REGIONAL HEALTH PROPERTIES, INC (Form: 10-K, Received: 05/17/2019 06:03:50)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

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 or organization)	(I.R.S. Employer Identification No.)
454 Satellite Boulevard NW, Suite 100, Suwanee, GA	30024-7191
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number including area code (678) 869-5116

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	RHE	NYSE American
10.875% Series A Cumulative Redeemable Preferred Stock, no par value	RHE-PA	NYSE American

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	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 ☒

The aggregate market value of Regional Health Properties, Inc.’s common stock held by non-affiliates as of June 30, 2018, the last business day of Regional Health Properties Inc.’s most recently completed second fiscal quarter, was $3,779,296. The number of shares of Regional Health Properties, Inc., common stock, no par value, outstanding as of April 22, 2019, was 1,688,219.

Regional Health Properties, Inc.

Form 10-K

Table of Contents

		Page Number
Part I
Item 1.	Business	4
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	46
Item 2.	Properties	47
Item 3.	Legal Proceedings	49
Item 4.	Mine Safety Disclosures	50
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	51
Item 6.	Selected Financial Data	51
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 8.	Financial Statements and Supplementary Data	74
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	138
Item 9A.	Controls and Procedures	138
Item 9B.	Other Information	138
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	139
Item 11.	Executive Compensation	142
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	146
Item 13.	Certain Relationships and Related Transactions, and Director Independence	149
Item 14.	Principal Accountant Fees and Services	151
Part IV
Item 15.	Exhibits, Financial Statement Schedules	153
Signatures		175

Special Note Regarding Fo rward Looking Statements

Certain statements in this Annual Report on Form 10-K (this “Annual Report”) contain “forward-looking” information as that term is defined by the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. Examples of forward-looking statements include all statements regarding our expected future financial position, results of operations, cash flows, liquidity, financing and refinancing plans, strategic and business plans, projected expenses and capital expenditures, competitive position, growth and acquisition opportunities, and compliance with, and changes in, governmental regulations. You can identify some of the forward-looking statements by the use of forward-looking words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “may” and other similar expressions, although not all forward-looking statements contain these identifying words.

Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following:

•

Our ability to address the “going concern” considerations described in the footnotes to our audited consolidated financial statements included elsewhere in this Annual Report and to generate sufficient liquidity to satisfy our obligations as they become due;

•

Whether we will be able to comply with the loan documents relating to a significant debt refinancing we entered into on February 15, 2018, with Pinecone Realty Partners II, LLC (“Pinecone”), including the short-term forbearance agreement regarding our noncompliance with certain covenants thereunder, under which Pinecone may exercise its default-related rights and remedies upon the occurrence of an event of default under such loan documents, or the expiration or termination of the forbearance period under such forbearance agreement, which rights and remedies include, among other things, accelerating the maturity of such debt, foreclosing on our facilities which secure such debt, and exercising Pinecone’s rights with respect to our pledge to Pinecone of our equity interests in substantially all of our direct and indirect, wholly-owned subsidiaries, which subsidiaries constitute substantially all of our assets and operations;

•

Whether we will be able to refinance or obtain further debt maturity extensions on the $4.1 million of mortgage indebtedness under our credit facility with Housing & Healthcare Funding, LLC, which matures in June 2019;

•

Our ability to execute upon the strategies we are pursuing to repay the indebtedness to Pinecone and to refinance or obtain further debt maturity extensions on the mortgage indebtedness maturing in June 2019, including the sale of certain assets;

•

Our ability to raise capital through equity and debt financings, and the cost of such capital;

•

Our ability to meet the continued listing requirements of the NYSE American LLC and to maintain the listing of our securities thereon;

•

Our dependence on the operating success of our tenants and their ability to meet their obligations to us;

•

The effect of increasing healthcare regulation and enforcement on our tenants, and the dependence of our tenants on reimbursement from governmental and other third-party payors;

•

The impact of litigation and rising insurance costs on the business of our tenants;

•

The effect of our tenants declaring bankruptcy or becoming insolvent;

•

The ability and willingness of our tenants to renew their leases with us upon expiration, and our ability to reposition our properties on the same or better terms in the event of nonrenewal or if we otherwise need to replace an existing tenant;

•

The impact of liabilities associated with our legacy business of owning and operating healthcare properties, including pending and potential professional and general liability claims;

•

The availability of, and our ability to identify, suitable acquisition opportunities, and our ability to complete such acquisitions and lease the respective properties on favorable terms; and

•

Other risks inherent in the real estate business, including uninsured or underinsured losses affecting our properties, the possibility of environmental compliance costs and liabilities, and the illiquidity of real estate investments.

We urge you to carefully consider these risks and review the additional disclosures we make concerning risks and other factors that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Part I, Item IA, “Risk Factors” in this Annual Report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (“SEC”), including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. We caution you that any forward-looking statements made in this Annual Report are not guarantees of future performance, events or results, and you should not place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events, unless required by law to do so.

PAR T I.

Item 1. Business

Overview

Regional Health Properties, Inc. (“Regional Health” or “Regional”), 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 such facilities to third-party tenants, which operate the facilities. As of December 31, 2018, the Company owned, leased, or managed for third parties 30 facilities primarily in the Southeast (which number was reduced to 28 effective January 15, 2019, due to a lease termination and as of April 15, 2019, four owned facilities are held for sale subject to the purchase and sale agreement ). The Company’s facilities provide a range of healthcare 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.

Regional Health’s predecessor was incorporated in Ohio on August 14, 1991, under the name Passport Retirement, Inc. In 1995, Passport Retirement, Inc. acquired substantially all of the assets and liabilities of AdCare Health Systems, Inc. and changed its name to AdCare Health Systems, Inc. (“AdCare”). AdCare completed its initial public offering in November 2006, relocated its executive offices and accounting operations to Georgia in 2012, and changed its state of incorporation from Ohio to Georgia in December, 2013.

Historically, AdCare’s business was focused primarily on owning and operating skilled nursing facilities and managing such facilities for unaffiliated owners with whom AdCare had management contracts. In July 2014, AdCare commenced a transition (the “Transition”). Whereby AdCare and its subsidiaries: (i) leased to third-party operators all of the healthcare properties which they own and previously operated; (ii) subleased to third-party operators all of the healthcare properties which they lease (but do not own) and previously operated; and (iii) retained a management agreement to manage two skilled nursing facilities and one independent living facility for third parties. The Transition was completed in December 2015, and, as a result of the Transition, the company acquired certain characteristics of a real estate investment trust (“REIT”) and became focused on the ownership, acquisition and leasing of healthcare properties.

On September 29, 2017, AdCare merged (the “Merger”) with and into Regional Health, a Georgia corporation and a then wholly owned subsidiary of AdCare formed for the purposes of the Merger, with Regional Health continuing as the surviving corporation in the Merger.

As a consequence of the Merger:

•

the outstanding shares of AdCare’s common stock, no par value per share (the “AdCare common stock”), converted, on a one-for-one basis, into the same number of shares of Regional Health’s common stock, no par value per share (the “RHE common stock”);

•

the outstanding shares of AdCare’s 10.875% Series A Cumulative Redeemable Preferred Stock (the “AdCare Series A Preferred Stock”) converted, on a one-for-one basis, into the same number of shares of Regional Health’s 10.875% Series A Cumulative Redeemable Preferred Stock (the “RHE Series A Preferred Stock”);

•

the board of directors (the “AdCare Board”) and executive officers of AdCare immediately prior to the Merger are the board of directors (the “RHE Board”) and executive officers, respectively, of Regional Health immediately following the Merger, and each director and executive officer continued his directorship or employment, as the case may be, with Regional Health under the same terms as his directorship or employment with AdCare immediately following the Merger;

•

Regional Health assumed all of AdCare’s equity incentive compensation plans, and all rights to acquire shares of AdCare common stock under any AdCare equity incentive compensation plan converted into rights to acquire RHE common stock pursuant to the terms of the equity incentive compensation plans and other related documents, if any;

•

Regional Health became the successor issuer to AdCare and succeeded to the assets and continued the business and assumed the obligations of AdCare;

•

the RHE common stock and RHE Series A Preferred Stock commenced trading on the NYSE American LLC (the “NYSE American” or the “Exchange”) immediately following the Merger;

•

the rights of the holders of RHE common stock and RHE Series A Preferred Stock are governed by the amended and restated articles of incorporation of RHE (the “RHE Charter”) and the amended and restated bylaws of RHE (the “RHE Bylaws”). The RHE Charter is substantially equivalent to AdCare’s articles of incorporation, as amended (the “AdCare Charter”), except that the RHE Charter includes ownership and transfer restrictions related to the RHE common stock. The RHE Bylaws are substantially equivalent to the bylaws of AdCare, as amended (the “AdCare Bylaws”);

•

there was no change in the assets we hold or in the business we conduct; and

•

there was no fundamental change to our current operational strategy.

As a result of the Merger, the RHE Charter contains ownership and transfer restrictions with respect to the common stock. These ownership and transfer restrictions will better position the Company to comply with certain U.S. federal income tax rules applicable to REITs under the Internal Revenue Code of 1986, as amended (the “Code”) to the extent such rules relate to the common stock. The RHE Board continues to analyze and consider: (i) whether and, if so, when, the Company could satisfy the requirements to qualify as a REIT under the Code; (ii) the structural and operational complexities which would need to be addressed before the Company could qualify as a REIT, including the disposition of certain assets or the termination of certain operations which may not be REIT compliant; and (iii) if the Company were to qualify as a REIT, whether electing REIT status would be in the best interests of the Company and its shareholders in light of various factors, including our significant consolidated federal net operating loss carryforwards. There is no assurance that the Company will qualify as a REIT in future taxable years or, if it were to so qualify, that the RHE Board would determine that electing REIT status would be in the best interests of the Company and its shareholders.

Effective December 31, 2018, the Company completed a one-for-twelve reverse stock split of the common stock (the “Reverse Stock Split”). The Reverse Stock Split was implemented for the purpose of complying with the NYSE American continued listing standards regarding low selling price.

On April 17, 2019, the Company received a letter from NYSE American stating that the Company was not in compliance with the Exchange’s continued listing standards under the timely filing criteria outlined in Section 1007 of the NYSE American Company Guide (the “Company Guide”) because the Company failed to timely file its Annual Report on Form 10-K for the period ended December 31, 2018 . The Company is now subject to the procedures and requirements set forth in Section 1007 of the Company Guide . The Company has been provided a six-month cure period, with an option additional six-month cure period at the discretion of the NYSE American, who reserve the right at any time to immediately truncate the cure period or immediately commence suspension and delisting procedures. Additionally as of December 31, 2018, the Company’s minimum equity was only $0.15 million above the required minimum per the NYSE American continued listing standards relating to stockholders’ equity.

For a more detailed discussion, see “Risks Related to the Delisting of Our Securities” in Part I, Item 1A, “Risk Factors”, of this Annual Report.

When used in this Annual Report, unless otherwise specifically stated or the context otherwise requires, the terms:

•

“Board” refers to the AdCare Board with respect to the period prior to the Merger and to the RHE Board with respect to the period after the Merger;

•

“Company”, “we”, “our” and “us” refer to AdCare and its subsidiaries with respect to the period prior to the Merger and to Regional Health and its subsidiaries with respect to the period after the Merger;

•

“common stock” refers to the AdCare common stock with respect to the period prior to the Merger and to the RHE common stock with respect to the period after the Merger;

•

“Series A Preferred Stock” refers to the AdCare Series A Preferred Stock with respect to the period prior to the Merger and to the RHE Series A Preferred Stock with respect to the period after the Merger;

•

“Charter” refers to the AdCare Charter with respect to the period prior to the Merger and to the RHE Charter with respect to the period after the Merger; and

•

“Bylaws” refers to the AdCare Bylaws with respect to the period prior to the Merger and to the RHE Bylaws with respect to the period after the Merger.

Our principal executive offices are located at 454 Satellite Boulevard NW, Suite 100, Suwanee, GA 30024, and our telephone number is (678) 869-5116. We maintain a website at www.regionalhealthproperties.com . The contents of our website are not incorporated by reference herein or in any of our filings with the SEC.

Portfolio of Healthcare Investments

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.

As of December 31, 2018, the Company owns, leases, or manages 30 facilities, which are located primarily in the Southeast. Of the 30 facilities, the Company: (i) leased 14 owned 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 to our audited consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report.

Effective January 15, 2019, the Company’s lease of two skilled nursing facilities located in Georgia (the “Omega Facilities”) which are comprised of an 115-bed skilled nursing facility located in East Point, Georgia and an 184-bed skilled nursing facility located in Atlanta, Georgia, was terminated by mutual consent of the Company and the lessor(s) (affiliates of Omega Healthcare) and the sublessee(s) (affiliates of Wellington Health Services, LP) of the Omega Facilities (the “Omega Lease Termination”). See Note 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report and see Overview in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information and tables giving effect to the Omega Lease Termination.

On April 15, 2019 the Company entered into a purchase and sale agreement with respect to four owned skilled nursing facilities, which purchase and sale agreement could be terminated for any reason by the Buyer prior to May, 15 2019, at 5:00 p.m. Eastern Time.

The following table provides summary information regarding the number of facilities and related operational beds/units by state and property type as of December 31, 2018:

									Managed for
	Owned				Leased				Third-Parties				Total
	Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units
State
Alabama ⁽²⁾		3		410		—		—		—		—		3		410
Georgia ^{(1) (2)}		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⁾		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 ⁽¹⁾⁽²⁾		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

⁽¹⁾

Effective January 15, 2019 the Company completed the Omega Lease Termination. See Note 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report. The foregoing table does not reflect the Omega Lease Termination.

⁽²⁾

On April 15, 2019 the Company entered into purchase and sale agreement with respect to four owned skilled nursing facilities, which purchase and sale agreement could be terminated for any reason by the Buyer prior to May, 15 2019, at 5:00 p.m. Eastern Time. See Note 19 – Subsequent Events, to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

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

Operator Affiliation	Number of Facilities ⁽¹⁾		Beds / Units
C.R. Management ⁽⁴⁾		8		936
Aspire		5		373
Wellington Health Services ⁽²⁾		4		641
Peach Health Group		3		252
Symmetry Healthcare ⁽³⁾		3		286
Beacon Health Management		2		212
Southwest LTC ⁽⁴⁾		2		197
Subtotal		27		2,897
Regional Health Managed		3		332
Total		30		3,229

⁽¹⁾

Represents the number of facilities which are 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 to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data”, and “Portfolio of Healthcare Investments” in Part I, Item 1., “Business”, in this Annual Report.

⁽²⁾

⁽³⁾

On February 28, 2019, the Company entered into a lease agreement (the “Vero Health Lease”) with Vero Health X, LLC (‘Vero Health”), an affiliate of Vero Health Management, LLC (“Vero Health Management”) whereby Vero Health took possession of, and commenced operations of an 106-bed skilled nursing facility located in Sylva, North Carolina (the “Mountain Trace Facility”). The Vero Health Lease became effective on March 1, 2019, upon the mutual termination of the lease with the prior tenant of the facility (the “Mountain Trace Symmetry Tenant”), who was affiliated with Symmetry Healthcare Management, LLC (“Symmetry Healthcare”). The Vero Health Lease is for an initial term of 10 years, with renewal options, is structured as a triple net lease and rent for the Mountain Trace Facility is approximately $0.5 million per year, with an annual 2.5 % rent escalation clause. See Note 19 – Subsequent Events to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

⁽⁴⁾

Current Debt Maturities, including Long Term-Debt Classified as Current

On February 15, 2018 (the “Closing Date”), the Company entered into a debt refinancing (the “Pinecone Credit Facility”) with Pinecone Realty Partners II, LLC (“Pinecone”), with an aggregate principal amount of $16.25 million (which also required a 3.0% or $0.5 million “tail fee” payable upon the maturity date of August 15, 2020), which refinanced existing mortgage debt in an aggregate amount of $8.7 million on three skilled nursing properties known as Attalla, College Park and Northwest (the “Facilities”), and provided additional surplus cash flow of $6.3 million for general corporate needs, after deducting approximately $1.25 million in debt issuance costs and prepayment penalties. The Pinecone Credit Facility originally bore 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. Regional Health is a guarantor of the Pinecone Credit Facility. Certain of the notes under the Pinecone Credit Facility are also guaranteed by certain wholly-owned subsidiaries of Regional Health. 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 (settled during the year ended December 31, 2018), 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 wa s used for general corporate purposes.

On May 10, 2018, Pinecone notified the Company in writing that the Company was in default under certain financial covenants of the loan documents evidencing the Pinecone Credit Facility. The Company and certain of its subsidiaries entered into forbearance agreements with Pinecone with respect to the Pinecone Credit Facility on May 18, 2018 (the “Original Forbearance Agreement”), on September 6, 2018 (the “New Forbearance Agreement”) and again on December 31, 2018 (the “A&R New Forbearance Agreement”). The forbearance period under the Original Forbearance Agreement terminated on July 6, 2018 and the forbearance period under the New Forbearance Agreement terminated on December 31, 2018, in each case because the Company did not satisfy certain conditions set forth therein. The A&R New Forbearance Agreement expired according to its terms on March 14, 2019.

On March 29, 2019, the Company and certain of its subsidiaries entered into a second new amended and restated Forbearance Agreement (the “Second A&R Forbearance Agreement”) with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the Second A&R Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to specified events of default (the “Specified Defaults”) under the Pinecone Credit Facility, dated as of February 15, 2018, among the Company and certain of its subsidiaries and Pinecone (the “Loan Agreement”). The forbearance period under the Second A&R Forbearance Agreement commenced on March 29, 2019 and may extend as late as October 1, 2019, unless the forbearance period is earlier terminated as a result of specified termination events, including a default or event of default under the Loan Agreement (other than any Specified Defaults) or any failure by the Company or its subsidiaries to comply with the terms of the Second A&R Forbearance Agreement, including, without limitation, the Company’s obligation to progress with an Asset Sale (as defined below) in accordance with the timeline specified therein. Accordingly, the forbearance period under the Second A&R Forbearance Agreement may terminate at any time and there is no assurance such period will extend through October 1, 2019.

Pursuant to the Second A&R Forbearance Agreement, the Company and Pinecone agreed to amend certain provisions of the Loan Agreement. The Second A&R Forbearance Agreement requires, among other things (i) that the Company pursue and complete an asset sale (the “Asset Sale”) which would result in the repayment in full of all of the Company’s indebtedness to Pinecone and, in connection therewith, the Company pay not less than $0.3 million and not more than $0.55 million in forbearance fees, as well as certain other expenses of Pinecone, or (ii) Pinecone’s other disposition of the Loan Agreement as contemplated by the Second A&R Forbearance Agreement. Additionally the Second A&R Forbearance Agreement accelerates the previously disclosed 3% finance “tail fee”, 1% prepayment penalty, and 1% break up fee so that such fees and penalties became part of the principal as of April 15, 2019.

On April 30, 2019 the Company extended the April 30, 2019 maturity date on the mortgage indebtedness under the Company’s credit facility with Housing & Healthcare Funding, LLC (the “Quail Creek Credit Facility”) to June 30, 2019, with an option to further extend to July 31, 2019, at the lenders discretion. There is no assurance that the Company will be able to refinance the Quail Creek Credit Facility.

As of December 31, 2018, the aggregate balance outstanding under the Pinecone Credit Facility is $20.2 million, the approximately $3.45 million increase is due to the forbearance agreements fee’s and associated legal expenses. The balance outstanding under the Quail Creek Credit Facility is $4.1 million. These factors create substantial doubt about the Company’s ability to continue as a going concern. If these efforts to repay or refinance these liabilities are unsuccessful, the Company may be required to seek relief through a number of other available routes, which may include a filing under the U.S. Bankruptcy Code. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

For further information, see Note 1 – Summary of Significant Accounting Policies, Note 9 – Notes Payable and Other Debt and Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Acquisitions and Dispositions

The Company made no acquisitions or dispositions during the year ended December 31, 2018.

Effective January 15, 2019, the Company ’ s lease of the Omega Facilities, which leases were due to expire August 2025 and which Omega Facilities the Company subleased to third party subtenants, was terminated by mutual consent of the Company and the lessor (s) and sublessee(s) of the Omega Facilities. In connection with the Omega Lease Termination, the Company transferred approximately $0.4 million of its integral physical fixed assets at the Omega Facilities to the lessor and on January 28, 201 9 received from the lessor gross proceeds of approximately $1.5 million, consisting of (i) a termination fee in the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other net amounts due to the Company under the leases . S ee Note 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events to our audited consolidated financial statements in Part II, Item 8., “ Financial Statements and Supplementary Data ” in this Annual Report.

On April 15, 2019, certain wholly owned subsidiaries of Regional Health (collectively, “Seller”) entered into a Purchase and Sale Agreement (the “PSA”) with affiliates of MED Healthcare Partners LLC (collectively, “Buyer”) with respect to four (4) skilled nursing facilities owned by the Seller. Subject to the terms and conditions of the PSA, the Seller agreed to sell, and the Buyer agreed to purchase, all of the Seller’s right, title and interest in: (a) that certain 182 licensed bed skilled nursing facility commonly known as Attalla Health & Rehab located in Attalla, AL; (b) that certain 100 licensed bed skilled nursing facility commonly known as Healthcare at College Park located in College Park, GA; (c) that certain 118 licensed bed skilled nursing facility commonly known as Quail Creek Nursing & Rehabilitation Center located in Oklahoma City, OK; and (d) that certain 100 licensed bed skilled nursing facility commonly known as Northwest Nursing Center located in Oklahoma City, OK (collectively, the “PSA Facilities”). The Buyer’s obligation to complete such purchase and sale is subject to specified closing conditions, including a thirty (30) day due diligence period (the “Due Diligence Period”). During the Due Diligence Period, the Buyer may, in its sole and absolute discretion, terminate the PSA by written notice to the Seller for any reason or no reason and receive the return of its security deposit. The Due Diligence Period will expire on May, 15 2019, at 5:00 p.m. Eastern Time.

The aggregate purchase price for the PSA Facilities is $28.5 million in cash, as prorated and adjusted in accordance with the PSA. Pursuant to the PSA, the Buyer deposited a first deposit of $0.150 million into an escrow account. A second deposit of $0.150 million is due from the Buyer after the expiration of the Due Diligence Period. If the Buyer does not terminate the PSA for any or no reason prior to the expiration of the Due Diligence Period and fails to timely make the second deposit of $0.150 million, then such failure shall be a default by the Buyer and the Seller may then elect to terminate the PSA and receive the first deposit as liquidated damages. The closing under the PSA is scheduled for thirty (30) days after the expiration of the Due Diligence Period.

Leasing Transactions

During the year ended December 31, 2018, the tenants of eight of the Company’s facilities were in arrears’ on their rent payments. Combined cash rental payments for all eight facilities totaled $0.4 million per month, or approximately 21% of our anticipated total monthly rental receipts. Five of these facilities are located in Ohio (the “Ohio Beacon Facilities”) and were leased to affiliates (the “Ohio Beacon Affiliates”) of Beacon Health Management, LLC (“Beacon”). The Ohio Beacon Affiliates, which were ten months in arrears on rental payments, surrendered possession of the Ohio Beacon Facilities to the Company on December 1, 2018 upon the mutual termination of the applicable leases.

On November 30, 2018 the Company subleased the Ohio Beacon Facilities to affiliates (collectively, “Aspire Sublessees”) of Aspire Regional Partners, Inc. (“Aspire”) management formerly affiliated with MSTC Development Inc., pursuant to separate sublease agreements (the “Aspire Subleases”), whereby the Aspire Sublessees took possession of, and commenced operating, the Ohio Beacon Facilities (under Aspire’s operation, the “Aspire Facilities”) as subtenant, effective December 1, 2018. Annual anticipated minimum cash rent for the next twelve months is approximately $1.8 million, with provision for approximately $0.7 million additional cash rent based on each facility’s prior month occupancy.

The Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. The Aspire Facilities are comprised of: (i) a 94-bed skilled nursing facility located in Covington, Ohio (the “Covington Facility”); (ii) an 80-bed assisted living facility located in Springfield, Ohio (the “Eaglewood ALF Facility”); (iii) a 99-bed skilled nursing facility located in Springfield, Ohio (the “Eaglewood Care Center Facility”); (iv) a 50-bed skilled nursing facility located in Greenfield, Ohio (the “H&C of Greenfield Facility”); and (v) a 50-bed skilled

nursing facility located in Sidney, Ohio (the “ Pavilion Care Facility ” ). Under the Aspire Subleases, a default related to an individual facility may cause a default under all the Aspire Subleases . A ll Aspire Subleases are for an initial term of ten years, with renewal options, except with respect to the term for the H&C of Greenfield Facility , which has an initial five year term . The Aspire Subleases provide for and set annual rent increases generally commencing in the third lease year; from month seven of the Subleases monthly rent amounts may increase based on each facility ’ s prior month occupancy, with minimum annual rent escalations of at least 1% generally commencing in the third lease year. Minimum rent receivable for the Covington Care Facility, the Eaglewood ALF Facility, the Eaglewood Care Center Facility, the H&C of Greenfield Facility and the Pavilion Care Facility for the year ended December 31, 2019 is $0.4 million, $0.5 million, $0.4 million, $0.2 million and $0.2 million per annum, respectively. Additionally , the Company agreed to indemnify Aspire against any and all liabilities imposed on them arising from the former operator, capped at $8.0 million. T he Company has assessed the fair value of the indemnity agreements as not material to the financial statements at December 31, 2018.

For a detailed description of each of the Company’s leases and the resolution of the dispute for the remaining three tenants who were in rent arrears’, see Note 7 - Leases and Note – 19 Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Leasing Transactions . As of the filing date of this Annual Report, the Company has leased or subleased, as applicable, the following facilities to tenants:


Facility Name	State	Owned / Leased	Transaction Type	Commencement Date
2014
Thomasville	GA	Leased	Sublease	7/1/2014
Lumber City	GA	Leased	Sublease	11/1/2014
Southland	GA	Owned	Lease	11/1/2014
Attalla	AL	Owned	Lease	12/1/2014
Coosa Valley	AL	Owned	Lease	12/1/2014
2015
College Park	GA	Owned	Lease	4/1/2015
LaGrange	GA	Leased	Sublease	4/1/2015
Powder Springs	GA	Leased	Sublease	4/1/2015
Tara	GA	Leased	Sublease	4/1/2015
Sumter Valley	SC	Owned	Lease	4/1/2015
Georgetown	SC	Owned	Lease	4/1/2015
Glenvue	GA	Owned	Lease	7/1/2015
Autumn Breeze	GA	Owned	Lease	9/30/2015
Quail Creek	OK	Owned	Lease	12/31/2015
Northwest	OK	Owned	Lease	12/31/2015
2016
Jeffersonville	GA	Leased	Sublease	6/18/2016
Oceanside	GA	Leased	Sublease	7/13/2016
Savannah Beach	GA	Leased	Sublease	7/13/2016
2017
Meadowood	AL	Owned	Lease	5/1/2017
2018 ⁽¹⁾
Hearth & Care of Greenfield	OH	Owned	Lease	12/1/2018
The Pavilion Care Center	OH	Owned	Lease	12/1/2018
Eaglewood ALF	OH	Owned	Lease	12/1/2018
Eaglewood Care Center	OH	Owned	Lease	12/1/2018
Covington Care Center	OH	Leased	Sublease	12/1/2018
2019 ⁽²⁾
Mountain Trace	NC	Owned	Lease	3/1/2019

⁽¹⁾	Effective December 1, 2018, the Company subleased these facilities to Aspire Sublessees.

⁽ ² ⁾

On February 28, 2019 the Company entered the Vero Health Lease with Vero Health an affiliate of Vero Health Management providing that Vero Health took possession of and operate the Mountain Trace Facility. The Vero Health Lease became effective, upon the termination of the prior tenant’s lease termination on March 1, 2019.

Industry Trends

The skilled nursing segment of the long-term care industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging population, increasing life expectancies and the trend toward shifting of patient care to lower cost settings. The growth of the senior population in the United States continues to increase healthcare costs, often faster than the available funding from government-sponsored healthcare programs. In response, federal and state governments have adopted cost containment measures that encourage the treatment of patients in more cost effective settings, such as skilled nursing facilities, for which the staffing requirements and associated costs are often significantly lower than acute care hospitals, inpatient rehabilitation facilities and other post-acute care settings. As a result, skilled nursing facilities are generally serving a larger population of higher acuity patients than in the past.

The skilled nursing industry is large, highly fragmented, and characterized predominantly by numerous local and regional providers. Based on a decrease in the number of skilled nursing facilities over the past few years, we expect that the supply and demand balance in the skilled nursing industry will continue to improve. We also anticipate that, as life expectancy continues to increase in the United States, notwithstanding the recent declines due to increased deaths amongst younger and middle-aged individuals (due to the overdose epidemic and suicides), the overall demand for skilled nursing services will increase. At present, the primary market demographic for skilled nursing services is primarily individuals age 75 and older. According to the 2010 U.S. Census, there were over 40 million people in the United States in 2010 that are over 65 years old. The 2010 U.S. Census estimates this group is one of the fastest growing segments of the United States population and is expected to more than double between 2000 and 2030.

We believe the skilled nursing industry has been and will continue to be impacted by several other trends. The use of long-term care insurance is increasing among seniors as a means of planning for the costs of skilled nursing care services. In addition, as a result of increased mobility in society, reduction of average family size, and the increased number of two-wage earner couples, more seniors are looking for alternatives outside their own family for their care.

Competitive Strengths

As of the date of filing this Annual Report we believe we possess the following competitive strengths:

Long-Term, Triple-Net Lease Structure. All of our real estate properties are leased under triple-net operating leases with initial terms generally ranging from ten to fifteen years pursuant to which the tenants are responsible for all facility maintenance, insurance and taxes, and utilities. As of the date of filing this Annual Report, the leases had an average remaining initial term of approximately 8 years. In addition, each lease contains specific rent escalation amounts ranging from 1.0% to 3.0% annually. Further, each lease has one or more renewal options. For those facilities subleased by the Company, the renewal option in the sublease agreement is dependent on the Company’s renewal of its lease agreement. We also typically receive additional security under these leases in the form of security deposits from the lessee and guarantees from the parent or other related entities of the lessee.

Tenant Diversification. Our 28 properties (including the three facilities that are managed by us and giving effect to the Omega Lease Termination) are operated by a total of 28 separate tenants, with each of our tenants being affiliated with one of eight 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. Ross Management, LLC (“C.R Management”) and Aspire, each operating eight and five facilities, or 28.6% and 17.9% of the total number of our facilities, respectively. We believe that our tenant diversification should limit the effect of any operator’s financial or operating performance decline on our overall performance.

Geographically Diverse Property Portfolio . Our portfolio of 28 properties, comprising 2,930 operational beds/units, is diversified across six states. Our properties in any one state did not account for more than 46% of our total

beds/units as of the date of filing this Annual Report . Properties in our largest state, Georgia, are geographically dispersed throughout the state. We believe this geographic diversification will limit the effect of a decline in any one regional market on our overall performance.

Business Strategy

Our business strategy primarily is focused on investing capital in our current portfolio and growing our portfolio through the acquisition of skilled nursing and other healthcare facilities. More specifically, we seek to:

Focus on Senior Housing Segment. We intend to continue to focus our investment program on senior housing, primarily the skilled nursing facility segment of the long-term care continuum. We have historically been focused on senior housing, and senior management has operating and financial experience and a significant number of relationships in the long-term care industry. In addition, we believe investing in the sector best meets our investing criteria.

Invest Capital in Our Current Portfolio. We intend to continue to support our operators by providing capital to them for a variety of purposes, including facility modernization and potentially replacing or renovating facilities in our portfolio that may have become less competitive. We expect to structure these investments as either lease amendments that produce additional rent or as loans that are repaid by operators during the applicable lease term. We believe such projects will provide an attractive return on capital and improve the underlying performance of facility operations.

Provide Capital to Underserved Operators. We believe that there is a significant opportunity to be a capital source to long-term care operators through the acquisition and leasing of healthcare properties that are consistent with our investment and financing strategy, but that, due to size and other considerations, are not a focus for large healthcare REITs. We seek primarily small to mid-size acquisition transactions with a focus on individual facilities with existing operators, as well as small groups of facilities and larger portfolios. In addition to pursuing acquisitions using triple-net lease structures, we may pursue other forms of investment, including partnering with investors, mortgage loans and joint ventures.

Identify Talented Operators. As a result of our management team’s operating experience, network of relationships and industry insight, we have been able and expect to continue to be able to identify qualified tenants. We seek tenants who possess local market knowledge, demonstrate hands-on management, have proven track records and focus on patient care.

Monitor Investments. We monitor our real estate investments through, among other things: (i) reviewing and evaluating tenant financial statements to assess operational and financial trends and performance; (ii) reviewing the state surveys, occupancy rates and patient payor mix of our facilities; (iii) verifying the payments of property and other taxes and insurance with respect to our facilities; and (iv) conducting periodic physical inspections of our facilities. For tenants or facilities that do not meet performance expectations, we may seek to work with our tenants to ensure our mutual success or seek to re-lease facilities to stronger operators.

Resolve Legacy Professional and General Liability Claims. As a result of the Transition (which was completed in December 2015), the Company no longer operates skilled nursing facilities. The Company, however, continues to be subject to certain pending professional and general liability actions with respect to the time it operated skilled nursing facilities, including claims that the services the Company provided while an operator resulted in the injury or death of patients and claims related to professional and general negligence, employment, staffing requirements and commercial matters. Management is committed to resolving pending claims. See Part I, Item 3, “Legal Proceedings” in this Annual Report.

Competition

We generally compete for real property investments with publicly traded, private and non-listed healthcare REITs, real estate partnerships, healthcare providers, healthcare lenders and other investors, including developers, banks, insurance companies, pension funds, government-sponsored entities and private equity firms, some of whom may have greater financial resources and lower costs of capital than we do. Increased competition challenges our ability to identify and successfully capitalize on opportunities that meet our investment criteria, which is affected by, among other factors, the availability of suitable acquisition or investment targets, our ability to negotiate acceptable transaction terms and our access to and cost of capital.

Our ability to generate rental revenues from our properties also depends on the competition faced by our tenants. Our tenants compete on a local and regional basis with other healthcare operating companies that provide comparable services. Our tenants compete to attract and retain patients and residents based on scope and quality of care, reputation and financial condition, price, location and physical appearance of the properties, services offered qualified personnel, physician referrals and family preferences. The ability of our tenants to compete successfully could be affected by private, federal and state reimbursement programs and other laws and regulations.

Revenue Sources and Recognition

Triple-Net Leased Properties. The Company’s triple-net leases provide for periodic and determinable increases in rent. The Company recognizes rental revenues under these leases on a straight-line basis over the applicable lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in other assets on our consolidated balance sheets. In the event the Company cannot reasonably estimate the future collection of rent from one or more tenant(s) of the Company’s facilities, rental income for the affected facilities will be recognized only upon cash collection, and any accumulated straight-line rent receivable will be reversed in the period in which the Company first deems rent collection no longer reasonably assured.

Management Fee and Other Revenue. The Company recognizes management fee revenues received as services are provided. Further, the Company recognizes income from lease inducement receivables and interest income from loans and investments, using the effective interest method when collectability is reasonably assured. We apply the effective interest method on a loan-by-loan basis.

Allowances. The Company assesses the collectability of our rent receivables, including straight-line rent receivables. 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 December 31, 2018 and December 31, 2017, the Company reserved for approximately $1.4 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 reserved at December 31, 2018 and December 31, 2017. Accounts receivable, net totaled $1.0 million at December 31, 2018 compared with $0.9 million at December 31, 2017.

Government Regulation

Healthcare Regulation . Our tenants are typically subject to extensive and complex federal, state and local laws and regulations relating to quality of care, licensure and certain certificate of need (“CON”) requirements, government reimbursement, fraud and abuse practices, qualifications of personnel, adequacy of plant and equipment, data privacy and security, and other laws and regulations governing the operation of healthcare facilities. We expect that the healthcare industry will, in general, continue to face increased regulation and pressure in these areas. The applicable rules are wide-ranging and can subject our tenants to civil, criminal, and administrative sanctions, including: the possible loss of accreditation or license; denial of reimbursement; imposition of fines; suspension, decertification, or exclusion from federal and state healthcare programs; or facility closure. Changes in laws or regulations, reimbursement policies, enforcement activity and regulatory non-compliance by tenants, operators and managers can all have a significant effect on their operations and financial condition, which in turn may adversely impact us, as detailed below and set forth under “Risk Factors” in this Annual Report.

Although the properties within our portfolio may be subject to varying levels of governmental scrutiny, we expect that the healthcare industry, in general, will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, including, but not limited to, the Federal Anti-Kickback Statute, the Federal Stark Law, the Federal False Claims Act, and comparable state counterparts, as well as cost control, healthcare management and provision of services, among others. We also expect that efforts by third-party payors, such as the federal Medicare program, state Medicaid programs and private insurance carriers (including health maintenance organizations and other health plans), to impose greater discounts and more stringent cost controls upon tenants (through changes in reimbursement rates and methodologies, discounted fee structures, the assumption by healthcare providers of all or a portion of the financial risk or otherwise) will intensify and continue. A significant expansion of applicable federal, state or local laws and regulations, existing or future healthcare reform measures, new interpretations of existing laws and regulations, changes in enforcement priorities, or significant limits on the scope of services reimbursed or reductions in reimbursement rates could have a material adverse effect on certain of our tenants’ liquidity, financial condition and results of operations and, in turn, their ability to satisfy their contractual obligations, including making rental payments under and otherwise complying with the terms of our leases.

Licensure, Certification and CONs. In general, the operators of our skilled nursing facilities must be licensed and periodically certified through various regulatory agencies that determine compliance with federal, state and local laws to participate in the Medicare and Medicaid programs. Legal requirements pertaining to such licensure and certification relate to the quality of medical care provided by the operator, qualifications of the tenant’s administrative personnel and clinical staff, adequacy of the physical plant and equipment and continuing compliance with applicable laws and regulations. A loss of licensure or certification could adversely affect a skilled nursing facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its obligations to us.

In addition, many of our skilled nursing facilities are subject to state CON laws that require governmental approval prior to the development or expansion of healthcare facilities and services. The approval process in these states generally requires a facility to demonstrate the need for additional or expanded healthcare facilities or services. CONs, where applicable, are also sometimes necessary for changes in ownership or control of licensed facilities, addition of beds, and investment in major capital equipment, introduction of new services or termination of services previously approved through the CON process. CON laws and regulations may restrict a tenant’s ability to expand our properties and grow its business in certain circumstances, which could have an adverse effect on the tenant’s revenues and, in turn, its ability to make rental payments under and otherwise comply with the terms of our leases. In addition, CON laws may constrain the ability of an operator to transfer responsibility for operating a particular facility to a new operator. If we have to replace a property operator who is excluded from participating in a federal or state healthcare program (as discussed below), our ability to replace the operator may be affected by a particular state’s CON laws, regulations, and applicable guidance governing changes in provider control.

Compared to skilled nursing facilities, seniors housing communities (other than those that receive Medicaid payments) do not receive significant funding from governmental healthcare programs and are subject to relatively few, if any, federal regulations. Instead, to the extent they are regulated, such regulation consists primarily of state and local laws governing licensure, provision of services, staffing requirements and other operational matters, which vary greatly from one jurisdiction to another. Although recent growth in the U.S. seniors housing industry has attracted the attention of various federal agencies that believe more federal regulation of these properties is necessary, Congress thus far has deferred to state regulation of seniors housing communities. However, as a result of this growth and increased federal scrutiny, some states have revised and strengthened their regulation of seniors housing communities, and more states are expected to do the same in the future.

Fraud and Abuse Enforcement, Other Related Laws, Initiatives, and Considerations. Long-term/post-acute care facilities (and seniors housing facilities that receive Medicaid payments) are subject to federal, state, and local laws, regulations, and applicable guidance that govern the operations and financial and other arrangements that may be entered into by healthcare providers. Certain of these laws prohibit direct or indirect payments of any kind for the purpose of inducing or encouraging the referral of patients for medical products or services reimbursable by government healthcare programs. Other laws require providers to furnish only medically necessary services and submit to the government valid and accurate statements for each service. Still other laws require providers to comply with a variety of safety, health and other requirements relating to the condition of the licensed property and the quality of care provided. Sanctions for violations of these laws, regulations, and other applicable guidance may include, but are not limited to, criminal and/or civil penalties and fines, loss of licensure, immediate termination of government payments, and exclusion from any government healthcare program. In certain circumstances, violation of these rules (such as those prohibiting abusive and fraudulent behavior) with respect to one property may subject other facilities under common control or ownership to sanctions, including exclusion from participation in the Medicare and Medicaid programs, as well as other government healthcare programs. In the ordinary course of its business, a property operator is regularly subjected to inquiries, investigations, and audits by the federal and state agencies that oversee these laws and regulations.

Long-term/post-acute care facilities (and seniors housing facilities that receive Medicaid payments) are also subject to the Federal Anti-Kickback Statute, which generally prohibits persons from offering, providing, soliciting, or receiving remuneration to induce either the referral of an individual or the furnishing of a good or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Long-term/post-acute care facilities are also subject to the Federal Ethics in Patient Referral Act of 1989, commonly referred to as the Stark Law. The Stark Law generally prohibits the submission of claims to Medicare for payment if the claim results from a physician referral for certain designated services and the physician has a financial relationship with the health service provider that does not qualify under one of the exceptions for a financial relationship under the Stark Law. Similar prohibitions on physician self-referrals and submission of claims apply to state Medicaid programs. Further, long-term/post-acute care facilities (and seniors housing facilities that receive Medicaid payments) are subject to substantial financial penalties under the Civil Monetary Penalties Act and the Federal False Claims Act and, in particular, actions under the Federal False Claims Act’s “whistleblower” provisions. Private enforcement of healthcare fraud has increased due in large part to amendments to the Federal False Claims Act that encourage private individuals to sue on behalf of the government. These whistleblower suits brought by private individuals, known as qui tam actions, may be filed by almost anyone, including present and former patients, nurses and other employees, and competitors. Significantly, if a claim is successfully adjudicated, the Federal False Claims Act provides for treble damages and a civil penalty of up to $22,363 per claim.

Prosecutions, investigations, or whistleblower actions could have a material adverse effect on a property operator’s liquidity, financial condition, and operations, which could adversely affect the ability of the operator to meet its financial obligations to us. Finally, various state false claim act and anti-kickback laws may also apply to each property operator. Violation of any of the foregoing statutes can result in criminal and/or civil penalties that could have a material adverse effect on the ability of an operator to meet its financial obligations to us.

Other legislative developments, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), have greatly expanded the definition of healthcare fraud and related offenses and broadened its scope to include private healthcare plans in addition to government payors. Congress also has greatly increased funding for the Department of Justice, Federal Bureau of Investigation and The Office of the Inspector General (“OIG”) to audit, investigate and prosecute suspected healthcare fraud. Moreover, a significant portion of the billions in healthcare fraud recoveries over the past several years has also been returned to government agencies to further fund their fraud investigation and prosecution efforts.

Additionally, other HIPAA provisions and regulations provide for communication of health information through standard electronic transaction formats and for the privacy and security of health information. In order to comply with the regulations, healthcare providers often must undertake significant operational and technical implementation efforts. Operators also may face significant financial exposure if they fail to maintain the privacy and security of medical records and other personal health information about individuals. The Health Information Technology for Economic and Clinical Health (“HITECH”) Act, passed in February 2009, strengthened the Department of Health and Human Services (“HHS”) Secretary’s authority to impose civil money penalties for HIPAA violations occurring after February 18, 2009. HITECH directs the HHS Secretary to provide for periodic audits to ensure covered entities and their business associates (as that term is defined under HIPAA) comply with the applicable HITECH requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action. The U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services (“CMS”) issued an interim Final Rule which conformed HIPAA enforcement regulations to HITECH, increasing the maximum penalty for multiple violations of a single requirement or prohibition to $1.5 million. Higher penalties may accrue for violations of multiple requirements or prohibitions. Additionally, on January 17, 2013, CMS released an omnibus final rule, which expands the applicability of HIPAA and HITECH and strengthens the government’s ability to enforce these laws. The final rule broadens the definition of “business associate” and provides for civil money penalty liability against covered entities and business associates for the acts of their agents regardless of whether a business associate agreement is in place. This rule also modified the standard for when a breach of unsecured personally identifiable health information must be reported. Some covered entities have entered into settlement agreements with HHS for allegedly failing to adopt policies and procedures sufficient to implement the breach notification provisions in the HITECH Act. Additionally, the final rule adopts certain changes to the HIPAA enforcement regulations to incorporate the increased and tiered civil monetary penalty structure provided by HITECH, and makes business associates of covered entities directly liable under HIPAA for compliance with certain of the HIPAA privacy standards and HIPAA security standards. HIPAA violations are also potentially subject to criminal penalties.

There has been an increased federal and state HIPAA privacy and security enforcement effort and we expect this trend to continue. Under HITECH, state attorneys general have the right to prosecute HIPAA violations committed against residents of their states. Several such actions have already been brought against both covered entities and a business associate, and continued enforcement actions are likely to occur in the future. In addition, HITECH mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities and business associates. It also tasks HHS with establishing a methodology whereby individuals who are harmed by HIPAA violations may receive a percentage of the civil monetary penalty fine or monetary settlement paid by the violator.

In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health information. In addition, some states are considering new laws and regulations that further protect the confidentiality, privacy, or security of medical records or other types of medical or personal information. These laws may be similar to or even more stringent than the federal provisions, in which case they are not preempted by HIPAA. Not only may some of these state laws impose fines and penalties upon violators, but some afford private rights of action to individuals who believe their personal information has been misused.

Also with respect to HIPAA, in September, 2015, OIG issued two reports calling for better privacy oversight of covered entities by the CMS Office for Civil Rights (“OCR”). The first report, titled “OCR Should Strengthen its Oversight of Covered Entities’ Compliance with the HIPAA Privacy Standards,” found that OCR’s oversight is primarily reactive, as OCR has not fully implemented the required audit program to proactively assess possible noncompliance from covered entities. OIG recommended, among other things, that OCR fully implement a permanent audit program and develop a policy requiring OCR staff to check whether covered entities had previously been investigated for noncompliance. The second report, titled “OCR Should Strengthen its Follow-up of Breaches of Patient Information Reported by Covered Entities,” found that (1) OCR did not record corrective action information for 23% of closed “large-breach” cases in which it made determinations of noncompliance, and (2) OCR did not record “small-breach” information in its case-tracking system, which limits its ability to track and identify covered entities with multiple small breaches. OIG recommended, among other things, that OCR enter small-breach information into its case-tracking system and maintain complete documentation of corrective actions taken. OCR agreed with OIG’s recommendations in both reports. If followed, these reports and recommendations may impact our tenants.

More recently with respect to HIPAA, OCR announced on March 21, 2016, that it has begun a new phase of audits of covered entities and their business associates. OCR stated that it will review policies and procedures adopted and employed by covered entities and their business associates to meet selected standards and implementation specifications of the HIPAA Privacy, Security, and Breach Notification Rules.

Congress has significantly increased funding to the governmental agencies charged with enforcing the healthcare fraud and abuse laws to facilitate increased audits, investigations and prosecutions of providers suspected of healthcare fraud. As a result, government investigations and enforcement actions brought against healthcare providers have increased significantly in recent years and are expected to continue. A violation of federal or state anti-fraud and abuse laws or regulations, or other related laws or regulations discussed above, by a tenant of our properties could have a material adverse effect on the tenant’s liquidity, financial condition or results of operations, which could adversely affect its ability to satisfy its contractual obligations, including making rental payments under and otherwise complying with the terms of our leases.

Government Reimbursement

The majority of skilled nursing facilities’ (“SNF”) reimbursement is through Medicare and Medicaid. These programs are often their largest source of funding. Senior housing communities generally do not receive funding from Medicare or Medicaid, but their ability to retain their residents is impacted by policy decisions and initiatives established by the administrators of Medicare and Medicaid. In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Healthcare Reform Law”). The passage of the Healthcare Reform Law allowed formerly uninsured Americans to acquire coverage and utilize additional healthcare services. In addition, the Healthcare Reform Law gave the CMS new authorities to implement Medicaid waiver and pilot programs that impact healthcare and long term custodial care reimbursement by Medicare and Medicaid. These activities promote “aging in place”, allowing senior citizens to stay longer in seniors housing communities, and diverting or delaying their admission into SNFs. In December, 2017, Congress eliminated the penalty associated with the individual mandate to maintain health insurance effective January 1, 2019. In December 2018, as a result of the penalty associated with the individual mandate being eliminated, a federal court in Texas found that the entire Healthcare Reform Law was unconstitutional. However, the law remains in place pending appeal. Additionally, final rules issued in 2018 expand the availability of association health plans and allow the sale of short-term, limited-duration health plans, neither of which are required to cover all of the essential health benefits mandated by the Healthcare Reform Law. These changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased. We cannot predict the ultimate impact of these developments on our tenants. The potential risks, however, that accompany these regulatory and market changes are discussed below.

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Enabled by the Medicare Modernization Act (2003) and subsequent laws, Medicare and Medicaid have implemented pilot programs (officially termed demonstrations or models) to “divert” elderly from SNFs and promote “aging in place” in “the least restrictive environment.” Several states have implemented Home and Community-based Medicaid waiver programs that increase the support services available to senior citizens in senior housing, lengthening the time that many seniors can live outside of a SNF. These Medicaid waiver programs are subject to re-approval and pilots are time-limited. Roll-back or expiration of these programs could have an adverse effect on the senior housing market.

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Changes in certification and participation requirements of the Medicare and Medicaid programs have restricted, and are likely to continue to restrict further, eligibility for reimbursement under those programs. On October 4, 2016, CMS published a final rule that, for the first time in nearly 25 years, comprehensively updated the SNF requirements for participation under Medicare and Medicaid. Among other things, the rule implemented requirements relating to quality of care and quality of life, facility responsibilities and staffing considerations, resident assessments, and compliance and ethics programs. The requirements are being implemented in phases with the final phase to be implemented by November 28, 2019. We cannot accurately predict the effect the final rule will have on our tenants’ business once it is fully promulgated. Failure to obtain and maintain Medicare and Medicaid certification by our tenants would result in denial of Medicare and Medicaid payments which would likely result in a significant loss of revenue. In addition, private payors, including managed care payors, increasingly are demanding that providers accept discounted payments resulting in lost revenue for specific patients. Efforts to impose reduced payments, greater discounts, and more stringent cost controls by government and other payors are expected to continue. Any reforms that significantly limit rates of reimbursement under the Medicare and Medicaid programs could have a material adverse effect on our tenants’ profitability and cash flows which, in turn, could adversely affect their ability to satisfy their obligations to us. We are unable to predict what reform proposals or reimbursement limitations will be adopted in the future or the effect such changes will have on our tenants’ operations. No assurance can be given that such reforms will not have a material adverse effect on our tenants or on their ability to fulfill their obligations to us.

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As a result of the Healthcare Reform Law, and specifically Medicaid expansion and establishment of Health Insurance Exchanges providing subsidized health insurance, more Americans have health insurance. These newly insured Americans utilize services delivered by providers at medical buildings and other healthcare facilities. The Healthcare Reform Law remains controversial and continued attempts to repeal or reverse aspects of the law (see discussion in Part I, Item 1A, “Risk Factors” in this Annual Report concerning a possible repeal of Healthcare Reform Law) could result in insured individuals losing coverage, and consequently foregoing services offered by provider tenants in medical buildings and other healthcare facilities. On June 28, 2012, the United States Supreme Court upheld the individual mandate of the Healthcare Reform Law but partially invalidated the expansion of Medicaid. The ruling on Medicaid expansion allowed states to decline to participate in the expansion—and to forego funding for the Medicaid expansion—without losing their existing Medicaid funding. Given that the federal government substantially funds the Medicaid expansion, it is still unclear how many states will ultimately pursue this option. The participation by states in the Medicaid expansion could have the dual effect of increasing our tenants’ revenues, through new patients, but could also further strain state budgets. While the federal government paid for approximately 100% of those additional costs from 2014 to 2016, the federal matching rate decreased to 93% in 2019. We cannot predict whether other current or future efforts to repeal or amend the Healthcare Reform Law will be successful. Even absent changes to the Healthcare Reform Law, the executive branch of the federal government may make significant changes to the enforcement and implementation of Healthcare Reform Law requirements. We cannot predict the impact that any such repeal or amendment of the Healthcare Reform Law or related action by the executive branch would have on our operators or tenants and their ability to meet their obligations to us. We cannot predict whether the existing Healthcare Reform Law, or future healthcare reform legislation or regulatory changes, will have a material impact on our operators’ or tenants’ property or business. If the operations, cash flows, or financial condition of our operators and tenants are materially and adversely impacted by the Healthcare Reform Law or future legislation, our revenue and operations may be adversely affected as well.

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CMS is currently in the midst of transitioning Medicare from a traditional fee-for-service reimbursement model to capitated, value-based, and bundled payment approaches in which the government pays a set amount for each beneficiary for a defined period of time, based on that person’s underlying medical needs, rather than the actual services provided. The result is increasing use of management tools to oversee individual providers and coordinate their services. This puts downward pressure on the number and expense of services provided. Roughly eight-million Medicare beneficiaries now receive care via Accountable Care Organizations, and Medicare Advantage health plans now provide care for roughly seventeen-million Medicare beneficiaries. The continued trend toward capitated, value-based, and bundled payment approaches has the potential to diminish the market for certain healthcare providers. In addition, on April 1, 2014, the Protecting Access to Medicare Act of 2014 was enacted, which implements value-based purchasing for SNFs. Beginning in fiscal year 2019, 2% of SNF payments will be withheld and approximately 50% to 70% of the amount withheld will be paid to SNFs through value-based payments. SNFs began reporting the claims-based 30-Day All-Cause Readmission Measure on October 1, 2015 and began reporting a resource use measure on October 1, 2016. Both measures are publicly available.

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In October 2015, the U.S. Government Accountability Office (“GAO”) released a report recommending that CMS continue to improve data and oversight of nursing home quality measures. The GAO found that although CMS collects several types of data that give some insight into the quality of nursing homes, the data could provide a clearer picture of nursing home quality if some underlying problems with the data ( i.e. , the use of self-reported data and non-standardized survey methodologies) are corrected. The GAO recommended, among other things, that CMS implement a clear plan for ongoing auditing of self-reported data and establish a process for monitoring oversight modifications to better assess their effects. According to the GAO, timely completion of these actions is particularly important because Medicare payments to nursing homes will be dependent on quality data, through the implementation of the value based purchasing program, starting in fiscal year 2019. HHS agreed with the GAO’s recommendations, and to the extent such recommendations are implemented, they could impact our operators and tenants.

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The majority of Medicare payments continue to be made through traditional Medicare Part A and Part B fee-for-service schedules. The Medicare and CHIP (Children’s Health Insurance Program) Reauthorization Act of 2015 (“MACRA”) addressed the risk of a Sustainable Growth Rate cut in Medicare payments for physician services. However, other annual Medicare payment regulations, particularly with respect to certain hospitals, skilled nursing care, and home health services, have resulted in lower net pay increases than providers of those services have often expected. In addition, MACRA established a multi-year transition into pay-for-quality approaches for Medicare physicians and other providers. This includes payment reductions for providers who do not meet government quality standards. The current Value-Based Payment Modifier program expired at the end of 2018, with the first Merit-based Incentive Payment System (“MIPS”) adjustments beginning in 2019. The continued implementation of pay-for-quality models is expected to produce funding disparities that could adversely impact some provider tenants in medical buildings and other healthcare properties.

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OIG has increased focus in recent years on billing practices by SNFs. In September 2015, OIG issued a report calling for reevaluation of the Medicare payment system for SNFs. In particular, OIG found that Medicare payments for therapy greatly exceeded SNFs’ costs for therapy, and that, under the current payment system, SNFs increasingly billed for the highest level of therapy even though key beneficiary characteristics remained largely the same. OIG determined that its findings demonstrated the need for CMS to reevaluate the Medicare SNF payment system, concluding that payment reform could save Medicare billions of dollars and encourage SNFs to provide services that are better aligned with beneficiaries’ care needs. OIG formulates a formal work plan each year for nursing centers. OIG’s most recent work plan indicates that among other things, OIG’s investigative and review focus in 2019 for nursing-facilities will include analysis of nursing facility staffing and review on inpatient claims subject to the post-acute care transfers policy. If followed, these reports and recommendations may impact our tenants. We cannot predict the likelihood, scope, or outcome of any such investigations on our tenants if these recommendations are implemented.

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In 2019, CMS will include the new long-term-stay hospitalization measurement that the agency began tracking in 2018 in its quality measures for the consumer-based Nursing Home Compare website. CMS also began posting the number of hours worked by a facility’s non-nursing staff in July, 2018 and, in October 2019, will resume posting the average number of citations per inspection for each state and the nation as a whole, which may affect each facility’s health inspection rating on the site. We cannot predict how this data will affect our tenants’ business.

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On July 29, 2016, CMS issued its final rule laying out the performance standards relating to preventable hospital readmissions from SNFs. The final rule includes the SNF 30-day All Cause Readmission Measure, which assesses the risk-standardized rates of all-cause, all conditions, unplanned inpatient readmissions for Medicare fee-for-service patients of SNFs within 30 days of discharge from admission to an inpatient prospective payment system (“IPPS”) hospital, critical access hospital (“CAH”), or psychiatric hospital. The final rule includes the SNF 30-Day Potentially Preventable Readmission Measure as the SNF all condition risk adjusted potentially preventable hospital readmission measure. This measure assesses the facility-level risk-standardized rate of unplanned, potentially preventable hospital readmissions for SNF patients within 30 days of discharge from a prior admission to an IPPS hospital, CAH, or psychiatric hospital. Hospital readmissions include readmissions to a short-stay acute-care hospital or CAH, with a diagnosis considered to be unplanned and potentially preventable.

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On September 16, 2016, CMS issued its final rule concerning emergency preparedness requirements for Medicare and Medicaid participating providers, including long-term care facilities and intermediate care facilities for individuals with intellectual disabilities. The rule is designed to ensure providers and suppliers have comprehensive and integrated emergency policies and procedures in place, in particular during natural and man-made disasters. Under the rule, facilities are required to (i) document risk assessment and emergency planning, (ii) develop and implement policies and procedures based on that risk assessment, (iii) develop and maintain an emergency preparedness communication plan in compliance with both federal and state law, and (iv) develop and maintain an emergency-preparedness training and testing program. Facilities were required to have been in compliance with these regulations by November 15, 2017. We cannot predict the impact of these regulations on our tenants.

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On February 8, 2018, President Trump signed into law the Bipartisan Budget Act of 2018 (the “BBA”) extending the reduction in Medicare provider payments commonly called the “sequestration.” This automatic payment reduction remains at 2% and applies to all Medicare physician claims and certain other claims, including physician-administered medications, submitted after April 1, 2013. Scheduled to expire in 2025, the BBA extended the sequestration through 2027.

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On July 31, 2018, CMS released its final rule outlining fiscal year 2019 Medicare payment rates and quality programs for SNFs. The policies in the final rule continue to shift Medicare payments from volume to value by implementing SNF Value-Based Purchasing program (“ VBP ”) and SNF Quality Reporting Program (“ QRP ”) . Additionally, effective October 1, 2019, CMS will be using the Patient Driven Payment Model (“ PDPM ”) , which focuses on the patient ’ s condition and resulting care needs rather than on the amount of care provided in order to determine Medicare payment. Based on changes contained within this final rule, CMS estimates that the fiscal year 2019 aggregate impact will be an increase of $820 million in Medicare payments to SNFs, resulting from the fiscal year 2019 SNF market basket update required to be 2.4% by the BBA. Absent the application of this statutory requirement, the fiscal year 2019 market basket update factor would have been 2.0 % which reflects the SNF fiscal year 2019 market basket index of 2.8 %, reduced by the multifactor productivity adjustment of 0.8 %. The effect of the 2019 PPS rate update on our tenants ’ revenues will be dependent upon their census and the mix of patients at the various PPS and PDPM pay rates. In addition, we cannot predict how future changes may impact reimbursement rates under the SNF PPS and PDPM system.

We are neither an ongoing participant in, nor a direct recipient of, any reimbursement under these programs with respect to our facilities. However, a significant portion of the revenue of the healthcare operators to which we lease and sublease properties is derived from governmentally-funded reimbursement programs, and any adverse change in such programs could negatively impact an operator’s ability to meet its obligations to us.

Environmental Regulation

As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters.

These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes, and, in certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. Although we do not currently operate or manage our properties, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of our current and former properties from which there is or has been an actual or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. Such costs typically are not limited by law or regulation and could exceed the property’s value. In addition, we may be liable for certain other costs, such as governmental fines and injuries to persons, property or natural resources, as a result of any such actual or threatened release.

Under the terms of our leases, we generally have a right to indemnification by the tenants of our properties for any contamination caused by them. However, there is no assurance that our tenants will have the financial capability or willingness to satisfy their respective indemnification obligations to us, and any failure, inability or unwillingness to do so may require us to satisfy the underlying environmental claims. In general, we have also agreed to indemnify our tenants against any environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, our properties at any time before the applicable lease commencement date.

We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations in 2017 or 2018.

Employees

As of December 31, 2018, we had 16 employees of which 11 were full-time employees (excluding facility-level employees related to the Company’s management services agreement for three facilities in Ohio).

Item 1A. Risk Factors

The following are certain risk factors that could affect our business, operations and financial condition. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. This section does not describe all risks applicable to our business, and we intend it only as a summary of certain material factors. If any of the following 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 the Series A Preferred Stock could decline.

Risks Related to Our Business

There is no assurance that the Company will be able to comply with, or otherwise modify, the requirements in the Pinecone Loan Documents, including the Second A&R Forbearance Agreement. If Pinecone elects to exercise its rights and remedies under the Pinecone Loan Documents with respect to any event of default, then it will have a material adverse effect on us and create substantial doubt about the Company’s ability to continue as a going concern.

On March 29, 2019, the Company and certain of its subsidiaries entered into the Second A&R Forbearance Agreement with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the Second A&R Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to the Specified Defaults under the Loan Agreement. The forbearance period under the Second A&R Forbearance Agreement commenced on March 29, 2019 and may extend as late as October 1, 2019, unless the forbearance period is earlier terminated as a result of specified termination events, including a default or event of default under the Loan Agreement (other than any Specified Defaults) or any failure by the Company or its subsidiaries to comply with the terms of the Second A&R Forbearance Agreement, including, without limitation, the Company’s obligation to progress with an Asset Sale in accordance with the timeline specified therein. Accordingly, the forbearance period under the Second A&R Forbearance Agreement may terminate at any time and there is no assurance such period will extend through October 1, 2019. The forbearance period under the Company’s prior forbearance agreement with Pinecone expired according to its terms on March 14, 2019.

As of such date, Pinecone will no longer be required to forbear from exercising its default-related rights and remedies with respect to the Specified Defaults and may exercise all of its rights and remedies with respect to the Pinecone Loan Documents at that time.

Upon the occurrence of an event of default (other than the Specified Defaults), or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement, Pinecone may declare the entire unpaid principal balance under the Pinecone Credit Facility, together with all accrued interest and other amounts payable to Pinecone thereunder, immediately due and payable. Subject to the terms of the Pinecone Loan Documents, Pinecone may foreclose on the collateral securing the Pinecone Credit Facility (the “Collateral”). The Collateral includes, among other things, the Facilities and all assets of the borrowers owning the Facilities, the leases associated with the Facilities and all revenue generated by the Facilities, and rights under a promissory note in the amount of $5.4 million, issued by Regional Health pursuant to the Pinecone Credit Facility in favor of one of its subsidiaries, which subsidiary is a borrower and guarantor under the Pinecone Credit Facility.

In addition, the equity interests in substantially all of Regional Health ’ s direct and indirect, wholly-owned subsidiaries (the “ Pledged Subsidiaries ” ) have been pledged to Pinecone as part of the Collateral. The assets and operations of the Pledged Subsidiaries constitute substantially all of the Company ’ s assets and operations. Upon the occurrence of an event of default (other than the Specified Defaults) or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement, Pinecone may, in addition to its other rights and remedies, remove any or all of the managers of the Pledged Subsidiaries and appoint its own representatives as manager s of such Pledged Subsidiaries. The assets and operations of the Pledged Subsidiaries constitute substantially all of the company’s assets and operations. If Pinecone elects to appoint its own representatives as managers of the Pledged Subsidiaries, then such managers would control such subsidiaries and their assets and operations and could potentially restrict or prevent such subsidiaries from paying dividends or distributions to Regional Health. As a holding company with no significant operations, Regional Health relies primarily on dividends and distributions from the Pledged Subsidiaries to meet its obligations and pay dividends on its capital stock (when and as declared by the Board.)

The Pinecone Loan Documents provide that Pinecone’s rights and remedies upon an event of default are cumulative, and that Pinecone may exercise (although it is not obligated to do so) all or any one or more of the rights and remedies available to it under the Pinecone Loan Documents or applicable law. The Company does not know which rights and remedies, if any, Pinecone may choose to exercise under the Pinecone Loan Documents upon the occurrence of an event of default (other than the Specified Defaults) or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement. If Pinecone elects to appoint its own representatives as managers of the Pledged Subsidiaries, to accelerate the indebtedness under the Pinecone Credit Facility, or to foreclose on significant assets of the Company (such as the Facilities and/or the equity interests in the Pledged Subsidiaries), then it will have a material adverse effect on the Company’s liquidity, cash flows, financial condition and results of operations, and the Company’s ability to continue operations will be materially jeopardized.

There is no assurance that the Company will be able to comply with the requirements in the Pinecone Loan Documents, including the Second A&R Forbearance Agreement, or otherwise modify the requirements thereof. Such compliance depends, in part, on the Company’s ability to obtain the cooperation of outside parties, which is not within the Company’s control. If Pinecone were to exercise its default-related rights and remedies under the Pinecone Credit Facility, then it will have a material adverse consequence on the Company’s ability to meet its obligations arising within the next twelve months, and create substantial doubt about the Company’s ability to continue as a going concern.

If we are unable to resolve our professional and general liability actions on terms acceptable to us, then it could have a material adverse effect on our business, financial condition and results of operation.

As of the date of filing this Annual Report, the Company is a defendant in 14 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. Two such actions are covered by insurance, except that any award of punitive damages would be excluded from such coverage and five 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.

The Company has self-insured against professional and general liability actions since it discontinued its healthcare operations in connection with the Transition. The Company established a self-insurance reserve for these professional and general liability claims, included within “ Accrued expenses and other ” in the Company ’ s audited consolidated balance sheets of $1.4 million and $5.1 million at December 31, 2018, and December 31, 2017, respectively. Additionally as of December 31, 2018 and December 31, 2017 approximately $0.6 million and $0.5 million was reserved for settlement amounts in “ Accounts payable ” in the Company ’ s consolidated balance sheets, and as of December 31, 2017, $0.2 million was reserved for settlement amounts in “ Other liabilities ” in the Company ’ s audited consolidated balance sheets. See Note 15 - Commitments and Contingencies to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data.” Also see “ Critical Accounting Policies - Self Insurance Reserve ” and “ Liquidity and Capital Resources - Cash Requirements ” in Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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.

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. The amount of the self-insurance reserve may increase, perhaps by a material amount, in any given period, particularly if the Company determines that it has probable exposure in one or more actions. If we are unable to resolve the pending actions on terms acceptable to us, then it could have a material adverse effect on our business, financial condition and results of operations. We have a history of operating losses and may incur losses in the future.

Our leases with tenants comprise our rental revenue and any failure, inability or unwillingness by these tenants to satisfy their obligations under our agreements could have a material adverse effect on us.

Our business depends upon our tenants meeting their obligations to us, including their obligations to pay rent, maintain certain insurance coverage, pay real estate and other taxes and maintain and repair the leased properties. We cannot assure you that these tenants will have sufficient assets, income and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by these tenants to do so could have a material adverse effect on us. In addition, any failure by these tenants to effectively conduct their operations or to maintain and improve our properties could adversely affect their business reputation and their ability to attract and retain patients and residents in our properties, which could have a material adverse effect on us. Our tenants have agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses, and we cannot assure you that our tenants will have sufficient assets, income, access to financing and insurance coverage to enable them to satisfy their respective indemnification obligations.

We depend on affiliates of C.R Management and Aspire 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 25 properties (excluding the three facilities that are managed by us) are operated by a total of 25 separate tenants, with each of our tenants being affiliated with one of eight 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 Aspire, each operating (through a group of affiliated tenants) eight and five facilities, respectively. We, therefore depend, on tenants who are affiliated with C.R Management and Aspire for a significant portion of our revenues. We cannot assure you that the tenants affiliated with C.R Management and Aspire 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 applicable leases and subleases, and any inability or unwillingness by such tenants to do so could have a material adverse effect on us.

A prolonged economic slowdown could adversely impact the results of operations of our tenants, which could impair their ability to meet their obligations to us.

We believe the risks associated with our investments will be more acute during periods of economic slowdown or recession (such as the most recent recession) due to the adverse impact caused by various factors, including inflation, deflation, increased unemployment, volatile energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market, a distressed real estate market, market volatility and weakened business and consumer confidence. This difficult operating environment caused by an economic slowdown or recession could have an adverse impact on the ability of our tenants to maintain occupancy rates, which could harm their financial condition. Any sustained period of increased payment delinquencies, foreclosures or losses by our tenants could adversely affect our income from investments in our portfolio.

Increased competition, as well as increased operating costs, could result in lower revenues for some of our tenants and may affect their ability to meet their obligations to us.

The long-term care industry is highly competitive, and we expect that it will become more competitive in the future. Our tenants are competing with numerous other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. Our tenants compete on a number of different levels, including the quality of care provided, reputation, the physical appearance of a facility, price, the range of services offered, family preference, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location and the size and demographics of the population in the surrounding areas. We cannot be certain that the tenants of all of our facilities will be able to achieve occupancy and rate levels that will enable them to meet all of their obligations to us. Our tenants may encounter increased competition in the future that could limit their ability to attract patients or residents or expand their businesses and, therefore, affect their ability to make their lease payments.

In addition, the market for qualified nurses, healthcare professionals and other key personnel is highly competitive, and our tenants may experience difficulties in attracting and retaining qualified personnel. Increases in labor costs due to higher wages and greater benefits required to attract and retain qualified healthcare personnel incurred by our tenants could affect their ability to meet their obligations to us. This situation could be particularly acute in certain states that have enacted legislation establishing minimum staffing requirements.

Disasters and other adverse events may seriously harm our business.

Our facilities and our business may suffer harm as a result of natural or man-made disasters such as storms, earthquakes, hurricanes, tornadoes, floods, fires, terrorist attacks and other conditions. The impact, or impending threat, of such events may require that our tenants evacuate one or more facilities, which could be costly and would involve risks, including potentially fatal risks, for their patients. The impact of disasters and similar events is inherently uncertain. Such events could harm our tenants’ patients and employees, severely damage or destroy one or more of our facilities, harm our tenants’ business, reputation and financial performance, or otherwise cause our tenants’ businesses to suffer in ways that we currently cannot predict.

A severe cold and flu season, epidemics, or any other widespread illnesses could adversely affect the occupancy of our tenants’ facilities.

Our and our tenants’ revenues are dependent upon occupancy. It is impossible to predict the severity of the cold and flu season or the occurrence of epidemics or any other widespread illnesses. The occupancy of our skilled nursing and assisted living facilities could significantly decrease in the event of a severe cold and flu season, an epidemic, or any other widespread illness. Such a decrease could affect the operating income of our tenants and the ability of our tenants to make payments to us.

The bankruptcy, insolvency or financial deterioration of our tenants could limit or delay our ability to collect unpaid rents or require us to find new tenants.

We are exposed to the risk that a distressed tenant may not be able to meet its obligations to us or other third parties. This risk is heightened during a period of economic or political instability. We are also exposed to increased risk in situations where we lease multiple properties to a single tenant (or affiliated tenants) under a master lease, as a tenant failure or default could reduce or eliminate rental revenue from multiple properties. If tenants are unable to comply with the terms of their leases, then we may be forced to modify the leases in ways that are unfavorable to us. Alternatively, the failure of a tenant to perform under a lease could require us to declare a default, repossess the property, find a suitable replacement tenant, hire third-party managers to operate the property or sell the property. There is no assurance that we would be able to lease a property on substantially equivalent or better terms than the prior lease, or at all, find another qualified tenant, successfully reposition the property for other uses or sell the property on terms that are favorable to us. It may be more difficult to find a replacement tenant for a healthcare property than it would be to find a replacement tenant for a general commercial property due to the specialized nature of the business. Even if we are able to find a suitable replacement tenant for a property, transfers of operations of skilled nursing facilities and assisted living facilities are subject to regulatory approvals not required for transfers of other types of commercial operations, which may affect our ability to successfully transition a property.

If any lease expires or is terminated, then we could be responsible for all of the operating expenses for that property until it is leased again or sold. If a significant number of our properties are unleased, then our operating expenses could increase significantly. Any significant increase in our operating costs may have a material adverse effect on our business, financial condition and results of operations, and our ability to pay dividends to our shareholders. Furthermore, to the extent we operate such property for an indeterminate amount of time, we would be subject to the various risks our tenants assume as operators and potentially fail to qualify as a REIT in any given year.

Although each of our lease agreements typically provides us with, or will provide us with, the right to terminate, evict a tenant, foreclose on our collateral, demand immediate payment and exercise other remedies upon the bankruptcy or insolvency of a tenant, the law relating to bankruptcy as codified and enacted as Title 11 of the United States Code (the “Bankruptcy Code”) would limit or, at a minimum, delay our ability to collect unpaid pre-bankruptcy rents and to pursue other remedies against a bankrupt tenant. A bankruptcy filing by one of our tenants would typically prevent us from collecting unpaid pre-bankruptcy rents or evicting the tenant absent approval of the bankruptcy court. The Bankruptcy Code provides a tenant with the option to assume or reject an unexpired lease within certain specified periods of time. Generally, a lessee is required to pay all rent that becomes payable between the date of its bankruptcy filing and the date of the assumption or rejection of the lease (although such payments will likely be delayed as a result of the bankruptcy filing). Any tenant that chooses to assume its lease with us must cure all monetary defaults existing under the lease (including payment of unpaid pre-bankruptcy rents) and provide adequate assurance of its ability to perform its future obligations under the lease. Any tenant that opts to reject its lease with us would face a claim by us for unpaid and future rents payable under the lease, but such claim would be subject to a statutory “cap” and would generally result in a recovery substantially less than the face value of such claim. Although the tenant’s rejection of the lease would permit us to recover possession of the leased facility, we would likely face losses, costs and delays associated with re-leasing the facility to a new tenant.

Several other factors could impact our rights under leases with bankrupt tenants. First, the tenant could seek to assign its lease with us to a third party. The Bankruptcy Code generally disregards anti-assignment provisions in leases to permit the assignment of unexpired leases to third parties (provided all monetary defaults under the lease are cured and the third party can demonstrate its ability to perform its obligations under the lease). Second, in instances in which we have entered into a master lease agreement with a tenant that operates more than one facility, the bankruptcy court could determine that the master lease was comprised of separate, divisible leases (each of which could be separately assumed or rejected), rather than a single, integrated lease (which would have to be assumed or rejected in its entirety). Finally, the bankruptcy court could recharacterize our lease agreement as a disguised financing arrangement, which could require us to receive bankruptcy court approval to foreclose or pursue other remedies with respect to the facility.

We give no assurance that our current tenants will not undergo bankruptcy, insolvency or financial deterioration that could have a material adverse effect our business, financial condition and results of operations.

If we must replace any of our tenants, we might be unable to rent the properties on as favorable terms, or at all, and we could be subject to delays, limitations and expenses, which could have a material adverse effect on us.

We cannot predict whether our tenants will renew existing leases beyond their current term. If any of our triple-net leases are not renewed, we would attempt to rent those properties to another tenant. In addition, following expiration of a lease term or if we exercise our right to replace a tenant in default, rental payments on the related properties could decline or cease altogether while we reposition the properties with a suitable replacement tenant. We also might not be successful in identifying suitable replacements or entering into leases or other arrangements with new tenants on a timely basis or on terms as favorable to us as our current leases, if at all, and we may be required to fund certain expenses and obligations (e.g., real estate and bed taxes, and maintenance expenses) to preserve the value of, and avoid the imposition of liens on, our properties while they are being repositioned. In addition, we may incur certain obligations and liabilities, including obligations to indemnify the replacement tenant, which could have a material adverse effect on us.

In the event of non-renewal or a tenant default, our ability to reposition our properties with a suitable replacement tenant could be significantly delayed or limited by state licensing, receivership, CON or other laws, as well as by the Medicare and Medicaid change-of-ownership rules, and we could incur substantial additional expenses in connection with any licensing, receivership or change-of-ownership proceedings. Our ability to locate and attract suitable replacement tenants also could be impaired by the specialized healthcare uses or contractual restrictions on use of the properties, and we may be forced to spend substantial amounts to adapt the properties to other uses. Any such delays, limitations and expenses could adversely impact our ability to collect rent, obtain possession of leased properties or otherwise exercise remedies for tenant default and could have a material adverse effect on us.

Moreover, in connection with certain of our properties, we have entered into intercreditor agreements with the tenants’ lenders or tri-party agreements with our lenders. Our ability to exercise remedies under the applicable leases or to reposition the applicable properties may be significantly delayed or limited by the terms of the intercreditor agreement or tri-party agreement. Any such delay or limit on our rights and remedies could adversely affect our ability to mitigate our losses and could have a material adverse effect on us.

Our tenants may be subject to significant legal actions that could result in their increased operating costs and substantial uninsured liabilities, which may affect their ability to meet their obligations to us.

As is typical in the long term care industry, our tenants may be subject to claims for damages relating to the services that they provide. We give no assurance that the insurance coverage maintained by our tenants will cover all claims made against them or continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages may not, in certain cases, be available to operators due to state law prohibitions or limitations of availability. As a result, our tenants doing business in these states may be liable for punitive damage awards that are either not covered by their insurance or are in excess of their insurance policy limits.

We also 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. The OIG, the enforcement arm of the Medicare and Medicaid programs, formulates a formal work plan each year for nursing centers. The OIG’s most recent work plan indicates that, among other things, the OIG’s investigative and review focus in 2017 for nursing facilities will include complaint investigations by state agencies, unreported incidents of potential abuse and neglect, reimbursement, background checks, compliance with prospective payment requirements, and potentially avoidable hospitalizations. We cannot predict the likelihood, scope or outcome of any such investigations and reviews with respect to our facilities or our tenants. Insurance is not available to our tenants to cover such losses. Any adverse determination in a legal proceeding or governmental investigation, whether currently asserted or arising in the future, could have a material adverse effect on a tenant’s financial condition. If a tenant is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant is required to pay uninsured punitive damages, or if a tenant is subject to an uninsurable government enforcement action, then such tenant could be exposed to substantial additional liabilities. Such liabilities could adversely affect a tenant’s ability to meet its obligations to us.

In addition, we may, in some circumstances, be named as a defendant in litigation involving the services provided by our tenants. Although we generally have no involvement in the services provided by our tenants, and our standard lease agreements generally require (or will require) our tenants to indemnify us and carry insurance to cover us in certain cases, a significant judgment against us in such litigation could exceed our and our tenants’ insurance coverage, which would require us to make payments to cover any such judgment.

Our tenants may be sued under a federal whistleblower statute.

Our tenants who engage in business with the federal government may be sued under a federal whistleblower statute designed to combat fraud and abuse in the healthcare industry. See “Governmental Regulation-Healthcare Regulation” in Part I, Item 1, “Business” in this Annual Report. These lawsuits can involve significant monetary damages and award bounties to private plaintiffs who successfully bring these suits. If any of these lawsuits were brought against our tenants, such suits combined with increased operating costs and substantial uninsured liabilities could have a material adverse effect on our tenants’ liquidity, financial condition and results of operations and on their ability to satisfy their obligations under our leases, which, in turn, could have a material adverse effect on us.

The amount and scope of insurance coverage provided by policies maintained by our tenants may not adequately insure against losses.

We maintain or require in our leases that our tenants maintain all applicable lines of insurance on our properties and their operations. Although we regularly review the amount and scope of insurance maintained by our tenants and believe the coverage provided to be customary for similarly situated companies in our industry, we cannot assure you that our tenants will continue to be able to maintain adequate levels of insurance. We also cannot assure you that our tenants will maintain the required coverages, that we will continue to require the same levels of insurance under our leases, that such insurance will be available at a reasonable cost in the future or that the policies maintained will fully cover all losses on our properties upon the occurrence of a catastrophic event, nor can we make any guaranty as to the future financial viability of the insurers that underwrite the policies maintained by our tenants.

For various reasons, including to reduce and manage costs, many healthcare companies utilize different organizational and corporate structures coupled with captive programs that may provide less insurance coverage than a traditional insurance policy. Companies that insure any part of their general and professional liability risks through their own captive limited purpose entities generally estimate the future cost of general and professional liability through actuarial studies that rely primarily on historical data. However, due to the rise in the number and severity of professional claims against healthcare providers, these actuarial studies may underestimate the future cost of claims, and reserves for future claims may not be adequate to cover the actual cost of those claims. As a result, the tenants of our properties who self-insure could incur large funded and unfunded general and professional liability expenses, which could materially adversely affect their liquidity, financial condition and results of operations and, in turn, their ability to satisfy their obligations to us. If tenants of our properties decide to implement a captive or self-insurance program, any large funded and unfunded general and professional liability expenses incurred could have a material adverse effect on us.

Should an uninsured loss or a loss in excess of insured limits occur, we could incur substantial liability or lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenues from the property. Following the occurrence of such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. We cannot assure you that material uninsured losses, or losses in excess of insurance proceeds, will not occur in the future.

Failure by our tenants to comply with various local, state and federal government regulations may adversely impact their ability to make lease payments to us.

Healthcare operators are subject to numerous federal, state and local laws and regulations, including those described below, that are subject to frequent and substantial changes (sometimes applied retroactively) resulting from new legislation, adoption of rules and regulations, and administrative and judicial interpretations of existing law. Although we cannot accurately predict the ultimate timing or effect of these changes, such changes could have a material effect on our tenants’ costs of doing business and on the amount of reimbursement by both government and other third-party payors. The failure of any of our tenants to comply with these laws, requirements and regulations could adversely affect its ability to meet its obligations to us.

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Healthcare Reform . The Healthcare Reform Law, which was signed into law in March 2010, represents the most comprehensive change to healthcare benefits since the inception of the Medicare program in 1965 and affects reimbursement for governmental programs, private insurance and employee welfare benefit plans in various ways. Among other things, the Healthcare Reform Law expands Medicaid eligibility, requires most individuals to have health insurance, establishes new regulations for health plans, creates health insurance exchanges, and modifies certain payment systems to encourage more cost-effective care and a reduction of inefficiencies and waste, including through new tools to address fraud and abuse. We cannot accurately predict the impact of the Healthcare Reform Law on our tenants or their ability to meet their obligations to us.

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Reimbursement; Medicare and Medicaid . A significant portion of the revenue of the healthcare operators to which we lease, or will lease, properties is, or will be, derived from governmentally-funded reimbursement programs, primarily Medicare and Medicaid. Failure to maintain certification in these programs would result in a loss of funding from such programs and could negatively impact an operator’s ability to meet its obligations to us.

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Quality of Care Initiatives . CMS has implemented a number of initiatives focused on the quality of care provided by nursing homes that could affect our tenants. Any unsatisfactory rating of our tenants under any rating system promulgated by the CMS could result in the loss of patients or residents or lower reimbursement rates, which could adversely impact their revenues and our business.

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Licensing and Certification . Healthcare operators are subject to various federal, state, and local licensing and certification laws and regulations, including laws and regulations under Medicare and Medicaid requiring operators to comply with extensive standards governing operations. Many of our properties may require a license, registration, and/or CON to operate. State and local laws also may regulate the expansion , including the addition of new beds or services or acquisition of medical equipment, and the construction or renovation of health care facilities, by requiring a CON or other similar approval from a state agency. Governmental agencies administering these laws and regulations regularly inspect facilities and investigate complaints. Failure to obtain any required licensure, certification, or CON, the loss or suspension of any required licensure, certification, or CON, or any violations or deficiencies with respect to relevant operating standards may require a facility to cease operations or result in ineligibility for reimbursement until the necessary licenses, certifications, or CON are obtained or reinstated or until any such violations or deficiencies are cured. In such event, our revenues from leasing these facilities could be indirectly reduced or eliminated for an extended period of time or permanently.

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Fraud and Abuse Laws and Regulations . There are various federal and state civil and criminal laws and regulations governing a wide array of healthcare provider referrals, relationships, and arrangements, including laws and regulations prohibiting fraud by healthcare providers. In addition, the Stark Law broadly defines the scope of prohibited physician referrals under federal health care programs to providers with which they have ownership or other financial arrangements. Many states have adopted, or are considering, legislative proposals similar to these laws, some of which extend beyond federal health care programs, to prohibit the payment or receipt of remuneration for the referral of patients and physician referrals regardless of the source of the payment for the care. Many of these complex laws raise issues that have not been clearly interpreted by the relevant governmental authorities and courts. We cannot assure you that governmental officials charged with responsibility for enforcing the provisions of these laws and regulations will not assert that one or more arrangements involving our tenants are in violation of the provisions of such laws and regulations. In addition, federal and state governments are devoting increasing attention and resources to anti-fraud initiatives against healthcare providers. The violation of any of these laws or regulations by any of our tenants may result in the imposition of fines or other penalties, including exclusion from Medicare, Medicaid and all other federal and state healthcare programs. Such fines or penalties could jeopardize a tenant’s ability to make lease payments to us or to continue operating its facility.

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Privacy Laws . Healthcare operators are subject to federal, state and local laws and regulations designed to protect the privacy and security of patient health information. These laws and regulations require operators to expend the requisite resources to protect and secure patient health information, including the funding of costs associated with technology upgrades. Operators found in violation of these laws may face large penalties. In addition, compliance with an operator’s notification requirements in the event of a breach of unsecured protected health information could cause reputational harm to an operator’s business. Such penalties and damaged reputation could adversely affect a tenant’s ability to meet its obligations to us.

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Other Laws . Other federal, state and local laws and regulations affect how our tenants conduct their business. We cannot accurately predict the effect that the costs of complying with these laws may have on the revenues of our tenants and, thus, their ability to meet their obligations to us.

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Legislative and Regulatory Developments . Each year, legislative and regulatory proposals are introduced at the federal, state and local levels that, if adopted, would result in major changes to the healthcare system in addition to those described herein. We cannot accurately predict whether any proposals will be adopted and, if adopted, what effect (if any) these proposals would have on our tenants or our business.

Our tenants may be adversely affected by healthcare regulation and enforcement.

Regulation of the long-term healthcare industry generally has intensified over time both in the number and type of regulations and in the efforts to enforce those regulations. This is particularly true for large for-profit, multi-facility providers. Federal, state, and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, qualified beneficiaries, quality of care, patient rights, fraudulent or abusive behavior, data privacy and security, and financial and other arrangements that may be entered into by healthcare providers. In addition, changes in enforcement policies by federal and state governments have resulted in an increase in the number of inspections, citations of regulatory deficiencies, and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties, and even criminal penalties. We are unable to predict the scope of future federal, state, and local regulations and legislation, including the Medicare and Medicaid statutes and regulations, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory framework could have a material adverse effect on our tenants, operators, and managers, which, in turn, could have a material adverse effect on us.

If our tenants fail to comply with the extensive laws, regulations, and other requirements applicable to their businesses and the operation of our properties, they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties, or be required to make significant changes to their operations. Our tenants also could face increased costs related to healthcare regulation, such as the Healthcare Reform Law, or be forced to expend considerable resources in responding to an investigation or other enforcement action under applicable laws or regulations. In such event, the results of operations and financial condition of our tenants and the results of operations of our properties operated or managed by those entities could be adversely affected, which, in turn, could have a material adverse effect on us.

The impact of healthcare reform legislation on our tenants cannot be accurately predicted.

The health care industry in the United States is subject to fundamental changes due to ongoing health care reform efforts and related political, economic, and regulatory influences. Notably, the Healthcare Reform Law resulted in expanded health care coverage to millions of previously uninsured people beginning in 2014 and has resulted in significant changes to the U.S. health care system. To help fund this expansion, the Healthcare Reform Law outlines certain reductions in Medicare reimbursements for various health care providers, including skilled nursing facilities, as well as certain other changes to Medicare payment methodologies.

Several provisions of the Healthcare Reform Law affect Medicare payments to skilled nursing facilities, including provisions changing Medicare payment methodology and implementing value-based purchasing and payment bundling. Although we cannot accurately predict how all of these provisions may be implemented, or the effect any such implementation would have on our tenants or our business, the Healthcare Reform Law could result in decreases in payments to our tenants, increase our tenants’ costs, or otherwise adversely affect the financial condition of our tenants, thereby negatively impacting their ability to meet their obligations to us.

The Healthcare Reform Law also requires skilled nursing facilities to have a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations and in promoting quality of care. If our tenants fall short in their compliance and ethics programs and quality assurance and performance improvement programs, then, in addition to facing regulatory sanctions, their reputations and ability to attract residents could be adversely affected.

This comprehensive health care legislation has resulted and will continue to result in extensive rulemaking by regulatory authorities, and also may be altered or amended. It is difficult to predict the full impact of the Healthcare Reform Law due to the complexity of the law and implementing regulations, as well our inability to foresee how CMS and other participants in the health care industry will respond to the choices available to them under the law. We also cannot accurately predict whether any new or pending legislative proposals will be adopted or, if adopted, what effect, if any, these proposals would have on our tenants’ business. Similarly, while we can anticipate that some of the rulemaking that will be promulgated by regulatory authorities will affect our tenants and the manner in which they are reimbursed by the federal health care programs, we cannot accurately predict today the impact of those regulations on their business and therefore on our business. The provisions of the legislation and other regulations implementing the provisions of the Healthcare Reform Law may increase our tenants’ costs or otherwise adversely affect the financial condition of our tenants, thereby negatively impacting their ability to meet their obligations to us.

Other legislative changes have been proposed and adopted since the Healthcare Reform Law was enacted that also may impact our business. For instance, on April 1, 2014, President Obama signed the Protecting Access to Medicare Act of 2014, which, among other things, has required CMS to measure, track, and publish readmission rates of skilled nursing facilities by 2017 and implement a value-based purchasing program for skilled nursing by October 1, 2018. The SNF VBP will increase Medicare reimbursement rates for skilled nursing facilities that achieve certain levels-of-quality performance measures to be developed by CMS, relative to other facilities. The value-based payments authorized by the SNF VBP will be funded by reducing Medicare payment for all skilled nursing facilities by 2% and redistributing up to 70% of those funds to high-performing skilled nursing facilities. If Medicare reimbursement provided to our tenants is reduced under the SNF VBP Program, that reduction may have an adverse impact on the ability of our tenants to meet their obligations to us.

Our tenants depend on reimbursement from governmental and other third-party payors, and reimbursement rates from such payors may be reduced.

Changes in the reimbursement rate or methods of payment from third-party payors, including the Medicare and Medicaid programs, or the implementation of other measures to reduce reimbursements for services provided by our tenants could result in a substantial reduction in the revenues and operating margins of our tenants. Significant limits on the scopes of services reimbursed and on reimbursement rates could have a material adverse effect on the results of operations and financial condition of our tenants, which could cause their revenues to decline and could negatively impact their ability to meet their obligations to us.

Additionally, net revenue realizable under third-party payor agreements can change after examination and retroactive adjustment by payors during the claims settlement processes or as a result of post-payment audits. Payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable, additional documentation is necessary, or certain services were not covered or were not medically necessary. New legislative and regulatory proposals could impose further limitations on government and private payments to healthcare providers. In some cases, states have enacted or are considering enacting measures designed to reduce Medicaid expenditures and to make changes to private healthcare insurance. No assurance is given that adequate third-party payor reimbursement levels will continue to be available for the services provided by our tenants.

The Healthcare Reform Law provides those states that expand their Medicaid coverage to otherwise eligible state residents with incomes at or below 138% of the federal poverty level with an increased federal medical assistance percentage that became effective January 1, 2014, if certain conditions are met. On June 28, 2012, the United States Supreme Court upheld the individual mandate of the Healthcare Reform Laws but partially invalidated the expansion of Medicaid. The ruling on Medicaid expansion allows states to elect not to participate in the expansion—and to forego funding for the Medicaid expansion—without losing their existing Medicaid funding. Given that the federal government substantially funds the Medicaid expansion, it is unclear how many states will ultimately pursue this option, although, as of early 2019, roughly three-quarters of the states have expanded Medicaid coverage in some form. The participation by states in the Medicaid expansion could have the dual effect of increasing our tenants’ revenues, through new patients, but further straining state budgets and their ability to pay our tenants. While the federal government paid for approximately 100% of those additional costs through 2016, states have been responsible for part of those additional costs since 2017. In light of this, at least one state that has passed legislation to allow the state to expand its Medicaid coverage has included sunset provisions in the legislation that require that the expanded benefits be reduced or eliminated if the federal government’s funding for the program is decreased or eliminated, permitting the state to re-visit the issue once it begins to share financial responsibility for the expansion. With increasingly strained budgets, it is unclear how states that do not include such sunset provisions will pay their share of these additional Medicaid costs and what other health care expenditures could be reduced as a result. A significant reduction in other health care related spending by states to pay for increased Medicaid costs could affect our tenants’ revenue streams.

Furthermore, on December 22, 2017, the Tax Cuts and Jobs Act was enacted and signed into law that repealed the individual mandate in the Patient Protection and Affordable Care Act. Because the Supreme Court’s 2012 decision finding the Healthcare Reform Law constitutional was grounded, at least in part, on the inclusion of the individual mandate in the law, a federal court found the entire law unconstitutional upon the mandate’s repeal. While the Healthcare Reform Law remains in place pending appeal, there is a high degree of uncertainty regarding the future of the law.

Executive orders with regard to the Healthcare Reform Law, may have unforeseen consequences.

In the absence of legislation repealing the Healthcare Reform Law, President Trump issued an executive order on October 12, 2017 directing federal agencies to reevaluate regulations and guidance associated with the Healthcare Reform Law. The effects of this executive order are unknown and it is possible that additional executive orders related to the Healthcare Reform Law may be issued. Because of the continued uncertainty about the implementation of the Healthcare Reform Law, including the potential for further legal challenges or repeal of that legislation, we cannot quantify or predict with any certainty the likely impact of the Healthcare Reform Law or its repeal on our tenants and, thus, their ability to meet their obligations to us. We also anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and adopt legislative or policy changes or implementations affecting additional fundamental changes in the healthcare delivery system. We cannot provide assurances as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the impact of any such potential legislative or policy changes on our tenants and, thus, their ability to meet their obligations to us.

Government budget deficits could lead to a reduction in Medicare and Medicaid reimbursement.

Many states are focusing on the reduction of expenditures under their Medicaid programs, which may result in a reduction in reimbursement rates for our tenants. These potential reductions could be compounded by the potential for federal cost-cutting efforts that could lead to reductions in reimbursement to our tenants under both the Medicare and Medicaid programs. Reductions in Medicare and Medicaid reimbursement to our tenants could reduce the cash flow of our tenants and their ability to make rent payments to us. The need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in Medicaid due to unemployment and declines in family incomes. Because the Healthcare Reform Law allows states to increase the number of people who are eligible for Medicaid and simplifies enrollment in this program, Medicaid enrollment may significantly increase in the future. Since our tenants’ profit margins with respect to Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement and an increase in the number of Medicaid patients could place some tenants in financial distress, which, in turn, could adversely affect us. If funding for Medicare or Medicaid is reduced, this could have a material adverse effect on our tenants’ results of operations and financial condition, which could adversely affect their ability to meet their obligations to us.

Changes in the reimbursement rates or methods of payment from third-party payors, including insurance companies and the Medicare and Medicaid programs, could have a material adverse effect on our tenants.

Our tenants rely on reimbursement from third-party payors, including the Medicare (both traditional Medicare and “managed” Medicare/Medicare Advantage) and Medicaid programs, for substantially all of their revenues. Federal and state legislators and regulators have adopted or proposed various cost-containment measures that would limit payments to healthcare providers, and budget crises and financial shortfalls have caused states to implement or consider Medicaid rate freezes or cuts. Private third-party payors also have continued their efforts to control healthcare costs. We cannot assure you that our tenants who currently depend on governmental or private payor reimbursement will be adequately reimbursed for the services they provide. Significant limits by governmental and private third-party payors on the scope of services reimbursed or on reimbursement rates and fees, whether from statutory and regulatory changes, retroactive rate adjustments, recovery of program overpayments or set-offs, court decisions, administrative rulings, policy interpretations, payment or other delays by fiscal intermediaries or carriers, government funding restrictions (at a program level or with respect to specific facilities), and interruption or delays in payments due to any ongoing government investigations and audits at such property, or private payor efforts, could have a material adverse effect on the liquidity, financial condition, and results of operations of certain of our tenants, which could affect adversely their ability to comply with the terms of our leases and have a material adverse effect on us.

Unforeseen costs associated with the acquisition of new healthcare properties could reduce our profitability.

Our business strategy contemplates future acquisitions that may not prove to be successful. For example, we might encounter unanticipated difficulties and expenditures relating to our acquired healthcare properties, including contingent liabilities, or our newly acquired healthcare properties might require significant management attention that would otherwise be devoted to our ongoing business. Such costs may negatively affect our results of operations.

Our real estate investments are relatively illiquid.

Real estate investments are relatively illiquid and generally cannot be sold quickly. In addition, all of our owned healthcare properties serve as collateral for our secured debt obligations and may not be readily sold. Additional factors that are specific to our industry also tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. For example, all of our healthcare properties are “special purpose” properties that cannot be readily converted into general residential, retail or office use. In addition, transfers of operations of skilled nursing facilities, assisted living facilities and other healthcare facilities are subject to regulatory approvals not required for transfers of other types of commercial operations and other types of real estate. Thus, if the operation of any of our healthcare properties becomes unprofitable due to competition, age of improvements or other factors such that a tenant becomes unable to meet its obligations to us, then the liquidation value of the property may be substantially less, particularly relative to the amount owing on any related mortgage loan, than would be the case if the property were readily adaptable to other uses. Furthermore, the receipt of liquidation proceeds or the replacement of a tenant that has defaulted on its lease could be delayed by the approval process of any federal, state or local agency necessary for the transfer of the property or the replacement of the tenant with a new tenant licensed to manage the facility. In addition, certain significant expenditures associated with real estate investment, such as real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment. Should such events occur, our revenues would be adversely affected.

As an owner with respect to real property, we may be exposed to possible environmental liabilities.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner of real property, such as us, may be liable in certain circumstances for the costs of investigation, removal or remediation of, or related releases of, certain hazardous or toxic substances at, under or disposed of in connection with such property, as well as certain other potential costs relating to hazardous or toxic substances, including government fines and damages for injuries to persons and adjacent property. Such laws often impose liability regardless of the owner’s knowledge of, or responsibility for, the presence or disposal of such substances. As a result, liability may be imposed on the owner in connection with the activities of an operator of the property.

The cost of any required investigation, remediation, removal, fines or personal or property damages and the owner’s liability therefor could exceed the value of the property and the assets of the owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect an operator’s ability to attract additional patients or residents and our ability to sell or rent such property or to borrow using such property as collateral which, in turn, could negatively impact our revenues.

The industry in which we operate is highly competitive.

Our business is highly competitive, and we expect that it may become more competitive in the future. We compete for healthcare facility investments with other healthcare investors, many of which have greater resources and lower costs of capital than we do. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our investment criteria. If we cannot identify and purchase a sufficient number of healthcare facilities at favorable prices, or if we are unable to finance such acquisitions on commercially favorable terms, our business, results of operations and financial condition may be materially adversely affected. In addition, if our cost of capital should increase relative to the cost of capital of our competitors, the spread that we realize on our investments may decline if competitive pressures limit or prevent us from charging higher lease rates.

The geographic concentration of our facilities could leave us vulnerable to an economic downturn or adverse regulatory changes in those areas.

Our properties are located in six states, with concentrations in Georgia and Ohio. As a result of this concentration, the conditions of local economies and real estate markets, changes in governmental rules, regulations and reimbursement rates or criteria, changes in demographics, state funding, acts of nature and other factors that may result in a decrease in demand and reimbursement for skilled nursing services in these states could have a disproportionately adverse effect on our tenants’ revenue, costs and results of operations, which may affect their ability to meet their obligations to us.

If we lose our key management personnel, we may not be able to successfully manage our business or achieve our objectives, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are dependent on our management team, and our future success depends largely upon the management experience, skill, and contacts of our management and the loss of any of our key management team could harm our business. If we lose the services of any or all of our management team, we may not be able to replace them with similarly qualified personnel, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our directors and officers substantially control all major decisions.

Our directors and officers beneficially own a significant number of shares of our outstanding common stock. Therefore, our directors and officers will be able to influence major corporate actions required to be voted on by shareholders, such as the election of directors, the amendment of our charter documents and the approval of significant corporate transactions such as mergers, reorganizations, sales of substantially all of our assets and liquidation. Furthermore, our directors will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and incur indebtedness. This control may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in their best interests.

Risks Related to Potential REIT Election

As previously discussed, the Board is in the process of evaluating the feasibility of the Company in the future qualifying for and electing status as a REIT under the Code. If the Board determines for any future taxable year, after further consideration and evaluation, that the Company qualifies as a REIT under the Code and that electing status as a REIT under the Code would be in the best interests of the Company and its shareholders, then there would be certain risks we would face if we subsequently elected REIT status, including the risks set forth below under this “- Risks Related to REIT Election” section. The applicability of these risks assumes that: (i) we would qualify in a future taxable year as a REIT under the Code; (ii) the Board determines that electing status as a REIT under the Code is in the best interests of the Company and its shareholders; and (iii) we subsequently elect status as a REIT under the Code.

Complying with the REIT requirements may cause us to liquidate assets or hinder our ability to pursue otherwise attractive asset acquisition opportunities.

To qualify as a REIT for federal income tax purposes, we would need to continually satisfy tests concerning, among other things, the nature and diversification of our assets, the sources of our income and the amounts we distribute to our shareholders. For example, to qualify as a REIT, we would need to ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code), including certain mortgage loans and securities. The remainder of our investments (other than government securities, qualified real estate assets and securities issued by any taxable REIT subsidiary (“TRS”)) generally could not include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a TRS) could consist of the securities of any one issuer, and no more than 20% of the value of our total assets could be represented by securities of one or more TRSs. If we were to elect as a REIT under the Code and subsequently we fail to comply with these requirements at the end of any calendar quarter, then we would need to correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we could be required to liquidate assets.

In addition to the asset tests set forth above, to qualify and be subject to tax as a REIT, we would generally be required, after the utilization of any available federal net operating loss carryforwards, to distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain) each year to our shareholders. If we were to elect as a REIT under the Code, any determination as to the timing or amount of future dividends would be based on a number of factors, including investment opportunities and the availability of our existing federal net operating loss carryforwards. If we were to elect as a REIT under the Code, and to the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our REIT taxable income (after the application of available federal net operating loss carryforwards, if any), we would be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we would be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders for a calendar year is less than a minimum amount specified under the Code. These distribution requirements could hinder our ability to pursue otherwise attractive asset acquisition opportunities. Furthermore, if we were to elect as a REIT under the Code, our ability to compete for acquisition opportunities in domestic markets may be adversely affected if we were to need, or require, the target company to comply with certain REIT requirements. These actions could have the effect of reducing our income, amounts available for distribution to our shareholders and amounts available for making payments on our indebtedness.

Qualifying as a REIT involves highly technical and complex provisions of the Code. If we were to elect as a REIT under the Code, and we fail to qualify as a REIT or fail to remain qualified as a REIT, to the extent we have REIT taxable income and have utilized our federal net operating loss carryforwards, we would be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our shareholders.

Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our potential REIT qualification. Our qualification as a REIT would depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we have not and will not obtain independent appraisals.

If we were to qualify and elect as a REIT under the Code for a future taxable year, and subsequently we fail to qualify as a REIT in any taxable year, to the extent we have taxable income and have utilized our federal net operating loss carryforwards, we would be subject to U.S. federal income tax on our taxable income at regular corporate rates, and dividends paid to our shareholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the value of our stock. Unless we were entitled to relief under certain provisions of the Code, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify as a REIT (after having elected as a REIT under the Code). If we were to fail to qualify for taxation as a REIT after having elected as a REIT under the Code, we may be required to borrow additional funds or liquidate assets to pay any additional tax liability and, therefore, funds available for investment and making payments on our indebtedness would be reduced.

We may be required to borrow funds, sell assets, or raise equity to satisfy REIT distribution requirements.

If we were to elect as a REIT under the Code, from time to time thereafter we might generate REIT taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. If we were to not have other funds available in those situations, we would need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings, sales or offerings, to enable us to satisfy the REIT distribution requirement and to avoid U.S. federal corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs and our leverage or require us to distribute amounts that would otherwise be invested in future acquisitions or stock repurchases. Thus, if we were to elect as a REIT under the Code: (i) continued compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our stock; and (ii) continued compliance with the REIT distribution requirements may increase the financing we would need to fund capital expenditures, future growth, or expansion initiatives, which would increase our total leverage.

Covenants specified in the instruments governing our indebtedness may limit our ability to make required REIT distributions.

If we were to elect as a REIT under the Code, restrictive loan covenants in the instruments governing our indebtedness may prevent us from satisfying REIT distribution requirements and, after such election, we could fail to qualify for taxation as a REIT. If these covenant limitations were not to jeopardize our qualification for taxation as a REIT but nevertheless were to prevent us from distributing 100% of our REIT taxable income, then we would be subject to U.S. federal corporate income tax, and potentially the nondeductible 4% excise tax, on the undistributed amounts.

Our payment of cash distributions in the future is not guaranteed and the amount of any future cash distributions may fluctuate, which could adversely affect the value of our stock.

REITs are required to distribute annually at least 90% of their REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gain). We had approximately $77.2 million in federal net operating loss carryforwards as of December 31, 2018. If we were to elect as a REIT under the Code, we would be able to use, at our discretion, these federal net operating loss carryforwards to offset our REIT taxable income, and thus the required distributions to shareholders may be reduced or eliminated until such time as our federal net operating loss carryforwards have been fully utilized. However, pursuant to the recently enacted Tax Reform Act referenced below, our ability to offset any federal net operating losses arising from our taxable years beginning after December 31, 2017, against any future REIT taxable income would be limited.

If we were to elect as a REIT under the Code, the amount of future distributions would be determined, from time to time, by the Board to balance our goal of increasing shareholder value and retaining sufficient cash to implement our current capital allocation policy, which includes portfolio improvement and potentially stock repurchases (when we believe our stock price is below its intrinsic value). If we were to elect as a REIT under the Code, the actual timing and amount of distributions would be as determined and declared by the Board and would depend on, among other factors, our federal net operating loss carryforwards, our financial condition, earnings, debt covenants and other possible uses of such funds.

Furthermore, we may only pay dividends on our capital stock if we have funds legally available to pay dividends and such payment is not restricted or prohibited by Georgia law, the terms of shares of our capital stock with higher priority with respect to dividends and the terms of any other documents governing our indebtedness. See “–Risks Related to Our Stock – There are no assurances of our ability to pay dividends in the future .”

Certain of our business activities may be subject to corporate level income tax, which would reduce our cash flows, and would have potential deferred and contingent tax liabilities.

If we were to elect as a REIT under the Code: (i) we may be subject to certain federal, state, and local taxes on our income and assets, taxes on any undistributed income and state, local income, franchise, property and transfer taxes; (ii) we could, in certain circumstances, be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain qualification for taxation as a REIT; and (iii) we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s length basis. Any of these taxes would decrease our earnings and our available cash.

If we were to elect as a REIT under the Code, any TRS assets and operations we may have would continue to be subject, as applicable, to federal and state corporate income taxes in the jurisdictions in which those assets and operations are located, which taxes would decrease our earnings and our available cash. If we were to elect as a REIT under the Code, we would also be subject to a federal corporate level tax at the highest regular corporate rate (currently 21%) on the gain recognized from a sale of assets occurring during the initial five-year period of time for which we are a REIT, up to the amount of the built-in gain that existed on January 1 of the year for which we elect as a REIT under the Code, which would be based on the fair market value of those assets in excess of our tax basis in those assets as of such date. Gain from a sale of an asset occurring after the specified period ends would not be subject to this corporate level tax.

Use of any TRSs we may have may cause us to fail to qualify as a REIT.

If we were to elect as a REIT under the Code, the net income of any TRSs we may have would not be required to be distributed to us, and such undistributed TRS income would generally not be subject to our REIT distribution requirements. However, if we were to elect as a REIT under the Code and if the accumulation of cash or reinvestment of significant earnings in any TRSs we may have would cause the fair market value of our securities in those entities, taken together with other non-qualifying assets, to represent more than 25% of the fair market value of our assets, or causes the fair market value of such TRS securities alone to represent more than 20% of the value of our total assets, in each case, as determined for REIT asset testing purposes, we would, absent timely responsive action, fail to qualify as a REIT.

Legislative or other actions affecting REITs could have a negative effect on us.

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect our investors or us. We cannot predict how changes in the tax laws might affect our investors or us. New legislation, U.S. Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences to our investors and us of such qualification.

In addition, On December 22, 2017, tax legislation commonly known as The Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted which has resulted in fundamental changes to the Code. Among the numerous changes included in the Tax Reform Act is a deduction of 20% of ordinary REIT dividends for individual taxpayers for taxable years beginning on or after January 1, 2018 through 2025. The impact of the Tax Reform Act on an investment in our shares, and our ability to qualify for and elect REIT status in any future year and the desirability thereof, is uncertain. We cannot assure you that the Tax Reform Act or any such other changes will not adversely affect the taxation of our shareholders. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. You are urged to consult with your tax advisor with respect to the impact of the Tax Reform Act on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

We do not have any experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our stock and ability to satisfy debt service obligations.

We have not actually operated as a REIT previously, and we do not currently qualify as a REIT under the Code. If we were to qualify and elect as a REIT under the Code in a future taxable year: (i) our pre-REIT operating experience may not be sufficient to enable us to operate successfully as a REIT; and (ii) we will be required to implement substantial control systems and procedures in order to maintain REIT status. As a result, we may incur additional legal, accounting and other expenses that we have not previously incurred, which could be significant, and our management and other personnel may need to devote additional time to comply with these rules and regulations and controls required for continued compliance with the Code. Therefore, if we were to qualify and elect as a REIT under the Code in a future taxable year, our historical combined consolidated financial statements may not be indicative of our future costs and performance as a REIT. If our performance is adversely affected, then it could affect our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations.

The current market price of the common stock may not be indicative of the market price of common stock if we were to elect as a REIT under the Code.

The current market price of the common stock may not be indicative of how the market will value the common stock if we elect as a REIT under the Code in a future taxable year, because of the change in our organization from a taxable C corporation to a REIT. The stock price of REIT securities have historically been affected by changes in market interest rates as investors evaluate the annual yield from distributions on the entity’s common stock as compared to yields on other financial instruments. In addition, if we elect as a REIT under the Code in a future taxable year, the market price of common stock in the future may be potentially affected by the economic and market perception of REIT securities.

Generally, ordinary dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. shareholders that are individuals, trusts and estates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividends. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our stock if we were to elect as a REIT under the Code. However, under the recently enacted Tax Reform Act as referenced above, commencing with taxable years beginning on or after January 1, 2018 and continuing through 2025, individual taxpayers may be entitled to claim a deduction in determining their taxable income of 20% of ordinary REIT dividends (dividends other than capital gain dividends and dividends attributable to certain qualified dividend income received by us), which temporarily reduces the effective tax rate on such dividends.

Risks Related to Our Capital Structure

We have substantial indebtedness, which may have a material adverse effect on our business and financial condition.

As of December 31, 2018, we had approximately $81.3 million in indebtedness, including current maturities of debt. We may also obtain additional short-term and long-term debt to meet future capital needs, subject to certain restrictions under our existing indebtedness, which would increase our total debt. Our substantial amount of debt could have negative consequences to our business. For example, it could:

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increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;

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require us to dedicate a substantial portion of cash flows from operations to interest and principal payments on outstanding debt, thereby limiting the availability of cash flow for dividends and other general corporate purposes;

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require us to maintain certain debt coverage and other financial ratios at specified levels, thereby reducing our financial flexibility;

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make it more difficult for us to satisfy our financial obligations;

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expose us to increases in interest rates for our variable rate debt;

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limit our ability to borrow additional funds on favorable terms, or at all, for working capital, debt service requirements, expansion of our business or other general corporate purposes;

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limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms, or at all;

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limit our flexibility in planning for, or reacting to, changes in our business and our industry;

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limit our ability to make acquisitions or take advantage of business opportunities as they arise;

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place us at a competitive disadvantage compared with our competitors that have less debt; and

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limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.

In addition, our ability to borrow funds in the future will depend in part on the satisfaction of the covenants in our debt agreements. If we are unable to satisfy the financial covenants contained in those agreements, or are unable to generate cash sufficient to make required debt payments, the lenders and other parties to those arrangements could accelerate the maturity of some or all of our outstanding indebtedness.

We may not have sufficient liquidity to meet our capital needs.

For the year ended and as of December 31, 2018, we had a net loss of $11.9 million and negative working capital of $28.6 million. At December 31, 2018, we had $2.4 million in cash, as well as restricted cash of $4.1 million, and $81.3 million in indebtedness, including current maturities of $26.4 million. The current portion of such indebtedness is comprised of: (i) $20.2 million of long term-debt (including a $0.5 million “tail fee” and a $0.5 million “repayment or acceleration fee”) under the Pinecone Credit Facility, classified as current due to the Company’s short-term forbearance agreement pursuant to noncompliance with certain covenants under the Pinecone Credit Facility and the lender’s ability to exercise default-related rights and remedies, including the acceleration of the maturity of such debt (as discussed below in this note); (ii) $4.1 million mortgage indebtedness under the Quail Creek Credit Facility maturing in June 2019; and (iii) other debt of approximately $2.1 million, which includes senior debt and bond and mortgage indebtedness.

We continue to undertake measures to grow our operations and streamline our operations and 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 both access to and receipt of several sources of liquidity, including cash from operations and cash on hand. We have routine ongoing discussions with existing and potential new lenders to refinance current debt on a longer-term basis and, in recent periods, have refinanced short-term acquisition-related debt with traditional long-term mortgage notes, some of which have been executed under government guaranteed lending programs.

In order to satisfy the Company’s capital needs, the Company seeks to: (i) refinance debt where possible to obtain more favorable terms (including via asset sales); (ii) raise capital through the issuance of debt securities and convertible securities; and (iii) increase operating cash flows through acquisitions. The Company anticipates that these actions, if successful, will provide the opportunity to maintain its liquidity, thereby permitting the Company to better meet its operating and financing obligations. However, there is no guarantee that such actions will be successful.

We rely on external sources of capital to fund our capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future investments necessary to grow our business or meet maturing debt commitments.

We rely on external sources of capital, including private or public offerings of debt or equity, the assumption of secured indebtedness, or mortgage financing on a portion of our owned portfolio. If we are unable to obtain needed capital at all or only on unfavorable terms from these sources, we might not be able to make the investments needed to grow our business or to meet our obligations and commitments as they mature. Our access to capital depends upon a number of factors over which we have little or no control, including the performance of the national and global economies generally; competition in the healthcare industry; issues facing the healthcare industry, including regulations and government reimbursement policies; our tenants’ operating costs; the market’s perception of our growth potential; the market value of our properties; our current and potential future earnings and cash dividends; on its common stock and preferred stock, if any; and the market price of the shares of our capital stock. We may not be in a position to take advantage of future investment opportunities if we are unable to access capital markets on a timely basis or are only able to obtain financing on unfavorable terms.

In particular, we are subject to risks associated with debt financing, which could negatively impact our business and limit our ability to pay dividends to our shareholders and to repay maturing indebtedness. If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds from other capital transactions, our cash flow may not be sufficient to repay our maturing indebtedness. Furthermore, if we have to pay higher interest rates in connection with a refinancing, the interest expense relating to that refinanced indebtedness would increase, which could reduce our profitability. Moreover, additional debt financing increases the amount of our leverage. The degree of leverage could have important consequences to our shareholders, including affecting our ability to obtain additional financing in the future, and making us more vulnerable to a downturn in our results of operations or the economy in general.

Our ability to raise capital through equity sales is dependent, in part, on the market price of our stock, and our failure to meet market expectations with respect to our business could negatively impact the market price of our stock and availability of equity capital.

As with other publicly-traded companies, the availability of equity capital will depend, in part, on the market price of our stock, which, in turn, will depend upon various market conditions and other factors that may change from time to time, including:

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the extent of investor interest;

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our financial performance and that of our tenants;

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general stock and bond market conditions; and

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other factors such as governmental regulatory action.

Covenants in the agreements evidencing our indebtedness limit our operational flexibility, and a covenant breach could materially adversely affect our operations.

The terms of our credit agreements and other agreements evidencing our indebtedness require us to comply with a number of financial and other covenants which may limit management’s discretion by restricting our ability to, among other things, incur additional debt, and create liens. Any additional financing we may obtain could contain similar or more restrictive covenants. Our continued ability to incur indebtedness and conduct our operations is subject to compliance with these financial and other covenants. Breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness in addition to any other indebtedness cross-defaulted against such instruments. Any such breach could materially adversely affect our business, results of operations and financial condition.

Our assets may be subject to impairment charges.

We periodically, but not less than annually, evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, operator performance and legal structure. If we determine that a significant impairment has occurred, then we are required to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our results of operations in the period in which the write-off occurs.

We may change our investment strategies and policies and capital structure.

The Board, without the approval of our shareholders, may alter our investment strategies and policies if it determines that a change is in our shareholders’ best interests. The methods of implementing our investment strategies and policies may vary as new investments and financing techniques are developed.

Economic conditions and turbulence in the credit markets may create challenges in securing indebtedness or refinancing our existing indebtedness.

Depressed economic conditions, the availability and cost of credit, turmoil in the mortgage market and depressed real estate markets have in the past contributed, and will in the future contribute, to increased volatility and diminished expectations for real estate markets and the economy as a whole. Significant market disruption and volatility could impact our ability to secure indebtedness or refinance our existing indebtedness.

We are subject to possible conflicts of interest; we have engaged in, and may in the future engage in, transactions with parties that may be considered related parties.

From time to time, we have engaged in various transactions with related parties including Christopher Brogdon, a former director and owner of greater than 5% of our outstanding common stock. See Part III, Item 13, “C ertain Relationships and Related Transactions, and Director Independence” in this Annual Report.

Although we do not believe the potential conflicts have adversely affected, or will adversely affect, our business, others may disagree with this position and litigation could ensue in the future. Our relationships with Mr. Brogdon and other related parties may give rise to litigation, or other issues which could result in substantial costs to us, and a diversion of our resources and management’s attention, whether or not any allegations made are substantiated.

Risks Related to the Ownership and Transfer Restrictions

The ownership and transfer restrictions contained in the Charter may prevent or restrict you from acquiring or transferring shares of the common stock.

As a result of the Merger, the Charter contains provisions restricting the ownership and transfer of the common stock. These ownership and transfer restrictions include that, subject to the exceptions, waivers and the constructive ownership rules described in the Charter, no person (including any “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) may beneficially own, or be deemed to constructively own by virtue of the ownership attribution provisions of the Code, in excess of 9.9% (by value or number of shares, whichever is more restrictive) of the outstanding common stock. The Charter also prohibits, among other things, any person from beneficially or constructively owning shares of common stock to the extent that such ownership would cause the Company to fail to qualify as a REIT by reason of being “closely held” under the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or that would cause the Company to otherwise fail to qualify as a REIT. Furthermore, any transfer, acquisition or other event or transaction that would result in common stock being beneficially owned by less than 100 persons (determined without reference to any rules of attribution) will be void ab initio, and the intended transferee shall acquire no rights in such common stock.

These ownership and transfer restrictions could have the effect of delaying, deferring or preventing a transaction or a change in control of us that might involve a premium price for our capital stock or otherwise be in the best interests of our shareholders.

Risks Related to Our Stock

The price of our stock has fluctuated, and a number of factors may cause the price of our stock to decline.

The market price of our stock has fluctuated and may fluctuate significantly in the future, depending upon many factors, many of which are beyond our control. These factors include:

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actual or anticipated fluctuations in our operating results;

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changes in our financial condition, performance and prospects;

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changes in general economic and market conditions and other external factors;

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the market price of securities issued by other companies in our industry;

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announcements by us or our competitors of significant acquisitions, dispositions, strategic partnerships or other transactions;

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press releases or negative publicity relating to us or our competitors or relating to trends in healthcare;

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government action or regulation, including changes in federal, state and local healthcare regulations to which our tenants are subject;

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changes in financial estimates, our ability to meet those estimates, or recommendations by securities analysts with respect to us or our competitors; and

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future sales of the common stock, our Series A Preferred Stock or another series of our preferred stock, or debt securities.

In addition, the market price of the Series A Preferred Stock also depends upon:

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prevailing interest rates, increases in which may have an adverse effect on the market price of the Series A Preferred Stock;

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trading prices of preferred equity securities issued by other companies in our industry; and

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the annual yield from distributions on the Series A Preferred Stock as compared to yields on other financial instruments.

Furthermore, the stock market in recent years has experienced sweeping price and volume fluctuations that often have been unrelated to the operating performance of affected companies. These market fluctuations may also cause the price of our stock to decline.

In the event of fluctuations in the price of our stock, shareholders may be unable to resell shares of our stock at or above the price at which they purchased such shares. Additionally, due to fluctuations in the price of our stock, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance.

Our common stock ranks junior to our Series A Preferred Stock with respect to dividends and amounts payable in the event of our liquidation.

Our common stock ranks junior to our Series A Preferred Stock with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up. This means that, unless accumulated accrued dividends have been paid or set aside for payment on all outstanding shares of our Series A Preferred Stock for all past dividend periods, no dividends may be declared or paid, or set aside for payment on, our common stock. Likewise, in the event of our voluntary or involuntary liquidation, dissolution or winding-up, no distribution of our assets may be made to holders of our common stock until we have paid to holders of our Series A Preferred Stock the applicable liquidation preference plus all accumulated accrued and unpaid dividends.

We suspended the quarterly dividend payment with respect to our Series A Preferred Stock commencing with the fourth quarter of 2017, and determined to continue such suspension indefinitely in June 2018. Accordingly, the Company has not paid dividends with respect to the Series A Preferred Stock since the third quarter of 2017. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of this Annual Report. As a result, the value of your investment in our common stock may suffer if sufficient funds are not available to first satisfy our obligations to the holders of our Series A Preferred Stock in the event of our liquidation.

There are no assurances of our ability to pay dividends in the future.

We are a holding company, and we have no significant operations. We rely primarily on dividends and other distributions from our subsidiaries to us so we may, among other things, pay dividends on our capital stock, if and to the extent declared by the Board. The ability of our subsidiaries to pay dividends and make other distributions to us depends on their earnings and may be restricted in the future by the terms of certain agreements governing their indebtedness. If our subsidiaries are in default under such agreements, then they may not pay dividends or make other distributions to us.

In addition, we may only pay dividends on our capital stock if we have funds legally available to pay dividends and such payment is not restricted or prohibited by law, the terms of any shares with higher priority with respect to dividends or any documents governing our indebtedness. We are restricted by Georgia law from paying dividends on our capital stock if we are not able to pay our debts as they become due in the normal course of business or if our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy preferential rights upon dissolution. In addition, no dividends may be declared or paid on our common stock unless all accumulated accrued and unpaid dividends on our Series A Preferred Stock have been, or contemporaneously are, declared and paid, or declared and a sum sufficient for the payment thereof is set apart for payments, for all past dividend periods. In addition, future debt, contractual covenants or arrangements that we or our subsidiaries enter into may restrict or prevent future dividend payments.

As such, we could become unable, on a temporary or permanent basis, to pay dividends on our stock, including our common stock and our Series A Preferred Stock. The payment of any future dividends on our stock will be at the discretion of the Board and will depend, among other things, on the earnings and results of operations of our subsidiaries, their ability to pay dividends and make other distributions to us under agreements governing their indebtedness, our financial condition and capital requirements, any debt service requirements and any other factors the Board deems relevant.

The Board indefinitely suspended dividend payments with respect to the Series A Preferred Stock. Such dividends are currently in arrears for the fourth quarter 2017, the first, second, third and fourth quarter 2018 dividend periods and the first quarter 2019. The Board plans to revisit the dividend payment policy with respect to the Series A Preferred Stock on an ongoing basis. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of this Annual Report. As a result of this dividend suspension, no dividends may be declared or paid on the common stock until all accumulated accrued and unpaid dividends on our Series A Preferred Stock have been, or contemporaneously are, declared and paid, or declared and a sum sufficient for the payment thereof is set apart for payment, for all past dividend periods.

The costs of being publicly owned may strain our resources and impact our business, financial condition, results of operations and prospects.

As a public company, we are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls for financial reporting. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting.

These requirements may place a strain on our systems and resources and have required us, and may in the future require us, to hire additional accounting and financial resources with appropriate public company experience and technical accounting knowledge. In addition, failure to maintain such internal controls could result in us being unable to provide timely and reliable financial information which could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities or cause us to be late in the filing of required reports or financial results. Any of the foregoing events could have a materially adverse effect on our business, financial condition, results of operations and prospects.

Provisions in Georgia law and our charter documents may delay or prevent a change in control or management that shareholders may consider desirable.

Various provisions of the Georgia Business Corporation Code (the “GBCC”) and the Charter and Bylaws may inhibit changes in control not approved by the Board and may have the effect of depriving our investors of an opportunity to receive a premium over the prevailing market price of the common stock and other securities in the event of an attempted hostile takeover. These provisions could also discourage proxy contests and make it more difficult for shareholders to elect directors and take other corporate actions. As a result, the existence of these provisions may adversely affect the market price of the common stock and other securities. These provisions include:

•

the ownership and transfer restrictions contained in the Charter with respect to the common stock;

•

a requirement that special meetings of shareholders be called by the Board, the Chairman, the President, or the holders of shares with voting power of at least 25%;

•

advance notice requirements for shareholder proposals and nominations;

•

a requirement that directors may only be removed for cause and then only by an affirmative vote of at least a majority of all votes entitled to be cast in the election of such directors;

•

a prohibition of shareholder action without a meeting by less than unanimous written consent;

•

availability of “blank check” preferred stock; and

•

a charter “constituency” clause authorizing (but not requiring) our directors to consider, in discharging their duties as directors, the effects of the Company’s actions on other interests and persons in addition to our shareholders.

In addition, the Company has elected in the Bylaws to be subject to the “fair price” and “business combination” provisions of the GBCC. The business combination provisions generally restrict us from engaging in certain business combination transactions with any “interested shareholder” (as defined in the GBCC) for a period of five years after the date of the transaction in which the person became an interested shareholder unless certain designated conditions are met. The fair price provisions generally restricts us from entering into certain business combinations with an interested shareholder unless the transaction is unanimously approved by the continuing directors who must constitute at least three members of the Board at the time of such approval; or the transaction is recommended by at least two-thirds of the continuing directors and approved by a majority of the shareholders excluding the interested shareholder.

The Board can use these and other provisions to prevent, delay or discourage a change in control of the Company or a change in our management. Any such delay or prevention of a change in control or management could deter potential acquirers or prevent the completion of a takeover transaction pursuant to which our shareholders could receive a substantial premium over the current market price of the common stock and other securities, which in turn may limit the price investors might be willing to pay for such securities.

Risks Related to the Delisting of Our Securities

If we fail to meet all applicable continued listing requirements of the NYSE American and the NYSE American determines to delist the common stock and Series A Preferred Stock, the delisting could adversely affect the market liquidity of such securities, impair the value of your investment, adversely affect our ability to raise needed funds and subject us to additional trading restrictions and regulations.

On August 28, 2018, the Company received a deficiency letter (the “Letter”) from NYSE American stating that the Company is not in compliance with the continued listing standards as set forth in Section 1003(f)(v) of the NYSE American Company Guide (the “Company Guide”). Specifically, the Letter informed the Company that the Exchange has determined that shares of the Company’s securities have been selling for a low price per share for a substantial period of time and, pursuant to Section 1003(f)(v) of the Company Guide, the Company’s continued listing is predicated on the Company effecting a reverse stock split of the common stock or otherwise demonstrating sustained price improvement within a reasonable period of time, which the Exchange determined to be no later than February 27, 2019. As a result of such noncompliance, the Company became subject to the procedures and requirements of Section 1009 of the Company Guide.

On February 28, 2019 the Company regained compliance with the continued listing standards set forth in the Company Guide by completing a reverse stock split of the common stock at a ratio of one-for-twelve on December 31, 2018. A proposal to amend the Charter to effect the reverse stock split of the common stock at a ratio of between one-for-six and one-for-twelve, as determined by the Board in its sole discretion, was approved at the Company’s 2018 annual meeting of shareholders.

As of December 31, 2018, the Company’s equity at $6.15 million was $0.15 million above the required minimum for compliance with certain NYSE American continued listing standards relating to stockholders’ equity. Specifically, Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years), Section 1003(a)(ii) (requiring stockholders’ equity of $4.0 million or more if an issuer has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years) and Section 1003(a)(iii) (requiring stockholders’ equity of $6.0 million or more if an issuer has reported losses from continuing operations and/or net losses in its five most recent fiscal years) of the Company Guide.

If the Company falls below the required minimum equity, the Company could become subject to the procedures and requirements of Section 1009 of the Company Guide and be required to submit a compliance plan describing the actions the Company is taking or would take to regain compliance with the continued listing standards.

On April 17, 2019, the Company received a Filing Delinquency Notification from the NYSE American. The Company is now subject to the procedures and requirements set forth in Section 1007 of the Company Guide. The Company failed to timely file the Delinquent Report. Within five days of the Filing Delinquency Notification the Company (a) contacted the Exchange to discuss the status of the Delinquent Report and (b) issued a press release disclosing the occurrence of the Filing Delinquency. The Company has been provided a six-month cure period, with an option additional six-month cure period at the discretion of the NYSE American, who reserve the right at any time to immediately truncate the cure period or immediately commence suspension and delisting procedures.

Going forward, the Company will be subject to NYSE Regulation’s normal continued listing monitoring. In addition, in the event that the Company is again determined to be noncompliant with any of the continued listing standards of the NYSE American within twelve (12) months of the Notice, such as the minimum equity standard described above, NYSE Regulation will examine the relationship between the Company’s previous noncompliance with the continued listing standards with respect to the low selling price and such new event of noncompliance in accordance with Section 1009(h) of the Company Guide. In connection with such new event of noncompliance, NYSE Regulation may, among other things, truncate the compliance procedures described in the continued listing standards or initiate immediate delisting proceedings.

If the common stock and Series A Preferred Stock are delisted from the NYSE American, such securities may trade in the over-the-counter market. If our securities were to trade on the over-the-counter market, selling the common stock and Series A Preferred Stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and any security analysts’ coverage of us may be reduced. In addition, in the event the common stock and Series A Preferred Stock are delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in such securities, further limiting the liquidity of the common stock and Series A Preferred Stock. These factors could result in lower prices and larger spreads in the bid and ask prices for our securities. Such delisting from the NYSE American and continued or further declines in our share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and could significantly increase the ownership dilution to shareholders caused by our issuing equity in financing or other transactions. Any such limitations on our ability to raise debt and equity capital could prevent us from making future investments and satisfying maturing debt commitments.

In addition, if the Company fails for 180 or more consecutive days to maintain a listing of the Series A Preferred Stock on a national exchange, then: (i) the annual dividend rate on the Series A Preferred Stock will be increased from 10.875% per annum to 12.875% per annum on the 181st day; and (ii) the holders of the Series A Preferred Stock will be entitled to vote for the election of two additional directors to serve on the Board. Such increased dividend rate and voting rights will continue for so long as the Series A Preferred Stock is not listed on a national exchange. Additionally as the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four consecutive dividends periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend period to has increased to 12.875%; commencing on the first day after the missed fourth quarterly payment (October 1, 2018) 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. See Note 12- Common and Preferred Stock to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Item 1B. Unresolved Staff Comments

Disclosure pursuant to Item 1B of Form 10-K is not required to be provided by smaller reporting companies.

Item 2. Properties

Operating Facilities

The following table provides summary information regarding our facilities leased and subleased to third parties as of December 31, 2018:

Facility Name	Beds/Units		Structure	Operator Affiliation ^(a)
Alabama
Attalla Health Care ⁽ ^c ⁾		182	Owned	C.R. Management
Coosa Valley Health Care		122	Owned	C.R. Management
Meadowood		106	Owned	C.R. Management
Subtotal (3)		410
Georgia
Autumn Breeze		108	Owned	C.R. Management
Bonterra (lease held for sale)		115	Leased	Wellington Health Services
College Park ⁽ ^c ⁾		95	Owned	C.R. Management
Glenvue H&R		134	Owned	C.R. Management
Jeffersonville		117	Leased	Peach Health Group
LaGrange		137	Leased	C.R. Management
Lumber City		86	Leased	Beacon Health Management
Oceanside		85	Leased	Peach Health Group
Parkview Manor/Legacy (lease held for sale)		184	Leased	Wellington Health Services
Powder Springs		208	Leased	Wellington Health Services
Savannah Beach		50	Leased	Peach Health Group
Southland Healthcare		126	Owned	Beacon Health Management
Tara		134	Leased	Wellington Health Services
Thomasville N&R		52	Leased	C.R. Management
Subtotal (14)		1,631
North Carolina
Mountain Trace Rehab ^(b)		106	Owned	Symmetry Healthcare
Subtotal (1)		106
Ohio
Covington Care		94	Leased	Aspire
Eaglewood ALF		80	Owned	Aspire
Eaglewood Care Center		99	Owned	Aspire
H&C of Greenfield		50	Owned	Aspire
Koester Pavilion		150	Managed	N/A
Spring Meade Health Center		99	Managed	N/A
Spring Meade Residence		83	Managed	N/A
The Pavilion Care Center		50	Owned	Aspire
Subtotal (8)		705
Oklahoma
NW Nursing Center ⁽ ^c ⁾		88	Owned	Southwest LTC
Quail Creek ⁽ ^c ⁾		109	Owned	Southwest LTC
Subtotal (2)		197
South Carolina
Georgetown Health		84	Owned	Symmetry Healthcare
Sumter Valley Nursing		96	Owned	Symmetry Healthcare
Subtotal (2)		180
Total - All Facilities (30)		3,229

(a)	Indicates the operator with which the tenant of the facility is affiliated.

(b)	On February 28, 2019, the Company entered into the Vero Health Lease with Vero Health, affiliated with the operator Vero Health Management , providing that Vero Health took possession of and operated the Mountain Trace Facility effective March 1, 2019.

^(c)

On April 15, 2019 the Company entered into the PSA with respect to four owned skilled nursing facilities, which PSA could be terminated for any reason by the Buyer prior to May, 15 2019, at 5:00 p.m. Eastern Time. See Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Our leases and subleases are generally on an individual facility basis with tenants that are separate legal entities affiliated with the above operators. See “ Portfolio of Healthcare Investments” in Part I, Item 1, “Business”, in this Annual Report.

All facilities are skilled nursing facilities except for Eaglewood ALF and Meadowood, which are assisted living facilities, and Spring Meade Residence, which is an independent living facility. Bed/units numbers refer to the number of operational beds.

For a detailed description of the Company’s operating leases, please see Note 7 - Leases to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

For a detailed description of the Company’s related mortgages payable for owned facilities, see Note 9 - Notes Payable and Other Debt to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

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⁾

March 31,

2018

June 30,

2018

September 30,

2018

December 31,

2018

Occupancy (%) ⁽²⁾

79.5

77.3

80.7

80.3

⁽¹⁾

Excludes the three Peach Facilities (as described below), due to decertification, 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 three managed facilities in Ohio, 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 ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018 was 85.7%, 82.3% , 83.8% and 87.6%, 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.

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”).

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 (%)
2019 ⁽²⁾		2		299		10.3	%		2,324		10.5	%
2020-2022		—		—		0.0	%		—		0.0	%
2023		1		50		1.7	%		263		1.2	%
2024		1		126		4.3	%		965		4.4	%
2025		5		534		18.4	%		4,068		18.4	%
2026		—		—		0.0	%		—		0.0	%
2027		8		869		30.0	%		7,748		35.0	%
2028		4		323		11.1	%		2,352		10.6	%
2029		1		106		3.7	%		538		2.4	%
Thereafter		5		590		20.5	%		3,884		17.5	%
Total		27		2,897		100.0	%		22,142		100.0	%

(1)	Straight-line rent.

(2)	Effective January 15, 2019 the Company completed the Omega Lease Termination, see Note 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Corporate Office

Our corporate office is located in Suwanee, Georgia. We lease approximately 3,000 square feet of office space in the Suwanee, Georgia area with a term through June 2019 and sublease approximately 3,100 square feet of office space in the Atlanta, Georgia area with a term through September 2020, which we no longer occupy. The Atlanta office space has been subleased through the end of the lease term.

Item 3. 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. 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 in “Note 15 - Commitments and Contingencies – “Professional and General Liability Claims ” and Note 19 – Subsequent Events- “Other Professional and General Liability Claims” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this Item 3. Except as set forth therein, we are not a party to, nor is any of our property the subject of, any material pending legal proceedings.

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. See “Risks Related to Our Business - If we are unable to resolve our professional and general liability claims on terms acceptable to us, then it could have a material adverse effect on our business, financial condition and results of operation ” in Part I, Item 1.A, “Risk Factors.”

Item 4. Mine Sa fety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Registrant’s Common Equity

The common stock is listed for trading on the NYSE American under the symbol “RHE.” based on information supplied from our transfer agent, there were approximately 243 shareholders of record of the common stock as of May 1, 2019.

We are a holding company, and we have no significant operations. We rely primarily on dividends and other distributions from our subsidiaries to us so we may, among other things, pay dividends on the common stock, and the Series A Preferred Stock, if and to the extent declared by the Board. The ability of our subsidiaries to pay dividends and make other distributions to us depends on their earnings and may be restricted by the terms of certain agreements governing their indebtedness. If our subsidiaries are in default under such agreements, then they may not pay dividends or make other distributions to us.

In addition, we may only pay dividends on the common stock and the Series A Preferred Stock if we have funds legally available to pay dividends and such payment is not restricted or prohibited by law, the terms of any shares with higher priority with respect to dividends or any documents governing our indebtedness. We are restricted by Georgia law from paying dividends on the common stock and the Series A Preferred Stock if we are not able to pay our debts as they become due in the normal course of business or if our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy preferential rights of shareholders whose preferential rights are superior to those receiving the dividend. In addition, no dividends may be declared or paid on the common stock unless full cumulative dividends on the Series A Preferred Stock have been, or contemporaneously are, declared and paid, or declared and a sum sufficient for the payment thereof is set apart for payments, for all past dividend periods. In addition, future debt, contractual covenants or arrangements we or our subsidiaries enter into may restrict or prevent future dividend payments.

The Board suspended dividend payments with respect to the Series A Preferred Stock commencing with the fourth quarter of 2017, and determined to continue such suspension indefinitely in June 2018. Accordingly, the Company has not paid dividends with respect to the Series A Preferred Stock since the third quarter of 2017. See Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of this Annual Report. As a result of this dividend suspension, no dividends may be declared or paid on the common stock until all accumulated accrued and unpaid dividends on the Series A Preferred Stock have been, or contemporaneously are, declared and paid, or declared and a sum sufficient for the payment thereof is set apart for payment, for all past dividend periods. Additionally as the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four consecutive dividends periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend period has increased to 12.875%; commencing on the first day after the missed fourth quarterly payment (October 1, 2018) 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. See Note 12- Common and Preferred Stock to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Issuer Purchases of Equity Securities

During the three months ended December 31, 2018 there were no open-market repurchases of the common stock or the Series A Preferred Stock.

For further information, see Note 12 - Common and Preferred Stock to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Item 6. Selected Financial Data

Disclosure pursuant to Item 6 of Form 10-K is not required to be provided by smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company 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 December 31, 2018, the Company owned, leased, or managed for third parties 30 facilities primarily in the Southeast. Effective January 15, 2019 the Company completed the Omega Lease Termination and on April 15, 2019 the Company entered into the PSA with respect to four (4) skilled nursing facilities owned by the Company, subject to the terms and conditions of the PSA . See N ote 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

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.

Going Concern

For the year ended and as of December 31, 2018, we had a net loss of $11.9 million and negative working capital of $28.6 million. At December 31, 2018, we had $2.4 million in cash and $81.3 million in indebtedness, including current maturities of $26.4 million. The current portion of such indebtedness is comprised of: (i) $20.2 million of long term-debt (including a $0.5 million “tail fee” and a $0.5 million “repayment or acceleration fee”) under the Pinecone Credit Facility, classified as current due to the short-term Second A&R Forbearance Agreement with Pinecone regarding the Company’s noncompliance with certain covenants under the Pinecone Credit Facility, pursuant to which Pinecone may exercise its default-related rights and remedies, including the acceleration of the maturity of such debt, upon the termination of the forbearance period under such forbearance agreement; (ii) $4.1 million of mortgage indebtedness under the Quail Creek Credit Facility maturing in June 2019; and (iii) other debt of approximately $2.1 million, which includes senior debt and bond and mortgage indebtedness.

The continuation of our business is dependent upon our ability; (i) to comply with the terms and conditions under the Pinecone Credit Facility and the Second A&R Forbearance Agreement; and (ii) to refinance or obtain further debt maturity extensions on the Quail Creek Credit Facility, neither of which is entirely within the Company’s control. These factors create substantial doubt about the Company’s ability to continue as a going concern.

The Company is pursuing a strategy to repay the Pinecone Credit Facility and the Quail Creek Credit Facility within the next few months. If these efforts are unsuccessful, the Company may be required to seek relief through a number of other available routes, which may include a filing under the U.S. Bankruptcy Code. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. See Note – 19 Subsequent Events to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report for a further discussion of a purchase and sale transaction to effectuate the Asset Sale, which if completed, would permit us to repay the Pinecone Credit Facility and the Quail Creek Credit Facility. There is no assurance that we will be able to successfully consummate the Asset Sale contemplated by such agreement or otherwise repay the Pinecone Credit Facility or the Quail Creek Credit Facility.

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

	Owned				Leased				Managed for Third Parties				Total
	Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units
State
Alabama ⁽²⁾		3		410		—		—		—		—		3		410
Georgia ^{(1) (2)}		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⁾		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 ^{(1) (2)}		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

⁽¹⁾	Effective January 15, 2019 the Company completed the Omega Lease Termination. See Note 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

⁽²⁾

The following table provides summary information regarding the number of facilities and related operational beds/units giving effect to the Omega Lease Termination as of January 15, 2019:

	Owned				Leased				Managed for Third Parties				Total
	Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units		Facilities		Beds/Units
State
Alabama ⁽¹⁾		3		410		—		—		—		—		3		410
Georgia ⁽¹⁾		4		463		8		869		—		—		12		1,332
North Carolina		1		106		—		—		—		—		1		106
Ohio		4		279		1		94		3		332		8		705
Oklahoma ⁽¹⁾		2		197		—		—		—		—		2		197
South Carolina		2		180		—		—		—		—		2		180
Total		16		1,635		9		963		3		332		28		2,930
Facility Type
Skilled Nursing ⁽¹⁾		14		1,449		9		963		2		249		25		2,661
Assisted Living		2		186		—		—		—		—		2		186
Independent Living		—		—		—		—		1		83		1		83
Total		16		1,635		9		963		3		332		28		2,930

⁽¹⁾

Excludes the impact of the PSA the Company entered into on April 15, 2019 with respect to four (4) owned skilled nursing facilities, which PSA could be terminated for any reason by the Buyer prior to May, 15 2019, at 5:00 p.m. Eastern Time. See Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

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

Operator Affiliation	Number of Facilities ⁽¹⁾		Beds / Units
C.R. Management ⁽²⁾		8		936
Aspire		5		373
Wellington Health Services		4		641
Peach Health		3		252
Symmetry Healthcare		3		286
Beacon Health Management		2		212
Southwest LTC ⁽²⁾		2		197
Subtotal		27		2,897
Regional Health Managed		3		332
Total		30		3,229

⁽¹⁾	Represents the number of facilities which are leased or subleased to separate tenants, which tenants are affiliates of the entity named in the table above. See “ Portfolio of Healthcare Investments” in Part I, Item 1, “Business” in this Annual Report.

⁽²⁾

On April 15, 2019 the Company entered into the PSA with respect to four owned skilled nursing facilities (two facilities per operator affiliation), which PSA could be terminated for any reason by the Buyer prior to May, 15 2019, at 5:00 p.m. Eastern Time. See Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

The following table provides summary information regarding the number of facilities and related operational beds/units by operator affiliation giving effect to the Omega Lease Termination as of January 15, 2019:

Operator Affiliation	Number of Facilities ⁽¹⁾		Beds / Units
C.R. Management ⁽²⁾		8		936
Aspire		5		373
Wellington Health Services		2		342
Peach Health		3		252
Symmetry Healthcare ⁽¹⁾		3		286
Beacon Health Management		2		212
Southwest LTC ⁽²⁾		2		197
Subtotal		25		2,598
Regional Health Managed		3		332
Total		28		2,930

⁽¹⁾

On March 1, 2019, the Company transferred operations of the 106-bed Mountain Trace Facility to Vero Health, an affiliate of Vero Health Management. See Note 19 – Subsequent Events to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

⁽²⁾

Excludes the impact of the PSA the Company entered into on April 15, 2019 with respect to four owned skilled nursing facilities (two facilities per operator affiliation), which PSA could be terminated for any reason by the Buyer prior to May, 15 2019, at 5:00 p.m. Eastern Time. See Note 19 – Subsequent Events , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Acquisitions and Dispositions

On March 8, 2017, the Company executed a purchase agreement (the “Meadowood Purchase Agreement”) with Meadowood Retirement Village, LLC and Meadowood Properties, LLC to acquire an assisted living and memory care community with 106 operational beds in Glencoe, Alabama (the “Meadowood Facility”) for $5.5 million cash. In addition, on March 21, 2017, the Company executed a long-term, triple net operating lease with an affiliate of C.R Management (the “Meadowood Operator”) to lease the facility upon purchase. Lease terms include: (i) a 13-year initial term with one five-year renewal option; (ii) base rent of $37,500 per month; (iii) a rental escalator of 2.0% per annum in the initial term and 2.5% per annum in the renewal term; (iv) a cross renewal provision, whereby the Meadowood Operator may exercise the lease renewal for the Meadowood Facility if its affiliate exercises the lease renewal option for a skilled nursing facility with 122 operational beds in Glencoe, Alabama (the “Coosa Valley Facility”); and (v) a security deposit equal to one month of base rent. The Company completed the purchase of the Meadowood Facility on May 1, 2017 pursuant to the Meadowood Purchase Agreement, at which time the lease commenced and operations of the Meadowood Facility transferred to the Meadowood Operator.

Effective January 15, 2019, the Company’s lease of the Omega Facilities, which leases were due to expire August 2025 and which Omega Facilities the Company subleased to third party subtenants, was terminated by mutual consent of the Company and the lessor of such facilities. In connection with the Omega Lease Termination, the Company transferred approximately $0.4 million of all its integral physical fixed assets in the Omega Facilities to the lessor and on January 28, 2019 received from the lessor gross proceeds of approximately $1.5 million, consisting of (i) a termination fee in the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other net amounts due to the Company under the leases. See Note 10 – Acquisitions and Dispositions and Note 19 – Subsequent Events to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Divestitures

For information regarding the Company’s divestitures, please refer to Note 11 - Discontinued Operations , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

The following table summarizes the activity of discontinued operations for the years ended December 31, 2018 and 2017:

	For the year ended December 31,
(Amounts in 000’s)	2018			2017
Cost of services and other	$	(83	)	$	1,657
Interest expense, net	$	9		$	22
Net income (loss)	$	74		$	(1,679	)

Critical Accounting Policies

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). 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. We believe that the following represents our critical accounting policies.

Revenue Recognition and Allowances

Triple-Net Leased Properties. The Company’s triple-net leases provide for periodic and determinable increases in rent. We recognize rental revenues under these leases on a straight-line basis over the applicable lease term when collectability is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in straight-line rent receivable on our consolidated balance sheets. In the event the Company cannot reasonably estimate the future collection of rent from one or more tenant(s) of the Company’s facilities, rental income for the affected facilities will be recognized only upon cash collection, and any accumulated straight-line rent receivable will be reversed in the period in which the Company deems rent collection no longer probable. Rental revenues for five facilities located in Ohio (until operator transition on December 1, 2018) and one facility in North Carolina are recorded on a cash basis. See Note 7 - Leases to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report)

Management Fee Revenues and Other Revenues. The Company recognizes management fee revenues as services are provided. The Company has one contract to manage three facilities, with payment for each month of service received in full on a monthly basis. The maximum penalty to the Company for nonperformance under the management contract is $50,000 per year, payable after the end of the year. Further, the Company recognizes interest income from loans and investments, using the effective interest method when collectability is probable, payments received on impaired loans are applied against the allowance. We apply the effective interest method on a loan-by-loan basis.

Allowances. The Company assesses the collectability of our 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, then 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 December 31, 2018 and December 31, 2017, the Company reserved for approximately $1.4 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 reserved at December 31, 2018 and December 31, 2017. Accounts receivable, net totaled $1.0 million at December 31, 2018 compared with $0.9 million at December 31, 2017.

Asset Impairment

We review the carrying value of long-lived assets that are held and used in our operations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined based upon expected undiscounted future net cash flows from the operations to which the assets relate, utilizing management’s best estimate, assumptions, and projections at the time. If the carrying value is determined to be unrecoverable from future operating cash flows, the asset is deemed impaired and an impairment loss would be recognized to the extent the carrying value exceeded the estimated fair value of the asset. We estimate the fair value of assets based on the estimated future discounted cash flows of the asset. Management has evaluated its long-lived assets and identified no material asset impairment during the years ended December 31, 2018 and 2017.

We test indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is subject to annual testing for impairment. In addition, goodwill is tested for impairment if events occur or circumstances change that would reduce the fair value of a facility below its carrying amount. We perform annual testing for impairment during the fourth quarter of each year (see Note 6 - Intangible Assets and Goodwill to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report).

Extinguishment of Debt

The Company recognizes extinguishment of debt when the criteria for a troubled debt restructure are not met and the change in the debt terms is considered substantial. The Company calculates the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt (including deferred finance fees) and recognizes a gain or loss on the income statement of the period of extinguishment.

Self-Insurance Reserve

The Company has self-insured against professional and general liability claims since it discontinued its healthcare operations in connection with the Transition. 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.

Stock-Based Compensation

The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 718 “ Compensation - Stock Compensation ”, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees, non-employees, and others receive shares of stock or equity instruments (options, warrants or restricted shares). All awards are amortized on a straight-line basis over their vesting terms.

Income Taxes

As required by ASC Topic 740, “ Income Taxes”, we established deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities at tax rates in effect when such temporary differences are expected to reverse. When necessary, we record a valuation allowance to reduce our net deferred tax assets to the amount that is more likely than not to be realized. At December 31, 2018, the Company has a valuation allowance of approximately $19.8 million. In future periods, we will continue to assess the need for and adequacy of the remaining valuation allowance. ASC 740 provides information and procedures for financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns.

Among other changes, the Tax Reform Act reduces the US federal corporate tax rate from 35% to 21% beginning in 2018. The Company has remeasured certain deferred tax assets and liabilities as of the enactment date of the Tax Reform Act based on the rates at which they are expected to reverse in the future, which is generally 21%. The amount recorded related to the remeasurement of our deferred tax balance was $9.5 million, which was offset by a reduction in the valuation allowance. The Company also recorded an income tax benefit of approximately $0.2 million related to the use of our naked credit (a deferred tax liability for an indefinite-lived asset) as a source of income to release a portion of our valuation allowance.

As a result of the Tax Reform Act, net operating loss (“NOL”) carry forwards generated in tax years 2018 and forward have an indefinite life. For this reason, the Company has taken the position that the deferred tax liability related to the indefinite lived intangibles can be used to support an equal amount of the deferred tax asset related to the 2018 NOL carry forward generated. This resulted in the Company recognizing an income tax benefit of approximately $0.04 million related to the use of our naked credit as a source of income to release a portion of our valuation allowance.

In determining the need for a valuation allowance, the annual income tax rate, or the need for and magnitude of liabilities for uncertain tax positions, we make certain estimates and assumptions. These estimates and assumptions are based on, among other things, knowledge of operations, markets, historical trends and likely future changes and, when appropriate, the opinions of advisors with knowledge and expertise in certain fields. Due to certain risks associated with our estimates and assumptions, actual results could differ.

In general, the Company’s tax returns filed for the 2015 through 2018 tax years are still subject to potential examination by taxing authorities. We are not currently under examination by any other major income tax jurisdiction.

Further information required by this Item is provided in Note 1 - Summary of Significant Accounting Policies to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Results of Operations

Year Ended December 31, 2018 and 2017

The following table sets forth, for the periods indicated, statement of operations items and the amount and percentage 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 audited consolidated financial statements and the notes thereto, which are included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

	Year Ended December 31,						Increase (Decrease)
(Amounts in 000’s)	2018			2017			Amount			Percent
Revenues:
Rental revenues	$	20,902		$	23,690		$	(2,788	)		(11.8	)%
Management fees		949			930			19			2.0	%
Other revenues		195			528			(333	)		(63.1	)%
Total revenues		22,046			25,148			(3,102	)		(12.3	)%
Expenses:
Facility rent expense		8,683			8,683			—			—
Cost of management fees		638			634			4			0.6	%
Depreciation and amortization		4,634			4,868			(234	)		(4.8	)%
General and administrative expenses		3,692			3,854			(162	)		(4.2	)%
Provision for doubtful accounts		4,132			886			3,246			366.4	%
Other operating expenses		1,059			1,085			(26	)		(2.4	)%
Total expenses		22,838			20,010			2,828			14.1	%
(Loss) income from operations		(792	)		5,138			(5,930	)		(115.4	)%
Other expense:
Interest expense, net		5,929			4,095			1,834			44.8	%
Loss on extinguishment of debt		5,234			63			5,171		NM
Other expense		52			474			(422	)		(89.0	)%
Total other expense, net		11,215			4,632			6,583			142.1	%
Loss (income) from continuing operations before income taxes		(12,007	)		506			(12,513	)	NM
Income tax benefit		(38	)		(188	)		150			(79.8	)%
Loss (income) from continuing operations		(11,969	)		694			(12,663	)	NM
Income (loss) from discontinued operations, net of tax		74			(1,679	)		1,753			(104.4	)%
Net loss	$	(11,895	)	$	(985	)	$	(10,910	)	NM

Year Ended December 31, 2018 Compared with Year Ended December 31, 2017 :

Rental Revenues —Total rental revenue decreased by $2.8 million, or 11.8%, to $20.9 million for the year ended December 31, 2018, compared with $23.7 million for the year ended December 31, 2017. The decrease reflects the non-payment of rent from the Ohio Beacon Affiliates, who notified us of their intention that they would no longer be operating the Ohio Beacon Facilities commencing July 1, 2018 (although they continued to operate such facilities beyond such date and who ceased operations of such facilities on November 30, 2018), and reflects rent in arrears for the Mountain Trace Facility. On February 28, 2019 the Company entered into the Vero Health Lease with respect to the Mountain Trace Facility, and Vero Health took possession of the Mountain Trace Facility on March 1, 2019. Affiliates of Symmetry Healthcare (the “Symmetry Tenants”), who withheld rent pursuant to a resolved capital expenditure dispute, resumed discounted rent payments beginning with the September 1, 2018 amounts due under their amended leases, partially off-set by lease revenue from the Meadowood Facility (acquired on May 1, 2017) and the Peach Facilities. The Company recognizes all rental revenues on a straight line rent accrual basis, except with respect to the Ohio Beacon Affiliates, the Mountain Trace Facility 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.

Other Revenues —Other revenues decreased by $0.3 million, or 63.1%, to $0.2 million for the twelve months ended December 31, 2018, compared with $0.5 million for the year ended December 31, 2017 due to a $0.3 million decrease in interest income on the $3.0 million note issued to Skyline Healthcare , LLC (“Skyline”) in relation to their purchase of nine former facilities of the Company located in Arkansas (the “ Skyline Note ”), due to Skyline’s bankruptcy .

Facility Rent Expense —Facility rent was $8.7 million for the twelve months ended December 31, 2018, and $8.7 million for the year ended December 31, 2017. Rent expense year over year is comparable due to the completion of the Transition. See Note 7 - Leases , to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Depreciation and Amortization —Depreciation and amortization decreased by approximately $0.3 million or 4.8%, to $4.6 million for the year ended December 31, 2018, compared with $4.9 million for the year ended December 31, 2017. The decrease is primarily due to the reduction in depreciation from fully depreciated equipment and computer related assets in the current year, partially off-set by depreciation on the Meadowood Facility acquired on May 1, 2017 and leasehold improvements on the Peach Facilities.

General and Administrative —General and administrative costs decreased by $0.2 million or 4.2%, to $3.7 million for the year ended December 31, 2018, compared with $3.9 million for the year ended December 31, 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 $0.4 million; and (ii) a decrease in stock compensation expense of approximately $0.1 million and; (iii) a net decrease in other expenses of approximately $0.1 million, partially offset by approximately $0.4 million in business consulting expenses required by the Original Forbearance Agreement, New Forbearance Agreement and the A&R New Forbearance Agreement.

Provision for doubtful accounts— Provision for doubtful accounts expense increased by approximately $3.2 million, to $4.1 million, for the twelve months ended December 31, 2018, compared with $0.9 million for the year ended December 31, 2017. During the twelve months ended December 31, 2018, the Company recorded allowances of approximately (i) $2.0 million on the $3.0 million Skyline Note; (ii) $0.3 million on the $1.0 million note issued to Highlands Arkansas Holdings, LLC ($0.6 million charged for the twelve months ended December 31, 2017); (iii) $0.7 million for balances owed by the Ohio Beacon Affiliates, and Mountain Trace Symmetry Tenant; and (iv) the associated write-off of approximately $1.1 million of straight-line rent receivable.

Interest Expense, net —Interest expense, net increased by approximately $1.8 million or 44.8%, to $5.9 million for the year ended December 31, 2018, compared with $4.1 million for the year ended December 31, 2017. Approximately $1.8 million of the increase is due to the net increase of debt principal year over year and increased interest rates related to the Pinecone Credit Facility and $0.4 million due to an increase in capitalized deferred financing (Pinecone amounts extinguished on September 6, 2018 and December 31, 2018 in connection with amendments to the Pinecone Loan Documents under the New Forbearance Agreement and A&R New Forbearance Agreement) and which was partially offset by (i) approximately $0.2 million refund in bond debt issuance fees; and (ii) approximately $0.2 million reduction due to the repayment of $6.7 million in convertible debt in the prior year and $1.5 million repayment of convertible debt during the first quarter of 2018, see Note 9 – Notes Payable and Other Debt and Note 19 – Subsequent Events, to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data.”

Loss on Debt Extinguishment —Loss on extinguishment of debt increased by approximately $5.1 million to $5.2 million for the year ended December 31, 2018, compared with approximately $0.1 million for the year ended December 31, 2017. The increase is due to (i) $3.5 million from the substantial change in debt terms pursuant to the New Forbearance Agreement with Pinecone; (ii) $0.5 million charge related finance fee payable on repayment or acceleration of the loans, depending on the time at which the loans are repaid ($0.25 million prior to December 31, 2018 and $0.5 million thereafter); (iii) a $0.35 million fee (paid in kind) pursuant to the A&R New Forbearance Agreement; (iv) $0.45 million in legal and other expenses; and (v) 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, off-set by $0.1 million prepayment penalty incurred on March 20, 2017, when mortgage indebtedness related to the Coosa Valley Facility, and Attalla Health Care, a 182-bed skilled nursing facility located in Attalla, Alabama, was reduced by $0.7 million and $0.8 million, respectively through the application of restricted cash held as collateral against such indebtedness, see Note 9 - Notes Payable and Other Debt to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data.”

Other Expense —Other expense decreased by $0.4 million or 89.0% to $0.1 million for the year ended December 31, 2018, compared with $0.5 million for the year ended December 31, 2017. The current year charge is expenses related to the R everse S tock S plit and the prior period charge was related to expenses for the Merger.

Income (loss) from Discontinued Operations —The Income (loss) from discontinued operations decreased by $1.8 million or 104.4% to a $0.1 million benefit for the twelve months ended December 31, 2018, compared with a loss of $1.7 million for the year ended December 31, 2017. The decrease is primarily due to lower professional and general legal and bad debt collection expense. The current year gain comprises approximately $0.2 million benefit upon settlement of general and professional liability actions, off-set by 0.1 million related to old patient care accounts receivable activity. Prior year expenses comprise approximately $0.6 million for professional and general legal expenses and settlements or estimated litigation expenses, net of approximately $2.8 million insurance contributions for recently settled cases, and the remaining $1.1 million is related to legal expenses, collection activities and other miscellaneous items.

Liquidity and Capital Resources

The continuation of our business, as discussed below, is dependent upon our ability: (i) to comply with the terms and conditions under the Pinecone Credit Facility and the Second A&R Forbearance Agreement; and (ii) to refinance or obtain further debt maturity extensions on the Quail Creek Credit Facility, neither of which is entirely within the Company’s control. These factors create substantial doubt about the Company’s ability to continue as a going concern.

The Company is undertaking measures to grow its operations, streamline its cost infrastructure and otherwise increase liquidity by: (i) refinancing or repaying debt which is classified as current and longer term debt to reduce interest costs and mandatory principal repayments, with such repayment to be funded through the sale of assets; (ii) increasing future lease revenue through acquisitions and investments in existing properties; (iii) modifying the terms of existing leases; (iv) replacing certain tenants who default on their lease payment terms; and (v) reducing other and general and administrative expenses.

Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing during the twelve months from the date of this filing. At December 31, 2018, the Company had $2.4 million in unrestricted cash. During the twelve months ended December 31, 2018, the Company generated positive cash flow from continuing operations of $3.1 million and anticipates continued positive cash flow from operations in the future. On June 8, 2018, the Board indefinitely suspended dividend payments with respect to the Series A Preferred Stock. Such dividends are currently in arrears for the fourth quarter 2017, the first, second, third and fourth quarter 2018 and the first quarter 2019 dividend periods. The Board plans to revisit the dividend payment policy with respect to the Series A Preferred Stock on an ongoing basis. The Board believes that the dividend suspension will provide the Company with additional funds to meet its ongoing liquidity needs. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four consecutive dividends periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend period has increased to 12.875%, which is equivalent to $3.22 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) 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. If and when the Company resumes payment of the dividend on the Series A Preferred Stock, the Company expects that it will satisfy the dividend requirements (including accrued dividends), if and when declared, from internally generated cash flows. See Note 12 – Common and Preferred Stock to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

As of December 31, 2018, the Company had total current liabilities of $36.7 million and total current assets of $8.1 million, resulting in a working capital deficit of approximately $28.6 million. Included in current liabilities at December 31, 2018 is the $26.4 million current portion of its $81.3 million in indebtedness. The current portion of such indebtedness is comprised of: (i) $20.2 million of long term-debt (including a $0.5 million “tail fee” and a $0.5 million “repayment or acceleration fee”) under the Pinecone Credit Facility, classified as current due to the short-term Second A&R Forbearance Agreement with Pinecone regarding the Company’s noncompliance with certain covenants under the Pinecone Credit Facility, pursuant to which Pinecone may exercise its default-related rights and remedies, including the acceleration of the maturity of such debt, upon the termination of the forbearance period under such forbearance agreement (as discussed below); (ii) $4.1 million mortgage indebtedness under the Quail Creek Credit Facility maturing in June 2019; and (iii) other debt of approximately $2.1 million, which includes senior debt and bond and mortgage indebtedness. The Company anticipates net principal repayments of approximately $26.4 million during the next twelve-month period which includes approximately $20.2 million debt

under the Pinecone Credit Facility , $4.1 million of payments under the Quail Creek Credit Facility, $1.4 million of routine debt service amortization, approximately $0. 6 million payments on other non-routine debt and a $0.1 million payment of bond debt (excluding approximately $0.2 million principal repayment as a result of a refund of issuance fees) . See Note 9— Notes Payable and Other Debt and Note 19— Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Current Maturities of Debt

On February 15, 2018, the Company entered into the Pinecone Credit Facility with 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 was available to fund general corporate needs, after deducting approximately $1.25 million in debt issuance costs and prepayment penalties. 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. The remaining $2.4 million in surplus cash proceeds from the Pinecone Credit Facility refinancing was used for general corporate purposes.

On May 10, 2018, Pinecone notified the Company in writing that the Company was in default under certain financial covenants of the loan documents evidencing the Pinecone Credit Facility (the “Pinecone Loan Documents”). In connection with the default, during the twelve months ended December 31, 2018 the Company entered into three separate successive forbearance agreements with amended conditions, interest and fees, the first two of which terminated because the Company did not satisfy certain conditions set forth therein and the third expired according to its terms on March 14, 2019.

On December 31, 2018, the Company and certain of its subsidiaries entered into the A&R New Forbearance Agreement with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the A&R New Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to specified defaults under the Loan Agreement, dated as of February 15, 2018, among the Company and certain of its subsidiaries and Pinecone. The forbearance period under the A&R New Forbearance Agreement was from December 31, 2018 to March 14, 2019, which expired within its terms.

Pursuant to the A&R New Forbearance Agreement, the Company and Pinecone amended certain provisions of the Loan Agreement, and Pinecone consented to the Omega Lease Termination.

In connection with the Omega Lease Termination, the Company transferred approximately $0.4 million of all its integral physical fixed assets in the Omega Facilities to the lessor of the Omega Facilities and on January 28, 2019 received from the lessor gross proceeds of approximately $1.5 million, consisting of (i) a termination fee in the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other net amounts due to the Company under the leases. The Company paid $1.2 million of such Omega Lease Termination proceeds to Pinecone on January 28, 2019, as required by the A&R New Forbearance Agreement, to reimburse Pinecone for approximately $0.3 million of certain unpaid expenses and partially prepay $0.9 million of Pinecone’s loan to AdCare Property Holdings, LLC, a subsidiary of the Company.

Pursuant to the Second A&R Forbearance Agreement, the Company and Pinecone amend ed certain provisions of the Loan Agreement. The Second A&R Forbearance Agreement requires, among other things (i) that the Company pursue and complete the Asset Sale which would result in the repayment in full of all of the Company ’ s indebtedness to Pinecone and, in connection therewith, the Company pay not less than $0.3 million and not more than $0.55 million in forbearance fees, as well as certain other expenses of Pinecone, or (ii) Pinecone ’ s other disposition of the Loan Agreement as contemplated by the Second A&R Forbearance Agreement. Additionally the Second A&R Forbearance Agreement accelerates the previously disclosed 3% finance “ tail fee ” , 1% prepayment penalty, and 1% break up fee so that such fees and penalties bec a me part of the principal as of April 15, 2019.

The Pinecone Loan Documents provide that Pinecone’s rights and remedies upon an event of default are cumulative, and that Pinecone may exercise (although it is not obligated to do so) all or any one or more of the rights and remedies available to it under the Pinecone Loan Documents or applicable law. The Company does not know which rights and remedies, if any, Pinecone may choose to exercise under the Pinecone Loan Documents upon the occurrence of an event of default (other than the Specified Defaults) or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement. If Pinecone elects to appoint its own representatives as managers of the Pledged Subsidiaries, to accelerate the indebtedness under the Pinecone Credit Facility, or to foreclose on significant assets of the Company (such as the Facilities and/or the equity interests in the Pledged Subsidiaries), then it will have a material adverse effect on the Company’s liquidity, cash flows, financial condition and results of operations, and the Company will be unable to continue as a going concern. See Note – 9 Notes Payable and Other Debt and Note – 19 Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report .

On April 30, 2019 the Company extended the April 30, 2019 maturity date on the mortgage indebtedness under the Quail Creek Credit Facility to June 30, 2019, with an option to further extend to July 31, 2019, at the lenders discretion. There is no assurance that the Company will be able to refinance the Quail Creek Credit Facility. See Note – 9 Notes Payable and Other Debt and Note – 19 Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report .

Changes in Operational Liquidity

During the year ended December 31, 2018, eight of the Company’s facilities were in arrears’ on their rent payments. Combined cash rental payments for all eight facilities totaled $0.4 million per month, or approximately 21% of our anticipated total monthly rental receipts. Five of these facilities were the Ohio Beacon Facilities and were leased to the Ohio Beacon Affiliates. The Ohio Beacon Affiliates who were ten months in arrears on rental payments, surrendered possession of the Ohio Beacon Facilities upon the mutual lease termination on December 1, 2018. Pursuant to the mutual lease termination, the Ohio Beacon Affiliates agreed to pay a $0.675 million termination fee, payable in 18 monthly installments of $37,500 commencing January 3, 2019 in full satisfaction of a $0.5 million lease inducement and approximately $2.5 million in rent arrears and approximately $0.6 million of other receivables. Of the remaining three facilities, who were in arrears on their rental payments, leased to affiliates of Symmetry Healthcare, one such facility is located in North Carolina (which the Company transitioned to a new operator on March 1, 2019) and two such facilities are located in South Carolina (for additional information with respect to such facilities, see Note 7 – Leases to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report).

On September 20, 2018, the Company reached an agreement with Symmetry Healthcare, pursuant to which Symmetry Healthcare agreed to a payment plan for rent arrears and the Company agreed to an aggregate reduction of approximately $0.6 million in annualized rent with respect to the three facilities leased to the Symmetry Tenants and waived approximately $0.2 million in rent that was in arrears with respect to such facilities, upon which the Symmetry Tenants recommenced monthly rent payments with respect to such facilities of $0.1 million in the aggregate, starting with the September 1, 2018 amounts due.

On November 30, 2018, the Company subleased the Ohio Beacon Facilities to the Aspire Sublessees pursuant to the Aspire Subleases, providing that Aspire Sublessees would take possession of and operate the Aspire Facilities as subtenant, effective December 1, 2018. Annual anticipated minimum cash rent for the next twelve months is approximately $1.8 million with provision for approximately $0.7 million additional cash rent based on each facility’s prior month occupancy. For additional information with respect to such facilities, see Note 7 – Leases to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

On January 15, 2019, but effective February 1, 2019 , the Company agreed to a 10% reduction in base rent , or in aggregate approximately an average $31,000 per month cash rent reduction for the year ended December 31, 2019 , and $48,000 per month decrease in straight-line revenue, respectively , for two of the Company ’ s eight facilities located in Georgia, which are subleased to affiliates of Wellington Health Services (the “ Wellington Sublessees ” ) under agreements dated January 31, 2015, as subsequently amended (the “ Wellington Subleases ” ) . The Wellington Sublessees are due to expire August 31, 2027, and relate to the Company’s 134-bed skilled nursing facility located in Thunderbolt, Georgia and an 208-bed skilled nursing facility located in Powder Springs, Georgia combined. Additionally , the Company modified the annual rent escalator to 1% per year from the prior scheduled increase from 1% to 2% previously due to commence on the 1st day of the sixth lease year. See Note – 19 Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “ Financial Statements and Supplementary Data ” in this Annual Report .

Debt Covenant Compliance

At December 31, 2018, three of the Company’s credit-related instruments were not in compliance. 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 December 31, 2018. The Pinecone Credit Facility requires the Company to 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 December 31, 2018. Such violation is waived for the duration of the forbearance period under the Second A&R Forbearance Agreement. Additionally as of December 31, 2018, the Company was not in compliance with the annual minimum debt service coverage ratio required under (a) the credit facility secured by the Mountain Trace Facility, which requires that the Company maintain a minimum debt service coverage ratio of 1.0 and with respect to which the Company’s minimum debt service coverage ratio was equal to -0.1 at December 31, 2018, and for which the Company obtained a waiver; and (b) the credit facility secured by the Company’s assisted living facility located in Springfield, Ohio known as Eaglewood Village, which requires that the Company maintain a minimum debt service coverage ratio of 1.3 and with respect to which the Company’s minimum debt service coverage ratio was equal to -0.5 at December 31, 2018, and for which the Company submitted a required management plan of correction report outlining the Company’s plans for re-attaining required minimum debt service coverage levels. The Company was in compliance with the foregoing minimum debt service coverage ratio requirements at December 31, 2017.

Non Compliance with the NYSE American Listing Standards

On August 28, 2018, the Company received a deficiency letter from NYSE American stating that the Company is not in compliance with the continued listing standards as set forth in the Company Guide. Specifically, the letter informed the Company that the Exchange determined that shares of the Company’s securities were selling for a low price per share for a substantial period of time and, pursuant to Section 1003(f)(v) of the Company Guide, the Company’s continued listing was predicated on the Company effecting a reverse stock split of the common stock or otherwise demonstrating sustained price improvement within a reasonable period of time, which the Exchange determined to be no later than February 27, 2019. On February 28, 2019, the Company regained compliance with the continued listing standards set forth in the Company Guide regarding the low selling price by completing the Reverse Stock Split. The proposal to amend the Charter to effect a reverse stock split of the common stock at a ratio of between one-for-six and one-for-twelve, as determined by the Board in its sole discretion, was approved at the Company’s 2018 annual meeting of shareholders and the Reverse Stock Split became effective on December 31, 2018. If the Company is again determined to be noncompliant with any of the continued listing standards of the NYSE American within the next twelve months of February 28, 2019, the Exchange will examine the relationship between the Company’s previous noncompliance with the continued listing standards with respect to the low selling price and such new event of noncompliance in accordance with Section 1009(h) of the Company Guide. In connection with such new event of noncompliance, the Exchange may, among other things, truncate the compliance procedures described in the continued listing standards or initiate immediate delisting proceedings.

As of December 31, 2018, the Company’s equity at $6.15 million is only $0.15 million above the required minimum for compliance with certain NYSE American continued listing standards relating to stockholders’ equity. If the Company falls below the required minimum stockholders equity, then the Company could become subject to the procedures and requirements of Section 1009 of the Company Guide and be required to submit a compliance plan describing the actions the Company is taking or would take to regain compliance with the continued listing standards. Alternatively, the Exchange may, among other things, truncate the compliance procedures described in the continued listing standards or initiate immediate delisting proceedings.

Management’s ability to raise additional capital through the issuance of equity securities and the terms upon which we are able to raise such capital may be adversely affected if we are unable to maintain the listing of the common stock and the Series A Preferred Stock on the NYSE American.

The Company is pursuing a strategy to repay the Pinecone Credit Facility and the Quail Creek Credit Facility by means of the Asset Sale and to streamline its cost infrastructure. There is no assurance however, that these efforts will be successful. Due to the inherent risks, unknown results, and significant uncertainties associated with each of these matters along with the direct correlation between these matters and the Company’s ability to satisfy the 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.

See Note 9 – Notes Payable and Other Debt and Note 19 – Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

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

	Year Ended December 31,
Amounts in (000’s)	2018			2017
Net cash provided by operating activities—continuing operations	$	3,079		$	5,995
Net cash used in operating activities—discontinued operations		(1,731	)		(850	)
Net cash used in investing activities—continuing operations		(338	)		(2,265	)
Net cash provided by (used in) financing activities—continuing operations		356			(16,372	)
Net cash used in financing activities—discontinued operations		(239	)		(658	)
Net Change in Cash and restricted cash		1,127			(14,150	)
Cash and restricted cash at beginning of period		5,359			19,509
Cash and restricted cash at end of period	$	6,486		$	5,359

Year Ended December 31, 2018

Net cash provided by operating activities—continuing operations for the year ended December 31, 2018, was approximately $3.1 million consisting primarily of our income from continuing operations less changes in working capital, and other noncash charges (primarily loss on debt extinguishment, depreciation and amortization, and bad debt expense less lease revenue in excess of cash received) all primarily the result of routine operating activity.

Net cash used in operating activities—discontinued operations for the year months ended December 31, 2018 was approximately $1.7 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 in investing activities—continuing operations for the year ended December 31, 2018, was approximately $0.3 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 for the year ended December 31, 2018, was approximately $0.4 million, excluding non-cash proceeds and payments. This is the result of $2.4 million new financing from Pinecone and approximately $0.2 million refund of bond debt issuance fees, offset by routine repayments of approximately $2.2 million of other existing debt obligations and $0.1 million of Pinecone debt issuance expense.

Net cash used in financing activities—discontinued operations for the year ended December 31, 2018 was approximately $0.2 million payments for Medicaid and vendor notes.

Year Ended December 31, 2017

Net cash provided by operating activities—continuing operations for the year ended December 31, 2017, was approximately $6.0 million consisting primarily of our income from continuing operations less changes in working capital, and other noncash charges (primarily depreciation and amortization, lease expense in excess of cash paid, share-based compensation, and amortization of debt discounts and related deferred financing costs less lease revenue in excess of cash received) all primarily the result of routine operating activity.

Net cash used in operating activities—discontinued operations for the year months ended December 31, 2017 was approximately $0.9 million. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims and is net of approximately $1.3 million of collections on patient care receivables.

Net cash used in investing activities—continuing operations for the year ended December 31, 2017, was approximately $2.3 million. This is the result of (i) $1.4 million for the acquisition of the Meadowood Facility transaction consisting of a $5.5 million purchase price offset by the associated $4.1 million financing and (ii) capital expenditures of approximately $0.9 million on building improvements notably, for the Oceanside Facility to assist the Peach Health Sublessee in connection with recertification efforts and the purchase of land adjacent to our facility located in Georgetown, South Carolina.

Net cash used in financing activities—continuing operations was approximately $16.4 million for the year ended December 31, 2017. This is primarily the result of the repayment of $7.7 million of convertible debt, the repayment of $3.8 million of other existing debt obligations, $0.2 million in payments to repurchase shares of our common stock and $5.7 million to pay dividends on the Series A Preferred Stock partially off-set by net proceeds of $1.0 million from issuances of shares of the Series A Preferred Stock.

Net cash used in financing activities—discontinued operations for the year ended December 31, 2017 was approximately $0.7 million payments for Medicaid and vendor notes.

Notes Payable and Other Debt

Notes payable and other debt consists of the following:

	December 31,
Amounts in (000’s)	2018			2017
Senior debt—guaranteed by HUD	$	32,857		$	33,685
Senior debt—guaranteed by USDA ^(a)		13,727			20,320
Senior debt—guaranteed by SBA ^(b)		668			2,210
Senior debt—bonds		6,960			7,055
Senior debt—other mortgage indebtedness		28,139			9,486
Other debt		664			1,050
Convertible debt		—			1,500
Sub Total		83,015			75,306
Deferred financing costs		(1,535	)		(2,027	)
Unamortized discounts on bonds		(167	)		(177	)
Total		81,313			73,102
Less: current portion of debt		26,397			8,090
Notes payable and other debt, net of current portion	$	54,916		$	65,012

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

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

For a detailed description of each of the Company’s debt financings, see Note 9 - Notes Payable and Other Debt to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Scheduled Maturities

The schedule below summarizes the scheduled gross maturities as of December 31, 2018 for each of the next five years and thereafter.

	Amounts in (000’s)
2019 ⁽¹⁾	$	26,436
2020		1,636
2021		1,721
2022		5,131
2023		1,741
Thereafter		46,350
Subtotal		83,015
Less: unamortized discounts		(167	)
Less: deferred financing costs		(1,535	)
Total notes payable and other debt	$	81,313

⁽¹⁾

Includes the Pinecone Credit Facility with a maturity date of August 15, 2020. Pursuant to the Second A&R Forbearance Agreement which commenced on March 29, 2019 and may extend as late as October 1, 2019, Pinecone agreed to forbear from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate), unless the forbearance period is earlier terminated. Additionally excludes approximately $0.2 million principal repayment as a result of a refund of issuance fees, see Note 19 – Subsequent Events to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Debt Covenant Compliance

As of December 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 table below indicates which of the Company’s credit-related instruments were not in compliance as of December 31, 2018.


Credit Facility ⁽¹⁾	Balance (000’s)		Subsidiary or Operator Level Covenant Requirement	Financial Covenant	Measurement Period	Min/Max Financial Covenant Required		Financial Covenant Metric Achieved			Future Financial Covenant Metric Required
Pinecone Credit Facility	$	20,162	Borrower	Minimum borrower fixed charge coverage ratio	Quarterly	1.2		1.1				1.2
Mountain Trace	$	4,135	Borrower	Minimum debt service coverage ratio	Annual		1.0		(0.1	)		1.0
Senior debt - bonds	$	6,960	Borrower	Minimum debt service coverage ratio	Annual		1.3		(0.5	)		1.3

⁽¹⁾	Waiver, amendment or other cure provision for violation of covenant obtained. For further information, see Note 3 – Liquidity to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Included in several of the Company’s loan agreements are administrative covenants requiring that a set of audited financial statements be provided to the guarantor within 90 days of the end of each fiscal year (the “Administrative Covenants”). For the year ended December 31, 2018 the Company was in compliance with all such Administrative Covenants.

Receivables

Our operations could be adversely affected if we experience significant delays in receipt of rental income from our operators. Our future liquidity will continue to be dependent upon the relative amounts of current assets (principally cash and accounts receivable) and current liabilities (principally accounts payable and accrued expenses). In that regard, accounts receivable can have a significant impact on our liquidity.

Accounts receivable totaled $1.0 million at December 31, 2018 compared with $0.9 million at December 31, 2017. All uncollected patient care receivables were fully reserved at December 31, 2018 and December 31, 2017.

The allowance for bad debt was $1.4 million and $2.6 million at December 31, 2018 and 2017, respectively. We continually evaluate the adequacy of our bad debt reserves based on aging of older balances, payment terms and historical collection trends after facility operations transfer to third-party operators. We continue to evaluate and implement additional processes to strengthen our collection efforts and reduce the incidence of uncollectible accounts.

Off-Balance Sheet Arrangements

Letters of Credit

The Company had $0.4 million of outstanding letters of credit (under the Company’s revolving credit facility with CIBC, formerly the PrivateBank) at December 31, 2016, used primarily for surety bonds, which the Company cancelled when no longer required under such credit facility. Such letters of credit were fully cash collateralized, the cash was returned to the Company during the year ended December 31, 2017.

Guarantee

On April 6, 2017, the Company guaranteed Peach Health Sublessee’s $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. Borrowings under the Peach Working Capital Facility are based on a percentage of a borrowing base of eligible accounts receivable. Eligible accounts, net of an allowance for amounts outstanding after 120 days, excluding applicable credits and further reduced for a liquidity factor specific to the payor type, comprise Medicare, Medicaid and commercial accounts only and exclude co-insurance and self-pay. The Peach Working Capital Facility is subject to certain 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’s by Peach Health Sublessee).

On November 30, 2018 the Company subleased the Ohio Beacon Facilities to the Aspire Sublessees pursuant to the Aspire Subleases, providing that Aspire Sublessees would take possession of and operate the Aspire Facilities as subtenant, effective December 1, 2018. Pursuant to the Aspire Subleases, the Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the financial statements at December 31, 2018.

Operating Leases

As of December 31, 2018, the Company leased a total of eleven skilled nursing facilities under non-cancelable leases, most of which have rent escalation clauses and provisions for payments of real estate taxes, insurance and maintenance costs; each of the skilled nursing facilities that are leased by the Company are subleased to and operated by third-party operators. Effective January 15, 2019 the Company leased a total of nine skilled nursing facilities pursuant to the Omega Lease Termination. The Company also leases certain office space located in Atlanta and Suwanee, Georgia.

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

	(Amounts in 000’s)
2019	$	6,359
2020		6,390
2021		6,551
2022		6,692
2023		6,824
Thereafter		26,788
Total	$	59,604

For a further description of the Company’s operating leases, see Note 7 - Leases to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Leased and Subleased Facilities to Third-Party Operators

As of December 31, 2018, twenty-seven facilities (sixteen owned by us and eleven leased to us) are leased or subleased 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 liabilities of the property in respect to insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable. Effective January 15, 2019 the Company has twenty-five facilities (sixteen owned by us and nine leased to us).

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

	(Amounts in 000’s)
2019	$	18,314
2020		18,752
2021		19,202
2022		20,442
2023		20,828
Thereafter		83,654
Total	$	181,192

The following is a summary of the Company’s leases and subleases to third-parties which comprise the future minimum lease receivables of the Company. Each lease contains specific rent escalation amounts ranging from 1.0% to 3.0% annually. Further, each lease has one or more renewal options. For those facilities subleased by the Company, the renewal option in the sublease agreement is dependent on the Company ’ s renewal of its lease agreement.

		Lease Term
		Commencement	Expiration	2019 Cash
Facility Name	Operator Affiliation ⁽¹⁾	Date	Date	Annual Rent
				(Thousands)
Owned
Eaglewood ALF	Aspire	12/1/2018	11/30/2028		538
Eaglewood Care Center	Aspire	12/1/2018	11/30/2028		408
H&C of Greenfield	Aspire	12/1/2018	11/30/2023		213
Southland Healthcare	Beacon Health Management	11/1/2014	10/31/2024		951
The Pavilion Care Center	Aspire	12/1/2018	11/30/2028		214
Attalla Health Care ⁽⁵⁾	C.R. Management	12/1/2014	8/31/2030		1,175
Autumn Breeze	C.R. Management	9/30/2015	9/30/2025		879
College Park ⁽⁵⁾	C.R. Management	4/1/2015	3/31/2025		645
Coosa Valley Health Care	C.R. Management	12/1/2014	8/31/2030		974
Glenvue H&R	C.R. Management	7/1/2015	6/30/2025		1,264
Meadowood	C.R. Management	5/1/2017	8/31/2030		465
NW Nursing Center ⁽⁵⁾	Southwest LTC	12/31/2015	11/30/2025		379
Quail Creek ⁽⁵⁾	Southwest LTC	12/31/2015	11/30/2025		783
Georgetown Health	Symmetry Healthcare	4/1/2015	3/31/2030		319
Mountain Trace Rehab ⁽³⁾	Symmetry Healthcare	6/1/2015	2/28/2019		30
Mountain Trace Rehab ⁽³⁾	Vero Health Management	3/1/2019	2/28/2029		400
Sumter Valley Nursing	Symmetry Healthcare	4/1/2015	3/31/2030		614
Subtotal Owned Facilities (16)				$	10,251
Leased
Covington Care	Aspire	12/1/2018	11/30/2028	$	430
Lumber City	Beacon Health Management	11/1/2014	8/31/2027		913
LaGrange	C.R. Management	4/1/2015	8/31/2027		1,106
Thomasville N&R	C.R. Management	7/1/2014	8/31/2027		354
Jeffersonville	Peach Health	6/18/2016	8/31/2027		727
Oceanside	Peach Health	7/13/2016	8/31/2027		495
Savannah Beach	Peach Health	7/13/2016	8/31/2027		271
Bonterra (held for sale) ⁽²⁾	Wellington Health Services	9/1/2015	1/15/2019		45
Parkview Manor/Legacy (held for sale) ⁽²⁾	Wellington Health Services	9/1/2015	1/15/2019		45
Powder Springs ⁽⁴⁾	Wellington Health Services	4/1/2015	8/31/2027		1,980
Tara ⁽⁴⁾	Wellington Health Services	4/1/2015	8/31/2027		1,697
Subtotal Leased Facilities (11)				$	8,063
Total (27)				$	18,314

⁽¹⁾	Represents the number of facilities which are leased or subleased to separate tenants, which tenants are affiliates of the entity named in the table above. See “ Portfolio of Healthcare Investments” in Part I, Item 1, “Business” in this Annual Report.

⁽²⁾

Effective January 15, 2019 the Company completed the Omega Lease Termination, see Note 10 - Acquisitions and Dispositions and Note 19 – Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report .

⁽³⁾

On March 1, 2019 the previous lease with an affiliate of Symmetry Healthcare with an expected lease term of May 31, 2030 was mutually terminated and operations transferred to Vero Health, an affiliate of Vero Health Management, on March 1, 2019. S ee Note 19 – Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

⁽⁴⁾	Effective February 1, 2019 base rent for these facilities was reduced 10% and is reflected in the above table. See Note 19 – Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

⁽⁵ ⁾

All facilities are skilled nursing facilities except for Eaglewood ALF and the Meadowood Facility which are assisted living facilities. All facilities have renewal provisions of one term of five years, except facilities (Mountain Trace, Quail Creek, NW Nursing, Sumter Valley, Covington Care, Pavilion Care Center, Eaglewood ALF, Eaglewood SNF and Georgetown) which have two renewal terms with each being five years and H&C of Greenfield which has three renewal terms with each being five years. The leases also contain standard rent escalations that range from 1.0% to 3.0% annually.

On April 24, 2018, 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 Ohio Beacon Facilities and that they would surrender operation of such facilities to the Company on June 30, 2018. On November 30, 2018, the Ohio Beacon Affiliates, who were ten months in arrears on rental payments surrendered possession of the Ohio Beacon Facilities and the lease was terminated by mutual consent. Pursuant to such termination the Ohio Beacon Affiliates agreed to pay a $0.675 million termination fee, payable in 18 monthly installments of $37,500 commencing January 3, 2019 in full satisfaction of the $0.5 million Beacon Lease Inducement and approximately $2.5 million in rent arrears and approximately $0.6 million of other receivables, such as property taxes and capital expenditures, which discharges each tenant from any and all claims upon completion of the payment plan. The Company intends to enforce its rights under the termination agreement. As of the date of filing this Annual Report, five such payments have been received, and there is no assurance that the Company will be able to obtain payment of all the outstanding unpaid termination fee from the Ohio Beacon Affiliates. The Company completed negotiations with Aspire, who received HUD approval, for such facilities and took possession of Ohio Beacon Facilities on December 1, 2018.

On November 30, 2018 the Company subleased the Ohio Beacon Facilities to affiliates of Aspire pursuant to the Aspire Subleases, providing that Aspire Sublessees would take possession of and operate the Aspire Facilities as subtenant. The Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. The Aspire Facilities are comprised of: (i) the Covington Facility; (ii) the Eaglewood ALF Facility; (iii) the Eaglewood Care Center Facility; (iv) the H&C of Greenfield Facility; and (v) the Pavilion Care Facility. Under the Aspire Subleases, a default related to an individual facility may cause a default under all the Aspire Subleases. All Aspire Subleases are for an initial term of ten years, with renewal options, except with respect to term for the H&C of Greenfield Facility, which has an initial five year term, and set annual rent increases generally commencing in the third lease year; from month seven of the Aspire Subleases monthly rent amounts may increase based on each facility’s prior month occupancy, with minimum annual rent escalations of at least 1% generally commencing in the third lease year. Minimum rent receivable for the Covington Care Facility, the Eaglewood ALF Facility, the Eaglewood Care Center Facility, the H&C of Greenfield Facility and the Pavilion Care Facility for the year ended December 31, 2019 is $0.4 million, $0.5 million, $0.4 million, $0.2 million and $0.2 million per annum, respectively. Additionally, the Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the financial statements at December 31, 2018.

For a detailed description of each of the Company’s leases, see Note 7 - Leases and Note – 19 Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Professional and General Liability

As of the date of filing this Annual Report, the Company is a defendant in 14 professional and general liability actions commenced on behalf of former patients. These actions seek unspecified compensatory and punitive damages for former patients who were allegedly injured or died while patients of facilities operated by the Company. Two such actions are covered by insurance, except that any award of punitive damages would be excluded from such coverage and five 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.

Accordingly, the self-insurance reserve accrual 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. These amounts are expected to be paid over time as the legal proceedings progress. The duration of such legal proceedings could be greater than one year subsequent to the year ended December 31, 2018; however management cannot reliably estimate the exact timing of payments.

See Note 15 – Commitments and Contingencies and Note 19 – Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosure pursuant to Item 7A. of Form 10-K is not required to be reported by smaller reporting companies.

Item 8. Financial Stateme nts and Supplementary Data

	PAGE
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	75
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2018 and 2017	78
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017	79
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018 and 2017	80
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017	81
Notes to Consolidated Financial Statements	83

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Regional Health Properties, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Regional Health Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements of the Company as of December 31, 2017, and for the year then ended (collectively referred to as the “2017 financial statements”), before the effects of the adjustments to cumulatively apply the change for the adoption of Revenue from Contracts Customers (Topic 606) as well as retrospectively apply the change for the adoption of ASU 2016-18, Statements of Cash Flows (Topic 230) and the reverse stock split in 2018 as discussed in Note 1 to the consolidated financial statements, were audited by other auditors whose report, dated April 16, 2018, expressed an unqualified opinion on those consolidated financial statements. We have also audited the adjustments to the 2017 consolidated financial statements to cumulatively apply the change in accounting for the adoption of Revenue from Contracts Customers (Topic 606) as well as retrospectively apply the change in account for the adoption of ASU 2016-18, Statements of Cash Flows (Topic 230) and the effects of the reverse stock split in 2018, as discussed in Note 1 to the consolidated financial statements. In our opinion, such cumulative and retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2017 consolidated financial statements of the Company other than with respect to the cumulative and retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2017 consolidated financial statements taken as a whole.

Adoption of New Accounting Standards and Reverse Stock Split

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for 1) recognition of revenue from contracts with customers in fiscal year 2018 due to the adoption of ASU no. 2014-09, Revenue from Contracts Customers and 2) classification and presentation of restricted cash, including transfers between cash and restricted cash, on the consolidated statements of cash flows in fiscal years 2018 and 2017 due to the adoption of ASU No. 2016-18, Statement of Cash Flows: Restricted Cash and the effects of the reverse stock split approved on December 27, 2018.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred a net loss of $11.9 million for the year ended December 31, 2018, has an accumulated deficit of $118.2 million and negative working capital of $28.6 million with $20.2 million of long term-debt classified as current due to the Company’s short-term forbearance agreement pursuant to noncompliance with certain covenants under the loan documents and the lender’s ability to exercise default-related rights and remedies, including the acceleration of the maturity of such debt and a $4.1 million mortgage indebtedness maturing in June 2019, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Notes 1 and 3. The consolidated financial statements do not include any adjustments that might result for the outcome of this substantial doubt.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.

/s/ Cherry Bekaert LLP

We have served as the Company’s auditor since 2018.

Atlanta, Georgia

May 16, 2019

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Regional Health Properties, Inc.:

Opinion on the Consolidated Financial Statements

We have audited, before the effects of the adjustments to retrospectively apply the change in accounting related to the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, and the effect of the reverse stock split, as described in Note 1, the consolidated balance sheet of Regional Health Properties, Inc. and subsidiaries (the Company) as of December 31, 2017, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). The 2017 consolidated financial statements before the effects of the adjustments described in Note 1 are not presented herein. In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the change in accounting related to the adoption of ASU 2014-09 and ASU 2016-18, and the effect of the reverse stock split, as described in Note 1, present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting related to the adoption of ASU 2014-09 and ASU 2016-18, and the effect of the reverse stock split, as described in Note 1 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ KPMG LLP

We served as the Company’s auditor from 2012 to 2018.

Atlanta, Georgia

April 16, 2018

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in 000’s)

	December 31,
	2018			2017
ASSETS
Current Assets:
Cash	$	2,407		$	1,818
Restricted cash		1,411			960
Accounts receivable, net of allowance of $1,356 and $2,570		971			945
Prepaid expenses and other		472			304
Notes receivable		610			677
Assets of disposal group held for sale		2,204			—
Total current assets		8,075			4,704
Restricted cash		2,668			2,581
Property and equipment, net		77,237			81,213
Intangible assets—bed licenses		2,471			2,471
Intangible assets—lease rights, net		906			2,187
Goodwill		2,105			2,105
Lease deposits and other deposits		402			808
Straight-line rent receivable		6,301			6,400
Notes receivable		331			3,540
Other assets		74			542
Total assets	$	100,570		$	106,551
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Current portion of notes payable and other debt	$	26,397		$	6,621
Current portion of convertible debt, net		—			1,469
Accounts payable		4,361			4,386
Accrued expenses and other		4,461			7,022
Liabilities of disposal group held for sale		1,491			—
Total current liabilities		36,710			19,498
Notes payable and other debt, net of current portion:
Senior debt, net		48,317			57,801
Bonds, net		6,599			6,567
Other debt, net		—			644
Other liabilities		2,793			4,133
Deferred tax liability		—			38
Total liabilities		94,419			88,681
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 1,688 and 1,647 shares issued and outstanding at December 31, 2018 and 2017, respectively		61,900			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 December 31, 2018 and 2017, respectively		62,423			62,423
Accumulated deficit		(118,172	)		(106,277	)
Total stockholders’ equity		6,151			17,870
Total liabilities and stockholders’ equity	$	100,570		$	106,551

See accompanying notes to consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Year Ended December 31,
	2018			2017
Revenues:
Rental revenues	$	20,902		$	23,690
Management fees		949			930
Other revenues		195			528
Total revenues		22,046			25,148
Expenses:
Facility rent expense		8,683			8,683
Cost of management fees		638			634
Depreciation and amortization		4,634			4,868
General and administrative expenses		3,692			3,854
Provision for doubtful accounts		4,132			886
Other operating expenses		1,059			1,085
Total expenses		22,838			20,010
(Loss) income from operations		(792	)		5,138
Other expense:
Interest expense, net		5,929			4,095
Loss on extinguishment of debt		5,234			63
Other expense		52			474
Total other expense, net		11,215			4,632
(Loss) income from continuing operations before income taxes		(12,007	)		506
Income tax benefit		(38	)		(188	)
(Loss) income from continuing operations		(11,969	)		694
Income (loss) from discontinued operations, net of tax		74			(1,679	)
Net loss		(11,895	)		(985	)
Net loss attributable to Regional Health Properties, Inc.		(11,895	)		(985	)
Preferred stock dividends - declared		—			(5,702	)
Preferred stock dividends - undeclared		(7,985	)		(1,912	)
Net loss attributable to Regional Health Properties, Inc. common stockholders	$	(19,880	)	$	(8,599	)
Net loss per share of common stock attributable to Regional Health ⁽¹⁾ Properties, Inc.
Basic and diluted:
Continuing Operations, after current period undeclared dividend	$	(11.90	)	$	(4.19	)
Discontinued Operations		0.04			(1.01	)
	$	(11.86	)	$	(5.20	)
Weighted average shares of common stock outstanding:
Basic and diluted		1,676			1,653

⁽¹⁾	Reflects our one-for-twelve reverse stock split that became effective on December 31, 2018. Refer to Note 1 - Summary of Significant Accounting Policies for further information.

See accompanying notes to consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in 000’s)

	Shares of Common Stock (a)			Shares of Preferred Stock		Common Stock and Additional Paid-in Capital			Preferred Stock (b)		Accumulated Deficit			Total
Balance, December 31, 2016		1,666			—	$	61,643		$	—	$	(99,590	)	$	(37,947	)
Reclassification of preferred stock ^(b)					2,812					62,423					62,423
Stock-based compensation		—			—		267			—		—			267
Issuance of restricted stock, net of forfeitures		(9	)		—		—			—		—			—
Stock repurchase program		(10	)		—		(186	)		—		—			(186	)
Preferred stock dividends		—			—		—			—		(5,702	)		(5,702	)
Net loss		—			—		—			—		(985	)		(985	)
Balance, December 31, 2017		1,647			2,812	$	61,724		$	62,423	$	(106,277	)	$	17,870
Stock-based compensation		—			—		176			—		—			176
Issuance of restricted stock, net of forfeitures		41			—		—			—		—			—
Net loss		—			—		—			—		(11,895	)		(11,895	)
Balance, December 31, 2018		1,688			2,812	$	61,900		$	62,423	$	(118,172	)	$	6,151

^(a)	Reflects our one-for-twelve reverse stock split that became effective on December 31, 2018. Refer to Note 1 - Summary of Significant Accounting Policies for further information.

^(b)

Reclassification of the Regional Health Properties, Inc.’s 10.875% Series A Cumulative Redeemable Preferred Stock as permanent equity, as a result of the ownership and transfer restrictions with respect to the common stock implemented in connection with the merger described in Note. 1- Summary of Significant Accounting Policies .

See accompanying notes to consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in 000’s)

	Year Ended December 31,
	2018			2017
Cash flows from operating activities:
Net Loss	$	(11,895	)	$	(985	)
Income (loss) from discontinued operations, net of tax		(74	)		1,679
(Loss) income from continuing operations		(11,969	)		694
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		4,634			4,868
Stock-based compensation expense		176			267
Rent expense in excess of cash paid		368			578
Rent revenue in excess of cash received		(2,003	)		(2,670	)
Amortization of deferred financing costs, debt discounts and premiums		575			338
Loss on debt extinguishment		5,234			—
Deferred tax expense		(38	)		(188	)
Bad debt expense		4,132			886
Changes in operating assets and liabilities:
Accounts receivable		(497	)		182
Prepaid expenses		314			283
Other assets		584			(76	)
Accounts payable, and accrued expenses and other		1,235			665
Other liabilities		334			168
Net cash provided by operating activities—continuing operations		3,079			5,995
Net cash used in operating activities—discontinued operations		(1,731	)		(850	)
Net cash provided by operating activities		1,348			5,145
Cash flow from investing activities:
Change in net cash investments		—			(44	)
Purchase of real estate, net		—			(1,375	)
Purchase of property and equipment		(338	)		(846	)
Net cash used in investing activities—continuing operations		(338	)		(2,265	)
Net cash provided by investing activities—discontinued operations		—			—
Net cash (used in) provided by investing activities		(338	)		(2,265	)
Cash flows from financing activities:
Proceeds from debt issuance		2,397			—
Repayment on notes payable		(2,076	)		(3,609	)
Repayment on bonds payable		(95	)		(90	)
Repayment on convertible debt		—			(7,700	)
Debt issuance costs, net of refunds		130			(62	)
Proceeds from preferred stock issuances, net		—			977
Repurchase of common stock		—			(186	)
Dividends on preferred stock		—			(5,702	)
Net cash provided by (used in) financing activities—continuing operations		356			(16,372	)
Net cash used in financing activities—discontinued operations		(239	)		(658	)
Net cash used in financing activities		117			(17,030	)
Net change in cash and restricted cash		1,127			(14,150	)
Cash and restricted cash at beginning of period		5,359			19,509
Cash and restricted cash at end of period	$	6,486		$	5,359

See accompanying notes to consolidated financial statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

(Amounts in 000’s)

	Year Ended December 31,
	2018			2017
Supplemental Disclosure of Cash Flow Information:
Interest	$	5,220		$	3,781
Income taxes paid	$	—		$	29
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 proceeds from debt to purchase real estate	$	—		$	4,125
Non-cash deferred financing	$	4,202		$	—
Surrender of security deposit	$	305		$	500
Non-cash proceeds from financing of South Carolina Medicaid audit repayment	$	—		$	385
Settlement agreements in excess of cash paid	$	—		$	264
Issuance of vendor-financed insurance	$	198		$	198

See accompanying notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF 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” or “Regional” and, together with its subsidiaries, the “Company” or “we”). 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 purpose of the Merger, with Regional Health continuing as the surviving corporation in the Merger. The Company 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. Regional Health is a self-managed real estate investment company that invests primarily in real estate purposed for long-term healthcare and senior living. Our business primarily consists of leasing and subleasing such facilities to third-party tenants, which operate the facilities.

Regional Health is a self-managed real estate investment company that invests primarily in real estate purposed for long-term healthcare and senior living. Our business primarily consists of leasing and subleasing such facilities to third-party tenants, which operate the facilities. The operators of the Company’s facilities provide a range of health care 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

As of December 31, 2018, the Company owned, leased, or managed for third parties 30 facilities primarily in the Southeast. Effective January 15, 2019, the Company’s lease of two facilities located in Georgia was terminated by mutual consent of the Company and the lessor of such facilities (see Note 10 – Acquisitions and Dispositions ) .

Regional Health’s predecessor was incorporated in Ohio on August 14, 1991, under the name Passport Retirement, Inc. In 1995, the Company acquired substantially all of the assets and liabilities of AdCare Health Systems, Inc. and changed its name to AdCare Health Systems, Inc. AdCare completed its initial public offering in November 2006. Initially based in Ohio, AdCare expanded its portfolio through a series of strategic acquisitions to include properties in a number of other states, primarily in the Southeast. In 2012, AdCare relocated its executive offices and accounting operations to Georgia, and AdCare changed its state of incorporation from Ohio to Georgia on December 12, 2013.

Historically, AdCare’s business focused on owning and operating skilled nursing and assisted living facilities. The Company also managed facilities on behalf of unaffiliated owners pursuant to management contracts. In July 2014, AdCare’s board of directors (the “AdCare Board”) approved a strategic plan to transition (the “Transition”) the Company to a healthcare property holding and leasing company through a series of leasing and subleasing transactions. As of December 31, 2015, AdCare and its subsidiaries completed the Transition through: (i) leasing to third-party operators all the healthcare properties which they owned and previously operated; (ii) subleasing to third-party operators all the healthcare properties which they leased (but did not own) and previously operated; and (iii) continuing the one remaining management agreement to manage two skilled nursing facilities and one independent living facility for a third-party. As a result of the Transition, the Company acquired certain characteristics of a real estate investment trust (“REIT”) and became focused on the ownership, acquisition and leasing of healthcare related properties.

As a consequence of the Merger:

•

the outstanding shares of AdCare’s common stock, no par value per share (the “AdCare common stock”), converted, on a one for one basis, into the same number of shares of Regional Health’s common stock, no par value per share (the “RHE common stock”);

•

the outstanding shares of AdCare’s 10.875% Series A Cumulative Redeemable Preferred Stock (the “AdCare Series A Preferred Stock”) converted, on a one for one basis, into the same number of shares of Regional Health’s 10.875% Series A Cumulative Redeemable Preferred Stock (the “RHE Series A Preferred Stock”);

•

the AdCare Board and executive officers of AdCare immediately prior to the Merger became the board of directors (the “RHE Board”) and executive officers, respectively, of Regional Health immediately following the Merger, and each director and executive officer continued his directorship or employment, as the case may be, with Regional Health under the same terms as his directorship or employment with AdCare immediately following the Merger;

•

Regional Health became the successor issuer to AdCare and succeeded to the assets and continued the business and assumed the obligations of AdCare;

•

the RHE common stock and the RHE Series A Preferred Stock commenced trading on the NYSE American LLC (“NYSE American” or the “Exchange”) immediately following the Merger;

•

there was no change in the assets held by or in the business conducted by the Company; and

•

there was no fundamental change to the Company’s current operational strategy.

When used in these notes to the consolidated financial statements, unless otherwise specifically stated or the context otherwise requires, the terms:

•

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

•

“Company refers to AdCare and its subsidiaries with respect to the period prior to the Merger and to Regional Health and its subsidiaries with respect to the period after the Merger;

•

“common stock” refers to the AdCare common stock with respect to the period prior to the Merger and to the RHE common stock with respect to the period after the Merger;

•

“Charter” refers to the AdCare Charter with respect to the period prior to the Merger and to the RHE Charter with respect to the period after the Merger.

As of December 31, 2018, the Company owns, leases, or manages 30 facilities primarily in the Southeast. Of the 30 facilities, the Company: (i) leased 14 owned 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 for a full description of the Company’s leases). Effective January 15, 2019, the Company’s lease of two skilled nursing facilities located in Georgia was terminated by mutual consent of the Company and the lessor of the facilities (see Note 10 – Acquisitions and Dispositions ). 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 properties 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 escalation clauses.

Basis of Presentation

The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

Going Concern

For the year ended and as of December 31, 2018, we had a net loss of $11.9 million and negative working capital of $28.6 million. At December 31, 2018, we had $2.4 million in cash and $81.3 million in indebtedness, including current maturities of $26.4 million. The current portion of such indebtedness is comprised of: (i) $20.2 million of long term-debt (including a $0.5 million “tail fee” and a $0.5 million “repayment or acceleration fee”) under a debt refinancing agreement dated February 15, 2018, as amended from time to time, between the Company and Pinecone Realty Partners II, LLC (“Pinecone”), with an original aggregate principal amount of $16.25 million which refinanced existing mortgage debt (the “Pinecone Credit Facility”), classified as current due to the Company’s short-term forbearance agreement regarding the Company’s noncompliance with certain covenants under the Pinecone Credit Facility, pursuant to which Pinecone may exercise its default-related rights and remedies, including the acceleration of the maturity of the debt, upon the termination of the forbearance period under such forbearance agreement (as further discussed below in this note and Note 3 – Liquidity ); (ii) $4.1 million of mortgage indebtedness under the Company’s credit facility with Housing & Healthcare Funding, LLC (the “Quail Creek Credit Facility”) maturing in June 2019; and (iii) other debt of approximately $2.1 million, which includes senior debt and bond and mortgage indebtedness.

The continuation of our business is dependent upon our ability: (i) to comply with the terms and conditions under the Pinecone Credit Facility and the second new amended and restated forbearance agreement, dated March 29, 2019, between the Company and certain of its subsidiaries and Pinecone (the “Second A&R Forbearance Agreement”); and (ii) to refinance or obtain further debt maturity extensions on the Quail Creek Credit Facility, neither of which is entirely within the Company’s control. These factors create substantial doubt about the Company’s ability to continue as a going concern.

The Company is following a strategy to repay the Pinecone Credit Facility and Quail Creek Credit Facility within the next few months. If these efforts are unsuccessful, the Company may be required to seek relief through a number of other available routes, which may include a filing under the U.S. Bankruptcy Code. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. See Note – 19 Subsequent Events for details on a purchase and sale agreement, which if successful remedies the factors creating substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance however, that these efforts will be successful.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported results of operations during the reporting period. Significant estimates include the self-insurance reserve for professional and general liability, allowance for doubtful accounts, contractual allowances for Medicaid, Medicare, and managed care reimbursements, deferred tax valuation allowance, fair value of employee and nonemployee share-based awards, fair value estimation methods used to determine the assigned fair value of assets and liabilities acquired in acquisitions, valuation of goodwill and other long-lived assets, and cash flow projections. Actual results could differ materially from those estimates.

Principles of Consolidation

The consolidated financial statements include the Company’s majority owned and controlled subsidiaries. All intercompany transactions and balances have been eliminated through consolidation.

Arrangements with other business enterprises are evaluated, and those in which Regional Health is determined to have controlling financial interest are consolidated. Guidance is provided by FASB ASC Topic 810-10, “ Consolidation—Overall”, which includes consolidation of business enterprises to which the usual condition of consolidation (ownership of a majority voting interest) does not apply. This guidance includes controlling financial interests that may be achieved through arrangements that do not involve voting interests. In absences of clear control through voting interests, a company’s exposure (variable interest) to the economic risks and potential rewards from the variable interest entity’s (“VIE”) assets and activities are the best evidence of control. If an enterprise holds the power to direct and right to receive benefits of an entity, it would be considered the primary beneficiary. The primary beneficiary is required to consolidate the assets, liabilities and results of operations of the VIE in its financial statements.

The Company has evaluated and concluded that as of December 31, 2018 and December 31, 2017, the Company has no relationship with a VIE in which it is the primary beneficiary required to consolidate the entity.

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 twelve months ended December 31, 2017 to conform the presentation of: (i) management fee revenues and its related expense, previously reported as general and administrative expense; and (ii) provision for doubtful accounts previously reported as Other operating expenses. Reclassifications were made to the consolidated statements of cash flows for the twelve months ended December 31, 2017 to include restricted cash in cash and restricted cash at the beginning-of-period and end-of-period totals.

Reverse Stock Split

On December 27, 2018, the Board of Directors authorized a reverse stock split of the issued and outstanding shares of the common stock, at a ratio of one-for-twelve shares (the “Reverse Stock Split”). Shareholder approval for the Reverse Stock Split was obtained at the Company’s annual meeting of shareholders on December 27, 2018 and the Reverse Stock Split became effective on December 31, 2018. At the effective date, every twelve shares of the common stock that were issued and outstanding were automatically combined into one issued and outstanding share of the common stock. Shareholders did not receive fractional shares in connection with the Reverse Stock Split and instead, received an additional whole share of the common stock in lieu thereof. The authorized number of shares, and the par value per share, of the common stock was not affected by the Reverse Stock Split. The Reverse Stock Split also correspondingly affected all outstanding Regional Health equity awards. The Reverse Stock Split was implemented for the purpose of complying with the NYSE American continued listing standards regarding low selling price.

All authorized, issued and outstanding stock and per share amounts contained in the accompanying consolidated financial statements have been adjusted to reflect the Reverse Stock Split for all prior periods presented.

Cash, Restricted Cash and Investments

The Company considers all unrestricted short-term investments with original maturities less than three months, which are readily convertible into cash, to be cash equivalents. Certain cash and investment amounts are restricted for specific purposes such as mortgage escrow requirements; reserves for capital expenditures on United States Housing and Urban Development (“HUD”) insured facilities and collateral for other debt obligations.

Revenue Recognition and Allowances

Adoption of ASC Topic 606, “Revenue from Contracts with Customers” . As detailed in “ Recent Accounting Pronouncements ,” the Company adopted Topic 606, Revenue from Contracts with Customers on January 1, 2018. The cumulative effect of initially applying the standard recognized on this date was immaterial. As a result, the Company has changed its accounting policies for revenue recognized on non-real estate lease contracts. As of adoption, non-lease revenue streams are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Triple-Net Leased Properties. The Company ’ s triple-net leases provide for periodic and determinable increases in rent. The Company recognizes rental revenues under these leases on a straight-line basis over the applicable lease term when collectability is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in straight-line rent receivable on our consolidated balance sheets. In the event the Company cannot reasonably estimate the future collection of rent from one or more tenant(s) of the Company ’ s facilities, rental income for the affected facilities will be recognized only upon cash collection, and any accumulated straight-line rent receivable will be reversed in the period in which the Company deems rent collection no longer probable. Rental revenues for five facilities located in Ohio (until operator transition on December 1, 2018) and one facility in North Carolina are recorded on a cash basis during the year ended December 31, 2018 (for additional information with respect to such facilities, see Note 7 – Leases ).

Management Fee Revenues and Other Revenues . The Company recognizes management fee revenues as services are provided. The Company has one contract to manage three facilities (the “Management Contract”), with payment for each month of service received in full on a monthly basis. The maximum penalty for service contract nonperformance under the management contract is $50,000 per year, payable after the end of the year. Further, the Company recognizes interest income from loans and investments, using the effective interest method when collectability is probable. The Company applies the effective interest method on a loan-by-loan basis.

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, then 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. Payments received on impaired loans are applied against the allowance. 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, then 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 (see Note 7 – Leases ).

Concentrations of Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash, restricted cash, accounts receivable and straight-line rent receivables. Cash and restricted cash are held with various financial institutions. From time to time, these balances exceed the federally insured limits. These balances are maintained with high quality financial institutions which management believes limits the risk.

Accounts receivable are recorded at net realizable value. The Company performs ongoing evaluations of its tenants and significant third-party payors with which it contracts, and generally does not require collateral. The Company maintains an allowance for doubtful accounts which management believes is sufficient to cover potential losses. Delinquent accounts receivable are charged against the allowance for doubtful accounts once collection has been determined to be unlikely. Accounts receivable are considered past due and placed on delinquent status based upon contractual terms as well as how frequently payments are received, on an individual account basis.

Property and Equipment

Property and equipment are stated at cost. Expenditures for major improvements are capitalized. Depreciation commences when the assets are placed in service. Maintenance and repairs which do not improve or extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is recorded. Depreciation is recorded on a straight-line basis over the estimated useful lives of the respective assets. Property and equipment also includes bed license intangibles for states other than Ohio (where the building and bed license are deemed complimentary assets) and are amortized over the life of the building. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable.

Leases and Leasehold Improvements

The Company leases certain facilities and equipment in the normal course of business. At the inception of each lease, the Company performs an evaluation to determine whether the lease should be classified as an operating lease or capital lease. As of December 31, 2018, all of the Company’s leased facilities are accounted for as operating leases. For operating leases that contain scheduled rent increases, the Company records rent expense on a straight-line basis over the term of the lease. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term. See “ Recently Issued Accounting Pronouncements” below in this Note – 1 for information regarding adoption of ASU 2016-02 , Leases, on January 1, 2019.

Intangible Assets and Goodwill

Intangible assets consist of finite lived and indefinite lived intangibles. The Company’s finite lived intangibles include lease rights and certain certificate of need (“CON”) and bed licenses that are not separable from the associated buildings. Finite lived intangibles are amortized over their estimated useful lives. For the Company’s lease related intangibles, the estimated useful life is based on the terms of the underlying facility leases averaging approximately ten years. For the Company’s CON/bed licenses that are not separable from the buildings, the estimated useful life is based on the building life when acquired with an average estimated useful life of approximately 32 years. The Company evaluates the recoverability of the finite lived intangibles whenever an impairment indicator is present.

The Company’s indefinite lived intangibles consist primarily of values assigned to CON/bed licenses that are separable from the buildings. The Company does not amortize goodwill or indefinite lived intangibles. The Company's goodwill is related to certain property acquisitions, but is evaluated for impairment on the operator level. On an annual basis, the Company evaluates the recoverability of the indefinite lived intangibles and goodwill by performing an impairment test. The Company performs its annual test for impairment during the fourth quarter of each year. For the year ended December 31, 2018 the test results indicated no impairment necessary.

Pre-paid Expenses and Other

As of December 31, 2018 and December 31, 2017, the Company had $0.5 million and $0.3 million, respectively, in pre-paid expenses and other; approximately $0.3 million relates to consultant and legal retainers as of December 31, 2018, and the remainder for both periods is primarily for directors’ and officers’ insurance and mortgage insurance premiums.

Extinguishment of Debt

Other E xpense

Other expense decreased by $0.4 million, or 89.0%, for the twelve months ended December 31, 2018, compared with $0.5 million for the same period in 2017. The prior period charge was related to expenses for the Merger.

Deferred Financing Costs

The Company records deferred financing costs associated with debt obligations as direct reduction from the carrying amount of the debt liability. Costs are amortized over the term of the related debt using the straight-line method and are reflected as interest expense. The straight-line method yields results substantially similar to those that would be produced under the effective interest rate method.

Income Taxes and Uncertain Tax Positions

Deferred tax assets or liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that included the enactment date. Deferred tax assets are also recognized for the future tax benefits from net operating loss and other carry forwards. Valuation allowances are recorded for deferred tax assets when the recoverability of such assets is not deemed more likely than not.

On December 22, 2017, tax legislation commonly known as The Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted. Among other changes the Tax Reform Act reduces the US federal corporate tax rate from 35% to 21% beginning in 2018.

The Company has remeasured certain deferred tax assets and liabilities as of the enactment date of the Tax Reform Act based on the rates at which they are expected to reverse in the future, which is generally 21%. The amount recorded related to the remeasurement of our deferred tax balance was $9.5 million, which was offset by a reduction in the valuation allowance. For the year ended December 31, 2017, the Company also recorded an income tax benefit of approximately $0.2 million related to the use of our naked credit (a deferred tax liability for an indefinite-lived asset) as a source of income to release a portion of our valuation allowance.

As a result of the Tax Reform Act, net operating loss (“NOL”) carry forwards generated in tax years 2018 and forward have an indefinite life. For this reason, the Company has taken the position that the deferred tax liability related to the indefinite lived intangibles can be used to support an equal amount of the deferred tax asset related to the 2018 NOL carry forward generated. This resulted in the Company recognizing an income tax benefit of approximately $0.04 million in 2018 related to the use of our naked credit as a source of income to release a portion of our valuation allowance.

Judgment is required in evaluating uncertain tax positions. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is measured to determine the amount of benefit to recognize in the financial statements. The Company classifies unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the consolidated balance sheets. The Company is subject to income taxes in the U.S. and numerous state and local jurisdictions. In general, the Company’s tax returns filed for the 2015 through 2018 tax years are still subject to potential examination by taxing authorities.

To the Company’s knowledge, the Company is not currently under examination by any major income tax jurisdiction.

Stock Based Compensation

The Company follows the provisions of ASC topic 718 “ Compensation - Stock Compensation ”, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees, non-

employees, and others receive shares of stock or equity instruments (options, warrants or restricted shares). All awards are amortized on a straight-line basis over their vesting terms.

Fair Value Measurements and Financial Instruments

Accounting guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The categorization of a measurement within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1— Quoted market prices in active markets for identical assets or liabilities

Level 2— Other observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3— Significant unobservable inputs

The respective carrying value of certain financial instruments of the Company approximates their fair value. These instruments include cash, restricted cash and investments, accounts receivable, notes receivable, and accounts payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values, they are receivable or payable on demand, or the interest rates earned and/or paid approximate current market rates.

Self-Insurance

Prior to the Transition, the Company was self-insured for employee medical claims (in all states except for Oklahoma, where the Company participated in the Oklahoma state subsidy program) and had a large deductible workers’ compensation plan (in all states except for Ohio, where workers’ compensation is covered under a premium-only policy provided by the Ohio Bureau of Workers’ Compensation).

In 2015, the insurance programs described above changed in order to address the different needs of the Company as a result of the Transition. The Company’s workers compensation plan transitioned from a high deductible to a guaranteed cost program in February 2015. As of December 31, 2018, there are no outstanding claims or unsettled claims for the legacy self-insured employee medical plan and the large deductible workers’ compensation plan.

Professional liability insurance was provided to facilities operations up until the date of the Transition. Claims which were associated with operations of the Company prior to the Transition but not reported as of the transition date were self-insured.

In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors’ and officers’ liability, crime and employment practices liability.

Classification of the Series A Preferred Stock as Permanent Equity

As a result of the Merger the common stock is subject to the ownership and transfer restrictions set forth in the RHE Charter. These restrictions permit classification of the Series A Preferred Stock as permanent equity. Prior to the Merger, the common stock was not subject to these restrictions, and the Series A Preferred Stock was classified outside of permanent equity. As of the effective date of the Merger, the Series A Preferred Stock was classified as permanent equity. See Note 12 – Common and Preferred Stock .

Recently Adopted Accounting Standards

Except for rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws, FASB ASC is the sole source of authoritative GAAP literature applicable to the Company. The Company has reviewed the FASB accounting pronouncements and Accounting Standards Updates (“ ASU ”) interpretations that have effectiveness dates during the periods reported and in future periods.

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers , as codified in 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 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 the Management Contract to manage 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 cumulative effect of initially applying the standard as of the adoption date to the Management Contract which was not completed as of January 1, 2018 was immaterial. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The Company has identified its non-lease revenue streams and adoption of this standard does not have a material impact on our financial position or results of operations. The Company has increased disclosures around revenue recognition in the notes to consolidated financial statements to comply with the standard.

As a result of the adoption of this guidance, for the twelve months ended December 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 , 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 twelve month period ended December 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 , which 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 restricted cash 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 twelve months ended December 31, 2017 to include restricted cash in cash and restricted cash at the beginning-of-period and end-of-period totals.

On April 1, 2017, the Company adopted ASU 2017-01 , clarifying the Definition of a Business, which narrows the FASB definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired asset is not a business. If this initial test is not met, an acquired asset cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. The primary differences between business combinations and asset acquisitions include recognition of goodwill at the acquisition date and expense recognition for transaction costs as incurred. The Company is applying ASU 2017-01 prospectively for acquisitions after April 1, 2017. Regardless of whether an acquisition is considered a business combination or an asset acquisition, the Company records the cost of the businesses (or assets) acquired as tangible and intangible assets and liabilities based upon their estimated fair values as of the acquisition date. Intangibles primarily include CONs but could include value of in-place leases and acquired lease contracts. For an asset acquisition, the cost of the acquisition is allocated to the assets and liabilities acquired on a relative fair value basis and no goodwill is recognized. The Company estimates the fair value of assets in accordance with FASB ASC 820 . The fair value is estimated under market conditions observed at the time of the measurement date and depreciated over the remaining life of the assets.

In March 2016, the FASB issued ASU 2016-09, with the intention to simplify aspects of the accounting for share-based payment transactions, including income tax impacts, classification on the statement of cash flows, and forfeitures. ASU 2016-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2016. The various amendments within the standard require different approaches to adoption, on a retrospective, modified retrospective or prospective basis. The Company adopted the various amendments in its consolidated financial statements for the twelve month period ended December 31, 2017 with an effective date of January 1, 2017. The Company has elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. The adoption of ASU 2016-09 did not have a material effect on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15 , which provides guidance regarding an entity’s ability to continue as a going concern, which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with early adoption permitted. The adoption of ASU 2014-15 did not have a material effect on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, which provides revised accounting guidance related to the accounting for and reporting of financial instruments. This guidance significantly revises an entity’s accounting related to (i) the classification and measurement of investments in equity securities and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017; earlier adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

Recently Issued 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. In July 2018, the FASB issued ASU 2018-11 , Leases (Topic 842) Targeted Improvements, which amends ASU 2016-02 , to provide: (i) entities with an additional (and optional) transition method to adopt the new leases standard; and (ii) lessors with a practical expedient option, 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. In December 2018, the FASB issued ASU 2018-20 , Leases (Topic 842) Narrow-Scope Improvements for Lessors, which amends ASU 2016-02 , to provide additional guidance on accounting for certain expenses such as property taxes and insurance paid on behalf of the lessor by the lessee. ASU 2016-02, ASU 2018-11 and ASU 2018-20 are not effective for the Company until January 1, 2019, with early adoption permitted. Entities currently are required to adopt the new leases standard using

either: (i) a modified retrospective transition method, where an entity initially applies the new leases standard (subject to specific transition requirements and optional practical expedients) at the beginning of the earliest period presented in the financial statements; or (ii) to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

On January 1, 2019, our adoption date, we will recognize both right of use assets and lease liabilities for leases in which we lease land, real property or other equipment, electing the practical expedient to maintain the prior operating lease classification. We will report revenues and expenses for real estate taxes and insurance, prospectively in the unlikely event the lessee has not made those payments directly to a third party in accordance with their respective leases with us. We will elect the practical expedient to account for our leases as a single lease component. Also, upon adoption, we will expense certain leasing costs, other than leasing commissions, as they are incurred, which may reduce our net income. Current GAAP provides for the deferral and amortization of such costs over the applicable lease term. We will continue to amortize any unamortized deferred lease costs as of December 31, 2018 over their respective lease terms. We expect the adoption of ASU 2016-02 will not have a material effect on the Company’s consolidated financial statements, other than we expect the initial balance sheet impact of recognizing the right-of-use assets and the right-of-use lease liabilities to be approximately in the $41 million range at December 31,2018. See Note 7– Leases for the Company’s operating leases.

In June 2016, the FASB issued ASU 2016-13 , which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. In November 2018, the FASB issued ASU 2018-19 Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

NOTE 2. EARNINGS PER SHARE

As indicated in Note 1 - Summary of Significant Accounting Policies , the Reverse Stock Split became effective on December 31, 2018 for all issued and outstanding shares of the common stock at a ratio of a one-for-twelve, and amounts authorized under the Company’s equity incentive plans were proportionately adjusted. Accordingly, all share and per share amounts have been adjusted to reflect the Reverse Stock Split for all prior periods presented.

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 period. Diluted earnings per share is similar to basic earnings per share except net income or loss is adjusted by the impact of the assumed issuance of convertible shares and the weighted-average number of shares of common stock outstanding (which includes potentially dilutive securities, such as options, warrants, non-vested shares, and additional shares issuable under convertible notes outstanding during the period when such potentially dilutive 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 promissory notes 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 2018 and 2017, potentially dilutive securities of 0.1 million and 0.1 million, respectively, were excluded from the diluted loss per share calculation because including them would have been anti-dilutive in both periods.

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

	Year Ended December 31,
	2018								2017
(Amounts in 000’s, except per share data)	Income (loss)			Shares ⁽²⁾		Per Share			Income (loss)			Shares ⁽²⁾		Per Share
Continuing Operations:
(Loss) income from continuing operations	$	(11,969	)						$	694
Preferred stock dividends, declared		—								(5,702	)
Preferred stock dividends, undeclared ⁽¹⁾		(7,985	)							(1,912	)
Basic and diluted loss from continuing operations	$	(19,954	)		1,676	$	(11.90	)	$	(6,920	)		1,653	$	(4.19	)
Discontinued Operations:
Income (loss) from discontinued operations	$	74							$	(1,679	)
Basic and Diluted Income (loss) from discontinued operations, net of tax	$	74			1,676	$	0.04		$	(1,679	)		1,653	$	(1.01	)
Net Loss Attributable to Regional Health Properties, Inc.:
Basic and Diluted Net loss attributable to Regional Health Properties, Inc. common stockholders	$	(19,880	)		1,676	$	(11.86	)	$	(8,599	)		1,653	$	(5.20	)

⁽¹⁾

The Board suspended the quarterly dividend payment with respect to our Series A Preferred Stock commencing with the fourth quarter of 2017, and determined to continue such suspension indefinitely in June 2018. Accordingly, the Company has not paid dividends with respect to the Series A Preferred Stock since the third quarter of 2017.

⁽²⁾	Securities outstanding that were excluded from the computation, prior to the use of the treasury stock method, because they would have been anti-dilutive are as follows:

	December 31,
(Amounts in 000’s)	2018		2017
Stock options		15		15
Common stock warrants - employee		49		49
Common stock warrants - nonemployee		36		36
Shares issuable upon conversion of convertible debt		—		29
Total shares		100		129

NOTE 3. LIQUIDITY

Going Concern and Overview

The continuation of our business, as discussed below in this note, is dependent upon our ability: (i) to comply with the terms and conditions under the Pinecone Credit Facility and the second new amended and restated forbearance agreement, dated March 29, 2019, between the Company and certain of its subsidiaries and Pinecone (the “Second A&R Forbearance Agreement”); and (ii) to refinance or obtain further debt maturity extensions on the Quail Creek Credit Facility, neither of which is entirely within the Company’s control. These factors create substantial doubt about the Company’s ability to continue as a going concern.

Series A Preferred Dividend Suspension

On June 8, 2018, the Board indefinitely suspended quarterly dividend payments with respect to the Series A Preferred Stock. Such dividends are currently in arrears with respect to the fourth quarter of 2017, all quarters of 2018, and the first quarter of 2019. The Board plans to revisit the dividend payment policy with respect to the Series A Preferred Stock on an ongoing basis. The Board believes that the dividend suspension will provide the Company with additional funds to meet its ongoing liquidity needs. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividends periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend periods has increased to 12.875%, which is equivalent to $3.22 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) 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.

Current Maturities of Debt

As of December 31, 2018, the Company had total current liabilities of $36.7 million and total current assets of $8.1 million, resulting in a working capital deficit of approximately $28.6 million. Included in current liabilities at December 31, 2018 is the $26.4 million current portion of the Company’s $81.3 million in indebtedness. The current portion of such indebtedness is comprised of: (i) $20.2 million of long term-debt (including a $0.5 million “tail fee” and a $0.5 million “repayment or acceleration fee” ) under the Pinecone Credit Facility, classified as current due to the Company’s short-term forbearance agreement with Pinecone regarding the Company’s noncompliance with certain covenants under the Pinecone Credit Facility pursuant to which Pinecone may exercise its default-related rights and remedies, including the acceleration of the maturity of the debt, upon the termination of the forbearance period under such forbearance agreement (as further discussed below in this note); (ii) $4.1 million mortgage indebtedness under the Quail Creek Credit Facility maturing in June 2019; and (iii) other debt of approximately $2.1 million, which includes senior debt and bond and mortgage indebtedness. The Company anticipates net principal repayments of approximately $26.4 million during the next twelve-month period which include the $20.2 million debt under the Pinecone Credit Facility, approximately $4.1 million of payments under the Quail Creek Credit Facility, $1.4 million of routine debt service amortization, approximately $0.6 million payments on other non-routine debt and a $0.1 million payment of bond debt (excluding approximately $0.2 million principal repayment as a result of a refund of issuance fees).

On February 15, 2018 (the “Closing Date”), the Company entered into the Pinecone Credit Facility with 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 known as Attalla, College Park and Northwest (the “Facilities”), and provided additional surplus cash flow of $6.3 million for general corporate needs (see Note 9 – Notes Payable and Other Debt ) after deducting approximately $1.25 million in debt issuance costs and prepayment penalties. Regional Health is a guarantor of the Pinecone Credit Facility. Certain of the notes under the Pinecone Credit Facility are also guaranteed by certain wholly-owned subsidiaries of Regional Health. 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 was used for general corporate purposes.

On May 10, 2018, Pinecone notified the Company in writing (the “Default Letter”) that the Company was in default under certain financial covenants of the Loan Agreement dated as of February 15, 2018, among the Company and certain of its subsidiaries and Pinecone (the “Loan Agreement”) and other loan documents evidencing the Pinecone Credit Facility (collectively, the “Pinecone Loan Documents”). On May 18, 2018, the Company and certain of its subsidiaries entered into a Forbearance Agreement with Pinecone with respect to the specified events of default set forth therein (the “Original Forbearance Agreement”), pursuant to which, among other things, additional fees in the amount of $0.4 million were added to the outstanding principal balance under the Pinecone Credit Facility. The forbearance period under the Original Forbearance Agreement terminated on July 6, 2018 because the Company did not satisfy conditions in the Original Forbearance Agreement that required the Company to enter into an agreement with Pinecone to support a transaction or series of transactions to remedy the defaults specified in the Default Letter and the Original Forbearance Agreement.

On September 6, 2018, the Company and certain of its subsidiaries entered into a new Forbearance Agreement (the “New Forbearance Agreement”) with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the New Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to specified events of default (the “Specified Defaults”) under the Pinecone Loan Documents.

Pursuant to the New Forbearance Agreement, the Company and Pinecone amended certain provisions of the Pinecone Loan Documents. Such amendments, among other things: (i) removed the restriction on prepaying the loans during the thirteen (13) month-period after the Closing Date; (ii) provided a thirty (30)-day cure period for certain events of default and a fifteen (15)-day cure period for certain failures to provide information or materials pursuant to the Pinecone Loan Documents; (iii) increased the finance fee payable on repayment or acceleration of the loans, depending on the time at which the loans are repaid ($0.25 million prior to December 31, 2018 and $0.5 million thereafter); and (iv) increased the outstanding principal balance owed by (a) approximately $0.7 million to reimburse Pinecone for its accrued and unpaid expenses and to pay outstanding interest payments for prior interest periods and (b) $1.5 million fee described as a non-refundable payment of additional interest. During the forbearance period under the New Forbearance Agreement, the interest rate reverted from the default rate of 18.5% per annum to the ongoing rate of 13.5% per annum.

The New Forbearance Agreement terminated on December 31, 2018 because the Company did not satisfy certain conditions set forth therein.

On December 31, 2018, the Company and certain of its subsidiaries entered into a new amended and restated Forbearance Agreement (the “A&R New Forbearance Agreement”) with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the A&R New Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to the Specified Defaults under the Loan Agreement.

Pursuant to the A&R New Forbearance Agreement, the Company and Pinecone amended certain provisions of the Loan Agreement. In addition Pinecone consented to the termination, effective January 15, 2019, of the Company’s lease and sublease of two skilled nursing facilities, an 115-bed skilled nursing facility located in East Point, Georgia and an 184-bed skilled nursing facility located in Atlanta, Georgia (the “Omega Facilities”), by mutual consent of the Company and the lessor (affiliate of Omega Healthcare) and the sublessees (affiliates of Wellington Health Services) of each of the Omega Facilities (the “Omega Lease Termination”). The leases of the Omega Facilities were to expire in August 2025, and the A&R New Forbearance Agreement required that the Omega Lease Termination be completed by February 1, 2019.

Pursuant to the A&R New Forbearance Agreement, the Company reimbursed Pinecone by February 1, 2019 for certain unpaid expenses and prepay Pinecone ’ s loan to AdCare Property Holdings, LLC (the “ AdCare Holdco Loan ” ). In connection with the Omega Lease Termination, the Company realized proceeds (including a termination fee payable by the landlord to the Company, which approximated future forgone cash flow from the Company ’ s related sublease) to contribute to the Company ’ s required payment to Pinecone of approximately $1.4 million, of which $0.2 million was paid to Pinecone on January 4, 2019 for Pinecone ’ s expenses and the balance of $1.2 million was paid on January 28, 2019, of which $0.1 million was for Pinecone ’ s expenses, which included a 1% prepayment penalty, and the balance of $0.9 million was applied to pay down the principal amount of the AdCare Holdco Loan, which at December 31, 2018 was approximately $5.4 million.

The A&R New Forbearance Agreement amended the Loan Agreement to, among other things: (i) add a $0.35 million fee (paid in kind) to the loans on a pro rata basis; (ii) provide for additional payment in kind interest at a rate of 3.5% (the “PIK rate”), with such interest to be paid in kind in arrears by increasing the outstanding principal amount of loans held by the Pinecone on the first (1st) day of each month; provided that interest accruing at the PIK Rate on each loan and any overdue interest on each loan was paid in cash (a) on the maturity of the loans, whether by acceleration or otherwise, or (b) in connection with any repayment or prepayment of the loans; and (iii) modify the default rate of interest to add an additional 2.5% to the PIK Rate, in addition to the ongoing rate of 13.5%. During the forbearance period under the A&R New Forbearance Agreement, the interest rate paid in cash on the first (1st) day of each month was the ongoing rate of 13.5% per annum. See Note – 19 Subsequent Events for further information and actual results on the Omega Lease Termination and subsequent AdCare Holdco Loan partial repayment completed on January 28, 2019. The forbearance period under the A&R New Forbearance Agreement expired according to its terms on March 14, 2019.

On March 29, 2019, the Company and certain of its subsidiaries entered into a second new amended and restated Forbearance Agreement (the “Second A&R Forbearance Agreement”) with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the Second A&R Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to the Specified Defaults under the Loan Agreement. The forbearance period under the Second A&R Forbearance Agreement commenced on March 29, 2019 and may extend as late as October 1, 2019, unless the forbearance period is earlier terminated as a result of specified termination events, including a default or event of default under the Loan Agreement (other than any Specified Defaults) or any failure by the Company or its subsidiaries to comply with the terms of the Second A&R Forbearance Agreement, including, without limitation, the Company’s obligation to progress with an Asset Sale (as defined below) in accordance with the timeline specified therein. Accordingly, the forbearance period under the Second A&R Forbearance Agreement may terminate at any time and there is no assurance such period will extend through October 1, 2019.

Pursuant to the Second A&R Forbearance Agreement, the Company and Pinecone amended certain provisions of the Loan Agreement. The Second A&R Forbearance Agreement requires, among other things (i) that the Company pursue and complete an asset sale (the “Asset Sale”) which would result in the repayment in full of all of the Company’s indebtedness to Pinecone and, in connection therewith, the Company pay not less than $0.3 million and not more than $0.55 million in forbearance fees, as well as certain other expenses of Pinecone, or (ii) Pinecone’s other disposition of the Loan Agreement as contemplated by the Second A&R Forbearance Agreement. Additionally the Second A&R Forbearance Agreement accelerates the previously disclosed 3% finance “tail fee”, 1% prepayment penalty, and 1% break up fee so that such fees and penalties became part of the principal as of April 15, 2019.

Upon the occurrence of an event of default (other than the Specified Defaults), or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement, Pinecone may declare the entire unpaid principal balance under the Pinecone Credit Facility, together with all accrued interest and other amounts payable to Pinecone thereunder, immediately due and payable. Subject to the terms of the Pinecone Loan Documents, Pinecone may foreclose on the collateral securing the Pinecone Credit Facility (the “ Collateral ” ). The Collateral includes, among other things, the Facilities and all assets of the borrowers owning the Facilities, the leases associated with the Facilities and all revenue generated by the Facilities, and rights under a promissory note in the amount of $5.4 million, issued by Regional Health pursuant to the Pinecone Credit Facility in favor of one of its subsidiaries, which subsidiary is a borrower and guarantor under the Pinecone Credit Facility.

In addition, the equity interests in substantially all of Regional Health’s direct and indirect, wholly-owned subsidiaries (the “Pledged Subsidiaries”) have been pledged to Pinecone as part of the Collateral. The assets and operations of the Pledged Subsidiaries constitute substantially all of the Company’s assets and operations. Upon the occurrence of an event of default (other than the Specified Defaults) or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement, Pinecone may, in addition to its other rights and remedies, remove any or all of the managers of the Pledged Subsidiaries and appoint its own representatives as managers of such Pledged Subsidiaries. If Pinecone elects to appoint its own representatives as managers of the Pledged Subsidiaries, then such managers would control such subsidiaries and their assets and operations and could potentially restrict or prevent such subsidiaries from paying dividends or distributions to Regional Health. As a holding company with no significant operations, Regional Health relies primarily on dividends and distributions from the Pledged Subsidiaries to meet its obligations and pay dividends on its capital stock (when and as declared by the Board.)

The Pinecone Loan Documents provide that Pinecone’s rights and remedies upon an event of default are cumulative, and that Pinecone may exercise (although it is not obligated to do so) all or any one or more of the rights and remedies available to it under the Pinecone Loan Documents or applicable law. The Company does not know which rights and remedies, if any, Pinecone may choose to exercise under the Pinecone Loan Documents upon the occurrence of an event of default (other than the Specified Defaults) or the expiration or termination of the forbearance period under the Second A&R Forbearance Agreement. If Pinecone elects to appoint its own representatives as managers of the Pledged Subsidiaries, to accelerate the indebtedness under the Pinecone Credit Facility, or to foreclose on significant assets of the Company (such as the Facilities and/or the equity interests in the Pledged Subsidiaries), then it will have a material adverse effect on the Company’s liquidity, cash flows, financial condition and results of operations, and whether or not the Company will be able to continue as a going concern.

The forbearance period under the Second A&R Forbearance Agreement commenced on March 29, 2019 and may extend as late as October 1, 2019, unless earlier terminated upon the occurrence of specified termination events under the Second A&R Forbearance Agreement. As of such date or earlier termination, Pinecone will no longer be required to forbear from exercising its default-related rights and remedies with respect to the Specified Defaults and may exercise all of its rights and remedies with respect to the Pinecone Loan Documents at that time.

Debt Covenant Compliance

At December 31, 2018, three of the Company’s credit-related instruments were not in compliance. 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 December 31, 2018. The Pinecone Credit Facility which requires the Company to 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 December 31, 2018. Such violation is waived for the duration of the forbearance period under the Second A&R Forbearance Agreement. Additionally as of December 31, 2018, the Company was not in compliance with the annual minimum debt service coverage ratio required under (a) the credit facility secured by the Company’s 106 bed, skilled nursing facility located in Sylvia, North Carolina (the “Mountain Trace Facility”) which requires that the Company maintain a minimum debt service coverage ratio of 1.0 and with respect to which the Company’s minimum debt service coverage ratio was equal to -0.1 at December 31, 2018 and for which the Company obtained a waiver; and (b) the credit facility secured by the Company’s assisted living facility located in Springfield, Ohio known as Eaglewood Village, which requires that the Company maintain a minimum debt service coverage ratio of 1.3 and with respect to which, the Company’s minimum debt service coverage ratio was equal to -0.5 at December 31, 2018, and for which the Company submitted a required management plan of correction report outlining the Company’s plans for re-attaining required minimum debt service coverage levels. The Company was in compliance with the foregoing minimum debt service coverage ratio requirements at December 31, 2017.

Changes in Operational Liquidity

During the year ended December 31, 2018, eight of the Company’s facilities were in arrears’ on their rent payments. Combined cash rental payments for all eight facilities totaled $0.4 million per month, or approximately 21% of our anticipated total monthly rental receipts. Five of these facilities located in Ohio (the “Ohio Beacon Facilities”) and leased to affiliates (the “Ohio Beacon Affiliates”) of Beacon Health Management, LLC (“Beacon”), who were ten months in arrears on rental payments, surrendered possession of the Ohio Beacon Facilities upon the mutual lease termination on November 30, 2018. Pursuant to the mutual lease terminations the Ohio Beacon Affiliates agreed to pay a $0.675 million termination fee, payable in 18 monthly installments of $37,500 commencing on January 3, 2019, in full satisfaction of a $0.5 million lease inducement and approximately $2.5 million in rent arrears and approximately $0.6 million of other receivables. Of the remaining three facilities who were in arrears on their rental payments, which facilities are leased to affiliates of Symmetry Healthcare Management, LLC (“Symmetry Healthcare”), one such facility is located in North Carolina (which the Company transitioned to a new operator on March 1, 2019) and two such facilities are located in South Carolina. For additional information with respect to such facilities, see Note 7 – Leases .

On September 20, 2018, the Company reached an agreement with Symmetry Healthcare, pursuant to which Symmetry Healthcare agreed to a payment plan for rent arrears and the Company agreed to an aggregate reduction of approximately $0.6 million in annualized rent with respect to the three facilities leased to the affiliates of Symmetry Healthcare and waived approximately $0.2 million in rent that was in arrears with respect to such facilities, upon which the affiliates of Symmetry Healthcare recommenced monthly rent payments with respect to such facilities of $0.1 million in the aggregate, starting with the September 1, 2018 amounts due.

On November 30, 2018, the Company subleased the Ohio Beacon Facilities to affiliates (collectively, “Aspire Sublessees”) of Aspire Regional Partners, Inc. (“Aspire”), management formerly affiliated with MSTC Development Inc., pursuant to separate sublease agreements (under Aspire’s operation, the “Aspire Subleases”), providing that Aspire Sublessees would take possession of and operate the Ohio Beacon Facilities (under Aspire’s operation, the “Aspire Facilities”) as subtenant, effective December 1, 2018. Annual anticipated minimum cash rent for the next twelve months is approximately $1.8 million with provision for approximately $0.7 million additional cash rent based on each facility’s prior month occupancy. For additional information with respect to such facilities, see Note 7 – Leases .

On January 15, 2019, but effective February 1, 2019, the Company agreed to a 10% reduction in base rent, or an aggregate average of approximately $31,000 per month cash rent reduction for the year ending December 31, 2019, and $48,000 per month decrease in straight-line revenue, respectively, for two of the Company’s eight facilities located in Georgia, which are subleased to affiliates of Wellington Health Services (the “Wellington Sublessees”) under agreements dated January 31, 2015, as subsequently amended (the “Wellington Subleases”). The Wellington Subleases due to expire August 31, 2027, relate to the Company’s 134-bed skilled nursing facility located in Thunderbolt, Georgia (the “Tara Facility”) and an 208-bed skilled nursing facility located in Powder Springs, Georgia (the “Power Springs Facility”). Additionally the Company modified the annual rent escalator to 1% per year from the prior scheduled increase from 1% to 2% previously due to commence on the 1st day of the sixth lease year. See Note – 19 Subsequent Events .

Non-Compliance with NYSE American Continued Listing Standards

On August 28, 2018, the Company received a deficiency letter from NYSE American stating that the Company was not in compliance with the continued listing standards as set forth in Section 1003(f)(v) of the NYSE American Company Guide (the “Company Guide”). Specifically, the letter informed the Company that the Exchange determined that shares of the Company’s securities were selling for a low price per share for a substantial period of time and, pursuant to Section 1003(f)(v) of the Company Guide, the Company’s continued listing was predicated on the Company effecting a reverse stock split of the common stock or otherwise demonstrating sustained price improvement within a reasonable period of time, which the Exchange determined to be no later than February 27, 2019.

On February 28, 2019 the Company regained compliance with the continued listing standards set forth in the Company Guide regarding the low selling price by completing the Reverse Stock Split. The proposal to amend the Charter to effect a reverse stock split of the common stock at a ratio of between one-for-six and one-for-twelve, as determined by the Board in its sole discretion, was approved at the Company ’ s 2018 annual meeting of shareholders, and the Reverse Stock Split became effective on December 31, 2018. If the Company is again determined to be noncompliant with any of the continued listing standards of the NYSE American within twelve months of February 28, 2019, the Exchange will examine the relationship between the Company ’ s previous noncompliance with the continued listing standards with respect to the low selling price and such new event of noncompliance in accordance with Section 1009(h) of the Company Guide. In connection with such new event of noncompliance, the Exchange may, among other things, truncate the compliance procedures described in the continued listing standards or initiate immediate delisting proceedings.

On April 17, 2019, the Company received a letter from NYSE American stating that the Company is not in compliance with the Exchange’s continued listing standards under the timely filing criteria outlined in Section 1007 of the Company Guide because the Company failed to timely file its Annual Report on Form 10-K for the period ended December 31, 2018. The Company is now subject to the procedures and requirements set forth in Section 1007 of the Company Guide. The Company has been provided a six-month cure period (until October 17, 2019) during which the Exchange will monitor the Company and the status of the initial delinquent report and any subsequent delinquent reports. If the Company fails to cure the filing delinquency within the initial cure period, the Exchange may, in its sole discretion, allow the Company’s securities to be traded for up to an additional six-month cure period, depending on the Company’s specific circumstances. If the Exchange determines that such additional cure period is not appropriate, suspension and delisting procedures will commence in accordance with the procedures set forth in Section 1010 of the Company Guide. Notwithstanding the foregoing, however, the Exchange may in its sole discretion decide (i) not to afford the Company any additional cure period at all or (ii) at any time during the initial cure period or additional cure period, to truncate the initial cure period or additional cure period, as the case may be. Furthermore, the Exchange may immediately commence suspension and delisting procedures if the Company is subject to delisting pursuant to any other provision of the Company Guide, including if the Exchange believes, in its sole discretion, that continued listing and trading of the Company’s securities on the Exchange is inadvisable or unwarranted in accordance with Sections 1001-1006 of the Company Guide.

As of December 31, 2018, the Company’s equity at $6.15 million was $0.15 million above the required minimum for compliance with certain NYSE American continued listing standards relating to stockholders’ equity. Specifically, Section 1003(a)(iii) of the Company Guide requires stockholders’ equity of $6.0 million or more if an issuer has reported losses from continuing operations and/or net losses in its five most recent fiscal years. If the Company falls below the required minimum stockholders equity, then the Company could become subject to the procedures and requirements of Section 1009 of the Company Guide and be required to submit a compliance plan describing the actions the Company is taking or would take to regain compliance with the continued listing standards. Alternatively, the Exchange may, among other things, truncate the compliance procedures described in the continued listing standards or initiate immediate delisting proceedings.

The Company’s ability to raise additional capital through the issuance of equity securities and the terms upon which we are able to raise such capital will be adversely affected if we are unable to maintain the listing of the common stock and the Series A Preferred Stock on the NYSE American.

Evaluation of the Company’s Ability to Continue as a Going Concern

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.

100

In applying applicable accounting guidance, management considered the Company ’ s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company ’ s obligations due over the next twelve months including the Quail Creek Credit Facility maturing in June 2019 , the likelihood that the Company will be able to comply with the requirements in the Pinecone Loan Documents, including the A&R New Forbearance Agreement, and Pinecone ’ s remedies in the event of non-compliance, as well as the Company ’ s recurring business operating expenses.

There is no assurance that the Company will be able to refinance or obtain further debt maturity extensions on the Quail Creek Credit Facility, or comply with all of the requirements under the Pinecone Loan Documents, including the Second A&R Forbearance Agreement, which requires, among other things, that the Company complete the Asset Sale in accordance with the timeframe set forth therein. Such compliance depends, in part, on the Company’s ability to work with outside parties, which is not within the Company’s exclusive control. If the Company is unable to refinance or obtain further debt maturity extensions on the Quail Creek Credit Facility, the Quail Creek Facility lender may exercise its default-related rights, or if the Company is unable to comply with all the requirements under the Pinecone Loan Documents, including the Second A&R Forbearance Agreement, and Pinecone were to accelerate all obligations under the Pinecone Loan Documents or otherwise exercise its default-related rights or foreclose on the Collateral, then it would 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 consolidated financial statements.

The Company is pursuing a strategy to repay the Pinecone Credit Facility and the Quail Creek Credit Facility by means of the Asset Sale and to streamline its cost infrastructure. See Note – 19 Subsequent Events for a further discussion of the conditions of the extension of the Quail Creek Credit Facility and a purchase and sale transaction to effectuate the Asset Sale, which if completed, would permit us to repay the Pinecone Credit Facility and the Quail Creek Credit Facility in full. There is no assurance that we will be able to successfully execute this strategy or otherwise repay the Pinecone Credit Facility and the Quail Creek Credit Facility. Due to the inherent risks, unknown results, and significant uncertainties associated with each of these matters along with the direct correlation between these matters and the Company’s ability to satisfy the 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.

These factors create substantial doubt about the Company’s ability to continue as a going concern. If the Company’s efforts to repay the Pinecone Credit Facility and the Quail Creek Facility are unsuccessful, the Company may be required to seek relief through a number of other available routes, which may include a filing under the U.S. Bankruptcy Code. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

101

NOTE 4. RESTRICTED CASH AND INVESTMENTS

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

	December 31,
Amounts in (000’s)	2018		2017
Cash	$	2,407	$	1,818
Restricted cash:
Cash collateral	$	313	$	63
Replacement reserves		297		260
Escrow deposits		801		637
Total current portion		1,411		960
Restricted investments for debt obligations		365		405
HUD and other replacement reserves		2,303		2,176
Total noncurrent portion		2,668		2,581
Total restricted cash		4,079		3,541

Total cash and restricted cash	$	6,486	$	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 for completion 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 other 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:

	Estimated Useful	December 31,
(Amounts in 000’s)	Lives (Years)	2018			2017
Buildings and improvements	5 - 40	$	88,710		$	89,665
Equipment and computer related	2 - 10		7,398			10,893
Land	—		4,131			4,248
Construction in process	—		43			49
			100,282			104,855
Less: accumulated depreciation and amortization			(23,045	)		(23,642	)
Property and equipment, net		$	77,237		$	81,213

102

During the twelve months ended December 31, 2018, and the twelve months ended December 31, 2017, the Company recorded no impairments in property and equipment.

On May 1, 2017, the Company completed the acquisition of an assisted living and memory care community with 106 operational beds in Glencoe, Alabama (the “Meadowood Facility”), see Note 10 – Acquisitions and Dispositions .

The following table summarizes total depreciation and amortization for the twelve months ended December 31, 2018 and 2017:

	December 31,
Amounts in (000’s)	2018		2017
Depreciation	$	3,182	$	3,318
Amortization		1,452		1,550
Total depreciation and amortization	$	4,634	$	4,868

NOTE 6. INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following:

(Amounts in 000’s)	Bed Licenses ⁽¹⁾ (included in property and equipment)			Bed Licenses— Separable		Lease Rights			Total
Balances, January 1, 2017
Gross	$	22,811		$	2,471	$	6,881		$	32,163
Accumulated amortization		(3,483	)		—		(4,127	)		(7,610	)
Net carrying amount	$	19,328		$	2,471	$	2,754		$	24,553
Acquisitions
Gross		—			—		300			300
Amortization expense		(683	)		—		(867	)		(1,550	)
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
Acquisitions
Gross		—			—		164			164
Transfers to assets held for sale
Gross		—			—		(2,330	)		(2,330	)
Amortization expense		—			—		1,654			1,654

Amortization expense		(683	)		—		(769	)		(1,452	)
Balances, December 31, 2018
Gross	$	22,811		$	2,471	$	5,015		$	30,297
Accumulated amortization		(4,849	)		—		(4,109	)		(8,958	)
Net carrying amount	$	17,962		$	2,471	$	906		$	21,339

⁽¹⁾	Non-separable bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 5 – Property and Equipment).

103

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
2019	$	683		482
2020		683		298
2021		683		18
2022		683		18
2023		683		18
Thereafter		14,547		72
Total	$	17,962	$	906

The following table summarizes the carrying amount of goodwill for the years ended December 31, 2018 and 2017.

	(Amounts in 000’s)
Balances, January 1, 2017
Goodwill	$	2,945
Accumulated impairment losses		(840	)
Total	$	2,105
Balances, December 31, 2017
Goodwill	$	2,945
Accumulated impairment losses		(840	)
Total	$	2,105
Balances, December 31, 2018
Goodwill	$	2,945
Accumulated impairment losses		(840	)
Total	$	2,105

NOTE 7. LEASES

Operating Leases

As of December 31, 2018, the Company leased a total of eleven skilled nursing facilities (which number was reduced to nine effective January 15, 2019, due to the Omega Lease Termination) from unaffiliated owners under non-cancelable leases, most of which have rent escalation clauses and provisions for payments of real estate taxes, insurance and maintenance costs; 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 Atlanta and Suwanee, Georgia. The Atlanta office space is subleased to a third-party entity. See Note – 19 Subsequent Events for further information on the Omega Lease Termination.

Foster Prime Lease. Eight of the Company’s skilled nursing facilities (collectively, the “Georgia Facilities”) are leased under a single master indivisible arrangement (as amended), by and between the Company and William M. Foster, with a lease termination date of August 31, 2027 (the “Prime Lease”). Under the Prime Lease, a default related to an individual facility may cause a default of the entire Prime Lease. The Company is responsible for the cost of maintaining the Georgia Facilities. On August 14, 2015, the lessor consented to the Company’s sublease of the Georgia Facilities to a third-party tenant. Commencing on July 1, 2016, annual rent increases at 2.0% annually for the remainder of the lease term.

On January 1, 2017, the Company released to the lessor the security deposit paid under the Prime Lease in the amount of $500,000. Commencing January 1, 2017, annual rent was increased by an additional $104,000, without annual increases, payable in four equal quarterly installments of $26,000 for the remainder of the seven year lease extension granted on August 15, 2015. The Prime Lease represents approximately 68% of our annual minimum lease payments during the year ended December 31, 2018.

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Bonterra/Parkview Master Lease. Prior to the Omega Lease Termination which was effective January 15, 2019, two of the Company ’ s facilities (referred to herein as the Omega F acilities ) were leased under a single indivisible agreement (the “ Bonterra/Parkview Master Lease ” ). Under the Bonterra/Parkview Master Lease, a default related to an individual facility could cause a default of the entire Bonterra/Parkview Master Lease. On September 1, 2015, the Bonterra/Parkview Master Lease was amended, whereby the parties agreed to: (i) extend its initial term by three years, resulting in a lease termination date of August 31, 2025; (ii) provide consent to the sublease of the two facilities to a third-party operator; and (iii) extend the optional renewal terms to two separate twelve-year renewal periods. In consideration for the amended terms, among other things, the Company agreed to a monthly increase in base rent equal to 37.5% of the difference between the base rent owed by the Company under the Bonterra/Parkview Master Lease and the base rent owed to the Company by the new sublease operator. The Bonterra/Parkview Master Lease represented approximately 24% of our annual minimum lease payments during the year ended December 31, 2018. Effective January 15, 2019, pursuant to the Omega Lease Termination, the Bonterra/Parkview Master Lease for the Omega Facilities terminated by mutual agreement of the parties. For further information, see Note - 19 Subsequent Events .

Covington Prime Lease. One of the Company’s facilities is leased under an agreement dated August 26, 2002, as subsequently amended (the “Covington Prime Lease”), by and between the Company and Covington Realty, LLC (“Covington”). On August 1, 2015, the Covington Prime Lease was amended, whereby the parties agreed to: (i) provide consent to the sublease of the facility to a third-party operator; (ii) extend the term of the lease to expire on April 30, 2025; and (iii) set the annual base rent, effective May 1, 2015 and continuing throughout the lease term, equal to 102% of the immediately preceding lease year’s base rent. The Covington Prime Lease represents approximately 8% of our annual minimum lease payments during the year ended December 31, 2018. As a result of the Ohio Beacon Affiliates’ non-payment of rent for this subleased facility, Covington allowed the Company to make reduced lease payments during the period of financial difficulty, from March 1, 2018, through December 31, 2018, with the Company receiving a default notice from Covington as of March 30, 2018. Pursuant to a letter agreement dated October 5, 2018, Covington agreed to forbear taking further action as a result of the Company’s default to allow for replacement of the operator, provided the terms and conditions of such letter agreement were fulfilled. As of October 5, 2018 the base rent unpaid by the Company amounted to approximately $0.3 million. On December 1, 2018, the Company replaced the operator, and on January 11, 2019 the Company and Covington entered into a forbearance agreement (the “Covington Forbearance Agreement”), whereby the parties agreed that (a) the term of the lease shall be extended until April 30, 2029; (b) the base rent was modified favorably, providing for approximately $0.2 million reduction for the next 2 years and approximately $0.1 million thereafter; and (c) Covington would provide the Company, subject to certain conditions, relief from approximately $0.5 million of outstanding lease amounts as December 31, 2018. For further information on the Covington Forbearance Agreement, see Note - 19 Subsequent Events.

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)
2019	$	6,359
2020		6,390
2021		6,551
2022		6,692
2023		6,824
Thereafter		26,788
Total	$	59,604

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Leased and Subleased Facilities to Third-Party Operators

As a result of the Company’s transition to a self-managed real estate investment company, as of December 31, 2018, 27 facilities (16 owned by us and 11 leased to us), are leased or subleased on a triple net basis, meaning that the lessee (i.e., the new 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. Effective January 15, 2019, as a result of the Omega Lease Termination the Company has 25 facilities (16 owned by us and 9 leased to us).

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 February 5, 2016 to October 6, 2016, of 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, Skyline 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 (the “Skyline Note”). The Skyline Note was subordinated to a revolving credit facility and term loan totaling $51.6 million and was guaranteed by Joseph Schwartz and Roselyn Schwartz (collectively, the “Guarantors”), pursuant to a Guaranty Agreement (the “Guaranty”), dated September 30, 2016, executed by the Guarantors in favor of the Company. The Company completed the sale of the Arkansas Facilities to the Purchaser on October 6, 2016.

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 the Canadian Imperial Bank of Commerce (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 was not able to 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 Skyline 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 amount 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 any 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. The Company did not receive 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. On October 12, 2018, the Company accepted a payment of approximately $1.0 million from such third party in full satisfaction of the Skyline Note, which represents a discount from the full amount of $3.0 million outstanding thereunder and accordingly recorded an expense of $2.0 million to “Provision for doubtful accounts” in the Company’s consolidated statement of operations. In connection with such payment, the Company agreed to release the Guarantors from their obligations under the Guaranty.

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Beacon. On August 1, 2015, the Company entered into a lease inducement fee agreement with certain Beacon Affiliates, 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 December 31, 2017 the balance of the Beacon Lease Inducement was approximately $0.5 million .

On April 24, 2018, the Ohio Beacon Affiliates informed the Company in writing that they would no longer be operating the Ohio Beacon Facilities and that they would surrender operation of such facilities to the Company on June 30, 2018. On November 30, 2018, the Ohio Beacon Affiliates, who were ten months in arrears on rental payments, surrendered possession of the Ohio Beacon Facilities and the lease was terminated by mutual consent. Pursuant to such termination, on November 30, 2018, the Company and the Ohio Beacon Affiliates entered into a termination agreement (the “Ohio Beacon Termination Agreement”), whereby the Ohio Beacon Affiliates agreed to pay a $0.675 million termination fee, payable in 18 monthly installments of $37,500 commencing January 3, 2019 in full satisfaction of the $0.5 million Beacon Lease Inducement and approximately $2.5 million in rent in arrears and approximately $0.6 million of other receivables, such as property taxes and capital expenditures, which discharges each tenant from any and all claims upon completion of the payment plan. The Company intends to enforce its rights under the Ohio Beacon Termination Agreement. As of the date of filing this Annual Report, five such installment payments have been received, but there is no assurance that the Company will be able to obtain payment of the outstanding unpaid termination fee from the Ohio Beacon Affiliates. During the year ended December 31, 2018, the Company recognized revenue on a cash basis with respect to the Ohio Beacon Facilities. During the first quarter of 2018, the Company expensed approximately $0.7 million straight-line rent asset, recorded an allowance of $0.5 million against the Beacon Lease Inducement and recorded approximately $0.3 million allowance for other receivables. The Company completed negotiations with suitably qualified replacement operators, the Aspire Sublessees, who received HUD approval for such facilities and took possession of Ohio Beacon Facilities on December 1, 2018.

The annualized 2018 cash rent under the lease agreements for the Ohio Beacon Facilities is shown below:

				Initial Lease Term		2018 Cash		2018 Cash
						Annual Rent		Annual Rent
Facility Name	Operating Beds/Units		Structure	Commencement Date	Expiration Date	(Amounts in 000’s)		% of Total Expected
Ohio
Covington Care		94	Leased	8/1/2015	4/30/2025	$	818		3.7	%
Eaglewood ALF		80	Owned	8/1/2015	7/31/2025		764		3.4	%
Eaglewood Care Center		99	Owned	8/1/2015	7/31/2025		764		3.4	%
H&C of Greenfield		50	Owned	8/1/2015	7/31/2025		382		1.7	%
The Pavilion Care Center		50	Owned	8/1/2015	7/31/2025		382		1.7	%
Total		373				$	3,110		13.9	%

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Aspire. On November 30, 2018 , the Company subleased the Ohio Beacon Facilities to affiliates of Aspire pursuant to the Aspire Subleases, providing that Aspire Sublessee s would take possession of and operate the Aspire Facilities as subtenant. The Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. The Aspire Facilities are comprised of: (i) a 94-bed skilled nursing facility located in Covington, Ohio (the “ Covington Facility ” ); (ii) an 80-bed assisted living facility located in Springfield, Ohio (the “ Eaglewood ALF Facility ” ); (iii) a 99-bed skilled nursing facility located in Springfield, Ohio (the “ Eaglewood Care Center Facility ” ); (iv) a 50-bed skilled nursing facility located in Greenfield, Ohio (the “ H&C of Greenfield Facility ” ); and (v) a 50-bed skilled nursing facility located in Sidney, Ohio (the “ Pavilion Care Facility ” ). Under the Aspire Subleases, a default related to an individual facility may cause a default under all the Aspire Subleases . A ll Subleases are for an initial term of ten years, with renewal options, except with respect to term for the H&C of Greenfield Facility , which has an initial five year term , and set annual rent increases generally commencing in the third lease year; from month seven of the Aspire Subleases monthly rent amounts may increase based on each facility ’ s prior month occupancy, with minimum annual rent escalations of at least 1% generally commencing in the third lease year. Minimum rent receivable for the Covington Care Facility, the Eaglewood ALF Facility, the Eaglewood Care Center Facility, the H&C of Greenfield Facility and the Pavilion Care Facility for the year end ing December 31, 2019 is $0.4 million, $0.5 million, $0.4 million, $0.2 million and $0.2 million per annum, respectively. Additionally , the Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the financial statements at December 31, 2018.

Symmetry. Affiliates of Symmetry Healthcare (the “Symmetry Tenants”) lease the following facilities from the Company, pursuant to separate lease agreements which expire in 2030 (the “Symmetry Leases”): (i) the Company’s Mountain Trace Facility; (ii) the Company’s 96-bed, skilled nursing facility located in Sumter, South Carolina (the “Sumter Facility”); and (iii) the Company’s 84-bed, skilled nursing facility located in Georgetown, South Carolina (the “Georgetown Facility”). On June 27, 2018, the Company notified Blue Ridge of Sumter, LLC, the tenant with respect to the Sumter Facility (the “Sumter Tenant”), and Blue Ridge on the Mountain, LLC, the tenant with respect to the Mountain Trace Facility (the “Mountain Trace Tenant”), that continued breach of the payment terms of the applicable Symmetry Lease would constitute an event of default. The Symmetry Tenants had alleged that the Company was in material breach of each of the Symmetry Leases with regard to deferred maintenance and were withholding rental payments on the basis of such allegations.

Prior to September 20, 2018, the Mountain Trace Tenant had not paid approximately $0.2 million in rent owned for April through August 2018, the Sumter Tenant had not paid approximately $0.3 million in rent owed for May through August 2018, and Blue Ridge in Georgetown, LLC, the tenant with respect to the Georgetown Facility (the “Georgetown Tenant”), had not paid $0.05 million in rent owed for July and August 2018.

On September 20, 2018, the Company reached an agreement with the Symmetry Tenants with respect to the Symmetry Leases, pursuant to which the Symmetry Tenants agreed to a payment plan for the rent arrears and the Company agreed to a reduction in annualized cash rent of approximately $0.6 million (the “Rent Concession”) and waived approximately $0.2 million in rent arrears, upon which the Symmetry Tenants recommenced monthly rent payments of $0.1 million starting with the September 1, 2018 amounts due under the Symmetry Leases.

As the Company had decided to replace the tenant of the Mountain Trace Facility, with a suitable qualified operator, the Company recognized revenue on a cash basis with respect to such facility and expensed approximately $0.5 million of straight-line rent asset during the year ended December 31, 2018. The Company completed negotiations with a suitably qualified replacement operator, Vero Health Management, LLC (“Vero Health Management”) for their affiliate Vero Health X, LLC (‘Vero Health”) to take possession of the Mountain Trace Facility on March 1, 2019. For further information, see Note – 19 Subsequent Events .

There is no assurance that the Company will be able to obtain payment of all unpaid rents and the collection of approximately $1.2 million (of asset balances shown in the table below) could be at risk.

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Balances, net of allowances as of December 31, 2018 and annualized cash rent under the lease agreements for the Symmetry Healthcare affiliated facilities is shown below:

(Amounts in 000’s)
Facility Name	Revenue Recognition	Straight- Line Rent Asset		Other Receivables		2018 Original Cash Annual Rent**		% of Total Original Expected 2018 Cash Annual Rent**			Annualized Rent Concession Granted*
North Carolina
Mountain Trace ⁽¹⁾	Cash basis	$	—	$	—	$	742		3.3	%	$	382
South Carolina
Sumter	Straight-line		554		304		836		3.8	%		236
Georgetown	Straight-line		227		114		338		1.5	%		26
		$	781	$	418	$	1,916		8.6	%	$	644

⁽¹⁾	On March 1, 2019 the previous lease with an affiliate of Symmetry Healthcare with an expected lease term of May 31, 2030 was mutually terminated. See Note 19 – Subsequent Events.

*	Effective September 1, 2018.

**	Excludes concession granted

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 were recertified by CMS as of December 20, 2016 and February 7, 2017, respectively (the “Peach Recertified Facilities”), which are the rent commencement dates for such facilities.

The Peach Health Sublease became effective for the Jeffersonville Facility on June 18, 2016, and for the Savannah Beach Facility and the Oceanside Facility on July 13, 2016 (the date on which the Company accepted possession of the facilities from the previous sublessee). The Peach Health Sublease is structured as a triple net lease, except that the Company assumed responsibility for the cost of certain deferred maintenance at the Savannah Beach Facility and capital improvements that were necessary for the Oceanside Facility and the Jeffersonville Facility in connection with recertification by CMS. As of December 31, 2017, the Company has invested approximately $1.3 million in connection with recertification capital expenditures at Peach Recertified Facilities. Rent for the Savannah Beach Facility, the Oceanside Facility and the Jeffersonville Facility is $0.3 million, $0.4 million and $0.6 million per annum, respectively; provided, however, that rent was only $1 per month for the Peach Recertified Facilities until the respective rent commencement dates. In addition, for the Peach Recertified Facilities, Peach Health Sublessee is entitled to three months of $1 per month rent following the respective rent commencement dates and, following such three-month period, five months of rent discounted by 50%. The annual rent for each of the Peach Facilities will escalate at a rate of 3% each year pursuant to the Peach Health Sublease, and the term of the Peach Health Sublease for all three Peach Facilities expires on August 31, 2027. 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 shall continue through March 1, 2018, for the Oceanside Facility and the Jeffersonville Facility, respectively and (ii) beginning April 1, 2018, 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. The Peach Health Sublease term for all three Peach Facilities expires on August 31, 2027.

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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%, increasing 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 Sublessee, 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 shall be 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 certain 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 Working 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 expected present value approach is immaterial.

As of December 31, 2018 and December 31, 2017, there was a $1.1 million and $0.9 million outstanding balance on the Peach Note, respectively.

C.R. Management. On March 21, 2018, C. R. of Attalla, LLC (the “Attalla Operator”), affiliated with C-Ross Management, filed a voluntary chapter 11 bankruptcy petition in the state of Alabama, due to unpaid back taxes owed to the Internal Revenue Services (the “IRS”) and a large professional and general liability judgement (the “Attalla PLGL Claim”) imposed against it, in order to be granted an automatic stay from any IRS recoupments and any collection attempts from the Attalla PLGL Claim. The Attalla Operator continued to pay its monthly rent obligations under its lease agreement to the Company pursuant to the April 16, 2018, court approved motion for the Attalla Operator to formally assume the Attalla lease. As of December 31, 2018, the Company had recorded a straight-line rent receivable of approximately $0.6 million. On January 8, 2019, the Attalla Operator bankruptcy filing was dismissed per filing with the bankruptcy court. See Note – 19 Subsequent Events .

Future Minimum Lease Receivables

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

	(Amounts in 000’s)
2019	$	18,314
2020		18,752
2021		19,202
2022		20,442
2023		20,828
Thereafter		83,654
Total	$	181,192

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The following is a summary of the Company ’ s leases to third-parties and which comprise the future minimum lease receivables of the Company. The terms of each lease are structured as “ triple-net ” leases. Each lease contains specific rent escalation amounts ranging from 1.0% to 3.0% annually. Further, each lease has one or more renewal options. For those facilities subleased by the Company, the renewal option in the sublease agreement is dependent on the Company ’ s renewal of its lease agreement.

		Initial Lease Term
		Commencement	Expiration	2019 Cash
Facility Name	Operator Affiliation ⁽¹⁾	Date	Date	Annual Rent
				(Thousands)
Owned
Eaglewood ALF	Aspire	12/1/2018	11/30/2028	$	538
Eaglewood Care Center	Aspire	12/1/2018	11/30/2028		408
H&C of Greenfield	Aspire	12/1/2018	11/30/2023		213
Southland Healthcare	Beacon Health Management	11/1/2014	10/31/2024		951
The Pavilion Care Center	Aspire	12/1/2018	11/30/2028		214
Attalla Health Care ⁽⁵⁾	C.R. Management	12/1/2014	8/31/2030		1,175
Autumn Breeze	C.R. Management	9/30/2015	9/30/2025		879
College Park ⁽⁵⁾	C.R. Management	4/1/2015	3/31/2025		645
Coosa Valley Health Care	C.R. Management	12/1/2014	8/31/2030		974
Glenvue H&R	C.R. Management	7/1/2015	6/30/2025		1,264
Meadowood	C.R. Management	5/1/2017	8/31/2030		465
NW Nursing Center ⁽⁵⁾	Southwest LTC	12/31/2015	11/30/2025		379
Quail Creek ⁽⁵⁾	Southwest LTC	12/31/2015	11/30/2025		783
Georgetown Health	Symmetry Healthcare	4/1/2015	3/31/2030		319
Mountain Trace Rehab ⁽³⁾	Symmetry Healthcare	6/1/2015	5/31/2030		30
Mountain Trace Rehab ⁽³⁾	Vero Health Management	3/1/2019	2/28/2029		400
Sumter Valley Nursing	Symmetry Healthcare	4/1/2015	3/31/2030		614
Subtotal Owned Facilities (16)				$	10,251
Leased
Covington Care	Aspire	12/1/2018	11/30/2028	$	430
Lumber City	Beacon Health Management	11/1/2014	8/31/2027		913
LaGrange	C.R. Management	4/1/2015	8/31/2027		1,106
Thomasville N&R	C.R. Management	7/1/2014	8/31/2027		354
Jeffersonville	Peach Health	6/18/2016	8/31/2027		727
Oceanside	Peach Health	7/13/2016	8/31/2027		495
Savannah Beach	Peach Health	7/13/2016	8/31/2027		271
Bonterra (held for sale) ⁽²⁾	Wellington Health Services	9/1/2015	8/31/2025		45
Parkview Manor/Legacy (held for sale) ⁽²⁾	Wellington Health Services	9/1/2015	8/31/2025		45
Powder Springs ⁽⁴⁾	Wellington Health Services	4/1/2015	8/31/2027		1,980
Tara ⁽⁴⁾	Wellington Health Services	4/1/2015	8/31/2027		1,697
Subtotal Leased Facilities (11)				$	8,063
Total (27)				$	18,314

⁽¹⁾	Represents the number of facilities which are leased or subleased to separate tenants, which tenants are affiliates of the entity named in the table above.

⁽²⁾	Effective January 15, 2019, the Company completed the Omega Lease Termination, see Note 10 - Acquisitions and Dispositions and Note 19 – Subsequent Events.

⁽³⁾	On February 28, 2019, the lease with an affiliate of Symmetry Healthcare with an expected lease term of May 31, 2030 was mutually terminated and operations transferred to a new operator (Vero Health Management) on March 1, 2019, see Note 19 – Subsequent Events.

⁽⁴⁾	Effective February 1, 2019, base rent for these facilities was reduced 10% and is reflected in the above table, see Note 19 – Subsequent Events “ Wellington Lease Amendment” .

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⁽⁵⁾	On April 15, 2019 , certain subsidiaries of Regional Health entered into a purchase and sale agreement, which may be terminated by the buyer for any reason prior to May 15, 2019 at 5:00pm, for these facilities , see Note 19 – Subsequent Events.

Our leases and subleases are by facility with tenants that are separate legal entities affiliated with the above operators. All facilities are skilled nursing facilities except for Eaglewood ALF and Meadowood which are assisted living facilities. All facilities have renewal provisions of one term of five years except facilities (Mountain Trace, Quail Creek, NW Nursing, Sumter Valley, Covington Care, Pavilion Care Center, Eaglewood ALF, Eaglewood SNF and Georgetown) which have two renewal terms with each being five years and H& C of Greenfield which has three renewal terms with each being five years. The leases also contain standard rent escalations that range from 1.0% to 3.0% annually.

NOTE 8. ACCRUED EXPENSES AND OTHER

Accrued expenses and other consist of the following:

	December 31,
Amounts in (000’s)	2018		2017
Accrued employee benefits and payroll related	$	326	$	290
Real estate and other taxes		851		423
Self-insured reserve ⁽¹⁾		1,435		5,077
Accrued interest		419		260
Unearned rental revenue		138		—
Other accrued expenses		1,292		972
Total	$	4,461	$	7,022

⁽¹⁾

The Company self-insures against professional and general liability cases incurred prior to the Transition and uses a third party administrator and outside counsel to manage and defend the claims. Additionally, for the year ended December 31, 2017, $0.2 million was accrued in “Other liabilities” in the Company’s consolidated balance sheets for amounts due in excess of twelve months (see Note 15 - Commitments and Contingencies ).

NOTE 9. NOTES PAYABLE AND OTHER DEBT

Notes payable and other debt consists of the following:

	December 31,
Amounts in (000’s)	2018			2017
Senior debt—guaranteed by HUD	$	32,857		$	33,685
Senior debt—guaranteed by USDA ^(a)		13,727			20,320
Senior debt—guaranteed by SBA ^(b)		668			2,210
Senior debt—bonds		6,960			7,055
Senior debt—other mortgage indebtedness		28,139			9,486
Other debt		664			1,050
Convertible debt		—			1,500
Sub Total		83,015			75,306
Deferred financing costs		(1,535	)		(2,027	)
Unamortized discounts on bonds		(167	)		(177	)
Total		81,313			73,102
Less current portion		26,397			8,090
Notes payable and other debt, net of current portion	$	54,916		$	65,012

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

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

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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)			December 31, 2018		December 31, 2017
Senior debt - guaranteed by HUD ^(b)
The Pavilion Care Center	Red Mortgage	12/01/2027	Fixed	4.16	%	$	1,219	$	1,329
Hearth and Care of Greenfield	Red Mortgage	08/01/2038	Fixed	4.20	%		2,061		2,127
Woodland Manor	Midland State Bank	10/01/2044	Fixed	3.75	%		5,216		5,334
Glenvue	Midland State Bank	10/01/2044	Fixed	3.75	%		8,099		8,283
Autumn Breeze	KeyBank	01/01/2045	Fixed	3.65	%		7,041		7,199
Georgetown	Midland State Bank	10/01/2046	Fixed	2.98	%		3,564		3,644
Sumter Valley	Key Bank	01/01/2047	Fixed	3.70	%		5,657		5,769
Total						$	32,857	$	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%	6.75	%		5,388		5,562
Mountain Trace	Community B&T	01/24/2036	Prime + 1.75%	7.00	%		4,135		4,260
Southland	Bank of Atlanta	07/27/2036	Prime + 1.50%	6.75	%		4,204		4,329
Total						$	13,727	$	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%	7.50	%		668		687
Total						$	668	$	2,210

^(a)	Represents interest rates as of December 31, 2018 as adjusted for 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 events 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 loans, the facilities entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions.

^(c)

For the four skilled nursing facilities, the Company has term loans with financial institutions, which are insured 70% to 80% by the USDA. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 2% to 3% 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. The notes mature at various dates starting in 2031 through 2036.

^(e)	On February 15, 2018, the Company repaid these loans with proceeds from the Pinecone Credit Facility.

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(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			December 31, 2018		December 31, 2017
Senior debt - bonds ^(b)
Eaglewood Bonds Series A ^(c)	City of Springfield, Ohio	05/01/2042	Fixed	7.65	%	$	6,610	$	6,610
Eaglewood Bonds Series B ^(c)	City of Springfield, Ohio	05/01/2021	Fixed	8.50	%		350		445
Total						$	6,960	$	7,055

^(a)	Represents interest rates as of December 31, 2018 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of approximately 0.26% per annum.

^(b)

In April 2012, a wholly-owned subsidiary of the Company entered into a loan agreement with the City of Springfield, Ohio pursuant to which City of Springfield lent to such subsidiary the proceeds from the sale of City of Springfield’s Series 2012 Bonds. The Series 2012 Bonds consist of $6.6 million in Series 2012A First Mortgage Revenue Bonds and $0.6 million in Taxable Series 2012B First Mortgage Revenue Bonds. The bonds are secured by the Company’s assisted living facility located in Springfield, Ohio known as Eaglewood Village and guaranteed by Regional Health. There is an original issue discount of $0.3 million related to this loan.

^(c)	On January 18, 2019, the principal on the bonds was reduced in aggregate by $0.2 million, see Note 19 – Subsequent Events .

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			December 31, 2018		December 31, 2017
Senior debt - other mortgage indebtedness
Quail Creek ^(c)	Congressional Bank	06/30/2019	LIBOR + 4.75%	7.10	%	$	4,059	$	4,314
Northwest ^(d)	First Commercial	07/31/2020	Prime	5.00	%		—		1,122
Meadowood ^(e)	Exchange Bank of Alabama	05/01/2022	Fixed	4.50	%		3,918		4,050
College Park	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		2,846		—
Northwest	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		2,803		—
Attalla	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		9,089		—
Adcare Property Holdings	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		5,424		—
Total						$	28,139	$	9,486

^(a)

Represents interest rates as of December 31, 2018 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which range from 0.09% to 1.49% per annum and excludes certain finance fee’s (described further under the “Pinecone Credit Facility” below in this Note).

^(b)

On February 15, 2018, the Company entered into the Pinecone Credit Facility with Pinecone. On December 31, 2018, the Company entered into the A&R New Forbearance Agreement, which provided for certain amendments to the Pinecone Credit Facility (for further information see, “Pinecone Credit Facility” below in this Note).

^(c)	On April 30, 2019, the Company extended the maturity date of the Quail Creek Credit Facility to June 30, 2019, with an option to further extend to July 31, 2019, at the lenders discretion (see Note 19 – Subsequent Events) .

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

^(e)

On May 1, 2017, in connection with the Company’s acquisition of the Meadowood Facility, a wholly-owned subsidiary of the Company entered into a Loan Agreement (the “Meadowood Credit Facility”) with the Exchange Bank of Alabama, which provides for a $4.1 million principal amount secured credit facility maturing on May 1, 2022. The Meadowood Credit Facility is secured by the Meadowood Facility.

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(Amounts in 000’s)
Lender	Maturity	Interest Rate			December 31, 2018		December 31, 2017
Other debt
First Insurance Funding	03/01/2019	Fixed	4.24	%	$	20	$	20
KeyBank	08/02/2019	Fixed	0.00	%		495		495
McBride Note ^(a)	09/30/2019	Fixed	4.00	%		115		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	%		34		229
Total					$	664	$	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, see Note 18 Related Party Transactions “McBride Matters”.

^(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	Conversion price		Maturity	Interest Rate			December 31, 2018		December 31, 2017
Convertible debt
Issued July 2012 ^(a)	$	4.25	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. Approximately $0.03 million of deferred financing was recorded in “Current portion of convertible debt, net” on the Company’s consolidated balance sheets at December 31, 2017.

Pinecone Credit Facility

On February 15, 2018, 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 with respect to the Facilities and recorded $0.4 million loss on extinguishment of the refinanced mortgage debt on the statement of operations. On May 18, 2018, the Company and Pinecone modified the debt and on September 6, 2018 and again on December 31, 2018, the Company and Pinecone substantially changed the terms of the Loan Agreement to complete an exchange of debt and accordingly recorded a $3.5 million and $1.3 million loss on extinguishment on the statement of operations for the respective periods.

The maturity date of the Pinecone Credit Facility is August 15, 2020 and it originally bore 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. Accrued and unpaid interest on the outstanding principal amount of the Pinecone Credit Facility is payable in consecutive monthly installments. Unless accelerated by Pinecone, 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.

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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 monthly 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 accelerated 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 can declare: (i) the entire unpaid principal balance under the Pinecone Credit Facility, together with all accrued interest and other amounts payable, immediately due and payable; (ii) increase the interest rate to 18.5%; and (iii) foreclose on the Collateral.

On May 10, 2018, management was notified by Pinecone that the certain events of default under the Pinecone Credit Facility had occurred and were continuing. On May 18, 2018, the Company and Pinecone entered into the Original Forbearance Agreement, pursuant to which Pinecone agreed, subject to terms and conditions set forth in the Original Forbearance Agreement, to forbear from exercising its default-related rights and remedies with respect to specified events of default under the Pinecone Credit Facility during the forbearance period provided for therein. The Original Forbearance Agreement outlined a plan of correction whereby the Company could regain compliance under the Pinecone Credit Facility. Requirements set forth in the Original Forbearance Agreement included, among other things, 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 amended certain provisions of the Pinecone Credit Facility to: (i) eliminate the Company’s obligation to complete certain lease assignments to suitably qualified replacement operators; (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 (iv) increase the outstanding principal balance of the Pinecone Credit Facility by 2.5%.

The forbearance period under the Original Forbearance Agreement terminated on July 6, 2018 because the Company did not satisfy the condition set forth in the Original Forbearance Agreement requiring the Company to enter into an agreement with Pinecone to support a transaction or series of transactions to remedy the defaults specified in the Original Forbearance Agreement. Accordingly, as of such date, Pinecone was no longer required to forbear from exercising its default-related rights and remedies with respect to the Specified Defaults and could have exercised all of its rights and remedies under the Pinecone Credit Facility (including the application of an additional 5% interest on the outstanding loans under the Pinecone Credit Facility, the acceleration of such outstanding loans or foreclose on the Collateral).

On July 18, 2018, the Company received a letter from Pinecone stating that, as a result of the termination of the forbearance period under the Original Forbearance Agreement, Pinecone could accelerate its outstanding loans under the Pinecone Credit Facility and the Company was obligated to pay interest on such loans at the default interest rate of 18.50% per annum.

On September 6, 2018, the Company and certain of its subsidiaries entered into the New Forbearance Agreement with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the New Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to the Specified Defaults under the Pinecone Loan Documents.

The forbearance period under the New Forbearance Agreement was from September 6, 2018, the date on which certain conditions set forth in the New Forbearance Agreement were satisfied, to December 31, 2018.

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Pursuant to the New Forbearance Agreement, the Company and Pinecone amended certain provisions of the Pinecone Loan Documents. Such amendments, among other things: (i) removed the restriction on prepaying the loans during the thirteen (13) month-period after the Closing Date; (ii) provided a thirty (30)-day cure period for certain events of default and a fifteen (15)-day cure period for certain failures to provide information or materials pursuant to the Pinecone Loan Documents; (iii) increased the finance fee payable on repayment or acceleration of the loans, depending on the time at which the loans are repaid ($0.25 million prior to December 31, 2018 and $0.5 million thereafter); and (iv) increased the outstanding principal balance owed by (a) approximately $0.7 million to reimburse Pinecone for its accrued and unpaid expenses and to pay outstanding interest payments for prior interest periods and (b) $1.5 million amount described as a non-refundable payment of additional interest. During the forbearance period under the New Forbearance Agreement, the interest rate reverted from the default rate of 18.5% per annum to the ongoing rate of 13.5% per annum.

Pursuant to the New Forbearance Agreement, the Company hired a financial advisor (a “Financial Advisor”) reasonably acceptable to Pinecone to advise management and the Board of Directors on operational improvements and to assist in coordinating overall Company strategy, whose engagement includes assisting the Company to obtain one or more sources of refinancing to repay the obligations under the Pinecone Loan Documents. The New Forbearance Agreement also amended the Pinecone Credit Facility to permit the Company to substitute or replace the operators of certain of the Company’s facilities without the prior written consent of Pinecone, provided that such substitution or replacement is on commercially reasonable terms, has been approved by a Financial Advisor, and the terms of which have been disclosed to Pinecone no later than two (2) business days prior to entry into definitive documentation and Pinecone has not objected during such time period.

The New Forbearance Agreement terminated on December 31, 2018 because the Company did not satisfy certain conditions set forth therein.

On December 31, 2018, the Company and certain of its subsidiaries entered into the A&R New Forbearance Agreement with Pinecone pursuant to which Pinecone agreed, subject to the terms and conditions set forth in the A&R New Forbearance Agreement, to forbear for a specified period of time from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate) with respect to the Specified Defaults under the Loan Agreement. The forbearance period under the A&R New Forbearance Agreement was from December 31, 2018 to March 14, 2019, and expired according to its terms.

Pursuant to the A&R New Forbearance Agreement, the Company and Pinecone amended certain provisions of the Loan Agreement, and Pinecone consented to the Omega Lease Termination, requiring that the Omega Lease Termination be completed by February 1, 2019. On February 1, 2019, the Company was required to reimburse Pinecone for certain unpaid expenses and prepay the AdCare Holdco Loan. In connection with the Omega Lease Termination, the Company realized proceeds (including a termination fee payable by the landlord to the Company, which approximates future forgone cash flow from the Company’s related sublease) to contribute to the Company’s required payment to Pinecone of approximately $1.4 million, of which $0.2 million was paid on January 4, 2019 for Pinecone’s expenses the balance of $1.2 million was paid on January 28, 2019, of which $0.1 million was for Pinecone’s expenses, which included a 1% prepayment penalty, and the balance of $0.9 million was applied to pay down the principal amount of the AdCare Holdco Loan, which at December 31, 2018 was approximately $5.4 million. On January 28, 2019 the Company paid $1.2 million to Pinecone, after expenses and prepayment penalty Pinecone applied $0.9 million to the AdCare Holdco Loan. The A&R New Forbearance Agreement amended the Loan Agreement to, among other things: (i) add a $0.35 million fee (paid in kind) to the loans on a pro rata basis; (ii) provided for the PIK rate (at a rate of 3.5% ), with such interest to be paid in kind in arrears by increasing the outstanding principal amount of loans held by the Pinecone on the first (1st) day of each month; provided that interest accruing at the PIK Rate on each loan and any overdue interest on each loan shall be paid in cash (a) on the maturity of the loans, whether by acceleration or otherwise, or (b) in connection with any repayment or prepayment of the loans; and (iii) modify the default rate of interest to add an additional 2.5% to the PIK Rate, in addition to the ongoing rate of 13.5%. During the forbearance period under the A&R New Forbearance Agreement, the interest rate to be paid in cash on the first (1st) day of each month was the ongoing rate of 13.5% per annum. For further information regarding certain developments with respect to the completed Omega Lease Termination transaction and subsequent partial repayment of the AdCare Holdco Loan, with associated expenses, in accordance with the A&R New Forbearance Agreement terms, see Note – 19 Subsequent Events .

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In addition, the A&R New Forbearance Agreement amended the Loan Agreement to require the Company to continue to retain the financial advisor as the Company ’ s chief restructuring officer ( “ CRO ” ) and hire a nationally recognized investment banker reasonably acceptable to Pinecone no later than January 7, 2019 to advise management and the Board on potential asset sale and related transactions and perform valuation debt capacity analyses. The Company reserve d the right to continue to attempt to refinance the loans in full, subject to the following conditions: (i) no later than January 14, 2019, the Company was to enter into and deliver to Pinecone a term sheet approved by the chief executive officer of the Company and the CRO evidencing a third party lender ’ s desire to pursue the provision of a refinancing; and (ii) no later than February 15, 2019, the Company would consummate the refinancing. By January 23, 2019, the Company was to provide Pinecone a written plan for a process of soliciting bids for one or more asset sale or related transactions (the “ Bid Solicitation ” ). By February 28, 2019, the Company and the CRO (whose responsibilities were expanded to include all aspects of transaction planning, including the Bid Solicitation) had to : (i) complete the Bid Solicitation; and (ii) negotiate in good faith and enter into with Pinecone an agreement that is acceptable to Pinecone, which require d , among other things, that the Company engage in a process that culminates in (a) the consummation of one or more asset sale or related transactions and (b) the payment in full in cash of all obligations under the Loan Agreement with the proceeds thereof. As a condition of t he A&R New F orbearance Agreement the Company appointed a Pinecone non-voting observer to attend all meetings of the Board and each committee thereof, subject to certain exceptions described in the A&R New Forbearance Agreement.

Pursuant to the Second A&R Forbearance Agreement, the Company and Pinecone amended certain provisions of the Loan Agreement. The Second A&R Forbearance Agreement requires, among other things (i) that the Company pursue and complete the Asset Sale which would result in the repayment in full of all of the Company’s indebtedness to Pinecone and, in connection therewith, the Company pay not less than $0.3 million and not more than $0.55 million in forbearance fees, as well as certain other expenses of Pinecone, or (ii) Pinecone’s other disposition of the Loan Agreement as contemplated by the Second A&R Forbearance Agreement. Additionally the Second A&R Forbearance Agreement accelerates the previously disclosed 3% finance “tail fee”, 1% prepayment penalty, and 1% break up fee so that such fees and penalties became part of the principal as of April 15, 2019.

Debt Covenant Compliance

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The table below indicates which of the Company ’ s credit-related instruments were not in compliance as of December 31, 2018.

Credit Facility ⁽¹⁾	Balance (000’s)		Subsidiary or Operator Level Covenant Requirement	Financial Covenant	Measurement Period	Min/Max Financial Covenant Required		Financial Covenant Metric Achieved		Future Financial Covenant Metric Required
Pinecone Credit Facility	$	20,162	Borrower	Minimum borrower fixed charge coverage ratio	Quarterly	1.2		1.1			1.2
Mountain Trace	$	4,135	Borrower	Minimum debt service coverage ratio	Annual		1.0		-0.1		1.0
Senior debt - bonds	$	6,960	Borrower	Minimum debt service coverage ratio	Annual		1.3		-0.5		1.3

⁽¹⁾	Waiver, amendment or other cure provision for violation of covenant obtained. For further information, see Note 3 – Liquidity .

Scheduled Maturities

The schedule below summarizes the scheduled gross maturities as of December 31, 2018 for each of the next five years and thereafter.

	Amounts in (000’s)
2019 ⁽¹⁾	$	26,436
2020		1,636
2021		1,721
2022		5,131
2023		1,741
Thereafter		46,350
Subtotal		83,015
Less: unamortized discounts		(167	)
Less: deferred financing costs		(1,535	)
Total notes and other debt	$	81,313

⁽¹⁾

Includes the Pinecone Credit Facility with a maturity date of August 15, 2020. Pursuant to the Second A&R Forbearance Agreement which commenced on March 29, 2019 and may extend as late as October 1, 2019, Pinecone agreed to forbear from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate), unless the forbearance period is earlier terminated as a result of specified termination events, including a default or event of default under the Loan Agreement (other than any Specified Defaults) or any failure by the Company or its subsidiaries to comply with the terms of the Second A&R Forbearance Agreement, including, without limitation, the Company’s obligation to progress with an Asset Sale in accordance with the timeline specified therein Additionally excludes approximately $0.2 million principal repayment as a result of a refund of issuance fees, see Note 19 – Subsequent Events .

NOTE 10. ACQUISITIONS AND DISPOSITIONS

Acquisitions of Assets

On March 8, 2017, the Company acquired the Meadowood Facility for $5.5 million cash from Meadowood Retirement Village, LLC. In addition, on March 21, 2017, the Company executed a long-term, triple net operating lease with an affiliate of C.R. Management (the “Meadowood Operator”) to lease the Meadowood Facility upon purchase. Lease terms include: (i) a 13-year initial term with one five-year renewal option; (ii) base rent of $37,500 per month; (iii) a rental escalator of 2.0% per annum in the initial term and 2.5% per annum in the renewal term; (iv) a cross renewal provision, whereby the Meadowood Operator may exercise the lease renewal for the Meadowood Facility if its affiliate exercises the lease renewal option for Coosa Valley Health Care, a 124-bed skilled nursing

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facility located in Gadsden, Alabama; and (v) a security deposit equal to one month of base rent. The Company completed the purchase of the Meadowood Facility on May 1, 2017, at which time the lease commenced and operations of the Meadowood Facility transferred to the Meadowood Operator. The Company made no acquisitions during the year ended December 31, 2018 .

The following table sets forth purchase price allocation of the Meadowood Facility:

(Amounts in 000’s)	Estimated Useful Lives (Years)	May 1, 2017
Buildings and improvements	15 - 32	$	4,700
Equipment and computer related	10		400
Land	—		100
Property and equipment, net			5,200
Intangible assets - lease rights	1		300
Total purchase price		$	5,500

On May 1, 2017, in connection with the purchase of the Meadowood Facility, a wholly-owned subsidiary of the Company entered into the Meadowood Credit Facility with the Exchange Bank of Alabama, see Note 9 - Notes Payable and Other Debt.

Held for Sale

On December 27, 2018, the Board unanimously approved to terminate the Bonterra/Parkview Master Lease for gross proceeds of approximately $1.5 million, consisting of (i) a termination fee in the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other net amounts due to the Company under the leases. For further information see Note 19 – Subsequent Events “Omega Lease Termination”.

Assets and liabilities of the disposal group held for sale at December 31, 2018, are as follows:

	Year Ending December 31,
(Amounts in 000’s)	2018		2017 ⁽¹⁾
Lease deposits	$	375	$	375
Straight-line rent receivable		704		562
Buildings and improvements, net		352		441
Equipment and computer related, net		97		163
Intangible assets—lease rights, net		676		877
Assets of disposal group held for sale	$	2,204	$	2,418

Accounts payable	$	100	$	63
Other liabilities -lease deposits		170		170
Other liabilities -accrued straight-line rent		1,221		1,165
Liabilities of disposal group held for sale	$	1,491	$	1,398

⁽¹⁾	Comparative balance as of December 31, 2017 for the assets and liabilities of the disposal group shown as held for sale at December 31, 2018.

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NOTE 11. DISCONTINUED OPERATIONS

Disposition of Facility Operations

Historically, the Company’s business has focused primarily on owning and operating skilled nursing facilities and managing such facilities for unaffiliated owners with whom the Company has management contracts. In July 2014, the Board approved and commenced the Transition, pursuant to which the Company: (i) leased to third-party operators all of the healthcare properties which the Company owns and previously operated; (ii) subleased to third-party operators all of the healthcare properties which the Company leases (but does not own) and previously operated; and (iii) retained a management agreement to manage two skilled nursing facilities and one independent living facility for third parties. The Transition was completed in December 2015.

For the discontinued operations, cost of services, primarily accruals for professional and general liability claims and bad debt expense prior to the commencement of leasing are classified in the activities below.

The following table summarizes the activity of discontinued operations for the years ended December 31, 2018 and 2017:

	Year Ending December 31,
(Amounts in 000’s)	2018			2017
Cost of services		(83	)		1,657
Interest expense, net		9			22
Net income (loss)	$	74		$	(1,679	)

NOTE 12. COMMON AND PREFERRED STOCK

Common Stock

There were no dividends paid on the common stock during the twelve months ended December 31, 2018 and during the twelve months ended December 31, 2017.

Preferred Stock

The liquidation preference of the Series A Preferred Stock is $25.00 per share. Cumulative dividends accrue and are paid in the amount of $2.72 per share each year, which is equivalent to 10.875% of the $25.00 liquidation preference per share. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividends periods, (i) the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend period has increased to 12.875%, which is equivalent to $3.22 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) 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 are entitled to vote, as a single class, for the election of two additional directors to serve on the Board, as further described in the Charter.

As of December 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, as described in the Charter. The Company is required to redeem the Series A Preferred Stock following a “Change of Control,” as defined in the Charter. On and after December 1, 2017, 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.

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Prior to the Merger, the Company was required to classify the Series A Preferred Stock as temporary equity due to the change-in-control redemption provision contained in the Charter because, although deemed a remote possibility, a purchaser could acquire a majority of the voting power of the outstanding common stock without Company approval, thereby triggering redemption of the Series A Preferred Stock. FASB ASC Topic 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, requires classification outside of permanent equity for redeemable instruments for which the redemption triggers are outside of the issuer’s control. The assessment of whether the redemption of an equity security could occur outside of the issuer’s control is required to be made without regard to the probability of the event or events that may result in the instrument becoming redeemable.

As a result of the Merger, the rights of the holders of the common stock and Series A Preferred Stock are now governed by the RHE Charter and the RHE Bylaws. The RHE Charter contains ownership and transfer restrictions with respect to the common stock which, among other things, prohibit any person (as defined in the RHE Charter) from beneficially or constructively owning, or being deemed to beneficially or constructively own by virtue of the attribution provisions of the Internal Revenue Code of 1986, as amended, more than 9.9%, by value or number of shares, whichever is more restrictive, of the outstanding shares of common stock. As such, a change of control redemption can no longer be triggered outside of the Company’s control, thus permitting the Series A Preferred Stock to be classified as permanent equity. As a result, the Company reclassified the Series A Preferred Stock from temporary equity to permanent equity on a prospective basis as of September 29, 2017, the effective date of the Merger, in accordance with applicable accounting guidance.

Preferred Stock Activity

The following table summarizes the shares of Series A Preferred Stock activity for the Company and net proceeds received and expenses from issuance and repurchases of Series A Preferred Stock for the years ended December 31, 2018 and 2017:

	Shares Issued & Outstanding		Net Proceeds from Issuance (in 000’s)
Balances, January 1, 2017 ⁽¹⁾		2,761,535	$	61,446
ATM Issuance of Preferred Stock for the three months ended: ⁽²⁾
March 31, 2017		—		—
June 30, 2017 ⁽¹⁾		50,000		977
September 30, 2017		—		—
December 31, 2017		—		—
Balances, December 31, 2017		2,811,535	$	62,423
ATM Issuance of Preferred Stock for the three months ended:
March 31, 2018		—		—
June 30, 2018		—		—
September 30, 2018		—		—
December 31, 2018		—		—
Balances, December 31, 2018		2,811,535	$	62,423

⁽¹⁾	Balances transferred into permanent equity upon the Merger.

⁽²⁾

For the year ended December 31, 2017, the Company sold 50,000 shares of the Series A Preferred Stock under an at market issuance sales agreement, at an average price of $21.80 per share, exclusive of commissions and related fees. In connection therewith, the Company received net proceeds of approximately $1.0 million. On August 2, 2017, the Company terminated the at market issuance sales agreement (the “ATM”) and discontinued sales under the ATM.

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Dividends

The following table summarizes the preferred stock dividends in arrears or paid by the Company for the years ended December 31, 2018 and 2017:

	Date paid / Arrears date	Dividends Paid (in 000’s)		Dividends Per Share		Dividend Arrears (in 000’s)
Preferred Stock Dividends:
	3/31/2017	$	1,878	$	0.68	$	—
	6/30/2017		1,912		0.68		—
	9/30/2017		1,912		0.68		—
	12/31/2017		—		0.68		1,912
For the year ended December 31, 2017		$	5,702	$	2.72	$	1,912
	3/31/2018	$	—	$	0.68	$	1,912
	6/30/2018		—		0.68		1,912
	9/30/2018		—		0.68		1,912
	12/31/2018		—		0.80		2,249
For the year ended December 31, 2018		$	—	$	2.84	$	7,985
Cumulative Total Outstanding						$	9,897

*	The Board has suspended payment of the quarterly dividend on the Series A Preferred Stock indefinitely. Such dividend suspension does not trigger a default under the Company’s outstanding indebtedness.

As of December 31, 2018, as a result of the suspension of the dividend payment on the Series A Preferred Stock commencing with the fourth quarter 2017 dividend period, the Company has $9.9 million of undeclared preferred stock dividends in arrears. 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, unless suspended by the Board. On June 8, 2018, the Board determined to continue suspension of the payment of the quarterly dividend on the Series A Preferred Stock indefinitely. 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. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for four dividends periods: (i) the annual dividend rate on the Series A Preferred Stock has increased to 12.875% ,which is equivalent to an annual rate of $3.22, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) 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 further described in the Charter.

Share Repurchase Programs

In November 2016, the Board approved two share repurchase programs (collectively, the “November 2016 Repurchase Program”), pursuant to which the Company 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.

In the twelve months ended December 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 of the Series A Preferred Stock during the twelve months ended December 31, 2018.

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NOTE 13. STOCK BASED COMPENSATION

As discussed in Note 1 - Summary of Significant Accounting Policies , the Reverse Stock Split became effective on December 31, 2018 for all issued and outstanding shares of the common stock. The number of shares authorized under the Company’s equity incentive plans was proportionately adjusted in connection with the Reverse Stock Split. The per share exercise price of all outstanding options and warrants was also increased proportionately and the number of shares of common stock issuable upon the exercise of such options and warrants was reduced proportionately. In addition, the conversion price of all other outstanding securities that are exercisable or exchangeable for, or convertible into, shares of common stock was increased proportionately and the number of shares of common stock issuable upon such exercise, exchange or conversion was reduced proportionally. Accordingly, all share and per share amounts have been adjusted to reflect the Reverse Stock Split for all periods presented.

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 168,950 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 December 31, 2018, the number of securities remaining available for future issuance is 19,421.

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.

The following table summarizes employee and nonemployee stock based compensation for the years ended December 31, 2018 and 2017:

	Year Ending December 31,
Amounts in (000’s)	2018		2017
Employee compensation:
Stock options	$	—	$	—
Warrants		—		(15	)
Restricted stock		15		—
Total employee stock-based compensation (income) expense	$	15	$	(15	)
Non-employee compensation:
Stock options	$	—	$	47
Warrants		—		—
Restricted stock		161		235
Total non-employee stock-based compensation expense	$	161	$	282
Total stock-based compensation expense	$	176	$	267

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Common Stock Options

The following summarizes the Company’s employee and non-employee stock option activity for the years ended December 31, 2018 and 2017:

	Number of Options (000’s)			Weighted Average Exercise Price		Weighted Average Remaining Contract Life (in years)		Aggregate Intrinsic Value (000’s) ^(a)
Outstanding at December 31, 2016		30		$	38.57
Granted		—		$	—
Exercised		—		$	—
Forfeited		—		$	—
Expired		(15	)	$	29.02
Outstanding and vested at December 31, 2017		15		$	47.77		6.4	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		—		$	—
Expired		—		$	—
Outstanding and vested at December 31, 2018		15		$	47.77		5.4	$	—

^(a)	Represents the aggregate gain on exercise for vested in-the-money options.

No stock options were granted during the year ended December 31, 2018 or for the year ended December 31, 2017. At December 31, 2018, the Company has no unrecognized compensation expense related to options.

The following summary information reflects stock options outstanding, vested and related details as of December 31, 2018:

	Stock Options Outstanding						Stock Options Exercisable
Exercise Price	Number Outstanding (000’s)		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Vested and Exercisable (000’s)		Weighted Average Exercise Price
$15.72 - $47.99		10		5.7	$	46.84		10	$	46.84
$48.00 - $51.60		5		4.7	$	49.42		5	$	49.42
Total		15		5.4	$	47.77		15	$	47.77

Common Stock Warrants

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 of the Board. The Board administers the granting of warrants, determines the persons to whom awards will be made, the amount of the awards, and the other terms and conditions of the awards.

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The following summarizes the Company’s employee and non-employee common stock warrant activity for the years ended December 31, 2018 and 2017:

	Number of Warrants (000’s)			Weighted Average Exercise Price		Weighted Average Remaining Contract Life (in years)		Aggregate Intrinsic Value (000’s) ^(a)
Outstanding at December 31, 2016		157		$	42.94
Granted		—		$	—
Exercised		—		$	—
Forfeited		(16	)	$	52.50
Expired		(56	)	$	36.33
Outstanding and vested at December 31, 2017		85		$	45.53		4.7	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		—		$	—
Expired		—		$	—
Outstanding and vested at December 31, 2018		85		$	45.53		3.7	$	—

^(a)	Represents the aggregate gain on exercise for vested in-the-money warrants.

No warrants were granted during the years ended December 31, 2018 and December 31, 2017. The Company has no unrecognized compensation expense related to common stock warrants as of December 31, 2018.

The following summary information reflects warrants outstanding, vested and related details as of December 31, 2018:

	Warrants Outstanding						Warrants Exercisable
Exercise Price	Number Outstanding (000’s)		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Vested and Exercisable (000’s)		Weighted Average Exercise Price
$0.00- $23.99		9		0.9	$	23.16		9	$	23.16
$24.00 - $35.99		9		0.9	$	30.84		9	$	30.84
$36.00 - $47.99		23		2.4	$	44.50		23	$	44.50
$48.00 - $59.99		42		5.5	$	52.99		42	$	52.99
$60.00 - $70.80		2		4.4	$	70.80		2	$	70.80
Total		85		3.7	$	45.53		85	$	45.53

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Restricted Stock

The following summarizes the Company’s restricted stock activity for the year ended December 31, 2018 and 2017:

	Number of Shares (000’s)			Weighted Average Grant Date Fair Value
Unvested at December 31, 2016		34		$	34.02
Granted		2		$	12.84
Vested		(12	)	$	33.62
Forfeited		(11	)	$	44.43
Unvested at December 31, 2017		13		$	21.91
Granted		41		$	3.60
Vested		(6	)	$	22.92
Forfeited		—		$	—
Unvested at December 31, 2018		48		$	6.20

The Company has approximately $0.1 million of unrecognized compensation expense related to unvested restricted stock awards as of December 31, 2018. Assuming no pre-vesting forfeitures, this expense will be recognized as a charge to earnings over a weighted-average remaining service period of 1.66 years.

NOTE 14. VARIABLE INTEREST ENTITIES

The Company has a loan receivable with Peach Health Sublessee, a loan receivable with an affiliate of Aria and had a lease inducement with Beacon Sublessee. These agreements create a variable interest in these entities that may absorb some or all of the expected losses of the entities. The Company does not consolidate the operating activities of the Peach Health Sublessee, the affiliate of Aria or the Beacon Sublessee as the Company does not have the power to direct the activities that most significantly impact the entities’ economic performance. See Note 7 – Leases and Note 15 – Commitments and Contingencies.

NOTE 15. 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. In February and May 2016, CMS decertified the Jeffersonville Facility and the Oceanside Facility respectively, meaning that the facilities were not able to accept Medicare or Medicaid patients. On December 20, 2016 and on February 7, 2017, the Jeffersonville Facility and Oceanside Facility, respectively were recertified by CMS and received a new Medicare/Medicaid provider contract.

As of December 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 are operational (see Note 7 - Leases ).

The Company believes that it is in compliance in all material respects with all applicable laws and regulations.

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 residents of the Company’s facilities and claims related to 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.

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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, the Company believes 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.

Ohio Attorney General Action. On October 27, 2016, the Ohio Attorney General (the “OAG”) filed in the Court of Common Pleas, Franklin County, Ohio a complaint against The Pavilion Care Center, LLC, Hearth & Home of Greenfield, LLC (each a subsidiary of the Company), and certain other parties (including parties for which the Company provides or provided management services). The lawsuit alleges that defendants submitted improper Medicaid claims for independent laboratory services for glucose blood tests and capillary blood draws and further alleges that defendants (i) engaged in deception, (ii) willfully received Medicaid payments to which they were not entitled or in a greater amount than that to which they were entitled, and (iii) obtained payments under the Medicaid program to which they were not entitled pursuant to their provider agreements and applicable Medicaid rules and regulations. The OAG is seeking, among other things, triple the amount of damages proven at trial (plus interest) and not less than $5,000 and not more than $10,000 for each deceptive claim or falsification. As previously disclosed, the Company received a letter from the OAG in February 2014 offering to settle its claims against the defendants for improper Medicaid claims related to glucose blood tests and capillary blood draws for a payment of approximately $1.0 million. The Company responded to such letter in July 2014 denying the allegations and did not receive further communication from the OAG until the above referenced lawsuit was filed. The Company filed an answer to the complaint on January 27, 2017 in which it denied the allegations. An order granting a motion to stay this proceeding was granted in the Court of Common Pleas, Franklin County, Ohio on July 12, 2017. Although there is no assurance as to the ultimate outcome of this matter or its impact on the Company’s business or its financial condition, the Company believes it has meritorious defenses and intends to vigorously defend the claim.

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Professional and General Liability Claims . As of December 31, 2018, the Company is a defendant in 13 professional and general liability actions primarily 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. Two such actions are covered by insurance, except that any award of punitive damages would be excluded from such coverage and five 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. Subsequent to December 31, 2018 , the Company was notified of an additional profession al and general liability action ( see Note 19 - Subsequent Events ) .

On March 12, 2018, the Company entered into a separate mediation settlement agreement with respect to 25 actions filed in the State of Arkansas which were pending on such date. As of December 31, 2018, all of such 25 actions have been dismissed with prejudice. Each mediation settlement agreement provided for payment by the Company of a specified settlement amount, which settlement amount was deposited into the mediator’s trust account. The aggregate settlement amount for all such 25 actions before related insurance proceeds was $5.2 million. The settlement of each such action was individually approved by the probate court, and the settlement of one action was 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 was disbursed to the plaintiff’s counsel. Under the settlement and release agreement with respect to a particular action, the Company was 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 Amount”), 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.

The Company paid, net of the Insurance Settlement Amount, an aggregate of approximately $2.4 million in settlement of the 25 actions filed in the State of Arkansas.

In the second quarter of 2018, the Company settled one professional and general liability action (which was not subject to a mediation settlement agreement as discussed above) for a total of $50,000, payable in 10 monthly installments commencing July 2018.

In the second quarter of 2018, the Company was notified of one employment related action filed against the Company related to one of the Company’s discontinued operations. On August 1, 2018, the Company responded requesting dismissal without prejudice on multiple grounds, including being barred by the applicable statute of limitation. On October 4, 2018, the case against the Company was dismissed with prejudice.

In the fourth quarter of 2018, the Company settled two professional and general liability actions (which were not subject to a mediation settlement agreement as discussed above), one for a total of $95,000, payable in 3 monthly installments commencing December 2018 and the other for a total of $52,500, payable in 6 monthly installments commencing December 2018, respectively.

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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.

In evaluating the adequacy of the self-insurance reserve in connection with the preparation of the Company’s financial statements for the year ended December 31, 2018, the Company also considered: (i) the change in the number of pending actions since December 31, 2017; (ii) the outcome of initial mediation sessions and the status of settlement negotiations; and (iii) defense counsel’s evaluation of estimated legal costs and other expenses if the pending actions were to be litigated to final judgment.

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. 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 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. Following venue transfer from the Delaware court, these cases have been settled in the United States Bankruptcy Court for the Eastern District of Arkansas (the “Bankruptcy Court”).

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 amount of $1.0 million and 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, 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 asserted that the Company was not entitled to any of the $0.8 million with respect to the HAH Note. In addition to opposing the Company’s claim to the $0.8 million, the Chapter 7 trustee had 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. The Company has charged approximately $0.3 million and $0.6 million to “Provision for doubtful accounts” in the Company’s consolidated statement of operations on the HAH Note as of December 31, 2018, and December 31, 2017, respectively. On March 13, 2019, the Company and the Chapter 7 bankruptcy trustee entered into a settlement agreement to settle all existing and potential claims, including such avoidance claim. The Company has received $0.1 million with respect to the $1.0 million HAH Note, see Note 19 - Subsequent Events for details.

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Employer Shared Responsibility Payment. On April 2, 2018, the Company received notification from the 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. 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.

NOTE 16. INCOME TAXES

The provision for income taxes attributable to continuing operations for the years ended December 31, 2018 and 2017 are presented below:

	Year Ended December 31,
(Amounts in 000’s)	2018			2017
Current Tax Expense:
Federal	$	—		$	—
	$	—		$	—
Deferred Tax benefit:
Federal	$	(38	)	$	(188	)
	$	(38	)	$	(188	)
Total income tax benefit	$	(38	)	$	(188	)

The income tax expense applicable to continuing and discontinued operations is presented below:

	Year Ended December 31,
(Amounts in 000’s)	2018			2017
Income tax benefit on continuing operations	$	(38	)	$	(188	)
Income tax (benefit) expense on discontinued operations		—			—
Total income tax benefit	$	(38	)	$	(188	)

At December 31, 2018 and 2017, the tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:

	Year Ended December 31,
(Amounts in 000’s)	2018			2017
Net deferred tax asset (liability):
Allowance for doubtful accounts	$	1,844		$	1,905
Accrued expenses		878			2,130
Net operating loss carry forwards		18,119			16,040
Property, equipment & intangibles		(3,209	)		(2,927	)
Stock based compensation		212			196
Convertible debt adjustments		0			218
Self-Insurance Reserve		360			0
Interest Expense - Limited under 163(j)		1,616			0
Total deferred tax assets		19,820			17,562
Valuation allowance		(19,820	)		(17,600	)
Net deferred tax liability	$	—		$	(38	)

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The items accounting for the differences between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:

	Year Ended December 31,
	2018			2017
Federal income tax at statutory rate		21.0	%		34.0	%
State and local taxes		(0.7	)%		5.5	%
Nondeductible expenses		(0.2	)%		(29.5	)%
Change in valuation allowance		(18.2	)%		128.2	%
Tax Reform Act Impact		—			(140.9	)%
Other		(1.6	)%		5.5	%
Effective tax rate		0.3	%		2.8	%

As of December 31, 2018, the Company had consolidated federal NOL carry forwards of $77.2 million. As a result of the Tax Reform Act, $11.3 million of NOL’s generated in 2018 do not expire and are currently offset by a full valuation allowance. The NOLs generated before December 31, 2018, which amount to $65.9 million begin to expire in 2019 through 2037 and currently are offset by a full valuation allowance. As of December 31, 2018, the Company had consolidated state NOL carry forwards of $43.5 million. These NOLs begin to expire in 2019 through 2037 and currently are offset by a full valuation allowance.

Given the Company’s historical net operating losses, a full valuation allowance has been established on the Company’s net deferred tax assets. The Company has generated additional deferred tax liabilities related to its tax amortization of certain acquired indefinite lived intangible assets because these assets are not amortized for book purposes. The tax amortization in current and future years gives rise to a deferred tax liability which will only reverse at the time of ultimate sale or book impairment. For years prior to 2018, due to the uncertain timing of this reversal, the temporary differences associated with indefinite lived intangibles could not be considered a source of future taxable income for purposes of determining a valuation allowance. As such, the deferred tax liability could not be used to support an equal amount of the deferred tax asset related to the NOL carry forward. This resulted in recognizing deferred federal and state tax expense of $0.2 million and a deferred tax liability of $0.4 million for the years ended December 31, 2017. As a result of the Tax Reform Act, NOL carry forwards generated in tax years 2018 and forward have an indefinite life. For this reason, the Company has taken the position that the deferred tax liability related to the indefinite lived intangibles can be used to support an equal amount of the deferred tax asset related to the 2018 NOL carry forward generated. This resulted in the Company recognizing an income tax benefit of approximately $0.04 million related to the use of our naked credit as a source of income to release a portion of our valuation allowance.

On December 22, 2017 the Tax Reform Act was enacted. Among other changes the Tax Reform Act reduces the US federal corporate tax rate from 35% to 21% beginning in 2018.

The Company has remeasured certain deferred tax assets and liabilities as of the enactment date of the Tax Reform Act based on the rates at which they are expected to reverse in the future, which is generally 21%. The amount recorded related to the remeasurement of our deferred tax balance was $9.5 million, which was offset by a reduction in the valuation allowance. For the twelve months ended December 31, 2017, the Company also recorded an income tax benefit of approximately $0.2 million related to the use of our naked credit as a source of income to release a portion of our valuation allowance.

The Company files federal, state and local income tax returns in the U.S. The Company is no longer subject to U.S. federal or State of Georgia tax examinations for years prior to fiscal 2015 and fiscal 2014, respectively. The Company is generally no longer subject to income tax examinations for years prior to fiscal 2014.

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N OTE 17. BENEFIT PLANS

The Company sponsors a 401(k) plan, which provides retirement benefits to eligible employees. All employees are eligible once they reach age 21 years and complete one year of eligible service. The Company’s plan allows eligible employees to contribute up to 20% of their eligible compensation, subject to applicable annual Code limits. The Company provides 20% matching on employee contributions, up to 5% of the employee’s contribution. Total matching contributions during the years ended December 31, 2018 and 2017 were approximately $5 thousand and $6 thousand, respectively.

NOTE 18. RELATED PARTY TRANSACTIONS

Park City Capital

On December 8, 2016, the Company announced a tender offer (the “Tender Offer”) for any and all of the Company’s 10% convertible subordinated notes due April 30, 2017 (the “2015 Notes”) at a cash purchase price equal to $1,000 per $1,000 principal amount of the 2015 Notes purchased, plus accrued and unpaid interest to, but not including, the payment date. The Tender Offer expired on January 9, 2017, and $6.7 million in aggregate principal amount of the 2015 Notes were tendered and paid on January 10, 2017. On April 30, 2017, the remaining $1.0 million in aggregate principal amount of the 2015 Notes outstanding was repaid plus accrued and unpaid interest in accordance with the terms of such notes, and all related obligations owed under the 2015 Notes were extinguished at that time.

On March 31, 2015, the Company accepted a Subscription Agreement from Park City Capital Offshore Master, Ltd. (“Park City Offshore”), an affiliate of Michael J. Fox, for a 2015 Note with an aggregate principal amount of $1,000,000 and, in connection therewith, issued such note to Park City Capital Offshore on April 30, 2015. The 2015 Note was offered to Park City Offshore on the same terms and conditions as all other investors in the offering. In January 2017, the Company repurchased the $1,000,000 2015 Note held by Park City Offshore pursuant to the terms of the Tender Offer for any and all of the outstanding 2015 Notes. Mr. Fox is a an affiliate of Park City Offshore, a director of the Company since October 2013, Lead Independent Director since April 1, 2015 and a beneficial owner of greater than 5% of the outstanding common stock.

McBride Matters

On September 26, 2017, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”), with William McBride III, our former Chief Executive Officer and director, pursuant to which, among other things, and in lieu of any other rights or obligations under Mr. McBride’s employment agreement: (i) the Company agreed to pay Mr. McBride $60,000 in cash for wage claims; (ii) the Company issued to Mr. McBride an Unsecured Negotiable Promissory Note with an original principal amount of $300,000 (the “McBride Note”); (iii) Mr. McBride released the Company from all claims and liabilities, including those arising out of his employment, and his employment agreement, with the Company and his separation therefrom (but excluding claims to enforce the provisions of the Settlement Agreement, the McBride Note and the indemnification provisions under his employment agreement); (iv) the Company released Mr. McBride from all claims and liabilities arising out of his employment, and his employment agreement, with the Company and his separation therefrom (excluding (a) claims for intentional tortious conduct, fraud or arising out criminal misconduct other than in connection with such separation (provided such claims were not known to, or reasonably discoverable by the Company), and (b) claims to enforce the provisions of the Settlement Agreement and the restrictive covenants under the employment agreement); and (v) from after the effective date of the Settlement Agreement, the termination of Mr. McBride’s employment shall be deemed a resignation by Mr. McBride.

The McBride Note accrues interest at an annual rate of 4.0% and principal and interest is payable in 24 equal monthly installments of $13,027, which payments commenced on October 31, 2017 and shall end on September 30, 2019. Upon the existence and continuation of an Event of Default (as defined in the McBride Note), interest accrues at a default rate of eighteen percent 18.0% per annum, see Note 9 – Notes Payable and Other Debt .

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Other than the items discussed above, there are no other material undisclosed related party transactions.

NOTE 19 . 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.

Attalla Operator Emergence from Bankruptcy

On March 21, 2018, the Attalla Operator, affiliated with C-Ross Management filed a voluntary chapter 11 bankruptcy petition in the state of Alabama, due to unpaid back taxes owed to the IRS and the Attalla PLGL Claim imposed against it, in order to be granted an automatic stay from any IRS recoupments and any collection attempts from the Attalla PLGL Claim. The Attalla Operator continued to pay its monthly rent obligations under its lease agreement to the Company pursuant to the April 16, 2018, court approved motion for the Attalla Operator to formally assume the Attalla lease. As of December 31, 2018, the Company had recorded a straight-line rent receivable of approximately $0.6 million. On January 8, 2019 the Attalla Operator bankruptcy filing was dismissed per filing with the bankruptcy court.

Omega Lease Termination and Adcare Holdco Loan Partial Repayment

Effective January 15, 2019, and as contemplated by the A&R New Forbearance Agreement, the Company’s lease of two facilities located in Georgia previously defined as the Omega Facilities, which leases were due to expire August 2025 and which Omega Facilities the Company subleased to third party subtenants, were terminated by mutual consent of the Company and the lessor of the Omega Facilities.

In connection with the Omega Lease Termination, the Company transferred approximately $0.4 million of all its integral physical fixed assets in the Omega Facilities to the lessor and on January 28, 2019 received from the lessor gross proceeds of approximately $1.5 million, consisting of (i) a termination fee in the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other net amounts due to the Company under the leases. The Company paid $1.2 million of such Omega Lease Termination proceeds to Pinecone on January 28, 2019, as required by the A&R New Forbearance Agreement, to reimburse Pinecone for approximately $0.3 million of certain unpaid expenses and partially prepay $0.9 million of the AdCare Holdco Loan.

Wellington Lease Amendment

Two of the Company’s eight Georgia Facilities, leased under the Prime Lease, are subleased to the Wellington Sublessees under the Wellington Subleases, due to expire August 31, 2027, comprising t he Tara Facility and the Power Springs Facility. Effective February 1, 2019, the Company agreed to a 10% reduction in base rent, or in aggregate approximately an average $31,000 per month cash rent reduction for the year ended December 31, 2019, and $48,000 per month decrease in straight-line revenue, respectively for the Tara Facility and the Power Springs Facility combined. Additionally the Company modified the annual rent escalator to 1% per year from the prior scheduled increase from 1% to 2% previously due to commence of the 1 ^st day of the sixth lease year.

Cure Notice from the NYSE American with respect Low Selling Price Matter.

On February 28, 2019, the NYSE American confirmed that the Company had regained compliance with the continued listing standards set forth in the Company Guide as a result of the Reverse Stock Split completed and effective on December 31, 2018. The proposal to amend the Charter to effect a reverse stock split of the common stock at a ratio of between one-for-six and one-for-twelve, as determined by the Board in its sole discretion, was approved at the Company’s 2018 annual meeting of shareholders. If the Company is again not in compliance with the continued listing standards within the next twelve months, then the Exchange may commence either truncated delisting procedures or effect an immediate delisting. The Company has failed to file this Annual Report (the Delinquent Report” in a timely fashion as required by the continued listing standards. For further information see the Filing Delinquency Notice from the NYSE American with respect to this Form 10-K section below regarding a six month cure period granted to the Company, with respect to the Delinquent Report.

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Covington Forbearance Agreement

On January 11, 2019 the Company and Covington entered into the Covington Forbearance Agreement, whereby the Company and Covington agreed that (a) the term of the lease shall be extended from April 30, 2025 until April 30, 2029 (the “Term”); (b) the base rent was reduced by approximately $0.8 million over the remainder of the prior lease term; and (c) the Company shall receive relief from approximately $0.5 million of outstanding lease amounts (the “Rent Due”) as of December 31, 2018. Without waiving any default by the Company or Covington’s rights and remedies, and subject to specified terms and conditions for so long as the Company or the Company’s subtenant are not in default under the lease and the proposed sublease, as the case may be. Covington (including its subsidiaries, affiliates, successors and assigns) will forbear from pursuing its rights against the Company for so long as neither the Company nor its subtenant is not in default under the existing lease, as amended on January 11, 2019, or the new sublease, on the final day of the third, fourth and fifth years following the execution of the new sublease. Covington will release and forever quit claim specified portions of the Rent Due as follows: one-third (1/3) at the end of year 3 of the new sublease, one-third (1/3) at the end of year 4 of the new sublease, and one-third (1/3) at the end of year 5 of the new sublease. The Forbearance period under the Covington Forbearance Agreement shall terminate as of the expiration of the Term. At Covington’s option in its sole and absolute business discretion, the Covington Forbearance Agreement and the forbearance period thereunder can be terminated upon the occurrence of certain specified events such as, the Company files a petition for bankruptcy or takes advantage of any other debtor relief law, or an involuntary petition for bankruptcy is filed against the Company, or any other judicial action is taken with respect to the Company by any creditor of the Company or the Company breaches or defaults in performance of any covenant or agreement contained in the Covington Forbearance Agreement. Upon termination of the forbearance period under the Covington Forbearance Agreement, for any reason, Covington may take all steps it deems necessary or desirable to enforce its lease rights as permitted by law or equity.

Senior Debt Bonds – Trustee Notice Regarding Partial Pro Rata Principal Distribution

On January 9, 2019, BOKF, NA, as trustee of the city of Springfield, Ohio first mortgage revenue bonds (Eaglewood Property, LLC project) Series 2012A and 2012B (the “Bonds”), notified bondholders as of the record date January 15, 2019 that a principal payment in the amount of $243,467 will be distributed on January 18, 2019 in accordance with the terms of the Trust Indenture dated as of April 12, 2012. This pro-rata distribution is being made pursuant to the Order Authorizing Distribution of Settlement Funds Collected in Related Actions Brought by the Securities and Exchange Commission Section 5 filed August 21, 2017 in the United States District Court District of New Jersey styled Securities and Exchange Commission, Plaintiff, v. Christopher Freeman Brogdon, Defendant, and Connie Brogdon, et al., Relief Defendants. Case 2:15-cv-08173-KM-JBC. On December 21, 2018, the Company received the above funds, representing a refund of the Bonds issuance fees, into its restricted cash account managed by BOKF, NA, who completed the principal distribution to notified bondholders on January 15, 2019.

Other Professional and General Liability

On February 21, 2019, the Company was served notice of a medical injury, improper care and treatment case filed in the State of Arkansas on behalf of a deceased patient, who received care outside Regional’s date of service (post Transition), against the then operator Skyline and the Company and CIBC Bancorp USA, Inc. The plaintiff is seeking unspecified compensatory damages for the actual losses and unspecified punitive damages. The Company believes that it acted in good faith, that this action lacks merit, the Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in the action that has been filed against it.

Mountain Trace Facility – New Operator

On February 28, 2019 the Company entered into a lease agreement (the “Vero Health Lease”) with Vero Health, providing that Vero Health would take possession of and operate the Mountain Trace Facility located in North Carolina. The Vero Health Lease became effective, upon the termination of the prior Mountain Trace Tenant mutual lease termination on March 1, 2019. The Vero Health Lease is for an initial term of 10 years, with renewal options, is structured as a triple net lease and rent for the Mountain Trace Facility is approximately $0.5 million per year, with an annual 2.5 % rent escalation clause.

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Aria Avoidance Claim

On March 28, 2018, the Chapter 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 with respect to recovering funds the Company received from the Debtors in the bankruptcy proceeding prior to the bankruptcy filings. On March 13, 2019 the Company and the Chapter 7 bankruptcy trustee entered into a settlement agreement (the “Settlement Agreement”), which the Bankruptcy Court approved on April 15, 2019, to settle all existing and potential claims, including such avoidance claim. The Company has received approximately $0.1 million with respect to the $1.0 million HAH Note, which as of December 31, 2018 the Company has recorded to the Settlement Agreement amount. The Company believes that it acted in good faith, that this agreement is not an admission or concession of any fault, liability, fact or amount of damages, or any other matter whatsoever. The Company entered into the Settlement Agreement solely to avoid the uncertainty and expense of litigation and to settle any and all claims and causes of action that are alleged or could have been alleged.

Hardin & Jesson Action

On February 25, 2019, the Company was served notice of an action filed in Sebastian County Circuit Court - Fort Smith Division, Arkansas by Hardin, Jesson & Terry, PLC requesting financial documents from the Company’s predecessor issuer and seeking relief of outstanding amounts for legal services provided to the Company (and certain of its subsidiaries) in the State of Arkansas in relation to professional and general liability claims of approximately $0.5 million. On April 18, 2019, Hardin, Jesson & Terry, PLC amended their filing to correct their initial filing to clarify the claim is against the Company. On May 8, 2019, the Company provided a response denying the allegations. There is no guarantee that the Company will prevail in the action that has been filed against it.

Pinecone Second A&R Forbearance Agreement

Pursuant to the Second A&R Forbearance Agreement, the Company and Pinecone agreed to amend certain provisions of the Loan Agreement. The Second A&R Forbearance Agreement requires, among other things (i) that the Company pursue and complete the Asset Sale which would result in the repayment in full of all of the Company’s indebtedness to Pinecone and, in connection therewith, the Company pay not less than $0.3 million and not more than $0.55 million in forbearance fees, as well as certain other expenses of Pinecone, or (ii) Pinecone’s other disposition of the Loan Agreement as contemplated by the Second A&R Forbearance Agreement. Additionally the Second A&R Forbearance Agreement accelerates the previously disclosed 3% finance “tail fee”, 1% prepayment penalty, and 1% break up fee so that such fees and penalties became part of the principal as of April 15, 2019.

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MED Purchase and Sale Agreement

On April 15, 2019, certain subsidiaries of the Company (the “Seller”) entered into a Purchase and Sale Agreement (the “PSA”) with affiliates of MED Healthcare Partners LLC (“MED” or “Buyer”), pursuant to which the Buyer deposited the first deposit of $0.15 million into an escrow account. Subject to the terms of the PSA, including among other usual customary items, a thirty (30) day due diligence period, Seller agrees to sell and Buyer agrees to purchase all of Seller’s right, title and interest in that certain (a) 182 licensed bed skilled nursing facility commonly known as Attalla Health & Rehab located in Attalla, AL, (b) that certain 100 licensed bed skilled nursing facility commonly known as Healthcare at College Park located in College Park, GA, (c) that certain 118 licensed bed skilled nursing facility commonly known as Quail Creek Nursing & Rehabilitation Center located in Oklahoma City, OK (the “Quail Creek Facility”) and (d) that certain 100 licensed bed skilled nursing facility commonly known as Northwest Nursing Center located in Oklahoma City, OK. In consideration therefor, Buyer shall pay to Seller the sum of $28.5 million in cash.

If the Buyer fails to terminate the PSA for any or no reason prior to May, 15 2019, 5:00 p.m. Eastern Time (the expiration of the due diligence period), or timely make a second deposit of $0.15 million, by such time, then such failure shall be deemed a default by the Buyer under the PSA and the Seller may then and only then elect to terminate the PSA and receive the first deposit as liquidated damages. The closing of the PSA is scheduled for thirty (30) days after the expiration of the due diligence period.

Filing Delinquency Notice from the NYSE American with respect to this Form 10-K

On April 17, 2019, the Company received a letter from NYSE American stating that the Company was not in compliance with the continued listing standards (“Filing Delinquency Notification”). The Company is now subject to the procedures and requirements set forth in Section 1007 of the Company Guide. The Company failed to timely file the Delinquent Report. Within five days of the Filing Delinquency Notification the Company (a) contacted the Exchange to discuss the status of the Delinquent Report and (b) issued a press release disclosing the occurrence of the Filing Delinquency. The Company has been provided a six-month cure period, with an option additional six-month cure period at the discretion of the NYSE American, who reserve the right at any time to immediately truncate the cure period or immediately commence suspension and delisting procedures.

Quail Creek Credit Facility

On April 30, 2019, the Company and a wholly owned subsidiary of the Company (the “Borrower”) and Congressional Bank, a Maryland chartered commercial bank (the “Quail Creek Lender”), amended a term loan agreement dated September 27, 2013, as amended from time to time, with an aggregate principal of $5.0 million (the “Quail Creek Loan Agreement”), to extend the maturity date of the Quail Creek Credit Facility, with a principal balance of approximately $4.1 million as of December 31, 2018, bearing interest at LIBOR + 4.75%, to June 30, 2019 (the “Maturity Date”), with an option to further extend to July 31, 2019, at the “Quail Creek Lender’s discretion. The Quail Creek Credit Facility is secured by a mortgage on the Quail Creek Facility.

As previously disclosed, on April 15, 2019, certain wholly owned subsidiaries of Regional entered into the PSA pursuant to which Seller agreed to sell four (4) skilled nursing facilities owned by Seller, including the Quail Creek Facility, subject to the terms and conditions set forth in the PSA.

The option to further extend the Maturity Date of the Quail Creek Credit Facility to July 31, 2019 (the “Extension Option”), is upon the Borrower’s satisfaction of the following conditions: (i) Borrower shall have delivered to the Quail Creek Lender written notice of its intent to exercise the Extension Option no earlier than forty-five (45) days and no later than thirty (30) days prior to the Maturity Date; (ii) no default or event of default shall have occurred and be continuing; (iii) the closing under the PSA shall have been extended and the PSA shall otherwise still be in full force and effect (including with respect to the Quail Creek Facility); (iv) Quail Creek Lender shall have received such additional information or costs as Quail Creek Lender may request; and (v) Quail Creek Lender shall have approved such extension in its commercially reasonable discretion. The Quail Creek Loan Agreement also provides that the termination of the PSA will constitute an immediate event of default under the Quail Creek Loan Agreement. 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.

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Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. 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 Securities Exchange Act of 1934 as amended (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 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 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 (the “Evaluation Date”) covered by this Annual Report on Form 10-K (the “Annual Report”). Based on such evaluation, our Chief Executive Officer and interim Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this evaluation, management used the framework and criteria set forth in the report entitled Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including: (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring. Based on this evaluation, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2018.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter of 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Our website address is www.regionalhealthproperties.com. You may obtain free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports from the investor relations section of our website. These reports are available on our website as soon as reasonably practicable after we electronically file them with the SEC. These reports are also available through the SEC’s website at www.sec.gov .

The charters for the Board’s Compensation Committee (the “Compensation Committee”), the Audit Committee and the Nominating and Corporate Governance Committee are available in the corporate governance subsection of the investor relations section of our website, www.regionalhealthproperties.com, and are also available in print upon written request to the Corporate Secretary, Regional Health Properties, Inc., 454 Satellite Boulevard NW, Suite 100, Suwanee, GA 30024.

Item 10. Directors, Executive Officers and Corporate Governance

Current Executive Officers and Directors

The following table sets forth certain information with respect to our executive officers and directors.

Name	Age		Position
Brent Morrison		43	Chief Executive Officer, President and Director
E. Clinton Cain		38	Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer
Michael J. Fox		41	Director
Kenneth W. Taylor		58	Director
David A. Tenwick		81	Director

Directors are elected at each of the Company’s annual meeting of shareholders to serve until the Company’s next annual meeting of shareholders. The terms of the Company’s current directors expire at the Company’s 2019 annual meeting of shareholders. Executive officers serve at the discretion of the Board, subject to applicable employment agreements or other agreements. See Part III, Item 11, “Executive Compensation Agreements – Compensation Arrangements With Executive Officers”.

Biographical information with respect to each of our current executive officers and directors is set forth below.

Brent Morrison. Mr. Morrison has served as the Company’s Chief Executive Officer and President since March 25, 2019, as Interim Chief Executive Officer and Interim President since October 18, 2017, and as a director since October 2014. Mr. Morrison is currently the Managing Director of Zuma Capital Management LLC, a position he has held since 2012. Prior thereto, Mr. Morrison was a Research Analyst for Wells Fargo Advisors from 2012 to 2013, the Senior Research Analyst at the Strome Group, a private investment firm, from 2009 to 2012, a Research Analyst at Clocktower Capital, LLC, a global long/short equity hedge fund based in Beverly Hills, California, from 2007 to 2009 and a Vice President of Wilshire Associates, a financial consulting firm, from 1999 to 2007. Mr. Morrison also served on the board of directors of iPass Inc., which provides global enterprises and telecommunications carriers with cloud-based mobility management and Wi-Fi connectivity services, from May 2015 to June 2016. Mr. Morrison’s expertise and background in the financial and equity markets provide experience that the Board considers valuable.

E. Clinton Cain. Mr. Cain has served as the Company’s Interim Chief Financial Officer since October 18, 2017, as the Company’s Senior Vice President and Chief Accounting Officer since January 1, 2018 and the Company’s Senior Vice President, Chief Accounting Officer and Controller since February 4, 2016. Mr. Cain previously served as Vice President of Finance at the Company beginning September 2014, before which time he worked as a Senior Financial Analyst at the Company beginning in June 2011. Prior to joining the Company, Mr. Cain worked as an audit associate at Habif, Arogeti & Wynne, LLP, in Atlanta, Georgia, and Huber, Erickson, and Bowman, LLC, in Salt Lake City, Utah, both certified public accounting firms.

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Michael J. Fox. Mr. Fox has served as a director since October 2013 and Lead Independent Director since April 2015. Mr. Fox is the Chief Executive Officer of Park City Capital, LLC (“Park City”), a value-oriented investment management firm he founded in June 2008. From 2000 to 2008, Mr. Fox worked at J.P. Morgan in New York, most recently as Vice President and Senior Business Services Analyst. As J.P. Morgan’s Senior Business Services Analyst, Mr. Fox headed the firm’s Business Services equity research group from 2005 to 2008. From 2000 to 2005, Mr. Fox was a member of J.P. Morgan’s Leisure equity research group which was consistently recognized by Institutional Investor’s All America Research Team. Mr. Fox also serves on the board of directors of Resonant Inc. Mr. Fox’s expertise and background in the financial and equity markets and his involvement in researching the commercial real estate industry provide experience that the Board considers valuable.

Kenneth W. Taylor . Mr. Taylor has served as a director since February 2018. Mr. Taylor is the Chief Financial Officer of H-E Parts International, a division of Hitachi Ltd and a leading supplier of parts, re-manufactured components and equipment to the global mining, heavy construction and energy industries, since March 2019. Previously, Mr. Taylor served as Chief Operations Officer and Chief Financial Officer for Cellairis, a leading supplier of mobile device accessories and repair services through 500 domestic and international franchisee operated company-leased stores since June 2012. Previously, Mr. Taylor served as Chief Operation Officer and Chief Financial Officer, for Anisa International, Inc., a leading manufacturer of cosmetic brushes, from 2009 to 2012, as Chief Financial Officer for InComm Holdings, Inc., a leading supplier of prepaid and gift cards products and networks, from 2004 to 2009, as Chief Financial Officer for The Edge Flooring, a private equity-backed flooring startup manufacturer, from 2003 to 2004, Chief Financial Officer for Numerex Corporation , a leading supplier of IoT products and gateways, from 2002 to 2003, as Chief Financial Officer for Rodenstock NA, Inc., a startup ophthalmic lens manufacturer, from 2001 to 2002, as Corporate Controller for Scientific Games Corporation, a leading supplier of products and services to the global lottery industry, from 1987 to 2000. Since 2010, Mr. Taylor has also served as a director for Thanks Again, LLC, a leading supplier of loyalty and consumer engagement services to global airports. Mr. Taylor’s business and principal financial officer experience provide experience that the Board considers valuable.

David A. Tenwick. Mr. Tenwick is our founder and has served as a director since our organization was founded in August 1991. Mr. Tenwick also served as Chairman of the Board from our founding until March 2015 and as the Company’s Interim Chief Executive Officer and President from June 1, 2014 to November 1, 2014. Prior to our founding, Mr. Tenwick was an independent business consultant from 1982 to 1990. In this capacity, he has served as a director and an officer of several businesses, including Douglass Financial Corporation, a surety company, and AmeriCare Health & Retirement, Inc., a long-term care management company. From 1967 until 1982, Mr. Tenwick was a director and an officer of Nucorp Energy, Inc., a company which he co-founded. Nucorp Energy was a public company that invested in oil and gas properties and commercial and residential real estate. Prior to founding Nucorp Energy, Mr. Tenwick was an enforcement attorney for the SEC. Mr. Tenwick is a member of the Ohio State Bar Association and was a founding member of the Ohio Assisted Living Association, an association that promotes high quality assisted living throughout the State of Ohio. Mr. Tenwick’s tenure with the Company and legal and business background provide experience that the Board considers valuable.

Arrangements with Directors Regarding Election/Appointment

On October 1, 2013, we entered into a letter agreement (the “Fox Agreement”) with Park City and Mr. Fox pursuant to which the Board appointed Mr. Fox as a director of the Company effective October 23, 2013.

Pursuant to the Fox Agreement, for so long as Mr. Fox serves on the Board as a nominee of the Board, Park City shall take such action as may be required so that all of the capital stock of the Company which is entitled to vote generally in the election of directors (the “Voting Securities”) and is beneficially owned by Park City, or any person who, within the meaning of Rule 12b-2 under the Exchange Act, is “controlling,” “controlled by” or “under common control with” Park City (the “Park City Group”), is voted in favor of each of the Board’s nominees to the Board at any and all meetings of our shareholders or at any adjournment or postponement thereof or in any other circumstance in connection with which a vote, consent or other approval of holders of Voting Securities is sought with respect to the election of any nominee to the Board.

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In addition, for so long as Mr. Fox serves on the Board as a nominee of the Board, Park City will not do or agree or commit to do (or encourage any other person to do or agree or commit to do) and will not permit any member of the Park City Group or any affiliate or associate thereof to do or agree or commit to do (or encourage any other person to do or agree or commit to do) any of the following:

(i)

solicit proxies or written consents of shareholders with respect to any Voting Securities, or make, or in any way participate in, any solicitation of any proxy to vote any Voting Securities (other than as conducted by us), or become a participant in any election contest with respect to us;

(ii)

seek to call, or request the call of, a special meeting of shareholders or seek to make, or make, any shareholder proposal at any meeting of shareholders that has not first been approved in writing by the Board;

(iii)

make any request or seek to obtain, in any fashion that would require public disclosure by us, Park City or their respective affiliates, any waiver or amendment of any provision of the Fox Agreement or take any action restricted thereby; and

(iv)

except as permitted by the Fox Agreement, make or cause to be made any statement or announcement that constitutes an ad hominem attack on us or our officers or directors in any document or report filed with or furnished to the SEC or any other governmental agency or in any press release or other publicly available format.

Furthermore, pursuant to the Fox Agreement, for so long as Mr. Fox serves on the Board as a nominee of the Board, Mr. Fox agrees to comply with all applicable policies and guidelines of the Company and, consistent with his fiduciary duties and his obligations of confidentiality as a member of the Board, to refrain from communicating to anyone any nonpublic information about us that he learns in his capacity as a member of the Board (which agreement shall remain in effect after Mr. Fox leaves the Board). Notwithstanding the foregoing, Mr. Fox may communicate such information to any member of the Park City Group who agrees to be bound by the same confidentiality restrictions applicable to Mr. Fox, provided that Mr. Fox shall be liable for any breach of such confidentiality by any such member. In addition, Mr. Fox has confirmed that each of the other members of the Park City Group has agreed not to trade in any of our securities while in possession of any nonpublic material information about us if and to the extent doing so would be in violation of applicable law or, without the prior written approval of the Board, to trade in any of our securities during any blackout period imposed by us.

Audit Committee of the Board of Directors

The Company has a separately designated Audit Committee which was established in accordance with Section 3(e)(58)(A) of the Exchange Act. The Audit Committee has the responsibility of reviewing our financial statements, evaluating internal accounting controls, reviewing reports of regulatory authorities and determining that all audits and examinations required by law are performed. The Audit Committee also approves the appointment of the independent registered public accounting firm for the next fiscal year, approves the services to be provided by such firm and the fees for such services, reviews and approves the audit plans, reviews and reports upon various matters affecting the independence of the independent registered public accounting firm and reviews with it the results of the audit and management’s responses.

The Audit Committee was established in 1995, and its charter was adopted in December 2005. The current members of the Audit Committee are Messrs. Fox, Taylor and Tenwick. Each of Messrs. Fox, Taylor and Tenwick is considered “independent,” as independence for Audit Committee members is defined in the applicable rules of the NYSE American listing standards and the rules of the SEC. The Board has designated Mr. Taylor as Chairman of the Audit Committee and has determined that Mr. Taylor is an “audit committee financial expert” as defined by Item 407 of Regulation S-K of the Exchange Act.

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Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires executive officers and directors and persons who beneficially own more than 10% of our common stock (the “Reporting Persons”) to file initial reports of ownership and reports of changes in ownership with the SEC. Reporting Persons are required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company and written representations from the executive officers and directors, the Company believes that the Reporting Persons complied with all Section 16(a) filing requirements since January 1, 2018, except that Mr. Taylor filed a late report on Form 3 with respect to his appointment as a director.

Code of Ethics

We have adopted a written code of conduct, our Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees of the Company (including our principal executive officer, principal financial officer, principal accounting officer or controller, and any person performing similar functions). Our Code of Business Conduct and Ethics is available in the corporate governance subsection of the investor relations page of our website, www.regionalhealthproperties.com , and is also available in print upon written request to our Corporate Secretary, Regional Health Properties, Inc., 454 Satellite Boulevard NW, Suite 100, Suwanee, Georgia 30024.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth the compensation awarded to, paid to or earned by or accrued our principal executive officer and our other most highly compensated executive officers whose total compensation exceeded $100,000 for the years ended December 31, 2018 and December 31, 2017 (collectively, our “named executive officers”):

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($) ⁽¹⁾			All Other Compensation ($)			Total ($)
Brent Morrison*	2018		—		—		37,500	⁽²⁾		255,126	⁽³⁾		292,626
Chief Executive Officer, President and Director
(principal executive officer)	2017		—		—		37,500	⁽⁴⁾		56,747	⁽⁵⁾		94,247
E. Clinton Cain**
Interim Chief Financial Officer, Senior Vice President and	2018		120,000		—		—			—			120,000
Chief Accounting Officer
(principal accounting officer)	2017		120,000		—		—			—			120,000

*Mr. Morrison, a director of the Company since October 2014, commenced serving as the Company’s Chief Executive Officer and President (and principal executive officer) on March 25, 2019 and was previously the Company’s Interim Chief Executive Officer and Interim President (and principal executive officer) from October 18, 2017.

**Mr. Cain commenced serving as the Company’s Interim Chief Financial Officer (and principal financial officer) on October 18, 2017.

⁽¹⁾

The amounts set forth above reflect the full aggregate grant date fair value of the awards. See Note 13 - Stock Based Compensation to our audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” for a description of the assumptions used to determine fair value.

⁽²⁾

Represents compensation paid to Mr. Morrison as a non-employee director for the year ended December 31, 2018, in the form of a restricted stock grant of 10,431 shares of common stock, with respect to 2018 compensation, that has a grant price of $3.595 per share which vests as to one-third of the shares on January 1, 2019, January 1, 2020 and January 1, 2021.

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⁽ ³ ⁾

Represents: (i) fees paid to Mr. Morrison as a non-employee director for the year ended December 31, 201 8 of $38,500; (ii) $ 36 , 626 reimbursed for travel and other out-of-pocket expenses in connection with his duties as Interim Chief Executive Officer and Interim President; and (iii) $ 180,000 paid for his services as I nterim Chief Executive Officer and Interim President. See “ Compensation Arrangements – With Executive Officers” below .

⁽⁴⁾

Represents compensation paid to Mr. Morrison as a non-employee director for the year ended December 31, 2017, in the form of a restricted stock grant of 2,043 shares of common stock with a grant price of $18.36 per share which vests as to one-third of the shares on January 1, 2018, January 1, 2019 and January 1, 2020.

⁽⁵⁾

Represents: (i) fees paid to Mr. Morrison as a non-employee director for the year ended December 31, 2017 of $38,500; (ii) $10,747 reimbursed for travel and other out-of-pocket expenses in connection with his duties as Interim Chief Executive Officer and Interim President; and (iii) $7,500 paid for his services as Interim Chief Executive Officer and Interim President.

Compensation Arrangements – With Executive Officers

Mr. Morrison . Mr. Morrison, a director of the Company since October 2014, commenced serving as the Company’s Chief Executive Officer and President (and principal executive officer) on March 25, 2019 and Interim Chief Executive Officer and Interim President (and principal executive officer) since October 18, 2017.

On November 17, 2017, the Board and the Compensation Committee of the Board determined that Mr. Morrison shall receive, as compensation for his service as Interim Chief Executive Officer and Interim President, a cash payment in the amount of $15,000 per month, without withholdings, payable on a date to be determined by Mr. Morrison, as well as reimbursement for reasonable travel and other out-of-pocket expenses incurred by Mr. Morrison in connection with the performance of his duties as Interim Chief Executive Officer and Interim President.

On March 25, 2019, upon the Board’s appointment of Mr. Morrison as the Company’s Chief Executive Officer and President, the Board and the Compensation Committee determined that that Mr. Morrison’s current compensation plan will remain place until the Company negotiates and executes an Employment Agreement with Mr. Morrison.

E. Clinton Cain. Mr. Cain commenced serving as the Company’s Interim Chief Executive Officer and Senior Vice President on October 18, 2017. On February 4, 2016 the Board appointed Mr. Cain as the Company’s Senior Vice President, Chief Accounting Officer and Controller.

The Compensation Committee has not yet made any determination regarding compensation for Mr. Cain in respect of this service as Interim Chief Financial Officer, however the Compensation Committee reviews salaries from time to time and provided for a discretionary annual salary increase of $30,000 effective January 1, 2019.

In connection with Mr. Cain’s employment and in respect of performance during the year ended December 31, 2015 prior to becoming an executive officer, the Company granted to Mr. Cain on January 1, 2016 a restricted stock award of 650 shares of common stock with a grant price of $29.88 per share, which vested with respect to one-third of such shares on January 1, 2017, January 1, 2018 and January 1, 2019.

Retirement Programs

Our retirement programs are designed to facilitate the retirement of employees, including our named executive officers, who have performed for us over the long term. We currently maintain a 401(k) plan with a match of 20% of the first 5% of an employee’s contribution as well as non-qualified employee stock purchase program. The terms of these plans are essentially the same for all employees. Our named executive officers participate in the plans on the same basis as all other employees. We do not provide our named executive officers any special retirement benefits.

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Outstanding Equity Awards at Fiscal Year-End Table

The Outstanding Equity Awards at Fiscal Year-End table below sets forth information regarding the outstanding equity awards held by our named executive officers as of December 31, 2018:

	OPTION AWARDS*							STOCK AWARDS*
Name and Principal Position	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#)— Unexercisable		Option Exercise Price		Option Expiration Date	Equity Incentive Plan Award: Total Number of Unearned Shares, Units or Other Rights that have Not Vested			Equity Incentive Plan Award: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not Vested
Brent Morrison, Chief Executive Officer, President and Director**		4,323		—	$	46.80	12/17/2024		12,800	⁽¹⁾	$	19,968
(principal executive officer)
E. Clinton Cain, Interim Chief Financial Officer, Senior Vice President and Chief Accounting Officer		375		—	$	51.60	4/17/2023		—		$	—
(principal financial officer and principal accounting officer)***

*	Reflects our one-for-twelve Reverse Stock Split that became effective on December 31, 2018. See Part II, Item 8, Financial Statements and Supplemental Data , Note 1 – Summary of Significant Accounting Policies for further information.

**	Mr. Morrison, a director of the Company, commenced serving as the Company’s Interim Chief Executive Officer (and principal executive officer) on October 18, 2017 and as Chief Executive Officer (and principal executive officer) on March 25, 2019.

***	Mr. Cain commenced serving as the Company’s Interim Chief Executive Officer on October 18, 2017.

⁽¹⁾	Restricted shares vest on the following schedule: 4,158 shares on January 1, 2019, 1,007 shares on January 27, 2019, 4,158 shares on January 1, 2020 and 3,477 shares on January 1, 2021.

Director Compensation

Director Compensation and Reimbursement Arrangements

On February 27, 2019, the Board and the Compensation Committee approved the Company’s director compensation plan for the year ending December 31, 2019. Pursuant to this plan, 2019 director fees for all directors (including Mr. Morrison), were set at $24,000 payable in cash in monthly payments of $2,000.00 for all months through December 2019, with some flexibility in the timing of payments from month to month based on the discretion of management.

On April 23, 2018, the Board and the Compensation Committee approved the Company’s director compensation plan for the year ended December 31, 2018. Pursuant to this plan, 2018 director fees for all directors (including Mr. Morrison), were set at $75,000, payable as follows: (i) $37,500 payable in cash; and (ii) $37,500 payable in restricted stock granted pursuant to the 2011 Plan. The Company paid half the cash portion of the 2018 director fees in July 2018 and December 2018 (excluding such payment to Mr. Morrison), and granted, on April 24, 2018, to each of Messrs. Fox, Morrison and Tenwick a restricted stock award of 10,431 shares of common stock, and to Mr. Taylor a restricted stock award of 9,562 shares of common stock. All restricted stock awards vest as to one-third of the shares on each of January 1, 2019, January 1, 2020 and January 1, 2021. The cash and stock portions of Mr. Taylor’s 2018 director compensation were prorated based on his appointment to the Board in February 2018.

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In addition, each director (including Mr. Morrison) also received, or will receive, a payment of $1,000 in cash for each in-person Board meeting attended during the year ended December 31, 201 8 and ending December 31, 201 9 . Directors are also reimbursed for travel and other out-of-pocket expenses in connection with their duties as directors.

Director Compensation Table

The following table sets forth information regarding compensation paid to our non-employee directors for the year ended December 31, 2018. Directors who are employed by us do not receive any compensation for their activities related to serving on the Board:

Name	Fees earned or paid in cash $		Stock awards ⁽¹⁾ $			All other compensation ⁽³⁾ $			Total $
Michael J. Fox		38,500		37,500	⁽²⁾		—			76,000
Kenneth W. Taylor		38,375		34,375	⁽³⁾		—			72,750
David A. Tenwick		38,500		37,500	⁽²⁾		1,499	⁽⁴⁾		77,499

See Part III, Item 11., “Executive Compensation – Summary Compensation Table” for a description of the compensation arrangements for Mr. Morrison, a director of the Company and Chief Executive Officer and President effective March 25, 2019, and previously Interim Chief Executive Officer and Interim President effective October 18, 2017 .

⁽¹⁾

The amounts set forth reflect the full aggregate grant date fair value of the awards. See Note 13 – Stock Based Compensation to our audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” in this Annual Report for a description of the assumptions used to determine fair value.

⁽²⁾	Represents a restricted stock grant of 10,431 shares of common stock with a grant price of $3.595 per share which vests as to one-third of the shares on January 1, 2019, January 1, 2020 and January 1, 2021.

⁽³⁾	Represents a restricted stock grant of 9,562 shares of common stock with a grant price of $3.595 per share which vests as to one-third of the shares on January 1, 2019, January 1, 2020 and January 1, 2021.

⁽⁴⁾	The amounts set forth reflect amounts reimbursed for travel and other out-of-pocket expenses in connection with their duties as directors.

The number of outstanding exercisable and unexercisable options and warrants, and the number of unvested shares of restricted stock held by each of our non-employee directors as of December 31, 2018 are shown below:

		As of December 31, 2018
		Number of Shares Subject to Outstanding Options or Warrants ⁽¹⁾				Number of Shares of Unvested ⁽¹⁾
Director		Exercisable		Unexercisable		Restricted Stock
Michael J. Fox ⁽²⁾	⁽³⁾		6,129		—		12,800
Kenneth W. Taylor	⁽⁴⁾		—		—		9,562
David A. Tenwick	⁽⁵⁾		2,315		—		12,800

⁽¹⁾	Reflects our one-for-twelve Reverse Stock Split that became effective on December 31, 2018. See Part II, Item 8, Financial Statements and Supplemental Data, Note 1 – Summary of Significant Accounting Policies for further information.

⁽²⁾	Excludes 27,369 shares subject to outstanding, exercisable warrants purchased by an affiliate of Mr. Fox unrelated to equity compensation.

⁽³⁾

Includes: (i) options to purchase 1,806 shares of common stock, with an expiration date of January 1, 2024, at an exercise price of $48.72 per share; (ii) options to purchase 4,323 of common stock, with an expiration date of December 17, 2024, at an exercise price of $46.80 per share; (iii) the restricted stock grant of 12,800 shares

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of which vested/(vests) as follows: (a) 4,158 shares on January 1, 2019; (b) 1,007 shares January 27, 2019; (c) 4,158 shares on January 1, 2020; and ( d ) 3, 477 shares on January 1, 2021.

⁽⁴⁾	Represents a restricted stock grant of 9,562 shares of common stock which vests as to one-third of the shares on January 1, 2019, January 1, 2020 and January 1, 2021.

⁽⁵⁾

Includes: (i) options to purchase 2,315 shares of common stock, with an expiration date of January 1, 2024, at an exercise price of $48.72 per share; (ii) the restricted stock grant of 12,800 shares of which vested/(vests) as follows: (a) 4,158 shares on January 1, 2019; (b) 1,007 shares January 27, 2019; (c) 4,158 shares on January 1, 2020; and (d) 3,477 shares on January 1, 2021.

Purpose of the Compensation Committee of the Board of Directors

The Compensation Committee advises the Board with respect to the compensation of each senior executive and each member of the Board. The Compensation Committee is also charged with the oversight of compensation plans and practices for all employees of the Company. The Compensation Committee relies upon data made available for the purpose of providing information on organizations of similar or larger scale engaged in similar activities. The purpose of the Compensation Committee’s activity is to assure that the Company’s resources are used appropriately to recruit and maintain competent and talented executives and employees able to operate and grow the Company successfully.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Beneficial Ownership of Common Stock

The following table furnishes information, as of April 22, 2019, as to shares of the common stock beneficially owned by: (i) each person or entity known to us to be the beneficial owner of more than 5% of the common stock, (ii) each of our directors and our named executive officers identified in Part III, Item 11., “Executive Compensation - Summary Compensation Table”; and (iii) our directors and executive officers as a group. As of April 22, 2019, there were 1,688,219 shares of common stock outstanding.

Name of Beneficial Owner ⁽¹⁾	Number of Shares of Common Stock Beneficially Owned ^(a) ⁽²⁾			Percent of Outstanding Common Stock ⁽³⁾
5% Beneficial Owners (Excluding Directors and Named Executive Officers):
Park City Capital, LLC ⁽⁴⁾		89,869	⁽⁷⁾		5.3	%
Christopher Brogdon ⁽⁵⁾		85,390	⁽⁸⁾		5.1	%
Connie B. Brogdon ⁽⁶⁾		85,390	⁽⁹⁾		5.1	%
Directors and Named Executive Officers:
Michael J. Fox		111,491	⁽¹⁰⁾		6.5	%
David A. Tenwick		54,301	⁽¹¹⁾		3.2	%
Brent Morrison		19,817	⁽¹²⁾		1.2	%
Kenneth W. Taylor		9,562	⁽¹³⁾	*
E. Clinton Cain**		1,025	⁽¹⁴⁾	*
All Directors and Executive Officers as a Group:		196,196			11.1	%

(a)	Reflects our one-for-twelve Reverse Stock Split that became effective on December 31, 2018. See Part II, Item 8, Financial Statements and Supplemental Data, Note 1 – Summary of Significant Accounting Policies for further information.

*	Less than one percent.

**	Mr. Cain commenced serving as the Company’s Interim Chief Financial Officer (and principal financial officer) on October 18, 2017.

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⁽¹⁾	The address for each of our directors and executive officers is c/o Regional Health Properties, Inc., 454 Satellite Boulevard NW, Suite 100, Suwanee, Georgia 30024.

⁽²⁾	Except as otherwise specified, each individual has sole and direct beneficial voting and dispositive power with respect to shares of the common stock indicated.

⁽³⁾	Percentage is calculated based on 1,688,219 shares of common stock outstanding as of April 22, 2019.

⁽⁴⁾	The address for Park City is 200 Crescent Court, Suite 1575, Dallas, Texas 75201.

⁽⁵⁾	The address for Mr. Brogdon is 88 West Paces Ferry Road N.W., Atlanta, Georgia 30305.

⁽⁶⁾	The address for Ms. Brogdon is 88 West Paces Ferry Road N.W., Atlanta, Georgia 30305.

⁽⁷⁾

The information set forth in this table regarding Park City is based on a Schedule 13 D/A filed with the SEC on April 4, 2017 and other information known to the Company. Park City Capital Offshore Master, Ltd. has shared voting and dispositive power with respect to 81,348 of the shares. Park City Special Opportunity Fund, LP. has shared voting and dispositive power with respect to 8,521 of the shares. Park City has shared voting and dispositive power with respect to 89,869 of the shares. PCC SOF GP, LLC has shared voting and dispositive power with respect to 8,521 of the shares. Michael J. Fox has shared voting and dispositive power with respect to 89,869 of the shares. Park City Capital Offshore Master, Ltd. has warrants to purchase 27,369 shares of common stock. See Part III, Item 10, “Directors, Executive Officers and Corporate Governance - Arrangements with Directors Regarding Election/Appointment.”

⁽⁸⁾	Includes: (i) 20,044 shares of common stock held directly by Mr. Brogdon; and (ii) 65,346 shares of common stock held by Connie B. Brogdon (his spouse). Share information is based on a Form 4 filed with the SEC on December 17, 2014 and other information known to the Company.

⁽⁹⁾	Includes: (i) 20,044 shares of common stock held directly by Mr. Brogdon (her spouse); and (ii) 65,346 shares of common stock held by Ms. Brogdon. Share information is based on a Form 4 filed with the SEC on December 2, 2014 and other information known to the Company.

⁽¹⁰⁾

The information set forth in this table regarding Michael J. Fox is based on a Schedule 13 D/A filed with the SEC on April 4, 2017 and other information known to the Company. Includes: (i) 15,493 shares of common stock held directly by Mr. Fox; (ii) 62,500 shares of common stock held by affiliates of Mr. Fox; (iii) options to purchase 1,806 shares of common stock held directly by Mr. Fox at an exercise price of $48.72 per share; (iv) options to purchase 4,323 of common stock held directly by Mr. Fox at an exercise price of $46.80 per share; (v) a warrant to purchase 9,123 shares of common stock held by an affiliate of Mr. Fox at an exercise price of $30.84 per share; (vi) a warrant to purchase 9,123 shares of common stock held by an affiliate of Mr. Fox at an exercise price of $41.16 per share; and (vii) a warrant to purchase 9,123 shares of common stock held by an affiliate of Mr. Fox at an exercise price of $23.16 per share. See Part III, Item 10, “Directors, Executive Officers and Corporate Governance - Arrangements with Directors Regarding Election/Appointment.”

⁽¹¹⁾	Includes: (i) 51,986 shares of common stock held by Mr. Tenwick; and (ii) options to purchase 2,315 shares of common stock at an exercise price of $48.72 per share.

⁽¹²⁾	Includes: (i) 15,494 shares of common stock held by Mr. Morrison; and (ii) options to purchase 4,323 shares of common stock held by Mr. Morrison at an exercise price of $46.80 per share.

⁽¹³⁾	Includes 9,562 shares of common stock held by Mr. Taylor.

⁽¹⁴⁾	Includes: (i) 650 shares of common stock held by Mr. Cain; and (ii) options to purchase 375 shares of common stock held by Mr. Cain at an exercise price of $51.60 per share.

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Equity Compensation Plan Information

The following table sets forth additional information as of December 31, 2018, with respect to shares of the common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements, divided between plans approved by our shareholders and plans or arrangements not submitted to the shareholders for approval. The information includes the number of shares covered by and the weighted average exercise price of, outstanding options, warrants, and the number of shares remaining available for future grants, excluding the shares to be issued upon exercise of outstanding options, warrants, and other rights. A one-for-twelve Reverse Stock Split became effective on December 31, 2018 for all issued and outstanding shares, including amounts authorized for issuance under the equity incentive plans. Accordingly, all share and per share amounts have been adjusted to reflect this Reverse Stock Split for all periods presented.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants		Weighted -Average Exercise Price of Outstanding Options, Warrants		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by security holders ⁽¹⁾		15,066	$	47.77		19,421
Equity compensation plans not approved by security holders ⁽²⁾		84,921	$	45.53		—
Total		99,987	$	45.87		19,421

⁽¹⁾	Represents options issued pursuant to the Company’s 2011 Stock Incentive Plan which was approved by our shareholders.

⁽²⁾

Represents warrants issued outside of our shareholder approved plan as described below. The warrants listed below contain certain anti-dilution adjustments and, therefore, were adjusted for stock dividends in October 2010, October 2011, and October 2012, if and as applicable. The share numbers and exercise prices below reflect all such applicable adjustments.

•

On December 19, 2011, we issued to David Rubenstein, as inducement to become our Chief Operating Officer, ten-year warrants, which as of December 31, 2018, represent the right to purchase an aggregate 14,583 shares of common stock at exercises prices per share ranging from $47.16 to $54.96, and may be exercised for cash or on a cashless exercise basis. All such warrants are fully vested.

•

On December 28, 2012, we issued to Strome Alpha Offshore, Ltd., as partial consideration for providing certain financing to the Company, a ten-year warrant to purchase 4,167 shares of common stock at an exercise price per share of $45.60. Such warrant is fully vested.

•

On May 15, 2013, we issued to Ronald W. Fleming, as an inducement to become our then Chief Financial Officer, a ten-year warrant, which as of December 31, 2018, represents the right to purchase 1,945 shares of common stock at an exercise price of $70.80, and may be exercised for cash or on a cashless exercise basis. Such warrant is fully vested.

•

On November 26, 2013, we issued to an investor relations firm, as partial consideration for providing certain investor relations services to the Company, a ten-year warrant to purchase 834 shares of common stock at an exercise price per share of $47.52. Such warrant is fully vested.

•

On March 28, 2014, we issued to the placement agents in the Company’s offering of subordinated convertible promissory notes issued in 2014, as partial compensation for serving as placement agents in such offering, five-year warrants to purchase an aggregate of 4,078 shares of common stock at an exercise price per share of $54.00. Such warrants are fully vested.

•

On October 10, 2014, we issued to William McBride III, as an inducement to become our Chief Executive Officer, a ten-year warrant to purchase 25,000 shares of common stock, of which 8,333 shares were forfeited on April 17, 2017 upon his separation from the Company, at an exercise price per share of $53.88. The balance of such warrant is fully vested and may be exercised for cash or on a cashless basis.

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•

On July 1, 2014, David Tenwick (a director of the Company) sold to Park City Capital Offshore Master, Ltd., an affiliate of Michael J. Fox (a director of the Company): (i) fully vested and unexercised warrants to purchase 9,123 shares of common stock for a total sale price of $211,283; and (ii) fully vested and unexercised warrants to purchase 9,123 shares of common stock for a total sale price of $117,136. These warrants have an exercise price of $30.84 and $41.16 per share respectively and they expire on November 20, 2019 and were originally issued to Mr. Tenwick in 2007 as compensation for his services.

•

On February 20, 2015, Mr. Tenwick sold to Park City Capital Offshore Master, Ltd., an affiliate of Mr. Fox, fully vested and unexercised warrants to purchase 9,123 shares of common stock for a total sale price of $281,343. These warrants have an exercise price of $23.16 per share, expire on November 20, 2019 and were originally issued to Mr. Tenwick in 2007 as compensation for his services.

•

On April 1, 2015, we issued to Allan J. Rimland, as an incentive to become our then President and Chief Financial Officer, a ten-year warrant to purchase 22,917 shares of common stock, of which 7,639 shares were forfeited on October 17, 2017 upon his resignation from the Company, at an exercise price per share equal to $51.00. The balance of such warrant is fully vested and may be exercised for cash or on a cashless exercise basis.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Related Party Transactions

Riverchase . On April 9, 2010, Riverchase Village ADK, LLC (“Riverchase”), then a wholly owned subsidiary of the Company, entered into a purchase agreement with a third party to acquire the assets of Riverchase Village, a 105-bed assisted living facility located in Hoover, Alabama. On June 22, 2010, the Company assigned to Christopher F. Brogdon (a then director of the Company, beneficial owner of more than 5% of the common stock and the Company’s former Chief Acquisition Officer) 100% of the membership interests in Riverchase (the “Assignment”). On June 25, 2010, Riverchase, then owned by Mr. Brogdon, completed the acquisition of the Riverchase Village facility. Riverchase financed the purchase of the Riverchase Village facility by borrowing from the Medical Clinic Board of the City of Hoover, Alabama the proceeds from the issuance of certain bonds with an aggregate principal amount of $6.3 million (the “Riverchase Bonds”). As part of the financing, AdCare guaranteed Riverchase’s obligations under the Riverchase Bonds.

On November 20, 2015, Riverchase sold the Riverchase Village facility to Omega Communities, LLC for a purchase price of $6.9 million. In connection with such sale, the Riverchase Bonds were repaid in full, and AdCare was released from its guaranty of Riverchase’s obligations thereunder.

Letter Agreement with Brogdon . On March 3, 2014, the Company and certain of its subsidiaries entered into a letter agreement (the “Letter Agreement”) with Mr. Brogdon and entities controlled by him, pursuant to which, among other things: (i) the parties agreed to terminate the management agreements between subsidiaries of the Company and the Brogdon entities under which the Company subsidiaries managed eight skilled nursing facilities located in Oklahoma owned by the Brogdon entities; and (ii) Mr. Brogdon executed a promissory note in favor of the Company in principal amount of $523,663, which represented amounts owed by the Brogdon entities pursuant to the management agreements and owed by GL Nursing, LLC (an entity controlled by Mr. Brogdon) to the Company in connection with the Company’s assignment to GL Nursing, LLC in May 2012 of the Company’s rights to acquire a skilled nursing facility located in Lonoke, Arkansas. The promissory note was originally payable in five equal monthly installments commencing on September 1, 2014 and ending on December 31, 2014, and did not bear interest. The promissory note provided that, upon sale of the Riverchase Village facility, the Company would receive the sales proceeds in accordance with a schedule set forth in the promissory note.

On May 15, 2014, the Company and certain of its subsidiaries entered into an amendment to the Letter Agreement (the “Letter Agreement First Amendment”), pursuant to which the Company paid $92,323 (the “Tax Payment”) to the appropriate governmental authorities of Jefferson County, Alabama, such amount representing outstanding real property taxes due on the Riverchase Village facility. The Company determined that it was in its best interests to make the Tax Payment in order to preserve the Company’s interest in the sale of the Riverchase Village facility. The parties also agreed to amend and restate the promissory note issued by Mr. Brogdon in favor of the Company to

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reflect a new principal amount of $615,986, which amount represents the original principal amount of the note plus the Tax Payment. Prior to the sale of the Riverchase Village facility in November 2015, the Company made a payment in the amount of $85,000 (the “Principal Obligation”) on behalf of Riverchase with respect to its obligations under the Riverchase Bonds. On October 10, 2014, Riverchase issued a promissory note in favor of the Company in the principal amount of $177,323, which represented the amount of Tax Payment plus the Principal Obligation. The note does not bear interest and was due upon the closing of the sale of the Riverchase Village facility.

On October 10, 2014, the Company and certain of its subsidiaries entered into a second amendment to the Letter Agreement, as amended (the “Letter Agreement Second Amendment”), with Mr. Brogdon and entities controlled by Mr. Brogdon, pursuant to which, among other things: (i) the Company reduced the principal amount of the promissory note issued by Mr. Brogdon by the amount equal to $92,323 (which represents the amount of the Tax Payment) plus $255,000 (which represents an offset of amounts owed by the Company to Mr. Brogdon under his consulting agreement with the Company, which terminated in November 2015); and (ii) the parties agreed that the net sales proceeds from the sale of the Riverchase Village facility would be distributed so that any net sales proceeds shall first be paid to the Company to satisfy the $177,323 outstanding under the note issued by Riverchase to the Company.

On March 25, 2015, the Company and certain of its subsidiaries entered into a third amendment to the Letter Agreement (the “Letter Agreement Third Amendment”), with Mr. Brogdon and entities controlled by him, pursuant to which Riverchase and the Company agreed to amend the promissory note issued by Riverchase to the Company to: (i) increase the principal amount due under the promissory note issued by Riverchase to the Company by any additional real property tax payments made by the Company with respect to the Riverchase Village facility and (ii) to state that such promissory note would not bear interest. The Letter Agreement Third Amendment amended the Letter Agreement, among other things, to provide a schedule for the payment to the Company of the net sales proceeds resulting from a sale of the Riverchase Village facility. The Letter Agreement Third Amendment required that the net sales proceeds from such sale be distributed to the Company as follows: (i) an amount sufficient to satisfy all amounts due and owing under the promissory note issued by Riverchase to the Company; (ii) one-half of the then remaining net sales proceeds; (iii) an amount sufficient to satisfy the amounts due and owing under the promissory note issued by Mr. Brogdon to the Company; and (iv) the then remaining balance of net sales proceeds. In connection with the Letter Agreement Third Amendment, the Company and Mr. Brogdon amended the promissory note issued by Mr. Brogdon to the Company to provide that principal balance plus any accrued interest under the promissory note shall be due and payable on the earlier of: (a) December 31, 2015; or (b) the closing of the sale of the Riverchase Village facility. On November 10, 2016, the Company and Mr. Brogdon further amended the promissory note issued by Mr. Brogdon to the Company to extend its maturity date to December 31, 2017. As a condition to such amendment, Winter Haven Homes, Inc. (“Winter Haven”), an entity owned and controlled by Mr. Brogdon, has agreed to waive payment of certain charges otherwise due and owing from the Company to Winter Haven from January 1, 2016 to July 31,2016.

As of December 31, 2018, principal due and payable under the promissory note: (i) issued by Mr. Brogdon to the Company was $268,663; and (ii) issued by Riverchase to the Company was $95,000.

Personal Guarantor on Loan Agreements . Mr. Brogdon serves as personal guarantor on certain loan agreements entered into by the Company prior to 2015. At December 31, 2018 and December 31, 2017, the total outstanding principal owed under such loan agreements was approximately $5.4 million and $11.8 million, respectively.

For a description of arrangements with Mr. Fox (a director of the Company, see “ Arrangements with Directors Regarding Election/Appointment” in Item 10 . - Directors, Executive Officers and Corporate Governance of this Annual Report.

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Approval of Related Party Transactions

Each of the foregoing transactions was approved by the independent members of the Board without the related party having input with respect to the discussion of such approval. In addition, the Board believes that each of the foregoing transactions was necessary for the Company’s business and is on terms no less favorable to the Company than could be obtained from independent third parties. The Company’s policy requiring that independent directors approve any related party transaction is not evidenced by writing but has been the Company’s consistent practice.

Director Independence

On January 1, 2018, the Board consisted of the following directors: Messrs. Fox, Morrison and Tenwick. Mr. Taylor was appointed to the Board on February 1, 2018.

The NYSE American listing standards for smaller reporting companies require that at least 50% of the members of a listed company’s Board qualify as “independent,” as defined under NYSE American rules and as affirmatively determined by the company’s Board. After review of all the relevant transactions and relationships between each director (and his family members) and the Company, senior management and our independent registered public accounting firm, the Board affirmatively determined that at all times during the year ended December 31, 2018, and through the date of filing this Annual Report, the following directors (while serving as such) were independent within the meaning of applicable NYSE American rules: Messrs. Fox, Tenwick and Taylor.

For purposes of determining the independence of Mr. Fox, the Board considered the Fox Agreement. See “ Arrangements with Directors Regarding Election/Appointment” in Item 10 . - Directors, Executive Officers and Corporate Governance of this Annual Report.

Item 14. Principal Accountant Fees and Services

On July 18, 2018, the Audit Committee of the Company concluded a competitive review process of independent registered public accounting firms. As a result of this process and following careful deliberation, on July 18, 2018, the Audit Committee approved the dismissal of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm effective as of such date. The Company provided KPMG with formal notice of such dismissal on July 18, 2018.

The reports of KPMG on the Company’s consolidated financial statements as of and for the years ended December 31, 2017 and 2016 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s two most recent fiscal years and the subsequent interim period preceding KPMG’s dismissal, there were: (i) no disagreements (within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to KPMG ‘s satisfaction, would have caused KPMG to make reference to the subject matter thereof in connection with its reports on the Company’s consolidated financial statements for such years; and (ii) no reportable events (as such term is defined in Item 304(a)(1)(v) of Regulation S-K).

On July 18, 2018, the Audit Committee engaged Cherry Bekaert, LLP (“Cherry Bekaert”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.

During the Company’s two most recent fiscal years and the subsequent interim period preceding Cherry Bekaert’s engagement, neither the Company nor anyone on its behalf consulted with Cherry Bekaert regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Cherry Bekaert concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as such term is defined in Item 304(a)(1)(v) of Regulation S-K).

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Fees

Pursuant to appointment by the Audit Committee, Cherry Bekaert and KPMG has audited the financial statements of the Company and its subsidiaries for the years ended December 31, 2018 and 2017, respectively.

The following table sets forth the aggregate fees that Cherry Bekaert and KPMG billed to the Company for the years ended December 31, 2018 and 2017, respectively. All of the fees were approved by the Audit Committee in accordance with its policies and procedures.

	Year Ended December 31,
(Amounts in 000’s)	2018		2017
Audit fees (total) ⁽¹⁾	$	120	$	—
Audit-related fees (total) ⁽²⁾		—		—
Tax fees		—		—
All other fees		—		—
Cherry Bekaert Total fees		120		—

Audit fees (total) ⁽¹⁾	$	85	$	385
Audit-related fees (total) ⁽²⁾		13		85
Tax fees		—		—
All other fees		—		—
KPMG Total fees	$	98	$	470

⁽¹⁾	Billed Audit fees include fees associated with professional services rendered for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s quarterly reports on Form 10-Q.

⁽²⁾	Billed Audit related fees include fees for additional services related to acquisitions, registration statements and other regulatory filings.

Pre-Approval Policy

The Audit Committee is required to pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Audit Committee prior to completion of the audit. The Audit Committee pre-approved all of the non-audit services provided by our independent registered public accounting firm in 2018 and 2017.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements. The following financial statements of Regional Health Properties, Inc. and its Subsidiaries are included in Part II, Item 8 of this Annual Report.

(i)

Consolidated Balance Sheets—December 31, 2018 and 2017;

(ii)

Consolidated Statements of Operations—Years ended December 31, 2018 and 2017;

(iii)

Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2018 and 2017;

(iv)

Consolidated Statements of Cash Flows—Years ended December 31, 2018 and 2017; and

(v)

Notes to Consolidated Financial Statements.

(a)(2) Financial Statement Schedules. Financial statement schedules are omitted because they are not required, are not material, are not applicable, or the required information is shown in the financial statements or notes thereto.

(a)(3) Exhibits. A list of the Exhibits required by Item 601 of Regulation S-K to be filed as a part of this Annual Report is shown on the “Exhibit Index” filed herewith and incorporated herein by this reference.

In reviewing the agreements included as exhibits to this Annual Report, investors are reminded that they are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about Regional or the other parties to the agreements. Some of the agreements 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 the 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 you or other investors, and

•

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

Accordingly, the representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about us may be found elsewhere in this Annual Report and our other public filings with the SEC, which are available without charge on our website at www.regionalhealthproperties.com .

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EXHIBIT INDEX

Exhibit No.	Description	Method of Filing
2.1	Asset Purchase Agreement, dated March 8, 2017, by and between Meadowood Retirement Village, LLC, and Meadowood Properties, LLC, and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 2.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
2.2	Agreement and Plan of Merger by and between AdCare Health Systems, Inc., and Regional Health Properties, Inc., dated July 7, 2017	Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on July 11, 2017
3.1	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
3.2	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
3.3	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
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	Filed herewith
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 Subordinated Convertible Note, issued April 29, 2011, by AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 4.2 to the Registrant’s Form S-3 (File No. 333-175541)
4.8*	Warrant to Purchase Shares of Common Stock, dated January 10, 2011, issued by AdCare Health Systems, Inc. to Boyd P. Gentry	Incorporated by reference to Exhibit 10.158 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
4.9*	Warrant to Purchase Shares of Common Stock, dated March 31, 2011, issued by AdCare Health Systems, Inc. to Cantone Research, Inc.	Incorporated by reference to Exhibit 4.3 to the Registrant’s Form S-3 (File No. 333-175541)

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Exhibit No.	Description	Method of Filing
4.10	Registration Rights Agreement, dated April 29, 2011, by and among AdCare Health Systems, Inc. and the investors named therein	Incorporated by reference to Exhibit 4.5 to the Registrant’s Form S-3 (File No. 333-175541)
4.11	Registration Rights Agreement, dated March 31, 2011, by and among AdCare Health Systems, Inc. and the investors named therein	Incorporated by reference to Exhibit 10.2 to the Registrant’s Form S-3 (File No. 333-175541)
4.12	Form of Registration Rights Agreement, dated as of June 28, 2012, between AdCare Health Systems, Inc. and the Buyers signatory thereto	Incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed July 5, 2012
4.13	Form of 8% Subordinated Convertible Note Due 2015 issued by AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed July 5, 2012
4.14	Form of Warrant to Purchase Common Stock of the Company	Incorporated by reference to Exhibit 4.3 to the Registrant’s Form S-3 (File No. 333-175541)
4.15	Form of Subordinated Convertible Note, issued March 31, 2011, by AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed April 6, 2011
4.16	Warrant to Purchase 312,500 Shares of Common Stock, dated April 1, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd.	Incorporated by reference to Exhibit 4.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
4.17	Warrant to Purchase 300,000 Shares of Common Stock, dated March 30, 2012, issued by AdCare Health Systems, Inc. to Cantone Asset Management LLC	Incorporated by reference to Exhibit 4.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
4.18	Warrant to Purchase 100,000 Shares of Common Stock, dated July 2, 2012, issued by AdCare Health Systems, Inc. to Cantone Research, Inc.	Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012
4.19	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
4.20	Warrant to Purchase 15,000 Shares of Common Stock, dated August 31, 2012, issued by AdCare Health Systems, Inc. to Hayden IR, LLC	Incorporated by reference to Exhibit 4.22 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
4.21*	Warrant to Purchase 70,000 Shares of Common Stock, dated May 15, 2013, issued by AdCare Health Systems, Inc. to Ronald W. Fleming	Incorporated by reference to Exhibit 4.23 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
4.22	Warrant to Purchase 75,000 shares of Common Stock, dated October 26, 2013, issued by AdCare Health Systems, Inc. to Cantone Research, Inc.	Incorporated by reference to Exhibit 4.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013
4.23	Form of Registration Rights Agreement, dated March 28, 2014, by and among AdCare Health Systems, Inc. and the investors named therein	Incorporated by reference to Exhibit 4.23 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013

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Exhibit No.	Description	Method of Filing
4.24	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
4.25	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 of the Registrant’s annual report on form 10-KSB as amended March 31, 2008
4.26	Registration Rights Agreement, dated March 31, 2015, by and among AdCare Health Systems, Inc. and the Purchasers of the Company’s 10% Convertible Subordinated Notes Due April 30, 2017	Incorporated by reference to Exhibit 4.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
4.27	Form of 10% Convertible Subordinated Notes Due April 30, 2017	Incorporated by reference to Exhibit 4.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
4.28	Form of 10% Convertible Subordinated Notes Due April 30, 2017 (Affiliate Form)	Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
4.29*	Unsecured Promissory Note, pursuant to Settlement Agreement dated September 26, 2017, effective October 4, 2017 by and between Regional Health Properties Inc., and William McBride, III	Incorporated by reference to Exhibit 4.17 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 14, 2017
4.30	Amendment No.2 to subordinated Convertible Note, Issued July 2, 2012, dated November 8, 2017 between Regional Health Properties Inc., and Cantone Asset Management LLC.	Incorporated by reference to Exhibit 4.16 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 14, 2017
10.1*	Employment Agreement between AdCare Health Systems, Inc. and David A. Tenwick, dated September 1, 2008	Incorporated by reference to Exhibit 99.1 of the Registrant’s Form 8-K filed September 8, 2008
10.2	Regulatory Agreement and Mortgage Note between The Pavilion Care Center, LLC and Red Mortgage Capital, Inc., in the original amount of $2,108,800 dated November 27, 2007	Incorporated by reference to Exhibit 10.24 of the Registrant’s annual report on form 10-KSB as amended March 31, 2008
10.3	Regulatory Agreement and Mortgage Note between Hearth & Care of Greenfield and Red Mortgage Capital, Inc., in the original amount of $2,524,800 dated July 29, 2008	Incorporated by reference to Exhibit 10.31 of the Registrant’s annual report on form 10-K filed March 31, 2009
10.4	Loan Agreement and Secured Promissory Note between Coosa Nursing ADK, LLC, and Metro City Bank in the original amount of $7,500,000 dated September 30, 2010	Incorporated by reference to Exhibits 10.1 and 10.2 of the Registrant’s Form 8-K filed October 6, 2010
10.5	Mt. Kenn Property Holdings, LLC Deed to Secure Debt, Assignment of Rents and Security Agreement dated April 29, 2011	Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed May 5, 2011
10.6	CP Property Holdings, LLC Loan Agreement dated May 27, 2011	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed June 6, 2011
10.7	Form of Promissory Note, issued by Mount Trace Nursing ADK, LLC	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 16, 2011
10.8	Amendment, dated June 22, 2011, between Hearth & Home of Ohio, Inc. and Christopher F. Brogdon	Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed June 28, 2011

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Exhibit No.	Description	Method of Filing
10.9	Guaranty, dated May 26, 2011, made by Christopher F. Brogdon	Incorporated by reference to Exhibit 10.34 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
10.10	Guaranty, dated May 26, 2011, made by Connie B. Brogdon	Incorporated by reference to Exhibit 10.35 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
10.11	Commercial Guaranty, dated May 25, 2011,made by Christopher F. Brogdon	Incorporated by reference to Exhibit 10.39 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
10.12	Commercial Guaranty, dated May 25, 2011, made by Connie B. Brogdon	Incorporated by reference to Exhibit 10.35 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
10.13	Loan Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan #47671350-10	Incorporated by reference to Exhibit 10.42 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
10.14	Term Note, dated July 27, 2011, made by Erin Property Holdings, LLC in favor of Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
10.15	Note, dated July 27, 2011, made by Erin Property Holdings, LLC, in favor of Bank of Atlanta, with respect to the SBA Loan	Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.16	Term Loan Agreement, dated July 27, 2011, among Erin Property Holdings, LLC, Erin Nursing, LLC, AdCare Health Systems, Inc. and Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.17	Loan Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan	Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.18	Deed to Secure Debt and Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.19	Deed to Secure Debt and Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan	Incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.20	Assignment of Leases and Rents, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011

157

Exhibit No.	Description	Method of Filing
10.21	Assignment of Leases and Rents, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan	Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.22	Indemnity Agreement, Regarding Hazardous Materials, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.23	Indemnity Agreement, Regarding Hazardous Materials, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.24	Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC, Erin Nursing, LLC and Bank of Atlanta, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.25	Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC, Erin Nursing, LLC and Bank of Atlanta, with respect to the SBA Loan	Incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.26	Guaranty, dated July 27, 2011, made by Erin Nursing, LLC, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.13 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.27	Guaranty, dated July 27, 2011, made by AdCare Health Systems, Inc., with respect to the USDA Loan	Incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.28	Unconditional Guaranty Business and Industry Guarantee Loan Program, dated July 27, 2011, made by Erin Nursing, LLC, with respect to the USDA Loan	Incorporated by reference to Exhibit 10.15 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.29	Unconditional Guarantee Business and Industry Guarantee Loan Program, dated July 27, 2011, made by AdCare Health Systems, Inc., with respect to the USDA Loan	Incorporated by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.30	Unconditional Guarantee, dated July 27, 2011, made by Erin Nursing, LLC, with respect to the SBA Loan	Incorporated by reference to Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.31	Unconditional Guarantee, dated July 27, 2011, made by AdCare Health Systems, Inc., with respect to the SBA Loan	Incorporated by reference to Exhibit 10.18 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.32	Escrow Agreement, dated July 27, 2011, between Erin Property Holdings, LLC, Bank of Atlanta, and Bank of Atlanta as Escrow Agent, with respect to the USDA Loan and the SBA Loan	Incorporated by reference to Exhibit 10.19 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011

158

Exhibit No.	Description	Method of Filing
10.33	Loan Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan #47671350-10	Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011
10.34	Loan Agreement, dated September 6, 2011, by and between CP Property Holdings, LLC; CP Nursing, LLC; and Economic Development Corporation of Fulton County	Incorporated by reference to Exhibit 10.43 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.35	Promissory Note, dated September 6, 2011, issued by CP Property Holdings, LLC, in favor of Economic Development Corporation of Fulton County, in the amount of $2,034,000	Incorporated by reference to Exhibit 10.44 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.36	Deed to Secure Debt and Security Agreement, made an entered into September 6, 2011, by and between CP Property Holdings, LLC and Economic Development Corporation of Fulton County	Incorporated by reference to Exhibit 10.45 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.37	Security Agreement, made and entered into as of September 6, 2011, between CP Property Holdings, LLC and CP Nursing, LLC, as grantors, and Economic Development Corporation of Fulton County, as the secured party	Incorporated by reference to Exhibit 10.46 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.38	Unconditional Guarantee, dated September 6, 2011, issued by AdCare Health Systems, Inc. in favor of Economic Development Corporation of Fulton County	Incorporated by reference to Exhibit 10.47 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.39	Unconditional Guarantee, dated September 6, 2011, issued by CP Nursing, LLC in favor of Economic Development Corporation of Fulton County	Incorporated by reference to Exhibit 10.48 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.40	Unconditional Guarantee, dated September 6, 2011, issued by Hearth and Home of Ohio, Inc. in favor of Economic Development Corporation of Fulton County	Incorporated by reference to Exhibit 10.49 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
10.41	Cognovit Promissory Note, dated as of January 1, 2012, issued by Eaglewood Property Holdings, LLC and Eaglewood Village, LLC in favor of Eaglewood Villa, Ltd. in the amount of $500,000	Incorporated by reference to Exhibit 10.141 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.42	Cognovit Promissory Note, dated as of January 1, 2012, issued by Eaglewood Property Holdings, LLC and Eaglewood Village, LLC in favor of Eaglewood Villa, Ltd. in the amount of $4,500,000	Incorporated by reference to Exhibit 10.142 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.43	Guaranty Agreement, dated as of December 30, 2011, executed by AdCare Health Systems, Inc. and AdCare Property Holdings, LLC in favor of Eaglewood Villa, Ltd	Incorporated by reference to Exhibit 10.143 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.44	Third Amended And Restated Multiple Facilities Lease, dated October 29, 2010, between Georgia Lessor - Bonterra/Parkview, Inc. and ADK Bonterra/Parkview, LLC	Incorporated by reference to Exhibit 10.144 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011

159

Exhibit No.	Description	Method of Filing
10.45	Guaranty, dated October 29, 2010, executed by AdCare Health Systems, Inc. in favor of Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.145 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.46	Guaranty, dated October 29, 2010, executed by Hearth & Home of Ohio, Inc. in favor of Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.146 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.47	Security Agreement, dated October 29, 2010, by and between AdCare Health Systems, Inc. and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.147 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.48	Security Agreement, dated October 29, 2010, by and between ADK Bonterra/Parkview, LLC and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.148 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.49	Security Agreement, dated October 29, 2010, by and between Hearth & Home of Ohio, Inc. and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.149 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.50	Pledge Agreement, dated October 29, 2010, between Hearth & Home of Ohio, Inc. and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.150 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.51	Subordination Agreement, dated October 29, 2010, between AdCare Health Systems, Inc., ADK Bonterra/Parkview, LLC and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.151 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.52	Letter of Credit Agreement, dated October 29, 2010, by and between ADK Bonterra/Parkview, LLC and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.152 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.53	Subordination, Non-Disturbance and Attornment Agreement, dated October 29, 2010, by and among Omega Healthcare Investors, Inc., ADK Bonterra/Parkview, LLC and Georgia Lessor - Bonterra/Parkview, Inc.	Incorporated by reference to Exhibit 10.153 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.54	Assignment and Assumption of Second Amended and Restated Multiple Facilities Lease And Consent of Lessor, dated October 29, 2010, by and among Georgia Lessor - Bonterra/Parkview, Inc., Triad Health Management of Georgia II, LLC, AdCare Health Systems, Inc., Hearth & Home of Ohio, Inc., ADK Bonterra/Parkview, LLC and the other entities signatory thereto	Incorporated by reference to Exhibit 10.154 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.55	Lease Agreement, dated August 1, 2010, between William M. Foster and ADK Georgia, LLC	Incorporated by reference to Exhibit 10.155 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.56	First Amendment to Lease, dated August 31, 2010, between William M. Foster and ADK Georgia, LLC	Incorporated by reference to Exhibit 10.156 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011

160

Exhibit No.	Description	Method of Filing
10.57	Guaranty Agreement, dated as of June 1, 2010, entered into by AdCare Health Systems, Inc. to and for the benefit of Bank of Oklahoma, N.A.	Incorporated by reference to Exhibit 10.159 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011
10.58	Note Purchase Agreement, dated March 29, 2012, by and between AdCare Health Systems, Inc. and Cantone Asset Management LLC	Incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
10.59	Promissory Note, dated March 30, 2012, issued by AdCare Health Systems, Inc. in favor of Cantone Asset Management LLC, in the amount of $3,500,000	Incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
10.60	Loan Agreement, dated as of April 12, 2012, between the City of Springfield, Ohio and Eaglewood Property Holdings, LLC	Incorporated by reference to Exhibit 10.18 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
10.61	Guaranty Agreement, dated as of April 12, 2012, made and entered into by AdCare Health Systems, Inc., to and for the benefit of BOKF, NA dba Bank of Oklahoma	Incorporated by reference to Exhibit 10.19 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
10.62	Land Use Restriction Agreement, dated as of April 12, 2012, by and between BOKF, NA dba Bank of Oklahoma and Eaglewood Property Holdings, LLC	Incorporated by reference to Exhibit 10.20 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
10.63	Open-End Mortgage, Assignment of Leases and Security Agreement, dated April 12, 2012, from Eaglewood Property Holdings, LLC to BOKF, NA dba Bank of Oklahoma	Incorporated by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
10.64	Form of Securities Purchase Agreement, dated as of June 28, 2012, between AdCare Health Systems, Inc. and the Buyers signatory thereto	Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed July 5, 2012
10.65	Bond Purchase Agreement, dated April 10, 2012, among Lawson Financial Corporation, The City of Springfield, Ohio and Eaglewood Property Holdings, LLC	Incorporated by reference to Exhibit 10.40 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012
10.66	Note Purchase Agreement, dated April 12, 2012, by and between Cantone Asset Management LLC and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.41 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012
10.67	Amendment entered into as of July 26, 2012, by and between Christopher F. Brogdon and Hearth & Home of Ohio, Inc.	Incorporated by reference to Exhibit 10.47 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012
10.68	Sublease Agreement, dated December 1, 2012, between ADK Georgia, LLC and Jeff Co. Nursing, LLC	Incorporated by reference to Exhibit 10.245 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012

161

Exhibit No.	Description	Method of Filing
10.69	Secured Loan Agreement, dated December 28, 2012, by and among Keybank National Association and the subsidiaries of AdCare Health Systems, Inc. named therein	Incorporated by reference to Exhibit 10.263 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.70*	Consulting Agreement, dated December 31, 2012, between Christopher Brogdon and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.279 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.71	Guaranty Indemnification Agreement, dated December 31, 2012, between AdCare Health Systems, Inc. and Christopher Brogdon	Incorporated by reference to Exhibit 10.280 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.72	Guaranty Indemnification Agreement, dated December 31, 2012, between AdCare Health Systems, Inc. and Christopher Brogdon	Incorporated by reference to Exhibit 10.281 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.73	Assignment of Rents, dated December 31, 2012, made and executed between Northwest Property Holdings, LLC and First Commercial Bank	Incorporated by reference to Exhibit 10.282 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.74	Mortgage, dated December 31, 2012, made and executed between Northwest Property Holdings, LLC and First Commercial Bank	Incorporated by reference to Exhibit 10.283 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.75	Promissory Note, dated December 31, 2012, issued by Northwest Property Holdings, LLC in favor of First Commercial Bank in the amount of $1,501,500	Incorporated by reference to Exhibit 10.284 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.76	Commercial Security Agreement, dated December 31, 2012, made and executed between Northwest Property Holdings, LLC and First Commercial Bank	Incorporated by reference to Exhibit 10.285 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.77	Commercial Security Agreement, dated December 31, 2012, made and executed between NW 61st Nursing, LLC and First Commercial Bank	Incorporated by reference to Exhibit 10.286 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.78	Commercial Guaranty, dated December 31, 2012, between AdCare Health Systems, Inc. and First Commercial Bank	Incorporated by reference to Exhibit 10.287 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.79	Commercial Guaranty, dated December 31, 2012, between Northwest Property Holdings, LLC and First Commercial Bank	Incorporated by reference to Exhibit 10.288 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012
10.80	Sublease Agreement, effective June 30, 2013, by and between ADK Georgia, LLC and Tybee NH, LLC	Incorporated by reference to Exhibit 10.24 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2013

162

Exhibit No.	Description	Method of Filing
10.81	Sublease Agreement, effective June 30, 2013, by and between ADK Georgia, LLC and Tybee NH, LLC	Incorporated by reference to Exhibit 10.25 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2013
10.82	Loan and Security Agreement, dated September 27, 2013, by and between QC Property Holdings, LLC and Housing & Healthcare Funding, LLC	Incorporated by reference to Exhibit 10.30 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2013
10.83	Promissory Note, dated September 27, 2013, issued by QC Property Holdings, LLC to Housing & Healthcare Funding, LLC in the amount of $5,000,000	Incorporated by reference to Exhibit 10.31 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2013
10.84	Mortgage, Security Agreement Assignment of Leases and Rents and Fixture Filing, dated September 27, 2013, by QC Property Holdings, LLC to and for the benefit of Housing & Healthcare Funding, LLC	Incorporated by reference to Exhibit 10.32 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2013
10.85	Guaranty, dated September 27, 2013, by AdCare Health Systems, Inc. to and for the benefit of Housing & Healthcare Funding, LLC	Incorporated by reference to Exhibit 10.33 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2013
10.86	Assignment of Rents and Leases, dated September 27, 2013, by QC Property Holdings, LLC to and for the benefit of Housing & Healthcare Funding, LLC	Incorporated by reference to Exhibit 10.34 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2013
10.87	Letter Agreement, dated October 1, 2013, among AdCare Health Systems, Inc., Park City Capital, LLC and Michael J. Fox	Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed on October 18, 2013
10.88	Note, dated February 28, 2014, by and among AdCare Health Systems, Inc. and Christopher F. Brogdon	Incorporated by reference to Exhibit 10.334 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013
10.89	Agreement Regarding Exit Fees, dated March 28, 2014, by and among Woodland Hills HC Property Holdings, LLC, Northridge HC&R Property Holdings, LLC, APH&R Property Holdings, LLC, Woodland Hills HC Nursing, LLC, Northridge HC&R Nursing, LLC, APH&R Nursing, LLC, AdCare Health Systems, Inc., AdCare Property Holdings, LLC, AdCare Operations, LLC and KeyBank National Association	Incorporated by reference to Exhibit 10.336 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013
10.90	Sublease Termination Agreement, entered into May 6, 2014 and effective as of May 31, 2014, by and between Winter Haven Homes, Inc. and ADK Administrative Property, LLC	Incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014
10.91	Amendment to Consulting Agreement, dated May 6, 2014, by and between AdCare Health Systems, Inc. and Christopher F. Brogdon	Incorporated by reference to Exhibit 10.11 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014
10.92	Amended and Restated Note, dated May 15, 2014, by and among AdCare Health Systems, Inc. and Christopher F. Brogdon	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on May 21, 2014

163

Exhibit No.	Description	Method of Filing
10.93	Security Instrument, Mortgage & Deed of Trust, dated September 24, 2014, by and between Woodland Manor Property Holdings, LLC and Housing & Healthcare Finance, LLC.	Incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014
10.94	Second Amended and Restated Note, dated October 10, 2014, by and among AdCare Health Systems, Inc. and Christopher F. Brogdon.	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on October 17, 2014
10.95*	Executive Employment Agreement, dated October 10, 2014, by and among AdCare Health Systems, Inc. and William McBride III.	Incorporated by reference to Exhibit 99.4 of the Registrant’s Current Report on Form 8-K filed on October 17, 2014
10.96	Healthcare Facility Note, dated December 1, 2014, by and among Mt. Kenn Property Holdings, LLC and KeyBank National Association	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on December 22, 2014
10.97	Healthcare Deed to Secure Debt, Security Agreement and Assignment of Rents, dated December 1, 2014, by and among Mt. Kenn Property Holdings, LLC and KeyBank National Association	Incorporated by reference to Exhibit 99.3 of the Registrant’s Current Report on Form 8-K filed on December 22, 2014
10.98	Healthcare Regulatory Agreement, dated December 1, 2014, by and among Mt. Kenn Property Holdings, LLC, its successors, heirs, and assigns (jointly and severally) and the U.S. Department of Housing and Urban Development.	Incorporated by reference to Exhibit 99.4 of the Registrant’s Current Report on Form 8-K filed on December 22, 2014
10.99	Modification of Mortgage Note Agreement dated as of October 1, 2014, by and between Hearth & Care of Greenfield, LLC. and Red Mortgage Capital, Inc.	Incorporated by reference to Exhibit 10.359 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.100	Modification of Mortgage Note Agreement dated as of October 1, 2014, by and between The Pavilion Care Center, LLC. and Red Mortgage Capital, Inc.	Incorporated by reference to Exhibit 10.360 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.101	Modification Agreement, dated as of October 1, 2014, by and among Hearth & Care of Greenfield, LLC., Red Mortgage Capital, Inc., and the U.S. Department of Housing and Urban Development	Incorporated by reference to Exhibit 10.361 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.102	Modification Agreement, dated as of October 1, 2014, by and among The Pavilion Care Center, LLC., Red Mortgage Capital, Inc., and the U.S. Department of Housing and Urban Development	Incorporated by reference to Exhibit 10.362 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.103	Sublease Agreement, dated as of January 31, 2015, by and between ADK Georgia, LLC. and 3460 Powder Springs Road Associates, L.P.	Incorporated by reference to Exhibit 10.380 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.104	Sublease Agreement, dated as of January 31, 2015, by and between ADK Georgia, LLC. and 3223 Falligant Avenue Associates, L.P.	Incorporated by reference to Exhibit 10.381 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.105	Promissory Note for exit fees (Northridge), dated February 25, 2015, issued by AdCare Health Systems, Inc. to KeyBank National Association in the amount of $170,000	Incorporated by reference to Exhibit 10.382 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014

164

Exhibit No.	Description	Method of Filing
10.106	Promissory Note for exit fees (Cumberland), dated February 25, 2015, issued by AdCare Health Systems, Inc. to KeyBank National Association in the amount of $170,000	Incorporated by reference to Exhibit 10.383 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.107	Promissory Note for exit fees (River Valley), dated February 25, 2015, issued by AdCare Health Systems, Inc. to KeyBank National Association in the amount of $170,000	Incorporated by reference to Exhibit 10.384 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.108	Promissory Note for exit fees (Sumter Valley), dated February 25, 2015, issued by AdCare Health Systems, Inc. to KeyBank National Association in the amount of $170,000	Incorporated by reference to Exhibit 10.385 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.109	Amendment to Second Amended and Restated Note, dated March 25, 2015, by and between Christopher F. Brogdon and Adcare Health Systems, Inc.	Incorporated by reference to Exhibit 10.394 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.110*	First Amendment to Executive Employment Agreement, dated March 25, 2015, by and among AdCare Health Systems, Inc. and William McBride, III	Incorporated by reference to Exhibit 10.396 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.111*	Employment Agreement between AdCare Health Systems, Inc. and Allan J. Rimland, dated March 25, 2015	Incorporated by reference to Exhibit 10.397 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.112	Security Instrument, Mortgage & Deed of Trust, dated September 24, 2014, by and between Glenvue H&R Property Holdings, LLC and Housing & Healthcare Finance, LLC	Incorporated by reference to Exhibit 10.24 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014
10.113	Healthcare Regulatory Agreement - Borrower, dated September 24, 2014, by and between Woodland Manor Property Holdings, LLC and The U.S. Department of Housing and Urban Development	Incorporated by reference to Exhibit 10.25 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014
10.114	Healthcare Regulatory Agreement - Borrower, dated September 24, 2014, by and between Glenvue H&R Property Holdings, LLC and U.S. Department of Housing and Urban Development	Incorporated by reference to Exhibit 10.26 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014
10.115	Healthcare Facility Note, dated September 24, 2014, by and between Woodland Manor Property Holdings, LLC and Housing & Healthcare Finance, LLC	Incorporated by reference to Exhibit 10.27 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014
10.116	Healthcare Facility Note, dated September 24, 2014, by and between Glenvue H&R Property Holdings, LLC and Housing & Healthcare Finance, LLC	Incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014
10.117	Lease Agreement, dated February 27, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown LLC	Incorporated by reference to Exhibit 10.408 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014

165

Exhibit No.	Description	Method of Filing
10.118	First Amendment to Lease Agreement, dated March 20, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC	Incorporated by reference to Exhibit 10.409 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.119	Lease Agreement, dated February 27, 2015 by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter LLC	Incorporated by reference to Exhibit 10.410 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.120	First Lease Amendment to Lease Agreement, dated March 20, 2015, by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC	Incorporated by reference to Exhibit 10.411 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.121	Lease Agreement dated February 27, 2015 by and between Mountain Trace Nursing ADK, LLC and Blue Ridge on the Mountain LLC	Incorporated by reference to Exhibit 10.412 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.122	First Amendment to Lease Agreement, dated March 20, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain , LLC	Incorporated by reference to Exhibit 10.413 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.123	Sublease Agreement, dated July 1, 2014 by and between ADK Georgia, LLC, and C.R. of Thomasville, LLC	Incorporated by reference to Exhibit 10.414 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.124	Lease Agreement, dated September 22, 2014 by and between Coosa Nursing ADK, LLC, and C.R. of Coosa Valley, LLC	Incorporated by reference to Exhibit 10.415 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.125	Lease Agreement, dated September 22, 2014 by and between Attalla Nursing ADK, LLC and C.R. of Attalla, LLC	Incorporated by reference to Exhibit 10.416 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.126	Sublease Agreement, dated February 18, 2015 by and between CP Nursing, LLC and C.R. of College Park, LLC	Incorporated by reference to Exhibit 10.417 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014
10.127	Amended and Restated Promissory Note for exit fees (Cumberland), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association	Incorporated by reference to Exhibit 10.25 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.128	Amended and Restated Promissory Note for exit fees (Northridge), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association	Incorporated by reference to Exhibit 10.26 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.129	Amended and Restated Promissory Note for exit fees (River Valley), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association	Incorporated by reference to Exhibit 10.27 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015

166

Exhibit No.	Description	Method of Filing
10.130	Amended and Restated Promissory Note for exit fees (Sumter Valley), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association	Incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.131	Promissory Note for exit fees (Stone County), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association	Incorporated by reference to Exhibit 10.29 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.132	Sublease Agreement, dated April 1, 2015, by and between ADK Georgia, LLC and C.R. of Lagrange, LLC	Incorporated by reference to Exhibit 99.10 of the Registrant’s Current Report on Form 8-K filed on April 7, 2015
10.133	Sublease Agreement, dated May 1, 2015 by and between NW 61st Nursing, LLC and Southwest LTC-NW OKC, LLC	Incorporated by reference to Exhibit 10.83 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.134	Sublease Agreement, dated May 1, 2015 by and between QC Nursing, LLC and Southwest LTC-Quail Creek, LLC	Incorporated by reference to Exhibit 10.84 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.135	Underwriting Agreement, dated April 8, 2015, by and between AdCare Health Systems, Inc. and MLV & Co. LLC, as the representative of the several underwriters named therein.	Incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K filed on April 13, 2015
10.136	Second Amendment to Lease Agreement, dated May 31, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain, LLC	Incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K filed on June 5, 2015
10.137	Sublease Agreement, dated July 1, 2015 by and between 2014 HUD Master Tenant, LLC and C.R. of Glenvue, LLC	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on July 7, 2015
10.138	Underwriting Agreement, dated May 28, 2015, by and between AdCare Health Systems, Inc. and MLV & Co. LLC, as the representative of the several underwriters named therein.	Incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K filed on June 2, 2015
10.139	At Market Issuance Sales Agreement, dated July 21, 2015, between AdCare Health Systems, Inc. and MLV & Co. LLC.	Incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K filed on July 22, 2015
10.140	At Market Issuance Sales Agreement, dated July 21, 2015, between AdCare Health Systems, Inc. and JMP Securities LLC.	Incorporated by reference to Exhibit 1.2 of the Registrant’s Current Report on Form 8-K filed on July 22, 2015
10.141	Sublease Agreement, dated August 1, 2015, by and between AdCare Health Systems, Inc. and CC SNF, LLC.	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on August 5, 2015
10.142	Sublease Agreement, dated August 1, 2015, by and between Eaglewood Village, LLC and EW ALF, LLC.	Incorporated by reference to Exhibit 99.3 of the Registrant’s Current Report on Form 8-K filed on August 5, 2015
10.143	Sublease Agreement, dated August 1, 2015, by and between RMC HUD Master Tenant, LLC and HC SNF, LLC.	Incorporated by reference to Exhibit 99.4 of the Registrant’s Current Report on Form 8-K filed on August 5, 2015
10.144	Sublease Agreement, dated August 1, 2015, by and between RMC HUD Master Tenant, LLC and PV SNF, LLC.	Incorporated by reference to Exhibit 99.5 of the Registrant’s Current Report on Form 8-K filed on August 5, 2015

167

Exhibit No.	Description	Method of Filing
10.145	Sublease Agreement, dated August 1, 2015, by and between 2014 HUD Master Tenant, LLC and EW SNF, LLC.	Incorporated by reference to Exhibit 99.6 of the Registrant’s Current Report on Form 8-K filed on August 5, 2015
10.146	Lease Inducement Fee Agreement, dated August 1, 2015, by and between the AdCare Health Systems, Inc. and PWW Healthcare, LLC, PV SNF, LLC, HC SNF, LLC, EW SNF, LLC, and EW ALF, LLC.	Incorporated by reference to Exhibit 99.7 of the Registrant’s Current Report on Form 8-K filed on August 5, 2015
10.147	Promissory Note, dated July 17, 2015, by and between Highlands Arkansas Holdings, LLC and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.101 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.148	Letter Agreement to the Equitable Adjustments, dated July 17, 2015, by and between AdCare Health Systems, Inc. and Highlands Arkansas Holdings, LLC.	Incorporated by reference to Exhibit 10.102 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.149	Promissory Note, dated August 1, 2015, by and between PWW Healthcare, LLC, PV SNF, LLC, HC SNF, LLC, CC SNF, LLC EW SNF, LLC, and EW ALF, LLC, and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.103 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.150	Sublease Agreement, dated July 20, 2015, by and between ADK Bonterra/Parkview, LLC and 2801 Felton Avenue, L.P., and 460 Auburn Avenue, L.P.	Incorporated by reference to Exhibit 10.104 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.151	Amendment to Subordinated Convertible Note, dated July 30, 2015, by and between AdCare Health Systems, Inc. and Cantone Asset Management LLC and Cantone Research, Inc.	Incorporated by reference to Exhibit 10.105 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.152	Second Amendment to Lease, dated as of August 14, 2015, between William M. Foster and ADK Georgia, LLC	Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed on August 18, 2015
10.153	Lease Guaranty made by AdCare Health Systems, Inc. for the benefit of William M. Foster, effective August 14, 2015	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on August 18, 2015
10.154	Sublease Agreement, dated October 1, 2015, by and between KB HUD Master Tenant 2014, LLC, and C.R. of Autumn Breeze, LLC	Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on October 6, 2015
10.155	Second Amendment to Lease Agreement, dated September 14, 2015, by and between Coosa Nursing ADK, LLC and C.R. of Coosa Valley, LLC	Incorporated by reference to Exhibit 10.124 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.156	Second Amendment to Lease Agreement, dated September 14, 2015, by and between Attalla Nursing ADK, LLC and C.R. of Attalla, LLC	Incorporated by reference to Exhibit 10.125 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.157	First Amendment to Lease Agreement, dated August 14, 2015, by and between 2014 HUD Master Tenant, LLC and C.R. of Glenvue, LLC	Incorporated by reference to Exhibit 10.126 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015

168

Exhibit No.	Description	Method of Filing
10.158	Second Amendment to Lease Agreement, dated September 24, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC	Incorporated by reference to Exhibit 10.127 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.159	First Amendment to Sublease Agreement, dated September 10, 2015, by and between ADK Georgia, LLC and LC SNF, LLC	Incorporated by reference to Exhibit 10.128 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.160	First Amendment to Sublease Agreement, dated September 14, 2015, by and between ADK Georgia, LLC and C.R. of LaGrange, LLC	Incorporated by reference to Exhibit 10.129 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.161	First Amendment to Sublease Agreement, dated September 23, 2015, by and between ADK Georgia, LLC and 3460 Powder Springs Road Associates, L.P.	Incorporated by reference to Exhibit 10.130 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.162	First Amendment to Sublease Agreement, dated September 23, 2015, by and between ADK Georgia, LLC and 3223 Falligant Avenue Associates, L.P.	Incorporated by reference to Exhibit 10.131 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.163	Third Amendment to Sublease Agreement, dated September 9, 2015, by and between ADK Georgia, LLC and C.R. of Thomasville, LLC	Incorporated by reference to Exhibit 10.132 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.164	First Amendment to Sublease Agreement, dated September 1, 2015, by and between ADK Bonterra/Parkview, LLC and 2801 Felton Avenue, L.P., and 460 Auburn Avenue, L.P.	Incorporated by reference to Exhibit 10.133 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.165	Second Amendment to Third Amended and Restated Multiple Facilities Lease, dated September 1, 2015, by and between Georgia Lessor - Bonterra/Parkview, LLC and ADK Bonterra/Parkview, LLC.	Incorporated by reference to Exhibit 10.139 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.166	Amendment Regarding Lease and Sublease, dated August 1, 2015, by and among Covington Realty, LLC, and Adcare Health Systems, Inc. and CC SNF, LLC	Incorporated by reference to Exhibit 10.140 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.167	Master Sublease Agreement, dated November 3, 2015, by and among ADK Georgia, LLC, and Jeffersonville Healthcare & Rehab, LLC, Oceanside Healthcare & Rehab, LLC, and Savannah Beach Healthcare & Rehab, LLC.	Incorporated by reference to Exhibit 10.141 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.168	Replacement Promissory Note, dated November 1, 2015, by and between New Beginnings Care, LLC, Jeffersonville Healthcare & Rehab, LLC, Oceanside Healthcare & Rehab, LLC, and Savannah Beach Healthcare & Rehab, LLC, and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.142 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015
10.169	Master Sublease Agreement, dated June 18, 2016, by and among ADK Georgia, LLC, OS Tybee, LLC, SB Tybee, LLC and JV Jeffersonville, LLC	Incorporated by reference to Exhibit 10.4 of the AdCare Health Systems, Inc. Quarterly Report on Form 10-Q for the three and six months ended June 30, 2016

169

Exhibit No.	Description	Method of Filing
10.170	Promissory Note, dated July 6, 2016, issued by OS Tybee, LLC, SB Tybee, LLC and JV Jeffersonville, LLC, in favor of AdCare Health Systems, Inc., in the amount of $1,000,000	Incorporated by reference to Exhibit 10.5 of the AdCare Health Systems, Inc. Quarterly Report on Form 10-Q for the three and six months ended June 30, 2016
10.171	Security Agreement, dated July 6, 2016, by and among ADK Georgia, LLC, OS Tybee, LLC, SB Tybee, LLC and JV Jeffersonville, LLC	Incorporated by reference to Exhibit 10.6 of the AdCare Health Systems, Inc. Quarterly Report on Form 10-Q for the three and six months ended June 30, 2016
10.172	Promissory Note, dated September 30, 2016, issued by JS Highland Holdings LLC in favor of AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 99.1 of the AdCare Health Systems, Inc. Current Report on Form 8-K filed on October 11, 2016
10.173	Guaranty Agreement, dated September 30, 2016, executed by Joseph Schwartz and Roselyn Schwartz in favor of AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 99.2 of the AdCare Health Systems, Inc. Current Report on Form 8-K filed on October 11, 2016
10.174	Second Amendment to Second Amended and Restated Note, dated November 10, 2016, by and between Christopher F. Brogdon and AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.7 of the AdCare Health Systems, Inc. Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2016
10.175	First Amendment to Promissory Note, dated September 19, 2016, by and between QC Property Holdings, LLC, and Congressional Bank.	Incorporated by reference to Exhibit 10.8 of the AdCare Health Systems, Inc. Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2016
10.176	Mortgage Refinance Agreement, insured by HUD by and between AdCare Health Systems, Inc. in favor of KeyBank National Association	Incorporated by reference to item 1.01 of the AdCare Health Systems, Inc.. Current Report on Form 8-K filed December 19, 2016.
10.177	Lease Agreement, dated March 22, 2017, by and between Meadowood Property Holdings, LLC and CRM of Meadowood, LLC	Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10.178	Amendment to Promissory Note, dated April 7, 2017, issued by OS Tybee, LLC, SB Tybee, LLC and JV Jeffersonville, LLC, in favor of AdCare Health Systems, Inc.	Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10.179	Loan Agreement, dated May 1, 2017, between Meadowood Property Holdings, LLC and the Exchange Bank of Alabama in the original amount of $4.1 million	Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10.180	Guaranty Agreement, dated April 6, 2017, executed by AdCare Health Systems, Inc., in favor of Congressional Bank, a Maryland chartered commercial bank	Incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10.181	At Market Issuance Sales Agreement, dated May 26, 2017, between AdCare Health Systems, Inc. and JMP Securities LLC.	Incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K filed on May 26, 2017

170

Exhibit No.	Description	Method of Filing
10.182	Amendment to Loan Agreement Issued September 27, 2013, dated August 10, 2017, by and between QC Property Holdings, LLC and the Congressional Bank, a Maryland chartered commercial bank	Incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017
10.183	Amendment to Loan Agreement Issued December 31, 2012, dated July 31, 2017, by and between Northwest Property Holdings, LLC and the First Commercial Bank	Incorporated by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017
10.184	Settlement Agreement, Mutual Release and Form of Unsecured Promissory Note, dated September 26, 2017 by and between AdCare Health Systems Inc., and William McBride, III	Incorporated by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017
10.185	Joinder and First Amendment to Guarantee Issued May 30, 2018, dated May 30, 2018, by and among AdCare Health Systems Inc., Regional Health Properties Inc., and Congressional Bank.	Incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017
10.186	Joinder and First Amendment to Guarantee Issued May 30, 2018, dated May 30, 2018, by and among AdCare Health Systems Inc., Regional Health Properties Inc., and Exchange Bank of Alabama	Incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017
10.187	Affirmation and Assumption of Loan Documents, Limited Guarantees and Security Agreements Issued May 30, 2018, by and Between Regional Health Properties, Inc., and Red Mortgage.	Incorporated by reference to Exhibit 10.11 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017
10.188	Consent to Merger Issued May 30, 2018, pursuant to Third Amendment and Restated Multiple Facilities Lease dated May 30, 2018, as amended by the First Amendment and Restated Multiple Facilities Lease dated May 30, 2018, and a Second Amendment to Third Amended and Restated Facilities Lease dated May 30, 2018 (as amended, the :Mater Lease”); by and between Bonterra/Parkview, Inc., a Maryland corporation and ADK	Incorporated by reference to Exhibit 10.12 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017
10.189	GUARANTY 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 REALTY 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
10.190	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 REALTY PARTNERS 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
10.191	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

171

Exhibit No.	Description	Method of Filing
10.192	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
10.193	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
10.194	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
10.195	2 ^nd 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
10.196	Settlement Agreement dated March 9 ^th , 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	Incorporated by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.197	Third Amendment to Promissory Note dated April 30, 2018 by and between QC Property Holdings, LLC, a Georgia limited liability company and Congressional Bank.	Incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.198	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	Incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.199	Guarantee Agreement dated May 18, 2018 by AdCare Operations, LLC, a Georgia limited liability company for the benefit of Pinecone Reality Partners, II, LLC	Incorporated by reference to Exhibit 10.11 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
10.200	Forbearance Agreement dated September 6, 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	Incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018

172

Exhibit No.	Description	Method of Filing
10.202	Amended and Restated Forbearance Agreement dated December 31, 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
10.203	Second Amended and Restated Forbearance Agreement dated March 29, 2019 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
10.205	Eighth Amendment to Loan and Security Agreement and Fourth Amendment to Promissory Note dated April 30, 2019 by and between QC Property Holdings, LLC, a Georgia limited liability company and Congressional Bank.	Filed herewith
10.206	Sublease Agreement, dated as of November 30, 2018, by and between Regional Health Properties, Inc. and Miami COV SNF, Inc.	Filed herewith
10.207	Sublease Agreement, dated as of November 30, 2018, by and between RMC HUD Master Tenant, LLC and Greenfield SNF, Inc.	Filed herewith
10.208	Sublease Agreement, dated as of November 30, 2018, by and between RMC HUD Master Tenant, LLC and Sidney SNF, Inc.	Filed herewith
10.209	Sublease Agreement, dated as of November 30, 2018, by and between Eaglewood Village, LLC and Springfield Clark ALF, Inc.	Filed herewith
10.210	Sublease Agreement, dated as of November 30, 2018, by and between 2014 HUD Master Tenant, LLC and Springfield SNF, Inc.	Filed herewith
10.211	Guaranty, dated as of December 1, 2018, by and between Regional Health Properties, Inc. and Miami COV SNF, Inc., Greenfield SNF, Inc., Sidney SNF, Inc., Springfield Clark ALF Inc. and Springfield SNF, Inc.	Filed herewith
10.212	Forbearance Agreement, dated as of January 11, 2019, by and between Covington Realty, LLC and Regional Health Properties, Inc.	Filed herewith
10.213	Lease Termination Agreement, dated as of January 15, 2019, by and between Bonterra/Parkview Inc. and ADK Bonterra/Parkview, LLC	Filed herewith
10.214	Second Amendment to Sublease Agreement, dated as of February 15, 2019, by and between ADK Georgia, LLC. and 3460 Powder Springs Road Associates, L.P.	Filed herewith

173

Exhibit No.	Description	Method of Filing
10.215	Second Amendment to Sublease Agreement, dated as of February 15, 2019, by and between ADK Georgia, LLC. and 3223 Falligant Avenue Associates, L.P.	Filed herewith
10.216	Lease Agreement, dated as of February 28, 2019, by and between Mountain Trace Nursing ADK, LLC and Vero Health X, LLC.	Filed herewith
10.217	Third Amendment to Sublease Agreement, dated as of March 13, 2019, by and between ADK Georgia, LLC. and 3460 Powder Springs Road Associates, L.P.	Filed herewith
10.218	Third Amendment to Sublease Agreement, dated as of February 15, 2019, by and between ADK Georgia, LLC. and 3223 Falligant Avenue Associates, L.P.	Filed herewith
10.219	Settlement Agreement and Release, dated as of March 13, 2019, by and between Regional Health Properties, Inc. and Chapter 7 Trustee	Filed herewith
21.1	Subsidiaries of the Registrant	Filed herewith
23.1	Consent of Cherry Bekaert LLP	Filed herewith
23.2	Consent of KPMG LLP	Filed herewith
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.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed herewith

*	Identifies a management contract or compensatory plan or arrangement.

174

Signat ures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Regional Health Properties, Inc.

	by:	/s/ BRENT MORRISON
		Brent Morrison
		Chief Executive Officer and President
		May 16, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE

/s/ BRENT MORRISON
Brent Morrison	Director, Chief Executive Officer, and President (Principal Executive Officer)	May 16, 2019

/s/ E. CLINTON CAIN
E. Clinton Cain	Interim Financial Officer, Senior Vice President and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)	May 16, 2019

/s/ MICHAEL J. FOX
Michael J. Fox	Director	May 16, 2019

/s/ DAVID A. TENWICK
David A. Tenwick	Director	May 16, 2019

/s/ KENNETH W. TAYLOR
Kenneth W. Taylor	Director	May 16, 2019

175

Exhbit 4.2

DESCRIPTION OF REGIONAL HEALTH PROPERTIES, INC. CAPITAL STOCK

The following summarizes the material terms of the common stock, no par value (the “RHE common stock”), and of the 10.875% Series A Cumulative Redeemable Preferred Shares, no par value (the “RHE Series A Preferred Stock”), of Regional Health Properties, Inc. (“Company”) as set forth in the Company’s Amended and Restated Articles of Incorporation (the “RHE Charter”) and the Company’s Amended and Restated Bylaws (the “RHE Bylaws”). While we believe that the following description covers the material terms of the Company’s capital stock, the following summary may not contain all of the information that is important to you and is subject to and qualified in its entirety by reference to applicable Georgia law and to the RHE Charter and the RHE Bylaws.

As used herein, unless otherwise expressly stated or the context otherwise requires, the terms “Company”, “RHE”, “we”, “our” and “us” refer to Regional Health Properties, Inc. and not to any of its subsidiaries.

Authorized Capital

The RHE Charter authorizes RHE to issue up to 60,000,000 shares, no par value per share, consisting of 55,000,000 shares of common stock and 5,000,000 shares of preferred stock.

RHE Common Stock

The outstanding RHE common stock is validly issued, fully paid and nonassessable.

Voting Rights. Holders of the RHE common stock are entitled to one vote for each share of RHE common stock held of record on the applicable record date on all matters submitted to a vote of shareholders. Except for the election of directors, which is determined by a plurality vote of the votes cast by the shares entitled to vote in the election, or as otherwise may be provided by applicable law or the rules of the NYSE American, a corporate action voted on by shareholders generally is approved, provided a quorum is present, if the votes cast within the voting group favoring the action exceed the votes cast opposing the action. Holders of the RHE common stock are not entitled to cumulate their votes in the election of directors.

Dividend Rights. Holders of the RHE common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for that purpose, subject to any preferential dividend rights or other preferences granted to the holders of any of the then‑outstanding shares of preferred stock.

Rights Upon Liquidation. In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of the RHE common stock will share ratably in all remaining assets available for distribution to shareholders after payment of, or provision for, our liabilities, subject to prior distribution rights of shares of the preferred stock, if any, then outstanding.

Preemptive Rights. Holders of the RHE common stock do not have any preemptive rights to purchase, subscribe for or otherwise acquire any unissued or treasury shares or other of our securities.

Ownership and Transfer Restrictions. The RHE common stock is subject to the ownership and transfer restrictions included in Article IX of the RHE Charter. See the section entitled “Ownership and Transfer Restrictions.”

Certain Provisions of the RHE Charter and RHE Bylaws . The RHE Charter and RHE Bylaws contain provisions that could make more difficult or discourage any attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of management. These provisions are expected to discourage specific types of coercive takeover practices and inadequate takeover bids as well as to encourage persons seeking to acquire control to first negotiate with us. Although these provisions may have the effect of delaying, deferring or preventing a change in control, we believe that the benefits of increased protection through the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of such proposals could result in an improvement of their terms. These provisions include the ownership and transfer restrictions related to the RHE common stock (see “ – Ownership and Transfer Restrictions”) as well as the following:

•

Shareholder Action Through Written Consent . The RHE Bylaws only provide for shareholder action by written consent in lieu of a meeting if all shareholders entitled to vote on such action sign such consent.

•

Special Meetings . The RHE Bylaws provide that special meetings of shareholders may only be called by: (i) the board of directors in accordance with the RHE Bylaws; (ii) the Chairman of the board of directors; (iii) our Chief Executive Officer; or (iv) the holders of 25% of the votes entitled to be cast on any issue proposed to be considered at such special meeting.

•

Removal of Directors . The RHE Charter and RHE Bylaws provide that directors may be removed from the board of directors only for cause and then only by the affirmative vote of at least a majority of all votes entitled to be cast in the election of such directors. The RHE Charter and RHE Bylaws provide that, for purposes of removing a director, “cause” shall mean only: (i) conviction of a felony; (ii) declaration of unsound mind by an order of a court; (iii) gross dereliction of duty; (iv) commission of an action involving moral turpitude; or (v) commission of an action which constitutes intentional misconduct or a knowing violation of law if such action results in an improper substantial personal benefit and a material injury to us.

•

Authorized But Unissued Stock . The authorized but unissued shares of RHE common stock and RHE preferred stock is available for future issuance without shareholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved shares of common stock and preferred stock may enable the board of directors to issue shares to persons friendly to management, which could render more difficult or discourage any attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of management.

•

Advance Notice Requirements . Section 2.15 the RHE Bylaws sets forth the specific procedures which a shareholder must follow in order to submit a proposal of business for a shareholder vote, or to nominate a person for election to the board of directors, at a meeting of shareholders.

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Georgia “Fair Price” Statute . Sections 14‑2‑1110 through 14‑2‑1113 of the Georgia Business Corporation Code (the “GBCC”), or the fair price statute, generally restrict a company from entering into certain business combinations (as defined in the GBCC) with an interested shareholder unless: (i) the transaction is unanimously approved by the continuing directors who must constitute at least three members of the board of directors at the time of such approval; or (ii) the transaction is recommended by at least two‑thirds of the continuing directors and approved by a majority of the shareholders excluding the interested shareholder. RHE has elected to be covered by the fair price statute.

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Georgia “Business Combination” Statute . Sections 14‑2‑1131 through 14‑2‑1133 of the GBCC generally restrict a company from entering into certain business combinations (as defined in the GBCC) with an interested shareholder for a period of five years after the date on which such shareholder became an interested shareholder unless: (i) the transaction is approved by the board of directors of the company prior to the date the person became an interested shareholder; (ii) the interested shareholder acquires at least 90% of the company’s voting stock in the same transaction (calculated pursuant to GBCC Section 14‑2‑1132) in which such person became an interested shareholder; or (iii) subsequent to becoming an interested shareholder, the shareholder acquires at least 90% (calculated pursuant to GBCC Section 14‑2‑1132) of the company’s voting stock and the business combination is approved by the holders of a majority of the voting stock entitled to vote on the matter (excluding the stock held by the interested shareholder and certain other persons pursuant to GBCC Section 14‑2‑1132). RHE has elected to be covered by the business combination statute.

RHE Series A Preferred Stock

The RHE Charter authorizes the RHE board of directors to issue from time to time up to 5,000,000 shares of preferred stock in one or more classes or series and, subject to the limitations prescribed by the RHE Charter and the GBCC, with the preferences, limitations and relative rights thereof as may be fixed from time to time by the RHE board of directors without shareholder action. In addition, the RHE board of directors may increase or decrease the number of shares contained in the series, but not below the number of shares then issued, or eliminate the series where no shares have been issued.

The RHE Series A Preferred Stock is validly issued, fully paid and nonassessable.

Maturity. The RHE Series A Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption, except following a change of control (as defined below under “– Special Redemption Upon a Change of Control”). Shares of the RHE Series A Preferred Stock will remain outstanding indefinitely unless we decide to redeem them as described under “– Redemption General” or we are required to redeem them following a change of control as

described under “– Special Redemption Upon a Change of Control.” We are not required to set aside funds to redeem the RHE Series A Preferred Stock.

Ranking . The RHE Series A Preferred Stock will ranks: (i) senior to the RHE common stock and any other shares of stock that we may issue in the future, the terms of which specifically provide that such stock ranks junior to the RHE Series A Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up, which we refer to as “junior shares”; (ii) equal to any shares of stock that we may issue in the future, the terms of which specifically provide that such stock ranks on parity with such RHE Series A Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up, which we refer to as “parity shares”; (iii) junior to all other shares of stock issued by us, the terms of which specifically provide that such stock ranks senior to the RHE Series A Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up (any such creation would require the affirmative vote of the holders of at least two‑thirds of the outstanding shares of RHE Series A Preferred Stock), which we refer to as “senior shares”; and (iv) junior to all our existing and future indebtedness.

Dividends. Holders of the RHE Series A Preferred Stock are entitled to receive, when and as declared by the RHE board of directors, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 10.875% per annum of the $25.00 per share liquidation preference, equivalent to $2.7187 per annum per share.

A “dividend period” with respect to the RHE Series A Preferred Stock means the quarterly dividend periods commencing on January 1, April 1, July 1 and October 1 of each year and ending on and including the day preceding the first day of the next succeeding dividend period (other than the initial dividend period which shall be deemed to have commenced on and include October 1, 2017 and which shall end on and include the day preceding the first day of the next succeeding dividend period).

Dividends are payable quarterly in equal amounts in arrears on the last calendar day of each dividend period (each a “dividend payment date”), provided that if any dividend payment date is not a business day, then the dividend which would have been payable on that dividend payment date will be paid on the next succeeding business day, and no interest, additional dividends or other sums will accrue on the amount so payable for the period from and after that dividend payment date to that next succeeding business day. Dividends on the RHE Series A Preferred Stock accrue and accumulate on each issued and outstanding share of the RHE Series A Preferred Stock on a daily basis from the original date of issuance of such share (or with respect to the initial dividend period, from and including the first day thereof).

Dividends payable on the shares of RHE Series A Preferred Stock for any partial dividend period will be computed on the basis of a 360‑day year consisting of twelve 30‑day months. We will pay dividends to holders of record as they appear in our stock records at the close of business on the applicable dividend record date, which is the tenth day preceding the applicable dividend payment date, or such other date we establish no less than ten days and no more than 30 days preceding the dividend payment date (the “dividend record date”).

We will not declare or pay or set aside for payment any dividend on the shares of RHE Series A Preferred Stock if the terms of any of our agreements or senior shares, including agreements relating to our indebtedness, prohibit us from doing so or provide that doing so would put is in breach of or default under any such agreement, or if the declaration, payment or setting aside of funds is restricted or prohibited by law. Future contractual covenants or arrangements we enter into may restrict or prevent future dividend payments.

Notwithstanding the foregoing, however, dividends on the shares of RHE Series A Preferred Stock accrue regardless of whether: (i) the terms of our senior shares or our agreements, including our existing or future indebtedness, at any time prohibit the current payment of dividends; (ii) we have earnings; (iii) there are funds legally available for the payment of such dividends; or (iv) such dividends are declared by the RHE board of directors. Except as otherwise provided, accrued but unpaid distributions on the shares of RHE Series A Preferred Stock will not bear interest, and holders of the shares of RHE Series A Preferred Stock are not entitled to any distributions in excess of full cumulative distributions as described above. All dividends on the shares of RHE Series A Preferred Stock will be credited to the previously accrued dividends on the shares of RHE Series A Preferred Stock. We will credit any dividends paid on the shares of RHE Series A Preferred Stock first to the earliest accrued and unpaid dividend due.

Notwithstanding anything herein to the contrary, the payment of dividends on the common stock and preferred stock, including the RHE Series A Preferred Stock, is at the discretion of the RHE board of directors and depends on, among other things, the earnings and results of operations of our subsidiaries, their ability to pay dividends and other distributions to us under agreements governing their indebtedness, our financial condition and capital requirements, any debt service requirements and any other factors the RHE board of directors deems relevant. Our subsidiaries may not pay dividends or other distributions to us under certain agreements governing their indebtedness if they are in default or breach of such agreements. Accordingly, we do not guarantee that we will be able to make cash dividend payments on the preferred stock, including the RHE Series A Preferred Stock, or what the actual dividends will be for any future period.

Unless full cumulative dividends on the RHE Series A Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods: (i) no dividends (other than in shares of the common stock or in shares of any series of the preferred stock that we may issue which are junior shares) shall be declared or paid or set aside for payment upon shares of the common stock, junior shares or parity shares; (ii) no other distribution shall be declared or made upon shares of the common stock, junior shares or parity shares; and (iii) no shares of the common stock, junior shares or parity shares shall be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any such shares) by us (except as mandatorily required by the terms of such equity security or by conversion into or exchange for shares of our other capital stock that we may issue which are junior shares).

When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the RHE Series A Preferred Stock and parity shares, all dividends declared upon the RHE Series A Preferred Stock and parity shares will be declared pro rata so that the amount of dividends declared per share of RHE Series A Preferred Stock and such other parity shares will in all cases bear to each other the same ratio that accrued dividends per share on the RHE Series A

Preferred Stock and such other series of the preferred stock that we may issue (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such preferred stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, will be payable in respect of any dividend payment or payments on the RHE Series A Preferred Stock which may be in arrears.

Failure to Make Dividend Payments. If we have committed a “dividend default” by failing to pay the accrued cash dividends on the outstanding RHE Series A Preferred Stock in full for any four consecutive or non‑consecutive quarterly periods, then until we have paid all accrued dividends on the shares of the RHE Series A Preferred Stock for all dividend periods up to, and including, the dividend payment date on which the accumulated and unpaid dividends are paid in full: (i) the annual dividend rate on the RHE Series A Preferred Stock will be increased to 12.875% per annum, which we refer to as the “penalty rate,” commencing on the first day after the missed fourth quarterly payment; and (iii) the holders of the RHE Series A Preferred Stock will have the voting rights described under “– Voting Rights.” Once we have paid all accumulated and unpaid dividends in full and have paid cash dividends at the penalty rate in full for an additional two consecutive quarters (or declared such dividends provided that a sum sufficient for the payment thereof is set aside for such payment), the dividend rate will be restored to the stated rate and the foregoing provisions will not be applicable, unless we again fail to pay any quarterly dividend for any future quarter.

Failure to Maintain a Listing on a National Exchange. If a “delisting event” occurs because we fail for 180 or more consecutive days to maintain the listing of the RHE Series A Preferred Stock on a national exchange, then: (i) the annual dividend rate on the RHE Series A Preferred Stock will be increased to the penalty rate commencing on the 181st day; and (ii) the holders of the RHE Series A Preferred Stock will have the voting rights described under “– Voting Rights.” When the RHE Series A Preferred Stock is once again listed on a national exchange, the dividend rate will be restored to the stated rate and the foregoing provisions will not be applicable, unless the RHE Series A Preferred Stock is again no longer listed on a national exchange.

Liquidation Preference . Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any common stock or any other class or series of junior shares in the distribution of assets upon any liquidation, dissolution or winding up of us, the holders of RHE Series A Preferred Stock are entitled to receive out of our assets legally available for distribution to shareholders, liquidating distributions in the amount of the liquidation preference, or $25.00 per share, plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to, but excluding, the date of payment. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of RHE Series A Preferred Stock will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding RHE Series A Preferred Stock and the corresponding amounts payable on all senior shares and parity shares, then after payment of the liquidating distribution on all outstanding senior shares, the holders of the RHE Series A Preferred Stock and all other such classes or series of parity shares will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. For such purposes, the consolidation or merger of us with or into any other entity, or the sale, lease or

conveyance of all or substantially all of our property or business, or a statutory share exchange will not be deemed to constitute a voluntary or involuntary liquidation, dissolution or winding up of us. Under the RHE Charter, we are not required to set aside funds to protect the liquidation preference of the RHE Series A Preferred Stock.

Redemption General. On and after December 1, 2017, we, at our option, upon not less than 30 nor more than 60 days’ written notice, may redeem the RHE Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not earned or declared) to, but excluding, the date fixed for redemption, without interest. If fewer than all of the outstanding RHE Series A Preferred Stock are to be redeemed, the number of shares to be redeemed will be determined by us and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in an equitable manner determined by us.

With respect to a redemption as described above, unless full cumulative dividends on all RHE Series A Preferred Stock and all parity shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period: (i) no RHE Series A Preferred Stock or parity shares shall be redeemed unless all outstanding RHE Series A Preferred Stock and parity shares are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of RHE Series A Preferred Stock or parity shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding RHE Series A Preferred Stock and parity shares; and (ii) we shall not purchase or otherwise acquire directly or indirectly any RHE Series A Preferred Stock or parity shares (except by conversion into or exchange for junior shares and parity shares).

From and after the redemption date (unless we default in payment of the redemption price), all dividends will cease to accumulate on the RHE Series A Preferred Stock, such shares shall no longer be deemed to be outstanding, and all of your rights as a holder of shares of RHE Series A Preferred Stock will terminate with respect to such shares, except the right to receive the redemption price and all accrued and unpaid dividends up to, but excluding, the redemption date.

Special Redemption Upon Change of Control. If a “change of control” of us by a person, entity or group occurs, we (or the acquiring entity) will be required to redeem the RHE Series A Preferred Stock, in whole but not in part, within 120 days after the date on which the change of control has occurred, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not earned or declared) to, but excluding, the redemption date, without interest. A “change of control” is deemed to occur when the following have occurred and are continuing:

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the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election

of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

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following the closing of any acquisition described in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American depositary receipts representing such securities) listed on a national exchange.

Voting Rights . Holders of the RHE Series A Preferred Stock do not have any voting rights, except as set forth below or as otherwise required by law.

Whenever a dividend default or a delisting event (each, a “penalty event”) has occurred, the number of directors constituting the board of directors will be automatically increased by two (if not already increased by two by reason of the election of directors by the holders of any other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and with which the RHE Series A Preferred Stock is entitled to vote as a class with respect to the election of those two directors), and the holders of the RHE Series A Preferred Stock (voting together as a class with all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the RHE Series A Preferred Stock in the election of those two directors) will be entitled to vote for the election of those two additional directors at a special meeting called by us at the request of the holders of record of at least 25% of the outstanding shares of RHE Series A Preferred Stock or by the holders of any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the RHE Series A Preferred Stock in the election of those two directors (unless the request is received less than 90 days before the date fixed for the next annual or special meeting of our shareholders, in which case, such vote will be held at the earlier of the next annual or special meeting of our shareholders), and at each subsequent annual meeting until a “correction event” (as defined below) has occurred with respect to each penalty event then continuing.

On the date a correction event occurs, the right of holders of the RHE Series A Preferred Stock to elect any directors will cease and, unless there are other classes or series of our stock upon which similar voting rights have been conferred and are exercisable, the term of any directors elected by holders of the RHE Series A Preferred Stock shall immediately terminate and the number of directors constituting our board of directors shall be reduced accordingly. A “correction event” means: (i) with respect to any delisting event, the listing of the RHE Series A Preferred Stock for trading on a national exchange; and (ii) with respect to a dividend default, the payment of all accumulated and unpaid dividends in full and the payment of cash dividends at the penalty rate in full for an additional two consecutive quarters (or the declaration of such dividends provided that a sum sufficient for the payment thereof is set aside for such payment). In no event shall the holders of RHE Series A Preferred Stock be entitled pursuant to these voting rights to elect a director that would cause us to fail to satisfy a requirement relating to director independence of any national exchange on which any class or series of our stock is listed or quoted.

If a special meeting is not called by us within 75 days after request from the requisite holders of RHE Series A Preferred Stock (or holders of other series or classes of stock we may issue upon which similar voting rights have been conferred and are exercisable) as described

above, then the holders of record of at least 25% of the outstanding RHE Series A Preferred Stock may designate a holder to call the meeting at our expense, and such meeting may be called by the holder so designated upon notice similar to that required for annual meetings of our shareholders and shall be held at the place designated by the holder calling such meeting.

If, at any time when the voting rights conferred upon the RHE Series A Preferred Stock are exercisable, any vacancy in the office of a director elected shall occur, then such vacancy may be filled only by the remaining such director or by vote of the holders of record of the outstanding RHE Series A Preferred Stock and any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the RHE Series A Preferred Stock in the election of directors. Any director elected or appointed may be removed only by the affirmative vote of holders of the outstanding RHE Series A Preferred Stock and any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which classes or series of stock are entitled to vote as a class with the RHE Series A Preferred Stock in the election of directors, such removal to be effected by the affirmative vote of a majority of the votes entitled to be cast by the holders of the outstanding RHE Series A Preferred Stock and any such other classes or series of stock, and may not be removed by the holders of the common stock.

On each matter on which holders of RHE Series A Preferred Stock are entitled to vote, each share of RHE Series A Preferred Stock will be entitled to one vote, except that when shares of any other class or series of our stock have the right to vote with the RHE Series A Preferred Stock as a single class on any matter, the RHE Series A Preferred Stock and the shares of each such other class or series will have one vote for each $25.00 of liquidation preference (excluding accumulated dividends).

So long as any shares of RHE Series A Preferred Stock remain outstanding, we will not, without the affirmative vote of the holders of at least two‑thirds of the shares of the RHE Series A Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting together as a series and also together as a class with all other classes or series of stock that we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the RHE Series A Preferred Stock): (i) authorize or create, or increase the authorized or issued amount of, any class or series of senior shares or reclassify any of our authorized stock into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the RHE Charter, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the RHE Series A Preferred Stock (each, an “event”); provided, however, with respect to the occurrence of any event set forth in (ii) above, so long as the RHE Series A Preferred Stock remains outstanding with the terms thereof materially unchanged, taking into account that, upon an occurrence of an event, we may not be the surviving entity (whether or not such event would constitute a change of control), the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of the RHE Series A Preferred Stock (although we would be required to redeem the RHE Series A Preferred Stock if such event constitutes a change of control) and, provided further, that any increase in the amount of the authorized common stock or other stock we may issue, including the RHE Series A Preferred Stock, or the creation or issuance of any additional common stock, RHE Series A Preferred Stock

or other class or other series of stock that we may issue, or any increase in the amount of authorized shares of such class or series, in each case which are parity shares or junior shares, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers and shall not require any affirmative vote or consent of the holders of the RHE Series A Preferred Stock.

Conversion; Preemptive Rights . The RHE Series A Preferred Stock is not, pursuant to its terms, convertible into or exchangeable for any of our other property or securities. No holders of the RHE Series A Preferred Stock, as holders of RHE Series A Preferred Stock, have any preemptive rights to purchase or subscribe for the common stock or any other security.

Book Entry . The RHE Series A Preferred Stock was issued in global form. The Depository Trust Company (“DTC”) or its nominee is the sole registered holder of the RHE Series A Preferred Stock. Ownership of beneficial interests in the RHE Series A Preferred Stock in global form is limited to persons who have accounts with DTC (“participants”) or persons who hold interests through such participants. Ownership of beneficial interests in the RHE Series A Preferred Stock in global form is shown on, and the transfer of that ownership is effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants).

So long as DTC, or its nominee, is the registered owner or holder of a global certificate representing the shares of the RHE Series A Preferred Stock, DTC or such nominee, as the case may be, will be considered the sole holder of the shares of the RHE Series A Preferred Stock represented by such global certificate for all purposes. No beneficial owner of an interest in the shares of the RHE Series A Preferred Stock in global form will be able to transfer that interest except in accordance with the applicable procedures of DTC in addition to those provided for under the RHE Charter.

Payments of dividends on the global certificate representing the shares of the RHE Series A Preferred Stock will be made to DTC or its nominee, as the case may be, as the registered holder thereof. None of us, the transfer agent, registrar or dividend disbursing agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global certificate representing the shares of the RHE Series A Preferred Stock or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

We expect that DTC or its nominee, upon receipt of any payment of dividends in respect of a global certificate representing the shares of the RHE Series A Preferred Stock, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial ownership interests in the aggregate liquidation preference of such global certificate representing the shares of the RHE Series A Preferred Stock as shown on the records of DTC or its nominee, as the case may be. We also expect that payments by participants to owners of beneficial interests in such global certificate representing the shares of the RHE Series A Preferred Stock held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same ‑day funds.

We understand that DTC is:

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a limited purpose trust company organized under the laws of the State of New York;

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a “banking organization” within the meaning of New York Banking Law;

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a member of the Federal Reserve System;

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a “clearing corporation” within the meaning of the Uniform Commercial Code; and

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a “Clearing Agency” registered pursuant to the provisions of Section 17A of the Exchange Act.

DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book‑entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates.

Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in a global security among its participants, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of us, the transfer agent, registrar or dividend disbursing agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

The information in this section concerning DTC and its book‑entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.

Ownership and Transfer Restrictions

The RHE Charter contains ownership and transfer restrictions relating to the RHE common stock. These ownership and transfer restrictions could have the effect of delaying, deferring or preventing a transaction or change of control of RHE that might involve a premium price for the RHE stock or otherwise be in the best interests of its shareholders. All certificates representing shares of RHE common stock will bear a legend describing or referring to such ownership and transfer restrictions.

Ownership and Transfer Restrictions . The RHE Charter provides that, subject to the exceptions, waivers and the constructive ownership rules described in the RHE Charter, no person may beneficially own, or be deemed to constructively own by virtue of the ownership attribution provisions of the Internal Revenue Code of 1986, as amended (the “Code”), in excess of 9.9% (by value or number of shares, whichever is more restrictive) of an outstanding class or series common stock (the “Common Stock Ownership Limit”).

The RHE Charter further prohibits (along with the Common Stock Ownership Limit, the “ownership and transfer restrictions”):

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any person from beneficially or constructively owning shares of common stock of any class or series (“Equity Shares”) to the extent that such ownership would cause the Company to fail to qualify as a Real Estate Investment Trust (“REIT”) by reason of being “closely held” under the Code (without regard to whether the ownership interest is held during the last half of a taxable year);

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any person from beneficially or constructively owning Equity Shares that would cause the Company to otherwise fail to qualify as a REIT (including beneficial or constructive ownership that would result in RHE owning (actually or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by RHE from such tenant would cause RHE to fail to satisfy any of the gross income requirements of Section 856(c) of the Code);

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any person from beneficially owning Equity Shares to the extent such beneficial ownership of Equity Shares would result in RHE failing to be “domestically controlled” within the meaning of Section 897(h)(4)(B) of the Code; and

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any person from beneficially owning Equity Shares to the extent such beneficial ownership of Equity Shares would result in RHE being “predominantly held” (within the meaning of Section 856(h)(3)(D)(iii) of the Code) by “qualified trusts” (within the meaning of Section 856(h)(3)(E) of the Code).

Furthermore, any transfer, acquisition or other event or transaction that would result in Equity Shares being beneficially owned by less than 100 persons (determined without reference to any rules of attribution) will be void ab initio , and the intended transferee shall acquire no rights in such Equity Shares.

The RHE Charter defines beneficial ownership as ownership of Equity Shares by a “person” (as defined therein), whether the interest in the Equity Shares is held directly or indirectly (including by a nominee), and includes interests that would be treated as owned through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code. The RHE Charter defines “person” to include a “group,” as defined under Section 13(d)(3) of the Exchange Act.

The applicable constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals or entities to be treated as owned by one individual or entity. As a result, the acquisition of less than 9.9% (by value or number of shares, whichever is more restrictive) of the outstanding shares of the common stock (including through the acquisition of an interest in an entity that owns, actually or constructively, shares of any class or series of the common stock) by an individual or entity could, through constructive ownership, nevertheless cause a violation of the ownership and transfer restrictions.

The foregoing ownership and transfer restrictions, including the Common Stock Ownership Limit, will not apply if the board of directors determines in its sole and absolute

discretion, each of the following: (i) that it is not in the best interests of the Company to attempt to qualify as, or to continue to qualify as, a REIT; and (ii) that compliance with all or any of the restrictions and limitations on beneficial ownership, constructive ownership, acquisitions or transfers of Equity Shares set forth in the RHE Charter is no longer otherwise advisable for the Company.

Notice of Restricted Transfer . Any person who acquires, or attempts to acquire, beneficial or constructive ownership of Equity Shares that will, or may, violate the ownership and transfer restrictions, and any person beneficially owns or constructively owns shares‑in‑trust as a transferee of Equity Shares resulting in a conversion to share‑in‑trust (as discussed below), must immediately give written notice to the Company (or, in the event of a proposed or attempted transfer, acquisition or purported change in beneficial or constructive ownership, give at least 15 days’ prior written notice), and promptly provide to the Company such other information as the Company may request.

Waivers by the Board of Directors; Increase in Common Stock Ownership Limit . Upon notice of an acquisition or transfer, or a proposed acquisition or transfer, that results or would result in the intended transferee having beneficial or constructive ownership of Equity Shares in excess of the Common Stock Ownership Limit, or would otherwise result in a violation of the any of the other ownership and transfer restrictions, the board of directors may, prospectively or retroactively, create a different limit on ownership for such transferee (an “excepted holder limit”), or otherwise waive such violation, in each case upon such conditions as the board of directors may determine, in its sole and absolute discretion

In addition, the board of directors may, from time to time, increase the Common Stock Ownership Limit for one or more persons, or decrease the Common Stock Ownership Limit for one or more persons. A decrease in the Common Stock Ownership Limit will not be effective for any person whose ownership of Equity Shares is in excess of the applicable decreased Common Stock Ownership Limit until such time as such person’s ownership equals or falls below the applicable decreased Common Stock Ownership Limit. Until such time, however, any further acquisition of Equity Shares will violate the Common Stock Ownership Limit.

Notwithstanding the foregoing, unless and until the board of directors determines that it is not in the best interests of the Company to attempt to qualify as, or to continue to qualify as, a REIT (and assuming the board of directors has not determined thereafter that it is in the best interests of the Company to attempt to qualify as, or to continue to qualify as a, a REIT), the Common Stock Ownership Limit for a class or series of Equity Shares may not be increased, and no additional excepted holder limits may be created, and no other waivers of ownership and transfer restrictions may be granted, if the board of directors determines in its sole and absolute discretion that, after giving effect to such increase, creation or waiver, the Company would be “closely held” within the meaning of the Code or such increase, creation or waiver would otherwise cause the Company to fail to qualify as a REIT.

Shares‑in‑Trust . The RHE Charter provides that, if there is any purported transfer or acquisition of Equity Shares or other event or transaction that, if effective, would result in any person beneficially or constructively owning Equity Shares in violation of any of the ownership and transfer restrictions, then the number of Equity Shares causing the violation (rounded up to

the nearest whole share) will be automatically converted into an equal number of “Shares ‑In ‑Trust” and will be deemed to have been transferred to a trust for the exclusive benefit of a designated charitable beneficiary. The automatic conversion will be effective as of the close of business on the business day prior to the date of the purported transfer, acquisition or other event or transaction that requires the conversion to Shares ‑in ‑Trust. (The person that would have owned the shares if they had not been converted and transferred to the trust is referred to in this document as “the purported transferee.”) The purported transferee shall have no rights in Shares ‑in ‑Trust, except as specifically provided in the RHE Charter. If, for any reason, the conversion into Shares ‑in ‑Trust as described in the RHE Charter is not automatically effective to prevent violation of the ownership and transfer restrictions, then such transfer, acquisition or other event or transaction giving rise to the Shares ‑in ‑Trust will be void ab initio , and the purported transferee will acquire no rights in such Equity Shares.

Rights of Shares‑in‑Trust . Notwithstanding any other provisions of the RHE Charter, Shares‑in‑Trust shall have only such rights as set forth in the RHE Charter. Specifically, Shares‑in‑Trust are entitled to the same rights and privileges with respect to dividends as all other Equity Shares of the same class or series. The trustee will receive all dividends on the Shares‑in‑Trust and will hold such dividends in trust for the benefit of the charitable beneficiary. Any dividend with a record date on or after the date that Equity Shares have converted to Shares‑in‑Trust which is paid on such Equity Shares to the purported transferee must be repaid to the trust, and any dividend declared on such Equity Shares but unpaid must be paid to the trust, in each case for the benefit of the chartable beneficiary. The Company shall take all measures that it determines are reasonably necessary to recover the amount of any dividend paid to the purported transferee, including, if necessary, withholding any portion of future dividends payable on Equity Shares beneficially or constructively owned by the purported transferee and paying such dividends over to the trust for the benefit of the charitable beneficiary.

Shares‑in‑Trust shall not have any voting rights. Until the Company has received notification that the Equity Shares have been converted into Shares‑in‑Trust, the Company shall be entitled to rely on its share transfer and other shareholder records for purposes of preparing lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of shareholders.

Transferability of Shares‑in‑Trust . Except as set forth in the RHE Charter, Shares‑in‑Trust are not transferable.

All Shares‑in‑Trust are deemed to be offered for sale to the Company, or its designee, at a price per share equal to the lesser of: (i) the price per share in the purported transaction that results in such Shares‑in‑Trust or, in the case of a gift or devise, the market price (as defined in the RHE Charter) at the time of such gift or devise; and (ii) the market price on the date the Company, or its designee, accepts such offer. The Company has the right to accept such offer for a period of 20 days after the later of the: (i) the date of the purported transaction that results in the Shares‑in‑Trust, as set forth in a notice received by the Company pursuant to the notice requirements in the RHE Charter; or (ii) if no such notice is received by the Company, the date the Company determines in good faith that a purported transfer, acquisition or other event or transaction occurred which resulted in the Shares‑in‑Trust. The Company may reduce the amount payable in connection with the purchase of Shares‑in‑Trust by the amount of any dividends that have been paid to the

purported transferee and are owed by the purported transferee to the trustee. The Company may pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary.

If the Company does not purchase the Shares‑in‑Trust, then the trustee shall: (i) sell that number of Equity Shares represented by such Shares‑in‑Trust to a permitted transferee who could acquire and own the shares without such acquisition or ownership resulting in another automatic conversion of such Equity Shares into Shares‑in‑Trust; (ii) cause to be recorded on the books of the Company that the permitted transferee is the holder of record of such number of Equity Shares; and (iii) cause the Shares‑in‑Trust to be canceled.

Upon a sale by the trustee of Shares‑in‑Trust, the purported transferee shall receive from the trustee a price per share equal to the lesser of: (i) the price per share in the purported transaction that created the Shares‑in‑Trust or, in the case of a gift or devise, the market price per share on the date of such transfer; and (ii) the price per share received by the trustee, provided that such price per share shall be net of any commissions and other expenses of the sale. The proceeds shall be sent to the purported transferee within five business days of the closing of the sale transaction.

Any amounts received by the trustee in excess of the amounts paid to the purported transferee must be paid to the charitable beneficiary.

The Trustee . The trustee will be designated by the Company and must be unaffiliated with the Company, any purported transferee and any purported holder of Equity Shares that converted into Shares‑in‑Trust.

Remedies for Breach . If the board of directors determines in good faith that a purported transfer, acquisition or other event or transaction has taken place in violation of the ownership and transfer restrictions, or that a person intends to or has attempted to acquire ownership in violation of such restrictions, then the board of directors shall take such action as it deems advisable to refuse to give effect to, or to prevent, such transfer, acquisition or other event or transaction from occurring or otherwise becoming effective, including causing the Company to repurchase Equity Shares, refusing to give effect to the transaction on the Company’s books or instituting proceedings to enjoin the transfer.

Disclosure of Ownership by Our Shareholders . Every beneficial or constructive owner of more than 5% (or such lower percentages as determined pursuant to regulations under the Code or as may be requested by the board of directors) of the outstanding Equity Shares of any class or series shall annually, and no later than 30 days after the end of each taxable year, give written notice to the Company of certain information as required in the RHE Charter. Each such owner shall promptly provide to the Company such additional information as the Company may request to determine the effect, if any, of such ownership on the Company’s qualification or status as a REIT, as applicable, and to ensure compliance with the ownership and transfer restrictions. In addition, each beneficial or constructive owner of Equity Shares and each person (including the shareholder of record) who is holding Equity Shares for a beneficial or constructive owner promptly shall provide to the Company such information as it may request to determine the Company’s qualification or status as a REIT (as applicable) to comply with the requirements of any taxing authority or other governmental agency, or to determine any such compliance or to ensure compliance with the ownership and transfer restrictions.

Exhibit 10.202

EXECUTION COPY

AMENDED AND RESTATED FORBEARANCE AGREEMENT

This AMENDED AND RESTATED FORBEARANCE AGREEMENT (as amended, restated, amended or restated, supplemented or otherwise modified from time to time, this “ Agreement ”) is entered into as of December 31, 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 ”), ADCARE OPERATIONS, LLC, a Georgia limited liability company, as guarantor (the “ AdCare Ops ”), ADCARE ADMINISTRATIVE SERVICES, LLC, a Georgia limited liability company, as guarantor (“ AdCare Admin ”), ADCARE CONSULTING, LLC, a Georgia limited liability company, as guarantor (“ AdCare Consulting ”), ADCARE FINANCIAL MANAGEMENT, LLC, a Georgia limited liability company, as guarantor (“ AdCare Financial ”), ADCARE OKLAHOMA MANAGEMENT, LLC, a Georgia limited liability company, as guarantor (“ AdCare OK ”), and ADCARE EMPLOYEE LEASING, LLC, a Georgia limited liability company, as guarantor (“ AdCare Employee ”; the HHO Guarantor, AdCare Holdco, the RHP Guarantor, AdCare Ops, AdCare Admin, AdCare Consulting, AdCare Financial, AdCare OK and AdCare Employee 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 ”) and (except to the extent set forth herein) amends and restates the Forbearance Agreement, dated as of September 6, 2018, by and among the Credit Parties and 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, certain Credit Parties and the Lender entered into that certain Forbearance Agreement, dated as of May 18, 2018 (the “ Original Forbearance Agreement ”), pursuant to which the Lender agreed, subject to the terms and conditions thereof, to forbear during the Forbearance Period (as defined therein) from exercising certain of its default-related rights and remedies against the Credit Parties with respect to the Specified Defaults (as defined therein, the “ Original Specified Defaults ”);

WHEREAS, a Termination Event under, and as defined in, the Original Forbearance Agreement occurred, and as a result, the Forbearance Period under, and as defined in, the Original Forbearance Agreement terminated;

NY 77472137

WHEREAS, certain Events of Default under the Loan Agreement occurred following such termination, and as a result, the Credit Parties and the Lender entered into to that certain Forbearance Agreement, dated as of September 6, 2018 (the “ Second Forbearance Agreement ”), pursuant to which the Lender agreed, subject to the terms and conditions thereof, to forbear during the Forbearance Period (as defined therein) from exercising certain of its default-related rights and remedies against the Credit Parties with respect to the Specified Defaults (as defined therein); and

WHEREAS, the Borrowers and Guarantors have requested that the Lender consent to the execution, delivery and performance of that certain Termination of Lease to be entered into following the date of this Agreement (the “ Termination Agreement ”), by and between Georgia Lessor – Bonterra/Parkview, Inc., a Maryland limited liability company (“ Landlord ”), and ADK Bonterra/Parkview, LLC, a Georgia limited liability company (“ Tenant ”), a form of which is attached hereto as Exhibit A which, among other things, will terminate that certain Third Amended and Restated Multiple Facilities Lease, dated October 29, 2010 (as amended, the “ Lease ”), between Landlord and Tenant (such transaction, the “ Lease Termination ”);

WHEREAS, upon the request of the Credit Parties, the Lender, subject to the terms and conditions set forth herein, has agreed to (i) continue 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), (ii) consent to the Lease Termination and (iii) consent to amend certain provisions of the Loan Agreement set forth herein.

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) each of the Original Specified Defaults; and

(ii) any other Event of Default that occurred and was continuing as of September 6, 2018 (the “ Additional Specified Defaults ”); provided that Additional Specified Defaults do not include any such Event of Default that (x) was known by any Credit Party to have occurred, (y) was continuing as of September 6, 2018 and (z) had not been disclosed to the Lender prior to September 6, 2018 in a reasonable level of detail.

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).

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(b) Forbearance . Effective as of the Forbearance Effective Date (as hereinafter defined), the Lender hereby agrees, that during the Forbearance Period, except as otherwise provided herein, to 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) March 14, 2019 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 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 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; or

(iv) 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 asserts any claim or cause of action or initiating any judicial, administrative or arbitration proceeding against the Lender related to the foregoing.

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 (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.

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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 Borrowers or any other Credit Party of this Agreement;

(c) the execution, delivery and performance by each Borrower and the other Credit Parties of this Agreement do not (i) contravene the terms of the Borrowers’ or any other Credit Party’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 Party 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 Party or the properties or assets of any Borrower or any other Credit Party 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 Party;

(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 related transactions with respect to the Obligations, the Collateral or any of the Loan Documents; and

(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.

SECTION 5. Covenants; Loan Agreement Amendment; Consents .

(a) Except to the extent set forth below, the amendments to the Loan Agreement set forth in Section 5(a) of the Second Forbearance Agreement shall remain in full force and effect notwithstanding that such amendments have not been restated below. Subject to the satisfaction of the conditions set forth in Section 3 hereof and as part of the consideration bargained for by the parties to this Agreement, the Loan Agreement is hereby amended as follows:

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(i) Section 1.1 of the Loan Agreement is amended as follows:

(A) the definition of “Loan Documents” is amended by (x) inserting the phrase “, the A&R New Forbearance Agreement” immediately after the first reference to “the New Forbearance Agreement” appearing therein and (y) deleting the phrase “, the Forbearance Agreement and/or the New Forbearance Agreement” appearing therein and inserting “, the Forbearance Agreement, the New Forbearance Agreement and/or the A&R New Forbearance Agreement” in lieu thereof;

(B) the definition of “New Forbearance Agreement” is amended and restated in its entirety as set forth below:

“ New Forbearance Agreement : that certain Forbearance Agreement, dated as of September 6, 2018, by and among the Credit Parties and the Lender (without giving effect to the amendment and restatement thereof pursuant to the A&R New Forbearance Agreement).”;

“ Default Rate : at any time, a rate per annum equal to the lesser of (i)the maximum rate permitted by Applicable Law, or (ii) the PIK Rate plus an additional two and a half percent (2.5%) per annum.”; and

(D) the following defined terms are hereby added in alphabetical order:

“ A&R New Forbearance Agreement : that certain Amended and Restated Forbearance Agreement, dated as of December 31, 2018, by and among the Credit Parties and the Lender.”

“ A&R New Forbearance Effective Date : the “Forbearance Effective Date” as defined in the A&R New Forbearance Agreement.”

“ Interest Rate : collectively, the Cash Interest Rate and the PIK Interest Rate.”

(ii) Section 2.2(a) of the Loan Agreement is amended and restated in its entirety as follows:

“(a) Interest Rate .

(i) Cash Interest . Each Loan and any overdue interest on each Loan (including both cash-pay interest and interest payable in kind) shall bear interest payable in cash at a fixed rate per annum equal to: (i) ten percent (10%) per annum (the “ Initial Rate ” ) from and after the Closing Date until the date that is three (3) months thereafter and (ii) twelve and one- half percent (12.5%) per annum from and after the date that is three (3) months after the Closing Date until the Business Day immediately preceding the Forbearance Effective Date and thirteen and one-half percent (13.5%) per annum from and after the Forbearance Effective Date (the “ Ongoing Rate ”) (the applicable interest rate pursuant to clause (i) or (ii) being referred to hereinafter as the “ Cash Interest Rate ”); provided, however, that, in the event (x) of any denial of payment for new admissions with respect to any Healthcare Facility (as a result of Medicare or Medicaid survey

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deficiencies or state monitoring or for any other reason) or (y) any Governmental Authority ceases to permit new residents or tenants to be admitted to any Healthcare Facility, the Cash Interest Rate shall be increased by one percent (1%) per annum commencing thirty (30) days after receipt of notice by any Credit Party from Lender, any Governmental Authority or any Operator if a plan of correction has not been filed with the applicable Governmental Authority and shall be increased by an additional one percent (1%) per annum each month thereafter until a plan of correction has been filed with the applicable Governmental Authority. One (1) day after the date that payments have been reinstated and admissions are permitted, the Cash Interest Rate shall revert to the Cash Interest Rate provided in clause (i) or (ii) of this Section 2.2(a), as applicable. The provisions of this Section 2.2(a) shall not derogate the Credit Parties obligation to file a plan of correction pursuant to Section 7.11(j). Interest payable in cash on the Loans shall be paid in arrears on the first (1st) day of each month and on the maturity of the Loans, whether by acceleration or otherwise.

(ii) PIK Interest . From and after January 1, 2019, each Loan and any overdue interest on each Loan shall bear interest payable in kind at a fixed rate per annum equal to three and a half percent (3.5%) per annum (the “ PIK Rate ”). Interest accruing at the PIK Rate on the Loans shall be paid in kind in arrears by increasing the outstanding principal amount of Loans held by the Lender on the first (1st) day of each month; provided that interest accruing at the PIK Rate on each Loan and any overdue interest on each Loan shall be paid in cash (i) on the maturity of the Loans, whether by acceleration or otherwise, or (ii) in connection with any repayment or prepayment of the Loans.”

(iii) Section 2.2(b)(i) of the Loan Agreement is amended and restated in its entirety as follows:

“(i) After the occurrence and during the continuance of an Event of Default hereunder, the per annum PIK Rate applicable to all Loans and overdue interest thereon shall be increased to the Default Rate. All such increases may be applied retroactively to the date of the occurrence of the Event of Default. Each Borrower agrees that the Default Rate (and the rate of any interest payable in cash accruing at the Cash Interest Rate on Loans and overdue interest thereon) payable to Lender is a reasonable estimate of the Lender’s damages and is not a penalty. Each Borrower also acknowledges that (i) its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing its Loan, that, during the time that any monthly installment or payment is delinquent, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities and that it is extremely difficult and impractical to determine any such additional costs and expenses; and (ii) during the time that any monthly installment or other payment due is delinquent, Lender’s risk of nonpayment will be materially increased and Lender is entitled to be compensated for such increased risk. Each Borrower further agrees that the increase in the rate of PIK Rate interest payable under the Default Rate represents a fair and reasonable estimate (taking into account all circumstances existing on the date hereof) of the additional costs and expenses Lender will incur by reason of Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent Loan.”

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(iv) Section 2.2(b)(ii) of the Loan Agreement is amended by deleting the phrase “outstanding Principal” therefrom and replacing it with the following: “outstanding Principal and overdue interest”.

(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) The Credit Parties shall use commercially reasonable efforts to: (i) order by no later than December 31, 2018 and receive by no later than January 18, 2019 (A) property condition reports, appraisals, surveys and phase I environmental reports for all owned Real Property and (B) any other third-party reports reasonably requested by the CRO (as defined below); and (ii) order by no later than January 14, 2019 and receive by no later than January 31, 2019 any additional third-party reports reasonably requested by the Banker (as defined below). “Commercially reasonable efforts” shall mean ordering any of the foregoing property condition reports, appraisals, surveys, phase I environmental reports and other third-party reports (the “ Third-Party Reports ”) on an expedited basis, to the extent necessary to timely receive the Third-Party Reports, unless the Credit Parties and the Lender mutually agree that the terms of such expedited ordering are unreasonable. For the avoidance of doubt, the Credit Parties shall not have violated their obligation to timely receive Third-Party Reports if delivery of Third-Party Reports is delayed for any reason outside of the control of the Credit Parties; provided , that the Credit Parties shall make best efforts under such circumstances to receive any such Third-Party Reports as expeditiously as possible under the circumstances. Notwithstanding the foregoing in this Section 5(d) , the Credit Parties shall not be required to order any property condition reports, appraisals, surveys, phase I environmental reports or other third-party reports substantially duplicative of property condition reports, appraisals, surveys, phase I environmental reports or other third-party reports received by the Credit Parties from a reputable service provider on or after July 1, 2018.

(e) The Credit Parties may seek debt financing from a third party lender, the proceeds of which are sufficient to and shall be used to repay the Obligations in full in cash (a “ Refinancing ”). If the Credit Parties seek a Refinancing, the Credit Parties shall, (i) no later than January 14, 2019 at 11:59 p.m. New York time (the “ Term Sheet Deadline ”), enter into and deliver to the Lender a term sheet approved by the chief executive officer of RHP Guarantor (the “ CEO ”) and the CRO (as defined below) evidencing a third party lender’s desire to pursue the provision of a Refinancing, subject to the satisfaction of customary closing conditions (the “ Term Sheet ”), and (ii) no later than February 15, 2019 at 11:59 p.m. New York time (the “ Consummation Deadline ”), consummate the Refinancing contemplated by the Term Sheet (the “ Refinancing Consummation ”). Failure to comply with the foregoing sentences of this Section 5(e) shall be deemed not to be a Termination Event. If (x) the Credit Parties do not deliver to Lender a Term Sheet by the Term Sheet Deadline, (y) a Refinancing Consummation does not occur by the Consummation Deadline or (z) at any time,

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the Credit Parties determine that the Refinancing is not feasible or the Credit Parties determine not to pursue a Refinancing (any of clauses (x) , (y) and (z) , a “ Refinancing Termination Event ”), the Credit Parties shall promptly, but in no event later than two (2) Business Days after such Refinancing Termination Event, provide notice to the Lender of such Refinancing Termination Event (the date such notice is provided, the “ Refinancing Termination Date ”).

(f) Unless the Obligations are paid in full in cash, the Credit Parties shall:

(i) By January 7, 2019, engage a nationally recognized, leading financial advisor that is reasonably acceptable to the Lender on terms that are reasonably acceptable to the Lender (the “ Banker ”), with any such acceptance by the Lender being evidenced in writing, the terms of whose engagement shall include: (A) reporting directly to the Board (as defined below); (B) advising the Credit Parties on potential asset sale and related transactions; and (C) performing valuation and debt capacity analyses (the “ Banker Responsibilities ”). The Credit Parties shall make the Banker reasonably and directly accessible to the Lender and its consultants and/or advisors on commercially reasonable terms to be agreed by the Credit Parties and the Lender. Once hired, the Credit Parties shall continue to retain the Banker for the purposes of performing the Banker Responsibilities through the end of the Forbearance Period;

(ii) By January 23, 2019 (the “ Bid Solicitation Plan Deadline ”), (A) provide to Lender a written plan (the “ Bid Solicitation Plan ”) for a process of soliciting bids for one or more asset sale or related transactions (the “ Bid Solicitation ”), which written plan shall (x) be reasonably acceptable to Lender in all respects and (y) be provided in draft form to the Lender not less than a Business Day prior to the Bid Solicitation Plan Deadline and (B) one Business Day after the Bid Solicitation Deadline, cause the Banker to begin the Bid Solicitation in accordance with the Bid Solicitation Plan;

(iii) By February 28, 2019, (A) complete the Bid Solicitation and (B) negotiate in good faith and enter into with Lender an agreement that is acceptable to Lender, which shall require, among other things, that the Credit Parties engage in a process that culminates in (x) the consummation of one or more asset sale or related transactions and (y) the payment in full in cash of all Obligations with the proceeds thereof.

(g) Commencing on the Forbearance Effective Date and ending on the date the Obligations have been paid in full in cash, the Lender shall have the right (but not the obligation) to designate one (1) individual to attend, as an observer and participant in a non- fiduciary and non-voting capacity (an “ Observer ”), each meeting of the board of directors of RHP Guarantor or any duly authorized committee thereof (the “ Board ” and each such meeting, a “ Meeting ”). No Lender nor any such Observer shall have any duty or obligation, fiduciary or otherwise, or be subject to any liability, to the RHP Guarantor or any other Credit Party (or any of their Affiliates) as a result of the Observer role or the rights related thereto. The Observer shall be entitled to participate in discussions of any matters presented at any Meeting, but shall not be entitled to vote on any such matters. RHP Guarantor shall (i) provide the Observer with reasonable advance written notice of the time, place, telephonic (or other remote access) information and agenda for each Meeting (but in no event shall such notice be given to the Observer later than the time at which such notice is provided to the Board) and, in the case of any proposed action by written consent in lieu of a Meeting, shall provide the Observer with copies of all consent materials no later than the time that such materials are provided to the Board, (ii) provide the Observer with

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copies of all minutes of each Meeting and all written consents in lieu of any Meeting promptly after such Meeting has been adjourned or such consent has been executed, as applicable, and (iii) provide the Observer with copies of all documents, materials and other information given to any member of any Board no later than the time at which any member of such Board is provided with such documents, materials or other information. The failure to deliver notice, or materials, to the Observer in connection with the Observer’s right to attend and/or review materials with respect to, any meeting of the Board shall not, of itself, impair the validity of any action taken by the Board at such meeting. The Observer shall be required to execute or otherwise become subject to any codes of conduct, confidentiality agreement and policy with respect to compliance with securities laws as RHP Guarantor may reasonably require. Notwithstanding the foregoing, the Observer shall not be entitled to receive portions of any materials relating to, or be in attendance for any portion of any Meetings or other discussions relating to, topics which the Board makes a reasonable good faith determination that the disclosure of such materials to the Observer, or the attendance at such portions of such Meetings or other discussions by the Observer, as applicable, (i) will constitute a waiver of the attorney client privilege to which RHP Guarantor or any of the Credit Parties, as applicable, is entitled, (ii) will result in a violation of applicable law or regulation by RHP Guarantor, or (iii) would provide the Observer with access to information that directly relates to RHP Guarantor’s strategy, negotiating position or obligations related to Lender, the Loan Agreement or similar matters or otherwise involves or is reasonably expected to involve a conflict of interest with the Observer. Lender may from time to time, in its sole discretion and by providing RHP Guarantor with prior written notice thereof, remove and replace an Observer with a new Observer. RHP Guarantor shall pay the Observer compensation equal to $6,250 per each calendar quarter that such individual is an Observer (which amount shall be prorated for any partial calendar quarter during which such individual is an Observer based on the actual number of days in such calendar quarter during which such individual is an Observer). Such amount shall be paid on the day an individual is appointed as an Observer (in respect of the quarter in which an individual is appointed as an Observer) and shall be paid in advance on the first day of each calendar quarter thereafter. In addition, the reasonable and documented costs and expenses incurred by the Observer (or any substitute individual) in connection with attendance at Meetings or otherwise, including, but not limited to, the reasonable travel (limited to commercial airlines with respect to air travel) and lodging costs, shall be paid by RHP Guarantor after receipt of a written request by the Observer for such payment in accordance with RHP Guarantor’s normal expense reimbursement policies and procedures. Anything herein to the contrary notwithstanding, this Section 5(g) shall not amend, modify, reduce, supersede, alter or otherwise change any of the covenants or obligations of RHP Guarantor in the Loan Documents to provide notices, documents, materials, reports and/or other information to the Lender. The initial Observer shall be the individual specified in a written notice delivered on or after the date of the Forbearance Effective Date to RHP Guarantor by Lender.

(h) Upon the Refinancing Termination Date, the Board shall promptly (and in no event later than two (2) Business Days after the Refinancing Termination Date) pass resolutions broadening the responsibilities of the chief restructuring officer of RHP Guarantor (the “ CRO ”) to include all aspects of transaction planning, including the Bid Solicitation, in a manner reasonably acceptable to Lender and the CRO (the “ Specified Resolutions ”). Promptly after passing the Specified Resolutions (and no later than two calendar days thereafter), RHP Guarantor shall effectuate the Specified Resolutions.

(i) Through the end of the Forbearance Period, if any of the Credit Parties (or any of their Affiliates) desires to incur Indebtedness, the proceeds of which would not repay the Obligations in full in cash (a “ Financing ”), the Credit Parties shall first deliver a written notice of such proposed incurrence of Indebtedness (a “ Financing Notice ”) to the Lender, which shall set forth the aggregate principal amount of Indebtedness intended to be incurred. Lender shall have ten (10) Business Days from the receipt of such notice to notify the Credit Parties of any offer to fund such Indebtedness (a “ Lender Financing Offer ”), which shall set forth the principal amount of Indebtedness being offered to be funded by the Lender. Upon receipt of any Lender Financing Offer, the Credit Parties shall negotiate the terms of a potential Financing with the Lender in good faith. The Lender will be deemed to have declined to fund such Indebtedness if a Lender Financing Offer is not delivered to

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the Credit Parties prior to the expiration of the tenth (10th) Business Day following the receipt of a Financing Notice. Until and unless the Lender declines to make or withdraws a Lender Financing Offer, the Credit Parties shall not, and shall not permit any of their Affiliates or any of their representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding any Financing, (ii) discuss or negotiate with, or provide any information to, any Person concerning a possible Financing or (iii) enter into any agreements or other instruments (whether or not binding) regarding a Financing.

(j) RHP Guarantor shall, at all times through the end of the Forbearance Period, employ a CRO reasonably acceptable to Lender on terms reasonably acceptable to Lender.

(k) Lender hereby consents to, for all purposes under the Loan Agreement and other Loan Documents, and hereby waives any notice otherwise required thereunder in connection with, the execution, delivery and performance of the Termination Agreement (with such changes from the form attached hereto as Exhibit A as may be reasonably acceptable to the Lender).

(l) On the earlier of (i) a Termination Event and (ii) January 1, 2019, the Borrowers shall pay 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 $350,000 in the aggregate (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.

(m) The Credit Parties shall use commercially reasonable efforts to enter into the Termination Agreement (with such changes from the form attached hereto as Exhibit A as may be reasonably acceptable to the Lender) as soon as practicable following the execution of this Agreement. On February 1, 2019, the Credit Parties shall consummate the Lease Termination pursuant to the Termination Agreement (with such changes from the form attached hereto as Exhibit A as may be reasonably acceptable to the Lender).

(n) On February 1, 2019, the Credit Parties shall (i) reimburse the Lender in cash in immediately available funds for all accrued and unpaid Expenses invoiced on or prior to January 31, 2019 (such amount of reimbursed expenses, “ Paid Expenses ”) and (ii) prepay the AdCare Holdco Loan in the manner set forth in Section 2.5 of the Loan Agreement in an amount equal to $1,205,000 minus the amount of Paid Expenses (the “ Loan Prepayment ”).

(o) On or prior to January 4, 2019, the Credit Parties shall have reimbursed the Lender in cash in immediately available funds for $200,000 of accrued and unpaid Expenses (it being understood that all accrued and unpaid Expenses in excess of such amount shall be reimbursed by the Credit Parties pursuant to Section 7.17 of the Loan Agreement at a subsequent date).

(p) As soon as practicable following the execution of this Agreement and in no event later than January 4, 2018, 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.

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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 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

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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 Party 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 Parties, 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 .

(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.

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(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.

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 pa r ties 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:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


NORTHWEST PROPERTY HOLDINGS, LLC,
a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


ATTALLA NURSING ADK, LLC ,
a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


ADCARE PROPERTY HOLDINGS, LLC,
a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


GUARANTORS:

REGIONAL HEALTH PROPERTIES, INC.,
a Georgia corporation

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Chief Executive Officer

[Signature Page to Forbearance Agreement]



ADCARE PROPERTY HOLDINGS, LLC,
a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


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

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: President


ADCARE OPERATIONS, LLC,
a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


ADCARE ADMINISTRATIVE SERVICES,
LLC, a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


ADCARE CONSULTING, LLC,
a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


ADCARE FINANCIAL MANAGEMENT,
LLC, a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager

[Signature Page to Forbearance Agreement]



ADCARE OKLAHOMA MANAGEMENT ,
LLC, a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager


ADCARE EMPLOYEE LEASING,
LLC, a Georgia limited liability company

By:	/s/ Brent Morrison
	Name : Brent Morrison
	Title: Manager

LENDER :

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

By :	Pinesap Investments, LLC , a Delaware limited liability company , its Manager

	By :	Pine Companies , LLC, a California limited liability com pany, its Manager


By:	/s/ Brian Timmer
	Name : Brian Timmer
	Title: Manager

[Signature Page to Forbearance Agreement]

Exhibit A

Termination Agreement

See attached

TERMINATION OF LEASE

( Adcare )

THIS TERMINATION OF LEASE (the “ Agreement ”) is effective as of January 1, 2019, by and among Georgia Lessor – Bonterra/Parkview, Inc. , a Maryland limited liability company (“ Landlord ”) and ADK Bonterra/Parkview, LLC , a Georgia limited liability company (“ Tenant ”).

RECITALS

A. Landlord is the owner of certain real property, improvements and fixtures thereon, related rights thereto and personal property comprising the following skilled nursing facilities (the “ Facilities ”): (1) Parkview Manor Nursing Home, and (2) Bonterra Nursing Center.

B. Pursuant to that certain Third Amended and Restated Multiple Facilities Lease dated October 29, 2010, as amended by the First Amendment to Third Amended and Restated Multiple Facilities Lease dated June 14, 2013, and the Second Amendment to Third Amended and Restated Multiple Facilities Lease dated September 1, 2015 (collectively, the “ Lease ”) between Landlord and Tenant, Landlord is leasing the Facilities to Tenant. Under the terms of the Lease, Tenant has paid to Landlord a security deposit in the amount of $375,000 (the

“$375,000 Deposit ”). On the Termination Effective Date Landlord will return to Tenant the

$375,000 Deposit as set forth in this Agreement.

C. Landlord and Tenant desire to terminate the Lease effective as of the date of this Agreement (the “ Termination Effective Date ”) pursuant to the terms and conditions of this Agreement.

D. Tenant has subleased the Facilites (the “ Adcare Sublease ”) to 2801 Felton Avenue, L.P. and 460 Auburn Avenue, L.P. (“ Subtenants ”) and following the termination of the Lease, Landlord will assume the lease of the Facilities to Subtenants or affiliates of Subtenants (the “ Direct Lease ”). Under the Adcare Sublease, Subtenants have paid Tenant a security deposit in the amount of $170,000 (the “$ 170,000 Deposit ”). On the Termination Effective Date Tenant will pay Landlord the $170,000 Deposit which Landlord will apply as security deposit under the Direct Lease and held by Landlord in accordance with the Direct Lease.

E. Capitalized terms used, but not defined, in this Agreement shall have the meaning given to such terms in the Lease.

AGREEMENT

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

1. Termination of Lease; Release; Further Assurances .

(a) Termination of Lease . As of the Termination Effective Date, the Lease is terminated; provided, however, that all obligations which by their terms survive the termination of the Lease shall survive the termination of the Lease pursuant to this Agreement.

(b) Conveyance . Tenant hereby assigns, transfers and conveys to the applicable Landlord (i) all of Tenant’s “Personal Property” as defined in the Lease, and (ii) all of Tenant’s right, title and interest (including beneficial interests), if any, in and to the “Leased Property” as defined in the Lease. Landlord agrees to accept all such Personal Property and Leased Property “as is, where is” in its current condition with all defects. On the Termination Effective Date, Tenant shall give up possession of the Facilities and Landlord shall accept and possession of the Facilities, as well as all other assignments, transfers, and conveyances contemplated by this Agreement.

(c) Release by Tenant and Guarantors . Effective as of the Termination Effective Date, Tenant and each Guarantor hereby release and forever discharge Landlord and its respective successors, assigns, agents, equity holders, directors, officers, employees, parent corporations, subsidiary corporations, affiliated corporations, and affiliates, from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action, of every nature and description, whether known or unknown, absolute, mature, or not yet due, liquidated or non-liquidated, contingent, non- contingent, direct, or indirect or otherwise arising prior to each Termination Effective Date; provided, however, that such release and discharge shall not release Landlord for failure to comply with the terms and conditions of this Agreement.

(d) Release by Landlord . Effective as of the Termination Effective Date, Landlord hereby releases and forever discharges Tenant and each Guarantor and each of their respective successors, assigns, agents, equity holders, directors, officers, employees, parent corporations, subsidiary corporations, affiliated corporations, and affiliates, from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action, of every nature and description, whether known or unknown, absolute, mature, or not yet due, liquidated or non-liquidated, contingent, non-contingent, direct, or indirect or otherwise arising prior to each Termination Effective Date; provided, however, that such release and discharge shall not release Tenant or any Guarantor for failure to comply with the terms and conditions of this Agreement.

(e) Further Assurances . Tenant and each Guarantor shall, on request of the other party, from time to time, execute, deliver, and furnish documents as may be necessary to fully consummate the transactions contemplated under this Agreement, including, but not limited to, such deeds, bills of sale, UCC assignments, and other documents as Landlord may reasonable request.

2. Security Deposits; Rent . On the Termination Effective Date, Tenant will pay Landlord the $170,000 Deposit and upon its receipt of the $170,000 Deposit, Landlord will apply the $170,000 Deposit to security deposit under the Direct Lease. On the Termination Effective Date, Landlord will pay Tenant the $375,000 Deposit in immediately available funds in addition to any other payments due Tenant under this Agreement. All Rent or other obligations due by Subtenant shall be prorated as of the Termination Effective Date and all amounts due to Tenant through and including the Termination Effective Date shall be paid to Tenant.

3. Termination Fee . As consideration for Tenant agreeing to terminate the Lease prior to the end of the Term, Landlord agrees to pay Tenant a termination fee in the amount of One Million Two Hundred Thousand Dollars ($1,200,000) (the “ Termination Fee ”), to be paid by Landlord on the Termination Effective Date.

4. Netting of Payments . Landlord and Tenant, if they shall so elect, may net payments between one another contemplated under this Agreement such that, if such election is made, Landlord shall pay Tenant a net sum of $1,405,000 (the “ Total Due Tenant ”) (the sum of the Termination Fee plus the $375,000 Deposit less the $170,000 Deposit) on the Termination Effective Date. The indefeasible receipt by Tenant of the Total Due Tenant shall be a condition precedent to the occurrence of the Termination Effective Date.

Termination of Lease – Adcare (Parkview/Bonterra)

5. Legal Fees and Expenses . Each party shall pay its own legal fees and expenses in connection with this Agreement.

6. Miscellaneous Provisions .

(a) Successors and Assigns . The terms, covenants, and conditions hereof shall inure to the benefit of and be binding upon the respective parties hereto, their heirs, executors, administrators, successors, and permitted assigns.

(b) Authority of the Parties . Each of the parties executing this Agreement hereby represents and warrants to the others that it has all requisite power and authority, corporate or otherwise, to enter into and deliver this Agreement.

(c) No Brokerage Fee . Each Party hereto represents to the other Party hereto that no brokerage or other similar fee is due under or in connection with the execution and performance of this Agreement. Each Party agrees to indemnify, defend, and hold the other Party harmless from any loss or expense incurred in connection with any breach of the foregoing representation.

(d) Counterparts . This Agreement may be executed in any number of counterparts and by different parties to this Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement via telephone facsimile transmission or electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement. Subject to the other provisions hereof, this Agreement shall become effective when each of the parties has received a counterpart of this Agreement executed by the other parties to this Agreement or a copy of such executed Agreement signed in counterparts.

(e) Attorneys’ Fees . In any dispute or action between the parties arising out of this Agreement, the prevailing party shall be entitled to seek to have and recover from the other party such amount as the court may adjudge reasonable as attorneys’ fees and expenses together with costs of litigation incurred by the prevailing party, in additional to all other amounts provided at law.

(f) Amendment . Any alteration, change or modification of or to this Agreement, in order to become effective, must be made in writing and in each instance signed on behalf of each party to be charged.

(g) Severability . If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law.

(h) Integration. This Agreement contains the entire understandings among the parties relating to the matters set forth herein. All prior or contemporaneous agreements, understandings, representations and statements with respect to the subject matters hereof, whether direct or indirect, oral or written, are merged into and superseded by this Agreement, and shall be of no further force or effect.

(i) Cooperation of Parties . Each party agrees to sign any other and further instruments and documents and take such other actions as may be reasonably necessary or proper in order to accomplish the intent of this Agreement, so long as the terms thereof are fully consistent with the terms of this Agreement.

Termination of Lease – Adcare (Parkview/Bonterra)

(j ) Governing Law . This Agreement shall be construed under the laws of the State of Maryland.

(k) EACH OF TENANT AND GUARANTORS CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF MARYLAND AND GEORGIA AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF GEORGIA OR IN MARYLAND. EACH OF TENANT AND GUARANTORS AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OF GEORGIA OR MARYLAND AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE OF GEORGIA AND OF MARYLAND.

(l) LANDLORD, TENANT, AND GUARANTORS HEREBY WAIVE TRIAL BY JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON, UNDER, OUT OF, BY REASON OF OR RELATING IN ANY WAY TO THIS AGREEMENT, THE SUBLEASES OR THE INTERPRETATION, BREACH OR ENFORCEMENT HEREOF OR THEREOF.

[Signature Page Follows]

Termination of Lease – Adcare (Parkview/Bonterra)

SIGNATURE PAGE TO TERMINATION OF LEASE

( Adcare )

LANDLORD :

Georgia Lessor – Bonterra/Parkview, Inc. , a Maryland limited liability company

By:
Name:		Vikas Gupta
Title:		Senior Vice President – Acquisitions and Development

STATE OF MARYLAND	)
	)	ss.
COUNTY OF BALTIMORE	)

This instrument was acknowledged before me on December , 2018, by Vikas Gupta, the Senior Vice President – Acquisitions and Development of Georgia Lessor – Bonterra/Parkview, Inc., a Maryland limited liability company, on behalf of such company.


Notary Public,		County,
My commission expires:

Signature Page 1 of 2

SIGNATURE PAGE TO TERMINATION OF LEASE

( Adcare )

TENANT :

ADK Bonterra/Parkview, LLC , a Georgia limited liability company

By:
Name:		William McBride
Title:		Manager

STATE OF GEORGIA	)
	)	ss.
COUNTY OF FULTON	)

This instrument was acknowledged before me on December , 2018, by William McBride, Manager of ADK Bonterra/Parkview, LLC, a Georgia limited liability company, on behalf of such company.


	, Notary Public
My County of Residence:
My commission expires:

Signature Page 2 of 2

EXHIBIT 10.203

EXECUTION VERSION

SECOND AMENDED AND RESTATED FORBEARANCE AGREEMENT

This SECOND AMENDED AND RESTATED FORBEARANCE AGREEMENT (as amended, restated, amended or restated, supplemented or otherwise modified from time to time, this “ Agreement ”) is entered into as of March 29, 2019 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 ”), ADCARE OPERATIONS, LLC, a Georgia limited liability company, as guarantor (the “ AdCare Ops ”), ADCARE ADMINISTRATIVE SERVICES, LLC, a Georgia limited liability company, as guarantor (“ AdCare Admin ”), ADCARE CONSULTING, LLC, a Georgia limited liability company, as guarantor (“ AdCare Consulting ”), ADCARE FINANCIAL MANAGEMENT, LLC, a Georgia limited liability company, as guarantor (“ AdCare Financial ”), ADCARE OKLAHOMA MANAGEMENT, LLC, a Georgia limited liability company, as guarantor (“ AdCare OK ”), and ADCARE EMPLOYEE LEASING, LLC, a Georgia limited liability company, as guarantor (“ AdCare Employee ”; the HHO Guarantor, AdCare Holdco, the RHP Guarantor, AdCare Ops, AdCare Admin, AdCare Consulting, AdCare Financial, AdCare OK and AdCare Employee 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 ”) and (except to the extent set forth herein) amends and restates (except as set forth in Section 5(a) hereof) the Amended and Restated Forbearance Agreement, dated as of December 31, 2018 (the “ A&R Second Forbearance Agreement ”), by and among the Credit Parties and the Lender.

RECITALS

WHEREAS, upon the request of the Credit Parties, the Credit Parties and the Lender entered into the A&R Second Forbearance Agreement, pursuant to which the Lender agreed, subject to the terms and conditions thereof, to forbear during the Forbearance Period (as defined therein) from exercising certain of its default-related rights and remedies against the Credit Parties with respect to the Specified Defaults (as defined therein);

SECTION 2. Forbearance; Forbearance Default Rights and Remedies .

(i) a Default or Event of Default under Section 11.1(c) of the Loan Agreement as a result of the failure of RHP Guarantor and the Borrowers to comply with the following provisions of the Loan Agreement: (A) Section 10.3(a) of the Loan Agreement as a result of the failure of RHP Guarantor and the Borrowers to furnish to the Lender an annual report on Form 10-K for the fiscal year ended December 31, 2018; (B) Section 10.3(b) of the Loan Agreement as a result of the failure of RHP Guarantor and the Borrowers to furnish to the Lender a quarterly report on Form 10-Q for the fiscal quarter ending March 31, 2019; and (C) Section 10.3(c) of the Loan Agreement as a result of the failure of RHP Guarantor and the Borrowers to furnish to the Lender an officer’s certificate required thereby with respect to the fiscal year ended December 31, 2018 and the fiscal quarter ending March 31, 2019 (the Defaults and Events of Defaults referred to in clauses (B) and (C), being the “ Prospective Defaults ”);

(ii) each of the Original Specified Defaults; and

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( ii i) any other Event of Default that occurred and was continuing as of March 24, 2019 (the “ Additional Specified Defaults ”); provided that Additional Specified Defaults do not include any such Event of Default that (x) was known or should have been known by any Credit Party to have occurred, (y) was continuing as of March 24, 2019 and (z) had not been disclosed to the Lender prior to March 24, 2019 in a reasonable level of detail.

Each Borrower and each other Credit Party hereby acknowledges and agrees that each of the Specified Defaults (other than the Prospective 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) Forbearance . Effective as of the Forbearance Effective Date (as hereinafter defined), the Lender hereby agrees, that during the Forbearance Period, except as otherwise provided herein, to 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) October 1, 2019 at 11:59 p.m. New York time, (ii) the occurrence of any Forbearance Default (as hereinafter defined) and (iii) the occurrence of any Credit Parties Termination (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 Event of Default (other than any Specified Default) under and as defined in the Loan Agreement;

(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; or

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(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; provided , that none of the obligations of the Credit Parties hereunder (including, without limitation, the obligations set forth in Section 5(f)) shall terminate upon the occurrence of a Termination Event that is not a Credit Parties Termination; provided , further , that notwithstanding the occurrence of such Termination Event, the Credit Parties shall continue to have the right to provide notice of a Credit Parties Termination in accordance with Section 2(d) . 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 consequence of any Default or Event of Default that has occurred prior to, during or after the Forbearance Period (including the Specified Defaults), all of which rights and remedies are fully reserved by the Lender.

(d) As used herein, a “ Credit Parties Termination ” shall occur if: (i) on or after April 16, 2019, the board of directors of RHP Guarantor or any duly authorized committee thereof (the “ Board ”) determines that closing the transactions contemplated by a PSA (as hereinafter defined) or another in-bankruptcy-court or out-of-bankruptcy-court transaction involving the LOI Counterparty (as hereinafter defined) or a New Lender Purchase (as hereinafter defined) are not reasonably likely to occur; and (ii) the Borrowers deliver to the Lender a certificate of an Authorized Officer of each Borrower attaching written resolutions of the Board making the determination in the foregoing clause (i) of this Section 2(d) . Notwithstanding the occurrence of a Credit Parties Termination, any and all fees earned hereunder by the Lender prior to such Credit Parties Termination shall not be impaired, impacted or modified in any way and shall remain fully earned and nonrefundable. However, from and after the occurrence of a Credit Parties Termination, Sections 5(e) and (f) shall no longer apply and no other or further forbearance fees from and after the date of such Credit Parties Termination shall be earned under this Agreement.

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) the Lender shall have received from the Borrowers a fee in an amount equal to $100,000 payable in immediately available funds, which fee shall be fully earned and payable on the Forbearance Effective Date (the “ Forbearance Amount ”); and

(c) the Lender shall have received from the Borrowers reimbursement in full in cash in immediately available funds for all accrued and unpaid Expenses.

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(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;

(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) Schedule I hereto reflects the outstanding aggregate Principal amount of each of the Loans to each of the Borrowers.

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SECTION 5. Covenants; Loan Agreement Amendment; Consents .

(a) Reaffirmation of Existing Covenants and Amendments . Except to the extent set forth below, (x) all amendments to the Loan Agreement set forth in Section 5(a) of each of the Second Forbearance Agreement and the A&R Second Forbearance Agreement shall remain in full force and effect notwithstanding that such amendments have not been restated below; and (y) other than the covenant set forth in Section 5(f)(iii)(B) of the A&R Second Forbearance Agreement, all covenants set forth in Section 5 of each of the Second Forbearance Agreement and the A&R Second Forbearance Agreement shall remain in full force and effect notwithstanding that such covenants have not been restated below (including, without limitation, the covenants set forth in Sections 5(g) , (i) and (j) of the A&R Second Forbearance Agreement); provided , that in each case of clause (x) and (y) any reference in such sections of the Second Forbearance Agreement and the A&R Second Forbearance Agreement to the “Forbearance Period” shall mean the “Forbearance Period” as defined in this Agreement.

(b) PSA . As soon as reasonably practicable following the Forbearance Effective Date, and no later than March 29, 2019, the RHP Guarantor shall enter into a letter of intent (the “ Letter of Intent ”) with an asset purchaser (the “ LOI Counterparty ”) pursuant to which the LOI Counterparty shall have expressed its intent to purchase assets owned directly or indirectly by the RHP Guarantor in a real-estate only transaction or series of transactions that do not contemplate any Operator transition at an aggregate gross purchase price sufficient to produce net cash proceeds in an amount greater than the aggregate Obligations outstanding as of October 1, 2019 (the “ Asset Sale ”). As soon as reasonably practicable following the Forbearance Effective Date, and no later than April 15, 2019, if no New Lender Purchase (as defined below) shall have occurred, the Credit Parties shall have entered into a purchase and sale agreement (together with other definitive legal documentation relating to the Asset Sale, as amended, supplemented or otherwise modified from time to time, collectively, the “ PSA ”), with the LOI Counterparty in respect of the Asset Sale. The PSA shall, unless consented to in writing by the Lender: (i) provide for an aggregate gross purchase price sufficient to produce net cash proceeds in an amount greater than the aggregate Obligations outstanding as of October 1, 2019; (ii) not contemplate or provide for any Operator transition or third-party approvals related to an Operator transition; and (iii) be substantially consistent with the terms of the Letter of Intent. If the conditions set forth in clauses (i) , (ii) and (iii) of this Section 5(b) are satisfied, the Lender shall not have any consent rights over the PSA.

(c) New Lender Purchase . A “ New Lender Purchase ” means one or more third parties (the “ New Lender ”) shall have: (A) either (i) purchased 100% of the equity of the Lender or (ii) purchased all of the Loans from the Lender, in each case, for a net purchase price paid to the Lender equal to the amount of the Obligations (provided that, for purposes of this clause (A) of this Section 5(c) only, the term “Obligations” shall not include any amounts owed or allegedly owed or other rights that may accrue under Section 7.21 of the Loan Agreement) as of the date of such purchase plus $350,000 less the Forbearance Amount (the “ New Lender Purchase Price ”); (B) entered into mutual releases between and among the Credit Parties, the Lender and the New Lender (other than with respect to any Obligations owed by the Credit Parties to the New Lender under and in connection with the Loan Agreement as the same may have been amended from time to time), (C) entered into an amendment to the Loan Agreement that is acceptable to the Credit Parties in their sole and absolute discretion, (D) agreed that mortgage re-recording, if any, shall occur on a post-closing basis; and (E) agreed to such other and further terms as are acceptable to the Lender in its sole and absolute discretion. If a New

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Lender Purchase has not occurred on or prior to April 15, 2019, then on such date (I) AdCare Holdco shall pay to the Lender a non-refundable payment as additional interest, payable in-kind by increasing the outstanding principal amount of the Loan to AdCare Holdco held by such Lender by an amount equal to $200,000, whereupon from and after such date such amounts shall be added to and constitute Obligations and (II) the Finance Fee, the Prepayment Premium and the Break-Up Fee (set forth in clause (a) of the definition thereof) shall each be deemed earned as of April 15, 2019 (and in the amounts set forth on Schedule I hereto) and deemed paid by the Borrowers to the Lender, which Finance Fee, Prepayment Premium and Break-Up Fee shall be non-refundable and payable in-kind by increasing the outstanding principal amount of Loans owed by each Borrower, whereupon from and after such date such amounts shall be added to and constitute Obligations.

(d) Earnest Money . As soon as reasonably practicable following the Forbearance Effective Date, and no later than May 30, 2019, all “earnest money” placed in escrow (or otherwise set aside) by the LOI Counterparty pursuant to or as contemplated by the Letter of Intent and/or the PSA shall (i) be released from escrow (if applicable) and provided to the Credit Parties and (ii) become nonrefundable.

(e) Asset Sale Consummation .

(i) For clarification purposes only, the Credit Parties may, but shall not be obligated to, seek to consummate all transactions contemplated by the PSA as soon as reasonably practicable, and, for the avoidance of doubt, do not have to delay consummation of any transaction contemplated by the PSA (including the sale of any individual Healthcare Facility) because another transaction contemplated by the PSA (including the sale of another individual Healthcare Facility) is not yet capable of being consummated. Concurrently with the consummation of any transaction contemplated by the PSA (including the sale of any individual Healthcare Facility), the Borrowers shall use the proceeds therefrom to prepay the Obligations in cash in accordance with the Loan Agreement.

(ii) As soon as reasonably practicable following the Forbearance Effective Date, and no later than July 3, 2019, the Credit Parties shall have consummated all transactions contemplated by the PSA or delivered to the Lender an Extension Certificate (as defined below) as of such date.

(iii) As soon as reasonably practicable following the Forbearance Effective Date, and no later than August 17, 2019, the Credit Parties shall have consummated all transactions contemplated by the PSA or delivered to the Lender an Extension Certificate as of such date.

(iv) As soon as reasonably practicable following the Forbearance Effective Date, and no later than October 1, 2019, the Credit Parties shall have consummated all transactions contemplated by the PSA.

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(v) “ Extension Certificate ” means a certificate of an Authorized Officer of each of the Borrowers delivered to the Lender, certifying that the sole reason that all of the transactions contemplated by the PSA have not been consummated and the proceeds therefrom are not available to prepay the Loans is the Credit Parties’ obligation to obtain regulatory approvals necessary to close a real estate-only transaction of a skilled nursing facility, (a) which have not yet been obtained despite commercially reasonable efforts by the Credit Parties and (b) for which no commercially reasonable alternative exists.

(f) Extension and Other Fees.

(i) If any Obligations remain outstanding:

(A) on July 4, 2019, AdCare Holdco shall pay to the Lender a non- refundable payment as additional interest, payable in-kind by increasing the outstanding principal amount of the Loan to AdCare Holdco held by such Lender by an amount equal to $125,000, whereupon from and after such date such amounts shall be added to and constitute Obligations; and

(B) on August 18, 2019, AdCare Holdco shall pay to the Lender a non- refundable payment as additional interest, payable in-kind by increasing the outstanding principal amount of the Loan to AdCare Holdco held by such Lender by an amount equal to $125,000, whereupon from and after such date such amounts shall be added to and constitute Obligations.

(ii) For the avoidance of doubt, the provisions of this Section 5(f) shall survive the occurrence of a Termination Event but shall not survive the occurrence of a Credit Parties Termination (including a Credit Parties Termination that occurs after a Termination Event).

(g) From and after the consummation of a New Lender Purchase pursuant to clause (i) of the definition thereof, Sections 5(e) and (f) shall no longer apply.

(h) Information Deliverables. The RHP Guarantor and the Borrowers will furnish, or cause to be furnished, to Lender:

(i) as soon as available, and in any event within 30 calendar days after the end of each calendar month of the RHP Guarantor, the unaudited consolidated balance sheet and statements of operations, stockholders’ equity and cash flows of the RHP Guarantor and its consolidated Subsidiaries as of the end of such calendar month and for such calendar-month period, as applicable;

(ii) as soon as available, and in any event within 21 calendar days after the end of each calendar month of the RHP Guarantor, the cash workbook of the RHP Guarantor and its Subsidiaries for such calendar month; and

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(iii) as soon as available, and in any event within 45 calendar days after the end of each calendar month of the RHP Guarantor, A complete detailed operator dashboard of the RHP Guarantor and its Subsidiaries for such calendar month.

(i) 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.

(j) 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.

(k) As soon as practicable following the execution of this Agreement and in no event later than April 3, 2019, 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.

SECTION 6. Ratification of Liability .

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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 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 Party 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 Parties, 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, the provisions of this Section 7 shall survive the occurrence of a Termination Event.

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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 10. Continuing Effect of the Loan Agreement .

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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.

[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:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

NORTHWEST PROPERTY HOLDINGS, LLC ,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ATTALLA NURSING ADK, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ADCARE PROPERTY HOLDINGS, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

GUARANTORS:

REGIONAL HEALTH PROPERTIES, INC.,

a Georgia Corporation

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Chief Executive Officer

ADCARE PROPERTY HOLDINGS, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

HEARTH & HOME OF OHIO, INC.,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: President, Secretary and Treasurer

ADCARE OPERATIONS, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ADCARE ADMINISTRATIVE SERVICES, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ADCARE CONSULTING, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ADCARE FINANCIAL MANAGEMENT, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ADCARE OKLAHOMA MANAGEMENT, LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

ADCARE EMPLOYEE LEASING , LLC,

a Georgia limited liability company

By:	/s/ Brent Morrison
	Name: Brent Morrison
	Title: Manager

LENDER :

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

By :	Pinesap Investments, LLC , a Delaware limited liability company , its Manager

	By :	Pine Companies , LLC, a California limited liability com pany, its Manager

By:	/s/ Brian Timmer
	Name: Brian Timmer
	Title: Manager

Schedule I

Principal and Fees

Principal as of the Forbearance Effective Date

Borrower	Principal Amount
CP Property Holdings, LLC	$2,718,505.88
Northwest Property Holdings, LLC	$2,690,333.65
Attalla Nursing ADK, LLC	$8,662,962.00
AdCare Property Holdings, LLC	$4,289,786.95

Exhibit 10.205

EXECUTION COPY

EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ,

AND FOURTH AMENDMENT TO PROMISSORY NOTE

THIS EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, AND FOURTH AMENDMENT TO PROMISSORY NOTE (this “ Agreement ”) is made as of April 30, 2019, by and among QC PROPERTY HOLDINGS, LLC, a Georgia limited liability company (“ Borrower ”), ADCARE HEALTH SYSTEMS, INC., a Georgia corporation (“ AdCare ”), REGIONAL HEALTH PROPERTIES, INC., a Georgia corporation (“ Regional Health ” and together with AdCare, collectively, the “ Guarantors ”; the Guarantors and the Borrower are collectively the “ Obligors ”), and CONGRESSIONAL BANK, a Maryland chartered commercial bank and its successors and assigns (“ Lender ”).

RECITALS

A. Borrower and Lender are parties to 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, that certain Second Amendment to Loan and Security Agreement dated September 19, 2016, that certain Third Amendment to Loan and Security Agreement dated May 12, 2017, that certain Fourth Amendment to Loan and Security Agreement dated August 10, 2017, that certain Fifth Amendment to Loan and Security Agreement dated December 29, 2017, that certain Sixth Amendment to Loan and Security Agreement dated March 2, 2018 and that certain Seventh Amendment to Loan and Security Agreement dated April 30, 2018, and as further amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Loan Agreement ”), pursuant to which the Lender made to Borrower a term loan in the aggregate principal amount of $5,000,000 (the “ Loan ”), as evidenced by that Promissory Note (Term Note) dated as of September 27, 2013 by Borrower payable to Lender (as amended by that certain First Amendment to Promissory Note dated September 19, 2016, that certain Second Amendment to Promissory Note dated March 2, 2018 and that certain Third Amendment to Promissory Note dated April 30, 2018, and as further amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Note ”).

B. On or about December 7, 2018, Lender delivered to Borrower a letter notifying Borrower that Events of Default occurred because the Obligors failed to comply with Section 11.18 of the Loan Agreement in that the following Financial Covenants were not met: (i) Borrower failed to meet the minimum Debt Service Coverage Ratio for the months ended August 31, 2018 and September 30, 2018, and (ii) the Facility failed to meet the Minimum Census for the trailing twelve month period ended June 30, 2018 (collectively, the “ Specified Events of Default ”).

C. The Obligors and Lender have agreed to amend the Loan Documents as set forth herein, subject to the terms, conditions and understandings set forth herein.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and the Obligors hereby agree as follows.

AGREEMENTS

1. Definitions . Capitalized terms used herein (including in the Recitals hereto) and not otherwise defined shall have the meaning given to such terms in the Loan Agreement.

2. Amendment to Note . The Note is hereby amended to replace the words “on or before April 30, 2019 (the “ Maturity Date ”)” in Section 1 thereof with the words “on or before the Maturity Date (as defined in the Loan Agreement)”.

3. Amendments to Loan Agreement . The Loan Agreement is hereby amended as follows:

(a) Section 1.1 of the Loan Agreement is hereby amended to amend and restate the following defined term in its entirety:

Maturity Date : June 30, 2019, subject to the Extension Option. If the Extension Option is exercised herein, “Maturity Date” shall mean the Extended Maturity Date.

(b) Section 1.1 of the Loan Agreement is hereby amended to add the following defined terms in correct alphabetical order:

Extended Maturity Date : As defined in Section 3.6 hereof.

Extension Option : As defined in Section 3.6 hereof.

Purchase Agreement : The Purchase and Sale Agreement dated April 15, 2019 by and between Borrower, Northwest Property Holdings, LLC, Attalla Nursing ADK, LLC and CP Property Holdings, LLC, as sellers, and Attalla Realty LLC, College Park Realty LLC, Quail Creek Realty LLC and Northwest Realty LLC, as buyer, pursuant to which Borrower has agreed to sell the Property subject to the terms and conditions therein.

as follows:

3.6 Extension Option . Borrower may extend the Maturity Date (the extension option) from June 30, 2019 to July 31, 2019 (such extended date, the “ Extended Maturity Date ”) upon Borrower’s satisfaction of the following conditions: (i) Borrower shall have delivered to Lender written notice of its intent to exercise the Extension Option no earlier than forty-five (45) days and no later than thirty (30) days prior to the Maturity Date; (ii) no Default or Event of Default shall have occurred and be continuing; (iii) the Closing Date and Scheduled Closing Date (each as defined in the Purchase Agreement) shall have been extended and the Purchase Agreement shall otherwise still be in full force and effect, including with respect to the Property; (iv) Lender shall have received such additional information or costs as Lender may request; and (v) Lender shall have approved such extension in its commercially reasonable discretion.

(d) Section 14.1(n) of the Loan Agreement is hereby amended and restated in its entirety as follows:

(n) the termination of the Purchase Agreement for any reason;

(e) Section 3) of Annex I of the Loan Agreement is hereby amended and restated in its entirety as follows:

3) Debt Service Coverage Ratio . Measured as of the last day of each calendar month for the Test Period then ended, Borrower shall maintain a Debt Service Coverage Ratio of at least 1.25:1.00.

4. Conditions . The effectiveness of this Agreement is subject to the fulfillment of the following conditions precedent:

(a) Lender shall have received the following documents, each duly executed by all of the parties thereto and each in form and substance satisfactory to Lender:

(i)

this Agreement;

(ii)

Certifications of Beneficial Ownership from each Obligor;

(iii)

certificates of good standing of each Obligor from the state of formation of such Obligor as Lender may require;

(iv)

the results of recent lien searches in such jurisdictions as Lender may require; and

(v)

such other documents, instruments, certificates, legal opinions, information and agreements as Lender may request; and

(b) Lender shall have received all costs, fees and expenses payable pursuant to Section 9.

5. Waiver . The Lender hereby waives the Specified Events of Default; provided, however, that this Section 5 shall be strictly limited to the Specified Events of Default and shall not be deemed to waive any defaults under the following provisions after the date of this Agreement or after the period stated, or any other defaults arising out of non-compliance by the Obligors with any of the Loan Documents, whether or not the events, facts or circumstances giving rise to such non-compliance existed on or prior to the date hereof.

6. Acknowledgements, Representations and Warranties . In order to induce Lender to enter into this Agreement, each of the Obligors (as applicable), for itself, and for its respective heirs, personal representatives, successors and assigns, hereby acknowledges, represents and warrants to Lender as follows:

(a) The Obligors (to the extent of their respective obligations under the Loan Documents, as applicable) are responsible for reimbursing or otherwise paying all of the fees and expenses of Lender, including, without limitation, all costs and expenses related to any field examination, appraisals and/or business risk reviews, all recordation and transfer taxes and all attorneys’ fees and expenses (including in-house counsel) incurred by Lender in connection with the Loan, the Loan Documents and the collection and enforcement of any or all of the Loan Obligations and the preparation and execution of this Agreement and any other instruments, documents or agreements executed and delivered in connection herewith or required hereby, whether previously incurred or incurred in the future (collectively, the “ Enforcement Costs ”). Notwithstanding any provision of the Loan Documents to the contrary, the Enforcement Costs shall be deemed to be part of the Loan Obligations, and shall be payable in full by the Obligors (to the extent of their respective obligations under the Loan Documents, as applicable) upon execution and delivery of this Agreement, and thereafter, upon demand.

(b) Each Obligor has full power and authority (as applicable) to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action (as applicable). No consent or approval of equity holders of, lenders to, or other creditors of any Obligor, or any other Person, and no consent, approval, filing or registration with or notice to any governmental authority, is required as a condition to the validity of this Agreement or the performance of any Obligor’s obligations hereunder.

(c) All understandings, representations, warranties and recitals contained or expressed in this Agreement are true, accurate, complete and correct in all respects; and, no such understanding, representation, warranty or recital fails or omits to state or otherwise disclose any material fact or information necessary to prevent such understanding, representation, warranty or recital from being misleading. All of the representations and warranties set forth in the Loan Documents remain in full force and effect, and are reaffirmed as of the date of this Agreement. All information included in each Certificate of Beneficial Ownership is true and correct in all respects. The Obligors acknowledge and agree that Lender has been induced in part to enter into this Agreement based upon Lender’s justifiable reliance on the truth, accuracy, and completeness of all understandings, representations, warranties and recitals contained in this Agreement and the other Loan Documents. There is no fact known to any of the Obligors which such Obligor has not disclosed to Lender in writing on or prior to the date of this Agreement which would materially and adversely affect the understandings of Lender expressed in this Agreement or any representation, warranty or recital contained in this Agreement.

(d) Each of the Loan Documents (as amended hereby) continues in full force and effect notwithstanding the execution and delivery of this Agreement. Each Obligor hereby reissues, ratifies and confirms the enforceability and validity of all Loan Documents to which it is a party and agrees that this Agreement and each of the Loan Documents to which such Obligor is a party constitute the legal, valid and binding obligations of such Obligor, enforceable in accordance with their respective terms. In addition, each Obligor acknowledges and agrees that neither the execution and delivery of this Agreement and/or any related documents nor any of the terms, provisions, covenants or agreements contained in this Agreement shall in any manner release, impair, lessen, modify, waive or otherwise affect the liability and obligations of such Obligor under the terms of the Loan Documents, except to the extent expressly set forth herein. Lender may disseminate any information it now has or hereafter obtains pertaining to the Loan Obligations, including any security for any of the Loan Obligations, any credit or other information on any collateral or security for any of the Loan Obligations (including appraisals, environmental reports and assessments, and market studies), the Obligors, any of the Obligors’ principals, partners or members to the following: (i) any actual or prospective assignee or participant; (ii) Lender’s affiliates; (iii) any regulatory body having jurisdiction over Lender; or (iv) any other party as necessary or appropriate in Lender’s reasonable judgment in connection with the enforcement of Lender’s rights and remedies under the Loan Documents.

(e) Lender has acted in good faith and has conducted itself in a commercially reasonable manner in its relationships with each Obligor in connection with this Agreement and in connection with the Loan, the Loan Obligations and the Loan Documents; the Obligors hereby waiving and releasing any claims to the contrary. No Obligor has any defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against Lender or any past, present or future agent, attorney, legal representative, predecessor in interest, subsidiary, affiliate, successor, assign, employee, stockholder, director or officer of Lender (including Lender, collectively, the “ Lender Group ”), directly or indirectly, arising out of, based upon, or in any manner connected with, any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to the execution of this Agreement and occurred, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of the Loan Obligations or any of the terms or conditions of the Loan Documents, or which directly or indirectly relate to or arise out of or in any manner are connected with the Loan Obligations or any of the Loan Documents; to the extent any such defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims, actions and causes of action are hereby forever waived, discharged and released. Each Obligor hereby acknowledges and agrees that the execution of this Agreement by Lender shall not constitute an acknowledgment of or admission by any member of the Lender Group of the existence of any claims or of liability for any matter or precedent upon which any claim or liability may be asserted. Each Obligor further acknowledges and agrees that, to the extent any such claims may exist, they are of a speculative nature so as to be incapable of objective valuation and that, in any event, the value to each Obligor of the covenants and obligations of Lender contained in this Agreement and the other documents executed and delivered in connection with this Agreement substantially and materially exceeds any and all value of any kind or nature whatsoever of any such claims. Each Obligor further acknowledges and agrees that Lender is not in any way responsible or liable for the previous, current or future condition or deterioration of the business operations and/or financial condition of any Obligor and that Lender has not breached any agreement or commitment to loan money or otherwise make financial accommodations available to any Obligor or to fund any operations of any Obligor at any time.

(f) EACH OBLIGOR HEREBY ACKNOWLEDGES THAT IT HAS FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT AFTER AN ADEQUATE OPPORTUNITY AND SUFFICIENT PERIOD OF TIME TO REVIEW, ANALYZE AND DISCUSS (I) ALL TERMS AND CONDITIONS OF THIS AGREEMENT, (II) ANY AND ALL OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND (III) ALL FACTUAL AND LEGAL MATTERS RELEVANT TO THIS AGREEMENT AND/OR ANY AND ALL SUCH OTHER DOCUMENTS, WITH COUNSEL FREELY AND INDEPENDENTLY SELECTED BY SUCH OBLIGOR. EACH OBLIGOR FURTHER ACKNOWLEDGES AND AGREES THAT (I) IT HAS ACTIVELY AND WITH FULL UNDERSTANDING PARTICIPATED IN THE NEGOTIATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS

AGREEMENT AFTER CONSULTATION AND REVIEW WITH ITS COUNSEL, (II) ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AGREEMENT HAVE BEEN NEGOTIATED AT ARM’S-LENGTH, AND (III) THIS AGREEMENT AND ANY AND ALL SUCH OTHER DOCUMENTS HAVE BEEN NEGOTIATED, PREPARED AND EXECUTED WITHOUT FRAUD, DURESS, UNDUE INFLUENCE, OR COERCION OF ANY KIND OR NATURE WHATSOEVER HAVING BEEN EXERTED BY OR IMPOSED UPON ANY PARTY TO THIS AGREEMENT BY ANY OTHER PARTY. NO PROVISION OF THIS AGREEMENT OR SUCH OTHER DOCUMENTS SHALL BE CONSTRUED AGAINST OR INTERPRETED TO THE DISADVANTAGE OF ANY PARTY TO THIS AGREEMENT BY ANY COURT OR OTHER GOVERNMENTAL OR JUDICIAL AUTHORITY BY REASON OF SUCH PARTY HAVING OR BEING DEEMED TO HAVE STRUCTURED, DICTATED OR DRAFTED SUCH PROVISION.

(g) There are no proceedings or investigations pending or, so far the as each Obligor knows, threatened, before any court or arbitrator or before or by any governmental, administrative or judicial authority or agency against such Obligor.

(h) There is no statute, regulation, rule, order or judgment, no charter, by-law, or preference stock provision of the Obligors, and no provision of any mortgage, indenture, contract or other agreement binding on the Obligors or any of its, his, her or their respective properties, which would prohibit or cause a default under or in any way prevent the execution, delivery, performance, compliance or observance of any of the terms and conditions of this Agreement and/or any of the other documents executed and delivered in connection with this Agreement.

(i) Each Obligor hereby acknowledges and agrees that it is obligated to pay and perform the Loan Obligations in accordance with the terms and conditions of the Loan Documents. Each Obligor further acknowledges and confirms that any and all collateral previously, simultaneously herewith or hereafter pledged as security for any or all of the Loan Obligations does and shall continue to secure all such Obligations. Lender has, and will continue to have as security for the Loan Obligations, and Borrower hereby grants and re-grants to Lender, a valid and perfected lien on and security interest in such Borrower’s right, title and interest in all of the collateral pledged by it as security for any or all of the Loan Obligations. The grant of the security interest in such collateral shall continue in full force and effect until such time as all of the Loan Obligations have been indefeasibly paid in full. Borrower hereby irrevocably authorizes Lender at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable law, reasonably required by Lender to establish or maintain the validity, perfection and priority of the security interests granted in the Loan Documents and this Agreement.

7. Further Assurances . Upon Lender’s request, the Obligors shall execute and deliver to Lender such additional documents, amendments, confirmation, supplements, instruments, certificates and agreements as Lender may reasonably request from time to time in order to effectuate this Agreement or any document executed in connection with this Agreement, or to ratify and confirm any of the Loan Documents or this Agreement or any document executed in connection with this Agreement, and the rights of Lender hereunder and thereunder. Further, promptly following any request therefor, each Obligor shall provide information and documentation reasonably requested by Lender for purposes of compliance with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act.

8. Releases and Waivers .

(a) Each Obligor knowingly and voluntarily forever releases, acquits and discharges the Lender Group, from and of any and all claims, damages, losses, costs, expenses, compensation, causes of actions, counterclaims, suits, judgments, obligations, liabilities, indebtedness, debts, affirmative and other defenses, setoffs, and demands of any kind or nature whatsoever, in law, in equity or otherwise, whether presently known or unknown, which the Obligors may have had, now have, upon, or by reason of any matter, course or thing whatsoever relating to, arising out of, based upon, or in any manner connected with, directly or indirectly, any transaction, contracts, controversies, promises, duties, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, begun, or otherwise related or connected to or with (i) any or all of the Loan Obligations, this Agreement, any or all of the Loan Documents, (ii) Lender’s acts, statements, conduct, representations and omissions made in connection therewith, including, without limitation, the terms and conditions of this Agreement, and (iii) any fact, matter, transaction or event relating thereto, whether known or unknown, suspected or unsuspected, whether presently enforceable or enforceable in the future, that could, might or may be claimed to exist, whether liquidated or unliquidated, each as though fully set forth herein at length.

(b) Without implying any limitation on the foregoing, each Obligor hereby agrees that from and after the date hereof, it will not assert to any person or entity that any deterioration of the business operations or financial condition of the Obligor was caused by any breach of contract or wrongful act of any member of the Lender Group, including, without limitation, any act to loan money or make other financial accommodations available to the Obligor or to fund any operations of the Obligor at any time. Each Obligor hereby knowingly and voluntarily, forever releases, acquits and discharges the Lender Group from and of any and all claims that any member of the Lender Group is in any way responsible for the past, current or future condition or deterioration of the business operations and/or financial condition of the Obligor, and from and of any and all claims that any member of the Lender Group breached any agreement.

(c) Each Obligor hereby waives the provisions of any applicable laws restricting the release of claims that the Obligor does not know or suspect to exist at the time of release, which, if known, would have materially affected the decision to agree to these releases. In this connection, each Obligor hereby agrees, represents and warrants to Lender that it realizes and acknowledges that factual matters now unknown may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses, expenses and/or other rights, claims or amounts which are presently unknown, unanticipated and unsuspected, and each Obligor further agrees, represents and warrants that the releases provided herein have been negotiated and agreed upon in light of that realization and the Obligor nevertheless hereby intends to release, discharge and acquit the parties set forth herein from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses, expenses and/or other rights, claims or amounts that are in any manner set forth in or related to any or all of the Loan Obligations, this Agreement, any or all of the Loan Documents and all dealings in connection therewith.

9. Fees; Expenses . As consideration for entering into this Agreement, Borrower shall pay to Lender: (i) a non-refundable amendment closing fee equal to $15,000, payable on or before the date hereof; and (ii) on or before the date hereof, all costs, fees and expenses of Lender incurred on or before the date hereof in connection with the preparation, execution and delivery of this Agreement and any and all other documents executed and delivered in connection with this Agreement including, without limitation, attorney’s fees and expenses (including in-house counsel) and appraisal fees.

10. Affirmation . Except as specifically amended hereby, the Loan Documents (and all covenants, terms, conditions and agreements therein) shall remain in full force and effect, and are hereby ratified and confirmed in all respects by the Obligors party thereto. Each Obligor hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Loan Documents to which it is a party. Except as expressly provided hereunder, each Obligor covenants and agrees to comply with all of the terms, covenants and conditions of the Loan Documents to which it is a party, as amended hereby, notwithstanding any prior course of conduct, waivers, releases or other actions or inactions on Lender’s part which might otherwise constitute or be construed as a waiver of or amendment to such terms, covenants and conditions.

11. No Waiver or Novation . The execution, delivery and effectiveness of this Agreement shall not operate as a waiver, diminishment, impairment or extinguishment of any right, power or remedy of Lender, nor constitute a waiver of any provision of the Loan Documents or any other document, instruments and agreements executed or delivered in connection with any of the foregoing. Except as expressly set forth in Section 5 hereof with respect to the Specified Events of Default) nothing herein is intended to be or shall be construed as a waiver of any existing Defaults or Events of Default under the Loan Documents or any of Lender’s rights and remedies in respect of such Defaults or Events of Default. This Agreement (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Loan or the Loan Obligations.

12. Notices . All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight delivery service or when mailed by certified mail, postage prepaid, as follows:

If to any Obligor:	c/o QC Property Holdings, LLC
	454 Satellite Boulevard, Ste. 404
	Suwanee, GA 30024
	Attention: Manager

If to Lender:	Congressional Bank
	5515 Security Lane, Suite 740
	North Bethesda, MD 20852
	Attention: Amy Heller

with a copy to:	Miles & Stockbridge P.C.
	1201 Pennsylvania Avenue, NW, Suite 900
	Washington, DC 20004
	Attention: Abbey M. Ruby

The Lender hereby gives notice to the Obligors that all notices to be provided under the Loan Documents shall be given to Lender at its address set forth above or at such other address as Lender may hereafter specify in a notice given in the manner required under the Loan Documents.

13. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION OF ANY LOAN DOCUMENT TO THE CONTRARY, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER DOCUMENTS CONTEMPLATED HEREBY, BASED UPON AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION AND (c) CERTIFIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE.

14. Venue and Jurisdiction . Notwithstanding any other provision of any Loan Document to the contrary, each Obligor agrees that any action or suit against Lender arising out of or relating to any of the Loan Documents shall be filed in federal court or state court located in the Montgomery County in the State of Maryland. Each Obligor agrees that Lender shall not be deemed to have waived its right to enforce this section by filing an action or suit against any Obligor in a venue outside of the State of Maryland. If Lender does commence an action or suit arising out of or relating to any of the Loan Documents, each Obligor agrees that the case may be filed in federal court or state court in the State of Maryland. Lender reserves the right to commence an action or suit in any other jurisdiction where any Obligor or any collateral has any presence or is located. Each Obligor consents to personal jurisdiction and venue in such forum selected by Lender and waives any right to contest jurisdiction and venue and the convenience of any such forum. The provisions of this section are material inducements to Lender’s acceptance of this Agreement.

15. Other Agreements . The parties to this Agreement further agree:

(a) This Agreement shall be governed by, and construed in accordance with, the laws of Maryland, without regard to any choice of law , rules or principles to the contrary. Nothing in this paragraph shall be construed to limit or otherwise affect any rights or remedies of Lender under federal law.

(b) In case one or more provisions contained in this Agreement shall be invalid, illegal, or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall remain effective and binding and shall not be affected or impaired thereby.

(c) If there is any conflict between the terms of this Agreement, any of the documents executed and delivered in connection with this Agreement and any of the other Loan Documents, the terms of this Agreement shall prevail.

(d) This Agreement may be amended, modified or supplemented only by written agreement of the parties hereto. No provision of this Agreement may be waived except in writing signed by the party against whom such waiver is sought to be enforced.

(e) This Agreement sets forth the final and entire agreement and understanding of the parties hereto, superseding all prior representations, understandings and agreements, written or oral, not expressly set forth in this Agreement or in any other documents executed and delivered in connection herewith.

(f) This Agreement shall constitute a “Loan Document” under the Loan Agreement and the other Loan Documents.

(g) As used in this Agreement, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require.

(h) The Recitals are part of this Agreement. The headings, titles and captions of this Agreement are for the convenience only and are not part of this Agreement.

(i) Time is of the essence of this Agreement with respect to the Obligors.

(j) This Agreement shall be binding upon and inure to the benefit of the Obligors and Lender and each of their respective heirs, personal representatives, successors, and assigns; provided, however, that no Obligor shall assign any of its rights or obligations under this Agreement.

(k) This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same agreement. Each party to this Agreement agrees that the respective signatures of the parties may be delivered by fax, “.PDF,” or other electronic means acceptable to Lender and that the parties may rely on a signature so delivered as an original. Any party who chooses to deliver its signature in such manner agrees to provide promptly to the other parties a copy of this Agreement with its inked signature, but the party’s failure to deliver a copy of this Agreement with its inked signature shall not affect the validity, enforceability and binding effect of this Agreement.

[ remainder of page intentionally blank ]

IN WITNESS WHEREOF, the pa rt ies have executed this Agreement as of the date first written above.

BORROWER:

QC PROPERTY HOLDINGS, LLC,
a Georgia•limited liability company

By:		Brent Morrison
Name:		Brent Morrison
Title:		Manager

GUARANTORS :

ADCARE HEALTH SYSTEMS, INC.,
a Georgia•corporation

By:		Brent Morrison
Name:		Brent Morrison
Title:		Manager


REGIONAL HEALTH PROPERTIES, INC.,
a Georgia•corporation

By:		Brent Morrison
Name:		Brent Morrison
Title:		Manager

LENDER:

CONGRESSIONAL BANK ,
a Maryland chartered commercial bank


By:		Paise K. Ela
Name:		Paise K. Ela
Title:		Authorized Signatory

Exhibit 10.206

FINAL

SUBLEASE AGREEMENT

~~THIS SUBLEASE AGREEMENT~~ (this “ ~~Sublease~~ ”) is entered into as of the 30 ^th day of November, 2018 (the ~~“Execution Date”)~~ by and between ~~REGIONAL HEALTH PROPERTIES, INC.,~~ a Georgia corporation (“ ~~Sublessor~~ ”) and ~~MIAMI COV SNF, INC~~ ., an Ohio corporation (“ ~~Sublessee~~ ~~”),~~ for the improved real property described on ~~Exhibit~~ ~~“A-l”~~ (the ~~“Premises”),~~ on which Premises is located that certain 106-bed licensed and 100-bed Medicare and Medicaid certified skilled nursing home facility located at 75 Mote Drive, Covington, Ohio 45318, including the ~~“Sublessor Personal Property~~ ” associated therewith described on ~~Exhibit~~ ~~“A-2”~~ (the Sublessor Personal Property together with the Premises, being collectively the ~~“Facility”)~~ . Certain capitalized terms used in this Sublease are defined on ~~Exhibit~~ ~~“B”~~ .

RECITALS

~~WHEREAS,~~ Sublessor is the tenant under that certain Lease Agreement dated as of August 26, 2002, as amended (the “ ~~Lease~~ ~~Agreement~~ ” ) pursuant to which Sublessor leases the Premises from Covington Realty, LLC, an Ohio limited liability company (the ~~“Landlord”);~~ and

~~WHEREAS,~~ Sublessor shall remain responsible for all obligations under the Lease Agreement. Sublessor shall exercise best efforts to cause the Landlord to perform its obligations under the Lease Agreement for the benefit of the Sublessee.

NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. ~~Term~~ . The ~~“Term~~ ” of this Sublease is the Initial Term of ten (10) years plus the Renewal Terms (if any). A “ ~~Sublease~~ ~~Year~~ ” is the twelve (12) month period commencing on the Commencement Date (as defined below) and each anniversary thereof during each year of the ~~Term~~ . The ~~“Initial~~ ~~Term”~~ commences on December 1, 2018 (the “ ~~Commencement~~ ~~Date~~ ”) and ends on November 30, 2028, and may be extended for two (2) separate renewal terms of five (5) years each (each a “ ~~Renewal~~ ~~Term~~ ”) if: (a) at least one hundred eighty (180) days prior to the end of the Initial Term or the Renewal Term (as applicable), Sublessee delivers to Sublessor the “ ~~Renewal~~ ~~Notice~~ ” indicating that Sublessee desires to exercise its right to extend this Sublease for the Renewal Term and (b) there is no then uncured Event of Default (i) as of the date Sublessor receives the Renewal Notice (the “ ~~Exercise~~ ~~Date~~ ~~”),~~ or (ii) on the last day of the Initial Term or the Renewal Term (as applicable), and (c) corresponding renewal options are exercised for all ~~Affiliated~~ ~~Subleases~~ excluding the facility known as Hearth and Care at Greenfield located in Greenfield, Ohio which sublease will not need to be renewed as a condition to renewal of this Sublease. For purposes hereof, “ ~~Termination~~ ~~Date~~ ” shall mean the last day of the Initial Term or a Renewal Term (if any) or the earlier date on which this Sublease may be terminated as provided herein.

2. Rent . During the Term, Sublessee shall pay in advance to Sublessor on or before the 1 ^st day of each month the following amounts:

2.1 Initial Term Base Rent (“Base Rent”) .

2.1.1 ~~Months~~ ~~One~~ ~~through~~ ~~Six~~ . During the first six (6) months of the Initial Term, Base Rent shall be equal to $34,000.00 per month.

2.1.2 ~~Months~~ ~~Seven~~ ~~through~~ ~~Twelve~~ . During months seven (7) through twelve (12) of the Initial Term, Base Rent per month shall be equal to the greater of: (i) the ~~Calculated~~ ~~Rent~~ or (ii) the ~~Debt~~ ~~Service~~ ~~Rent~~ .

~~2.1.3~~ ~~Months~~ ~~Thirteen~~ ~~through~~ ~~Thirty~~ ~~six~~ . Commencing on the first day of the second Sublease Year and continuing through months thirty six (36), Base Rent per month shall be equal to the greater of (i) the ~~Calculated~~ ~~Rent~~ or (ii) 115% of the ~~Debt~~ ~~Service~~ ~~Rent~~ .

2.1.4 Months Thirty seven through the End of the Initial Term . Commencing on the first day of month Thirty seven and continuing through the end of month Forty eight of the Initial Term, Base Rent shall be $67,000.00 per month.

Commencing on the first day of the fifth Lease Year of the Initial Term and continuing on the first day of each Lease Year thereafter during the Initial Term, Base Rent for the applicable Lease Year shall increase by the Base Rent Escalator.

2.2 ~~Renewal~~ ~~Term~~ ~~Base~~ ~~Rent~~ . During the first Sublease Year of each Renewal Term, Base Rent shall be reset in an amount equal to the ~~Reset~~ ~~Rent~~ . For each Sublease Year thereafter during the applicable Renewal Term, Base Rent shall be equal to the Base Rent paid during the preceding Sublease Year plus the ~~Base~~ ~~Rent~~ ~~Escalator~~ .

2.3 ~~Additional~~ ~~Rent~~ . In addition to Base Rent, Sublessee shall pay to Sublessor as additional rent (“ ~~Additional~~ ~~Rent”)~~ an amount equal to the monthly payments required to fund escrows for Taxes (as hereinafter defined) pursuant to Section 5.2 to be held, applied, disbursed and/or otherwise spent in accordance with the ~~Facility~~ ~~Mortgage~~ ~~Documents~~ accruing only during the Term of this Sublease. The terms Base Rent and Additional Rent are sometimes collectively referred to as ~~“Rent.”~~

~~2.4~~ ~~Absolute~~ ~~Net~~ ~~Sublease~~ . Except with respect to Sublessee’s off-set rights pursuant to Section 2.6 hereof, all Rent payments shall be absolutely net to Sublessor, free of any and all Taxes (as defined below in Section 5 ), Other Charges (as defined below in Section 5 ), and operating or other expenses of any kind whatsoever, all of which shall be paid by Sublessee. Sublessee shall at all times during the Term remain obligated under this Sublease without any right of set-off, counterclaim, abatement, deduction, reduction or defense of any kind, except as set forth in Section 2.6 , and Sublessee’s sole right to recover such other damages against Sublessor under this Sublease shall be to prove such damages in a separate action.

2.5 ~~Payment~~ ~~Terms~~ . All Rent hereunder shall be paid, at the election of Sublessee, by wire transfer, automated clearing house transfer or direct deposit (in each case as implemented by Sublessee with its financial institution) in accordance with Sublessor’s written wire transfer instructions provided by Sublessor to Sublessee from time to time (but at a minimum of thirty (30) days prior to the payment of Rent), or by direct payment authorization established by Sublessee with its lender to withdraw payments of Rent directly from Sublessee’s account to Sublessor’s designated account.

2.6 ~~Off~~ - ~~Set~~ ~~Rights~~ . Notwithstanding any other provision of this Sublease to the contrary, Sublessee may off-set amounts against the Rent arising from any breach, default or failure to pay and/or perform (collectively, the “Indemnity Obligations”) (a) by Sublessor and/or Landlord under this Sublease, including, without limitation, the indemnification obligations hereunder, (b) by Regional Health Properties, Inc., a Georgia corporation (the “Guarantor”) under this Sublease, the Operations Transfer Agreement and/or the Guaranty of Guarantor referred to in the Operations Transfer Agreement (the “Guaranty”) and attached thereto as an exhibit or schedule, including, without limitation, the indemnification and/or other obligations under any of the foregoing documents, and/or (c) by Exiting Operator under the Operations Transfer Agreement, including, without limitation, the indemnification obligations thereunder; provided, however, that such offset right shall not be effective until Sublessee has provided Sublessor and Landlord written notice of the breach or Indemnity Obligations to which Sublessee is entitled and such breach, default or failure to pay or perform such Indemnity Obligations have not been cured or paid to Sublessee within thirty (30) days thereafter.

2.7 Events Prior to Commencement Date and Indemnification . Notwithstanding any provision in this Sublease to the contrary, Sublessee shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor or Landlord), whether known or unknown, now existing or arising in the future, arising out of or in connection with the operation of the Facility, the ownership (in fee simple or leasehold) of the Premises, leasing of the Facility or the Premises, violations of any applicable laws or other events to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility or the Premises (each, a “Preexisting Event”). Sublessor and Landlord shall, jointly and severally, indemnify, defend and save harmless Sublessee and its successors and assigns (collectively, “Sublessee Indemnitees”) from and against any and all obligations, liabilities, damages, costs, expenses, losses or claims costs, expenses or losses (including fees and expenses of counsel) incurred by Sublessee Indemnitees arising out of or in connection with any Preexisting Event.

3. Security Deposit .

3.1 ~~Security~~ ~~Deposit~~ . During the Term, Sublessee shall fund in four (4) installments and maintain a security deposit (the “ ~~Security~~ ~~Deposit~~ ”) in the following amounts (each, an “ ~~Installment~~ ~~”):~~ (i) $34,000.00 on the Commencement Date; (ii) an additional $34,000.00 on the first day of the ninth month of the Initial Term, (iii) an additional $34,000.00 on the first day of the eighteenth month of the Initial Term and (iv) an additional $34,000.00 on the first day of the twenty-fourth month of the Initial Term.

3.2 Acceleration of Security Deposit Installment Payments. Notwithstanding the provisions of Section 3.1, if Sublessee fails to meet the required Lease Coverage Ratios set forth in Section 27(a) hereof (without regard to any notice and cure provisions applicable thereto), Sublessee shall pay to Sublessor the next due Installment of the Security Deposit. By way of example, if Sublessee fails to meet the Lease Coverage Ratio for the first full fiscal quarter ended after month 9 of the Initial Term, Sublessee shall pay to Sublessor the third Installment of the Security Deposit in the amount of $34,000.00 otherwise due and payable on the first day of the 18 ^th month of the Initial Term. If an accelerated Installment of the Security Deposit is due and payable hereunder, Sublessee shall make such Installment payment within five (5) business days of written demand by Sublessor.

3.3 ~~Payment~~ of ~~Security~~ ~~Deposit~~ . Sublessee may fund the Security Deposit by wire transfer to Sublessor of immediately available funds or through a Letter of Credit.

3.4 ~~Application~~ of ~~Security~~ ~~Deposit~~ . Sublessor shall hold the Security Deposit as security for the full and faithful performance of every term, provision, obligation and covenant under this Sublease. If the Security Deposit is paid in immediately available funds, the Security Deposit will be deposited by into an interest-bearing account, which interest shall accrue for the benefit of Sublessee. Subject to the earlier return of the Security Deposit pursuant to the provisions of the Eaglewood ALF Affiliated Sublease (as defined in Exhibit “F” attached hereto), within thirty (30) days of the end of the Initial Term or Renewal Term, as applicable, Sublessor shall return the Security Deposit to Sublessee with all accrued interest. The Security Deposit shall not be considered an advance payment of Rent (or of any other sum payable by Sublessee under this Sublease) or a measure of Sublessor’s damages in case of a default by Sublessee. If the Security Deposit is paid in immediately available funds, Sublessor shall have no obligation to maintain the Security Deposit separate and apart from Sublessor’s general and/or other funds but shall deposit same in a separate bank account in order to track accrued interest and to provide periodic statements thereof to Sublessee at least quarterly within ten (10) days after each calendar quarter. If Sublessee defaults in respect of any of the terms, provisions, covenants and conditions of this Sublease or if there is a default under any Affiliated Sublease, Sublessor may, but shall not be required to, in addition to and not in lieu of any other rights and remedies available to Sublessor, apply all or any part of the Security Deposit and accrued interest to the payment of any such sum in default, or any other sum that Sublessor may reasonably and necessarily expend or be required to expend by reason of such default, including but not limited to, any damages or deficiency in reletting the Premises. Whenever, and as often as, Sublessor has applied any portion of the Security Deposit to cure Sublessee’s default hereunder or under any Affiliated Sublease, Sublessee shall, within ten (10) days after Notice from Sublessor, deposit additional funds or Letters of Credit with Sublessor sufficient to restore the Security Deposit to the full amount then required to be deposited with Sublessor, and Sublessee’s failure to do so shall constitute an Event of Default without any further Notice. If Sublessor transfers or assigns its interest under this Sublease in accordance with the terms hereof, Sublessor shall assign the Security Deposit and accrued interest to the new sublessor and thereafter Sublessor shall have no further liability for the return of the Security Deposit, and Sublessee agrees to look solely to the new sublessor for the return of the Security Deposit. Sublessee agrees that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that Sublessor, its successors and assigns shall return the Security Deposit to the last Sublessee in possession of the Premises at the last address for which Notice has been given by such Sublessee or set forth in this Sublease, or as otherwise directed by Sublessee in writing, and that Sublessor thereafter shall be relieved of any liability therefor, regardless of one or more assignments of this Sublease or any such actual or attempted assignment or encumbrances of the Security Deposit.

~~3.5~~ [Intentionally Omitted] .

4. ~~Late~~ ~~Charges~~ . The late payment of Rent will cause Sublessor to lose the use of such money and incur administrative and other expenses not contemplated under this Sublease. While the exact amount of the foregoing is difficult to ascertain, the parties agree that as a reasonable estimate of fair compensation to Sublessor, if Rent is not paid within ten (10) days after the due date for such payment then (a) Sublessee shall thereafter pay to Sublessor on demand a late charge equal to five percent (5%) of such delinquent amounts, and (b) such delinquent amounts shall accrue interest from the due date at the rate of eight percent (8%) per annum (the “ ~~Agreed~~ ~~Rate~~ ”) until paid in full.

5. ~~Taxes~~ ~~and~~ ~~Other~~ ~~Charges~~ . At the commencement and at the expiration of the Term, all Taxes and Other Charges shall be prorated. Sublessor shall promptly forward to Sublessee and Facility Mortgagee copies of all bills and payment receipts for Taxes or Other Charges received by it to enable payment thereof prior to the imposition of penalties and interest. Sublessee shall not be penalized for delays by Sublessor in the forwarding of such to Sublessee and Facility Mortgagee. Sublessee or Facility Mortgagee (as applicable) shall pay and discharge (including the filing of all required returns), prior to delinquency or imposition of any fine, penalty, interest or other cost (“ ~~Penalty~~ ”) provided that Sublessee and Facility Mortgagee timely receive such bills as aforesaid, “ ~~Taxes~~ ” , consisting of any real property and other taxes and assessments accruing during the Term of this Sublease with respect to the Premises (but not such Taxes accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease), and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date (excluding income taxes, franchise taxes, estate taxes, transfer taxes and/or gross receipts taxes that may be imposed upon Sublessor), provided such are received in a timely manner that provides Sublessee reasonable time to ensure such payments are made timely. For the avoidance to doubt, the parties acknowledge that Taxes are paid in arrears and the escrow of Taxes by Sublessee will be based on the Taxes payable only during the term of this Sublease, i.e., Sublessee’s obligation to pay Taxes will commence with the tax bill issued for the last half of 2018 (payable in July, 2019), as prorated based on the Commencement Date. Sublessee will escrow payments of Taxes prior to such July, 2019 due date as hereinabove provided. Sublessor acknowledges that all Taxes for the period prior to the Commencement Date shall be the Exiting Operator’s responsibility. Sublessee shall promptly pay and discharge “ ~~Other~~ ~~Charges~~ ” , consisting of any utilities and other costs and expenses of Sublessee’s operation of the Facility or any portion of the Premises and all other charges, obligations or deposits assessed against any portion of the Premises accruing during the Term of this Sublease with respect to of Sublessee’s operation of the Premises. Sublessee shall not be responsible for Taxes or Other Charges accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease, and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date. Notwithstanding any provision of this Section 5, to the extent Sublessee has funded Taxes in accordance with Section 5.2 below, Facility Mortgagee shall timely pay all Taxes to the extent of the impound held by Facility Mortgagee.

~~5.1~~ ~~Protests~~ . Sublessee has the right, but not the obligation, in good faith to protest or contest (a “ ~~Protest~~ ”) in whole or in part (a) the amount or payment of any Taxes or Other Charges, and (b) the existence, amount or validity of any Lien (as defined in Section 8.1 ) , by appropriate proceedings sufficient to (i) prevent the collection or other realization of such Taxes, Other Charges or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other Charges or Liens (so long as it provides Sublessor with reasonable security to assure the foregoing). Sublessee shall diligently prosecute any such Protest at its sole cost and expense. Sublessor shall cooperate in any Protest that involves an amount assessed against it.

5.2 ~~Impound~~ . If required by the Facility Mortgagee or upon Sublessor’s written notice to Sublessee during the Term during any ongoing Event of Default (after the expiration of any notice and cure period), Sublessor may require, Sublessee to pay with each Base Rent payment a deposit of one-twelfth (1/12 ^t ^h ) of the amount required to discharge the annual amount of real property Taxes secured by a Lien encumbering any portion of the Premises as and when they become due. The deposits shall not bear interest nor be held by Sublessor or Facility Mortgagee (as applicable) in trust or as an agent of Sublessee, but rather shall be applied to the payment of the real property taxes. If at any time within thirty (30) days prior to the due date the deposits shall be insufficient for the payment of the obligation in full, Sublessee shall within ten (10) days after demand by Sublessor or Facility Mortgagee (as applicable), deposit the deficiency with Sublessor or Facility Mortgagee (as applicable). If deposits are in excess of the actual obligation, the required monthly deposits for the ensuing Sublease Year shall be reduced proportionately and any such excess at the end of the final Sublease Year shall be refunded to Sublessee within ten (10) calendar days. Sublessee shall forward to Sublessor or Facility Mortgagee (as applicable) all Tax bills, bond and assessment statements within five (5) days of receipt by Sublessee. If Sublessor assigns this Sublease in accordance with the terms hereof, all such deposits shall be transferred to the assignee, and Sublessor shall thereafter have no liability of any kind with respect thereto.

5.3 ~~Tax~~ ~~Treatment~~ ; ~~Reporting~~ . Sublessor and Sublessee each acknowledges that each shall treat this transaction as a true Sublease for state law purposes and shall report this transaction as a Sublease for Federal income tax purposes. For Federal income tax purposes each shall report this Sublease as a true Sublease with Sublessor as the sublessor of the Premises and Sublessee as the sublessee of such Premises including: (a) Sublessee reporting its Rent payments as rent expense under Section 162 of the Code, and (b) Sublessor reporting the Rent payments as rental income. For the avoidance of doubt, nothing in this Sublease shall be deemed to constitute a guaranty, warranty or representation by either Sublessor or Sublessee as to the actual treatment of this transaction for state law purposes and for federal income tax purposes.

shall also name the Sublessor, Landlord, and Facility Mortgagee as loss payee. The parties hereby waive as to each other all rights of subrogation which any insurance carrier, or either of them, may have by reason of any provision in any policy issued to them, provided such waiver does not thereby invalidate such policy. Original policies or satisfactory insurer certificates evidencing the existence of the insurance required by this Sublease and showing the interest of Sublessor, Landlord, and Facility Mortgagee shall be provided to Sublessor prior to the commencement of the Term or, for a renewal policy, not less than ten (10) days prior to the expiration date of the insurance policy being renewed. If Sublessor and/or Landlord are provided with a certificate, either may demand that Sublessee provide a complete copy of the related policy within ten (10) days. Sublessee may satisfy the insurance requirements hereunder through coverage under so-called blanket policy(ies) of insurance carried and maintained by Sublessee regarding other operations or facilities; provided, however, that the coverage afforded Sublessor and Landlord will not be reduced or diminished or otherwise be different from that which would exist under a separate policies of insurance meeting all other requirements of this Sublease by reason of the use of such blanket policies of insurance. During the Term, Sublessee shall maintain the following insurance and any claims thereunder shall be adjudicated by and at the expense of it or its insurance carrier:

(a) ~~Property~~ Insurance with respect to the Facility and Business against loss or damage from all causes under standard “all risk” property insurance coverage with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), without exclusion for fire, lightning, windstorm, explosion, smoke damage, vehicle damage, sprinkler leakage, flood, vandalism, earthquake, malicious mischief and any other risks normally covered under an extended coverage endorsement, in amounts that are not less than the actual replacement value of the Premises and all Sublessor and Sublessee Personal Property associated therewith (including the cost of compliance with changes in zoning and building codes and other laws and regulations, demolition and debris removal and increased cost of construction). Additionally, if the Facility contains steam boilers, steam pipes, steam engines, steam turbines or other high pressure vessels, insurance with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), covering the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the Facility, in an amount equal to one hundred percent (100%) of the full replacement cost of the Facility, which policies shall insure against physical damage to and loss of occupancy and use of the Premises arising out of an accident or breakdown covered thereunder;

(b) ~~Business~~ ~~Interruption~~ ~~and~~ ~~Extra~~ ~~Expense~~ ~~Coverage~~ with respect to the Facility and Business for loss of rental value for a period not less than twelve (12) months, covering perils consistent with the requirements of Section 6(a), and including either an agreed amount endorsement or a waiver of any co-insurance provisions, so as to prevent Sublessee, Sublessor and any other insured thereunder from being a co-insurer, and providing that any covered loss thereunder shall be payable to the Sublessee;

(c) ~~Commercial~~ ~~General~~ ~~Public~~ ~~Liability~~ ~~Coverage~~ with respect to the Facility and Business (including products liability and broad form coverage) against claims for bodily injury, death or property damage occurring on, in or about the Facility, affording the parties protection of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as additional insured;

(d) ~~Professional~~ ~~Liability~~ ~~Coverage~~ with respect to the Facility and Business, providing for claims specifically relating to patient care and services provided by the Facility staff, its contractors and all related parties, to include coverage for medical directors with regard to their administrative duties provided to the Premises, with limits of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as an additional insured. If such coverage is purchased on a claims made basis, Sublessee must show proof of the ability to purchase tail coverage to last through the statute of limitations, upon the end of the Sublease Term;

(e) ~~Worker’s Compensation and Employers Liability Insurance~~ with respect to the Facility and Business for losses sustained by Sublessee’s employees in the course and scope of their employment, as well as volunteers, and otherwise consistent with all applicable state law and meeting all other legal requirements; and

(f) ~~Deductibles/Se~~ l ~~f-Insured Retentions~~ for the above policies shall not be greater than $100,000.00. To the extent reasonably required by a Facility Mortgagee or Landlord, Sublessor may require a lower deductible amount or set higher policy limits to the extent both are commercially available and customary for properties similar to the Facility located in the State of Ohio.

7. Use, Regulatory Compliance, Preservation of Business and Management .

7.1 Permitted Use; Qualified Care; Number of Beds.

(a) Subject to Section 7.1(b) below, Sublessee shall continuously use and occupy the Premises during the Term as a skilled nursing facility with not less than 106 licensed and 100 Medicare and Medicaid certified beds and for ancillary services relating thereto, but for no other purpose (“ ~~Permitted~~ ~~Use~~ ~~”).~~ Sublessee shall provide care, treatment and services to all residents of the Facility in a manner consistent in all material respects with all applicable laws. Notwithstanding any common law or statutory right, Sublessee agrees not to transfer, move or otherwise take action that reduces the bed complement of the Facility and Sublessee agrees not to take any of the beds out of service or move the beds to a different location without the prior written consent of the Sublessor in its sole and absolute discretion. Schedule 7.1 attached hereto sets forth a true, correct and complete list of the number and types of licensed beds at the Premises and whether such beds are Medicaid and/or Medicare certified. Subject to Section 7.1(b) below, Sublessee shall take no action to reduce or modify the number of beds for which the Premises are licensed.

(b) On or before December 31, 2018 (the “ ~~Effective~~ ~~Date~~ ~~”),~~ Landlord shall execute and file with the Ohio Department of Health and the Ohio Department of Medicaid a letter prepared by Sublessee (the “ ~~Letter~~ ”) that provides for the permanent relinquishment on or before the Effective Date of seven (7) beds currently licensed at the Facility (one (1) of which is currently Medicare- and Medicaid-certified) (the “ ~~Relinquished~~ ~~Beds~~ ”) . Landlord, Sublessor, and Sublessee acknowledge and agree that the effect of filing the Letter will be that: (a) the Relinquished Beds will be permanently relinquished and not be eligible to be operated, placed into service, or sold following the Effective Date; (b) the Facility’s licensed bed capacity will be reduced from one hundred six (106) beds (one hundred (100) of which are Medicare- and Medicaid-certified) to ninety-nine (99) beds (all of which beds will be Medicare- and Medicaid-certified) following the Effective Date; (c) in accordance with applicable law in effect as of the Execution Date, the Facility/Sublessee will be eligible for an increase in its Medicaid reimbursement rate as a result of the Facility decreasing its licensed bed capacity below one hundred (100) beds; and (d) as of January 1, 2019, in accordance with applicable law in effect as of the Execution Date, the State of Ohio franchise permit fee assessed against the Facility/Sublessee (the “ ~~Franchise~~ ~~Permit~~ ~~Fee~~ ”) will be based upon ninety-nine (99) beds, instead of one hundred six (106) beds (the “ ~~Franchise~~ ~~Permit~~ ~~Fee~~ ~~Reduction~~ ”) . Provided that the Letter is timely executed and filed by Landlord as provided herein, Sublessee shall pay to Landlord, as consideration for Landlord’s agreement to permanently relinquish the Relinquished Beds, an amount equal to Forty-Eight Thousand and 00/100 Dollars ($48,000.00) (the “ ~~Consideration~~ ”) . The Consideration shall be paid by Sublessee to Landlord in forty-eight (48) consecutive monthly installments of One Thousand and 00/100 Dollars ($1,000.00) each, payable on the first (1 ^st ) day of each month, beginning on the first (1 ^st ) day of the month that is thirteen (13) months after the month in which the Execution Date occurs. If the Letter is not timely executed and filed by Landlord as provided herein and/or the Franchise Permit Fee Reduction does not become effective, then the obligation of Sublessee to pay the Consideration to Landlord shall automatically extinguish and terminate, and, notwithstanding anything to the contrary contained herein, Landlord shall be solely responsible for the full and timely payment of the Franchise Permit Fee attributable to the Relinquished Beds after the Effective Date.

7.2 ~~Regulatory~~ ~~Compliance~~ . Sublessee, the Facility and the Premises shall comply in all material respects with all licensing and other laws and all covenants, conditions, restrictions and other use or maintenance requirements applicable to the Facility and, to the extent applicable, all Medicare, Medicaid and other third-party payor certification requirements, including timely filing cost and other required reports, timely paying all expenses shown thereon, and ensuring that the Facility continues to be fully certified for participation in Medicare and Medicaid (if applicable) throughout the Term and when they are returned to Sublessor, all without any suspension, revocation, decertification or other material limitation of such certification, if any. Further, Sublessee shall not commit any act or omission that would in any way violate any certificate of occupancy affecting the Facility, result in closure of the Facility or result in the sale or transfer of all or any portion of any related certificate of need (if applicable), bed rights or other similar certificate or license at any of the Facility. All inspection fees, costs and charges associated with a change of such licensure or certification shall be borne solely by Sublessor.

7.3 ~~Preservation~~ of ~~Business~~ . Sublessee acknowledges that a fair return to Sublessor on and protection of its investment in the Premises depends, in part, on Sublessee’s dedication to the Business and the concentration of similar businesses of Sublessee and its Affiliates in the geographical area of each Facility. Sublessee further acknowledges that the diversion of residents or patient care activities (except as is necessary to provide residents or patients with an alternative level of care or comply with contractual provisions of applicable admission agreements) from any Facility to other facilities at any time during the Term will have a material adverse effect on the value and utility of such Facility. Therefore, Sublessee agrees that during the Term and for a period of one (1) year thereafter, neither Sublessee nor any of its Affiliates shall, without the prior written consent of Sublessor: (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (l0)-mile geographical radius of the Facility, (ii) except as is necessary to provide residents or patients with an alternative level of care, recommend or solicit the removal or transfer of any resident or patient from any Facility to any other nursing, health care, senior housing or retirement housing facility or divert actual or potential residents, patients or care activities of the Business conducted at the Facility to any other facilities, or (iii) employ for other businesses any personnel working in the Facility; provided, however, that if Sublessee or an Affiliate leases or subleases additional facilities from Sublessor or Sublessor’s Affiliates, the parties agree that Sublessee may move employees among those affiliated facilities.

7.4 ~~Consulting~~ ~~Services~~ . MSTC Development, Inc. (“ ~~Consultant~~ ”) shall provide administration and management services (or shall cause a wholly-owned subsidiary to do so) to the Facility pursuant to a consulting services agreement acceptable to Sublessor, in substantially the form attached hereto as ~~Exhibit~~ ~~“H”~~ (the “ ~~Consulting~~ ~~Agreement~~ ”) . The consulting fee (“ ~~Consulting~~ ~~Fee~~ ”) under the Consulting Agreement shall not exceed five percent (5.0%) of the annual gross revenue realized from Sublessee’s operation of the Facility (after adjustment for contractual adjustments and overpayment by providers). Payment of the Consulting Fee shall be subordinate to the payment of Rent and all other amounts payable by Sublessee pursuant to this Sublease. The Consulting Agreement shall provide that from and after the date that an Event of Default has occurred and until such Event of Default, if curable, has been cured, Consultant shall not make any distributions to the holders of the equity interests of Consultant; provided, however, that Consultant shall be permitted to pay all compensation, salaries and/or bonuses to employees or contractors of Consultant (including Key Principals) in the ordinary course of business. Sublessee shall not be permitted to engage any third-party consultant for the Facility without the prior written consent of Sublessor, which consent shall not be unreasonably withheld.

7.5 ~~Indebtedness~~ . Sublessee shall not incur debt other than (a) trade debt incurred in the ordinary course of business, (b) a working capital line secured by Sublessee’s accounts receivable, or (c) indebtedness constituting or in connection with Permitted Liens and Consulting Fees permitted hereunder.

8. ~~Acceptance, Maintenance, Upgrade, Alteration and Environmental.~~

8.1 Acceptance “AS IS”; No Liens . ~~Sublessee~~ ~~acknowledges that it is~~ presently engaged in operations similar to those to be conducted at the Facility and has expertise in such industry and, in deciding to enter into this Sublease, has not relied on any representations or warranties, express or implied, of any kind from Sublessor except as contained herein. Sublessee accepts the Facility and the Premises on an “AS IS” basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Notwithstanding its right to Protest set forth in Section 5.1 , Sublessee shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a “ ~~Lien~~ ”) for any reason other than Permitted Liens, provided that nothing in this Sublease shall require Sublessee to keep the Premises free of ~~Permitted~~ ~~Liens~~ . Furthermore, notwithstanding anything to the contrary contained in this Sublease, the provisions of this Section are expressly subject to the terms and conditions of the Guaranty, and Sublessor acknowledges and agrees this Section 8.1 shall not in any way whatsoever reduce, limit or cancel Sublessor’s liability or obligations under the Guaranty.

8.2 ~~Sublessee’s~~ ~~Maintenance~~ ~~Obligations~~ . Sublessee shall (a) keep and maintain the Premises and the Facility in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all ordinary interior and exterior, non-structural repairs necessary to keep the Facility in good and working order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable, certification for participation in Medicare and Medicaid, and (c) keep and maintain all Sublessor and Sublessee Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice for skilled nursing facilities located in the State of Ohio as required under this Sublease.

8.3 ~~Alterations~~ by ~~Sublessee~~ . Sublessee shall not make any ~~Alterations~~ to the Premises without the express prior written consent of Sublessor, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that Sublessor’s consent shall not be required, but no less than ten (10) days advance notice to Sublessor shall be provided, with respect to (i) Alterations required by governmental authorities which are necessary to maintain applicable licenses and certifications to operate the Facility or (ii) minor cosmetic Alterations that (x) are non-structural in nature, (y) are not visible from the outside of the Premises and (z) do not cost, in the aggregate, in excess of $75,000.00 in any rolling twelve (12) month period. All Alterations shall immediately become a part of the Premises and the property of Sublessor subject to this Sublease, and the cost of all Alterations or other purchases, whether undertaken as an on-going licensing, Medicare, Medicaid or other regulatory requirement, or otherwise, shall be borne solely by Sublessee. All Alterations shall be constructed in a good and workmanlike manner in compliance with all applicable laws and the insurance required under this Sublease.

8.4 ~~Hazardous~~ ~~Materials~~ . Sublessee’s use of the Premises shall comply in all material respects with all ~~Hazardous~~ ~~Materials~~ ~~Laws~~ . If any ~~Environmental~~ ~~Activities~~ occur or are suspected to have occurred in violation of any Hazardous Materials Laws by Sublessee during the Term or if Sublessee has received notice of any ~~Hazardous~~ ~~Materials~~ ~~Claim~~ against any portion of the Premises solely as a result of Sublessee’s acts or omissions during the Term, Sublessee shall promptly obtain all permits and approvals necessary to remedy any such actual or suspected problem through the removal of Hazardous Materials or otherwise, and upon Sublessor’s approval of the remediation plan, remedy any such problem to the satisfaction of Sublessor and all applicable governmental authorities, in accordance with all Hazardous Materials Laws and good business practices. During the Term, Sublessee shall promptly advise Sublessor in writing of (a) any Environmental Activities in violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims against Sublessee or any portion of the Premises; (c) any remedial action taken by Sublessee in response to any Hazardous Materials Claims or any Hazardous Materials on, under or about any portion of the Premises in violation of any Hazardous Materials Laws; (d) Sublessee’s discovery of any occurrence or condition on or in the vicinity of any portion of the Premises that materially increase the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Sublessee, any governmental authority or any other Person relating to Hazardous Materials Laws or Hazardous Materials Claims with respect to any portion of the Premises, including copies thereof . Sublessor shall have the right, at Sublessor’s sole cost and expense (including, without limitation, Sublessor’s reasonable attorneys’ fees and costs) and with counsel chosen by Sublessor, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims. Sublessor represents and warrants to Sublessee that there are no Hazardous Materials Claims arising out of or relating to the Facility or the Premises as of the commencement of the Term.

9. ~~Sublessee~~ Property . At Sublessee’s sole discretion, Sublessee shall obtain and install all items of furniture, fixtures, supplies and equipment not included as Sublessor Personal Property as shall be necessary or reasonably appropriate to operate the Facility in compliance with this Sublease (“ ~~Sublessee~~ ~~Personal~~ ~~Property~~ ”, which collectively with the “ ~~Sublessee~~ ~~Intangible~~ ~~Property~~ ” shall be referred to herein as “ ~~Sublessee~~ ~~Property~~ ~~”),~~ and all Sublessee Property shall remain Sublessee’s sole property at all times, including upon termination of this Sublease. As used herein, “ ~~Sublessee Intangible Property~~ ” means all the following at any time owned by Sublessee in connection with its use of any portion of the Premises: Medicare, Medicaid and other accounts and proceeds thereof; rents, profits, income or revenue derived from such operation or use; all documents, chattel paper, instruments, contract rights (including contracts with residents, employees and third-party payors), deposit accounts, general intangibles and chooses in action; refunds of any Taxes or Other Charges for periods of time during the Term; and licenses and permits necessary or desirable for Sublessee’s use of any portion of the Premises, including licensed Medicaid beds (if applicable). Subject to Sublessee’s working capital lender’s liens and the intercreditor agreement required by such working capital lender with respect thereto, Sublessor shall have a security interest in and to the Sublessee Property, which security interest Sublessor shall have the right to assign to a Facility Mortgagee in Sublessor’s sole discretion. Sublessor will agree to subordinate its lien and security interest with respect to Sublessee’s accounts receivable to any third party lender providing to Sublessee a working capital line of credit, whether such working capital line of credit exists as of the Commencement Date or future working capital lines of credit, on commercially reasonable terms reasonably acceptable to Sublessor. The terms and conditions of any working capital line of credit obtained by Sublessee after the Execution Date must be approved by Sublessor and Facility Mortgagee, which approval shall not be unreasonably withheld, conditioned or delayed so long as the line of credit terms and conditions are customary for loans in the senior living industry and are commercially reasonable.

~~10.~~ ~~Financial~~ , ~~Management~~ ~~and~~ ~~Regulatory~~ ~~Reports~~ . Sublessee shall provide Sublessor with the reports listed in ~~Exhibit~~ “C ” at the time described therein, which reports will be internally prepared by Sublessee unless otherwise provided for in Exhibit “C” and, with respect to any refinancing of the Premises such other information about Sublessee or the operations of the Facility as Sublessor may reasonably request. All financial information provided by Sublessee shall be prepared in accordance with generally accepted accounting principles consistently applied and shall be submitted electronically in the form of unrestricted, unlocked “ .xis” spreadsheets created using Microsoft Excel (2003 or newer editions), if Sublessee’s accounting office can reasonably provide it in this format. If Sublessee or any Affiliate becomes subject to any reporting requirements of the Securities and Exchange Commission ~~(“SEC”)~~ during the Term, it shall concurrently deliver to Sublessor such reports as are delivered pursuant to applicable securities laws. Similarly, should Sublessor or its parent, Regional Health Properties, Inc., be subject to any particular reporting requirements of the SEC during the Term for which it needs reports, documentation or other information from Sublessee, Sublessee agrees to deliver such reports, documentation and information within thirty (30) days after Sublessor’s request for the same. At Sublessor’s sole expense and upon reasonable notice so as not to interfere with Sublessee’s business and operations, Sublessee shall allow the review and audit of Sublessee’s financial statements listed in ~~Exhibit~~ ~~“C”~~ .

~~11.~~ ~~Representations~~ ~~and~~ ~~Warranties~~ . Each party represents and warrants to the other as of the Execution Date hereof and as of the Commencement Date, that: (a) it has the power and authority to execute, deliver and perform this Sublease; (b) it has taken all requisite action necessary to authorize the execution, delivery and performance of such party’s obligations under this Sublease; (c) this Sublease constitutes a legal, valid and binding obligation of it enforceable in accordance with its terms; (d) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Sublease within the state where the Premises is located; and (e) the execution, delivery and performance of this Sublease by it do not and will not (1) require any consent, approval, authorization, order or declaration of, or any filing or registration with, any court, any governmental authority or any other Person other than as set forth in Section 30.1, below, (2) conflict with, and do not and will not result in a breach of, any organizational documents of it or any agreement of which it is a party, and (3) violate any legal requirements, order, writ, injunction or decree, statute, rule or regulation, applicable to it or the Facility or the Premises provided the Authorization described in Sections 30.1 and 30.2 are timely secured. In addition, Sublessor and Landlord jointly and severally represent and warrant to Sublessee that (A) provided the Authorizations are timely secured, neither Sublessee nor Landlord is in default of, or not in compliance with, the Permitted Use, the Lease Agreement or the Facility Mortgage Documents, including the replacement reserve requirements with respect thereto and the amount of the HUD Cap Ex Balance as set forth in Section 30 hereof; (B) Sublessor has good and marketable leasehold title to the Premises and the Authorizations (as hereinafter defined), subject to Exiting Operator’s leasehold rights under the Lease Agreement and to the Authorizations which will be terminated as of the Commencement Date, and as of the Commencement Date, there will be no existing subleases or other occupancy agreements in effect with respect to the Premises other than resident admission agreements for residents in possession of the Facility; (C) Landlord has good and marketable fee simple title to the Premises and the Authorizations subject to the Lease Agreement; and (D) the Facility contains 106 beds licensed by the Ohio Department of Health as skilled nursing beds and 100 beds certified by Medicare and Medicaid (which beds are subject to reduction pursuant to Section 7.1(b) hereof. As used herein

the term “Authorizations” shall mean, with respect to the Facility, any and all licenses, permits, certifications, registrations, accreditations, provider agreements, certificates of need, certificates of exemption, approvals, waivers, variances and other authorizations issued by any governmental authority, including, but not limited to HUD, necessary or advisable for the use and operation of the Facility as it is currently being operated, as contemplated to be operated under this Sublease, and receipt of reimbursement or other payments under any third party payor program in which such Facility participates.

12. ~~Events~~ ~~of Default~~ . So long as there is no Event of Default, Sublessee shall

peaceably and quietly have, hold and enjoy the Premises for the Term, free of any claim or other action not caused or created by Sublessee or pursuant to Sections 17 or 18 . The occurrence of any of the following events will constitute an “ ~~Event~~ of ~~Default~~ ” on the part of Sublessee:

(a) Sublessee’s failure to pay within ten (10) days of when due any Base Rent;

(b) Sublessee’s failure to (i) pay Additional Rent, Taxes, Other Charges or other required payments or (ii) pay or replace the Security Deposit at the time or in the manner required by Section 3 above within ten (10) days after written notice thereof from Sublessor;

(c) (i) The revocation, suspension or material limitation of any license which would prohibit the operation of the Facility as a skilled nursing facility or the certification of the Facility for provider status under Medicare or Medicaid, if applicable; (ii) the closure of the Facility for more than twenty-four (24) hours except due to force majeure, mandatory evacuation, casualty or condemnation; (iii) the sale or transfer of all or any portion of any certificate of need, bed rights or other similar certificate or license relating to the Facility; (iv) the use of any portion of the Facility other than for a skilled nursing facility and for ancillary services relating thereto; or (v) any act or omission of Sublessee that in the reasonable judgment of Sublessor will likely result in any of the foregoing;

(d) Any other material suspension, termination or restriction placed upon Sublessee, the Facility or the ability to admit residents (e.g., an admissions ban or non-payment for new admissions by Medicare or Medicaid resulting from an inspection survey, if applicable) which is reasonably expected to result in a material adverse effect on Sublessee or the Facility; provided that Sublessee uses its good faith efforts to cure such matter by promptly commencing and diligently pursuing such cure to the completion thereof and providing prompt notice to Sublessor of same and periodic updates with respect thereto;

(e) An Event of Default has occurred under any Affiliated Sublease (as said term is defined therein) which Event of Default has not been cured during any applicable cure period or waived;

(f) Any misrepresentation by Sublessee under this Sublease or material misstatement or omission of fact in any written report, notice or communication from Sublessee to Sublessor, to include without limitation the financial reporting and submissions required hereunder, the effect of any of the foregoing would reasonably be expected to result in a material adverse effect on Sublessee or the Facility;

(g) The failure to perform or comply in any material respects with the provisions of Section 6 (Insurance) or Section 15 (Sublessor Rights); and if such failure is to provide a renewal insurance policy pursuant to Section 6 and such failure is not cured within three (3) business days after written notice thereof from Sublessor;

(h) (i) Sublessee shall admit in writing its inability to pay its debts generally; (ii) Sublessee shall make an assignment of all or substantially all of its property for the benefit of creditors; (iii) a receiver, trustee or liquidator shall be appointed for Sublessee or substantially all of its property, if within seven (7) business days of such appointment Sublessee does not inform Sublessor in writing that they intend to cause such appointment to be discharged or such discharge is not diligently prosecuted to completion within sixty (60) days after the date of such appointment; (iv) the filing by Sublessee of a voluntary petition under any federal bankruptcy or state law to be adjudicated as bankrupt or for any arrangement or other debtor’s relief; or (v) the involuntary filing of such a petition against Sublessee by any other party, unless Sublessee within seven (7) business days of such filing informs Sublessor in writing of its intent to cause such petition to be dismissed, such dismissal is diligently prosecuted and such petition is dismissed within one hundred twenty (120) days after filing;

(i) The failure to perform or comply with any representation, warranty, covenant or agreement of this Sublease not requiring the payment of money unless (i) within seven (7) business days of Sublessee’s receipt of a notice of default from Sublessor, Sublessee gives Sublessor notice of its intent to cure such default; and (ii) Sublessee cures it either (x) within thirty (30) days after such notice from Sublessor or (y) if such default cannot with due diligence be so cured because of the nature of the default or delays beyond the control of Sublessee and cure after such period will not have a materially adverse effect upon the Facility, then such default shall not constitute an Event of Default if Sublessee uses its good faith efforts to cure such default by promptly commencing and diligently pursuing such cure to the completion thereof and cures it within sixty (60) days after such notice from Sublessor, provided, however, in the event such default is caused by life safety code change or other change in law applicable to the Facility, Sublessee shall have such additional time as is necessary for Sublessee to cure the same, provided that Sublessee uses its good faith efforts to cure such default by promptly commencing and diligently pursuing such cure to completion and provided that such additional time to cure does not have a material adverse effect on the operations of the Facility;

(j) Except as permitted under this Sublease, Sublessee shall enter into any sale or transfer of substantially all of its assets, recapitalization, change of control (other than among Key Principals which is permitted hereunder), merger, reorganization or combination without the prior written consent of Sublessor, which consent may be granted or withheld in Sublessor’s sole and absolute discretion;

(k) Commencing two (2) years after the Commencement Date, the appointment or implementation of a facility level manager, monitor, temporary management company or Systems Improvement Agreement by the CMS or any other regulatory agency (voluntary or mandatory) as a result of poor regulatory performance, appointment of additional mandatory monitoring by state or regulatory agencies;

(l) The failure of Sublessee to comply with any of the Financial Covenants set forth in Section 27(a) ; or

(m) The failure of Sublessee to timely provide any of the reports required by Section 10 .

13. ~~Remedies~~ . Upon the occurrence and continuance of an Event of Default, Sublessor may exercise all rights and remedies under this Sublease and the laws of the State of Ohio that are available to a Sublessor of real and personal property in the event of a default by its Sublessee, and as to the Sublessee Property, all remedies granted under the laws of said state to a secured party under its Uniform Commercial Code. Sublessor shall have the duty to mitigate damages. Sublessee shall pay Sublessor, promptly upon demand, all reasonable out-of-pocket expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, agents and brokers. Notwithstanding any provision to the contrary contained in Sections 12 or 13 hereof, if all then existing Events of Default would be considered to be capable of being cured within (i) five (5) days for a monetary default or (ii) thirty (30) days for a non-monetary default by a reasonably prudent landlord and tenant in the skilled nursing industry located in Ohio, then prior to Sublessor’s exercising any remedies provided herein, including, but limited to the termination of this Sublease, as a result of the occurrence of any such Event of Default, Sublessee shall have the right to cure each such Event of Default within five (5) days of notice from Sublessor for a monetary default and within thirty (30) days of notice from Sublessor for a non-monetary default, and upon such cure of all Events of Default then existing, Sublessor may not exercise its remedies thereunder or terminate this Sublease as a result of such cured Events of Default. Notwithstanding the preceding sentence, Sublessee’s right to cure an Event of Default and thereby avoid Sublessor’s exercise of remedies or termination of this Sublease shall not apply if Sublessee and/or the sublessees under any Affiliated Sublease have cured Events of Default two (2) times in the aggregate under this Sublease and/or the Affiliated Subleases in any twelve (12) consecutive month period.

13.1 General . Without limiting the foregoing but subject to the provisions thereof, Sublessor shall have the right (but not the obligation) to do any of the following upon an Event of Default to the extent not prohibited by applicable law: (a) sue for the specific performance of any covenant of Sublessee as to which it is in breach or for the performance of any other obligation or Sublessee under this Sublease; (b) enter upon any portion of the Premises, terminate this Sublease, dispossess Sublessee from the Premises through appropriate legal procedures and/or collect money damages by reason of Sublessee’s breach, including the acceleration of all Rent which would have accrued after such termination and all obligations and liabilities of Sublessee under this Sublease which survive the termination of the Term; (c) elect to leave this Sublease in place and sue for Rent and other money damages as the same come due; and (d) (before or after repossession of the Premises pursuant to clause (b) above and whether or not this Sublease has been terminated) assign this Sublease from Sublessee to a third party selected by Sublessor, in which case Sublessee agrees to consent to such assignment, and execute any and all documents necessary to effect such assignment; provided, that rent received from such third party assignee/new tenant shall serve to mitigate Sublessee’s obligation for damages to Sublessor hereunder.

13.2 ~~Receivership~~ . Sublessee acknowledges that one of the rights and remedies available to Sublessor under applicable law is to apply to a court of competent jurisdiction for the appointment of a receiver to take possession of the Premises, to collect the rents, issues, profits and income of the Premises and to manage the operation of the Premises. Sublessor further acknowledges and agrees that, due to the specific use of the Premises as a health care facility, upon the occurrence and continuance of an Event of Default by Sublessee, the appointment of a receiver to take over the operations of the Premises may be necessary to ensure the continued operation of the premises as a health care facility in order to ensure the continuation of quality care to the residents who reside therein. Sublessee irrevocably and unconditionally agrees that, upon the occurrence and continuance of an Event of Default, and in addition to any other right or remedy of Sublessor under this Sublease or allowed by law, Sublessor may petition any appropriate court for the appointment of a receiver to take possession of the Premises, to manage the operation of the Premises, to collect and disburse all rents, issues, profits and income generated thereby and to preserve or replace to the extent possible any operating license for the Premises or to otherwise substitute the licensee or provider thereof. The receiver shall be entitled to a reasonable fee for its services as a receiver. All such fees and other expenses of the receivership estate shall be added to the monthly rent due to Sublessor under this Sublease and shall be the obligation of Sublessee. To the extent not prohibited by applicable law, Sublessee hereby irrevocably stipulates to the appointment of a receiver under such circumstances and for such purposes and agrees not to contest such appointment in any manner whatsoever.

13.3 ~~Remedies~~ ~~Cumulative~~ ; No ~~Waiver~~ . No right or remedy herein conferred upon or reserved to Sublessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of Sublessor to insist at any time upon the strict performance of any provision of this Sublease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Sublessee. Sublessor’s receipt of and Sublessee’s payment of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Sublessor of any provision of this Sublease shall be effective unless expressed in a writing signed by it.

13.4 ~~Performance of Sublessee’s Obligations~~ . If Sublessee at any time shall fail to make any payment or perform any act on its part required to be made or performed under this Sublease and the same constitutes an Event of Default and the same is not cured after the expiration of any applicable notice and cure period or waived, then Sublessor may (but is not obligated to), without waiving or releasing Sublessee from any obligations or Event of Default hereunder, make such payment or perform such act for the account and at the expense of Sublessee, and in such event Sublessor will thereafter provide notice to Sublessee of any such payment or performance. All sums so paid by Sublessor and all necessary and reasonable incidental costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the performance of any such act by it in connection with curing any such Event of Default, together with interest at the Agreed Rate (as defined in Section 4 hereof) from the date of the making of such payment or the incurring of such costs and expenses, shall be payable by Sublessee to Sublessor upon Sublessor’s written demand therefor.

14. ~~Provisions on Termination.~~

14.1 ~~Surrender of Possession~~ . On the expiration of the Term or earlier termination or cancellation of this Sublease (the “ ~~Termination Date”)~~ , Sublessee shall deliver to Sublessor or its designee possession of (a) the Facility and associated Sublessor Personal Property in a neat and clean condition and in as good a condition as existed at the date of Sublessee’s possession and occupancy pursuant to this Sublease, ordinary wear and tear excepted, (b) a fully operational, licensed and certified (if applicable) Business at the Facility, and (c) all patient charts and resident records along with appropriate resident consents if necessary and copies of all books and records relating to the Facility and the Premises which are usual and customary for skilled nursing facilities located in the State of Ohio for an orderly transfer of the operations of the Facility at the time of its surrender of the Premises to Sublessor or its designee, excluding books and records relating to Sublessee Personal Property. Sublessee shall reasonably cooperate with Sublessor or its designee in transferring or obtaining all necessary licenses and certifications for Sublessor or its designee, and Sublessee shall comply with all usual and customary requests regarding skilled nursing facilities located in the State of Ohio for an orderly transfer of the Facility licenses, and Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Sublessor or its designee to operate the Facility. Subject to all applicable laws, Sublessee hereby assigns, effective upon the Termination Date, all rights to operate the Facility to Sublessor or its designee, including all required licenses and permits and all rights to apply for or otherwise obtain them, and all other nonproprietary Sublessee Intangible Property relating to any portion of the Premises.

14.2 ~~Removal of Sublessee Property~~ . Provided that no Event of Default then exists, in connection with the surrender of the Premises, Sublessee may upon at least five (5) business days’ prior notice to Sublessor remove from the Premises all Sublessee Property, leaving the Premises in good and presentable condition and appearance, including repair of any damage caused by such removal; provided that Sublessor shall have the right and option to purchase the non-proprietary Sublessee Personal Property (but excluding all Sublessee Intangible Property) for its then net book value during such five (5)-business day notice period, in which case Sublessee shall so convey the Sublessee Personal Property to Sublessor by executing a bill of sale in a form reasonably required by Sublessor. If there is any Event of Default then existing, Sublessee may not remove any Sublessee Personal Property from the Premises and instead will, on demand from Sublessor, convey it to Sublessor for application to any amounts owed by Sublessee under this Sublease at net book value, by executing a bill of sale in a form reasonably required by Sublessor. Title to any Sublessee Personal Property which is not removed by Sublessee as permitted above upon the expiration of the Term shall, at Sublessor’s election, vest in Sublessor; provided, however, that Sublessor may remove and store or dispose any or all of such Sublessee Personal Property which is not so removed by Sublessee without obligation or accounting to Sublessee.

14.3 ~~Management of Premises~~ . Commencing on the Termination Date, Sublessor or its designee, upon written notice to Sublessee, may elect to assume the responsibilities and obligations for the management and operation of the Facility and Sublessee agrees to reasonably cooperate to accomplish the transfer of such management and operation without interrupting the operation of the Facility, and Sublessee will, upon Sublessor’s request, execute a mutually agreeable, reasonable and customary short-term operations transition agreement, respecting operations of the Facility pending the engagement by Sublessor of a replacement operator. Sublessee shall comply with all usual and customary requests for skilled nursing facilities located in the State of Ohio for an orderly transfer of any and all Facility and other licenses, applicable Medicare and Medicaid certifications and possession of the Premises at the time of any such surrender.

14.4 ~~Holding Over~~ . If Sublessee shall for any reason remain in possession of the Premises after the Termination Date, such possession shall be a month-to-month tenancy during which time Sublessee shall pay as rental on the first (1 ^st ) business day of each month one hundred twenty-five percent (125%) of the monthly Rent payable with respect to the last Sublease Year, all additional charges accruing during the month and all other sums, if any, payable by Sublessee pursuant to this Sublease. Nothing contained herein shall constitute the consent, express or implied, of Sublessor to the holding over of Sublessee after the Termination Date, nor shall anything contained herein be deemed to limit Sublessor’s remedies.

14.5 ~~Survival~~ . All representations, warranties, covenants and other obligations of Landlord, Sublessor and Sublessee under this Sublease shall survive the Termination Date.

15. ~~Certain Sublessor Rights.~~

15.1 ~~Entry and Examination of Records~~ . Sublessor and its representatives may enter any portion of the Premises at any reasonable time after at least forty-eight (48) hours’ notice to Sublessee to inspect the Premises for compliance and to exhibit the Premises for sale, Sublease or mortgaging; provided that no such notice shall be required in the event of an emergency, upon the occurrence and continuance of an Event of Default or to post notices of nonresponsibility under any mechanics’ or materialmans’ lien law. No such entry shall unreasonably interfere with residents, patients, patient care or the Sublessee’s operations of the Facility. Upon 48 hours’ prior notice and during normal business hours, Sublessee will permit Sublessor and its representatives, inspectors and consultants, at no cost or expense to Sublessee, to examine all contracts, books and financial records (wherever kept) relating to Sublessee’s operations of the Facility.

15.2 ~~Grant Liens~~ . This Sublease shall be subordinate to the right, title, and interest of any lender or other party holding a security interest in or a lien upon the Premises under any and all mortgage instruments or deeds to secure debt presently encumbering the Premises or the Building and to any and all other deeds to secure debt or mortgage instruments hereafter encumbering the Premises or the Building. Sublessee shall at any time hereafter, on written demand of Sublessor or the holder of any such deed to secure debt or mortgage instrument, execute such usual and customary instruments for skilled nursing facilities located in the State of Ohio which may reasonably be required by such party for the purpose of evidencing the subordination of this Sublease to the lien or security of such party. Sublessee shall, upon written demand, at any time or times, execute, acknowledge, and deliver to Sublessor or the holder of any such usual and customary instruments for skilled nursing facilities located in the State of Ohio to secure debt, without expense, any and all documents that may be reasonably necessary to make this Sublease superior to the lien of any of the same, in form and substance reasonably acceptable to Sublessee with attornment and non-disturbance provisions included therein for the benefit of Sublessee. If the holder of any of said instruments or deeds to secure debt shall hereafter succeed to the rights of Sublessor under this Sublease, Sublessee shall, at the option of such holder or a purchaser at any foreclosure or sale under power, attorn to and recognize such successor as Sublessee's Sublessor under this Sublease. Sublessee shall promptly execute, acknowledge, and deliver any instrument that may be reasonably necessary to evidence such attornment. Prior to the Execution Date, Sublessor will obtain from any lender holding a lien on the Premises, a subordination, non-disturbance and attornment agreement for the benefit of, and reasonably acceptable to, Sublessee.

15.3 ~~Estoppel Certificates~~ . Sublessor and Sublessee shall, at any time upon not less than five (5) business days’ prior written request by the other party, have an authorized representative execute, acknowledge and deliver to Sublessor or Sublessee, as the case may be, or their designee a written statement certifying (a) that this Sublease, together with any specified modifications, is in full force and effect, (b) the dates to which Rent and additional charges have been paid, (c) that no default by either party exists or specifying any such default, and (d) as to such other matters as Sublessor or Sublessee, as the case may be, may reasonably request. Prior to the Execution Date, Sublessor shall cause an authorized representative of Landlord to execute, acknowledge and deliver to Sublessee, a written statement certifying the aforesaid matters relating to the Lease Agreement, in form and substance reasonably required by Sublessee.

15.4 ~~Conveyance Release~~ . If Sublessor or any successor owner shall sell or transfer any portion of the Premises in accordance with this Sublease, they shall thereafter be released from all future liabilities and obligations hereunder arising or accruing from and after the date of such conveyance or other transfer, which instead shall thereupon be binding upon the new owner; provided, however, that the indemnification obligations of Sublessor or Landlord hereunder shall survive any such conveyance, with respect only to claims arising prior to the closing date of such conveyance.

15.5 ~~Affiliate Contracts~~ . Sublessee may not enter into any contracts respecting the Facility with any of Sublessee’s Affiliates which are not at arm’s length and fair market value without the prior written consent of Sublessor.

16. ~~Assignment and Subletting~~ . Except as otherwise expressly permitted in this Sublease, without Sublessor’s prior written consent, which may be granted or withheld in Sublessor’s sole discretion, Sublessee shall not assign this Sublease, or sub-sublease all or any part of the Premises, or permit the use of the Premises by any party other than Sublessee or any wholly- owned subsidiary or sub-subsidiary of a Sublessee. This prohibition includes an assignment or sub-subletting to or by a receiver or trustee in any federal or state bankruptcy, insolvency, or other proceeding. For purposes of this Section, a sale or transfer of all or a controlling ownership interest in Sublessee or a merger or other combination by Sublessee or a sale of all or substantially all of Sublessee’s assets in lieu thereof shall be deemed an assignment or other transfer of this Sublease. Notwithstanding the foregoing, any Key Principal may transfer interests in Sublessee and/or any Affiliates thereof to any other Key Principal, provided that such transfer complies with all applicable regulatory approvals.

17. ~~Damage by Fire or Other Casualty~~ . Sublessee shall promptly notify Sublessor of any damage or destruction of any portion of the Premises and diligently repair or reconstruct such portion of the Premises to a like or better condition than existed prior to such damage or destruction. Any net insurance proceeds payable with respect to the casualty shall be paid directly to Sublessor and, if an Event of Default has not occurred and is continuing, shall be used for the repair or reconstruction of the applicable portion of the Premises pursuant to Sublessor's reasonable disbursement requirements. If there are excess insurance proceeds, the surplus shall belong and be paid to Sublessee. Subject to the provisions of Section 18, Sublessee shall not have any right under this Sublease, and hereby waives all rights under applicable law, to abate, reduce or offset Rent by reason of any damage or destruction of any portion of the Premises by reason of an insured or uninsured casualty.

18. ~~Condemnation~~ . Except as provided to the contrary in this Section 1 8 , this Sublease shall not terminate and shall remain in full force and effect in the event of a taking or condemnation of the Premises, or any portion thereof, and Sublessee hereby waives all rights under applicable law to abate, reduce or offset rent by reason of such taking. If during the Term all or substantially all (a “ ~~Complete~~ ~~Taking~~ ”) or a smaller portion (a “ ~~Partial~~ ~~Taking~~ ”) of the Premises is taken or condemned by any competent public or quasi-public authority, then (a) in the case of a Complete Taking, Sublessee may at its election made within thirty (30) days of the effective date of such Taking, terminate this Sublease and the current Rent shall be equitably abated as of the effective date of such termination, or (b) in the case of a Partial Taking, the Rent shall be abated to the same extent as the resulting diminution in Fair Market Value of the applicable portion of the Premises. The resulting diminution in Fair Market Value on the effective date of a Partial Taking shall be as established pursuant to ~~Exhibit~~ ~~“E”~~ . Sublessor alone shall be entitled to receive and retain any award for a taking or condemnation other than a temporary taking; provided, however, Sublessee shall be entitled to submit its own claim in the event of any such taking or condemnation with respect to the value of Sublessee’s Subleasehold interest in any portion of the Premises and/or the relocation costs incurred by Sublessee as a result thereof. In the event of a temporary taking of less than all or substantially all of the Premises, Sublessee shall be entitled to receive and retain any and all awards for the temporary taking and the Rent due under this Sublease shall be not be abated during the period of such temporary taking.

19. Indemnification .

19.1 Sublessee agrees to protect, indemnify, defend and save harmless Sublessor and Landlord and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of (except to the extent arising from the gross negligence or willful misconduct of Sublessor or Landlord and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees) (a) the breach by Sublessee or any of its representations, warranties, covenants or other obligations hereunder, (b) any Protest, (c) all known and unknown Environmental Activities, Hazardous Materials Claims and violations by Sublessee of a Hazardous Materials Law in each case related to Sublessee’s use of any portion of the Premises on and after the Commencement Date, and (d) upon or following the Termination Date, the correction of all deficiencies of a physical matter identified by, and any liability assessed or asserted by, any governmental agency or Medicare or Medicaid providers, as applicable, as a result of or arising out of or in connection with Sublessee’s operation of the Facility or the related change in ownership inspection and audit (including any overpayment to any Medicare, Medicaid or other third party payor, as applicable). Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessor or Landlord believes is covered by this indemnity, it shall give Sublessee notice of this matter. If Sublessor or Landlord, as applicable, does not elect to defend the matter with its own counsel at Sublessee’s expense, Sublessee shall then defend Sublessor and Landlord, as applicable, at Sublessee’s expense (including Sublessor’s and Landlord’s reasonable attorneys’ fees and costs) with legal counsel reasonably satisfactory to Sublessor and Landlord, applicable.

19.2 Sublessor agrees to protect, indemnify, defend and save harmless Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of (except to the extent arising from the gross negligence or willful misconduct of Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees) (a) the breach by Sublessor of any of its representations, warranties, covenants or other obligations hereunder, (b) all known and unknown Environmental Activities, Hazardous Materials Claims and violations by Landlord, Sublessor or any prior operator of the Facility of a Hazardous Materials Law in each case related to any such person’s ownership, lease, use or operation of any portion of the Premises prior to the Commencement Date, and (c) for all periods prior to the Commencement Date, the correction of all deficiencies of a physical matter identified by, and any liability assessed or asserted by, any governmental agency or Medicare or Medicaid providers, as applicable, as a result of or arising out of or in connection with the Facility or any portion thereof or the related change in ownership inspection and audit (including any overpayment to any Medicare, Medicaid or other third party payor). Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessee believes is covered by this indemnity, it shall give Sublessor notice of this matter. If Sublessee does not elect to defend the matter with its own counsel at Sublessor’s expense, Sublessor shall then defend Sublessee at Sublessor’s expense (including Sublessee’s reasonable attorneys’ fees and costs) with legal counsel reasonably satisfactory to Sublessee. In addition, Landlord agrees to protect, indemnify, defend and save harmless Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of (except to the extent arising from the gross negligence or willful misconduct of Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees) the breach by Landlord of any of its representations, warranties, covenants or other obligations hereunder. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessee believes is covered by this indemnity, it shall give Landlord notice of this matter. If Sublessee does not elect to defend the matter with its own counsel at Landlord’s expense, Landlord shall then defend Sublessee at Landlord’s expense (including Sublessee’s reasonable attorneys’ fees and costs) with legal counsel reasonably satisfactory to Sublessee.

19.3 Notwithstanding any provision in this Sublease to the contrary, Sublessee and its members, managers, Affiliates, directors, officers, shareholders, agents and employees shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor) arising out of any Environmental Activities, Hazardous Materials Claims, violations of Hazardous Materials Laws, remediation of Hazardous Materials or other events described in Section 19.1 to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility and such matters as disclosed or referenced in the existing phase one environmental site assessments obtained by Sublessor (each, a “Preexisting Environmental Condition”). Sublessor shall indemnify, defend and save harmless Sublessee Indemnitees from and against any obligations, liabilities, damages, costs, expenses, losses or claims incurred by Sublessee Indemnitees (including fees and expenses of counsel) arising out of or in connection with any Preexisting Environmental Condition.

20. Disputes . If any party brings any action to interpret or enforce this Sublease, or for damages for any alleged breach, the prevailing party shall be entitled to reasonable attorneys’ fees and costs as awarded by the court in addition to all other recovery, damages and costs.

EACH PARTY HEREBY WAIVES ANY RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER IN CONNECTION WITH ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SUBLEASE, INCLUDING RELATIONSHIP OF THE PARTIES, SUBLESSEE’S USE AND OCCUPANCY OF ANY PORTION OF THE PREMISES, OR ANY CLAIM OF INJURY OR DAMAGE RELATING TO THE FOREGOING OR THE ENFORCEMENT OF ANY REMEDY.

21. Notices . All notices and demands, certificates, requests, consents, approvals and other similar instruments under this Sublease shall be in writing and sent by personal delivery, U.S. certified or registered mail (return receipt requested, postage prepaid) or FedEx or similar generally recognized overnight carrier regularly providing proof of delivery, addressed as follows:


If to Sublessee:	If to Sublessor:
Miami Cov SNF, Inc. c/o MSTC Development, Inc. 556 Niles Courtland Road, S.E. Warren, Ohio 44484 Attn: President/CEO	Regional Health Properties, Inc. 454 Satellite Blvd, Suite 100 Suwanee, Georgia 30024 Attn: CEO
With a copy to:	If to Landlord:
Rolf Goffman Martin Lang LLP 30100 Chagrin Boulevard, Suite 350 Cleveland, Ohio 44124 Attn: Ira S. Goffman, Esq.	Covington Realty, LLC 8160 Corporate Park Drive Suite 220 Cincinnati, Ohio 45242 Attn: Fred Kanter

A party may designate a different address by notice as provided above. Any notice or other instrument so delivered (whether accepted or refused) shall be deemed to have been given and received on the date of delivery established by U.S. Post Office return receipt or the carrier’s proof of delivery or, if not so delivered, upon its receipt. Delivery to any officer, general partner or principal of a party shall be deemed delivery to such party. Notice to any one co-Sublessee shall be deemed notice to all co-Sublessees.

22. Intentionally Omitted.

23. ~~Cooperation~~ . Sublessee agrees that should Sublessor and Sublessor’s Affiliates desire to consolidate all of their Subleases with Sublessee and Sublessee’s Affiliates into one master Sublease, Sublessee shall cooperate with Sublessor and Sublessor’s Affiliates in so documenting such consolidation; provided, however, that Sublessee’s obligations thereunder shall not be increased as a result thereof.

24. ~~Miscellaneous~~ . This Sublease has been freely and fairly negotiated, and all provisions shall be interpreted according to their fair meaning and shall not be strictly construed against any party. While nothing contained in this Sublease should be deemed or construed to constitute an extension of credit by Sublessor to Sublessee, if a portion of any payment made to Sublessor is deemed to violate any applicable laws regarding usury, such portion shall be held by Sublessor to pay the future obligations of Sublessee as such obligations arise and if Sublessee discharges and performs all obligations hereunder, such funds will be reimbursed (without interest) to Sublessee within ten (10) days or if not so reimbursed, Sublessee may credit such amount against Rent on a dollar-for-dollar basis. If any part of this Sublease shall be determined to be invalid or unenforceable, the remainder shall nevertheless continue in full force and effect. Time is of the essence, and whenever action must be taken (including the giving of notice or the delivery of documents) hereunder during a certain period of time or by a particular date that ends or occurs on a Saturday, Sunday or federal holiday, then such period or date shall be extended until the immediately following business day. Whenever the words ‘‘including”, “include” or “includes” are used in this Sublease, they shall be interpreted in a non-exclusive manner as though the words “without limitation” immediately followed. Whenever the words day or days are used in this Sublease, they shall mean “calendar day” or “calendar days” unless expressly provided to the contrary. The titles and headings in this Sublease are for convenience of reference only and shall not in any way affect the meaning or construction of any provision. Unless otherwise expressly provided, references to any “Section” mean a section of this Sublease (including all subsections), to any “Exhibit” or “Schedule” mean an exhibit or schedule attached hereto or to “Medicare” or “Medicaid” include any successor program. If more than one Person is Sublessee hereunder, their liability and obligations hereunder shall be joint and several. Promptly upon the request of either party and at its expense, the parties shall prepare, enter into and record a suitable short form memorandum of this Sublease. This Sublease (a) contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior or contemporaneous verbal or written agreements or understandings, (b) may be executed in several counterparts, (including electronically mailed copies in portable document format (PDF)), each of which shall be deemed an original, but all of which shall constitute one and the same document, (c) may only be amended by a writing executed by the parties, (d) shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties; provided, however, that the indemnification obligations of any party hereunder shall survive any such assignment, (e) shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio, and (f) incorporates by this reference any Exhibits and Schedules attached hereto.

25. ~~Non~~ - ~~Disturbance~~ ~~and~~ ~~Attornment~~ . If the Lease Agreement shall expire or terminate during the term of this Sublease for any reason other than condemnation or destruction by fire or other casualty, or if Sublessor shall surrender the Lease Agreement to Landlord during the term of this Sublease, Landlord shall continue this Sublease with the same force and effect as if Landlord as lessor and Sublessee as lessee had entered into a lease as of such effective date for a term equal to the then unexpired term of this Sublease and containing the same provisions as those contained in this Sublease, provided that (i) the Lease Agreement was terminated pursuant to Sublessor’s default under the Lease Agreement, (ii) the default is of such a type that Sublessee can cure, and (iii) Sublessee in fact cures such default within thirty (30) days, where possible, or within a reasonable amount of time. In such event, Sublessor shall promptly transfer any remaining security deposit described in Section 3 of this Sublease to Landlord. If this Sublease is continued pursuant to this Section 25, Sublessee shall attorn to Landlord and Landlord and Sublessee shall have the same rights, obligations and remedies thereunder as were had by Sublessor and Sublessee hereunder prior to such effective date, respectively.

26. ~~Terrorism~~ / ~~Governmental~~ ~~Action~~ . Sublessee warrants and represents to Sublessor that Sublessee is not, and shall not become, a person or entity with whom Sublessor is restricted from doing business under regulations of the Office of Foreign Asset Control ~~(“OFAC”)~~ of the Department of the Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any applicable law, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action, and is not and shall not knowingly engage in any dealings or transaction or otherwise knowingly be associated with such persons or entities.

27. ~~Financial~~ ~~Covenant~~ . Sublessee shall be required to comply with the following financial covenant: Maintaining a ~~Lease~~ ~~Coverage~~ ~~Ratio~~ of 1.0 to 1.0 for months 9 through 18 of the Initial ~~Term~~ , 1.15 to 1.0 for months 19 through 36 of the Initial Term and 1.25 to 1.0 thereafter. Such Lease Coverage Ratio will be tested on a quarterly basis beginning with the first full fiscal quarter ended after month 9 of the Initial ~~Term~~ and continuing each fiscal quarter thereafter through month 24 of the Initial Term. Notwithstanding the foregoing, if the Lease Coverage Ratio in months 13 through 24 of the Initial Term meets a minimum of 1,0 to 1.0 over either a trailing twelve-month testing period or a trailing three-month period, then there shall be no financial covenant default under this Section 27(a). After month 24 of the Initial ~~Term~~ , Sublessee must satisfy the Lease Coverage Ratio for a trailing twelve-month testing period tested quarterly beginning with the first full fiscal quarter ended of Sublessee after month 24 of the Initial ~~Term~~ .

28. [ Intentionally Omitted ].

29. [ Intentionally Omitted ].

30. Certain Conditions Precedent and Transitional Provisions . ~~The~~ provisions of this Section 30 shall govern and control over any contrary provisions of this Sublease.

30.1 Certain Conditions Precedent .

30.1.1 The effectiveness of this Sublease, Sublessor’s and Sublessee’s rights and obligations hereunder and the consummation of the transactions contemplated thereby are subject to satisfaction of the condition precedent that Sublessee has obtained the Required Authorizations (as defined below) for the Facility.

30.1.2 Sublessee (“ ~~Applicant~~ ~~”),~~ with respect to the Facility, shall file and submit all applications, petitions and other documents (collectively, the “ ~~Required~~ ~~Authorization~~ ~~Applications~~ ”) that are necessary or appropriate for it to obtain all of the Required Authorizations for the Facility. Applicant shall use its commercially reasonable efforts and due diligence to obtain the Required Authorizations for the Facility and shall promptly respond to any questions or information requests from any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications. Upon Sublessor’s written request, Applicant shall furnish to Sublessor copies of all Required Authorization Applications and any correspondence or other written documentation received from or delivered to any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications.

30.1.3 Sublessor shall cooperate reasonably, and cause Exiting Operator to cooperate reasonably, with Applicant’s aforesaid efforts to obtain and maintain the Required Authorizations. Relative to the foregoing, each of Sublessor, Exiting Operator and Applicant, as applicable, shall (1) furnish upon request to each other such further information, (2) execute and deliver to each other such other documents and (3) do such other acts and things, all as the other party may reasonably request, for the purpose of obtaining and maintaining the Required Authorizations for the Facility.

30.1.4 The term “ ~~Required~~ ~~Authorizations~~ ” shall mean, with respect to the Facility, such consents, approvals and other assurances, oral or written, as are, under local custom and practice, customarily obtained from state licensing authorities by reasonable operators of facilities like the Facility, acting in good faith, before such an operator takes possession of, and begins to operate, a facility like the Facility. By way of example and without limitation of the foregoing, in the event that Applicant receives permission from the applicable state licensing authorities to assume operational control of a particular Facility prior to the issuance of a nonprovisional or non-conditional license for such Facility (e.g., due to a state licensing authority’s requirement that a survey of Applicant’s operations at the Facility be completed prior to the issuance of a non-provisional or non-conditional license) and, under local custom and practice, reasonable operators of facilities like the Facility customarily take possession of, and begin to operate, facilities like the Facility on the basis of such permission, then, for purposes of this Section 30.1, the date of such permission would be treated as the date that Applicant obtained the Required Authorizations for the Facility; provided, however, that if Applicant provides written correspondence from state licensing authorities indicating that additional documentation is required to obtain the Required Authorizations, then in no event shall the Required Authorizations be deemed to have been obtained by Applicant.

~~30.2~~ ~~Additional~~ ~~Conditions~~ ~~Precedent~~ . The effectiveness of this Sublease, Sublessor’s and Sublessee’s rights and obligations hereunder and the consummation of the transactions contemplated thereby are subject to satisfaction of each of the following conditions precedent for the Facility:

30.2.1 The closing of the transactions and other agreements contemplated by the Operations Transfer Agreement, including, but not limited to, the timely filing of the 45-day change of operator notice provided by Exiting Operator and Sublessee;

30.2.2 An Estoppel, Non-Disturbance and Attornment Agreement executed by Landlord in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee;

30.2.3 Evidence of the termination of all of the Exiting Operator’s right to occupy the Premises and operate in the Business, in form and substance reasonably acceptable to Sublessee;

30.2.4 Evidence of escrow and reserves held by Facility Mortgagee and compliance with Facility Mortgage Documents and conditions of use of reserves regarding same, in form and substance reasonably acceptable to Sublessee;

30.2.5 A copy of the certificate of occupancy relating to the Facility, in form and substance acceptable to Sublessee to obtain licensure for the Facility;

30.2.6 The concurrent closing of the Affiliated Subleases and all required HUD TPA approvals with respect thereto;

30.2.7 Sublessee obtaining the working capital line of credit secured by Sublessee’s accounts receivable from the Facility and execution and delivery by Sublessor, and Sublessor’s Facility Mortgagee if required, of an intercreditor agreement in such form and substance required by such working capital lender;

30.2.8 Notwithstanding any provision hereof, Sublessee shall have the right to terminate this Sublease without penalty or cost, in Sublessee’s sole and absolute discretion, at any time within forty-five (45) days following the Execution Date upon written notice to Sublessor. If Sublessee exercises the termination right provided in the preceding sentence, Sublessor’s Affiliates or Sublessee’s Affiliates shall have the right but not the obligation to terminate any or all of the Affiliated Subleases upon written notice to the applicable sublessees or sublessors; and

30.2.9 A Subordination, Non-Disturbance and Attornment Agreement executed by each Facility Mortgagee in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee.

30.2.10 ~~HUD~~ ~~Cap~~ Ex ~~Account~~ . Sublessor and Landlord, jointly and severally, represent and warrant to Sublessee that the balance in the capital improvements reserve account required to be maintained under the documents evidencing the HUD Loan relating to the Leased Premises (the "HUD Cap Ex Account") as of the Execution Date is $435,000.00 (the “HUD Cap Ex Balance”). From and after the Commencement Date, Sublessee shall pay as Additional Rent due hereunder to Sublessor or the servicer of the HUD loan, as applicable, the required monthly payment to the HUD Cap Ex Account in the amount of $3,000.00. From time to time in Sublessee's discretion, Sublessee shall submit all HUD required documentation of work performed and amounts incurred for qualifying expenditures in connection with the Leased Premises in support of a request for reimbursement from the HUD Cap Ex Account. Sublessor and Landlord agree to cooperate in good faith and use commercially reasonable efforts to timely obtain HUD approval of reimbursement from the HUD Cap Ex Account relating to such HUD submission, including, but not limited to, submitting such additional documents required by HUD. Upon HUD approval and reimbursement for qualifying expenditures, Sublessor or Landlord, as applicable, shall within five (5) business days pay to Sublessee the amount received by Sublessor or Landlord, as applicable, from the HUD Cap Ex Account for such qualifying expenditures submitted, and if any such payment from the HUD Cap Ex Account is not timely paid as set forth above, such delinquent amount shall be accessed payment premium in the amount of eight percent (8%) of said delinquency, as liquidated damages and not as a penalty, it being agreed that said premium amount represents a reasonable estimate of the probable damages to Sublessee as a result of such timely failure to pay, and Sublessor and Landlord hereby each waives any and all rights to contest or bring an action with respect to such required payment and premium. In addition, Sublessor and Landlord agree that in the event the HUD reserves being paid monthly by Sublessee hereunder meet the total maximum HUD reserves required by HUD, Sublessee shall not be required to pay any additional monthly HUD reserves under this Sublease.

30.2.11 [ Intentionally Omitted ] .

30.2.12 HU D ~~Addendum~~ . Sublessor, Landlord and Sublessee shall execute and deliver an Addendum to Operating Lease (HUD Form 91116-ORCF) and any and all other documents required by HUD in connection with HUD’s approval of Sublessee as the operator of the Facility, in form and substance reasonably acceptable to Sublessee.

[Signatures on Following Pages]

IN WITNESS WHEREOF , this Sublease has been executed by Sublessor and Sublessee as of the date first written above .


~~SUBLESSOR~~ :

REGIONAL HEALTH PROPERTIES,
INC., a Georgia. corporation


By	~~/s/~~ Brent Morrison
~~Name~~	Brent Morrison
~~Title:~~	~~Interim CEO~~


STATE OF	Georgia	:
		: ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December , 2018, by Brent Morrison , the Interim CEO of Regional Health Properties, Inc., a Georgia corporation, on behalf of the corporation.

K N. Parker

Notary Public


Commission
Expiration:	4/16/20

[Signature Page Continues]


~~SUBLESSEE~~ :

MIAMI COV SNF, INC.,
an Ohio corporation


By	/s/ Michael P Slyk
~~Name~~	Michael P Slyk
~~Title:~~	~~President~~


~~STATE OF OHIO~~		:
		: ss
COUNTY OF	Trumbull	:

The foregoing instrument was acknowledged before me this 30 day of November , 2018, by ~~Michael P Slyk~~ , the President of Miami Cov SNF, Inc., an Ohio corporation, on behalf of the corporation.


/s/ TRACIE A. KATZENBERGEK
Notary Public
TRACIE A. KATZENBERGEK


Commission
Expiration:	6-26-2021


	TRACIE A. KATZENBERGEK

	NOTARY PUBLIC
	STATE OF OHIO

	My Commission Expires
	June 26, 2021

[Signature Page Continues]

The undersigned Landlord hereby executes this Sublease for the sole purpose of consenting to the Sublease as required under the Lease and for purposes of becoming a party to and agreeing to Sections 2.6, 2.7, 11, 15.3, 25, 30.2.10, and 30.2.12 hereof.


~~LANDLORD~~ :

COVINGTON REALTY, LLC,
an Ohio limited liability company


By	~~/s/ Mark Kanter~~
~~Name~~	~~Mark Kanter~~
~~Title:~~	~~Member~~


~~STATE OF~~	Ohio	:
		: ss
COUNTY OF	Hamilton	:

The foregoing instrument was acknowledged before me this 3 ^rd day of Decem ~~ber~~ , 2018,by ~~Mark Kanter~~ , the Member of Covington Realty, LLC, an Ohio limited liability company, on behalf of the company.


/s/ Natalie C. Smith
Notary Public



Commission	NATALIE C. SMITH
Expiration:	Notary Public, State of Ohio
	My Commission Expires 07-28-2023

~~List of Exhibits~~


~~Exhibit A-l:~~	~~Legal Description~~

~~Exhibit A-2:~~	~~Sublessor Personal Property~~

~~Exhibit B:~~	~~Certain Definitions~~

~~Exhibit C:~~	~~Financial, Management and Regulatory Reports~~

~~Exhibit D:~~	~~Fair Market Reset Rent~~

~~Exhibit E:~~	~~Fair Market Value~~

~~Exhibit F:~~	~~Affiliated Subleases~~

~~Exhibit G:~~	~~Calculated Rent~~

~~Exhibit~~ H :	~~Consulting Services Agreement~~

~~List of Schedules~~

Schedule 7.1: Licensed Beds

₄

EXHIBIT “A-1”

LEGAL DESCRIPTION

SITUATED IN THE VILLAGE OF COVINGTON, THE COUNTY OF MIAMI AND THE STATE OF OHIO, BEING ALL OF LOT NUMBERED ONE THOUSAND TWO HUNDRED AND TWO (1202) AND BEING PART OF A REPLAT OF LOT ONE THOUSAND ONE HUNDRED AND FIFTY-THREE (1153) IN SAID VILLAGE, AND ACCORDING TO A PLAT RECORDED IN VOLUME 12, PAGE 81 OF THE PLAT RECORDS OF THE RECORDER OF MIAMI COUNTY, OHIO.

EXHIBIT A - 2

~~SUBLESSOR PERSONAL PROPERTY~~

“Sublessor Personal Property” means: (i) all personal property used in the operation or management of the Facility, including machinery, equipment, furniture, furnishings, beds, computers, signage, trade fixtures or other personal property and consumable inventory and supplies, including any and all such personal property replaced by Sublessee or required by the state in which the Facility is located or any other governmental entity to operate the Facility, and (ii) all site plans, surveys, soil and substrata studies, architectural drawings, plans and specifications, engineering plans and studies, floor plans, landscape plans, and other plans and studies that relate to the Facilities; provided, however, that Sublessor Personal Property shall not include: (a) any vehicles or computer software used in connection with the operation of the Facilities, (b) any equipment leased or subleased by Sublessee from third parties, which equipment is not a replacement of what would otherwise be Sublessor Personal Property, (c) any proprietary intangible personal property of Sublessee, (d) any Sublessee Property, or (e) any personal property encumbered by indebtedness which any Key Principal is personally liable for by guaranty or otherwise (the personal property set forth in clauses (a) through (e) above shall constitute “Sublessee Property” (as defined in Section 9 of the Sublease)).

EXHIBIT “B”

~~CERTAIN DEFINITIONS~~

For purposes of this Sublease, the following terms and words shall have the specified

meanings:

~~“Affiliate”~~ shall mean with respect to any Person, any other Person which, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the first Person.

~~“Affiliated Subleases”~~ shall mean those certain subleases identified on ~~Exhibit “F”~~ attached hereto between affiliates of Sublessor, as sublessors, and affiliates of Sublessee, as sublessees.

~~“Alterations”~~ shall mean any additions, installations, substitutions or improvements to the Facility made or to be made by Sublessee after its acceptance of the Facility.

~~“Base Rent Escalator”~~ shall mean the change in the CPI over the previous twelve (12) month period, computed by using the most recently published CPI and the CPI published twelve (12) months earlier; provided, however, that for purposes hereof, in no event shall such change in CPI be less than one (1%) or greater than two and one-half percent (2.5%). For purposes of illustration, if CPI at December 1, 2021 is 2.5% and the CPI at December 1, 2022 is 3.5%, then the difference in 2022 CPI compared to 2021 CPI is 1.0%, and therefore the escalator percent would be I % for the upcoming year.

~~“Business”~~ shall mean the business and operation of the Facility and all financial activities and other matters related thereto.

~~“Calculated Rent”~~ shall mean during Months seven (7) through Thirty six (36) the amount set forth on ~~Exhibit “G”~~ attached hereto.

~~“Control”~~ shall mean, as applied to any Person, the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of that Person, whether through ownership, voting control, by contract or otherwise.

~~“CPI”~~ shall mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items, Not Seasonally Adjusted, as published by the United States Department of Labor, Bureau of Labor Statistics of the United States Department of Labor. In the event such index is discontinued, comparable statistics in the purchasing power of the consumer dollar, as published at the time of said discontinuance by a responsible financial authority shall be selected at the Sublessor’s reasonable discretion and shall be used in lieu of such index.

~~“Debt Service Rent”~~ shall mean the amount of $36,427.00.

~~“Environmental Activities”~~ shall mean the use, generation, transportation, handling, discharge, production, treatment, storage, release or disposal of any Hazardous Materials at any time to or from any portion of the Premises or located on or present on or under any portion of the Premises.

~~“Exiting Operator”~~ shall mean CC SNF, LLC.

~~“Facility Interest Expense”~~ shall mean, for any period, the sum of (i) total interest expense for such period, plus (ii) for such period, fees with respect to Sublessee’s outstanding indebtedness including capitalized interest, but excluding commissions, discounts and other fees owed with respect to Letters of Credit and bankers’ acceptance financing, all calculated in connection with the Business.

~~“Facility Mortgage”~~ shall mean any mortgage, deed of trust or other security agreement or lien encumbering the Premises or any portion thereof and securing an indebtedness of Sublessor or any Affiliate of Sublessor with respect to the Facility, or any ground, building or similar Sublease or other title retention agreement to which the Premises or any portion thereof is subject from time to time.

~~“Facility Net Income”~~ shall mean, for any period, the net income (or loss) of the Business.

~~“Facility Mortgagee”~~ shall mean the holder or beneficiary of a Facility Mortgage and any other rights of the lender, credit party or lessor under the applicable Facility Mortgage Documents.

~~“Facility Mortgage Documents”~~ shall mean with respect to each Facility Mortgage and Facility Mortgagee, the applicable Facility Mortgage, loan or credit agreement, Sublease, note, collateral assignment instruments, guarantees, indemnity agreements, bond documents and other documents or instruments evidencing, securing or otherwise relating to the loan made, credit extended, Sublease or other financing vehicle pursuant thereto with respect to the Facility.

~~“Fair Market Reset Rent”~~ shall mean the annual fair market rental value of the Facility, as agreed to by Sublessor and Sublessee, or if the parties are not able to agree within ten (10) days after the Renewal Notice, the amount determined in accordance with the procedures set forth on ~~Exhibit “D”~~ attached hereto.

“Hazardous Materials” shall mean (a) any petroleum products and/or by-products (including any fraction thereof), flammable substances, explosives, radioactive materials, hazardous or toxic wastes, substances or materials, known carcinogens or any other materials, contaminants or pollutants which pose a hazard to any portion of the Premises or to Persons on or about any portion of the Premises or cause any portion of the Premises to be in violation of any Hazardous Materials Laws; (b) asbestos in any form which is friable; (c) urea formaldehyde in foam insulation or any other form; (d) transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million or any other more restrictive standard then prevailing; (e) medical wastes and biohazards not disposed of in accordance with applicable law; (f) radon gas; and (g) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or may or could pose a hazard to the health and safety of the occupants of any portion of the Premises or the owners and/or occupants of property adjacent to or surrounding any portion of the Premises, including, without limitation, any materials or substances that are listed in the United States Department of Transportation Hazardous Materials Table (49 CFR 172.101) as amended from time to time.

~~“Hazardous Materials Claims”~~ shall mean any and all enforcement, clean up, removal or other governmental or regulatory actions or orders pending, threatened, instituted or completed pursuant to any Hazardous Material Laws, together with all claims made, pending or threatened by any third party against any portion of the Premises, Sublessor or Sublessee relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials.

“Hazardous Materials Laws” shall mean any laws, ordinances, regulations, rules, orders, guidelines or policies relating to the environment, health and safety, Environmental Activities, Hazardous Materials, air and water quality, waste disposal and other environmental matters.

“Issuer” shall mean a financial institution satisfactory to Sublessor issuing the Letter of Credit and such Issuer’s successor and assigns. Any Issuer shall be rated A or better by Standard & Poor’s Ratings Group, A2 or better by Moody’s Investor Services, Inc., or, if not rated by either of the foregoing agencies, an equivalent rating by Fitch Inc. or other nationally recognized rating agency at all times throughout the Term.

“Key Principals” shall mean Tim Chesney, Michael Slyk and Dan D’Amico.

“Lease Coverage Ratio” shall mean a fraction, the numerator of which is “Adjusted EBITDAR” and the denominator of which is Base Rent. “Adjusted EBITDAR” shall mean, for any period, the Facility Net Income for such period plus, without duplication, to the extent deducted in determining Facility Net Income, the sum of (i) Facility Interest Expense for such period, plus (ii) expense for income taxes paid or accrued for such period, plus (iii) all amounts attributable to the amount of the provision for depreciation and amortization for such period, plus (iv) the amount of other non-cash charges (other than the write-down of current assets for such period (as determined in accordance with GAAP), plus (v) Base Rent for such period, plus (vi) capital expenditures of $500 per bed (per annum) for such period (the parties recognizing and agreeing that such capital expenditures are not typically included in the definition of EBITDAR but will be for purposes of the definition of Lease Coverage Ratio), plus (vii) extraordinary losses for such period (as determined in accordance with GAAP), minus, to the extent included in Facility Net Income for such period, extraordinary gains for such period (as determined in accordance with GAAP), all calculated in connection with the Business.

“Letter of Credit” shall mean an irrevocable and transferrable letter of credit issued by an Issuer in favor of Sublessor as security for Sublessee’s obligations under this Sublease and in form acceptable to Sublessor, together with amendments thereto or replacements or substitutions thereof.

“Occupancy” shall mean, with respect to the Premises, the percentage of (a) total patient days relating to such Facility for any reporting period ~~divided b~~ y (b) the product of (i) the number of licensed beds and (ii) the total days in such reporting period,

“Operations Transfer Agreement” means that certain Agreement to Transfer Operations and Related Assets dated October 16, 2018 by and between, ~~inter alios,~~ Exiting Operator and Sublessee.

liens, encumbrances, restrictions, agreements and other title matters existing as of the Execution Date, (vi) purchase money financing and capitalized equipment leases for the acquisition of personal property for any such financing where the original cost of the equipment financed exceeds $50,000 (except for bulk equipment financing which does not exceed $100,000 and except in the case of a facility van or bus there shall be no dollar limitation as long as the purchase or lease is usual and customary for skilled nursing facilities in the State of Ohio), (vii) any easement granted by Sublessor, in Sublessor’s discretion, at the request of Sublessee which is necessary to (A) obtain utilities or other services for the Facilities in the ordinary course of Sublessee’s business or (B) satisfy requests from local authorities in respect of, without limitation, township projects; (viii) liens that may be filed as a result of Sublessor’s acts or omissions; and (ix) liens granted to Sublessee’s working capital lender.

~~“Person”~~ shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, governmental authority, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

~~“Reset Rent”~~ shall mean an amount equal to the greater of: (i) the product of the Base Rent during the immediately preceding Sublease Year multiplied by the Base Rent Escalator or (ii) the Fair Market Reset Rent for the applicable Sublease Year.

~~EXHIBIT “C”~~

FINANCIAL, MANAGEMENT AND REGULATORY REPORTS

~~REPORT~~	~~DUE DATE~~
~~Monthly financial reports concerning the Business at the Facility consisting of:~~
(1) a reasonably detailed income statement showing, among other things, gross revenues; (2) total patient days; (3) Occupancy; and (4) payor mix.	Forty-Five (45) days after the end of each calendar month
(All via e-mail to clinton.cain@regionalhealthproperties.com )
~~Monthly census reports concerning the Facility~~
(via e-mail to clinton.cain@regionalhealthproperties.com ) [To extent this information is contained in monthly financial reports it will not be necessary to provide duplication here]	Thirty (30) days after the end of each calendar month
~~Monthly accounts payable report concerning the Facility~~ consisting of a list and aging report of all payables owed by the Facility to all parties	Thirty (30) days after the end of each calendar month
(via e-mail to clinton.cain@regionalhealthproperties.com )
~~Quarterly litigation summaries~~ of Sublessee to the extent that any such litigation is reasonably expected to result in a material adverse effect on Sublessee or the Facility and is not covered by insurance and diligently defended	Thirty (30) days after the end of each quarter of the fiscal year of Sublessee
(via e-mail to clinton.cain@regionalhealthproperties.com )
~~Annual financial statements~~ of Sublessee and each sublessee under the Affiliated Subleases compiled by a reputable certified public accounting firm	One hundred twenty (120) days after the fiscal year end of Sublessee
(via e-mail to clinton.cain@regionalhealthproperties.com )
~~Regulatory reports with respect to the Facility to the extent that any such report or survey is reasonably expected to result in a material adverse effect on Sublessee or the Facility,~~ as follows:
(1) all federal, state and local licensing and reimbursement certification surveys, inspection and other reports received by Sublessee as to any portion of the Premises and any portion of the Business, including state department of health licensing surveys;	Ten (10) business days after receipt
(2) Medicare and Medicaid certification surveys; and
(3) life safety code reports.

~~Reports of regulatory violations, by~~ written notice of the following:
(1) any material violation of any federal, state or local licensing or reimbursement certification statute or regulation, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility;
(2) any material suspension, termination or restriction placed upon Sublessee or any portion of the Premises, the operation of any portion of the Business or the ability to admit residents or patients, which violation is not reasonably expected to be resolved in favor of Sublessee or the Facility within forty-five (45) days; or	Seven (7) business days after receipt
(3) any violation of any other permit, approval or certification in connection with any portion of the Premises or any portion of the Business, by any federal, state or local authority, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility.
~~Cost Reports for the Facility~~	Fifteen (15) days after filing
~~Monthly Balance Sheet of Sublessee~~	Thirty (30) days after the end of each calendar month
~~Annual Budget for the Facility~~	No later than January 1 of each calendar year
~~Accounts Receivable Aging by payor type for the Facility~~	Thirty (30) days after the end of each calendar month

EXHIBIT “D”

FAIR MARKET RESET RENT

1. If Sublessor and Sublessee are unable to agree upon the Fair Market Reset Rent within the applicable period provided in this Sublease, each party shall within ten (10) days after written demand by the other select one (1) MAI Appraiser to participate in the determination of Fair Market Reset Rent. Within ten (10) days after such selection, the MAI Appraisers so selected by Sublessor and Sublessee shall select a third MAI Appraiser (the ~~“Third Appraiser”).~~ In the event either Sublessor or Sublessee fails to select a MAI Appraiser within the time period set forth above, the MAI Appraiser selected by the other party shall alone determine the Fair Market Reset Rent as if it was the Third Appraiser.

2. The Third Appraiser, within ten (10) days after its appointment, shall (i) hear the Sublessor and Sublessee and their respective witnesses and MAI Appraisers, and each of Sublessor and Sublessee shall, upon the conclusion of both presentations, be required to simultaneously submit a proposal (the ~~“Fair Market Reset Rent Proposal”)~~ setting forth the party’s proposed determination of the Fair Market Reset Rent, and (ii) examine the records relating to the facility and such other documents and records as may, in its judgment, be necessary to determine Fair Market Reset Rent.

3. If the Sublessee’s Fair Market Reset Rent Proposal is higher than the Sublessor’s Fair Market Reset Rent Proposal, the Fair Market Reset Rent shall be the Sublessor’s Fair Market Reset Rent Proposal.

4. If the Sublessor’s Fair Market Reset Rent Proposal is higher than the Sublessee’s Fair Market Reset Rent Proposal, then within ten (10) days after the foregoing hearing, the Third Appraiser shall set the Fair Market Reset Rent. In setting the Fair Market Reset Rent, the Third Appraiser shall select, in its entirety, without modification, the Fair Market Rent Proposal submitted by either Sublessor or Sublessee as the Fair Market Reset Rent, whichever the Third Appraiser believes most accurately reflects the fair market rental value per annum for the Facilities.

5. The fees and expenses of any appraisal pursuant to this ~~Exhibit “D”~~ shall be borne by the parties equally, but each party shall bear the expense of its own attorneys and experts and the additional expenses of presenting its own proof.

6. The Third Appraiser shall not have the power to add to, modify or change any of the provisions of this Sublease. After a determination has been made of the Fair Market Reset Rent, the parties shall execute and deliver an instrument setting forth the Fair Market Reset Rent, but the failure to so execute and deliver any such instrument shall not affect the determination of Fair Market Reset Rent.

7. Fair Market Reset Rent shall be determined based only upon (i) the financial records of the Facility and (ii) similarly situated Facilities (e.g., size, location, competition, governmental rankings, census and available financial data) located in Ohio.

~~“MAI Appraiser”~~ shall mean an independent appraiser who has substantial experience in performing appraisals of properties similar to the applicable Property and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is reasonably approved by Sublessor and Sublessee.

~~EXHIBIT “E”~~

~~FAIR MARKET VALUE~~

~~“Fair Market Value”~~ means the fair market value of the Premises or applicable portion thereof on a specified date as agreed to by the parties, or failing such agreement within ten (10) days of such date, as established pursuant the following appraisal process. Each party shall within ten (10) days after written demand by the other party select one MAI Appraiser to participate in the determination of Fair Market Value. For all purposes under this Lease, the Fair Market Value shall be the fair market value of the Premises or applicable portion thereof unencumbered by this Lease. Within ten (10) days of such selection, the MAI Appraisers so selected by the parties shall select a third (3 ^rd ) MAI Appraiser. The three (3) selected MAI Appraisers shall each determine the Fair Market Value of the Premises or applicable portion thereof within thirty (30) days of the selection of the third appraiser. Tenant shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Landlord shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Each party shall pay half the fees and expenses of the third MAI Appraiser selected by the respective MAI Appraisers selected by each of the parties.

If either party fails to select a MAI Appraiser within the time period set forth in the foregoing paragraph, the MAI Appraiser selected by the other party shall alone determine the fair market value of the Premises or applicable portion thereof in accordance with the provisions of this Exhibit and the Fair Market Value so determined shall be binding upon the parties. If the MAI Appraisers selected by the parties are unable to agree upon a third (3 ^rd ) MAI Appraiser within the time period set forth in the foregoing paragraph, either party shall have the right to apply to the presiding judge of the court of original trial jurisdiction in the county in which the Premises or applicable portion thereof are located to name the third (3 ^rd ) MAI Appraiser. The cost of such application to the presiding judge shall be equally shared by the parties.

Within five (5) days after completion of the third (3 ^rd ) MAI Appraiser’s appraisal, all three (3) MAI Appraisers shall meet and a majority of the MAI Appraisers shall attempt to determine the fair market value of the Premises or applicable portion thereof. If a majority are unable to determine the fair market value at such meeting, the three (3) appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the Fair Market Value. If, however, either or both of the low appraisal or the high appraisal are more than ten percent (10%) lower or higher than the middle appraisal, any such lower or higher appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting quotient shall be such Fair Market Value. If both the lower appraisal and higher appraisal are disregarded as provided herein, the middle appraisal shall be such Fair Market Value. In any event, the result of the foregoing appraisal process shall be final and binding.

~~“MAI~~ Appraiser” shall mean an appraiser licensed or otherwise qualified to do business in the state(s) where the Premises or applicable portion thereof are located and who has substantial experience in performing appraisals of facilities similar to the Premises or applicable portion thereof and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is approved by Landlord.

EXHIBIT “F”

~~AFFILIATED SUBLEASES~~

1. Sublease between Eaglewood Village, LLC and Springfield Clark ALF, Inc. regarding the 95-bed licensed assisted living facility and operated as an 80-unit apartment facility Eaglewood Village assisted living facility located at 3001 Middle Urbana Road, Springfield, Ohio 45502.

2. Sublease between RMC HUD Master Tenant, LLC and Greenfield SNF, Inc. regarding the 50-bed licensed and 50-bed Medicare and Medicaid certified Hearth & Care at Greenfield skilled nursing home located at 238 South Washington Street, Greenfield, OH, 45123.

3. Sublease between 2014 HUD Master Tenant, LLC and Springfield SNF, Inc. regarding the 113-bed licensed and 99-bed Medicare and Medicaid certified Eaglewood Care Center skilled nursing home located at 2000 Villa Road, Springfield, OH 45503.

4. Sublease between RMC HUD Master Tenant, LLC and Sidney SNF, Inc., regarding the 62-bed licensed and 50-bed Medicare and Medicaid certified Pavilion Care Center skilled nursing home located at 705 Fulton Street, Sidney, Ohio 45365.

EXHIBIT “G”

CALCULATED RENT


Occupancy (%) Based on average occupancy for the prior calendar month using total number of licensed beds	Covington Calculated Rent per month for months seven through thirty-six of the Initial Term
88%	$67,000.00
86%	$67,000.00
84%	$67,000.00
82%	$67,000.00
80%	$63,333.00
78%	$59,667.00
76%	$56,000.00
74%	$52,333.00
72%	$48,667.00
70%	$45,000.00
68%	$41,333.00
66%	$37,667.00
≤64%	$34,000.00

~~EXHIBIT “H”~~

[Attach copy of form of Consulting Services Agreement]

SCHEDULE 7.1: LICENSED BEDS

Ohio Department of Health: 106 licensed beds

Medicare and Medicaid: 100 certified beds

Schedule 3

Lessee Defaults

Sublessor defaults include, but are not limited to:

(1)

Failure to timely pay Base Rent, as required by Section 2.01 of the Lease;

(2)

Failure to timely pay Additional Rent, as required by Section 2.03 of the Lease;

(3)

Failure to cooperate with Landlord’s efforts to exercise its Inspection Rights, as provided in Article 15 of the Lease; and

(4)

Failure to comply with certain HUD mortgage terms and requirements, as required at Section 18.01 (and Sections 22.10 and 22.20) of the Lease, in particular, timely providing financial reports to the mortgage lender.

Exhibit 10.207

FINAL

SUBLEASE AGREEMENT

~~THIS SUBLEASE AGREEMENT~~ (this “ ~~Sublease~~ ”) is entered into as of the 30 ^th day of November, 2018 (the “ ~~Execution Date~~ ”) by and between ~~RMC HUD MASTER TENANT, LLC,~~ a Georgia limited liability company (“ ~~Sublessor~~ ”) and ~~GREENFIELD SNF, INC.,~~ an Ohio corporation (“ ~~Sublessee~~ ”) , for the improved real property described on ~~Exhibit “A-l”~~ (the “ ~~Premises~~ ”) , on which Premises is located that certain 50 bed licensed and 50 bed Medicare and Medicaid certified skilled nursing home facility located at 238 South Washington Street, Greenfield, Ohio 45123, including the “ ~~Sublessor Personal Property~~ ” associated therewith described on ~~Exhibit “A-2”~~ (the Sublessor Personal Property together with the Premises, being collectively the “ ~~Facility~~ ”) . Certain capitalized terms used in this Sublease are defined on ~~Exhibit “B”~~ .

RECITALS

~~WHEREAS,~~ Sublessor is the tenant under that certain Master Lease Agreement dated as of August 1, 2015, as amended (the “ ~~Lease Agreement~~ ”) pursuant to which Sublessor leases the Premises from Hearth & Care of Greenfield, LLC, an Ohio limited liability company (the “ ~~Landlord~~ ~~”);~~ and

1. ~~Term~~ . The “ ~~Term~~ ” of this Sublease is the Initial Term of five ( 5 ) years plus the Renewal Terms (if any). A “ ~~Sublease Year~~ ” is the twelve ( 12 ) month period commencing on the Commencement Date (as defined below) and each anniversary thereof during each year of the Term. The “ ~~Initial Term~~ ” commences on December ~~1, 2018~~ (the “ ~~Commencement Date~~ ”) and ends on November ~~30, 2023,~~ and may be extended for three ( 3 ) separate renewal terms of five ( 5 ) years each (each a “ ~~Renewal Term~~ ”) if: (a) at least one hundred eighty ( ~~180~~ ) days prior to the end of the Initial Term or the Renewal Term (as applicable), Sublessee delivers to Sublessor the “ ~~Renewal Notice~~ ” indicating that Sublessee desires to exercise its right to extend this Sublease for the Renewal Term and (b) there is no then uncured Event of Default (i) as of the date Sublessor receives the Renewal Notice (the “ ~~Exercise Date~~ ”) , or (ii) on the last day of the Initial Term or the Renewal Term (as applicable). For purposes hereof, “ ~~Termination Date~~ ” shall mean the last day of the Initial Term or a Renewal Term (if any) or the earlier date on which this Sublease may be terminated as provided herein.

2. ~~Rent~~ . During the Term, Sublessee shall pay in advance to Sublessor on or before the 1 ^s ^t day of each month the following amounts:

2.1 ~~Initial Term Base Rent (“Base Rent”)~~ .

2.1.1 ~~Months One through Six~~ . During the first six (6) months of the Initial Term, Base Rent shall be equal to $17,750.00 per month.

2.1.2 ~~Months Seven through Twelve~~ . During months seven (7) through twelve (12) of the Initial Term, Base Rent per month shall be equal to the greater of: (i) the ~~Calculated Rent~~ or (ii) the ~~Debt Service Rent.~~

2 . ~~1.3~~ ~~Months Thirteen through Thirty six~~ . Commencing on the first day of the second Sublease Year and continuing through months thirty six (36), Base Rent per month shall be equal to the greater of (i) the ~~Calculated Rent~~ or (ii) 115% of the ~~Debt Service Rent.~~

2.1.4 ~~Months Thirty seven through the End of the Initial Term~~ . Commencing on the first day of month Thirty seven and continuing through the end of month Forty eight of the Initial Term, Base Rent shall be $28,000.00 per month.

Commencing on the first day of the fifth Lease Year of the Initial Term and continuing on the first day of each Lease Year thereafter during the Initial Term Base Rent for the applicable Lease Year shall increase by the Base Rent Escalator.

2.2 ~~Renewal Term Base~~ ~~Rent~~ . During the first Sublease Year of each Renewal Term, Base Rent shall be reset in an amount equal to the ~~Reset Rent.~~ For each Sublease Year thereafter during the applicable Renewal Term, Base Rent shall be equal to the Base Rent paid during the preceding Sublease Year plus the ~~Base Rent Escalator~~ .

2.3 ~~Additional Rent~~ . In addition to Base Rent, Sublessee shall pay to Sublessor as additional rent (“ ~~Additional Rent~~ ”) an amount equal to the monthly payments required to fund escrows for Taxes (as hereinafter defined) pursuant to Section 5.2 to be held, applied, disbursed and/or otherwise spent in accordance with the ~~Facility Mortgage Documents~~ accruing only during the Term of this Sublease. The terms Base Rent and Additional Rent are sometimes collectively referred to as “ ~~Rent.~~ ”

2.4 ~~Absolute Net Sublease.~~ Except with respect to Sublessee’s off-set rights pursuant to ~~Section 2.6~~ hereof, all Rent payments shall be absolutely net to Sublessor, free of any and all Taxes (as defined below in ~~Section 5~~ ), Other Charges (as defined below in ~~Section~~ 5 ) , and operating or other expenses of any kind whatsoever, all of which shall be paid by Sublessee. Sublessee shall at all times during the Term remain obligated under this Sublease without any right of set-off, counterclaim, abatement, deduction, reduction or defense of any kind, except as set forth in ~~Section 2.6~~ , and Sublessee’s sole right to recover such other damages against Sublessor under this Sublease shall be to prove such damages in a separate action.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

2.5 ~~Payment Terms~~ . All Rent hereunder shall be paid, at the election of Sublessee, by wire transfer, automated clearing house transfer or direct deposit (in each case as implemented by Sublessee with its financial institution) in accordance with Sublessor’s written wire transfer instructions provided by Sublessor to Sublessee from time to time (but at a minimum of thirty (30) days prior to the payment of Rent), or by direct payment authorization established by Sublessee with its lender to withdraw payments of Rent directly from Sublessee’s account to Sublessor’s designated account.

2.6 ~~Off-Set Rights~~ . Notwithstanding any other provision of this Sublease to the contrary, Sublessee may off-set amounts against the Rent arising from any breach, default or failure to pay and/or perfonn (collectively, the “Indemnity Obligations”) (a) by Sublessor and/or Landlord under this Sublease, including, without limitation, the indemnification obligations hereunder, (b) by Regional Health Properties, Inc,, a Georgia corporation (the “Guarantor”) under this Sublease, the Operations Transfer Agreement and/or the Guaranty of Guarantor referred to in the Operations Transfer Agreement (the “Guaranty”) and attached thereto as an exhibit or schedule, including, without limitation, the indemnification and/or other obligations under any of the foregoing documents, and/or (c) by Exiting Operator under the Operations Transfer Agreement, including, without limitation, the indemnification obligations thereunder; provided, however, that such offset right shall not be effective until Sublessee has provided Sublessor written notice of the breach or Indemnity Obligations to which Sublessee is entitled and such breach, default or failure to pay or perform such Indemnity Obligations have not been cured or paid to Sublessee within thirty (30) days thereafter.

2.7 ~~Events Prior to Commencement Date and Indemnification~~ .

Notwithstanding any provision in this Sublease to the contrary, Sublessee shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor or Landlord), whether known or unknown, now existing or arising in the future, arising out of or in connection with the operation of the Facility, the ownership (in fee simple or leasehold) of the Premises, leasing of the Facility or the Premises, violations of any applicable laws or other events to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility or the Premises (each, a “Preexisting Event”). Sublessor, Guarantor and Landlord shall, jointly and severally, indemnify, defend and save harmless Sublessee and its successors and assigns (collectively, “Sublessee Indemnitees”) from and against any and all obligations, liabilities, damages, costs, expenses, losses or claims costs, expenses or losses (including fees and expenses of counsel) incurred by Sublessee Indemnitees arising out of or in connection with any Preexisting Event.

3. ~~Security Deposit.~~

3.1 ~~Security Deposit~~ . During the Term, Sublessee shall fund in four (4) installments and maintain a security deposit (the “ ~~Security Deposit~~ ”) in the following amounts (each, an “ ~~Installment~~ ”) : (i) $17,750.00 on the Commencement Date; (ii) an additional $17,750.00 on the first day of the ninth month of the Initial Term, (iii) an additional $17,750.00 on the first day of the eighteenth month of the Initial Term and (iv) an additional $17,750.00 on the first day of the twenty-fourth month of the Initial Term.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

3.2 ~~Acceleration of~~ ~~Security~~ ~~Deposit Installment~~ ~~Payments~~ . Notwithstanding the provisions of Section 3.1, if Sublessee fails to meet the required Lease Coverage Ratios set forth in Section 27(a) hereof (without regard to any notice and cure provisions applicable thereto), Sublessee shall pay to Sublessor the next due Installment of the Security Deposit. By way of example, if Sublessee fails to meet the Lease Coverage Ratio for the first full fiscal quarter ended after month 9 of the Initial Term, Sublessee shall pay to Sublessor the third Installment of the Security Deposit in the amount of $17,750.00 otherwise due and payable on the first day of the 18 ^th month of the Initial Term. If an accelerated Installment of the Security Deposit is due and payable hereunder, Sublessee shall make such Installment payment within five (5) business days of written demand by Sublessor.

~~3.3~~ ~~Payment of Security Deposit~~ . Sublessee may fund the Security Deposit by wire transfer to Sublessor of immediately available funds or through a Letter of Credit.

3 . 4 ~~Application of Security Deposit~~ . Sublessor shall hold the Security Deposit as security for the full and faithful performance of every term, provision, obligation and covenant under this Sublease. If the Security Deposit is paid in immediately available funds, the Security Deposit will be deposited by into an interest-bearing account, which interest shall accrue for the benefit of Sublessee. Subject to the earlier return of the Security Deposit pursuant to the provisions of the Eaglewood ALF Affiliated Sublease (as defined in Exhibit “F” attached hereto, within thirty (30) days of the end of the Initial Term or Renewal Term, as applicable, Sublessor shall return the Security Deposit to Sublessee with all accrued interest. The Security Deposit shall not be considered an advance payment of Rent (or of any other sum payable by Sublessee under this Sublease) or a measure of Sublessor’s damages in case of a default by Sublessee. If the Security Deposit is paid in immediately available funds, Sublessor shall have no obligation to maintain the Security Deposit separate and apart from Sublessor’s general and/or other funds but shall deposit same in a separate bank account in order to track accrued interest and to provide periodic statements thereof to Sublessee at least quarterly within ten (10) days after each calendar quarter. If Sublessee defaults in respect of any of the terms, provisions, covenants and conditions of this Sublease or if there is a default under any Affiliated Sublease, Sublessor may, but shall not be required to, in addition to and not in lieu of any other rights and remedies available to Sublessor, apply all or any part of the Security Deposit and accrued interest to the payment of any such sum in default, or any other sum that Sublessor may reasonably and necessarily expend or be required to expend by reason of such default, including but not limited to, any damages or deficiency in reletting the Premises. Whenever, and as often as, Sublessor has applied any portion of the Security Deposit to cure Sublessee’s default hereunder or under any Affiliated Sublease, Sublessee shall, within ten (10) days after Notice from Sublessor, deposit additional funds or Letters of Credit with Sublessor sufficient to restore the Security Deposit to the full amount then required to be deposited with Sublessor, and Sublessee’s failure to do so shall constitute an Event of Default without any further Notice. If Sublessor transfers or assigns its interest under this Sublease in accordance with the terms hereof, Sublessor shall assign the Security Deposit and accrued interest to the new sublessor and thereafter Sublessor shall have no further liability for the return of the Security Deposit, and Sublessee agrees to look solely to the new sublessor for the return of the Security Deposit. Sublessee agrees that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that Sublessor, its successors and assigns shall return the Security Deposit to the last Sublessee in possession of the Premises at the last address for which Notice has been given by such Sublessee or set forth in this Sublease, or as otherwise directed by Sublessee in writing, and that Sublessor thereafter shall be relieved of any liability therefor, regardless of one or more assignments of this Sublease or any such actual or attempted assignment or encumbrances of the Security Deposit. Notwithstanding any provision to the contrary contained in this Sublease, Landlord and Guarantor, jointly and severally, hereby guaranty in favor of Sublessee the full and indefeasible repayment of the Security Deposit plus all applicable interest accrued thereon.

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~~3.5~~ ~~[Intentionally Omitted].~~

4. ~~Late Charges~~ . The late payment of Rent will cause Sublessor to lose the use of such money and incur administrative and other expenses not contemplated under this Sublease. While the exact amount of the foregoing is difficult to ascertain, the parties agree that as a reasonable estimate of fair compensation to Sublessor, if Rent is not paid within ten (10) days after the due date for such payment then (a) Sublessee shall thereafter pay to Sublessor on demand a late charge equal to five percent (5%) of such delinquent amounts, and (b) such delinquent amounts shall accrue interest from the due date at the rate of eight percent (8%) per annum (the “ ~~Agreed Rate~~ ” ) until paid in ~~full.~~

5. ~~Taxes and Other Charges~~ . At the commencement and at the expiration of the Term, all Taxes and Other Charges shall be prorated. Sublessor shall promptly forward to Sublessee and Facility Mortgagee copies of all bills and payment receipts for Taxes or Other Charges received by it to enable payment thereof prior to the imposition of penalties and interest. Sublessee shall not be penalized for delays by Sublessor in the forwarding of such to Sublessee and Facility Mortgagee. Sublessee or Facility Mortgagee (as applicable) shall pay and discharge (including the filing of all required returns), prior to delinquency or imposition of any fine, penalty, interest or other cost (“ ~~Penalty~~ ”) provided that Sublessee and Facility Mortgagee timely receive such bills as aforesaid, “ ~~Taxes~~ ” , consisting of any real property and other taxes and assessments accruing during the Term of this Sublease with respect to the Premises (but not such Taxes accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease), and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date (excluding income taxes, franchise taxes, estate taxes, transfer taxes and/or gross receipts taxes that may be imposed upon Sublessor), provided such are received in a timely manner that provides Sublessee reasonable time to ensure such payments are made timely. For the avoidance to doubt, the parties acknowledge that Taxes are paid in arrears and the escrow of Taxes by Sublessee will be based on the Taxes payable only during the term of this Sublease, i.e., Sublessee’s obligation to pay Taxes will commence with the tax bill issued for the last half of 2018 (payable in July, 2019), as prorated based on the Commencement Date. Sublessee will escrow payments of Taxes prior to such July, 2019 due date as hereinabove provided. Sublessor acknowledges that all Taxes for the period prior to the Commencement Date shall be the Exiting Operator’s responsibility. Sublessee shall promptly pay and discharge “ ~~Other Charges~~ ” , consisting of any utilities and other costs and expenses of Sublessee’s operation of the Facility or any portion of the Premises and all other charges, obligations or deposits assessed against any portion of the Premises accruing during the Term of this Sublease with respect to of Sublessee’s operation of the Premises. Sublessee shall not be responsible for Taxes or Other Charges accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease, and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date. Notwithstanding any provision of this Section 5, to the extent Sublessee has funded Taxes in accordance with Section 5.2 below, Facility Mortgagee shall timely pay all Taxes to the extent of the impound held by Facility Mortgagee.

5.1 ~~Protests~~ . Sublessee has the right, but not the obligation, in good faith to protest or contest (a “ ~~Protest~~ ”) in whole or in part (a) the amount or payment of any Taxes or Other Charges, and (b) the existence, amount or validity of any Lien (as defined in ~~Section 8.~~ 1 ) , by appropriate proceedings sufficient to (i) prevent the collection or other realization of such Taxes, Other Charges or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other Charges or Liens (so long as it provides Sublessor with reasonable security to assure the foregoing). Sublessee shall diligently prosecute any such Protest at its sole cost and expense. Sublessor shall cooperate in any Protest that involves an amount assessed against it.

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5.2 ~~Impound~~ . If required by the Facility Mortgagee or upon Sublessor’s written notice to Sublessee during the Term during any ongoing Event of Default (after the expiration of any notice and cure period), Sublessor may require, Sublessee to pay with each Base Rent payment a deposit of one-twelfth (1/12 ^th ) of the amount required to discharge the annual amount of real property Taxes secured by a Lien encumbering any portion of the Premises as and when they become due. The deposits shall not bear interest nor be held by Sublessor or Facility Mortgagee (as applicable) in trust or as an agent of Sublessee, but rather shall be applied to the payment of the real property taxes. If at any time within thirty (30) days prior to the due date the deposits shall be insufficient for the payment of the obligation in full, Sublessee shall within ten (10) days after demand by Sublessor or Facility Mortgagee (as applicable), deposit the deficiency with Sublessor or Facility Mortgagee (as applicable). If deposits are in excess of the actual obligation, the required monthly deposits for the ensuing Sublease Year shall be reduced proportionately and any such excess at the end of the final Sublease Year shall be refunded to Sublessee within ten (10) calendar days. Sublessee shall forward to Sublessor or Facility Mortgagee (as applicable) all Tax bills, bond and assessment statements within five (5) days of receipt by Sublessee. If Sublessor assigns this Sublease in accordance with the t erm s hereof, all such deposits shall be transferred to the assignee, and Sublessor shall thereafter have no liability of any kind with respect thereto.

5.3 ~~Tax Treatment; Reporting~~ . Sublessor and Sublessee each acknowledges that each shall treat this transaction as a true Sublease for state law purposes and shall report this transaction as a Sublease for Federal income tax purposes. For Federal income tax purposes each shall report this Sublease as a ~~true~~ Sublease with Sublessor as the sublessor of the Premises and Sublessee as the sublessee of such Premises including: (a) Sublessee reporting its Rent payments as rent expense under Section 162 of the Code, and (b) Sublessor reporting the Rent payments as rental income. For the avoidance of doubt, nothing in this Sublease shall be deemed to constitute a guaranty, warranty or representation by either Sublessor or Sublessee as to the actual treatment of this transaction for state law purposes and for federal income tax purposes.

6. ~~Insurance~~ . All insurance provided for in this Sublease shall (i) be maintained under valid and enforceable policies issued by insurers licensed and approved to do business in the state where the Premises are located, (ii) name Sublessor as an additional insured and, for the property insurance policies, as the owner, (iii) be on an “occurrence” basis, or if claims made, include a provision whereby tail coverage costs are specified upon policy inception, (iv) cover all of Sublessee’s operations at the Facility, (v) provide that the policy may not be canceled except upon not less than thirty (30) days’ prior written notice to Sublessor and (vi) be primary and provide that any insurance with respect to any portion of the Premises maintained by Sublessor is excess and noncontributing with Sublessee’s insurance. The property policy(ies) shall also name the Sublessor and Facility Mortgagee as loss payee. The parties hereby waive as to each other all rights of subrogation which any insurance carrier, or either of them, may have by reason of any provision in any policy issued to them, provided such waiver does not thereby invalidate such policy. Original policies or satisfactory insurer certificates evidencing the existence of the insurance required by this Sublease and showing the interest of Sublessor and Facility Mortgagee shall be provided to Sublessor prior to the commencement of the Term or, for a renewal policy, not less than ten (10) days prior to the expiration date of the insurance policy being renewed. If Sublessor is provided with a certificate, it may demand that Sublessee provide a complete copy of the related policy within ten (10) days. Sublessee may satisfy the insurance requirements hereunder through coverage under so-called blanket policy(ies) of insurance carried and maintained by Sublessee regarding other operations or facilities; provided, however, that the coverage afforded Sublessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policies of insurance meeting all other requirements of this Sublease by reason of the use of such blanket policies of insurance. During the Term, Sublessee shall maintain the following insurance and any claims thereunder shall be adjudicated by and at the expense of it or its insurance carrier:

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(a) ~~Property Insurance~~ with respect to the Facility and Business against loss or damage from all causes under standard “all risk” property insurance coverage with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), without exclusion for fire, lightning, windstorm, explosion, smoke damage, vehicle damage, sprinkler leakage, flood, vandalism, earthquake, malicious mischief and any other risks normally covered under an extended coverage endorsement, in amounts that are not less than the actual replacement value of the Premises and all Sublessor and Sublessee Personal Property associated therewith (including the cost of compliance with changes in zoning and building codes and other laws and regulations, demolition and debris removal and increased cost of construction). Additionally, if the Facility contains steam boilers, steam pipes, steam engines, steam turbines or other high pressure vessels, insurance with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), covering the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the Facility, in an amount equal to one hundred percent (100%) of the full replacement cost of the Facility, which policies shall insure against physical damage to and loss of occupancy and use of the Premises arising out of an accident or breakdown covered thereunder;

(b) ~~Business Interruption and Extra Expense Coverage~~ with respect to the Facility and Business for loss of rental value for a period not less than twelve (12) months, covering perils consistent with the requirements of ~~Section 6(a)~~ , and including either an agreed amount endorsement or a waiver of any co-insurance provisions, so as to prevent Sublessee, Sublessor and any other insured thereunder from being a co-insurer, and providing that any covered loss thereunder shall be payable to the Sublessee;

(c) ~~Commercial General Public Liability Coverage~~ with respect to the Facility and Business (including products liability and broad form coverage) against claims for bodily injury, death or property damage occurring on, in or about the Facility, affording the parties protection of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as additional insured;

(d) ~~Professional Liability Coverage~~ with respect to the Facility and Business, providing for claims specifically relating to patient care and services provided by the Facility staff, its contractors and all related parties, to include coverage for medical directors with regard to their administrative duties provided to the Premises, with limits of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as an additional insured. If such coverage is purchased on a claims made basis, Sublessee must show proof of the ability to purchase tail coverage to last through the statute of limitations, upon the end of the Sublease Term;

(f) ~~Deductibles/Self-Insured Retentions~~ for the above policies shall not be greater than $100,000.00. To the extent reasonably required by a Facility Mortgagee, Sublessor may require a lower deductible amount or set higher policy limits to the extent both are commercially available and customary for properties similar to the Facility located in the State of Ohio.

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7. ~~Use, Regulatory Compliance, Preservation of Business and~~ ~~Management~~ .

7 . 1 ~~Permitted Use; Qualified Care; Number of Beds~~ . Sublessee shall continuously use and occupy the Premises during the Term as a skilled nursing facility with not less than 50 licensed and 50 Medicare and Medicaid certified beds and for ancillary services relating thereto, but for no other purpose (“ ~~Permitted Use~~ ”) . Sublessee shall provide care, treatment and services to all residents of the Facility in a manner consistent in all material respects with all applicable laws. Notwithstanding any common law or statutory right, Sublessee agrees not to transfer, move or otherwise take action that reduces the bed complement of the Facility and Sublessee agrees not to take any of the beds out of service or move the beds to a different location without the prior written consent of the Sublessor in its sole and absolute discretion. ~~Schedule 7.1~~ attached hereto sets forth a true, correct and complete list of the number and types of licensed beds at the Premises and whether such beds are Medicaid and/or Medicare certified. Sublessee shall take no action to reduce or modify the number of beds for which the Premises are licensed.

7 . 2 ~~Regulatory Compliance~~ . Sublessee, the Facility and the Premises shall comply in all material respects with all licensing and other laws and all covenants, conditions, restrictions and other use or maintenance requirements applicable to the Facility and, to the extent applicable, all Medicare, Medicaid and other third-party payor certification requirements, including timely filing cost and other required reports, timely paying all expenses shown thereon, and ensuring that the Facility continues to be fully certified for participation in Medicare and Medicaid (if applicable) throughout the Term and when they are returned to Sublessor, all without any suspension, revocation, decertification or other material limitation of such certification, if any. Further, Sublessee shall not commit any act or omission that would in any way violate any certificate of occupancy affecting the Facility, result in closure of the Facility or result in the sale or transfer of all or any portion of any related certificate of need (if applicable), bed rights or other similar certificate or license at any of the Facility. All inspection fees, costs and charges associated with a change of such licensure or certification shall be borne solely by Sublessor.

7.3 ~~Preservation of Business~~ . Sublessee acknowledges that a fair return to Sublessor on and protection of its investment in the Premises depends, in part, on Sublessee’s dedication to the Business and the concentration of similar businesses of Sublessee and its Affiliates in the geographical area of each Facility. Sublessee further acknowledges that the diversion of residents or patient care activities (except as is necessary to provide residents or patients with an alternative level of care or comply with contractual provisions of applicable admission agreements) from any Facility to other facilities at any time during the Term will have a material adverse effect on the value and utility of such Facility. Therefore, Sublessee agrees that during the Term and for a period of one (1) year thereafter, neither Sublessee nor any of its Affiliates shall, excluding the nursing facility doing business as Four Seasons of Washington Courthouse, located at 201 Courthouse Parkway, Washington Courthouse, Ohio 43160 (provided that a monthly report of admitted/discharged residents will be provided to Sublessor of any such activities with respect to said facility), without the prior written consent of Sublessor: (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (l0)-mile geographical radius of the Facility, (ii) except as is necessary to provide residents or patients with an alternative level of care, recommend or solicit the removal or transfer of any resident or patient from any Facility to any other nursing, health care, senior housing or retirement housing facility or divert actual or potential residents, patients or care activities of the Business conducted at the Facility to any other facilities, or (iii) employ for other businesses any personnel working in the Facility; provided, however, that if Sublessee or an Affiliate leases or subleases additional facilities from Sublessor or Sublessor’s Affiliates, the parties agree that Sublessee may move employees among those affiliated facilities.

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7.4 ~~Consulting Services~~ . ~~MSTC~~ Development, Inc. (“ ~~Consultant~~ ”) shall provide administration and management se rvice s (or shall cause a wholly-owned subsidiary to do so) to the Facility pursuant to a consulting services agreement acceptable to Sublessor, in substantially the form attached hereto as ~~Exhibit~~ “ H ” (the “ ~~Consulting Agreement~~ ”) . The consulting fee (“ ~~Consulting Fee~~ ”) under the Consulting Agreement shall not exceed five percent (5.0%) of the annual gross revenue realized from Sublessee’s operation of the Facility (after adjustment for contractual adjustments and overpayment by providers). Payment of the Consulting Fee shall be subordinate to the payment of Rent and all other amounts payable by Sublessee pursuant to this Sublease. The Consulting Agreement shall provide that from and after the date that an Event of Default has occurred and until such Event of Default, if curable, has been cured, Consultant shall not make any distributions to the holders of the equity interests of Consultant; provided, however, that Consultant shall be permitted to pay all compensation, salaries and/or bonuses to employees or contractors of Consultant (including Key Principals) in the ordinary course of business. Sublessee shall not be pe rm itted to engage any third-party consultant for the Facility without the prior written consent of Sublessor, which consent shall not be unreasonably withheld.

~~7.5~~ ~~Indebtedness~~ . Sublessee shall not incur debt other than (a) trade debt incurred in the ordinary course of business, (b) a working capital line secured by Sublessee’s accounts receivable, or (c) indebtedness constituting or in connection with Permitted Liens and Consulting Fees permitted hereunder.

8. ~~Acceptance, Maintenance, Upgrade, Alteration and Environmental~~ .

8.1 ~~Acceptance “AS IS”; No Liens~~ . Sublessee acknowledges that it is presently engaged in operations similar to those to be conducted at the Facility and has expertise in such industry and, in deciding to enter into this Sublease, has not relied on any representations or warranties, express or implied, of any kind from Sublessor except as contained herein. Sublessee accepts the Facility and the Premises on an “ ~~AS IS~~ ” basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Notwithstanding its right to Protest set forth in ~~Section 5.1~~ , Sublessee shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a “ ~~Lien~~ ”) for any reason other than Permitted Liens, provided that nothing in this Sublease shall require Sublessee to keep the Premises free of ~~Permitted Liens.~~ Furthermore, notwithstanding anything to the contrary contained in this Sublease, the provisions of this Section 8.1 are expressly subject to the terms and conditions of the Guaranty, and Sublessor and Landlord each acknowledges and agrees this Section 8.1 shall not in any way whatsoever reduce, limit or cancel the Guarantor’s liability or obligations under the Guaranty or this Sublease.

8.2 ~~Sublessee’s Maintenance Obligations~~ . Sublessee shall (a) keep and maintain the Premises and the Facility in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all ordinary interior and exterior, non-structural repairs necessary to keep the Facility in good and working order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable, certification for participation in Medicare and Medicaid, and (c) keep and maintain all Sublessor and Sublessee Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice for skilled nursing facilities located in the State of Ohio as required under this Sublease.

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8 . 3 ~~Alterations by Sublessee~~ . ~~Sublessee shall not make any~~ Alterations to the Premises without the express prior written consent of Sublessor, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that Sublessor’s consent shall not be required, but no less than ten (10) days advance notice to Sublessor shall be provided, with respect to (i) Alterations required by governmental authorities which are necessary to maintain applicable licenses and certifications to operate the Facility or (ii) minor cosmetic Alterations that (x) are non-structural in nature, (y) are not visible from the outside of the Premises and (z) do not cost, in the aggregate, in excess of $75,000.00 in any rolling twelve (12) month period. All Alterations shall immediately become a part of the Premises and the property of Sublessor subject to this Sublease, and the cost of all Alterations or other purchases, whether undertaken as an on-going licensing, Medicare, Medicaid or other regulatory requirement, or otherwise, shall be borne solely by Sublessee. All Alterations shall be constructed in a good and workmanlike manner in compliance with all applicable laws and the insurance required under this Sublease.

~~8.4~~ ~~Hazardous Materials~~ . Sublessee’s use of the Premises shall comply in all material respects with all ~~Hazardous Materials Laws.~~ If any ~~Environmental Activities~~ occur or are suspected to have occurred in violation of any Hazardous Materials Laws by Sublessee during the Term or if Sublessee has received notice of any ~~Hazardous Materials Claim~~ against any portion of the Premises solely as a result of Sublessee’s acts or omissions during the Term, Sublessee shall promptly obtain all permits and approvals necessary to remedy any such actual or suspected problem through the removal of Hazardous Materials or otherwise, and upon Sublessor’s approval of the remediation plan, remedy any such problem to the satisfaction of Sublessor and all applicable governmental authorities, in accordance with all Hazardous Materials Laws and good business practices. During the Term, Sublessee shall promptly advise Sublessor in writing of (a) any Environmental Activities in violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims against Sublessee or any portion of the Premises; (c) any remedial action taken by Sublessee in response to any Hazardous Materials Claims or any Hazardous Materials on, under or about any portion of the Premises in violation of any Hazardous Materials Laws; (d) Sublessee’s discovery of any occurrence or condition on or in the vicinity of any portion of the Premises that materially increase the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Sublessee, any governmental authority or any other Person relating to Hazardous Materials Laws or Hazardous Materials Claims with respect to any portion of the Premises, including copies thereof. Sublessor shall have the right, at Sublessor’s sole cost and expense (including, without limitation, Sublessor’s reasonable attorneys’ fees and costs) and with counsel chosen by Sublessor, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims. Sublessor represents and warrants to Sublessee that there are no Hazardous Materials Claims arising out of or relating to the Facility or the Premises as of the commencement of the Term.

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licensed Medicaid beds (if applicable). Subject to Sublessee’s working capital lender’s liens and the intercreditor agreement required by such working capital lender with respect thereto, Sublessor shall have a security interest in and to the Sublessee Property, which security interest Sublessor shall have the right to assign to a Facility Mortgagee in Sublessor’s sole discretion. Sublessor will agree to subordinate its lien and security interest with respect to Sublessee’s accounts receivable to any third party lender providing to Sublessee a working capital line of credit, whether such working capital line of credit exists as of the Commencement Date or future working capital lines of credit, on commercially reasonable terms reasonably acceptable to Sublessor. The terms and conditions of any working capital line of credit obtained by Sublessee after the Execution Date must be approved by Sublessor and Facility Mortgagee, which approval shall not be unreasonably withheld, conditioned or delayed so long as the line of credit t erm s and conditions are customary for loans in the senior living industry and are commercially reasonable.

10. ~~Financial, Management and Regulatory Reports~~ . Sublessee shall provide Sublessor with the reports listed in ~~Exhibit “C”~~ at the time described therein, which reports will be internally prepared by Sublessee unless otherwise provided for in Exhibit “C” and, with respect to any refinancing of the Premises such other information about Sublessee or the operations of the Facility as Sublessor may reasonably request. All financial information provided by Sublessee shall be prepared in accordance with generally accepted accounting principles consistently applied and shall be submitted electronically in the form of unrestricted, unlocked ^“ .xls” spreadsheets created using Microsoft Excel (2003 or newer editions), if Sublessee’s accounting office can reasonably provide it in this format. If Sublessee or any Affiliate becomes subject to any reporting requirements of the Securities and Exchange Commission (“ ~~SEC~~ ”) during the Term, it shall concurrently deliver to Sublessor such reports as are delivered pursuant to applicable securities laws. Similarly, should Sublessor or its parent, Regional Health Properties, Inc., be subject to any particular reporting requirements of the SEC during the Term for which it needs reports, documentation or other information from Sublessee, Sublessee agrees to deliver such reports, documentation and information within thirty (30) days after Sublessor’s request for the same. At Sublessor’s sole expense and upon reasonable notice so as not to interfere with Sublessee’s business and operations, Sublessee shall allow the review and audit of Sublessee’s financial statements listed in ~~Exhibit “C”~~ .

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Commencement Date, and as of the Commencement Date, there will be no existing subleases or other occupancy agreements in effect with respect to the Premises other than resident admission agreements for residents in possession of the Facility; (C) Landlord has good and marketable fee simple title to the Premises and the Authorizations subject to the Lease Agreement; and (D) the Facility contains 50 beds licensed by the Ohio Department of Health as skilled nursing beds and 50 beds certified by Medicare and Medicaid. As used herein the term “Authorizations” shall mean, with respect to the Facility, any and all licenses, permits, certifications, registrations, accreditations, provider agreements, certificates of need, certificates of exemption, approvals, waivers, variances and other authorizations issued by any governmental authority necessary or advisable for the use and operation of the Facility as it is currently being operated and receipt of reimbursement or other payments under any third party payor program in which such Facility participates.

12. ~~Events of Default~~ . So long as there is no Event of Default, Sublessee shall peaceably and quietly have, hold and enjoy the Premises for the Term, free of any claim or other action not caused or created by Sublessee or pursuant to ~~Sections 17~~ or 18 . The occurrence of any of the following events will constitute an “ ~~Event of Default~~ ” on the part of Sublessee:

(a) Sublessee’s failure to pay within ten (10) days of when due any Base Rent;

(e) An Event of Default has occurred under any Affiliated Sublease (as said term is defined therein) which Event of Default has not been cured during any applicable cure period or waived;

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(g) The failure to perform or comply in any material respects with the provisions of ~~Section 6~~ (Insurance) or Section 15 (Sublessor Rights); and if such failure is to provide a renewal insurance policy pursuant to Section 6 and such failure is not cured within three (3) business days after written notice thereof from Sublessor;

(l) The failure of Sublessee to comply with any of the Financial Covenants set forth in ~~Section 27~~ ( a ) ; or

(m) The failure of Sublessee to timely provide any of the reports required by ~~Section 10~~ .

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13. ~~Remedies~~ . Upon the occurrence and continuance of an Event of Default, Sublessor may exercise all rights and remedies under this Sublease and the laws of the State of Ohio that are available to a Sublessor of real and personal property in the event of a default by its Sublessee, and as to the Sublessee Property, all remedies granted under the laws of said state to a secured party under its Uniform Commercial Code. Sublessor shall have the duty to mitigate damages. Sublessee shall pay Sublessor, promptly upon demand, all reasonable out-of-pocket expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, agents and brokers. Notwithstanding any provision to the contrary contained in ~~Sections 12 or 13~~ hereof, if all then existing Events of Default would be considered to be capable of being cured within (i) five (5) days for a monetary default or (ii) thirty (30) days for a non-monetary default by a reasonably prudent landlord and tenant in the skilled nursing industry located in Ohio, then prior to Sublessor’s exercising any remedies provided herein, including, but limited to the termination of this Sublease, as a result of the occurrence of any such Event of Default, Sublessee shall have the right to cure each such Event of Default within five (5) days of notice from Sublessor for a monetary default and within thirty (30) days of notice from Sublessor for a non-monetary default, and upon such cure of all Events of Default then existing, Sublessor may not exercise its remedies thereunder or terminate this Sublease as a result of such cured Events of Default. Notwithstanding the preceding sentence, Sublessee’s right to cure an Event of Default and thereby avoid Sublessor’s exercise of remedies or Term ination of this Sublease shall not apply if Sublessee and/or the sublessees under any Affiliated Sublease have cured Events of Default two (2) times in the aggregate under this Sublease and/or the Affiliated Subleases in any twelve (12) consecutive month period.

13.1 ~~General~~ . Without limiting the foregoing but subject to the provisions thereof, Sublessor shall have the right (but not the obligation) to do any of the following upon an Event of Default to the extent not prohibited by applicable law: (a) sue for the specific performance of any covenant of Sublessee as to which it is in breach or for the performance of any other obligation or Sublessee under this Sublease; (b) enter upon any portion of the Premises, terminate this Sublease, dispossess Sublessee from the Premises through appropriate legal procedures and/or collect money damages by reason of Sublessee’s breach, including the acceleration of all Rent which would have accrued after such termination and all obligations and liabilities of Sublessee under this Sublease which survive the termination of the Term; (c) elect to leave this Sublease in place and sue for Rent and other money damages as the same come due; and (d) (before or after repossession of the Premises pursuant to clause (b) above and whether or not this Sublease has been terminated) assign this Sublease from Sublessee to a third party selected by Sublessor, in which case Sublessee agrees to consent to such assignment, and execute any and all documents necessary to effect such assignment; provided, that rent received from such third party assignee/new tenant shall serve to mitigate Sublessee’s obligation for damages to Sublessor hereunder.

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preserve or replace to the extent possible any operating license for the Premises or to otherwise substitute the licensee or provider thereof. The receiver shall be entitled to a reasonable fee for its services as a receiver. All such fees and other expenses of the receivership estate shall be added to the monthly rent due to Sublessor under this Sublease and shall be the obligation of Sublessee. To the extent not prohibited by applicable law, Sublessee hereby irrevocably stipulates to the appointment of a receiver under such circumstances and for such purposes and agrees not to contest such appointment in any manner whatsoever.

13.3 ~~Remedies Cumulative~~ ; ~~No Waiver~~ . No right or remedy herein conferred upon or reserved to Sublessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of Sublessor to insist at any time upon the strict performance of any provision of this Sublease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Sublessee. Sublessor’s receipt of and Sublessee’s payment of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Sublessor of any provision of this Sublease shall be effective unless expressed in a writing signed by it.

13.4 ~~Performance of Sublessee’s Obligations~~ . If Sublessee at any time shall fail to make any payment or perform any act on its part required to be made or performed under this Sublease and the same constitutes an Event of Default and the same is not cured after the expiration of any applicable notice and cure period or waived, then Sublessor may (but is not obligated to), without waiving or releasing Sublessee from any obligations or Event of Default hereunder, make such payment or perform such act for the account and at the expense of Sublessee, and in such event Sublessor will thereafter provide notice to Sublessee of any such payment or performance. All sums so paid by Sublessor and all necessary and reasonable incidental costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the performance of any such act by it in connection with curing any such Event of Default, together with interest at the Agreed Rate (as defined in ~~Section 4~~ hereof) from the date of the making of such payment or the incurring of such costs and expenses, shall be payable by Sublessee to Sublessor upon Sublessor’s written demand therefor.

14. ~~Provisions on Termination~~ .

14.1 ~~Surrender of Possession~~ . On the expiration of the Term or earlier termination or cancellation of this Sublease (the “ ~~Termination Date~~ ”) , Sublessee shall deliver to Sublessor or its designee possession of (a) the Facility and associated Sublessor Personal Property in a neat and clean condition and in as good a condition as existed at the date of Sublessee’s possession and occupancy pursuant to this Sublease, ordinary wear and tear excepted, (b) a fully operational, licensed and certified (if applicable) Business at the Facility, and (c) all patient charts and resident records along with appropriate resident consents if necessary and copies of all books and records relating to the Facility and the Premises which are usual and customary for skilled nursing facilities located in the State of Ohio for an orderly transfer of the operations of the Facility at the time of its surrender of the Premises to Sublessor or its designee, excluding books and records relating to Sublessee Personal Property. Sublessee shall reasonably cooperate with Sublessor or its designee in transferring or obtaining all necessary licenses and certifications for Sublessor or its designee, and Sublessee shall comply with all usual and customary requests regarding skilled nursing facilities located in the State of Ohio for an orderly transfer of the Facility licenses, and Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Sublessor or its designee to operate the Facility. Subject to all applicable laws, Sublessee hereby assigns, effective upon the Termination Date, all rights to operate the Facility to Sublessor or its designee, including all required licenses and permits and all rights to apply for or otherwise obtain them, and all other nonproprietary Sublessee Intangible Property relating to any portion of the Premises.

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14.5 ~~Survival~~ . All representations, warranties, covenants and other obligations of Landlord, Sublessor, Guarantor and Sublessee under this Sublease shall survive the Termination Date.

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15. ~~Certain Sublessor Rights~~ .

15.1 ~~Entry and Examination of Records~~ . Sublessor and its representatives may enter any portion of the Premises at any reasonable time after at least forty-eight (48) hours’ notice to Sublessee to inspect the Premises for compliance and to exhibit the Premises for sale, Sublease or mortgaging; provided that no such notice shall be required in the event of an emergency, upon the occurrence and continuance of an Event of Default or to post notices of non-responsibility under any mechanics’ or materialmans’ lien law. No such entry shall unreasonably interfere with residents, patients, patient care or the Sublessee’s operations of the Facility. Upon 48 hours’ prior notice and during normal business hours, Sublessee will permit Sublessor and its representatives, inspectors and consultants, at no cost or expense to Sublessee, to examine all contracts, books and financial records (wherever kept) relating to Sublessee’s operations of the Facility.

15.2 ~~Grant Liens~~ . This Sublease shall be subordinate to the right, title, and interest of any lender or other party holding a security interest in or a lien upon the Premises under any and all mortgage instruments or deeds to secure debt presently encumbering the Premises or the Building and to any and all other deeds to secure debt or mortgage instruments hereafter encumbering the Premises or the Building. Sublessee shall at any time hereafter, on written demand of Sublessor or the holder of any such deed to secure debt or mortgage instrument, execute such usual and customary instruments for skilled nursing facilities located in the State of Ohio which may reasonably be required by such party for the purpose of evidencing the subordination of this Sublease to the lien or security of such party. Sublessee shall, upon written demand, at any time or times, execute, acknowledge, and deliver to Sublessor or the holder of any such usual and customary instruments for skilled nursing facilities located in the State of Ohio to secure debt, without expense, any and all documents that may be reasonably necessary to make this Sublease superior to the lien of any of the same, in form and substance reasonably acceptable to Sublessee with attornment and non-disturbance provisions included therein for the benefit of Sublessee. If the holder of any of said instruments or deeds to secure debt shall hereafter succeed to the rights of Sublessor under this Sublease, Sublessee shall, at the option of such holder or a purchaser at any foreclosure or sale under power, attorn to and recognize such successor as Sublessee’s Sublessor under this Sublease. Sublessee shall promptly execute, acknowledge, and deliver any instrument that may be reasonably necessary to evidence such attornment. Prior to the Execution Date, Sublessor will obtain from any lender holding a lien on the Premises, a subordination, non-disturbance and attornment agreement for the benefit of, and reasonably acceptable to, Sublessee.

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15. 5 ~~Affiliate Contracts~~ . Sublessee may not enter into any contracts respecting the Facility with any of Sublessee’s Affiliates which are not at a r m’s length and fair market value without the prior written consent of Sublessor.

16. ~~Assignment and Subletting~~ . Except as otherwise expressly permitted in this Sublease, without Sublessor’s prior written consent, which may be granted or withheld in Sublessor’s sole discretion, Sublessee shall not assign this Sublease, or sub-sublease all or any part of the Premises, or permit the use of the Premises by any party other than Sublessee or any wholly-owned subsidiary or sub-subsidiary of a Sublessee. This prohibition includes an assignment or sub-subletting to or by a receiver or trustee in any federal or state bankruptcy, insolvency, or other proceeding. For purposes of this Section, a sale or transfer of all or a controlling ownership interest in Sublessee or a merger or other combination by Sublessee or a sale of all or substantially all of Sublessee’s assets in lieu thereof shall be deemed an assignment or other transfer of this Sublease. Notwithstanding the foregoing, any Key Principal may transfer interests in Sublessee and/or any Affiliates thereof to any other Key Principal, provided that such transfer complies with all applicable regulatory approvals.

17. ~~Damage by Fire or Other Casualty~~ . Sublessee shall promptly notify Sublessor of any damage or destruction of any portion of the Premises and diligently repair or reconstruct such portion of the Premises to a like or better condition than existed prior to such damage or destruction. Any net insurance proceeds payable with respect to the casualty shall be paid directly to Sublessor and, if an Event of Default has not occurred and is continuing, shall be used for the repair or reconstruction of the applicable portion of the Premises pursuant to Sublessor's reasonable disbursement requirements. If there are excess insurance proceeds, the surplus shall belong and be paid to Sublessee, Subject to the provisions of Section 18, Sublessee shall not have any right under this Sublease, and hereby waives all rights under applicable law, to abate, reduce or offset Rent by reason of any damage or destruction of any portion of the Premises by reason of an insured or uninsured casualty.

18. ~~Condemnation~~ . Except as provided to the contrary in this ~~Section 18~~ , this Sublease shall not terminate and shall remain in full force and effect in the event of a taking or condemnation of the Premises, or any portion thereof, and Sublessee hereby waives all rights under applicable law to abate, reduce or offset rent by reason of such taking. If during the Term all or substantially all (a “ ~~Complete Taking~~ ”) or a smaller portion (a “ ~~Partial Taking~~ ”) of the Premises is taken or condemned by any competent public or quasi-public authority, then (a) in the case of a Complete Taking, Sublessee may at its election made within thirty (30) days of the effective date of such Taking, Terminate this Sublease and the current Rent shall be equitably abated as of the effective date of such termination, or (b) in the case of a Partial Taking, the Rent shall be abated to the same extent as the resulting diminution in Fair Market Value of the applicable portion of the Premises. The resulting diminution in Fair Market Value on the effective date of a Partial Taking shall be as established pursuant to ~~Exhibit “E”~~ . Sublessor alone shall be entitled to receive and retain any award for a taking or condemnation other than a temporary taking; provided, however, Sublessee shall be entitled to submit its own claim in the event of any such taking or condemnation with respect to the value of Sublessee’s Subleasehold interest in any portion of the Premises and/or the relocation costs incurred by Sublessee as a result thereof. In the event of a temporary taking of less than all or substantially all of the Premises, Sublessee shall be entitled to receive and retain any and all awards for the temporary taking and the Rent due under this Sublease shall be not be abated during the period of such temporary taking.

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19. ~~Indemnification.~~

19.1 Sublessee agrees to protect, indemnify, defend and save harmless Sublessor and its respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of (a) the breach by Sublessee or any of its representations, warranties, covenants or other obligations hereunder, (b) any Protest, (c) all known and unknown Environmental Activities, Hazardous Materials Claims and violations by Sublessee of a Hazardous Materials Law in each case related to Sublessee’s use of any portion of the Premises on and after the Commencement Date, and (d) upon or following the Termination Date, the correction of all deficiencies of a physical matter identified by, and any liability assessed or asserted by, any governmental agency or Medicare or Medicaid providers, as applicable, as a result of or arising out of or in connection with Sublessee’s operation of the Facility or the related change in ownership inspection and audit (including any overpayment to any Medicare, Medicaid or other third party payor, as applicable). Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessor believes is covered by this indemnity, it shall give Sublessee notice of this matter. If Sublessor does not elect to defend the matter with its own counsel at Sublessee’s expense, Sublessee shall then defend Sublessor at Sublessee’s expense (including Sublessor’s reasonable attorneys’ fees and costs) with legal counsel satisfactory to Sublessor.

19.2 Landlord, Guarantor and Sublessor, jointly and severally, agree to protect, indemnify, defend and save harmless Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of (a) the breach by Sublessor, Guarantor and/or Landlord of any of their respective representations, warranties, covenants or other obligations hereunder, (b) all known and unknown Environmental Activities, Hazardous Materials Claims and violations by Landlord, Sublessor or any prior operator of the Facility of a Hazardous Materials Law in each case related to any such person’s ownership, lease, use or operation of any portion of the Premises prior to the Commencement Date, and (c) for all periods prior to the Commencement Date, the correction of all deficiencies of a physical matter identified by, and any liability assessed or asserted by, any governmental agency or Medicare or Medicaid providers, as applicable, as a result of or arising out of or in connection with the Facility or any portion thereof or the related change in ownership inspection and audit (including any overpayment to any Medicare, Medicaid or other third party payor). Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessee believes is covered by this indemnity, it shall give Landlord, Guarantor and Sublessor notice of this matter. If Sublessee does not elect to defend the matter with its own counsel at Landlord’s, Guarantor’s and Sublessor’s expense, Landlord, Guarantor and Sublessor shall then defend Sublessee at Landlord’s, Guarantor’s and Sublessor’s expense (including Sublessee’s reasonable attorneys’ fees and costs) with legal counsel satisfactory to Sublessee.

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Facility and such matters as disclosed or referenced in the existing phase one environmental site assessments obtained by Sublessor (each, a “Preexisting Environmental Condition”). Landlord, Guarantor and Sublessor shall, jointly and severally, indemnify, defend and save harmless Sublessee Indemnitees from and against any obligations, liabilities, damages, costs, expenses, losses or claims incurred by Sublessee Indemnitees (including fees and expenses of counsel) arising out of or in connection with any Preexisting Environmental Condition .

20. ~~Disputes~~ . If any party brings any action to interpret or enforce this Sublease, or for damages for any alleged breach, the prevailing party shall be entitled to reasonable attorneys’ fees and costs as awarded by the court in addition to all other recovery, damages and costs.

21. ~~Notices~~ . All notices and demands, certificates, requests, consents, approvals and other similar instruments under this Sublease shall be in writing and sent by personal delivery, U.S. certified or registered mail (return receipt requested, postage prepaid) or FedEx or similar generally recognized overnight carrier regularly providing proof of delivery, addressed as follows:

If to Sublessee:		If to Sublessor:

~~Greenfield, SNF, Inc.~~		~~RMC HUD Master Tenant, LLC~~
~~c/o MSTC Development, Inc.~~		~~c/o Regional Health Properties, Inc.~~
~~556 Niles Courtland Road, S.E.~~		~~454 Satellite Blvd.~~
~~Warren, Ohio 44484~~		~~Suite 100~~
~~Attn: President/CEO~~		~~Suwanee, Georgia 30024~~
		~~Attn: CEO~~

~~With a copy to:~~
~~Rolf Goffman Martin Lang LLP~~
~~30100 Chagrin Boulevard, Suite 350~~
~~Cleveland, Ohio 44124~~
~~Attn: Ira S. Goffman, Esq.~~

22. ~~Intentionally Omitted~~ .

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24. ~~Miscellaneous~~ . This Sublease has been freely and fairly negotiated, and all provisions shall be interpreted according to their fair meaning and shall not be strictly construed against any party. While nothing contained in this Sublease should be deemed or construed to constitute an extension of credit by Sublessor to Sublessee, if a portion of any payment made to Sublessor is deemed to violate any applicable laws regarding usury, such portion shall be held by Sublessor to pay the future obligations of Sublessee as such obligations arise and if Sublessee discharges and performs all obligations hereunder, such funds will be reimbursed (without interest) to Sublessee within ten (10) days or if not so reimbursed, Sublessee may credit such amount against Rent on a dollar-for-dollar basis. If any part of this Sublease shall be determined to be invalid or unenforceable, the remainder shall nevertheless continue in full force and effect. Time is of the essence, and whenever action must be taken (including the giving of notice or the delivery of documents) hereunder during a certain period of time or by a particular date that ends or occurs on a Saturday, Sunday or federal holiday, then such period or date shall be extended until the immediately following business day. Whenever the words “including”, “include” or “includes” are used in this Sublease, they shall be interpreted in a non exclusive manner as though the words “without limitation” immediately followed. Whenever the words day or days are used in this Sublease, they shall mean “calendar day” or “calendar days” unless expressly provided to the contrary. The titles and headings in this Sublease are for convenience of reference only and shall not in any way affect the meaning or construction of any provision. Unless otherwise expressly provided, references to any “Section” mean a section of this Sublease (including all subsections), to any “Exhibit” or “Schedule” mean an exhibit or schedule attached hereto or to “Medicare” or “Medicaid” include any successor program. If more than one Person is Sublessee hereunder, their liability and obligations hereunder shall be joint and several. Promptly upon the request of either party and at its expense, the parties shall prepare, enter into and record a suitable short form memorandum of this Sublease. This Sublease (a) contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior or contemporaneous verbal or written agreements or understandings, (b) may be executed in several counterparts, (including electronically mailed copies in portable document format (PDF)), each of which shall be deemed an original, but all of which shall constitute one and the same document, (c) may only be amended by a writing executed by the parties, (d) shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties; provided, however, that the indemnification obligations of any party hereunder shall survive any such assignment, (e) shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio, and (f) incorporates by this reference any Exhibits and Schedules attached hereto.

25. ~~Non-Disturbance and Attornment~~ . If the Lease Agreement shall expire or terminate during the term of this Sublease for any reason other than condemnation or destruction by fire or other casualty, or if Sublessor shall surrender the Lease Agreement to Landlord during the term of this Sublease, Landlord shall continue this Sublease with the same force and effect as if Landlord as lessor and Sublessee as lessee had entered into a lease as of such effective date for a term equal to the then unexpired term of this Sublease and containing the same provisions as those contained in this Sublease, provided that (i) the Lease Agreement was terminated pursuant to Sublessor’s default under the Lease Agreement, (ii) the default is of such a type that Sublessee can cure, and (iii) Sublessee in fact cures such default within thirty (30) days, where possible, or within a reasonable amount of time. In such event, Sublessor shall promptly transfer any remaining security deposit described in ~~Section 3~~ of this Sublease to Landlord. If this Sublease is continued pursuant to this Section 25, Sublessee shall attorn to Landlord and Landlord and Sublessee shall have the same rights, obligations and remedies thereunder as were had by Sublessor and Sublessee hereunder prior to such effective date, respectively.

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26. ~~Terrorism/Governmental Action~~ . Sublessee warrants and represents to Sublessor that Sublessee is not, and shall not become, a person or entity with whom Sublessor is restricted from doing business under regulations of the Office of Foreign Asset Control (“ ~~OFAC~~ ”) of the Department of the Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any applicable law, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action, and is not and shall not knowingly engage in any dealings or transaction or otherwise knowingly be associated with such persons or entities.

27. ~~Financial Covenant~~ . Sublessee shall be required to comply with the following financial covenant: Maintaining a ~~Lease Coverage Ratio~~ of 1.0 to 1.0 for months 9 through 18 of the Initial Term, 1.15 to 1.0 for months 19 through 36 of the Initial Term and 1.25 to 1.0 thereafter. Such Lease Coverage Ratio will be tested on a quarterly basis beginning with the first full fiscal quarter ended after month 9 of the Initial Term and continuing each fiscal quarter thereafter through month 24 of the Initial Term. Notwithstanding the foregoing, if the Lease Coverage Ratio in months 13 through 24 of the Initial Term meets a minimum of 1.0 to 1.0 over either a trailing twelve-month testing period or a trailing three-month period, then there shall be no financial covenant default under this Section 27(a). After month 24 of the Initial Term, Sublessee must satisfy the Lease Coverage Ratio for a trailing twelve-month testing period tested quarterly beginning with the first full fiscal quarter ended of Sublessee after month 24 of the Initial Term.

28. ~~[Intentionally Omitted].~~

29. ~~[Intentionally Omitted].~~

30. ~~Certain Conditions Precedent and Transitional Provisions~~ . The provisions of this Section 30 shall govern and control over any contrary provisions of this Sublease.

30.1 ~~Certain Conditions Precedent~~ .

30.1.2 Sublessee (“ ~~Applicant~~ ”) , with respect to the Facility, shall file and submit all applications, petitions and other documents (collectively, the “ ~~Required Authorization Applications~~ ”) that are necessary or appropriate for it to obtain all of the Required Authorizations for the Facility. Applicant shall use its commercially reasonable efforts and due diligence to obtain the Required Authorizations for the Facility and shall promptly respond to any questions or information requests from any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications. Upon Sublessor’s written request, Applicant shall furnish to Sublessor copies of all Required Authorization Applications and any correspondence or other written documentation received from or delivered to any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications.

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30.1.4 The term “ ~~Required Authorizations~~ ” shall mean, with respect to the Facility, such consents, approvals and other assurances, oral or written, as are, under local custom and practice, customarily obtained from state licensing authorities by reasonable operators of facilities like the Facility, acting in good faith, before such an operator takes possession of, and begins to operate, a facility like the Facility. By way of example and without limitation of the foregoing, in the event that Applicant receives permission from the applicable state licensing authorities to assume operational control of a particular Facility prior to the issuance of a non-provisional or non-conditional license for such Facility (e.g., due to a state licensing authority’s requirement that a survey of Applicant’s operations at the Facility be completed prior to the issuance of a non-provisional or non-conditional license) and, under local custom and practice, reasonable operators of facilities like the Facility customarily take possession of, and begin to operate, facilities like the Facility on the basis of such permission, then, for purposes of this Section 30 . 1, the date of such permission would be treated as the date that Applicant obtained the Required Authorizations for the Facility; provided, however, that if Applicant provides written correspondence from state licensing authorities indicating that additional documentation is required to obtain the Required Authorizations, then in no event shall the Required Authorizations be deemed to have been obtained by Applicant,

30.2 ~~Additional Conditions Precedent~~ . The effectiveness of this Sublease, Sublessor’s and Sublessee’s rights and obligations hereunder and the consummation of the transactions contemplated thereby are subject to satisfaction of each of the following conditions precedent for the Facility:

30.2.2 An Estoppel, Non-Disturbance and Attornment Agreement executed by Landlord in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee;

30.2.3 Evidence of the termination of all of the Exiting Operator’s right to occupy the Premises and operate in the Business, in form and substance reasonably acceptable to Sublessee;

30.2.5 A copy of the certificate of occupancy relating to the Facility, in form and substance acceptable to Sublessee to obtain licensure for the Facility;

30.2.6 The concurrent closing of the Affiliated Subleases and all required HUD TPA approvals with respect thereto, as applicable;

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30.2. 7 Sublessee obtaining the working capital line of credit secured by Sublessee’s accounts receivable from the Facility and execution and delivery by Sublessor, and Sublessor’s Facility Mortgagee if required, of an intercreditor agreement in such form and substance required by such working capital lender;

30.2.9 A Subordination, Non-Disturbance and Attornment Agreement executed by each Facility Mortgagee in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee.

30.2.10 ~~HUD~~ Cap Ex Account. Sublessor and Landlord, jointly and severally, represent and warrant to Sublessee that the balance in the capital improvements reserve account required to be maintained under the documents evidencing the HUD Loan relating to the Leased Premises (the “HUD Cap Ex Account”) as of the Execution Date is $216,192.65 (the “HUD Cap Ex Balance”). From and after the Commencement Date, Sublessee shall pay as Additional Rent due hereunder to Sublessor or the servicer of the HUD loan, as applicable, the required monthly payment to the HUD Cap Ex Account in the amount of $3,541.67. From time to time in Sublessee’s discretion, Sublessee shall submit all HUD required documentation of work performed and amounts incurred for qualifying expenditures in connection with the Leased Premises in support of a request for reimbursement from the HUD Cap Ex Account. Sublessor and Landlord agree to cooperate in good faith and use commercially reasonable efforts to timely obtain HUD approval of reimbursement from the HUD Cap Ex Account relating to such HUD submission, including, but not limited to, submitting such additional documents required by HUD. Upon HUD approval and reimbursement for qualifying expenditures, Sublessor or Landlord, as applicable, jointly and severally, shall within five (5) business days pay to Sublessee the amount received by Sublessor or Landlord, as applicable, from the HUD Cap Ex Account for such qualifying expenditures submitted, and if any such payment from the HUD Cap Ex Account is not timely paid as set forth above, such delinquent amount shall be accessed payment premium in the amount of eight percent (8%) of said delinquency, as liquidated damages and not as a penalty, it being agreed that said premium amount represents a reasonable estimate of the probable damages to Sublessee as a result of such timely failure to pay, and Sublessor and Landlord hereby each waives any and all rights to contest or bring an action with respect to such required payment and premium. In addition, Sublessor and Landlord agree that in the event the HUD reserves being paid monthly by Sublessee hereunder meet the total maximum HUD reserves required by HUD, Sublessee shall not be required to pay any additional monthly HUD reserves under this Sublease.

30.2.11 Redevelopment. Upon the request of Sublessee, Sublessor will conduct, at its sole expense, a feasibility study or assessment to assess economic viability and competitiveness of the Facility with options for the redevelopment, addition to or construction of a new building for the Facility, with input and approval from Sublessee with respect thereto, and submit a proposal to the Landlord. Landlord will make reasonable best efforts to provide funds via HUD redevelopment programs in the amount supported by mutually accepted analysis and redevelopment.

30.2.12 HUD Addendum. Sublessor, Landlord and Sublessee shall execute and deliver an Addendum to Operating Lease (HUD Form 91116-ORCF) and any and all other documents required by HUD in connection with HUD’s approval of Sublessee as the operator of the Facility, in form and substance reasonably acceptable to Sublessee.

[Signatures on Following Pages]

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~~IN WITNESS WHEREOF,~~ this Sublease has been executed by Sublessor and Sublessee as of the date first written above.

~~SUBLESSOR~~ :

RMC HUD MASTER TENANT, LLC
a Georgia limited liability company

By:	/s / Brent Morrison
Name:	Brent Morrison
Title:	Manager

STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The, fore going instrument was acknowledged before me this 3 ^rd day of December, ~~2018, by~~ Brent Morrison , ~~the~~ ~~Manager~~ ~~of RMC HUD Master~~ Tenant, LLC, a Georgia limited liability company, on behalf of the company.

/s / K N. Parker

Notary Public

Commission
Expiration:	4/14/20

SUBLEASE AGREEMENT H&C

~~SUBLESSEE~~ :

GREENFIELD SNF, INC.
an Ohio corporation

By:	/s/ Michael P. Slyk
Name:	Michael P. Slyk
Title:	President

STATE OF OHIO		:
		:	ss
COUNTY OF	Trumbull	:

The foregoing instrument was acknowledged before me this 30 day of November , 2018, by Michael P. Slyk , the President of Greenfield SNF, Inc., an Ohio corporation, on behalf of the corporation.

/s/ TRACIE A. KATZENBERGEK

Notary Public

TRACIE A. KATZENBERGEK

Commission
Expiration:	6-26-2021

	TRACIE A. KATZENBERGEK

	NOTARY PUBLIC
	STATE OF OHIO

	My Commission Expires
	June 26, 2021

~~LANDLORD~~ :

HEARTH & CARE OF GREENFIELD, LLC,
an Ohio limited Liability company

By :	~~/s/~~ ~~Brent Morrison~~
~~Name:~~	~~Brent Morrison~~
~~Title:~~	~~Manager~~

STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December , 2018, by ~~Brent Morrison~~ , the ~~Manager~~ of Hearth & Care of Greenfield, LLC, an Ohio limited liability company, on behalf of the company.

		/s/ K N. Parker
Commission
Expiration:	4/14/20

SUBLEASE AGREEMENT H&C

The undersigned Guarantor hereby executes this Sublease for the sole purpose of becoming a party to and agreeing to Sections 2.6 , 2.7, 3.4, 8.1, 14.5, 19.2 and 19.3.

~~GUARANTOR~~ :

REGIONAL HEALTH PROPERTIES, INC.,
a Georgia corporation

~~By:~~	~~/s/~~ ~~Brent Morrison~~
~~Name:~~	~~Brent Morrison~~
~~Title:~~	~~Interim CEO~~

STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day o f ~~December~~ , 2018, by ~~Brent Morrison~~ , the Interim CEO of Regional Health Properties, Inc., a Georgia corporation, on behalf of the corporation.

/s/ K N Parker

Notary Public

Commission
Expiration:	4/14/20

SUBLEASE AGREEMENT H&C

~~List of Exhibits~~

Exhibit A-l:		Legal Description

Exhibit A-2:		Sublessor Personal Property

Exhibit B:		Certain Definitions

Exhibit C:		Financial, Management and Regulatory Reports

Exhibit D:		Fair Market Reset Rent

Exhibit E:		Fair Market Value

Exhibit F:		Affiliated Subleases

Exhibit G:		Calculated Rent

Exhibit H :		Consulting Services Agreement

~~List of Schedules~~

Schedule 7.1:

Licensed Beds

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “A-1”~~

~~LEGAL DESCRIPTION~~

~~Legal Description of The Pavilion~~

~~PARCEL I (Nursing Home);~~

~~Situated in t~~ h ~~e City of Greenfield, County of Highland and State of Ohio:~~ ~~And known as being parts of~~ In ~~-Lots No. 103 and No. 104 of said Village (now City) and located on the Northwest co~~ rn e r ~~of Washington Street and South Street~~ ~~intersection~~ ~~, fronting eighty and one-half (~~ 80 ~~-I/2) on Washington Street and 97-1/2 on South Street, extending back and parallel with the same width of which 97-1/2 fronting on South Stree~~ t ~~82-1~~ /2 ~~feet frontage in on In-Lot 103 and 1~~ 5 ~~feet is on the East frontage of In-Lot No. 104 on South Street~~ .

~~PARCEL II (Nursing Home):~~

~~Situated in the City of Greenfield, County of Highland and State of Ohio:~~

~~And known as being a portion of In-Lots Number 103 and 104, be~~ ~~ginning~~ ~~at a point in the East Line of In-Lot No. 103, on~~ ~~Washington~~ ~~Street, Eight~~ y ~~and One-Half (80-1/2) feet from the Northwest co~~ rn ~~er of Washington and South Streets;~~

~~Thence Westerly parallel with South Street Ninety-Seven and One-Half (97-3/2) feet to a stake on In-Lot No~~ . ~~104;~~

~~Thence Northerly and parallel with the East line of In-Lot No~~ . ~~104, Eighty-four and one- half (84-1 /2) feet to the alley;~~

~~Thence wi~~ th ~~alley Easterly, ninety-seven and one-half (97-1/2) feet to a stake in the West line of Washington Street;~~

~~Thence Southerly wi~~ th th ~~e East li~~ ne ~~of In-Lot No. One Hundred and three (103) and parallel with Washington S~~ tr ~~eet to~~ th ~~e place of~~ ~~beg~~ ~~innin~~ ~~g, eighty-four and one-half (84-1/2) feet;~~

~~PARCEL~~ ~~III~~ ~~(Office Bu~~ il ~~ding):~~

~~Situated in the City of Greenfield, County of Highland and State of Ohio:~~

~~And known as beginning at a cross in~~ th ~~e sidewalk 16-1/2 feet from~~ th ~~e curb on~~ th ~~e North side of South Street, and near the North edge of said sidewalk, said cross being 97-1~~ /2 ~~feet from~~ th ~~e Southeast co~~ rn ~~er of In-Lot 103 and 150 feet from~~ th ~~e East side of an alley on~~ th ~~e West side of In-Lot No. 118;~~

~~Thence running Northward, parallel to Washington Street, 165 feet to an alley;~~

~~Thence turning and~~ ~~running~~ ~~Westward, parallel to South Street, 50 f~~ ~~eet~~ ;

~~Thence turning and running Southward, parallel to Washington Street, 165 feet;~~

~~Thence turning and running Eastward, parallel to South Street, 50 feet to the beginning~~ .

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “A-1”~~

~~LEGAL DESCRIPTION~~ – ~~CONTINUED~~

PA R ~~CEL~~ ~~IV (Parking Lot):~~

~~Situated~~ in ~~the City of Greenfield, County of Highland and State of Ohio:~~

~~And known as being a part of In-Lot No. 105 of the Original Town Plat as recorded in Plat Book 01, Page 135 of the Highland County Recorders Office, and being f~~ u ~~rther bounded and described as follows:~~

~~Beginning at a 5/8-inch iron pin (found, bent) in the Northerly margin of an alley, 165 feet wide, said iron pin being the Southeasterly co~~ rn ~~er of a 52~~ 8 ~~0 sq. ft~~ , ~~tract as conveyed to~~ ~~the~~ ~~Home Building and Loan company of Greenfield (O~~ . ~~R. 079, Page 745);~~

~~Thence with the Easterly line of the Home Building and Loan Company of Greenfield, North~~ 14 ~~deg, 00' 00~~ ” ~~West, a distance of 103.00 feet to 5/8-~~ ~~inch~~ ~~iron pin (set);~~

~~Thence with a new division~~ l ~~ine North 76 deg. 00' 00~~ ” ~~East, a distance of 50.50 ft. to a 5/8- inch iron pin (set) in the Westerly line of an unrecorded 12.5 ft~~ , ~~alley way South 14 deg. 00' (~~ ~~00”~~ ~~East, a distance of 103.00 feet to a 5/8-inch iron pin (found) in the Northerly margin of the aforementioned alley, 16.50 feet wide;~~

Th e nc e ~~with the Northerly margin of said alley South 76 deg. 00' 00~~ ” ~~West, a distance of 50.50 feet to the beginning, containing 0,1194 acre of land.~~

~~Subject to all legal easements and rights-of-way of record.~~

~~Bearings are based upon~~ th ~~e record bearing (South 76 deg. 00’ 00° West) of the Northerly margin of~~ ~~Mirb~~ e ~~au Street &s found in D~~ .B ~~. 315, Page 705.~~

~~The above description is a~~ ~~part of In~~ Lo ~~t No. 105 as conveyed to Thomas B. Fenton and Connie J.~~ Fe n t ~~on and recorded in Official Record 114, Page 282 of Highland County Recorder~~ ’ ~~s Office.~~

~~Land surveyed in July 1994 and May 1996, under the direction of Thomas E. Purt~~ ~~ell~~ ~~, Registered Professional Surveyor No. 6519, the survey plat of~~ ~~which is referred to as Drawing No. S96310 on file in the office of McCarty Associates, Hillsboro, Ohio.~~

~~311 South Street~~

~~Greenfield, Ohio 45~~ 1 23

P P ~~N: 27-16-001-114.00 (as to Part of In-Lot 104)~~

~~Y/L Washington Street~~

~~Greenfield, Ohio 45123~~

~~PPN; 27-16-001-115.000 (as to Part of In-Lot 104)~~

~~238 S. Washington Street~~

~~Greenfield, Ohio 45123~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “A-1~~ ”

~~LEGAL DESCRIPTION - CONTINUED~~

PPN: 27-16-001-116.000 (as to Part of In-Lot 103 and 104)

22 5 Washington Street

Greenfield, Ohio 45123

PPN: 27-16-001-117. 00 (as to Part of In-Lot 103)

~~Y/L Mirbeau Street~~

~~Greenfield, Ohio 45123~~

~~PPN: 27~~ -1 ~~6-001-137.01 (as to Part of~~ ~~In-L~~ ~~ot 105)~~

~~PARCEL V~~

~~FIRST TRACT: Situate in the City of Greenfield, County of Highland, State of Ohio, and bounded and described as~~ ~~follows:~~

~~Commencing at the Southeast comer of~~ ~~In-L~~ ~~ot No~~ . ~~102 as known and described on the recorded p~~ la ~~t of said City;~~

~~Thence North 20 feet with the line of Washington Street~~ ; -

~~Thence West 60 feet;~~

~~Thence South to the line of the alley;~~

~~Thence East with~~ th ~~e line of the alley 60 feet to the place of beginning~~ .

~~SECOND TRACT: Situate in the City of Greenfield, Co~~ un ~~ty of Highland, State of Ohio,~~ ~~and~~ ~~bounded and described as follows:~~

~~A strip of ground fronting 41 feet on Washington Street and running ba~~ ck that width at right angles with Washington Street 70 feet to an alley, said strip being a portion of said In-Lot Number 102 as known and designated on the recorded plat of said City and lying adjoining and North of the present residence of Jessie Robins .

~~THIRD TRACT: Situate in the City of Greenfield, County of Highland, State of Ohio, and bounded and described as follows:~~

~~Also a strip or ground 10 feet by 20 feet in the rear of and adjoining the present lot of Jessie Robins;~~

~~Being part of the Southwest co~~ rn ~~er of~~ In ~~-Lo~~ t No . ~~102, excepting a strip of land 12~~ -1 ~~/2 feet in width running North and S~~ ~~out~~ ~~h which is hereby reserved for an alley.~~

~~PPN: 27-16-001-132~~ . 00

~~222 South Washington Street, Greenfield, Ohio 45123~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT~~ A -2

~~SUBLESSOR PERSONAL PROPERTY~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “B”~~

~~CERTAIN DEFINITIONS~~

For purposes of this Sublease, the following terms and words shall have the specified meanings:

“ ~~Affiliate”~~ shall mean with respect to any Person, any other Person which, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the first Person.

~~“Alterations”~~ shall mean any additions, installations, substitutions or improvements to the Facility made or to be made by Sublessee after its acceptance of the Facility.

~~“Business”~~ shall mean the business and operation of the Facility and all financial activities and other matters related thereto.

~~“Calculated Rent”~~ shall mean during Months seven (7) through thirty-six (36) the amount set forth on ~~Exhibit “G”~~ attached hereto.

“CPI” shall mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items, Not Seasonally Adjusted, as published by the United States Department of Labor, Bureau of Labor Statistics of the United States Department of Labor. In the event such index is discontinued, comparable statistics in the purchasing power of the consumer dollar, as published at the time of said discontinuance by a responsible financial authority shall be selected at the Sublessor's reasonable discretion and shall be used in lieu of such index.

~~“Debt Service Rent”~~ shall mean the amount of $15,031.00.

~~“Exiting Operator”~~ shall mean HC SNF, LLC d/b/a Hearth & Care at Greenfield.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~“Facility Net Income”~~ shall mean, for any period, the net income (or loss) of the Business.

~~“Facility Mortgagee”~~ shall mean the holder or beneficiary of a Facility Mortgage and any other rights of the lender, credit party or lessor under the applicable Facility Mortgage Documents.

~~“Hazardous Materials”~~ shall mean (a) any petroleum products and/or by-products (including any fraction thereof), flammable substances, explosives, radioactive materials, hazardous or toxic wastes, substances or materials, known carcinogens or any other materials, contaminants or pollutants which pose a hazard to any portion of the Premises or to Persons on or about any portion of the Premises or cause any portion of the Premises to be in violation of any Hazardous Materials Laws; (b) asbestos in any form which is friable; (c) urea formaldehyde in foam insulation or any other form; (d) transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million or any other more restrictive standard then prevailing; (e) medical wastes and biohazards not disposed of in accordance with applicable law; (f) radon gas; and (g) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or may or could pose a hazard to the health and safety of the occupants of any portion of the Premises or the owners and/or occupants of property adjacent to or surrounding any portion of the Premises, including, without limitation, any materials or substances that are listed in the United States Department of Transportation Hazardous Materials Table (49 CFR 172.101) as amended from time to time.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~“Hazardous Materials Laws”~~ shall mean any laws, ordinances, regulations, rules, orders, guidelines or policies relating to the environment, health and safety, Environmental Activities, Hazardous Materials, air and water quality, waste disposal and other environmental matters.

~~“Issuer”~~ shall mean a financial institution satisfactory to Sublessor issuing the Letter of Credit and such Issuer’s successor and assigns. Any Issuer shall be rated A or better by Standard & Poor’s Ratings Group, A2 or better by Moody’s Investor Services, Inc., or, if not rated by either of the foregoing agencies, an equivalent rating by Fitch Inc. or other nationally recognized rating agency at all times throughout the Term.

~~“Key Principals”~~ shall mean Tim Chesney, Michael Slyk and Dan D’Amico.

~~“Lease Coverage Ratio”~~ shall mean a fraction, the numerator of which is “ ~~Adjusted EBITDAR~~ ” and the denominator of which is Base Rent. “ ~~Adjusted EBITDAR~~ ” shall mean, for any period, the Facility Net Income for such period plus, without duplication, to the extent deducted in determining Facility Net Income, the sum of (i) Facility Interest Expense for such period, plus (ii) expense for income taxes paid or accrued for such period, plus (iii) all amounts attributable to the amount of the provision for depreciation and amortization for such period, plus (iv) the amount of other non-cash charges (other than the write-down of current assets for such period (as determined in accordance with GAAP), plus (v) Base Rent for such period, plus (vi) capital expenditures of $500 per bed (per annum) for such period ( ~~the~~ parties recognizing and agreeing that such capital expenditures are not typically included in the definition of EBITDAR but will be for purposes of the definition of Lease Coverage Ratio), plus (vii) extraordinary losses for such period (as determined in accordance with GAAP), minus, to the extent included in Facility Net Income for such period, extraordinary gains for such period (as determined in accordance with GAAP), all calculated in connection with the Business.

~~“Letter of Credit”~~ shall mean an irrevocable and transferrable letter of credit issued by an Issuer in favor of Sublessor as security for Sublessee’s obligations under this Sublease and in form acceptable to Sublessor, together with amendments thereto or replacements or substitutions thereof.

~~“Occupancy”~~ shall mean, with respect to the Premises, the percentage of (a) total patient days relating to such Facility for any reporting period ~~divided by~~ (b) the product of (i) the number of licensed beds and (ii) the total days in such reporting period.

~~“Operations Transfer Agreement”~~ means that certain Agreement to Transfer Operations and Related Assets dated October 16, 2018 by and between, ~~inter alios~~ , Exiting Operator and Sublessee.

~~“Permitted Liens”~~ shall mean (i) liens granted to Sublessor or any Affiliate of Sublessor, (ii) liens customarily incurred by Sublessee in the ordinary course of business for items not delinquent, (iii) liens for Taxes not yet due and payable, (iv) any lien, charge or encumbrance which is being contested in good faith pursuant to the terms of this Sublease, (v) all easements, liens, encumbrances, restrictions, agreements and other title matters existing as of the Execution Date, (vi) purchase money financing and capitalized equipment leases for the acquisition of personal property for any such financing where the original cost of the equipment financed exceeds $50,000 (except for bulk equipment financing which does not exceed $100,000 and except in the case of a facility van or bus there shall be no dollar limitation as long as the purchase or lease is usual and customary for skilled nursing facilities in the State of Ohio), (vii) any easement granted by Sublessor, in Sublessor’s discretion, at the request of Sublessee which is necessary to (A) obtain utilities or other services for the Facilities in the ordinary course of Sublessee’s business or (B) satisfy requests from local authorities in respect of, without limitation, township projects; (viii) liens that may be filed as a result of Sublessor’s acts or omissions; and (ix) liens granted to Sublessee’s working capital lender.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~“Person”~~ shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, governmental authority, any other person or entity, and any federal, sta t e, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “C”~~

~~FINANCIAL, MANAGEMENT AND REGULATORY REPORTS~~

~~REPORT~~	~~DUE DATE~~
~~Monthly financial reports concerning the Business at the Facility consisting of:~~ (1) ~~a reasonably detailed income statement showing, among other things, gross revenues;~~ (2) ~~total patient days;~~ (3) ~~Occupancy; and~~ (4) ~~payor mix.~~ ~~(All~~ ~~via e-mail to~~ clinton.cain@regionalhealthproperties.com )	~~Forty-Five (45) days after the end of each calendar month~~
~~Monthly census reports concerning the Facility~~ ~~(via e-mail to~~ ~~clinton.cain~~ @ re g ~~ionalhealth~~ p ro p ~~erties~~ ~~.com~~ ) ~~[To extent this information is contained in monthly financial reports it will not be necessary to provide duplication here]~~	~~Thirty (30) days after the end of each calendar month~~
~~Monthly accounts payable report concerning the Facility~~ ~~consisting of a list and aging report of all payables owed by the Facility to all parties~~	~~Thirty (30) days after the end of each calendar month~~
~~Quarterly litigation summaries~~ ~~of Sublessee to the extent that any such litigation is reasonably expected to result in a material adverse effect on Sublessee or the Facility and is not covered by insurance and diligently defended~~ ~~(via e-mail to~~ clinton.cain@regionalhealthproperties.com )	~~Thirty (30) days after the end of each quarter of the fiscal year of Sublessee~~
~~Annual financial statements~~ ~~of Sublessee and each sublessee under the Affiliated Subleases compiled by a reputable certified public accounting firm~~ ~~(via e-mail to~~ clinton.cain@regionalhealthproperties.com )	~~One hundred twenty (120) days after the fiscal year end of Sublessee~~
~~Regulatory reports with respect to the Facility to the extent that any such report or survey is reasonably expected to result in a material adverse effect on Sublessee or the Facility~~ ~~, as follows:~~ ~~(1)~~ all federal, state and local licensing and reimbursement certification surveys, inspection and other reports received by Sublessee as to any portion of the Premises and any portion of the Business, including state department of health licensing surveys; ~~(2)~~ ~~Medicare~~ ~~and Medicaid certification surveys; and~~ ~~(3)~~ ~~life safety code reports.~~	~~Ten (10) business days after receipt~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~Reports of regulatory violations,~~ ~~by written notice of the following:~~ (1) any material violation of any federal, state or local licensing or reimbursement certification statute or regulation, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility; (2) any material suspension, termination or restriction placed upon Sublessee or any portion of the Premises, the operation of any portion of the Business or the ability to admit residents or patients, which violation is not reasonably expected to be resolved in favor of Sublessee or the Facility within forty-five (45) days; or (3) ~~any violation of any other permit, approval or certification in connection~~ with any portion of the Premises or any portion of the Business, by any federal, state or local authority, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility.	~~Seven (7) business days after receipt~~
~~Cost Reports for the Facility~~	~~Fifteen (15) days after filing~~
~~Monthly Balance Sheet of Sublessee~~	~~Thirty (30) days after the end of each calendar month~~
~~Annual Budget for the Facility~~	~~No later than January 1 of each calendar year~~
~~Accounts Receivable Aging by payor type for the Facility~~	~~Thirty (30) days after the end of each calendar month~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “D”~~

~~FAIR MARKET RESET RENT~~

1. If Sublessor and Sublessee are unable to agree upon the Fair Market Reset Rent within the applicable period provided in this Sublease, each party shall within ten (10) days after written demand by the other select one (1) MAI Appraiser to participate in the determination of Fair Market Reset Rent. Within ten (10) days after such selection, the MAI Appraisers so selected by Sublessor and Sublessee shall select a third MAI Appraiser (the “Third Appraiser” ). In the event either Sublessor or Sublessee fails to select a MAI Appraiser within the time period set forth above, the MAI Appraiser selected by the other party shall alone determine the Fair Market Reset Rent as if it was the Third Appraiser.

2. The Third Appraiser, within ten (10) days after its appointment, shall (i) hear the Sublessor and Sublessee and their respective witnesses and MAI Appraisers, and each of Sublessor and Sublessee shall, upon the conclusion of both presentations, be required to simultaneously submit a proposal (the “ ~~Fair Market Reset Rent Proposal~~ ”) setting forth the party’s proposed determination of the Fair Market Reset Rent, and (ii) examine the records relating to the facility and such other documents and records as may, in its judgment, be necessary to determine Fair Market Reset Rent.

“MAI Appraiser” shall mean an independent appraiser who has substantial experience in performing appraisals of properties similar to the applicable Property and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is reasonably approved by Sublessor and Sublessee,

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “E”~~

~~FAIR MARKET VALUE~~

~~“MAI Appraiser”~~ shall mean an appraiser licensed or otherwise qualified to do business in the state(s) where the Premises or applicable portion thereof are located and who has substantial experience in performing appraisals of facilities similar to the Premises or applicable portion thereof and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is approved by Landlord.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “F”~~

~~AFFILIATED SUBLEASES~~

1. Sublease between Eaglewood Village, LLC and Springfield Clark ALF, Inc. regarding the 95-bed licensed Eaglewood Village assisted living facility, operated as an 80-unit apartment facility, located at 3001 Middle Urbana Road, Springfield, Ohio 45502 (the “Eaglewood ALF Affiliated Sublease”).

2. Sublease between RMC HUD Master Tenant, LLC and Sidney SNF, Inc. regarding the 62-bed licensed and 50-bed Medicare and Medicaid certified Pavilion Care Center skilled nursing home located at 705 Fulton Street, Sidney, Ohio 45365.

4. Sublease between Regional Health Properties, Inc. and Miami Cov SNF, Inc. regarding the 106-bed licensed and 100-bed Medicare and Medicaid certified Covington Care Center skilled nursing home located at 75 Mote Drive, Covington, OH 45318.

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “G”~~

~~CALCULATED RENT~~


~~Occupancy (%) Based on~~ ~~average occupancy for the~~ ~~prior calendar month using~~ ~~total number of licensed beds~~	~~Hearth~~ & ~~Care at Greenfield~~ ~~Calculated Rent per month for~~ ~~months seven through thirty-six~~ of ~~the Initial Term~~
~~88%~~	~~$28,000.00~~
~~86%~~	~~$28,000.00~~
~~84%~~	~~$28,000.00~~
≤ ~~82%~~	~~$17,750.00~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~EXHIBIT “H”~~

~~[Attach copy of form of Consulting Services Agreement]~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

~~SCHEDULE 7.1: LICENSED BEDS~~

~~Ohio Department of Health: 50 licensed beds~~

~~Medicare and Medicaid: 50 certified beds~~

SUBLEASE AGREEMENT GREENFIELD (Hearth & Care) (Rolf 11-30-18) FINAL CLEAN.docx

Exhibit 10.208

FINAL

SUBLEASE AGREEMENT

~~THIS SUBLEASE AGREEMENT~~ (this “ ~~Sublease~~ ” ) is entered into as of the 30 ^t ^h day of November, 2018 (the “ ~~Execution Date~~ ” ) by and between ~~RMC HUD MASTER TENANT, LLC,~~ a Georgia limited liability company ( “ ~~Sublessor~~ ” ) and ~~SIDNEY SNF, INC.,~~ an Ohio corporation ( “ ~~Sublessee~~ ” ) , for the improved real property described on ~~Exhibit~~ “ A -1 ” (the “ ~~Premises~~ ” ) , on which Premises is located that certain 62-bed licensed and 50-bed Medicare and Medicaid certified skilled nursing home facility located at 705 Fulton Street, Sidney, Ohio 45365, including the “ ~~Sublessor Personal Property~~ ” associated therewith described on ~~Exhibit~~ “ ~~A-2~~ ” (the Sublessor Personal Property together with the Premises, being collectively the “ ~~Facility~~ ” ) . Certain capitalized terms used in this Sublease are defined on ~~Exhibit~~ “ B ” .

RECITALS

~~WHEREAS,~~ Sublessor is the tenant under that certain Master Lease Agreement dated as of August 1, 2015, as amended (the “ ~~Lease Agreement~~ ” ) pursuant to which Sublessor leases the Premises from The Pavilion Care Center, LLC, an Ohio limited liability company (the “ ~~Landlord~~ ” ) ; and

~~NOW, THEREFORE,~~ in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. ~~Term~~ . The “ ~~Term~~ ” of this Sublease is the Initial Term of ten (10) years plus the Renewal Terms (if any). A “ ~~Sublease Year~~ ” is the twelve (12) month period commencing on the Commencement Date (as defined below) and each anniversary thereof during each year of the Term. The “ ~~Initial Term~~ ” commences on December 1, 2018 (the “ ~~Commencement Date~~ ” ) and ends on November 30, 2028, and may be extended for two (2) separate renewal terms of five (5) years each (each a “ ~~Renewal Term~~ ” ) if: (a) at least one hundred eighty (180) days prior to the end of the Initial Term or the Renewal Term (as applicable), Sublessee delivers to Sublessor the “ ~~Renewal Notice~~ ” indicating that Sublessee desires to exercise its right to extend this Sublease for the Renewal Term and (b) there is no then uncured Event of Default (i) as of the date Sublessor receives the Renewal Notice (the “ ~~Exercise Date~~ ” ) , or (ii) on the last day of the Initial Term or the Renewal Term (as applicable), and (c) corresponding renewal options are exercised for all ~~Affiliated Subleases~~ excluding the facility known as Hearth and Care at Greenfield located in Greenfield, Ohio which sublease will not need to be renewed as a condition to renewal of this Sublease. For purposes hereof, “ ~~Termination Date~~ ” shall mean the last day of the Initial Term or a Renewal Term (if any) or the earlier date on which this Sublease may be terminated as provided herein.

2. ~~Rent~~ During the Te rm , Sublessee shall pay in advance to Sublessor on or before the 1 ^st day of each month the following amounts:

2.1 ~~Initial Term Base Rent (~~ “ ~~Base Rent~~ ” ) .

2.1.1 ~~Months One through Six~~ . During the first six (6) months of the Initial Term, Base Rent shall be equal to $17,750.00 per month.

2.1.3 ~~Months Thirteen through Thirty six~~ . Commencing on the first day of the second Sublease Year and continuing through months thirty six (36), Base Rent per month shall be equal to the greater of (i) the ~~Calculated Rent~~ or (ii) 115% of the ~~Debt Service Rent.~~

2.2 ~~Renewal Term Base Rent~~ . During the first Sublease Year of each Renewal Term, Base Rent shall be reset in an amount equal to the ~~Reset Rent.~~ For each Sublease Year thereafter during the applicable Renewal Term, Base Rent shall be equal to the Base Rent paid during the preceding Sublease Year plus the ~~Base Rent Escalator~~ .

2.3 ~~Additional Rent~~ . In addition to Base Rent, Sublessee shall pay to Sublessor as additional rent ( “ ~~Additional Rent~~ ” ) an amount equal to the monthly payments required to fund escrows for Taxes (as hereinafter defined) pursuant to Section 5.2 to be held, applied, disbursed and/or otherwise spent in accordance with the ~~Facility Mortgage Documents~~ accruing only during the Term of this Sublease. The terms Base Rent and Additional Rent are sometimes collectively referred to as “ ~~Rent.~~ ”

2.4 ~~Absolute Net Sublease.~~ Except with respect to Sublessee’s off-set rights pursuant to ~~Section 2.6~~ hereof, all Rent payments shall be absolutely net to Sublessor, free of any and all Taxes (as defined below in ~~Section 5)~~ , Other Charges (as defined below in ~~Section 5)~~ , and operating or other expenses of any kind whatsoever, all of which shall be paid by Sublessee. Sublessee shall at all times during the Term remain obligated under this Sublease without any right of set-off, counterclaim, abatement, deduction, reduction or defense of any kind, except as set forth in ~~Section 2.6~~ , and Sublessee’s sole right to recover such other damages against Sublessor under this Sublease shall be to prove such damages in a separate action.

2.5 ~~Payment Terms~~ . All Rent hereunder shall be paid, at the election of Sublessee, by wire transfer, automated clearing house transfer or direct deposit (in each case as implemented by Sublessee with its financial institution) in accordance with Sublessor ’ s written wire transfer instructions provided by Sublessor to Sublessee from time to time (but at a minimum of thirty (30) days prior to the payment of Rent), or by direct payment authorization established by Sublessee with its lender to withdraw payments of Rent directly from Sublessee ’ s account to Sublessor ’ s designated account.

2.6 ~~Off-Set Rights~~ . Notwithstanding any other provision of this Sublease to the contrary, Sublessee may off-set amounts against the Rent arising from any breach, default or failure to pay and/or perform (collectively, the “Indemnity Obligations”) (a) by Sublessor and/or Landlord under this Sublease, including, without limitation, the indemnification obligations hereunder, (b) by Regional Health Properties, Inc., a Georgia corporation (the “Guarantor”) under this Sublease, the Operations Transfer Agreement and/or the Guaranty of Guarantor referred to in the Operations Transfer Agreement (the “Guaranty”) and attached thereto as an exhibit or schedule, including, without limitation, the indemnification and/or other obligations under any of the foregoing documents, and/or (c) by Exiting Operator under the Operations Transfer Agreement, including, without limitation, the indemnification obligations thereunder; provided, however, that such offset right shall not be effective until Sublessee has provided Sublessor written notice of the breach or Indemnity Obligations to which Sublessee is entitled and such breach, default or failure to pay or perform such Indemnity Obligations have not been cured or paid to Sublessee within thirty (30) days thereafter.

2.7 ~~Events Prior to Commencement Pate and Indemnification~~ . Notwithstanding any provision in this Sublease to the contrary, Sublessee shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor or Landlord), whether known or unknown, now existing or arising in the future, arising out of or in connection with the operation of the Facility, the ownership (in fee simple or leasehold) of the Premises, leasing of the Facility or the Premises, violations of any applicable laws or other events to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility or the Premises (each, a “Preexisting Event”). Sublessor, Guarantor and Landlord shall, jointly and severally, indemnify, defend and save harmless Sublessee and its successors and assigns (collectively, “Sublessee Indemnitees”) from and against any and all obligations, liabilities, damages, costs, expenses, losses or claims costs, expenses or losses (including fees and expenses of counsel) incurred by Sublessee Indemnitees arising out of or in connection with any Preexisting Event.

3. ~~Security Deposit.~~

3.1 ~~Security Deposit~~ During the Term, Sublessee shall fund in four ~~(4)~~ installments and maintain a security deposit (the “ ~~Security Deposit~~ ” ) in the following amounts (each, an “ ~~Installment~~ ” ): (i) $17,750.00 on the Commencement Date; (ii) an additional $17,750.00 on the first day of the ninth month of the Initial Term, (iii) an additional $17,750.00 on the first day of the eighteenth month of the Initial Term and (iv) an additional $17,750.00 on the first day of the twenty-fourth month of the Initial Term.

3.2 ~~Acceleration of~~ ~~Security Deposit Installment~~ ~~Payments~~ . Notwithstanding the provisions of Section 3.1, if Sublessee fails to meet the required Lease Coverage Ratios set forth in Section 27(a) hereof (without regard to any notice and cure provisions applicable thereto), Sublessee shall pay to Sublessor the next due Installment of the Security Deposit. By way of example, if Sublessee fails to meet the Lease Coverage Ratio for the first full fiscal quarter ended after month 9 of the Initial Te rm , Sublessee shall pay to Sublessor the third Installment of the Security Deposit in the amount of $17,750.00 otherwise due and payable on the first day of the 18 ^t ^h month of the Initial Te rm . If an accelerated Installment of the Security Deposit is due and payable hereunder, Sublessee shall make such Installment payment within five (5) business days of written demand by Sublessor.

~~3.3~~ ~~Payment of Security Deposit~~ . Sublessee may fund the Security Deposit by wire transfer to Sublessor of immediately available funds or through a Letter of Credit.

~~3.4~~ ~~Application of Security Deposit~~ . Sublessor shall hold the Security Deposit as security for the full and faithful performance of every term, provision, obligation and covenant under this Sublease. If the Security Deposit is paid in immediately available funds, the Security Deposit will be deposited by into an interest-bearing account, which interest shall accrue for the benefit of Sublessee. Subject to the earlier return of the Security Deposit pursuant to the provisions of the Eaglewood ALF Affiliated Sublease (as defined in Exhibit “F” attached hereto, within thirty (30) days of the end of the Initial Term or Renewal Term, as applicable, Sublessor shall return the Security Deposit to Sublessee with all accrued interest. The Security Deposit shall not be considered an advance payment of Rent (or of any other sum payable by Sublessee under this Sublease) or a measure of Sublessor’s damages in case of a default by Sublessee. If the Security Deposit is paid in immediately available funds, Sublessor shall have no obligation to maintain the Security Deposit separate and apart from Sublessor’s general and/or other funds but shall deposit same in a separate bank account in order to track accrued interest and to provide periodic statements thereof to Sublessee at least quarterly within ten (10) days after each calendar quarter. If Sublessee defaults in respect of any of the terms, provisions, covenants and conditions of this Sublease or if there is a default under any Affiliated Sublease, Sublessor may, but shall not be required to, in addition to and not in lieu of any other rights and remedies available to Sublessor, apply all or any part of the Security Deposit and accrued interest to the payment of any such sum in default, or any other sum that Sublessor may reasonably and necessarily expend or be required to expend by reason of such default, including but not limited to, any damages or deficiency in reletting the Premises. Whenever, and as often as, Sublessor has applied any portion of the Security Deposit to cure Sublessee’s default hereunder or under any Affiliated Sublease, Sublessee shall, within ten (10) days after Notice from Sublessor, deposit additional funds or Letters of Credit with Sublessor sufficient to restore the Security Deposit to the full amount then required to be deposited with Sublessor, and Sublessee’s failure to do so shall constitute an Event of Default without any further Notice. If Sublessor transfers or assigns its interest under this Sublease in accordance with the terms hereof, Sublessor shall assign the Security Deposit and accrued interest to the new sublessor and thereafter Sublessor shall have no further liability for the return of the Security Deposit, and Sublessee agrees to look solely to the new sublessor for the return of the Security Deposit. Sublessee agrees that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that Sublessor, its successors and assigns shall return the Security Deposit to the last Sublessee in possession of the Premises at the last address for which Notice has been given by such Sublessee or set forth in this Sublease, or as otherwise directed by Sublessee in writing, and that Sublessor thereafter shall be relieved of any liability therefor, regardless of one or more assignments of this Sublease or any such actual or attempted assignment or encumbrances of the Security Deposit. Notwithstanding any provision to the contrary contained in this Sublease, Landlord and Guarantor, jointly and severally, hereby guaranty in favor of Sublessee the full and indefeasible repayment of the Security Deposit plus all applicable interest thereon.

3.5 [Intentionally Omitted] .

5. ~~Taxes and Other Charges~~ . At the commencement and at the expiration of the Term, all Taxes and Other Charges shall be prorated. Sublessor shall promptly forward to Sublessee and Facility Mortgagee copies of all bills and payment receipts for Taxes or Other Charges received by it to enable payment thereof prior to the imposition of penalties and interest. Sublessee shall not be penalized for delays by Sublessor in the forwarding of such to Sublessee and Facility Mortgagee. Sublessee or Facility Mortgagee (as applicable) shall pay and discharge (including the filing of all required returns), prior to delinquency or imposition of any fine, penalty, interest or other cost ( “ ~~Penalty~~ ” ) provided that Sublessee and Facility Mortgagee timely receive such bills as aforesaid, “ ~~Taxes~~ ” , consisting of any real property and other taxes and assessments accruing during the Term of this Sublease with respect to the Premises (but not such Taxes accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease), and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date (excluding income taxes, franchise taxes, estate taxes, transfer taxes and/or gross receipts taxes that may be imposed upon Sublessor), provided such are received in a timely manner that provides Sublessee reasonable time to ensure such payments are made timely. For the avoidance to doubt, the parties acknowledge that Taxes are paid in arrears and the escrow of Taxes by Sublessee will be based on the Taxes payable only during the term of this Sublease, i.e., Sublessee’s obligation to pay Taxes will commence with the tax bill issued for the last half of 2018 (payable in July, 2019), as prorated based on the Commencement Date. Sublessee will escrow payments of Taxes prior to such July, 2019 due date as hereinabove provided. Sublessor acknowledges that all Taxes for the period prior to the Commencement Date shall be the Exiting Operator’s responsibility. Sublessee shall promptly pay and discharge “ ~~Other Charges~~ ” , consisting of any utilities and other costs and expenses of Sublessee’s operation of the Facility or any portion of the Premises and all other charges, obligations or deposits assessed against any portion of the Premises accruing during the Term of this Sublease with respect to of Sublessee’s operation of the Premises. Sublessee shall not be responsible for Taxes or Other Charges accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease, and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date. Notwithstanding any provision of this Section 5, to the extent Sublessee has funded Taxes in accordance with Section 5.2 below, Facility Mortgagee shall timely pay all Taxes to the extent of the impound held by Facility Mortgagee.

5 . 1 ~~Protests~~ . Sublessee has the right, but not the obligation, in good faith to protest or contest (a “ ~~Protest~~ ” ) in whole or in part (a) the amount or payment of any Taxes or Other Charges, and (b) the existence, amount or validity of any Lien (as defined in ~~Section 8.1)~~ , by appropriate proceedings sufficient to (i) prevent the collection or other realization of such Taxes, Other Charges or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other Charges or Liens (so long as it provides Sublessor with reasonable security to assure the foregoing). Sublessee shall diligently prosecute any such Protest at its sole cost and expense. Sublessor shall cooperate in any Protest that involves an amount assessed against it.

5.2 ~~Impound~~ . If required by the Facility Mortgagee or upon Sublessor’s written notice to Sublessee during the Term during any ongoing Event of Default (after the expiration of any notice and cure period), Sublessor may require, Sublessee to pay with each Base Rent payment a deposit of one-twelfth (l/12 ^t ^h ) of the amount required to discharge the annual amount of real property Taxes secured by a Lien encumbering any portion of the Premises as and when they become due. The deposits shall not bear interest nor be held by Sublessor or Facility Mortgagee (as applicable) in trust or as an agent of Sublessee, but rather shall be applied to the payment of the real property taxes. If at any time within thirty (30) days prior to the due date the deposits shall be insufficient for the payment of the obligation in full, Sublessee shall within ten (10) days after demand by Sublessor or Facility Mortgagee (as applicable), deposit the deficiency with Sublessor or Facility Mortgagee (as applicable). If deposits are in excess of the actual obligation, the required monthly deposits for the ensuing Sublease Year shall be reduced proportionately and any such excess at the end of the final Sublease Year shall be refunded to Sublessee within ten (10) calendar days. Sublessee shall forward to Sublessor or Facility Mortgagee (as applicable) all Tax bills, bond and assessment statements within five (5) days of receipt by Sublessee. If Sublessor assigns this Sublease in accordance with the terms hereof, all such deposits shall be transferred to the assignee, and Sublessor shall thereafter have no liability of any kind with respect thereto.

5.3 ~~Tax Treatment~~ ; ~~Reporting~~ . Sublessor and Sublessee each acknowledges that each shall treat this transaction as a true Sublease for state law purposes and shall report this transaction as a Sublease for Federal income tax purposes. For Federal income tax purposes each shall report this Sublease as a true Sublease with Sublessor as the sublessor of the Premises and Sublessee as the sublessee of such Premises including: (a) Sublessee reporting its Rent payments as rent expense under Section 162 of the Code, and (b) Sublessor reporting the Rent payments as rental income. For the avoidance of doubt, nothing in this Sublease shall be deemed to constitute a guaranty, warranty or representation by either Sublessor or Sublessee as to the actual treatment of this transaction for state law purposes and for federal income tax purposes.

6. ~~Insurance~~ . All insurance provided for in this Sublease shall (i) be maintained under valid and enforceable policies issued by insurers licensed and approved to do business in the state where the Premises are located, (ii) name Sublessor as an additional insured and, for the property insurance policies, as the owner, (iii) be on an “ occurrence ” basis, or if claims made, include a provision whereby tail coverage costs are specified upon policy inception, (iv) cover all of Sublessee ’ s operations at the Facility, (v) provide that the policy may not be canceled except upon not less than thirty (30) days ’ prior written notice to Sublessor and (vi) be primary and provide that any insurance with respect to any portion of the Premises maintained by Sublessor is excess and noncontributing with Sublessee ’ s insurance. The property policy(ies) shall also name the Sublessor and Facility Mortgagee as loss payee. The parties hereby waive as to each other all rights of subrogation which any insurance carrier, or either of them, may have by reason of any provision in any policy issued to them, provided such waiver does not thereby invalidate such policy. Original policies or satisfactory insurer certificates evidencing the existence of the insurance required by this Sublease and showing the interest of Sublessor and Facility Mortgagee shall be provided to Sublessor prior to the commencement of the Term or, for a renewal policy, not less than ten (10) days prior to the expiration date of the insurance policy being renewed. If Sublessor is provided with a certificate, it may demand that Sublessee provide a complete copy of the related policy within ten (10) days. Sublessee may satisfy the insurance requirements hereunder through coverage under so-called blanket policy(ies) of insurance carried and maintained by Sublessee regarding other operations or facilities; provided, however, that the coverage afforded Sublessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policies of insurance meeting all other requirements of this Sublease by reason of the use of such blanket policies of insurance. During the Term, Sublessee shall maintain the following insurance and any claims thereunder shall be adjudicated by and at the expense of it or its insurance carrier:

(e) Worker’s Compensation and Employers Liability Insurance with respect to the Facility and Business for losses sustained by Sublessee’s employees in the course and scope of their employment, as well as volunteers, and otherwise consistent with all applicable state law and meeting all other legal requirements; and

7. ~~Use, Regulatory Compliance~~ , ~~Preservation of Business and~~ ~~Management~~ .

7.1 ~~Permitted Use~~ ; ~~Qualified Care~~ ; ~~Number of Beds~~ . Sublessee shall continuously use and occupy the Premises during the Term as a skilled nursing facility with not less than sixty-two (62) licensed and fifty (50) Medicare and Medicaid certified beds and for ancillary services relating thereto, but for no other ~~purpose~~ ( “ ~~Permitted Use~~ ” ). Sublessee shall provide care, treatment and services to all residents of the Facility in a manner consistent in all material respects with all applicable laws. Notwithstanding any common law or statutory right, Sublessee agrees not to transfer, move or otherwise take action that reduces the bed complement of the Facility and Sublessee agrees not to take any of the beds out of service or move the beds to a different location without the prior written consent of the Sublessor in its sole and absolute discretion. ~~Schedule 7.1~~ attached hereto sets forth a true, correct and complete list of the number and types of licensed beds at the Premises and whether such beds are Medicaid and/or Medicare certified. Sublessee shall take no action to reduce or modify the number of beds for which the Premises are licensed.

~~7.2~~ ~~Regulatory Compliance~~ . Sublessee, the Facility and the Premises shall comply in all material respects with all licensing and other laws and all covenants, conditions, restrictions and other use or maintenance requirements applicable to the Facility and, to the extent applicable, all Medicare, Medicaid and other third-party payor certification requirements, including timely filing cost and other required reports, timely paying all expenses shown thereon, and ensuring that the Facility continues to be fully certified for participation in Medicare and Medicaid (if applicable) throughout the Term and when they are returned to Sublessor, all without any suspension, revocation, decertification or other material limitation of such certification, if any. Further, Sublessee shall not commit any act or omission that would in any way violate any certificate of occupancy affecting the Facility, result in closure of the Facility or result in the sale or transfer of all or any portion of any related certificate of need (if applicable), bed rights or other similar certificate or license at any of the Facility. All inspection fees, costs and charges associated with a change of such licensure or certification shall be borne solely by Sublessor.

7.3 ~~Preservation of Business~~ . Sublessee acknowledges that a fair return to Sublessor on and protection of its investment in the Premises depends, in part, on Sublessee’s dedication to the Business and the concentration of similar businesses of Sublessee and its Affiliates in the geographical area of each Facility. Sublessee further acknowledges that the diversion of residents or patient care activities (except as is necessary to provide residents or patients with an alternative level of care or comply with contractual provisions of applicable admission agreements) from any Facility to other facilities at any time during the Term will have a material adverse effect on the value and utility of such Facility. Therefore, Sublessee agrees that during the Term and for a period of one (1) year thereafter, neither Sublessee nor any of its Affiliates shall, without the prior written consent of Sublessor: (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (10)-mile geographical radius of the Facility, (ii) except as is necessary to provide residents or patients with an alternative level of care, recommend or solicit the removal or transfer of any resident or patient from any Facility to any other nursing, health care, senior housing or retirement housing facility or divert actual or potential residents, patients or care activities of the Business conducted at the Facility to any other facilities, or (iii) employ for other businesses any personnel working in the Facility; provided, however, that if Sublessee or an Affiliate leases or subleases additional facilities from Sublessor or Sublessor’s Affiliates, the parties agree that Sublessee may move employees among those affiliated facilities.

7.4 ~~Consulting Services~~ . MSTC Development, Inc. (“Consultant”) shall provide administration and management services (or shall cause a wholly-owned subsidiary to do so) to the Facility pursuant to a consulting services agreement acceptable to Sublessor, in substantially the form attached hereto as ~~Exhibit~~ “ H ” ( the “ ~~Consulting Agreement~~ ” ). The consulting fee ( “ ~~Consulting Fee~~ ” ) under the Consulting Agreement shall not exceed five percent (5.0%) of the annual gross revenue realized from Sublessee’s operation of the Facility (after adjustment for contractual adjustments and overpayment by providers). Payment of the Consulting Fee shall be subordinate to the payment of Rent and all other amounts payable by Sublessee pursuant to this Sublease. The Consulting Agreement shall provide that from and after the date that an Event of Default has occurred and until such Event of Default, if curable, has been cured, Consultant shall not make any distributions to the holders of the equity interests of Consultant; provided, however, that Consultant shall be permitted to pay all compensation, salaries and/or bonuses to employees or contractors of Consultant (including Key Principals) in the ordinary course of business. Sublessee shall not be permitted to engage any third-party consulotant for the Facility without the prior written consent of Sublessor, which consent shall not be unreasonably withheld.

~~7.5~~ ~~Indebtedness~~ . Sublessee shall not incur debt other than (a) trade debt incurred in the ordinary course of business, (b) a working capital line secured by Sublessee ’ s accounts receivable, or (c) indebtedness constituting or in connection with Permitted Liens and Consulting Fees permitted hereunder.

8. ~~Acceptance~~ , ~~Maintenance, Upgrade, Alteration and Environmental~~ .

8.1 ~~Acceptance~~ “ ~~AS IS~~ ” ; ~~No Liens~~ . Sublessee acknowledges that it is presently engaged in operations similar to those to be conducted at the Facility and has expertise in such industry and, in deciding to enter into this Sublease, has not relied on any representations or warranties, express or implied, of any kind from Sublessor except as contained herein. Sublessee accepts the Facility and the Premises on an “ ~~AS IS~~ ” basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Notwithstanding its right to Protest set forth in ~~Section 5.1~~ , Sublessee shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a “ ~~Lien~~ ” ) for any reason other than Permitted Liens, provided that nothing in this Sublease shall require Sublessee to keep the Premises free of ~~Permitted Liens.~~ Furthermore, notwithstanding anything to the contrary contained in this Sublease, the provisions of this Section 8.1 are expressly subject to the terms and conditions of the Guaranty, and Sublessor and Landlord each acknowledges and agrees this Section 8.1 shall not in any way whatsoever reduce, limit or cancel the Guarantor’s liability or obligations under the Guaranty or this Sublease.

8.2 ~~Sublessee~~ ’ ~~s Maintenance Obligations~~ . Sublessee shall (a) keep and maintain the Premises and the Facility in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all ordinary interior and exterior, non-structural repairs necessary to keep the Facility in good and working order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable, certification for participation in Medicare and Medicaid, and (c) keep and maintain all Sublessor and Sublessee Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice for skilled nursing facilities located in the State of Ohio as required under this Sublease.

8.3 ~~Alterations by Sublessee~~ . Sublessee shall not make any ~~Alterations~~ to the Premises without the express prior written consent of Sublessor, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that Sublessor’s consent shall not be required, but no less than ten (10) days advance notice to Sublessor shall be provided, with respect to (i) Alterations required by governmental authorities which are necessary to maintain applicable licenses and certifications to operate the Facility or (ii) minor cosmetic Alterations that (x) are non-structural in nature, (y) are not visible from the outside of the Premises and (z) do not cost, in the aggregate, in excess of $75,000.00 in any rolling twelve (12) month period. All Alterations shall immediately become a part of the Premises and the property of Sublessor subject to this Sublease, and the cost of all Alterations or other purchases, whether undertaken as an on-going licensing, Medicare, Medicaid or other regulatory requirement, or otherwise, shall be borne solely by Sublessee. All Alterations shall be constructed in a good and workmanlike manner in compliance with all applicable laws and the insurance required under this Sublease.

8.4 ~~Hazardous Materials~~ . Sublessee ’ s use of the Premises shall comply in all material respects with all ~~Hazardous Materials Laws.~~ If any ~~Environmental Activities~~ occur or are suspected to have occurred in violation of any Hazardous Materials Laws by Sublessee during the Term or if Sublessee has received notice of any ~~Hazardous Materials Claim~~ against any portion of the Premises solely as a result of Sublessee ’ s acts or omissions during the Term, Sublessee shall promptly obtain all permits and approvals necessary to remedy any such actual or suspected problem through the removal of Hazardous Materials or otherwise, and upon Sublessor ’ s approval of the remediation plan, remedy any such problem to the satisfaction of Sublessor and all applicable governmental authorities, in accordance with all Hazardous Materials Laws and good business practices. During the Term, Sublessee shall promptly advise Sublessor in writing of (a) any Environmental Activities in violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims against Sublessee or any portion of the Premises; (c) any remedial action taken by Sublessee in response to any Hazardous Materials Claims or any Hazardous Materials on, under or about any portion of the Premises in violation of any Hazardous Materials Laws; (d) Sublessee ’ s discovery of any occurrence or condition on or in the vicinity of any portion of the Premises that materially increase the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Sublessee, any governmental authority or any other Person relating to Hazardous Materials Laws or Hazardous Materials Claims with respect to any portion of the Premises, including copies thereof . Sublessor shall have the right, at Sublessor ’ s sole cost and expense (including, without limitation, Sublessor ’ s reasonable attorneys ’ fees and costs) and with counsel chosen by Sublessor, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims. Sublessor represents and warrants to Sublessee that there are no Hazardous Materials Claims arising out of or relating to the Facility or the Premises as of the commencement of the Term.

9. ~~Sublessee Property~~ . At Sublessee’s sole discretion, Sublessee shall obtain and install all items of furniture, fixtures, supplies and equipment not included as Sublessor Personal Property as shall be necessary or reasonably appropriate to operate the Facility in compliance with this Sublease ( “ ~~Sublessee Personal Property~~ ” , which collectively with the “ ~~Sublessee Intangible Property~~ ” shall be referred to herein as “ ~~Sublessee Property~~ ” ), and all Sublessee Property shall remain Sublessee’s sole property at all times, including upon termination of this Sublease. As used herein, “ ~~Sublessee Intangible Property~~ ” means all the following at any time owned by Sublessee in connection with its use of any portion of the Premises: Medicare, Medicaid and other accounts and proceeds thereof; rents, profits, income or revenue derived from such operation or use; all documents, chattel paper, instruments, contract rights (including contracts with residents, employees and third-party payors), deposit accounts, general intangibles and chooses in action; refunds of any Taxes or Other Charges for periods of time during the Term; and licenses and permits necessary or desirable for Sublessee’s use of any portion of the Premises, including licensed Medicaid beds (if applicable). Subject to Sublessee’s working capital lender’s liens and the intercreditor agreement required by such working capital lender with respect thereto, Sublessor shall have a security interest in and to the Sublessee Property, which security interest Sublessor shall have the right to assign to a Facility Mortgagee in Sublessor’s sole discretion. Sublessor will agree to subordinate its lien and security interest with respect to Sublessee’s accounts receivable to any third party lender providing to Sublessee a working capital line of credit, whether such working capital line of credit exists as of the Commencement Date or future working capital lines of credit, on commercially reasonable terms reasonably acceptable to Sublessor. The terms and conditions of any working capital line of credit obtained by Sublessee after the Execution Date must be approved by Sublessor and Facility Mortgagee, which approval shall not be unreasonably withheld, conditioned or delayed so long as the line of credit terms and conditions are customary for loans in the senior living industry and are commercially reasonable.

10. ~~Financial, Management and Regulatory Reports~~ . Sublessee shall provide Sublessor with the reports listed in ~~Exhibit~~ “ C ” at the time described therein, which reports will be internally prepared by Sublessee unless otherwise provided for in Exhibit “ C ” and, with respect to any refinancing of the Premises such other information about Sublessee or the operations of the Facility as Sublessor may reasonably request. All financial information provided by Sublessee shall be prepared in accordance with generally accepted accounting principles consistently applied and shall be submitted electronically in the form of unrestricted, unlocked “ .xls ” spreadsheets created using Microsoft Excel (2003 or newer editions), if Sublessee ’ s accounting office can reasonably provide it in this format. If Sublessee or any Affiliate becomes subject to any reporting requirements of the Securities and Exchange Commission ( “ ~~SEC~~ ” ) during the Term, it shall concurrently deliver to Sublessor such reports as are delivered pursuant to applicable securities laws. Similarly, should Sublessor or its parent, Regional Health Properties, Inc., be subject to any particular reporting requirements of the SEC during the Term for which it needs reports, documentation or other information from Sublessee, Sublessee agrees to deliver such reports, documentation and information within thirty (30) days after Sublessor ’ s request for the same. At Sublessor ’ s sole expense and upon reasonable notice so as not to interfere with Sublessee ’ s business and operations, Sublessee shall allow the review and audit of Sublessee ’ s financial statements listed in ~~Exhibit~~ “ C ” .

11. ~~Representations and Warranties~~ . Each party represents and warrants to the other as of the Execution Date hereof and as of the Commencement Date, that: (a) it has the power and authority to execute, deliver and perform this Sublease; (b) it has taken all requisite action necessary to authorize the execution, delivery and performance of such party’s obligations under this Sublease; (c) this Sublease constitutes a legal, valid and binding obligation of it enforceable in accordance with its terms; (d) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Sublease within the state where the Premises is located; and (e) the execution, delivery and performance of this Sublease by it do not and will not (1) require any consent, approval, authorization, order or declaration of, or any filing or registration with, any court, any governmental authority or any other Person, (2) conflict with, and do not and will not result in a breach of, any organizational documents of it or any agreement of which it is a party, and (3) violate any legal requirements, order, writ, injunction or decree, statute, rule or regulation, applicable to it or the Facility or the Premises. In addition, Sublessor and Landlord jointly and severally represent and warrant to Sublessee that (A) neither Sublessee nor Landlord is in default of, or not in compliance with, the Permitted Use, the Lease Agreement or the Facility Mortgage Documents including the replacement reserve requirements with respect thereto and the amount of the HUD Cap Ex Balance as set forth in Section 30 hereof; (B) Sublessor has good and marketable leasehold title to the Premises and the Authorizations (as hereinafter defined), subject to Exiting Operator’s leasehold rights under the Lease Agreement and to the Authorizations which will be terminated as of the Commencement Date, and as of the Commencement Date, there will be no existing subleases or other occupancy agreements in effect with respect to the Premises other than resident admission agreements for residents in possession of the Facility; (C) Landlord has good and marketable fee simple title to the Premises and the Authorizations subject to the Lease Agreement; and (D) the Facility contains sixty-two (62) beds licensed by the Ohio Department of Health as skilled nursing beds and fifty (50)-beds certified by Medicare and Medicaid. As used herein the term “Authorizations” shall mean, with respect to the Facility, any and all licenses, permits, certifications, registrations, accreditations, provider agreements, certificates of need, certificates of exemption, approvals, waivers, variances and other authorizations issued by any governmental authority necessary or advisable for the use and operation of the Facility as it is currently being operated and receipt of reimbursement or other payments under any third party payor program in which such Facility participates.

12. ~~Events of Default~~ . So long as there is no Event of Default, Sublessee shall peaceably and quietly have, hold and enjoy the Premises for the ~~Term,~~ free of any claim or other action not caused or created by Sublessee or pursuant to ~~Sections 17~~ or 18 . The occurrence of any of the following events will constitute an “ ~~Event of Default~~ ” on the part of Sublessee:

(a) Sublessee’s failure to pay within ten ( ~~10)~~ days of when due any Base Rent;

(e) An Event of Default has occurred under any Affiliated Sublease (as said term is defined therein) which Event of Default has not been cured during any applicable cure period or waived;

(g) The failure to perform or comply in any material respects with the provisions of ~~Section 6~~ (Insurance) or Section 1 5 (Sublessor Rights); and if such failure is to provide a renewal insurance policy pursuant to Section 6 and such failure is not cured within three (3) business days after written notice thereof from Sublessor;

(l) The failure of Sublessee to comply with any of the Financial Covenants set forth in ~~Section 27(a)~~ ; or

(m) The failure of Sublessee to timely provide any of the reports required by ~~Section 10~~ .

13. ~~Remedies~~ . Upon the occurrence and continuance of an Event of Default, Sublessor may exercise all rights and remedies under this Sublease and the laws of the State of Ohio that are available to a Sublessor of real and personal property in the event of a default by its Sublessee, and as to the Sublessee Property, all remedies granted under the laws of said state to a secured party under its Uniform Commercial Code. Sublessor shall have the duty to mitigate damages. Sublessee shall pay Sublessor, promptly upon demand, all reasonable out-of-pocket expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, agents and brokers. Notwithstanding any provision to the contrary contained in ~~Sections 12 or 13~~ hereof, if all then existing Events of Default would be considered to be capable of being cured within (i) five (5) days for a monetary default or (ii) thirty (30) days for a non-monetary default by a reasonably prudent landlord and tenant in the skilled nursing industry located in Ohio, then prior to Sublessor’s exercising any remedies provided herein, including, but limited to the termination of this Sublease, as a result of the occurrence of any such Event of Default, Sublessee shall have the right to cure each such Event of Default within five (5) days of notice from Sublessor for a monetary default and within thirty (30) days of notice from Sublessor for a non-monetary default, and upon such cure of all Events of Default then existing, Sublessor may not exercise its remedies thereunder or terminate this Sublease as a result of such cured Events of Default. Notwithstanding the preceding sentence, Sublessee’s right to cure an Event of Default and thereby avoid Sublessor’s exercise of remedies or termination of this Sublease shall not apply if Sublessee and/or the sublessees under any Affiliated Sublease have cured Events of Default two (2) times in the aggregate under this Sublease and/or the Affiliated Subleases in any twelve (12) consecutive month period.

13.3 ~~Remedies Cumulative; No Waiver~~ . No right or remedy herein conferred upon or reserved to Sublessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of Sublessor to insist at any time upon the strict performance of any provision of this Sublease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Sublessee. Sublessor’s receipt of and Sublessee’s payment of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Sublessor of any provision of this Sublease shall be effective unless expressed in a writing signed by it.

13.4 ~~Performance of Sublessee~~ ’ ~~s Obligations~~ . If Sublessee at any time shall fail to make any payment or perform any act on its part required to be made or performed under this Sublease and the same constitutes an Event of Default and the same is not cured after the expiration of any applicable notice and cure period or waived, then Sublessor may (but is not obligated to), without waiving or releasing Sublessee from any obligations or Event of Default hereunder, make such payment or perform such act for the account and at the expense of Sublessee, and in such event Sublessor will thereafter provide notice to Sublessee of any such payment or performance. All sums so paid by Sublessor and all necessary and reasonable incidental costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the performance of any such act by it in connection with curing any such Event of Default, together with interest at the Agreed Rate (as defined in ~~Section 4~~ hereof) from the date of the making of such payment or the incurring of such costs and expenses, shall be payable by Sublessee to Sublessor upon Sublessor’s written demand therefor.

14 . ~~Provisions on Termination~~ .

14.1 ~~Surrender of Possession~~ . On the expiration of the Term or earlier termination or cancellation of this Sublease (the “ ~~Termination Date~~ ” ), Sublessee shall deliver to Sublessor or its designee possession of (a) the Facility and associated Sublessor Personal Property in a neat and clean condition and in as good a condition as existed at the date of Sublessee’s possession and occupancy pursuant to this Sublease, ordinary wear and tear excepted, (b) a fully operational, licensed and certified (if applicable) Business at the Facility, and (c) all patient charts and resident records along with appropriate resident consents if necessary and copies of all books and records relating to the Facility and the Premises which are usual and customary for skilled nursing facilities located in the State of Ohio for an orderly transfer of the operations of the Facility at the time of its surrender of the Premises to Sublessor or its designee, excluding books and records relating to Sublessee Personal Property. Sublessee shall reasonably cooperate with Sublessor or its designee in transferring or obtaining all necessary licenses and certifications for Sublessor or its designee, and Sublessee shall comply with all usual and customary requests regarding skilled nursing facilities located in the State of Ohio for an orderly transfer of the Facility licenses, and Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Sublessor or its designee to operate the Facility. Subject to all applicable laws, Sublessee hereby assigns, effective upon the Termination Date, all rights to operate the Facility to Sublessor or its designee, including all required licenses and permits and all rights to apply for or otherwise obtain them, and all other nonproprietary Sublessee Intangible Property relating to any portion of the Premises.

14.2 ~~Removal of Sublessee Property~~ . Provided that no Event of Default then exists, in connection with the surrender of the Premises, Sublessee may upon at least five (5) business days’ prior notice to Sublessor remove from the Premises all Sublessee Property, leaving the Premises in good and presentable condition and appearance, including repair of any damage caused by such removal; provided that Sublessor shall have the right and option to purchase the non-proprietary Sublessee Personal Property (but excluding all Sublessee intangible Property) for its then net book value during such five (5)-business day notice period, in which case Sublessee shall so convey the Sublessee Personal Property to Sublessor by executing a bill of sale in a form reasonably required by Sublessor. If there is any Event of Default then existing, Sublessee may not remove any Sublessee Personal Property from the Premises and instead will, on demand from Sublessor, convey it to Sublessor for application to any amounts owed by Sublessee under this Sublease at net book value, by executing a bill of sale in a form reasonably required by Sublessor. Title to any Sublessee Personal Property which is not removed by Sublessee as permitted above upon the expiration of the Term shall, at Sublessor’s election, vest in Sublessor; provided, however, that Sublessor may remove and store or dispose any or all of such Sublessee Personal Property which is not so removed by Sublessee without obligation or accounting to Sublessee.

14.5 ~~Survival~~ . All representations, warranties, covenants and other obligations of Landlord, Sublessor, Guarantor and Sublessee under this Sublease shall survive the Termination Date.

15. ~~Certain Sublessor Rights~~ .

15.1 ~~Entry and Examination of Records~~ . Sublessor and its representatives may enter any portion of the Premises at any reasonable time after at least forty-eight (48) hours’ notice to Sublessee to inspect the Premises for compliance and to exhibit the Premises for sale, Sublease or mortgaging; provided that no such notice shall be required in the event of an emergency, upon the occurrence and continuance of an Event of Default or to post notices of non-responsibility under any mechanics’ or materialmans’ lien law. No such entry shall unreasonably interfere with residents, patients, patient care or the Sublessee’s operations of the Facility. Upon 48 hours’ prior notice and during normal business hours, Sublessee will permit Sublessor and its representatives, inspectors and consultants, at no cost or expense to Sublessee, to examine all contracts, books and financial records (wherever kept) relating to Sublessee’s operations of the Facility.

15.2 ~~Grant Liens~~ . This Sublease shall be subordinate to the right, title, and interest of any lender or other party holding a security interest in or a lien upon the Premises under any and all mortgage instruments or deeds to secure debt presently encumbering the Premises or the Building and to any and all other deeds to secure debt or mortgage instruments hereafter encumbering the Premises or the Building. Sublessee shall at any time hereafter, on written demand of Sublessor or the holder of any such deed to secure debt or mortgage instrument, execute such usual and customary instruments for skilled nursing facilities located in the State of Ohio which may reasonably be required by such party for the purpose of evidencing the subordination of this Sublease to the lien or security of such party. Sublessee shall, upon written demand, at any time or times, execute, acknowledge, and deliver to Sublessor or the holder of any such usual and customary instruments for skilled nursing facilities located in the State of Ohio to secure debt, without expense, any and all documents that may be reasonably necessary to make this Sublease superior to the lien of any of the same, in form and substance reasonably acceptable to Sublessee with attornment and non-disturbance provisions included therein for the benefit of Sublessee. If the holder of any of said instruments or deeds to secure debt shall hereafter succeed to the rights of Sublessor under this Sublease, Sublessee shall, at the option of such holder or a purchaser at any foreclosure or sale under power, attorn to and recognize such successor as Sublessee’s Sublessor under this Sublease. Sublessee shall promptly execute, acknowledge, and deliver any instrument that may be reasonably necessary to evidence such attornment. Prior to the Execution Date, Sublessor will obtain from any lender holding a lien on the Premises, a subordination, non-disturbance and attornment agreement for the benefit of, and reasonably acceptable to, Sublessee.

15.3 ~~Estoppel Certificates~~ . Sublessor and Sublessee shall, at any time upon not less than five (5) business days ’ prior written request by the other party, have an authorized representative execute, acknowledge and deliver to Sublessor or Sublessee, as the case may be, or their designee a written statement certifying (a) that this Sublease, together with any specified modifications, is in full force and effect, (b) the dates to which Rent and additional charges have been paid, (c) that no default by either party exists or specifying any such default, and (d) as to such other matters as Sublessor or Sublessee, as the case may be, may reasonably request. Prior to the Execution Date, Sublessor shall cause an authorized representative of Landlord to execute, acknowledge and deliver to Sublessee, a written statement certifying the aforesaid matters relating to the Lease Agreement, in form and substance reasonably required by Sublessee.

16. ~~Assignment and Subletting~~ . Except as otherwise expressly permitted in this Sublease, without Sublessor’s prior written consent, which may be granted or withheld in Sublessor’s sole discretion, Sublessee shall not assign this Sublease, or sub-sublease all or any part of the Premises, or permit the use of the Premises by any party other than Sublessee or any wholly-owned subsidiary or sub-subsidiary of a Sublessee. This prohibition includes an assignment or sub-subletting to or by a receiver or trustee in any federal or state bankruptcy, insolvency, or other proceeding. For purposes of this Section, a sale or transfer of all or a controlling ownership interest in Sublessee or a merger or other combination by Sublessee or a sale of all or substantially all of Sublessee’s assets in lieu thereof shall be deemed an assignment or other transfer of this Sublease. Notwithstanding the foregoing, any Key Principal may transfer interests in Sublessee and/or any Affiliates thereof to any other Key Principal, provided that such transfer complies with all applicable regulatory approvals.

17. ~~Damage by Fire or Other Casualty~~ . Sublessee shall promptly notify Sublessor of any damage or destruction of any portion of the Premises and diligently repair or reconstruct such portion of the Premises to a like or better condition than existed prior to such damage or destruction. Any net insurance proceeds payable with respect to the casualty shall be paid directly to Sublessor and, if an Event of Default has not occurred and is continuing, shall be used for the repair or reconstruction of the applicable portion of the Premises pursuant to Sublessor’s reasonable disbursement requirements. If there are excess insurance proceeds, the surplus shall belong and be paid to Sublessee. Subject to the provisions of Section 18, Sublessee shall not have any right under this Sublease, and hereby waives all rights under applicable law, to abate, reduce or offset Rent by reason of any damage or destruction of any portion of the Premises by reason of an insured or uninsured casualty.

18. ~~Condemnation~~ . Except as provided to the contrary in this ~~Section 18~~ , this Sublease shall not terminate and shall remain in full force and effect in the event of a taking or condemnation of the Premises, or any portion thereof, and Sublessee hereby waives all rights under applicable law to abate, reduce or offset rent by reason of such taking. If during the Term all or substantially all (a “ ~~Complete Taking~~ ” ) or a smaller portion (a “ ~~Partial Taking~~ ” ) of the Premises is taken or condemned by any competent public or quasi-public authority, then (a) in the case of a Complete Taking, Sublessee may at its election made within thirty (30) days of the effective date of such Taking, terminate this Sublease and the current Rent shall be equitably abated as of the effective date of such termination, or (b) in the case of a Partial Taking, the Rent shall be abated to the same extent as the resulting diminution in Fair Market Value of the applicable portion of the Premises. The resulting diminution in Fair Market Value on the effective date of a Partial Taking shall be as established pursuant to ~~Exhibit~~ “ E ” . Sublessor alone shall be entitled to receive and retain any award for a taking or condemnation other than a temporary taking; provided, however, Sublessee shall be entitled to submit its own claim in the event of any such taking or condemnation with respect to the value of Sublessee ’ s Subleasehold interest in any portion of the Premises and/or the relocation costs incurred by Sublessee as a result thereof. In the event of a temporary taking of less than all or substantially all of the Premises, Sublessee shall be entitled to receive and retain any and all awards for the temporary taking and the Rent due under this Sublease shall be not be abated during the period of such temporary taking.

19. ~~Indemnification.~~

19.2 Landlord, Guarantor and Sublessor, jointly and severally, agree to protect, indemnify, defend and save harmless Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys ’ fees, from any suits, claims or demands, on account of (a) the breach by Sublessor, Guarantor and/or Landlord of any of their respective representations, warranties, covenants or other obligations hereunder, (b) all known and unknown Environmental Activities, Hazardous Materials Claims and violations by Landlord, Sublessor or any prior operator of the Facility of a Hazardous Materials Law in each case related to any such person ’ s ownership, lease, use or operation of any portion of the Premises prior to the Commencement Date, and (c) for all periods prior to the Commencement Date, the correction of all deficiencies of a physical matter identified by, and any liability assessed or asserted by, any governmental agency or Medicare or Medicaid providers, as applicable, as a result of or arising out of or in connection with the Facility or any portion thereof or the related change in ownership inspection and audit (including any overpayment to any Medicare, Medicaid or other third party payor). Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessee believes is covered by this indemnity, it shall give Landlord, Guarantor and Sublessor notice of this matter. If Sublessee does not elect to defend the matter with its own counsel at Landlord ’ s, Guarantor ’ s and Sublessor ’ s expense, Landlord, Guarantor and Sublessor shall then defend Sublessee at Landlord ’ s, Guarantor ’ s and Sublessor ’ s expense (including Sublessee ’ s reasonable attorneys ’ fees and costs) with legal counsel satisfactory to Sublessee.

19.3 Notwithstanding any provision in this Sublease to the contrary, Sublessee and its members, managers, Affiliates, directors, officers, shareholders, agents and employees shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor) arising out of any Environmental Activities, Hazardous Materials Claims, violations of Hazardous Materials Laws, remediation of Hazardous Materials or other events described in Section 19.1 to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility and such matters as disclosed or referenced in the existing phase one environmental site assessments obtained by Sublessor (each, a “Preexisting Environmental Condition”). Landlord, Guarantor and Sublessor shall, jointly and severally, indemnify, defend and save harmless Sublessee Indemnitees from and against any obligations, liabilities, damages, costs, expenses, losses or claims incurred by Sublessee Indemnitees (including fees and expenses of counsel) arising out of or in connection with any Preexisting Environmental Condition.

20. ~~Disputes~~ . If any party brings any action to interpret or enforce this Sublease, or for damages for any alleged breach, the prevailing party shall be entitled to reasonable attorneys ’ fees and costs as awarded by the court in addition to all other recovery, damages and costs.


If to Sublessee:		If to Sublessor:

~~Sidney, SNF, Inc.~~		~~RMC HUD Master Tenant, LLC~~
~~c/o MSTC Development, Inc.~~		~~c/o Regional Health Properties,~~
~~556 Niles Courtland Road, S.E.~~		~~Inc.~~
~~Warren, Ohio 44484~~		~~454 Satellite Blvd.~~
~~Attn: President/CEO~~		~~Suite 100~~
		~~Suwanee, Georgia 30024~~
~~With a copy to:~~		~~Attn: CEO~~

~~Rolf Goffman Martin Lang LLP~~
~~30100 Chagrin Boulevard, Suite 350~~
~~Cleveland, Ohio 44124~~
~~Attn: Ira S. Goffman, Esq.~~

A party may designate a different address by notice as provided above. Any notice or other instrument so delivered (whether accepted or refused) shall be deemed to have been given and received on the date of delivery established by U.S. Post Office return receipt or the carrier ’ s proof of delivery or, if not so delivered, upon its receipt. Delivery to any officer, general partner or principal of a party shall be deemed delivery to such party. Notice to any one co-Sublessee shall be deemed notice to all co-Sublessees.

22. ~~Intentionally Omitted~~ .

24. ~~Miscellaneous~~ . This Sublease has been freely and fairly negotiated, and all provisions shall be interpreted according to their fair meaning and shall not be strictly construed against any party. While nothing contained in this Sublease should be deemed or construed to constitute an extension of credit by Sublessor to Sublessee, if a portion of any payment made to Sublessor is deemed to violate any applicable laws regarding usury, such portion shall be held by Sublessor to pay the future obligations of Sublessee as such obligations arise and if Sublessee discharges and performs all obligations hereunder, such funds will be reimbursed (without interest) to Sublessee within ten (10) days or if not so reimbursed, Sublessee may credit such amount against Rent on a dollar- for-dollar basis. If any part of this Sublease shall be determined to be invalid or unenforceable, the remainder shall nevertheless continue in full force and effect. Time is of the essence, and whenever action must be taken (including the giving of notice or the delivery of documents) hereunder during a certain period of time or by a particular date that ends or occurs on a Saturday, Sunday or federal holiday, then such period or date shall be extended until the immediately following business day. Whenever the words “including”, “include” or “includes” are used in this Sublease, they shall be interpreted in a non-exclusive manner as though the words “without limitation” immediately followed. Whenever the words day or days are used in this Sublease, they shall mean “calendar day” or “calendar days” unless expressly provided to the contrary. The titles and headings in this Sublease are for convenience of reference only and shall not In any way affect the meaning or construction of any provision. Unless otherwise expressly provided, references to any “Section” mean a section of this Sublease (including all subsections), to any “Exhibit” or “Schedule” mean an exhibit or schedule attached hereto or to “Medicare” or “Medicaid” include any successor program. If more than one Person is Sublessee hereunder, their liability and obligations hereunder shall be joint and several. Promptly upon the request of either party and at its expense, the parties shall prepare, enter into and record a suitable short form memorandum of this Sublease. This Sublease (a) contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior or contemporaneous verbal or written agreements or understandings, (b) may be executed in several counterparts, (including electronically mailed copies in portable document format (PDF)), each of which shall be deemed an original, but all of which shall constitute one and the same document, (c) may only be amended by a writing executed by the parties, (d) shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties; provided, however, that the indemnification obligations of any party hereunder shall survive any such assignment, (e) shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio, and (f) incorporates by this reference any Exhibits and Schedules attached hereto.

25. ~~Non-~~ D ~~isturbance and Attornment~~ . If the Lease Agreement shall expire or terminate during the te rm of this Sublease for any reason other than condemnation or destruction by fire or other casualty, or if Sublessor shall surrender the Lease Agreement to Landlord during the te rm of this Sublease, Landlord shall continue this Sublease with the same force and effect as if Landlord as lessor and Sublessee as lessee had entered into a lease as of such effective date for a te rm equal to the then unexpired te rm of this Sublease and containing the same provisions as those contained in this Sublease, provided that (i) the Lease Agreement was terminated pursuant to Sublessor ’ s default under the Lease Agreement, (ii) the default is of such a type that Sublessee can cure, and (iii) Sublessee in fact cures such default within thirty (30) days, where possible, or within a reasonable amount of time. In such event, Sublessor shall promptly transfer any remaining security deposit described in ~~Section 3~~ of this Sublease to Landlord. If this Sublease is continued pursuant to this Section 25, Sublessee shall attorn to Landlord and Landlord and Sublessee shall have the same rights, obligations and remedies thereunder as were had by Sublessor and Sublessee hereunder prior to such effective date, respectively.

26 . ~~Terrorism/Governmental Action~~ . Sublessee warrants and represents to Sublessor that Sublessee is not, and shall not become, a person or entity with whom Sublessor is restricted from doing business under regulations of the Office of Foreign Asset Control ( “ ~~OFAC~~ ” ) of the Department of the Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any applicable law, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action, and is not and shall not knowingly engage in any dealings or transaction or otherwise knowingly be associated with such persons or entities.

~~27.~~ ~~Financial Covenant~~ . Sublessee shall be required to comply with the following financial covenant: Maintaining a ~~Lease Coverage Ratio~~ of 1.0 to 1.0 for months 9 through 18 of the Initial Term, 1.15 to 1.0 for months 19 through 36 of the Initial Term and 1.25 to 1.0 thereafter. Such Lease Coverage Ratio will be tested on a quarterly basis beginning with the first full fiscal quarter ended after month 9 of the Initial Term and continuing each fiscal quarter thereafter through month 24 of the Initial Term. Notwithstanding the foregoing, if the Lease Coverage Ratio in months 13 through 24 of the Initial Term meets a minimum of 1.0 to 1.0 over either a trailing twelve-month testing period or a trailing three-month period, then there shall be no financial covenant default under this Section 27(a). After month 24 of the Initial Term, Sublessee must satisfy the Lease Coverage Ratio for a trailing twelve-month testing period tested quarterly beginning with the first full fiscal quarter ended of Sublessee after month 24 of the Initial Term.

28. [Intentionally Omitted].

29. [Intentionally Omitted].

30. ~~Certain Conditions Precedent and~~ ~~Transitional Provisions~~ . The provisions of this Section 30 shall govern and control over any contrary provisions of this Sublease.

30.1 ~~Certain Conditions Precedent.~~

30.1.2 Sublessee ( “ ~~Applicant~~ ” ), with respect to the Facility, shall file and submit all applications, petitions and other documents (collectively, the “ ~~Required Authorization Applications~~ ” ) that are necessary or appropriate for it to obtain all of the Required Authorizations for the Facility. Applicant shall use its commercially reasonable efforts and due diligence to obtain the Required Authorizations for the Facility and shall promptly respond to any questions or information requests from any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications. Upon Sublessor’s written request, Applicant shall furnish to Sublessor copies of all Required Authorization Applications and any correspondence or other written documentation received from or delivered to any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications.

30.1.4 The term “ ~~Required Authorizations~~ ” shall mean, with respect to the Facility, such consents, approvals and other assurances, oral or written, as are, under local custom and practice, customarily obtained from state licensing authorities by reasonable operators of facilities like the Facility, acting in good faith, before such an operator takes possession of, and begins to operate, a facility like the Facility. By way of example and without limitation of the foregoing, in the event that Applicant receives permission from the applicable state licensing authorities to assume operational control of a particular Facility prior to the issuance of a non-provisional or non-conditional license for such Facility (e.g., due to a state licensing authority’s requirement that a survey of Applicant’s operations at the Facility be completed prior to the issuance of a nonprovisional or non-conditional license) and, under local custom and practice, reasonable operators of facilities like the Facility customarily take possession of, and begin to operate, facilities like the Facility on the basis of such permission, then, for purposes of this Section 30.1, the date of such permission would be treated as the date that Applicant obtained the Required Authorizations for the Facility; provided, however, that if Applicant provides written correspondence from state licensing authorities indicating that additional documentation is required to obtain the Required Authorizations, then in no event shall the Required Authorizations be deemed to have been obtained by Applicant.

~~30.2~~ ~~Additional Conditions Precedent~~ . The effectiveness of this Sublease, Sublessor ’ s and Sublessee ’ s rights and obligations hereunder and the consummation of the transactions contemplated thereby are subject to satisfaction of each of the following conditions precedent for the Facility:

30.2.2 An Estoppel, Non-Disturbance and Attornment Agreement executed by Landlord in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee;

30.2.3 Evidence of the termination of all of the Exiting Operator’s right to occupy the Premises and operate in the Business, in form and substance reasonably acceptable to Sublessee;

30.2.5 A copy of the certificate of occupancy relating to the Facility, in form and substance acceptable to Sublessee to obtain licensure for the Facility;

30.2.6 The concurrent closing of the Affiliated Subleases and all required HUD TPA approvals with respect thereto, as applicable;

~~30.2.9~~ A Subordination, Non-Disturbance and Attornment Agreement executed by each Facility Mortgagee in favor of Sublessee, in such fo rm and substance reasonably acceptable to Sublessee.

30.2.10 ~~HUD Cap Ex Account~~ . Sublessor and Landlord, jointly and severally, represent and warrant to Sublessee that the balance in the capital improvements reserve account required to be maintained under the documents evidencing the HUD Loan relating to the Leased Premises (the “HUD Cap Ex Account”) as of the Execution Date is $208,523.68 (the “HUD Cap Ex Balance”). From and after the Commencement Date, Sublessee shall pay as Additional Rent due hereunder to Sublessor or the servicer of the HUD loan, as applicable, the required monthly payment to the HUD Cap Ex Account in the amount of $3,416.66. From time to time in Sublessee’s discretion, Sublessee shall submit all HUD required documentation of work performed and amounts incurred for qualifying expenditures in connection with the Leased Premises in support of a request for reimbursement from the HUD Cap Ex Account. Sublessor and Landlord agree to cooperate in good faith and use commercially reasonable efforts to timely obtain HUD approval of reimbursement from the HUD Cap Ex Account relating to such HUD submission, including, but not limited to, submitting such additional documents required by HUD. Upon HUD approval and reimbursement for qualifying expenditures, Sublessor or Landlord, as applicable, jointly and severally, shall within five (5) business days pay to Sublessee the amount received by Sublessor or Landlord, as applicable, from the HUD Cap Ex Account for such qualifying expenditures submitted, and if any such payment from the HUD Cap Ex Account is not timely paid as set forth above, such delinquent amount shall be accessed payment premium in the amount of eight percent (8%) of said delinquency, as liquidated damages and not as a penalty, it being agreed that said premium amount represents a reasonable estimate of the probable damages to Sublessee as a result of such timely failure to pay, and Sublessor and Landlord hereby each waives any and all rights to contest or bring an action with respect to such required payment and premium. In addition, Sublessor and Landlord agree that in the event the HUD reserves being paid monthly by Sublessee hereunder meet the total maximum HUD reserves required by HUD, Sublessee shall not be required to pay any additional monthly HUD reserves under this Sublease.

30.2.11 ~~Redevelopment.~~ Upon the request of Sublessee, Sublessor will conduct, at its sole expense, a feasibility study or assessment to assess economic viability and competitiveness of the Facility with options for the redevelopment, addition to or construction of a new building for the Facility, with input and approval from Sublessee with respect thereto, and submit a proposal to the Landlord. Landlord will make reasonable best efforts to provide funds via HUD redevelopment programs in the amount supported by mutually accepted analysis and redevelopment.

30.2.12 ~~HUD Addendum.~~ Sublessor, Landlord and Sublessee shall execute and deliver an Addendum to Operating Lease (HUD Form 91116-ORCF) and any and all other documents required by HUD in connection with HUD’s approval of Sublessee as the operator of the Facility, in form and substance reasonably acceptable to Sublessee.

[Signatures on Following Pages]

~~IN WITNESS WHEREOF,~~ this Sublease has been executed by Sublessor and Sublessee as of the date first written above.


SUBLESSOR:

RMC HUD MASTER TENANT, LLC
a Georgia limited liability company

By:		/ s/ Brent morrison
~~Name:~~		Brent morrison
Title:		Manager


STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd ~~day of the~~ ~~December~~ , ~~2018~~ , by ~~Brent Morrison~~ , ~~the~~ ~~Manager~~ ~~of RMC HUD Master Tenant, LLC, a Georgia limited liability~~ company on behalf of the company.

/s/ K N Parker

Notary Public


Commission
Expiration:	4/16/20

[Signature Page Continues]


~~SUBLESSEE:~~

~~SIDNEY SNF, INC.,~~
~~an Ohio corporation~~

By:		/s/ Michael P Slyk
~~Name:~~		Michael P Slyk
Title:		President


STATE OF OHIO		:
		:	ss
COUNTY OF	Trumbull	:

The foregoing instrument was acknowledged before me this 30 ^th day of November, ~~2018,~~ by ~~Michael P Slyk~~ , ~~the~~ ~~President~~ of Sidney SNF, Inc., an Ohio ~~corporation~~ ~~, on behalf of the corporation.~~

TRACIE A. KATZENBERGER

Notary Public

TRACIE A. KATZENBERGEK


Commission
Expiration:	6-26-2021

	TRACIE A. KATZENBERGEK

	NOTARY PUBLIC
	STATE OF OHIO

	My Commission Expires
	June 26, 2021

[Signature Page Continues]


~~LANDLORD:~~

THE PAVILION CARE CENTER, LLC,
an Ohio limited liability company

By:		/s / Brent Morrison
~~Name:~~		Brent Morrison
Title:		Manager


STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December ,2018, by Brent Morrison, the Manager of The Pavilion Care Center, LLC, an Ohio limited liability company, on behalf of the company.

K N. Parker

Notary Public

Commission
Expiration:	4/16/20

[Signature Page Continues]

The undersigned Guarantor hereby executes this Sublease for the sole purpose of becoming a party to and agreeing to Sections 2.6 , 2.7, 3.4 , 8.1, 14.5, 19.2 and 19.3.


GUARANTOR:

REGIONAL HEALTH PROPERTIES, INC.,
a Georgia corporation

By:		/ s / Brent Morrison
~~Name:~~		Brent Morrison
Title:		Interim CEO


STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd ~~day of~~ ~~December~~ , ~~2018~~ , by Brent Morrison, the Interim CEO of Regional Health Properties, Inc., a Georgia corporation, on behalf of the corporation.

Notary Public

K.N Parker

Notary Public


Commission
Expiration:	4/16/20

~~List of Exhibits~~


Exhibit A-l:	Legal Description
Exhibit A-2:	Sublessor Personal Property
Exhibit B:	Certain Definitions
Exhibit C:	Financial, Management and Regulatory Reports
Exhibit D:	Fair Market Reset Rent
Exhibit E:	Fair Market Value
Exhibit F:	Affiliated Subleases
Exhibit G:	Calculated Rent
Exhibit H:	Consulting Services Agreement

List of Schedules


Schedule 7.1:	Licensed Beds

~~EXHIBIT~~ “ A -1 ”

LEGAL DESCRIPTION

3.282 ACRE & 0.578 ACRE TRACTS

LOCATED WEST OF FULTON STREET, SOUTH OF FIELDING ROAD CITY OF SIDNEY, COUNTY OF SHELBY, OHIO

Situated in the State of Ohio, County of Shelby, City of Sidney, being a part of Miami River Survey, Township 1, Range 13, Sections 10 & 4, said 3.282 & 0.578 acre tracts of land conveyed to U V ~~MC NURSING CARE~~ , ~~INC~~ . , as shown in Deed Volume 352, Page 152, Recorder’s Office, Shelby County, Ohio, said tracts being more particularly described as follows:

~~TRACT I — 0.578 ACRES~~

Beginning for reference at a 4” x 3” rectangular monument stone found at the corner of Sections 10, 4, 3 and 9, said stone delineated upon a ~~PLAT O~~ F ~~SURVEY~~ by Thomas L. Sheldon, P.S. as shown in Volume 5, Page 104, thence along the easterly line of Section 10 and the westerly line of a 1.700 acre tract conveyed to ~~WENDY~~ E . ~~MITCHELL~~ as shown in Deed Volume 991, Page 53, North 05°00’00” East, a distance of 504.77 feet a 4” diameter, 4 feet in height wooden fence post found marking the TRUE POINT OF BEGINNING of the herein described 0.578 acre tract of land;

Thence and continuing with said aforementioned Section line North 05°00’00” East, passing a drill hole set a 87.89 feet, a total distance of 184.06 (184.20 by deed) feet to an iron pin set at the southwest corner of a tract of land conveyed to ~~ELMER~~ C. ~~& KIMBERLY B. KIES~~ as shown in Deed Volume 383, Page 169;

Thence and along the boundary lines of said 0.578 acre and said ~~KIES~~ tract the following three (3) courses:

North 89 25’29” East, a distance of 82.06 (80.50 by deed) feet to an iron pipe found;

North 06°26’09” East, distance of 19.49 (20.00 by deed) feet to an iron pipe found;

South 86°09’41” East, a distance of 62.53 (63.00 by deed) feet to an iron pipe found marking the southeast corner of a 0.240 acre tract conveyed to ~~GARY CA~~ V ~~INDER~~ as shown in Deed Volume 270, Page 550, said pipe being in the westerly line of the ~~CLIFFORD T & HENERY A SHIE~~ subdivision of record as shown in Plat Book 3, Page 166;

Thence along the westerly line of said SHIE subdivision and the easterly line of 0.578 acre tract South 04 ^o 54’58” West, a distance of 163.52 (159.00 by deed) feet to a 4” diameter, 4 feet in height wooden fence post found marking the northeast corner of said 1.700 acre tract;

~~EXHIBIT~~ “ A -1 ”

LEGAL DESCRIPTION - CONTINUED

Thence along the northerly line of said 1.700 acre tract South 76°13’36” West, a distance of 153.07 (155.76 by deed) feet to the TRUE POINT OF BEGINNING, containing 0.578 acres, more or less. Subject to all easements, agreements and right of ways of record.

~~TRACT II —~~ ~~3.282 ACRES~~

Beginning at a 4”x3” rectangular monument stone found at the corner of Sections 10, 4, 3 and 9, said stone delineated upon a ~~PLAT OF SURVEY~~ by Thomas L. Sheldon, P.S. as shown in Volume 5, Page 104, said stone also marking the TRUE POINT OF BEGINNING of the herein described 3.282 acre tract of land;

Thence along the southerly line of Section 10 North 84°41’20” West, a distance of 234.12 (233.60 by deed/plat) feet to an iron pin set in the easterly line of Lot 3330 of the ~~PETER WAGNER~~ ’ ~~S ADDITION,~~ a subdivision of record as shown in Plat Book 2, Page 88;

Thence along the easterly line of said ADDITION North 02°58’55” East, a distance 577.66 (578.45 by deed/plat) feet an iron pipe found at the southwest corner of a 1.053 acre tract conveyed to ~~VIOLET J.~~ H ~~ELMAN~~ as shown in Deed Volume 237, Page 322 and the northwest corner of said 3.282 acre tract, said pipe being in the easterly line of Lot 38 of aforementioned ~~ADDITION~~ ;

Thence along the southerly line of said 1.053 acre tract and the northerly line of said 3.282 acre tract South 88°10’08” East, passing an iron pipe found at 158.69 feet, a total distance of 254.85 (254.75 by deed/plat) feet to a drill hole in concrete set marking the southeast corner of a 0.624 acre tract conveyed to ~~KENT M & MARCELLA N HUFFMAN~~ as shown in Deed Volume 334, Page 41, said drill hole being in the westerly line of Section 10 and said 3.282 acre tract;

Thence along the easterly line of Section 10 and the westerly line of a 1.700 acre tract conveyed to ~~WENDY E. MITCHELL~~ as shown in Deed Volume 991, Page 53, South 05°00’00” West, a distance of 592.66 (593.00 by deed/plat) feet to TRUE POINT OF BEGINNING, containing 3.282 acres, more or less. Subject to all easements, agreements and right of ways of record.

Both descriptions were prepared by LJB Incorporated and are based on official county records of the Shelby County Recorder’s Office and actual field survey of the premises in September 2001.

The basis of bearings for the descriptions was the establishment of the easterly line of Section 10 by field evidence and cited as North 5°00’00” East, in Deed Volume 237, Page 323, Deed Volume 256, Page 258 and Deed Volume 334, Page 41, Recorder’s Office, Shelby County, Ohio.

All iron pins set in the above boundary descriptions 3/4” (O.D.) 30” long with a plastic cap stamp (LJB).

~~EXHIBIT A-2~~

SUBLESSOR PERSONAL PROPERTY

~~EXHIBIT~~ “ B ”

CERTAIN DEFINITIONS

For purposes of this Sublease, the following terms and words shall have the specified meanings:

“Affiliate” shall mean with respect to any Person, any other Person which, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the first Person.

“ ~~Affiliated Subleases~~ ” shall mean those certain subleases identified on ~~Exhibit~~ “ E ” attached hereto between affiliates of Sublessor, as sublessors, and affiliates of Sublessee, as sublessees.

“ ~~Alterations~~ ” shall mean any additions, installations, substitutions or improvements to the Facility made or to be made by Sublessee after its acceptance of the Facility.

“ ~~Base Rent Escalator~~ ” shall mean the change in the ~~CPI~~ over the previous twelve ~~(12)~~ month period, computed by using the most recently published ~~CPI~~ and the ~~CPI~~ published twelve (12) months earlier; provided, however, that for purposes hereof, in no event shall such change in ~~CPI~~ be less than one ~~(1%)~~ or greater than two and one-half percent ~~(2.5%).~~ For purposes of illustration, if ~~CPI~~ at December ~~1, 2021~~ is ~~2.5%~~ and the ~~CPI~~ at December ~~1, 2022~~ is ~~3.5%,~~ then the difference in ~~2022 CPI~~ compared to ~~2021 CPI~~ is ~~1.0%,~~ and therefore the escalator percent would be 1% for the upcoming year.

“ ~~Business~~ ” shall mean the business and operation of the Facility and all financial activities and other matters related thereto.

“ ~~Calculated Rent~~ ” shall mean during Months seven (7) through Thirty six (36) the amount set forth on ~~Exhibit~~ “ G ” attached hereto.

“ ~~Control~~ ” shall mean, as applied to any Person, the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of that Person, whether through ownership, voting control, by contract or otherwise.

“CPI” shall mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items, Not Seasonally Adjusted, as published by the United States Department of Labor, Bureau of Labor Statistics of the United States Department of Labor. In the event such index is discontinued, comparable statistics in the purchasing power of the consumer dollar, as published at the time of said discontinuance by a responsible financial authority shall be selected at the Sublessor’s reasonable discretion and shall be used in lieu of such index.

“ ~~Debt Service Rent~~ ” shall mean the amount of $16,065.00.

“ ~~Environmental Activities~~ ” shall mean the use, generation, transportation, handling, discharge, production, treatment, storage, release or disposal of any Hazardous Materials at any time to or from any portion of the Premises or located on or present on or under any portion of the Premises.

“ ~~Exiting Operator~~ ” shall mean PV SNF, LLC d/b/a Pavilion Care Center.

“ ~~Facility Interest Expense~~ ” shall mean, for any period, the sum of (i) total interest expense for such period, plus (ii) for such period, fees with respect to Sublessee’s outstanding indebtedness including capitalized interest, but excluding commissions, discounts and other fees owed with respect to Letters of Credit and bankers’ acceptance financing, all calculated in connection with the Business.

“ ~~Facility Mortgage~~ ” shall mean any mortgage, deed of trust or other security agreement or lien encumbering the Premises or any portion thereof and securing an indebtedness of Sublessor or any Affiliate of Sublessor with respect to the Facility, or any ground, building or similar Sublease or other title retention agreement to which the Premises or any portion thereof is subject from time to time.

“ ~~Facility Net Income~~ ” shall mean, for any period, the net income (or loss) of the Business.

“ ~~Facility Mortgagee~~ ” shall mean the holder or beneficiary of a Facility Mortgage and any other rights of the lender, credit party or lessor under the applicable Facility Mortgage Documents.

“ ~~Facility Mortgage Documents~~ ” shall mean with respect to each Facility Mortgage and Facility Mortgagee, the applicable Facility Mortgage, loan or credit agreement, Sublease, note, collateral assignment instruments, guarantees, indemnity agreements, bond documents and other documents or instruments evidencing, securing or otherwise relating to the loan made, credit extended, Sublease or other financing vehicle pursuant thereto with respect to the Facility.

“ ~~Fair Market Reset Rent~~ ” shall mean the annual fair market rental value of the Facility, as agreed to by Sublessor and Sublessee, or if the parties are not able to agree within ten (10) days after the Renewal Notice, the amount determined in accordance with the procedures set forth on ~~Exhibit~~ “ D ” attached hereto.

“ ~~Hazardous Materials~~ ” shall mean (a) any petroleum products and/or by-products (including any fraction thereof), flammable substances, explosives, radioactive materials, hazardous or toxic wastes, substances or materials, known carcinogens or any other materials, contaminants or pollutants which pose a hazard to any portion of the Premises or to Persons on or about any portion of the Premises or cause any portion of the Premises to be in violation of any Hazardous Materials Laws; (b) asbestos in any form which is friable; (c) urea formaldehyde in foam insulation or any other form; (d) transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million or any other more restrictive standard then prevailing; (e) medical wastes and biohazards not disposed of in accordance with applicable law; ~~(f)~~ radon gas; and (g) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or may or could pose a hazard to the health and safety of the occupants of any portion of the Premises or the owners and/or occupants of property adjacent to or surrounding any portion of the Premises, including, without limitation, any materials or substances that are listed in the United States Department of Transportation Hazardous Materials Table (49 CFR 172.101) as amended from time to time.

“ Hazardous Materials Claims ” shall mean any and all enforcement, clean up, removal or other governmental or regulatory actions or orders pending, threatened, instituted or completed pursuant to any Hazardous Material Laws, together with all claims made, pending or threatened by any third party against any portion of the Premises, Sublessor or Sublessee relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials.

“Key Principals” shall mean Tim Chesney, Michael Slyk and Dan D’Amico.

“ ~~Occupancy~~ ” shall mean, with respect to the Premises, the percentage of (a) total patient days relating to such Facility for any reporting period ~~divided by~~ (b) the product of (i) the number of licensed beds and (ii) the total days in such reporting period.

“ ~~Operations Transfer Agreement~~ ” means that certain Agreement to Transfer Operations and Related Assets dated October 16, ~~20I~~ 8 by and between, ~~inter alios~~ , Exiting Operator and Sublessee.

“ ~~Permitted Liens~~ ” shall mean (i) liens granted to Sublessor or any Affiliate of Sublessor, (ii) liens customarily incurred by Sublessee in the ordinary course of business for items not delinquent, (iii) liens for Taxes not yet due and payable, (iv) any lien, charge or encumbrance which is being contested in good faith pursuant to the terms of this Sublease, (v) all easements, liens, encumbrances, restrictions, agreements and other title matters existing as of the Execution Date, (vi) purchase money financing and capitalized equipment leases for the acquisition of personal property for any such financing where the original cost of the equipment financed exceeds $50,000 (except for bulk equipment financing which does not exceed $100,000 and except in the case of a facility van or bus there shall be no dollar limitation as long as the purchase or lease is usual and customary for skilled nursing facilities in the State of Ohio), (vii) any easement granted by Sublessor, in Sublessor ’ s discretion, at the request of Sublessee which is necessary to (A) obtain utilities or other services for the Facilities in the ordinary course of Sublessee ’ s business or (B) satisfy requests from local authorities in respect of, without limitation, township projects; (viii) liens that may be filed as a result of Sublessor ’ s acts or omissions; and (ix) liens granted to Sublessee ’ s working capital lender.

“ ~~Person~~ ” shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, governmental authority, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

“ ~~Reset Rent~~ ” shall mean an amount equal to the greater of: (i) the product of the Base Rent during the immediately preceding Sublease Year multiplied by the Base Rent Escalator or (ii) the Fair Market Reset Rent for the applicable Sublease Year.

~~EXHIBIT~~ “ C ”

FINANCIAL, MANAGEMENT AND REGULATORY REPORTS

~~REPORT~~	~~DUE DATE~~
~~Monthly financial reports concerning the Business at the Facility consisting of:~~ (1) a reasonably detailed income statement showing, among other things, gross revenues; (2) total patient days; (3) Occupancy; and (4) payor mix. (All via e-mail to clinton.cain@regionalhealthproperties.com )	Forty-Five (45) days after the end of each calendar month
~~Monthly census reports concerning the Facility~~ (via e-mail to clinton.cain@regionalhealthproperties.com ) [To extent this information is contained in monthly financial reports it will not be necessary to provide duplication here]	Thirty (30) days after the end of each calendar month
~~Monthly accounts payable report concerning the Facility~~ consisting of a list and aging report of all payables owed by the Facility to all parties (via e-mail to clinton.cain@regionalhealthproperties.com )	Thirty (30) days after the end of each calendar month
~~Quarterly litigation summaries~~ of Sublessee to the extent that any such litigation is reasonably expected to result in a material adverse effect on Sublessee or the Facility and is not covered by insurance and diligently defended (via e-mail to clinton.cain@regionalhealthproperties.com	Thirty (30) days after the end of each quarter of the fiscal year of Sublessee
~~Annual financial statements~~ of Sublessee and each sublessee under the Affiliated Subleases compiled by a reputable certified public accounting firm (via e-mail to clinton.cain@regionalhealthproperties.com )	One hundred twenty (120) days after the fiscal year end of Sublessee
~~Regulatory reports with respect to the Facility to the extent that any such report or survey is reasonably expected to result in a material adverse effect on Sublessee or the Facility,~~ as follows:	Ten (10) business days after receipt

(1) all federal, state and local licensing and reimbursement certification surveys, inspection and other reports received by Sublessee as to any portion of the Premises and any portion of the Business, including state department of health licensing surveys; (2) Medicare and Medicaid certification surveys; and (3) life safety code reports.
~~Reports of regulatory violations,~~ by written notice of the following: (1) any material violation of any federal, state or local licensing or reimbursement certification statute or regulation, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility; (2) any material suspension, termination or restriction placed upon Sublessee or any portion of the Premises, the operation of any portion of the Business or the ability to admit residents or patients, which violation is not reasonably expected to be resolved in favor of Sublessee or the Facility within forty-five (45) days; or (3) any violation of any other permit, approval or certification in connection with any portion of the Premises or any portion of the Business, by any federal, state or local authority, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility.	Seven (7) business days after receipt
~~Cost Reports for the Facility~~	Fifteen (15) days after filing
~~Monthly Balance Sheet of Sublessee~~	Thirty (30) days after the end of each calendar month
~~Annual Budget for the Facility~~	No later than January ~~1 of~~ each calendar year
~~Accounts Receivable Aging by payor type for the Facility~~	Thirty (30) days after the end of each calendar month

~~EXHIBIT~~ “ D ”

FAIR MARKET RESET RENT

1. If Sublessor and Sublessee are unable to agree upon the Fair Market Reset Rent within the applicable period provided in this Sublease, each party shall within ten (10) days after written demand by the other select one (1) MAI Appraiser to participate in the determination of Fair Market Reset Rent. Within ten (10) days after such selection, the MAI Appraisers so selected by Sublessor and Sublessee shall select a third MAI Appraiser (the “Third Appraiser” ). In the event either Sublessor or Sublessee fails to select a MAI Appraiser within the time period set forth above, the MAI Appraiser selected by the other party shall alone determine the Fair Market Reset Rent as if it was the Third Appraiser.

2. The Third Appraiser, within ten (10) days after its appointment, shall (i) hear the Sublessor and Sublessee and their respective witnesses and MAI Appraisers, and each of Sublessor and Sublessee shall, upon the conclusion of both presentations, be required to simultaneously submit a proposal (the “ ~~Fair Market Reset Rent Proposal~~ ” ) setting forth the party’s proposed determination of the Fair Market Reset Rent, and (ii) examine the records relating to the facility and such other documents and records as may, in its judgment, be necessary to determine Fair Market Reset Rent.

5. The fees and expenses of any appraisal pursuant to this ~~Exhibit~~ “ D ” shall be borne by the parties equally, but each party shall bear the expense of its own attorneys and experts and the additional expenses of presenting its own proof.

“ ~~MAI Appraiser~~ ” shall mean an independent appraiser who has substantial experience in performing appraisals of properties similar to the applicable Property and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is reasonably approved by Sublessor and Sublessee.

EXHIBIT “ E ”

FAIR MARKET VALUE

“ ~~Fair Market Value~~ ” means the fair market value of the Premises or applicable portion thereof on a specified date as agreed to by the parties, or failing such agreement within ten (10) days of such date, as established pursuant the following appraisal process. Each party shall within ten (10) days after written demand by the other party select one MAI Appraiser to participate in the determination of Fair Market Value. For all purposes under this Lease, the Fair Market Value shall be the fair market value of the Premises or applicable portion thereof unencumbered by this Lease. Within ten (10) days of such selection, the MAI Appraisers so selected by the parties shall select a third (3 ^rd ) MAI Appraiser. The three (3) selected MAI Appraisers shall each determine the Fair Market Value of the Premises or applicable portion thereof within thirty (30) days of the selection of the third appraiser. . Tenant shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Landlord shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Each party shall pay half the fees and expenses of the third MAI Appraiser selected by the respective MAI Appraisers selected by each of the parties.

“MAI Appraiser” shall mean an appraiser licensed or otherwise qualified to do business in the state(s) where the Premises or applicable portion thereof are located and who has substantial experience in performing appraisals of facilities similar to the Premises or applicable portion thereof and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is approved by Landlord.

~~EXHIBIT~~ “ F ”

AFFILIATED SUBLEASES

~~EXHIBIT~~ “ G ”

CALCULATED RENT

Occupancy (%) Based on average occupancy for the prior calendar month using total number of licensed beds	Pavilion Care Calculated Rent per month for months seven through thirty-six of the Initial Term
88%	$28,000.00
86%	$28,000.00
84%	$28,000.00
82%	$17,750.00

EXHIBIT “ H ”

[Attach copy of form of Consulting Services Agreement]

SCHEDULE 7.1: LICENSED BEDS

Ohio Department of Health: 62 licensed beds

Medicare and Medicaid: 50 certified beds

Exhibit 10.209

FINAL

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (this “Sublease”) is entered into as of the 30 ^th day of November, 2018 (the “Execution Date”) by and between EAGLEWOOD VILLAGE, LLC, a Georgia limited liability company (“Sublessor”) and SPRINGFIELD CLARK ALF, INC., an Ohio corporation (“Sublessee”), for the improved real property described on Exhibit “A-l” (the “Premises”), on which Premises is located that certain 95 bed licensed assisted living facility located at 3001 Middle Urbana Road, Springfield, Ohio 45502, including the “Sublessor Personal Property” associated therewith described on Exhibit “A-2” (the Sublessor Personal Property together with the Premises, being collectively the “Facility”). Certain capitalized terms used in this Sublease are defined on Exhibit “B” .

RECITALS

WHEREAS, Sublessor is the tenant under that certain Facility Lease Agreement dated as of December 29, 2011, as amended (the “Lease Agreement”) pursuant to which Sublessor leases the Premises from Eaglewood Property Holdings, LLC, a Georgia limited liability company (the “Landlord”); and

WHEREAS, Sublessor shall remain responsible for all obligations under the Lease Agreement. Sublessor shall exercise best efforts to cause the Landlord to perform its obligations under the Lease Agreement for the benefit of the Sublessee.

1. Term . The “Term” of this Sublease is the Initial Term of ten (10) years plus the Renewal Terms (if any). A “Sublease Year” is the twelve (12) month period commencing on the Commencement Date (as defined below) and each anniversary thereof during each year of the Term. The “Initial Term” commences on December 1,2018 (the “Commencement Date”) and ends on November 30, 2028, and may be extended for two (2) separate renewal terms of five (5) years each (each a “Renewal Term”) if: (a) at least one hundred eighty (180) days prior to the end of the Initial Term or the Renewal Term (as applicable), Sublessee delivers to Sublessor the “Renewal Notice” indicating that Sublessee desires to exercise its right to extend this Sublease for the Renewal Term and (b) there is no then uncured Event of Default (i) as of the date Sublessor receives the Renewal Notice (the “Exercise Date”), or (ii) on the last day of the Initial Term or the Renewal Term (as applicable), and (c) corresponding renewal options are exercised for all Affiliated Subleases excluding the facility known as Hearth and Care at Greenfield located in Greenfield, Ohio which sublease will not need to be renewed as a condition to renewal of this Sublease. For purposes hereof, “Termination Date” shall mean the last day of the Initial Term or a Renewal Term (if any) or the earlier date on which this Sublease may be terminated as provided herein.

2. Rent . During the Term, Sublessee shall pay in advance to Sublessor on or before the 1 ^st day of each month the following amounts:

2.1 Initial Term Base Rent (“Base Rent”) .

2.1.1 Months One through Six . During the first six (6) months of the Initial Term, Base Rent shall be equal to $34,000.00 per month.

2.1.2 Months Seven through Twelve . During months seven (7) through twelve (12) of the Initial Term, Base Rent per month shall be equal to the greater of: (i) the Calculated Rent or (ii) the Debt Service Rent.

2.1.3 Months Thirteen through the End of the Initial Term . Commencing on the first day of the second Sublease Year and continuing through the end of the Initial Term, Base Rent per month shall be equal to the greater of (i) the Calculated Rent or (ii) 100% of the Debt Service Rent.

2.2 Renewal Term Base Rent . During the first Sublease Year of each Renewal Term, Base Rent shall be reset in an amount equal to the Reset Rent. For each Sublease Year thereafter during the applicable Renewal Term, Base Rent shall be equal to the Base Rent paid during the preceding Sublease Year plus the Base Rent Escalator

2.3 Additional Rent . In addition to Base Rent, Sublessee shall pay to Sublessor as additional rent (“Additional Rent”) an amount equal to the monthly payments required to fund escrows for Taxes (as hereinafter defined) pursuant to Section 5.2 to be held, applied, disbursed and/or otherwise spent in accordance with the Facility Mortgage Documents accruing only during the Term of this Sublease. The terms Base Rent and Additional Rent are sometimes collectively referred to as “Rent.”

2.4 Absolute Net Sublease. Except with respect to Sublessee’s off-set rights pursuant to Section 2.6 hereof, all Rent payments shall be absolutely net to Sublessor, free of any and all Taxes (as defined below in Section 5) , Other Charges (as defined below in Section 5) , and operating or other expenses of any kind whatsoever, all of which shall be paid by Sublessee. Sublessee shall at all times during the Term remain obligated under this Sublease without any right of set-off, counterclaim, abatement, deduction, reduction or defense of any kind, except as set forth in Section 2.6 , and Sublessee’s sole right to recover such other damages against Sublessor under this Sublease shall be to prove such damages in a separate action.

2.5 Payment Terms . All Rent hereunder shall be paid, at the election of Sublessee, by wire transfer, automated clearing house transfer or direct deposit (in each case as implemented by Sublessee with its financial institution) in accordance with Sublessor’s written wire transfer instructions provided by Sublessor to Sublessee from time to time (but at a minimum of thirty (30) days prior to the payment of Rent), or by direct payment authorization established by Sublessee with its lender to withdraw payments of Rent directly from Sublessee’s account to Sublessor’s designated account.

2.6 Off-Set Rights . Notwithstanding any other provision of this Sublease to the contrary, Sublessee may off-set amounts against the Rent arising from any breach, default or failure to pay and/or perform (collectively, the “Indemnity Obligations”) (a) by Sublessor and/or Landlord under this Sublease, including, without limitation, the indemnification obligations hereunder, (b) by Regional Health Properties, Inc., a Georgia corporation (the “Guarantor”) under this Sublease, the Operations Transfer Agreement and/or the Guaranty of Guarantor referred to in the Operations Transfer Agreement (the “Guaranty”) and attached thereto as an exhibit or schedule, including, without limitation, the indemnification and/or other obligations under any of the foregoing documents, and/or (c) by Exiting Operator under the Operations Transfer Agreement, including, without limitation, the indemnification obligations thereunder; provided, however, that such offset right shall not be effective until Sublessee has provided Sublessor written notice of the breach or Indemnity Obligations to which Sublessee is entitled and such breach, default or failure to pay or perform such Indemnity Obligations have not been cured or paid to Sublessee within thirty (30) days thereafter.

2.7 Events Prior to Commencement Date and Indemnification . Notwithstanding any provision in this Sublease to the contrary, Sublessee shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor or Landlord), whether known or unknown, now existing or arising in the future, arising out of or in connection with the operation of the Facility, the ownership (in fee simple or leasehold) of the Premises, leasing of the Facility or the Premises, violations of any applicable laws or other events to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility or the Premises (each, a “Preexisting Event”). Sublessor, Guarantor and Landlord shall, jointly and severally, indemnify, defend and save harmless Sublessee and its successors and assigns (collectively, “Sublessee Indemnitees”) from and against any and all obligations, liabilities, damages, costs, expenses, losses or claims costs, expenses or losses (including fees and expenses of counsel) incurred by Sublessee Indemnitees arising out of or in connection with any Preexisting Event.

3. Security Deposit .

3.1 Security Deposit. During the Term, Sublessee shall fund in four (4) installments and maintain a security deposit (the “Security Deposit”) in the following amounts (each, an “Installment”): (i) $34,000.00 on the Commencement Date; (ii) an additional $34,000.00 on the first day of the ninth month of the Initial Term, (iii) an additional $34,000.00 on the first day of the eighteenth month of the Initial Term and (iv) an additional $34,000.00 on the first day of the twenty-fourth month of the Initial Term.

3.2 Acceleration of Security Deposit Installment Payments. Notwithstanding the provisions of Section 3.1, if Sublessee fails to meet the required Lease Coverage Ratios set forth in Section 27(a) hereof (without regard to any notice and cure provisions applicable thereto), Sublessee shall pay to Sublessor the next due Installment of the Security Deposit. By way of example, if Sublessee fails to meet the Lease Coverage Ratio for the first full fiscal quarter ended after month 9 of the Initial Term, Sublessee shall pay to Sublessor the third Installment of the Security Deposit in the amount of $34,000.00 otherwise due and payable on the first day of the 18 ^th month of the Initial Term, If an accelerated Installment of the Security Deposit is due and payable hereunder, Sublessee shall make such Installment payment within five (5) business days of written demand by Sublessor.

3.3 Payment of Security Deposit . Sublessee may fund the Security Deposit by wire transfer to Sublessor of immediately available funds or through a Letter of Credit.

3.4 Application of Security Deposit . Sublessor shall hold the Security Deposit as security for the full and faithful performance of every term, provision, obligation and covenant under this Sublease. If the Security Deposit is paid in immediately available funds, the Security Deposit will be deposited by into an interest-bearing account, which interest shall accrue for the benefit of Sublessee. Subject to the earlier return of the Security Deposit pursuant to the provisions of the Eaglewood ALF Affiliated Sublease (as defined in Exhibit “F” attached hereto, within thirty (30) days of the end of the Initial Term or Renewal Term, as applicable, Sublessor shall return the Security Deposit to Sublessee with all accrued interest. The Security Deposit shall not be considered an advance payment of Rent (or of any other sum payable by Sublessee under this Sublease) or a measure of Sublessor’s damages in case of a default by Sublessee. If the Security Deposit is paid in immediately available funds, Sublessor shall have no obligation to maintain the Security Deposit separate and apart from Sublessor’s general and/or other funds but shall deposit same in a separate bank account in order to track accrued interest and to provide periodic statements thereof to Sublessee at least quarterly within ten (10) days after each calendar quarter. If Sublessee defaults in respect of any of the terms, provisions, covenants and conditions of this Sublease or if there is a default under any Affiliated Sublease, Sublessor may, but shall not be required to, in addition to and not in lieu of any other rights and remedies available to Sublessor, apply all or any part of the Security Deposit and accrued interest to the payment of any such sum in default, or any other sum that Sublessor may reasonably and necessarily expend or be required to expend by reason of such default, including but not limited to, any damages or deficiency in reletting the Premises. Whenever, and as often as, Sublessor has applied any portion of the Security Deposit to cure Sublessee’s default hereunder or under any Affiliated Sublease, Sublessee shall, within ten (10) days after Notice from Sublessor, deposit additional funds or Letters of Credit with Sublessor sufficient to restore the Security Deposit to the full amount then required to be deposited with Sublessor, and Sublessee’s failure to do so shall constitute an Event of Default without any further Notice. If Sublessor transfers or assigns its interest under this Sublease in accordance with the terms hereof, Sublessor shall assign the Security Deposit and accrued interest to the new sublessor and thereafter Sublessor shall have no further liability for the return of the Security Deposit, and Sublessee agrees to look solely to the new sublessor for the return of the Security Deposit. Sublessee agrees that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that Sublessor, its successors and assigns shall return the Security Deposit to the last Sublessee in possession of the Premises at the last address for which Notice has been given by such Sublessee or set forth in this Sublease, or as otherwise directed by Sublessee in writing, and that Sublessor thereafter shall be relieved of any liability therefor, regardless of one or more assignments of this Sublease or any such actual or attempted assignment or encumbrances of the Security Deposit. Notwithstanding any provision to the contrary contained in this Sublease, Landlord and Guarantor, jointly and severally, hereby guaranty in favor of Sublessee the full and indefeasible repayment of the Security Deposit and the Deposits (as defined in Section 3.5) plus all applicable interest accrued thereon.

3.5 Return of Security Deposits . In event that the Lease or this Sublease is terminated prior to the expiration of its term by any Facility Mortgagee or any beneficiary of the Facility Mortgage Documents for any reason other than solely because of a then existing Event of Default of Sublessee hereunder, which has not been cured within any applicable notice and grace period or has not been waived in writing by such Facility Mortgagee or beneficiary, the Security Deposit and a ll interest thereon together with all other security deposits and interest held under all Affiliated Subleases shall be paid to Sublessee and Sublessee ’ s Affiliates, as applicable (collectively, the “ Deposits ” ), concurrently with any such Lease or Sublease termination, as liquidated damages, and as Sublessee ’ s sole remedy and not as a penalty, it being agreed that the Deposits represent a reasonable estimate of the probable damages to Sublessee as a result of such termination, Sublessor hereby waiving any and all rights to contest or bring an action with respect to such required payment, and thereafter the parties shall be released from all obligations hereunder, except those obligations which expressly survive termination of this Sublease, and there shall be no obligation to restore the Deposits with respect to any Affiliated Sublease. In addition, such termination of this Sublease shall not be deemed to cause an Event of Default under any Affiliated Sublease. If the Deposits are not paid as set forth above, such delinquent amount shall accrue interest from the due date at the rate of eight percent (8%) per annum.

4. Late Charges . The late payment of Rent will cause Sublessor to lose the use of such money and incur administrative and other expenses not contemplated under this Sublease. While the exact amount of the foregoing is difficult to ascertain, the parties agree that as a reasonable estimate of fair compensation to Sublessor, if Rent is not paid within ten (10) days after the due date for such payment then (a) Sublessee shall thereafter pay to Sublessor on demand a late charge equal to five percent (5%) of such delinquent amounts, and (b) such delinquent amounts shall accrue interest from the due date at the rate of eight percent (8%) per annum (the “Agreed Rate”) until paid in full.

5. Taxes and Other Charges . At the commencement and at the expiration of the Term, all Taxes and Other Charges shall be prorated. Sublessor shall promptly forward to Sublessee and Facility Mortgagee copies of all bills and payment receipts for Taxes or Other Charges received by it to enable payment thereof prior to the imposition of penalties and interest. Sublessee shall not be penalized for delays by Sublessor in the forwarding of such to Sublessee and Facility Mortgagee. Sublessee or Facility Mortgagee (as applicable) shall pay and discharge (including the filing of all required returns), prior to delinquency or imposition of any fine, penalty, interest or other cost (“Penalty”) provided that Sublessee and Facility Mortgagee timely receive such bills as aforesaid, “Taxes”, consisting of any real property and other taxes and assessments accruing during the Term of this Sublease with respect to the Premises (but not such Taxes accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease), and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date (excluding income taxes, franchise taxes, estate taxes, transfer taxes and/or gross receipts taxes that may be imposed upon Sublessor), provided such are received in a timely manner that provides Sublessee reasonable time to ensure such payments are made timely. For the avoidance to doubt, the parties acknowledge that Taxes are paid in arrears and the escrow of Taxes by Sublessee will be based on the Taxes payable only during the term of this Sublease, i.e., Sublessee’s obligation to pay Taxes will commence with the tax bill issued for the last half of 2018 (payable in July, 2019), as prorated based on the Commencement Date. Sublessee will escrow payments of Taxes prior to such July, 2019 due date as hereinabove provided. Sublessor acknowledges that all Taxes for the period prior to the Commencement Date shall be the Exiting Operator’s responsibility. Sublessee shall promptly pay and discharge “Other Charges”, consisting of any utilities and other costs and expenses of Sublessee’s operation of the Facility or any portion of the Premises and all other charges, obligations or deposits assessed against any portion of the Premises accruing during the Term of this Sublease with respect to of Sublessee’s operation of the Premises. Sublessee shall not be responsible for Taxes or Other Charges accruing prior to or after the Term of this Sublease, even if due and payable during the Term of this Sublease, and the same shall be apportioned for the first lease year for the period after the Commencement Date and the last lease year for the period prior to the Termination Date. Notwithstanding any provision of this Section 5, to the extent Sublessee has funded Taxes in accordance with Section 5.2 below, Facility Mortgagee shall timely pay all Taxes to the extent of the impound held by Facility Mortgagee.

5.1 Protests . Sublessee has the right, but not the obligation, in good faith to protest or contest (a “ Protest ” ) in whole or in part (a) the amount or payment of any Taxes or Other Charges, and (b) the existence, amount or validity of any Lien (as defined in Section 8.1) , by appropriate proceedings sufficient to (i) prevent the collection or other realization of such Taxes, Other Charges or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other Charges or Liens (so long as it provides Sublessor with reasonable security to assure the foregoing). Sublessee shall diligently prosecute any such Protest at its sole cost and expense. Sublessor shall cooperate in any Protest that involves an amount assessed against it.

5.2 Impound . If required by the Facility Mortgagee or upon Sublessor’s written notice to Sublessee during the Term during any ongoing Event of Default (after the expiration of any notice and cure period), Sublessor may require, Sublessee to pay with each Base Rent payment a deposit of one-twelfth (1/12 ^th ) of the amount required to discharge the annual amount of real property Taxes secured by a Lien encumbering any portion of the Premises as and when they become due. The deposits shall not bear interest nor be held by Sublessor or Facility Mortgagee (as applicable) in trust or as an agent of Sublessee, but rather shall be applied to the payment of the real property taxes. If at any time within thirty (30) days prior to the due date the deposits shall be insufficient for the payment of the obligation in full, Sublessee shall within ten (10) days after demand by Sublessor or Facility Mortgagee (as applicable), deposit the deficiency with Sublessor or Facility Mortgagee (as applicable). If deposits are in excess of the actual obligation, the required monthly deposits for the ensuing Sublease Year shall be reduced proportionately and any such excess at the end of the final Sublease Year shall be refunded to Sublessee within ten (10) calendar days. Sublessee shall forward to Sublessor or Facility Mortgagee (as applicable) all Tax bills, bond and assessment statements within five (5) days of receipt by Sublessee. If Sublessor assigns this Sublease in accordance with the terms hereof, all such deposits shall be transferred to the assignee, and Sublessor shall thereafter have no liability of any kind with respect thereto.

5.3 Tax Treatment; Reporting . Sublessor and Sublessee each acknowledges that each shall treat this transaction as a true Sublease for state law purposes and shall report this transaction as a Sublease for Federal income tax purposes. For Federal income tax purposes each shall report this Sublease as a true Sublease with Sublessor as the sublessor of the Premises and Sublessee as the sublessee of such Premises including: (a) Sublessee reporting its Rent payments as rent expense under Section 162 of the Code, and (b) Sublessor reporting the Rent payments as rental income. For the avoidance of doubt, nothing in this Sublease shall be deemed to constitute a guaranty, warranty or representation by either Sublessor or Sublessee as to the actual treatment of this transaction for state law purposes and for federal income tax purposes.

6. Insurance . All insurance provided for in this Sublease shall (i) be maintained under valid and enforceable policies issued by insurers licensed and approved to do business in the state where the Premises are located, (ii) name Sublessor as an additional insured and, for the property insurance policies, as the owner, (iii) be on an “occurrence” basis, or if claims made, include a provision whereby tail coverage costs are specified upon policy inception, (iv) cover all of Sublessee’s operations at the Facility, (v) provide that the policy may not be canceled except upon not less than thirty (30) days’ prior written notice to Sublessor and (vi) be primary and provide that any insurance with respect to any portion of the Premises maintained by Sublessor is excess and noncontributing with Sublessee’s insurance. The property policy(ies) shall also name the Sublessor and Facility Mortgagee as loss payee. The parties hereby waive as to each other all rights of subrogation which any insurance carrier, or either of them, may have by reason of any provision in any policy issued to them, provided such waiver does not thereby invalidate such policy. Original policies or satisfactory insurer certificates evidencing the existence of the insurance required by this Sublease and showing the interest of Sublessor and Facility Mortgagee shall be provided to Sublessor prior to the commencement of the Term or, for a renewal policy, not less than ten (10) days prior to the expiration date of the insurance policy being renewed. If Sublessor is provided with a certificate, it may demand that Sublessee provide a complete copy of the related policy within ten (10) days. Sublessee may satisfy the insurance requirements hereunder through coverage under so-called blanket policy(ies) of insurance carried and maintained by Sublessee regarding other operations or facilities; provided, however, that the coverage afforded Sublessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policies of insurance meeting all other requirements of this Sublease by reason of the use of such blanket policies of insurance. During the Term, Sublessee shall maintain the following insurance and any claims thereunder shall be adjudicated by and at the expense of it or its insurance carrier:

(a) Property Insurance with respect to the Facility and Business against loss or damage from all causes under standard “ all risk ” property insurance coverage with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), without exclusion for fire, lightning, windstorm, explosion, smoke damage, vehicle damage, sprinkler leakage, flood, vandalism, earthquake, malicious mischief and any other risks normally covered under an extended coverage endorsement, in amounts that are not less than the actual replacement value of the Premises and all Sublessor and Sublessee Personal Property associated therewith (including the cost of compliance with changes in zoning and building codes and other laws and regulations, demolition and debris removal and increased cost of construction). Additionally, if the Facility contains steam boilers, steam pipes, steam engines, steam turbines or other high pressure vessels, insurance with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), covering the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the Facility, in an amount equal to one hundred percent (100%) of the full replacement cost of the Facility, which policies shall insure against physical damage to and loss of occupancy and use of the Premises arising out of an accident or breakdown covered thereunder;

(b) Business Interruption and Extra Expense Coverage with respect to the Facility and Business for loss of rental value for a period not less than twelve (12) months, covering perils consistent with the requirements of Section 6(a) , and including either an agreed amount endorsement or a waiver of any co-insurance provisions, so as to prevent Sublessee, Sublessor and any other insured thereunder from being a co-insurer, and providing that any covered loss thereunder shall be payable to the Sublessee;

(c) Commercial General Public Liability Coverage with respect to the Facility and Business (including products liability and broad form coverage) against claims for bodily injury, death or property damage occurring on, in or about the Facility, affording the parties protection of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as additional insured;

(d) Professional Liability Coverage with respect to the Facility and Business, providing for claims specifically relating to patient care and services provided by the Facility staff, its contractors and all related parties, to include coverage for medical directors with regard to their administrative duties provided to the Premises, with limits of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as an additional insured. If such coverage is purchased on a claims made basis, Sublessee must show proof of the ability to purchase tail coverage to last through the statute of limitations, upon the end of the Sublease Term;

(f) Deductibles/Self-Insured Retentions for the above policies shall not be greater than $100,000.00. To the extent reasonably required by a Facility Mortgagee, Sublessor may require a lower deductible amount or set higher policy limits to the extent both are commercially available and customary for properties similar to the Facility located in the State of Ohio.

7. Use, Regulatory Compliance, Preservation of Business and Management.

7.1 Permitted Use; Qualified Care; Number of Beds . Sublessee shall continuously use and occupy the Premises during the Term as an assisted living facility with not less than 80 apartment units available for use and for ancillary services relating thereto, but for no other purpose (“Permitted Use”). Notwithstanding the foregoing sentence, Sublessor and Sublessee acknowledge and agree that the Facility is currently licensed with the Ohio Department of Health for 95 residential care facility beds. Sublessee shall provide care, treatment and services to all residents of the Facility in a manner consistent in all material

respects with all applicable laws. Notwithstanding any common law or statutory right, Sublessee agrees not to transfer, move or otherwise take action that reduces the bed complement of the Facility and Sublessee agrees not to take any of the beds out of service or move the beds to a different location without the prior written consent of the Sublessor in its sole and absolute discretion. Schedule 7.1 attached hereto sets forth a true, correct and complete list of the number and types of licensed beds at the Premises and whether such beds are Medicaid and/or Medicare certified. Sublessee shall take no action to reduce or modify the number of beds for which the Premises are licensed.

7.2 Regulatory Compliance . Sublessee, the Facility and the Premises shall comply in all material respects with all licensing and other laws and all covenants, conditions, restrictions and other use or maintenance requirements applicable to the Facility and, to the extent applicable, all Medicare, Medicaid and other third-party payor certification requirements, including timely filing cost and other required reports, timely paying all expenses shown thereon, and ensuring that the Facility continues to be fully certified for participation in Medicare and Medicaid (if applicable) throughout the Term and when they are returned to Sublessor, all without any suspension, revocation, decertification or other material limitation of such certification, if any. Further, Sublessee shall not commit any act or omission that would in any way violate any certificate of occupancy affecting the Facility, result in closure of the Facility or result in the sale or transfer of all or any portion of any related certificate of need (if applicable), bed rights or other similar certificate or license at any of the Facility. All inspection fees, costs and charges associated with a change of such licensure or certification shall be borne solely by Sublessor.

7.3 Preservation of Business . Sublessee acknowledges that a fair return to Sublessor on and protection of its investment in the Premises depends, in part, on Sublessee’s dedication to the Business and the concentration of similar businesses of Sublessee and its Affiliates in the geographical area of each Facility. Sublessee further acknowledges that the diversion of residents or patient care activities (except as is necessary to provide residents or patients with an alternative level of care or comply with contractual provisions of applicable admission agreements) from any Facility to other facilities at any time during the Term will have a material adverse effect on the value and utility of such Facility. Therefore, Sublessee agrees that during the Term and for a period of one (1) year thereafter, neither Sublessee nor any of its Affiliates shall, excluding the nursing facility doing business as Four Seasons of Washington Courthouse, located at 201 Courthouse Parkway, Washington Courthouse, Ohio 43160 (provided that a monthly report of admitted/discharged residents will be provided to Sublessor of any such activities with respect to said facility), without the prior written consent of Sublessor; (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (l0)-mile geographical radius of the Facility, (ii) except as is necessary to provide residents or patients with an alternative level of care, recommend or solicit the removal or transfer of any resident or patient from any Facility to any other nursing, health care, senior housing or retirement housing facility or divert actual or potential residents, patients or care activities of the Business conducted at the Facility to any other facilities, or (iii) employ for other businesses any personnel working in the Facility; provided, however, that if Sublessee or an Affiliate leases or subleases additional facilities from Sublessor or Sublessor’s Affiliates, the parties agree that Sublessee may move employees among those affiliated facilities.

7.4 Consulting Services . MSTC Development, Inc. (“Manager”) shall provide administration and management services (or shall cause a wholly-owned subsidiary to do so) to the Facility pursuant to a consulting services agreement acceptable to Sublessor, in substantially the form attached hereto as Exhibit “I” (the “Consulting Agreement”). The consulting fee (“Consulting Fee”) under the Consulting Agreement shall not exceed five percent (5.0%) of the annual gross revenue realized from Sublessee’s operation of the Facility (after adjustment for contractual adjustments and overpayment by providers). Payment of the Consulting Fee shall be subordinate to the payment of Rent and all other amounts payable by Sublessee pursuant to this Sublease. The Consulting Agreement shall provide that from and after the date that an Event of Default has occurred and until such Event of Default, if curable, has been cured, Manager shall not make any distributions to the holders of the equity interests of Manager; provided, however, that Manager shall be permitted to pay all compensation, salaries and/or bonuses to employees or contractors of Manager (including Key Principals) in the ordinary course of business. Sublessee shall not be permitted to engage any third-party manager for the Facility without the prior written consent of Sublessor, which consent shall not be unreasonably withheld.

7.5 Indebtedness . Sublessee shall not incur debt other than (a) trade debt incurred in the ordinary course of business, (b) a working capital line secured by Sublessee ’ s accounts receivable, or (c) indebtedness constituting or in connection with Permitted Liens and Consulting Fees permitted hereunder.

8. Acceptance, Maintenance, Upgrade, Alteration and Environmental .

8.1 Acceptance “AS IS”: No Liens . Sublessee acknowledges that it is presently engaged in operations similar to those to be conducted at the Facility and has expertise in such industry and, in deciding to enter into this Sublease, has not relied on any representations or warranties, express or implied, of any kind from Sublessor except as contained herein. Sublessee accepts the Facility and the Premises on an “AS IS” basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Notwithstanding its right to Protest set forth in Section 5.1 , Sublessee shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a “Lien”) for any reason other than Permitted Liens, provided that nothing in this Sublease shall require Sublessee to keep the Premises free of Permitted Liens. Furthermore, notwithstanding anything to the contrary contained in this Sublease, the provisions of this Section 8.1 are expressly subject to the terms and conditions of the Guaranty, and Sublessor and Landlord each acknowledges and agrees this Section 8.1 shall not in any way whatsoever reduce, limit or cancel the Guarantor’s liability or obligations under the Guaranty or this Sublease.

8.2 Sublessee’s Maintenance Obligations . Sublessee shall (a) keep and maintain the Premises and the Facility in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all ordinary interior and exterior, non-structural repairs necessary to keep the Facility in good and working order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable, certification for participation in Medicare and Medicaid, and (c) keep and maintain all Sublessor and Sublessee Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice for residential care facilities located in the State of Ohio as required under this Sublease.

8.3 Alterations by Sublessee . Sublessee shall not make any Alterations to the Premises without the express prior written consent of Sublessor, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that Sublessor’s consent shall not be required, but no less than ten (10) days advance notice to Sublessor shall be provided, with respect to (i) Alterations required by governmental authorities which are necessary to maintain applicable licenses and certifications to operate the Facility or (ii) minor cosmetic Alterations that (x) are non-structural in nature, (y) are not visible from the outside of the Premises and (z) do not cost, in the aggregate, in excess of $75,000.00 in any rolling twelve (12) month period. All Alterations shall immediately become a part of the Premises and the property of Sublessor subject to this Sublease, and the cost of all Alterations or other purchases, whether undertaken as an on-going licensing, Medicare, Medicaid or other regulatory requirement, or otherwise, shall be borne solely by Sublessee. All Alterations shall be constructed in a good and workmanlike manner in compliance with all applicable laws and the insurance required under this Sublease.

discovery of any occurrence or condition on or in the vicinity of any portion of the Premises that materially increase the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Sublessee, any governmental authority or any other Person relating to Hazardous Materials Laws or Hazardous Materials Claims with respect to any portion of the Premises, including copies thereof. Sublessor shall have the right, at Sublessor ’ s sole cost and expense (including, without limitation, Sublessor ’ s reasonable attorneys ’ fees and costs) and with counsel chosen by Sublessor, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims. Sublessor represents and warrants to Sublessee that there are no Hazardous Materials Claims arising out of or relating to the Facility or the Premises as of the commencement of the Term.

9. Sublessee Property . At Sublessee’s sole discretion, Sublessee shall obtain and install all items of furniture, fixtures, supplies and equipment not included as Sublessor Personal Property as shall be necessary or reasonably appropriate to operate the Facility in compliance with this Sublease (“Sublessee Personal Property”, which collectively with the “Sublessee Intangible Property” shall be referred to herein as “Sublessee Property”), and all Sublessee Property shall remain Sublessee’s sole property at all times, including upon termination of this Sublease. As used herein, “Sublessee Intangible Property” means all the following at any time owned by Sublessee in connection with its use of any portion of the Premises: Medicare, Medicaid and other accounts and proceeds thereof; rents, profits, income or revenue derived from such operation or use; all documents, chattel paper, instruments, contract rights (including contracts with residents, employees and third-party payors), deposit accounts, general intangibles and chooses in action; refunds of any Taxes or Other Charges for periods of time during the Term; and licenses and permits necessary or desirable for Sublessee’s use of any portion of the Premises, including licensed Medicaid beds (if applicable). Subject to Sublessee’s working capital lender’s liens and the intercreditor agreement required by such working capital lender with respect thereto, Sublessor shall have a security interest in and to the Sublessee Property, which security interest Sublessor shall have the right to assign to a Facility Mortgagee in Sublessor’s sole discretion. Sublessor will agree to subordinate its lien and security interest with respect to Sublessee’s accounts receivable to any third party lender providing to Sublessee a working capital line of credit, whether such working capital line of credit exists as of the Commencement Date or future working capital lines of credit, on commercially reasonable terms reasonably acceptable to Sublessor. The terms and conditions of any working capital line of credit obtained by Sublessee after the Execution Date must be approved by Sublessor and Facility Mortgagee, which approval shall not be unreasonably withheld, conditioned or delayed so long as the line of credit terms and conditions are customary for loans in the senior living industry and are commercially reasonable.

10. Financial, Management and Regulatory Reports . Sublessee shall provide Sublessor with the reports listed in Exhibit “C” at the time described therein, which reports will be internally prepared by Sublessee unless otherwise provided for in Exhibit “C” and, with respect to any refinancing of the Premises such other information about Sublessee or the operations of the Facility as Sublessor may reasonably request. All financial information provided by Sublessee shall be prepared in accordance with generally accepted accounting principles consistently applied and shall be submitted electronically in the form of unrestricted, unlocked “.xls” spreadsheets created using Microsoft Excel (2003 or newer editions), if Sublessee’s accounting office can reasonably provide it in this format. If Sublessee or any Affiliate becomes subject to any reporting requirements of the Securities and Exchange Commission (“SEC”) during the Term, it shall concurrently deliver to Sublessor such reports as are delivered pursuant to applicable securities laws. Similarly, should Sublessor or its parent, Regional Health Properties, Inc., be subject to any particular reporting requirements of the SEC during the Term for which it needs reports, documentation or other information from Sublessee, Sublessee agrees to deliver such reports, documentation and information within thirty (30) days after Sublessor’s request for the same. At Sublessor’s sole expense and upon reasonable notice so as not to interfere with Sublessee’s business and operations, Sublessee shall allow the review and audit of Sublessee’s financial statements listed in Exhibit “C” .

11. Representations and Warranties . Each party represents and warrants to the other as of the Execution Date hereof and as of the Commencement Date, that: (a) it has the power and authority to execute, deliver and perform this Sublease; (b) it has taken all requisite action necessary to authorize the execution, delivery and performance of such party ’ s obligations under this Sublease; (c) this Sublease constitutes a legal, valid and binding obligation of it enforceable in accordance with its terms; (d) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Sublease within the state where the Premises is located; and (e) the execution, delivery and performance of this Sublease by it do not and will not (1) require any consent, approval, authorization, order or declaration of, or any filing or registration with, any court, any governmental authority or any other Person, (2) conflict with, and do not and will not result in a breach of, any organizational documents of it or any agreement of which it is a party, and (3) violate any legal requirements, order, writ, injunction or decree, statute, rule or regulation, applicable to it or the Facility or the Premises. In addition, Sublessor and Landlord jointly and severally represent and warrant to Sublessee that (A) neither Sublessee nor Landlord is in default of, or not in compliance with, the Permitted Use, the Lease Agreement or the Facility Mortgage Documents, including, but not limited to the Land Use Restriction Agreement dated as of April 1, 2012 in connection with the Facility Mortgage Documents ; (B) Sublessor has good and marketable leasehold title to the Premises and the Authorizations (as hereinafter defined), subject to Exiting Operator ’ s leasehold rights under the Lease Agreement and to the Authorizations which will be terminated as of the Commencement Date, and as of the Commencement Date, there will be no existing subleases or other occupancy agreements in effect with respect to the Premises other than resident admission agreements for residents in possession of the Facility; (C) Landlord has good and marketable fee simple title to the Premises and the Authorizations subject to the Lease Agreement; (D) the Facility is licensed by the Ohio Department of Health for ninety-five (95) residential care facility beds and the Facility is operated as an 80-unit apartment facility; and (E) there are no reserves held by Facility Mortgagee which would be available for use by Sublessee to make improvements to the Facility. As used herein the term “ Authorizations ” shall mean, with respect to the Facility, any and all licenses, permits, certifications, registrations, accreditations, provider agreements, certificates of need, certificates of exemption, approvals, waivers, variances and other authorizations issued by any governmental authority necessary or advisable for the use and operation of the Facility as it is currently being operated and receipt of reimbursement or other payments under any third party payor program in which such Facility participates.

12. Events of Default . So long as there is no Event of Default, Sublessee shall peaceably and quietly have, hold and enjoy the Premises for the Term, free of any claim or other action not caused or created by Sublessee or pursuant to Sections 17 or 18 . The occurrence of any of the following events will constitute an “Event of Default” on the part of Sublessee:

(a) Sublessee’s failure to pay within ten (10) days of when due any Base Rent;

(c) (i) The revocation, suspension or material limitation of any license which would prohibit the operation of the Facility as an assisted living facility or the certification of the Facility for provider status under Medicare or Medicaid, if applicable; (ii) the closure of the Facility for more than twenty-four (24) hours except due to force majeure, mandatory evacuation, casualty or condemnation; (iii) the sale or transfer of all or any portion of any certificate of need, bed rights or other similar certificate or license relating to the Facility; (iv) the use of any portion of the Facility other than for an assisted living facility and for ancillary services relating thereto; or (v) any act or omission of Sublessee that in the reasonable judgment of Sublessor will likely result in any of the foregoing;

(e) An Event of Default has occurred under any Affiliated Sublease (as said term is defined therein) which Event of Default has not been cured during any applicable cure period or waived;

(k) Commencing two (2) years after the Commencement Date, the appointment or implementation of a facility level manager, monitor, temporary management company or

Systems Improvement Agreement by the CMS or any other regulatory agency (voluntary or mandatory) as a result of poor regulatory performance, appointment of additional mandatory monitoring by state or regulatory agencies;

(l) The failure of Sublessee to comply with any of the Financial Covenants set forth in Section 27(a) ; or

(m) The failure of Sublessee to timely provide any of the reports required by Section 10 .

13. Remedies . Upon the occurrence and continuance of an Event of Default, Sublessor may exercise all rights and remedies under this Sublease and the laws of the State of Ohio that are available to a Sublessor of real and personal property in the event of a default by its Sublessee, and as to the Sublessee Property, all remedies granted under the laws of said state to a secured party under its Uniform Commercial Code. Sublessor shall have the duty to mitigate damages. Sublessee shall pay Sublessor, promptly upon demand, all reasonable out-of-pocket expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, agents and brokers. Notwithstanding any provision to the contrary contained in Sections 12 or 13 hereof, if all then existing Events of Default would be considered to be capable of being cured within (i) five (5) days for a monetary default or (ii) thirty (30) days for a non-monetary default by a reasonably prudent landlord and tenant in the senior assisted living industry located in Ohio, then prior to Sublessor ’ s exercising any remedies provided herein, including, but limited to the te rm ination of this Sublease, as a result of the occurrence of any such Event of Default, Sublessee shall have the right to cure each such Event of Default within five (5) days of notice from Sublessor for a monetary default and within thirty (30) days of notice from Sublessor for a non-monetary default, and upon such cure of all Events of Default then existing, Sublessor may not exercise its remedies thereunder or terminate this Sublease as a result of such cured Events of Default. Notwithstanding the preceding sentence, Sublessee ’ s right to cure an Event of Default and thereby avoid Sublessor ’ s exercise of remedies or termination of this Sublease shall not apply if Sublessee and/or the sublessees under any Affiliated Sublease have cured Events of Default two (2) times in the aggregate under this Sublease and/or the Affiliated Subleases in any twelve (12) consecutive month period.

13.2 Receivership . Sublessee acknowledges that one of the rights and remedies available to Sublessor under applicable law is to apply to a court of competent jurisdiction for the appointment of a receiver to take possession of the Premises, to collect the rents, issues, profits and income of the Premises and to manage the operation of the Premises. Sublessor further acknowledges and agrees that, due to the specific use of the Premises as a health care facility, upon the occurrence and continuance of an Event of Default by Sublessee, the appointment of a receiver to take over the operations of the Premises may be necessary to ensure the continued operation of the premises as a health care facility in order to ensure the continuation of quality care to the residents who reside therein. Sublessee irrevocably and unconditionally agrees that, upon the occurrence and continuance of an Event of Default, and in addition to any other right or remedy of Sublessor under this Sublease or allowed by law, Sublessor may petition any appropriate court for the appointment of a receiver to take possession of the Premises, to manage the operation of the Premises, to collect and disburse all rents, issues, profits and income generated thereby and to preserve or replace to the extent possible any operating license for the Premises or to otherwise substitute the licensee or provider thereof. The receiver shall be entitled to a reasonable fee for its services as a receiver. All such fees and other expenses of the receivership estate shall be added to the monthly rent due to Sublessor under this Sublease and shall be the obligation of Sublessee. To the extent not prohibited by applicable law, Sublessee hereby irrevocably stipulates to the appointment of a receiver under such circumstances and for such purposes and agrees not to contest such appointment in any manner whatsoever.

13.3 Remedies Cumulative; No Waiver . No right or remedy herein conferred upon or reserved to Sublessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of Sublessor to insist at any time upon the strict performance of any provision of this Sublease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Sublessee. Sublessor ’ s receipt of and Sublessee ’ s payment of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Sublessor of any provision of this Sublease shall be effective unless expressed in a writing signed by it.

13.4 Performance of Sublessee’s Obligations . If Sublessee at any time shall fail to make any payment or perform any act on its part required to be made or performed under this Sublease and the same constitutes an Event of Default and the same is not cured after the expiration of any applicable notice and cure period or waived, then Sublessor may (but is not obligated to), without waiving or releasing Sublessee from any obligations or Event of Default hereunder, make such payment or perform such act for the account and at the expense of Sublessee, and in such event Sublessor will thereafter provide notice to Sublessee of any such payment or performance. All sums so paid by Sublessor and all necessary and reasonable incidental costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the performance of any such act by it in connection with curing any such Event of Default, together with interest at the Agreed Rate (as defined in Section 4 hereof) from the date of the making of such payment or the incurring of such costs and expenses, shall be payable by Sublessee to Sublessor upon Sublessor’s written demand therefor.

14. Provisions on Termination .

14.1 Surrender of Possession . On the expiration of the Term or earlier termination or cancellation of this Sublease (the “Termination Date”), Sublessee shall deliver to Sublessor or its designee possession of (a) the Facility and associated Sublessor Personal Property in a neat and clean condition and in as good a condition as existed at the date of Sublessee’s possession and occupancy pursuant to this Sublease, ordinary wear and tear excepted, (b) a fully operational, licensed and certified (if applicable) Business at the Facility, and (c) all patient charts and resident records along with appropriate resident consents if necessary and copies of all books and records relating to the Facility and the Premises which are usual and customary for residential care facilities located in the State of Ohio for an orderly transfer of the operations of the Facility at the time of its surrender of the Premises to Sublessor or its designee, excluding books and records relating to Sublessee Personal Property. Sublessee shall reasonably cooperate with Sublessor or its designee in transferring or obtaining all necessary licenses and certifications for Sublessor or its designee, and Sublessee shall comply with all usual and customary requests regarding residential care facilities located in the State of Ohio for an orderly transfer of the Facility licenses, and Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Sublessor or its designee to operate the Facility. Subject to all applicable laws, Sublessee hereby assigns, effective upon the Termination Date, all rights to operate the Facility to Sublessor or its designee, including all required licenses and permits and all rights to apply for or otherwise obtain them, and all other nonproprietary Sublessee Intangible Property relating to any portion of the Premises.

on demand from Sublessor, convey it to Sublessor for application to any amounts owed by Sublessee under this Sublease at net book value, by executing a bill of sale in a form reasonably required by Sublessor. Title to any Sublessee Personal Property which is not removed by Sublessee as permitted above upon the expiration of the Term shall, at Sublessor ’ s election, vest in Sublessor; provided, however, that Sublessor may remove and store or dispose any or all of such Sublessee Personal Property which is not so removed by Sublessee without obligation or accounting to Sublessee.

14.3 Management of Premises . Commencing on the Termination Date, Sublessor or its designee, upon written notice to Sublessee, may elect to assume the responsibilities and obligations for the management and operation of the Facility and Sublessee agrees to reasonably cooperate to accomplish the transfer of such management and operation without interrupting the operation of the Facility, and Sublessee will, upon Sublessor’s request, execute a mutually agreeable, reasonable and customary short-term operations transition agreement, respecting operations of the Facility pending the engagement by Sublessor of a replacement operator. Sublessee shall comply with all usual and customary requests for residential care facilities located in the State of Ohio for an orderly transfer of any and all Facility and other licenses, applicable Medicare and Medicaid certifications and possession of the Premises at the time of any such surrender.

14.4 Holding Over . If Sublessee shall for any reason remain in possession of the Premises after the Termination Date, such possession shall be a month-to-month tenancy during which time Sublessee shall pay as rental on the first (1 ^st ) business day of each month one hundred twenty-five percent (125%) of the monthly Rent payable with respect to the last Sublease Year, all additional charges accruing during the month and all other sums, if any, payable by Sublessee pursuant to this Sublease. Nothing contained herein shall constitute the consent, express or implied, of Sublessor to the holding over of Sublessee after the Termination Date, nor shall anything contained herein be deemed to limit Sublessor’s remedies.

14.5 Survival . All representations, warranties, covenants and other obligations of Landlord, Guarantor, Sublessor and Sublessee under this Sublease shall survive the Termination Date.

15. Certain Sublessor Rights .

15.1 Entry and Examination of Records . Sublessor and its representatives may enter any portion of the Premises at any reasonable time after at least forty-eight (48) hours’ notice to Sublessee to inspect the Premises for compliance and to exhibit the Premises for sale, Sublease or mortgaging; provided that no such notice shall be required in the event of an emergency, upon the occurrence and continuance of an Event of Default or to post notices of non-responsibility under any mechanics’ or materialmans’ lien law. No such entry shall unreasonably interfere with residents, patients, patient care or the Sublessee’s operations of the Facility. Upon 48 hours’ prior notice and during normal business hours, Sublessee will permit Sublessor and its representatives, inspectors and consultants, at no cost or expense to Sublessee, to examine all contracts, books and financial records (wherever kept) relating to Sublessee’s operations of the Facility.

any of said instruments or deeds to secure debt shall hereafter succeed to the rights of Sublessor under this Sublease , Sublessee shall, at the option of such holder or a purchaser at any foreclosure or sale under power, attorn to and recognize such successor as Sublessee ’ s Sublessor under this Sublease. Sublessee shall promptly execute, acknowledge, and deliver any instrument that may be reasonably necessary to evidence such attornment. Prior to the Execution Date, Sublessor will obtain from any lender holding a lien on the Premises, a subordination, non - disturbance and attornment agreement for the benefit of, and reasonably acceptable to, Sublessee.

15.3 Estoppel Certificates . Sublessor and Sublessee shall, at any time upon not less than five (5) business days’ prior written request by the other party, have an authorized representative execute, acknowledge and deliver to Sublessor or Sublessee, as the case may be, or their designee a written statement certifying (a) that this Sublease, together with any specified modifications, is in full force and effect, (b) the dates to which Rent and additional charges have been paid, (c) that no default by either party exists or specifying any such default, and (d) as to such other matters as Sublessor or Sublessee, as the case may be, may reasonably request. Prior to the Execution Date, Sublessor shall cause an authorized representative of Landlord to execute, acknowledge and deliver to Sublessee, a written statement certifying the aforesaid matters relating to the Lease Agreement, in form and substance reasonably required by Sublessee.

15.4 Conveyance Release . If Sublessor or any successor owner shall sell or transfer any portion of the Premises in accordance with this Sublease, they shall thereafter be released from all future liabilities and obligations hereunder arising or accruing from and after the date of such conveyance or other transfer, which instead shall thereupon be binding upon the new owner; provided, however, that the indemnification obligations of Sublessor or Landlord hereunder shall survive any such conveyance, with respect only to claims arising prior to the closing date of such conveyance.

15.5 Affiliate Contracts . Sublessee may not enter into any contracts respecting the Facility with any of Sublessee’s Affiliates which are not at arm’s length and fair market value without the prior written consent of Sublessor.

16. Assignment and Subletting . Except as otherwise expressly permitted in this Sublease, without Sublessor’s prior written consent, which may be granted or withheld in Sublessor’s sole discretion, Sublessee shall not assign this Sublease, or sub-sublease all or any part of the Premises, or permit the use of the Premises by any party other than Sublessee or any wholly-owned subsidiary or sub-subsidiary of a Sublessee. This prohibition includes an assignment or sub-subletting to or by a receiver or trustee in any federal or state bankruptcy, insolvency, or other proceeding. For purposes of this Section, a sale or transfer of all or a controlling ownership interest in Sublessee or a merger or other combination by Sublessee or a sale of all or substantially all of Sublessee’s assets in lieu thereof shall be deemed an assignment or other transfer of this Sublease. Notwithstanding the foregoing, any Key Principal may transfer interests in Sublessee and/or any Affiliates thereof to any other Key Principal, provided that such transfer complies with all applicable regulatory approvals.

17. Damage by Fire or Other Casualty . Sublessee shall promptly notify Sublessor of any damage or destruction of any portion of the Premises and diligently repair or reconstruct such portion of the Premises to a like or better condition than existed prior to such damage or destruction. Any net insurance proceeds payable with respect to the casualty shall be paid directly to Sublessor and, if an Event of Default has not occurred and is continuing, shall be used for the repair or reconstruction of the applicable portion of the Premises pursuant to Sublessor’s reasonable disbursement requirements. If there are excess insurance proceeds, the surplus shall belong and be paid to Sublessee. Subject to the provisions of Section 18, Sublessee shall not have any right under this Sublease, and hereby waives all rights under applicable law, to abate, reduce or offset Rent by reason of any damage or destruction of any portion of the Premises by reason of an insured or uninsured casualty.

18. Condemnation . Except as provided to the contrary in this Section 18 , this Sublease shall not terminate and shall remain in full force and effect in the event of a taking or condemnation of the Premises, or any portion thereof, and Sublessee hereby waives all rights under applicable law to abate, reduce or offset rent by reason of such taking. If during the Term all or substantially all (a “ Complete Taking ” ) or a smaller portion (a “ Partial Taking ” ) of the Premises is taken or condemned by any competent public or quasi-public authority, then (a) in the case of a Complete Taking, Sublessee may at its election made within thirty (30) days of the effective date of such Taking, terminate this Sublease and the current Rent shall be equitably abated as of the effective date of such termination, or (b) in the case of a Partial Taking, the Rent shall be abated to the same extent as the resulting diminution in Fair Market Value of the applicable portion of the Premises. The resulting diminution in Fair Market Value on the effective date of a Partial Taking shall be as established pursuant to Exhibit “ E ” . Sublessor alone shall be entitled to receive and retain any award for a taking or condemnation other than a temporary taking; provided, however, Sublessee shall be entitled to submit its own claim in the event of any such taking or condemnation with respect to the value of Sublessee ’ s Subleasehold interest in any portion of the Premises and/or the relocation costs incurred by Sublessee as a result thereof. In the event of a temporary taking of less than all or substantially all of the Premises, Sublessee shall be entitled to receive and retain any and all awards for the temporary taking and the Rent due under this Sublease shall be not be abated during the period of such temporary taking.

19. Indemnification.

19.2 Landlord, Guarantor and Sublessor, jointly and severally, agree to protect, indemnify, defend and save harmless Sublessee Indemnitees and their respective members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage (including consequential or punitive damages) of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of (a) the breach by Sublessor, Guarantor and/or Landlord of any of their respective representations, warranties, covenants or other obligations hereunder, (b) all known and unknown Environmental Activities, Hazardous Materials Claims and violations by Landlord, Sublessor or any prior operator of the Facility of a Hazardous Materials Law in each case related to any such person’s ownership, lease, use or operation of any portion of the Premises prior to the Commencement Date, and (c) for all periods prior to the Commencement Date, the correction of all deficiencies of a physical matter identified by, and any liability assessed or asserted by, any governmental agency or Medicare or Medicaid providers, as applicable, as a result of or arising out of or in connection with the Facility or any portion thereof or the related change in ownership inspection and audit (including any overpayment to any Medicare, Medicaid or other third party payor). Upon receiving knowledge of any suit, claim or demand asserted by a third party that Sublessee believes is covered by this indemnity, it shall give Landlord, Guarantor and Sublessor notice of this matter. If Sublessee does not elect to defend the matter with its own counsel at Landlord’s, Guarantor’s and Sublessor’s expense, Landlord. Guarantor and Sublessor shall then defend Sublessee at Landlord’s, Guarantor’s and Sublessor’s expense (including Sublessee’s reasonable attorneys’ fees and costs) with legal counsel satisfactory to Sublessee.

19.3 Notwithstanding any provision in this Sublease to the contrary, Sublessee and its members, managers, Affiliates, directors, officers, shareholders, agents and employees shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor) arising out of any Environmental Activities, Hazardous Materials Claims, violations of Hazardous Materials Laws, remediation of Hazardous Materials or other events described in Section 19.1 to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility and such matters as disclosed or referenced in the existing phase one environmental site assessments obtained by Sublessor (each, a “ Preexisting Environmental Condition ” ). Landlord, Guarantor and Sublessor shall, jointly and severally, indemnify, defend and save ha rm less Sublessee Indemnitees from and against any obligations, liabilities, damages, costs, expenses, losses or claims incurred by Sublessee Indemnitees (including fees and expenses of counsel) arising out of or in connection with any Preexisting Environmental Condition.

If to Sublessee:	If to Sublessor:

Springfield Clark ALF, Inc.	Eaglewood Village, LLC
c/o MSTC Development, Inc.	c/o Regional Health Properties, Inc.
556 Niles Courtland Road, S.E.	454 Satellite Blvd.
Warren, Ohio 44484	Suite 100
Attn: President/CEO	Suwanee, Georgia 30024 Attn: CEO
With a copy to:

Rolf Goffman Martin Lang LLP 30100 Chagrin Boulevard, Suite 350 Cleveland, Ohio 44124 Attn: Ira S. Goffman, Esq.

22. Intentionally Omitted .

23. Cooperation . Sublessee agrees that should Sublessor and Sublessor’s Affiliates desire to consolidate all of their Subleases with Sublessee and Sublessee’s Affiliates into one master Sublease, Sublessee shall cooperate with Sublessor and Sublessor’s Affiliates in so documenting such consolidation; provided, however, that Sublessee’s obligations thereunder shall not be increased as a result thereof.

24. Miscellaneous . This Sublease has been freely and fairly negotiated, and all provisions shall be interpreted according to their fair meaning and shall not be strictly construed against any party. While nothing contained in this Sublease should be deemed or construed to constitute an extension of credit by Sublessor to Sublessee, if a portion of any payment made to Sublessor is deemed to violate any applicable laws regarding usury, such portion shall be held by Sublessor to pay the future obligations of Sublessee as such obligations arise and if Sublessee discharges and performs all obligations hereunder, such funds will be reimbursed (without interest) to Sublessee within ten (10) days or if not so reimbursed, Sublessee may credit such amount against Rent on a dollar-for-dollar basis. If any part of this Sublease shall be determined to be invalid or unenforceable, the remainder shall nevertheless continue in full force and effect. Time is of the essence, and whenever action must be taken (including the giving of notice or the delivery of documents) hereunder during a certain period of time or by a particular date that ends or occurs on a Saturday, Sunday or federal holiday, then such period or date shall be extended until the immediately following business day. Whenever the words “ including ” , “ include ” or “ includes ” are used in this Sublease, they shall be interpreted in a non-exclusive manner as though the words “ without limitation ” immediately followed. Whenever the words day or days are used in this Sublease, they shall mean “ calendar day ” or “ calendar days ” unless expressly provided to the contrary. The titles and headings in this Sublease are for convenience of reference only and shall not in any way affect the meaning or construction of any provision. Unless otherwise expressly provided, references to any “ Section ” mean a section of this Sublease (including all subsections), to any “ Exhibit ” or “ Schedule ” mean an exhibit or schedule attached hereto or to “ Medicare ” or “ Medicaid ” include any successor program. If more than one Person is Sublessee hereunder, their liability and obligations hereunder shall be joint and several. Promptly upon the request of either party and at its expense, the parties shall prepare, enter into and record a suitable short form memorandum of this Sublease. This Sublease (a) contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior or contemporaneous verbal or written agreements or understandings, (b) may be executed in several counterparts, (including electronically mailed copies in portable document format (PDF)), each of which shall be deemed an original, but all of which shall constitute one and the same document, (c) may only be amended by a writing executed by the parties, (d) shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties; provided, however, that the indemnification obligations of any party hereunder shall survive any such assignment, (e) shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio, and (f) incorporates by this reference any Exhibits and Schedules attached hereto.

25. Non-Disturbance and Attornment . If the Lease Agreement shall expire or terminate during the term of this Sublease for any reason other than condemnation or destruction by fire or other casualty, or if Sublessor shall surrender the Lease Agreement to Landlord during the term of this Sublease, Landlord shall continue this Sublease with the same force and effect as if Landlord as lessor and Sublessee as lessee had entered into a lease as of such effective date for a term equal to the then unexpired term of this Sublease and containing the same provisions as those contained in this Sublease, provided that (i) the Lease Agreement was terminated pursuant to Sublessor’s default under the Lease Agreement, (ii) the default is of such a type that Sublessee can cure, and (iii) Sublessee in fact cures such default within thirty (30) days, where possible, or within a reasonable amount of time. In such event, Sublessor shall promptly transfer any remaining security deposit described in Section 3 of this Sublease to Landlord. If this Sublease is continued pursuant to this Section 25, Sublessee shall attorn to Landlord and Landlord and Sublessee shall have the same rights, obligations and remedies thereunder as were had by Sublessor and Sublessee hereunder prior to such effective date, respectively.

26. Terrorism/Governmental Action . Sublessee warrants and represents to Sublessor that Sublessee is not, and shall not become, a person or entity with whom Sublessor is restricted from doing business under regulations of the Office of Foreign Asset Control ( “ OFAC ” ) of the Department of the Treasury (including, but not limited to, those named on OFAC ’ s Specially Designated and Blocked Persons list) or under any applicable law, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action, and is not and shall not knowingly engage in any dealings or transaction or otherwise knowingly be associated with such persons or entities.

27. Financial Covenant . Sublessee shall be required to comply with the following financial covenant: Maintaining a Lease Coverage Ratio of 1.0 to 1.0 for months 9 through 18 of the Initial Term, 1.15 to 1.0 for months 19 through 36 of the Initial Term and 1.25 to 1.0 thereafter. Such Lease Coverage Ratio will be tested on a quarterly basis beginning with the first full fiscal quarter ended after month 9 of the Initial Term and continuing each fiscal quarter thereafter through month 24 of the Initial Term. Notwithstanding the foregoing, if the Lease Coverage Ratio in months 13 through 24 of the Initial Term meets a minimum of 1.0 to 1.0 over either a trailing twelve-month testing period or a trailing three-month period, then there shall be no financial covenant default under this Section 27(a). After month 24 of the Initial Term, Sublessee must satisfy the Lease Coverage Ratio for a trailing twelve-month testing period tested quarterly beginning with the first full fiscal quarter ended of Sublessee after month 24 of the Initial Term.

28. Intentionally Omitted .

29. Minimum Annual Capital Expenditures . To maintain the Facility, Sublessee shall spend $500.00 per apartment unit per year (i.e., for the 80 units in the Facility), or such lesser amount as may be required by any future lender including HUD, and in the case of a HUD refinancing, such capital expenditure reserve will be escrowed pursuant to then applicable HUD regulations.

30. Certain Conditions Precedent and Transitional Provisions . The provisions of this Section 30 shall govern and control over any contrary provisions of this Sublease.

30.1 Certain Conditions Precedent .

30.1.2 Sublessee ( “Applicant” ) , with respect to the Facility, shall file and submit all applications, petitions and other documents (collectively, the “Required Authorization Applications” ) that are necessary or appropriate for it to obtain all of the Required Authorizations for the Facility. Applicant shall use its commercially reasonable efforts and due diligence to obtain the Required Authorizations for the Facility and shall promptly respond to any questions or information requests from any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications. Upon Sublessor’s written request, Applicant shall furnish to Sublessor copies of all Required Authorization Applications and any correspondence or other written documentation received from or delivered to any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications.

30.1.4 The term “ Required Authorizations ” shall mean, with respect to the Facility, such consents, approvals and other assurances, oral or written, as are, under local custom and practice, customarily obtained from state licensing authorities by reasonable operators of facilities like the Facility, acting in good faith, before such an operator takes possession of, and begins to operate, a facility like the Facility. By way of example and without limitation of the foregoing, in the event that Applicant receives permission from the applicable state licensing authorities to assume operational control of a particular Facility prior to the issuance of a non-provisional or non-conditional license for such Facility (e.g., due to a state licensing authority ’ s requirement that a survey of Applicant ’ s operations at the Facility be completed prior to the issuance of a non-provisional or non-conditional license) and, under local custom and practice, reasonable operators of facilities like the Facility customarily take possession of, and begin to operate, facilities like the Facility on the basis of such permission, then, for purposes of this Section 30.1, the date of such permission would be treated as the date that Applicant obtained the Required Authorizations for the Facility; provided, however, that if Applicant provides written correspondence from state licensing authorities indicating that additional documentation is required to obtain the Required Authorizations, then in no event shall the Required Authorizations be deemed to have been obtained by Applicant.

30.2 Additional Conditions Precedent . The effectiveness of this Sublease, Sublessor’s and Sublessee’s rights and obligations hereunder and the consummation of the transactions contemplated thereby are subject to satisfaction of each of the following conditions precedent for the Facility:

30.2.2 An Estoppel, Non-Disturbance and Attornment Agreement executed by Landlord in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee;

30.2.3 Evidence of the termination of all of the Exiting Operator’s right to occupy the Premises and operate in the Business, in form and substance reasonably acceptable to Sublessee;

30.2.4 Intentionally Omitted

30.2.5 A copy of the certificate of occupancy relating to the Facility, in form and substance acceptable to Sublessee to obtain licensure for the Facility;

30.2.6 The concurrent closing of the Affiliated Subleases and all required HUD TPA approvals with respect thereto;

30.2.9 A Subordination, Non-Disturbance and Attornment Agreement executed by each Facility Mortgagee in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee.

30.2.10 Sublessor, Landlord and Guarantor, jointly and severally, covenant and agree in favor of Sublessee that commencing on the first full month after the Commencement Date, to commit the investment of $25,000.00 per month for six (6) consecutive months, for a total of $150,000.00, to be used by Sublessee from time to time during the Initial Term of this Sublease for capital expenditures to the Facility located on the Premises (the “ CapEx Fund ” ). The CapEx Fund will be available on a cumulative, rolling monthly basis until fully expended and shall not be forfeited or lost in the event Sublessee does not use the $25,000.00 in any given month. For the avoidance of doubt, the CapEx Fund will accumulate month after month until Sublessee utilizes the entire $150,000.00 thereof. Sublessee will submit invoices for work to be completed at the Facility and Sublessor, Landlord or Guarantor will promptly disburse that portion of the CapEx Fund to Sublessee in connection with such invoices, but in no event later than ten (10) days after Sublessee ’ s submission of applicable invoices.

[SIGNATURES ON FOLLOWING PAGES]

IN WITNESS WHEREOF, this Sublease has been executed by Sublessor and Sublessee as of the date first written above.

SUBLESSOR:

EAGLEWOOD VILLAGE, LLC
a Georgia limited liability company


By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Manager

STATE OF Georgia	:
	:	ss
COUNTY OF Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December , 2018, by Brent Morrison , the Manager of Eaglewood Village, LLC, a Georgia limited liability company, on behalf of the company.

K N. Parker
Notary Public

Commission
Expiration:	4/16/20

[Signature Page Continues]

SUBLESSEE :

SPRINGFIELD CLARK ALF, INC.,
an Ohio corporation


By:	/s/ Michael P Slyk
Name:	Michael P Slyk
Title:	President

STATE OF OHIO	:
	:	ss
COUNTY OF Trumbull	:

The foregoing instrument was acknowledged before me this- 30 ^th day of November , 2018, by Michael P. Slyk , the President of Springfield Clark ALF, Inc., an Ohio corporation, on behalf of the corporation.

Tracie A. Katzenberger
Notary Public Tracie A. Katzenberger

Commission
Expiration:	6-26-2021
		TRACIE A. KATZENBERGER

		NOTARY PUBLIC STATE OF OHIO

		My Commission Expires
		June 26, 2021

[Signature Page Continues]

LANDLORD :

EAGLEWOOD PROPERTY HOLDINGS, LLC,
a Georgia limited liability company


By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Manager

STATE OF Georgia	:
	:	ss
COUNTY OF Gwinnett	:

The foregoing instrument was acknowledged before me this day of 3 ^rd day of December , 2018, by Brent Morrison, the Manager of Eaglewood Property Holdings, LLC, a Georgia limited liability company, on behalf of the company.

K N. Parker
Notary Public

Commission
Expiration:	4/16/20

[Signature Page Continues]

Guarantor hereby executes this Sublease for the sole purpose of becoming a party to and agreeing to Sections 2.6, 2.7 , 3.4, 8.1, 14.5, 19.2, 19.3 and 30.2.10.

GUARANTOR:

REGIONAL HEALTH PROPERTIES, INC.,
a Georgia corporation


By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Interim CEO

STATE OF Georgia	:
	:	ss
COUNTY OF Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December , 2018, by Brent Morrison, the Interim CEO of Regional Health Properties, Inc., a Georgia corporation, on behalf of the corporation.

K N Parker
Notary Public

Commission
Expiration:	4/16/20

List of Exhibits

Exhibit A-l:	Legal Description

Exhibit A-2:	Sublessor Personal Property

Exhibit B:	Certain Definitions

Exhibit C:	Financial, Management and Regulatory Reports

Exhibit D:	Fair Market Reset Rent

Exhibit E:	Affiliated Subleases

Exhibit F:	Calculated Rent

Exhibit G:	Annual Income Certification

Exhibit H:	Quarterly Compliance Certificate

Exhibit I:	Consulting Services Agreement


List of Schedules

Schedule 7.1:	Licensed Beds

EXHIBIT “ A- 1 ”

LEGAL DESCRIPTION

Situate in the City of Springfield, County of Clark, in the State of Ohio and being further described as:

Beginning on the centerline of Middle Urbana Road, North, 4 ° 35’ 04” East,369.00 feet from an iron pipe (found) at the south quarter corner of Section 20, Town 5, Range 10 B.M.R.S., said quarter corner being the intersection of the centerline of Villa Road and the centerline of Middle Urbana Road:

Thence, North 85 24’ 56” West, 54.00 feet to a point of curvature;

Thence along a curve to the right having a radius of 175.00 feet, and a chord which bears North 73° 32’ 39” West at 72.00 feet, an are distance of 72.52 feet to a point of reverse curvature;

Thence along a curve to the left having a radius of 234.00 feet, and a chord which bears North 69 ° 57’ 57” West at 67.50 feet an arc distance of 67.74 feet to a point of compound curvature;

Thence along a curve to the left having a radius of 134.75 feet, and a chord which bears South 80 ° 14’ 19” West at 98.79 feet, an are distance 101.14 feet;

Thence, South 22 01’ 20” East, 49.07 feet;

Thence, South 30 ° 36’ 40” West 56.32 feet;

Thence, North 59 ° 23’ 20” West 23.00 feet;

Thence, South 30 36’ 40” West, 15.00 feet;

Thence, North 59 ° 23’ 20” West, 44.00 feet;

Thence, South 30 36’ 40” West, 47.00 feet;

Thence, South 59 ° 23’ 20” East, 83.00 feet;

Thence, South 30 36’ 40” West, 47.50 feet;

Thence, South 3° 56’ 40” West 181.00 feet to the centerline of Villa Road;

Thence, with the centerline of Villa Road, North 86” 03’ 20” West, 345.00 feet to the southwest corner of premises described in deed to Church of the Brethren in Christ Central Conference, Inc. recorded in Volume 753, Page 529 of the deed records of Clark County, Ohio.

Thence with part of the west line of said premises, North 4° 46’ 27” East, 545.00 feet;

Thence, South 85 ° 13’ 33” East, 98.00 feet;

Thence, South 59 ° 23’ 20” East, 175.50 feet;

EXHIBIT “ A- 1 ”

LEGAL DESCRIPTION - CONTINUED

Thence, South 86 27’ 24” East, 183.10 feet to a point of curvature;

Thence along a curve to the right having a radius of 294.00 feet, and a chord which bears South 74 ° 03’ 53” East at 126.18 feet, an are distance of 127.17 feet to a point of reverse curvature;

Thence along a curve to the left having a radius of 115.00 feet and a chord which bears South 73° 32’ 40” East at 47.31 feet, an are distance of 47.65 feet to a point of tangency;

Thence, South 85 ° 24’ 56” East, 54.00 feet to the centerline of Middle Urbana Road;

Thence with the centerline of Middle Urbana Road, South 4 35’ 04” West. 60.00 feet to the point of beginning and containing 4,522 acres subject, however, to all legal rights of way, easements and restrictions of record.

Being part of the premises described in deed to Church of the Brethren in Christ Central Conference, Inc., recorded in Volume 753, Page 529 of the deed records of Clark County, Ohio.

The above description is based on an actual field survey dated September 23, 1983 by Terry A. Hoppes, Registered Surveyor #6352. Basis of bearings is North 4 ° 35’ 04” East, on the centerline of Middle Urbana Road.

Reserving, however, to the Grantor an easement for sanitary sewer purposes in and over so much of said premises as is described as follows;

Situate in the State of Ohio, County of Clark, and within the corporate limits of the City of Springfield, and being part of the southwest quarter of Section 20, Town 5, Range 10, between the Miami Rivers Survey, and being a sanitary sewer easement 16 feet in width, 8 feet on each side of the following described centerline;

Beginning on the centerline of Villa Road, North 86° 03’ 20” West, 656,63 feet from the intersection of the centerline of Villa Road with the centerline of Middle-Urbana Road;

Thence parallel with and 8 feet distant from the westerly property line of a 4.522 Acre tract, North 4° 46’ 27” East, 545 feet to the north line of said 4.522 Acre tract, the point of ending;

Being part of the premises described in deed to Church of the Brethren in Christ Central Conference, Inc., recorded in Volume 753, Page 529 of the deed records of Clark County, Ohio.

The above description is based on an actual field survey by Terry A. Hoppes, Registered Surveyor Number 6352. Basis of hearing is North 4 ° 35’ 04” East on the centerline of Middle Urbana Road.

EXCEPTING FROM THE ABOVE DESCRIBED LAND the portion of said lying within the bounds of the 1.111 acre tract conveyed to the City of Springfield, Ohio, by Deed recorded in Volume 805, Page 890, Clark County records. Said 1.111 acre tract being more particularly described as follows:

EXHIBIT “ A- 1 ”

LEGAL DESCRIPTION - CONTINUED

Situate in the State of Ohio, County of Clark, and within the corporate limits of the City of Springfield, and being part of the southwest quarter of Section 20, Town 5, Range 10, Between the Miami Rivers Survey, and being described as follows;

Beginning at the intersection of the centerline of Villa Road and the centerline of Middle-Urbana Road;

Thence with the centerline of Villa Road, North 86° 03’ 20” West, 664.63 feet to the southwest corner of premises described in deed to Church of the Brethren in Christ Central Conference, Inc., recorded Volume 753,k Page 529 of the deed records of Clark County, Ohio;

Thence with part of the west line of said premises, North 4° 46’ 27” East 50.01 feet;

Thence parallel with and 50 feet distant from the centerline of Villa Road, South 86 03’ 20” East, 624,46 feet;

Thence parallel with and 40 feet distant from the centerline of Middle-Urbana Road, North 4 ° 35’ 04” East, 379.44 feet;

Thence South 85 ° 24’ 56” East, 40.00 feet to the centerline of Middle-Urbana Road;

Thence with the centerline of Middle-Urbana Road, South 4 ° 35’ 04” West, 429.00 feet to the point of beginning and containing 1.111 Acre;

Being part of the premises described in deed to Church of the Brethren in Christ Central Conference, Inc., recorded Volume 753, Page 529 of the deed records of Clark County, Ohio.

The above description is based on an actual field survey by Terry A. Hoppes, Registered Surveyor Number 6352. Basis of bearings is North 4 ° 35’ 04” East on the centerline of Middle-Urbana Road.

EXHIBIT A-2

SUBLESSOR PERSONAL PROPERTY

EXHIBIT “ B ”

CERTAIN DEFINITIONS

For purposes of this Sublease, the following terms and words shall have the specified meanings:

“Affiliated Subleases” shall mean those certain subleases identified on Exhibit “E” attached hereto between affiliates of Sublessor, as sublessors, and affiliates of Sublessee, as sublessees.

“Alterations” shall mean any additions, installations, substitutions or improvements to the Facility made or to be made by Sublessee after its acceptance of the Facility.

“Base Rent Escalator” shall mean the change in the CPI over the previous twelve (12) month period, computed by using the most recently published CPI and the CPI published twelve (12) months earlier; provided, however, that for purposes hereof, in no event shall such change in CPI be less than one (1%) or greater than two and one-half percent (2.5%). For purposes of illustration, if CPI at December 1, 2021 is 2.5% and the CPI at December 1, 2022 is 3.5%, then the difference in 2022 CPI compared to 2021 CPI is 1.0%, and therefore the escalator percent would be 1% for the upcoming year.

“Business” shall mean the business and operation of the Facility and all financial activities and other matters related thereto.

“Calculated Rent” shall mean (i) during month seven (7) through the remainder of the Initial Term the amount set forth on Exhibit “F” attached hereto and (ii) during each Sublease Year thereafter during the Term, the Calculated Rent for the previous Sublease Year multiplied by the Base Rent Escalator.

“Control” shall mean, as applied to any Person, the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of that Person, whether through ownership, voting control, by contract or otherwise.

“CPI” shall mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items, Not Seasonally Adjusted, as published by the United States Department of Labor, Bureau of Labor Statistics of the United States Department of Labor. In the event such index is discontinued, comparable statistics in the purchasing power of the consumer dollar, as published at the time of said discontinuance by a responsible financial authority shall be selected at the Sublessor’s reasonable discretion and shall be used in lieu of such index.

“Debt Service Rent” shall mean the amount of $52,534.00.

“Environmental Activities” shall mean the use, generation, transportation, handling, discharge, production, treatment, storage, release or disposal of any Hazardous Materials at any time to or from any portion of the Premises or located on or present on or under any portion of the Premises.

“Exiting Operator” shall mean EW ALF, LLC d/b/a Eaglewood Village (ALF).

“Facility Interest Expense” shall mean, for any period, the sum of (i) total interest expense for such period, plus (ii) for such period, fees with respect to Sublessee’s outstanding indebtedness including capitalized interest, but excluding commissions, discounts and other fees owed with respect to Letters of Credit and bankers’ acceptance financing, all calculated in connection with the Business.

“ Facility Mortgage ” shall mean any mortgage, deed of trust or other security agreement or lien encumbering the Premises or any portion thereof and securing an indebtedness of Sublessor or any Affiliate of Sublessor with respect to the Facility, or any ground, building or similar Sublease or other title retention agreement to which the Premises or any portion thereof is subject from time to time.

“Facility Net Income” shall mean, for any period, the net income (or loss) of the Business.

“Facility Mortgagee” shall mean the holder or beneficiary of a Facility Mortgage and any other rights of the lender, credit party or lessor under the applicable Facility Mortgage Documents.

“Facility Mortgage Documents” shall mean with respect to each Facility Mortgage and Facility Mortgagee, the applicable Facility Mortgage, loan or credit agreement, Sublease, note, collateral assignment instruments, guarantees, indemnity agreements, bond documents and other documents or instruments evidencing, securing or otherwise relating to the loan made, credit extended, Sublease or other financing vehicle pursuant thereto with respect to the Facility.

“Fair Market Reset Rent” shall mean the annual fair market rental value of the Facility, as agreed to by Sublessor and Sublessee, or if the parties are not able to agree within ten (10) days after the Renewal Notice, the amount determined in accordance with the procedures set forth on Exhibit “D” attached hereto.

“Hazardous Materials Claims” shall mean any and all enforcement, clean up, removal or other governmental or regulatory actions or orders pending, threatened, instituted or completed pursuant to any Hazardous Material Laws, together with all claims made, pending or threatened by any third party against any portion of the Premises, Sublessor or Sublessee relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials.

“Key Principals” shall mean Tim Chesney, Michael Slyk and Dan D’Amico.

“ Lease Coverage Ratio ” shall mean a fraction, the numerator of which is “ Adjusted EBITDAR ” and the denominator of which is Base Rent. “ Adjusted EBITDAR ” shall mean, for any period, the Facility Net Income for such period plus, without duplication, to the extent deducted in determining Facility Net Income, the sum of (i) Facility Interest Expense for such period, plus (ii) expense for income taxes paid or accrued for such period, plus (iii) all amounts attributable to the amount of the provision for depreciation and amortization for such period, plus (iv) the amount of other non-cash charges (other than the write-down of current assets for such period (as determined in accordance with GAAP), plus (v) Base Rent for such period, plus (vi) capital expenditures of $500 per bed (per annum) for such period (the parties recognizing and agreeing that such capital expenditures are not typically included in the definition of EBITDAR but will be for purposes of the definition of Lease Coverage Ratio), plus (vii) extraordinary losses for such period (as determined in accordance with GAAP), minus, to the extent included in Facility Net Income for such period, extraordinary gains for such period (as determined in accordance with GAAP), all calculated in connection with the Business.

“Occupancy” shall mean, with respect to the Premises, the percentage of (a) total patient days relating to such Facility for any reporting period divided by (b) the product of (i) the number of licensed beds at the Facility and (ii) the total days in such reporting period.

“Operations Transfer Agreement” means that certain Agreement to Transfer Operations and Related Assets dated October 16, 2018 by and between, inter alios, Exiting Operator and Sublessee.

“Permitted Liens” shall mean (i) liens granted to Sublessor or any Affiliate of Sublessor, (ii) liens customarily incurred by Sublessee in the ordinary course of business for items not delinquent, (iii) liens for Taxes not yet due and payable, (iv) any lien, charge or encumbrance which is being contested in good faith pursuant to the terms of this Sublease, (v) all easements, liens, encumbrances, restrictions, agreements and other title matters existing as of the Execution Date, (vi) purchase money financing and capitalized equipment leases for the acquisition of personal property for any such financing where the original cost of the equipment financed exceeds $50,000 (except for bulk equipment financing which does not exceed $100,000 and except in the case of a facility van or bus there shall be no dollar limitation as long as the purchase or lease is usual and customary for residential care facilities in the State of Ohio), (vii) any easement granted by Sublessor, in Sublessor’s discretion, at the request of Sublessee which is necessary to (A) obtain utilities or other services for the Facilities in the ordinary course of Sublessee’s business or (B) satisfy requests from local authorities in respect of, without limitation, township projects; (viii) liens that maybe filed as a result of Sublessor’s acts or omissions: and (ix) liens granted to Sublessee’s working capital lender.

“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, governmental authority, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

“Reset Rent” shall mean an amount equal to the greater of: (i) the product of the Base Rent during the immediately preceding Sublease Year multiplied by the Base Rent Escalator or (ii) the Fair Market Reset Rent for the applicable Sublease Year.

EXHIBIT “ C ”

FINANCIAL, MANAGEMENT AND REGULATORY REPORTS

REPORT	DUE DATE
Monthly financial reports concerning the Business at the Facility consisting of: (1) a reasonably detailed income statement showing, among other things, gross revenues; (2) total patient days; (3) Occupancy; and (4) payor mix. (All via e-mail to cli8nton.cain@regionalhealthproperties.com)	Forty-Five (45) days after the end of each calendar month
Monthly census reports concerning the Facility (via e-mail to clinton.cain@regionalhealthproperties.com) [To extent this information is contained in monthly financial reports it will not be necessary to provide duplication here]	Thirty (30) days after the end of each calendar month
Monthly accounts payable report concerning the Facility consisting of a list and aging report of all payables owed by the Facility to all parties	Thirty (30) days after the end of each calendar month
Quarterly litigation summaries of Sublessee to the extent that any such litigation is reasonably expected to result in a material adverse effect on Sublessee or the Facility and is not covered by insurance and diligently defended (via e-mail to clinton.cain@regionalhealthproperties.com)	Thirty (30) days after the end of each quarter of the fiscal year of Sublessee
Annual financial statements of Sublessee and each sublessee under the Affiliated Subleases compiled by a reputable certified public accounting firm (via e-mail to clinton.cain@regionalhealthproperties.com)	One hundred twenty (120) days after the fiscal year end of Sublessee
Regulatory reports with respect to the Facility to the extent that any such report or survey is reasonably expected to result in a material adverse effect on Sublessee or the Facility, as follows: (1) all federal, state and local licensing and reimbursement certification surveys, inspection and other reports received by Sublessee as to any portion of the Premises and any portion of the Business, including state department of health licensing surveys; (2) Medicare and Medicaid certification surveys; and (3) life safety code reports.	Ten (10) business days after receipt

Reports of regulatory violations, by written notice of the following: (1) any material violation of any federal, state or local licensing or reimbursement certification statute or regulation, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility; (2) any material suspension, termination or restriction placed upon Sublessee or any portion of the Premises, the operation of any portion of the Business or the ability to admit residents or patients, which violation is not reasonably expected to be resolved in favor of Sublessee or the Facility within forty-five (45) days; or (3) any violation of any other permit, approval or certification in connection with any portion of the Premises or any portion of the Business, by any federal, state or local authority, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility.	Seven (7) business days after receipt
Cost Reports for the Facility	Fifteen (15) days after filing
Monthly Balance Sheet of Sublessee	Thirty (30) days after the end of each calendar month
Annual Budget for the Facility	No later than January 1 of each calendar year
Accounts Receivable Aging by payor type for the Facility	Thirty (30) days after the end of each calendar month
Annual Income Certification from each low to Moderate Tenant in the form of Exhibit “G”	Sixty (60) days of the end of each calendar year
Quarterly Compliance Certificate in the form of Exhibit “H”	Ten (10) days after the end of each calendar quarter

EXHIBIT “ D ”

FAIR MARKET RESET RENT

1. If Sublessor and Sublessee are unable to agree upon the Fair Market Reset Rent within the applicable period provided in this Sublease, each party shall within ten (10) days after written demand by the other select one (1) MAI Appraiser to participate in the determination of Fair Market Reset Rent. Within ten (10) days after such selection, the MAI Appraisers so selected by Sublessor and Sublessee shall select a third MAI Appraiser (the “Third Appraiser” ). In the event either Sublessor or Sublessee fails to select a MAI Appraiser within the time period set forth above, the MAI Appraiser selected by the other party shall alone determine the Fair Market Reset Rent as if it was the Third Appraiser.

2. The Third Appraiser, within ten (10) days after its appointment, shall (i) hear the Sublessor and Sublessee and their respective witnesses and MAI Appraisers, and each of Sublessor and Sublessee shall, upon the conclusion of both presentations, be required to simultaneously submit a proposal (the “Fair Market Reset Rent Proposal”) setting forth the party’s proposed determination of the Fair Market Reset Rent, and (ii) examine the records relating to the facility and such other documents and records as may, in its judgment, be necessary to determine Fair Market Reset Rent.

5. The fees and expenses of any appraisal pursuant to this Exhibit “D” shall be borne by the parties equally, but each party shall bear the expense of its own attorneys and experts and the additional expenses of presenting its own proof.

EXHIBIT “ E ”

AFFILIATED SUBLEASES

1. Sublease between RMC HUD Master Tenant, LLC and Sidney SNF, Inc. regarding the 62-bed licensed, 50-bed Medicare and Medicaid certified Pavilion skilled nursing home, located at 705 Fulton Street, Sidney, OH 45365.

2. Sublease between RMC HUD Master Tenant, LLC and Greenfield SNF, Inc. regarding the 50-bed licensed, 50-bed Medicare and Medicaid certified Hearth & Care at Greenfield skilled nursing home, located at 238 South Washington Street, Greenfield, OH, 45123.

3. Sublease between 2014 HUD Master Tenant, LLC and Springfield SNF, Inc. regarding the 113-bed licensed, 99-bed Medicare and Medicaid certified Eaglewood Care Center skilled nursing home, located at 2000 Villa Road, Springfield, OH 45503.

4. Sublease between Regional Health Properties, Inc. and Miami Cov SNF, Inc. regarding the 106-bed licensed, 100-bed Medicare and Medicaid certified Covington Care Center skilled nursing home, located at 75 Mote Drive, Covington, OH 45318.

EXHIBIT “ F ”

CALCULATED RENT

Occupancy (%) based on average occupancy for the prior calendar month using total number of licensed beds	Eaglewood ALF Calculated Rent per month for months seven (7) through the remainder of the Initial Term
88%	$67,000.00
86%	$67,000.00
84%	$67,000.00
82%	$67,000.00
80%	$53,078.00
78%	$48,438.00
76%	$42,250.00
< 74%	$34,000.00

EXHIBIT “ G ”

TENANT INCOME CERTIFICATE

[NAME OF FACILITY]

Name of Tenant (i.e., person whose name appears on the lease):




Address of Apartment:



Apartment Number:

Some or all of the cost of the apartment development in which you are to lease an apartment was financed by bonds issued for the benefit of the owner. Interest paid on those bonds is intended to be excluded from gross income for purposes of federal income taxation. In order to qualify for that exclusion there are certain requirements which must be met with respect to the apartment building and its tenants. To satisfy one of those requirements, it is necessary for you to provide the information requested in this Income Certificate at the time you sign your lease.

I. ANTICIPATED INCOME

For each person who is expected to occupy the unit at any time during the next twelve months, the Tenant provides the following information:

Name	Salary/Wages*	Other Income**	Total Income

The Employers of the persons listed above are as follows:

Occupant	Employer	Employer Address	Telephone Number

Provide copies of latest Form 1040s.

*State the gross amount of compensation, before any payroll deductions, including any wages and salaries, bonuses, overtime pay, tips, commissions, or fees anticipated to be received during the next twelve months.

**Other income generally includes income anticipated to be received from any source whatsoever during the next twelve months, including but not limited to:

(a) interest, dividends, rental income or other income derived from capital

investments;

(b) net income from a profession or operation of a business;

(c) regular or periodic payments received instead of earnings, such as unemployment compensation, worker’s compensation and severance (but does not include lump-sum payments that are received only once);

(d) periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts;

(e) periodic and determinable allowances, such as alimony and child support payments and regular contributions or gifts from persons not listed above;

(f) welfare or public assistance, but if the public assistance payment includes an amount specifically designated for shelter and utilities which is subject to adjustment by the public assistance agency in accordance with the actual cost of shelter and utilities, the amount of public assistance income to be included shall consist of;

(1) the amount of the assistance that is not specifically designated for shelter and utilities, plus

(2) the maximum amount which the public assistance agency could in fact allow the occupant for shelter and utilities;

(g) for members of the armed forces, all regular pay, special pay and allowances (except special pay for hazardous duty); and

(h) any earned income tax credit to the extent that it exceeds the taxes paid for

that year.

(i) financial assistance received under the Higher Education Act of 1965 from private sources or an institution of higher education in excess of the amount received for tuition, unless the recipient is over the age of 23 and has dependent children.

Do not include in the amount of other income shown above the following items:

(a) temporary, special or irregular payments you may receive (including gifts);

(b) income earned by children under 18 years of age;

(d) amounts which are specifically for, or in reimbursement of, the cost of medical expenses;

(e) lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workmen’s compensation), capital gains and settlements for personal or property losses;

(f) income of a live-in aide who resides in the apartment to assist an elderly or disabled person;

(g) amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment; provided that any amounts of such scholarships, or payments to veterans not used for the above purposes which are available for subsistence are to be included in income;

(h) Amounts received by a disabled person that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set aside for use under a Plan to Attain Self-Sufficiency (PASS); or

(i) Amounts received by a participant in other publicly assisted programs which are specifically for out-of-pocket expenses incurred (special equipment, clothing, transportation, child care, etc.) and which are made to allow participation in a specific program.

II. STUDENTS

(a) Will all of the persons listed above be (or have they been) full-time students during five calendar months of this calendar year at an educational institution (other than a correspondence school) with regular faculty and students?

Yes

(b) Is any such full-time student married and eligible to file a joint federal income tax return?

Yes

I, the undersigned, certify that I have read and answered fully, frankly and personally each of the foregoing questions and requests for information for all persons who are to occupy the unit in the above Facility. I acknowledge that all of the above information is relevant to the status under federal income tax law of the interest on bonds issued to finance the Facility containing the unit which 1 intend to occupy. I consent to the disclosure of this information to the issuer of such bonds, the owners of such bonds and any agent acting on their behalf.

I certify under penalty of perjury that the foregoing is true and correct.

Executed this

day of

, 20

, at


Tenant

STATE OF		)

	COUNTY	)

I, , a Notary Public in and for the said County in the State aforesaid, do hereby certify that , personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and severally acknowledged that he/she signed and delivered the said instrument, as his/her free and voluntary act, for the uses and purposes therein set forth.

GIVEN under my hand and notarial seal this

day of


			Notary Public
(SEAL)			My Commission Expires:

EXHIBIT “ H ”

CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE

The undersigned (the “Operator”), the operator of [NAME OF FACILITY], certifies to its knowledge as of , 20 , as follows:

1. As of the date of this certificate, the following number of residential units in the Facility (i) are occupied to Low or Moderate Income Tenants (as such term is defined in the Land Use Restriction Agreement dated as of April 1, 2012 (the “Restriction Agreement”) or (ii) were previously occupied by Low or Moderate income Tenants and have been vacant and not re-occupied except for a temporary period of no more than thirty-one (31) days, as indicated:

(a) Number of units occupied by Low or Moderate Income Tenants:

(b) Number of units previously occupied by Low or Moderate Income Tenants (vacated and not re-occupied except for a temporary period of no more than thirty-one (31) days):

2. The total number of units occupied or previously occupied by Low or Moderate Income Tenants as shown above is % of the total number of units.

3. As of the date of this certificate for preceding calendar quarter then ended, no material default has occurred in the observance of the covenants contained in the Restriction Agreement, and no event has occurred in connection with the operation of the Facility which has caused or will cause the Facility to cease to materially meet the requirements of the Restriction Agreement.


[Operator Name]

By:
Name:
Title:

EXHIBIT “ I ”

[Attach copy of form of Consulting Services Agreement]

SCHEDULE 7.1: LICENSED BEDS

Ohio Department of Health: 95 licensed residential care facility beds

Medicare and Medicaid: Not Applicable

Exhibit 10.210

FINAL

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (this “Sublease”) is entered into as of the 30 ^th day of November, 2018 (the “Execution Date”) by and between 2014 HUD MASTER TENANT, LLC, a Georgia limited liability company (“Sublessor”) and SPRINGFIELD SNF, INC., an Ohio corporation (“Sublessee”), for the improved real property described on Exhibit “A-l” (the “Premises”), on which Premises is located that certain 113 bed licensed and 99 bed Medicare and Medicaid certified skilled nursing home facility located at 2000 Villa Road, Springfield, Ohio 45503, including the “Sublessor Personal Property” associated therewith described on Exhibit “A-2” (the Sublessor Personal Property together with the Premises, being collectively the “Facility”). Certain capitalized terms used in this Sublease are defined on Exhibit “B” .

RECITALS

WHEREAS, Sublessor is the tenant under that certain Master Lease Agreement dated as of September 24, 2014, as amended (the “Lease Agreement”) pursuant to which Sublessor leases the Premises from Woodland Manor Property Holdings, LLC, a Georgia limited liability company (the “Landlord”); and

1. Term . The “Term” of this Sublease is the Initial Term of ten (10) years plus the Renewal Terms (if any). A “Sublease Year” is the twelve (12) month period commencing on the Commencement Date (as defined below) and each anniversary thereof during each year of the Term. The “Initial Term” commences on December 1, 2018 (the “Commencement Date”) and ends on November 30, 2028, and may be extended for two (2) separate renewal terms of five (5) years each (each a “Renewal Term”) if: (a) at least one hundred eighty (180) days prior to the end of the Initial Term or the Renewal Term (as applicable), Sublessee delivers to Sublessor the “Renewal Notice” indicating that Sublessee desires to exercise its right to extend this Sublease for the Renewal Term and (b) there is no then uncured Event of Default (i) as of the date Sublessor receives the Renewal Notice (the “Exercise Date”), or (ii) on the last day of the Initial Term or the Renewal Term (as applicable), and (c) corresponding renewal options are exercised for all Affiliated Subleases excluding the facility known as Hearth and Care at Greenfield located in Greenfield, Ohio which sublease will not need to be renewed as a condition to renewal of this Sublease. For purposes hereof, “Termination Date” shall mean the last day of the Initial Term or a Renewal Term (if any) or the earlier date on which this Sublease may be terminated as provided herein.

2. Rent . During the Term, Sublessee shall pay in advance to Sublessor on or before the 1 ^st day of each month the following amounts:

2.1 Initial Term Base Rent (“Base Rent”) .

2.1.1 Months One through Six . During the first six (6) months of the Initial Term, Base Rent shall be equal to $34,000.00 per month.

2.1.3 Months Thirteen through Thirty six . Commencing on the first day of the second Sublease Year and continuing through months thirty six (36), Base Rent per month shall be equal to the greater of (i) the Calculated Rent or (ii) 115% of the Debt Service Rent.

2.1.4 Months Thirty seven through the End of the Initial Term .

Commencing on the first day of month Thirty seven and continuing through the end of month Forty eight of the Initial Term, Base Rent shall be $67,000.00 per month.

2.4 Absolute Net Sublease. Except with respect to Sublessee’s off-set rights pursuant to Section 2.6 hereof, all Rent payments shall be absolutely net to Sublessor, free of any and all Taxes (as defined below in Section 5 ), Other Charges (as defined below in Section 5 ), and operating or other expenses of any kind whatsoever, all of which shall be paid by Sublessee. Sublessee shall at all times during the Term remain obligated under this Sublease without any right of set-off, counterclaim, abatement, deduction, reduction or defense of any kind, except as set forth in Section 2.6 , and Sublessee’s sole right to recover such other damages against Sublessor under this Sublease shall be to prove such damages in a separate action.

2.7 Events Prior to Commencement Date and Indemnification . Notwithstanding any provision in this Sublease to the contrary, Sublessee shall not be responsible for any obligations, liabilities, damages, costs, expenses, losses or claims (including but not limited to fees and expenses of counsel to Sublessor or Landlord), whether known or unknown, now existing or arising in the future, arising out of or in connection with the operation of the Facility, the ownership (in fee simple or leasehold) of the Premises, leasing of the Facility or the Premises, violations of any applicable laws or other events to the extent arising as a result of events occurring and conditions existing prior to the Commencement Date with respect to the Facility or the Premises (each, a “Preexisting Event”). Sublessor, Guarantor and Landlord shall, jointly and severally, indemnify, defend and save harmless Sublessee and its successors and assigns (collectively, “Sublessee Indemnitees”) from and against any and all obligations, liabilities, damages, costs, expenses, losses or claims costs, expenses or losses (including fees and expenses of counsel) incurred by Sublessee Indemnitees arising out of or in connection with any Preexisting Event.

3. Security Deposit.

3.1 Security Deposit. During the Term , Sublessee shall fund in four (4) installments and maintain a security deposit (the “Security Deposit”) in the following amounts (each, an “Installment”): (i) $34,000.00 on the Commencement Date; (ii) an additional $34,000.00 on the first day of the ninth month of the Initial Term, (iii) an additional $34,000.00 on the first day of the eighteenth month of the Initial Term and (iv) an additional $34,000.00 on the first day of the twenty-fourth month of the Initial Term.

3.3 Payment of Security Deposit . Sublessee may fund the Security Deposit by wire transfer to Sublessor of immediately available funds or through a Letter of Credit.

3.5 (Intentionally Omitted].

5.1 Protests . Sublessee has the right, but not the obligation, in good faith to protest or contest (a “Protest”) in whole or in part (a) the amount or payment of any Taxes or Other Charges, and (b) the existence, amount or validity of any Lien (as defined in Section 8.1) , by appropriate proceedings sufficient to (i) prevent the collection or other realization of such Taxes, Other Charges or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other Charges or Liens (so long as it provides Sublessor with reasonable security to assure the foregoing). Sublessee shall diligently prosecute any such Protest at its sole cost and expense. Sublessor shall cooperate in any Protest that involves an amount assessed against it.

5.2 Impound . If required by the Facility Mortgagee or upon Sublessor’s written notice to Sublessee during the Term during any ongoing Event of Default (after the expiration of any notice and cure period), Sublessor may require, Sublessee to pay with each Base Rent payment a deposit of one-twelfth (l/12 ^th ) of the amount required to discharge the annual amount of real property Taxes secured by a Lien encumbering any portion of the Premises as and when they become due. The deposits shall not bear interest nor be held by Sublessor or Facility Mortgagee (as applicable) in trust or as an agent of Sublessee, but rather shall be applied to the payment of the real property taxes. If at any time within thirty (30) days prior to the due date the deposits shall be insufficient for the payment of the obligation in full, Sublessee shall within ten (10) days after demand by Sublessor or Facility Mortgagee (as applicable), deposit the deficiency with Sublessor or Facility Mortgagee (as applicable). If deposits are in excess of the actual obligation, the required monthly deposits for the ensuing Sublease Year shall be reduced proportionately and any such excess at the end of the final Sublease Year shall be refunded to Sublessee within ten (10) calendar days. Sublessee shall forward to Sublessor or Facility Mortgagee (as applicable) all Tax bills, bond and assessment statements within five (5) days of receipt by Sublessee. If Sublessor assigns this Sublease in accordance with the terms hereof, all such deposits shall be transferred to the assignee, and Sublessor shall thereafter have no liability of any kind with respect thereto.

insurance required by this Sublease and showing the interest of Sublessor and Facility Mortgagee shall be provided to Sublessor prior to the commencement of the Term or, for a renewal policy, not less than ten (10) days prior to the expiration date of the insurance policy being renewed. If Sublessor is provided with a certificate, it may demand that Sublessee provide a complete copy of the related policy within ten (10) days. Sublessee may satisfy the insurance requirements hereunder through coverage under so-called blanket policy(ies) of insurance carried and maintained by Sublessee regarding other operations or facilities; provided, however, that the coverage afforded Sublessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policies of insurance meeting all other requirements of this Sublease by reason of the use of such blanket policies of insurance. During the Term, Sublessee shall maintain the following insurance and any claims thereunder shall be adjudicated by and at the expense of it or its insurance carrier:

(a) Property Insurance with respect to the Facility and Business against loss or damage from all causes under standard “all risk” property insurance coverage with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), without exclusion for fire, lightning, windstorm, explosion, smoke damage, vehicle damage, sprinkler leakage, flood, vandalism, earthquake, malicious mischief and any other risks normally covered under an extended coverage endorsement, in amounts that are not less than the actual replacement value of the Premises and all Sublessor and Sublessee Personal Property associated therewith (including the cost of compliance with changes in zoning and building codes and other laws and regulations, demolition and debris removal and increased cost of construction). Additionally, if the Facility contains steam boilers, steam pipes, steam engines, steam turbines or other high pressure vessels, insurance with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), covering the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the Facility, in an amount equal to one hundred percent (100%) of the full replacement cost of the Facility, which policies shall insure against physical damage to and loss of occupancy and use of the Premises arising out of an accident or breakdown covered thereunder;

medical directors with regard to their administrative duties provided to the Premises, with limits of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Sublessor as an additional insured. If such coverage is purchased on a claims made basis, Sublessee must show proof of the ability to purchase tail coverage to last through the statute of limitations, upon the end of the Sublease Term;

7. Use, Regulatory Compliance, Preservation of Business and Management .

7.1 Permitted Use; Qualified Care; Number of Beds . Sublessee shall continuously use and occupy the Premises during the Term as a skilled nursing facility with not less than 113 licensed and 99 Medicare and Medicaid certified beds and for ancillary services relating thereto, but for no other purpose (“Permitted Use”). Sublessee shall provide care, treatment and services to all residents of the Facility in a manner consistent in all material respects with all applicable laws. Notwithstanding any common law or statutory right, Sublessee agrees not to transfer, move or otherwise take action that reduces the bed complement of the Facility and Sublessee agrees not to take any of the beds out of service or move the beds to a different location without the prior written consent of the Sublessor in its sole and absolute discretion. Schedule 7.1 attached hereto sets forth a true, correct and complete list of the number and types of licensed beds at the Premises and whether such beds are Medicaid and/or Medicare certified. Sublessee shall take no action to reduce or modify the number of beds for which the Premises are licensed. Notwithstanding any provision to the contrary contained in this Sublease, Landlord, Sublessor and Sublessee covenant and agree that on or before March 31, 2019 (the “Effective Date”), the number of skilled nursing beds at the Facility licensed by the Ohio Department of Health shall be reduced by fourteen (14) licensed beds, so that after such reduction the Facility shall have a total of ninety-nine (99) licensed skilled nursing beds. In connection with the aforesaid bed reduction, Landlord and Sublessor hereby irrevocably authorize and direct Sublessee to execute and file with the Ohio Department of Health and the Ohio Department of Medicaid a letter prepared by Sublessee (the “Letter”) that provides for the permanent relinquishment on the Effective Date of fourteen (14) skilled nursing beds currently licensed at the Facility (the “Relinquished Beds”), and Sublessee hereby agrees to take such action. Landlord, Sublessor, and Sublessee acknowledge and agree that the effect of filing the Letter will be that: (a) the Relinquished Beds will be permanently relinquished and not be eligible to be operated, placed into service, or sold following the Effective Date; and (b) the Facility’s licensed skilled nursing bed capacity will be reduced from one hundred thirteen (113) beds (of which ninety-nine (99) beds are Medicare- and Medicaid-certified) to ninety-nine (99) beds (all of which beds will be Medicare- and Medicaid-certified) following the Effective Date. If Landlord or Sublessor take any action, directly or indirectly, to prevent, avoid or circumvent the effect of the aforesaid bed reduction, and such bed reduction does not become effective on the Effective Date, then notwithstanding anything to the contrary contained herein, Landlord, Sublessor and Guarantor, jointly and severally, shall be solely responsible for the full and timely payment of the State of Ohio franchise permit fees attributable to the Relinquished Beds at all times on and after the Effective Date and the failure to pay same shall constitute a default under this Sublease.

7.3 Preservation of Business . Sublessee acknowledges that a fair return to Sublessor on and protection of its investment in the Premises depends, in part, on Sublessee’s dedication to the Business and the concentration of similar businesses of Sublessee and its Affiliates in the geographical area of each Facility. Sublessee further acknowledges that the diversion of residents or patient care activities (except as is necessary to provide residents or patients with an alternative level of care or comply with contractual provisions of applicable admission agreements) from any Facility to other facilities at any time during the Term will have a material adverse effect on the value and utility of such Facility. Therefore, Sublessee agrees that during the Term and for a period of one (1) year thereafter, neither Sublessee nor any of its Affiliates shall, excluding the nursing facility doing business as Four Seasons of Washington Courthouse, located at 201 Courthouse Parkway, Washington Courthouse, Ohio 43160 (provided that a monthly report of admitted/discharged residents will be provided to Sublessor of any such activities with respect to said facility), without the prior written consent of Sublessor: (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (l0)-mile geographical radius of the Facility, (ii) except as is necessary to provide residents or patients with an alternative level of care, recommend or solicit the removal or transfer of any resident or patient from any Facility to any other nursing, health care, senior housing or retirement housing facility or divert actual or potential residents, patients or care activities of the Business conducted at the Facility to any other facilities, or (iii) employ for other businesses any personnel working in the Facility; provided, however, that if Sublessee or an Affiliate leases or subleases additional facilities from Sublessor or Sublessor’s Affiliates, the parties agree that Sublessee may move employees among those affiliated facilities.

7.4 Consulting Services . MSTC Development, Inc. (“Consultant”) shall provide administration and management services (or shall cause a wholly-owned subsidiary to do so) to the Facility pursuant to a consulting services agreement acceptable to Sublessor, in substantially the form attached hereto as Exhibit “H” (the “Consulting Agreement”) . The consulting fee (“Consulting Fee”) under the Consulting Agreement shall not exceed five percent (5.0%) of the annual gross revenue realized from Sublessee’s operation of the Facility (after adjustment for contractual adjustments and overpayment by providers). Payment of the Consulting Fee shall be subordinate to the payment of Rent and all other amounts payable by Sublessee pursuant to this Sublease. The Consulting Agreement shall provide that from and after the date that an Event of Default has occurred and until such Event of Default, if curable, has been cured, Consultant shall not make any distributions to the holders of the equity interests of Consultant; provided, however, that Consultant shall be permitted to pay all compensation, salaries and/or bonuses to employees or contractors of Consultant (including Key Principals) in the ordinary course of business. Sublessee shall not be permitted to engage any third-party consultant for the Facility without the prior written consent of Sublessor, which consent shall not be unreasonably withheld.

7.5 Indebtedness . Sublessee shall not incur debt other than (a) trade debt incurred in the ordinary course of business, (b) a working capital line secured by Sublessee’s accounts receivable, or (c) indebtedness constituting or in connection with Permitted Liens and Consulting Fees permitted hereunder.

8. Acceptance, Maintenance, Upgrade, Alteration and Environmental .

8.1 Acceptance “AS IS”; No Liens . Sublessee acknowledges that it is presently engaged in operations similar to those to be conducted at the Facility and has expertise in such industry and, in deciding to enter into this Sublease, has not relied on any representations or warranties, express or implied, of any kind from Sublessor except as contained herein. Sublessee accepts the Facility and the Premises on an “AS IS” basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Notwithstanding its right to Protest set forth in Section 5.1, Sublessee shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a “Lien” ) for any reason other than Permitted Liens, provided that nothing in this Sublease shall require Sublessee to keep the Premises free of Permitted Liens . Furthermore, notwithstanding anything to the contrary contained in this Sublease, the provisions of this Section 8.1 are expressly subject to the terms and conditions of the Guaranty, and Sublessor and Landlord each acknowledges and agrees this Section 8.1 shall not in any way whatsoever reduce, limit or cancel the Guarantor’s liability or obligations under the Guaranty or this Sublease.

8.2 Sublessee’s Maintenance Obligations . Sublessee shall (a) keep and maintain the Premises and the Facility in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all ordinary interior and exterior, non-structural repairs necessary to keep the Facility in good and working order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable, certification for participation in Medicare and Medicaid, and (c) keep and maintain all Sublessor and Sublessee Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice for skilled nursing facilities located in the State of Ohio as required under this Sublease.

8.4 Hazardous Materials . Sublessee’s use of the Premises shall comply in all material respects with all Hazardous Materials Laws. If any Environmental Activities occur or are suspected to have occurred in violation of any Hazardous Materials Laws by Sublessee during the Term or if Sublessee has received notice of any Hazardous Materials Claim against any portion of the Premises solely as a result of Sublessee’s acts or omissions during the Term, Sublessee shall promptly obtain all permits and approvals necessary to remedy any such actual or suspected problem through the removal of Hazardous Materials or otherwise, and upon Sublessor’s approval of the remediation plan, remedy any such problem to the satisfaction of Sublessor and all applicable governmental authorities, in accordance with all Hazardous Materials Laws and good business practices. During the Term, Sublessee shall promptly advise Sublessor in writing of (a) any Environmental Activities in violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims against Sublessee or any portion of the Premises; (c) any remedial action taken by Sublessee in response to any Hazardous Materials Claims or any Hazardous Materials on, under or about any portion of the Premises in violation of any Hazardous Materials Laws; (d) Sublessee’s discovery of any occurrence or condition on or in the vicinity of any portion of the Premises that materially increase the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Sublessee, any governmental authority or any other Person relating to Hazardous Materials Laws or Hazardous Materials Claims with respect to any portion of the Premises, including copies thereof . Sublessor shall have the right, at Sublessor’s sole cost and expense (including, without limitation, Sublessor’s reasonable attorneys’ fees and costs) and with counsel chosen by Sublessor, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims. Sublessor represents and warrants to Sublessee that there are no Hazardous Materials Claims arising out of or relating to the Facility or the Premises as of the commencement of the Term.

11. Representations and Warranties . Each party represents and warrants to the other as of the Execution Date hereof and as of the Commencement Date, that: (a) it has the power and authority to execute, deliver and perform this Sublease; (b) it has taken all requisite action necessary to authorize the execution, delivery and performance of such party’s obligations under this Sublease; (c) this Sublease constitutes a legal, valid and binding obligation of it enforceable in accordance with its terms; (d) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Sublease within the state where the Premises is located; and (e) the execution, delivery and performance of this Sublease by it do not and will not (1) require any consent, approval, authorization, order or declaration of, or any filing or registration with, any court, any governmental authority or any other Person, (2) conflict with, and do not and will not result in a breach of, any organizational documents of it or any agreement of which it is a party, and (3) violate any legal requirements, order, writ, injunction or decree, statute, rule or regulation, applicable to it or the Facility or the Premises. In addition, Sublessor and Landlord jointly and severally represent and warrant to Sublessee that (A) neither Sublessee nor Landlord is in default of, or not in compliance with, the Permitted Use, the Lease Agreement or the Facility Mortgage Documents including the replacement reserve requirements with respect thereto and the amount of the HUD Cap Ex Balance as set forth in Section 30 hereof; (B) Sublessor has good and marketable leasehold title to the Premises and the Authorizations (as hereinafter defined), subject to Exiting Operator’s leasehold rights under the Lease Agreement and to the Authorizations which will be terminated as of the Commencement Date, and as of the Commencement Date, there will be no existing subleases or other occupancy agreements in effect with respect to the Premises other than resident admission agreements for residents in possession of the Facility; (C) Landlord has good and marketable fee simple title to the Premises and the Authorizations subject to the Lease Agreement; and (D) the Facility contains 113 beds licensed by the Ohio Department of Health as skilled nursing beds and 99 beds certified by Medicare and Medicaid. As used herein the term “Authorizations” shall mean, with respect to the Facility, any and all licenses, permits, certifications, registrations, accreditations, provider agreements, certificates of need, certificates of exemption, approvals, waivers, variances and other authorizations issued by any governmental authority necessary or advisable for the use and operation of the Facility as it is currently being operated and receipt of reimbursement or other payments under any third party payor program in which such Facility participates.

12. Events of Default . So long as there is no Event of Default, Sublessee shall peaceably and quietly have, hold and enjoy the Premises for the Term, free of any claim or other action not caused or created by Sublessee or pursuant to Sections 17 or 18. The occurrence of any of the following events will constitute an “Event of Default” on the part of Sublessee:

(a) Sublessee’s failure to pay within ten (10) days of when due any Base Rent;

(e) An Event of Default has occurred under any Affiliated Sublease (as said term is defined therein) which Event of Default has not been cured during any applicable cure period or waived;

(h) (i) Sublessee shall admit in writing its inability to pay its debts generally; (ii) Sublessee shall make an assignment of all or substantially all of its property for

the benefit of creditors; (iii) a receiver, trustee or liquidator shall be appointed for Sublessee or substantially all of its property, if within seven (7) business days of such appointment Sublessee does not inform Sublessor in writing that they intend to cause such appointment to be discharged or such discharge is not diligently prosecuted to completion within sixty (60) days after the date of such appointment; (iv) the filing by Sublessee of a voluntary petition under any federal bankruptcy or state law to be adjudicated as bankrupt or for any arrangement or other debtor’s relief; or (v) the involuntary filing of such a petition against Sublessee by any other party, unless Sublessee within seven (7) business days of such filing informs Sublessor in writing of its intent to cause such petition to be dismissed, such dismissal is diligently prosecuted and such petition is dismissed within one hundred twenty (120) days after filing;

(l) The failure of Sublessee to comply with any of the Financial Covenants set forth in Section 27(a) ; or

(m) The failure of Sublessee to timely provide any of the reports required by Section 10 .

13. Remedies . Upon the occurrence and continuance of an Event of Default, Sublessor may exercise all rights and remedies under this Sublease and the laws of the State of Ohio that are available to a Sublessor of real and personal property in the event of a default by its Sublessee, and as to the Sublessee Property, all remedies granted under the laws of said state to a secured party under its Uniform Commercial Code. Sublessor shall have the duty to mitigate damages. Sublessee shall pay Sublessor, promptly upon demand, all reasonable out-of-pocket expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, agents and brokers. Notwithstanding any provision to the contrary contained in Sections 12 or 13 hereof, if all then existing Events of Default would be considered to be capable of being cured within (i) five (5) days for a monetary default or (ii) thirty (30) days for a non-monetary default by a reasonably prudent landlord and tenant in the skilled nursing industry located in Ohio, then prior to Sublessor’s exercising any remedies provided herein, including, but limited to the termination of this Sublease, as a result of the occurrence of any such Event of Default, Sublessee shall have the right to cure each such Event of Default within five (5) days of notice from Sublessor for a monetary default and within thirty (30) days of notice from Sublessor for a non-monetary default, and upon such cure of all Events of Default then existing, Sublessor may not exercise its remedies thereunder or terminate this Sublease as a result of such cured Events of Default. Notwithstanding the preceding sentence, Sublessee’s right to cure an Event of Default and thereby avoid Sublessor’s exercise of remedies or termination of this Sublease shall not apply if Sublessee and/or the sublessees under any Affiliated Sublease have cured Events of Default two (2) times in the aggregate under this Sublease and/or the Affiliated Subleases in any twelve (12) consecutive month period.

Sublessor under this Sublease or allowed by law, Sublessor may petition any appropriate court for the appointment of a receiver to take possession of the Premises, to manage the operation of the Premises, to collect and disburse all rents, issues, profits and income generated thereby and to preserve or replace to the extent possible any operating license for the Premises or to otherwise substitute the licensee or provider thereof. The receiver shall be entitled to a reasonable fee for its services as a receiver. All such fees and other expenses of the receivership estate shall be added to the monthly rent due to Sublessor under this Sublease and shall be the obligation of Sublessee. To the extent not prohibited by applicable law, Sublessee hereby irrevocably stipulates to the appointment of a receiver under such circumstances and for such purposes and agrees not to contest such appointment in any manner whatsoever.

13.3 Remedies Cumulative; No Waiver . No right or remedy herein conferred upon or reserved to Sublessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of Sublessor to insist at any time upon the strict performance of any provision of this Sublease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Sublessee. Sublessor’s receipt of and Sublessee’s payment of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Sublessor of any provision of this Sublease shall be effective unless expressed in a writing signed by it.

14. Provisions on Termination .

designee in transferring or obtaining all necessary licenses and certifications for Sublessor or its designee, and Sublessee shall comply with all usual and customary requests regarding skilled nursing facilities located in the State of Ohio for an orderly transfer of the Facility licenses, and Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Sublessor or its designee to operate the Facility. Subject to all applicable laws, Sublessee hereby assigns, effective upon the Termination Date, all rights to operate the Facility to Sublessor or its designee, including all required licenses and permits and all rights to apply for or otherwise obtain them, and all other nonproprietary Sublessee Intangible Property relating to any portion of the Premises.

14.2 Removal of Sublessee Property . Provided that no Event of Default then exists, in connection with the surrender of the Premises, Sublessee may upon at least five (5) business days’ prior notice to Sublessor remove from the Premises all Sublessee Property, leaving the Premises in good and presentable condition and appearance, including repair of any damage caused by such removal; provided that Sublessor shall have the right and option to purchase the non-proprietary Sublessee Personal Property (but excluding all Sublessee Intangible Property) for its then net book value during such five (5)-business day notice period, in which case Sublessee shall so convey the Sublessee Personal Property to Sublessor by executing a bill of sale in a form reasonably required by Sublessor. If there is any Event of Default then existing, Sublessee may not remove any Sublessee Personal Property from the Premises and instead will, on demand from Sublessor, convey it to Sublessor for application to any amounts owed by Sublessee under this Sublease at net book value, by executing a bill of sale in a form reasonably required by Sublessor. Title to any Sublessee Personal Property which is not removed by Sublessee as permitted above upon the expiration of the Term shall, at Sublessor’s election, vest in Sublessor; provided, however, that Sublessor may remove and store or dispose any or all of such Sublessee Personal Property which is not so removed by Sublessee without obligation or accounting to Sublessee.

14.3 Management of Premises . Commencing on the Termination Date, Sublessor or its designee, upon written notice to Sublessee, may elect to assume the responsibilities and obligations for the management and operation of the Facility and Sublessee agrees to reasonably cooperate to accomplish the transfer of such management and operation without interrupting the operation of the Facility, and Sublessee will, upon Sublessor’s request, execute a mutually agreeable, reasonable and customary short-term operations transition agreement, respecting operations of the Facility pending the engagement by Sublessor of a replacement operator. Sublessee shall comply with all usual and customary requests for skilled nursing facilities located in the State of Ohio for an orderly transfer of any and all Facility and other licenses, applicable Medicare and Medicaid certifications and possession of the Premises at the time of any such surrender.

14.4 Holding Over . If Sublessee shall for any reason remain in possession of the Premises after the Termination Date, such possession shall be a month-to-month tenancy during which time Sublessee shall pay as rental on the first (l ^st ) business day of each month one hundred twenty-five percent (125%) of the monthly Rent payable with respect to the last Sublease Year, all additional charges accruing during the month and all other sums, if any, payable by Sublessee pursuant to this Sublease. Nothing contained herein shall constitute the consent, express or implied, of Sublessor to the holding over of Sublessee after the Termination Date, nor shall anything contained herein be deemed to limit Sublessor’s remedies.

14.5 Survival . All representations, warranties, covenants and other obligations of Landlord, Sublessor, Guarantor and Sublessee under this Sublease shall survive the Termination Date.

15. Certain Sublessor Rights .

15.2 Grant Liens . This Sublease shall be subordinate to the right, title, and interest of any lender or other party holding a security interest in or a lien upon the Premises under any and all mortgage instruments or deeds to secure debt presently encumbering the Premises or the Building and to any and all other deeds to secure debt or mortgage instruments hereafter encumbering the Premises or the Building. Sublessee shall at any time hereafter, on written demand of Sublessor or the holder of any such deed to secure debt or mortgage instrument, execute such usual and customary instruments for skilled nursing facilities located in the State of Ohio which may reasonably be required by such party for the purpose of evidencing the subordination of this Sublease to the lien or security of such party. Sublessee shall, upon written demand, at any time or times, execute, acknowledge, and deliver to Sublessor or the holder of any such usual and customary instruments for skilled nursing facilities located in the State of Ohio to secure debt, without expense, any and all documents that may be reasonably necessary to make this Sublease superior to the lien of any of the same, in form and substance reasonably acceptable to Sublessee with attornment and non-disturbance provisions included therein for the benefit of Sublessee. If the holder of any of said instruments or deeds to secure debt shall hereafter succeed to the rights of Sublessor under this Sublease, Sublessee shall, at the option of such holder or a purchaser at any foreclosure or sale under power, attorn to and recognize such successor as Sublessee’s Sublessor under this Sublease. Sublessee shall promptly execute, acknowledge, and deliver any instrument that may be reasonably necessary to evidence such attornment. Prior to the Execution Date, Sublessor will obtain from any lender holding a lien on the Premises, a subordination, non-disturbance and attornment agreement for the benefit of, and reasonably acceptable to, Sublessee.

17. Damage by Fire or Other Casualty . Sublessee shall promptly notify Sublessor of any damage or destruction of any portion of the Premises and diligently repair or reconstruct such portion of the Premises to a like or better condition than existed prior to such damage or destruction. Any net insurance proceeds payable with respect to the casualty shall be paid directly to Sublessor and, if an Event of Default has not occurred and is continuing, shall be used for the repair or reconstruction of the applicable portion of the Premises pursuant to Sublessor's reasonable disbursement requirements. If there are excess insurance proceeds, the surplus shall belong and be paid to Sublessee. Subject to the provisions of Section 18, Sublessee shall not have any right under this Sublease, and hereby waives all rights under applicable law, to abate, reduce or offset Rent by reason of any damage or destruction of any portion of the Premises by reason of an insured or uninsured casualty.

18. Condemnation . Except as provided to the contrary in this Section 18 , this Sublease shall not terminate and shall remain in full force and effect in the event of a taking or condemnation of the Premises, or any portion thereof, and Sublessee hereby waives all rights under applicable law to abate, reduce or offset rent by reason of such taking. If during the Term all or substantially all (a “Complete Taking” ) or a smaller portion (a “Partial Taking” ) of the Premises is taken or condemned by any competent public or quasi-public authority, then (a) in the case of a Complete Taking, Sublessee may at its election made within thirty (30) days of the effective date of such Taking, terminate this Sublease and the current Rent shall be equitably abated as of the effective date of such termination, or (b) in the case of a Partial Taking, the Rent shall be abated to the same extent as the resulting diminution in Fair Market Value of the applicable portion of the Premises. The resulting diminution in Fair Market Value on the effective date of a Partial Taking shall be as established pursuant to Exhibit “E” . Sublessor alone shall be entitled to receive and retain any award for a taking or condemnation other than a temporary taking; provided, however, Sublessee shall be entitled to submit its own claim in the event of any such taking or condemnation with respect to the value of Sublessee’s Subleasehold interest in any portion of the Premises and/or the relocation costs incurred by Sublessee as a result thereof. In the event of a temporary taking of less than all or substantially all of the Premises, Sublessee shall be entitled to receive and retain any and all awards for the temporary taking and the Rent due under this Sublease shall be not be abated during the period of such temporary taking.

19. Indemnification.

assessments obtained by Sublessor (each, a “Preexisting Environmental Condition”). Landlord, Guarantor and Sublessor shall, jointly and severally, indemnify, defend and save harmless Sublessee Indemnitees from and against any obligations, liabilities, damages, costs, expenses, losses or claims incurred by Sublessee Indemnitees (including fees and expenses of counsel) arising out of or in connection with any Preexisting Environmental Condition.

If to Sublessee:	If to Sublessor:

Springfield, SNF, Inc.	2014 HUD Master Tenant, LLC
c/o MSTC Development, Inc.	c/o Regional Health Properties, Inc,
556 Niles Courtland Road, S.E.	454 Satellite Blvd.
Warren, Ohio 44484	Suite 100
Attn: President/CEO	Suwanee, Georgia 30024
	Attn: CEO

With a copy to:

Rolf Goffman Martin Lang LLP 30100 Chagrin Boulevard, Suite 350 Cleveland, Ohio 44124 Attn: Ira S. Goffman, Esq.

22. Intentionally Omitted .

24. Miscellaneous . This Sublease has been freely and fairly negotiated, and all provisions shall be interpreted according to their fair meaning and shall not be strictly construed against any party. While nothing contained in this Sublease should be deemed or construed to constitute an extension of credit by Sublessor to Sublessee, if a portion of any payment made to Sublessor is deemed to violate any applicable laws regarding usury, such portion shall be held by Sublessor to pay the future obligations of Sublessee as such obligations arise and if Sublessee discharges and performs all obligations hereunder, such funds will be reimbursed (without interest) to Sublessee within ten (10) days or if not so reimbursed, Sublessee may credit such amount against Rent on a dollar-for-dollar basis. If any part of this Sublease shall be determined to be invalid or unenforceable, the remainder shall nevertheless continue in full force and effect. Time is of the essence, and whenever action must be taken (including the giving of notice or the delivery of documents) hereunder during a certain period of time or by a particular date that ends or occurs on a Saturday, Sunday or federal holiday, then such period or date shall be extended until the immediately following business day. Whenever the words “including”, “include” or “includes” are used in this Sublease, they shall be interpreted in a non - exclusive manner as though the words “without limitation” immediately followed. Whenever the words day or days are used in this Sublease, they shall mean “calendar day” or “calendar days” unless expressly provided to the contrary. The titles and headings in this Sublease are for convenience of reference only and shall not in any way affect the meaning or construction of any provision. Unless otherwise expressly provided, references to any “Section” mean a section of this Sublease (including all subsections), to any “Exhibit” or “Schedule” mean an exhibit or schedule attached hereto or to “Medicare” or “Medicaid” include any successor program. If more than one Person is Sublessee hereunder, their liability and obligations hereunder shall be joint and several. Promptly upon the request of either party and at its expense, the parties shall prepare, enter into and record a suitable short form memorandum of this Sublease. This Sublease (a) contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior or contemporaneous verbal or written agreements or understandings, (b) may be executed in several counterparts, (including electronically mailed copies in portable document format (PDF)), each of which shall be deemed an original, but all of which shall constitute one and the same document, (c) may only be amended by a writing executed by the parties, (d) shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties; provided, however, that the indemnification obligations of any party hereunder shall survive any such assignment, (e) shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio, and (f) incorporates by this reference any Exhibits and Schedules attached hereto.

25. Non-Disturbance and Attornment . If the Lease Agreement shall expire or terminate during the term of this Sublease for any reason other than condemnation or destruction by fire or other casualty, or if Sublessor shall surrender the Lease Agreement to Landlord during the term of this Sublease, Landlord shall continue this Sublease with the same force and effect as if Landlord as lessor and Sublessee as lessee had entered into a lease as of such effective date for a term equal to the then unexpired term of this Sublease and containing the same provisions as those contained in this Sublease, provided that (i) the Lease Agreement was terminated pursuant to Sublessor’s default under the Lease Agreement, (ii) the default is of such a type that Sublessee can cure, and (iii) Sublessee in fact cures such default within thirty (30) days, where possible, or within a reasonable amount of time. In such event, Sublessor shall promptly transfer any remaining security deposit described in Section 3 of this Sublease to Landlord, If this Sublease is continued pursuant to this Section 25, Sublessee shall attorn to Landlord and Landlord and Sublessee shall have the same rights, obligations and remedies thereunder as were had by Sublessor and Sublessee hereunder prior to such effective date, respectively.

26. Terrorism/Govcrnmental Action . Sublessee warrants and represents to Sublessor that Sublessee is not, and shall not become, a person or entity with whom Sublessor is restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any applicable law, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action, and is not and shall not knowingly engage in any dealings or transaction or otherwise knowingly be associated with such persons or entities.

28. [Intentionally Omitted].

29. [Intentionally Omitted].

30. Certain Conditions Precedent and Transitional Provisions . The provisions of this Section 30 shall govern and control over any contrary provisions of this Sublease.

30.1 Certain Conditions Precedent .

30.1.2 Sublessee (“Applicant”), with respect to the Facility, shall file and submit all applications, petitions and other documents (collectively, the “Required Authorization Applications”) that are necessary or appropriate for it to obtain all of the Required Authorizations for the Facility. Applicant shall use its commercially reasonable efforts and due diligence to obtain the Required Authorizations for the Facility and shall promptly respond to any questions or information requests from any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications. Upon Sublessor’s written request, Applicant shall furnish to Sublessor copies of all Required Authorization Applications and any correspondence or other written documentation received from or delivered to any governmental authority responsible for or otherwise involved in the review of Required Authorization Applications.

30.1.4 The term “Required Authorizations” shall mean, with respect to the Facility, such consents, approvals and other assurances, oral or written, as are, under local custom and practice, customarily obtained from state licensing authorities by reasonable operators of facilities like the Facility, acting in good faith, before such an operator takes possession of, and begins to operate, a facility like the Facility. By way of example and without limitation of the foregoing, in the event that Applicant receives permission from the applicable state licensing authorities to assume operational control of a particular Facility prior to the issuance of a non-provisional or non-conditional license for such Facility (e.g., due to a state licensing authority’s requirement that a survey of Applicant’s operations at the Facility be completed prior to the issuance of a non-provisional or non-conditional license) and, under local custom and practice, reasonable operators of facilities like the Facility customarily take possession of, and begin to operate, facilities like the Facility on the basis of such permission, then, for purposes of this Section 30.1, the date of such permission would be treated as the date that Applicant obtained the Required Authorizations for the Facility; provided, however, that if Applicant provides written correspondence from state licensing authorities indicating that additional documentation is required to obtain the Required Authorizations, then in no event shall the Required Authorizations be deemed to have been obtained by Applicant.

30.2.2 An Estoppel, Non-Disturbance and Attornment Agreement executed by Landlord in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee;

30.2.3 Evidence of the termination of all of the Exiting Operator’s right to occupy the Premises and operate in the Business, in form and substance reasonably acceptable to Sublessee;

30.2.5 A copy of the certificate of occupancy relating to the Facility, in form and substance acceptable to Sublessee to obtain licensure for the Facility;

30.2.6 The concurrent closing of the Affiliated Subleases and all required HUD TPA approvals with respect thereto, as applicable;

30.2.9 A Subordination, Non-Disturbance and Attornment Agreement executed by each Facility Mortgagee in favor of Sublessee, in such form and substance reasonably acceptable to Sublessee.

30.2.10 HUD Cap Ex Account. Sublessor and Landlord, jointly and severally, represent and warrant to Sublessee that the balance in the capital improvements reserve account required to be maintained under the documents evidencing the HUD Loan relating to the Leased Premises (the "HUD Cap Ex Account") as of the Execution Date is $417,032.00 (the “HUD Cap Ex Balance”). From and after the Commencement Date, Sublessee shall pay as Additional Rent due hereunder to Sublessor or the servicer of the HUD loan, as applicable, the required monthly payment to the HUD Cap Ex Account in the amount of $5,528.00. From time to time in Sublessee’s discretion, Sublessee shall submit all HUD required documentation of work performed and amounts incurred for qualifying expenditures in connection with the Leased Premises in support of a request for reimbursement from the HUD Cap Ex Account. Sublessor and Landlord agree to cooperate in good faith and use commercially reasonable efforts to timely obtain HUD approval of reimbursement from the HUD Cap Ex Account relating to such HUD submission, including, but not limited to, submitting such additional documents required by HUD. Upon HUD approval and reimbursement for qualifying expenditures, Sublessor or Landlord, as applicable, jointly and severally, shall within five (5) business days pay to Sublessee the amount received by Sublessor or Landlord, as applicable, from the HUD Cap Ex Account for such qualifying expenditures submitted, and if any such payment from the HUD Cap Ex Account is not timely paid as set forth above, such delinquent amount shall be accessed payment premium in the amount of eight percent (8%) of said delinquency, as liquidated damages and not as a penalty, it being agreed that said premium amount represents a reasonable estimate of the probable damages to Sublessee as a result of such timely failure to pay, and Sublessor and Landlord hereby each waives any and all rights to contest or bring an action with respect to such required payment and premium. In addition, Sublessor and Landlord agree that in the event the HUD reserves being paid monthly by Sublessee hereunder meet the total maximum HUD reserves required by HUD, Sublessee shall not be required to pay any additional monthly HUD reserves under this Sublease.

30.2.11 HUD Addendum. Sublessor, Landlord and Sublessee shall execute and deliver an Addendum to Operating Lease (HUD Form 91116-ORCF) and any and all other documents required by HUD in connection with HUD’s approval of Sublessee as the operator of the Facility, in form and substance reasonably acceptable to Sublessee.

[Signatures on Following Pages]

IN WITNESS WHEREOF, this Sublease has been executed by Sublessor and Sublessee as of the date first written above.

SUBLESSOR :

2014 HUD MASTER TENANT, LLC
a Georgia limited liability company

By:		/s/ Brent Morrison
Name:		Brent Morrison
Title:		Manager

STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December , 2018, by Brent Morrison , the Manager of RMC HUD Master Tenant, LLC, a Georgia limited liability company, on behalf of the company.

		K N. Parker
		Notary Public

Commission
Expiration:	4/16/20

[Signature Page Continues]

SUBLESSEE :

SPRINGFIELD SNF, INC.,
an Ohio corporation

By:		/s/ Michael P. Slyk
Name:		Michael P. Slyk
Title:		President

STATE OF OHIO		:
		:	ss
COUNTY OF	Trumbull	:

The foregoing instrument was acknowledged before me this 30 day of, November , 2018, by Michael P. Slyk , the President of Springfield SNF, Inc., an Ohio corporation, on behalf of the corporation.

		Tracie a . Katzenberger
		Notary Public Tracie a . Katzenberger
Commission
Expiration:	6-26-2021

[Signature Page Continues]

LANDLORD :

WOODLAND MANOR PROPERTY HOLDINGS, LLC,
a Georgia limited liability company

By:		/s/ Brent Morrison
Name:		Brent Morrison
Title:		Manager

STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December , 2018, by Brent Morrison , the Manager of Woodland Manor Property Holdings, LLC, a Georgia limited liability company, on behalf of the company.

		K N. Parker
		Notary Public
Commission
Expiration:	4/16/20

The undersigned Guarantor hereby executes this Sublease for the sole purpose of becoming a party to and agreeing to Sections 2.6, 2.7, 3.4, 8.1, 14.5, 19.2 and 19.3.

GUARANTOR :

REGIONAL HEALTH PROPERTIES, INC.,
a Georgia corporation

By:		/s/ Brent Morrison
Name:		Brent Morrison
Title:		Interim CEO

STATE OF	Georgia	:
		:	ss
COUNTY OF	Gwinnett	:

The foregoing instrument was acknowledged before me this 3 ^rd day of December ,2018, by Brent Morrison , the Interim CEO of Regional Health Properties, Inc., a Georgia corporation, on behalf of the corporation.

		K N. Parker
		Notary Public
Commission
Expiration:	4/16/20

List of Exhibits


Exhibit A-1:	Legal Description

Exhibit A-2:	Sublessor Personal Property

Exhibit B:	Certain Definitions

Exhibit C:	Financial, Management and Regulatory Reports

Exhibit D:	Fair Market Reset Rent

Exhibit E:	Fair Market Value

Exhibit F:	Affiliated Subleases

Exhibit G:	Calculated Rent

Exhibit H:	Consulting Services Agreement

List of Schedules

Schedule 7.1: Licensed Beds

EXHIBIT “A- 1 ”

LEGAL DESCRIPTION

Real property in the City of Springfield, County of Clark, State of Ohio, described as follows:

Parcel I:

Lying in Section 20, Town 5, Range 10, City of Springfield, Moorefield Township, Clark County, Ohio.

Being all of that tract of land in the name of Woodland Manor Limited Partnership, an Ohio limited partnership, as deeded and described in Official Record Book 423, Page 345 of the Clark County records of deeds and being more particularly described as follows:

Beginning for reference at a PK nail set over a stone at the intersection of centerlines of Villa Road (100 feet wide) and Middle Urban Road (100 feet wide);

Thence, with the centerline of Villa Road, N 85° 34’ 25” W. a distance of 319.73 feet to a railroad spike set;

Thence, N 4 ° 24’ 08” E. 50.00 feet to a 5/8" iron rod set at the true point of beginning;

Thence, with the lines of the Eaglewood Villa, Ltd. 4.522 acre tract (Vol. 803, Page 795) the following thirteen courses:

N. 4° 24’ 08” E. a distance of 130.99 feet to a railroad spike set;

N. 31° 04’ 08” E. a distance of 47.50 feet to a PK nail set in a drill hole in concrete;

N. 58° 51’ 45” W. a distance of 82.58 feet to a point against the East wall of the Eaglewood Villa, Ltd. building, passing a 5/8” iron rod set at 80.58 feet;

N. 30° 58’ 34" E. with the East face of said wall, a distance of 47.00 feet to a point at an angle in the wall;

S. 59° 00’ 13" E. with a South face of the Eaglewood Villa, Ltd. wall, a distance of 43.89 feet to a point at an angle in the said wall;

N. 30° 59’ 47” E. a distance of 15.00 feet to a PK nail set in a drill hole in concrete passing the North wall of the Woodland Manor Limited Partnership building at 13.70 feet;

S. 59° 00’ 13" E. parallel and 1.30 feet North from a North wall of the Woodland Manor Limited Partnership building, a distance of 23.00 feet to a PK nail set in a drill hole in concrete;

N. 30° 59’ 47” E. parallel and 0.67 feet West from a West wall of the Woodland manor Limited Partnership building, a distance of 56.32 feet to a 5/8” iron rod set;

EXHIBIT “A- 1 ”

LEGAL DESCRIPTION - CONTINUED

N. 21° 37’ 11” W. a distance of 49.06 feet to a PK nail set in a concrete sidewalk;

With a curve to the right having a radius of 134.42 feet, a central angle of 43° 08’ 34” and a chord distance of 98.84 feet bearing N. 80° 38’ 28” E. an arc distance of 101.22 feet to a 5/8” iron rod set;

With a curve to the right having a radius of 234.00 feet, a central angle of 16° 37’ 25” and a chord distance of 67.65 feet bearing S. 69° 28’ 47” E. an arc distance of 67.89 feet to a 5/8” iron rod set;

With a curve to the right having a radius of 175.00 feet, a central angle of 23° 44’ 33” and a chord distance of 72.00 feet bearing S. 73° 02’ 10” E. an arc distance of 72.52 feet to a 5/8” iron rod set;

S. 84° 54’ 26” E. a distance of 13.81 feet to a 5/8” iron rod set, passing a 5/8” iron rod set at 3.81 feet;

Thence with the West line of the City of Springfield, Ohio’s 1.111 acres (Volume 305, Page 892), S. 5° 02’ 50” W. a distance of 319.58 feet to a 5/8” iron rod set;

Thence with the North lie of the City of Springfield, Ohio’s 1.111 acres N. 85° 34’ 25” W. a distance of 280.29 feet to the place of beginning;

Containing 2.128 acres o which 0.073 acre is within the street rights-of-way.

The basis for bearing is based upon the centerline of Middle Urban Road being S. 5° 02’ 50” W, and all other bearing are from angles and distances measured in a field survey by Lee Surveying and Mapping Company on June 22, 1993.

Description prepared by Jeffrey I. Lee, Professional Surveyor 6359, on June 21, 1993.

Parcel II:

Together with Easements as contained in Reciprocal Easement Agreement by and between Woodland Manor Property Holdings, LLC and Eaglewood Property Holdings, LLC, dated December 30, 2011 and recorded at Deed Book 1948, Page 2414, Clark County, Ohio, Records.

EXHIBIT A-2

SUBLESSOR PERSONAL PROPERTY

EXHIBIT “B”

CERTAIN DEFINITIONS

For purposes of this Sublease, the following terms and words shall have the specified meanings:

“Affiliated Subleases” shall mean those certain subleases identified on Exhibit “F” attached hereto between affiliates of Sublessor, as sublessors, and affiliates of Sublessee, as sublessees.

“Alterations” shall mean any additions, installations, substitutions or improvements to the Facility made or to be made by Sublessee after its acceptance of the Facility.

“Business” shall mean the business and operation of the Facility and all financial activities and other matters related thereto.

“Calculated Rent” shall mean during Months seven (7) through thirty-six (36) the amount set forth on Exhibit “G” attached hereto.

“CPI” shall mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items, Not Seasonally Adjusted, as published by the United States Department of Labor, Bureau of Labor Statistics of the United States Department of Labor. In the event such index is discontinued, comparable statistics in the purchasing power of the consumer dollar, as published at the time of said discontinuance by a responsible financial authority shall be selected at the Sublessor’s reasonable discretion and shall be used in lieu of such index.

“Debt Service Rent” shall mean the amount of $29,290.00.

“Exiting Operator” shall mean EW SNF, LLC d/b/a Eaglewood Care Center.

“Facility Mortgage” shall mean any mortgage, deed of trust or other security agreement or lien encumbering the Premises or any portion thereof and securing an indebtedness of Sublessor or any Affiliate of Sublessor with respect to the Facility, or any ground, building or similar Sublease or other title retention agreement to which the Premises or any portion thereof is subject from time to time.

“Facility Net Income” shall mean, for any period, the net income (or loss) of the Business.

“Facility Mortgagee” shall mean the holder or beneficiary of a Facility Mortgage and any other rights of the lender, credit party or lessor under the applicable Facility Mortgage Documents.

“Facility Mortgage Documents” shall mean with respect to each Facility Mortgage and Facility Mortgagee, the applicable Facility Mortgage, loan or credit agreement, Sublease, note, collateral assignment instruments, guarantees, indemnity agreements, bond documents and other documents or instruments evidencing, securing or otherwise relating to the Ioan made, credit extended, Sublease or other financing vehicle pursuant thereto with respect to the Facility.

“Hazardous Materials Claims” shall mean any and all enforcement, clean up, removal or other governmental or regulatory actions or orders pending, threatened, instituted or completed pursuant to any Hazardous Material Laws, together with all claims made, pending or threatened by any third party against any portion of the Premises, Sublessor or Sublessee relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials.

“Key Principals” shall mean Tim Chesney, Michael Slyk and Dan D’Amico.

“Operations Transfer Agreement” means that certain Agreement to Transfer Operations and Related Assets dated October 16, 2018 by and between, inter alios, Exiting Operator and Sublessee.

“Permitted Liens” shall mean (i) liens granted to Sublessor or any Affiliate of Sublessor, (ii) liens customarily incurred by Sublessee in the ordinary course of business for items not delinquent, (iii) liens for Taxes not yet due and payable, (iv) any lien, charge or encumbrance which is being contested in good faith pursuant to the terms of this Sublease, (v) all easements, liens, encumbrances, restrictions, agreements and other title matters existing as of the Execution Date, (vi) purchase money financing and capitalized equipment leases for the acquisition of personal property for any such financing where the original cost of the equipment financed exceeds $50,000 (except for bulk equipment financing which does not exceed $100,000 and except in the case of a facility van or bus there shall be no dollar limitation as long as the purchase or lease is usual and customary for skilled nursing facilities in the State of Ohio), (vii) any easement granted by Sublessor, in Sublessor’s discretion, at the request of Sublessee which is necessary to (A) obtain utilities or other services for the Facilities in the ordinary course of Sublessee’s business or (B) satisfy requests from local authorities in respect of, without limitation, township projects; (viii) liens that may be filed as a result of Sublessor’s acts or omissions; and (ix) liens granted to Sublessee’s working capital lender.

EXHIBIT “C”

FINANCIAL, MANAGEMENT AND REGULATORY REPORTS


REPORT	DUE DATE
Monthly financial reports concerning the Business at the Facility consisting of: (1) a reasonably detailed income statement showing, among other things, gross revenues; (2) total patient days; (3) Occupancy; and (4) payor mix. (All via e-mail to clinton.cain@regionalhealthproperties.com)	Forty-Five (45) days after the end of each calendar month
Monthly census reports concerning the Facility (via e-mail to clinton.cain@regionalhealthproperties.com) [To extent this information is contained in monthly financial reports it will not be necessary to provide duplication here]	Thirty (30) days after the end of each calendar month
Monthly accounts payable report concerning the Facility consisting of a list and aging report of all payables owed by the Facility to all parties (via e-mail to clinton.cain@regionalhealthproperties.com)	Thirty (30) days after the end of each calendar month
Quarterly litigation summaries of Sublessee to the extent that any such litigation is reasonably expected to result in a material adverse effect on Sublessee or the Facility and is not covered by insurance and diligently defended (via e-mail to clinton.cain@regionalhealthproperties.com)	Thirty (30) days after the end of each quarter of the fiscal year of Sublessee
Annual financial statements of Sublessee and each sublessee under the Affiliated Subleases compiled by a reputable certified public accounting firm (via e-mail to clinton.cain@regionalhealthproperties.com)	One hundred twenty (120) days after the fiscal year end of Sublessee
Regulatory reports with respect to the Facility to the extent that any such report or survey is reasonably expected to result in a material adverse effect on Sublessee or the Facility, as follows: (1) all federal, state and local licensing and reimbursement certification surveys, inspection and other reports received by Sublessee as to any portion of the Premises and any portion of the Business, including state department of health licensing surveys; (2) Medicare and Medicaid certification surveys; and	Ten (10) business days after receipt
(3) life safety code reports.


Reports of regulatory violations, by written notice of the following: (1) any material violation of any federal, state or local licensing or reimbursement certification statute or regulation, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility; (2) any material suspension, termination or restriction placed upon Sublessee or any portion of the Premises, the operation of any portion of the Business or the ability to admit residents or patients, which violation is not reasonably expected to be resolved in favor of Sublessee or the Facility within forty-five (45) days; or (3) any violation of any other permit, approval or certification in connection with any portion of the Premises or any portion of the Business, by any federal, state or local authority, including Medicare or Medicaid, to the extent that any such violation is reasonably expected to result in a material adverse effect on Sublessee or the Facility.		Seven (7) business days after receipt
Cost Reports for the Facility		Fifteen (15) days after filing
Monthly Balance Sheet of Sublessee		Thirty (30) days after the end of each calendar month
Annual Budget for the Facility		No later than January 1 of each calendar year
Accounts Receivable Aging by payor type for the Facility		Thirty (30) days after the end of each calendar month

EXHIBIT “D”

FAIR MARKET RESET RENT

1. If Sublessor and Sublessee are unable to agree upon the Fair Market Reset Rent within the applicable period provided in this Sublease, each party shall within ten (10) days after written demand by the other select one (1) MAI Appraiser to participate in the determination of Fair Market Reset Rent. Within ten (10) days after such selection, the MAI Appraisers so selected by Sublessor and Sublessee shall select a third MAI Appraiser (the “Third Appraiser”). In the event either Sublessor or Sublessee fails to select a MAI Appraiser within the time period set forth above, the MAI Appraiser selected by the other party shall alone determine the Fair Market Reset Rent as if it was the Third Appraiser.

2. The Third Appraiser, within ten (10) days after its appointment, shall (i) hear the Sublessor and Sublessee and their respective witnesses and MAI Appraisers, and each of Sublessor and Sublessee shall, upon the conclusion of both presentations, be required to simultaneously submit a proposal (the “Fair Market Reset Rent Proposal”) setting forth the party’s proposed determination of the Fair Market Reset Rent, and (ii) examine the records relating to the facility and such other documents and records as may, in its judgment, be necessary to determine Fair Market Reset Rent.

EXHIBIT “E”

FAIR MARKET VALUE

“Fair Market Value” means the fair market value of the Premises or applicable portion thereof on a specified date as agreed to by the parties, or failing such agreement within ten (10) days of such date, as established pursuant the following appraisal process. Each party shall within ten (10) days after written demand by the other party select one MAI Appraiser to participate in the determination of Fair Market Value. For all purposes under this Lease, the Fair Market Value shall be the fair market value of the Premises or applicable portion thereof unencumbered by this Lease. Within ten (10) days of such selection, the MAI Appraisers so selected by the parties shall select a third (3 ^rd ) MAI Appraiser. The three (3) selected MAI Appraisers shall each determine the Fair Market Value of the Premises or applicable portion thereof within thirty (30) days of the selection of the third appraiser. . Tenant shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Landlord shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Each party shall pay half the fees and expenses of the third MAI Appraiser selected by the respective MAI Appraisers selected by each of the parties.

EXHIBIT “ F”

AFFILIATED SUBLEASES

3. Sublease between RMC HUD Master Tenant, LLC and Greenfield SNF, Inc. regarding the certain 50-bed licensed and 50-bed Medicare and Medicaid certified Hearth & Care at Greenfield skilled nursing home located at 238 South Washington Street, Greenfield, Ohio 45123.

EXHIBIT “G”

CALCULATED RENT


Occupancy (%) Based on average occupancy for the prior calendar month using total number of licensed beds	Eaglewood Care Center Calculated Rent per month for months seven through thirty-six of the Initial Term
88%	$67,000.00
86%	$67,000.00
84%	$67,000.00
82%	$67,000.00
80%	$63,333.00
78%	$59,667.00
76%	$56,000.00
74%	$52,333.00
72%	$48,667.00
70%	$45,000.00
68%	$41,333.00
66%	$37,667.00
< 64%	$34,000.00

EXHIBIT “H”

[Attach copy of form of Consulting Services Agreement]

SCHEDULE 7.1: LICENSED BEDS

Ohio Department of Health: 113 licensed beds

Medicare and Medicaid: 99 certified beds

Exhibit 10.211

EXECUTION VERSION

GUARANTY

THIS GUARANTY (this “ Guaranty ”) is executed and effective as of December 1, 2018, by Regional Health Properties, Inc., a Georgia corporation (“ Guarantor ”), in favor of those entities listed on Exhibit A , attached hereto and incorporated herein (collectively, “ New Operators ”).

R E C I T A L S

A. New Operators and the entities listed on Exhibit B , attached hereto and incorporated herein (collectively, “ Current Operators ”), have entered into an Agreement to Transfer Operations and Related Assets, dated October 16, 2018 (the “ OTA ”), regarding the transfer of operations of the nursing facilities and/or residential care facility identified on Exhibit C , attached hereto and incorporated herein (collectively, the “ Facilities ”).

B. Guarantor is the owner or master tenant of the Facilities, and has derived substantial economic and other benefits from the execution, delivery, and performance of the OTA by the parties thereto.

C. Guarantor acknowledges that New Operators will not close the transactions contemplated under the OTA unless this Guaranty is executed and delivered by Guarantor.

D. Guarantor acknowledges that it has received and read the OTA.

E. Guarantor wishes to guaranty to New Operators the obligations of Current Operators under the OTA as set forth in this Guaranty.

NOW, THEREFORE , in consideration of the execution and delivery of the OTA and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor covenants and agrees as follows:

1. DEFINITIONS . Defined terms used in this Guaranty and not otherwise defined herein have the meanings assigned to them in the OTA.

2. COVENANTS .

(a) Guarantor absolutely, unconditionally, and irrevocably agrees to timely and fully satisfy, and guaranties: (i) the full and timely payment of all Monetary Obligations (as such term is defined below) of Current Operators under the OTA and all other amounts required to be paid by Guarantor hereunder up to a maximum of Eight Million and 00/100 Dollars ($8,000,000.00); and (ii) with respect to obligations of Current Operators under the OTA that are not Monetary Obligations, to use commercial best efforts to satisfy the full, timely, and complete performance of all covenants, terms, conditions, obligations, indemnities, and agreements whatsoever to be performed by Current Operators under the OTA (to the extent not timely and fully performed by

Current Operators) and by Guarantor hereunder (all of the obligations described in clauses (i) and (ii) above are collectively referred to herein as the “ Obligations ”). Guarantor will , as provided in this Guaranty , prom ptly and fully pay, perform, and discharge all outstanding Obligations in accordance with its obligations under this Section 2(a) ; provided, however, that Guarantor shall be released from liability with respect to , and only with respect to, a claim for Obligations by New Operators to Guarantor for which any applicable statute of limitations has lapsed with respect thereto (an “ Excluded Claim ”) , and in such event any release from liability with respect to an Excluded Claim shall not in any respect or at any time release Guarantor from any other liability hereunder. For purposes of this Guaranty, a “ Monetary Obligation ” means any Damages suffered , incurred, or paid by New Operator s under or pursuant to the OTA or hereunder and all reasonable costs and expenses of collection with respect thereto , including, without limitation, the imposition of any Excluded Liabilities against New Operator s . For the avoidance of doubt, the term Monetary Obligation does not include any unaccrued, unliquidated, unmatured, unascertainable, contingent, or other unknown amounts ; provided, however, that if and when such amounts are (i) accrued, liquidated, matured, ascertainable, non-contingent, or known , and/ or (ii) suffered or incurred by New Operators , then such amounts shall be considered Monetary Obligations . Notwithstanding anything to the contrary contained her ein, Guarantor acknowledges and agrees that neither the immediately preceding sentence, nor any other provision in this Guaranty, shall be interpreted as limiting the Damages or remedies to which New Operators would be entitled pursuant to any Action (as hereinafter defined) commenced by New Operators against Guarantor in connection with any default hereunder by Guarantor .

(b) Guarantor acknowledges and agrees that (i) any action, suit, or proceeding of any kind or nature whatsoever (an “ Action ”) commenced by New Operators against Guarantor to collect any Monetary Obligations shall not prejudice in any way New Operators’ rights to collect any such Monetary Obligations due for any subsequent period in any subsequent Action; (ii) New Operators shall join Guarantor in any Action against Current Operators in connection with or based upon any of the Obligations not timely and fully satisfied as provided herein; (iii) to the extent Current Operators fail to timely and fully satisfy any of their Obligations under the OTA, New Operators may seek and obtain full recovery against Guarantor with respect to such Obligations, as provided in this Guaranty; and (iv) Guarantor will be conclusively bound by a judgment entered in any Action in favor of New Operators against Current Operators wherein Guarantor has been joined to or otherwise named in such an Action, irrespective of whether or not Guarantor participates in such Action.

(c) Guarantor agrees that, in the event of the rejection or disaffirmance of the OTA by Current Operators or Current Operators’ trustee in bankruptcy, pursuant to bankruptcy law or any other law affecting creditors’ rights, Guarantor will, if New Operators so request and unless prohibited by applicable law, assume promptly all obligations and liabilities of Current Operators under the OTA, to the same extent as if Guarantor were a party to such document and there had been no such rejection or disaffirmance. In such event, Guarantor will promptly confirm such assumption, in writing, at the request of New Operators upon or after such rejection or disaffirmance.

3. UNCONDITIONAL NATURE OF OBLIGATIONS .

(a) This Guaranty is an absolute, unconditional, and irrevocable guaranty of payment and of performance, and shall be enforceable against Guarantor, without the necessity of the commencement by New Operators of any Action against Current Operators; provided, however, that with respect to any Obligations that are Obligations of one or more Current Operators under the OTA that have not been timely and fully paid or performed by Current Operators, as determined by New Operators (the “ Delinquent Current Operator Obligations ”), prior to Guarantor becoming obligated hereunder to timely and fully satisfy such Delinquent Current Operator Obligations, New Operators shall give Guarantor notice of the existence of such Delinquent Current Operator Obligations (the “ Notice ”), and Guarantor shall timely and fully pay, perform, or otherwise satisfy, without objection or delay, all such Delinquent Current Operator Obligations within thirty (30) days of New Operators providing the Notice. The failure of New Operators to provide the Notice to Guarantor shall only suspend Guarantor’s obligation to satisfy the underlying Delinquent Current Operator Obligations until whenever, if at all, the Notice is provided, and such failure or delay by New Operators to provide the Notice shall not invalidate, cancel, or terminate this Guaranty. The obligations of Guarantor hereunder are independent of, and may exceed, the obligations of Current Operators.

(b) This Guaranty is a continuing guaranty and will remain in full force and effect notwithstanding: (i) any renewals, extensions, modifications, alterations, or amendments of the OTA, provided that Guarantor consented in writing, which consent shall not be unreasonably withheld or delayed; (ii) any releases or discharges of Current Operators; (iii) New Operators’ failure or delay to assert any claim or demand or to enforce any of its rights against Current Operators, except as otherwise specifically provided herein; (iv) any extension of time that may be granted by New Operators to Current Operators; (v) any assignment or transfer of all or any part of Current Operators’ interest under the OTA (whether by Current Operators, by operation of law, or otherwise); (vi) any other dealings or matters occurring between New Operators and Current Operators; (vii) the taking by New Operators of any additional guaranties, or the receipt by New Operators of any collateral, from Current Operators or any other Persons; (viii) New Operators’ release of any security or waiver of rights provided under the OTA; (ix) any assumption by any Person of any or all of Current Operators’ obligations under the OTA, or Current Operators’ assignment of any or all of its rights and interests under the OTA; (x) the existence, non-existence, or lapse at any time of Current Operators as legal entities or the existence, non-existence, or termination of any corporate, ownership, business or other relationship between Current Operators and Guarantor; (xi) any assignment by New Operators of either or both of this Guaranty and the OTA; (xii) the solvency or lack of solvency of Current Operators and/or Guarantor at any time or from time to time; or (xiii) any other cause, whether similar or dissimilar to any of the foregoing, that might constitute a legal or equitable discharge of Guarantor (whether or not Guarantor shall have knowledge or notice thereof) other than the timely payment and performance in full of the Obligations or as otherwise specifically provided herein. Without in any way limiting the generality of the foregoing, Guarantor specifically agrees that (A) if Current Operators’ obligations under the OTA are modified or amended pursuant to a fully-executed amendment to the OTA (an “ OTA Amendment ”), this Guaranty shall extend to such obligations after New Operators provide to Guarantor, or Guarantor otherwise receives, a copy of the OTA Amendment, provided that Guarantor has consented to such amendment as set forth in Section 3(b)(i) of this Guaranty; and (B) this Guaranty shall be

applicable to any obligations of Current Operators arising in connection with a ny termination of the OTA , whether voluntary or otherwise. For pur poses of this Guaranty and the O bligations, “ Current Operators ” shall be deemed to include any and all successors and assignees of Current Operators under the OTA , as fully as if any of the same were the named Current Operators under the OTA .

(c) Guarantor hereby expressly agrees that the validity of this Guaranty and the Obligations shall in no way be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by New Operators against Current Operators, of any of the rights or remedies reserved to New Operators pursuant to the provisions of the OTA or by relief of Current Operators from any of Current Operators’ obligations under the OTA or otherwise by (i) the release or discharge of Current Operators in any state or federal creditors’ proceedings, receivership, bankruptcy or other proceeding; (ii) the impairment, limitation, or modification of the liability of Current Operators in bankruptcy, or of any remedy for the enforcement of Current Operators’ liability under the OTA, resulting from the operation of any present or future provision of the United States Bankruptcy Code (11 U.S.C. § 101 et seq., as amended), or from the order of any court; or (iii) the rejection, disaffirmance or other termination of the OTA in any such proceeding. This Guaranty shall continue to be effective if at any time the payment of any amount due under the OTA or this Guaranty is rescinded or must otherwise be returned by New Operators for any reason, including, without limitation, the insolvency, bankruptcy, liquidation or reorganization of Current Operators, Guarantor, or otherwise, all as though such payment had not been made, and, in such event, Guarantor shall pay to New Operators an amount equal to any such payment that has been rescinded or returned.

4. WAIVERS .

(a) Except as otherwise specifically provided herein, Guarantor irrevocably waives (i) notice of acceptance of this Guaranty, protest, demand and dishonor, presentment, and demands of any kind now or hereafter provided for by any Legal Requirement, (ii) notice of any actions taken by New Operators or Current Operators under the OTA or any other agreement or instrument relating thereto, (iii) notice of any and all defaults by Current Operators in the payment of any sums, charges, or amounts under the OTA, (iv) all other notices, demands and protests in connection with the enforcement of the Obligations, omission of or delay in which, but for the provisions of this Section 4 , might constitute grounds for relieving Guarantor of its Obligations, and (v) any requirement that New Operators exhaust any right or take any action against Current Operators or any other Person.

(b) GUARANTOR IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PERSON WITH RESPECT TO ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH: THIS GUARANTY; THE OTA; ANY LIABILITY OR OBLIGATION OF CURRENT OPERATORS IN ANY MANNER RELATED TO THE FACILITIES; ANY CLAIM OF INJURY OR DAMAGE IN ANY WAY RELATED TO THE OTA AND/OR THE FACILITIES; ANY ACT OR OMISSION OF CURRENT OPERATORS, THEIR AGENTS OR EMPLOYEES; OR ANY ASPECT OF THE USE OR OCCUPANCY OF, OR THE CONDUCT OF BUSINESS IN, THE FACILITIES. GUARANTOR PERMANENTLY WAIVES ANY AND ALL DEFENSES AGAINST ANY CLAIM ASSERTED BY NEW OPERATORS OR IN

ANY SUIT OR ACTION INSTITUTED BY NEW OPERATORS TO ENFORCE THIS GUARANTY. IN ADDITION, GUARANTOR WAIVES ANY AND ALL RIGHTS WHICH ARE WAIVED BY CURRENT OPERATORS UNDER THE OTA, IN THE SAME MANNER AS IF ALL SUCH WAIVERS WERE FULLY RESTATED HEREIN. THE LIABILITY OF GUARANTOR UNDER THIS GUARANTY IS UNCONDITIONAL AND SHALL NOT BE DIRECTLY OR INDIRECTLY CHALLENED OR DISPUTED AT ANY TIME WHATSOEVER OR IN ANY WAY BY GUAR AN TOR OR ANY AGENT OR ATTORNEY OF GUARANTOR.

(c) Guarantor expressly, unconditionally, and permanently waives any and all rights to any and all defenses, objections, or justifications or excuses for nonpayment or late payment hereunder whatsoever, including, but not limited to, those arising directly or indirectly by reason of (i) any “one-action” or “anti-deficiency” law or any other law that may prevent New Operators from bringing any action, including a claim for deficiency, against Guarantor before or after New Operators’ commencement or completion of any action against Current Operators; (ii) any disability, insolvency, bankruptcy, lack of authority or power, death, insanity, minority, dissolution, or other defense of Current Operators, of any other guarantor, or of any other Person, or by reason of the cessation of Current Operators’ liability from any cause whatsoever, other than full, timely, and final payment in legal tender and performance of the Obligations; (iii) any change in the relationship between Guarantor and Current Operators or any termination of such relationship; (iv) any irregularity, defect, or unauthorized action by any or all of New Operators, Current Operators, any other guarantor or surety, or any of their respective officers, directors, or other agents in executing and delivering any instrument or agreements relating to the Obligations or in carrying out or attempting to carry out the terms of any such agreements; (v) any assignment, endorsement or transfer, in whole or in part, of the Obligations; (vi) provided that New Operator complies with the terms of this Guaranty, the benefits of any and all Legal Requirements applicable in the State of Ohio which may require the prior or concurrent joinder of any other party to any action on this Guaranty; (vii) any release or other reduction of the Obligations arising as a result of the sale, transfer, lease, expansion, downsizing, closing, or destruction of the Facilities; (viii) any default or breach by New Operators under the OTA or any lease, sublease, contract, or other oral or verbal agreement whatsoever with Guarantor and/or any other Person whatsoever; (ix) any neglect, delay, omission, failure or refusal of New Operators to take or prosecute any action for the collection or enforcement of any of the Obligations; or (x) any change in law or any change in market or economic conditions.

(d) Notwithstanding any agreement between New Operators and Current Operators or any defenses, rights, and/or remedies to which Current Operators are, or may be, entitled under the OTA, Guarantor expressly and permanently waives all of the following items that are contained in, or relate to, the OTA: (i) all defenses against liability or responsibility for any obligations, payments, indemnification, or other matters, as set forth in the OTA; and (ii) any limitations, restrictions, or “caps” on Damages, remedies, or indemnification. Accordingly, Guarantor expressly acknowledges and agrees that: (A) none of the provisions of Section 7 of the OTA (including, but not limited to, any representations, warranties, statements, waivers, or disclaimers therein) are applicable in any way to this Guaranty or shall serve as a defense to Guarantor with respect to the payment or performance of any of the Obligations or limit, restrict, or prevent New Operators’ ability to recover all Damages and obtain all remedies to which New Operators are entitled at law or in equity; (B) none of the survival or time limits, knowledge

qualifiers, materiality qualifiers, or any similar qualifications or limits as to representation s , warranties, covenants, and indemnification, including, but not limited to, the provisions in Section 15.1 of the OTA , are applicable in any way to this Guaranty or shall serve as a defense to Guarantor with respect to the payment or performance of any of the Obligations or limit, restrict, or prevent New Ope rators’ ability to recover all D amages and obtain all remedies to which New Operators are entitled at law or in equity ; and (C) none of the limitatio ns and waivers with respect to D amages, including, but not limited to, the provisions of Section 14.2(b) of the OTA, are applicable in any way to this Guarantor or shall serve as a defense to Guarantor with respect to the payment or performance of any of the Obligations or limit, restrict, or prevent New Ope rators’ ability to recover all D amages and obtain all remedies to which New Operators are entitled at law or in equity . Guarantor agrees to not assert or attempt to assert any defenses of Current Operator under the OTA at any time or in any circumstance with respect to this Guaranty or any matters, claims, or suits arising from this Guaranty. Guarantor acknowledges and agrees that it is a fundamental understanding and agreement of Guarantor and New Operators that if New Operators incur at any time whatsoever any Damages relating to any matters or Liabilities pertaining to the Facilities, Current Operators, or Guarantor , in whole or in part before the Effective Time, t hat Guarantor shall reimburse, pay, and/or satisfy all such Damages , provided that such Damages constitute Monetary Obligations within the meaning of this Guaranty, when and as provided herein and subject to the limitations herein , wi thout directly or indirectly , contesting, challenging, delaying, or objecting thereto .

5. REPRESENTATIONS AND WARRANTIES . Guarantor represents, warrants, and certifies to New Operators as follows:

(a) Guarantor has all requisite power and authority to enter into and pay, perform, and satisfy the Obligations under this Guaranty, and this Guaranty is valid and binding in all respects upon and enforceable in all respects against Guarantor without the requirement of further action or condition. Copies of all Consents required by all applicable Legal Requirements, all applicable lenders, and the organizational or governing documents of Guarantor in connection with Guarantor’s execution, delivery, and performance of this Guaranty are attached hereto and incorporated herein as Schedule 5(a) . Other than the Consents attached hereto at Schedule 5(a) , there are no Consents required for Guarantor to execute, deliver, and perform this Guaranty. Guarantor is permitted in all respects by all applicable Legal Requirements and all lenders, and has obtained all requisite corporate and governing body approval, to execute, delivery, and perform this Guaranty. The Person executing this Guaranty on behalf of Guarantor is a duly elected or appointed officer of Guarantor with all requisite authority to execute this Guaranty in such capacity, as documented in the Consents attached hereto at Schedule 5(a) .

(b) The execution, delivery, and performance by Guarantor of this Guaranty does not and will not (i) contravene any applicable Legal Requirements, the organizational or governing documents of Guarantor, any order, writ, injunction, decree applicable to Guarantor, or any contractual restriction binding on or affecting Guarantor or any of its properties or assets, or (ii) result in or require the creation of any lien, security interest, or other charge or encumbrance upon or with respect to any of its properties or assets.

(c) There is no P roceeding pending or threatened against or otherwise affecting Guara ntor before any court or other Governmental A uthority or any arbitrator that could affect in any manner whatsoever Guarantor’s ability to fully and timely perform the O bligations under this Guaranty.

(d) Guarantor’s principal place of business is 454 Satellite Boulevard, NW,
Suite 100, Suwanee, Georgia 30024.

(e) Guarantor shall derive significant financial and other advantages and benefits, directly or indirectly, from the OTA and the payment and performance of the Obligations. Guarantor expressly, permanently, and unconditionally waives any defenses hereto relating to lack or insufficiency of consideration, and acknowledges and agrees that this Guaranty is fully enforceable against Guarantor.

(f) Guarantor hereby acknowledges that New Operators will be relying in all respects upon Guarantor’s guaranty, representations, warranties, and covenants contained herein. Guarantor further acknowledges that New Operators have invested and incurred a significant amount of money, time, attorney and accountant fees, due diligence costs, and resources in reliance upon such guaranty, representations, warranties and covenants contained herein and that any breach or default under any such guaranty, representations, warranties, and covenants contained herein will absolutely result in significant and substantial Damages being incurred by New Operators that Guarantor shall pay, as provided herein.

(g) Guarantor has the financial wherewithal to timely and fully satisfy all Obligations, as provided herein. Guarantor warrants to New Operators in connection with this Guaranty that the financial statements set forth in Exhibit D to this Guaranty are true and correct as of the applicable date(s) or period(s) provided therein and fairly and accurately represent the financial condition of Guarantor as of the respective date(s) thereof.

6. NOTICES . Any consents, notices, demands, requests, approvals, or other communications given under this Guaranty shall be in writing and shall be given as provided in the OTA, as follows or to such other addresses as either New Operators or Guarantor may designate by written notice given to the other:


If to Guarantor:	If to New Operators:
Regional Health Properties, Inc. 454 Satellite Boulevard, NW, Suite 100 Suwanee, Georgia 30024 Attn: Brent Morrison, CFA E-mail: Brent.Morrison@regionalhealthproperties.com	c/o MSTC Development, Inc. 556 Niles Cortland Rd, SE Warren, Ohio 44484 Attn: Daniel J. D’Amico, Jr. E-mail: ddamico@mstcinc.com
With a copy to: Alston & Bird LLP 1201 West Peachtree Street Atlanta, Georgia 30309 Attn: William S. Sugden, Esq. Email: Will.Sugden@alston.com	With a copy to: Rolf Goffman Martin Lang LLP 30100 Chagrin Boulevard, Suite 350 Cleveland, Ohio 44124 Attn: Ira S. Goffman, Esq. Email: Goffman@RolfLaw.com

7. CONSENT TO JURISDICTION . Guarantor hereby (a) consents and submits to the jurisdiction of the courts of the State of Ohio and the federal courts sitting in the State of Ohio with respect to any dispute or matter arising, directly or indirectly, out of this Guaranty, and (b) waives any and all objections which the undersigned may have to the laying of venue in any suit, action or pr oceeding in any such court . Guarantor hereby acknowledges and agrees that New Operators may obtain personal jurisdiction and perfect service of process through any means now or hereafter permitted by applicable law. Nothing above shall limit New Operators ’ choice of forum for purposes of enforcing this Guaranty.

8. ADDITIONAL COVENANTS .

(a) Guarantor shall provide New Operators with all of the same information and documents that Guarantor or any of the other Credit Parties (as defined in the Loan Agreement (as hereinafter defined)) is obligated to deliver pursuant to Sections 10.2, 10.3, and 10.4 of the Loan Agreement, within the time frames provided therein (the “ Reporting Disclosures ”). Sections 10.2, 10.3, and 10.4 of the Loan Agreement, which contain the Reporting Disclosures, are reproduced in Exhibit E to this Guaranty. Upon the delivery by Guarantor to New Operators of any Reporting Disclosures, Guarantor shall be deemed to automatically represent and warrant to New Operators that such Reporting Disclosures are true, accurate, and complete in all material respects, present fairly the results of operations of Guarantor for the respective periods covered thereby, and reflect accurately the books and records of account of Guarantor as of such dates and for such periods in all respects.

(b) Guarantor, without any objection or delay whatsoever, shall make any and all payments due hereunder within thirty (30) days after New Operators’ demand therefor and Guarantor becoming liable therefor, in immediately available funds by wire transfer to a bank account designated by New Operators, unless New Operators agree in writing to another method of payment. If Guarantor does not pay any amount due hereunder on or before its due date, Guarantor shall pay, on demand, interest at the rate of seven percent (7%) per annum on the amount due for a period ending on the full payment of such amount, including the day of repayment. Furthermore, in the event that Guarantor fails to timely pay, perform, or satisfy any of the Obligations, or breaches or defaults under this Guaranty in any manner whatsoever, Guarantor acknowledges that New Operators will incur significant Damages and that Guarantor shall be solely responsible, and obligated to New Operators, for all such Damages, including all reasonable costs of collection and reasonable attorney fees incurred by New Operators. Notwithstanding the foregoing, in the event that certain Obligations are owed to a Third Party Payor or Governmental Authority and New Operators have not incurred any Damages with respect thereto (the “ Payor Obligations ”) and such Third Party Payor or Governmental Authority permits (without New Operators incurring any Damages) the Payor Obligations to be paid or satisfied over time (an “ Approved Payment Plan ”), then Guarantor shall be entitled to satisfy such Payor Obligations by participating in the Approved Payment Plan. As long as Guarantor timely and fully complies with all terms, conditions, and obligations of such Approved Payment Plan, then Guarantor shall not be deemed to be in default hereunder with respect to such Payor Obligations, but if Guarantor does breach or default under the Approved Payment Plan, then the full amount of such outstanding Payor Obligations (including all late fees, interest charges, and penalties with respect thereto) shall be immediately paid by Guarantor directly to the applicable Third Party Payor or Governmental Authority.

(c) Guarantor shall not directly or indirectly commit, or have incurred , a default or event of default under the terms (including any and all representations, warranties, and affirmative and negative covenants) of any borrowed money loan Guarantor has incurred or hereafter may incur, including, without limitation, that certain Loan Agreement , dated February 15, 2018 (the “ Loan Agreement ”), by and among CP Property Holding s , LLC, Northwest Property Holdings, LLC , and Attalla Nur sing ADK, LLC, as b orrowers; Hea rth & Home of Ohio, Inc., as a g uarantor; Adcare Property Holdings, LLC, as a guarantor and b orrower; Guarantor, as a g uarantor; a nd Pineco ne Realty Partners II, LLC, as l ender (collectively, a “ Borrowed Money Loan ”); provided however, that if a default or event of default shall have occurred under a Borrowed Money Loan and the lender therein shall have agreed to forebear from the exercise of remedies or otherwise shall not have accelerated monetary obligations under such Borrowed Money Loan with respect to such default or event of default , then Guarantor shall be deemed to be in compliance with the covena nt set forth in this Section 8(c ) , but only with respect to such default or event of default under such Borrowed Money Loan .

(d) Guarantor shall provide prompt written notice to New Operators of any breaches, defaults, facts, circumstances, occurrences, or events that could or do lead to or result in a default hereunder or under any Borrowed Money Loan, or in any way adversely impact Guarantor’s ability to timely and fully satisfy the Obligations.

(e) Guarantor acknowledges that the applicable Current Operator did not satisfy its legal obligation of providing at least ninety (90) days prior written notice (the “ Waiver Program Notice ”) to the residents of any Facilities participating in the Waiver Program, the Ohio Department of Aging, and the applicable Area Agency on Aging of such Current Operator’s intent to cease providing services under the Waiver Program at such Facilities as of the Closing Date. As a result, Guarantor agrees to indemnify and hold harmless New Operators from and against any Damages whatsoever incurred or suffered by New Operators arising out of the failure of the applicable Current Operator to timely provide the Waiver Program Notice, including, but not limited to, reimbursing on demand and without objection New Operators for any lost revenue, funds, or payments resulting directly or indirectly from any delay in the effective date of the applicable New Operator’s provider agreement/enrollment in the Waiver Program beyond the Closing Date.

9. MISCELLANEOUS .

(a) Guarantor agrees that New Operators may, upon written notice to Guarantor, assign this Guaranty in whole or in part. If New Operators dispose of their interest in the OTA, “New Operators,” as used in this Guaranty, shall mean New Operators’ successors and assigns; provided that New Operators shall have complied with the terms and limitations of this Guaranty.

(b) The provisions, covenants and guaranties of this Guaranty shall be binding upon Guarantor and its successors, legal representatives and assigns, and shall inure to the benefit of New Operators and its successors and assigns, and shall not be deemed waived or modified unless such waiver or modification is specifically set forth in writing, executed by New Operators or its successors and assigns, and delivered to Guarantor.

(c) Without the prior written consent of New Operators, which consent shall not be unreasonably withheld, Guarantor shall in no event transfer or assign , in whole or in part, this Guaranty or any of its obligations hereunder, directly or indirectly, by operation of law or otherwise (including, without limitation, through a change in control , a merger , a consolidation, a reverse merger , or a sale of substantially all of its assets ) (collectively, a “ Transfer Event ” ) .

(d) Guarantor, without objection or delay, promises to fully pay all reasonable costs of collection or enforcement incurred by New Operators in exercising any remedies resulting from a default hereunder by Guarantor.

(e) If any legal action or proceeding is commenced to interpret or enforce the terms of, or obligations arising out of, this Guaranty, or to recover Damages for the breach thereof, the party prevailing in any such action or proceedings shall be entitled to recover from the non-prevailing party all attorney fees and reasonable costs and expenses incurred by the prevailing party.

(f) If any portion of this Guaranty shall be deemed invalid, unenforceable, or illegal for any reason, such invalidity, unenforceability, or illegality shall not affect the balance of this Guaranty, which shall remain in full force and effect to the maximum permitted extent.

(g) From time to time upon the request of New Operators, Guarantor shall promptly and duly execute, acknowledge, and deliver any and all such further instruments and documents reasonably necessary for the continuing effectiveness of this Guaranty.

(h) This Guaranty cannot be amended, modified, waived, changed, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of such amendment, modification, waiver, change, discharge or termination is sought. No waiver shall be applicable except in the specific instance for which given.

(i) No course of dealing and no delay or failure of any party in exercising any right, power, or privilege under this Guaranty or the OTA shall affect any other or future exercise thereof or exercise of any other right, power, or privilege; nor shall any single or partial exercise of any such right, power, or privilege or any abandonment or discontinuance of steps to enforce such a right, power, or privilege preclude any further exercise thereof or of any other right, power or privilege.

(j) Whenever the words “include”, “includes”, or “including” are used in this Guaranty, they shall be deemed to be followed by the words “without limitation”, and, whenever the circumstances or the context requires, the singular shall be construed as the plural, the masculine shall be construed as the feminine and/or the neuter and vice versa. This Guaranty shall be interpreted and enforced without the aid of any canon, custom, or rule of law requiring or suggesting construction against the party drafting or causing the drafting of the provision in question. This provisions of this Guaranty accurately reflect the intentions of Guarantor.

(k) Each of the rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law or in the OTA or this Guaranty.

(l) The provisions of this Guaranty shall be governed by and interpreted solely in accordance with the laws of the State of Ohio , without giving effect to the principles of conflicts of law.

(m) The Recitals set forth above are hereby incorporated by this reference and made a part of this Guaranty. Guarantor hereby represents and warrants that the Recitals are true and correct.

(n) Any signature hereon transmitted electronically by, for example, e-mail or facsimile, shall in all respects have the same effect as an original signature.

(o) The section headings herein shall have no legal meaning and are intended for convenience of reference only.

(p) This Guaranty sets forth the entire agreement and understanding between Guarantor and New Operators with respect to the Obligations and supersedes any and all prior agreements and understandings with respect thereto.

[Signature Page Follows]

IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and year first above written, and upon and at all times after such execution, Guarantor acknowledges, confirms, and certifies its full and unequivocal agreement, in all respects whatsoever, to all provisions of this Guaranty, including, but not limited to, all schedules and exhibits attached hereto and/or referenced herein.


GUARANTOR:
Regional Health Properties, Inc., a Georgia corporation
By:
Name:
Title:

Exhibit A

NEW OPERATORS

Miami Cov SNF, Inc., an Ohio corporation

Greenfield SNF, Inc., an Ohio corporation

Springfield SNF, Inc., an Ohio corporation

Sidney SNF, Inc., an Ohio corporation

Springfield Clark ALF, Inc, an Ohio corporation

Exhibit B

CURRENT OPERATORS

CC SNF, LLC, a Florida limited liability company

HC SNF, LLC, a Florida limited liability company

EW ALF, LLC, a Florida limited liability company

PV SNF, LLC, a Florida limited liability company

EW SNF, LLC, a Florida limited liability company

Exhibit C

FACILITIES

Covington Care Center

75 Mote Drive

Covington, Ohio 45318

Hearth & Care of Greenfield

238 South Washington Street

Greenfield, Ohio 45123

Eaglewood Care Center

2000 Villa Road

Springfield, Ohio 45503

The Pavilion

705 Fulton Street

Sidney, Ohio 45365

Eaglewood Village

3001 Middle Urbana Road

Springfield, Ohio 45502

Exhibit D

FINANCIAL STATEMENTS

(see attached)

Exhibit E

REPORTING DISCLOSURES

10.2 Notice of Litigation and Other Matters . Each Credit Party shall promptly, and in any event within three (3) Business Days after such Credit Party or any Authorized Officer of such Credit Party obtains knowledge thereof, provide telephonic and written Notice to Lender and each Lender of:

(a) the commencement of all litigation, proceedings and investigations, including those by or before any Governmental Authority, and all actions and proceedings in any court or before any arbitrator against or involving any RHP Party or any of its properties, assets or businesses, which could reasonably be expected to have a Material Adverse Effect;

(b) any notice of any violation received by any RHP Party from any Governmental Authority including any notice of violation of Healthcare Laws, Environmental Laws or any other Legal Requirements which in any such case could reasonably be expected to have a Material Adverse Effect;

(c) any labor controversy that has resulted in, or threatens to result in, a strike or other work stoppage against any Healthcare Facility;

(d) any attachment, judgment, lien, levy or order exceeding $25,000.00 that may be assessed against any RHP Party excluding judgments that are fully covered by insurance;

(e) the occurrence of any “reportable event” (as defined in ERISA) which might result in the termination by the PBGC of any employee benefit plan (“ Plan ”) covering any officers or employees of any Credit Party, any benefits of which are, or are required to be, guaranteed by the PBGC, (y) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor or (z) its intention to terminate or withdraw from any Plan;

(f) the occurrence of any Default or Event of Default;

(g) (i) any default under or termination of a Material Contract, or (ii) the assertion of any Intellectual Property Claim, if an adverse resolution could have a Material Adverse Effect;

(h) any material Environmental Release by any RHP Party or on any property owned, leased or occupied by an RHP Party; or receipt of any Environmental Notice;

(i) the discharge of or any withdrawal or resignation by any RHP Party’s certified independent accountants;

(j) any other material adverse change in the business, Collateral, property, assets, prospects, operations or condition, financial or otherwise, of any RHP Party;

(k) promptly after any material property owned or used by any RHP Party is (i) materially damaged or destroyed, or suffers any other material loss, or (ii) is condemned, confiscated or otherwise taken, in whole or in part, or the use thereof is otherwise diminished so as to render impracticable or unreasonable the use of such asset or property for the purpose to which such property was used immediately prior to such condemnation, confiscation or taking, by exercise of the powers of condemnation or eminent domain or otherwise, and in either case the amount of the damage, destruction, loss or diminution in value of the Collateral not covered by insurance equals or exceeds $25,000.00 (collectively, a “ Casualty Loss ”);

(l) (i) the receipt of any notice or request from any Governmental Authority or Government Reimbursement Program regarding any liability or claim of liability, (ii) any pending, threatened or actual investigation or survey of any RHP Party or any Operator or their directors, officers or managing employees by any Government Reimbursement Program, or any nongovernmental payor programs, (iii) any RHP Party or any Operator becoming a party to a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services, (iv) any RHP Party or any Operator becoming subject to reporting obligations pursuant to any settlement agreement entered into with any Governmental Authority, (v) any RHP Party or any Operator becoming the subject of any government payor program investigation conducted by any federal or state enforcement agency, (vi) any RHP Party or any Operator becoming a defendant in any qui tam/False Claims Act litigation, (vii) any RHP Party being served with or received any search warrant, subpoena, civil investigative demand or contact letter by or from any federal or state enforcement agency relating to an investigation, (viii) any RHP Party becoming subject to any written complaint filed with or submitted to any Governmental Authority having jurisdiction over such RHP Party or filed with or submitted to such RHP Party pursuant to their policies relating to the filing or submissions of such types of complaints, from employees, independent contractors, vendors, physicians, or any other Person that would indicate that such RHP Party has violated any Law;

(m) Credit Parties shall, by the fifth (5 ^th ) day of each calendar month (but the twentieth (20 ^th ) day of each calendar month for operating surveys), provide copies of all cost reports, operating surveys, rate reports, rate computation reports, licensing reports, deficiency notices, recoupment orders or similar reports from any Government Reimbursement Program, each together with true and correct copies thereof, received for the prior calendar month; provided , however , that any Citation shall be provided to Lender within one (1) Business Day after the receipt thereof. Notwithstanding the above provisions of this paragraph, upon the occurrence of an Event of Default, without limitation on any other rights or remedies, Lender may require delivery of all such reports and other items upon receipt or at such other times as Lender designates; and

(n) Copies of all reports and notices provided or to be provided by any Operator to any RHP Party under any of the Operating Leases.

10.3 Financial Statements, Compliance Certificates and Projections . The RHP Guarantor will furnish, or cause to be furnished, to Lender:

(a) Annual Financial Statements . As soon as available, and in any event within 120 days after the close of each fiscal year of the RHP Guarantor, a Form 10-K as required to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the Exchange Act, which includes financial information required by such Form 10‑K, such financial information to be in reasonable form and detail and audited by KPMG LLP or another independent registered public accounting firm of recognized national standing reasonably acceptable to the Lender and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified in any respect

(b) Quarterly Financial Statements . As soon as available, and in any event within 60 days after the close of each of the first three fiscal quarters of the RHP Guarantor, a Form 10‑Q as required to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the Exchange Act, which includes the financial information required by such Form 10‑Q, such financial information to be in reasonable form and detail and accompanied by a certificate of the chief financial officer or treasurer of the RHP Guarantor to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the RHP Guarantor and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments.

(c) Officer’s Certificate . At the time of delivery of the financial statements provided for in clauses (a) and (b) above, a certificate of an Authorized Officer, substantially in the form of Exhibit A , (i) demonstrating compliance with the financial covenants contained in Article XI by calculation thereof as of the end of each such fiscal period and (ii) stating that no Default or Event of Default by the RHP Guarantor exists, 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.

(d) Reports . Promptly upon transmission or receipt thereof, copies of any publicly available filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all publicly available financial statements, proxy statements, notices and reports as the RHP Guarantor shall send to its shareholders.

(e) Other Information . Promptly upon any such request, such other information regarding the business, properties or financial condition of the RHP Guarantor or any of its Subsidiaries as Lender may request.

10.4 Other Reports .

(a) Promptly upon receipt thereof, copies of all material reports, if any, submitted to each Credit Party, its Board of Directors or members by its independent public accountants in connection with their auditing function, including any management report and any management responses thereto; and

(b) Such other financial reports and other information regarding the operations, business affairs and financial condition of the RHP Parties as Lender may reasonably request.

Exhibit 10.212

FORBEARANCE AGREEMENT

This FORBEARANCE AGREEMENT (“Agreement”) is entered into by and between COVINGTON REALTY, LLC, an Ohio limited liability company (the “Landlord”) and REGIONAL HEALTH PROPERTIES, INC., a Georgia corporation (the “Tenant”), This Agreement is effective as of the last date shown below the signature of the parties’ representatives (the “Effective Date”).

BACKGROUND

A. Landlord and Tenant are parties to a Lease Agreement dated August 26, 2002 (the “Original Lease”), as amended by a First Amendment to Lease Agreement dated July 14, 2003, by a Second Amendment to Lease Agreement dated April 1, 2008, by a Third Amendment to Lease Agreement dated May 1, 2011, and by a Fourth Amendment to Lease Agreement, dated April 14, 2014, and further by an Agreement Regarding Lease and Sublease entered into as of August 1, 2015, among Landlord, Tenant and CC SNF LLC, wherein Landlord consented to Tenant’s sublease of the Facility (as defined below) to CC SNF LLC, a Florida corporation (the “Subtenant”) (as so amended, the “Lease”), pursuant to which Landlord leases to Tenant (and Tenant subleased to Subtenant) the licensed and certified nursing facility commonly known as Covington Care Center, 75 Mote Drive, Covington, Ohio (the “Facility”). All capitalized terms used in this Agreement that are defined in the Lease and not otherwise defined in this Amendment shall have the meanings given in the Lease.

B. Tenant is the successor by merger to AdCare Health Systems, Inc., a Georgia corporation, the original tenant to the Lease.

C. Tenant received from Landlord a notice of Lease Default dated March 30, 2018, citing Tenant’s failure to pay Base Rent for the period commencing March 2018 (the “Base Rent Default”), which failure constitutes a default under Section 14.01 of the Original Lease (the “Default Notice”).

D. Pursuant to a letter agreement dated October 5, 2018, certain terms and conditions were agreed upon, whereby Landlord will agree to forbear taking further action as a result of Tenant’s default, provided the terms and conditions of this Agreement are fulfilled by Tenant. As of the Effective Date, the unpaid Base Rent is $338,776.22.

E. Due to certain operating and financial difficulties experienced by Tenant’s Subtenant, the Tenant has requested, and the Landlord is agreeable, subject to the terms set forth in this Agreement, to temporarily forbear from exercising its Lease rights and remedies to allow Tenant to make replace the Subtenant with a new subtenant, and to make temporarily reduced Base Rent payments.

F. On or about November 30, 2018, Tenant, as Sublessor and MIAMI COV SNF, INC., an Ohio corporation, as Sublessee (referred to herein as “New Sublessee”), entered into a Sublease Agreement (the “New Sublease”), whereby New Sublessee subleased the Facility on the terms and conditions stated in the New Sublease.

G. In consideration by Tenant of the execution of this Agreement, Landlord consented to the New Sublease, and executed additional documents to facilitate certain financing arrangements required by New Sublessee to enable it to perform its obligations under the New Sublease.

Taft Draft 12 21 2018

NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Tenant and Landlord agree to the above and as follows:

1. ~~Background Statements~~ . The above Background Statements are incorporated into and made a substantive, contractual part of this Agreement.

2. ~~Tenant Acknowledgment and Admission of Lease Default~~ . To induce the Landlord to enter into this Agreement, the Tenant acknowledges, agrees, warrants and represents that: (a) Tenant timely received the Default Notice; (b) Tenant admits its failure to fully pay the Base Rent ($338,776.22), Insurance Escrow ($21,838.32), Tax Escrow ($34,503.90) and Replacement Reserve Funding ($30,000.00) for a total amount of $470,118.44 for the months of March through December 2018; (c) Tenant further acknowledges and agrees that a Rent payment default exists and that Landlord has the right and is entitled to exercise all of its applicable legal rights and remedies to enforce this Lease and collect rent damages; (d) the Lease is valid and legally binding on Tenant and is enforceable by Landlord; (e) Tenant waives any additional required notification or opportunity to cure options given by the Landlord, other than as may be specifically provided herein; (f) the Tenant has no defenses, set-offs or counterclaims against the Landlord, and Tenant affirmatively and voluntarily hereby waives any and all defenses, set-offs and counterclaims that may exist or that it may have under the Lease or by law; and (g) no Lease default whatsoever by the Landlord exists.

3. ~~Consideration; Forbearance Period~~ ; ~~Payment of New Base Rent~~ . As consideration for, and as a condition to, Landlord’s willingness to forbear from exercising its Lease remedies, effective as of the Effective Date Tenant agrees that (a) the Term of the Lease shall be extended until April 30, 2029 (the “Forbearance Period”); and (b) Tenant shall pay Landlord on a monthly basis, due and payable on the first day of each and every month as shown below, in immediately available funds, the following sums of money as new Base Rent payments:

~~Period~~	~~New~~ ~~Base Rent~~
~~December 2018~~ – ~~March 2019~~	~~$34,000/mo (net)~~
~~April 2019~~ – ~~August 2020~~	~~$40,000/mo (net)~~
~~September 2020~~ – ~~March 2021~~	~~$45,000/mo (net)~~
~~April 2021~~ – ~~April 2022~~	~~$50,000/mo (net)~~
~~Thereafter~~	~~Base Rent increases as set forth in the Lease~~

a. ~~Replacement Reserve~~ . Tenant agrees to Landlord’s withdrawal of Sixty-Eight Thousand and No/100 Dollars ($68,000) from the tenant-funded (non-HUD) replacement reserve account to satisfy a portion of the unpaid Base Rent as of the Effective Date.

b. ~~Method of Payment~~ . During the term of this Agreement the Tenant shall pay to Landlord on a monthly basis the stated amount of Base Rents by electronic funds transfer to the Landlord’s account at the banking institution shown below.

~~Bank Name:~~	Stock Yards Bank & Trust
~~ABA:~~	083000564
~~Beneficiary:~~	Covington Realty, LLC
~~Acct No:~~	1927329

~~23981343.4~~	2

Taft Draft 12 21 2018

4. ~~Additional Requirements~~ . In addition to the requirements of Tenant set forth in the Lease, which requirements are hereby reaffirmed and shall be continued by Tenant without Default, Tenant agrees to the following covenants and requirements for the remainder of the Term:

a. Rent shall be due on the first day of each month with late charges accruing after the 10th of the month;

b. Monthly census and financial reports shall be due to Landlord no later than the end of the following calendar month to which they relate;

c. Landlord will have industry-standard inspection rights for the Facility. Landlord shall be permitted to have a designated representative tour the premises and inspect records during normal business hours upon three (3) days’ notice to the Tenant and sublessee.

d. Tenant and New Sublessee must maintain the Facility during the Term with no consecutive surveys resulting in an IJ or higher level citation and must maintain diligent and consistent efforts to improve the Facility’s Medicare Five State Rating.

5. ~~Conditions Precedent~~ . The Parties acknowledge that Landlord has satisfied all conditions precedent required of Landlord to the execution and implementation of the New Sublease, to wit, the execution of:

a. The New Sublease;

b. A Landlord and Sublessor Waiver; and,

c. An Attornment and Non-Disturbance Agreement and Estoppel Certificate.

6. ~~Representations and Warranties~~ . The Tenant hereby represents and warrants to the Landlord that: (a) the representations, warranties and acknowledgements set forth in this Agreement are a mutual, voluntary concession, on a temporary basis, of the payment of Rent that Tenant is obligated to make per the terms of the Lease and that the terms of both the Lease and this Agreement are true and correct in all material respects as of the date hereof; (b) the Tenant has the requisite power necessary to execute and deliver this Agreement; and (c) the execution, delivery and performance of this Agreement have been duly authorized by the applicable members of the Tenant, and when executed, this Agreement will constitute the valid, binding and enforceable obligation of the Tenant. Landlord represents and warrants to Tenant that: (a) it is the owner of the Leased Premises and the holder of the Lease; and (b) it has the requisite authority to enter into this Agreement and perform all of its obligations hereunder.

~~23981343.4~~	3

Taft Draft 12 21 2018

7. ~~Further Agreements and Representations~~ . The Tenant hereby:

a. ratifies, confirms and acknowledges that the Lease, as amended hereby, and notwithstanding anything stated in the New Sublease, is and continues to be valid, binding and in full force and effect as of the Effective Date, and enforceable in accordance with their terms;

b. covenants and agrees to perform all of its obligations under the Lease and this Agreement;

c. acknowledges and agrees that as of the date hereof, the Tenant has no defense, set-off, counterclaim or challenge against the payment of any sums owing to Landlord or the enforcement of any of the terms of the Lease, as amended hereby, or any other document or writing between the parties;

d. acknowledges and agrees that this Agreement does not constitute a novation nor modification of the Lease;

e. ratifies, confirms and continues all rights and remedies granted to Landlord in the Lease; and

f. ratifies and confirms all waivers made by such Tenant in or with respect to the Lease.

8. ~~Releases by the Tenant~~ . The Tenant, on behalf of itself, its members and any person or entity directly or indirectly claiming by or through it (collectively, the “Releasors”), hereby unconditionally remises, releases and forever discharges the Landlord, and each of their respective past and present direct and indirect owners, shareholders, partners, members, officers, directors, agents, parent corporations, subsidiaries, affiliates, trustees (including without limitation under any deed of trust, mortgage and/or deed to secure debt), administrators, servicers, contractors, attorneys, successors and assigns and the heirs, executors, administrators, successors’ and assigns of any such person or entity (collectively, the “Releasees”), of and from any and all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, promises, warranties, guaranties, representations, liens, mechanics’ liens, judgments, claims, counterclaims, cross claims, defenses and/or demands whatsoever, including claims for contribution and/or indemnity, whether now known or unknown, past or present, asserted or unasserted, contingent or liquidated, at law, by statute or in equity, or resulting from any assignment, if any (collectively, the “Claims”), which any of the Releasors ever had, now have, or may have against any of the Releasees, for or by reason of any cause, matter or thing whatsoever, arising from the beginning of time to the date hereof relating to or arising from the Lease or the landlord/tenant relationship created thereby between any of the Releasees and such Tenant. The Tenant warrants and represents that it has not assigned, pledged, hypothecated and/or otherwise divested itself and/or encumbered all or any part of the Claims being released hereby and that it hereby agrees to indemnify and hold harmless any and all of Releasees against whom any Claim so assigned, pledged, hypothecated, divested and/or encumbered is asserted. The Tenant hereby agrees to protect, defend, indemnify and hold harmless each Releasee from and against any and all loss, cost, damage, expense or liability (including attorneys’ fees and costs) which such Releasee may sustain or incur by reason of (i) any claim, defense or cause of action brought by the Tenant or any of its members, (ii) any breach by the Tenant of its obligations under this Agreement, (iii) any inaccuracy when made of any representation or warranty made by the Tenant in this Agreement, or (iv) or any act or omission of any Releasee which occurred prior to the date of this Agreement.

~~23981343.4~~	4

Taft Draft 12 21 2018

9 . ~~Forbearance by Landlord~~ . Without waiving any Default by Tenant or the Landlord’s rights and remedies, and subject to the terms and conditions set forth in this Agreement and the Lease, or any documents executed in connection with this Agreement, for so long as Tenant and Tenant’s subtenant are not in default under the Lease and the proposed sublease, as the case may be, Landlord (including its subsidiaries, affiliates, successors and assigns) will forbear from pursuing against Tenant any manner of action and actions, claims, charges, demands, counterclaims, crossclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, 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 (each, a “Default Claim”) that arises out of Tenant’s non-payment of Rent or any other sums due to Landlord prior to the date of this Agreement under the existing Lease (collectively, the “Rent Due”). For so long as neither Tenant nor its subtenant is not in default under the existing Lease, as amended, or the new sublease, on the final day of the third, fourth and fifth years following the execution of the new sublease, Landlord will release and forever quitclaim specified portions of the Rent Due as follows: one-third (1/3) at the end of year 3 of the new sublease, one-third (1/3) at the end of year 4 of the new sublease, and one-third (1/3) at the end of year 5 of the new sublease (collectively, t h e “Rent Due Bu rn Off ” ) . To the extent that Landlord has notified Tenant that it or its subtenant is in default under the terms of Lease or the new sublease, such that said default would impact the efficacy of the forbearance or the Rent Due Burn-off provided above, Tenant will have fifteen days from receipt of a notification of default to cure any monetary default, and thirty (30) days to initiate a cure of any non-monetary default and an additional thirty (30) days to complete the cure of any such default, provided however, that if any such default cannot reasonably be cured within thirty (30) days, the cure period shall be extended for up to ninety (90) days, or o ~~therwise as may be agreed to by Landlord~~ , ~~whose agreement to extend the allowable cure period ma~~ y ~~not be unreasonably withheld or delayed,~~ p rovided Tenant continues to utilize its best efforts to timely effectuate such cure. The Forbearance Period shall terminate as of the expiration of the Term. Further at Landlord’s option in its sole and absolute business discretion, this Agreement and the Forbearance Period can be terminated upon the occurrence of any of the following:

a. The Tenant files a petition for bankruptcy under any chapter of the Federal Bankruptcy Code or takes advantage of any other debtor relief law, or an involuntary petition for bankruptcy under any chapter of the Federal Bankruptcy Code is filed against the Tenant, or any other judicial action is taken with respect to the Tenant by any creditor of Tenant that appoints a trustee, receiver, sequestrator or other custodian for itself or a substantial part of its property or makes any assignment for the benefit of creditors;

b. Landlord discovers that any representation or warranty made herein by the Tenant was or is untrue, incorrect or misleading in any material respect;

c. The Tenant breaches or defaults in performance of any covenant or agreement contained in this Agreement; or

d. Any creditor commences any enforcement action against the Tenant or any assets of the Tenant including, without limitation, filing of a suit or foreclosure action, filing of a notice of li ~~s pendens~~ or similar notice, exercise of a power of sale or the filing of a lien; provided, however, if the amount claimed by the opposing party is less than $10,000, or if any such action (other than a foreclosure) is dismissed within sixty (60) days of filing, then it shall be deemed immaterial and this Section 9(d) shall not apply to such action, so long as Tenant takes commercially reasonable steps to contest the action.

Upon termination of the Forbearance Period, for any reason, Landlord may take all steps it deems necessary or desirable to enforce its Lease rights as permitted by law or equity.

~~23981343.4~~	5

Taft Draft 12 21 2018

10. ~~Miscellaneous~~ .

a. This Agreement shall be governed by the laws of the State of Ohio.

b. Time is of the essence in this Agreement.

c. This Agreement may be executed in any number of counterparts with the same effect as if all the signatures on such counterparts appeared on one document and each such counterpart shall be deemed an original. Any signature on this Agreement, delivered by any party by facsimile or PDF transmission shall be deemed to be an original signature thereto.

d. To the extent of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of the Lease, the terms and conditions of this Agreement shall prevail. All terms and conditions of the Lease not inconsistent herewith shall remain in full force and effect.

e. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. The Tenant shall not assign its rights or obligations under this Agreement.

f. This Agreement is the entire agreement between the parties relating to the subject matter hereof, incorporates or rescinds all prior agreements and understandings between the parties hereto relating to forbearance of Base Rent payments due under the Lease, cannot be changed or terminated orally or by course of conduct, and shall be deemed effective as of the date it is accepted by the Landlord. Oral commitments to modify or change the terms of this Agreement, extend credit or to forbear from enforcing repayment of a debt, including promises to extend or renew such Base Rent payment default, are not enforceable. To protect Tenant and Landlord from misunderstanding or disappointment, all agreements reached concerning such matters are included in this writing, which is a complete and exclusive statement of the agreement between Tenant and Landlord.

g. Except as expressly set forth herein, neither the execution, delivery nor performance of this Agreement, nor anything contained herein, shall be construed as or shall operate as a course of conduct, course of dealing or a consent to or waiver of any provision of, or any right, power or remedy of the Landlord under the Lease.

h. No present or future advisor, trustee, director, officer, employee, shareholder, person, partner, member or agent of Landlord shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and the Tenant, its successors and assigns hereby waive any and all such personal liability.

i. Neither party has any obligation to re-negotiate or modify the Lease (or to attempt to do so in good faith or otherwise) and any such negotiations which may occur may be broken off by any party at any time in their respective sole and absolute discretion without liability. Any future waiver, alteration, amendment or modification of any of the provisions of the Lease or this Agreement shall not be valid or enforceable unless separately agreed to in writing and signed by all parties (in their respective sole and absolute discretion), it being expressly agreed that neither the Lease, nor this Agreement can be modified orally, by course of dealing or by implied agreement. Moreover, any delay by Landlord in enforcing its rights after an event of default shall not be a release or waiver of the event of default and shall not be relied upon by any party as a release or waiver of the default.

~~23981343.4~~	6

Taft Draft 12 21 2018

j. The headings of paragraphs in this Agreement are for convenience of reference only and shall not in any way affect the interpretation or construction of this Agreement.

k. In any legal action relating to this Agreement, Tenant agrees that it shall pay to Landlord, as additional Rents or Rent damages if reduced to a judgment in favor of Landlord, all costs and expenses incurred by Landlord for such action (including reasonable out of pocket attorneys’ fees and disbursements).

l. Tenant understands and agrees that any discussions and all communications, including documents prepared in connection therewith during the Forbearance period regarding the Lease are and shall be confidential, and shall not be disclosed to third parties, except to agents, lenders, investors, representatives, lawyers, and accountants as such may be reasonably necessary in order to pursue discussions during the Forbearance Period. Further, this Agreement may not be introduced by Tenant in any other litigation or other proceeding (including Tenant’s bankruptcy case) involving a claim against Landlord the same being privileged in the same ma nn er as a settlement offer in litigation. Notwithstanding the foregoing, Landlord may disclose this Agreement and any communications in any matter or proceeding as it deems necessary or advisable in order to enforce or otherwise give effect to the terms and conditions hereof.

m. The warranties and representations of the Tenant in this Agreement shall survive the termination of this Agreement.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE OF PARTIES ON FOLLOWING PAGE.

~~23981343.4~~	7

Taft Draft 12 21 2018

IN WITNESS WHEREOF, the undersigned have each executed this Agreement with an effective date being the last date shown below their respective signature.

~~TENANT:~~

REGIONAL HEALTH PROPERTIES, INC., a Georgia corporation

By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Interim CEO
Date:	1/11/2019

LANDLORD:

COVINGTON REALTY, LLC, an Ohio limited liability company

By:	/s/ Find O. Karter
Name:	Find O. Karter
Title:	Manager
Date:	1/11/2018

~~23981343.4~~	8

Exhibit 10.213

~~TERMINATION OF LEASE~~

~~(Adcare)~~

THIS TERMINATION OF LEASE (the “ ~~Agreement~~ ”) is effective as of January 15, 2019, by and among ~~Georgia Lessor - Bonterra/Parkview, Inc.~~ , a Maryland limited liability company (“ ~~Landlord~~ ”) and ~~ADK Bonterra/Parkview, LLC~~ , a Georgia limited liability company (“Tenant”).

RECITALS

A. Landlord is the owner of certain real property, improvements and fixtures thereon, related rights thereto and personal property comprising the following skilled nursing facilities (the “ ~~Facilities~~ ”): (1) Parkview Manor Nursing Home, and (2) Bonterra Nursing Center.

B. Pursuant to that certain Third Amended and Restated Multiple Facilities Lease dated October 29, 2010, as amended by the First Amendment to Third Amended and Restated Multiple Facilities Lease dated June 14, 2013, and the Second Amendment to Third Amended and Restated Multiple Facilities Lease dated September 1, 2015 (collectively, the “Lease”) between Landlord and Tenant, Landlord is leasing the Facilities to Tenant. Under the terms of the Lease, Tenant has paid to Landlord a security deposit in the amount of $375,000 (the ~~“$375,000 Deposit~~ ”). On the Termination Effective Date Landlord will return to Tenant the $375,000 Deposit as set forth in this Agreement.

C. Landlord and Tenant desire to terminate the Lease effective as of the date of this Agreement (the “ ~~Termination Effective Date~~ ”) pursuant to the terms and conditions of this Agreement.

D. Tenant has subleased the Facilites (the “ ~~Adcare Sublease~~ ”) to 2801 Felton Avenue, L.P. and 460 Auburn Avenue, L.P. (“Subtenants”) and following the termination of the Lease, Landlord will lease the Facilities to Subtenants or affiliates of Subtenants (the “ ~~Direct Lease~~ ”). Under the Adcare Sublease, Subtenants have paid Tenant a security deposit in the amount of $170,000 (the “$ ~~170,000 Deposit~~ ”). On the Termination Effective Date Tenant will pay Landlord the $170,000 Deposit which Landlord will apply as security deposit under the Direct Lease and held by Landlord in accordance with the Direct Lease.

E. Capitalized terms used, but not defined, in this Agreement shall have the meaning given to such terms in the Lease.

AGREEMENT

1. ~~Termination of Lease; Release; Further Assurances~~ .

(a) ~~Termination of Lease~~ . As of the Termination Effective Date, the Lease is terminated; provided, however, that all obligations which by their terms survive the termination of the Lease shall survive the termination of the Lease pursuant to this Agreement and all obligations which by their terms would not survive the termination of the Lease shall be terminated.

(b) ~~Conveyance~~ . Tenant hereby assigns, transfers and conveys to the applicable Landlord (i) all of Tenant’s “Personal Property” as defined in the Lease, and (ii) all of Tenant’s right, title and interest (including beneficial interests), if any, in and to the “Leased Property” as defined in the Lease. Landlord agrees to accept all such Personal Property and Leased Property “as is, where is” in its current condition with all defects. On the Termination Effective Date, Tenant shall give up possession of the Facilities as contemplated by this Agreement.

(c) ~~Release by Tenant and Guarantors~~ . Effective as of the Termination Effective Date, Tenant and each Guarantor hereby release and forever discharge Landlord and its respective successors, assigns, agents, equity holders, directors, officers, employees, parent corporations, subsidiary corporations, affiliated corporations, and affiliates, from any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action, of every nature and description, whether known or unknown, absolute, mature, or not yet due, liquidated or non-liquidated, contingent, non-contingent, direct, or indirect or otherwise arising prior to each Termination Effective Date; provided, however, that such release and discharge shall not release Landlord for failure to comply with the terms and conditions of this Agreement.

(d) ~~Further Assurances~~ . Tenant and each Guarantor shall, on request of the other party, from time to time, execute, deliver, and furnish documents as may be necessary to fully consummate the transactions contemplated under this Agreement, including, but not limited to, such deeds, bills of sale, UCC assignments, and other documents as Landlord may reasonable request.

2. ~~Security Deposits; January Rent~~ . On the Termination Effective Date, Tenant will pay Landlord the $170,000 Deposit and upon its receipt of the $170,000 Deposit, Landlord will apply the $170,000 Deposit to security deposit under the Direct Lease. On the Termination Effective Date, Landlord will pay Tenant the $375,000 Deposit in immediately available funds in addition to any other payments due Tenant under this Agreement. Since Tenant has paid the monthly Rent payment under the Lease on January 1, 2019, Landlord will refund Tenant the prorated rent from January 16, 2019 through January 31, 2019; Landlord and Tenant acknowledge and agree that the amount of this prorated Rent is $86,963.31 (the “ ~~Rent Proration Amount~~ ”). Further, Tenant acknowledges and agrees that the rent under the due from Subtenant under the Sublease has been paid through January 15, 2019 and that Tenant will not charge Subtenant any further amounts under the Sublease.

3. ~~Termination Fee~~ . As consideration for Tenant agreeing to terminate the Lease prior to the end of the Term, Landlord agrees to pay Tenant a termination fee in the amount of One Million Two Hundred Thousand Dollars ($1,200,000) (the “ ~~Termination Fee~~ ”), to be paid by Landlord on the Termination Effective Date.

4. ~~Netting of Payments~~ . Landlord and Tenant agree that the amount due under this Agreement shall be netted such that Landlord shall pay Tenant a net sum of $1,491,963.31 (the “ ~~Total Due Tenant~~ ”) (the sum of the Termination Fee plus the $375,000 Deposit less the $170,000 Deposit plus the Rent Proration Amount) on the Termination Effective Date. The indefeasible receipt by Tenant of the Total Due Tenant shall be a condition precedent to the occurrence of the Termination Effective Date.

5. ~~Legal Fees and Expenses~~ . Each party shall pay its own legal fees and expenses in connection with this Agreement.

6. ~~Miscellaneous Provisions~~ .

(a) ~~Successors and Assigns~~ . The terms, covenants, and conditions hereof shall inure to the benefit of and be binding upon the respective parties hereto, their heirs, executors, administrators, successors, and permitted assigns.

(b) ~~Authority of the Parties~~ . Each of the parties executing this Agreement hereby represents and warrants to the others that it has all requisite power and authority, corporate or otherwise, to enter into and deliver this Agreement.

(c) ~~No Brokerage Fee~~ . Each Party hereto represents to the other Party hereto that no brokerage or other similar fee is due under or in connection with the execution and performance of this Agreement. Each Party agrees to indemnify, defend, and hold the other Party harmless from any loss or expense incurred in connection with any breach of the foregoing representation.

Termination of Lease - Adcare (Parkview/Bonterra)

(JJB 1-18-19)

(d) ~~Counterparts~~ . This Agreement may be executed in any number of counterparts and by different parties to this Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement via telephone facsimile transmission or electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement. Subject to the other provisions hereof, this Agreement shall become effective when each of the parties has received a counterpart of this Agreement executed by the other parties to this Agreement or a copy of such executed Agreement signed in counterparts.

(e) ~~Attorneys’ Fees~~ . In any dispute or action between the parties arising out of this Agreement, the prevailing party shall be entitled to seek to have and recover from the other party such amount as the court may adjudge reasonable as attorneys’ fees and expenses together with costs of litigation incurred by the prevailing party, in additional to all other amounts provided at law.

(f) ~~Amendment~~ . Any alteration, change or modification of or to this Agreement, in order to become effective, must be made in writing and in each instance signed on behalf of each party to be charged.

(g) ~~Severability~~ . If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law.

(h) ~~Integration.~~ This Agreement contains the entire understandings among the parties relating to the matters set forth herein. All prior or contemporaneous agreements, understandings, representations and statements with respect to the subject matters hereof, whether direct or indirect, oral or written, are merged into and superseded by this Agreement, and shall be of no further force or effect.

(i) ~~Cooperation of Parties~~ . Each party agrees to sign any other and further instruments and documents and take such other actions as may be reasonably necessary or proper in order to accomplish the intent of this Agreement, so long as the terms thereof are fully consistent with the terms of this Agreement.

(j) ~~Governing Law~~ . This Agreement shall be construed under the laws of the State of Maryland.

[Signature Page Follows]

Termination of Lease - Adcare (Parkview/Bonterra)

(JJB 1-18-19)

~~SIGNATURE PAGE TO TERMINATION OF LEASE~~

( ~~Adcare)~~


~~LANDLORD:~~
Georgia Lessor - Bonterra/Parkview, Inc., ~~a Maryland limited liability company~~
~~By:~~	/ s / Vikas Gupta
Name:	Vikas Gupta
Title:	Senior Vice President - Acquisitions and Development


STATE OF MARYLAND	)
	) ss.
COUNTY OF BALTIMORE	)

This instrument was acknowledged before me on January 10 , 2019, by Vikas Gupta, the Senior Vice President - Acquisitions and Development of Georgia Lessor - Bonterra/Parkview, Inc., a Maryland limited liability company, on behalf of such company.


			~~/s/ Judith A Jacobs~~
	Notary Public, State of Maryland County of Baltimore		Notary Public, Baltimore County, MD My Commission expires: May 12, 2020
	My Commission expires May 12, 2020

Signature Page 1 of 2

~~SIGNATURE PAGE TO TERMINATION OF LEASE~~

~~(ADCARE)~~

~~TENANT:~~


ADK Bonterra/Parkview, LLC , a Georgia
Limited liability company


By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:


STATE OF GEORGIA	)
	) ss.
COUNTY OF FULTON	)

~~This instrument was acknowledged before me on January~~ ~~22,~~ ~~2019, by Brent Morrison, Manager of ADK Bonterra/Parkview, LLC, a Georgia limited liability company, on behalf of such company.~~

		~~/s/~~ ~~Ansley S. Zeitler~~
		~~Ansley S. Zeitler~~ , ~~Notary Public~~
		~~My Country of Residence:~~ F ul ~~Ton~~
		~~My Commission expires:~~ ~~December~~ ~~12, 2021~~

Signature Page 2 of 2

Exhibit 10.214

SECOND AMENDMENT TO SUBLEASE AGREEMENT

THIS SECOND AMENDMENT TO SUBLEASE AGREEMENT (the “ Amendment ”) is made and entered into as of the day of , 2019, (the “ Execution Date ”) but effective upon the Effective Date (as hereinafter defined), by and between ADK GEORGIA, LLC, a Georgia limited liability company (“ Sublessor ”) and 3460 POWDER SPRINGS ROAD ASSOCIATES, L.P., a Georgia limited Partnership (“ Sublessee ”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain lease dated August 1, 2010, as amended (the “ Master Lease ”), Sublessor leased from William F. Foster (“ Landlord ”) the premises described in the Master Lease;

WHEREAS, Sublessor and Sublessee have entered into that certain Sublease Agreement dated January 31, 2015 for that certain skilled nursing facility located at 3460 Powder Springs Road, Powder Springs, Georgia 30127, as amended pursuant to that certain First Amendment to Sublease Agreement dated as of September 23, 2015 (as amended, the “ Sublease ”); and

WHEREAS, Sublessor and Sublessee desire to further amend the Sublease as hereinafter set forth.

NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, paid by each party to the other, the receipt and sufficiency of which are hereby acknowledged, and the mutual covenants and benefits flowing between the parties, Sublessor and Sublessee, intending to be legally bound, do hereby covenant and agree as follows:

1. Capitalized Terms . Unless otherwise defined herein, all capitalized words and phrases used herein shall have the same meanings ascribed to them in the Sublease.

2. Effective Date . This Amendment shall be effective as of the Execution Date (the “ Effective Date ”).

3. Base Rent . Section 3 of the Sublease is hereby deleted in its entirety and the following is inserted in lieu thereof:

871993_2

“During the Term, Sublessee shall pay in advance to Sublessor on or before the 1 ^st day of each month (except for the first payment, which shall be made on the Commencement Date), the following amounts as Base Rent (as defined below):

Lease Year		Base Rent Per Month
Year 1		$175,000.00
Year 2		$176,750.00
Year 3		$178,517.50
Year 4		$162,274.41
Year 5		$163,897.15
Year 6		$165,536.12
Year 7		$167,191.48
Year 8		$168,863.40
Year 9		$170,552.03
Year 10		$172,257.55
Year 11		$173,980.13
Year 12		$175,719.93
Year 13		$177,477.13

Commencing on the first day of any extended term of this Lease and on the first day of each year thereafter during an extended term, Base Rent payable hereunder shall increase by two percent (2%) over the Base Rent for the previous year.”

4. Agreement in Effect . Except as herein specifically provided, all other terms and provisions of the Sublease shall remain in full force and effect, and are hereby ratified and reaffirmed by the parties.

[Signatures on Following Page]

871993_2

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

SUBLESSOR :

ADK GEORGIA, LLC ,
a Georgia limited liability company

By:		/s/ Brent Morrison
Name:		Brent Morrison
Title:		Manager

SUBLESSEE :

3460 POWDER SPRINGS ROAD
ASSOCIATES, L.P.,
a Georgia limited partnership

By:		/s/ James J Andrews
Name:		James J Andrews
Title:		President

871993_2

Exhibit 10.215

SECOND AMENDMENT TO SUBLEASE AGREEMENT

THIS SECOND AMENDMENT TO SUBLEASE AGREEMENT (the“ Amendment ”) is made and entered into as of the day of , 2019 (the“ Execution Date ”), but effective upon the Effective Date (as hereinafter defined), by and between ADK GEORGIA, LLC, a Georgia limited liability company (“ Sublessor ”) and 3223 FALLIGANT AVENUE ASSOCIATES, L.P., a Georgia limited Partnership (“ Sublessee ”).

W I T N E S S E T H:

WHEREAS, Sublessor and Sublessee have entered into that certain Sublease Agreement dated January 31, 2015 for that certain skilled nursing facility located at 3223 Falligant Avenue, Thunderbolt, Georgia 31404 as amended pursuant to that certain First Amendment to Sublease Agreement dated as of September 23, 2015 (as amended, the “ Sublease ”); and

WHEREAS, Sublessor and Sublessee desire to further amend the Sublease as hereinafter set forth.

1. Capitalized Terms . Unless otherwise defined herein, all capitalized words and phrases used herein shall have the same meanings ascribed to them in the Sublease.

2. Effective Date . This Amendment shall be effective as of the Execution Date (the “ Effective Date ”).

3. Base Rent . Section 3 of the Sublease is hereby deleted in its entirety and the following is inserted in lieu thereof:

871995_2

Lease Year		Base Rent Per Month

Year 1		$150,000.00
Year 2		$151,500.00
Year 3		$153,015.00
Year 4		$139,090.64
Year 5		$140,481.54
Year 6		$141,886.36
Year 7		$143,305.22
Year 8		$144,738.27
Year 9		$146,185.65
Year 10		$147,647.51
Year 11		$149,123.99
Year 12		$150,615.23
Year 13		$152,121.38

[Signatures on Following Page]

871995_2

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

SUBLESSOR :


ADK GEORGIA, LLC,
a Georgia limited liability company


By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Manager


SUBLESSEE :


3223 FALLIGANT AVENUE ASSOCIATES, L.P.,
a Georgia limited partnership


By:	/s/ James J. Andrews
Name:	James J. Andrews
Title:	President

871995_2

Exhibit 10.216

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “ Lease ”) is entered into as of the 28 ^th day of February, 2019 (the “ Execution Date ”) by and between MOUNTAIN TRACE NURSING ADK, LLC, an Ohio limited liability company (“ Lessor ”) and VERO HEALTH X, LLC, a Delaware limited liability company (“ Lessee ”) , for the improved real property described on Exhibit “A-l” (the “ Premises ”) , on which Premises is located that certain 106 bed skilled nursing facility located at 417 Mountain Trace Road, Sylva, North Carolina 28779, including the “ Lessor Personal Property ” associated therewith described on Exhibit “A-2” (the Lessor Personal Property together with the Premises, being collectively the “Facility” ) . Certain capitalized terms used in this Lease are defined on Exhibit “B” .

RECITALS

WHEREAS, Lessor desires to lease the Premises to Lessee and Lessee desires to lease the Premises from Lessor on the terms and conditions hereinafter set forth.

1. Term . The “ Term ” of this Lease is the Initial Term of ten (10) years plus the Renewal Terms (if any). A “ Lease Year ” is the twelve (12) month period commencing on the Commencement Date (as defined below) and each anniversary thereof during each year of the Term. The “ Initial Term ” commences on March 1, 2019 (the “ Commencement Date ”) and ends on February 28, 2029, and may be extended for two (2) separate renewal terms of five (5) years each (each a “ Renewal Term ”) if: (a) at least one hundred eighty (180) days prior to the end of the Initial Term or the Renewal Term (as applicable), Lessee delivers to Lessor the “ Renewal Notice ” indicating that Lessee desires to exercise its right to extend this Lease for the Renewal Term and (b) there is no then uncured Event of Default (i) as of the date Lessor receives the Renewal Notice (the “ Exercise Date ”) , or (ii) on the last day of the Initial Term or the Renewal Term (as applicable). For purposes hereof, “ Termination Date ” shall mean the last day of the Initial Term or a Renewal Term (if any) or the earlier date on which this Lease may be terminated as provided herein.

2. Rent . During the Term, Lessee shall pay in advance to Lessor on or before the 1 ^st day of each month the following amounts:

2.1 Base Rent . During the first Lease Year of the Initial Term, Base Rent shall be equal to $40,000.00 per month. Base Rent for the second Lease Year and for each subsequent Lease Year shall be equal to 102.5% of the Base Rent due for the immediately preceding Lease Year.

2.2 Absolute Net Lease. All Rent payments shall be absolutely net to Lessor, free of any and all Taxes (as defined below in Section 5) , Other Charges (as defined below in Section 5), and operating or other expenses of any kind whatsoever, all of which shall be paid by Lessee. Except as otherwise set forth herein, Lessee shall at all times during the Term remain obligated under this Lease without any right of set-off, counterclaim, abatement, deduction, reduction or defense of any kind. Except as otherwise set forth herein, Lessee’s sole right to recover damages against Lessor under this Lease shall be to prove such damages in a separate action.

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2.3 Payment Terms . All Rent and other payments to Lessor hereunder shall be paid by wire transfer in accordance with Lessor’s wire transfer instructions provided by Lessor from time to time.

3. Security Deposit. The aggregate security deposit (the “ Security Deposit ”) to be funded by Lessee shall be One Hundred Sixty Thousand Dollars ($160,000.00), which amount shall be funded as follows: (i) Forty Thousand Dollars ($40,000.00) on the Commencement Date and (ii) commencing with the first month of the second Lease Year and continuing each month thereafter through the final month of the fourth Lease Year, Three Thousand Three Hundred Thirty-Three Dollars and thirty-three cents ($3,333.33) per month.

3.1 Payment of Security Deposit . Lessee shall fund the Security Deposit by wire transfer to Lessor of immediately available funds pursuant to the terms hereof.

3.2 Application of Security Deposit . Lessor shall hold the Security Deposit as security for the full and faithful performance by Lessee of every term, provision, obligation and covenant under this Lease and subject to the terms and conditions of this Lease. If the Security Deposit is paid in immediately available funds, the Security Deposit may be deposited by Lessor into an interest-bearing account, which interest shall accrue for the sole benefit of Lessor and not Lessee. The Security Deposit shall not be considered an advance payment of Rent (or of any other sum payable by Lessee under this Lease) or a measure of Lessor’s damages in case of a default by Lessee. If the Security Deposit is paid in immediately available funds, Lessor shall have no obligation to maintain the Security Deposit separate and apart from Lessor’s general and/or other funds. If Lessee defaults in respect of any of the terms, provisions, covenants and conditions of this Lease, Lessor may, but shall not be required to, in addition to and not in lieu of any other rights and remedies available to Lessor, apply all or any part of the Security Deposit to the payment of any sum in default, or any other sum that Lessor may expend or be required to expend by reason of Lessee’s default, including but not limited to, any damages or deficiency in reletting the Premises. Whenever, and as often as, Lessor has applied any portion of the Security Deposit to cure Lessee’s default hereunder, Lessee shall, within ten (10) days after Notice from Lessor, deposit additional funds with Lessor sufficient to restore the Security Deposit to the full amount then required to be deposited with Lessor, and Lessee’s failure to do so shall constitute an Event of Default without any further Notice. If Lessor transfers or assigns its interest under this Lease, Lessor shall assign the Security Deposit to the new lessor and upon new lessor’s assumption of the Lease, Lessor shall have no further liability for the return of the Security Deposit, and Lessee agrees to look solely to the new lessor for the return of the Security Deposit. Lessee agrees that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that Lessor, its successors and assigns may return the Security Deposit to the last lessee in possession of the Premises at the last address for which Notice has given by such lessee and that Lessor thereafter shall be relieved of any liability therefor, regardless of one or more assignments of this Lease or any such actual or attempted assignment or encumbrances of the Security Deposit. Provided Lessee is not in default, Lessor shall return the Security Deposit to Lessee within thirty (30) days of the date of termination of this Lease.

4. Late Charges . The late payment of Rent or other amounts due under this Lease will cause Lessor to lose the use of such money and incur administrative and other expenses not contemplated under this Lease. While the exact amount of the foregoing is difficult to ascertain, the parties agree that as a reasonable estimate of fair compensation to Lessor, if Rent or any other amount is not paid within five (5) days of when due, then (a) Lessee shall thereafter pay to Lessor a late charge equal to five percent (5%) of such delinquent amounts, and (b) such delinquent amounts shall accrue interest from the due date at the rate of ten percent (10%) per annum (the “ Agreed Rate ”) until paid in full.

5. Taxes and Other Charges . At the commencement and at the expiration of the Term, all Taxes and Other Charges shall be prorated. Lessor shall promptly forward to Lessee copies of all bills and payment receipts for Taxes or Other Charges received by it. Lessee shall pay and discharge (including the filing of all required returns), prior to delinquency or imposition of any fine, penalty, interest or other cost (“ Penalty ”), (a) “ Taxes ”, consisting of any real property and other taxes and assessments levied or assessed with respect to the Premises (excluding income taxes, franchise taxes, estate taxes, transfer taxes and/or gross receipts taxes that may be imposed upon Lessor), and (b) “ Other Charges ”, consisting of any utilities and other costs and expenses of the Facility or any portion of the Premises and all other charges, obligations

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or deposits assessed against any portion of the Premises during the Term. Lessee shall pay the foregoing when due and before any Penalty, but may pay the foregoing in permitted installments (whether or not interest accrues on the unpaid balance). Within ten (10) business days of its receipt of Lessor’s written notice of payment, Lessee shall pay Lessor an amount equal to any Taxes or Penalty that Lessor at any time is assessed or otherwise becomes responsible and for which Lessee is liable under this Lease. However, nothing in this Lease shall obligate Lessee to pay penalties incurred as a result of Lessor’s failure to timely forward bills to Lessee.

5.1 Protests . Lessee has the right, but not the obligation, in good faith to protest or contest (a “Protest”) in whole or in part (a) the amount or payment of any Taxes or Other Charges, and (b) the existence, amount or validity of any Lien (as defined in Section 8.1) , by appropriate proceedings sufficient to (i) prevent the collection or other realization of such Taxes, Other Charges or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other Charges or Liens (so long as it provides Lessor with reasonable security to assure the foregoing). Lessee shall diligently prosecute any such Protest at its sole cost and expense and pay such Taxes, Other Charges or Lien. Lessor shall cooperate in any Protest that involves an amount assessed against it.

5.2 Impound . Upon Lessor’s written notice to Lessee during the Term, Lessor may require Lessee to pay with each Rent payment a deposit of one-twelfth (1/12 ^th ) of the amount required to discharge the annual amount of real property Taxes secured by a Lien encumbering any portion of the Premises as and when they become due. The deposits shall not bear interest nor be held by Lessor in trust or as an agent of Lessee, but rather shall be applied solely to the payment of the related obligations. If at any time within thirty (30) days prior to the due date the deposits shall be insufficient for the payment of the obligation in full, Lessee shall within ten (10) days after demand deposit the deficiency with Lessor. If deposits are in excess of the actual obligation, the required monthly deposits for the ensuing Lease Year shall be reduced proportionately and any such excess at the end of the final Lease Year shall be refunded to Lessee within thirty calendar (30) days. Lessee shall forward to Lessor or its designee all Tax bills, bond and assessment statements as soon as they are received. If Lessor transfers this Lease, it shall transfer all such deposits to the transferee, and upon the new lessor’s assumption of this Lease, Lessor shall thereafter have no liability of any kind with respect thereto.

5.3 Tax Treatment; Reporting . Lessor and Lessee each acknowledges that each shall treat this transaction as a true lease for state law purposes and shall report this transaction as a lease for Federal income tax purposes. For Federal income tax purposes each shall report this lease as a true lease with Lessor as the owner of the Premises and Lessee as the lessee of such Premises including: (a) treating Lessor as the owner of the property eligible to claim depreciation deductions under Section 167 or 168 of the Internal Revenue Code of 1986 (the “ Code ”) with respect to the Premises, (b) Lessee reporting its Rent payments as rent expense under Section 162 of the Code, and (c) Lessor reporting the Rent payments as rental income. For the avoidance of doubt, nothing in this Lease shall be deemed to constitute a guaranty, warranty or representation by either Lessor or Lessee as to the actual treatment of this transaction for state law purposes and for federal income tax purposes.

6. Insurance . All insurance provided for in this Lease shall (i) be maintained under valid and enforceable policies issued by insurers licensed and approved to do business in the state where the Premises is located, (ii) name Lessor as an additional insured and, for the property insurance policies, as the owner, (iii) be on an “occurrence” basis, or if claims made, include a provision whereby tail coverage costs are specified upon policy inception, (iv) cover all of Lessee’s operations at the Facility, (v) provide that the policy may not be canceled except upon not less than thirty (30) days’ prior written notice to Lessor and (vi) be primary and provide that any insurance with respect to any portion of the Premises maintained by Lessor is excess and noncontributing with Lessee’s insurance. The property policy(ies) shall also name the Lessor and Facility Mortgagee as loss payee. The parties hereby waive as to each other all rights of subrogation which any insurance carrier, or either of them, may have by reason of any provision in any policy issued to them, provided such waiver does not thereby invalidate such policy. Original policies or satisfactory insurer certificates evidencing the existence of the insurance required by this Lease and

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showing the interest of Lessor and Facility Mortgagee shall be provided to Lessor prior to the Commencement Date or, for a renewal policy, not less than ten (10) days prior to the expiration date of the insurance policy being renewed. If Lessor is provided with a certificate, it may demand that Lessee provide a complete copy of the related policy within ten (10) days. Lessee may satisfy the insurance requirements hereunder through coverage under so-called blanket policy(ies) of insurance carried and maintained by Lessee regarding other operations or facilities; provided, however, that the coverage afforded Lessor will not be reduced or diminished or otherwise be different from that which would exist under separate policies of insurance meeting all other requirements of this Lease by reason of the use of such blanket policies of insurance. During the Term, Lessee shall maintain the following insurance and any claims thereunder shall be adjudicated by and at the expense of it or its insurance carrier:

(a) Property Insurance with respect to the Facility and Business against loss or damage from all causes under standard “all risk” property insurance coverage with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), without exclusion for fire, lightning, windstorm, explosion, smoke damage, vehicle damage, sprinkler leakage, flood, vandalism, earthquake, malicious mischief and any other risks normally covered under an extended coverage endorsement, in amounts that are not less than the actual replacement value of the Premises and all Lessor and Lessee Personal Property associated therewith (including the cost of compliance with changes in zoning and building codes and other laws and regulations, demolition and debris removal and increased cost of construction). Additionally, if the Facility contains steam boilers, steam pipes, steam engines, steam turbines or other high pressure vessels, insurance with an agreed amount endorsement (such that the insurance carrier has accepted the amount of coverage and has agreed that there will be no co-insurance penalty), covering the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the Facility, in an amount equal to one hundred percent (100%) of the full replacement cost of the Facility, which policies shall insure against physical damage to and loss of occupancy and use of the Premises arising out of an accident or breakdown covered thereunder;

(b) Business Interruption and Extra Expense Coverage with respect to the Facility and Business for loss of rental value for a period not less than twelve (12) months, covering perils consistent with the requirements of Section 6(a) , and including either an agreed amount endorsement or a waiver of any co-insurance provisions, so as to prevent Lessee, Lessor and any other insured thereunder from being a co-insurer, and providing that any covered loss thereunder shall be payable to the Lessor;

(d) Professional Liability Coverage with respect to the Facility and Business providing for claims specifically relating to patient care and services provided by the Facility staff, its contractors and all related parties, to include coverage or medical directors with regard to their administrative duties provided to the Premises, with limits of not less than $1,000,000.00 per occurrence/$3,000,000.00 per location in the aggregate, naming Lessor as additional insured. If such coverage is purchased on a claims made basis, Lessee must show proof of the ability to purchase tail coverage to last through the statute of limitations, upon the end of the Lease Term;

(e) Worker’s Compensation and Employers Liability Insurance with respect to the Facility and Business for losses sustained by Lessee’s employees in the course and scope of their employment, as well as volunteers, and otherwise consistent with all applicable state law and meeting all other legal requirements;

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(f) Business Interruption and Extra Expense Coverage for loss of rental value for a period not less than one (1) year, covering perils consistent with the requirements of Section 6(a), and including either an agreed amount endorsement or a waiver of any co-insurance provisions, so as to prevent Lessee, Lessor and any other insured thereunder from being a co-insurer, and providing that any covered loss thereunder shall be payable to the Lessor; and

(g) Deductibles/Self-Insured Retentions for the above policies shall not be greater than $100,000.00, and Lessor shall have the right at any time to require a lower amount or set higher policy limits, to the extent commercially available and reasonable and customary for similar operations and properties to those of the Facility.

7. Use, Regulatory Compliance, Preservation of Business and Management.

7.1 Permitted Use; Qualified Care . Lessee shall continuously use and occupy the Premises during the Term as a skilled nursing facility with not less than one hundred six (106) licensed beds and for ancillary services relating thereto, but for no other purpose. Lessee shall provide care, treatment and services to all residents of the Facility in a manner consistent with all applicable laws. Notwithstanding any common law or statutory right, Lessee agrees not to transfer, move or otherwise take action that reduces the licensed beds at the Facility and Lessee agrees not to take any of the licensed beds out of service or move the licensed beds to a different location. Lessor represents and warrants that Schedule 7.1 attached hereto sets forth a true, correct and complete list of the number and type of licensed beds at the Premises and whether such beds are Medicare and/or Medicaid certified. Lessee shall take no action to reduce or modify the number of beds for which the Premises are licensed.

7.2 Regulatory Compliance . Lessee, the Facility and the Premises shall comply in all material respects with all licensing and other laws and all covenants, conditions, restrictions and other use or maintenance requirements applicable to the Facility and, to the extent applicable, all Medicare, Medicaid and other third-party payor certification requirements, including timely filing properly completed cost and other required reports, timely paying all expenses shown thereon, and ensuring that the Facility continues to be fully certified for participation in Medicare and Medicaid (if applicable) throughout the Term and when it is returned to Lessor, all without any suspension, revocation, decertification or other material limitation of such certification. Further, Lessee shall not commit any act or omission that would in any way violate any certificate of occupancy affecting the Facility, result in closure of the Facility or result in the sale or transfer of all or any portion of any related certificate of need (if applicable), bed rights or other similar certificate or license at any of the Facility.

7.3 Preservation of Business . Lessee acknowledges that a fair return to Lessor on and protection of its investment in the Premises depends, in part, on Lessee’s dedication to the Business and the concentration of similar businesses of Lessee and its Affiliates in the geographical area of the Facility. Lessee further acknowledges that the diversion of residents or patient care activities (except as is necessary to provide residents or patients with an alternative level of care) from the Facility to other facilities at any time during the Term will have a material adverse effect on the value and utility of the Facility. Therefore, Lessee agrees that during the Term, neither Lessee nor any of its Affiliates shall, without the prior written consent of Lessor: (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (l0)-mile geographical radius of the Facility, (ii) except as is necessary to provide residents or patients with an alternative level of care, recommend or solicit the removal or transfer of any resident or patient from the Facility to any other nursing, health care, senior housing or retirement housing facility or divert actual or potential residents, patients or care activities of the Business conducted at the Facility to any other facilities owned or operated by Lessee or its Affiliates or from which they receive any type of referral fees or other compensation for transfers, or (iii) employ for other businesses any personnel working on or in connection with any portion of the business or the Facility. In the event Lessee deems it medically necessary to transfer any resident from the Facility to any other nursing, health care, senior housing or retirement housing facility owned or operated by Lessee or its affiliates or from which they receive any type of referral fees or other compensation, Lessee shall provide written notice of such transfer to Lessor within two (2) business days of such transfer.

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7.4 Management . Lessee’s Affiliate may manage the Facility pursuant to a management agreement. The management fee (“ Management Fee ”) under such agreement shall not exceed five percent (5%) of the annual gross revenue realized from Lessee’s operation of the Facility (after adjustment for contractual adjustments and overpayment by providers). Payment of the Management Fee shall be subordinate to the payment of Rent and all other amounts payable by Lessee pursuant to this Lease. From and after the date that an Event of Default has occurred, any until such Event of Default; if curable, has been cured, Lessee shall not be permitted to pay any Management Fee to any party without Lessor’s express written consent. Lessee shall not be permitted to engage any third-party manager for the Facility other than Lessee’s Affiliate without the prior written consent of Lessor, which consent may be granted or withheld in Lessor’s sole discretion.

8. Acceptance, Maintenance, Upgrade, Alteration and Environmental .

8.1 Acceptance “AS IS”; No Liens . Lessee acknowledges that it is presently engaged in operations similar to those to be conducted at the Facility and has expertise in such industry and, in deciding to enter into this Lease, has not relied on any representations or warranties, express or implied, of any kind from Lessor. Lessee has investigated the Premises, has selected the Premises to its own specifications, has concluded that no improvements or modifications to them are required in order to operate the Facility, and accepts the Facility and the Premises on an “ AS IS ” basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Notwithstanding its right to Protest set forth in Section 5.1, Lessee shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a “ Lien ”) for any reason, provided that nothing in this Lease shall require Lessee to keep the Premises free of Permitted Liens.

8.2 Lessee’s Maintenance Obligations . Lessee shall (a) keep and maintain the Premises and the Facility in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all repairs (interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen) necessary to keep the Facility in good and working order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable, certification for participation in Medicare and Medicaid, and (c) keep and maintain all Lessor and Lessee Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice as required under this Lease.

8.3 Alterations by Lessee . Lessee shall not make any Alterations to the Premises without the express prior written consent of Lessor, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lessor’s consent shall not be required, but no less than thirty (30) days advance notice to Lessor shall be provided, with respect to (i) Alterations required by governmental authorities which are necessary to maintain applicable licenses to operate the Facility or (ii) minor cosmetic Alterations that (x) are non-structural in nature, (y) are not visible from the outside of the Premises and (z) do not cost, in the aggregate, in excess of $75,000.00 in any rolling twelve (12) month period. All Alterations shall immediately become a part of the Premises and the property of Lessor subject to this Lease, and the cost of all Alterations or other purchases, whether undertaken as an on-going licensing, Medicare, Medicaid or other regulatory requirement, or otherwise, shall be borne solely by Lessee. All Alterations shall be constructed in a good and workmanlike manner in compliance with all applicable laws and the insurance required under this Lease.

8.4 Hazardous Materials . Lessee’s use of the Premises shall comply with all Hazardous Materials Laws. If any Environmental Activities occur or are suspected to have occurred in violation of any Hazardous Materials Laws by Lessee during the Term or if Lessee has received notice of any Hazardous Materials Claim against any portion of the Premises as a result of Lessee’s acts or omissions during the Term, Lessee shall promptly obtain all permits and approvals necessary to remedy any such actual or suspected problem through the removal of Hazardous Materials or otherwise, and upon Lessor’s approval of the remediation plan, remedy any such problem to the satisfaction of Lessor and all applicable governmental authorities, in accordance with all Hazardous Materials Laws and good business practices. During the Term, Lessee shall promptly advise Lessor in writing of (a) any Environmental Activities in

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violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims against Lessee or any portion of the Premises; (c) any remedial action taken by Lessee in response to any Hazardous Materials Claims or any Hazardous Materials on, under or about any portion of the Premises in violation of any Hazardous Materials Laws; (d) Lessee’s discovery of any occurrence or condition on or in the vicinity of any portion of the Premises that materially increase the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Lessee, any governmental authority or any other Person relating to Hazardous Materials Laws or Hazardous Materials Claims with respect to any portion of the Premises, including copies thereof. Lessor shall have the right, at Lessee’s sole cost and expense (including, without limitation, Lessor’s reasonable attorneys’ fees and costs) and with counsel chosen by Lessor, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims. Lessor represents and warrants to Lessee that to Lessor’s knowledge, there are no pending claims or causes of action arising out or relating to the Facility or the Premises as of the Commencement Date.

9. Lessee Property . Lessee shall obtain and install all items of furniture, fixtures, supplies and equipment not included as Lessor Personal Property as shall be necessary or reasonably appropriate to operate the Facility in compliance with this Lease (“ Lessee Personal Property ” , which collectively with the “ Lessee Intangible Property ” shall be referred to herein as “Lessee Property ”.) As used herein, “ Lessee Intangible Property ” means all the following at any time owned by Lessee in connection with its use of any portion of the Premises: Medicare, Medicaid and other accounts and proceeds thereof; rents, profits, income or revenue derived from such operation or use; all documents, chattel paper, instruments, contract rights (including contracts with residents, employees and third-party payors), deposit accounts, general intangibles and chooses in action; refunds of any Taxes or Other Charges for periods of time during the Term; and licenses and permits necessary or desirable for Lessee’s use of any portion of the Premises, including licensed Medicaid beds (if applicable). Lessor shall have a security interest in and to the Lessee Property, which security interest Lessor shall have the right to assign to a Facility Mortgagee in Lessor’s sole discretion. Lessor will agree to subordinate its lien and security interest with respect to Lessee’s accounts receivable to any third party lender providing to Lessee a working capital line of credit, whether such working capital line of credit exists as of the Commencement Date or future working capital lines of credit, on commercially reasonable terms reasonably acceptable to Lessor. If required by Facility Mortgagee, Lessee will cause its working capital lender to enter into a mutually agreeable intercreditor agreement. In such an event, Lessee shall enter into deposit account control agreements as may be reasonably required by Lessor, subject to any intercreditor requirements agreed to by Facility Mortgagee and Lessee’s working capital lender.

10. Financial, Management and Regulatory Reports . Lessee shall provide Lessor with the reports listed in Exhibit “C” at the time described therein, and such other information about it or the operations of the Facility as Lessor may reasonably request from time to time, including such information requested in connection with any financing of the Premises sought by Lessor. All financial information provided by Lessee shall be prepared in accordance with generally accepted accounting principles consistently applied and shall be submitted electronically in the form of unrestricted, unlocked “.xls” spreadsheets created using Microsoft Excel (2003 or newer editions). If Lessee or any Affiliate becomes subject to any reporting requirements of the Securities and Exchange Commission (“ SEC ”) during the Term, it shall concurrently deliver to Lessor such reports as are delivered pursuant to applicable securities laws. Similarly, should Lessor or its parent, Regional Health Properties, Inc., be subject to any particular reporting requirements of the SEC during the Term for which it needs reports, documentation or other information from Lessee, Lessee agrees to deliver such reports, documentation and information within ten (10) days after Lessor’s request for the same. At Lessor’s sole expense, Lessee shall allow and, as necessary, assist with the review and audit of Lessee’s financial statements listed in Exhibit “C” . Furthermore, Lessee shall provide to Lessor with any other information reasonably requested by Lessor or the Facility Mortgagee respecting the financial records or business operations of Lessee, within fifteen (15) days after Lessor’s written request for such information.

11. Representations and Warranties . Each party represents and warrants to the other that: (a) this Lease and all other documents executed or to be executed by it in connection herewith have been

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duly authorized and shall be binding upon it; (b) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Lease within the state where the Premises is located; and (c) neither this Lease nor any other document executed or to be executed in connection herewith violates the terms of any other agreement of such party. Lessor further represents and warrants to Lessee that it is the fee simple owner of the Premises.

12. Events of Default . So long as there is no Event of Default, Lessee shall peaceably and quietly have, hold and enjoy the Premises for the Term, free of any claim or other action not caused or created by Lessee or pursuant to Sections 18 or 19 . The occurrence of any of the following events will constitute an “ Event of Default ” if not cured within the period set forth in Section 13 .

(a) Lessee’s failure to pay within five (5) days of when due any Rent, Taxes, Security Deposit, Other Charges, impounds or other required payments;

(b) Lessee’s failure to replace any Security Deposit in the manner required by Section 3.2;

(c) (i) The revocation, suspension or material limitation of any license, approval or consent required for the operation of the Facility or the certification of the Facility for provider status under Medicare or Medicaid, if applicable; (ii) the closure of the Facility for more than twenty-four (24) hours; (iii) the sale or transfer of all or any portion of any certificate of need, bed rights or other similar certificate or license relating to the Facility; (iv) the use of any portion of the Facility other than for a skilled nursing facility and for ancillary services relating thereto; or (v) any act or omission of Lessee that in the judgment of Lessor will more likely than not result in any of the foregoing;

(d) Any other material suspension, termination or restriction placed upon Lessee, the Facility or the ability to admit residents (e.g., an admissions ban or non-payment for new admissions by Medicare or Medicaid resulting from an inspection survey, if applicable);

(e) Any material misrepresentation by Lessee under this Lease or material misstatement or omission of fact in any written report, notice or communication from Lessee to Lessor, to include without limitation the financial reporting submissions required hereunder;

(f) The failure to perform or comply with the provisions of Sections 6 or 16 ;

(g) (i) Lessee or any guarantor of this Lease (a “ Guarantor ”) shall generally not pay its debts as they become due; (ii) Lessee shall incur debt other than (x) trade debt incurred in the ordinary course of business, (y) a working capital line secured by Lessee’s accounts receivable or (z) or indebtedness constituting Permitted Liens; (iii) Lessee or any Guarantor shall admit in writing its inability to pay its debts generally; (iv) Lessee or any Guarantor shall make an assignment of all or substantially all of its property for the benefit of creditors; (v) a receiver, trustee or liquidator shall be appointed for either of them or any of their property, if within three (3) business days of such appointment Lessee does not inform Lessor in writing that Lessee or any Guarantor (as applicable) intends to cause such appointment to be discharged or such discharge is not diligently prosecuted to completion within sixty (60) days after the date of such appointment; (vi) the filing by Lessee or any Guarantor of a voluntary petition under any federal bankruptcy or state law to be adjudicated as bankrupt or for any arrangement or other debtor’s relief; or (vii) the involuntary filing of such a petition against Lessee or any Guarantor by any other party, unless Lessee within three (3) business days of such filing informs Lessor in writing of its intent to cause such petition to be dismissed, such dismissal is diligently prosecuted and such petition is dismissed within one hundred twenty (120) days after filing;

(h) Lessee shall enter into any sale, recapitalization, transfer, conveyance, merger or other capital event resulting in a change of control of Lessee without the prior written consent of Lessor, which consent may be granted or withheld in Lessor’s sole and absolute discretion;

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(i) Appointment or implementation of a facility level manager, monitor, temporary management company or Systems Improvement Agreement by the CMS or any other regulatory agency (voluntary or mandatory) as a result of poor regulatory performance, appointment of additional mandatory monitoring by state or regulatory agencies;

(j) Subject to the provisions of Section 13 below, Lessee’s failure to comply with any covenant or other provision of this Lease not requiring the payment of money including, without limitation, the financial reporting covenants in Section 10 of this Lease;

(k) Any violation at the Facility at or above “Level 1” or survey tags greater than G severity under the CMS system in two (2) consecutive surveys; or

(l) Decertification of the Facility by Medicare and/or Medicaid exceeding thirty (30) days.

13. Grace Period . Except for the monetary defaults set forth in Section 12(a) above, Lessee shall have a period of thirty (30) days after receipt of notice from Lessor of a default in which to cure the default. This grace period shall be extended if the default is of a nature that it cannot be completely cured within such cure period solely as a result of circumstances outside of Lessee’s control, provided that (i) Lessor consents to such extension and (ii) Lessee has promptly commenced all appropriate actions to cure the default within such cure period and those actions are thereafter diligently and continuously pursued by Lessee in good faith. In no event, however, shall the grace period exceed a total of ninety (90) days. If the default is not cured before the expiration of the grace period, as extended, then it shall be an Event of Default and Lessor may pursue any or all of its remedies set forth herein.

14. Remedies . Upon the occurrence of an Event of Default that has not been cured within the period set forth in Section 13 , Lessor may exercise all rights and remedies under this Lease and the laws of the state where the Premises is located that are available to a Lessor of real and personal property in the event of a default by its Lessee, and as to the Lessee Property, all remedies granted under the laws of such state(s) to a secured party under its Uniform Commercial Code. Lessor shall have no duty to mitigate damages unless required by applicable law and shall not be responsible or liable for any failure to relet the Premises or to collect any rent due upon any such reletting. Lessee shall pay Lessor, promptly upon demand, all expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, architects, agents and brokers.

14.1 General . Without limiting the foregoing, Lessor shall have the right (but not the obligation) to do any of the following upon an Event of Default that is not cured within the period set forth in Section 13 : (a) sue for the specific performance of any covenant of Lessee as to which it is in breach or for the performance of any other obligation of Lessee under this Lease; (b) enter upon any portion of the Premises, terminate this Lease, dispossess Lessee from the Premises through appropriate legal procedures and/or collect money damages by reason of Lessee’s breach, including the acceleration of all Rent which would have accrued after such termination and all obligations and liabilities of Lessee under this Lease which survive the termination of the Term; (c) elect to leave this Lease in place and sue for Rent and other money damages as the same come due; and (d) (before or after repossession of the Premises pursuant to clause (b) above and whether or not this Lease has been terminated) assign this Lease from Lessee to a third party selected by Lessor, in which case Lessee agrees to consent to such assignment, and execute any and all documents necessary to effect such assignment; provided, that rent received from such third party assignee/new tenant shall serve to mitigate Lessee’s obligation for damages to Lessor hereunder.

14.2 Receivership . Lessee acknowledges that one of the rights and remedies available to Lessor under applicable law is to apply to a court of competent jurisdiction for the appointment of a receiver to take possession of the Premises, to collect the rents, issues, profits and income of the Premises and to manage the operation of the Premises. Lessor further acknowledges and agrees that, due to the specific use of the Premises as a health care facility, upon a default by Lessee, the appointment of a receiver to take over the operations of the Premises may be necessary to ensure the continued operation of the premises as

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a health care facility in order to ensure the continuation of quality care to the residents who reside therein. Lessee irrevocably and unconditionally agrees that, upon the occurrence of an Event of Default, and in addition to any other right or remedy of Lessor under this Lease or allowed by law, Lessor may petition any appropriate court for the appointment of a receiver to take possession of the Premises, to manage the operation of the Premises, to collect and disburse all rents, issues, profits an income generated thereby and to preserve or replace to the extent possible any operation license for the Premises or to otherwise substitute the licensee or provider thereof, The receiver shall be entitled to a reasonable fee for its services as a receiver. All such fees and other expenses of the receivership estate shall be added to the monthly rent due to Lessor under this Lease and shall be the obligation of Lessee. Lessee hereby irrevocably stipulates to the appointment of a receiver under such circumstances and for such purposes and agrees not to contest such appointment in any manner whatsoever.

14.3 Remedies Cumulative; No Waiver . No right or remedy herein conferred upon or reserved to Lessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of Lessor to insist at any time upon the strict performance of any provision of this Lease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Lessee. Lessor’s receipt of and Lessee’s payment of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Lessor of any provision of this Lease shall be effective unless expressed in a writing signed by it.

14.4 Performance of Lessee’s Obligations . If Lessee at any time shall fail to make any payment or perform any act on its part required to be made or performed under this Lease, then Lessor may, without waiving or releasing Lessee from any obligations or default hereunder, make such payment or perform such act for the account and at the expense of Lessee after delivering Lessee thirty (30) days’ written notice with an opportunity to cure, and enter upon any portion of the Premises for the purpose of taking all such action as may be reasonably necessary. No such entry shall be deemed an eviction of Lessee. All sums so paid by Lessor and all necessary and reasonable incidental costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the performance of any such act by it, together with interest at the Agreed Rate (as defined in Section 3 hereof) from the date of the making of such payment or the incurring of such costs and expenses, shall be payable by Lessee to Lessor upon Lessor’s written demand therefor.

15. Provisions on Termination .

15.1 Surrender of Possession . On the expiration of the Term or earlier termination or cancellation of this Lease (the “ Termination Date ”), Lessee shall deliver to Lessor or its designee possession of (a) the Facility and associated Lessor Personal Property in a neat and clean condition and in as good a condition as existed at the date of Lessee’s possession and occupancy pursuant to this Lease, ordinary wear and tear excepted, (b) a fully operational, licensed and certified (if applicable) Business at the Facility including, at Lessee’s sole cost, any Alterations necessitated by, or imposed in connection with, a change of ownership inspection survey for the transfer of operation of any portion of the Premises to Lessor or its designee, and (c) all patient charts and resident records along with appropriate resident consents if necessary and copies of all of its books and records relating to the Facility and the Premises. Accordingly, Lessee shall not at any time during or after the Term seek to transfer, surrender, or allow to lapse the licenses, permits or certifications relating to the Facility or the Premises, nor shall Lessee commit or omit any act that would jeopardize the Facility or any licensure or certification of the Facility. Lessee shall cooperate fully with Lessor or its designee in transferring or obtaining all necessary licenses and certifications for Lessor or its designee, and Lessee shall comply with all requests for an orderly transfer of the Facility licenses, and Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Lessor or its designee to operate the Facility. Subject to all applicable laws, Lessee hereby assigns, effective upon the Termination Date, all rights to operate the Facility to Lessor or its designee, including all required licenses and permits and all rights to apply for or otherwise obtain them.

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15.2. Removal of Lessee Personal Property . Provided that no Event of Default then exists, in connection with the surrender of the Premises, Lessee may upon at least five (5) business days’ prior notice to Lessor remove from the Premises in a workmanlike manner all Lessee Personal Property, leaving the Premises in good and presentable condition and appearance, including repair of any damage caused by such removal. If there is any Event of Default then existing, Lessee may not remove any Lessee Personal Property from the Premises and instead will, on demand from Lessor, convey it to Lessor for no additional consideration by executing a bill of sale in a form reasonably required by Lessor. Title to any Lessee Personal Property which is not removed by Lessee as permitted above upon the expiration of the Term shall, at Lessor’s election, vest in Lessor; provided, however, that Lessor may remove and store or dispose any or all of such Lessee Personal Property which is not so removed by Lessee without obligation or accounting to Lessee.

15.3 Management of Premises . Commencing on the Termination Date, Lessor or its designee, upon written notice to Lessee, may elect to assume the responsibilities and obligations for the management and operation of the Facility and Lessee agrees to cooperate fully to accomplish the transfer of such management and operation without interrupting the operation of the Facility, and Lessee will, upon Lessor’s request, execute a reasonable and customary operations transition agreement, respecting operations of the Facility pending the engagement by Lessor of a replacement operator. Lessee agrees that Lessor or its designee may operate the Facility under Lessee’s licenses and certifications pending the issuance of new licenses and certifications to Lessor or its designee. Lessee shall not commit any act or be remiss in the undertaking of any act that would jeopardize any licensure or certification of the Facility, and Lessee shall comply with all requests for an orderly transfer of any and all Facility and other licenses, Medicare and Medicaid certifications and possession of the Premises at the time of any such surrender.

15.4 Holding Over . If Lessee shall for any reason remain in possession of the Premises after the Termination Date, such possession shall be a month-to-month tenancy during which time Lessee shall pay as rental on the first (1 ^st ) business day of each month one hundred fifty percent (150%) of the monthly Rent payable with respect to the last Lease Year, all additional charges accruing during the month and all other sums, if any, payable by Lessee pursuant to this Lease. Nothing contained herein shall constitute the consent, express or implied, of Lessor to the holding over of Lessee after the Termination Date, nor shall anything contained herein be deemed to limit Lessor’s remedies.

16. Certain Lessor Rights .

16.1 Entry and Examination of Records . Lessor and its representatives may enter any portion of the Premises at any reasonable time after at least twenty-four (24) hours’ notice to Lessee to inspect the Premises for compliance, to exhibit the Premises for sale, Lease or mortgaging, or for any other reason; provided that no such notice shall be required in the event of an emergency, upon an Event of Default or to post notices of non-responsibility under any mechanics’ or materialmans’ lien law. No such entry shall unreasonably interfere with residents, patients, patient care or the Lessee’s operations of the Facility. During normal business hours, Lessee will permit Lessor and its representatives, inspectors and consultants to examine all contracts, books and financial and other records (wherever kept) relating to Lessee’s operations of the Facility.

16.2 Grant Liens . This Lease shall be subordinate to the right, title, and interest of any lender or other party holding a security interest in or a lien upon the Premises under any and all mortgage instruments or deeds to secure debt presently encumbering the Premises or the Building and to any and all other deeds to secure debt or mortgage instruments hereafter encumbering the Premises or the Building. Lessee shall at any time hereafter, on demand of Lessor or the holder of any such deed to secure debt or mortgage instrument, execute any instruments which may reasonably be required by such party for the purpose of evidencing the subordination of this Lease to the lien or security of such party. Lessee shall, upon demand, at any time or times, execute, acknowledge, and deliver to Lessor or the holder of any such instruments or deeds to secure debt, without expense, any and all documents that may be necessary to make this Lease superior to the lien of any of the same. If the holder of any of said instruments or deeds to secure debt shall hereafter succeed to the rights of Lessor under this Lease, Lessee shall, at the option of such

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holder or a purchaser at any foreclosure or sale under power, attorn to and recognize such successor as Lessee’s Lessor under this Lease. Lessee shall promptly execute, acknowledge, and deliver any instrument that may be necessary to evidence such attornment. Lessor will use commercially reasonably efforts to obtain from any lender holding a lien on the Premises, a subordination, non - disturbance and attornment agreement for the benefit of Lessee.

16.3 Estoppel Certificates . Lessor and Lessee shall, at any time upon not less than ten (10) business days’ prior written request by the other party, have an authorized representative execute, acknowledge and deliver to Lessor or Lessee, as the case may be, or their designee a written statement certifying (a) that this Lease, together with any specified modifications, is in full force and effect, (b) the dates to which Rent and additional charges have been paid, (c) that no default by either party exists or specifying any such default, and (d) as to such other matters as Lessor or Lessee, as the case may be, may reasonably request.

16.4 Conveyance Release . If Lessor or any successor owner shall sell or transfer any portion of the Premises in accordance with this Lease, they shall thereafter be released from all future liabilities and obligations hereunder arising or accruing from and after the date of such conveyance or other transfer, which instead shall thereupon be binding upon the new owner.

16.5 Affiliate Contracts . Except for the management agreement described in Section 7.4 hereof, Lessee may not enter into any contracts respecting the Facility with any of Lessee’s Affiliates or make any payments, directly or indirectly through one or more intermediaries, to any of Lessee’s Affiliates using funds generated from the operation of the Facility without the prior written consent of Lessor, not to be unreasonably withheld; provided, however, that Lessee shall not be required to obtain Lessor’s prior consent for any contracts with Affiliates that equal a total cost of Lessee, in aggregate over the immediately preceding one (1) year period, of less than Fifty Thousand Dollars ($50,000).

17. Assignment and Subletting . Except as otherwise expressly permitted in this Lease, without Lessor’s prior written consent, which may be granted or withheld in Lessor’s sole discretion, Lessee shall not assign this Lease, or sub-sublease all or any part of the Premises, or permit the use of the Premises by any party other than Lessee. This prohibition includes an assignment or sub-subletting to or by a receiver or trustee in any federal or state bankruptcy, insolvency, or other proceeding. For purposes of this Section, a sale or transfer of all or a controlling ownership interest in Lessee or a merger or other combination by Lessee or a sale of all or substantially all of Lessee’s assets in lieu thereof shall be deemed an assignment or other transfer of this Lease. Notwithstanding the foregoing, any Key Principal may transfer its interest in Lessee to any other Key Principal or to any of its Affiliates, provided that such transfer does not require the consent of a Facility Mortgagee and does not require regulatory approval.

18. Damage by Fire or Other Casualty . Lessee shall promptly notify Lessor of any damage or destruction of any portion of the Premises and diligently repair or reconstruct such portion of the Premises to a like or better condition than existed prior to such damage or destruction. Any net insurance proceeds payable with respect to the casualty shall be paid directly to Lessor and, if an Event of Default has not occurred hereunder, may be used for the repair or reconstruction of the applicable portion of the Premises pursuant to Lessor’s reasonable disbursement requirements and subject to the provisions of the Facility Mortgage Documents and the release of insurance proceeds by the Facility Mortgagee, if any. If such proceeds are insufficient, Lessee shall provide the required additional funds; if they are more than sufficient, the surplus shall belong and be paid to Lessee. Lessee shall not have any right under this Lease, and hereby waives all rights under applicable law, to abate, reduce or offset rent by reason of any damage or destruction of any portion of the Premises by reason of an insured or uninsured casualty.

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19 . Condemnation . Except as provided to the contrary in this Section 19, this Lease shall not terminate and shall remain in full force and effect in the event of a taking or condemnation of the Premises, or any portion thereof, and Lessee hereby waives all rights under applicable law to abate, reduce or offset rent by reason of such taking. If during the Term all or substantially all (a “ Complete Taking ”) or a smaller portion (a “ Partial Taking ”) of the Premises is taken or condemned by any competent public or quasi-public authority, then (a) in the case of a Complete Taking, Lessee may at its election made within thirty (30) days of the effective date of such Taking, terminate this Lease and the current Rent shall be equitably abated as of the effective date of such termination, or (b) in the case of a Partial Taking, the Rent shall be abated to the same extent as the resulting diminution in Fair Market Value of the applicable portion of the Premises. The resulting diminution in Fair Market Value on the effective date of a Partial Taking shall be as established pursuant to Exhibit “D” . Lessor alone shall be entitled to receive and retain any award for a taking or condemnation other than a temporary taking; provided, however, Lessee shall be entitled to submit its own claim in the event of any such taking or condemnation with respect to the value of Lessee’s Subleasehold interest in any portion of the Premises and/or the relocation costs incurred by Lessee as a result thereof. In the event of a temporary taking of less than all or substantially all of the Premises, Lessee shall be entitled to receive and retain any and all awards for the temporary taking and the Rent due under this Lease shall be not be abated during the period of such temporary taking.

20. Indemnification . Lessee agrees to protect, indemnify, defend and save harmless Lessor, its members, managers, Affiliates, directors, officers, shareholders, agents and employees from and against any and all foreseeable or unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or damage of any kind or nature, including reasonable attorneys’ fees, from any suits, claims or demands, on account of any matter or thing, action or failure to act arising out of or in connection with this Lease or operations of Lessee on any portion of the Premises (except to the extent arising from the gross negligence or willful misconduct of Lessor), including, without limitation, (a) the breach by Lessee or any of its representations, warranties, covenants or other obligations hereunder, (b) any Protest, (c) all known and unknown Environmental Activities on any portion of the Premises, Hazardous Materials Claims or violations of a Hazardous Materials Law with respect to any portion of the Premises but only, with respect to any of the foregoing, to the extent that such activity, claim or violation is the result of an act or omission of Lessee or any of its agents during the Term, and (d) upon or following the Termination Date, the correction of all deficiencies of a physical matter identified by, and any liability (including any overpayment to any Medicare, Medicaid or other third party payor), assessed or asserted by, any governmental agency or Medicare or Medicaid providers, but only, with respect to any of the foregoing, to the extent such deficiency or liability is the result of the act or omission of Lessee or any of its agents during the Term. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Lessor believes is covered by this indemnity, it shall give Lessee notice of this matter. If Lessor does not elect to defend the matter with its own counsel at Lessee’s expense, Lessee shall then defend Lessor at Lessee’s expense (including Lessor’s reasonable attorneys’ fees and costs) with legal counsel satisfactory to Lessor. In no event shall Lessee be liable for consequential or punitive damages hereunder.

21. Disputes . If any party brings any action to interpret or enforce this Lease, or for damages for any alleged breach, the prevailing party shall be entitled to reasonable attorneys’ fees and costs as awarded by the court in addition to all other recovery, damages and costs.

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2 2 . Notices . All notices and demands, certificates, requests, consents, approvals and other similar instruments under this Lease shall be in writing and sent by personal delivery, U.S. certified or registered mail (return receipt requested, postage prepaid) or FedEx or similar generally recognized overnight carrier regularly providing proof of delivery, addressed as follows:


If to Lessee:		If to Lessor:

Vero Health Care, Inc. 10420 Little Patuxent Parkway		Mountain Trace Nursing ADK, LLC c/o Regional Health Properties, Inc.

Suite 210		454 Satellite Blvd.
Columbia, Maryland 21044		Suite 100
Attn: Eamonn D. Reilly		Suwanee, Georgia 30024 Attn: CEO

With a copy to:

Williams Mullen 200 S. 10 ^th Street, Suite 1600 Richmond, VA 23219 Attn: Wyatt S. Beazley IV, Esquire

A party may designate a different address by notice as provided above. Any notice or other instrument so delivered (whether accepted or refused) shall be deemed to have been given and received on the date of delivery established by U.S. Post Office return receipt or the carrier’s proof of delivery or, if not so delivered, upon its receipt. Delivery to any officer, general partner or principal of a party shall be deemed delivery to such party. Notice to any one co-Lessee shall be deemed notice to all co-Sublessees.

23. Compliance with Facility Mortgage Documents . Lessee acknowledges that any Facility Mortgage Documents, including, without limitation, documents evidencing loans made by the U. S. Department of Housing and Urban Development (HUD), executed by Lessor or any Affiliate of Lessor may impose certain obligations on the “borrower” or other counterparty thereunder to comply with or cause the operator and/or lessee of a Facility to comply with all representations, covenants and warranties contained therein relating to such Facility and the operator and/or lessee of such Facility, including, covenants relating to (i) the maintenance and repair of such Facility; (ii) maintenance and submission of financial records and accounts of the operation of such Facility and related financial and other information regarding the operator and/or lessee of such Facility and such Facility itself; (iii) the procurement of insurance policies with respect to such Facility; (iv) minimum Occupancy, fixed coverage ratio or other Facility-related financial and/or performance requirements, and (v) without limiting the foregoing, compliance with all applicable legal requirements relating to such Facility and the operation of the Business thereof. For so long as any Facility Mortgages encumber the Premises or any portion thereof or interest therein, provided Lessee has received copies of the Facility Mortgage Documents from Lessor, Lessee covenants and agrees, at its sole cost and expense and for the express benefit of Lessor, to operate the applicable Facility in strict compliance with the terms and conditions of the Facility Mortgage Documents (other than payment of any indebtedness evidenced or secured thereby) and to timely perform all of the obligations of Lessor relating thereto, or to the extent that any of such duties and obligations may not properly be performed by Lessee, Lessee shall cooperate with and assist Lessor in the performance thereof (other than payment of any indebtedness evidenced or secured thereby); provided however, this Section 23 shall not (i) increase Lessee’s monetary or non-monetary obligations under this Lease or (ii) diminish Lessee’s rights under this Lease. If any new Facility Mortgage Documents to be executed by Lessor or any Affiliate of Lessor would impose on Lessee any obligations under this Section 23 (provided that all such obligations shall comply with the restrictions set forth in the immediately preceding sentence), Lessor shall provide copies of the same to Lessee for informational purposes (but not for Lessee’s approval) prior to the execution and delivery thereof by Lessor

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or any Affiliate of Lessor.

24. Miscellaneous . This Lease has been freely and fairly negotiated, and all provisions shall be interpreted according to their fair meaning and shall not be strictly construed against any party. While nothing contained in this Lease should be deemed or construed to constitute an extension of credit by Lessor to Lessee, if a portion of any payment made to Lessor is deemed to violate any applicable laws regarding usury, such portion shall be held by Lessor to pay the future obligations of Lessee as such obligations arise and if Lessee discharges and performs all obligations hereunder, such funds will be reimbursed (without interest) to Lessee on the Termination Date. If any part of this Lease shall be determined to be invalid or unenforceable, the remainder shall nevertheless continue in full force and effect. Time is of the essence, and whenever action must be taken (including the giving of notice or the delivery of documents) hereunder during a certain period of time or by a particular date that ends or occurs on a Saturday, Sunday or federal holiday, then such period or date shall be extended until the immediately following business day. Whenever the words “including”, “include” or “includes” are used in this Lease, they shall be interpreted in a non-exclusive manner as though the words “without limitation” immediately followed. Whenever the words day or days are used in this Lease, they shall mean “calendar day” or “calendar days” unless expressly provided to the contrary. The titles and headings in this Lease are for convenience of reference only and shall not in any way affect the meaning or construction of any provision. Unless otherwise expressly provided, references to any “Section” mean a section of this Lease (including all subsections), to any “Exhibit” or “Schedule” mean an exhibit or schedule attached hereto or to “Medicare” or “Medicaid” include any successor program. If more than one Person is Lessee hereunder, their liability and obligations hereunder shall be joint and several. Promptly upon the request of either party and at its expense, the parties shall prepare, enter into and record a suitable short form memorandum of this Lease. This Lease (a) contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior or contemporaneous verbal or written agreements or understandings, (b) may be executed in several counterparts, (including electronically mailed copies in portable document format (PDF)), each of which shall be deemed an original, but all of which shall constitute one and the same document, (c) may only be amended by a writing executed by the parties, (d) shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties, (e) shall be governed by and construed and enforced in accordance with the internal laws of the State of Georgia, and (f) incorporates by this reference any Exhibits and Schedules attached hereto.

25. Terrorism/Governmental Action . Lessee warrants and represents to Lessor that Lessee is not, and shall not become, a person or entity with whom Lessor is restricted from doing business under regulations of the Office of Foreign Asset Control (“ OFAC ”) of the Department of the Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any applicable law, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action, and is not and shall not knowingly engage in any dealings or transaction or otherwise knowingly be associated with such persons or entities.

26. Financial Covenants . Lessee shall be required to maintain a Lease Coverage Ratio of 1.0 to 1.0 for months 10 through 18 of the Initial Term, 1.15 to 1.0 for months 19 through 36 of the Initial Term and 1.25 to 1.0 thereafter. Such Lease Coverage Ratio will be tested on a quarterly basis beginning from month 10 through month 24 of the Initial Term (and not including any months prior to month 10). Notwithstanding the foregoing, if the Lease Coverage Ratio in months 13 through 24 of the Initial Term meets a minimum of 1.0 to 1.0 over a trailing twelve-month testing period or a trailing three-month period, then there shall be no financial covenant default. After month 24 of the Initial Term, Lessee must satisfy the Lease Coverage Ratio for a trailing twelve-month testing period.

27. Minimum Annual Capital Expenditures . To maintain the Facility, Lessee shall spend $500.00 per licensed bed per year.

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2 8 . Conditions to Obligation of Lessee . The obligations of Lessee and the effectiveness of this Agreement shall be wholly contingent on Lessee receiving:

(a) a fully executed OTA, in a form acceptable to Lessee, which contains an indemnification section through which Lessor’s exiting operator indemnifies Lessee, from any and all liabilities arising at the Facility prior to the date the operations of the Facility transfer from Lessor to Lessee,

(b) a Subordination, Non-Disturbance, and Attornment (SNDA) Agreement, in a form acceptable to Lessee, duly executed by Lessee, Lessor and Facility Mortgagee, and

(c) a credit facility with an institutional lender providing Lessee with sufficient working capital financing to operate the Facility.

29. Negative Covenants . During the Term of this Lease, Lessee shall not:

(a) incur any debt other than trade debt incurred in the ordinary course of business, a working capital line of credit secured by Lessee’s accounts receivable or indebtedness constituting Permitted Liens;

(b) create any liens on the Premises other than Permitted Liens;

(c) enter into any sale, re-capitalization, transfer, conveyance, merger or other capital event resulting in a change of control of Lessee without the prior written consent of Lessor, which consent may be granted or withheld in Lessor’s sole and absolute discretion; or

(d) breach the Patriot Act or any OFAC regulations.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, this Lease has been executed by Lessor and Lessee as of the date first written above.

LESSOR :

MOUNTAIN TRACE NURSING ADK, LLC
a Georgia limited liability company

By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Manager Member

LESSEE :

VERO HEALTH X, LLC
a Delaware limited liability company

By:
Name:
Title:

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IN WITNESS WHEREOF, this Lease has been executed by Lessor and Lessee as of the date first written above.

LESSOR :

MOUNTAIN TRACE NURSING ADK, LLC
a Georgia limited liability company

By:
Name:
Title:

LESSEE :

VERO HEALTH X, LLC
a Delaware limited liability company

By:	/s/ Eamonn Reilly
Name:	Eamonn Reilly
Title:	Manager

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EXHIBIT “A-l”

LEGAL DESCRIPTION

Jackson County, North Carolina

Said Property located on Mountain Trace Road (NCSR 1571) off Little Savannah Road (NCSR 1367), Webster Township, Jackson County, North Carolina and being more particularly described as follows:

COMMENCING from a Nail Set on the C. J. Harris Hospital Property (Parcel # 7630-93-6526) having NGS NAD 83 coordinates North 603,862,466 feet, East 739,902.522 feet THENCE South 66 degrees 59 minutes 20 seconds West for a distance of 346.50 feet (346.43 feet-grid) to a Nail Set having coordinates N = 603,727.044 feet, E = 739,583,662 feet THENCE North 32 degrees 28 minutes 25 seconds West for a distance of 103.12 feet (103.10 feet-grid) to a 5/8” Rebar Set with Cap having coordinates N = 603,814.025 feet, E = 739,528.310 feet the TRUE POINT OF BEGINNING;

THENCE with new severance line South 72 degrees 19 minutes 25 seconds East for a distance of 26.01 feet to a 5/8” Rebar Set with Cap; THENCE North 37 degrees 47 minutes 35 seconds East for a distance 74.99 feet to a 5/8” Rebar Set with Cap; THENCE North 54 degrees 35 minutes 50 seconds East for a distance of 75.02 feet to a 5/8” Rebar Set with Cap; THENCE North 73 degrees 32 minutes 00 seconds East for a distance of 243.51 feet to a 5/8” Rebar Set with Cap; THENCE South 71 degrees 05 minutes 10 seconds East for a distance of 246.08 feet to a 5/8” Rebar Set with Cap, passing a 5/8” Rebar Set with Cap at 59.99 feet; THENCE South 17 degrees 28 minutes 20 seconds West for a distance of 411.97 feet to a 5/8” Rebar Set with Cap; THENCE North 37 degrees 15 minutes 10 seconds West for a distance of 86.75 feet to a 5/8” Rebar Set with cap; THENCE North 64 degrees 29 minutes 55 seconds West for a distance of 48.95 feet to a 5/8” Rebar Set with Cap; THENCE South 21 degrees 24 minutes 50 seconds West for a distance of 79.91 feet to a 5/8” Rebar set with Cap; THENCE South 10 degrees 23 minutes 15 seconds West for a distance of 47.16 feet to a 5/8” Rebar Set with Cap; THENCE South 01 degrees 03 minutes 10 seconds West for a distance of 42.12 feet to a 5/8” Rebar Set with Cap; THENCE South 09 degrees 01 minutes 10 seconds West for a distance of 15.29 feet to a 5/8” Rebar Set with Cap; THENCE South 19 degrees 44 minutes 20 seconds West for a distance of 13.92 feet to a 5/8” Rebar Set with Cap; THENCE South 26 degrees 32 minutes 50 seconds West for a distance of 39.21 feet to a 5/8” Rebar Set with Cap on northern right of way of Leaning Tree Lane; THENCE with said northern right of way South 65 degrees 33 minutes 35 seconds West for a distance of 10.76 feet to a Point; THENCE South 62 degrees 56 minutes 35 seconds West for a distance of 23.25 feet to a Point; THENCE South 61 degrees 21 minutes 50 seconds West for a distance of 50.44 feet to a 5/8” Rebar Set with Cap; THENCE South 65 degrees 31 minutes 35 seconds West for a distance of 16.46 feet to a Point; THENCE South 69 degrees 12 minutes 30 seconds West for a distance of 14.88 feet to a Point; THENCE South 73 degrees 51 minutes 55 seconds West for a distance of 15.53 feet to a Point; THENCE South 80 degrees 02 minutes 05 seconds West for a distance of 15.37 feet to a 5/8” Rebar Set with Cap; THENCE South 87 degrees 59 minutes 45 seconds West for a distance of 23.32 feet to a Point; THENCE South 87 degrees 27 minutes 30 seconds West for a distance of 30.07 feet to a Point; THENCE South 87 degrees 29 minutes 45 seconds West for a distance of 40.87 feet to a Point; THENCE South 87 degrees 25 minutes 45 seconds West for a distance of 53.68 feet to a Point; THENCE South 87 degrees 28 minutes 45 seconds West for a distance of 44.47 feet to a Point; THENCE North 87 degrees 40 minutes 45 seconds West for a distance of 22.68 feet to a 5/8” Rebar Set with Cap; THENCE North 81 degrees 45 minutes 55 seconds West for a distance of 19.58 feet to a Point; THENCE North 78 degrees 08 minutes 00 seconds West for a distance of 9.53 feet to a Point; THENCE North 73 degrees 41 minutes 15 seconds West for a distance of 13.08 feet to a Point; THENCE North 70 degrees 25 minutes 50 seconds West for a distance of 20.74 feet to a 5/8” Rebar Set with Cap; THENCE North 60 degrees 56 minutes 00 seconds West for a distance of 46.99 feet to a Point; THENCE North 63 degrees 17 minutes 40 seconds West for a distance of 16.60 feet to a Point; THENCE North 73 degrees 45 minutes 45 seconds West for a distance of 6.17 feet to a 5/8” Rebar Set with Cap; THENCE leaving said northern right of way north 18 degrees 56 minutes 15 seconds East for a distance of 5.48 feet to a Concrete Monument Found, Common corner of Healy DB 1493, PG 168, and C.J. Harris DB 739, PG 606; THENCE with the line of C.J. Harris North 18 degrees 39 minutes 55 seconds East for a distance of 483.42 feet to the POINT OF BEGINNING and being part of that certain tract of land as shown on a plat of survey prepared for C. J. Harris Hospital by Joel Johnson Land Surveying, Inc. dated February 12, 2009, and last revised May 7, 2009, Drawing Number 08090P, and also being more particularly described as Tract A1 on plat entitled “Plat of Survey for : C. J. Harris Hospital” by Joel Johnson Land Surveying, Inc. dated February 12, 2009, and last revised May 7, 2009, Drawing Number 08090P, recorded in Plat Book 18 at Page 5 of the Burke County Public Registry, and also being more particularly described as that certain 7.36 acre tract described on plat of survey for Mountain Trace Nursing ADK, LLC, dated November 30, 2010, prepared by Joel Johnson Land Surveying, Inc., and bearing the certification of R. Joel Johnson, N.C.L.S. No. L-3882.

PROPERTY MORE COMMONLY KNOWN AS: 417 Mountain Trace Rd., Sylva, Jackson County, NC 28779

36734458_7

EXHIBIT A-2

LESSOR PERSONAL PROPERTY

“Lessor Personal Property” means: (i) all personal property used in the operation or management of the Facility, including machinery, equipment, furniture, furnishings, beds, computers, signage, trade fixtures or other personal property and consumable inventory and supplies, including any and all such personal property replaced by Lessee or required by the state in which the Facility is located or any other governmental entity to operate the Facility, and (ii) all site plans, surveys, soil and substrata studies, architectural drawings, plans and specifications, engineering plans and studies, floor plans, landscape plans, and other plans and studies that relate to the Facilities; provided, however, that Lessor Personal Property shall not include: (a) any vehicles or computer software used in connection with the operation of the Facilities, or (b) any equipment leased or subleased by Lessee from third parties, which equipment is not a replacement of what would otherwise be Lessor Personal Property.

36734458_7

EXHIBIT “B”

CERTAIN DEFINITIONS

For purposes of this Lease, the following terms and words shall have the specified meanings:

“Affiliate” shall mean with respect to any Person, any other Person which directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the first Person.

“Business” shall mean the business and operation of the Facility and all financial activities and other matters related thereto.

“Control” shall mean, as applied to any Person, the possession, directly or indirectly, of the power to direct the management and policies of that Person, whether through ownership, voting control, by contract or otherwise.

“Facility Mortgage” shall mean any mortgage, deed of trust or other security agreement or lien encumbering the Premises or any portion thereof and securing an indebtedness of Lessor or any Affiliate of Lessor or any ground, building or similar Lease or other title retention agreement to which the Premises or any portion thereof is subject from time to time.

“Facility Mortgagee” shall mean the holder or beneficiary of a Facility Mortgage and any other rights of the lender, credit party or lessor under the applicable Facility Mortgage Documents.

“Facility Mortgage Documents” shall mean with respect to each Facility Mortgage and Facility Mortgagee, the applicable Facility Mortgage, loan or credit agreement, Lease, note, collateral assignment instruments, guarantees, indemnity agreements and other documents or instruments evidencing, securing or otherwise relating to the loan made, credit extended, Lease or other financing vehicle pursuant thereto.

“Guarantor” shall mean Vero Health Care, LLC, a Delaware limited liability company.

“Guaranty” shall mean that certain Guaranty executed by Guarantor in favor of Lessor of even date herwith.

36734458_7

“Hazardous Materials Claims” shall mean any and all enforcement, clean up, removal or other governmental or regulatory actions or orders threatened, instituted or completed pursuant to any Hazardous Material Laws, together with all claims made or threatened by any third party against any portion of the Premises, Lessor or Lessee relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials.

“Issuer” shall mean a financial institution satisfactory to Lessor issuing the Letter of Credit and such Issuer’s successor and assigns. Any Issuer shall be rated A or better by Standard & Poor’s Ratings Group, A2 or better by Moody’s Investor Services, Inc., or, of not rated by either of the foregoing agencies, an equivalent rating by Fitch Inc., or other nationally recognized rating agency at all times through the Term.

“Key Principals” shall mean Eamonn Reilly.

“Lease Coverage Ratio” shall mean a fraction, the numerator of which is “ Adjusted EBITDAR ” and the denominator of which is Base Rent. “ Adjusted EBITDAR ” shall mean, for any period, the Facility Net Income for such period plus, without duplication, to the extent deducted in determining Facility Net Income, the sum of (i) Facility Interest Expense for such period, plus (ii) expense for income taxes paid or accrued for such period, plus (iii) all amounts attributable to the amount of the provision for depreciation and amortization for such period, plus (iv) the amount of other non-cash charges (other than the write-down of current assets) for such period, plus (v) Base Rent for such period, plus (vi) the Facility Management Fee for such period, plus (vii) capital expenditures of $500 per bed (per annum) for such period, plus (viii) extraordinary losses for such period (as determined in accordance with GAAP) not in excess of $25,000 unless approved in writing by Lessor, minus, to the extent included in Facility Net Income for such period, extraordinary gains for such period (as determined in accordance with GAAP), all calculated in connection with the Business.

“Letter of Credit” shall mean an irrevocable and transferable letter of credit issued by an Issuer in favor of Lessor as security for Lessee’s obligations under this Lease and in a form acceptable to Lessor, together with amendments thereto or replacements or substitutions thereof.

“Occupancy” shall mean, with respect to the Premises, the percentage of (a) total patient days relating to such Facility for any reporting period divided by (b) the product of (i) 80 and (ii) the total days in such reporting period.

“OTA” means that certain Agreement to Transfer Operations and Related Assets to which Lessor’s exiting operator and Lessee are parties of even date herewith.

“Permitted Liens” shall mean (i) liens granted to Lessor or any Affiliate of Lessor, (ii) liens customarily incurred by Lessee in the ordinary course of business for items not delinquent, (iii) liens for Taxes not yet due and payable, (iv) any lien, charge or encumbrance which is being contested in good faith pursuant to the terms of this Lease, (v) all easements, liens, encumbrances, restrictions, agreements and other title matters existing as of the Execution Date, (vi) purchase money financing and capitalized equipment leases for the acquisition of personal property, provided that Lessor receives a non-disturbance agreement from the purchase money lender or equipment lessor in form and substance as may be satisfactory to Lessor, in Lessor’s sole discretion, for any such financing where the original cost of the equipment financed exceeds $25,000, (vii) any easement granted by Lessor, in Lessor’s discretion, at the request of Lessee which is necessary to (A) obtain utilities or other services for the Facilities in the ordinary course of Lessee’s business or (B) satisfy requests from local authorities in respect of, without limitation, township projects; and (viii) liens that may be filed as a result of Lessor’s acts or omissions.

“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, governmental authority, and other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and fiduciary acting in such capacity on behalf of any of the foregoing.

36734458_7

EXHIBIT “C”

FINANCIAL, MANAGEMENT AND REGULATORY REPORTS


REPORT	DUE DATE
Monthly financial reports concerning the Business at the Facility consisting of: (1) a reasonably detailed income statement showing, among other things, gross revenues; (2) total patient days; (3) occupancy; and (4) payor mix. (All via e-mail to )	Forty-five (45) days after the end of each calendar month
Monthly census reports concerning the Facility (via e-mail to )	Forty-five (45) days after the end of each calendar month
Monthly accounts payable report concerning the Facility consisting of a list and ageing report of all payables owed by the Facility to all parties	Forty-five (45) days after the end of each calendar month
Quarterly consolidated or combined financial statements of Lessee (via e-mail to )	Forty-five (45) days after the end of each of the first three quarters of the fiscal year of Lessee
Quarterly litigation summaries of Lessee (via e-mail to )	Forty-five (45) days after the end of each quarter of the fiscal year of Lessee
Annual consolidated or combined financial statements of Lessee, each lessee or sublessee under Affiliated Leases or Subleases audited by a reputable certified public accounting firm (via e-mail to )	One Hundred Twenty (120) days after the fiscal year end of Lessee and
Regulatory reports with respect to the Facility, as follows: (1) all federal, state and local licensing and reimbursement certification surveys, inspection and other reports received by Lessee as to any portion of the Premises and any portion of the Business, including state department of health licensing surveys; (2) Medicare and Medicaid certification surveys; and (3) life safety code reports.	Fifteen (15) business days after receipt
Reports of regulatory violations, by written notice of the following: (1) any violation of any federal, state or local licensing or reimbursement certification statute or regulation, including Medicare or Medicaid;	Five (5) business days after receipt
(2) any suspension, termination or restriction placed upon Lessee or any portion of the Premises, the operation of any portion of the Business or the ability to admit residents or patients; or (3) any violation of any other permit, approval or certification in connection with any portion of the Premises or any portion of the Business, by any federal, state or local authority, including Medicare or Medicaid.
Cost Reports	Fifteen (15) days after filing

36734458_7

EXHIBIT “D”

FAIR MARKET VALUE

“Fair Market Value” means the fair market value of the Premises or applicable portion thereof on a specified date as agreed to by the parties, or failing such agreement within ten (10) days of such date, as established pursuant the following appraisal process. Each party shall within ten (10) days after written demand by the other party select one MAI Appraiser to participate in the determination of Fair Market Value. For all purposes under this Lease, the Fair Market Value shall be the fair market value of the Premises or applicable portion thereof unencumbered by this Lease. Within ten (10) days of such selection, the MAI Appraisers so selected by the parties shall select a third (3 ^rd ) MAI Appraiser. The three (3) selected MAI Appraisers shall each determine the Fair Market Value of the Premises or applicable portion thereof within thirty (30) days of the selection of the third appraiser. To the extent consistent with sound appraisal practices as then existing at the time of any such appraisal, and if requested by Landlord, such appraisal shall be made on a basis consistent with the basis on which the Premises or applicable portion thereof were appraised at the time of their acquisition by Landlord. Tenant shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Landlord shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this Exhibit. Each party shall pay half the fees and expenses of the third MAI Appraiser selected by the respective MAI Appraisers selected by each of the parties.

36734458_7

SCHEDULE 7.1

Number and Type of Licensed Beds: 106

Number of Medicare / Medicaid Certified Beds: 106

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Exhibit 10.217

THIRD AMENDMENT TO SUBLEASE AGREEMENT

THIS THIRD AMENDMENT TO SUBLEASE AGREEMENT (the “ Amendment ”) is made and entered into as of the day of , 2019, (the “ Execution Date ”) but effective upon the Effective Date (as hereinafter defined), by and between ADK GEORGIA, LLC, a Georgia limited liability company (“ Sublessor ”) and 3460 POWDER SPRINGS ROAD ASSOCIATES, L.P., a Georgia limited Partnership (“ Sublesse e”).

W I T N E S S E T H:

WHEREAS, Sublessor and Sublessee desire to further amend the Sublease to clarify the commencement date of the Sublease and to correct certain scrivener’s errors in the Second Amendment.

1. Capitalized Terms . Unless otherwise defined herein, all capitalized words and phrases used herein shall have the same meanings ascribed to them in the Sublease.

2. Effective Date . This Amendment shall be effective as of the Execution Date (the “ Effective Date ”).

3. Commencement Date . Section 2 of the Sublease is hereby amended by deleting the reference to “March 1, 2015” in the first and second line thereof and inserting in lieu thereof “April 1, 2015”.

4. Base Rent . Section 3 of the Sublease is hereby deleted in its entirety and the following is inserted in lieu thereof:

Third Amendment to Lease Agreement - Powder Springs

Lease Year	Base Rent Per Month

Year 1	$175,000.00
Year 2	$176,750.00
Year 3	$178,517.50
04/01/2018-01/31/2019	$180,302.68
02/01/2019-03/31/2019	$162,274.41
Year 5	$163,897.15
Year 6	$165,536.12
Year 7	$167,191.48
Year 8	$168,863.40
Year 9	$170,552.03
Year 10	$172,257.55
Year 11	$173,980.13
Year 12	$175,719.93
Year 13	$177,477.13

Commencing on the first day of any extended term of this Lease and on the first day of each Lease Year thereafter during an extended term, Base Rent payable hereunder shall increase by two percent (2%) over the Base Rent for the previous Lease Year. For purposes of this Sublease, each “Lease Year” shall be the twelve (12) month period commencing on April 1 and ending on March 31 of the following calendar year.

5. Agreement in Effect . Except as herein specifically provided, all other terms and provisions of the Sublease shall remain in full force and effect, and are hereby ratified and reaffirmed by the parties.

[Signatures on Following Page]

Third Amendment to Lease Agreement - Powder Springs

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.


SUBLESSOR:

ADK GEORGIA, LLC,
a Georgia limited liability company

By:	/s/ Brent Morrison
Name:	Brent Morrison
Title:	Manager

SUBLESSEE:

3460 POWDER SPRINGS ROAD ASSOCIATES, L.P.,
a Georgia limited partnership

By:	/s/ James J. Andrews
Name:	James J. Andrews
Title:	President

Third Amendment to Lease Agreement - Powder Springs

Exhibit 10.218

THIRD AMENDMENT TO SUBLEASE AGREEMENT

THIS THIRD AMENDMENT TO SUBLEASE AGREEMENT (the “ Amendment ”) is made and entered into as of the day of , 2019 (the “Execution Date”), but effective upon the Effective Date (as hereinafter defined), by and between ADK GEORGIA, LLC, a Georgia limited liability company ( “Sublessor ”) and 3223 FALLIGANT AVENUE ASSOCIATES, L.P., a Georgia limited Partnership (“ Sublessee ”).

W I T N E S S E T H:

WHEREAS, Sublessor and Sublessee desire to further amend the Sublease to clarify the commencement date of the Sublease and to correct certain scrivener’s errors in the Second Amendment.

1. Capitalized Terms . Unless otherwise defined herein, all capitalized words and phrases used herein shall have the same meanings ascribed to them in the Sublease.

2. Effective Date . This Amendment shall be effective as of the Execution Date (the “ Effective Date ”).

4. Base Rent . Section 3 of the Sublease is hereby deleted in its entirety and the following is inserted in lieu thereof:

Third Amendment to Lease Agreement - Tara - Thunderbolt

Third Amendment to Lease Agreement - Tara – Thunderbolt

Lease Year		Base Rent Per Month

Year 1		$150,000.00
Year 2		$151,500.00
Year 3		$153,015.00
04/01/2018-01/31/2019		$154,545.15
02/01/2019 - 03/31/2019		$139,090.64
Year 5		$140,481.54
Year 6		$141,886.36
Year 7		$143,305.22
Year 8		$144,738.27
Year 9		$146,185.65
Year 10		$147,647.51
Year 11		$149,123.99
Year 12		$150,615.23
Year 13		$152,121.38

Commencing on the first day of any extended term of this Lease and on the first day of each Lease Year thereafter during an extended term, Base Rent payable hereunder shall increase by two percent (2%) over the Base Rent for the previous Lease Year.” For purposes of this Sublease, each “Lease Year” shall be the twelve (12) month period commencing on April 1 and ending on March 31 of the following calendar year.

[Signatures on Following Page]

Third Amendment to Lease Agreement - Tara – Thunderbolt

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

SUBLESSOR :

ADK GEORGIA, LLC,
a Georgia limited liability company

By:		/s/ Brent Morrison
Name:		Brent Morrison
Title:		Manager

SUBLESSEE :

3223 FALLIGANT AVENUE
ASSOCIATES, L.P.,
a Georgia limited partnership

By:		/s/ James J. Andrews
Name:		James J. Andrews
Title:		President

Third Amendment to Lease Agreement - Tara – Thunderbolt

Exhibit 10.219

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (the “ Settlement Agreement ”) is made and entered into this ___ day of March, 2019 by and between James F. Dowden, as Chapter 7 Trustee (the “ Trustee ”) of the Debtors (as defined below) and the Regional Health Parties (as defined below). The Trustee and Regional Health Parties are collectively referred to herein as the “Parties” or individually as “Party.”

DEFINITIONS

“Bankruptcy Court” shall mean the United States Bankruptcy Court for the Eastern District of Arkansas, Little Rock Division.

“Bankruptcy Cases” shall mean the following jointly administered Chapter 7 cases pending in the Bankruptcy Court: In re Highlands Arkansas Holdings, LLC , Bankr. E.D. Ark. Case No. 4:16- bk-13397; In re Highland of Stamps, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13412; In re Highlands of Rogers Dixieland, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13411; In re Highlands of North Little Rock John Ashley, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13409; In re Highlands of Mountain View SNF, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13410; In re Highlands of Mountain View RCF, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13408; In re Highlands of Little Rock West Markham, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13406; In re Highlands of Little Rock South Cumberland, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13404; In re Highlands of Little Rock Riley, LLC , Bankr. E.D. Ark. Case No. 4:16-bk-13402; and In re Highlands of Fort Smith, LLC , Bankr. E.D. Ark. Case No. 16-bk-13401.

“Debtors” shall mean Highlands Arkansas Holdings, LLC, 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.

“Regional Health Parties” shall mean AdCare Health Systems, Inc., Regional Health Properties, Inc., Park Heritage Property Holdings, LLC, Park Heritage Nursing, LLC, Valley River Property Holdings, LLC, Valley River Nursing, LLC, Northridge HC&R Property Holdings, LLC, Northridge HC&R Nursing, LLC, Mountain Top Property Holdings, LLC, Mountain Top ALF, LLC, Woodland Hills HC Property Holdings, LLC, Woodland Hills HC Nursing, LLC, APH&R Property Holdings, LLC, APH&R Nursing, LLC, Mt. V Property Holdings, LLC, Mountain View Nursing, LLC, Homestead Property Holdings, LLC, Homestead Nursing, LLC, Little Rock HC&R Property Holdings, LLC, and Little Rock HC&R Nursing, LLC.

“Adversary Case” means that certain adversary proceeding between the Trustee and the Regional Health Parties, styled James F. Dowden, as Chapter 7 Trustee v. AdCare Health Systems, Inc., et al. , Adversary Case No. 4:18-ap-01037, pending in the Bankruptcy Court.

RECITALS

WHEREAS the Trustee filed the Adversary Case on March 27, 2018, and therein made allegations against the Regional Health Parties arising from certain loans, subleases, and payments between them and the Debtors, and pursuant to, inter alia , 11 U.S.C. §§ 502, 510, 542, 544, 547, 548, 550, and 726, 21 U.S.C. § 2201, and Arkansas Code Annotated §§ 4-59-201, et seq ., the Trustee asserted causes of action against the Regional Health Parties to determine the validity and extent of their asserted liens on the Debtors’ healthcare receivables;

WHEREAS, the Regional Health Parties have at all times denied, and continue to deny, all allegations and claims made by the Trustee that their liens are invalid, that they received any fraudulent and/or preferential transfers, or that they were in any way involved in any transactions that caused harm, injury or damages to the Debtors;

WHEREAS, the settlement provided for herein is not and shall not in any way be construed or deemed to be evidence or an admission or concession of any fault, liability, fact or amount of damages, or any other matter whatsoever on the part of any Party, and the Parties are entering into this Settlement Agreement solely because they wish to avoid the uncertainty and expense of litigation and to completely and finally put to rest any and all claims and causes of action that are alleged or could have been alleged in the Adversary Case; and

WHEREAS, the Parties to this Settlement Agreement consider it desirable and in their best interests that the claims between them be compromised and settled upon and subject to the terms and conditions herein.

NOW THEREFORE, FOR AND IN CONSIDERATION OF THE MUTUAL COVENANTS, AGREEMENTS AND RELEASES CONTAINED HEREIN, THE PARTIES AGREE TO SETTLE ALL EXISTING AND POTENTIAL CLAIMS BETWEEN THEM ON THE FOLLOWING TERMS, SUBJECT TO APPROVAL BY THE BANKRUPTCY COURT:

SECTION 1. Dates. The date upon which the Bankruptcy Court signs the order approving this Settlement Agreement (the “ Order ”) shall be the “Order Date.” The “Final Order Date” shall be the later of the following: (i) the expiration of the deadline for filing an appeal (“ Appellate Pleading ”), or (ii) in the event any Appellate Pleading is filed, the date on which all proceedings resulting from any Appellate Pleading(s) become final.

SECTION 2. Bankruptcy Court Approval . No later than seven (7) days after the execution of this Settlement Agreement by all Parties, the Trustee will file with the Bankruptcy Court and serve a motion to approve this Settlement Agreement under F ED . R. B ANKR . P. 9019 (the “ 9019 Motion ”). The Parties agree to execute all documents reasonably required, and to file and serve all motions or pleadings reasonably necessary, to obtain all required approvals from the Bankruptcy Court of this Settlement Agreement and to otherwise carry out the terms and provisions of this Settlement Agreement. The Parties and/or their counsel additionally agree to provide reasonable cooperation and assistance, if necessary, at any hearing seeking Bankruptcy Court approval of this Settlement Agreement.

In the event the Bankruptcy Court fails to approve the 9019 Motion, this Settlement Agreement will be null and void and of no further force or effect whatsoever. In such circumstances, neither the fact of the Parties ’ negotiation of, nor their entry into this Settlement Agreement, nor any of the Parties ’ statements made in connection therewith, may be utilized by any Party in any subsequent litigation or contested matter, offered or admitted into evidence at any trial or hearing, disclosed to persons other than the Parties, or used in any fashion except as may be required by applicable law or permitted by court order, or as otherwise provided in this Settlement Agreement.

SECTION 3. Payment to Regional Health Parties. In consideration of the mutual promises contained herein, within seven (7) days of the Final Order Date, the Trustee shall pay $100,000.00 to the Regional Health Parties (the “ Settlement Payment ”) according to confidential payment transmittal instructions that shall be provided by counsel for the Regional Health Parties. The Settlement Payment shall be allocated among the Debtors’ bankruptcy estates based on a pro rata percentage of funds collected on the Debtors’ healthcare receivables as follows:


Debtor	Deposits in each estate from Debtors’ Healthcare receivables ¹	Each estates’ percentage of total collections	Allocation of Settlement Payment among Debtors’ estates
Highlands Arkansas Holdings, LLC	$0.00	0.00%	$0.00
Highland of Stamps, LLC	$15,194.33	1.87%	$1,867.17
Highlands of Rogers Dixieland, LLC	$21,767.81	2.67%	$2,674.96
Highlands of North Little Rock John Ashley, LLC	$62,299.71	7.66%	$7,655.78
Highlands of Mountain View SNF, LLC	$20,545.84	2.52%	$2,524.80
Highlands of Mountain View RCF, LLC	$1,457.94	0.18%	$179.16
Highlands of Little Rock West Markham, LLC	$370,329.58	45.51%	$45,508.41
Highlands of Little Rock South Cumberland, LLC	$96,893.01	11.91%	$11,906.82
Highlands of Little Rock Riley, LLC	$159,118.78	19.55%	$19,553.52
Highlands of Fort Smith, LLC	$66,153.69	8.13%	$8,129.38
TOTALS	$813,760.69	100.00%	$100,000.00

¹ These are gross deposits. After monthly bankruptcy service charges to the bank holding the estate accounts, actual funds on hand in all of the estates is currently $787,877.68.

SECTION 4. Regional Health Parties ’ Releases. The Regional Health Parties, their present and former affiliates, parents, subsidiaries, together with their heirs, successors and assigns (collectively, the “ Regional Releasing Parties ”) hereby irrevocably and unconditionally release and discharge the Trustee Releasing Parties (defined below) from any and all claims, demands, debts, liens, causes of action, obligations, promises, agreements, damages, costs, losses, expenses of any nature or liabilities, at law or in equity, in contract or in tort, by statute or at common law, which they may now have or may hereafter claim to hold or possess, whether known or unknown, foreseeable or unforeseeable, asserted or unasserted, or liquidated or unliquidated, arising out of or related to the Adversary Case or the Bankruptcy Cases. It is understood and agreed that this is a full and complete release, and includes all sums of any kind or character, including compensatory and non-compensatory damages. Any claims arising from a breach of this Agreement are specifically excluded from this release.

SECTION 5. Trustee’s Releases . Subject to the contingency contained in Section 7, on the 91 ^st day following the Final Order Date, the Trustee, on behalf of himself, his professionals, the Debtors, and the Debtors' bankruptcy estates (collectively, the “ Trustee Releasing Parties ”), shall irrevocably and unconditionally release and discharge the Regional Releasing Parties from any and all claims, demands, debts, liens, causes of action, obligations, promises, agreements, damages, costs, losses, expenses of any nature, or liabilities, at law or in equity, in contract or in tort, by statute or at common law, which they may now have or may hereafter claim to hold or possess, whether known or unknown, foreseeable or unforeseeable, asserted or unasserted, or liquidated or unliquidated, arising out of or related to the Adversary Case or the Bankruptcy Cases. It is understood and agreed that this will be a full and complete release, and includes all sums of any kind or character, including compensatory and non-compensatory damages. Any claims arising from a breach of this Agreement are specifically excluded from this release.

SECTION 6. Dismissal by Trustee. Subject to the contingency contained in Section 7, within five (5) days after the 91 ^st day following the Final Order Date the Trustee shall take all action necessary to dismiss the Adversary Case with prejudice, and the Trustee shall withdraw his Motion to Determine Privilege Waiver with prejudice and return all copies of the privileged documents. Until then, the Adversary Case shall be temporarily abated.

SECTION 7. Contingency to Effectiveness of Trustee’s Releases and Dismissal of Adversary Case. This Settlement Agreement provides the Regional Health Parties with a contemporaneous exchange for new value in the form of the Settlement Payment and release of all claims. Notwithstanding the releases by the Trustee Releasing Parties and the dismissal of the Adversary Case called for in Sections 5 and 6, such releases and dismissal are expressly contingent on the Trustee and the Debtors' bankruptcy estates being able to retain the benefits bargained for in this Settlement Agreement, and therefore, the releases by the Trustee Releasing Parties and the dismissal of the Adversary Case shall not become effective in the event any of the Regional Health Parties files for bankruptcy protection within 90 days following the Final Order Date, in which case the Trustee's claims against the Regional Health Parties shall be fully preserved and he shall retain the right to continue the Adversary Case, subject to the automatic stay. Notwithstanding the foregoing, if any of the Regional Health Parties files for bankruptcy protection within 90 days following the Final Order Date, the Trustee shall standstill and shall not in any way continue the Adversary Case or otherwise pursue the claims that were or could have been asserted therein, so long as the Regional Health Parties do not attempt to claw back the release provided in Section 4. The filing of a contingent proof of claim by the Trustee Releasing Parties in any bankruptcy case initiated by any of the Regional Health Parties shall not violate this standstill agreement.

SECTION 8. Breach of Settlement Agreement and Specific Performance. In the event any Party fails to perform their obligations under this Settlement Agreement, the Party affected by such failure shall have the right, in addition to any other relief available under applicable law, to seek specific performance of any of those obligations. The Parties further acknowledge and agree that, should any Party be required by any breach of this Settlement Agreement by any other Party to institute legal proceedings to enforce or interpret any of the provisions of this Settlement Agreement, that the prevailing Party in such litigation shall be entitled to recover its reasonable attorneys ’ fees and expenses, including fees on appeal, as well as court costs.

SECTION 9. No Release of Obligations in this Settlement Agreement. Nothing in this Settlement Agreement is intended to release any of the Parties from any obligations, duties, or debts that are set forth in this Settlement Agreement.

SECTION 10. No Admission of Liability. The Parties understand and agree that this Settlement Agreement is signed and delivered by the undersigned, with the understanding that the Regional Health Parties have denied all claims asserted against them, and with only the intention to resolve and terminate the disputes among the Parties and to avoid the burdens, continued expense and potential risks of litigation. Each party will bear its own costs, expenses of litigation, and attorneys' fees arising out of these matters. It is further understood and agreed that the Settlement Payment is not to be construed as an admission of liability on the part of any Party—all such liability being expressly denied. The Parties understand and agree that no Party may use this Settlement Agreement, the fact of the Parties settlement negotiations, their reaching a settlement, or the payment of any amounts pursuant to this Settlement Agreement as an admission by any Party as to either the legitimacy or value of any claim or defense that has been asserted or could have been asserted.

SECTION 11. Entire Agreement. This is the entire agreement between and among the Parties concerning the subject matters hereof and supersedes and prevails over all prior and/or contemporaneous agreements, understandings, correspondence or representations between and among the parties, whether oral or written. This Settlement Agreement may not be modified or amended, and there shall be no waiver of its provisions, except by a written instrument executed by the Parties. The Parties expressly waive any right to assert, after the execution of this Settlement Agreement, that any undertaking or obligation has, through ignorance, oversight, or for any other reason been omitted from the scope of this Settlement Agreement.

SECTION 12. Representation by Counsel . Each Party has had the opportunity to be represented by counsel in entering into this Agreement. Each of the Parties affirms to the others that it has consulted and discussed the provisions of this Agreement with its counsel and fully understands the legal effect of each such provisions.

SECTION 13. No Reliance on Other Parties and Informed Agreement. Each Party hereby expressly warrants and represents that: (i) they are not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in this Settlement Agreement; (ii) they make this Settlement Agreement voluntarily and of their own choice and not under coercion or duress; (iii) they have made their own investigation of the facts and are relying solely upon their own information and knowledge and advice of their counsel; (iv) they have no expectation that any other Party will disclose to them facts material to this Settlement Agreement; and (v) they knowingly waive any claim to rescind or avoid this Settlement Agreement based upon undisclosed facts, known or unknown. No Party has made any representation to or covenant with any other Party about the legal, tax or other consequences of this Settlement Agreement. Each Party has had access to the legal, tax and other advisors of that Party’s own choosing, and has freely and fully reviewed and negotiated the terms of this Settlement Agreement.

SECTION 14. Binding Effect . This Agreement will be binding upon and inure to the benefit of the respective successors and assigns of the Parties.

SECTION 15. Saving Provision. If any one or more of the covenants or agreements of this Settlement Agreement should be determined by a court of competent jurisdiction to be contrary to law, and such covenant or agreement is not a material part or term in this Settlement Agreement, then such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and in no way affect the validity of the remaining provisions of this Settlement Agreement.

SECTION 16. Interpretation. This Agreement shall be deemed to have been drafted jointly by the Parties. Accordingly, any rule pertaining to the construction of contracts to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement or of any modifications of or amendments to this Agreement.

SECTION 17. Governing Law and Consent to Jurisdiction. This Settlement Agreement shall be governed by and construed in accordance with the laws of the State of Arkansas, without regard to choice of law provisions. The Parties consent to the jurisdiction of the Bankruptcy Court for the interpretation and enforcement of this Settlement Agreement.

SECTION 18. Notices. All notices required to be given to the Parties hereto shall be sent to the following addresses (unless notified in writing to send to another address):

(a)

Notices to the Trustee:

Kathryn G. Reid

R OCHELLE M C C ULLOUGH , LLP

325 N. St. Paul, Suite 4500

Dallas, Texas 75201

Telephone: (214) 953-0182

Facsimile: (214) 953-0185

kreid@romclaw.com

James F. Dowden

212 Center Street, 10 th Floor

Little Rock, AR 72201

(501) 324-4700 Phone

(501) 374-5463 Fax

jfdowden@swbell.net

(b)

Notices to Regional Health Parties:

Laura F. Ketcham

Miller & Martin PLLC

832 Georgia Avenue, Suite 1200

Chattanooga, TN 37402

423.785.8383 (phone)

Laura.ketcham@millermartin.com

Brent Morrison, CFA

Interim Chief Executive Officer

Regional Health Properties, Inc.

454 Satellite Boulevard, NW

Suite 100

Suwanee, GA 30024

678.368.4402 (phone)

brent.morrison@regionalhealthproperties.com

SECTION 19. Authority of Signatories. Each Party hereby warrants and represents that the person signing this Settlement Agreement is expressly authorized and empowered by the Party on whose behalf the person’s signature appears to bind that Party to each of the obligations set forth herein. The Parties agree that facsimile and/or pdf signatures shall be deemed to be originals. This Settlement Agreement shall be deemed made and entered into when each of the Parties for whose signature it is prepared has executed a copy hereof. There shall be no necessity that the Parties execute a single original or a single copy hereof. Each copy bearing the original signature of a Party shall be deemed a counterpart. All of the counterparts together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties hereto have each caused this Settlement Agreement to be executed and attested as of the first date written above.

[Signature page follows]

TRUSTEE:		REGIONAL HEALTH PARTIES:



By: James F. Dowden, Chapter 7 Trustee		Signature


		Printed Name of Authorized Signer
Date:	, 2019

		Title of Authorized Signer

		Date:	, 2019

TRUSTEE:			REGIONAL HEALTH PARTIES:
/s/ James F. Dowden			/s/ Brent Morrison
By: James F. Dowden, Chapter 7 Trustee			Signature
			/s/ Brent Morrison
			Printed Name of Authorized Signer
Date:	3/8	, 2019	Interim CEO
			Title of Authorized Signer

			Date:	March 13	, 2019

EXHIBIT 21.1

Entity		Jurisdiction of Organization
2014 HUD Master Tenant, LLC		Georgia
AdCare Acquisition, Inc.		Ohio
AdCare Management, Inc.		Ohio
ADK Administrative Property, LLC		Georgia
ADK Bonterra/Parkview, LLC		Georgia
ADK Georgia, LLC		Georgia
ADK LaGrange Operator, LLC		Georgia
ADK Powder Springs Operator, LLC		Georgia
APH&R Nursing, LLC		Georgia
APH&R Property Holdings, LLC		Georgia
AdCare Administrative Services, LLC		Georgia
AdCare Consulting, LLC		Georgia
AdCare Employee Leasing, LLC		Georgia
AdCare Financial Management, LLC		Georgia
AdCare Oklahoma Management, LLC		Georgia
AdCare Operations, LLC		Georgia
AdCare Property Holdings, LLC		Georgia
Attalla Nursing ADK, LLC		Georgia
Attalla Property Holdings, LLC		Georgia
Benton Nursing, LLC		Georgia
CP Nursing, LLC		Georgia
CP Property Holdings, LLC		Georgia
CSCC Nursing, LLC		Georgia
CSCC Property Holdings, LLC		Georgia
Coosa Nursing ADK, LLC		Georgia
Eaglewood Property Holdings, LLC		Georgia
Erin Nursing, LLC		Georgia
Erin Property Holdings, LLC		Georgia
Georgetown HC&R Nursing, LLC		Georgia
Georgetown HC&R Property Holdings, LLC		Georgia
Glenvue H&R Nursing, LLC		Georgia
Glenvue H&R Property Holdings, LLC		Georgia
Hearth & Care of Greenfield, LLC		Ohio
Hearth & Home of Ohio, Inc.		Georgia
Homestead Nursing, LLC		Georgia
Homestead Property Holdings, LLC		Georgia
KB HUD Master Tenant 2014, LLC		Georgia
Little Rock HC&R Nursing, LLC		Georgia
Little Rock HC&R Property Holdings, LLC		Georgia
Mountain Top Property Holdings, LLC		Georgia
Mountain Trace Nursing ADK, LLC		Ohio
Mountain View Nursing, LLC		Georgia
Mt. Kenn Nursing, LLC		Georgia
Mt. Kenn Property Holdings, LLC		Georgia
NW 61st Nursing, LLC		Georgia

Entity		Jurisdiction of Organization
Northridge HC&R Nursing, LLC		Georgia
Northridge HC&R Property Holdings, LLC		Georgia
Northwest Property Holdings, LLC		Georgia
Park Heritage Nursing, LLC		Georgia
Park Heritage Property Holdings, LLC		Georgia
QC Nursing, LLC		Georgia
QC Property Holdings, LLC		Georgia
Regional Health Properties, Inc.		Georgia
RMC HUD Master Tenant, LLC		Georgia
Sumter N&R, LLC		Georgia
Sumter Valley Property Holdings, LLC		Georgia
The Pavilion Care Center, LLC		Ohio
Valley River Nursing, LLC		Georgia
Valley River Property Holdings, LLC		Georgia
Woodland Hills HC Nursing, LLC		Georgia
Woodland Hills HC Property Holdings, LLC		Georgia
Woodland Manor Nursing, LLC		Georgia
Woodland Manor Property Holdings, LLC		Georgia

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Regional Health Properties, Inc.:

We hereby consent to the incorporation by reference in the Registration Statements of Regional Health Properties, Inc. (the “Company”), on Form S-8 No. 333-184462 and No. 333-177531 of our report dated May 16, 2019, relating to the consolidated financial statements as of December 31, 2018, and for the year ended December 31, 2018, which appears in the Company’s annual report on Form 10-K, which report expresses an unqualified opinion and contains an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern and the retrospective adjustments to the 2017 consolidated financial statements of the Company (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s adoption of a new accounting standards and effects of the reverse stock split approved on December 27, 2018).

	/s/ CHERRY BEKEART LLP

Atlanta, Georgia
May 16, 2019

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Regional Health Properties, Inc.:

We consent to the incorporation by reference in the registration statements (Nos. 333-184462 and 333-177531) on Form S-8 of Regional Health Properties, Inc. of our report dated April 16, 2018, with respect to the consolidated balance sheet of Regional Health Properties, Inc. as of December 31, 2017, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements), before the effects of the adjustments applied, as more fully described in Note 1, to the consolidated financial statements for the year ended December 31, 2017, which report appears in the December 31, 2018 annual report on Form 10-K of Regional Health Properties, Inc.

	/s/ KPMG LLP

Atlanta, Georgia
May 16, 2019

Exhibit 31.1

CERTIFICATIONS

I, Brent Morrison, certify that:

1. I have reviewed this annual report on Form 10-K 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;

4. The registrant’s other certifying officer(s) 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 15 d-15(f)) for the registrant and have:

a. 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;

b. 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;

c. 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

d. 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(s) 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):

a. 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

b. 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 16, 2019	By	/s/ Brent Morrison
		Chief Executive Officer and President

Exhibit 31.2

CERTIFICATIONS

I, E. Clinton Cain, certify that:

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

b. 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 16, 2019	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 PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Regional Health Properties, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brent Morrison, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 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.

May 16, 2019

By:

/s/ BRENT MORRISON

Brent Morrison

Chief Executive Officer and President

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Regional Health Properties, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (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 Section 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.

May 16, 2019

By:

/s/ E. CLINTON CAIN

E. Clinton Cain

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