UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) | ||
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2011 |
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from to |
Commission file number 001-33135
AdCare Health Systems, Inc.
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization) |
31-1332119
(I.R.S. Employer Identification No.) |
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5057 Troy Rd, Springfield, OH (Address of principal executive offices) |
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45502-9032 (Zip Code) |
Registrant's telephone number including area code (937) 964-8974
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Name of each exchange on which registered | |
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Common Stock, no par value | NYSE Amex |
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 o No ý
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 o No ý
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 ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer
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(Do not check if a smaller reporting company) |
Smaller reporting company ý |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The aggregate market value of AdCare Health Systems, Inc., common stock held by non-affiliates as of June 30, 2011, the last business day of the registrant's most recently completed second fiscal quarter, was $44,208,356. The number of shares of AdCare Health Systems, Inc., common stock, no par value, outstanding as of March 14, 2012 was 12,202,042.
DOCUMENTS INCORPORATED BY REFERENCE: NONE .
AdCare Health Systems, Inc.
Form 10-K
Table of Contents
Special Note Regarding Forward Looking Statements
Certain statements contained in this Annual Report on Form 10-K (this "Annual Report") under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere, including information incorporated herein by reference to other documents, are "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance, or achievements of AdCare Health Systems, Inc. to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, those described in Part I, Item 1A., "Risk Factors," and elsewhere in this Annual Report and those described from time to time in our future reports filed with the Securities and Exchange Commission (the "SEC") under the Exchange Act.
All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this Annual Report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this Annual Report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.
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Overview
AdCare Health Systems, Inc. ("AdCare") through its subsidiaries (together, the "Company" or "we"), own and operate retirement communities, skilled nursing facilities and assisted living facilities in the states of Arkansas, Alabama, Georgia, Missouri, North Carolina, Ohio, and Oklahoma. AdCare, through its wholly owned separate operating subsidiaries, owns, leases and manages 42 facilities consisting of 33 skilled nursing facilities, eight assisted living facilities and one independent living/senior housing facility which total approximately 3,700 units. Our facilities provide a range of health care services to patients and residents, including, but not limited to, skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term residents and short-stay patients. As of December 31, 2011, of the total 42 facilities, we managed four facilities, owned 20 facilities and operated 18 facilities (including six variable interest entities ("VIE's") and 12 long-term lease arrangements).
The Company is organized into three main segments: skilled nursing facilities ("SNF"), assisted living facilities ("ALF") and Corporate & Other. The SNF and ALF segments provide services to individuals needing long-term care in a nursing home or assisted living setting and management of those facilities. The corporate & other segment engages in the management of facilities and accounting and IT services. Through our subsidiaries, we provide a full complement of administrative services as well as consultative services that permit our local facility leadership teams to better focus on the delivery of healthcare services. We also provide these services to unaffiliated third party long term care operators and/or owners with whom we enter into contracts. We currently provide these services to five unaffiliated facility owners. Each of our facilities is led by highly dedicated individuals who are responsible for key operational decisions at their facilities. Facility leaders and staff are trained and motivated to pursue superior clinical outcomes, high patient and family satisfaction, operating efficiencies and financial performance at their facilities. In addition, our facility leaders are enabled and motivated to share real-time operating data and otherwise benchmark clinical and operational performance against their peers in other facilities in order to improve clinical care, maximize patient satisfaction and augment operational efficiencies, promoting the sharing of best practices.
Much of our historical growth can be attributed to our expertise in acquiring under-performing facilities and transforming them into market leaders in clinical quality, staff competency, employee loyalty and financial performance. We plan to continue to grow our revenue and earnings by:
Our principal executive offices are located at 5057 Troy Road, Springfield, Ohio 45502, and our telephone number is (937) 964-8974. We maintain a website at www.adcarehealth.com.
Company History
AdCare is an Ohio corporation. We were incorporated on August 14, 1991 under the name Passport Retirement, Inc. In 1995, we acquired substantially all of the assets and liabilities of AdCare Health Systems, Inc. and changed our name to AdCare Health Systems, Inc.
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We have embarked on a strategy to grow our business through acquisitions and leases of skilled nursing facilities and businesses providing services to those facilities. During the year ended December 31, 2011, we acquired a total of 15 skilled nursing facilities, and one assisted living facility, and we completed a number of transactions to provide capital for our strategic growth initiatives. We are currently evaluating acquisition opportunities in addition to those described below and we continue to seek new opportunities to further implement our growth strategy. As part of our strategy to focus on the growth of skilled nursing facilities, we decided in the fourth quarter of 2011 to exit the home health business and, therefore, this segment is reported as discontinued operations in our audited financial statements for the year ended December 31, 2011, which are included elsewhere in this report.
Acquisitions and Dispositions
Acquisitions. On December 30, 2010, we completed the acquisition of Mountain Trace, a skilled nursing facility located in Sylva, North Carolina, for a purchase price of $6,171,000. We obtained control of the facility effective January 1, 2011.
On April 29, 2011, we acquired the Southland Care Center, a skilled nursing facility located in Dublin, Georgia; the Autumn Breeze Healthcare Center, a skilled nursing facility located in Marietta, Georgia; and College Park Healthcare Center, a skilled nursing facility located in College Park, Georgia. The total purchase price for all three facilities was $17,943,000. Operations of Autumn Breeze Healthcare and Southland Care Center began May 1, 2011. Operations of College Park Care Center began June 1, 2011.
On August 1, 2011, five skilled nursing facilities located in Oklahoma, were purchased for an aggregate purchase price of $11,218,555 by companies controlled by Christopher Brogdon, the Company's Vice Chairman and Chief Acquisition Officer ("Mr. Brogdon"), and others. These facilities are known as the Living Center, Kenwood Manor, Enid Senior Care, Betty Ann Nursing Center and Grand Lake Villa. Even though we do not have any equity interest in these facilities, we are providing management services and have a related party affiliation with Mr. Brogdon. Due to these factors, we determined that it is a variable interest entity as the ownership entity does not have sufficient equity at risk. We initially consolidated the Oklahoma VIE's on August 1, 2011, the date of acquisition and initial operations.
On September 1, 2011, we acquired the Homestead Manor Nursing Home, a skilled nursing facility located in Stamps, Arkansas; the River Valley Health & Rehabilitation Center, a skilled nursing facility located in Fort Smith, Arkansas; Bentonville Manor, a skilled nursing facility located in Bentonville, Arkansas; Heritage Park Nursing Center, a skilled nursing facility located in Rogers, Arkansas; and the Pinnacle Home Office, a parcel of improved real property containing office facilities located in Rogers, Arkansas for an aggregate adjusted purchase price of $19,449,000. We also became the tenant and operator of the Red Rose Facility, a skilled nursing facility located in Cassville, Missouri and in connection with the transaction paid $490,000 in lease acquisition costs and $13,500 as a security deposit under the lease. The term of the lease expires on September 30, 2014. Operations for the Arkansas facilities began September 1, 2011. Operations for the Missouri facility began December 1, 2011.
On November 30, 2011, we acquired the Stone County facilities from White River Health System, Inc. consisting of the Stone County Nursing and Rehabilitation Facility, a 97 bed skilled nursing, and the Stone County Residential Care Facility, a 32 bed skilled nursing facility/assisted living facility, both located in Mountain View, Arkansas, for an aggregate purchase price of $4,250,000.
On December 30, 2011, we acquired Woodland Manor (also known as Eaglewood Care Center), a 113 bed skilled nursing facility, and Eaglewood Village, an 80 bed assisted living facility, both located in Springfield, Ohio, for an aggregate purchase price of $12,500,000. Operations began on January 1, 2012.
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During 2011, we acquired 16 facilities (15 skilled nursing facilities and one assisted living facility), bringing our Company's total bed count to 3,737 at December 31, 2011. During 2010, we acquired 13 facilities (12 skilled nursing facilities and one assisted living facility), bringing our Company's total bed count to more than 2,400 units at December 31, 2010. The following tables provide summary information regarding our recent acquisitions and facility composition at December 31, 2011:
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Number of Facilities | |||||||||||||||||
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State
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Number of
Operational Beds/Units |
Owned | VIE | Leased |
Managed for
Third Parties |
Total | |||||||||||||
Arkansas |
530 | 6 | | | | 6 | |||||||||||||
Alabama |
408 | 2 | 1 | | | 3 | |||||||||||||
Georgia |
1,497 | 3 | | 10 | | 13 | |||||||||||||
Missouri |
80 | | | 1 | | 1 | |||||||||||||
North Carolina |
106 | 1 | | | | 1 | |||||||||||||
Ohio |
802 | 8 | | 1 | 4 | 13 | |||||||||||||
Oklahoma |
314 | | 5 | | | 5 | |||||||||||||
Total |
3,737 | 20 | 6 | 12 | 4 | 42 | |||||||||||||
Facility Type |
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Skilled Nursing |
3,322 | 13 | 5 | 12 | 3 | 33 | |||||||||||||
Assisted Living |
332 | 7 | 1 | | | 8 | |||||||||||||
Independent Living |
83 | | | | 1 | 1 | |||||||||||||
Total |
3,737 | 20 | 6 | 12 | 4 | 42 | |||||||||||||
We are currently evaluating acquisition opportunities in addition to those described above and we continue to seek new opportunities to further implement our growth strategy. No assurances are made that we will be able to complete any such acquisitions on terms acceptable to us, if at all.
Discontinued Operations. As part of the Company's strategy to focus on the growth of skilled nursing facilities, the Company decided in the fourth quarter of 2011 to exit the home health business. At December 31, 2011, the home heath business was held for sale. The Company anticipates the sale or termination of the home health business to occur in 2012.
Growth Strategy
Our objective is to be the provider of choice for health care and related services to the elderly in the communities in which we operate. We intend to grow our business through numerous initiatives. We expect to continue to increase occupancy rates and revenue per occupied unit at our communities, and to continue our growth in the ancillary services that we offer through additional strategic acquisitions. We believe that our current operations serve as the foundation on which we can build a large fully-integrated senior living company. We will target attractive geographic markets by using our existing infrastructure and operating model, to provide a broad range of high quality care in a cost-efficient manner.
Organic Growth. We intend to focus on improving our operating margins within all of our communities. We continually seek to maintain and improve occupancy rates by:
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Pursue Strategic Acquisitions. We believe that our current infrastructure and extensive contacts within the industry will continue to provide us with the opportunity to evaluate numerous acquisition opportunities. We believe there is a significant opportunity for a private to public arbitrage, and to increase our operating margins by focusing on service companies to the senior marketplace versus the capital intensive ownership of facilities.
Fragmentation in the Industry Provides Acquisition and Consolidation Opportunities. The senior living industry is highly fragmented and we believe that this provides significant acquisition and consolidation opportunities. We believe that the limited capital resources available to many small, private operators impedes their growth and exit prospects. We believe that we are well positioned to approach strategic small private operators and offer to them exit strategies which are not currently available as well as the ability to grow in their business.
Emphasize Employee Training and Retention. We devote special attention to the hiring, screening, training, supervising and retention of our employees and caregivers. We have adopted comprehensive recruiting and screening programs for management positions that utilize corporate office team interviews and thorough background and reference checks. We believe our commitment to and emphasis on quality hiring practices, employee training and retention differentiates us from many of our competitors.
Positioned for Growth. We believe that we are well-positioned to be a substantial independent senior living company. Our development/consulting practice for third-party owners provides a comprehensive turnkey package from project inception, through the development process, to the management of a facility. The consulting practice is strategic, providing additional development and management opportunities that support our core long-term care business without requiring large capital outlays. We believe our physical assets and human resources position us for internal growth and provide a platform for strategic acquisitions of complementary health care providers.
Pursue Management Contracts. We intend to pursue management opportunities for senior living communities. We believe that our management infrastructure and proven operating track record will allow us to take advantage of increased opportunities in the senior living market for new management contracts for third-party operators.
Operating Strategy
Our operating philosophy is to provide affordable, quality living communities and services to senior citizens and provide a continuum of care as their needs change over time. This continuum of care sustains residents' autonomy and independence based on their physical and mental abilities. As residents age, in many of our communities, they are able to obtain the additional needed services within the same community, avoiding the disruptive and often traumatic move to a different facility.
Provide a Broad Range of Cost-Effective Services. We provide a variety of services in a broad continuum of care which meet the ever changing needs of the elderly. Our expanded service offering currently includes assisted living, independent living and skilled nursing (including Alzheimer's and dementia care).
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Increase Revenues and Profitability at Existing Facilities. Our strategy includes increasing facility revenues and profitability levels through increasing occupancy levels, maximizing reimbursement rates as appropriate, providing additional services to our current residents, and containing costs. Ongoing initiatives to promote higher occupancy levels and appropriate payor and case mixes at our senior living facilities include corporate programs to improve customer service, develop safety programs to improve worker compensation insurance rates and programs for specialized care and therapy services at our facilities.
Offer Services Based on Level of Care. Our range of products and services is continually expanding to meet the evolving needs of our residents. We have developed a menu of products and service programs that may be further customized to serve both the moderate and upper income markets of a particular targeted geographic area.
Improve Operating Efficiencies. We actively monitor and manage our operating costs. By having an established portfolio of communities, we believe that we have a platform to achieve operating efficiencies through economies of scale in the purchase of bulk items, such as food, and in the spreading of fixed costs, such as corporate overhead, over a larger revenue base, and the ability to provide more effective management supervision and financial controls.
Increase Occupancy Through Emphasis on Marketing Efforts. We emphasize strong corporate support for the marketing of our various local facilities. At a local level, our sales and marketing efforts are designed to promote higher occupancy levels and optimal payor mix. Management believes that the long-term care industry is fundamentally a local industry in which both patients and residents and the referral sources for them are based in the immediate local geographic area of the facility.
Promote an Internally-Developed Marketing Program. We focus on the identification and provision of services needed by the community. We assist each facility administrator in analysis of local demographics and competition with a view toward complementary service development. Our belief is that this locally based marketing approach, coupled with strong corporate monitoring and support, provides an advantage over many smaller or larger regional competitors.
Operate the Community Based Management Model. We hire an administrator/manager for each of our communities and provide them with autonomy, responsibility and accountability. We believe this allows us to attract and retain a higher quality of administrator. This administrator manages the day-to-day operations at each senior living community, including oversight of the quality of care, delivery of resident services, and monitoring of the financial performance and marketing functions. We actively recruit personnel to maintain adequate staffing levels at our existing communities and provide financial and budgeting assistance for our managers and administrators.
Industry Trends
The skilled nursing 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 and highly fragmented, characterized predominantly by numerous local and regional providers. We believe this fragmentation provides significant acquisition
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and consolidation opportunities for us. Additionally, 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 due to the shift of patient care to lower cost settings, an aging population and increasing life expectancies.
We also anticipate that as life expectancy continues to increase in the United States, 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 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 the family for their care.
Medicare and Medicaid Reimbursement
Rising healthcare costs due to a variety of factors, including an aging population and increasing life expectancies, has generated growing demand for post-acute healthcare services in recent years. In an effort to mitigate the cost of providing healthcare benefits, third party payors including Medicare, Medicaid, managed care providers, insurance companies and others have increasingly encouraged the treatment of patients in lower-cost care settings. As a result, in recent years skilled nursing facilities, which typically have significantly lower cost structures than acute care hospitals and certain other post-acute care settings, have generally been serving larger populations of higher-acuity patients than in the past. However, Medicare and Medicaid reimbursement rates are subject to change from time to time and reduction in rates could materially and adversely impact our revenue.
Revenue derived directly or indirectly from Medicare reimbursement has historically comprised a substantial portion of our consolidated revenue. Medicare reimburses our skilled nursing facilities under a prospective payment system ("PPS") for certain inpatient covered services. Under the PPS, facilities are paid a predetermined amount per patient, per day, based on the anticipated costs of treating patients. The amount to be paid is determined by classifying each patient into a resource utilization group ("RUG") category that is based upon each patient's acuity level. In October 2010, the number of RUG categories was expanded from 53 to 66 as part of the implementation of the RUGs IV system and the introduction of a revised and substantially expanded patient assessment tool called the minimum data set (MDS) version 3.0.
On July 29, 2011, the Centers for Medicare & Medicaid Services ("CMS") issued a final rule providing for, among other things, a net 11.1% reduction in PPS payments to skilled nursing facilities for CMS's fiscal year 2012 (which began October 1, 2011) as compared to PPS payments in CMS's fiscal year 2011 (which ended September 30, 2011). The 11.1% reduction is on a net basis, after the application of a 2.7% market basket increase, and reduced by a 1.0% multi-factor productivity adjustment required by the Patient Protection and Affordable Care Act of 2010 ("PPAC"). The final CMS rule also adjusted the method by which group therapy is counted for reimbursement purposes, and changed the timing in which patients who are receiving therapy must be reassessed for purposes of determining their RUG category.
Should future changes in PPS include further reduced rates or increased standards for reaching certain reimbursement levels (including as a result of automatic cuts tied to federal deficit cut efforts or otherwise), our Medicare revenues derived from our skilled nursing facilities) could be reduced, with a corresponding adverse impact on our financial condition or results of operation.
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We also derive a substantial portion of our consolidated revenue from Medicaid reimbursement, primarily through our skilled nursing business. Medicaid programs are administered by the applicable states and financed by both state and federal funds. Medicaid spending nationally has increased significantly in recent years, becoming an increasingly significant component of state budgets. This, combined with slower state revenue growth and other state budget demands, has led both the federal government to institute measures aimed at controlling the growth of Medicaid spending (and in some instances reducing it).
Historically, adjustments to reimbursement under Medicare and Medicaid have had a significant effect on our revenue and results of operations. Recently enacted, pending and proposed legislation and administrative rulemaking at the federal and state levels could have similar effects on our business. Efforts to impose reduced reimbursement rates, greater discounts and more stringent cost controls by government and other payors are expected to continue for the foreseeable future and could adversely affect our business, financial condition and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare and/or Medicaid reimbursement payments could materially and adversely affect our business, financial condition and results of operations.
Revenue Sources
Total Revenue by Payor Sources. We derive revenue primarily from the Medicaid and Medicare programs, private pay patients and managed care payors. Medicaid typically covers patients that require standard room and board services, and provides reimbursement rates that are generally lower than rates earned from other sources. We monitor our patient mix, which is the percentage of non-Medicaid revenue from each of our facilities, to measure the level received from each payor across each of our business units. We intend to continue our focus on enhanced care offerings for high acuity patients.
Medicaid. Medicaid is a state-administered program financed by state funds and matching federal funds. Medicaid programs are administered by the states and their political subdivisions, and often go by state-specific names. Medicaid programs generally provide health benefits for qualifying individuals, and may supplement Medicare benefits for financially needy persons aged 65 and older. Medicaid reimbursement formulas are established by each state with the approval of the federal government in accordance with federal guidelines. Seniors who enter skilled nursing facilities as private pay clients can become eligible for Medicaid once they have substantially depleted their assets. Medicaid is the largest source of funding for nursing home facilities.
Private and Other Payors. Private and other payors consist primarily of individuals, family members or other third parties who directly pay for the services we provide.
Medicare. Medicare is a federal program that provides healthcare benefits to individuals who are 65 years of age or older or are disabled. To achieve and maintain Medicare certification, a skilled nursing facility must meet the CMS, "Conditions of Participation", on an ongoing basis, as determined in periodic facility inspections or "surveys" conducted primarily by the state licensing agency in the state where the facility is located. Medicare pays for inpatient skilled nursing facility services under the prospective payment system. The prospective payment for each beneficiary is based upon the medical condition of and care needed by the beneficiary. Medicare skilled nursing facility coverage is limited to 100 days per episode of illness for those beneficiaries who require daily care following discharge from an acute care hospital.
Managed Care and Private Insurance. Managed care patients consist of individuals who are insured by a third-party entity, typically a senior HMO plan, or who are Medicare beneficiaries who have assigned their Medicare benefits to a senior HMO plan. Another type of insurance, long-term care insurance, is also becoming more widely available to consumers, but is not expected to contribute significantly to industry revenues in the near term.
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Billing and Reimbursement. Our revenue from government payors, including Medicare and state Medicaid agencies, is subject to retroactive adjustments in the form of claimed overpayments and underpayments based on rate adjustments and asserted billing and reimbursement errors. We believe billing and reimbursement errors, disagreements, overpayments and underpayments are common in our industry, and we are regularly engaged with government payors and their fiscal intermediaries in reviews, audits and appeals of our claims for reimbursement due to the subjectivity inherent in the processes related to patient diagnosis and care, recordkeeping, claims processing and other aspects of the patient service and reimbursement processes, and the errors and disagreements those subjectivities can produce.
We employ accounting, reimbursement and compliance specialists who train, mentor and assist our clerical, clinical and rehabilitation staffs in the preparation of claims and supporting documentation, regularly monitor billing and reimbursement practices within our facilities, and assist with the appeal of overpayment and recoupment claims generated by governmental, fiscal intermediary and other auditors and reviewers. In addition, due to the potentially serious consequences that could arise from any impropriety in our billing and reimbursement processes, we investigate all allegations of impropriety or irregularity relative thereto.
Whether information about our billing and reimbursement processes is obtained from external sources or activities such as Medicare and Medicaid audits or probe reviews or our regular day-to-day monitoring and training activities, we collect and utilize such information to improve our billing and reimbursement functions and the various processes related thereto. We continually strive to improve the efficiency and accuracy of all of our operational and business functions, including our billing and reimbursement processes.
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December 31, | |||||||||
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Annual Revenue by Payor
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2011 | 2010 | 2009 | |||||||
Amounts in (000s)
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Medicare |
$ | 43,842 | $ | 9,375 | $ | 2,744 | ||||
Medicaid |
78,690 | 22,957 | 6,467 | |||||||
Other |
27,201 | 16,365 | 12,569 | |||||||
Total |
$ | 149,733 | $ | 48,697 | $ | 21,780 | ||||
Competition
Our ability to compete successfully varies from location to location and depends on a number of factors, including the number of competing facilities in the local market, the types of services available, our local reputation for quality care of patients, the commitment and expertise of our staff and physicians, our local service offerings and treatment programs, the cost of care in each locality, and the physical appearance, location, age and condition of our facilities. We are in a competitive, yet fragmented, industry. While there are several national and regional companies that provide retirement living alternatives, we anticipate that our primary source of competition will be the smaller regional and local development and management companies. There is limited, if any, price competition with respect to Medicaid and Medicare patients, since revenues for services to such patients are strictly controlled and are based on fixed rates and cost reimbursement principles. Although the degree of success with which our facilities compete varies from location to location, management believes that its facilities generally compete effectively with respect to these factors. Our competitors include assisted living communities and other retirement facilities and communities, home health care agencies, nursing homes, and convalescent centers, some of which operate on a not-for-profit or charitable basis. Our nursing homes and assisted living facilities compete with both national and local competitors. We also compete with other health care companies for facility acquisitions and management contracts. There
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can be no assurance that additional facilities and management contracts can be acquired on favorable terms.
We seek to compete effectively in each market by establishing a reputation within the local community for quality of care, attractive and comfortable facilities, and providing specialized healthcare with an ability to care for high-acuity patients. We believe that the average cost to a third-party payor for the treatment of our typical high-acuity patient is lower if that patient is treated in one of our skilled nursing facilities than if that same patient were to be treated in an inpatient rehabilitation facility or long-term acute-care hospital. We face direct competition from alternative facilities in our markets for residents. The skilled nursing facilities operated by us compete with other facilities in their respective markets, including rehabilitation hospitals and other "skilled" and personal care residential facilities. Some of these providers are not-for-profit organizations with access to sources of funds not available to our centers. In addition, our facilities also face competition for employees.
Increased competition could limit our ability to expand our business. We believe that the most important competitive factors in the long-term care business are: a nursing center's local reputation with the local community and other healthcare providers, such as acute care hospitals, physicians, religious groups, other community organizations, managed care organizations, and a patient's family and friends; physical plant condition; the ability to identify and meet particular care needs in the community; the availability of qualified personnel to provide the requisite care; and the rates charged for services. There is limited, if any, price competition with respect to Medicaid and Medicare patients, since revenues for services to such patients are strictly controlled and are based on fixed rates and cost reimbursement principles. Although the degree of success with which our centers compete varies from location to location, we believe that our centers generally compete effectively with respect to these factors.
Increased competition could limit our ability to attract and retain patients, maintain or increase rates or to expand our business. Many of our competitors have greater financial and other resources than we have, may have greater brand recognition and may be more established in their respective communities than we are. Competing companies may also offer newer facilities or different programs or services than we do and may as a result be more attractive to our current patients, to potential patients and to referral sources. Some of our competitors may accept lower profit margins than we do, which could present significant price competition, particularly for managed care and private pay patients.
Government Regulation
The health care industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, reimbursement for patient services, certificates of need, quality of patient care and Medicare and Medicaid fraud and abuse. Over the last several years, government activity has increased with respect to investigations and allegations concerning possible violations by health care providers of fraud and abuse statutes and regulations as well as laws and regulations governing quality of care issues in the skilled nursing profession in general. Violations of these laws and regulations could result in exclusion from government health care programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Compliance with such laws and regulations is subject to ongoing government review and interpretation, as well as regulatory actions in which government agencies seek to impose fines and penalties.
Licensure and Certification. Certain states administer a certificate of need program, which applies to the incurrence of capital expenditures, the offering of certain new institutional health services, the cessation of certain services and the acquisition of major medical equipment. Such legislation also stipulates requirements for such programs, including that each program be consistent with the
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respective state health plan in effect pursuant to such legislation and provide for penalties to enforce program requirements. To the extent that certificates of need or other similar approvals are required for expansion of our operations, either through acquisitions, expansion or provision of new services or other changes, such expansion could be affected adversely by the failure or inability to obtain the necessary approvals, changes in the standards applicable to such approvals or possible delays and expenses associated with obtaining such approvals.
Skilled nursing homes and assisted living facilities are required to be individually licensed or certified under applicable state law and as a condition of participation under the Medicare program. In addition, healthcare professionals and practitioners are required to be licensed in most states. We believe that our operating companies and personnel that provide these services have all required regulatory approvals necessary for our current operations. The failure to obtain, retain or renew any required license could adversely affect our operations, including our financial results.
Health Reform Legislation. In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services in the United States. These initiatives have ranged from proposals to fundamentally change federal and state healthcare reimbursement programs, including the provision of comprehensive healthcare coverage to the public under governmental funded programs, to minor modifications to existing programs. PPAC, which was passed in 2010 and has implementation timing and costs and regulatory implications that are still uncertain in many respects, is among the most comprehensive and notable of these legislative efforts, and its full effects on us and others in our industry are still in many ways difficult to predict. The content or timing of any future health reform legislation, and its impact on us, is impossible to predict. If significant reforms are made to the U.S. healthcare system, those reforms may have an adverse effect on our financial condition and results of operations.
In addition, we incur considerable administrative costs in monitoring the changes made within the various reimbursement programs in which we participate, determining the appropriate actions to be taken in response to those changes, and implementing the required actions to meet the new requirements and minimize the repercussions of the changes to our organization, reimbursement rates and costs.
Medicare and Medicaid. Medicare is a federally-funded and administered health insurance program for the aged and for certain chronically disabled individuals. Part A of the Medicare program covers inpatient hospital services and certain services furnished by other institutional providers such as skilled nursing facilities. Part B covers the services of doctors, suppliers of medical items, various types of outpatient services and certain ancillary services of the type provided by long-term and acute care facilities. Medicare payments under Part A and Part B are subject to certain caps and limitations, as provided in Medicare regulations. Medicare benefits are not available for intermediate and custodial levels of nursing center care or for assisted living center arrangements.
Medicaid is a medical assistance program for the indigent, operated by individual states with financial participation by the federal government. Criteria for medical indigence and available Medicaid benefits and rates of payment vary somewhat from state to state, subject to certain federal requirements. Basic long-term care services are provided to Medicaid beneficiaries, including nursing, dietary, housekeeping and laundry, restorative health care services, room and board and medications. Federal law requires that a state Medicaid program must provide for a public process for determination of Medicaid rates of payment for nursing center services. Under this process, proposed rates, the methodologies underlying the establishment of such rates and the justification for the proposed rates are published. This public process gives providers, beneficiaries and concerned state patients a reasonable opportunity for review and comment. Certain of the states in which we now operate are actively seeking ways to reduce Medicaid spending for nursing center care by such methods as capitated payments and substantial reductions in reimbursement rates.
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As a component of CMS administration of the government's reimbursement programs, a new ratings system was implemented in December 2008 to assist the public in choosing a skilled care provider. The system is an attempt to simplify all the data for each nursing center to a "Star" ranking. The overall Star rating is determined by three components (three years survey results, quality measure calculations, and staffing data), with each of the components receiving star rankings as well. We will continue to strive to achieve high rankings for our facilities, as well as assuring that our rankings are correct and appropriately reflect our quality results.
Health Insurance Portability and Accountability Act of 1996 Compliance. The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") has mandated an extensive set of regulations to standardize electronic patient health, administrative and financial data transactions, and to protect the privacy of individually identifiable health information. These regulations provide for uniform standards for data reporting, formatting and coding that we must use in certain transactions with health plans. The HIPAA security regulations establish detailed requirements for safeguarding protected health information that is electronically transmitted or electronically stored. Some of the security regulations are technical in nature, while others are addressed through policies and procedures. We implemented or upgraded computer and information systems as we believe necessary to comply with the new regulations. We believe that we are in substantial compliance with applicable state and federal regulations relating to privacy and security of patient information. However, if we fail to comply with the applicable regulations, we could be subject to significant penalties.
Employees
As of December 31, 2011, we had approximately 3,800 total employees of which 3,450 were full time employees.
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 on Form 10-K 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 our stock could decline.
Health care reform may affect our profitability and may require us to change the way our business is conducted.
Health care is an area of extensive and frequent regulatory change. The manner and the extent to which health care is regulated at the federal and state level is evolving. Changes in the laws or new interpretations of existing laws may have a significant effect on our methods and costs of doing business. Our success will depend partially on our ability to satisfy the applicable regulations and requirements and to procure and maintain required licenses. Our operations could also be adversely affected by, among other things, regulatory developments such as mandatory increases in the scope and quality of care given to the residents and revisions in licensing and certification standards. We are and will continue to be subject to varying degrees of regulation and licensing by health or social service agencies. We believe that our operations do not presently violate any existing federal or state laws, but we make no assurances that federal, state, or local laws or regulatory procedures which might adversely affect our business, financial condition and results of operations for prospects will not be expanded or imposed. A failure to comply with applicable requirements could cause us to be fined or could cause the cessation of our business, which would have a material adverse effect on our Company.
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In March 2010, the PPCA and the Health Care and Education Reconciliation Act of 2010 were signed into law. Together, these two measures make the most sweeping changes to the U.S. health care system since the creation of Medicare and Medicaid. These new laws include a large number of health care related provisions scheduled to take effect over the next four years, including expanding Medicaid eligibility, requiring most individuals to have health insurance, establishing new regulations on health plans, establishing health insurance exchanges and modifying certain payment systems to encourage more cost-effective care and a reduction of inefficiencies and waste, including new tools to address fraud and abuse. As the implementation of, and rulemaking with respect to, these measures is ongoing, we are unable to accurately predict the effect these laws or any future legislation or regulation will have on us or our operations, including future reimbursement rates and occupancy in our inpatient facilities.
Our business depends on reimbursement under federal and state programs, and federal and state legislation or other changes to reimbursement and other aspects of Medicaid and Medicare may reduce or otherwise adversely affect reimbursement amounts.
A substantial portion of our revenue is derived from third-party payors, including Medicare and Medicaid programs. Our business, revenues, financial condition and results of operations would be adversely affected in the event that reimbursement rates under these programs are reduced or rise more slowly than the rate at which our costs increase or if there are changes in the way these programs pay for services. For example, services for which we are currently reimbursed by Medicaid and Medicare may not continue to be reimbursed at adequate levels or at all, or further limits on the scope of services being reimbursed, delays or reductions in reimbursement or changes in other aspects of reimbursement could occur, each of which could adversely impact our business, our financial condition and our results of operations.
The Medicaid and Medicare programs are subject to statutory and regulatory changes affecting, among other things, base rates or basis of payment, retroactive rate adjustments, annual caps that limit the amount that can be paid (including deductible and coinsurance amounts) for rehabilitation therapy services rendered to Medicare beneficiaries, administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates and frequency at which these programs reimburse us for our services.
On July 29, 2011, CMS announced a final rule reducing Medicare skilled nursing facility PPS payments in fiscal year 2012 by $3.87 billion, or 11.1% lower than payments for fiscal year 2011. Moreover, CMS effectively reduced our Medicare reimbursement rates by nearly 11.7% by reducing rates as well as implementing changes to the RUG classification system. Similarly, in July 2011, Ohio Medicaid implemented reductions to the reimbursement rates of 6%.
On August 2, 2011, President Obama signed into law the Budget Control Act of 2011 ("Budget Control Act"), which requires the federal budget to include automatic spending reductions beginning in 2012, including reduction of not more than 2% to Medicare providers, but exempting reductions to certain Medicaid and Medicare benefits. We are unable to accurately predict the impact these automatic reductions will have on our business beginning in 2013, and those reductions could materially adversely affect our business, financial condition and results of operations.
We cannot currently estimate the magnitude of the potential Medicare and Medicaid rate reductions, the impact of the failure of these programs to increase rates to match increasing expenses or the impact on us of potential Medicare and Medicaid policy changes, but they may be material to our operations and affect our future results of operations. We are unable to accurately predict whether future Medicare and Medicaid rates will be sufficient to cover our costs. Future Medicare and Medicaid rate declines or a failure of these rates to cover our costs could result in our experiencing materially lower earnings or losses.
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We conduct business in a heavily regulated industry, and changes in, or violations of, regulations may result in increased costs or sanctions that reduce our revenue and profitability.
As a result of our participation in the Medicaid and Medicare programs, we are subject to, in the ordinary course of business, various governmental reviews, inquiries, investigations and audits by federal and state agencies to verify our compliance with these programs and laws and regulations applicable to the operation of, and reimbursement for, skilled nursing and assisted living facilities and our other operating areas. These regulations include those relating to licensure, conduct of operations, ownership of facilities, construction of new facilities and additions to existing facilities, allowable costs, services and prices for services.
Recently, the federal government has imposed extensive enforcement policies resulting in a significant increase in the number of inspections, citations of regulatory deficiencies and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, denials of payment for new Medicare and Medicaid admissions and civil monetary penalties. If we fail to comply, or are perceived as failing to comply, with the extensive laws and regulations applicable to our industry, we may become ineligible to receive government program reimbursement, be required to refund amounts received from Medicare, Medicaid or private payors, suffer civil or criminal penalties, suffer damage to our reputation or be required to significantly change the way we operate our business.
We also are subject to potential lawsuits under a federal whistleblower statute designed to combat fraud and abuse in the health care industry. These lawsuits can involve significant monetary awards to private plaintiffs who successfully bring these suits.
We operate in multiple states and the applicable regulatory provisions in each state are subject to changes over time. We continue to monitor state regulatory provisions applicable to our business to facilitate compliance with any revised or newly issued rules and policies.
We believe that we maintain and follow policies and procedures that are sufficient to ensure that our facilities will operate in substantial compliance with these anti-fraud and abuse requirements and other Medicare and Medicaid program criteria. While we believe that our business practices are consistent with Medicare and Medicaid criteria, those criteria are often vague and subject to change and interpretation.
We are unable to accurately predict the future course of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or the intensity of federal and state enforcement actions. An adverse review, inquiry, investigation or audit could result in:
An expanded federal program is underway to recover Medicare overpayments.
The Medicare Modernization Act of 2003 established a three year demonstration project to recover overpayments and identify underpayments on Medicare claims from hospitals, skilled nursing facilities and home health agencies through a review of claims previously paid by Medicare beginning in October, 2007. Medicare contracted nationwide with third parties known as Recovery Audit Contractors ("RAC") to conduct these reviews commonly referred to as RAC Audits. Due to the success of the
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program, the Tax Relief and Health Care Act of 2006 made the program permanent and mandated its expansion to all 50 states in 2010. As of December 31, 2011, we have not received notification that any of our claims are subject to RAC Audits; however, we make no assurances that our claims will not be selected for RAC Audits in the future and, if they are selected for RAC Audits, the extent to which these audits may have a material adverse effect on our business, financial condition and results of operations.
We are subject to claims under the self-referral and anti-kickback legislation.
In the United States, various state and federal laws regulate the relationships between providers of health care services, physicians and other clinicians. In particular, various laws, including federal and state anti-kickback and anti-fraud statutes, prohibit certain business practices and relationships that might affect the provision and cost of health care services reimbursable under Medicare and Medicaid programs, including the payment or receipt of compensation for the referral of patients whose care will be paid by federal governmental programs. Sanctions for violating the anti-kickback and anti-fraud statutes include criminal penalties and civil sanctions, including fines and possible exclusion from governmental programs such as Medicare and Medicaid.
These laws and regulations are complex, and limited judicial or regulatory interpretation exists. While we make every effort to ensure compliance, we make no assurances that governmental officials charged with responsibility for enforcing the provisions of these laws and regulations will not assert that one or more of our arrangements are in violation of the provisions of such laws and regulations. Violations of these laws may result in substantial civil or criminal penalties for individuals or entities, including large civil monetary penalties and exclusion from participation in the Medicare or Medicaid programs. Such exclusion or penalties, if applied to us, could have a material adverse effect on our business, financial condition and results of operations.
We are required to comply with laws governing the transmission and privacy of health information.
HIPAA requires us to comply with standards for the exchange of health information within our Company and with third parties, such as payors, business associates and patients. These include standards for common health care transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures, unique identifiers for providers, employers, health plans and individuals, and security, privacy and enforcement. If we are found to be in violation of the privacy or security rules under HIPAA or other federal or state laws protecting the confidentiality of patient health information, we could be subject to criminal penalties and civil sanctions, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business, financial condition and results of operations.
We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and manage or support a variety of business processes, including medical records, financial transactions and records, personal identifying information, payroll data and workforce scheduling information. We purchase some of our information technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential patient, resident and other customer information, such as individually identifiable information, including information relating to health protected by HIPAA. Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems' improper functioning or damage or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Security breaches,
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including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches can create system disruptions or shutdowns or the unauthorized disclosure of confidential information. If personal or otherwise protected information of our patients is improperly accessed, tampered with or distributed, we may incur significant costs to remediate possible injury to the affected patients and we may be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under HIPAA or other similar federal or state laws protecting confidential patient health information. Any failure to maintain proper functionality and security of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could have a material adverse effect on our business, financial condition and results of operations.
We intend to expand our business into new areas of operation.
Our business model calls for seeking to acquire existing cash flowing operations and to expand our operations by pursuing an acquisition growth strategy to acquire and lease long term care facilities, primarily skilled nursing facilities. Our success will largely depend on our ability to finance the new acquisitions and implement and integrate the new acquisitions into our management systems. As a result, we expect to experience all of the risks that generally occur with rapid expansion such as:
If we are unable to successfully integrate the operations of an acquired property or business into our operations, we could be required to undertake unanticipated changes. These changes could increase our operating costs and have a material adverse effect on our business, financial condition and results of operations.
We continue to seek acquisitions and other strategic opportunities that may require a significant amount of management resources and costs.
We continue to seek acquisitions and other strategic opportunities. Accordingly, we are often engaged in evaluating potential transactions and other strategic alternatives. In addition, from time to time, we engage in preliminary discussions that may result in one or more transactions. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transaction, we may devote a significant amount of our management resources to such transactions, which could negatively impact our existing and continuing operations. In addition, we may incur significant costs in connection with exploring and targeting acquisitions, regardless of whether these acquisitions are completed. In the event that we consummate an acquisition or strategic alternative in the future, there is no assurance that we would complete the acquisition or fully realize the potential benefit of such a transaction even if it is completed.
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We will require additional financing in order to fund future acquisitions.
The pursuit of our growth strategy and the acquisition of new skilled nursing facilities may involve significant cash expenditures, debt incurrence, capital expenditures, additional operating losses, amortization of the intangible assets of acquired companies, dilutive issuances of equity securities and other expenses that could have a material adverse effect on our business, financial condition and results of operations.
In 2012, we will need to acquire additional financing to satisfy our financial obligations and implement our expansion strategy. We are currently exploring several financing alternatives and may seek to raise additional capital through the sale of additional debt or equity securities. As of December 31, 2011 we had an accumulated deficit of $18,713,000 and a working capital deficit of approximately $5,367,000. Our cumulative losses have, in the past, made it difficult for us to borrow adequate funds on what management believed to be commercially reasonable terms. There is no assurance that we will succeed in obtaining financing or will be able to raise additional capital through the issuance of debt or equity securities on terms acceptable to us, or at all, or that any financing obtained will not contain restrictive covenants that limit our operating flexibility. If we are unable to secure such additional financing, then we may be required to restructure our outstanding indebtedness and delay or modify our expansion plans. If we raise capital for new acquisitions through the sale of equity securities, then our shareholders may experience dilution.
We may be unable to complete future facility or business acquisitions at attractive prices or at all, which may adversely affect our revenue and financial condition.
The profitability of our operations relies on acquiring existing cash flowing operations and expanding our operations by acquiring and leasing long term care facilities, primarily skilled nursing facilities.
We face competition for the acquisition of these facilities and related businesses and expect this competition to increase. Based upon factors such as our ability to identify suitable acquisition candidates, the purchase price of the facilities, prevailing market conditions, the availability of leadership to manage new facilities and our willingness to take on new operations, the rate at which we have historically acquired facilities has fluctuated significantly. In the future, we anticipate the rate at which we may acquire facilities will continue to fluctuate, which may affect our revenue and financial condition.
In undertaking acquisitions, we may be adversely impacted by costs, liabilities and regulatory issues that may adversely affect our operations.
In acquiring new facilities, we may be adversely impacted by unforeseen liabilities attributable to prior providers who operated those facilities, against whom we may have little or no recourse. Even if we improve operations and patient care at facilities that we have acquired, we still may face post-acquisition regulatory issues related to pre-acquisition events. These may include, without limitation, payment recoupment related to our predecessors' prior noncompliance, the imposition of fines, penalties, operational restrictions or special regulatory status. Further, we may incur post-acquisition compliance risk due to the difficulty or impossibility of immediately or quickly bringing non-compliant facilities into full compliance. Diligence materials pertaining to acquisition targets, especially the underperforming facilities that often represent the greatest opportunity for return, are often inadequate, inaccurate or impossible to obtain, sometimes requiring us to make acquisition decisions with incomplete information. Despite our due diligence procedures, facilities that we have acquired or may acquire in the future may generate unexpectedly low returns, may cause us to incur substantial losses, may require unexpected levels of management time, expenditures or other resources or may otherwise not meet a risk profile that our investors find acceptable.
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In addition, we might encounter unanticipated difficulties and expenditures relating to any of the acquired facilities, including contingent liabilities. For example, when we acquire a facility, we may assume the facility's existing Medicare provider number for purposes of billing Medicare for services. If CMS later determined that the prior owner of the facility had received overpayments from Medicare for the period of time during which it operated the facility, or had incurred fines in connection with the operation of the facility, CMS could hold us liable for repayment of the overpayments or fines. If the prior operator is defunct or otherwise unable to reimburse us, we may be unable to recover these funds. We may be unable to improve every facility that we acquire. In addition, operation of these facilities may divert management time and attention from other operations and priorities, negatively impact cash flows, result in adverse or unanticipated accounting charges or otherwise damage other areas of our Company if they are not timely and adequately improved.
We may not be able to successfully integrate acquired facilities and businesses into our operations, and we may not achieve the benefits we expect from any of our facility acquisitions.
We may not be able to efficiently or effectively integrate newly acquired facilities with our existing operations, culture and systems. The process of integrating acquired facilities into our existing operations may result in unforeseen operating difficulties, divert management's attention from existing operations or require an unexpected commitment of staff, financial or other resources, and the integration process may ultimately be unsuccessful. We recognize the importance of maintaining adequate staffing and supervision in our facilities at all times to ensure a high quality of care for our patients and residents. The financial benefits we expect to realize from many of our acquisitions rely largely upon our ability to improve performance, overcome regulatory deficiencies, increase and maintain occupancy and control costs. If we are unable to accomplish any of these objectives at facilities we acquire, we may not realize the expected benefits, which may have a material adverse effect on our business, financial condition and results of operations.
State efforts to regulate the construction or expansion of health care providers could impair our ability to expand our operations or make acquisitions.
Some states require health care providers (including skilled nursing facilities, hospices and assisted living facilities) to obtain prior approval, in the form of a Certificate of Need ("CON"), for the purchase, construction or expansion of health care facilities, capital expenditures exceeding a prescribed amount or changes in services or bed capacity. To the extent that we are unable to obtain any required CON or other similar approvals, our expansion could be materially adversely affected. Additionally, failure to obtain the necessary state approvals can also result in sanctions or adverse action on the facility's license and adverse reimbursement action. No assurances are given that we will be able to obtain a CON or other similar approval for any future projects requiring this approval or that such approvals will be timely.
Circumstances that adversely affect the ability of seniors, or their families, to pay for our services could have material adverse effects on our business, financial condition and results of operations.
Approximately 6% of our skilled nursing occupants and nearly all of the occupants of our assisted living facilities rely on their personal investments and wealth to pay for their stay in our facilities. We expect to continue to rely on the ability of our residents to pay for our services from their own financial resources. Inflation, continued high levels of unemployment, declines in market values of investments and home prices, or other circumstances that may adversely affect the ability of the elderly or their families to pay for our services could have a material adverse effect on our business, financial condition and results of operations.
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We depend largely upon reimbursement from third-party payors, and our business, financial condition and results of operations could be negatively affected impacted by any changes in the mix of patients in our facilities as well as payor mix and payment methodologies.
Our revenue is affected by the percentage of our patients who require a high level of skilled nursing and rehabilitative care, whom we refer to as high acuity patients, and by our mix of payment sources. Changes in our patient mix, as well as our payor mix among Medicaid, Medicare, private payors and managed care companies, may significantly affect our profitability because we generally receive higher reimbursement rates for certain patients, such as rehabilitation patients, and because the payors reimburse us at different rates. As a result, changes in the case mix of patients as well as the payor mix may significantly affect our profitability. Particularly, a significant increase in Medicaid patients will have a material adverse effect on our business, financial condition and results of operations, especially if states operating Medicaid programs continue to limit, or more aggressively seek limits on, reimbursement rates.
We operate in an industry that is highly competitive.
The long-term care industry is highly competitive and we believe that it will become even more competitive in the future. We face direct competition for the acquisition of facilities, and in turn, we face competition for employees and patients. Our assisted living facilities and nursing homes face competition from skilled nursing, assisted living, independent living facilities, homecare services, community-based service programs, retirement communities and other operations that provide services comparable to those offered by us.
We compete with national companies with respect to both our skilled nursing and assisted living facilities. Additionally, we also compete with local and regional based entities. Many of these competing companies have greater financial and other resources than we have. Failure to effectively compete with these companies may have a material adverse effect on our business, financial condition and results of operations.
Our ability to compete is based on several factors, including, without limitation, building age, appearance, reputation, availability of patients, survey history and CMS rankings. We provide no assurances that increases in competition in the future will not adversely affect our business, financial condition and results of operations.
The cost to replace or retain qualified personnel may affect our business, financial condition and results of operations, and we may not be able to comply with the staffing requirements of certain states.
We could experience significant increases in our costs due to shortages in qualified nurses, health care professionals and other key personnel. We compete with other providers of home health care, nursing home care, and assisted living with respect to attracting and retaining qualified personnel, and the market is competitive. Because of the small markets in which we operate, shortages of nurses and trained personnel may require us to enhance our wage and benefit package in order to compete and attract qualified employees from more metropolitan areas. Further, acquisitions of new facilities may require us to pay increased compensation or offer other incentives to retain key personnel and other employees in any newly acquired facilities. Increased competition in the future with respect to attracting and maintaining key personnel could limit our ability to attract and retain residents or to expand our business.
Certain states in which we currently operate, or may operate in the future, may have adopted minimum staffing standards, and additional states may also establish similar requirements in the future. Our ability to satisfy these requirements will depend upon our ability to attract and retain qualified, nurses, certified nurses' assistants and other personnel. Failure to comply with these requirements may result in the imposition of fines or other sanctions. If states do not appropriate sufficient additional
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funding, through Medicaid appropriations or otherwise, to pay for any additional operating costs resulting from minimum staffing requirements, then our business, financial condition and results of operations may be adversely affected.
To date, we have been able to adequately staff all of our operations and future operations following an acquisition. However, we make no assurances that the ability to adequately staff all of our operations will continue in the future. Additionally, increasing employee health and workers' compensation insurance costs may materially and negatively affect our profitability. We provide no assurances that our labor costs will not increase or that any increase will be matched by corresponding increases in rates we charge to facility residents. Our ability to control labor costs will significantly effect on our business, financial condition and results of operation in the future.
Successful union organization of our employees may adversely affect our business, financial condition and results of operations.
Periodically, labor unions attempt to organize our employees. Although we currently have no collective bargaining agreements with unions with respect to our employees or our facilities, there is no assurance that this will continue to be the case in the future. If future federal legislation makes it easier for employee groups to unionize, then groups of our employees may seek union representation. If more of our employees unionize, we could experience business interruptions, work stoppages, declines in service levels due to union specific rules or increased operating expenses that may adversely affect our business, financial condition and results of operations.
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 and results of operations.
We are dependent on our management team, and our future success depends largely upon the management experience, skill, and contacts of our executive officers, in particular, Christopher Brogdon, Vice-Chairman and Chief Acquisitions Officer, Boyd Gentry, CEO and President, David Rubenstein, COO, and Martin Brew, CFO, and the loss of any of these individuals would harm our business. Mr. Gentry and Mr. Rubenstein have entered into employment agreements. If we lose any or all of these executive officers, we may not be able to replace them with similarly qualified personnel, which could have a material adverse effect on our business, financial condition or results of operations.
Termination of assisted living resident agreements and resident attrition could adversely affect our revenues and earnings.
State regulations governing assisted living facilities typically require a written resident agreement with each resident. Most of these regulations also require that each resident have the right to terminate our assisted living resident agreement for any reason on reasonable notice. Consistent with these regulations, most resident agreements allow residents to terminate their agreements on 30 days' notice. Unlike typical leasing relationships which require a commitment of one year or more, we cannot contract with our residents for longer periods of time. In event that a substantial number of residents elect to terminate their resident agreements at or around the same time, our revenues and earnings could be materially and adversely affected.
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Environmental compliance costs and liabilities associated with our facilities may have a material adverse effect on our business, financial condition and results of operations.
We are subject to various federal, state and local environmental and health and safety laws and regulations with respect to our facilities. These laws and regulations address various matters, including asbestos, fuel oil management, wastewater discharges, air emissions, medical wastes and hazardous wastes. The costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. For example, with respect to our owned and leased property, we may be held liable for costs relating to the investigation and cleanup of any of our owned or leased properties from which there has been a release or threatened release of a regulated material as well as other properties affected by the release. In addition to these costs, which are typically not limited by law or regulation and could exceed the property's value, we could be liable for certain other costs, including, without limitation, governmental fines and injuries to persons, property or natural resources. Further, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs it incurs in connection with the contamination. While we are not aware of any potential environmental problems, no assurances are made that such problems and the costs associated with them will not arise in the future. If any of our properties were found to violate environmental laws, we may be required to expend significant amounts of time and money to rehabilitate the property, and we may be subject to significant liability. Any environmental compliance costs and liabilities incurred may have a material adverse effect on our business, financial condition and results of operations.
Disasters and other adverse events may seriously harm our business.
Our facilities and residents may suffer harm as a result of natural or man-made disasters such as storms, earthquakes, hurricanes, tornadoes, floods, fires and terrorist attacks and other conditions. Such events may disrupt our operations, harm our patients and employees, severely damage or destroy one more of our facilities, harm our business, reputation and financial performance, or otherwise cause our business to suffer in ways that cannot currently be predicted.
The nature of business exposes us to certain litigation risks.
The provision of health care services entails an inherent risk of liability. In recent years, participants in the long-term care industry have become subject to an increasing number of lawsuits alleging malpractice, negligence, product liability or other related legal theories. In several well publicized instances, private litigation by residents of senior living facilities for alleged abuses has resulted in large damage awards against other operating companies. Certain lawyers and firms specialize in bringing litigation against companies such as ours. As a result of this litigation, our cost of liability insurance has increased during the past few years.
We currently maintain liability insurance. This insurance is intended to cover malpractice and other lawsuits. Although we believe that it is in keeping with industry standards, no assurances are made that claims in excess of our limits will not arise. Any such successful claims could have a material adverse effect upon our business, financial condition and results of operations. Claims against us, regardless of their merit or eventual outcome, may also have a material adverse effect upon our ability to attract and retain patients and key personnel. In addition, our insurance policies must be renewed annually, and no assurances are made that we will be able to retain coverage in the future or, if coverage is available, that it will be available on acceptable terms.
We are subject to possible conflicts of interest; we have engaged in, and expect to continue to engage in, transactions with parties that may be considered related parties.
We sublease office space from Christopher Brogdon, an Officer and principal owner of the Company. The total cost in 2011 was $38,000. In connection with certain acquisitions, Christopher
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Brogdon received approximately $219,000. Of this amount $194,000 relates to the acquisition by a VIE controlled by Christopher Brogdon and such amount was paid by third parties with respect to such acquisition.
We lease an administrative office building from a partnership the members of which include a non-officer employee of the company and a family member of Christopher Brogdon. Our cost for use of the office building is based on the building owner's operating cost plus the amount of the monthly mortgage payment on the building and totaled $94,000 in 2011. In September 2011, we executed a purchase agreement to purchase the building for an amount equal to the outstanding mortgage balance plus unpaid real estate taxes which currently approximates $1,200,000. We anticipate closing on this purchase agreement in 2012.
We believe that our affiliations with Christopher Brogdon, and other related parties have been, and will be, beneficial to us. Although we do not believe the potential conflicts have adversely affected, or will adversely affect, our business, others may disagree with this position. In the past, in particular following periods of financial instability, shareholder litigation and dissident shareholder director nominations and shareholder proposals have often been instituted against companies alleging conflicts of interest in business dealings with officers, directors and other affiliates. Our relationships with Christopher Brogdon and other related parties may give rise to such litigation, nominations or proposals which could result in substantial costs to us and a diversion of our resources and our management's attention, whether or not any allegations made are substantiated.
The increasing costs of being publicly owned may strain our resources and impact our business, financial condition and results of operations.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Sarbanes-Oxley Act of 2002, or the 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. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404.
These requirements may place a strain on our systems and resources and in the future may require us to hire additional accounting and financial staff 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 Securities and Exchange Commission (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 an adverse effect on our business, financial condition and results of operations. Although we have taken steps to maintain our internal control structure as required by the Exchange Act and the Sarbanes-Oxley Act, we cannot provide any assurances that control deficiencies will not occur in the future.
We have a history of operating losses and may incur losses in the future.
For the year ended December 31, 2011, for amounts attributable to the Company, we had a net loss of $6,164,000 compared to a net loss of $2,743,621 for the year ended December 31, 2010. We provide no assurances that we will be able to operate profitably as we expand. As of December 31, 2011, we have a working capital deficit of approximately $5,367,000.
23
Management's plans with the objective of improving liquidity and profitability in future years encompass the following:
Management believes that the actions that will be taken by the Company provide the opportunity for the Company to improve liquidity and achieve profitability. No assurances are made that such improvements or achievements will occur.
Our business requires us to make capital expenditures to maintain and improve our facilities.
Our facilities sometimes require capital expenditures to address ongoing required maintenance and to make them attractive to residents. Physical characteristics of senior living facilities and rehabilitation centers are mandated by various governmental authorities; and changes in these regulations may require us to make significant expenditures. In addition, we often are required to make significant capital expenditures when we acquire new facilities in pursuit of our growth strategy. Our available financial resources may be insufficient to fund these expenditures.
We may not be able to meet all of our capital needs.
We cannot assure you that our business will generate cash flow from operations, that anticipated revenue growth and improvement of operating efficiencies will be realized or that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity, sell assets or delay certain discretionary capital expenditures.
An increase in market interest rates could increase our interest costs on existing and future debt.
We have incurred and expect in the future to incur floating rate indebtedness in connection with our acquisition of new facilities, as well as for other purposes. Accordingly, increases in interest rates would increase the Company's interest costs. These increased costs could make the financing of any acquisition more costly and could limit our ability to refinance existing debt when it matures.
Our ability and intent to pay cash dividends in the future may be limited.
We have never declared or paid any cash dividend on our shares of common stock, and we currently do not anticipate paying any cash dividends in the foreseeable future. As a result, investors must rely on sales of their common stock after price appreciation, which may not occur, as the only way to realize future gains on their investment.
The price of our common stock has fluctuated, and a number of factors may cause the price of our common stock to decline.
The market price of our common stock has fluctuated and could fluctuate significantly in the future as a result of various factors and events, many of which are beyond our control. These factors may include:
24
In addition, 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 common stock to decline.
In the event of fluctuations in the price of our common stock, shareholders may be unable to resell shares of our common stock at or above the price at which they purchased such shares. Additionally, due to fluctuations in the price of our common 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 directors and officers substantially control all major decisions.
Our directors and officers beneficially own approximately 24% of our outstanding common shares, options and warrants. 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 interest.
Takeover defense provisions in Ohio law and our corporate governance documents may delay or prevent takeover attempts thereby preventing our shareholders from realizing a premium on their common stock.
Various provisions of Ohio corporation law and of our corporate governance documents may inhibit changes in control not approved by our Board of Directors and may have the effect of depriving our investors of an opportunity to receive a premium over the prevailing market price of our common stock in the event of an attempted hostile takeover. In addition, the existence of these provisions may adversely affect the market price of our common stock. These provisions include:
25
Our Board of Directors 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 our common stock, which in turn may limit the price investors might be willing to pay for our common stock.
Provisions in our bylaws provide for indemnification of officers and directors, which could require us to direct funds away from our business and future operations.
Our Articles of Incorporation and Code of Regulations provide for the indemnification of our officers and directors. We may be required to advance costs incurred by an officer or director and to pay judgments, fines and expenses incurred by an officer or director, including reasonable attorneys' fees, as a result of actions or proceedings in which our officers and directors are involved by reason of being or having been an officer or director of our Company. Funds paid in satisfaction of judgments, fines and expenses may be funds we need for the operation and growth of our business.
Item 1B. Unresolved Staff Comments
None.
Facilities
As of December 31, 2011, we operated 42 facilities in seven states with the operational capacity to serve approximately 3,737 residents. Of the facilities that we operated, we owned twenty facilities, leased twelve pursuant to operating leases, and managed four facilities for third parties.
The following table provides summary information regarding the number of operational beds at our facilities at December 31, 2011:
|
December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | 2009 | |||||||
Cumulative number of facilities |
42 | 27 | 14 | |||||||
Cumulative number of operational beds |
3,737 | 2,428 | 852 |
26
Facility
Breakdown at December 31, 2011
|
|
Number of Facilities | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
State
|
Number of
Operational Beds/Units |
Owned | VIE | Leased |
Managed for
Third Parties |
Total | |||||||||||||
Arkansas |
530 | 6 | | | | 6 | |||||||||||||
Alabama |
408 | 2 | 1 | | | 3 | |||||||||||||
Georgia |
1,497 | 3 | | 10 | | 13 | |||||||||||||
Missouri |
80 | | | 1 | | 1 | |||||||||||||
North Carolina |
106 | 1 | | | | 1 | |||||||||||||
Ohio |
802 | 8 | | 1 | 4 | 13 | |||||||||||||
Oklahoma |
314 | | 5 | | | 5 | |||||||||||||
Total |
3,737 | 20 | 6 | 12 | 4 | 42 | |||||||||||||
Facility Type |
|||||||||||||||||||
Skilled Nursing |
3,322 | 13 | 5 | 12 | 3 | 33 | |||||||||||||
Assisted Living |
332 | 7 | 1 | | | 8 | |||||||||||||
Independent Living |
83 | | | | 1 | 1 | |||||||||||||
Total |
3,737 | 20 | 6 | 12 | 4 | 42 | |||||||||||||
Corporate Office
Our corporate office is located in Springfield, Ohio. We own the office building, which contains approximately 7,200 square feet of office space. There is a note securing the property (See Note 8 to our Consolidated Financial Statements included elsewhere in this Annual Report). In addition, we have two monthly leases for a total of approximately 14,000 square feet of office space in the Atlanta, Georgia area.
We are party to various legal actions and administrative proceedings and are subject to various claims arising in the ordinary course of business, including claims that our services have resulted in injury or death to the residents of our facilities and claims related to employment, staffing requirements and commercial matters. Although we intend to vigorously defend ourselves in these matters, there can be no assurance that the outcomes of these matters will not have a material adverse effect on our business, results of operations and financial condition.
We operate in an industry that is extremely regulated. As such, in the ordinary course of business, we 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 to being subject to direct regulatory oversight of state and federal regulatory agencies, our industry is frequently subject to the regulatory practices, which could subject us to civil, administrative or criminal fines, penalties or restitutionary relief, and reimbursement authorities could also seek the suspension or exclusion of the provider or individual from participation in their program. We believe that there has been, and will continue to be, an increase in governmental investigations of long-term care providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Adverse determinations in legal proceedings or governmental investigations against or involving us, whether currently asserted or arising in the future, could have a material adverse effect on our business results of operations and financial condition.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed for trading on the NYSE Amex Equities exchange under the symbol "ADK". The high and low sales prices of our stock during the quarters listed below were as follows:
|
|
High | Low | ||||||
---|---|---|---|---|---|---|---|---|---|
"ADK" | |||||||||
2011 | First Quarter | $ | 5.09 | $ | 3.90 | ||||
Second Quarter | $ | 6.31 | $ | 4.66 | |||||
Third Quarter | $ | 6.69 | $ | 4.15 | |||||
Fourth Quarter | $ | 4.71 | $ | 3.70 |
|
|
High | Low | ||||||
---|---|---|---|---|---|---|---|---|---|
2010 | First Quarter | $ | 6.10 | $ | 3.76 | ||||
Second Quarter | $ | 5.95 | $ | 3.10 | |||||
Third Quarter | $ | 4.02 | $ | 3.00 | |||||
Fourth Quarter | $ | 4.70 | $ | 3.35 |
On December 31, 2011, we had approximately 1,400 share owner accounts of record.
We have never declared or paid any cash dividends with respect to our common stock. Our ability to pay dividends will depend upon our future earnings and net worth. We are restricted by Ohio law from paying dividends on any of our common stock while insolvent or if such payment would result in a reduction of our stated capital below the required amount. We currently intend to retain any future earnings to fund the operation and growth of our business. We do not anticipate paying cash dividends in the foreseeable future.
In 2011, we issued 38,200 shares of our common stock to an accredited investor upon conversion of a Subordinated Convertible Note in principal amount of $150,000 issued by us on October 26, 2010. The conversion price was approximately $3.92 per share. The shares issued upon conversion of the Subordinate Convertible Note were issued without registration under the Securities Act upon reliance on the exemption set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder. The Company relied on such exemption based upon representations made by the recipient of the shares regarding, among other things, the recipient's status as an accredited investor (as such term is defined under the Securities Act).
Equity Compensation Plan Information
The following table sets forth additional information as of December 31, 2011, concerning shares of our 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,
28
outstanding options and other rights 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) | (b) | (c) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Plan Category
|
Number of
Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights |
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) |
1,364,097 | $ | 3.36 | 627,900 | ||||||
Equity compensation plan not approved by security holders(2) |
2,084,774 | $ | 3.62 | 150,689 |
Item 6. Selected Financial Data
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are an owner and manager of retirement communities, assisted living facilities, and nursing homes. We deliver skilled nursing, assisted living and home health services through wholly owned
29
separate operating subsidiaries. As of December 31, 2011, we operated 42 facilities, comprised of 33 skilled nursing centers, eight assisted living residences and one independent living/senior housing facility, totaling approximately 3,700 beds/units. Our facilities are located in Arkansas, Alabama, Georgia, Missouri, North Carolina, Ohio and Oklahoma (via VIE).
Acquisitions
We have embarked on a strategy to grow our business through acquisitions and leases of senior care facilities and businesses providing services to those facilities. During the year we acquired a total of 15 skilled nursing facilities and one assisted living facility. In addition, on December 30, 2011, we closed on a transaction to acquire one skilled nursing facility and one assisted living facility, the transfer of which occurred on January 1, 2012.
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We are currently evaluating acquisition opportunities in addition to those described above and we continue to seek new opportunities to further our growth strategy. No assurances can be made that any of these opportunities will be determined to be appropriate or that they may be acquired on terms acceptable to us.
Segments
The Company reports its operations in three segments: SNF, ALF, and Corporate & Other. The Company delivers services through wholly owned separate operating subsidiaries. The SNF and ALF segments provide services to individuals needing long-term care in a nursing home or assisted living setting and management of those facilities. The Corporate & Other segment engages in the management of facilities and accounting and IT services. We evaluate financial performance and allocate resources primarily based on segment operating income (loss). Segment operating results excludes interest expense and other non-operating income and expenses.
The table below contains our segment information for the years ended December 31, 2011 and 2010.
Amounts in 000's
|
SNF | ALF |
Corporate &
Other |
Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended December 31, 2011 |
||||||||||||||||
Net Revenue |
$ | 139,932 | $ | 9,801 | $ | 10,366 | $ | (8,746 | ) | $ | 151,353 | |||||
Cost of services |
123,015 | 7,781 | 133 | (8,710 | ) | 122,219 | ||||||||||
General and Administrative |
| | 13,317 | (36 | ) | 13,281 | ||||||||||
Facility rent expense |
7,688 | | 107 | | 7,795 | |||||||||||
Depreciation and Amortization |
3,045 | 650 | 243 | | 3,938 | |||||||||||
Salary Continuation Costs |
| | 1,451 | | 1,451 | |||||||||||
Operating Income/(Loss) |
$ | 6,184 | $ | 1,370 | $ | (4,885 | ) | $ | | $ | 2,669 | |||||
Total Assets |
$ | 110,532 | $ | 22,328 | $ | 35,792 | $ | (9,548 | ) | $ | 159,104 | |||||
Capital Spending |
$ | 2,120 | $ | 230 | $ | 2,113 | $ | | $ | 4,463 | ||||||
Year ended December 31, 2010 |
||||||||||||||||
Net Revenue |
$ | 40,427 | $ | 8,270 | $ | 6,157 | $ | (4,063 | ) | $ | 50,791 | |||||
Cost of services |
37,214 | 7,013 | 446 | (4,063 | ) | 40,610 | ||||||||||
General and Administrative |
| | 7,936 | | 7,936 | |||||||||||
Facility rent expense |
2,858 | | | | 2,858 | |||||||||||
Depreciation and Amortization |
585 | 554 | 123 | 1,262 | ||||||||||||
Operating Income/(Loss) |
$ | (230 | ) | $ | 703 | $ | (2,348 | ) | $ | | $ | (1,875 | ) | |||
Total Assets |
$ | 47,407 | $ | 21,506 | $ | 18,560 | $ | (4,514 | ) | $ | 82,959 | |||||
Capital Spending |
$ | 510 | $ | 347 | $ | 274 | $ | | $ | 1,131 | ||||||
Skilled Nursing Facilities
We focus on two primary indicators in evaluating the financial performance in this segment. Those indicators are facility occupancy and patient mix. Facility occupancy is important as higher occupancy generally leads to higher revenues. In addition, concentrating on increasing the number of Medicare covered admissions ("the patient mix") helps in increasing revenues. We include commercial insurance covered admissions that are reimbursed at the same level as those covered by Medicare in our Medicare utilization percentages and analysis.
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For the year ended December 31, 2011, revenue in our skilled nursing segment increased approximately $99,505,000 as a result of acquisitions during the year. This segment had an income from operations of $6,184,000 as a result of optimization of occupancy and quality mix as well as expense control. We expect to continue to implement and refine strategies to sustain these goals. Total assets increased $63,125,000 due to acquisitions made during the year.
"Same Facilities" results represent those owned and leased facilities we began to operate prior to January 1, 2011.
"Recently Acquired Facilities" results represents those owned and leased facilities we began to operate subsequent to January 1, 2011.
|
Three Months
Ended December 31, |
Year Ended
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | 2011 | 2010 | |||||||||
Same Facilities |
86.4 | % | 86.2 | % | 86.5 | % | 85.1 | % | |||||
Recently Acquired Facilities |
77.1 | % | n/a | 80.8 | % | n/a | |||||||
Total |
82.4 | % | 86.2 | % | 85.0 | % | 85.1 | % | |||||
We continue our work towards maximizing the number of patients covered by Medicare where our operating margins are higher.
Patient Mix
Three Months Ended December 31,
|
Same Facilities |
Recently
Acquired Facilities |
Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||
Medicare |
14.0 | % | 12.7 | % | 12.6 | % | n/a | 13.4 | % | 12.7 | % | ||||||||
Medicaid |
73.8 | % | 79.8 | % | 76.4 | % | n/a | 74.8 | % | 79.8 | % | ||||||||
Other |
12.2 | % | 7.5 | % | 11.0 | % | n/a | 11.8 | % | 7.5 | % | ||||||||
Total |
100.0 | % | 100.0 | % | 100.0 | % | n/a | 100.0 | % | 100.0 | % | ||||||||
|
Same Facilities |
Recently
Acquired Facilities |
Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||
Medicare |
14.5 | % | 12.6 | % | 12.2 | % | n/a | 13.9 | % | 12.6 | % | ||||||||
Medicaid |
75.4 | % | 77.5 | % | 76.9 | % | n/a | 75.8 | % | 77.5 | % | ||||||||
Other |
10.1 | % | 9.9 | % | 10.9 | % | n/a | 10.3 | % | 9.9 | % | ||||||||
Total |
100.0 | % | 100.0 | % | 100.0 | % | n/a | 100.0 | % | 100.0 | % | ||||||||
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For the Three Months Ended December 31, 2011:
Region (SNF Only)
|
Operational
Beds at Period End |
Period's
Average Operational Beds |
Occupancy
(Operational Beds) |
Medicare
Utilization (Skilled %ADC) |
2011 Q4
Total Revenues |
Medicare
(Skilled) $PPD |
Medicaid
$PPD |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Alabama |
304 | 304 | 87.1 | % | 11.1 | % | $ | 4,913,873 | $ | 396.61 | $ | 172.17 | ||||||||||
Arkansas |
498 | 434 | 72.3 | % | 15.3 | % | $ | 5,964,305 | $ | 382.56 | $ | 175.08 | ||||||||||
Georgia |
1,497 | 1,497 | 87.2 | % | 13.9 | % | $ | 22,945,403 | $ | 448.12 | $ | 139.13 | ||||||||||
Missouri |
80 | 53 | 55.8 | % | 16.9 | % | $ | 512,365 | $ | 441.19 | $ | 119.92 | ||||||||||
North Carolina |
106 | 106 | 91.3 | % | 15.1 | % | $ | 1,893,398 | $ | 468.45 | $ | 154.91 | ||||||||||
Ohio |
194 | 194 | 80.1 | % | 16.9 | % | $ | 3,253,442 | $ | 445.45 | $ | 155.71 | ||||||||||
Oklahoma |
314 | 314 | 71.9 | % | 8.0 | % | $ | 3,067,186 | $ | 377.84 | $ | 123.69 | ||||||||||
Total |
2,993 | 2,902 | 82.4 | % | 13.6 | % | $ | 42,549,972 | $ | 430.64 | $ | 146.99 | ||||||||||
For the Year Ended December 31, 2011:
Region (SNF Only)
|
Operational
Beds at Period End |
Period's
Average Operational Beds |
Occupancy
(Operational Beds) |
Medicare
Utilization (Skilled %ADC) |
2011
Total Revenues |
Medicare
(Skilled) $PPD |
Medicaid
$PPD |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Alabama |
304 | 304 | 83.6 | % | 11.1 | % | $ | 18,452,112 | $ | 385.54 | $ | 172.74 | ||||||||||
Arkansas |
498 | 143 | 72.2 | % | 14.9 | % | $ | 7,564,596 | $ | 388.00 | $ | 168.35 | ||||||||||
Georgia |
1,497 | 1,381 | 87.6 | % | 14.1 | % | $ | 86,642,549 | $ | 477.17 | $ | 141.08 | ||||||||||
Missouri |
80 | 13 | 55.8 | % | 16.9 | % | $ | 512,365 | $ | 441.19 | $ | 119.92 | ||||||||||
North Carolina |
106 | 106 | 93.1 | % | 18.6 | % | $ | 7,986,326 | $ | 448.88 | $ | 156.09 | ||||||||||
Ohio |
194 | 194 | 83.5 | % | 15.5 | % | $ | 13,670,246 | $ | 357.19 | $ | 154.00 | ||||||||||
Oklahoma |
314 | 132 | 73.1 | % | 7.3 | % | $ | 5,103,470 | $ | 371.11 | $ | 123.55 | ||||||||||
Total |
2,993 | 2,272 | 85.0 | % | 13.6 | % | $ | 139,931,664 | $ | 446.68 | $ | 147.45 | ||||||||||
Medicare reimbursement rates and procedures are subject to change from time to time, which could materially impact our revenues. Medicare reimburses our skilled nursing facilities under PPS for certain inpatient-covered services. Under the PPS, facilities are paid a predetermined amount per patient, per day, based on the anticipated costs of treating patients. The amount to be paid is determined by classifying each patient into a RUG category that is based upon each patient's acuity level. On July 29, 2011, CMS announced a final rule reducing Medicare skilled nursing facility PPS payments in fiscal year 2012 by $3.87 billion, or 11.1% lower than payments for fiscal year 2011. CMS announced it is recalibrating the case-mix indexes ("CMIs") for fiscal year 2012 to restore overall payments to their intended levels on a prospective basis. Each RUG group consists of CMIs that reflect a patient's severity of illness and the services that a patient requires in the skilled nursing facility. In transitioning from the previous classification system to the new RUG-IV, CMS adjusted the CMIs for fiscal year 2011 based on forecasted utilization under this new classification system to establish parity in overall payments. The fiscal year 2011 recalibration of the CMIs will result in a reduction to skilled nursing facility payments of $4.47 billion, or 12.6%. However, this reduction would be partially offset by the fiscal year 2012 update to Medicare payments to skilled nursing facilities. The update, a 1.7% or $600 million increase, reflects a 2.7% market basket increase, reduced by a 1.0% multi-factor productivity ("MFP") adjustment mandated by the PPAC. The combined MFP-adjusted market basket increase and the fiscal year 2012 recalibration will yield a net reduction of $3.87 billion, or 11.1%.
Assisted Living Facilities
For the year ended December 31, 2011, revenue in our ALF segment increased approximately $1,531,000 as a result of increased revenue from acquisitions, an annual increase in rates charged to
33
privately paying residents and increasing occupancy. This segment had income from operations of $1,370,000 and improvement of $667,000 over 2010. Total assets increased $822,000 primarily due to building improvements made during the year.
Residents of our assisted living facilities rely on their personal investments and wealth to pay for their stay. Recent declines in market values of investments could limit their ability to pay for services or shorten the period of time for which they can pay privately for their stay. The current depressed market for the sale of homes could limit their ability to sell their personal assets further reducing their ability to remain in our facilities. Furthermore, adult children who have recently become unemployed may decide to care for their parent at home so that their parent's income may help offset some of their own financial burdens. We do not believe this is a trend and we believe facility occupancy will improve.
Corporate & Other
We manage three skilled nursing facilities and one independent living campus for third party owners under contracts that either are for a fixed monthly fee or for a percentage of revenue generated by the managed facility. Depending on the type of contract, our revenues increase annually according to inflationary adjustments stipulated in our management agreements or they increase as the facility's revenue increases for the contracts that are based on a percentage of revenue. This segment includes our corporate overhead expenses, which are made up of salaries of our senior management team members and various other corporate expenses including, but not limited to, corporate office operating expenses, audit fees, legal fees and board activities. Additionally, non-cash charges for compensation expense related to warrants, restricted stock and stock options are included in corporate overhead. We do not allocate these expenses to the divisions or separate them from management and development business for management review purposes.
We also provide accounting and back office services for one contract in Georgia.
Divestitures
As part of our strategy to focus on the growth of skilled nursing facilities, we decided in the fourth quarter of 2011 to exit the home health business. The results of operations for this segment are reported as discontinued operations and were a net loss of $1,963,000 in 2011 inclusive of a goodwill impairment charge of $1,774,000 versus a net income in 2010 of $174,000. At December 31, 2011, the home health business was held for sale. The Company anticipates the sale or termination of the home health business will occur in 2012.
Critical Accounting Policies
We prepare our financial statements in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. 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
34
estimates. These estimates are evaluated by management and revised as circumstances change. We believe that the following represents our critical accounting policies:
Our financial statements reflect consolidation with entities in which we have determined to have a controlling financial interest
Arrangements with other business enterprises are evaluated, and those in which AdCare is determined to have controlling financial interest are consolidated. ASC Topic 810, Consolidation addresses the consolidation of business enterprises to which the usual condition of consolidation (ownership of a majority voting interest) does not apply. This interpretation focuses on controlling financial interests that may be achieved through arrangements that do not involve voting interests. It concludes that, 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 assets and activities are the best evidence of control. If an enterprise holds a majority of the variable interests 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 variable interest entity in its financial statements.
We have evaluated and concluded that we have 6 relationships with variable interest entities in which we have determined that we are the primary beneficiary required to consolidate the entities. See Note 19 to our Consolidated Financial Statements included in this Annual Report for more information on our variable interest entities.
Patient Care Receivables
Patient care receivables are reported net of allowances for doubtful accounts. The administrators and managers of our properties evaluate the adequacy of the allowance for doubtful accounts on a monthly basis, and adjustments are made if necessary. Approximately 82% of our revenue in our nursing facilities is derived from Medicare and Medicaid qualifying residents. Charges to these payers are evaluated monthly to insure that revenue is recorded properly and that any adjustments necessitated by our contractual arrangement with these payers are recorded in the month incurred.
Asset Impairment
We evaluate our property and equipment and other long-lived assets, other than goodwill and other indefinite lived intangibles, on an annual basis to determine if facts and circumstances suggest that the assets may be impaired or that the estimated depreciable life of the asset may need to be changed such as significant physical changes in the property, significant adverse changes in general economic conditions, and significant deteriorations of the underlying cash flows or fair values of the property. The need to recognize impairment is based on estimated future cash flows from a property compared to the carrying value of that property. If recognition of impairment is necessary, it is measured as the amount by which the carrying amount of the property exceeds the fair value of the property.
For goodwill and other indefinite lived intangibles, we perform an annual impairment test in the fourth quarter of each year or earlier if there are indications of potential impairment.
Our asset impairment analysis is consistent with the fair value measurements described in ASC 820, Fair Value Measurements and Disclosures . We recorded an impairment to goodwill of $1,774,000 in 2011 due to our discontinuation of the home health segment. If our estimates or assumptions with respect to a property change in the future, we may be required to record additional impairment charges for our assets.
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Business Combinations
We follow ASC 805, Business Combinations , which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree as well as the goodwill acquired or gain recognized in a bargain purchase. The guidance also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. During 2011, we expensed approximately $2,267,000 in acquisition costs with an offsetting bargain purchase gain of $1,104,000 for a net amount of $1,163,000 related to the transactions discussed in Note 18 of the Consolidated Financial Statements included elsewhere in this Annual Report. ASC 805 requires that we make certain valuations to determine the fair value of assets acquired and the liabilities assumed. Such valuations require us to make significant estimates, judgments and assumptions, including projections of future events and operating performance.
Stock-Based Compensation
We recognize compensation cost for all share-based payments granted after January 1, 2006 based on various vesting criteria over the requisite service period. We calculate the recognized and unrecognized stock-based compensation using the Black-Scholes-Merton option valuation method, which requires us to use certain key assumptions to develop the fair value estimates. These key assumptions include expected volatility, risk-free interest rate, expected dividends and expected term. During the years ended December 31, 2011 and 2010, we recorded share-based compensation charges for various employee and non-employee services totaling approximately $1,019,000 and $841,000, respectively. Stock-based compensation expense is a non-cash expense and such amounts are included as a component of general and administrative expenses.
Income Taxes
As required by ASC 740, Income Taxes, we determine deferred tax assets and liabilities based upon differences between financial reporting and tax bases of assets and liabilities and measure them using the enacted tax laws that will be in effect when the differences are expected to reverse. At December 31, 2011 we maintain a valuation allowance of approximately $6,063,000 to reduce the deferred tax assets by the amount we believe is more likely than not to not be utilized through the turnaround of existing temporary differences, future earnings, or a combination thereof. In future periods, we will continue to assess the need for and adequacy of the remaining valuation allowance. We follow the relevant ASC 740 guidance when accounting for uncertainty in income taxes. The guidance provides information and procedures for financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns.
Results of Operations
Comparison for the years ended December 31, 2011 and 2010
|
Total Patient
Care Revenues Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
Amounts in (000s)
|
2011 | 2010 | |||||
Skilled Nursing
|
|||||||
Same Facilities |
$ | 107,072 | $ | 40,427 | |||
Recently Acquired Facilities |
32,860 | n/a | |||||
Total |
$ | 139,932 | $ | 40,427 | |||
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|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
Assisted Living
|
2011 | 2010 | |||||
Same Facilities |
$ | 9,765 | 8,270 | ||||
Recently Acquired Facilities |
36 | n/a | |||||
Total |
$ | 9,801 | $ | 8,270 | |||
Patient Care Revenues For the periods presented, total patient care revenues increased $100.6 million, or 198%.
For the year ended December 31, 2011, revenue in our SNF segment increased approximately $99,505,000 compared to the year ended December 31, 2010, primarily as a result of the optimization of occupancy and resident mix in the facilities acquired in 2010. This segment had a net income from operations of $6,184,000, which is $6,414,000 greater than net income from operations for this segment for the year ended December 31, 2010, as a result of higher revenue due to the acquisition of new facilities and variable interest entities, as well as, increased occupancy and a greater number of residents covered by Medicare.
For the year ended December 31, 2011, revenue in our ALF segment increased approximately $1,531,000 compared to the year ended December 31, 2010, from increased revenue from a VIE acquisition and improvements in occupancy in our legacy facilities. This segment had income from operations of $1,370,000, which is $667,000 greater than income from operations for the same period in 2010 because of the acquisition and an annual increase in rates charged to residents of the facilities.
Management Revenues For the periods presented, management revenues (net of eliminations) decreased $473,000, or 23%, as a result of fewer managed facilities.
Cost of Services For the periods presented, cost of services increased $81.6 million, or 201%, resulting primarily from the acquisitions in both years. Acquisitions from 2010 were only operational during a portion of the third quarter and the fourth quarter of 2010 compared to a full year of operations in 2011. In addition the 2011 acquisitions added costs throughout the year.
Sales, General and Administrative SG&A costs increased by $5,345,000 to $13,281,000 in 2011 from $7,936,000 in 2010. We increased our corporate overhead structure throughout 2011 in response to the growth needs and opened an accounting service center located in Roswell, Georgia during the second quarter of 2011.
Infrastructure Costs Company management separately identifies certain costs, which the Company has incurred that we believe are directly related to the growth of the Company. These "infrastructure costs" include, but are not limited to, additional management and staff necessary to support our operational teams in our newly acquired facilities, including those in states that we have not previously operated. These costs are included on the Statement of Operations of our Consolidated Financial Statements, included elsewhere in this Annual Report under the title Cost of Services. Infrastructure costs are estimated as $1,679,000 for the year ended December 31, 2011. These are newly identified expenses and therefore there are no comparable costs for the same period of 2010.
Facility Rent Expense For the periods presented, facility rent expenses increased $4,937,000. The lease expense increase resulted from the acquisition of ten leased facilities in Georgia which were in place only a portion of 2010 and the full year in 2011.
Depreciation and Amortization For the periods presented, depreciation and amortization increased $2,676,000. The depreciation increase is directly related to acquisition activity that was not included in
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the 2010 results. In addition, the acquisitions resulted in intangibles that are being amortized during the period.
Retirement and Salary Continuation Costs For the period ended December 2011, we incurred certain retirement and salary continuation costs of approximately $1,451,000 related to separation agreements with prior officers of the Company.
Interest Expense, net For the periods presented, interest expense, net increased $5.9 million, or 252%. We have entered into numerous debt instruments in relation to our growth strategy for the acquisition of the facilities which began in the third quarter of 2010. In addition, several of the arrangements are short term in nature resulting in higher interest rates than previously experienced.
Acquisition Costs, net of Gains For the period ended December 31, 2011, acquisition costs, net of gains was a net loss of $1,163,000, compared to a net gain of $2,446,000 for the comparative period. For the year ended December 31, 2011, the results were a combination of a $1,104,000 gain on the purchase of the Mountain Trace facility, offset by acquisition costs of $2,267,000 for the 2011 acquisitions. In comparison, in the same period of 2010 we recognized bargain purchase gains of $3,306,000 partially offset by $860,000 of acquisition costs related to the 2010 acquisitions.
Derivative Gain/Loss For the year ended December 31, 2011, the derivative gain was $958,000 compared to a loss of $343,000 in 2010. The derivative is a product of a convertible debt instrument entered into during the third quarter of 2010. The expense associated with the derivative increases as the stock price climbs, and conversely decreases as the stock price declines. The price of our common stock declined during the year ended December 31, 2011.
Loss on Debt Extinguishment For the year ended December 31, 2011, the loss on debt extinguishment was $141,000; compared to a loss of $228,000 in 2010. In March 2011, we issued a promissory note in the amount of $1,385,000 and paid a commitment fee of $55,400. Subsequent to March 31, 2011, we repaid this promissory note, and recorded a loss on debt extinguishment resulting from unamortized deferred financing costs. In June 2011, we recorded a $13,100 loss on debt extinguishment resulting from unamortized deferred financing costs related to a $75,000 conversion of debt. In August 2011, the refinance of the Southland Care Center resulted in a $45,300 loss on debt extinguishment related to the unamortized deferred financing costs for the interim financing that was refinanced.
Other Income/(Expense) For the period ended December 31, 2011, other income of $552,000 was recorded, compared with other expense of $25,000 for the comparative period, a net change of $577,000. In the acquisition of five leased facilities in 2010, we purchased receivables and recorded them at the estimated value at the time of acquisition. We collected substantially more of the receivables than expected by $632,000, resulting in the additional income for 2011.
Income Tax Expense For the periods presented, income tax expense increased $243,000. As a result of acquisitions in a number of new states, the increase was primarily due to taxable income in certain state taxing jurisdictions resulting in approximately $200,000 of current state income tax expense. There were no current income taxes payable in 2010.
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Discontinued Operations As part of the Company's strategy to focus on the growth of skilled nursing facilities, the Company decided in the fourth quarter of 2011 to exit the home health business. The results of operations for this segment are reported as discontinued operations and were a net loss of $1,963,000 in 2011 inclusive of a goodwill impairment charge of $1,774,000 versus a net income in 2010 of $174,000.
Liquidity and Capital Resources
Liquidity is the measure of the Company's ability to have adequate cash or access to cash at all times in order to meet financial obligations when due, as well as to fund corporate expansion and other activities. Historically, the Company has met its liquidity requirements through a combination of net cash flow from operations, debt from third party lenders and issuances of debt and equity securities.
We have negative working capital of approximately $5,367,000 at December 31, 2011. Our ability to sustain profitable operations is dependent on continued growth in revenue and controlling costs.
For 2012, the Company believes it will require additional financing to satisfy its financial obligations and implement its expansion strategy. The Company is currently exploring several financing alternatives and may seek to raise additional capital through the sale of additional debt or equity securities, although there is no assurance that the Company will be able to raise additional capital through the issuance of debt or equity securities on terms acceptable to it, or at all. If the Company is unable to secure such additional financing, then the Company may be required to restructure its outstanding indebtedness and delay or modify its expansion plans.
The following table presents selected data from our consolidated statement of cash flows for the periods presented:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
Amounts in (000s)
|
2011 | 2010 | |||||
Net cash provided by (used in) operating activitiescontinuing operations |
$ | 2,144 | $ | (1,408 | ) | ||
Net cash (used in) provided by operating activitiesdiscontinued operations |
(151 | ) | 191 | ||||
Net cash used in investing activitiescontinuing operations |
(17,154 | ) | (14,354 | ) | |||
Net cash used in investing activitiesdiscontinued operations |
| (9 | ) | ||||
Net cash provided by financing activitiescontinuing operations |
18,796 | 15,223 | |||||
Net cash used in financing activitiesdiscontinued operations |
(182 | ) | (213 | ) | |||
Net change in cash and cash equivalents |
3,453 | (570 | ) | ||||
Cash and cash equivalents at beginning of period |
3,911 | 4,481 | |||||
Cash and cash equivalents at end of period |
$ | 7,364 | $ | 3,911 | |||
Year ended December 31, 2011
Net cash provided by operating activitiescontinuing operations for the year ended December 31, 2011, was approximately $2,144,000 consisting primarily of our income from operations less changes in working capital, and noncash charges (primarily depreciation and amortization, the derivative loss, share-based compensation, difference between straight-line rent and rent paid, and amortization of debt discounts and related deferred financing costs); all primarily the result of routine operating activity. The net cash used in operating activitiesdiscontinued operations was approximately $151,000.
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Net cash used in investing activitiescontinuing operations for the year ended December 31, 2011, was approximately $17,154,000. This is primarily the result of funding our acquisitions, including making escrow deposits as well as capital expenditures throughout the facilities and new computer software.
Net cash provided by financing activitiescontinuing operations was approximately $18,796,000 for the year ended December 31, 2011. This is primarily the result of cash proceeds received from warrant exercises (including exercises of warrants in connection with our call to redeem our publicly traded warrants in August 2011), increases in borrowings on the line of credit, and proceeds from debt financings to fund our acquisitions, partially offset by repayments of existing debt obligations. Net cash used in financing activitiesdiscontinued operations was approximately $182,000 consisting of repayments of existing debt obligations.
Year ended December 31, 2010
Net cash used in operating activitiescontinuing operations for the year ended December 31, 2010 was approximately $1,408,000 consisting primarily of our net loss from operations and changes in working capital partially offset by noncash charges, all primarily the result of routine operating activity. Net cash provided by operating activitiesdiscontinued operations was approximately $191,000 for the year ended December 31, 2010.
Net cash used in investing activitiescontinuing operations for the year ended December 31, 2010 was approximately $14,354,000. This is primarily the result of escrow deposits for the acquisition of two facilities, our purchase of the remaining 50% noncontrolling interest in Community's Hearth & Home and Hearth & Home of Urbana assisted living facilities, and the purchase of additional equipment partially offset by a decrease in restricted cash due to proceeds received from escrow accounts required by the Department of Housing and Urban Development ("HUD"). In addition, significant deposits were made on the leased facilities acquired. Net cash used in investing activitiesdiscontinued operations was approximately $9,000.
Net cash provided by financing activitiescontinuing operations was approximately $15,223,000 for the year ended December 31, 2010. This is primarily the result of proceeds from stock issuance, increases in borrowings on the line of credit, proceeds from debt financings to fund our acquisitions, partially offset by repayments of existing debt obligations. Net used in financing activitiesdiscontinued operations was approximately $213,000 for the year ended December 31, 2010 and was the result of repayments of existing debt.
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Total notes payable and other debt obligations as of December 31, 2011 and 2010 were as follows:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Amounts in 000's
|
2011 | 2010 | |||||
Revolving credit facilities and lines of credit |
$ | 8,651 | $ | 1,950 | |||
Senior debt HUD |
15,738 | 15,950 | |||||
Senior debt USDA |
38,717 | 15,774 | |||||
Senior debt SBA |
5,087 | | |||||
Senior debt Bonds |
6,176 | 6,166 | |||||
Senior debt other mortgage indebtedness |
23,823 | 231 | |||||
Other debt |
4,196 | 971 | |||||
Convertible debt issued in 2010, net of discount |
10,105 | 9,380 | |||||
Convertible debt issued in 2011 |
4,509 | | |||||
Total |
117,002 | 50,422 | |||||
Less current portion |
11,909 | 3,446 | |||||
Notes payable and other debt, net of current portion |
$ | 105,093 | $ | 46,976 | |||
The following table represents the Company's cumulative facility growth from 2009 to the end of 2011:
|
December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | 2009 | |||||||
Cumulative number of facilities |
42 | 27 | 14 |
Revolving Credit Facility with Gemino Healthcare Finance
On February 25, 2011, AdCare and five of its subsidiaries joined as additional borrowers under our Credit Agreement that was initially entered into on October 29, 2010, with Gemino Healthcare Finance, LLC ("Gemino"). The amount of credit available to the Company, and the maximum amount of the credit facility was increased from $5,000,000 to $7,500,000. On April 26, 2011, the original terms of the Credit Agreement with Gemino were modified to reduce the maximum amount of the credit facility to $5,500,000, to issue a new $2,000,000 revolving note under an affiliated credit agreement and to add two additional subsidiaries as borrowers under the Credit Agreement (See Note 8 to our Consolidated Financial Statements included elsewhere in this Annual Report). On June 2, 2011, AdCare joined two additional subsidiaries as additional borrowers under the Credit Agreement with Gemino. The combined total maximum debt with Gemino remains at $7,500,000.
The Credit Agreement with Gemino contains various financial covenants and other restrictions, including a fixed charge coverage ratio and maximum loan turn days. The Company is required to maintain a fixed charge coverage ratio of 1.1:1. The Company was not in compliance with these covenants and restrictions at December 31, 2011 and a waiver was obtained.
Revolving Credit Facility with the Private Bank
On September 30, 2011, Benton Nursing, LLC, Park Heritage Nursing, LLC and Valley River Nursing, LLC, each wholly owned subsidiaries of AdCare, entered into a Loan and Security Agreement with Private Bank and Trust Company ("Private Bank") in an aggregate principal amount of $2,000,000. The loan is revolving and will be used to fund the working capital requirements of the three facilities.
The loan matures in February of 2013. Interest accrues on the principal balance at an annual rate equal to the greater of: (i) the floating per annum rate of interest most recently announced by Private Bank as its prime plus one percent (1.0%); or (ii) six percent (6.0%). Interest on the loan is payable in
41
equal monthly installments beginning on November 1, 2011, and continuing until maturity. Pre-payment is permitted, if any such pre-payment includes the payment of all accrued and unpaid interest on the loan. The loan is secured by a first priority security interest on all assets of the borrowers, and the Company has guaranteed the loan.
The agreement with Private Bank contains various financial covenants and other restrictions, including a fixed charge coverage ratio and a minimum quarterly EBITDAR. The Company is required to maintain a fixed charge coverage ratio of 1.01:1, beginning in the fourth quarter of 2011. The Company was in compliance with these covenants and restrictions at December 31, 2011.
HUD Financings
For eight facilities, the Company has term notes guaranteed by HUD with a financial institution that totaled approximately $15,738,000 at December 31, 2011. The combined HUD mortgage notes require monthly principal and interest payments of approximately $98,000 with fixed interest rates ranging from 3.74% to 7.25%. The notes mature at various dates starting in 2027 through 2044. Deferred financing costs incurred on these notes amounted to approximately $540,000 and are being amortized to interest expense over the life of the notes. The notes have prepayment penalties of 6% to 8% through 2012 declining by 1% each year through 2022. The loans have certain financial covenants of which the Company was in compliance at December 31, 2011.
USDA Financings
For ten facilities, the Company has term notes guaranteed 70% to 80% by the U.S. Department of Agriculture (the "USDA") with a financial institution that totaled approximately $38,717,000 at December 31, 2011. The combined USDA mortgage notes require monthly principal and interest payments of approximately $251,000 adjusted quarterly with a variable interest rate of prime plus 1.50% to 1.75% with a floor of 5.50% to 6.00%. The notes mature at various dates starting in 2035 through 2036. Deferred financing costs incurred on these notes amounted to approximately $1,034,000 and are being amortized to interest expense over the life of the notes. In addition, the notes have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The notes have prepayment penalties of 9% to 10% through 2012 declining by 1% each year capped at 1% for the remainder of the term. The notes have certain financial covenants of which the Company was not in compliance at December 31, 2011, but has obtained a waiver.
SBA Financings
For three facilities, the Company has term notes guaranteed 75% by the U.S. Small Business Association (the "SBA") with a financial institution that totaled approximately $5,087,000 at December 31, 2011. The combined SBA mortgage notes require monthly principal and interest payments of approximately $326,000 with an interest rate of 2.81% to 8.0%. The notes mature at various dates starting in 2031 through 2036. Deferred financing costs incurred on these notes amounted to approximately $410,000 and are being amortized to interest expense over the life of the note. In addition, the notes have an annual renewal fee for the SBA guarantee of 0.13% to 0.25% of the guaranteed portion. The notes have prepayment penalties of 10% through 2012 declining by 1% each year through 2021. The loans have certain financial covenants of which the Company was in compliance at December 31, 2011.
Other Mortgage Indebtedness
For six facilities, the Company has term notes that totaled approximately $20,829,000 at December 31, 2011. The combined mortgage notes require monthly principal and interest payments of approximately $267,000 with interest rates of 6.00% to 6.25%. The notes mature at various dates
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starting in 2013 through 2036. Deferred financing costs incurred on these notes amounted to approximately $670,000 and are being amortized to interest expense over the life of the notes.
The remaining mortgage note balance is related to the financing on the Company's corporate headquarters in Springfield, Ohio with a balance of approximately $194,000 at December 31, 2011. The mortgage requires fixed monthly payments of approximately $3,000 plus interest at LIBOR plus 3.00% maturing in 2017.
A $2,800,000 operating note was issued by a bank in 2011 for the five variable interest entity facilities in Oklahoma. At December 31, 2011, the outstanding balance was $2,800,000. The note requires quarterly interest payments of $70,000 beginning in 2012 with a 10% fixed interest rate. The note matures in July 2013. Deferred financing costs incurred on this loan amount to approximately $391,000 and are being amortized to interest expense over the life of the notes.
Riverchase, one of our consolidated variable interest entities, has revenue bonds, in two series, issued by the Medical Clinical Board of the City of Hoover in the State of Alabama. The first series has an outstanding balance of $5,845,000 at December 31, 2011. The first series bonds require monthly interest payments of $38,000 with a fixed interest rate of 7.88% and mature in June 2039. The second series has an outstanding balance of $520,000 at December 31, 2011 and requires monthly principal and interest payments of $48,000 with a 7.6% interest rate that increases 0.2% each year through 2017. The second series bonds mature in June 2017. The Company has guaranteed Riverchase's obligations under the bonds. The bonds contain an original issue discount that is being amortized over the term of the notes. At December 31, 2011, the unamortized discount on the bonds was $189,000.The bonds are subject to certain covenants and a mandatory sinking fund redemption requirement.
Mountain Trace Promissory Notes
On June 10, 2011, Mountain Trace ADK, LLC, a wholly owned subsidiary of AdCare, issued promissory notes in the aggregate principal amount of $1,000,000. The notes mature April 1, 2013, and bear interest at 11% payable quarterly in arrears the first day of each January, April, July and October beginning July 1, 2011. The notes are subject to mandatory prepayment in the aggregate principal amount of $250,000 on each of October 1, 2011, April 1, 2012 and October 1, 2012. The notes may also be prepaid without penalty by providing fifteen days prior notice. The Company received proceeds of $895,000 net of legal and other financing costs.
Pinnacle Healthcare Promissory Notes
On August 31, 2011, Pinnacle Healthcare, LLC, a wholly owned subsidiary of AdCare, issued promissory notes in the aggregate principal amount of $2,400,000. The notes mature March 1, 2014, and bear interest at 7% payable quarterly in arrears the first day of each December, March, June and September beginning December 1, 2011. The notes are subject to mandatory prepayment in the aggregate principal amount of $250,000 on each of December 1, 2011, March 1, 2012, June 1, 2012, September 1, 2012 and December 1, 2012. The notes may also be prepaid without penalty at any time.
Convertible Debt Issued in October 2010
On October 26, 2010, the Company entered into a Securities Purchase Agreement with certain accredited investors to sell and issue to the purchasers an aggregate of $11,050,000 in principal amount of the Company's Subordinated Convertible Notes, bearing 10% interest per annum payable quarterly in cash in arrears beginning December 31, 2010. On October 29, 2010, the Company entered into an amendment and joinder agreement to effectuate the sale of an additional $750,000 in principal amount of the Subordinated Convertible Notes. The initial sale of $11,050,000 in principal amount of the Subordinated Convertible Notes occurred on October 26, 2010, and the subsequent sale of $750,000 in
43
principal amount of the Subordinated Convertible Notes occurred on October 29, 2010. The Subordinated Convertible Notes mature in October 2013.
The Subordinated Convertible Notes are convertible into shares of common stock of the Company at a current conversion price of $3.92 that is subject to future reductions if the Company issues equity instruments at a lower price. Since there is no minimum conversion price resulting in an indeterminate number of shares to be issued in the future, the Company determined an embedded derivative existed that was required to be bifurcated from the Subordinated Convertible Notes and accounted for separately as a derivative liability recorded at fair value (see Note 15 to our Consolidated Financial Statements included elsewhere in this Annual Report). At the time of initial measurement, the derivative had an estimated fair value of $2,562,606 resulting in a discount on the Subordinated Convertible Notes. The discount is being amortized over the term of the Notes. At December 31, 2011, the unamortized discount on the Notes was $1,544,935.
There was a conversion of a Subordinated Convertible Note in the principal amount of $150,000 that was issued in the October 26, 2010 offering. It was recorded in two $75,000 allotments. The first one converted in July 2011 at a price of $4.13 per share and resulted in the issuance of 18,160 shares. The second converted in November 2011 at a price of $3.92 (due to the stock dividend paid in October 2011) and resulted in the issuance of 19,132 shares. The derivative and discount on the derivative were both adjusted for the conversion.
Convertible Debt Issued in April, May 2011
On March 31, 2011, the Company entered into a Securities Purchase Agreement with certain accredited investors to sell and issue to the purchasers an aggregate of $2,115,000 in principal amount of the Company's Subordinated Convertible Notes. On April 29, 2011, the Company issued an additional $1,783,700 in principal amount of the Subordinated Convertible Notes.. On May 6, 2011, the Company issued an additional $610,000 in principal amount of the Subordinated Convertible Notes. The total outstanding principal amount of the Subordinated Convertible Notes is $4,508,700. Approximately $1,427,000 of the proceeds from the offering of the Subordinated Convertible Notes obtained was used to repay the short-term promissory note that was issued March 31, 2011 and related accrued interest.
The Subordinated Convertible Notes bear a 10% interest per annum and are payable quarterly in cash in arrears beginning June 30, 2011. The Subordinated Convertible Notes mature on March 31, 2014. Debt issuance costs of $559,100 are being amortized over the life of the Notes.
The Subordinated Convertible Notes are convertible into shares of common stock of the Company at a conversion price of $5.04. The initial conversion price is subject to adjustment for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar events. The Subordinated Convertible Notes are unsecured and subordinated in right of payment to existing and future senior indebtedness.
Receivables
Our operations could be adversely affected if we experience significant delays in reimbursement from Medicare, Medicaid and other third-party revenue sources. Our future liquidity will continue to be dependent upon the relative amounts of current assets (principally cash and patient accounts receivable and current liabilities (principally accounts payable and accrued expenses). In that regard, accounts receivable can have a significant impact on our liquidity. Continued efforts by governmental and third-party payors to contain or reduce the acceleration of costs by monitoring reimbursement rates, by increasing medical review of bills for services, or by negotiating reduced contract rates, as well as any delay by the staff at our facilities in the processing of our invoices, could adversely affect our liquidity and results of operations.
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Accounts receivable attributable to patient services of continuing operations totaled $16.8 million at December 31, 2011, compared to $9.8 million at December 31, 2010, representing approximately 40 days and 75 days revenue in accounts receivable in 2011 and 2010, respectively. The increase in accounts receivable is primarily the result of increased revenue in 2011.
The allowance for bad debt was $1.3 million and $0.3 million at December 31, 2011 and 2010, respectively. We continually evaluate the adequacy of our bad debt reserves based on patient mix trends, aging of older balances, payment terms and delays with regard to third-party payors, as well as other factors. We continue to evaluate and implement additional processes to strengthen our collection efforts and reduce the incidence of uncollectible accounts.
Inflation
We have historically derived a substantial portion of our revenue from the Medicare program. We also derive revenue from state Medicaid and similar reimbursement programs. Payments under these programs generally provide for reimbursement levels that are adjusted for inflation annually based upon the state's fiscal year for the Medicaid programs and in each October for the Medicare program. These adjustments may not continue in the future, and even if received, such adjustments may not reflect the actual increase in our costs for providing healthcare services.
Labor and supply expenses make up a substantial portion of our cost of services. Those expenses can be subject to increase in periods of rising inflation and when labor shortages occur in the marketplace. To date, we have generally been able to implement cost control measures or obtain increases in reimbursement sufficient to offset increases in these expenses. We may not be successful in offsetting future cost increases.
Off-Balance Sheet Arrangements
There were no outstanding letters of credit outstanding as of December 31, 2011. However, on March 9, 2012 we pledged as collateral $100,000 of borrowing capacity on the Private Bank revolver to secure an outstanding letter of credit.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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Item 8. Financial Statements and Supplementary Data
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders
AdCare Health Systems, Inc.
Springfield, Ohio
We have audited the accompanying consolidated balance sheets of AdCare Health Systems, Inc. and subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AdCare Health Systems, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial statements, the Company is subject to certain risks and uncertainties.
/s/ BATTELLE & BATTELLE LLP
Dayton,
Ohio
March 19, 2012
47
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
ASSETS |
|||||||
Current Assets: |
|||||||
Cash and cash equivalents |
$ | 7,363,953 | $ | 3,911,140 | |||
Restricted cash and cash equivalents |
1,883,196 | 1,047,454 | |||||
Accounts receivable, net |
18,782,052 | 11,215,187 | |||||
Prepaid expenses and other |
662,731 | 1,243,663 | |||||
Assets of disposal group held for sale |
46,942 | 1,844,018 | |||||
Total current assets |
28,738,874 | 19,261,462 | |||||
Restricted cash and investments |
4,869,829 |
3,099,936 |
|||||
Property and equipment, net |
105,143,341 | 43,660,350 | |||||
Intangible assetsbed licenses |
1,189,307 | 1,189,307 | |||||
Intangible assetslease rights, net |
8,460,003 | 8,850,538 | |||||
Goodwill |
905,854 | 905,854 | |||||
Escrow deposits for acquisitions |
3,172,169 | 1,725,086 | |||||
Lease deposits |
1,685,040 | 1,670,282 | |||||
Deferred loan costs, net |
4,817,875 | 2,532,156 | |||||
Other assets |
121,743 | 63,935 | |||||
Total assets |
$ | 159,104,035 | $ | 82,958,906 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Current Liabilities: |
|||||||
Current portion of notes payable and other debt |
$ | 4,566,547 | $ | 1,495,496 | |||
Revolving credit facilities and lines of credit |
7,342,943 | 1,950,132 | |||||
Accounts payable |
12,074,582 | 3,411,322 | |||||
Accrued expenses |
9,881,207 | 9,664,776 | |||||
Liabilities of disposal group held for sale |
240,138 | 636,452 | |||||
Total current liabilities |
34,105,417 | 17,158,178 | |||||
Notes payable and other debt, net of current portion: |
|||||||
Senior debt, net of discounts |
87,770,571 | 37,591,390 | |||||
Convertible debt, net of discounts |
14,613,765 | 9,379,761 | |||||
Revolving credit facilities |
1,308,227 | | |||||
Other debt |
1,400,001 | 5,239 | |||||
Derivative liability |
1,889,198 | 2,905,750 | |||||
Other liabilities |
2,437,354 | 1,267,429 | |||||
Deferred tax liability |
86,000 | 41,066 | |||||
Total liabilities |
143,610,533 | 68,348,813 | |||||
Commitments and contingencies (Note 13) |
| | |||||
Stockholders' equity: |
|||||||
Preferred stock, no par value; 1,000,000 shares authorized; no shares issued or outstanding |
| | |||||
Common stock and additional paid-in capital, no par value; 29,000,000 shares authorized; 12,192,669 and 8,766,657 shares issued and outstanding |
35,047,209 | 26,611,870 | |||||
Accumulated deficit |
(18,713,125 | ) | (12,548,870 | ) | |||
Total stockholders' equity |
16,334,084 | 14,063,000 | |||||
Noncontrolling interest in subsidiaries |
(840,582 | ) | 547,093 | ||||
Total equity |
15,493,502 | 14,610,093 | |||||
Total liabilities and stockholders' equity |
$ | 159,104,035 | $ | 82,958,906 | |||
See notes to consolidated financial statements
48
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Revenues: |
|||||||
Patient care revenues |
$ | 149,732,749 | $ | 48,697,180 | |||
Management revenues |
1,619,981 | 2,093,334 | |||||
Total revenues |
151,352,730 | 50,790,514 | |||||
Expenses: |
|||||||
Cost of services (exclusive of facility rent, depreciation and amortization) |
122,219,325 | 40,609,964 | |||||
General and administrative expenses |
13,280,517 | 7,935,760 | |||||
Facility rent expense |
7,795,171 | 2,858,130 | |||||
Depreciation and amortization |
3,937,943 | 1,261,485 | |||||
Salary retirement and continuation costs |
1,451,192 | | |||||
Total expenses |
148,684,148 | 52,665,339 | |||||
Income (Loss) from Operations |
2,668,582 | (1,874,825 | ) | ||||
Other Income (Expense): |
|||||||
Interest expense, net |
(8,199,221 | ) | (2,328,899 | ) | |||
Acquisition costs, net of gains |
(1,162,802 | ) | 2,446,483 | ||||
Derivative gain (loss) |
957,517 | (343,144 | ) | ||||
Loss on extinguishment of debt |
(140,994 | ) | (228,203 | ) | |||
Other income (expense) |
551,565 | (25,027 | ) | ||||
Total other expense, net |
(7,993,935 | ) | (478,790 | ) | |||
Loss from Continuing Operations Before Income Taxes |
(5,325,353 | ) | (2,353,615 | ) | |||
Income Tax Expense |
(263,195 |
) |
(20,533 |
) |
|||
Loss from Continuing Operations |
(5,588,548 | ) | (2,374,148 | ) | |||
(Loss) Income from discontinued operations |
(1,963,382 |
) |
174,369 |
||||
Net Loss |
(7,551,930 | ) | (2,199,779 | ) | |||
Net Loss (Income) Attributable to Noncontrolling Interests |
1,387,675 | (543,842 | ) | ||||
Net Loss Attributable to AdCare Health Systems |
$ | (6,164,255 | ) | $ | (2,743,621 | ) | |
Net Loss per Common ShareBasic: |
|||||||
Continuing Operations |
$ | (0.42 | ) | $ | (0.40 | ) | |
Discontinued Operations |
(0.20 | ) | 0.02 | ||||
|
$ | (0.62 | ) | $ | (0.38 | ) | |
Net Loss per Common ShareDiluted: |
|||||||
Continuing Operations |
$ | (0.42 | ) | $ | (0.40 | ) | |
Discontinued Operations |
(0.20 | ) | 0.02 | ||||
|
$ | (0.62 | ) | $ | (0.38 | ) | |
Weighted Average Common Shares Outstanding: |
|||||||
Basic |
9,991,142 | 7,223,633 | |||||
Diluted |
9,991,142 | 7,223,633 |
See notes to consolidated financial statements
49
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
Common
Stock Shares |
Common
Stock and Additional Paid-in Capital |
Accumulated
Deficit |
Noncontrolling
Interests |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1, 2010 |
5,909,407 | $ | 17,571,801 | $ | (9,805,249 | ) | $ | 309,256 | $ | 8,075,808 | ||||||
Nonemployee warrants for services |
|
129,892 |
|
|
129,892 |
|||||||||||
Stock based compensation expense |
| 818,765 | | | 818,765 | |||||||||||
Public stock offering, net |
2,138,893 | 6,109,725 | | | 6,109,725 | |||||||||||
Exercises of options and warrants |
309,296 | 331,100 | | | 331,100 | |||||||||||
Warrants issued with debt financing |
| 400,587 | | | 400,587 | |||||||||||
Stock issued in connection with an acquisition |
409,061 | 1,250,000 | | | 1,250,000 | |||||||||||
Purchase of minority interest |
| | | (306,005 | ) | (306,005 | ) | |||||||||
Net (loss) income |
| | (2,743,621 | ) | 543,842 | (2,199,779 | ) | |||||||||
Balance, December 31, 2010 |
8,766,657 | $ | 26,611,870 | $ | (12,548,870 | ) | $ | 547,093 | $ | 14,610,093 | ||||||
Nonemployee warrants for services |
|
434,029 |
|
|
434,029 |
|||||||||||
Nonemployee stock issuance for services |
38,154 | 206,394 | | | 206,394 | |||||||||||
Stock based compensation expense |
| 806,302 | | | 806,302 | |||||||||||
Exercises of options and warrants |
3,349,658 | 6,795,428 | | | 6,795,428 | |||||||||||
Stock issued from debt conversion |
38,200 | 193,186 | | | 193,186 | |||||||||||
Net loss |
| | (6,164,255 | ) | (1,387,675 | ) | (7,551,930 | ) | ||||||||
Balance, December 31, 2011 |
12,192,669 | $ | 35,047,209 | $ | (18,713,125 | ) | $ | (840,582 | ) | $ | 15,493,502 | |||||
See notes to consolidated financial statements
50
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Cash flows from operating activities: |
|||||||
Net Loss |
$ | (7,551,930 | ) | $ | (2,199,779 | ) | |
Net Loss (Income) from discontinued operations |
1,963,382 | (174,369 | ) | ||||
Net loss from continuing operations |
(5,588,548 | ) | (2,374,148 | ) | |||
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities: |
|||||||
Depreciation and amortization |
3,937,943 | 1,261,485 | |||||
Warrants issued for services |
212,371 | 21,648 | |||||
Stock based compensation expense |
806,302 | 818,765 | |||||
Provision for leases in excess of cash |
699,867 | 201,816 | |||||
Amortization of deferred financing costs |
926,784 | 158,076 | |||||
Amortization of debt discounts |
900,614 | 330,535 | |||||
Derivative (gain) loss |
(957,517 | ) | 343,144 | ||||
Loss on debt extinguishment |
140,994 | 228,203 | |||||
Deferred tax expense |
69,708 | 20,533 | |||||
Loss on disposal of assets |
126,015 | 1,303 | |||||
Gain on acquisitions |
(1,104,486 | ) | (2,739,949 | ) | |||
Provision for bad debts |
1,715,421 | 235,887 | |||||
Non cash acquisition costs |
206,394 | | |||||
Other noncash expenses |
80,436 | 196,988 | |||||
Changes in certain assets and liabilities, net of acquisitions: |
|||||||
Accounts receivable |
(9,453,938 | ) | (6,398,647 | ) | |||
Prepaid expenses and other |
429,026 | (772,473 | ) | ||||
Other assets |
(179,050 | ) | 6,797 | ||||
Accounts payable and other liabilities |
9,175,596 | 7,052,381 | |||||
Net cash provided by (used in) operating activitiescontinuing operations |
2,143,932 | (1,407,656 | ) | ||||
Net cash (used in) provided by operating activitiesdiscontinued operations |
(150,837 | ) | 191,465 | ||||
Net cash provided by (used in) operating activities |
1,993,095 | (1,216,191 | ) | ||||
Cash flow from investing activities: |
|||||||
Change in restricted cash and investments |
1,070,495 | (134,378 | ) | ||||
Escrow deposits for acquisitions |
(3,426,229 | ) | (1,725,086 | ) | |||
Lease deposits |
(14,758 | ) | (1,670,282 | ) | |||
Acquisitions |
(10,320,321 | ) | (9,693,418 | ) | |||
Purchase of property, plant and equipment |
(4,462,769 | ) | (1,131,241 | ) | |||
Net cash used in investing activitiescontinuing operations |
(17,153,582 | ) | (14,354,405 | ) | |||
Net cash used in investing activitiesdiscontinued operations |
| (9,507 | ) | ||||
Net cash used in investing activities |
(17,153,582 | ) | (14,363,912 | ) | |||
See notes to consolidated financial statements
51
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Cash flows from financing activities: |
|||||||
Proceeds from debt |
8,026,057 | 8,827,000 | |||||
Debt issuance costs |
(617,809 | ) | (1,134,938 | ) | |||
Change in lines of credit |
6,727,556 | 1,828,084 | |||||
Exercise of warrants |
6,795,428 | 331,100 | |||||
Proceeds from stock issuances |
| 6,109,725 | |||||
Repayment on notes payable |
(2,135,694 | ) | (737,990 | ) | |||
Net cash provided by financing activitiescontinuing operations |
18,795,538 | 15,222,981 | |||||
Net cash used in financing activitiesdiscontinued operations |
(182,238 | ) | (212,838 | ) | |||
Net cash provided by financing activities |
18,613,300 | 15,010,143 | |||||
Net Change in Cash |
3,452,813 | (569,960 | ) | ||||
Cash, Beginning |
3,911,140 |
4,481,100 |
|||||
Cash, Ending |
$ | 7,363,953 | $ | 3,911,140 | |||
Supplemental Disclosure of Cash Flow Information: |
|||||||
Cash paid during the year for: |
|||||||
Interest |
$ | 6,090,935 | $ | 1,953,926 | |||
Income taxes |
$ |
197,000 |
$ |
|
|||
Supplemental Disclosure of Non-Cash Activities: |
|||||||
Acquisitions in exchange for debt and equity instruments |
$ |
46,064,270 |
$ |
28,914,021 |
|||
Warrants issued for financing costs |
$ | 329,901 | | ||||
Conversion of debt to equity |
$ | 150,000 | | ||||
Other assets acquired in exchange for debt |
$ | 6,441,041 | | ||||
Noncash change in fair value of property and equipment from acquisition |
| $ | 750,287 | ||||
Discounts on debt for bifurcated derivative and detachable warrants |
| $ | 2,963,193 |
See notes to consolidated financial statements
52
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AdCare Health Systems, Inc. and Subsidiaries ("AdCare" or "the Company"), is an owner and/or operator of retirement communities, skilled nursing facilities, assisted living facilities, and home health care services in the states of Arkansas, Alabama, Georgia, Missouri, North Carolina, Ohio, and Oklahoma. The Company, through wholly owned separate operating subsidiaries, manages 42 facilities comprised of 33 skilled nursing facilities, 8 assisted living facilities and 1 independent living/senior housing facility which total approximately 3,700 units. The Company's facilities provide a range of health care services to their patients and residents including, but not limited to, skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term residents and short-stay patients. As of December 31, 2011, of the total 42 facilities, the Company managed 4 facilities, owned 20 facilities and operated 18 facilities (including 6 consolidated variable interest entities (VIE's) and 12 long-term lease arrangements). As part of the Company's strategy to focus on the growth of skilled nursing facilities, the Company decided in the fourth quarter of 2011 to exit the home health business; therefore, this segment is reported as discontinued operations (see Note 3).
Basis of Presentation
The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States ("GAAP") in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC").
Principles of Consolidation
The consolidated financial statements include the Company's majority owned and controlled subsidiaries. "VIEs" in which the Company has a variable interest have been consolidated as controlled subsidiaries when the Company is identified as the primary beneficiary. All intercompany transactions and balances have been eliminated through consolidation. For subsidiaries that are not wholly owned by the Company, the portions not controlled by the Company are presented as noncontrolling interests in the consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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. Examples of significant estimates include allowance for doubtful accounts, contractual allowances for Medicare and Medicaid, deferred tax valuation allowance, fair value of derivative instruments, fair value of employee and nonemployee stock based awards, and impairment analysis of goodwill and other long-lived assets. Actual results could differ materially from those estimates.
Acquisition Policy
The Company periodically enters into agreements to acquire assets and/or businesses. The considerations involved in each of these agreements may include cash, financing, and/or long-term lease
53
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
arrangements for real properties. The Company evaluates each transaction to determine whether the acquired interests are assets or businesses. A business is defined as a self-sustaining integrated set of activities and assets conducted and managed for the purpose of providing a return to investors. A business consists of (a) inputs, (b) processes applied to those inputs, and (c) resulting outputs that are used to generate revenues. In order for an acquired set of activities and assets to be a business, it must contain all of the inputs and processes necessary for it to continue to conduct normal operations after the acquired entity is separated from the seller, including the ability to sustain revenue streams by providing its outputs to customers. An acquired set of activities and assets fail the definition of a business if it excludes one or more of the above items making it impossible to continue normal operations and sustain a revenue stream by providing its products and/or services to customers.
The Company currently operates its skilled nursing facilities ("SNFs") in states that are subject to certificate of need ("CON") programs. The CON programs govern the establishment, construction, renovation and transferability of the rights to operate SNFs. In certain states, such as Ohio, CON programs permit the transferability and sale of bed licenses separate from the facility. In other states, bed licenses are non-transferable separate and apart from the underlying licensed facility. Through acquisitions completed in 2011, the Company now operates in a number of states including Alabama, Arkansas, Georgia, North Carolina and Oklahoma where the bed licenses are not transferable separate from the facility.
The CON/bed license arises from contractual rights and is an identifiable intangible asset that the Company assigns a fair value to transactions accounted for as business combinations. In states where the CON/bed licenses are transferable separate from the facility, the intangible asset has been determined to have an indefinite life. Because the intangible asset is separable from the facility and has separate stand-alone value, for financial reporting purposes, the fair value assigned to the CON/license is classified as a separate intangible asset in the accompanying consolidated balance sheets.
In states where the CON/bed license is non-transferable separate from the facility, the CON/bed license and building are complimentary assets and therefore, the intangible asset is assigned a definite life and amortized over the estimated remaining useful life of the related building. As complimentary assets, the intangible asset has no value separate from the building and the estimated remaining useful lives of the intangible asset and building are equal, the intangible asset and the building are classified together as "buildings" and is included in property and equipment in the consolidated balance sheets. As of December 31, 2011 and December 31, 2010, the value of CON/bed licenses was $26,149,000 and $6,120,000, respectively. The $6,120,000 at December 31, 2010 that was previously classified as "intangible assets" in prior period financial statements was reclassified to property and equipment in the accompanying December 31, 2010 consolidated balance sheet. The cumulative effect of additional amortization expense that should have been recorded in 2010 related to the change in accounting for the intangible assets as indefinite life to definite life in 2011 was not material and was expensed in 2011.
Cash and Cash Equivalents
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, cash equivalents and investment amounts are restricted for specific purposes such as mortgage escrow
54
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
requirements and reserves for capital expenditures on HUD-insured facilities and other restricted investments held as collateral for other debt obligations.
Investments
The Company has certain restricted investments in debt instruments that are limited as to use by certain debt obligations. These investments are classified as held-to-maturity investments because the Company has the positive intent and ability to hold the securities until maturity. Held-to-maturity investments are carried at amortized cost. These restricted investments are classified as noncurrent assets given their related maturity dates and the restrictions required by the long-term debt obligations.
Patient Care Receivables and Revenues
Patient care accounts receivable and revenues for the Company are recorded in the month in which the services are provided.
The Company provides services to certain patients under contractual arrangements with third-party payors, primarily under the federal Medicare and state Medicaid programs. Amounts paid under these contractual arrangements are subject to review and final determination by the appropriate government authority or its agent. In the opinion of management, adequate provision was made in the consolidated financial statements for any adjustments resulting from the respective government authorities' review.
For residents under reimbursement arrangements with third-party payors, including Medicaid, Medicare and private insurers, revenue is recorded based on contractually agreed-upon amounts on a per patient, daily basis.
Potentially uncollectible patient accounts are provided for on the allowance method based upon management's evaluation of outstanding accounts receivable at period-end and historical experience. As of December 31, 2011 and 2010, management recorded an allowance for uncollectible accounts estimated at $1,300,000 and $306,000, respectively.
Management Fee Receivables and Revenue
Management fee receivables and revenue are recorded in the month that services are provided. As of December 31, 2011 and 2010, management recorded an allowance for uncollectible accounts estimated at $46,000 and $120,000 respectively.
Leases and Leasehold Improvements
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, 2011, all of the Company's leased facilities are accounted for as operating leases. The Company records rent expense for operating leases that contain scheduled rent increases on a straight-line basis over the term of the lease. The accumulated difference between the straight-line expense recognition and the actual cash rent paid is reflected in Other Liabilities in the Consolidated Balance Sheet and was approximately $953,000 and $253,000 as of December 31, 2011 and 2010, respectively. The lease term is also used to provide the basis for establishing depreciable lives for buildings subject to lease and leasehold improvements.
55
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings per Share
Basic earnings per share is computed by dividing net income or loss by the weighted-average number of common shares 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 common shares outstanding and 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 option, warrants and non-vested shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options and warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities. Potentially dilutive securities from convertible debt are calculated based on the assumed issuance at the beginning of the period, as well as any adjustment to income that would result from their assumed issuance. For 2011 and 2010, potentially dilutive securities of approximately 7,300,000 and 8,700,000 were excluded from the diluted earnings per share calculation because including them would have been anti-dilutive in both periods.
For the years ended December 31, 2011 and 2010, no potentially dilutive securities were included in the diluted earnings per share calculation because to do so would be anti-dilutive. The following table provides a reconciliation of net income (loss) for continuing and discontinued operations and the number of common shares used in the computation of both basic and diluted earnings per share:
|
Years Ended December 31, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||||||||||||||
|
Income
(loss) |
Shares(1) |
Per
Share |
Income
(loss) |
Shares(1) |
Per
Share |
|||||||||||||
(Loss) Income from Discontinued Operations |
$ | (1,963,382 | ) | 9,991,142 | $ | (0.20 | ) | $ | 174,369 | 7,223,633 | $ | 0.02 | |||||||
Net loss from continuing operations attributable to AdCare Health Systems |
$ | (4,200,873 | ) | 9,991,142 | $ | (0.42 | ) | $ | (2,917,990 | ) | 7,223,633 | $ | (0.40 | ) | |||||
Effect from options, warrants and non-vested shares |
| | | | |||||||||||||||
Effect from assumed issuance of convertible shares(2) |
| | | | |||||||||||||||
Diluted net (loss) |
$ | (6,164,255 | ) | 9,991,142 | $ | (0.62 | ) | $ | (2,743,621 | ) | 7,223,633 | $ | (0.38 | ) | |||||
56
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Financing Costs
The Company records deferred financing costs associated with debt obligations. 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.
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 CON/bed licenses that are not separable from the associated buildings (see Note 1). 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, currently averaging approximately 10 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 a weighted-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 (see Note 1). The Company's consolidated goodwill of $906,000 at December 31, 2011 and 2010 is allocated to an assisted living facility ("ALF"). The Company does not amortize goodwill or indefinite lived intangibles. On an annual basis, the Company evaluates the recoverability of the indefinite lived intangibles and goodwill, by performing an annual impairment test. The Company performs its annual test for impairment during the fourth quarter of each year. There have been no required impairment adjustments to intangible assets and goodwill during 2011 or 2010 other than the impairment of goodwill related to Discontinued Operations (see Note 3).
For 2010, the Home Health segment goodwill of $1,774,000 has been reclassified to Assets of Disposal Group Held for Sale in the consolidated balance sheet (see Note 3). A sensitivity analysis was performed by the Company where certain key assumptions were adjusted to determine if it is reasonable that the estimated fair value of goodwill could be below its carrying value. Based on the sensitivity analysis it is possible that unforeseen future events or deteriorating conditions could result in changes in management's key assumptions used in the sensitivity analysis that could result in a material impairment of goodwill.
Intangible assets consist of the following:
|
December 31, 2011 | December 31, 2010 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amounts in (000's)
|
Gross
Carrying Amount |
Accumulated
Amortization |
Net
Carrying Amount |
Gross
Carrying Amount |
Accumulated
Amortization |
Net
Carrying Amount |
|||||||||||||
Lease Rights |
$ | 9,545 | $ | 1,085 | $ | 8,460 | $ | 9,020 | $ | 169 | $ | 8,851 | |||||||
Bed Licenses (included in property and equipment) |
26,149 | 533 | 25,616 | 6,120 | | 6,120 | |||||||||||||
Bed LicensesSeparable |
1,189 | | 1,189 | 1,189 | | 1,189 | |||||||||||||
Totals |
$ | 36,883 | $ | 1,618 | $ | 35,265 | $ | 16,329 | $ | 169 | $ | 16,160 | |||||||
57
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization expense for bed licenses is included in the property and equipment disclosure (see Note 5). Amortization expense for lease rights was approximately $916,000 and $169,000 for the years ended December 31, 2011 and 2010, respectively. Estimated amortization expense for all definite lived intangibles for each of the future years ending December 31 is as follows:
Amounts in (000's)
|
Lease Rights | Bed Licenses | |||||
---|---|---|---|---|---|---|---|
2012 |
$ | 1,069 | $ | 905 | |||
2013 |
1,069 | 905 | |||||
2014 |
1,010 | 905 | |||||
2015 |
885 | 905 | |||||
2016 |
885 | 905 | |||||
Thereafter |
3,542 | 21,091 | |||||
|
$ | 8,460 | $ | 25,616 | |||
Income Taxes
An asset or liability is recognized for the deferred tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. These temporary differences would result in taxable or deductible amounts in future years when the reported amounts of the assets are recovered or liabilities are settled. Deferred tax assets are also recognized for the future tax benefits from net operating loss and other carryforwards. A valuation allowance is provided if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In evaluating the need to record or continue to reflect a valuation allowance, all items of positive evidence and negative evidence are considered.
The Company's taxable income includes all amounts attributable to AdCare Health Systems, Inc., and excludes all noncontrolling interests as these entities are not part of the consolidated tax group. The excluded entities are all pass-through entities that are not subject to corporate level income taxes. As such, the taxable income is passed on to other parties/entities that are not part of the consolidated financial statements.
The Company is subject to income taxes in the U.S. and numerous state and local jurisdictions. Judgment is required in evaluating uncertain tax positions. The Company recognizes a tax benefit only if it is more likely than not that a particular tax position will be sustained upon examination or audit. In general, the Company's tax returns filed for the 1996 through 2011 tax years are still subject to potential examination by taxing authorities.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, restricted investments, and accounts receivable. Cash and cash equivalents, restricted cash and restricted investments 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.
58
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts receivable are recorded at net realizable value. The Company performs ongoing evaluations of its residents and significant third-party payers with which they contract, generally not requiring collateral. Management believes that credit risk with respect to accounts receivable is limited based on the stature and diversity of the third-party payers with which they contract. 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 likelihood of collection has been determined. Accounts receivable are considered to be past due and placed on delinquent status based upon contractual terms, how frequently payments are received, and 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.
Advertising
Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2011 and 2010 were approximately $366,600 and $425,700, respectively.
Stock Based Compensation
Stock based compensation for employee awards is measured at the grant date based upon the fair value of the awards and is recognized as compensation expense over the requisite service period only for those awards that are expected to vest. Restricted stock awards are based upon the stock price on the date of grant. The Company estimates the value of stock options and employee warrants using the Black-Scholes option-pricing model.
The Company issues warrants to non-employees from time to time for various services. The Company estimates the value of warrants using the Black-Scholes Merton option-pricing model.
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 within the valuation hierarchy is based
59
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 approximated their fair value. These instruments include cash and cash equivalents, restricted cash and investments, accounts receivable, notes payable and other debt, 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.
Derivative Instruments
The Company generally does not use derivative instruments to hedge exposures to certain risks. However, the Company entered into a securities purchase agreement with respect to the issuance of Subordinated Convertible Notes in October 2010 which includes a conversion feature that is not afforded equity classification and embodies risks that are not clearly and closely related to the host debt agreement. As such, this conversion feature is an embedded derivative instrument that is required to be bifurcated from the debt instrument and reported separately as a derivative liability at fair value.
The Company estimates the conversion feature derivative instrument by using the Black-Scholes option-pricing model because it embodies the requisite assumptions necessary to estimate the fair value of this instrument. Changes in fair value of this derivative instrument are reported in the statement of operations.
Insurance
The Company maintains insurance programs including: workers' compensation, general and professional liability, employee benefits liability, property, casualty, directors' and officers' liability, crime, automobile, employment practices liability and earthquake and flood. The Company believes that its insurance programs are adequate and where there has been a direct transfer of risk to the insurance carrier, the Company does not recognize a liability in the consolidated financial statements.
The Company's services subject it to certain liability risks which may result in malpractice claims being asserted against the Company if its services are alleged to have resulted in patient injury or other adverse effects. The Company carries policies to protect against such claims.
Employee medical insurance programs are offered as a component of the Company's employee benefits. All employee medical plans are guaranteed cost plans with coverage provided for by insurance carriers.
60
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Discontinued Operations
As part of the Company's strategy to focus on the growth of skilled nursing facilities, the Company decided in the fourth quarter of 2011 to exit the home health business. The results of operations and cash flows for this segment are reported as discontinued operations under FASB ASC 205-20 Discontinued Operations (see Note 3). Current assets and liabilities of the disposal group are classified as such in the consolidated balance sheet.
Recently Issued Accounting Pronouncements
In May 2011, the FASB issued an accounting update that amends existing guidance regarding fair value measurements and disclosure requirements. The amendments are effective during interim and annual periods beginning after December 15, 2011 and are to be applied prospectively. The accounting update will be applicable to the Company beginning in the first quarter of fiscal year 2012. The Company will update its fair value disclosures to comply with the updated disclosure requirements.
In July 2011, the FASB issued an accounting update that requires health care entities to separately present bad debt expense related to patient care revenue as a reduction of patient care revenue (net of contractual allowances and discounts) on the statement of operations for which the ultimate collection of all or a portion of the amounts billed or billable cannot be determined at the time services are rendered. This update also requires certain qualitative disclosures about the Company's policy for recognizing revenue and bad debt expense for patient care services. This update will be applied retrospectively effective for interim and annual periods beginning after December 15, 2011. The Company is currently assessing the potential impact of the adoption but believes that the adoption will not have a material impact on the Company's consolidated financial statements.
In September 2011, the FASB issued an accounting update that gives companies the option to make a qualitative evaluation about the likelihood of goodwill impairment. Companies will be required to perform the two-step impairment test only if it concludes that the fair value of a reporting unit is more likely than not less than its carrying value. The accounting update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company will adopt the accounting update for its goodwill impairment test to be performed for the fiscal year ending December 31, 2012.
Reclassifications
Certain reclassifications have been made to the 2010 financial information to conform to the 2011 presentation.
NOTE 2. LIQUIDITY AND PROFITABILITY
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. At December 31, 2011, the Company has an accumulated deficit of $18,713,000. The Company incurred a net loss attributable to the Company of approximately $6,164,000 and $2,744,000 for the years ended December 31, 2011 and 2010, respectively. The Company has negative working capital of approximately $5,367,000 at December 31, 2011. The Company's ability to sustain profitable operations and meet its current obligations is dependent on continued growth in revenue and controlling costs.
61
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2. LIQUIDITY AND PROFITABILITY (Continued)
Management's plans for increasing liquidity and profitability in future years encompass the following:
Management believes that the actions that will be taken by the Company provide the opportunity for the Company to improve liquidity and profitability, however, there can be no assurance that such events will occur. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3. DISCONTINUED OPERATIONS
As part of the Company's strategy to focus on the growth of its skilled nursing segment, the Company decided in the fourth quarter of 2011 to exit the home health segment of the business. The Company held only one business unit in this segment. Continued struggling operations along with failure to adequately provide cash flow from operations contributed to the decision to discontinue this segment. Changes in the Medicare reimbursement environment negatively impacted this unit starting in 2010. For the previous 24 months, this unit has experienced declining results of operations resulting in an aggregate net income of approximately $174,000 for 2010 and net loss of $1,963,000 for 2011, inclusive of a goodwill impairment charge of $1,774,000. For the years ended December 31, 2011 and 2010, this discontinued segment represented less than 2% and 5% of total revenues for the Company, respectively.
The unit will continue its daily operations and the Company expects the unit to continue to require cash to operate until a sale is completed or business operations are terminated.
As a result of the decision to exit the home health business, the assets and liabilities that are expected to be sold in 2012 were reflected as assets and liabilities held for sale and are comprised of the following:
Amounts in (000s)
|
December 31, 2011 | December 31, 2010 | |||||
---|---|---|---|---|---|---|---|
Property and equipment, net |
$ | 45 | $ | 66 | |||
Goodwill |
| 1,774 | |||||
Other assets |
2 | 4 | |||||
Assets of disposal group held for sale |
$ | 47 | $ | 1,844 | |||
Current portion of debt |
$ | 197 | $ | 188 | |||
Deferred tax liability |
| 214 | |||||
Notes payable |
43 | 234 | |||||
Liabilities of disposal group held for sale |
$ | 240 | $ | 636 | |||
62
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. SEGMENTS
The Company reports its operations in three segments: SNF, ALF, and Corporate & Other. The SNF and ALF segments provide services to individuals needing long-term care in a nursing home or assisted living setting and management of those facilities. The Corporate & Other segment engages in the management of facilities and accounting and IT services. We evaluate financial performance and allocate resources primarily based upon segment operating income (loss). Segment operating results excludes interest expense and other non-operating income and expenses. The table below contains segment information for the years ended December 31, 2011 and 2010.
Amounts in 000's
|
SNF | ALF |
Corporate &
Other |
Eliminations | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended December 31, 2011 |
||||||||||||||||
Net Revenue |
$ | 139,932 | $ | 9,801 | $ | 10,366 | $ | (8,746 | ) | $ | 151,353 | |||||
Cost of services |
123,015 | 7,781 | 133 | (8,710 | ) | 122,219 | ||||||||||
General and Administrative |
| | 13,317 | (36 | ) | 13,281 | ||||||||||
Facility rent expense |
7,688 | | 107 | | 7,795 | |||||||||||
Depreciation and Amortization |
3,045 | 650 | 243 | | 3,938 | |||||||||||
Salary Continuation Costs |
| | 1,451 | | 1,451 | |||||||||||
Operating Income/(Loss) |
$ | 6,184 | $ | 1,370 | $ | (4,885 | ) | $ | | $ | 2,669 | |||||
Total Assets |
$ | 110,532 | $ | 22,328 | $ | 35,792 | $ | (9,548 | ) | $ | 159,104 | |||||
Capital Spending |
$ | 2,120 | $ | 230 | $ | 2,113 | $ | | $ | 4,463 | ||||||
Year ended December 31, 2010 |
||||||||||||||||
Net Revenue |
$ | 40,427 | $ | 8,270 | $ | 6,157 | $ | (4,063 | ) | $ | 50,791 | |||||
Cost of services |
37,214 | 7,013 | 446 | (4,063 | ) | 40,610 | ||||||||||
General and Administrative |
| | 7,936 | | 7,936 | |||||||||||
Facility rent expense |
2,858 | | | | 2,858 | |||||||||||
Depreciation and Amortization |
585 | 554 | 123 | | 1,262 | |||||||||||
Operating Income/(Loss) |
$ | (230 | ) | $ | 703 | $ | (2,348 | ) | $ | | $ | (1,875 | ) | |||
Total Assets |
$ | 47,407 | $ | 21,506 | $ | 18,560 | $ | (4,514 | ) | $ | 82,959 | |||||
Capital Spending |
$ | 510 | $ | 347 | $ | 274 | $ | | $ | 1,131 | ||||||
63
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
|
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Estimated
Useful Lives (Years) |
|||||||||
Amounts in 000's
|
2011 | 2010 | ||||||||
Buildings and improvements |
5 - 40 | $ | 96,065 | $ | 40,937 | |||||
Equipment |
2 - 10 | 7,108 | 2,512 | |||||||
Land |
| 7,636 | 4,719 | |||||||
Computer related |
2 - 10 | 2,414 | 752 | |||||||
Construction in process |
| 77 | 197 | |||||||
|
113,300 | 49,117 | ||||||||
Less: accumulated depreciation expense |
7,624 | 5,457 | ||||||||
Less: accumulated amortization expense |
533 | | ||||||||
|
$ | 105,143 | $ | 43,660 | ||||||
For the years ended December 31, 2011 and 2010 depreciation and amortization expense was approximately $3,022,000 and $1,092,000 respectively.
NOTE 6. RESTRICTED CASH AND INVESTMENTS
The following presents the Company's various restricted cash, escrow deposits and investments:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Amounts in (000's)
|
2011 | 2010 | |||||
HUD escrow deposits |
$ | 326 | $ | 337 | |||
Funds held in trust for residents |
45 | 114 | |||||
Refundable escrow deposit |
500 | | |||||
Self-restricted cash |
| 596 | |||||
Collateral certificates of deposit |
1,012 | | |||||
Total current portion |
1,883 | 1,047 | |||||
HUD reserve replacement |
1,130 | 1,036 | |||||
Reserves for capital improvements |
1,767 | 182 | |||||
Restricted investments for other debt obligations |
1,973 | 1,882 | |||||
Total noncurrent portion |
4,870 | 3,100 | |||||
Total restricted cash and investments |
$ | 6,753 | $ | 4,147 | |||
HUD escrow deposits The Regulatory Agreements we have entered into in connection with the financing secured through the Department of Housing and Urban Development ("HUD") for seven of the Company's facilities require monthly escrow deposits for taxes and insurance.
64
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6. RESTRICTED CASH AND INVESTMENTS (Continued)
Funds held in trust for residents Nursing homes are required to maintain a savings account for the use of the residents to deposit their personal funds. The Company maintains such accounts for their nursing home residents with an offsetting liability as these funds are payable to the residents on demand. In some locations, the residents funds are managed by a third party and are not reflected on the balance sheet. Other funds held in trust for residents include security deposits required at certain assisted living assisted living facilities.
Refundable escrow deposit In March 2012, the Company terminated an agreement to acquire or lease 15 skilled nursing facilities in South Carolina, North Carolina, Virginia, and Tennessee and, as a result of such termination, the deposit was refunded.
Self-restricted cash In 2010, the Company had certain self-restricted cash set aside for group health insurance and workers' compensation premiums. This was not deemed necessary in 2011.
Collateral certificates of deposit In 2011, a short term mortgage obtained required a three-month certificate of deposit to be held as collateral. The certificate matures in February 2012.
HUD Replacement Reserve The Regulatory Agreements we have entered into in connection with the financing secured through HUD also requires monthly escrow deposits for replacement and improvement of the HUD project assets.
Reserves for Capital Improvements Several of the newly acquired facilities also have requirements to have funds set aside for capital improvements.
Restricted investments for other debt obligations One of the Company's consolidated variable interest entities entered into a bond agreement that requires a project fund and a debt service reserve fund. In addition, two mortgages obtained in 2010 required 2 5-year certificates of deposit to be held as collateral. The certificates of deposit are required to be held to maturity through October 2015 and will automatically renew if the lender continues to require them as collateral.
NOTE 7. ACCRUED EXPENSES
Accrued expenses consist of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Amounts in 000's
|
2011 | 2010 | |||||
Accrued Payroll Related |
$ | 5,040 | $ | 3,386 | |||
Accrued Employee Benefits |
2,023 | 1,405 | |||||
Real Estate and Other Taxes |
982 | 761 | |||||
Other Accrued Expenses |
1,836 | 4,113 | |||||
|
$ | 9,881 | $ | 9,665 | |||
65
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. NOTES PAYABLE AND OTHER DEBT
Notes payable and other debt consists of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Amounts in 000's
|
2011 | 2010 | |||||
Revolving credit facilities and lines of credit |
$ | 8,651 | $ | 1,950 | |||
Senior debt HUD |
15,738 | 15,950 | |||||
Senior debt USDA |
38,717 | 15,774 | |||||
Senior debt SBA |
5,087 | | |||||
Senior debt Bonds, net of discount |
6,176 | 6,166 | |||||
Senior debt other mortgage indebtedness |
23,823 | 231 | |||||
Other debt |
4,196 | 971 | |||||
Convertible debt issued in 2010, net of discount |
10,105 | 9,380 | |||||
Convertible debt issued in 2011 |
4,509 | | |||||
Total |
117,002 | 50,422 | |||||
Less current portion |
11,909 | 3,446 | |||||
Notes payable and other debt, net of current portion |
$ | 105,093 | $ | 46,976 | |||
Lines of Credit
The Company has revolving line of credit arrangements with three lenders. The total maximum amount of the credit facilities was $9.7 million at December 31, 2011.
Gemino Healthcare Finance
On February 25, 2011, AdCare and five of its subsidiaries joined as additional borrowers under the Credit Agreement that was initially entered into on October 29, 2010, with Gemino Healthcare Finance, LLC ("Gemino"). In connection with adding the additional borrowers to the Credit Agreement the amount of credit available to the Company, and the maximum amount of the credit facility, was increased from $5,000,000 to $7,500,000. On April 26, 2011, the original terms of the Credit Agreement with Gemino were modified to reduce the maximum amount of the credit facility to $5,500,000, to issue a new $2,000,000 revolving note under an affiliated credit agreement and to add two additional subsidiaries as borrowers under the Credit Agreement. On June 2, 2011, AdCare joined two additional subsidiaries as additional borrowers under the Credit Agreement with Gemino. The combined total maximum debt with Gemino remains at $7,500,000. Interest accrues on the principal balance outstanding at an annual rate equal to the LIBOR rate plus the applicable margin of 4.75% to 5.00%, depending on the principal amount outstanding. The agreement also contains an early termination fee of 1%, an unused line of credit fee of 0.5% on the unused portion, and a collateral monitoring fee of 0.5% on the principal balance. At December 31, 2011 and 2010, the balance outstanding was approximately $7.3 million and $1.8 million, respectively.
The Credit Agreement with Gemino contains various financial covenants, of which the Company was not in compliance with at December 31, 2011, but has obtained a waiver. The Credit Agreement also contains a borrowing base restriction of which the company exceeded at December 31, 2011 but has obtained approval for the excess borrowings.
66
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. NOTES PAYABLE AND OTHER DEBT (Continued)
Private Bank
On September 30, 2011, Benton Nursing, LLC, Park Heritage Nursing, LLC and Valley River Nursing, LLC, each wholly owned subsidiaries of AdCare, entered into a Loan and Security Agreement with Private Bank and Trust Company ("Private Bank") in an aggregate principal amount of $2,000,000. The loan is revolving and will be used to fund the working capital requirements of the three facilities. In March 2012, the revolving loan was modified adding three more facilities as borrowers and extending the maturity date to February 2013. At December 31, 2011, the balance outstanding was approximately $1.3 million.
Interest accrues on the principal balance outstanding at an annual rate equal to the greater of: (i) the floating per annum rate of interest most recently announced by Private Bank as its prime plus one percent (1.0%); or (ii) six percent (6.0%). Interest on the loan is payable in equal monthly installments beginning on November 1, 2011, and continuing until maturity. Pre-payment is permitted, if any such pre-payment includes the payment of all accrued and unpaid interest on the loan. The loan is secured by a first priority security interest on all assets of the borrowers, and the Company has guaranteed the loan.
The agreement with Private Bank contains various financial covenants. The Company was in compliance with these covenants and restrictions at December 31, 2011. The agreement also contains borrowing base restrictions of which the company had exceeded at December 31, 2011, but has obtained approval for the excess borrowings through the modifications of the agreement.
Other Line of Credit
We have a corporate line of credit that expires in October of 2012. Interest accrued on the principal balance outstanding at a variable rate of the LIBOR plus 3.25%. At December 31, 2011 and 2010, the balance outstanding was approximately $77,000 and $187,000, respectively.
Senior Debt
HUD Financing
For eight facilities, the Company has term loans insured by HUD with a financial institution that totaled approximately $15,738,000 at December 31, 2011. The combined HUD mortgage notes require monthly principal and interest payments of approximately $98,000 with fixed interest rates ranging from 3.74% to 7.25%. The notes mature at various dates starting in 2027 through 2044. Deferred financing costs incurred on these loans amounted to approximately $540,000 and are being amortized to interest expense over the life of the notes. The loans have prepayment penalties of 6% to 8% through 2012 declining by 1% each year through 2022. The loans have certain restrictive covenants and HUD regulatory compliance requirements including maintenance of certain restricted escrow deposits and reserves for replacement. In January 2012, one of the facilities refinanced its HUD mortgage reducing the interest rate from 8.5% to 3.74% on an outstanding principal balance of approximately $3.7 million.
USDA Financing
For ten facilities, the Company has term loans insured 70% to 80% by the USDA with a financial institution that totaled approximately $38,717,000 at December 31, 2011. The combined USDA mortgage notes require monthly principal and interest payments of approximately $251,000 adjusted
67
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. NOTES PAYABLE AND OTHER DEBT (Continued)
quarterly with a variable interest rate of prime plus 1.50% to 1.75% with a floor of 5.50% to 6.00%. The notes mature at various dates starting in 2035 through 2036. Deferred financing costs incurred on these loans amounted to approximately $1,034,000 and are being amortized to interest expense over the life of the notes. In addition, the loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 9% to 10% through 2012 declining by 1% each year capped at 1% for the remainder of the term. The loans have certain financial covenants of which the Company was not in compliance at December 31, 2011, but has obtained a waiver.
SBA Financing
For three facilities, the Company has term loans insured 75% by the SBA with a financial institution that totaled approximately $5,087,000 at December 31, 2011. The combined SBA mortgage notes require monthly principal and interest payments of approximately $326,000 with an interest rate of 2.81% to 8.0%. The notes mature at various dates starting in 2031 through 2036. Deferred financing costs incurred on these loans amounted to approximately $410,000 and are being amortized to interest expense over the life of the note. In addition, the loans have an annual renewal fee for the SBA guarantee of 0.13% to 0.25% of the guaranteed portion. The loans have prepayment penalties of 10% through 2012 declining by 1% each year until year 10 and 5% declining 2% each year capped at 1% for the remainder of the loan. The loans have certain financial covenants of which the Company was in compliance at December 31, 2011.
Bonds
The Company's consolidated variable interest entity, Riverchase Village ADK, LLC ("Riverchase"), has revenue bonds, in two series, issued by the Medical Clinical Board of the City of Hoover in the state of Alabama which the Company has guaranteed the obligation under the bonds.
The Series 2010A portion of $5,845,000 matures on June 1, 2039. The Series 2010B portion of $520,000 matures serially beginning on June 1, 2012 through June 1, 2017, with annual redemption amounts ranging from $75,000 to $100,000. The Series 2010A and 2010B bonds may be redeemed early beginning on June 1, 2012 through May 31, 2015 at a redemption price ranging from 101% to 103% of the principal amount plus accrued interest. Any early redemption after May 31, 2015 is at a redemption price of 100% of the principal amount plus accrued interest. The bonds require monthly payments of fixed interest of $38,000 at a weighted average effective interest rate of 7.9%.
The bonds contain an original issue discount that is being amortized over the term of the notes. At December 31, 2011 and 2010, the unamortized discount on the bonds was $189,000 and $199,000, respectively.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. NOTES PAYABLE AND OTHER DEBT (Continued)
The bonds are subject to certain covenants and a mandatory sinking fund redemption requirement. The following is a summary of the mandatory redemption and sinking fund requirements for each of the next five years and thereafter:
Amounts in 000's
|
|
|||
---|---|---|---|---|
2012 |
$ | 75 | ||
2013 |
75 | |||
2014 |
85 | |||
2015 |
90 | |||
2016 |
95 | |||
Thereafter |
5,945 | |||
|
$ | 6,365 | ||
Other Mortgage Indebtedness
For six facilities, during 2011 the Company obtained various term loans that totaled approximately $20,829,000 at December 31, 2011. The combined mortgage notes require monthly principal and interest payments of approximately $267,000 with interest rates of 6.00% to 6.25%. The notes mature at various dates starting in 2013 through 2036. Deferred financing costs incurred on these loans amounted to approximately $670,000 and are being amortized to interest expense over the life of the notes.
A $2,800,000 operating note was issued in 2011 for the 5 variable interest entity facilities in Oklahoma. At December 31, 2011, the outstanding balance was $2,800,000. The note requires quarterly interest payments of $70,000 beginning in 2012 with a 10% fixed interest rate. The note matures in July 2013 with the entire principal balance due on that date. Deferred financing costs incurred on this loan amount to approximately $391,000 and are being amortized to interest expense over the life of the notes.
The remaining mortgage note balance is related to the financing on the Company's corporate headquarters in Springfield, Ohio with a balance of approximately $194,000 at December 31, 2011 and $231,000 at December 31, 2010. The mortgage requires fixed monthly payments of approximately $3,000 plus interest at LIBOR plus 3.00% maturing in 2017.
Other Debt
Mountain Trace Promissory Notes
On June 10, 2011, Mountain Trace ADK, LLC, a wholly owned subsidiary of AdCare, issued promissory notes in the aggregate principal amount of $1,000,000. The notes mature April 1, 2013, and bear interest at 11% payable quarterly in arrears the first day of each January, April, July and October beginning July 1, 2011. The notes are subject to mandatory prepayment in the aggregate principal amount of $250,000 on each of October 1, 2011, April 1, 2012 and October 1, 2012. The notes may also be prepaid without penalty by providing fifteen days prior notice. The Company received proceeds of $895,000 net of legal and other financing costs. At December 31, 2011, $750,000 remained outstanding.
69
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. NOTES PAYABLE AND OTHER DEBT (Continued)
Pinnacle Healthcare Promissory Notes
On August 31, 2011, Pinnacle Healthcare, LLC, issued promissory notes in the aggregate principal amount of $2,400,000. The notes mature March 1, 2014, and bear interest at 7% payable quarterly in arrears the first day of each December, March, June and September beginning December 1, 2011. The notes are subject to mandatory prepayment in the aggregate principal amount of $250,000 on each of December 1, 2011, March 1, 2012, June 1, 2012, September 1, 2012 and December 1, 2012. The notes may also be prepaid without penalty at any time. At December 31, 2011, $2,150,000 remained outstanding.
Other Seller Notes
The Company has a number of other miscellaneous subordinated debt agreements that mature at various dates through May 2012. Interest accrues on the principal balance outstanding on these notes at rates ranging between 5.14% and 7%. The majority of the balance relates to seller notes associated with the Company's current year acquisitions. At December 31, 2011 and 2010, the outstanding principal balance was approximately $1,296,000 and $971,000, respectively.
Convertible Debt
Convertible Debt Issued in October 2010
On October 26, 2010, the Company entered into a Securities Purchase Agreement with certain accredited investors to sell and issue to the Purchasers an aggregate of $11,050,000 in principal amount of the Company's Subordinated Convertible Notes, bearing 10% interest per annum payable quarterly in cash in arrears beginning December 31, 2010.
On October 29, 2010, the Company entered into an amendment and joinder agreement to effectuate the sale of an additional $750,000 in principal amount of Notes. The initial sale of $11,050,000 in principal amount of Notes occurred on October 26, 2010, and the subsequent sale of $750,000 in principal amount of Notes occurred on October 29, 2010. The notes mature in October 2013.
The Notes are convertible into shares of common stock of the Company at a current conversion price of $3.92 (due to the stock dividend) that is subject to future reductions if the Company issues equity instruments at a lower price. Since there is no minimum conversion price resulting in an indeterminate number of shares to be issued in the future, the Company determined an embedded derivative existed that was required to be bifurcated from the Notes and accounted for separately as a derivative liability recorded at fair value (see Note 15). At the time of initial measurement, the derivative had an estimated fair value of $2,562,606 resulting in a discount on the Notes. The discount is being amortized over the term of the Notes. At December 31, 2011 and 2010, the unamortized discount on the Notes was $1,544,935 and $2,420,239, respectively.
There was a conversion of a $150,000 note that was part of the October 26, 2010 offering. It was recorded in two $75,000 allotments. The first one converted in July 2011 at a price of $4.13 per share and resulted in the issuance of 18,160 shares. The second converted in November 2011 at a price of $3.92 and resulted in the issuance of 19,132 shares.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. NOTES PAYABLE AND OTHER DEBT (Continued)
Convertible Debt Issued in April, May 2011
On March 31, 2011, the Company entered into a Securities Purchase Agreement with certain accredited investors to sell and issue to the Purchasers an aggregate of $2,115,000 in principal amount of the Company's Subordinated Convertible Notes. On April 29, 2011, the Company issued an additional $1,783,700 in principal amount of the convertible debt issuance. On May 6, 2011, the Company issued an additional $610,000 in principal amount of the Notes. The total outstanding principal amount of the Notes is $4,508,700. Approximately $1,427,000 of the proceeds obtained were used to repay the short-term promissory note that was issued March 31, 2011 and related accrued interest.
The Notes bear a 10% interest per annum and are payable quarterly in cash in arrears beginning June 30, 2011. The Notes mature on March 31, 2014. Debt issuance costs of $559,100 are being amortized over the life of the Notes.
The Notes are convertible into shares of common stock of the Company at a conversion price of $5.04. The initial conversion price is subject to adjustment for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar events. The Notes are unsecured and subordinated in right of payment to existing and future senior indebtedness.
Scheduled Maturities
The following is a summary of the scheduled maturities as of December 31, 2011 for each of the next five years and thereafter:
Amounts in 000's
|
|
|||
---|---|---|---|---|
2012 |
$ | 11,909 | ||
2013 |
23,404 | |||
2014 |
2,085 | |||
2015 |
2,025 | |||
2016 |
12,635 | |||
Thereafter |
66,678 | |||
|
118,736 | |||
Less: unamortized discounts |
(1,734 | ) | ||
|
$ | 117,002 | ||
NOTE 9. STOCKHOLDERS' EQUITY
Shares Authorized and Reserved
In June 2010, our shareholders voted to amend our articles of incorporation to increase the number of authorized shares of common stock from 14,500,000 shares to 29,000,000 shares and to increase the number of authorized shares of preferred stock from 500,000 shares to 1,000,000 shares. The amendments were effective in the second quarter of 2010.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9. STOCKHOLDERS' EQUITY (Continued)
At December 31, 2011, the Company had reserved approximately 8.0 million shares of its authorized but unissued common stock for possible future issuance in connection with the following approximate number of shares:
Exercise and future grants of stock options under plans |
1,350,000 | |||
Exercise of outstanding stock warrantsemployee |
1,700,000 | |||
Exercise of outstanding stock warrantsnon-employee |
1,150,000 | |||
Convertible debt shares issuable |
3,800,000 | |||
Total authorized shares reserved |
8,000,000 | |||
Stock Dividends
On August 31, 2011, the Company's Board of Directors declared a 5% stock dividend issued on October 14, 2011 to stockholders of record at the close of business on September 30, 2011. As a result of the stock dividend, the number of outstanding shares of common stock increased by 579,516 shares in 2011.
On August 11, 2010, the Company's Board of Directors declared a 5% stock dividend to be issued on October 15, 2010 based on the shareholders of record at the close of business on September 30, 2010. As a result of the stock dividend, the number of outstanding shares of common stock increased by 379,193 shares in 2010.
As the Company was in a deficit position for both 2011 and 2010, there was no recorded impact to the reported amounts of stockholders' equity in the accompanying consolidated balance sheet. All references to the number of common shares and per-share amounts included in these consolidated financial statements are restated based on the increased number of shares giving retroactive effect to the stock dividend to prior year amounts.
2011 Warrant Call
In August 2011, the Company called for redemption the outstanding warrants to purchase shares of common stock sold in the Company's initial public offering and private placement offering. Each warrant exercised in response to the call was exercised for 1.05 shares of common stock at a price of $2.38 per share as adjusted for the 2010 stock dividend. Any warrants not exercised expired on the last day of the exercise period and were redeemed at $.10 per underlying share of common stock. In connection with the warrant call, the Company issued 2,897,149 shares of common stock. The Company received aggregate net proceeds of $6.3 million upon such exercises including issuance costs of approximately $0.6 million. The remaining unexercised warrants expired requiring the Company to pay the aggregate call amount of approximately $3,000.
2010 Public Stock Offering
In June 2010, the Company closed a public stock offering of 1,714,286 shares of common stock at a gross price of $3.50 per share. The Company received net proceeds of approximately $5.4 million after deducting underwriting discounts, and other offering-related expenses of approximately $0.6 million. In August 2010, the underwriter exercised their overallotment option to purchase an additional
72
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9. STOCKHOLDERS' EQUITY (Continued)
225,400 shares of common stock at a discounted price of $3.255 per share, resulting in net proceeds to the Company of approximately $0.7 million.
NOTE 10. STOCK BASED COMPENSATION
The following table summarizes employee and nonemployee stock based compensation for the years ended December 31, 2011 and 2010:
Amounts in 000's
|
December 31,
2011 |
December 31,
2010 |
|||||
---|---|---|---|---|---|---|---|
Employee compensation: |
|||||||
Stock options |
$ | 212 | $ | 35 | |||
Employee warrants |
594 | 328 | |||||
Restricted stock |
| 456 | |||||
Total Employee Compensation Expense |
$ | 806 | $ | 819 | |||
Non-employee compensation: |
|||||||
Warrants |
$ | 434 | $ | 236 | |||
Less: Deferred financing and prepaid services |
(330 | ) | (236 | ) | |||
Amortization of prepaid services |
108 | 22 | |||||
Total Nonemployee Compensation Expense |
$ | 212 | $ | 22 | |||
The Company uses the Black-Scholes Merton option-pricing model for estimating the fair values of employee share options, employee and nonemployee warrants and similar instruments with the following key assumptions:
Expected Dividend Yield: The Company has not historically paid cash dividends and does not expect to pay cash dividends in the near future. As such, there is no expected dividend yield.
Expected Volatility: The Company estimates the expected volatility factor using the Company's historical stock price volatility. For the calculations in the first quarter of 2011, the volatility also included the weighted-average historical volatility of similar companies within the industry whose stock prices are publicly available.
Risk-Free Interest Rate: The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the expected term of the options and warrants being valued.
Expected Term: The Company currently uses a simplified method for calculating the expected term based on the vesting and contractual expiration dates.
73
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10. STOCK BASED COMPENSATION (Continued)
The weighted average significant assumptions used to estimate the fair value of both employee stock options and stock warrants granted is as follows:
|
2011 | 2010 | |||||
---|---|---|---|---|---|---|---|
Dividend Yield |
0.0 | % | 0.0 | % | |||
Expected Volatility |
65.6 | % | 60.0 | % | |||
Risk-Free Interest Rate |
1.23 | % | 2.21 | % | |||
Expected Term |
4.7 years | 3.5 years |
Employee Stock Options
The Company has three active employee stock option plans.
All three plans permit the granting of incentive or nonqualified stock options. The 2011 plan also permits the granting of restricted stock. The Plans are administered by the Board of Directors which has the authority to determine the employees to whom awards will be made, the amounts of the awards, and the other terms and conditions of the awards.
The following summarizes the Company's stock option activity for the period ending December 31, 2011:
|
Number
of Shares |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contract Life |
Aggregate
Intrinsic Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at January 1, 2011 |
212,404 | $ | 1.79 | ||||||||||
Stock Dividend |
16,298 | $ | 3.79 | ||||||||||
Granted |
487,000 | $ | 4.77 | ||||||||||
Exercised |
(37,338 | ) | $ | 1.74 | |||||||||
Forfeited |
(98,807 | ) | $ | 4.53 | |||||||||
Expired |
(4,280 | ) | $ | 2.26 | |||||||||
Outstanding at December 31, 2011 |
575,277 | $ | 3.90 | 8.3 years | $ | 370,606 | |||||||
Exercisable at December 31, 2011 |
213,178 | $ | 2.66 | 5.7 years | $ | 370,606 | |||||||
The weighted average grant date fair value of options granted during 2011 and 2010 was $2.21 and $4.13, respectively. At December 31, 2011, the Company has approximately $474,000 of unrecognized compensation expense related to outstanding stock options. Assuming no pre-vesting forfeitures, this expense will be recognized as a charge to earnings over a weighted-average remaining service period of
74
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10. STOCK BASED COMPENSATION (Continued)
2.5 years. The total intrinsic value of options exercised during 2011 and 2010 was approximately $137,000 and $29,000, respectively.
Employee Common Stock Warrants
In addition to the Company's stock option plans, the Company grants stock warrants to officers, directors, employees and certain consultants to the Company from time to time as determined by the Board of Directors. The Board of Directors 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.
The following summarizes the Company's employee common stock warrant activity for the period ending December 31, 2011:
|
Number
of Shares |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contract Life |
Aggregate
Intrinsic Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at January 1, 2011 |
1,289,412 | $ | 2.64 | ||||||||||
Stock Dividend |
71,162 | $ | 2.93 | ||||||||||
Granted |
450,000 | $ | 4.18 | ||||||||||
Exercised |
(70,433 | ) | $ | 2.08 | |||||||||
Forfeited |
(20,121 | ) | $ | 2.38 | |||||||||
Outstanding at December 31, 2011 |
1,720,020 | $ | 3.10 | 6.6 years | $ | 1,676,791 | |||||||
Exercisable at December 31, 2011 |
1,345,020 | $ | 2.78 | 5.8 years | $ | 1,666,991 | |||||||
The weighted average grant date fair value of options granted during 2011 was $2.29. No employee warrants were granted in 2010. The Company has approximately $483,000 of unrecognized compensation expense related to these warrants as of December 31, 2011. Assuming no pre-vesting forfeitures, this expense will be recognized as a charge to earnings between 2012 and 2014. The total intrinsic value of employee warrants exercised during 2011 and 2010 was approximately $391,000 and $61,000, respectively.
Restricted Stock
There was no restricted stock activity in 2011. The total fair value of restricted shares that vested during 2010 was approximately $686,000.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10. STOCK BASED COMPENSATION (Continued)
Nonemployee Common Stock Warrants
The following summarizes the Company's non-employee common stock warrant activity for the period ending December 31, 2011:
|
Number
of Shares |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contract Life |
Aggregate
Intrinsic Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at January 1, 2011 |
953,074 | $ | 3.13 | ||||||||||
Stock Dividend |
86,236 | $ | 3.84 | ||||||||||
Granted |
300,000 | $ | 4.91 | ||||||||||
Exercised |
(179,452 | ) | $ | 1.78 | |||||||||
Expired |
(6,284 | ) | $ | 3.11 | |||||||||
Outstanding at December 31, 2011 |
1,153,574 | $ | 3.85 | 2.0 years | $ | 437,432 | |||||||
Exercisable at December 31, 2011 |
1,153,574 | $ | 3.85 | 2.0 years | $ | 437,432 | |||||||
During 2011 and 2010, the Company granted various awards to nonemployees with a weighted-average per share fair value estimated at $1.45 and $0.91, respectively. The warrants have terms between 3 and5 years and vested immediately at grant.
The weighted average significant assumptions used to estimate the fair value of nonemployee common stock warrants granted using the Black Scholes Merton option-pricing model is as follows:
|
2011 | 2010 | |||||
---|---|---|---|---|---|---|---|
Dividend Yield |
0.0% | 0.0% | |||||
Expected Volatility |
62.0% | 60.0% | |||||
Risk-Free Interest Rate |
0.86% | 0.49% | |||||
Expected Term |
1.7 years | 1.7 years |
NOTE 11. OFFERING WARRANTS
A summary of the status of the Company's warrants issued in connection with the initial public offering and subsequent offering as of December 31, 2011 and December 31, 2010 is presented below:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Beginning balance |
2,927,925 | 2,788,500 | |||||
Stock Dividend |
| 139,425 | |||||
Exercised |
(2,897,149 | ) | | ||||
Redeemed |
(30,776 | ) | | ||||
Ending balance |
| 2,927,925 | |||||
In August 2011, the Company called for redemption of all outstanding offering warrants (see Note 9).
76
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12. INCOME TAXES
The provision for income taxes attributable to continuing operations for the years ended December 31, 2011 and December 31, 2010 is presented below.
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Current Tax Expense: |
|||||||
Federal |
$ | | $ | | |||
State |
193,487 | | |||||
|
$ | 193,487 | $ | | |||
Deferred Tax Expense |
$ |
69,708 |
$ |
20,533 |
|||
Total income tax expense |
$ | 263,195 | $ | 20,533 | |||
The income tax expense (benefit) applicable to continuing and discontinued operations is presented below.
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Income tax expense on continuing operations |
$ | 263,195 | $ | 20,533 | |||
Income tax (benefit) expense on discontinued operations |
(238,849 | ) | 22,034 | ||||
Total income tax expense |
$ | 24,346 | $ | 42,567 | |||
At December 31, 2011 and 2010, the tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Net current deferred tax asset: |
|||||||
Allowance for doubtful accounts |
$ | 493,843 | $ | 144,757 | |||
Accrued expenses |
429,513 | 373,500 | |||||
|
923,356 | 518,257 | |||||
Net long-term deferred tax asset (liability): |
|||||||
Net operating loss carry forwards |
3,896,081 | 3,653,013 | |||||
Noncontrolling interests |
38,068 | (53,419 | ) | ||||
Property, equipment & intangibles |
(1,433,665 | ) | (334,511 | ) | |||
Stock based compensation |
832,194 | 398,489 | |||||
Lease and other financing related items |
1,400,018 | | |||||
Compensation related items |
557,258 | | |||||
Other |
(235,919 | ) | 191,337 | ||||
|
5,054,035 | 3,854,909 | |||||
Total deferred tax assets |
5,977,391 | 4,373,166 | |||||
Valuation allowance |
(6,063,391 | ) | (4,414,232 | ) | |||
Net deferred tax liability |
$ | (86,000 | ) | $ | (41,066 | ) | |
77
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12. INCOME TAXES (Continued)
The items accounting for the differences between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Federal income tax at statutory rate |
34.0 | % | 34.0 | % | |||
State and local taxes |
(3.5 | )% | | ||||
Nondeductible expenses |
(1.0 | )% | 7.4 | % | |||
Change in valuation allowance |
(34.4 | )% | (42.3 | )% | |||
Effective tax rate |
(4.9 | )% | (0.9 | )% | |||
As of December 31, 2011 AdCare had consolidated federal net operating loss ("NOL") carry forwards of approximately $11.5 million. These NOLs begin to expire in 2012 through 2031 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. Due to the uncertain timing of this reversal, the temporary differences associated with indefinite lived intangibles cannot be considered a source of future taxable income for purposes of determining a valuation allowance. As such, the deferred tax liability cannot be used to support an equal amount of the deferred tax asset related to the NOL carry forward ("naked credit"). This resulted in recognized deferred Federal tax expense of $69,708 and $20,533 for each of the years ending December 31, 2011 and 2010, and a deferred tax liability of $86,000 and $41,066 as of December 31, 2011 and 2010, respectively.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code), the utilization of net operating loss carry forwards may be limited under the change in stock ownership rules of the Code. As a result of ownership changes, which occurred in November 2006 in connection with the Company's initial public offering and subsequent stock issuances, the Company may have substantially limited the availability of its net operating loss carry forwards.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Regulatory Matters
Laws and regulations governing Federal Medicare and State Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from certain governmental programs. The Company believes that it is in compliance in all material respects with all applicable laws and regulations.
A significant portion of the Company's revenue is derived from Medicaid and Medicare, for which reimbursement rates are subject to regulatory changes and government funding restrictions. Any
78
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)
significant future change to reimbursement rates could have a material effect on the Company's operations.
Operating Leases
The Company leases certain office space and 12 skilled nursing facilities under non-cancelable operating leases, most of which have initial lease terms of 10 to12 years with rent escalation clauses and provisions for payments by the Company of real estate taxes, insurance and maintenance costs. Eight of the facilities were initiated in the third quarter of 2010, and two additional in the fourth quarter of 2010. One lease agreement was initiated in the fourth quarter of 2011. For the years ending December 31, 2011 and 2010, facility rent expense totaled approximately $7,795,000 and $2,858,000, respectively.
Eight of the Company's facilities are operated under a single master lease arrangement. The lease has a term of 10 years into 2020. Under the master lease, a breach at a single facility could subject one or more of the other facilities covered by the same master lease to the same default risk. Failure to comply with regulations or governmental authorities, such as Medicare and Medicaid provider requirements, is a default under the Company's master lease agreement. In addition, other potential defaults related to an individual facility may cause a default of the entire master lease agreement. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord. The Company is not aware of any defaults as of December 31, 2011.
Two of the Company's facilities are operated under a separate lease agreement. The lease is a single indivisible lease; therefore, a breach at a single facility could subject the second facility to the same default risk. The lease has a term of 12 years into 2022 and includes covenants and restrictions. A commitment is included that requires minimum capital expenditures of $375 per licensed bed per lease year at each facility which amounts to approximately $115,000 per year for both facilities. At December 31, 2011, the Company was in violation of a financial covenant. As a result, management will be working with the lessor to remediate the issue. The potential impact of this matter is unknown at this time.
Future minimum lease payments for each of the years ending December 31 are as follows:
(Amounts in 000's)
|
|
|||
---|---|---|---|---|
2012 |
$ | 7,591 | ||
2013 |
7,751 | |||
2014 |
7,306 | |||
2015 |
6,927 | |||
2016 |
7,083 | |||
Thereafter |
30,445 | |||
|
$ | 67,103 | ||
The Company has also entered into lease agreements for various equipment used in the facilities. These leases are normally for a period of one year or less and do not have material future minimum lease payments.
79
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)
Legal Matters
The skilled nursing business involves a significant risk of liability due to the age and health of the Company's patients and residents and the services the Company provides. The Company and others in the industry are subject to an increasing number of claims and lawsuits, including professional liability claims, which may allege that services have resulted in personal injury, elder abuse, wrongful death or other related claims. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards.
In addition to the potential lawsuits and claims described above, the Company is also subject to potential lawsuits under the Federal False Claims Act and comparable state laws alleging submission of fraudulent claims for services to any healthcare program (such as Medicare) or payer. A violation may provide the basis for exclusion from federally funded healthcare programs. As of December 31, 2011, the Company does not have any material loss contingencies recorded based upon the evaluation of the probability of loss from known claims.
The Company is currently a defendant in two related lawsuits asserting claims of breach of contract. One lawsuit was asserted prior to December 31, 2011 and the other was asserted subsequent to December 31, 2011. Both of these lawsuits are either just entering discovery phase or were just recently asserted. As such, the ultimate outcome is not probable. Management intends to vigorously defend these allegations and believes the potential payment under these claims is not probable. As such, no additional loss contingency amounts have been recorded as of December 31, 2011.
In connection with the related lawsuits, the Company originally filed a lawsuit against a third-party for breach of contract. In 2010, the Company obtained control of certain leased facilities that were previously operated by the third-party. After taking over as operator, the Company incurred certain losses related to events at certain facilities before the Company obtained control. As a result of certain indemnification clauses in the contracts with the third-party, the Company is seeking recovery of these losses and has a receivable recorded for approximately $700,000 at December 31, 2011. At December 31, 2011, the Company also has outstanding obligations to the third-party that total approximately $1,600,000. As a result of the lawsuit, the Company ceased making payments on these obligations until the matter was resolved. The third-party has issued a counterclaim against the Company for $2,000,000 plus legal expenses for breach of contract related to the recorded obligations. Subsequent to December 31, 2011, one of the parties asserted a separate but related claim against the Company for a breach of a consulting agreement seeking approximately $170,000 plus legal fees.
Special Termination Benefits
The Company incurred certain salary retirement and continuation costs of approximately $1,500,000 related to separation agreements with certain of the Company's former officers. The benefits include wage continuation and fringe benefits which are to be paid out to these former employees over various future periods ranging from a 6-month period to a 24-month period. The remaining unpaid balance accrued as of December 31, 2011 is approximately $1,224,000.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)
Commitment to Future Lease Payments
A leased SNF has signed a security agreement associated with the lessor, Covington Realty, LLC, in conjunction with the lessor's refinancing of the project through HUD. The commitment gives the lender the right to pursue the facility for unpaid lease payments to the lessor.
Purchase Commitment
In 2011, the Company began leasing an administrative office building from a partnership the members of which include a non-officer employee of the Company and a family member of an Officer of the Company. In September 2011, the Company executed a purchase agreement to purchase the building for an amount equal to the outstanding mortgage balance plus unpaid real estate taxes which currently approximates $1,200,000. Closing was subject to approval of the Company's Board of Directors which occurred in March 2012. The Company anticipates closing on this purchase in the second quarter of 2012.
NOTE 14. THIRD-PARTY REIMBURSEMENT
Medicare
Payments for Medicare resident services are made under a prospective payment system. There is no retroactive adjustment to allowable cost. The Company is paid one of several prospectively set rates that vary depending on the resident's service needs. Payment rates are established on a federal basis by the Centers for Medicare and Medicaid Services (CMS). The final settlement process is primarily a reconciliation of services provided and rates paid. As a result, no material settlement estimates are expected.
Medicaid
Payments for Medicaid resident services are calculated and made under a prospective reimbursement system. Payment rates are based on actual cost, limited by certain ceilings, adjusted by a resident service needs factor and updated for inflation. The direct care portion of the rate can be adjusted prospectively for changes in residents' service needs. While interim rates are subject to reconsideration and appeal, once this process is completed, they are not subject to subsequent retroactive adjustment. However, the states in which the Company operates have the opportunity to audit the cost report used to establish the prospective rate. If the state departments discover non-allowable or misclassified costs that resulted in overpayments to the Company, the funds will be recovered by the state departments through the final rate recalculation process. For the years ended December 31, 2011 and 2010, Management estimated that no amounts are due to the Medicaid program resulting from non-allowable or misclassified costs for any open Medicaid reimbursement years.
Laws and Regulations
Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is materially in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigation involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. THIRD-PARTY REIMBURSEMENT (Continued)
and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties and exclusion from the Medicare and Medicaid programs.
NOTE 15. FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following are the major categories of assets and liabilities measured at fair value on a recurring basis during the years ended December 31, 2011 and 2010, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).
Amounts in (000's)
|
Level 1: | Level 2: | Level 3: | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Derivative Liability2011 |
$ | | $ | | $ | 1,889 | $ | 1,889 | |||||
Derivative Liability2010 |
| | 2,906 | 2,906 |
Following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period ended December 31, 2011:
Amounts in (000s)
|
Derivative
Liability |
|||
---|---|---|---|---|
Beginning Balance |
$ | 2,906 | ||
Debt extinguishment |
(59 | ) | ||
Derivative gain |
(958 | ) | ||
Ending Balance |
$ | 1,889 | ||
The derivative liability is the result of the Company issuing the 2010 convertible notes (see Note 8). The Company estimates the fair value of the derivative liability using the Black-Scholes Merton option-pricing model with changes in fair value being reported in the consolidated statement of operations. This model requires certain key inputs that are significant unobservable inputs (Level 3).
Nonrecurring Fair Value Measurements
During 2011, the Company recorded a goodwill impairment charge of approximately $1.8 million which is reflected in loss from discontinued operations. The impairment charge was a result of the required goodwill impairment test that requires the goodwill to be written down to the estimate of the implied fair value. The goodwill was measured using primarily an income approach with significant unobservable inputs (Level 3).
NOTE 16. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Company's operations are concentrated in the long-term care market, which is a heavily regulated environment. The operations of the Company are subject to the administrative directives, rules and regulations of federal and state regulatory agencies, including, but not limited to, CMS, and the Department of Health and Aging in all states in which the Company operates. Such administrative directives, rules and regulations, including budgetary reimbursement funding, are subject to change by
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS (Continued)
an act of Congress, the passage of laws by the General Assembly or an administrative change mandated by one of the executive branch agencies. Such changes may occur with little notice or inadequate funding to pay for the related costs, including the additional administrative burden, to comply with a change.
Given the significant concentration of revenue from third-party payors including Medicare and Medicaid, along with recent healthcare reform and budgetary constraints of governmental agencies, there is potential for reimbursement rate reductions in the near term that could materially and adversely impact the Company's revenue and profitability.
The Company has 100% of its 2,993 skilled nursing facility beds that it owns or leases certified under the Medicaid and Medicare programs. A summary of occupancy utilization and net revenues for these nursing facility beds is as follows:
For the Years Ended
|
Percent of
Total Occupancy |
Percent of
Long-Term Care Receivables |
Percent of
Patient Care Revenue |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Medicaid |
||||||||||
December 31, 2011 |
76 | % | 34 | % | 53 | % | ||||
December 31, 2010 |
77 | % | 36 | % | 47 | % | ||||
Medicare |
||||||||||
December 31, 2011 |
14 | % | 29 | % | 29 | % | ||||
December 31, 2010 |
11 | % | 38 | % | 19 | % | ||||
Other Payers |
||||||||||
December 31, 2011 |
10 | % | 37 | % | 18 | % | ||||
December 31, 2010 |
12 | % | 26 | % | 34 | % |
NOTE 17. DEFERRED COMPENSATION PLAN
The Company maintains a non-qualified deferred compensation plan available to a select group of management or highly compensated employees. Contributions to the plan are made by the participants. The Company does not provide any matching contributions. The benefits of the plan are payable upon the employee's separation of employment with the Company.
As of December 31, 2011 and 2010, the Company had a gross asset of approximately $284,000 and $261,000, respectively, to reflect the amount of investments held in the plan and a corresponding liability acknowledging the Company's obligation to employees participating in the plan (included in other assets and other liabilities in the accompanying consolidated balance sheet). At December 31, 2011, the Company had one outstanding loan for $155,000 from the plan including accrued interest of $7,000 at an 8% annual interest rate. This loan was subsequently repaid in 2012. During 2010, two executive officers loaned the Company $191,000 with 8% annual interest. The loan along with interest of approximately $28,000 was repaid during 2011. The underlying assets are recorded at fair value and primarily represent short term fixed income assets invested at the participants' direction. Contributions to and payments from the plan in 2011 and 2010 were not material.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18. ACQUISITIONS
Summary of 2011 Acquisitions
During the year ended December 31, 2011, the Company has acquired a total of fifteen skilled nursing facilities and one assisted living facility described further below and a number of pending acquisitions are in process. For the year ended December 31, 2011, the Company has incurred a total of approximately $2,267,000 of acquisition costs net of approximately $1,104,000, net of bargain purchase gains for a net amount of $1,163,000 in the "Other Income" section of the Consolidated Statements of Operations. Acquisition costs include non-cash charges of $206,000 from the issuance of 36,337 shares of common stock with a per share market value of $5.68. As discussed in Note 1, Acquisition Policy, in acquisitions of facilities in states where the acquired CON/bed licenses are not transferable from the facility acquired the fair value of the CON/bed licenses are classified together as building.
All of our 2011 acquisitions were in conjunction with our growth strategy for acquiring nursing facilities and optimizing performance. The Company issued various notes to complete these transactions (see Note 8).
Mountain Trace
On December 30, 2010, Mountain Trace Nursing ADK, LLC, a wholly owned subsidiary of AdCare, completed the acquisition of Mountain Trace, a skilled nursing facility located in Sylva, North Carolina, for a purchase price of $6,171,000 after final closing adjustments. The Company obtained control of the facility effective January 1, 2011. In connection with the acquisition, the Company recognized a total gain of approximately $1,104,000, as the transaction resulted in a bargain purchase because the seller was motivated to sell the facility in order to retire and restructure the composition of their facilities in certain of the states in which they operate.
Consideration Transferred: |
||||
Net proceeds from Loans |
$ | 4,945,428 | ||
Cash from earnest money deposits |
250,000 | |||
Cash |
975,086 | |||
Total consideration transferred |
$ | 6,170,514 | ||
Assets Acquired: |
||||
Land |
320,000 | |||
Building |
6,806,200 | |||
Equipment and Furnishings |
148,800 | |||
Total identifiable net assets |
7,275,000 | |||
Less: gain on bargain purchase |
(1,104,486 | ) | ||
Total consideration |
$ | 6,170,514 | ||
Autumn Breeze Healthcare Center, Southland Care Center and College Park Healthcare Center
On April 29, 2011, Erin Property acquired the Southland Care Center, a skilled nursing facility located in Dublin, Georgia. In addition, on April 29, 2011, Mt. Kenn Property acquired the Autumn Breeze Healthcare Center, a skilled nursing facility located in Marietta, Georgia. On May 31, 2011,
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18. ACQUISITIONS (Continued)
CP Property acquired the College Park Healthcare Center, a skilled nursing facility located in College Park, Georgia. The total purchase price for all three facilities was $17,943,000 after final closing adjustments.
Through separate Operations Transfer Agreements, the Company obtained control of Autumn Breeze Healthcare and Southland Care Center effective May 1, 2011. The Company had paid $500,000 in earnest money upon entering the purchase agreement and an additional $400,000 to extend the closing date to April 29, 2011. A final Operations Transfer Agreement allowed the Company to obtain control of the College Park Care Center effective June 1, 2011.
Consideration Transferred: |
||||
Net proceeds from Loans |
$ | 12,438,990 | ||
Cash from earnest money deposits |
900,000 | |||
Cash |
4,603,527 | |||
Total consideration transferred |
$ | 17,942,517 | ||
Assets Acquired: |
||||
Land |
675,000 | |||
Building |
17,041,017 | |||
Equipment and Furnishings |
226,500 | |||
Total identifiable net assets |
$ | 17,942,517 | ||
The Living Center, Kenwood Manor, Enid Senior Care, Betty Ann Nursing Center, and Grand Lake Villa ("Oklahoma VIE's")
On August 1, 2011, five skilled nursing facilities located in Oklahoma, were purchased for an aggregate purchase price of $11,219,000, after closing adjustments by companies controlled by Christopher Brogdon, the Company's Vice Chairman and Chief Acquisition Officer, and others. These facilities are known as the Living Center, Kenwood Manor, Enid Senior Care, Betty Ann Nursing Center and Grand Lake Villa.
Even though the Company does not have any equity interest in these facilities, the Company determined that it is a variable interest entity as the ownership entity does not have sufficient equity at risk. Given the related party relationship with Christopher Brogdon, the common shareholder and other variable interests, the Company determined that it is the primary beneficiary and consolidation of
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18. ACQUISITIONS (Continued)
the facilities is required. The Company initially consolidated the Oklahoma VIE's on August 1, 2011, the date of acquisition and initial operations (See Note 19).
Consideration Transferred: |
||||
Net proceeds from Loans |
$ | 9,459,017 | ||
Cash from earnest money deposits |
200,000 | |||
Cash at closing |
1,559,538 | |||
Total consideration transferred |
$ | 11,218,555 | ||
Assets Acquired: |
||||
Land |
660,740 | |||
Building |
9,745,010 | |||
Equipment and Furnishings |
844,250 | |||
Total assets acquired |
11,250,000 | |||
Liabilities Assumed: |
||||
Real estate taxes |
(31,445 | ) | ||
Total identifiable net assets |
$ | 11,218,555 | ||
Homestead Manor, River Valley Center, Benton Manor, Heritage Park Center and Rose Nursing
On September 1, 2011, the Company acquired and obtained effective control of 4 skilled nursing facilities and a corporate office building located in Arkansas. In addition, effective November 1, 2011, the Company acquired the rights to a leased skilled nursing facility located in Missouri. The total purchase price for all five facilities was $19,939,000 after final closing adjustments.
Consideration Transferred: |
||||
Net proceeds from Loans |
$ | 14,582,106 | ||
Seller note |
2,400,000 | |||
Cash from earnest money deposits |
350,000 | |||
Cash |
2,607,255 | |||
Total consideration transferred |
$ | 19,939,361 | ||
Assets Acquired: |
||||
Land |
1,095,000 | |||
Building |
17,632,000 | |||
Equipment and Furnishings |
773,000 | |||
Intangible Assetslease rights |
500,000 | |||
Total assets acquired |
20,000,000 | |||
Liabilities Assumed: |
||||
Real estate taxes |
(60,639 | ) | ||
Total identifiable net assets |
$ | 19,939,361 | ||
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18. ACQUISITIONS (Continued)
Stone County Nursing and Rehabilitation and Stone County Residential Care Facility
On November 30, 2011, the Company acquired and obtained effective control of 1 skilled nursing facility and 1 assisted living facility both located in Mountain View, Arkansas. The total purchase price was $4,250,000.
Consideration Transferred: |
||||
Net proceeds from Loans |
$ | 2,908,730 | ||
Seller note |
750,000 | |||
Cash from earnest money deposits |
300,000 | |||
Cash |
291,270 | |||
Total consideration transferred |
$ | 4,250,000 | ||
Assets Acquired: |
||||
Land |
194,000 | |||
Building |
3,789,000 | |||
Equipment and Furnishings |
267,000 | |||
Total assets acquired |
$ | 4,250,000 | ||
Eaglewood Care Center and Eaglewood Village
On December 30, 2011, the Company acquired and obtained effective control of 1 skilled nursing facility and 1 assisted living facility both located in Springfield, Ohio. The total purchase price was $12,412,000. The company obtained control of the facilities effective January 1, 2012.
Potential Acquisitions
North Carolina, South Carolina, Tennessee and Virginia
On June 27, 2011, the Company entered into a purchase agreement for the asset purchase of two skilled nursing facilities located in North Carolina and South Carolina, the acquisition of lease agreements for nine skilled nursing facilities that are located in North Carolina, South Carolina, Tennessee and Virginia, and the acquisition of management agreements to manage four skilled nursing facilities located in Tennessee. At December 31, 2011, the Company had paid $500,000 as an earnest money deposit. The earnest money deposit is refundable subject to certain terms and conditions. In March 2012, the Company terminated the purchase agreement and, as a result, the earnest money deposit was refunded.
Oklahoma
On October 14, 2011, the Company entered into an agreement to purchase six skilled nursing facilities located in Oklahoma. The total purchase price is $16,000,000.
At December 31, 2011, the Company had deposited $100,000 into escrow to be held as an earnest money deposit. If the Company terminates the purchase agreement due to the seller's failure to satisfy certain conditions, then the deposit will be returned to the Company. If the Company does not consummate the purchase, then seller will retain the deposit.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18. ACQUISITIONS (Continued)
The closing of the purchase is expected to occur no later than four months after the date the Company files its application for a certificate of need with the Oklahoma State Department of Health. The closing of the purchase is subject to customary closing conditions, indemnification provisions and termination provisions.
Arkansas
On December 29, 2011, the Company entered into an agreement to purchase three skilled nursing facilities located in Little Rock, Arkansas. The total purchase price is $27,280,000.
Subsequent to December 31, 2011, the Company was required to deposit $1,100,000 into escrow to be held as earnest money. If the agreement is terminated due to the sellers' failure to satisfy certain conditions set forth therein, then the deposit shall be returned to the Company. If the Company does not consummate the purchase, the sellers will retain the deposit.
The Company extended the closing to March 31, 2012, with the payment of an additional $500,000 in earnest money.
Two additional purchase agreements for potential acquisitions were entered into subsequent to December 31, 2011 (See Note 22).
Unaudited Proforma Financial Information
Acquisitions have been included in the consolidated financial statements since the dates the Company gained effective control. For 2011, combined revenue for all acquisitions since gaining effective control is approximately $24,900,000 and resulted in a net income from operations of approximately $6,700.
The following table represents pro forma results of consolidated operations as if the 2010 and 2011 acquisitions had occurred at the beginning of the earliest fiscal year being presented, after giving effect to certain adjustments.
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Amounts in 000's
|
2011 | 2010 | |||||
Pro Forma Revenue |
$ | 185,423 | $ | 173,017 | |||
Pro Forma Operating Expenses |
$ | 178,427 | $ | 171,952 | |||
Pro Forma Income from Operations |
$ | 6,996 | $ | 1,065 |
The forgoing pro forma information is not indicative of what the results of operations would have been if the acquisitions had actually occurred at the beginning of the periods presented and is not intended as a projection of future results or trends.
NOTE 19. VARIABLE INTEREST ENTITIES
Riverchase Village ADK, LLC
Riverchase Village ADK, LLC (Riverchase), a newly formed entity, was established during 2010 by the Company. After formation, 100% of the membership interests of Riverchase were assigned to Christopher Brogdon, a significant shareholder, director and officer of the Company. On June 25, 2010,
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 19. VARIABLE INTEREST ENTITIES (Continued)
Riverchase acquired a business and began operations. Even though the Company does not have any equity interest in Riverchase, it was determined that Riverchase is a variable interest entity as it does not have sufficient equity at risk. Given the related party relationship with the common shareholder and certain other variable interests with Riverchase, the Company determined that it is the primary beneficiary and consolidation of Riverchase is required. As such, the Company initially consolidated Riverchase on June 25, 2010, the date of acquisition and initial operations.
The Company's primary variable interest is a guarantee agreement for Riverchase's revenue bonds that were used to finance the acquisition (see Note 8 for additional information about the bond issue). The Company's maximum exposure is the outstanding principal of the revenue bonds and any accrued interest. At December 31, 2011 and 2010, the maximum exposure to the Company under the guarantee agreement was $6,365,000. In addition to the guarantee agreement, the Company has entered into a management agreement to operate Riverchase. The Company also has an option agreement that allows the Company to exercise its right to purchase 100% of the membership interest rights by June, 2012 for $100,000.
As the primary beneficiary of Riverchase, its assets, liabilities and results of operations are included in the Company's consolidated financial statements. As the Company does not have any equity interest, the other equity holder's 100% interest is reflected in "Net Loss (Income) Attributable to Noncontrolling Interests" in the consolidated statement of operations and "Noncontrolling interest in subsidiaries" in the consolidated balance sheet. The net loss for the year ending December 31, 2011 was $729,000 and the net income for the year ending December 31, 2010 was $546,000. The following summarizes the carrying amounts of Riverchase's assets and liabilities included in the consolidated balance sheet at December 31, 2011 and 2010:
Riverchase Assets and Liabilities:
(Amounts in 000's)
|
December 31,
2011 |
December 31,
2010 |
|||||
---|---|---|---|---|---|---|---|
Cash |
$ | 16 | $ | 6 | |||
Accounts Receivable |
10 | 4 | |||||
Prepaid expenses |
19 | 6 | |||||
Restricted investments |
451 | 482 | |||||
Property and equipment, net |
5,999 | 6,093 | |||||
Other assets |
413 | 436 | |||||
Total assets |
$ | 6,908 | $ | 7,027 | |||
Accounts payable |
$ | 740 | $ | 111 | |||
Bonds payable, current portion |
75 | 0 | |||||
Accrued expenses |
175 | 205 | |||||
Bonds payable |
6,101 | 6,165 | |||||
Noncontrolling interest |
(183 | ) | 546 | ||||
Total liabilities |
$ | 6,908 | $ | 7,027 | |||
The restricted investments of Riverchase are limited for purposes specified by the bond issuance.
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 19. VARIABLE INTEREST ENTITIES (Continued)
Oklahoma Operations
Effective August 1, 2011, entities controlled by Chris Brogdon, a significant shareholder, director and officer of the Company, obtained control of five skilled nursing facilities in Oklahoma. The Company began providing certain administrative services to these facilities and intends on negotiating an option agreement that will provide the Company the exclusive rights to acquire the facilities in the future. The Company does not have any equity interest in the facilities and does not explicitly guarantee any of the debt. However, the Company is required to consolidate its financial statements because a related party, Chris Brogdon, has a variable interest. Mr. Brogdon is the managing member of each of the entities and also a significant shareholder, and executive officer of the Company. In this capacity, the potential ability exists to influence the Company to reimburse the owners of the facilities for any losses. As such, the Company initially consolidated the Oklahoma Operations on August 1, 2011, the date of the acquisition and initial operations.
As the Company does not have any equity interest, the other equity holder's 100% interest is reflected in "Net (Loss) Income Attributable to Noncontrolling Interests" in the consolidated statement of operations and "Noncontrolling interest in subsidiaries" in the consolidated balance sheet. The net loss for the year ending December 31, 2011 was $659,000. The following summarizes the carrying amounts of the facilities' assets and liabilities included in the consolidated balance sheet at December 31, 2011:
Oklahoma Operations Assets and Liabilities:
(Amounts in 000's)
|
December 31,
2011 |
|||
---|---|---|---|---|
Cash |
$ | 181 | ||
Accounts Receivable |
800 | |||
Prepaid expenses |
35 | |||
Property and equipment, net |
11,111 | |||
Other assets |
607 | |||
Total assets |
$ | 12,734 | ||
Accounts payable |
$ | 458 | ||
Notes payable, current |
189 | |||
Accrued expenses |
357 | |||
Notes payable, deferred |
12,389 | |||
Noncontrolling interest |
(659 | ) | ||
Total liabilities |
$ | 12,734 | ||
This VIE entity maintains a segregated cash management system from the Company.
NOTE 20. 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 and complete 1 year of eligible service. The Company matches employee contributions at 50% up to 2% of the employee's salary. Total matching contributions during 2011 and 2010 were $45,017 and $60,675, respectively. Given the significant
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ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 20. BENEFIT PLANS (Continued)
acquisitions and resulting increase in the number of employees, as new employees become eligible and are added as participants in the 401(k) plan in the future, the Company expects the employer match obligation to increase.
NOTE 21. RELATED PARTY TRANSACTIONS
The Company subleases office space from an entity controlled by Christopher Brogdon, an Officer and principal owner of the Company. The total cost in 2011 was $38,000.
In 2011, the company also leases an administrative office building from a partnership the members of which include a non-officer employee of the Company and a family member of Christopher Brogdon. The Company's cost for use of the office building is based on the building owner's operating cost plus the amount of the monthly mortgage payment on the building and totaled $94,000 in 2011. In September 2011, the Company executed a purchase agreement to purchase the building for an amount equal to the outstanding mortgage balance plus unpaid real estate taxes which currently approximates $1,200,000. The Company anticipates closing on this purchase agreement in 2012.
In 2011, in connection with certain acquisitions Christopher Brogdon received approximately $219,000. Of this amount $194,000 relates to the acquisition by a VIE controlled by Christopher Brogdon and such amount was paid by third parties with respect to such acquisition.
Other than the items above, the Company does not believe there are any other material undisclosed related party transactions. There are no material amounts due to or due from related parties at both December 31, 2011 and 2010.
NOTE 22. SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date the financial statements were issued and filed with the United States Securities and Exchange Commission. The following is a summary of the material subsequent events.
Potential Acquisitions
ArkansasAbington
On January 3, 2012, the Company entered into a Purchase and Sale Agreement with SCLR, LLC to acquire certain land, buildings, improvements, furniture, fixtures, operating agreements and equipment comprising Abington Place Health and Rehab Center, a 120 bed skilled nursing facility located in Little Rock, Arkansas, for an aggregate purchase price of $3,600,000.
Pursuant to the agreement, the Company deposited $150,000 into escrow to be held as earnest money. Upon consummation of the purchase, the deposit will be retained by the Abington Place Seller and applied against the purchase price.
The closing of the Abington Place Purchase is expected to occur on April 1, 2012. The Company may extend the closing until April 30, 2012, subject to payment of an additional $100,000 in earnest money.
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NOTE 22. SUBSEQUENT EVENTS (Continued)
ArkansasConvacare
On January 17, 2012, the Company entered into a Purchase and Sale Agreement with Gyman Properties, to acquire certain land, buildings, improvements, furniture, fixtures, vehicles, operating agreements and equipment comprising a 141 bed skilled nursing facility located in Lonoke, Arkansas, for an aggregate purchase price of $6,486,000. Pursuant to the agreement, the Company deposited $50,000 into escrow to be held as earnest money. Upon consummation of the purchase, the deposit will be retained by the Seller and applied against the purchase price.
The Company extended the closing to March 31, 2012, with the payment of an additional $50,000 in earnest money.
Oklahoma
On March 12, 2012, the Company entered into a Purchase and Sale Agreement with Westlake Nursing Home Limited to acquire certain land, buildings, improvements, furniture, fixtures, vehicles, operating agreements and equipment comprising a 118 bed skilled nursing facility located in Oklahoma City, Oklahoma, for an aggregate purchase price of $5,800,000, Pursuant to the Agreement, the Company deposited $25,000 into escrow to be held as earnest money. Upon consummation of the purchase, the deposit will be retained by the Seller and applied against the purchase price.
On March 14, 2012, the Company entered into a Purchase and Sale Agreement with F & F Ventures, LLC and Tulsa Christian Care, Inc., to acquire certain land, buildings, improvements, furniture, fixtures, operating agreements and equipment comprising a 121 bed skilled nursing facility located in Tulsa, Oklahoma for an aggregate purchase price of $5,750,000. The purchase price consists of a $5,000,000 cash payment and the issuance of shares of the Company's common stock with an aggregate value of $750,000. Pursuant to the agreement, the Company will deposit $150,000 into escrow to be held as earnest money. Upon consummation of the purchase, the deposit will be retained by the Seller and applied against the purchase price therefor.
Debt Refinance
On January 31, 2012, a subsidiary of the Company refinanced its original mortgage. The original mortgage accrued interest at an annual rate of 8.5% and was insured by HUD.
In connection with the refinancing, the Company issued a mortgage note in the amount of $3,721,500, dated January 31, 2012 but recorded and effective January 1, 2012, which accrues interest on the unpaid balance thereof at an annual rate of 3.74% and is also insured by HUD.
The note is secured by a mortgage deed on and matures on May 1, 2041. The note is payable in equal monthly installments of principal and interest payable on the first day of each month, commencing on March 1, 2012 and continuing through and including the maturity date, May 1, 2041. The note has a prepayment penalty of 8% for any prepayment made prior to March 1, 2014, which penalty is reduced by 1% each year thereafter until the eighth anniversary of such date, after which there is no prepayment penalty.
92
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 22. SUBSEQUENT EVENTS (Continued)
Material Contract
In March 2012, the Company entered in to a 36-month contract with a technology provider to provide application hosting, data warehousing and dashboard services for a monthly charge of approximately $49,000.
Debt Modification
On March 9, 2012, the terms of the Private Bank line of credit were modified to include additional borrowers and extend the maturity date to March 8, 2013.
Acquisition Cancellation
In March 2012, the pending transaction to acquire 15 facilities in North Carolina, South Carolina, Tennessee and Virginia (see Note 18), was not extended and expired. The escrow deposit was refunded to the Company.
93
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 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 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 Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report (the "Evaluation Date"). Based on such evaluation, our Chief Executive Officer and 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 generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
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.
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
94
2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this evaluation, management used the framework set forth in the report entitled Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or 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, 2011.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permits us to provide only management's report in this Annual Report.
None.
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
The following table sets forth certain information with respect to our executive officers and directors. We have historically separated the function of Chairman of the Board and Chief Executive Officer as we believe that the Company is better served by these functions being performed by separate individuals.
Name
|
Age | Position |
Expiration of
Term |
||||||
---|---|---|---|---|---|---|---|---|---|
David A. Tenwick (1) |
74 | Director, Chairman of the Board | 2012 | ||||||
Christopher Brogdon (1) |
63 |
Director, Vice-Chairman, Chief Acquisitions Officer |
2013 |
||||||
Boyd P. Gentry (1) |
53 |
Director, President, CEO |
2014 |
||||||
Gary L. Wade |
75 |
Director |
2012 |
||||||
Peter J. Hackett (1) |
74 |
Director |
2013 |
||||||
Jeffrey Levine |
60 |
Director |
2012 |
||||||
Joshua J. McClellan |
40 |
Director |
2014 |
||||||
Philip S. Radcliffe |
74 |
Director |
2014 |
||||||
Laurence E. Sturtz |
69 |
Director |
2013 |
||||||
Martin D. Brew |
51 |
Chief Financial Officer, Treasurer |
|||||||
David Rubenstein |
45 |
Chief Operations Officer |
95
Directors are elected at the annual meeting of shareholders and hold office for a term of three (3) years or until their successors have been duly elected and qualified. All officers serve at the discretion of the Board of Directors, subject to applicable employment agreements. The Board has a four-person Executive Committee. At the beginning of 2011, the Executive Committee was comprised of David A. Tenwick, Christopher Brogdon, Gary L. Wade, and Peter J. Hackett. In mid-2011, Mr. Gentry was added to the Executive Committee in replacement of Mr. Wade. The Executive Committee is elected by the whole Board of Directors and meets in between regularly-scheduled meetings of the Board of Directors in order to take needed actions.
David A. Tenwick. Mr. Tenwick, our founder, has served as our Chairman and as a director since our organization was founded in August 1991. Prior to founding our Company, 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 earned his Bachelor of Business Administration and Juris Doctor (JD) degrees from the University of Cincinnati in 1960 and 1962, respectively. Mr. Tenwick's tenure with the Company and legal and business background provide experience the Board of Directors considers valuable.
Christopher Brogdon. Mr. Brogdon was appointed as a director by existing members of the Board of Directors in September 2009 and was elected by the shareholders in 2010. Mr. Brogdon currently serves as the Company's Vice-Chairman and Chief Acquisitions Officer. Mr. Brogdon has been primarily responsible for directing the Company's acquisition strategy. Mr. Brogdon brings to AdCare more than 20 years of experience in the nursing home, assisted living and retirement community. Since 1998, Mr. Brogdon has owned and operated Brogdon Family LLC which owns and operates nursing homes, assisted living facilities and restaurants. Mr. Brogdon previously served as Chairman of the Board of NYSE-listed Retirement Care Associates and Chairman of the Board of NASDQ-listed Contour Medical. Mr. Brogdon's extensive background with public companies and his experience in nursing home development, acquisitions and mergers as well as his experience in financing those activities provides experience the Board of Directors considers valuable.
Boyd P. Gentry. Mr. Gentry was appointed as a director by existing members of the Board of Directors in December 2009 and became Co-Chief Executive Officer of the Company on January 10, 2011 and President and Chief Executive Officer on June 30, 2011. Mr. Gentry was employed by Mariner Health Care, Inc., a former NYSE publicly held long-term health care provider, from 1995 to 2007, and promoted to Chief Financial Officer subsequent to its 2004 going private transaction sponsored by National Senior Care. He transitioned to an ongoing consulting role for Mariner in September 2007 when he was recruited to Millennium Pharmacy Systems, Inc. to serve as Chief Financial Officer. He remained with Millennium until 2009 and rejoined Mariner Health Care, Inc. as its President in April of 2010. From 1982 until 1995, Mr. Gentry was employed with Bank of America and its predecessors with various financial responsibilities as Senior Vice President. Mr. Gentry received his Bachelor of Arts (BA) in Economics from Knox College in Galesburg, Illinois and his Master of Business Administration (MBA) in Finance and Accounting from Southern Methodist University in Dallas, Texas. Mr. Gentry's expertise and background in the healthcare industry provides experience the Board of Directors considers valuable, especially as the Company expands its operations and adds to the number of nursing home beds that it owns or leases.
96
Gary L. Wade. Mr. Wade has served as our President and as a director since 1995 and became Chief Executive Officer in 1998. Mr. Wade became Co- Chief Executive Officer (with Boyd Gentry) on January 10, 2011 and retired as Chief Executive Officer and President on June 30, 2011. In 1988 Mr. Wade was a co-founder of AdCare Health Systems, Inc., whose assets we acquired in 1995. Prior to that, he served as the Chief Executive Officer and President of St. John's Mercy from 1980 to 1989 and was responsible for the development and operation of Oakwood Village Retirement Community in 1987, a 230-unit continuing care retirement community, and the operation of St. John's Center, a sub-acute long-term care facility. His extensive experience in health care also includes work with chemical abuse treatment programming and care for Alzheimer's patients. Mr. Wade earned his undergraduate degree at Ohio University and his MBA from Xavier University, where he specialized in hospital and health care administration. He is a past Chairman of the Ohio Assisted Living Association and served on the Government Relations and Health Care committees of the Association of Ohio Philanthropic Homes. Mr. Wade's tenure with the Company and healthcare business background provides experience the Board of Directors considers valuable.
Peter J. Hackett. Mr. Hackett was appointed as a director by existing members of the Board of Directors in May 2005 and he was elected by the shareholders in June 2007. Mr. Hackett is a certified public accountant who received his BA degree from the University of Notre Dame and his Master of Arts degree from The Ohio State University in 1959 and 1965, respectively. Mr. Hackett worked as an auditor and was a stockholder in the accounting firm of Clark, Schaefer, & Hackett & Co. from 1962 to 2003. Mr. Hackett served as the Chief Executive Officer of Clark, Schaefer, & Hackett & Co. from 1991 to 1999 and was Chairman from 1999 to 2003. Mr. Hackett currently acts as a consultant for Clark, Schaefer, & Hackett & Co. Mr. Hackett is a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants. Mr. Hackett was member of the board of directors of Mercy Medical Center from 1972 to 1995. Mr. Hackett is also involved in numerous civic and charitable affiliations in the Springfield, Ohio area. Mr. Hackett's extensive financial and auditing background provides experience the Board of Directors considers valuable.
Jeffrey L. Levine. Mr. Levine was elected to the Board of Directors at the December 2005 annual shareholders' meeting. He also served as a director of the Company from its organization in 1991 until 2003. Mr. Levine received his Bachelor of Science (BS) in Business from Miami University in 1973 and his JD from Capital University Law School in 1976. He has worked as an industrial and commercial real estate broker from 1975 to present. He is the President of the Levine Real Estate Company and the Senior Vice President of Cassidy Turley. He is the past President of Larry Stein Realty. Mr. Levine has extensive experience in negotiating and appraising commercial and investment real estate. Mr. Levine has served as an officer and director on several private and public real estate companies and financial institutions. He is a member of the National Association of Realtors, the Ohio State Bar Association and the Florida State Bar Association. Mr. Levine's extensive real estate background provides experience the Board of Directors considers valuable.
Joshua J. McClellan. Mr. McClellan was appointed as a director by existing members of the Board of Directors in December 2009 and was elected by the shareholders in 2010. From 1996 to 2006, Mr. McClellan served as the Founder and President of McClellan Health Systems, Inc., located in northwest Ohio. Through acquisitions and development, he grew his company from a single, skilled nursing facility to a large regional healthcare provider for over 650 residents. In June 2006, Mr. McClellan sold McClellan Health Systems, Inc. for $53M. In 2011, he developed and opened a large rehab facility in Denman, Colorado , which facility has the capacity to provide rehabilitation and other medical services to approximately 100 residents. Mr. McClellan received his BS from Ohio State University and his MBA from the University of Findlay in Findlay, Ohio. Mr. McClellan is also a member of the Young Presidents Organization. Mr. McClellan's expertise and background in the healthcare industry (, particularly nursing homes) , provides experience the Board of Directors considers valuable.
97
Philip S. Radcliffe. Mr. Radcliffe has served as a director since our organization was founded in August 1991. Mr. Radcliffe spent his career in the industrial computer industry. Through the 1960s, Mr. Radcliffe was employed by IBM and then the Westinghouse Electric Company in their Computer and Instruments Division. Mr. Radcliffe next became an entrepreneur and participated in the startup of an industrial systems integration supplier. Mr. Radcliffe served as the Chief Financial Officer of this company and led the effort in the company becoming public and directed all SEC reporting requirements. In 1980 Mr. Radcliffe started his own virtual company in the Washington, DC area providing turnkey data acquisition and control systems to industry and the government. Since 1992 , Mr. Radcliffe has assisted several early stage high tech companies in developing their business plan, locating funds and providing oversight and mentoring. Since 1970, Mr. Radcliffe has served on the boards of directors of several private and public companies. Mr. Radcliffe has served as a mentor for the Dingman School of Entrepreneurship, affiliated with the University of Maryland School of Business. Mr. Radcliffe received his Bachelor's Degree from Baldwin Wallace College in 1959. Mr. Radcliffe's expertise and background in founding and advising start-up companies and helping them transition to public SEC reporting companies provides experience the Board of Directors considers valuable. In addition, his expertise in information technology is valuable as the Company continues to acquire long-term care facilities.
Laurence E. Sturtz. Mr. Sturtz was appointed as a director by existing members of the Board of Directors in June 2005 and was elected by the shareholders at the December 2005 annual meeting of shareholders. Mr. Sturtz is a retired attorney at law. He received his BA in Economics and his JD from The Ohio State University in 1964 and 1967, respectively. Mr. Sturtz was a prominent trial lawyer in Columbus, Ohio and also specialized in representing companies of all sizes until his retirement in 2002. Mr. Sturtz left the private practice of law for six years, from 1982 to 1988, during which time he served as Vice President and General Counsel, and then President and Chief Executive Officer, of Strata Corporation, a public company based in Columbus, Ohio. In 1988, Mr. Sturtz returned to the private practice of law and became the senior litigator with the firm of Carlile Patchen & Murphy LLP. Mr. Sturtz was admitted to practice before the United States Supreme Court and had five cases before the Court during the course of his career. Mr. Sturtz has served as a director of Advanced Biological Marketing, Inc. since [2007], and was Chairman of the Board of The Language Access Network from March, 2006 until December 2007. Mr. Sturtz currently works as a mediator and arbitrator in Florida and Ohio. Mr. Sturtz' extensive legal experience, management background and experience with public companies provides experience the Board of Directors considers valuable.
Other than Messrs. Tenwick, Wade, Brogdon and Gentry who are also directors, the following persons serve as executive officers of the Company:
Martin D. Brew. Mr. Brew was appointed as Chief Financial Officer and Treasurer of the Company in June 2011. Mr. Brew brings to the Company extensive financial management experience in the senior housing, hospitality and real estate industries. Mr. Brew is a seasoned finance and healthcare industry executive who brings more than thirty years of experience and from 2007 to 2010 served as Vice President of Finance of, and provided consulting services to, Formation Capital, a private equity firm with expertise in the senior housing industry. While at Formation, Mr. Brew played key roles in the company's mergers and acquisitions, due diligence and financial modeling and analysis processes, which processes included the post-acquisition integration and oversight of Genesis Health Care, a $2 billion former public company that owns and operates more than 200 nursing facilities, and Tandem Health Care, an owner of more than 70 nursing facilities. Prior to 2007, Mr. Brew served as Treasurer and Chief Accounting Officer at Jameson Inns, a publicly traded owner and operator of hotels. Mr. Brew received his BS in Business from Indiana University and is a Certified Public Accountant.
David Rubenstein. Mr. Rubenstein has more than 23 years of experience in long-term care facility management and was appointed to serve as the Company's Executive Vice President and Chief
98
Operating Officer in December 2011. From March 2010 until December 18, 2011, Mr. Rubenstein served as Chief Executive Officer of LaVie Management Services, where he was responsible for the management of operations of the skilled nursing facility company. From January 2009 to March 2010, Mr. Rubenstein was the Chief Executive Officer of Coastal Administrative Services as well as the Executive Vice President of Strategy and Support for Genoa Healthcare, where he was responsible for oversight of information technology, accounting and reimbursement issues for the skilled nursing facility companies. From January 2006 to December 2008, Mr. Rubenstein served as the Chief Development Officer for Genoa Healthcare Consulting, where he oversaw the acquisition and divestiture of skilled nursing facilities. Mr. Rubenstein holds a BS in Accounting from the University of Rhode Island.
Committees of the Board of Directors
We have an Audit Committee, a Compensation Committee and an Executive Committee.
The Audit Committee 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 auditors for the next fiscal year, approves the services to be provided by the independent auditors and the fees for such services, reviews and approves the auditor's audit plans, reviews and reports upon various matters affecting the independence of the independent auditors and reviews with the independent auditors 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 Audit Committee is composed of Messrs. Hackett, Levine, Radcliffe and Sturtz. During 2011, all of the members of the Audit Committee were considered "independent," as independence for Audit Committee members is defined in the applicable rules of the NYSE Amex listing standards and the rules of the SEC. The Board of Directors has designated Peter J. Hackett as Chairman of the Audit Committee and as the "audit committee financial expert" as defined by Item 407 of Regulations S-K of the Exchange Act.
The Compensation Committee was established in 1995, and its charter was adopted in December, 2005. During 2011, the Compensation Committee was comprised of Messrs. Radcliffe, Levine and McClellan. Our Compensation Committee is responsible for establishing our compensation plans. Its duties include the development with management of benefit plans for our employees and the formulation of bonus plans and incentive compensation packages. The Board of Directors has designated Philip S. Radcliffe as Chairman of the Compensation Committee.
The Executive Committee was established in 1991 in order to take actions necessary between the meetings of the Board of Directors. The Executive Committee is authorized to exercise all the powers of the Board of Directors and the management and business affairs of the Company, other than that of filling vacancies among the directors or any committee of the Board of Directors. At the beginning of 2011, the Executive Committee was comprised of Messrs. Tenwick, Wade, Hackett and Brogdon. In mid-2011, Mr. Gentry was added to the Executive Committee in replacement of Mr. Wade.
The Board of Directors has no standing nominating committee. We believe that, as a result of the role of the independent directors, as described below, it is not necessary to have a separate nominating committee at this time. Five of our nine current directors, Messrs. Hackett, Levine, Radcliffe, Sturtz and McClellan, were independent in 2011 as determined utilizing the standards for director "independence" set forth in the applicable rules of the NYSE Amex listing standards. The independent members of the Board of Directors select nominees for election as directors by majority vote. In selecting nominees for director, the Board of Directors does not operate pursuant to a charter.
99
In selecting director nominees, the Board of Directors considers, among other factors, the existing composition of the Board of Directors and the mix of its members appropriate for the perceived needs of AdCare. The Board of Directors believes that continuity in leadership and tenure maximizes the Board of Directors ability to exercise meaningful oversight. Because qualified incumbent directors are generally uniquely positioned to provide shareholders the benefit of continuity of leadership and seasoned judgment gained through experience as a director, the Board of Directors will generally consider as potential candidates those incumbent directors interested in standing for re-election who they believe have satisfied director performance expectations, including regular attendance at, preparation for and meaningful participation in meetings of the Board of Directors and committees thereof. While the Board of Directors does not have a formal policy on diversity, it seeks nominees with a broad diversity of experiences, professions, skills and backgrounds. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers, directors and greater than 10% shareholders to file reports of ownership and changes in ownership of our securities with the SEC. Copies of the reports are required by SEC regulation to be furnished to us. Based on our review of such reports, and written representations from reporting persons, we believe that all reporting persons complied with all filing requirements during the year ended December 31, 2011, except that (1) Mr. McClellan filed late one Form 4 relating to one transaction occurring in 2011; and (2) Mr. Brogdon and his spouse filed late: (i) one Form 4 relating to 10 transactions occurring in 2011; (ii) one Form 4 relating to one transaction occurring in 2010; (iii) one Form 4 relating to three transactions occurring in 2009; and (iv) seven Form 4s relating to 13 transactions occurring in 2008.
Code of Ethics
We have a Business Conduct Policy applicable to all employees of AdCare. Additionally, the Chief Executive Officer and all senior financial officers, including the principal financial officer, the principal accounting officer or controller, or any person performing a similar function are bound by the provisions of our code of ethics relating to ethical conduct, conflicts of interest, and compliance with the law.
Item 11. Executive Compensation
The following table sets forth the amount accrued by us during fiscal year 2011 for services rendered by our named executive officers. This includes all compensation awarded to, earned by or accrued for the executive officers listed below during the periods in question:
Name and principal
position |
Year | Salary | Bonus |
Stock
(4)
awards |
Option
(4)
awards |
Non-equity
incentive plan compensation |
All other
compensation (1) |
Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David A. Tenwick, |
2011 | $ | 221,333 | | | | | $ | 47,072 | $ | 268,405 | ||||||||||||||
Chairman (PEO) |
2010 | $ | 165,476 | $ | 100,000 | | | | $ | 41,540 | $ | 307,016 | |||||||||||||
Christopher Brogdon, |
2011 |
|
|
|
$ |
177,023 |
|
$ |
25,000 |
$ |
202,023 |
||||||||||||||
Vice-Chairman and |
2010 | | $ | 100,000 | | | | | $ | 100,000 | |||||||||||||||
Chief Acquisition |
|||||||||||||||||||||||||
Officer |
|||||||||||||||||||||||||
Gary L. Wade (2) , |
2011 |
$ |
105,097 |
|
|
$ |
14,925 |
|
$ |
137,697 |
$ |
257,719 |
|||||||||||||
President, Co-Chief |
2010 | $ | 159,965 | $ | 100,000 | | | | $ | 36,541 | $ | 296,506 | |||||||||||||
Executive Officer |
100
Name and principal
position |
Year | Salary | Bonus |
Stock
(4)
awards |
Option
(4)
awards |
Non-equity
incentive plan compensation |
All other
compensation (1) |
Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Boyd Gentry |
2011 | $ | 279,629 | | | $ | 679,982 | | $ | 35,918 | $ | 995,529 | |||||||||||||
President, Chief |
|||||||||||||||||||||||||
Executive Officer |
|||||||||||||||||||||||||
Scott Cunningham (3) , |
2011 |
$ |
87,437 |
|
|
|
|
$ |
11,126 |
$ |
98,563 |
||||||||||||||
Chief Financial Officer (PFO) |
2010 | $ | 132,401 | $ | 75,000 | | | | $ | 15,270 | $ | 222,671 | |||||||||||||
Martin D. Brew, |
2011 |
$ |
103,333 |
|
|
$ |
158,979 |
|
$ |
8,089 |
$ |
270,401 |
|||||||||||||
Chief Financial Officer (PFO) |
|||||||||||||||||||||||||
David Rubenstein, |
2011 |
|
$ |
150,000 |
|
$ |
350,068 |
|
|
$ |
500,068 |
||||||||||||||
Chief Operating |
|||||||||||||||||||||||||
Officer |
Employment Agreements
We entered into an Employment Agreement with Mr. Gentry, effective January 10, 2011 (the "Gentry Agreement"). The terms of the Gentry Agreement include an annual salary of $300,000 per year, an annual performance bonus of up to 100% of the annual salary based on standards to be established by the Compensation Committee of the Board of Directors and participation in the Company's Executive Expense Allowance program to the extent of $30,000 per year. Pursuant to the Gentry Agreement, Mr. Gentry also received equity compensation in the form of a warrant to purchase 250,000 shares of the Company's common stock , with an exercise price equal to $4.13 per share. The warrant vested as to one-third of the underlying shares on each of January 10, 2011 and January 9, 2012, and the warrant will vest as to one-third of the underlying shares on January 9, 2013. In the event Mr. Gentry resigns for "good reason," is terminated without "cause" or a "change in control" occurs while he is employed by the Company, the warrant immediately becomes 100% vested. If Mr. Gentry resigns his employment for good reason or the Company terminates Mr. Gentry's employment without cause, then Mr. Gentry or his successors and assigns, shall be entitled to severance pay in an amount equal to two (2) times the sum of his annual salary plus target bonus, payable in substantially equal installments at least monthly for a period of twenty-four (24) months after his termination date (the "Gentry Initial Severance Period"), plus if such termination occurs within three (3) months before or twenty-four (24) months after the occurrence of a change in control then Mr. Gentry is entitled to an additional payment equal to the sum of his annual salary plus target bonus, payable at least monthly in substantially equal installments over a period not to exceed twelve (12) months, which period shall begin immediately after the expiration of the Gentry Initial Severance Period. For the period for which severance pay is paid, i.e., twenty-four (24), or thirty-six (36) months in the case of a termination of
101
Mr. Gentry within three (3) months before or twenty-four (24) months after the occurrence of a change in control of the Company (the "Gentry Severance Period"), Mr. Gentry and his family are entitled to continue to be covered under all employee benefit plans of the Company under which executive officers of the Company are covered and at the same cost and under the same terms and conditions as apply to executive officers; provided, however, if the Company is prohibited by applicable law or its insurer from covering Mr. Gentry under any such plan, then the Company is required to pay Mr. Gentry an amount each month during the Gentry Severance Period equal to the Company's cost of coverage for similarly situated executive officers.
We entered into an Employment Agreement with Mr. Rubenstein, effective December 19, 2011 (the "Rubenstein Agreement"). The terms of the Rubenstein Agreement include an annual salary of $300,000 per year to be increased to $325,000 by June 30, 2012, an annual performance bonus of up to 75% of the annual salary based on standards to be established by the Compensation Committee of the Board of Directors and a one-time signing bonus of $150,000. On December 19, 2011, Mr. Rubenstein also received equity compensation in the form of: (i) a warrant to purchase 100,000 shares of the Company's common stock, with an exercise price equal to $4.13 per share, which warrant vests as to one-third of the underlying shares on each of the three subsequent anniversaries of the grant date; and (ii) a warrant to purchase 100,000 shares of the Company's common stock, with an exercise price equal to $4.97 per share., which warrant vests as to one-third of the underlying shares on each of the second, third and fourth anniversaries of the grant date. In the event Mr. Rubenstein resigns for a "good reason" or a "change in control" occurs while Mr. Rubenstein is employed by the Company, the warrants immediately become 100% vested. If, during the first three (3) months of continuous employment with the Company, Mr. Rubenstein resigns his employment for good reason, or the Company terminates his employment without "cause," then Mr. Rubenstein is entitled to severance pay in the form of salary continuation for a period of three (3) months. If after a minimum of three (3) months of continuous employment with the Company, but less than six (6) months of continuous employment with the Company, Mr. Rubenstein resigns his employment for good reason or the Company terminates his employment without cause (other than due to his disability), then Mr. Rubenstein or his successors and assigns, is entitled to receive severance pay in an amount equal to one-half ( 1 / 2 ) of his annual salary, payable in substantially equal installments at least monthly for a period of six (6) months after his termination date. If, after a minimum of six (6) months of continuous employment with the Company Mr. Rubenstein resigns his employment for good reason or the Company terminates Mr. Rubenstein's employment without cause (other than due to his disability), then Mr. Rubenstein's successors and assigns shall receive the severance pay and benefits hereafter provided. The severance pay shall be an amount equal to one (1) times the sum of his annual salary payable in substantially equal installments at least monthly for a period of twelve (12) months after his termination date (the "Rubenstein Initial Severance Period"), plus if such termination occurs within three (3) months before or twenty-four (24) months after the occurrence of a change in control of the Company then Mr. Rubenstein is entitled to an additional one-half times the sum of his annual salary and target bonus, payable in substantially equal installments at least monthly for a period six (6) months, which period shall begin immediately after the expiration of the Rubenstein Initial Severance Period. For the period for which severance pay is paid, i.e., three (3), six (6), twelve (12) or eighteen (18) months following termination of employment (the "Rubenstein Severance Period"), Mr. Rubenstein and his family are entitled to continue to be covered under all employee benefit plans of the Company under which executive officers of the Company are covered and at the same cost and under the same terms and conditions as apply to executive officers, ; provided, however, if the Company prohibited by applicable law or its insurer from covering Mr. Rubenstein under any such plan, then the Company shall pay to Mr. Rubenstein an amount each month during the Rubenstein Severance Period equal to the Company's cost of coverage for similarly situated executive officers.
For purposes of the above referenced Gentry Agreement and Rubenstein Agreement, the following terms have the following meanings: (i) resignation for good reason" means the officer's resignation
102
within ninety (90) days following the Company's failure to cure a material breach of the agreement within thirty (30) days after the officer gives the Company written notice of such breach within ninety (90) days of the occurrence of such breach; (ii) "cause" means the officer's fraud, dishonesty, willful misconduct, or gross negligence in his performance of his duties, or the officer's conviction for a crime of moral turpitude, or material breach by the officer of the agreement which the officer fails to cure within thirty (30) days after the Company gives the officer written notice of such breach; and (iii) "change in control" means one or more sales or dispositions, within a twelve (12) month period, of assets representing a majority of the value of the assets of the Company or the acquisition (whether by purchase or through a merger or otherwise) of common stock of the Company immediately following which the holders of common stock of the Company immediately prior to such acquisition cease to own directly or indirectly common stock of the Company or its legal successor representing more than fifth percent (50%) of the voting power of the common stock of the Company or its legal successor.
In connection with his hiring, we provided to Mr. Brew an Offer Letter, effective May 17, 2011 (the "Brew Letter"). Pursuant to the Brew Letter, Mr. Brew was offered an annual salary of $175,000 and is eligible to receive an increase in annual salary of $25,000 or more no later than May 17, 2012, which increase shall be based on Mr. Brew's work performance. Additionally, Mr. Brew is eligible to receive an annual performance bonus of up to 75% of his annual salary based on his achievement of the same goals established for the Chief Executive Officer's receipt of incentive compensation and participation in the Company's Executive Expense Allowance program to the extent of $15,000 per year. Mr. Brew also received equity compensation in the form of an option to purchase 50,000 shares of the Company's common stock, which option vests as to one-third of the underlying shares on each of the three subsequent anniversaries of the grant date, June 6, 2011. If after a minimum of six (6) months of continuous employment with the Company, but less than twelve (12) months of continuous employment with the Company, the Company terminates Mr. Brew's employment without cause, then Mr. Brew is entitled to severance pay in the form of salary continuation for a period of six (6) months, or twelve (12) months in the event of termination without cause in connection with a change of control event. If after twelve (12) months of continuous employment with the Company the Company terminates Mr. Brew's employment without cause, then Mr. Brew is entitled to severance pay in the form of salary continuation for a period of twelve (12) months, or twenty-four (24) months in the event of termination without cause in connection with a change of control event.
Mr. Tenwick had an employment agreement that expired in September of 2011. The Company is currently not a party to an employment agreement with Mr. Brogdon.
Stock Incentive Plans
In November, 2007, the Board of Directors of the Company granted warrants to officers and directors of the Company equal to two warrants for every share of common stock owned. The original warrants vested ratably over a period of five years and matured on the tenth anniversary of their grant. The exercise price of the warrants in each of the five years following the issuance of the warrants was initially determined as follows: warrants vesting in 2008 were exercisable at $1.21 per share; warrants vesting in 2009 were exercisable at $2.25 per share; warrants vesting in 2010 through 2012 were exercisable at a price equal to the greater of: (i) the average closing price of the Company's common stock on NYSE-Amex exchange during the month of January each year and (ii) $3.00. The issuance of these warrants was approved at a Special Meeting of the Shareholders on August 15, 2008. In connection with the Company's private placement approved by the shareholders on November 30, 2009, the Company amended the terms of the warrants to provide that (i) the unvested warrants scheduled to vest in 2011 will be exercisable at $4.00 per share, (ii) the unvested warrants scheduled to vest in 2012 will be eliminated; and (iii) all unexercised warrants would be exercisable on a cashless basis. The warrants that were to vest in 2012 will be replaced with a like number of restricted shares of our common stock.
103
At our 2011 Annual Meeting of Shareholders held on June 3, 2011, the shareholders of the Company adopted the 2011 Stock Incentive Plan. The 2011 Stock Incentive Plan is intended to further the growth and profitability of our Company by providing increased incentives to encourage share ownership on the part of key employees, officers, directors, consultants and advisors who render services to the Company and any future parent or subsidiary of the Company. The 2011 Stock Incentive Plan permits the granting of stock options and restricted stock awards (collectively, "Awards") to eligible participants. The 2011 Stock Incentive Plan authorizes issuance of options to purchase up to 1,050,000 shares of our common stock and is administered by the Compensation Committee of the Board of Directors. Subject to the terms of the 2011 Stock Incentive Plan, the Compensation Committee has the sole discretion to determine the persons who will be granted Awards under the 2011 Stock Incentive Plan and the terms and conditions of such Awards, and to construe and interpret the 2011 Stock Incentive Plan. The Compensation Committee is also responsible for making adjustments in outstanding Awards, the shares available for Awards, and the numerical limitations for Awards to reflect transactions such as stock splits and dividends. The Compensation Committee may delegate its authority to one or more directors or officers; provided, however, that the Committee may not delegate its authority and powers: (i) with respect to Section 16 reporting persons, or (ii) in any way which would jeopardize the 2011 Stock Incentive Plan's qualifying under Section 162(n) of the Code or Rule 16b-3 promulgated under the Exchange Act. The 2011 Stock Incentive Plan allows for the exercise of options through cash, or with the consent of the Compensation Committee: (a) by tendering previously acquired shares; (b) by tendering a full recourse promissory note of the optionee; (c) through a cashless exercise without the payment of cash by reducing the number of shares of common stock that would be obtainable upon the exercise of the option; (d) through a brokerage transaction; or (e) through any combination of the foregoing. The 2011 Stock Incentive Plan provides the issuance of both incentive stock options and nonqualified stock options as permitted by the 2005 stock option plan described below. As of December 31, 2011, 277,000 incentive options with exercise prices ranging from $4.96 to $5.75, and 210,000 nonqualified options with exercise prices ranging from $4.32 to $7.00 have been granted under the 2011 Stock Incentive Plan. A total of 75,000 of these options have been forfeited due to routine staff attrition.
In August 2005, we adopted a Stock Option Plan (the "2005 Plan") to secure for us and our shareholders the benefits arising from capital stock ownership by our officers, directors, employees, and consultants who are expected to contribute to our future growth and success. The 2005 Plan authorizes the grant of options to purchase an aggregate of 220,500 shares of our common stock (adjusted for stock split and stock dividends) both as "incentive stock options" as that term is defined under Section 422(A) of the Code and stock options which do not qualify as incentive stock options ("non-qualified stock options"). The 2005 Plan provides that the Board of Directors or the Compensation Committee of the Board of Directors may grant options and otherwise administer the 2005 Plan. As of December 31, 2011, 166,800 incentive stock options and 32,200 non-qualified stock options have been granted at an exercise price of $1.50 per share under the 2005 Plan. A total of 61,400 of these options have been forfeited due to routine staff attrition.
In August 2004, we adopted a Stock Option Plan ("2004 Plan") to secure for us and our shareholders the benefits arising from capital stock ownership by our officers, directors, employees, and consultants who are expected to contribute to our future growth and success. The terms and conditions of the 2004 Plan are exactly the same as the 2005 Plan. The 2004 Plan authorizes the grant of options to purchase an aggregate of 132,300 shares of our common stock (adjusted for the stock split and stock dividends). As of December 31, 2011, 98,200 incentive stock options and 16,000 non-qualified stock options have been granted at an exercise price of $2.50 per share under the 2004 Plan. A total of 28,040 of these options have been forfeited due to routine staff attrition and 38,280 have expired.
104
Retirement Programs
The Company's retirement programs are designed to facilitate the retirement of employees who have performed for AdCare over the long term. We currently maintain a 401(k) Plan with a match of 50% of the first 2% 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. AdCare does not provide our named executive officers any special benefits such as executive life insurance.
Outstanding Equity Awards at Fiscal Year End
|
OPTIONS/WARRANTS AWARDS |
|
|
STOCK AWARDS | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position
|
Number of
securities underlying unexercised options (#) exercisable |
Number of
securities underlying unexercised options (#) unexercisable |
Equity
incentive plan awards: number of securities underlying unexercised earned options (#) |
Option
exercise price |
Option
expiration date |
Number
of shares or units of stock that have not vested |
Market
value of stock that is not vested |
Total
number of unearned shares, units or other rights that have not vested |
Market
or payout value of unearned shares, units or other rights that have not vested |
|||||||||||||||||||
Chairman |
104,260 | $ | 1.11 | 11/16/2017 | | | | | ||||||||||||||||||||
David A. Tenwick (1) |
104,260 | $ | 2.05 | 11/16/2017 | ||||||||||||||||||||||||
|
104,260 | $ | 2.72 | 11/16/2017 | ||||||||||||||||||||||||
|
104,260 | $ | 3.63 | 11/16/2017 | ||||||||||||||||||||||||
Vice-Chairman & Chief Acquisitions Officer |
110,250 |
$ |
2.72 |
11/1/2017 |
150,000 |
$ |
597,000 |
|
|
|||||||||||||||||||
Christopher Brogdon (2) |
110,250 | $ | 3.63 | 11/1/2017 | ||||||||||||||||||||||||
|
110,250 | $ | 4.53 | 11/1/2017 | ||||||||||||||||||||||||
|
100,000 | $ | 6.00 | 11/18/2021 | ||||||||||||||||||||||||
|
50,000 | $ | 7.00 | 11/18/2021 | ||||||||||||||||||||||||
Co-CEO to 6/30/2011 |
2,205 |
|
$ |
1.36 |
5/09/2013 |
|
|
|
||||||||||||||||||||
Gary L. Wade (3) |
2,205 | $ | 1.36 | 5/09/2014 | ||||||||||||||||||||||||
|
2,205 | $ | 1.36 | 5/09/2015 | ||||||||||||||||||||||||
|
2,205 | $ | 1.36 | 5/09/2016 | ||||||||||||||||||||||||
|
10,000 | $ | 4.32 | 11/18/2016 | ||||||||||||||||||||||||
|
56,079 | $ | 1.11 | 11/16/2017 | ||||||||||||||||||||||||
|
56,079 | $ | 2.05 | 11/16/2017 | ||||||||||||||||||||||||
|
56,079 | $ | 2.72 | 11/16/2017 | ||||||||||||||||||||||||
|
56,079 | $ | 3.63 | 11/16/2017 | ||||||||||||||||||||||||
CFO to 6/30/2011 |
3,528 |
|
$ |
2.27 |
8/24/2012 |
|
|
|
|
|||||||||||||||||||
Scott Cunningham (4) |
2,205 | $ | 1.36 | 5/09/2012 | ||||||||||||||||||||||||
|
2,205 | $ | 1.36 | 5/09/2013 | ||||||||||||||||||||||||
|
2,205 | $ | 1.36 | 5/09/2014 | ||||||||||||||||||||||||
|
2,205 | $ | 1.36 | 5/09/2015 | ||||||||||||||||||||||||
|
2,205 | $ | 1.36 | 5/09/2016 | ||||||||||||||||||||||||
|
1,940 | $ | 1.11 | 11/16/2017 | ||||||||||||||||||||||||
|
1,940 | $ | 2.05 | 11/16/2017 | ||||||||||||||||||||||||
|
1,940 | $ | 2.72 | 11/16/2017 | ||||||||||||||||||||||||
|
1,940 | $ | 3.63 | 11/16/2017 | ||||||||||||||||||||||||
|
9,188 | $ | 2.72 | 12/08/2014 | ||||||||||||||||||||||||
|
9,188 | $ | 2.72 | 12/08/2014 | ||||||||||||||||||||||||
|
9,188 | $ | 2.72 | 12/08/2014 | ||||||||||||||||||||||||
Co-CEO to 6/30/12 and CEO from 7/1/2011 |
87,500 |
|
$ |
3.92 |
1/10/2021 |
175,000 |
$ |
696,500 |
|
|
||||||||||||||||||
Boyd Gentry (5) |
87,500 | $ | 3.92 | 1/10/2021 | ||||||||||||||||||||||||
|
87,500 | $ | 3.92 | 1/10/2021 | ||||||||||||||||||||||||
CFO from 7/1/2011 |
17,500 |
|
$ |
5.48 |
6/6/2016 |
52,500 |
$ |
208,950 |
|
|
||||||||||||||||||
Martin D. Brew (6) |
17,500 | $ | 5.48 | 6/6/2016 | ||||||||||||||||||||||||
|
17,500 | $ | 5.48 | 6/6/2016 |
105
|
OPTIONS/WARRANTS AWARDS |
|
|
STOCK AWARDS | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position
|
Number of
securities underlying unexercised options (#) exercisable |
Number of
securities underlying unexercised options (#) unexercisable |
Equity
incentive plan awards: number of securities underlying unexercised earned options (#) |
Option
exercise price |
Option
expiration date |
Number
of shares or units of stock that have not vested |
Market
value of stock that is not vested |
Total
number of unearned shares, units or other rights that have not vested |
Market
or payout value of unearned shares, units or other rights that have not vested |
|||||||||||||||||||
COODavid Rubenstein (7) |
100,000 | | $ | 4.13 | 12/19/2021 | 200,000 | $ | 796,000 | | | ||||||||||||||||||
|
100,000 | $ | 4.97 | 12/19/2021 |
Director Compensation
The following table sets forth information regarding compensation paid to our non-employee directors. Directors who are employed by us do not receive any compensation for their activities related to serving on the Board of Directors.
Name
(1)
|
Fees
earned or paid in cash |
Stock
awards |
Option
awards |
Non-equity
incentive plan compensation |
Change in pension
value and non- qualified deferred compensation earnings |
All other
compensation |
Total | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter J. Hackett |
$ | 55,266 | | $ | 14,925 | | | | $ | 70,191 | ||||||||||||
Jeffrey Levine |
$ | 47,500 | | $ | 14,925 | | | | $ | 62,425 | ||||||||||||
Joshua J. McClellan |
$ | 44,500 | | $ | 14,925 | | | | $ | 59,425 | ||||||||||||
Philip S. Radcliffe |
$ | 57,266 | | $ | 14,925 | | | | $ | 72,191 | ||||||||||||
Laurence E. Sturtz |
$ | 47,500 | | $ | 14,925 | | | | $ | 62,425 |
The following discloses the aggregate number of stock option awards outstanding for all directors:
Mr. Tenwick104,260 warrants exercisable at $1.11 per share, 104,260 warrants exercisable at $2.05 per share, 104,260 warrants exercisable at $2.72 per share and 104,260 warrants exercisable at $3.63, all exercisable within 60 days of March 31, 2012.
106
Mr. Brogdon110,250 warrants exercisable at $2.72 per share, 110,250 warrants exercisable at $3.63 per share, 110,250 warrants exercisable at $4.53 per share, all exercisable within 60 days of March 31, 2012.
Mr. Wade56,079 warrants exercisable at $1.11 per share, 56,079 warrants exercisable at $2.05 per share, 56,079 warrants exercisable at $2.72 per share, 56,079 warrants exercisable at $3.63 per share, 8,820 options exercisable at $1.36 per share and 10,000 options exercisable at $4.32 per share, all exercisable within 60 days of March 31, 2012.
Mr. Gentry175,000 warrants exercisable at $3.92 per share all exercisable within 60 days of March 31, 2012.
Mr. Hackett7,720 options exercisable at $1.36 per share, 10,000 options exercisable at $4.32 per share, 882 warrants exercisable at $1.11 per share, 882 warrants exercisable at $2.05 per share, 882 warrants exercisable at $2.72 per share and 882 warrants exercisable at $3.63 per share, all exercisable within 60 days of March 31, 2012.
Mr. Levine7,720 options at $1.36 per share, 10,000 options exercisable at $4.32 per share, 3,087 warrants exercisable at $1.11 per share, 3,087 warrants exercisable at $2.05 per share, 3,087 warrants exercisable at $2.72 per share and 3,087 warrants exercisable at $3.63 per share, all exercisable within 60 days of March 31, 2012.
Mr. McClellan10,000 options at $4.32 per share, all exercisable within 60 days of March 31, 2012.
Mr. Radcliffe441 options exercisable at $2.27 per share, 7,720 options exercisable at $1.36 per share, 10,000 options exercisable at $4.32 per share, 4,907 warrants exercisable at $1.11 per share, 4,907 warrants exercisable at $2.05 per share, 4,907 warrants exercisable at $2.72 per share and 4,907 warrants exercisable at $3.63 per share, all exercisable within 60 days of March 31, 2012.
Mr. Sturtz7,720 options exercisable at $1.36 per share, 10,000 options exercisable at $4.32 per share, 9,667 warrants exercisable at $1.11 per share, 9,667 warrants exercisable at $2.05 per share, 9,667 warrants exercisable at $2.72 per share and 9,667 warrants exercisable at $3.63 per share, all exercisable within 60 days of March 31, 2012.
Non-Employee Director Reimbursement
Non-employee directors are reimbursed for travel and other out-of-pocket expenses for travel in connection with their duties as directors.
Directors who are not employed by us receive a retainer of $4,500 per month plus $1,000 for each meeting attended in person and $500 for each meeting attended via conference call. Committee chairs receive an additional $1,100 per month as a retainer.
Compensation Committee Interlocks and Insider Participation
During 2011, the Compensation Committee was comprised of Messrs. Hackett, Radcliffe and Sturtz. None of the members of the Compensation Committee is a former or current officer or employee of the Company or any of its subsidiaries.
None of our executive officers has served:
107
Purpose of the Compensation Committee of the Board of Directors and Committee Report
The Compensation Committee advises the Board with respect to the compensation of each senior executive and each member of the Board of Directors. 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
Ownership of Common Stock by Directors and Executive Officers
The following table sets forth, as of March 19, 2012, the beneficial ownership of our common stock by each of our directors, each executive officer named in the Summary Compensation Table, and by all directors and executive officers as a group.
Names and Address
|
Number (+) |
Percent of
Total (++) |
|||||
---|---|---|---|---|---|---|---|
David A. Tenwick
|
800,772 | (1) | 6.3 | % | |||
Christopher Brogdon
|
1,366,763 |
(2) |
10.9 |
% |
|||
Gary L. Wade
|
452,687 |
(3) |
3.6 |
% |
|||
Boyd P. Gentry
|
220,088 |
(4) |
1.8 |
% |
|||
Peter J. Hackett
|
38,578 |
(5) |
* |
||||
Jeffrey Levine
|
61,590 |
(6) |
* |
||||
Joshua J. McClellan
|
126,611 |
(7) |
1.0 |
% |
|||
Philip S. Radcliffe
|
60,512 |
(8) |
* |
108
109
Ownership of Common Stock by Principal Shareholders
The following table sets forth information as of March 14, 2012, relating to the beneficial ownership of common stock by each person known by us to beneficially own more than 5% of our outstanding shares of common stock.
Names and Address
|
Number (+) |
Percent of
Total (++) |
|||||
---|---|---|---|---|---|---|---|
Connie B. Brogdon
|
1,366,763 | (1) | 10.9 | % | |||
AQR Capital Management, LLC
|
1,138,011 |
(2) |
9.9 |
% |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Riverchase Village ADK, LLC
On April 9, 2010, Riverchase Village ADK, LLC ("Riverchase"), then our wholly owned subsidiary, entered into a Purchase Agreement with an Oklahoma limited liability company controlled by a bank ("Riverchase Seller") to acquire the assets of Riverchase Village, a 105 bed assisted living facility located in Hoover, Alabama. The purchase price was approximately $5,000,000. On June 22, 2010, we assigned to Mr. Brogdon, our Vice Chairman and Chief Acquisition Officer and a significant stockholder, 100% of the membership interests in Riverchase. On June 25, 2010, Riverchase, then owned by Mr. Brogdon, purchased Riverchase Village pursuant to the terms of the Purchase Agreement.
In connection with financing the Riverchase Village transaction, Riverchase borrowed from the Medical Clinic Board of the City of Hoover the proceeds from the issuance of $5,845,000 First Mortgage Healthcare Facility Revenue Bonds (Series 2010 A) and $520,000 First Mortgage Revenue Bonds (Series B), which proceeds were used to acquire Riverchase Village, pay the cost of certain repairs and improvements to Riverchase Village, fund certain services and pay the cost of the issuance of the bonds. As part of the financing, each of AdCare and Mr. Brogdon guaranteed Riverchase's obligations under the bonds. For a further description regarding the bonds, see Note 8 to our Consolidated Financial Statements included elsewhere in this Annual Report. Riverchase Seller refunded to AdCare the $250,000 of earnest money related to the Riverchase Village transaction.
As consideration for: (i) our assignment of 100% of the membership interests in Riverchase to Mr. Brogdon; and (ii) our guaranteeing the bonds, Mr. Brogdon granted to us an option, exercisable until June 22, 2012, to acquire Riverchase for an exercise price of $100,000 and otherwise under the
110
same terms and conditions set forth in the Purchase Agreement. In addition, we entered into a five-year management contract with Riverchase to manage Riverchase Village.
Mountain Trace
Effective January 1, 2011, pursuant to an Operations Transfer Agreement, we acquired the operations and selected assets of Mountain Trace, a 106 bed skilled nursing facility located in Sylva, North Carolina. To complete the acquisition, we issued a secured promissory note in the amount of $5,000,000. The promissory note was secured by the Mountain Trace facility and was guaranteed personally by each of Mr. Brogdon and his spouse, Connie Brogdon, also a significant stockholder.
Oklahoma Operations
Effective August 1, 2011, entities controlled by Mr. Brogdon and his spouse, Connie Brogdon, purchased five skilled nursing facilities located in Oklahoma. In connection with the closing of this purchase, we paid closing costs on behalf of these entities in the amount of $56,894. These entities refunded the $56,894 to us in February of 2012.
Effective August 1, 2011, we began providing certain administrative services to these facilities and intend to negotiate an option agreement with these entities to provide us exclusive rights to acquire the facilities in the future.
Red Rose Facility
On October 31, 2011, pursuant to the terms of an Assignment of Lease and Landlord's Consent, Rose Missouri Nursing, LLC, our wholly owned subsidiary, became the tenant and operator of the Red Rose Facility, a 90 bed skilled nursing facility located in Cassville, Missouri. In connection with this transaction, Mr. Brogdon and his spouse, Connie Brogdon, each personally guaranteed the performance of our obligations, including payment obligations, under the lease. In consideration of these personal guaranties, we paid to Mr. Brogdon the amount of $25,000 as a guaranty fee.
Office Subleases
We currently sublease on a month-to-month basis from Winter Haven Homes, Inc., a corporation owned and controlled by Mr. Brogdon ("Winter Haven"), office space in the Buckhead area of Atlanta, Georgia. This sublease commenced in April 2011. Pursuant to this sublease, we pay to Winter Haven on a monthly basis base rent of approximately $4,257, which includes all taxes, insurance and utilities. We paid an aggregate of $38,314 in rent under this sublease in 2011. We also reimburse Winter Haven for our share of office supplies and other office expenses, which averages about $1,000 per month.
We currently sublease on a month-to-month basis from JRT Group Properties, LLC ("JRT"), the office space in Roswell, Georgia which we use as our service center. Mr. Brogdon's son is a one-third owner of JRT. This sublease commenced in April 2011. Pursuant to this sublease, we pay to JRT on a monthly basis base rent of approximately $10,457. We paid an aggregate of $94,120 in rent under this sublease in 2011. We periodically pay unrelated third parties for utilities and property taxes with respect to office space, and we pay to an unrelated office building association monthly dues in the amount of $1,200. On or about September 15, 2011, we entered into a Purchase Agreement with JRT, pursuant to which we have agreed to purchase this office space for an amount equal to JRT's outstanding liabilities with respect thereto plus any accrued but unpaid property taxes at the time of the closing of the purchase transaction. We anticipate that this purchase amount will be approximately $1.2 million.
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Other Transactions
In 2007, Mr. Tenwick advanced $155,000 to the Company as a loan from his retirement plan. This loan currently accrues interest at the rate of 8% per annum, with total payments made to Mr. Tenwick in 2011 of interest in the amount of $7,270. The principal amount of this loan was repaid by the Company in full in January of 2012.
Approval of Related Party Transactions
Each of the foregoing transactions was approved by the independent members of the Board of Directors of the Company without the related party having input with respect to the discussion of such approval. In addition, the Board of Directors believes that each of the foregoing transactions were necessary for the Company's business and are on terms no less favorable to the Company than could be obtained from independent third parties.
Director Independence
Five of nine of our current directors, Messrs. Hackett, Levine, Radcliffe, Sturtz and McClellan, were independent in 2011 as determined utilizing the standards for director "independence" set forth in the applicable rules of the NYSE Amex listing standards.
Item 14. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed by Battelle & Battelle LLP for professional services rendered by it for the audit of our annual financial statements included elsewhere in this Annual Report and review of financial statements included in our quarterly reports on Form 10-Q were $372,000 for 2011 and $303,000 for 2010. All audit fees were approved by the audit committee pursuant to its preapproval policy.
Audit Related Fees
Additionally, we paid $144,400 in 2011 and $162,700 in 2010 in audit related fees for the audits of our HUD properties, other stand-alone facility attestations, and additional services related to acquisitions, registration statements and other regulatory filings. All audit related fees were approved by the audit committee pursuant to its preapproval policy.
Tax Fees
None.
All Other Fees
None.
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 for us by our independent auditor and other 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.
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Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements . The following financial statements of AdCare Health Systems, Inc. and its Subsidiaries are included in Part II, Item 8 of this Annual Report.
(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 AdCare 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:
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.adcarehealth.com.
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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.
AdCare Health Systems, Inc. | ||||
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by |
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/s/ BOYD P. GENTRY Boyd P. Gentry, President and Chief Executive Officer March 19, 2012 |
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
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TITLE
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DATE
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/s/ DAVID A. TENWICK
David A. Tenwick |
Director, Chairman | March 19, 2012 | ||
/s/ CHRISTOPHER F. BROGDON Christopher F. Brogdon |
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Director, Vice Chairman and Chief Acquisitions Officer |
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March 19, 2012 |
/s/ MARTIN D. BREW Martin D. Brew |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
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March 19, 2012 |
/s/ JEFFREY L. LEVINE Jeffrey L. Levine |
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Director |
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March 19, 2012 |
/s/ PHILIP S. RADCLIFFE Philip S. Radcliffe |
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Director |
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March 19, 2012 |
/s/ LAURENCE E. STURTZ Laurence E. Sturtz |
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Director |
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March 19, 2012 |
/s/ PETER J. HACKETT Peter J. Hackett |
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Director |
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March 19, 2012 |
/s/ BOYD P. GENTRY Boyd P. Gentry |
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Director, Chief Executive Officer (Principal Executive Officer) |
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March 19, 2012 |
/s/ JOSHUA J. MCCLELLAN Joshua J. McClellan |
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Director |
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March 19, 2012 |
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Exhibit | Description of Exhibit |
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2.1 | Purchase and Sale Agreement. dated as of August 15, 2011, among Eaglewood Villa, Ltd., Woodland Manor, Ltd. and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K/A filed August 19, 2011 | |||
2.2 | Purchase and Sale Agreement, dated as of August 15, 2011, among White River Health Systems, Inc. and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K/A filed August 19, 2011 | |||
2.3 | Purchase and Sale Agreement, made and entered into as of March 14, 2011, by and between KMJ Management, LLC and Arkansas ADK, LLC | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed March 29, 2011 | |||
2.4 | Amendment, made and entered into as of July 1, 2011, by and between KMJ Management, LLC and Arkansas ADK, LLC | Incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
2.5 | Amendment to Purchase and Sale Agreement, dated as of October 19, 2011, among Eaglewood Villa, Ltd., Woodland Manor, Ltd. and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed October 25, 2011 | |||
2.6 | Amendment, made and entered into as of November 30, 2011, by and between White River Health System, Inc. and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
2.7 | Second Amendment to Purchase and Sale Agreement, dated as of December 16, 2011, among Eaglewood Villa, Ltd., Woodland Manor, Ltd. and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K filed December 22, 2011. | |||
2.8 | Purchase and Sale Agreement, dated as of December 29, 2011, among Little Rock Aviv, L.L.C., Woodland Arkansas, L.L.C., Northridge Arkansas, L.L.C. and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed January 5, 2012. | |||
2.9 | Purchase and Sale Agreement, dated as of January 3, 2012, between SCLR, LLC and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed January 9, 2012 | |||
2.10 | Purchase and Sale Agreement, dated as of January 17, 2012, between Gyman Properties, LLC and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed January 23, 2012 | |||
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115
Exhibit | Description of Exhibit |
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3.1 | Amended and Restated Articles of Incorporation of Registrant | Incorporated by reference to Exhibit 3.1 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
3.2 | Code of Regulations of Registrant | Incorporated by reference to Exhibit 3.2 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
3.3 | Amendment to Amended and Restated Articles of Incorporation of Registrant | Incorporated by reference to Exhibit 3.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
4.1 | Specimen Common Share Certificate | Incorporated by reference to Exhibit 4.1 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
4.3 | Specimen Warrant Certificate | Incorporated by reference to Exhibit 4.3 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
4.4 | Form of Warrant Agreement, dated , 2006 | Incorporated by reference to Exhibit 4.4 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
4.5 | * | 2004 Stock Option Plan of AdCare Health Systems, Inc. | Incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | ||
4.6 | * | 2005 Stock Option Plan of AdCare Health Systems, Inc. | Incorporated by reference to Exhibit 4.2 of the Company's Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | ||
4.7 | * | AdCare Health Systems, Inc. 2011 Stock Incentive Plan | Incorporated by reference to Exhibit 4.3 of the Company's Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | ||
4.8 | * | Form of Non-Statutory Stock Option Agreement | Incorporated by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | ||
4.9 | * | Form of Incentive Stock Option Agreement | Incorporated by reference to Exhibit 4.5 of the Company's Registration Statement on Form S-8 (Registration No. 333-131542) filed October 27, 2011 | ||
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116
117
Exhibit | Description of Exhibit |
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10.4 | Form of Warrant to Purchase Shares of AdCare Health Systems, Inc. dated October 31, 2004 | Incorporated by reference to Exhibit 10.7 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
10.5 | Reimbursement Agreement between Community's Hearth & Home, Ltd. and Cornerstone Bank dated December 1, 2002 | Incorporated by reference to Exhibit 10.14 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
10.6 | Reimbursement Agreement between Community's Hearth & Home, Ltd. and The Huntington National Bank dated September 13, 2007 | Incorporated by reference to Exhibit 10.19 of the Company's annual report on form 10-KSB as amended March 31, 2008 | |||
10.7 | Form of Warrant granted to management to Purchase Shares of AdCare Health Systems, Inc. dated November 20, 2007 | Incorporated by reference to Exhibit 10.19 of the Company's annual report on form 10-KSB as amended March 31, 2008 | |||
10.8 | 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 10.19 of the Company's annual report on form 10-KSB as amended March 31, 2008 | |||
10.9 | Regulatory Agreement and Mortgage Note between Hearth & Home of Urbana and Red Mortgage Capital, Inc, in the original amount of $2,142,700 dated June 26, 2008 | Incorporated by reference to Exhibit 10.26 of the Company's annual report on form 10-K filed March 31, 2009 | |||
10.10 | Regulatory Agreement and Mortgage Note between Community's Hearth & Home and Red Mortgage Capital, Inc, in the original amount of $1,863,800 dated June 26, 2008 | Incorporated by reference to Exhibit 10.27 of the Company's annual report on form 10-K filed March 31, 2009 | |||
10.11 | Promissory Note between Assured Health Care and Huntington National Bank in the original amount of $760,000 dated July 24, 2008 | Incorporated by reference to Exhibit 10.28 of the Company's annual report on form 10-K filed March 31, 2009 | |||
10.12 | Promissory Note between AdCare Health Systems, Inc. and Huntington National Bank in the original amount of $300,000 dated October 17, 2008 | Incorporated by reference to Exhibit 10.29 of the Company's annual report on form 10-K filed March 31, 2009 | |||
10.13 | Promissory Note between AdCare Health Systems, Inc. and Huntington National Bank in the original amount of $100,000 dated November 14, 2008 | Incorporated by reference to Exhibit 10.30 of the Company's annual report on form 10-K filed March 31, 2009 | |||
10.14 | 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 Company's annual report on form 10-K filed March 31, 2009 | |||
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118
Exhibit | Description of Exhibit |
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10.15 | Promissory Note between AdCare Health Systems and the AdCare Deferred Compensation plan for a $150,000 line of credit dated January 2008. | Incorporated by reference to Exhibit 10.32 of the Company's annual report on form 10-K filed March 31, 2009 | |||
10.16 | Regulatory Agreement and Mortgage Note between Hearth & Home of Van Wert and Red Mortgage Capital, Inc, in the original amount of $2,181,200 dated November 1, 2009 | Incorporated by reference to Exhibit 10.33 of the Company's annual report on form 10-K filed March 31, 2010 | |||
10.17 | 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 Company's Form 8-K filed October 6, 2010 | |||
10.18 | Promissory Note between Coosa Nursing ADK, LLC, and Coosa Valley Health Care Inc. in the original amount of $600,000 dated September 30, 2010 | Incorporated by reference to Exhibits 10.1 and 10.2 of the Company's Form 8-K filed October 6, 2010 | |||
10.19 | Loan Agreement and Secured Promissory Note between Attalla Nursing ADK, LLC, and Metro City Bank in the original amount of $8,320,000 dated September 30, 2010 | Incorporated by reference to Exhibits 10.1 and 10.6 of the Company's Form 8-K filed October 6, 2010 | |||
10.20 | Form of Subordinated Convertible Note dated October 26, 2010 | Incorporated by reference to Exhibit 10.3 of the Company's Form 8-K filed November 1, 2010 | |||
10.21 | Credit Agreement between Gemino Healthcare Finance, LLC and certain subsidiaries of the Company named therein dated October 29, 2010 | Incorporated by reference to Exhibit 10.3 of the Company's Form 8-K filed November 4, 2010 | |||
10.22 | Employment Agreement between AdCare Health Systems, Inc. and Boyd Gentry, effective as of January 10, 2011 | Incorporated by reference to Exhibit 99.1 of the Company's Form 8-K filed January 14, 2011 | |||
10.23 | Securities Purchase Agreement dated March 31, 2011, by and among AdCare Health Systems, Inc. and the investors named therein | Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 6, 2011 | |||
10.24 | Registration Rights Agreement dated October 26, 2010, by and among AdCare Health Systems, Inc. and the investors named therein | Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 6, 2011 | |||
10.25 | Form of Lock-Up Agreement, dated March 31, 2011. | Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed April 6, 2011 | |||
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119
Exhibit | Description of Exhibit |
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10.26 | Promissory Note dated March 31, 2011, by and among AdCare Health Systems, Inc. and Anthony Cantone | Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed April 6, 2011 | |||
10.27 | Promissory Note dated April 29, 2011, between Erin Property Holdings, LLC, Erin Nursing, LLC and Regions Bank | Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 5, 2011 | |||
10.28 | Erin Property Holdings, LLC Deed to Secure Debt, Assignment of Rents and Security Agreement dated April 29, 2011 | Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed May 5, 2011 | |||
10.29 | Promissory Note, dated April 29, 2011, between Mt. Kenn Property Holdings, LLC, Mt. Kenn Nursing, LLC, and Regions Bank | Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed May 5, 2011 | |||
10.30 | 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 Company's Current Report on Form 8-K filed May 5, 2011 | |||
10.31 | CP Property Holdings, LLC Business Loan Agreement dated May 25, 2011 | Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 6, 2011 | |||
10.32 | CP Property Holdings, LLC Loan Agreement dated May 27, 2011 | Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed June 6, 2011 | |||
10.33 | Form of Promissory Note, issued by Mount Trace Nursing ADK, LLC | Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 16, 2011 | |||
10.34 | Amendment, dated June 22, 2011, between Hearth & Home of Ohio, Inc. and Christopher F. Brogdon | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed June 22, 2011 | |||
10.35 | Guaranty, dated May 26, 2011, made by Christopher F. Brogdon | Incorporated by reference to Exhibit 10.34 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.36 | Guaranty, dated May 26, 2011, made by Connie B. Brogdon | Incorporated by reference to Exhibit 10.35 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.37 | Operations Transfer Agreement, dated May 1, 2011, between Five Star Quality Care-GA, LLC and Erin Nursing, LLC | Incorporated by reference to Exhibit 10.36 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.38 | Operations Transfer Agreement, dated May 1, 2011, between Five Star Quality Care-GA, LLC and Mt. Kenn Nursing, LLC | Incorporated by reference to Exhibit 10.37 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
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120
Exhibit | Description of Exhibit |
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10.39 | Operations Transfer Agreement, dated May 1, 2011, between Five Star Quality Care-GA, LLC and Mt. Kenn Nursing, LLC | Incorporated by reference to Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.40 | Commercial Guaranty, dated May 25, 2011,made by Christopher F. Brogdon | Incorporated by reference to Exhibit 10.39 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.41 | Commercial Guaranty, dated May 25, 2011,made by Connie B. Brogdon | Incorporated by reference to Exhibit 10.40 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.42 | Joinder Agreement, Third Amendment and Supplement to Credit Agreement, dated June 2, 2011, among Gemino Healthcare Finance, LLC and the subsidiaries of the Company named therein | Incorporated by reference to Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.43 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.44 | Term Note, dated July 27, 2011, made by Erin Property Holdings, LLC in favor of Bank of America, with respect to the USDA Loan | Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 | |||
10.45 | Note, dated July 27, 2011, made by Erin Property Holdings, LLC, in favor of Bank of America, with respect to the SBA Loan | Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.46 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.47 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.48 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
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Exhibit | Description of Exhibit |
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10.49 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.50 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.51 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.52 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.53 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.54 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.55 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.56 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.57 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.58 | Unconditional Guarantee 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.59 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 |
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Exhibit | Description of Exhibit |
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10.60 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.61 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.62 | 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 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.63 | 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 10.20 to the Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011 | |||
10.64 | Securities Purchase Agreement dated April 29, 2011, by and among AdCare Health Systems, Inc. and the investors named therein | Incorporated by reference to Exhibit 10.2 of the Company's Form S-3 (File No. 333-175541) | |||
10.65 | Loan Agreement, made and entered into September 1, 2011, by and between Homestead Property Holdings, LLC and Metro City Bank | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.66 | Promissory Note, dated September 1, 2011, issued by Homestead Property Holdings, LLC, in favor of Metro City Bank, in the amount of $3,600,000 | Incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.67 | Mortgage and Security Agreement, dated September 1, 2011, between Homestead Property Holdings, LLC and Metro City Bank | Incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.68 | Security Agreement, dated September 1, 2011, between Homestead Property Holdings, LLC and Homestead Nursing, LLC, as the debtor, and Metro City Bank, as the secured party | Incorporated by reference to Exhibit 99.4 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.69 | Guaranty, dated as of September 1, 2011, issued by Homestead Nursing, LLC in favor of Metro City Bank | Incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.70 | Guaranty, dated as of September 1, 2011, issued by AdCare Health Systems, Inc., in favor of Metro City Bank | Incorporated by reference to Exhibit 99.6 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
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123
Exhibit | Description of Exhibit |
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10.71 | Guaranty, dated as of September 1, 2011, issued by Christopher F. Brogdon in favor of Metro City Bank | Incorporated by reference to Exhibit 99.7 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.72 | Loan Agreement, dated as of September 1, 2011, by and among Benton Property Holdings, LLC; Park Heritage Property Holdings, LLC and Valley River Property Holdings, LLC, as borrowers, and The PrivateBank and Trust Company, as lender | Incorporated by reference to Exhibit 99.8 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.73 | Promissory Note, dated September 1, 2011, issued by Benton Property Holdings, LLC; Park Heritage Property Holdings, LLC and Valley River Property Holdings, LLC, in favor of The PrivateBank and Trust Company, in the amount of $11,800,000 | Incorporated by reference to Exhibit 99.9 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.74 | 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 99.10 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.75 | Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing, dated as of September 1, 2011, executed by Benton Property Holdings, LLC, to and for the benefit of The PrivateBank and Trust Company | Incorporated by reference to Exhibit 99.11 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.76 | Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing, dated as of September 1, 2011, executed by Valley River Property Holdings, LLC, to and for the benefit of The PrivateBank and Trust Company | Incorporated by reference to Exhibit 99.12 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.77 | Guaranty of Payment and Performance, dated as of September 1, 2011, issued by AdCare Health Systems, Inc.; Benton Nursing, LLC; Park Heritage Nursing, LLC; and Valley River Nursing, LLC in favor of The PrivateBank and Trust Company | Incorporated by reference to Exhibit 99.13 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
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124
Exhibit | Description of Exhibit |
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10.78 | Secured Promissory Note, dated August 31, 2011, issued by Benton Property Holdings, LLC; Valley River Property Holdings, LLC; Homestead Property Holdings, LLC; Park Heritage Property Holdings, LLC and Home Office Property Holdings, LLC, in favor of KMJ Management, LLC (d/b/a Pinnacle Healthcare, LLC), in the amount of $2,400,000 | Incorporated by reference to Exhibit 99.14 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.79 | Mortgage, made and entered into as of August 31, 2011, by and between Benton Property Holdings, LLC and KMJ Management, LLC | Incorporated by reference to Exhibit 99.15 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.80 | Mortgage, made and entered into as of August 31, 2011, by and between Park Heritage Property Holdings, LLC and KMJ Management, LLC | Incorporated by reference to Exhibit 99.16 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.81 | Mortgage, made and entered into as of August 31, 2011, by and between Valley River Property Holdings, LLC and KMJ Management, LLC | Incorporated by reference to Exhibit 99.17 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.82 | Pledge and Security Agreement with Power of Sale, entered into and executed as of August 31, 2011, by and between AdCare Property Holdings, LLC and KMJ Management, LLC, with respect to one hundred percent (100%) of the ownership interest in Benton Property Holdings, LLC. | Incorporated by reference to Exhibit 99.18 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.83 | Pledge and Security Agreement with Power of Sale, entered into and executed as of August 31, 2011, by and between AdCare Property Holdings, LLC and KMJ Management, LLC, with respect to one hundred percent (100%) of the ownership interest in Valley River Property Holdings, LLC | Incorporated by reference to Exhibit 99.19 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.84 | Pledge and Security Agreement with Power of Sale, entered into and executed as of August 31, 2011, by and between AdCare Property Holdings, LLC and KMJ Management, LLC, with respect to one hundred percent (100%) of the ownership interest in Homestead Property Holdings, LLC | Incorporated by reference to Exhibit 99.20 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
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125
Exhibit | Description of Exhibit |
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10.85 | Pledge and Security Agreement with Power of Sale, entered into and executed as of August 31, 2011, by and between AdCare Property Holdings, LLC and KMJ Management, LLC, with respect to one hundred percent (100%) of the ownership interest in Park Heritage Property Holdings, LLC | Incorporated by reference to Exhibit 99.21 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.86 | Pledge and Security Agreement with Power of Sale, entered into and executed as of August 31, 2011, by and between AdCare Property Holdings, LLC and KMJ Management, LLC, with respect to one hundred percent (100%) of the ownership interest in Home Office Property Holdings, LLC | Incorporated by reference to Exhibit 99.22 to the Company's Current Report on Form 8-K filed September 7, 2011 | |||
10.87 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.88 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.89 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.90 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.91 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.92 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
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126
Exhibit | Description of Exhibit |
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10.93 | 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 Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.94 | Loan Agreement, dated as of September 30, 2011, by and among Benton Nursing, LLC, Park Heritage Nursing, LLC and Valley River Nursing, LLC, as borrowers, and The PrivateBank and Trust Company, as lender | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed October 6, 2011 | |||
10.95 | Promissory Note, dated September 30, 2011, issued by Benton Nursing, LLC, Park Heritage Nursing, LLC and Valley River Nursing, LLC, in favor of The PrivateBank and Trust Company, in the amount of $2,000,000 | Incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed October 6, 2011 | |||
10.96 | Guaranty of Payment and Performance, dated September 30, 2011, executed by AdCare Health Systems, Inc., Benton Property Holdings, LLC, Park Heritage Property Holdings, LLC and Valley River Property Holdings, LLC, in favor of The PrivateBank and Trust Company | Incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed October 6, 2011 | |||
10.97 | Term Loan Agreement, dated as of October 14, 2011, by and among Homestead Property Holdings, LLC and Homestead Nursing, LLC, as borrowers; AdCare Health Systems, Inc., as guarantor; and Square 1 Bank, as lender | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.98 | Term Note, dated October 14, 2011, issued by Homestead Property Holdings, LLC and Homestead Nursing, LLC, in favor of Square 1 Bank, in the amount of $3,600,000 | Incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.99 | Mortgage and Security Agreement, dated October 14, 2011, by and between Homestead Property Holdings, LLC and Square 1 Bank | Incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.100 | Security Agreement, dated October 14, 2011, by and between Homestead Property Holdings, LLC and Homestead Nursing, LLC, as debtors, and Square 1 Bank, as the secured party | Incorporated by reference to Exhibit 99.4 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.101 | Guaranty, dated October 14, 2011, issued by AdCare Health Systems, Inc. in favor of Square 1 Bank | Incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
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127
Exhibit | Description of Exhibit |
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10.102 | United States Department of Agriculture Rural Development, Unconditional Guarantee, Business and Industry Guaranteed Loan Program, on Form RD 4279-14, dated October 13, 2011, issued by AdCare Health Systems, Inc. in favor of Square 1 Bank | Incorporated by reference to Exhibit 99.6 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.103 | Escrow Agreement, dated October 14, 2011, by and among Homestead Property Holdings, LLC and Homestead Nursing, LLC, as borrowers, and Square 1 Bank, as both lender and escrow agent | Incorporated by reference to Exhibit 99.7 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.104 | Purchase and Sale Agreement, made and entered into as of May 5, 2011, by and between First Commercial Bank and Brogdon Family, LLC | Incorporated by reference to Exhibit 99.8 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.105 | First Amendment to Purchase and Sale Agreement, made and entered into as of June 13, 2011, by and between First Commercial Bank and Brogdon Family, LLC | Incorporated by reference to Exhibit 99.9 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.106 | Amendment and Assignment of Purchase and Sale Agreement, made and entered into as of September 30, 2011, by and among First Commercial Bank, Brogdon Family, LLC and AdCare Property Holdings, LLC | Incorporated by reference to Exhibit 99.10 to the Company's Current Report on Form 8-K filed October 20, 2011 | |||
10.107 | Guaranty of AdCare Health Systems, Inc., dated August 31, 2011, issued in favor of KMJ Management, LLC | Incorporated by reference to Exhibit 10.63 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 | |||
10.108 | Assignment of Lease and Landlord's Consent, made and entered into as of October 31, 2011, by and among Cassville Real Estate, Inc. (f/k/a Cassville Manor, Inc.), KMJ Enterprises Cassville, LLC and Rose Missouri Nursing, LLC | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed November 4, 2011 | |||
10.109 | Operations Transfer Agreement, dated as of November 1, 2011, by and between KMJ Management, LLC (d/b/a Pinnacle Healthcare, LLC) and Rose Missouri Nursing, LLC | Incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed November 4, 2011 | |||
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128
Exhibit | Description of Exhibit |
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10.110 | Guaranty of Lease, made as of November 1, 2011, issued by each of AdCare Health Systems, Inc., Christopher F. Brogdon and Connie B. Brogdon in favor of Cassville Real Estate, Inc | Incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed November 4, 2011 | |||
10.111 | Loan Agreement, made and entered into November 30, 2011, issued by Mt. V Property Holdings, LLC, Mountain View Nursing, LLC and Metro City Bank | Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.112 | Promissory Note, dated November 30, 2011, issued by Mt. V Property Holdings, LLC and Mountain View Nursing, LLC in favor of Metro City Bank in the amount of $3,114,000 | Incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.113 | Mortgage and Security Agreement, dated as of November 30, 2011, between Mt. V Property Holdings, LLC and Metro City Bank | Incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.114 | Security Agreement, dated November 30, 2011, between Mt. V Property Holdings, LLC, Mountain View Nursing, LLC and Metro City Bank | Incorporated by reference to Exhibit 99.4 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.115 | Guaranty, dated as of November 30, 2011, issued by Mt. V Property Holdings, LLC and Mountain View Nursing, LLC in favor of Metro City Bank | Incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.116 | Term Note, dated as of November 29, 2011, issued by Mountain Top AFL, LLC and Mountain Top Property Holdings, LLC, in favor of White River Health System, Inc., in the amount of $750,000 | Incorporated by reference to Exhibit 99.6 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.117 | Mortgage (with Security Agreement and Absolute Assignment of Rents and Leases) and Fixture Filing, dated as of November 30, 2011, executed by Mountain Top Property Holdings, LLC in favor of White River Health System, Inc. | Incorporated by reference to Exhibit 99.7 to the Company's Current Report on Form 8-K filed December 6, 2011 | |||
10.118 | * | Employment Agreement, dated December 1, 2011, between AdCare Health Systems, Inc. and David Rubenstein | Filed herewith | ||
10.119 | * | Employment Agreement, dated December 16, 2011, between AdCare Health Systems, Inc. and David Rubenstein | Filed herewith | ||
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129
Exhibit | Description of Exhibit |
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10.120 | Promissory Note, dated November 4, 2011, issued by Mt. Kenn Property Holdings, LLC in favor of The Bank of Las Vegas, in the amount of $3,175,200 | Filed herewith | |||
10.121 | Loan Agreement, dated November 4, 2011, by and between Mt. Kenn Property Holdings, LLC and The Bank of Las Vegas | Filed herewith | |||
10.122 | Guaranty, dated November 4, 2011, issued by Mt. Kenn Nursing, LLC in favor of The Bank of Las Vegas | Filed herewith | |||
10.123 | Guaranty, dated November 4, 2011, issued by Hearth & Home of Ohio, Inc. in favor of The Bank of Las Vegas | Filed herewith | |||
10.124 | Guaranty, dated November 4, 2011, issued by AdCare Health Systems, Inc. in favor of The Bank of Las Vegas | Filed herewith | |||
10.125 | Promissory Note, dated November 4, 2011, issued by Mt. Kenn Property Holdings, LLC in favor of Apax Capital, LLC, in the amount of $2,222,640 | Filed herewith | |||
10.126 | Loan Agreement, dated November 4, 2011, by and between Mt. Kenn Property Holdings, LLC and Apax Capital, LLC | Filed herewith | |||
10.127 | Guaranty, dated November 4, 2011, issued by Mt. Kenn Nursing, LLC in favor of Apax Capital, LLC | Filed herewith | |||
10.128 | Guaranty, dated November 4, 2011, issued by Hearth & Home of Ohio, Inc. in favor of Apax Capital, LLC | Filed herewith | |||
10.129 | Guaranty, dated November 4, 2011, issued by AdCare Health Systems, Inc. in favor of Apax Capital, LLC | Filed herewith | |||
10.130 | Promissory Note, dated November 4, 2011, issued by Mt. Kenn Property Holdings, LLC in favor of Economic Development Corporation of Fulton County, in the amount of $2,274,000 | Filed herewith | |||
10.131 | Loan Agreement, dated November 4, 2011, by and between Mt. Kenn Property Holdings, LLC and Economic Development Corporation of Fulton County. | Filed herewith | |||
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130
Exhibit | Description of Exhibit |
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10.132 | Unconditional Guarantee, dated November 4, 2011, issued by Mt. Kenn Nursing, LLC in favor of Economic Development Corporation of Fulton County | Filed herewith | |||
10.133 | Unconditional Guarantee, dated November 4, 2011, issued by Hearth & Home of Ohio, Inc. in favor of Economic Development Corporation of Fulton County | Filed herewith | |||
10.134 | Unconditional Guarantee, dated November 4, 2011, issued by AdCare Health Systems, Inc. in favor of Economic Development Corporation of Fulton County | Filed herewith | |||
10.135 | Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement, dated November 29, 2011, by and among Gemino Healthcare Finance, LLC and the subsidiaries of the Company named therein | Filed herewith | |||
10.136 | Third Amended and Restated Revolving Note, dated November 29, 2011, dated November 29, 2011, by and among Gemino Healthcare Finance, LLC and the subsidiaries of the Company named therein | Filed herewith | |||
10.137 | Guaranty, dated as of November 29, 2011, issued by AdCare Operations, LLC in favor of Gemino Healthcare Finance, LLC | Filed herewith | |||
10.138 | Loan Agreement, dated as of December 30, 2011, by and between Woodland Manor Property Holdings, LLC and The PrivateBank and Trust Company | Filed herewith | |||
10.139 | Promissory Note, dated as of December 30, 2011, issued by Woodland Manor Property Holdings, LLC in favor of The PrivateBank and Trust Company in the amount of $4,800,000 | Filed herewith | |||
10.140 | Guaranty of Payment and Performance, dated as of December 30, 2011, executed by Woodland Manor Property Holdings, LLC and Adcare Health Systems, Inc. in favor of The PrivateBank and Trust Company | Filed herewith | |||
10.141 | 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 | Filed herewith | |||
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131
Exhibit | Description of Exhibit |
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10.142 | 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 | Filed herewith | |||
10.143 | 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 | Filed herewith | |||
10.144 | Third Amended And Restated Multiple Facilities Lease, dated October 29, 2010, between Georgia LessorBonterra/Parkview, Inc. and ADK Bonterra/Parkview, LLC | Filed herewith | |||
10.145 | Guaranty, dated October 29, 2010, executed by AdCare Health Systems, Inc. in favor of Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.146 | Guaranty, dated October 29, 2010, executed by Hearth & Home of Ohio, Inc. in favor of Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.147 | Security Agreement, dated October 29, 2010, by and between AdCare Health Systems, Inc. and Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.148 | Security Agreement, dated October 29, 2010, by and between ADK Bonterra/Parkview, LLC and Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.149 | Security Agreement, dated October 29, 2010, by and between Hearth & Home of Ohio, Inc. and Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.150 | Pledge Agreement, dated October 29, 2010, between Hearth & Home of Ohio, Inc. and Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.151 | Subordination Agreement, dated October 29, 2010, between AdCare Health Systems, Inc., ADK Bonterra/Parkview, LLC and Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.152 | Letter of Credit Agreement, dated October 29, 2010, by and between ADK Bonterra/Parkview, LLC and Georgia LessorBonterra/Parkview, Inc. | Filed herewith |
132
Exhibit | Description of Exhibit |
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10.153 | Subordination, Non-Disturbance and Attornment Agreement, dated October 29, 2010, by and among Omega Healthcare Investors, Inc., ADK Bonterra/Parkview, LLC and Georgia LessorBonterra/Parkview, Inc. | Filed herewith | |||
10.154 | Assignment and Assumption of Second Amended and Restated Multiple Facilities Lease And Consent of Lessor, dated October 29, 2010, by and among Georgia LessorBonterra/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 | Filed herewith | |||
10.155 | Lease Agreement, dated August 1, 2010, between William M. Foster and ADK Georgia, LLC | Filed herewith | |||
10.156 | First Amendment to Lease, dated August 31, 2010, between William M. Foster and ADK Georgia, LLC | Filed herewith | |||
10.157 | * | Employment Offer Letter, dated May 15, 2011, from AdCare Health Systems, Inc. to Martin Brew | Filed herewith | ||
10.158 | * | Warrant to Purchase Shares of Common Stock, dated January 10, 2011, issued by AdCare Health Systems, Inc. to Boyd P. Gentry | Filed herewith | ||
10.159 | 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. | Filed herewith | |||
10.160 | Purchase Agreement, dated as of September 15, 2011, by and between JRT Group Properties, LLC and AdCare Hembree Road Property, LLC | Filed herewith | |||
10.161 | First Amendment to Purchase Agreement, dated as of October 31, 2011, by and between JRT Group Properties, LLC and AdCare Hembree Road Property, LLC | Filed herewith | |||
14.1 | Code of Business Conduct and Ethics | Incorporated by reference to Exhibit 10.19 of the Company's annual report on form 10-KSB as amended April 30, 2007 | |||
21.1 | Subsidiaries of the Registrant | Filed herewith |
133
Exhibit | Description of Exhibit |
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23.1 | Consent of Battelle & Battelle 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 | |||
99.1 | Audit Committee Charter | Incorporated by reference to Exhibit 99.1 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
99.2 | Compensation Committee Charter | Incorporated by reference to Exhibit 99.2 of the Company's Registration Statement Form SB (Registration No. 333-131542) filed February 3, 2006 | |||
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 |
134
Exhibit 10.118
EMPLOYMENT AGREEMENT
between
AdCare Health Systems, Inc. (the Company)
and
David Rubenstein (the Officer)
This Employment Agreement (Agreement) is entered into November 15, 2011, to be effective the later of December 19, 2011 or the date upon which Officer provides the Company with a fully executed release by Shoreline Healthcare Management, LLC (Shoreline) of all obligations owed by Officer to Shoreline under the Assignment and Assumption Agreement and First Amendment to Employment Agreement of September 12, 2011 (Prior Obligations), or as otherwise discussed herein.
Background
The Company and the Officer desire that the Officer be engaged as Executive Vice President and Chief Operating Officer of the Company and desire to enter into this Agreement to reflect the terms and conditions of such engagement.
Statement of Agreement
For good and valuable consideration (including the respective obligations of the parties hereunder), the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Employment . For the purposes and upon the terms and conditions hereinafter set forth, the Company agrees to employ the Officer and the Officer accepts such employment. The Officers employment shall be based in the Atlanta, Georgia greater metropolitan area, subject to business travel as necessary. The Company shall provide the Officer with an office in Roswell, Georgia at its 1145 Hembree Road location.
Section 2. Duties . The Officer shall be employed as of the Effective Date as Executive Vice President and Chief Operating Officer of the Company. The Officer shall have such duties and responsibilities as are commonly incident to such offices of a substantial corporation and shall report to the Chief Executive Officer. The Officer shall devote such time, attention and energy to the business of the Company and the performance of his duties hereunder as are necessary to properly perform his duties hereunder. The Officer represents and warrants that his entry into and performance of services under this Agreement does not violate the terms of his engagement with Shoreline, the restrictive covenants in any agreement with Shoreline or the Prior Obligations and that Shoreline has expressly released the Officer from any obligation not to compete with Shoreline or to solicit any clients, customers, vendors or suppliers of Shoreline. The Officer also represents and warrants that other than the Prior Obligations, he is bound by no agreement that would in any way restrict his ability to perform his duties for the Company. The Officer will be expected to carry out his duties with the highest degree of ethical
`
and moral standards and to comply with all terms and conditions regarding the nature and manner in carrying out his duties as may be established from time to time by the Company and set forth in its employee handbook or manual.
Section 3. Compensation .
(a) Salary . The Officer shall be paid an initial salary of $300,000 per year (the Annual Salary), payable in installments on the date of the Companys regular pay periods or such other installments as the Officer and the Company from time to time mutually agree upon. On or before June 30, 2012 Officers Annual Salary shall be increased to $325,000 per year. The Annual Salary shall be reviewed at least annually by the Compensation Committee of the Board of Directors of the Company (the Compensation Committee) for possible increases, and if so increased, the increased amount shall thereafter be deemed to be the Annual Salary for all purposes under this Agreement.
(b) Signing Bonus . The Officer shall be paid a one time bonus of $150,000 that shall be earned upon the completion of his first day of employment with the Company after the Effective Date and which shall be paid on the date of the first regular pay period after his first day of employment with the Company.
(c) Bonus . The Officer shall be eligible to earn an annual bonus for 2012 and each year thereafter, the target amount of which, based on reasonably expected performance, shall be seventy-five percent (75%) of Annual Salary (the Target Bonus). The performance criteria for earning the bonus and the formula for determining the amount of the bonus shall be established by the CEO and Compensation Committee under the Companys management incentive plan for executive officers. The criteria and the formula for each year will be provided to the Officer no later than the ninetieth (90 th ) day of that year. The bonus earned shall be paid as soon as feasible following the end of each year, but not later than March 30 of the following year. The bonus for any year will be earned and accrued and payable only if the Officer is employed by the Company on the last day of the year for which the bonus is earned.
(d) Equity Compensation . As of the Effective Date and as a material inducement to the Officer to enter into employment with the Company, the Compensation Committee shall grant to the Officer: (i) a warrant to purchase 100,000 shares of the Companys common stock, no par value (the Common Stock), with an exercise price per share equal to the Fair Market Value (as defined in the AdCare Health Systems, Inc. 2011 Stock Incentive Plan) of the Common Stock on the Effective Date (the First Warrant); and (ii) a warrant to purchase 100,000 shares of Common Stock with an exercise price per share equal to the sum of the Fair Market Value of the Common Stock on the Effective Date plus $1.00 per share (the Second Warrant and, together with the First Warrant, the Warrants). The First Warrant shall vest one third (1/3) on each of the three subsequent anniversaries of the Effective Date; the Second Warrant will vest one third (1/3) on the second, third and fourth anniversaries of the Effective Date. All vesting requires that the Officer is employed by the Company on such date, provided however, that if the Officer resigns for Good Reason, or a Change in Control occurs while the Officer is employed by the Company, then the Warrants shall immediately become one hundred percent (100%) vested. The Warrants shall have a term of ten (10) years subject to earlier expiration upon termination of Officers employment. The Warrants shall be exercisable
for cash, or at the option of the Officer, in a cashless exercise (by reducing the number of shares he receives upon exercise by a number of shares with a then Fair Market Value equal to the aggregate exercise price of the shares purchased). The Warrants, to the extent vested, shall continue to be exercisable for three (3) months following the Officers termination of employment. The Warrants shall be evidenced by warrant certificates bearing restrictive legends, in form and substance acceptable to the Company and the Officer and otherwise in accordance with this Agreement. The Officer understands and acknowledges that, (i) the Warrants are being issued without registration under the Securities Act of 1933, as amended (the Securities Act), or any state securities laws pursuant to an exemption from the Securities Act and such laws; (ii) the issuance of the Common Stock issuable upon the exercise of any Warrant or portion thereof may be made only if an exemption from the registration requirements of the Securities Act and any applicable state securities laws is available; and (iii) the Warrants and all shares of Common Stock issuable upon exercise of the Warrants may be disposed of only in accordance with the Securities Act and any applicable state securities laws.
The Officer shall be eligible to receive future grants of equity compensation at the discretion of the CEO and Compensation Committee.
For purposes of this Agreement, the following terms shall have the following meanings. Resignation for Good Reason means the Officers resignation within ninety (90) days following the Companys failure to cure a material breach of this Agreement within thirty (30) days after the Officer gives the Company written notice of such breach within ninety (90) days of the occurrence of such breach. Cause means the Officers fraud, dishonesty, willful misconduct, or gross negligence in his performance of his duties hereunder, or the Officers conviction for a crime of moral turpitude, or material breach by the Officer of this Agreement which the Officer fails to cure within thirty (30) days after the Company gives the Officer written notice of such breach. Change in Control means one or more sales or dispositions, within a twelve (12) month period, of assets representing a majority of the value of the assets of the Company or the acquisition (whether by purchase or through a merger or otherwise) of common stock of the Company immediately following which the holders of common stock of the Company immediately prior to such acquisition cease to own directly or indirectly common stock of the Company or its legal successor representing more than fifty percent (50%) of the voting power of the common stock of the Company or its legal successor.
Section 4. Officer Benefits; Vacation . During the Employment Term, the Officer shall be entitled to participate in life insurance, hospitalization medical insurance, retirement, and other benefits as are presently or may hereafter be provided to other executive officers of the Company and paid vacation in accordance with the Companys vacation policy for executive officers. In addition to the benefits generally available to executive officers of the Company, the Company agrees to (a) pay the COBRA premiums of the Officer and his spouse and eligible dependents for the period from the Effective Date until the Officer is covered under the Companys group health plan, such amounts to be paid as soon as feasible, or at the Companys option, waive any waiting period for eligibility under the Companys group health plan, and (b) continue to pay the Officer at the rate of 100% of his Annual Salary for a period of three (3) months after the date of Disability and at the rate of 60% of his Annual Salary as of the date of Disability for an additional twenty-one (21) months. For purposes of this Agreement, the term Disability means the inability of the Officer to perform his duties for medical reasons for a
period of ninety (90) days in any three hundred sixty-five (365) day period. In the event there is a question as to whether or not the Officer is subject to a Disability, the Board of Directors of the Company will select a qualified physician who will make the determination which will be binding on both the Officer and the Company.
Section 5. Term of Employment.
(a) The term of this Agreement shall begin on the Effective Date and remain in effect thereafter while the Officer is employed by the Company (the Employment Term).
(b) The Company and the Officer shall at all times have the right to terminate the Officers employment, in the case of the Company with or without Cause, and in the case of the Officer with or without Good Reason, and in either case subject to the terms of this Agreement. Upon termination of the Officers employment, the Officer shall have no obligation or duty to further serve the Company in any capacity (other than to comply with the obligations set forth in Section 6 below), nor shall the Company be under any obligation or duty to employ the Officer or provide the benefits specified in Section 4 or make any of the payments provided for in Sections 3, or 4, (except to the extent any such benefits are required to be provided by this Agreement, the applicable plan or law or any such payments under Sections 3, or 4, have accrued prior to and remain unpaid as of the effective date of such termination).
(c) If, during the first three months of continuous employment with the Company the officer resigns his employment for Good Reason, or the Company terminates the Officers employment without Cause, the Officer shall receive severance pay in the form of salary continuation for three months. If after a minimum of three months continuous employment with the Company after the Effective Date, but less than a six months of continuous employment with the Company, the Officer resigns his employment for Good Reason or the Company terminates the Officers employment without Cause (other than due to the Officers Disability), the Officer, or his successors and assigns, shall receive severance pay in an amount equal to one-half (1/2) times the sum of the Annual Salary, payable in substantially equal installments at least monthly for six (6) months after the Officers termination date. If, after a minimum of six months of continuous employment with the Company after the Effective Date the Officer resigns his employment for Good Reason or the Company terminates the Officers employment without Cause (other than due to the Officers Disability) the Officer or his successors and assigns shall receive the severance pay and benefits hereafter provided. The severance pay shall be an amount equal to one (1) times the sum of Annual Salary payable in substantially equal installments at least monthly for twelve (12) months after the termination date, plus if such termination occurs within three (3) months before or twenty-four (24) months after the occurrence of a Change in Control, an additional half time the sum of Annual Salary plus Target Bonus, payable in substantially equal installments at least monthly for six (6) months beginning immediately after twelve (12) months following the termination date.
For the period for which severance pay is paid, i.e., three (3), six (6), twelve (12) or eighteen (18) months following termination of employment (the Severance Period), the Officer and his family shall be entitled to continue to be covered under all employee benefit plans of the Company under which executive officers of the Company are covered and at the same cost and under the same terms and conditions as apply to executive officers, provided, however, that if the
Company is unable under applicable law or the insurer will not permit the Officer to be covered under any such plan, the Company shall pay to the Officer an amount each month during the Severance Period equal to the Companys cost of coverage for similarly situated executive officers. For purposes of this Agreement, termination of employment and similar terms means a termination of employment constituting a separation from service within the meaning of Code Section 409A. Notwithstanding the foregoing, to the extent necessary to avoid the Officer incurring a tax under Code Section 409A, any amount that is otherwise due within six (6) months following termination of employment shall be delayed until six months after termination of employment. The provisions contained in this Section shall survive the termination of the Officers employment.
Section 6. Certain Officer Covenants . The Officer expressly covenants and agrees to and with the Company as hereinafter set forth in this Section 6.
(a) Non-Competition . In the event that the Officers employment is voluntarily terminated by the Officer other than for Good Reason or is terminated by the Company for Cause, then for a period of twelve (12) months after the date of termination, the Officer shall not within the Area, directly or indirectly, acting alone or with others, on behalf of a competitor of the Company undertake to perform executive management responsibilities similar to those the Officer provides for the Company during the last twenty-four (24) months of his employment with the Company. For purposes of this Agreement Area shall be defined as a twenty-five (25) mile radius from the physical address of any skilled nursing facility or business office owned or operated by the Company as of the date of the termination of this Agreement. The foregoing restrictions shall not, however, prohibit the Officer from performing services for a division or business unit of a competitor of the Company if such division or business unit does not provide goods or services competitive with those offered by the Company. Notwithstanding anything herein to the contrary, the provisions of this Section shall not prohibit the Officer from acquiring less than 1% of the securities of any corporation which competes with the Company and whose shares are regularly traded on a nationally recognized stock exchange or over-the-counter market.
(b) Prohibition Against Hiring Employees . For a period of twelve (12) months after the date of termination, regardless of the reason for termination, the Officer shall not directly or indirectly solicit for employment, or directly or indirectly assist others in soliciting for employment, any person who was an employee of the Company at any time during the twelve (12) months preceding the date of the Officers termination of employment and with whom the Officer had material contact during such twelve (12) month period, unless the employment of such employee has been terminated by the Company or such employee has been laid-off by the Company during such period.
(c) Confidential Information . Except to the extent required in the performance of his duties hereunder, the Officer shall not at any time while he is employed by the Company or after termination of his employment, directly or indirectly, use, disclose, disseminate or otherwise publish Confidential Information. For purposes of this Agreement, the term Confidential Information means data and information relating to the business of the Company (whether constituting a Trade Secret or not) which is or has been disclosed to the Officer or of which the Officer became aware as a consequence of or through his relationship
with Company and which has value to the Company and is not generally known to the Companys competitors. Confidential Information shall not include any data or information which has been voluntarily disclosed to the public by the Company (except where such disclosure has been made by representative without authorization) or that has been independently developed and disclosed by others, or otherwise has entered the public domain through lawful means.
(d) Return of Information . Upon termination of the Officers employment for whatever reason, the Officer shall return to or leave with the Company, without making or retaining copies thereof, all documents, records, notebooks and similar repositories containing Confidential Information.
(e) Reasonableness of Covenants . The Officer has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Section 6, and hereby acknowledges and agrees that, in light of his position, the information to which he will be privy, and the nature of the business, the restrictions are reasonable in time and territory, are designed to eliminate unfair competition to the Company, are fully required to protect the Companys legitimate interests, and do not confer a benefit upon the Company disproportionate to any detriment to the Officer.
If the Officer breaches any of the agreements contained in this Section 6, then, in addition to any other rights or remedies which the Company may have, the Company shall have the right to an accounting and repayment of all profits or other benefits directly realized as a result of any such breach, to collect any damages caused by such breach in addition to those specifically listed herein, and to enforce any legal or equitable remedy (including injunctive relief) that it may have against the Officer to prevent further injury to the Company resulting from such breach.
The Officer acknowledges that any breach of the agreements contained in this Section could cause irreparable harm to the Company. The Officer acknowledges that damages in the event of Officers breach of this Agreement will be difficult, if not impossible, to ascertain and therefore it is agreed that the Company, in addition to, and without limiting any other remedy or right it may have under this Agreement or the law, will have the right to an injunction enjoining any such breach. The Officer agrees to reimburse the Company for all costs and expenses, including reasonable attorneys fees, incurred by the Company because of any breach of this provision, but only in the event that the Officer fails to cure such breach, within ten (10) days after being provided written notice thereof by the Company.
All covenants and provisions contained in Section 6 shall survive the termination of the Officers employment, regardless of the reason of such termination.
The Officer confirms that he has reviewed this Agreement with his independent legal counsel.
Section 7. Notices . Any notice or other communication required or desired to be given hereunder shall be in writing and shall be deemed duly given when personally delivered or when deposited in the United States mail, first class postage prepaid, properly addressed to the
parties at their respective addresses below or such addresses as shall be given by notice of any party.
The Company: |
AdCare Health Systems, Inc. |
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5057 Troy Road |
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Springfield, OH 45502 |
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Attn: Chairman |
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With a copy to: |
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Boyd P. Gentry |
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Two Buckhead Plaza |
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3050 Peachtree Road NW |
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Suite 355 |
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Atlanta, GA 30305 |
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The Officer: |
The most recent address that the Company has on file. |
Section 8. Actions by the Company . Any determination, consent, waiver, agreement, or other action under or with respect to this Agreement and its implementation of or by the Company shall not be deemed made, taken or effected hereunder unless made, taken or effected in a writing signed by a duly authorized officer of the Company.
Section 9. Waiver; Remedies Cumulative . No waiver of any right or option hereunder by any party shall operate as a waiver of any other right or option, or the same right or option as respects any subsequent occasion for its exercise, or of any legal remedy. No waiver by any party of any breach of this Agreement or of any agreement or covenant contained herein shall be held to constitute a waiver of any other breach or a continuation of the same breach. All remedies provided by this Agreement are in addition to all other remedies by it or the law provided.
Section 10. Assignment . This Agreement shall be binding upon and inure to the benefit of the legal successors of the Company. Neither this Agreement nor any rights hereunder shall be assignable and any such purported assignment by his shall be void and of no force or effect; provided, however, that in the event of the Officers death, any amounts that are unpaid and owing to the Officer or rights that are exercisable by the Officer shall be paid to or exercisable by his estate.
Section 11. Applicable Law . This Agreement shall be governed and construed in accordance with the laws of the State of Georgia. Any action for breach or to enforce the terms of this Agreement, or in any way arising out of or related to Officers employment with the company or this Agreement, including without limitation the covenants and provisions contained in Section 6, shall be brought in the Superior Court of Fulton County, Georgia or in a federal court sitting in Atlanta, Georgia, and the parties hereto each consent to jurisdiction and venue in such courts.
Section 12. Indemnification . The Company shall indemnify the Officer for his actions and omissions as an officer and provide for advancement of expenses in connection therewith to the maximum extent permitted by its state of incorporation. The Company shall maintain, during
the Employment Term and for at least three (3) years thereafter, an adequate officers liability policy covering the Officer for actions and omissions during the Employment Term.
Section 13. Severability and Judicial Modification . The parties agree that each provision of this Agreement is separate, distinct and severable from the other remaining provisions of this Agreement, and that the invalidity or unenforceability of any Agreement provision shall not effect the validity and unenforceability of any other provision or provisions of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of the conflict between such provision and any applicable law or public policy, it is the intent of the parties that such provision shall be modified by the Court to the extent appropriate to render the provision reasonable valid and enforceable.
Section 14. Miscellaneous . This Agreement constitutes the entire understanding between the parties concerning the Officers employment with the Company and supersedes any and all previous agreements between the Officer and the Company concerning such employment. Except for judicial modification as set forth in Section 13, this Agreement cannot be amended or modified in any respect, unless such amendment or modification is evidenced by a written instrument signed by both the Company and the Officer. The captions of the various sections of this Agreement are not a part of the context hereof, are inserted merely for convenience in locating the different provisions hereof and shall be ignored in construing this Agreement.
Section 15. Agreement Void If No Release . This Agreement shall be null and void and of no force or effect and the Company shall owe no compensation or obligation to the Officer if a full written release of the Prior Obligations is not delivered to the Company on or before December 31, 2011 in the form attached hereto as Exhibit A or in some other form acceptable to the Company in its sole discretion.
The parties have executed multiple counterparts of this Agreement, each of which shall be deemed to be an original, as of the date set forth at the beginning hereof.
THE COMPANY: |
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THE OFFICER: |
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ADCARE HEALTH SYSTEMS, INC. |
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DAVID RUBENSTEIN |
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By: |
/s/ Boyd P. Gentry |
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/s/ David Rubenstein |
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Boyd P. Gentry, |
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David Rubenstein |
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President and CEO |
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Exhibit 10.119
AMENDMENT TO
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the Amendment) is effective as of December 16, 2011, by and between ADCARE HEALTH SYSTEMS, INC. , an Ohio corporation (the Company), and DAVID RUBENSTEIN , an individual (Officer).
W I T N E S S E T H :
WHEREAS , the Company and Officer have entered into that certain Employment Agreement dated as of November 15, 2011, (the Agreement), and the parties wish to amend the Agreement as provided herein;
NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements herein, the parties hereto do hereby agree as follows:
1. Amendment of Agreement . The first paragraph of Section 3(d) of the Agreement is hereby amended and restated in its entirety as follows:
(d) Equity Compensation . As of the Effective Date and as a material inducement to the Officer to enter into employment with the Company, the Compensation Committee shall grant to the Officer: (i) a warrant to purchase 100,000 shares of the Companys common stock, no par value (the Common Stock), with an exercise price per share equal to the Fair Market Value (as defined in the AdCare Health Systems, Inc. 2011 Stock Incentive Plan) of the Common Stock on the Effective Date: provided, however, that if the Fair Market Value of the Common Stock on the Effective Date is less than $4.13, then the exercise price shall be equal to $4.13 per share (the First Warrant); and (ii) a warrant to purchase 100,000 shares of Common Stock with an exercise price per share equal to the sum of the Fair Market Value of the Common Stock on the Effective Date plus $1.00 per share (such sum, the Base Exercise Price); provided, however, that if the Fair Market Value of the Common Stock on the Effective Date is less than $4.13, then the exercise price shall be equal to (1) the Base Exercise Price minus (2) the absolute value of the difference between the Fair Market Value of the Common Stock on the Effective Date and $4.13 (the Second Warrant and, together with the First Warrant, the Warrants). The First Warrant shall vest one third (1/3) on each of the three subsequent anniversaries of the Effective Date; the Second Warrant will vest one third (1/3) on the second, third and fourth anniversaries of the Effective Date. All vesting requires that the Officer is employed by the Company on such date, provided however, that if the Officer resigns for Good Reason, or a Change in Control occurs while the Officer is employed by the Company, then the Warrants shall immediately become one hundred percent (100%) vested. The Warrants shall have a term of ten (10) years subject to earlier expiration upon termination of Officers employment. The Warrants shall be exercisable for cash, or at the option of the Officer, in a cashless exercise (by reducing the number of shares he receives upon exercise by a number of shares with a then Fair Market Value equal to the aggregate exercise price of the shares purchased). The Warrants, to the extent vested, shall continue to be exercisable for three (3) months following the Officers termination of employment. The Warrants shall be evidenced by warrant certificates bearing restrictive legends, in form and substance acceptable to the Company and the Officer and otherwise in accordance with this Agreement. The Officer understands and acknowledges that, (i) the Warrants are being issued without registration under
the Securities Act of 1933, as amended (the Securities Act), or any state securities laws pursuant to an exemption from the Securities Act and such laws; (ii) the issuance of the Common Stock issuable upon the exercise of any Warrant or portion thereof may be made only if an exemption from the registration requirements of the Securities Act and any applicable state securities laws is available; and (iii) the Warrants and all shares of Common Stock issuable upon exercise of the Warrants may be disposed of only in accordance with the Securities Act and any applicable state securities laws.
2. Miscellaneous . The existing terms and conditions of the Agreement shall remain in full force and effect except as such terms and conditions are specifically amended by, or conflict with, the terms of this Amendment. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Georgia, without regard to the conflicts of laws principles thereof. This Amendment may be executed simultaneously in counterparts, each of which will be deemed an original, and all of which together will constitute one and the same instrument. Executed counterparts may be delivered via facsimile transmission.
IN WITNESS WHEREOF , the Officer has executed and delivered this Amendment, and the Company has caused this Amendment to be executed and delivered by its duly authorized officer, all as of the day and year first above written.
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ADCARE HEALTH SYSTEMS, INC. |
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By: |
/s/ Boyd P. Gentry |
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Name: |
Boyd P. Gentry |
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Title: |
President and CEO |
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/s/ david rubenstein |
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DAVID RUBENSTEIN |
Exhibit 10.120
THE BANK OF LAS VEGAS
$3,175,200.00 |
November 4, 2011 |
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Marietta, Georgia |
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, jointly and severally if more than one, promises to pay to the order of THE BANK OF LAS VEGAS or its successors or assigns, 622 Douglas Avenue, P.O. Box 3210, Las Vegas, NM 87701, or such other place as the holder hereof may from time to time designate in writing, the principal sum of Three Million One Hundred Seventy-Five Thousand Two Hundred and No/100 Dollars ($3,175,200.00), plus interest on the unpaid principal balance at the rate specified below. Interest shall be calculated on the basis of the actual number of days elapsed over a year of 360 days.
For the period commencing on the date hereof and continuing through and until the Maturity Date (hereinafter defined) interest on the principal balance hereof, or portions thereof, outstanding from time to time shall accrue at the rate per annum equal to two percent (2%) plus the prime interest rate (hereinafter referred to as the Prime) quoted or published from time to time in the Money Rates section of the Wall Street Journal, or if no such rate is published in the Wall Street Journal, then the nearest comparable published rate, as determined by the holder of this Note. The interest rate shall be adjusted monthly hereafter upon any change in the Prime to the appropriate percentage above the Prime in effect on such date. At no time shall the interest rate be less than six and 25/100 ths percent (6.25%); accordingly, the rate of interest in effect as of the date hereof, and remaining in effect unless and until a monthly change occurs to the Prime and Prime is at least four and 25/100ths percent (4.25%), is and shall be six and 25/100 ths percent (6.25%) per annum.
The repayment of this note shall be as follows:
(i) On January 1, 2012, equal monthly installments of principal and interest based on a twenty (20) year amortization schedule each in the amount of $23,352.44 will be due and payable and continue on the 1 st day of each and every month thereafter through and including November , 2031.
(ii) On November , 2031 (the Maturity Date), the entire outstanding principal balance of the indebtedness hereby evidenced, together with all accrued but unpaid interest thereon, and all other sums due to holder hereunder shall be due and payable in full.
Payments, when made, shall be applied in a manner and order according to the sole discretion of the holder of this Note.
If any payment required to be paid by this Note is not paid in full within ten (10) days after its scheduled due date, the holder hereof may assess a late charge in the amount of five percent (5%) of the unpaid amount of the payment, or the maximum permitted by applicable law, whichever is less.
The undersigned and all guarantors and endorsers of this Note waive presentment, demand, protest and notice of non-payment and each of the undersigned is bound as a principal and not as a surety. The undersigned and all guarantors and endorsers hereof agree to any extensions of time of payment and partial payment, before, at or after maturity, without notice. This Note shall bear interest at
the rate of five percent (5%) per annum above the interest rate otherwise payable under the terms of this Note after maturity or in the event of default until paid in full, or the maximum permitted by applicable law, whichever is less.
This Note and any extensions or renewals hereof is secured by (i) that certain Deed to Secure Debt and Security Agreement dated of even date herewith and recorded in the Office of the Records of Cobb County, Georgia, and any and all amendments and replacements thereto, executed by the undersigned in favor of THE BANK OF LAS VEGAS and (ii) other security.
Failure to make any payment when due, or any default under any encumbrance or agreement securing this Note, or any default in any document executed simultaneously herewith in connection with the loan, shall cause the entire remaining unpaid balance of principal and interest to be declared immediately due and payable at the option of the holder of this Note.
In the event holder shall employ counsel to collect this obligation or to administer, protect or foreclose the security given in connection herewith, the undersigned, jointly and severally if more than one, agrees to pay reasonable attorneys fees for services of such counsel, whether or not suit is brought, plus costs incurred in connection therewith.
In the event of any prepayment on the outstanding principal balance of this Note, a prepayment penalty shall be assessed as follows:
1. If the prepayment occurs on or before the first anniversary date of the loan, the prepayment penalty will equal ten percent (10%) of the principal amount prepaid.
2. If the prepayment occurs after the first anniversary date, but on or before the second anniversary date, the prepayment penalty will equal nine percent (9%) of the principal amount prepaid.
3. If the prepayment occurs after the second anniversary date, but on or before the third anniversary date, the prepayment penalty will equal eight percent (8%) of the principal amount prepaid.
4. If the prepayment occurs after the third anniversary date, but on or before the fourth anniversary date, the prepayment penalty will equal seven percent (7%) of the principal amount prepaid.
5. If the prepayment occurs after the fourth anniversary date, but on or before the fifth anniversary date, the prepayment penalty will equal six percent (6%) of the principal amount prepaid.
6. If the prepayment occurs after the fifth anniversary date, but on or before the sixth anniversary date, the prepayment penalty will equal five percent (5%) of the principal amount prepaid.
7. If the prepayment occurs after the sixth anniversary date, but on or before the seventh anniversary date, the prepayment penalty will equal four percent (4%) of the principal amount prepaid.
8. If the prepayment occurs after the seventh anniversary date, but on or before the eighth anniversary date, the prepayment penalty will equal three percent (3%) of the principal amount prepaid.
9. If the prepayment occurs after the eighth anniversary date, but on or before the ninth anniversary date, the prepayment penalty will equal two percent (2%) of the principal amount prepaid.
10. If the prepayment occurs after the ninth anniversary date, but on or before the tenth anniversary date, the prepayment penalty will equal one percent (1%) of the principal amount prepaid.
A prepayment penalty shall not apply if the prepayment occurs after the tenth anniversary date.
This Promissory Note shall be governed by and construed and enforced in accordance with federal law and the substantive, and not the conflict laws of the State of New Mexico, except and only to the extent of procedural matters related to the perfection and enforcement of Lenders rights and remedies against the Property, which matters shall be governed by the laws of the State of Georgia. However, in the event that the enforceability or validity of any provision of this Note is challenged or questioned, such provision shall be governed by whichever applicable state or federal law would uphold or would enforce such challenged or questioned provision. The loan transaction which is evidenced by the Note and this Agreement has been applied for, considered, approved and made, and all necessary loan documents have been accepted by Lender in the State of New Mexico. Time is of the essence of this Note.
If the Note is mutilated, lost, stolen or destroyed, then upon surrender thereof (if mutilated) or receipt of evidence and indemnity (if lost, stolen or destroyed) the undersigned shall execute and deliver a new note of like tenor, which shall show all payments which have been made on account of the principal hereof.
THE UNDERSIGNED AND ANY ENDORSER OR GUARANTOR OF THIS NOTE HEREBY EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY AND ALL RIGHTS TO ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned has executed this Note under seal as of the date first above written.
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Mt. Kenn Property Holdings, LLC |
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By: |
/s/ Martin Brew |
(L.S.) |
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Martin Brew, Chief Financial Officer |
Exhibit 10.121
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and entered into this 4th day of November, 2011, by and between Mt. Kenn Property Holdings, LLC (the Borrower), and THE BANK OF LAS VEGAS (Lender).
W I T N E S S E T H :
WHEREAS, Borrower desires financing on certain real property located in Cobb County, Georgia, more particularly described in Exhibit A attached hereto and by this reference made a part hereof (Property);
WHEREAS, of even date herewith, Lender and Borrower entered into that certain loan wherein the Lender agreed to provide a loan (the Loan) to Borrower for up to Three Million One Hundred Seventy-Five Thousand Two Hundred and No/100 Dollars ($3,175,200.00) for the refinance of existing debt, closing costs and other permissible uses; and
WHEREAS, in order to loan funds to Borrower, Lender enters into this Loan Agreement with Borrower for the purposes herein contained; and
WHEREAS, the loan made hereunder will be secured in part by a first security interest in the Property and a first priority security interest in all the furniture, fixtures and equipment, now owned or hereafter acquired and located at the Property.
NOW, THEREFORE, for and in consideration of the premises, the sum of Ten ($10.00) Dollars and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
AMOUNT AND TERMS OF LOAN
1.1 RECITALS. Each of the above recitals are hereby incorporated into and made a part of this Agreement by this reference.
1.2 LOAN AND NOTE. The term Loan herein shall refer to the indebtedness of Borrower to Lender evidenced by a Note in the original principal amount of Three Million One Hundred Seventy-Five Thousand Two Hundred and No/100 Dollars ($3,175,200.00) in form satisfactory to Lender (the Note).
ARTICLE II
CONDITION OF LENDING
2.1 CONDITIONS PRECEDENT TO THE LOAN. As a condition precedent to Lender making the Loan, the Borrower shall deliver to Lender on or before the date of the Loan closing, the following, in form and substance satisfactory to Lender:
(a) The Note;
(b) The Deed to Secure Debt and Security Agreement to be filed on the Property;
(c) Assignment of Leases and Rents to be filed on the Property;
(d) UCC-1 Financing Statements;
(e) Evidence satisfactory to Lender of ownership of the Collateral by Borrower free and clear of encumbrances of any kind;
(f) Corporate guaranties from Mt. Kenn Nursing, LLC, AdCare Health Systems, Inc. and Hearth & Home of Ohio, Inc. (collectively, the Guarantor);
(g) Such other documents as reasonably may be required by the Lender or Lenders counsel.
The Loan documents as provided above (collectively, the Loan Documents), when prepared, shall set forth the matters contained in the Loan Agreement and contain such other provisions as are deemed necessary or desirable by Lender. The form and substance of all such documents must be satisfactory to Lender prior to disbursement by Lender of any of the proceeds of the Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to, and agrees with the Lender as follows:
3.1 POWER AND AUTHORIZATION.
(a) The Borrower has authorized the execution and delivery of the Note and all other documents contemplated by this Loan Agreement, and such execution and delivery will not violate any law, or any other agreement to which Borrower is a party.
(b) This Loan Agreement constitutes, and upon execution and delivery thereof, the Note, the Deed to Secure Debt and Security Agreement and the ancillary documents will constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower.
3.2 FINANCIAL CONDITION. The reports and financial statements of Borrower and Guarantors submitted to Lender in connection with the Loan have been prepared from Borrowers or Guarantors books and records in accordance with generally accepted accounting principles and practices, consistently applied, and fairly reflect the financial condition of Borrower and Guarantors for the periods therein defined. No material adverse changes have since occurred.
Except as disclosed in the aforesaid reports and financial statements, Borrower:
(a) Has not incurred any debts, liabilities or other obligations nor committed to incur any debts, liabilities or obligations;
(b) Has no liabilities, direct or contingent;
(c) Has made no investments in, advances to, or guaranties or obligations of any other company, person, firm, corporation, or other entity;
(d) Is not subject to any judgment, nor are there any liens, encumbrances or security interests outstanding against Borrower or any of its properties.
3.3 LITIGATION. There is no litigation, proceeding, claim or dispute pending or threatened against Borrower, the adverse determination of which would materially affect Borrowers ability to repay the loan or otherwise perform hereunder.
ARTICLE IV
COVENANTS BY BORROWER
Until all the obligations of Borrower under this Agreement have been performed and paid in full, Borrower covenants and agrees as follows:
4.1 INSURANCE. Borrower shall maintain or require Guarantors to maintain insurance on the Collateral (hereinafter defined) as described in Article VII hereof in such amounts and against such hazards and liabilities as is customarily maintained by other companies in the same geographical area operating similar businesses or as may be otherwise requested by the Lender. All such policies of insurance shall be in form and substance and with insurance companies satisfactory to Lender, and Borrower shall deliver evidence thereof to Lender upon request. Further, upon request, Lender shall be designated as loss payee or as Mortgagor under any such policies, as its interests may appear.
4.2 MAINTENANCE OF BUSINESS AND CORPORATE EXISTENCE. Borrower shall comply with all valid and applicable statutes, ordinances, rules and regulations and shall keep in force and effect all licenses, permits, bonds and franchises necessary for the proper conduct of its business.
4.3 ADVERSE CHANGES AND LITIGATION. Borrower shall immediately inform Lender of any material adverse change in its financial condition, or the financial condition of Guarantors, and shall promptly inform Lender of any litigation or threatened litigation or of the
occurrence of any other event or circumstance which might substantially affect the financial condition or business of Borrower or Guarantors.
4.4 MANAGEMENT AND OWNERSHIP. No material adverse change shall be made without the prior written consent of Lender in the management or ownership of Borrower, or in the manner in which its business is conducted. Said consent shall not be unreasonably withheld by Lender.
4.5 FINANCIAL STATEMENTS. Within ninety (90) days of Borrowers and Guarantors fiscal year end, Borrower shall furnish to Lender a copy of its compiled financial statement. Borrowers and Guarantors financial statements shall contain a balance sheet, profit and loss statement and aging of accounts receivable and accounts payable, all in reasonable detail, prepared in accordance with generally accepted accounting principles, consistently applied. Each set of financial statements shall be prepared by a certified public accountant or accountants acceptable to Lender and certified by a duly authorized officer of Borrower and Guarantor to be correct and accurate. Borrower and Guarantor shall also furnish a copy of its income tax returns, and such other or additional financial information as Lender may from time to time request. Borrower and Guarantor shall also furnish evidence of payment of real estate taxes on the Property to Lender on an annual basis. Borrower shall maintain a debt service coverage ratio of 1.25 to 1 for the duration of the Loan.
4.6
OTHER DEBTS. Other than the loan from Lender of even date herein in the principal amount of $3,175,200.00, that certain subordinate lien in favor of APAX CAPITAL, LLC in the principal amount of $2,222,640.00 which shall subsequently be replaced by a SBA 504 loan in the principal amount o $2,274,000.00, the Borrower shall not directly or indirectly incur, create, assume or permit to exist any obligation for payment of borrowed money, excepting only unsecured current liabilities incurred in the ordinary course of business and obligations contemplated by this Agreement, without the express written consent of Lender, which consent shall not be unreasonably withheld; provided, however, Borrower shall have the right to pledge its accounts receivable to a third party working capital lender, including, without limitation,
Gemino Healthcare Finance, LLC. Further, Borrower shall not guarantee the obligations of any person or entity, excepting only obligations contemplated by this Agreement.
4.7 SALE OF COLLATERAL. Borrower shall not sell, lease, transfer or otherwise dispose of any of the Collateral as described in ARTICLE VII hereof, other than in the ordinary course of Borrowers business. If Borrower should desire to sell any of the Collateral, a release price therefor will be determined at the sole discretion of Lender, and upon the sale of that Collateral, the release price will be paid over by Borrower to Lender and applied by Lender to payments due on the Note, in inverse order of the due dates, and Lender shall thereupon release its lien or security interest upon the Collateral sold.
4.8 BULK SALE. The Borrower shall not, without the prior written consent of the Lender, sell, transfer or convey all or any part of its interest in its assets to another entity.
4.9 ENCUMBRANCES. Borrower shall not incur or permit to exist nor allow Guarantors to incur or permit to exist any encumbrance, pledge or lien upon or against any of the Collateral, except:
(a) Liens or security interests required or expressly contemplated or permitted by this Agreement;
(b) Liens for taxes, assessments and other governmental charges not yet due and liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due; and
(c) Tax liens which are being contested in good faith.
4.10 TAXES. Borrower shall pay promptly, when due, all taxes, assessments and governmental charges or levies imposed upon the Borrower or upon the income or any property of the Borrower, as well as all claims of any kind (including claims for labor, material, supplies or rent) which, if unpaid, might become a lien upon any or all of the Collateral.
4.11 EXAMINATION OF RECORDS. Borrower shall permit any representative of Lender to examine and to audit any or all of Borrowers books and records and to copy portions thereof, and to visit and inspect any of the Collateral upon receipt of reasonable notification and request.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an Event of Default:
(a) Nonpayment, when due, of any principal, accrued interest, premium, fee or other charge due under the Note.
(b) Default by Borrower in the due observance or performance of any term, covenant, condition or agreement on its part to be performed under this Loan Agreement, the Note, or under any other document contemplated by this Loan Agreement.
(c) If Borrower shall:
(1) Make a general assignment for the benefit of its creditors;
(2) File a voluntary petition in bankruptcy;
(3) Be adjudicated as bankrupt or insolvent;
(4) File any petition or answer seeking, consenting to, or acquiescing in, reorganization, arrangement, composition, liquidation, dissolution or similar relief, under any present or future statute, law or regulation;
(5) File an answer admitting or failing to deny the material allegations of the petition against it for any such relief;
(6) Admit in writing its inability to pay its debts as they mature;
(7) Discontinue business; or
(8) Be unable to pay debts as they become due.
(d) Borrower fails to have vacated or set aside within thirty (30) days of its entry any court order appointing a receiver or trustee for all or a substantial portion of the Borrowers property.
(e) Any warranty, representation or statements made or furnished to Lender by Borrower in connection with the Loan or in connection with this Agreement (including any warranty, representation or statement in the application of Borrower for the Loan or in any accompanying financial statements) or to induce Lender to make the Loan, proves to be untrue, misleading or false in any material respect.
(f) Borrower suffers or permits any lien, encumbrance or security interest to attach to any of its property, except as herein otherwise expressly permitted, or if any judgment shall be entered against Borrower or any attachment shall be made against any property of Borrower, which judgment or attachment shall remain undischarged, unbonded, or undismissed for a period of thirty (30) days.
(g) Borrower defaults in the payment of any principal or interest on any obligation to Lender.
(h) Borrower shall sell, lease, or otherwise transfer or convey any of the Collateral, or any interest therein without Lenders prior written approval, except as herein otherwise expressly permitted.
(i) Borrower or Mt. Kenn Nursing, LLC defaults under or causes to be revoked, any state or local license or permit which is required in order to operate a skilled nursing facility.
ARTICLE VI
REMEDIES ON EVENT OF DEFAULT
6.1 DECLARE NOTE DUE. Upon the occurrence of any Event of Default as defined in this Agreement, the Note, the Deed to Secure Debt and Security Agreements, Security Agreement or any other document contemplated by this Agreement, then in any such event (subject however to any notice and cure provision or any grace period), Lender at its option, may
declare the entire unpaid balance of the Note to be forthwith due and payable, and thereupon such balance shall become so due and payable without presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived, and Borrower will forthwith pay to Lender the entire principal of and interest accrued on the Note.
6.2 OTHER REMEDIES. Upon the occurrence or discovery of an Event of Default, the Lender shall, in addition to its option to declare the entire unpaid amount of the Note due and payable, at its option:
(a) Move to protect its rights and remedies as a secured party under the Deeds to Secure Debt and Security Agreements and Security Agreement, by extrajudicial authority as set forth in those instruments, by action at law or equity, or by any other lawful remedy to enforce payment.
(b) Apply the proceeds from any disposition of the Collateral to the satisfaction of the following items in the order in which they are listed:
(1) The expenses of taking, preserving, insuring, repairing, holding and selling the Collateral, including any legal costs and attorneys fees. If any of the Note shall be referred to an attorney for collection, Borrower and all others liable on the Note, jointly and severally agree to pay reasonable attorneys fees and all costs of collection.
(2) The unpaid amount of any interest due on the Note, and all other expenses of Lender.
(3) The unpaid principal amounts of the Note.
(4) Any other indebtedness of Borrower to Lender.
(5) The remainder, if any, to Borrower, it being understood and agreed that if the proceeds realized from the disposition of the Collateral shall fail to satisfy items (1) through (4) above, Borrower shall forthwith pay any such deficiency to Lender upon demand.
(c) Exercise any and all rights of setoff which Lender may have against any account, fund or property of any kind, tangible or intangible, belonging to Borrower and which shall be in Lenders possession or under Lenders control.
ARTICLE VII
COLLATERAL
Borrowers obligation for payment of the Note shall be collateralized by the following (the Collateral):
7.1 DEED TO SECURE DEBT AND SECURITY AGREEMENT. A first Deed to Secure Debt and Security Agreement on the Property.
7.2 UCC FINANCING STATEMENT. A first lien on all the furniture, fixtures, and equipment now owned or hereafter acquired and located at the Property.
ARTICLE VIII
MISCELLANEOUS
8.1 CLOSING. The Lender shall not be obligated to make the Loan or advance any funds until Borrower has fully met all requirements herein set forth to be met by Borrower, and until Borrower has paid to Lender and any other parties entitled thereto, all fees and other charges due in connection with the Loan.
8.2 AMENDMENTS. No amendment of any provisions of this Loan Agreement, nor consent to any departure of Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.3 NOTICES. All notices and other communications provided for hereunder shall be in writing and mailed or telegraphed or delivered.
If to Borrower:
3050 Peachtree Road, NW, Suite 355
Two Buckhead Plaza
Atlanta, Georgia 30305
If to Lender:
622 Douglas Avenue
P.O. Box 3210
Las Vegas, NM 87701
8.4 GOVERNING LAW AND PARTIES BOUND. This Agreement shall be governed by and construed and enforced in accordance with federal law and the substantive, and not the conflict laws of the State of New Mexico, except and only to the extent of procedural matters related to the perfection and enforcement of Lenders rights and remedies against the Property, which matters shall be governed by the laws of the State of Georgia. However, in the event that the enforceability or validity of any provision of this Loan Agreement is challenged or questioned, such provision shall be governed by whichever applicable state or federal law would uphold or would enforce such challenged or questioned provision. The loan transaction which is evidenced by the Note and this Loan Agreement has been applied for, considered, approved and made, and all necessary loan documents have been accepted by Lender in the State of New Mexico.
8.5 ATTORNEYS FEES AND EXPENSES. If Lender shall incur any cost or expense, including, without limitation, reasonable attorneys fees, in connection with this Agreement, the Note or the Loan, in any manner whatsoever, direct or indirect, whether with
regard to the collection of amounts due, protection of Collateral, defense of Lender or otherwise, upon demand by Lender, Borrower shall pay the same or shall reimburse Lender therefor in full.
8.6 CHANGES IN OWNERSHIP. Transfers or changes of majority beneficial ownership in Borrower will be permitted, subject to satisfactory underwriting and compliance with applicable rating agency criteria, subject to the payment of a 1% transfer fee. Transfers of minority interests in the Borrower will be permitted without the payment of a transfer fee.
8.7 ASSIGNMENT BY BORROWER. No commitment issued by Lender to Borrower for the Loan nor any of Borrowers rights hereunder shall be assignable by Borrower without the prior written consent of Lender.
8.8 NO WAIVER: REMEDIES. No failure on the part of the Lender, and no delay in exercising any right under this Loan Agreement, shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Loan Agreement preclude any other or further exercise thereof or the exercise of any other right.
8.9 SEVERABILITY. In the event that any clause or provisions of this Loan Agreement or any document or instrument contemplated by this Agreement shall be held to be invalid by any court of competent jurisdiction, the invalidity of such clause or provision shall not affect any of the remaining portions or provisions of this Loan Agreement.
8.10 TIME. Time is of the essence of this Agreement.
8.11 GRACE AND NOTICE OF CURE RIGHTS. Notwithstanding any other provision to the contrary contained in this Agreement or in any of the other Loan Documents, upon the occurrence of a monetary default or a monetary Event of Default under any of the Loan Documents, Lender shall not be required to send written notice to Borrower and/or Guarantors. All loan payments are due on the first (1 st ) day of each month, however; payments will not be considered late until ten (10) days thereafter. In the event the default does not involve the payment of money by Borrower to Lender, Borrower and Guarantors shall have thirty (30) days following receipt of such notice to fully cure such default. In the event the default is cured within such period, it shall be as if no default had occurred.
8.12 MISCELLANEOUS. Notwithstanding anything contained in this Loan Agreement or in the loan documents, including, without limitation, any security agreement executed in connection with this Loan Agreement (collectively, the Loan Documents) evidencing the Loan, Lender agrees that its collateral for the loan expressly excludes (and any definition of Collateral in the Loan Documents shall also expressly exclude) all or part of the following property of Mt. Kenn Nursing, LLC:
(a) all Accounts; (b) all Payment Intangibles; (c) all Instruments, Chattel Paper (including Electronic Chattel Paper), Documents, Letter-of-Credit Rights, Supporting Obligations and Commercial Tort Claims, in each case to the extent arising out of, relating to or given in exchange for or settlement of or to evidence the obligation to pay any Account or Payment Intangible; (d) all General Intangibles (including contract rights and trademarks, copyrights, patents and other intellectual property) that arise out of or relate to any Account or Payment Intangible or from which any Account or Payment Intangible arises; (e) all remedies, guarantees
and collateral evidencing, securing or otherwise relating to or associated with any Account or Payment Intangible, including all rights of enforcement and collection; (f) all Commercial Lockboxes, Governmental Lockboxes, Collection Accounts and other Deposit Accounts into which Collections or other proceeds of Collateral or Advances are deposited, and all checks or Instruments from time to time representing or evidencing the same; (g) all cash, currency and other monies at any time in the possession or under the control of Mt. Kenn Nursing, LLCs working capital or operating lender [the Operations Lender] or a bailee of such Operations Lender; (h) all books and records evidencing or relating to or associated with any of the foregoing; (i) all information and data compiled or derived with respect to any of the foregoing (other than any such information and data subject to legal restrictions of patient confidentiality); and (j) all Collections, Accessions, receipts and Proceeds derived from any of the foregoing, all words with capitalized letters being defined in the Uniform Commercial Code or the loan agreement between Mt. Kenn Nursing, LLC and Operations Lender.
IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the date first above written.
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BORROWER: |
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Signed, sealed and delivered in the presence of: |
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Mt. Kenn Property Holdings, LLC |
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/s/ [Illegible] |
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By: |
/s/ Martin Brew |
(L.S.) |
Witness |
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Martin Brew, Chief Financial Officer |
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/s/ Ellen Smith |
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Notary Public |
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LENDER: |
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Signed, sealed and delivered in the presence of: |
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THE BANK OF LAS VEGAS |
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/s/ [Illegible] |
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Witness |
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By: |
/s/ Gilbert N. Vallejos |
(L.S.) |
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Name: |
Gilbert N. Vallejos |
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Title: |
Executive Vice President |
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/s/ Rosita P. Chavez |
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Notary Public |
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The undersigned hereby expressly agree and consent to all of the terms and conditions contained herein and further agree to be bound by all of the terms and conditions contained herein. This 4th day of November, 2011.
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GUARANTORS: |
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MT. KENN NURSING, LLC |
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By: |
/s/ Martin Brew |
(L.S.) |
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Martin Brew, Chief Financial Officer |
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ADCARE HEALTH SYSTEMS, INC. |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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[Corporate Seal] |
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HEARTH & HOME OF OHIO, INC. |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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[CORPORATE SEAL] |
Exhibit 10.122
GUARANTY
1. As an inducement for and in consideration of any loan(s), lease(s), or other financial accommodation(s) of even date herewith granted to MT. KENN PROPERTY HOLDINGS, LLC (hereinafter collectively called Obligor), by THE BANK OF LAS VEGAS (hereinafter, together with its successors and assigns, called Lender), the undersigned, Mt. Kenn Nursing, LLC (hereinafter called Guarantor), hereby, jointly and severally if more than one, unconditionally guarantees the full and prompt payment, observance and performance when due, whether at the stated time, by acceleration or otherwise, of all obligations of Obligor to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Guaranty, and whether now or hereafter existing, or due or to become due, including without limitation, the following:
(a) Any and all amounts owed by Obligor under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of Three Million One Hundred Seventy-Five Thousand Two Hundred and No/100 Dollars ($3,175,200.00) (the Note), with interest thereon according to the provisions thereof, and all obligations of Obligor thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and
(b) All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys fees and other legal expenses) by Lender pursuant to or in connection with the Note or any agreements and other documents in connection therewith plus applicable interest on such sums, expenses or costs; and
(c) Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above; and
(d) Any and all other indebtedness, obligations and liabilities of any kind, of Obligor to Lender, now or hereafter existing, absolute or contingent, joint and/or several, due or not due, secured or unsecured, arising by operation of law or otherwise, direct or indirect, including without limitation indebtedness, obligations and liabilities of Obligor to Lender as a member of any partnership, syndicate or association or other group and whether incurred by Obligor as principal, surety, endorser, guarantor, accommodation party or otherwise, and any obligations which give rise to an equitable remedy for breach of performance if such breach gives rise to an obligation by Obligor to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be referred to hereafter as the Liabilities. In the event any of the Liabilities shall not be paid or performed according to their terms, Guarantor, shall immediately pay, perform or cause the performance of the same, this Guaranty being a guarantee of full payment and performance and not of collectibility and in no way conditional or contingent. This Guaranty is an absolute, unconditional and continuing guarantee the Guarantor being jointly and severally liable with the Obligor and is in no way conditioned upon any requirement that Lender first attempt to collect
payment or seek performances of any of the Liabilities from Obligor or any other obligor or guarantor, or resort to any other security or other means of obtaining payment or performance of any of the Liabilities, or upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable attorneys fees and legal expenses) paid or incurred by Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially interested in Obligor or will receive other material economic benefits as a result of any loan(s), leases(s) or other financial accommodation(s) made or granted to Obligor by Lender from time to time. Guarantor further represents and warrants that Guarantor is willing to enter into this Guaranty as a material inducement to Lender to extend loan(s) or other financial accommodation(s), or to enter into lease(s), from time to time to or with Obligor, and acknowledges that Lender would not be willing to extend any such loan(s) or other financial accommodation(s) or enter into such lease(s) absent this Guaranty. In any community property state, if Guarantor is married, Guarantors promise is made for the benefit of Guarantors marital community.
5. Guarantor agrees that the occurrence of any of the following events shall constitute a default under this Guaranty: (a) the failure of Guarantor to perform or observe any obligation under this Guaranty or (b) the death, incompetency, dissolution or insolvency of Obligor or Guarantor or any other guarantor of any of the Liabilities, or (c) the inability of Obligor or Guarantor or any other guarantor of any of the Liabilities to pay debts as they mature, or (d) an assignment by Obligor or Guarantor or any other guarantor of any of the Liabilities for the benefit of creditors, or (e) the institution of any proceeding by or against Obligor or Guarantor or any other guarantor of any of the Liabilities (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for itself or for all or a substantial part of its property unless such petition and the case or proceeding initiated thereby are dismissed within thirty (30) days from the date of such filing, or (f) the institution by Guarantor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Guarantor, or (g) the default by Obligor under any other agreement or document concerning or relating to the Liabilities, or (h) the default by Guarantor under the terms of any other obligation of Guarantor to Lender, or (i) any representation or warranty contained herein or in any other document delivered by or on behalf of Guarantor or Obligor to Lender shall be false or misleading in any material respect, or (j) there shall be a material default or event of default under any other agreement or document securing or guaranteeing any of the obligations secured by this Guaranty, or (k) if Guarantor is a corporation, the sale, pledge or assignment by the shareholders of Guarantor of any shares of the stock of Guarantor without the prior written consent of Lender; the transfer of Guarantors assets not in the ordinary course of the Guarantors business; the merger or consolidation of Guarantor with another company or entity; the liquidation of Guarantor; or the issuance by Guarantor of any new stock or warrants, or the transfer of issued and outstanding treasury stock or warrants of Guarantor, or (l) if Guarantor is a partnership or joint venture, the sale, pledge, transfer or assignment by any of the partners or joint venturers of Guarantor of any of their partnership or joint venture interest in Guarantor; the withdrawal of any general partner(s) or joint venturer(s); or the admittance of any additional partner(s) or joint venturer(s) into Guarantor without the prior
written consent of Lender. Upon and after the occurrence of a default hereunder, the Liabilities shall be automatically accelerated and shall become immediately due and payable by Guarantor, or Guarantors successor or estate, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment to or for the benefit of Lender of the Liabilities, or any part thereof, is rescinded or must otherwise be returned by Lender due to the insolvency, bankruptcy or reorganization of Obligor or otherwise, all as though such payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, and in such order of application as Lender may from time to time elect, any property, balances, credits, deposits, accounts, instruments or moneys of Guarantor in the possession or control of Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional guaranty of payment and performance and not of collectibility and shall remain in full force and effect as to Guarantor, subject to discontinuance only as follows: Guarantor, or any person duly authorized and acting on behalf of Guarantor, may give written notice to Lender of discontinuance of this Guaranty, but no such notice shall be effective in any respect until it is actually received by Lender and no such notice shall affect or impair the obligations hereunder of Guarantor with respect to any Liabilities existing at the date of receipt of such notice by Lender (or any Liabilities required or permitted to be advanced by Lender on or after such date), or for renewals or extensions of such Liabilities made after Lender receives Guarantors notice, or any interest thereon or any expenses paid or incurred by Lender in endeavoring to collect such Liabilities, or any part thereof, or in enforcing this Guaranty against Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor shall not affect, impair or release the obligations hereunder of any other guarantor with respect to any of the Liabilities.
9. If requested by Lender, Guarantor hereby agrees to provide Lender, within 90 days after the end of each calendar year a financial statement prepared in accordance with generally accepted accounting principles, and within thirty (30) days of filing, a certified copy of Guarantors most recent federal tax return, and concurrently therewith a certificate to the effect that such Guarantor is not aware of any condition or event which constitutes a default under this Guaranty, or under any notes or other obligations of Guarantor or which, with the mere passage of time or notice, or both, would constitute a default under this Guaranty.
10. Lender may at any time and from time to time, without the consent of, or notice to, Guarantor, and without affecting, impairing or releasing the obligations of Guarantor hereunder, do any or all of the following: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligations hereunder, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Guarantor, with respect to any of the Liabilities, (c) renew, extend (including extensions beyond the original term), modify, alter, change the interest rate of, release or discharge any of the Liabilities, (d) settle, release or compromise any liability of any other guarantor of any of the Liabilities or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefor, (e)
accept partial payments of the Liabilities, (f) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Liabilities and any property securing any of the Liabilities, (g) consent to the transfer of any property securing any of the Liabilities, (h) resort to Guarantor for payment of any of the Liabilities, whether or not Lender shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other guarantor or any other party primarily or secondarily liable on any of the Liabilities, (i) make any other changes in its agreements with Obligor, and (j) stop lending money or extending other credit to Obligor.
11. Any amount received by Lender from whatsoever source and applied by it to the payment of the Liabilities may be applied in such a manner as provided in the Loan Agreement executed of even date herewith.
12. Guarantor is now adequately informed of Obligors financial condition, and Guarantor agrees to keep so informed. Guarantor agrees that Lender has no obligation to provide Guarantor with any present or future information concerning the financial condition of Obligor. Guarantor has not relied on financial information furnished by Lender in deciding to execute this Guaranty.
13. Guarantor hereby agrees that any debt of Obligor to Guarantor is expressly subordinate to the right of Lender to payment of the Liabilities, and that Lender shall be entitled to full payment of all of the Liabilities prior to the exercise by Guarantor of any rights to payment or performance of any debt which the Obligor may owe Guarantor. Guarantor assigns to Lender all rights Guarantor may have in any proceeding under the Federal Bankruptcy Code or any receivership or insolvency proceeding of Obligor, including all rights of Guarantor to be paid by Obligor. This assignment does not prevent Lender from enforcing Guarantors obligations hereunder in any way.
14. Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all defenses based on suretyship or impairment of collateral, and (f) all events and circumstances which might otherwise constitute a defense or discharge of the obligations of Obligor, Guarantor or any other guarantor. Guarantor shall not be released or discharged, either in whole or in part, by Lenders failure to perfect, delay in perfection or failure to continue the perfection of any security interest in any property that secures any of the Liabilities or any obligation of Guarantor hereunder, or to protect the property covered by any such security interest.
15. Lender may, without notice to Guarantor or Obligor of any kind, sell, assign, or transfer all or any of the Liabilities, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Liabilities shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee, or holder, as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. Lender shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of Lender as to so much of the Liabilities as it has not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect, impair or release this Guaranty.
18. For purposes of this Guaranty, Liabilities shall include all obligations of Obligor to Lender stated herein, notwithstanding any right or power of Obligor or anyone else to assert any claim or defense as to the payment or performance of such Liabilities, and no such claim or defense shall affect, impair or release the obligations of Guarantor hereunder.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal representatives, successors and assigns of Guarantor. If more than one party shall execute this Guaranty, the term Guarantor shall mean all parties executing this Guaranty, and all such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s), lease(s), or other financial accommodation(s) by Lender to Obligor and as a material inducement to Lender to make or enter into the loan(s), lease(s), or other financial accommodation(s) and accept this Guaranty, and notwithstanding anything to the contrary contained in this Guaranty or any other document delivered in connection with this Guaranty, Guarantor hereby irrevocably waives, disclaims and relinquishes any and all claims, rights or remedies which Guarantor may now have or hereafter acquire against Obligor that arise in connection with this Guaranty and/or the performance by Guarantor hereunder, including without limitation any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Obligor or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be directed to the addresses set forth herein or such other address as may be specified in a notice given in accordance with the requirements of this paragraph. Except as otherwise specifically provided herein, notices shall be deemed to be given three (3) days after mailing by certified or registered mail, return receipt requested, or one (1) business day after deposit with a recognized overnight courier, or when personally delivered to and received at the required address.
22. In the event any provision contained in this Guaranty is invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
23. The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided in O.C.G.A. § 10-7-24.
24. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE SUBSTANTIVE, AND NOT THE CONFLICT LAWS OF THE STATE OF NEW MEXICO, EXCEPT AND
ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT OF LENDERS RIGHTS AND REMEDIES AGAINST THE PROPERTY, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. HOWEVER, IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS GUARANTY IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS EVIDENCED BY THE NOTE AND THIS GUARANTY HAS BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY LENDER IN THE STATE OF NEW MEXICO.
GUARANTOR, AND LENDER BY ACCEPTANCE OF THIS GUARANTY, EACH HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION UNDER OR IN ANY WAY CONNECTED WITH THIS GUARANTY AND IN NO EVENT SHALL LENDER BE LIABLE FOR PUNITIVE OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date written below.
November 4, 2011. |
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Mt. Kenn Nursing, LLC |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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Address of Guarantor: |
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Exhibit 10.123
GUARANTY
1. As an inducement for and in consideration of any loan(s), lease(s), or other financial accommodation(s) of even date herewith granted to MT. KENN PROPERTY HOLDINGS, LLC (hereinafter collectively called Obligor), by THE BANK OF LAS VEGAS (hereinafter, together with its successors and assigns, called Lender), the undersigned, Hearth & Home of Ohio, Inc. (hereinafter called Guarantor), hereby, jointly and severally if more than one, unconditionally guarantees the full and prompt payment, observance and performance when due, whether at the stated time, by acceleration or otherwise, of all obligations of Obligor to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Guaranty, and whether now or hereafter existing, or due or to become due, including without limitation, the following:
(a) Any and all amounts owed by Obligor under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of Three Million One Hundred Seventy-Five Thousand Two Hundred and No/100 Dollars ($3,175,200.00) (the Note), with interest thereon according to the provisions thereof, and all obligations of Obligor thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and
(b) All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys fees and other legal expenses) by Lender pursuant to or in connection with the Note or any agreements and other documents in connection therewith plus applicable interest on such sums, expenses or costs; and
(c) Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above; and
(d) Any and all other indebtedness, obligations and liabilities of any kind, of Obligor to Lender, now or hereafter existing, absolute or contingent, joint and/or several, due or not due, secured or unsecured, arising by operation of law or otherwise, direct or indirect, including without limitation indebtedness, obligations and liabilities of Obligor to Lender as a member of any partnership, syndicate or association or other group and whether incurred by Obligor as principal, surety, endorser, guarantor, accommodation party or otherwise, and any obligations which give rise to an equitable remedy for breach of performance if such breach gives rise to an obligation by Obligor to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be referred to hereafter as the Liabilities. In the event any of the Liabilities shall not be paid or performed according to their terms, Guarantor, shall immediately pay, perform or cause the performance of the same, this Guaranty being a guarantee of full payment and performance and not of collectibility and in no way conditional or contingent. This Guaranty is an absolute, unconditional and continuing guarantee the Guarantor being jointly and severally liable with the Obligor and is in no way conditioned upon any requirement that Lender first attempt to collect
payment or seek performances of any of the Liabilities from Obligor or any other obligor or guarantor, or resort to any other security or other means of obtaining payment or performance of any of the Liabilities, or upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable attorneys fees and legal expenses) paid or incurred by Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially interested in Obligor or will receive other material economic benefits as a result of any loan(s), leases(s) or other financial accommodation(s) made or granted to Obligor by Lender from time to time. Guarantor further represents and warrants that Guarantor is willing to enter into this Guaranty as a material inducement to Lender to extend loan(s) or other financial accommodation(s), or to enter into lease(s), from time to time to or with Obligor, and acknowledges that Lender would not be willing to extend any such loan(s) or other financial accommodation(s) or enter into such lease(s) absent this Guaranty. In any community property state, if Guarantor is married, Guarantors promise is made for the benefit of Guarantors marital community.
5. Guarantor agrees that the occurrence of any of the following events shall constitute a default under this Guaranty: (a) the failure of Guarantor to perform or observe any obligation under this Guaranty or (b) the death, incompetency, dissolution or insolvency of Obligor or Guarantor or any other guarantor of any of the Liabilities, or (c) the inability of Obligor or Guarantor or any other guarantor of any of the Liabilities to pay debts as they mature, or (d) an assignment by Obligor or Guarantor or any other guarantor of any of the Liabilities for the benefit of creditors, or (e) the institution of any proceeding by or against Obligor or Guarantor or any other guarantor of any of the Liabilities (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for itself or for all or a substantial part of its property unless such petition and the case or proceeding initiated thereby are dismissed within thirty (30) days from the date of such filing, or (f) the institution by Guarantor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Guarantor, or (g) the default by Obligor under any other agreement or document concerning or relating to the Liabilities, or (h) the default by Guarantor under the terms of any other obligation of Guarantor to Lender, or (i) any representation or warranty contained herein or in any other document delivered by or on behalf of Guarantor or Obligor to Lender shall be false or misleading in any material respect, or (j) there shall be a material default or event of default under any other agreement or document securing or guaranteeing any of the obligations secured by this Guaranty, or (k) if Guarantor is a corporation, the sale, pledge or assignment by the shareholders of Guarantor of any shares of the stock of Guarantor without the prior written consent of Lender; the transfer of Guarantors assets not in the ordinary course of the Guarantors business; the merger or consolidation of Guarantor with another company or entity; the liquidation of Guarantor; or the issuance by Guarantor of any new stock or warrants, or the transfer of issued and outstanding treasury stock or warrants of Guarantor, or (l) if Guarantor is a partnership or joint venture, the sale, pledge, transfer or assignment by any of the partners or joint venturers of Guarantor of any of their partnership or joint venture interest in Guarantor; the withdrawal of any general partner(s) or joint venturer(s); or the admittance of any additional partner(s) or joint venturer(s) into Guarantor without the prior
written consent of Lender. Upon and after the occurrence of a default hereunder, the Liabilities shall be automatically accelerated and shall become immediately due and payable by Guarantor, or Guarantors successor or estate, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment to or for the benefit of Lender of the Liabilities, or any part thereof, is rescinded or must otherwise be returned by Lender due to the insolvency, bankruptcy or reorganization of Obligor or otherwise, all as though such payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, and in such order of application as Lender may from time to time elect, any property, balances, credits, deposits, accounts, instruments or moneys of Guarantor in the possession or control of Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional guaranty of payment and performance and not of collectibility and shall remain in full force and effect as to Guarantor, subject to discontinuance only as follows: Guarantor, or any person duly authorized and acting on behalf of Guarantor, may give written notice to Lender of discontinuance of this Guaranty, but no such notice shall be effective in any respect until it is actually received by Lender and no such notice shall affect or impair the obligations hereunder of Guarantor with respect to any Liabilities existing at the date of receipt of such notice by Lender (or any Liabilities required or permitted to be advanced by Lender on or after such date), or for renewals or extensions of such Liabilities made after Lender receives Guarantors notice, or any interest thereon or any expenses paid or incurred by Lender in endeavoring to collect such Liabilities, or any part thereof, or in enforcing this Guaranty against Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor shall not affect, impair or release the obligations hereunder of any other guarantor with respect to any of the Liabilities.
9. If requested by Lender, Guarantor hereby agrees to provide Lender, within 90 days after the end of each calendar year a financial statement prepared in accordance with generally accepted accounting principles, and within thirty (30) days of filing, a certified copy of Guarantors most recent federal tax return, and concurrently therewith a certificate to the effect that such Guarantor is not aware of any condition or event which constitutes a default under this Guaranty, or under any notes or other obligations of Guarantor or which, with the mere passage of time or notice, or both, would constitute a default under this Guaranty.
10. Lender may at any time and from time to time, without the consent of, or notice to, Guarantor, and without affecting, impairing or releasing the obligations of Guarantor hereunder, do any or all of the following: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligations hereunder, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Guarantor, with respect to any of the Liabilities, (c) renew, extend (including extensions beyond the original term), modify, alter, change the interest rate of, release or discharge any of the Liabilities, (d) settle, release or compromise any liability of any other guarantor of any of the Liabilities or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefor, (e)
accept partial payments of the Liabilities, (f) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Liabilities and any property securing any of the Liabilities, (g) consent to the transfer of any property securing any of the Liabilities, (h) resort to Guarantor for payment of any of the Liabilities, whether or not Lender shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other guarantor or any other party primarily or secondarily liable on any of the Liabilities, (i) make any other changes in its agreements with Obligor, and (j) stop lending money or extending other credit to Obligor.
11. Any amount received by Lender from whatsoever source and applied by it to the payment of the Liabilities may be applied in such a manner as provided in the Loan Agreement executed of even date herewith.
12. Guarantor is now adequately informed of Obligors financial condition, and Guarantor agrees to keep so informed. Guarantor agrees that Lender has no obligation to provide Guarantor with any present or future information concerning the financial condition of Obligor. Guarantor has not relied on financial information furnished by Lender in deciding to execute this Guaranty.
13. Guarantor hereby agrees that any debt of Obligor to Guarantor is expressly subordinate to the right of Lender to payment of the Liabilities, and that Lender shall be entitled to full payment of all of the Liabilities prior to the exercise by Guarantor of any rights to payment or performance of any debt which the Obligor may owe Guarantor. Guarantor assigns to Lender all rights Guarantor may have in any proceeding under the Federal Bankruptcy Code or any receivership or insolvency proceeding of Obligor, including all rights of Guarantor to be paid by Obligor. This assignment does not prevent Lender from enforcing Guarantors obligations hereunder in any way.
14. Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all defenses based on suretyship or impairment of collateral, and (f) all events and circumstances which might otherwise constitute a defense or discharge of the obligations of Obligor, Guarantor or any other guarantor. Guarantor shall not be released or discharged, either in whole or in part, by Lenders failure to perfect, delay in perfection or failure to continue the perfection of any security interest in any property that secures any of the Liabilities or any obligation of Guarantor hereunder, or to protect the property covered by any such security interest.
15. Lender may, without notice to Guarantor or Obligor of any kind, sell, assign, or transfer all or any of the Liabilities, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Liabilities shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee, or holder, as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. Lender shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of Lender as to so much of the Liabilities as it has not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect, impair or release this Guaranty.
18. For purposes of this Guaranty, Liabilities shall include all obligations of Obligor to Lender stated herein, notwithstanding any right or power of Obligor or anyone else to assert any claim or defense as to the payment or performance of such Liabilities, and no such claim or defense shall affect, impair or release the obligations of Guarantor hereunder.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal representatives, successors and assigns of Guarantor. If more than one party shall execute this Guaranty, the term Guarantor shall mean all parties executing this Guaranty, and all such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s), lease(s), or other financial accommodation(s) by Lender to Obligor and as a material inducement to Lender to make or enter into the loan(s), lease(s), or other financial accommodation(s) and accept this Guaranty, and notwithstanding anything to the contrary contained in this Guaranty or any other document delivered in connection with this Guaranty, Guarantor hereby irrevocably waives, disclaims and relinquishes any and all claims, rights or remedies which Guarantor may now have or hereafter acquire against Obligor that arise in connection with this Guaranty and/or the performance by Guarantor hereunder, including without limitation any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Obligor or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be directed to the addresses set forth herein or such other address as may be specified in a notice given in accordance with the requirements of this paragraph. Except as otherwise specifically provided herein, notices shall be deemed to be given three (3) days after mailing by certified or registered mail, return receipt requested, or one (1) business day after deposit with a recognized overnight courier, or when personally delivered to and received at the required address.
22. In the event any provision contained in this Guaranty is invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
23. The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided in O.C.G.A. § 10-7-24.
24. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE
STATE OF NEW MEXICO AND/OR OHIO, EXCEPT AND ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT OF LENDERS RIGHTS AND REMEDIES AGAINST THE REAL AND PERSONAL PROPERTY COLLATERAL, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. HOWEVER, IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS AGREEMENT IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICH WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS EVIDENCED BY THIS AGREEMENT HAS BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY LENDER IN THE STATE OF NEW MEXICO.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date written below.
November 4, 2011.
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Hearth & Home of Ohio, Inc. |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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[CORPORATE SEAL] |
Address of Guarantor: |
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Exhibit 10.124
GUARANTY
1. As an inducement for and in consideration of any loan(s), lease(s), or other financial accommodation(s) of even date herewith granted to MT. KENN PROPERTY HOLDINGS, LLC (hereinafter collectively called Obligor), by THE BANK OF LAS VEGAS (hereinafter, together with its successors and assigns, called Lender), the undersigned, AdCare Health Systems, Inc. (hereinafter called Guarantor), hereby, jointly and severally if more than one, unconditionally guarantees the full and prompt payment, observance and performance when due, whether at the stated time, by acceleration or otherwise, of all obligations of Obligor to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Guaranty, and whether now or hereafter existing, or due or to become due, including without limitation, the following:
(a) Any and all amounts owed by Obligor under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of Three Million One Hundred Seventy-Five Thousand Two Hundred and No/100 Dollars ($3,175,200.00) (the Note), with interest thereon according to the provisions thereof, and all obligations of Obligor thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and
(b) All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys fees and other legal expenses) by Lender pursuant to or in connection with the Note or any agreements and other documents in connection therewith plus applicable interest on such sums, expenses or costs; and
(c) Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above; and
(d) Any and all other indebtedness, obligations and liabilities of any kind, of Obligor to Lender, now or hereafter existing, absolute or contingent, joint and/or several, due or not due, secured or unsecured, arising by operation of law or otherwise, direct or indirect, including without limitation indebtedness, obligations and liabilities of Obligor to Lender as a member of any partnership, syndicate or association or other group and whether incurred by Obligor as principal, surety, endorser, guarantor, accommodation party or otherwise, and any obligations which give rise to an equitable remedy for breach of performance if such breach gives rise to an obligation by Obligor to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be referred to hereafter as the Liabilities. In the event any of the Liabilities shall not be paid or performed according to their terms, Guarantor, shall immediately pay, perform or cause the performance of the same, this Guaranty being a guarantee of full payment and performance and not of collectibility and in no way conditional or contingent. This Guaranty is an absolute, unconditional and continuing guarantee the Guarantor being jointly and severally liable with the Obligor and is in no way conditioned upon any requirement that Lender first attempt to collect
payment or seek performances of any of the Liabilities from Obligor or any other obligor or guarantor, or resort to any other security or other means of obtaining payment or performance of any of the Liabilities, or upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable attorneys fees and legal expenses) paid or incurred by Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially interested in Obligor or will receive other material economic benefits as a result of any loan(s), leases(s) or other financial accommodation(s) made or granted to Obligor by Lender from time to time. Guarantor further represents and warrants that Guarantor is willing to enter into this Guaranty as a material inducement to Lender to extend loan(s) or other financial accommodation(s), or to enter into lease(s), from time to time to or with Obligor, and acknowledges that Lender would not be willing to extend any such loan(s) or other financial accommodation(s) or enter into such lease(s) absent this Guaranty. In any community property state, if Guarantor is married, Guarantors promise is made for the benefit of Guarantors marital community.
5. Guarantor agrees that the occurrence of any of the following events shall constitute a default under this Guaranty: (a) the failure of Guarantor to perform or observe any obligation under this Guaranty or (b) the death, incompetency, dissolution or insolvency of Obligor or Guarantor or any other guarantor of any of the Liabilities, or (c) the inability of Obligor or Guarantor or any other guarantor of any of the Liabilities to pay debts as they mature, or (d) an assignment by Obligor or Guarantor or any other guarantor of any of the Liabilities for the benefit of creditors, or (e) the institution of any proceeding by or against Obligor or Guarantor or any other guarantor of any of the Liabilities (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for itself or for all or a substantial part of its property unless such petition and the case or proceeding initiated thereby are dismissed within thirty (30) days from the date of such filing, or (f) the institution by Guarantor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Guarantor, or (g) the default by Obligor under any other agreement or document concerning or relating to the Liabilities, or (h) the default by Guarantor under the terms of any other obligation of Guarantor to Lender, or (i) any representation or warranty contained herein or in any other document delivered by or on behalf of Guarantor or Obligor to Lender shall be false or misleading in any material respect, or (j) there shall be a material default or event of default under any other agreement or document securing or guaranteeing any of the obligations secured by this Guaranty, or (k) if Guarantor is a partnership or joint venture, the sale, pledge, transfer or assignment by any of the partners or joint venturers of Guarantor of any of their partnership or joint venture interest in Guarantor; the withdrawal of any general partner(s) or joint venturer(s); or the admittance of any additional partner(s) or joint venturer(s) into Guarantor without the prior written consent of Lender. Upon and after the occurrence of a default hereunder, the Liabilities shall be automatically accelerated and shall become immediately due and payable by Guarantor, or Guarantors successor or estate, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment to or for the benefit of Lender of the Liabilities, or any part thereof, is rescinded or must otherwise be returned by Lender due to the insolvency, bankruptcy or reorganization of Obligor or otherwise, all as though such payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, and in such order of application as Lender may from time to time elect, any property, balances, credits, deposits, accounts, instruments or moneys of Guarantor in the possession or control of Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional guaranty of payment and performance and not of collectibility and shall remain in full force and effect as to Guarantor, subject to discontinuance only as follows: Guarantor, or any person duly authorized and acting on behalf of Guarantor, may give written notice to Lender of discontinuance of this Guaranty, but no such notice shall be effective in any respect until it is actually received by Lender and no such notice shall affect or impair the obligations hereunder of Guarantor with respect to any Liabilities existing at the date of receipt of such notice by Lender (or any Liabilities required or permitted to be advanced by Lender on or after such date), or for renewals or extensions of such Liabilities made after Lender receives Guarantors notice, or any interest thereon or any expenses paid or incurred by Lender in endeavoring to collect such Liabilities, or any part thereof, or in enforcing this Guaranty against Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor shall not affect, impair or release the obligations hereunder of any other guarantor with respect to any of the Liabilities.
9. If requested by Lender, Guarantor hereby agrees to provide Lender, within 90 days after the end of each calendar year a financial statement prepared in accordance with generally accepted accounting principles, and within thirty (30) days of filing, a certified copy of Guarantors most recent federal tax return, and concurrently therewith a certificate to the effect that such Guarantor is not aware of any condition or event which constitutes a default under this Guaranty, or under any notes or other obligations of Guarantor or which, with the mere passage of time or notice, or both, would constitute a default under this Guaranty.
10. Lender may at any time and from time to time, without the consent of, or notice to, Guarantor, and without affecting, impairing or releasing the obligations of Guarantor hereunder, do any or all of the following: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligations hereunder, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Guarantor, with respect to any of the Liabilities, (c) renew, extend (including extensions beyond the original term), modify, alter, change the interest rate of, release or discharge any of the Liabilities, (d) settle, release or compromise any liability of any other guarantor of any of the Liabilities or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefor, (e) accept partial payments of the Liabilities, (f) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Liabilities and any property securing any of the Liabilities, (g) consent to the transfer of any property securing any of the Liabilities, (h) resort to Guarantor for payment of any of the Liabilities, whether or not Lender shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have
proceeded against any other guarantor or any other party primarily or secondarily liable on any of the Liabilities, (i) make any other changes in its agreements with Obligor, and (j) stop lending money or extending other credit to Obligor.
11. Any amount received by Lender from whatsoever source and applied by it to the payment of the Liabilities may be applied in such a manner as provided in the Loan Agreement executed of even date herewith.
12. Guarantor is now adequately informed of Obligors financial condition, and Guarantor agrees to keep so informed. Guarantor agrees that Lender has no obligation to provide Guarantor with any present or future information concerning the financial condition of Obligor. Guarantor has not relied on financial information furnished by Lender in deciding to execute this Guaranty.
13. Guarantor hereby agrees that any debt of Obligor to Guarantor is expressly subordinate to the right of Lender to payment of the Liabilities, and that Lender shall be entitled to full payment of all of the Liabilities prior to the exercise by Guarantor of any rights to payment or performance of any debt which the Obligor may owe Guarantor. Guarantor assigns to Lender all rights Guarantor may have in any proceeding under the Federal Bankruptcy Code or any receivership or insolvency proceeding of Obligor, including all rights of Guarantor to be paid by Obligor. This assignment does not prevent Lender from enforcing Guarantors obligations hereunder in any way.
14. Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all defenses based on suretyship or impairment of collateral, and (f) all events and circumstances which might otherwise constitute a defense or discharge of the obligations of Obligor, Guarantor or any other guarantor. Guarantor shall not be released or discharged, either in whole or in part, by Lenders failure to perfect, delay in perfection or failure to continue the perfection of any security interest in any property that secures any of the Liabilities or any obligation of Guarantor hereunder, or to protect the property covered by any such security interest.
15. Lender may, without notice to Guarantor or Obligor of any kind, sell, assign, or transfer all or any of the Liabilities, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Liabilities shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee, or holder, as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. Lender shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of Lender as to so much of the Liabilities as it has not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect, impair or release this Guaranty.
18. For purposes of this Guaranty, Liabilities shall include all obligations of Obligor to Lender stated herein, notwithstanding any right or power of Obligor or anyone else to assert any claim or defense as to the payment or performance of such Liabilities, and no such claim or defense shall affect, impair or release the obligations of Guarantor hereunder.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal representatives, successors and assigns of Guarantor. If more than one party shall execute this Guaranty, the term Guarantor shall mean all parties executing this Guaranty, and all such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s), lease(s), or other financial accommodation(s) by Lender to Obligor and as a material inducement to Lender to make or enter into the loan(s), lease(s), or other financial accommodation(s) and accept this Guaranty, and notwithstanding anything to the contrary contained in this Guaranty or any other document delivered in connection with this Guaranty, Guarantor hereby irrevocably waives, disclaims and relinquishes any and all claims, rights or remedies which Guarantor may now have or hereafter acquire against Obligor that arise in connection with this Guaranty and/or the performance by Guarantor hereunder, including without limitation any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Obligor or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be directed to the addresses set forth herein or such other address as may be specified in a notice given in accordance with the requirements of this paragraph. Except as otherwise specifically provided herein, notices shall be deemed to be given three (3) days after mailing by certified or registered mail, return receipt requested, or one (1) business day after deposit with a recognized overnight courier, or when personally delivered to and received at the required address.
22. In the event any provision contained in this Guaranty is invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
23. The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided in O.C.G.A. § 10-7-24.
24. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF NEW MEXICO AND/OR OHIO, EXCEPT AND ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT OF LENDERS RIGHTS AND REMEDIES AGAINST THE REAL AND PERSONAL PROPERTY COLLATERAL, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. HOWEVER, IN THE EVENT THAT THE ENFORCEABILITY OR
VALIDITY OF ANY PROVISION OF THIS AGREEMENT IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICH WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS EVIDENCED BY THIS AGREEMENT HAS BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY LENDER IN THE STATE OF NEW MEXICO.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date written below.
November 4, 2011 |
AdCare Health Systems, Inc. |
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By: |
/s/ Martin Brew |
Address of Guarantor: |
Martin Brew, Chief Financial Officer |
Exhibit 10.125
Apax Capital, LLC
$2,222,640.00 |
November 4, 2011 |
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, jointly and severally if more than one, promises to pay to the order of Apax Capital, LLC or its successors or assigns at 8190 W. Deer Valley Road, Suite 104-333, Peoria, Arizona 85382, or such other place as the holder hereof may from time to time designate in writing, the principal sum of Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00), plus interest on the unpaid principal balance at the rate specified below. Interest shall be calculated on the basis of the actual number of days elapsed over a year of 360 days.
For the period commencing on the date hereof and continuing through and until the Maturity Date (hereinafter defined) interest on the principal balance hereof, or portions thereof, outstanding from time to time shall accrue at the rate per annum equal to two percent (2%) plus the prime interest rate (hereinafter referred to as the Prime) quoted or published from time to time in the Money Rates section of the Wall Street Journal, or if no such rate is published in the Wall Street Journal, then the nearest comparable published rate, as determined by the holder of this Note. The interest rate shall be adjusted monthly hereafter upon any change in the Prime to the appropriate percentage above the Prime in effect on such date. At no time shall the interest rate be less than eight percent (8%); accordingly, the rate of interest in effect as of the date hereof, and remaining in effect unless and until a monthly change occurs to the Prime and Prime is at least six percent (6%), is and shall be eight percent (8.00%) per annum.
The repayment of this note shall be as follows:
(i) On December 14, 2012 (the Maturity Date), the entire outstanding principal balance of the indebtedness hereby evidenced, together with all accrued but unpaid interest thereon, and all other sums due to holder hereunder shall be due and payable in full.
Payments, when made, shall be applied in a manner and order pursuant to the terms of the Loan Agreement executed of even date herewith.
If any payment required to be paid by this Note is not paid in full within ten (10) days after its scheduled due date, the holder hereof may assess a late charge in the amount of five percent (5%) of the unpaid amount of the payment, or the maximum permitted by applicable law, whichever is less.
The undersigned and all guarantors and endorsers of this Note waive presentment, demand, protest and notice of non-payment and each of the undersigned is bound as a principal and not as a surety. The undersigned and all guarantors and endorsers hereof agree to any extensions of time of payment and partial payment, before, at or after maturity, without notice.
This Note shall bear interest at the rate of five points (5%) per annum above the interest rate otherwise payable under the terms of this Note after maturity or in the event of default until paid in full, or the maximum permitted by applicable law, whichever is less.
This Note and any extensions or renewals hereof is secured by (i) that certain Deed to Secure Debt and Security Agreement dated of even date herewith and recorded in the Office of the Records of Cobb County, Georgia, and any and all amendments and replacements thereto, executed by the undersigned in favor of Apax Capital, LLC and (ii) other security.
Failure to make any payment when due, or any default under any encumbrance or agreement securing this Note, or any default in any document executed simultaneously herewith in connection with the loan, shall cause the entire remaining unpaid balance of principal and interest to be declared immediately due and payable at the option of the holder of this Note.
In the event holder shall employ counsel to collect this obligation or to administer, protect or foreclose the security given in connection herewith, the undersigned, jointly and severally if more than one, agrees to pay reasonable attorneys fees for services of such counsel, whether or not suit is brought, plus costs incurred in connection therewith.
This Promissory Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of Georgia. Time is of the essence of this Note.
If the Note is mutilated, lost, stolen or destroyed, then upon surrender thereof (if mutilated) or receipt of evidence and indemnity (if lost, stolen or destroyed) the undersigned shall execute and deliver a new note of like tenor, which shall show all payments which have been made on account of the principal hereof.
THE UNDERSIGNED AND ANY ENDORSER OR GUARANTOR OF THIS NOTE HEREBY EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY AND ALL RIGHTS TO ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned has executed this Note under seal as of the date first above written.
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Mt. Kenn Property Holdings, LLC |
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By: |
/s/ Martin Brew |
(L.S.) |
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Martin Brew, Chief Financial Officer |
Exhibit 10.126
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and entered into this 4th day of November, 2011, by and between Mt. Kenn Property Holdings, LLC (the Borrower), and APAX CAPITAL, LLC (Lender).
W I T N E S S E T H :
WHEREAS, Borrower desires financing on certain real property located in Cobb County, Georgia, more particularly described in Exhibit A attached hereto and by this reference made a part hereof (Property);
WHEREAS, of even date herewith, Lender and Borrower entered into that certain loan wherein the Lender agreed to provide a loan (the Loan) to Borrower for up to Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) for the refinance of existing debt, closing costs and other permissible uses; and
WHEREAS, in order to loan funds to Borrower, Lender enters into this Loan Agreement with Borrower for the purposes herein contained; and
WHEREAS, the loan made hereunder will be secured in part by a second security interest in the Property and a second priority security interest in all the furniture, fixtures and equipment, now owned or hereafter acquired and located at the Property.
NOW, THEREFORE, for and in consideration of the premises, the sum of Ten ($10.00) Dollars and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
AMOUNT AND TERMS OF LOAN
1.1 RECITALS. Each of the above recitals are hereby incorporated into and made a part of this Agreement by this reference.
1.2 LOAN AND NOTE. The term Loan herein shall refer to the indebtedness of Borrower to Lender evidenced by a Note in the original principal amount of Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) in form satisfactory to Lender (the Note).
ARTICLE II
CONDITION OF LENDING
2.1 CONDITIONS PRECEDENT TO THE LOAN. As a condition precedent to Lender making the Loan, the Borrower shall deliver to Lender on or before the date of the Loan closing, the following, in form and substance satisfactory to Lender:
(a) The Note;
(b) The Deed to Secure Debt and Security Agreement to be filed on the Property;
(c) Assignment of Leases and Rents to be filed on the Property;
(d) UCC-1 Financing Statements;
(e) Evidence satisfactory to Lender of ownership of the Collateral by Borrower free and clear of encumbrances of any kind;
(f) Corporate guaranties from Mt. Kenn Nursing, LLC, AdCare Health Systems, Inc. and Hearth & Home of Ohio, Inc. (collectively, the Guarantor);
(g) Such other documents as reasonably may be required by the Lender or Lenders counsel.
The Loan documents as provided above (collectively, the Loan Documents), when prepared, shall set forth the matters contained in the Loan Agreement and contain such other provisions as are deemed necessary or desirable by Lender. The form and substance of all such documents must be satisfactory to Lender prior to disbursement by Lender of any of the proceeds of the Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to, and agrees with the Lender as follows:
3.1 POWER AND AUTHORIZATION.
(a) The Borrower has authorized the execution and delivery of the Note and all other documents contemplated by this Loan Agreement, and such execution and delivery will not violate any law, or any other agreement to which Borrower is a party.
(b) This Loan Agreement constitutes, and upon execution and delivery thereof, the Note, the Deed to Secure Debt and Security Agreement and the ancillary documents will constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower.
3.2 FINANCIAL CONDITION. The reports and financial statements of Borrower and Guarantors submitted to Lender in connection with the Loan have been prepared from Borrowers or Guarantors books and records in accordance with generally accepted accounting principles and practices, consistently applied, and fairly reflect the financial condition of Borrower and Guarantors for the periods therein defined. No material adverse changes have since occurred.
Except as disclosed in the aforesaid reports and financial statements, Borrower:
(a) Has not incurred any debts, liabilities or other obligations nor committed to incur any debts, liabilities or obligations;
(b) Has no liabilities, direct or contingent;
(c) Has made no investments in, advances to, or guaranties or obligations of any other company, person, firm, corporation, or other entity;
(d) Is not subject to any judgment, nor are there any liens, encumbrances or security interests outstanding against Borrower or any of its properties.
3.3 LITIGATION. There is no litigation, proceeding, claim or dispute pending or threatened against Borrower, the adverse determination of which would materially affect Borrowers ability to repay the loan or otherwise perform hereunder.
ARTICLE IV
COVENANTS BY BORROWER
Until all the obligations of Borrower under this Agreement have been performed and paid in full, Borrower covenants and agrees as follows:
4.1 INSURANCE. Borrower shall maintain or require Guarantors to maintain insurance on the Collateral (hereinafter defined) as described in Article VII hereof in such amounts and against such hazards and liabilities as is customarily maintained by other companies in the same geographical area operating similar businesses or as may be otherwise requested by the Lender. All such policies of insurance shall be in form and substance and with insurance companies satisfactory to Lender, and Borrower shall deliver evidence thereof to Lender upon request. Further, upon request, Lender shall be designated as loss payee or as Mortgagor under any such policies, as its interests may appear.
4.2 MAINTENANCE OF BUSINESS AND CORPORATE EXISTENCE. Borrower shall comply with all valid and applicable statutes, ordinances, rules and regulations and shall keep in force and effect all licenses, permits, bonds and franchises necessary for the proper conduct of its business.
4.3 ADVERSE CHANGES AND LITIGATION. Borrower shall immediately inform Lender of any material adverse change in its financial condition, or the financial condition of Guarantors, and shall promptly inform Lender of any litigation or threatened litigation or of the
occurrence of any other event or circumstance which might substantially affect the financial condition or business of Borrower or Guarantors.
4.4 MANAGEMENT AND OWNERSHIP. No material adverse change shall be made without the prior written consent of Lender in the management or ownership of Borrower, or in the manner in which its business is conducted. Said consent shall not be unreasonably withheld by Lender.
4.5 FINANCIAL STATEMENTS. Within ninety (90) days of Borrowers and Guarantors fiscal year end, Borrower shall furnish to Lender a copy of its compiled financial statement. Borrowers and Guarantors financial statements shall contain a balance sheet, profit and loss statement and aging of accounts receivable and accounts payable, all in reasonable detail, prepared in accordance with generally accepted accounting principles, consistently applied. Each set of financial statements shall be prepared by a certified public accountant or accountants acceptable to Lender and certified by a duly authorized officer of Borrower and Guarantor to be correct and accurate. Borrower and Guarantor shall also furnish a copy of its income tax returns, and such other or additional financial information as Lender may from time to time request. Borrower and Guarantor shall also furnish evidence of payment of real estate taxes on the Property to Lender on an annual basis. Borrower shall maintain a debt service coverage ratio of 1.25 to 1 for the duration of the Loan.
4.6 OTHER DEBTS. Other than the loan from Lender of even date herein in the principal amount of $2,222,640.00 which shall subsequently be replaced by a SBA 504 loan in the principal amount o $2,274,000.00, and that certain first lien in favor of THE BANK OF LAS VEGAS in the principal amount of $3,175,200.00, the Borrower shall not directly or indirectly incur, create, assume or permit to exist any obligation for payment of borrowed money, excepting only unsecured current liabilities incurred in the ordinary course of business and obligations contemplated by this Agreement, without the express written consent of Lender, which consent shall not be unreasonably withheld; provided, however, Borrower shall have the right to pledge its accounts receivable to a third party working capital lender, including, without limitation,Gemino Healthcare Finance, LLC. Further, Borrower shall not guarantee the obligations of any person or entity, excepting only obligations contemplated by this Agreement. Borrower and Lender acknowledge that both parties are awaiting SBA approval of a 504 loan (504 Loan) with the intent that this Loan shall be paid off in full by the funding of the 504 Loan.
4.7 SALE OF COLLATERAL. Borrower shall not sell, lease, transfer or otherwise dispose of any of the Collateral as described in ARTICLE VII hereof, other than in the ordinary course of Borrowers business. If Borrower should desire to sell any of the Collateral, a release price therefor will be determined at the sole discretion of Lender, and upon the sale of that Collateral, the release price will be paid over by Borrower to Lender and applied by Lender to payments due on the Note, in inverse order of the due dates, and Lender shall thereupon release its lien or security interest upon the Collateral sold.
4.8 BULK SALE. The Borrower shall not, without the prior written consent of the Lender, sell, transfer or convey all or any part of its interest in its assets to another entity.
4.9 ENCUMBRANCES. Borrower shall not incur or permit to exist nor allow Guarantors to incur or permit to exist any encumbrance, pledge or lien upon or against any of the Collateral, except:
(a) Liens or security interests required or expressly contemplated or permitted by this Agreement;
(b) Liens for taxes, assessments and other governmental charges not yet due and liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due; and
(c) Tax liens which are being contested in good faith.
4.10 TAXES. Borrower shall pay promptly, when due, all taxes, assessments and governmental charges or levies imposed upon the Borrower or upon the income or any property of the Borrower, as well as all claims of any kind (including claims for labor, material, supplies or rent) which, if unpaid, might become a lien upon any or all of the Collateral.
4.11 EXAMINATION OF RECORDS. Borrower shall permit any representative of Lender to examine and to audit any or all of Borrowers books and records and to copy portions thereof, and to visit and inspect any of the Collateral upon receipt of reasonable notification and request.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an Event of Default:
(a) Nonpayment, when due, of any principal, accrued interest, premium, fee or other charge due under the Note.
(b) Default by Borrower in the due observance or performance of any term, covenant, condition or agreement on its part to be performed under this Loan Agreement, the Note, or under any other document contemplated by this Loan Agreement.
(c) If Borrower shall:
(1) Make a general assignment for the benefit of its creditors;
(2) File a voluntary petition in bankruptcy;
(3) Be adjudicated as bankrupt or insolvent;
(4) File any petition or answer seeking, consenting to, or acquiescing in, reorganization, arrangement, composition, liquidation, dissolution or similar relief, under any present or future statute, law or regulation;
(5) File an answer admitting or failing to deny the material allegations of the petition against it for any such relief;
(6) Admit in writing its inability to pay its debts as they mature;
(7) Discontinue business; or
(8) Be unable to pay debts as they become due.
(d) Borrower fails to have vacated or set aside within thirty (30) days of its entry any court order appointing a receiver or trustee for all or a substantial portion of the Borrowers property.
(e) Any warranty, representation or statements made or furnished to Lender by Borrower in connection with the Loan or in connection with this Agreement (including any warranty, representation or statement in the application of Borrower for the Loan or in any accompanying financial statements) or to induce Lender to make the Loan, proves to be untrue, misleading or false in any material respect.
(f) Borrower suffers or permits any lien, encumbrance or security interest to attach to any of its property, except as herein otherwise expressly permitted, or if any judgment shall be entered against Borrower or any attachment shall be made against any property of Borrower, which judgment or attachment shall remain undischarged, unbonded, or undismissed for a period of thirty (30) days.
(g) Borrower defaults in the payment of any principal or interest on any obligation to Lender.
(h) Borrower shall sell, lease, or otherwise transfer or convey any of the Collateral, or any interest therein without Lenders prior written approval, except as herein otherwise expressly permitted.
(i) Borrower or Mt. Kenn Nursing, LLC defaults under or causes to be revoked, any state or local license or permit which is required in order to operate a skilled nursing facility.
ARTICLE VI
REMEDIES ON EVENT OF DEFAULT
6.1 DECLARE NOTE DUE. Upon the occurrence of any Event of Default as defined in this Agreement, the Note, the Deed to Secure Debt and Security Agreements, Security Agreement or any other document contemplated by this Agreement, then in any such event (subject however to any notice and cure provision or any grace period), Lender at its option, may
declare the entire unpaid balance of the Note to be forthwith due and payable, and thereupon such balance shall become so due and payable without presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived, and Borrower will forthwith pay to Lender the entire principal of and interest accrued on the Note.
6.2 OTHER REMEDIES. Upon the occurrence or discovery of an Event of Default, the Lender shall, in addition to its option to declare the entire unpaid amount of the Note due and payable, at its option:
(a) Move to protect its rights and remedies as a secured party under the Deeds to Secure Debt and Security Agreements and Security Agreement, by extrajudicial authority as set forth in those instruments, by action at law or equity, or by any other lawful remedy to enforce payment.
(b) Apply the proceeds from any disposition of the Collateral to the satisfaction of the following items in the order in which they are listed:
(1) The expenses of taking, preserving, insuring, repairing, holding and selling the Collateral, including any legal costs and attorneys fees. If any of the Note shall be referred to an attorney for collection, Borrower and all others liable on the Note, jointly and severally agree to pay reasonable attorneys fees and all costs of collection.
(2) The unpaid amount of any interest due on the Note, and all other expenses of Lender.
(3) The unpaid principal amounts of the Note.
(4) Any other indebtedness of Borrower to Lender.
(5) The remainder, if any, to Borrower, it being understood and agreed that if the proceeds realized from the disposition of the Collateral shall fail to satisfy items (1) through (4) above, Borrower shall forthwith pay any such deficiency to Lender upon demand.
(c) Exercise any and all rights of setoff which Lender may have against any account, fund or property of any kind, tangible or intangible, belonging to Borrower and which shall be in Lenders possession or under Lenders control.
ARTICLE VII
COLLATERAL
Borrowers obligation for payment of the Note shall be collateralized by the following (the Collateral):
7.1 DEED TO SECURE DEBT AND SECURITY AGREEMENT. A second Deed to Secure Debt and Security Agreement on the Property.
7.2 UCC FINANCING STATEMENT. A second lien on all the furniture, fixtures, and equipment now owned or hereafter acquired and located at the Property.
ARTICLE VIII
MISCELLANEOUS
8.1 CLOSING. The Lender shall not be obligated to make the Loan or advance any funds until Borrower has fully met all requirements herein set forth to be met by Borrower, and until Borrower has paid to Lender and any other parties entitled thereto, all fees and other charges due in connection with the Loan.
8.2 AMENDMENTS. No amendment of any provisions of this Loan Agreement, nor consent to any departure of Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.3 NOTICES. All notices and other communications provided for hereunder shall be in writing and mailed or telegraphed or delivered.
If to Borrower:
3050 Peachtree Road, NW, Suite 355
Two Buckhead Plaza
Atlanta, Georgia 30305
If to Lender:
8190 W. Deer Valley Road, Suite 104-333
Peoria, Arizona 85382
8.4 GOVERNING LAW AND PARTIES BOUND. This Agreement shall be governed by and construed and enforced in accordance with federal law and the substantive, and not the conflict laws of the State of Arizona, except and only to the extent of procedural matters related to the perfection and enforcement of Lenders rights and remedies against the Property, which matters shall be governed by the laws of the State of Georgia. However, in the event that the enforceability or validity of any provision of this Loan Agreement is challenged or questioned, such provision shall be governed by whichever applicable state or federal law would uphold or would enforce such challenged or questioned provision. The loan transaction which is evidenced by the Note and this Loan Agreement has been applied for, considered, approved and made, and all necessary loan documents have been accepted by Lender in the State of Arizona.
8.5 ATTORNEYS FEES AND EXPENSES. If Lender shall incur any cost or expense, including, without limitation, reasonable attorneys fees, in connection with this Agreement, the Note or the Loan, in any manner whatsoever, direct or indirect, whether with
regard to the collection of amounts due, protection of Collateral, defense of Lender or otherwise, upon demand by Lender, Borrower shall pay the same or shall reimburse Lender therefor in full.
8.6 CHANGES IN OWNERSHIP. Transfers or changes of majority beneficial ownership in Borrower will be permitted, subject to satisfactory underwriting and compliance with applicable rating agency criteria, subject to the payment of a 1% transfer fee. Transfers of minority interests in the Borrower will be permitted without the payment of a transfer fee.
8.7 ASSIGNMENT BY BORROWER. No commitment issued by Lender to Borrower for the Loan nor any of Borrowers rights hereunder shall be assignable by Borrower without the prior written consent of Lender.
8.8 NO WAIVER: REMEDIES. No failure on the part of the Lender, and no delay in exercising any right under this Loan Agreement, shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Loan Agreement preclude any other or further exercise thereof or the exercise of any other right.
8.9 SEVERABILITY. In the event that any clause or provisions of this Loan Agreement or any document or instrument contemplated by this Agreement shall be held to be invalid by any court of competent jurisdiction, the invalidity of such clause or provision shall not affect any of the remaining portions or provisions of this Loan Agreement.
8.10 TIME. Time is of the essence of this Agreement.
8.11 GRACE AND NOTICE OF CURE RIGHTS. Notwithstanding any other provision to the contrary contained in this Agreement or in any of the other Loan Documents, upon the occurrence of a monetary default or a monetary Event of Default under any of the Loan Documents, Lender shall not be required to send written notice to Borrower and/or Guarantors. All loan payments are due on the first (1 st ) day of each month, however; payments will not be considered late until ten (10) days thereafter. In the event the default does not involve the payment of money by Borrower to Lender, Borrower and Guarantors shall have thirty (30) days following receipt of such notice to fully cure such default. In the event the default is cured within such period, it shall be as if no default had occurred.
8.12 MISCELLANEOUS. Notwithstanding anything contained in this Loan Agreement or in the loan documents, including, without limitation, any security agreement executed in connection with this Loan Agreement (collectively, the Loan Documents) evidencing the Loan, Lender agrees that its collateral for the loan expressly excludes (and any definition of Collateral in the Loan Documents shall also expressly exclude) all or part of the following property of Mt. Kenn Nursing, LLC:
(a) all Accounts; (b) all Payment Intangibles; (c) all Instruments, Chattel Paper (including Electronic Chattel Paper), Documents, Letter-of-Credit Rights, Supporting Obligations and Commercial Tort Claims, in each case to the extent arising out of, relating to or given in exchange for or settlement of or to evidence the obligation to pay any Account or Payment Intangible; (d) all General Intangibles (including contract rights and trademarks, copyrights, patents and other intellectual property) that arise out of or relate to any Account or Payment Intangible or from which any Account or Payment Intangible arises; (e) all remedies, guarantees
and collateral evidencing, securing or otherwise relating to or associated with any Account or Payment Intangible, including all rights of enforcement and collection; (f) all Commercial Lockboxes, Governmental Lockboxes, Collection Accounts and other Deposit Accounts into which Collections or other proceeds of Collateral or Advances are deposited, and all checks or Instruments from time to time representing or evidencing the same; (g) all cash, currency and other monies at any time in the possession or under the control of Mt. Kenn Nursing, LLCs working capital or operating lender [the Operations Lender] or a bailee of such Operations Lender; (h) all books and records evidencing or relating to or associated with any of the foregoing; (i) all information and data compiled or derived with respect to any of the foregoing (other than any such information and data subject to legal restrictions of patient confidentiality); and (j) all Collections, Accessions, receipts and Proceeds derived from any of the foregoing, all words with capitalized letters being defined in the Uniform Commercial Code or the loan agreement between Mt. Kenn Nursing, LLC and Operations Lender.
IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the date first above written.
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BORROWER: |
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Signed, sealed and delivered in the presence of: |
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Mt. Kenn Property Holdings, LLC |
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/s/ [Illegible] |
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By: |
/s/ Martin Brew |
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Witness |
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Martin Brew, Chief Financial Officer |
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/s/ Ellen Smith |
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Notary Public |
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LENDER: |
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Signed, sealed and delivered in the presence of: |
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APAX CAPITAL, LLC |
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Witness |
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/s/ Sanat B. Patel |
(L.S.) |
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Name: |
Sanat B. Patel |
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President |
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/s/ William Striplin |
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Notary Public |
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The undersigned hereby expressly agree and consent to all of the terms and conditions contained herein and further agree to be bound by all of the terms and conditions contained herein. This 4th day of November, 2011.
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GUARANTORS: |
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MT. KENN NURSING, LLC |
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By: |
/s/ Martin Brew |
(L.S.) |
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Martin Brew, Chief Financial Officer |
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ADCARE HEALTH SYSTEMS, INC. |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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[Corporate Seal] |
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HEARTH & HOME OF OHIO, INC. |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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[CORPORATE SEAL] |
Exhibit 10.127
GUARANTY
1. As an inducement for and in consideration of any loan(s), lease(s), or other financial accommodation(s) of even date herewith granted to Mt. Kenn Property Holdings, LLC (hereinafter collectively called Obligor), by Apax Capital, LLC (hereinafter, together with its successors and assigns, called Lender), the undersigned, Mt. Kenn Nursing, LLC (hereinafter called Guarantor), hereby, jointly and severally if more than one, unconditionally guarantees the full and prompt payment, observance and performance when due, whether at the stated time, by acceleration or otherwise, of all obligations of Obligor to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Guaranty, and whether now or hereafter existing, or due or to become due, including without limitation, the following:
(a) Any and all amounts owed by Obligor under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) (the Note), with interest thereon according to the provisions thereof, and all obligations of Obligor thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and
(b) All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys fees and other legal expenses) by Lender pursuant to or in connection with the Note or any agreements and other documents in connection therewith plus applicable interest on such sums, expenses or costs; and
(c) Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above; and
(d) Any and all other indebtedness, obligations and liabilities of any kind, of Obligor to Lender, now or hereafter existing, absolute or contingent, joint and/or several, due or not due, secured or unsecured, arising by operation of law or otherwise, direct or indirect, including without limitation indebtedness, obligations and liabilities of Obligor to Lender as a member of any partnership, syndicate or association or other group and whether incurred by Obligor as principal, surety, endorser, guarantor, accommodation party or otherwise, and any obligations which give rise to an equitable remedy for breach of performance if such breach gives rise to an obligation by Obligor to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be referred to hereafter as the Liabilities. In the event any of the Liabilities shall not be paid or performed according to their terms, Guarantor, shall immediately pay, perform or cause the performance of the same, this Guaranty being a guarantee of full payment and performance and not of collectibility and in no way conditional or contingent. This Guaranty is an absolute, unconditional and continuing guarantee the Guarantor being jointly and severally liable with the Obligor and is in no way conditioned upon any requirement that Lender first attempt to collect
payment or seek performances of any of the Liabilities from Obligor or any other obligor or guarantor, or resort to any other security or other means of obtaining payment or performance of any of the Liabilities, or upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable attorneys fees and legal expenses) paid or incurred by Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially interested in Obligor or will receive other material economic benefits as a result of any loan(s), leases(s) or other financial accommodation(s) made or granted to Obligor by Lender from time to time. Guarantor further represents and warrants that Guarantor is willing to enter into this Guaranty as a material inducement to Lender to extend loan(s) or other financial accommodation(s), or to enter into lease(s), from time to time to or with Obligor, and acknowledges that Lender would not be willing to extend any such loan(s) or other financial accommodation(s) or enter into such lease(s) absent this Guaranty. In any community property state, if Guarantor is married, Guarantors promise is made for the benefit of Guarantors marital community.
5. Guarantor agrees that the occurrence of any of the following events shall constitute a default under this Guaranty: (a) the failure of Guarantor to perform or observe any obligation under this Guaranty or (b) the death, incompetency, dissolution or insolvency of Obligor or Guarantor or any other guarantor of any of the Liabilities, or (c) the inability of Obligor or Guarantor or any other guarantor of any of the Liabilities to pay debts as they mature, or (d) an assignment by Obligor or Guarantor or any other guarantor of any of the Liabilities for the benefit of creditors, or (e) the institution of any proceeding by or against Obligor or Guarantor or any other guarantor of any of the Liabilities (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for itself or for all or a substantial part of its property unless such petition and the case or proceeding initiated thereby are dismissed within thirty (30) days from the date of such filing, or (f) the institution by Guarantor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Guarantor, or (g) the default by Obligor under any other agreement or document concerning or relating to the Liabilities, or (h) the default by Guarantor under the terms of any other obligation of Guarantor to Lender, or (i) any representation or warranty contained herein or in any other document delivered by or on behalf of Guarantor or Obligor to Lender shall be false or misleading in any material respect, or (j) there shall be a material default or event of default under any other agreement or document securing or guaranteeing any of the obligations secured by this Guaranty, or (k) if Guarantor is a corporation, the sale, pledge or assignment by the shareholders of Guarantor of any shares of the stock of Guarantor without the prior written consent of Lender; the transfer of Guarantors assets not in the ordinary course of the Guarantors business; the merger or consolidation of Guarantor with another company or entity; the liquidation of Guarantor; or the issuance by Guarantor of any new stock or warrants, or the transfer of issued and outstanding treasury stock or warrants of Guarantor, or (l) if Guarantor is a partnership or joint venture, the sale, pledge, transfer or assignment by any of the partners or joint venturers of Guarantor of any of their partnership or joint venture interest in Guarantor; the withdrawal of any general partner(s) or joint venturer(s); or the admittance of any additional partner(s) or joint venturer(s) into Guarantor without the prior
written consent of Lender. Upon and after the occurrence of a default hereunder, the Liabilities shall be automatically accelerated and shall become immediately due and payable by Guarantor, or Guarantors successor or estate, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment to or for the benefit of Lender of the Liabilities, or any part thereof, is rescinded or must otherwise be returned by Lender due to the insolvency, bankruptcy or reorganization of Obligor or otherwise, all as though such payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, and in such order of application as Lender may from time to time elect, any property, balances, credits, deposits, accounts, instruments or moneys of Guarantor in the possession or control of Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional guaranty of payment and performance and not of collectibility and shall remain in full force and effect as to Guarantor, subject to discontinuance only as follows: Guarantor, or any person duly authorized and acting on behalf of Guarantor, may give written notice to Lender of discontinuance of this Guaranty, but no such notice shall be effective in any respect until it is actually received by Lender and no such notice shall affect or impair the obligations hereunder of Guarantor with respect to any Liabilities existing at the date of receipt of such notice by Lender (or any Liabilities required or permitted to be advanced by Lender on or after such date), or for renewals or extensions of such Liabilities made after Lender receives Guarantors notice, or any interest thereon or any expenses paid or incurred by Lender in endeavoring to collect such Liabilities, or any part thereof, or in enforcing this Guaranty against Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor shall not affect, impair or release the obligations hereunder of any other guarantor with respect to any of the Liabilities.
9. If requested by Lender, Guarantor hereby agrees to provide Lender, within 90 days after the end of each calendar year a financial statement prepared in accordance with generally accepted accounting principles, and within thirty (30) days of filing, a certified copy of Guarantors most recent federal tax return, and concurrently therewith a certificate to the effect that such Guarantor is not aware of any condition or event which constitutes a default under this Guaranty, or under any notes or other obligations of Guarantor or which, with the mere passage of time or notice, or both, would constitute a default under this Guaranty.
10. Lender may at any time and from time to time, without the consent of, or notice to, Guarantor, and without affecting, impairing or releasing the obligations of Guarantor hereunder, do any or all of the following: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligations hereunder, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Guarantor, with respect to any of the Liabilities, (c) renew, extend (including extensions beyond the original term), modify, alter, change the interest rate of, release or discharge any of the Liabilities, (d) settle, release or compromise any liability of any other guarantor of any of the Liabilities or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefor, (e)
accept partial payments of the Liabilities, (f) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Liabilities and any property securing any of the Liabilities, (g) consent to the transfer of any property securing any of the Liabilities, (h) resort to Guarantor for payment of any of the Liabilities, whether or not Lender shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other guarantor or any other party primarily or secondarily liable on any of the Liabilities, (i) make any other changes in its agreements with Obligor, and (j) stop lending money or extending other credit to Obligor.
11. Any amount received by Lender from whatsoever source and applied by it to the payment of the Liabilities may be applied in such a manner as provided in the Loan Agreement executed of even date herewith.
12. Guarantor is now adequately informed of Obligors financial condition, and Guarantor agrees to keep so informed. Guarantor agrees that Lender has no obligation to provide Guarantor with any present or future information concerning the financial condition of Obligor. Guarantor has not relied on financial information furnished by Lender in deciding to execute this Guaranty.
13. Guarantor hereby agrees that any debt of Obligor to Guarantor is expressly subordinate to the right of Lender to payment of the Liabilities, and that Lender shall be entitled to full payment of all of the Liabilities prior to the exercise by Guarantor of any rights to payment or performance of any debt which the Obligor may owe Guarantor. Guarantor assigns to Lender all rights Guarantor may have in any proceeding under the Federal Bankruptcy Code or any receivership or insolvency proceeding of Obligor, including all rights of Guarantor to be paid by Obligor. This assignment does not prevent Lender from enforcing Guarantors obligations hereunder in any way.
14. Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all defenses based on suretyship or impairment of collateral, and (f) all events and circumstances which might otherwise constitute a defense or discharge of the obligations of Obligor, Guarantor or any other guarantor. Guarantor shall not be released or discharged, either in whole or in part, by Lenders failure to perfect, delay in perfection or failure to continue the perfection of any security interest in any property that secures any of the Liabilities or any obligation of Guarantor hereunder, or to protect the property covered by any such security interest.
15. Lender may, without notice to Guarantor or Obligor of any kind, sell, assign, or transfer all or any of the Liabilities, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Liabilities shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee, or holder, as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. Lender shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of Lender as to so much of the Liabilities as it has not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect, impair or release this Guaranty.
18. For purposes of this Guaranty, Liabilities shall include all obligations of Obligor to Lender stated herein, notwithstanding any right or power of Obligor or anyone else to assert any claim or defense as to the payment or performance of such Liabilities, and no such claim or defense shall affect, impair or release the obligations of Guarantor hereunder.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal representatives, successors and assigns of Guarantor. If more than one party shall execute this Guaranty, the term Guarantor shall mean all parties executing this Guaranty, and all such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s), lease(s), or other financial accommodation(s) by Lender to Obligor and as a material inducement to Lender to make or enter into the loan(s), lease(s), or other financial accommodation(s) and accept this Guaranty, and notwithstanding anything to the contrary contained in this Guaranty or any other document delivered in connection with this Guaranty, Guarantor hereby irrevocably waives, disclaims and relinquishes any and all claims, rights or remedies which Guarantor may now have or hereafter acquire against Obligor that arise in connection with this Guaranty and/or the performance by Guarantor hereunder, including without limitation any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Obligor or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be directed to the addresses set forth herein or such other address as may be specified in a notice given in accordance with the requirements of this paragraph. Except as otherwise specifically provided herein, notices shall be deemed to be given three (3) days after mailing by certified or registered mail, return receipt requested, or one (1) business day after deposit with a recognized overnight courier, or when personally delivered to and received at the required address.
22. In the event any provision contained in this Guaranty is invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
23. The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided in O.C.G.A. § 10-7-24.
24. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE SUBSTANTIVE, AND NOT THE CONFLICT LAWS OF THE STATE OF ARIZONA, EXCEPT AND
ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT OF LENDERS RIGHTS AND REMEDIES AGAINST THE PROPERTY, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. HOWEVER, IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS GUARANTY IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS EVIDENCED BY THE NOTE AND THIS GUARANTY HAS BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY LENDER IN THE STATE OF ARIZONA.
GUARANTOR, AND LENDER BY ACCEPTANCE OF THIS GUARANTY, EACH HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION UNDER OR IN ANY WAY CONNECTED WITH THIS GUARANTY AND IN NO EVENT SHALL LENDER BE LIABLE FOR PUNITIVE OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date written below.
November 4, 2011.
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Mt. Kenn Nursing, LLC |
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By: |
/s/ Martin Brew |
(L.S.) |
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Martin Brew, Chief Financial Officer |
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Address of Guarantor:
Exhibit 10.128
GUARANTY
1. As an inducement for and in consideration of any loan(s), lease(s), or other financial accommodation(s) of even date herewith granted to Mt. Kenn Property Holdings, LLC (hereinafter collectively called Obligor), by Apax Capital, LLC (hereinafter, together with its successors and assigns, called Lender), the undersigned, Hearth & Home of Ohio, Inc. (hereinafter called Guarantor), hereby, jointly and severally if more than one, unconditionally guarantees the full and prompt payment, observance and performance when due, whether at the stated time, by acceleration or otherwise, of all obligations of Obligor to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Guaranty, and whether now or hereafter existing, or due or to become due, including without limitation, the following:
(a) Any and all amounts owed by Obligor under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) (the Note), with interest thereon according to the provisions thereof, and all obligations of Obligor thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and
(b) All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys fees and other legal expenses) by Lender pursuant to or in connection with the Note or any agreements and other documents in connection therewith plus applicable interest on such sums, expenses or costs; and
(c) Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above; and
(d) Any and all other indebtedness, obligations and liabilities of any kind, of Obligor to Lender, now or hereafter existing, absolute or contingent, joint and/or several, due or not due, secured or unsecured, arising by operation of law or otherwise, direct or indirect, including without limitation indebtedness, obligations and liabilities of Obligor to Lender as a member of any partnership, syndicate or association or other group and whether incurred by Obligor as principal, surety, endorser, guarantor, accommodation party or otherwise, and any obligations which give rise to an equitable remedy for breach of performance if such breach gives rise to an obligation by Obligor to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be referred to hereafter as the Liabilities. In the event any of the Liabilities shall not be paid or performed according to their terms, Guarantor, shall immediately pay, perform or cause the performance of the same, this Guaranty being a guarantee of full payment and performance and not of collectibility and in no way conditional or contingent. This Guaranty is an absolute, unconditional and continuing guarantee the Guarantor being jointly and severally liable with the Obligor and is in no way conditioned upon any requirement that Lender first attempt to collect
payment or seek performances of any of the Liabilities from Obligor or any other obligor or guarantor, or resort to any other security or other means of obtaining payment or performance of any of the Liabilities, or upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable attorneys fees and legal expenses) paid or incurred by Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially interested in Obligor or will receive other material economic benefits as a result of any loan(s), leases(s) or other financial accommodation(s) made or granted to Obligor by Lender from time to time. Guarantor further represents and warrants that Guarantor is willing to enter into this Guaranty as a material inducement to Lender to extend loan(s) or other financial accommodation(s), or to enter into lease(s), from time to time to or with Obligor, and acknowledges that Lender would not be willing to extend any such loan(s) or other financial accommodation(s) or enter into such lease(s) absent this Guaranty. In any community property state, if Guarantor is married, Guarantors promise is made for the benefit of Guarantors marital community.
5. Guarantor agrees that the occurrence of any of the following events shall constitute a default under this Guaranty: (a) the failure of Guarantor to perform or observe any obligation under this Guaranty or (b) the death, incompetency, dissolution or insolvency of Obligor or Guarantor or any other guarantor of any of the Liabilities, or (c) the inability of Obligor or Guarantor or any other guarantor of any of the Liabilities to pay debts as they mature, or (d) an assignment by Obligor or Guarantor or any other guarantor of any of the Liabilities for the benefit of creditors, or (e) the institution of any proceeding by or against Obligor or Guarantor or any other guarantor of any of the Liabilities (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for itself or for all or a substantial part of its property unless such petition and the case or proceeding initiated thereby are dismissed within thirty (30) days from the date of such filing, or (f) the institution by Guarantor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Guarantor, or (g) the default by Obligor under any other agreement or document concerning or relating to the Liabilities, or (h) the default by Guarantor under the terms of any other obligation of Guarantor to Lender, or (i) any representation or warranty contained herein or in any other document delivered by or on behalf of Guarantor or Obligor to Lender shall be false or misleading in any material respect, or (j) there shall be a material default or event of default under any other agreement or document securing or guaranteeing any of the obligations secured by this Guaranty, or (k) if Guarantor is a corporation, the sale, pledge or assignment by the shareholders of Guarantor of any shares of the stock of Guarantor without the prior written consent of Lender; the transfer of Guarantors assets not in the ordinary course of the Guarantors business; the merger or consolidation of Guarantor with another company or entity; the liquidation of Guarantor; or the issuance by Guarantor of any new stock or warrants, or the transfer of issued and outstanding treasury stock or warrants of Guarantor, or (l) if Guarantor is a partnership or joint venture, the sale, pledge, transfer or assignment by any of the partners or joint venturers of Guarantor of any of their partnership or joint venture interest in Guarantor; the withdrawal of any general partner(s) or joint venturer(s); or the admittance of any additional partner(s) or joint venturer(s) into Guarantor without the prior
written consent of Lender. Upon and after the occurrence of a default hereunder, the Liabilities shall be automatically accelerated and shall become immediately due and payable by Guarantor, or Guarantors successor or estate, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment to or for the benefit of Lender of the Liabilities, or any part thereof, is rescinded or must otherwise be returned by Lender due to the insolvency, bankruptcy or reorganization of Obligor or otherwise, all as though such payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, and in such order of application as Lender may from time to time elect, any property, balances, credits, deposits, accounts, instruments or moneys of Guarantor in the possession or control of Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional guaranty of payment and performance and not of collectibility and shall remain in full force and effect as to Guarantor, subject to discontinuance only as follows: Guarantor, or any person duly authorized and acting on behalf of Guarantor, may give written notice to Lender of discontinuance of this Guaranty, but no such notice shall be effective in any respect until it is actually received by Lender and no such notice shall affect or impair the obligations hereunder of Guarantor with respect to any Liabilities existing at the date of receipt of such notice by Lender (or any Liabilities required or permitted to be advanced by Lender on or after such date), or for renewals or extensions of such Liabilities made after Lender receives Guarantors notice, or any interest thereon or any expenses paid or incurred by Lender in endeavoring to collect such Liabilities, or any part thereof, or in enforcing this Guaranty against Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor shall not affect, impair or release the obligations hereunder of any other guarantor with respect to any of the Liabilities.
9. If requested by Lender, Guarantor hereby agrees to provide Lender, within 90 days after the end of each calendar year a financial statement prepared in accordance with generally accepted accounting principles, and within thirty (30) days of filing, a certified copy of Guarantors most recent federal tax return, and concurrently therewith a certificate to the effect that such Guarantor is not aware of any condition or event which constitutes a default under this Guaranty, or under any notes or other obligations of Guarantor or which, with the mere passage of time or notice, or both, would constitute a default under this Guaranty.
10. Lender may at any time and from time to time, without the consent of, or notice to, Guarantor, and without affecting, impairing or releasing the obligations of Guarantor hereunder, do any or all of the following: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligations hereunder, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Guarantor, with respect to any of the Liabilities, (c) renew, extend (including extensions beyond the original term), modify, alter, change the interest rate of, release or discharge any of the Liabilities, (d) settle, release or compromise any liability of any other guarantor of any of the Liabilities or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefor, (e)
accept partial payments of the Liabilities, (f) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Liabilities and any property securing any of the Liabilities, (g) consent to the transfer of any property securing any of the Liabilities, (h) resort to Guarantor for payment of any of the Liabilities, whether or not Lender shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other guarantor or any other party primarily or secondarily liable on any of the Liabilities, (i) make any other changes in its agreements with Obligor, and (j) stop lending money or extending other credit to Obligor.
11. Any amount received by Lender from whatsoever source and applied by it to the payment of the Liabilities may be applied in such a manner as provided in the Loan Agreement executed of even date herewith.
12. Guarantor is now adequately informed of Obligors financial condition, and Guarantor agrees to keep so informed. Guarantor agrees that Lender has no obligation to provide Guarantor with any present or future information concerning the financial condition of Obligor. Guarantor has not relied on financial information furnished by Lender in deciding to execute this Guaranty.
13. Guarantor hereby agrees that any debt of Obligor to Guarantor is expressly subordinate to the right of Lender to payment of the Liabilities, and that Lender shall be entitled to full payment of all of the Liabilities prior to the exercise by Guarantor of any rights to payment or performance of any debt which the Obligor may owe Guarantor. Guarantor assigns to Lender all rights Guarantor may have in any proceeding under the Federal Bankruptcy Code or any receivership or insolvency proceeding of Obligor, including all rights of Guarantor to be paid by Obligor. This assignment does not prevent Lender from enforcing Guarantors obligations hereunder in any way.
14. Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all defenses based on suretyship or impairment of collateral, and (f) all events and circumstances which might otherwise constitute a defense or discharge of the obligations of Obligor, Guarantor or any other guarantor. Guarantor shall not be released or discharged, either in whole or in part, by Lenders failure to perfect, delay in perfection or failure to continue the perfection of any security interest in any property that secures any of the Liabilities or any obligation of Guarantor hereunder, or to protect the property covered by any such security interest.
15. Lender may, without notice to Guarantor or Obligor of any kind, sell, assign, or transfer all or any of the Liabilities, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Liabilities shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee, or holder, as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. Lender shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of Lender as to so much of the Liabilities as it has not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect, impair or release this Guaranty.
18. For purposes of this Guaranty, Liabilities shall include all obligations of Obligor to Lender stated herein, notwithstanding any right or power of Obligor or anyone else to assert any claim or defense as to the payment or performance of such Liabilities, and no such claim or defense shall affect, impair or release the obligations of Guarantor hereunder.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal representatives, successors and assigns of Guarantor. If more than one party shall execute this Guaranty, the term Guarantor shall mean all parties executing this Guaranty, and all such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s), lease(s), or other financial accommodation(s) by Lender to Obligor and as a material inducement to Lender to make or enter into the loan(s), lease(s), or other financial accommodation(s) and accept this Guaranty, and notwithstanding anything to the contrary contained in this Guaranty or any other document delivered in connection with this Guaranty, Guarantor hereby irrevocably waives, disclaims and relinquishes any and all claims, rights or remedies which Guarantor may now have or hereafter acquire against Obligor that arise in connection with this Guaranty and/or the performance by Guarantor hereunder, including without limitation any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Obligor or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be directed to the addresses set forth herein or such other address as may be specified in a notice given in accordance with the requirements of this paragraph. Except as otherwise specifically provided herein, notices shall be deemed to be given three (3) days after mailing by certified or registered mail, return receipt requested, or one (1) business day after deposit with a recognized overnight courier, or when personally delivered to and received at the required address.
22. In the event any provision contained in this Guaranty is invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
23. The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided in O.C.G.A. § 10-7-24.
24. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE
STATE OF ARIZONA AND/OR OHIO, EXCEPT AND ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT OF LENDERS RIGHTS AND REMEDIES AGAINST THE REAL AND PERSONAL PROPERTY COLLATERAL, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. HOWEVER, IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS AGREEMENT IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICH WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS EVIDENCED BY THIS AGREEMENT HAS BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY LENDER IN THE STATE OF ARIZONA.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date written below.
November 4, 2011.
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Hearth & Home of Ohio, Inc. |
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By: |
/s/ Martin Brew |
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Martin Brew, Chief Financial Officer |
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[CORPORATE SEAL] |
Address of Guarantor:
Exhibit 10.129
GUARANTY
1. As an inducement for and in consideration of any loan(s), lease(s), or other financial accommodation(s) of even date herewith granted to Mt. Kenn Property Holdings, LLC (hereinafter collectively called Obligor), by Apax Capital, LLC (hereinafter, together with its successors and assigns, called Lender), the undersigned, AdCare Health Systems, Inc. (hereinafter called Guarantor), hereby, jointly and severally if more than one, unconditionally guarantees the full and prompt payment, observance and performance when due, whether at the stated time, by acceleration or otherwise, of all obligations of Obligor to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Guaranty, and whether now or hereafter existing, or due or to become due, including without limitation, the following:
(a) Any and all amounts owed by Obligor under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) (the Note), with interest thereon according to the provisions thereof, and all obligations of Obligor thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and
(b) All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys fees and other legal expenses) by Lender pursuant to or in connection with the Note or any agreements and other documents in connection therewith plus applicable interest on such sums, expenses or costs; and
(c) Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above; and
(d) Any and all other indebtedness, obligations and liabilities of any kind, of Obligor to Lender, now or hereafter existing, absolute or contingent, joint and/or several, due or not due, secured or unsecured, arising by operation of law or otherwise, direct or indirect, including without limitation indebtedness, obligations and liabilities of Obligor to Lender as a member of any partnership, syndicate or association or other group and whether incurred by Obligor as principal, surety, endorser, guarantor, accommodation party or otherwise, and any obligations which give rise to an equitable remedy for breach of performance if such breach gives rise to an obligation by Obligor to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be referred to hereafter as the Liabilities. In the event any of the Liabilities shall not be paid or performed according to their terms, Guarantor, shall immediately pay, perform or cause the performance of the same, this Guaranty being a guarantee of full payment and performance and not of collectibility and in no way conditional or contingent. This Guaranty is an absolute, unconditional and continuing guarantee the Guarantor being jointly and severally liable with the Obligor and is in no way conditioned upon any requirement that Lender first attempt to collect
payment or seek performances of any of the Liabilities from Obligor or any other obligor or guarantor, or resort to any other security or other means of obtaining payment or performance of any of the Liabilities, or upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable attorneys fees and legal expenses) paid or incurred by Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially interested in Obligor or will receive other material economic benefits as a result of any loan(s), leases(s) or other financial accommodation(s) made or granted to Obligor by Lender from time to time. Guarantor further represents and warrants that Guarantor is willing to enter into this Guaranty as a material inducement to Lender to extend loan(s) or other financial accommodation(s), or to enter into lease(s), from time to time to or with Obligor, and acknowledges that Lender would not be willing to extend any such loan(s) or other financial accommodation(s) or enter into such lease(s) absent this Guaranty. In any community property state, if Guarantor is married, Guarantors promise is made for the benefit of Guarantors marital community.
5. Guarantor agrees that the occurrence of any of the following events shall constitute a default under this Guaranty: (a) the failure of Guarantor to perform or observe any obligation under this Guaranty or (b) the death, incompetency, dissolution or insolvency of Obligor or Guarantor or any other guarantor of any of the Liabilities, or (c) the inability of Obligor or Guarantor or any other guarantor of any of the Liabilities to pay debts as they mature, or (d) an assignment by Obligor or Guarantor or any other guarantor of any of the Liabilities for the benefit of creditors, or (e) the institution of any proceeding by or against Obligor or Guarantor or any other guarantor of any of the Liabilities (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for itself or for all or a substantial part of its property unless such petition and the case or proceeding initiated thereby are dismissed within thirty (30) days from the date of such filing, or (f) the institution by Guarantor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Guarantor, or (g) the default by Obligor under any other agreement or document concerning or relating to the Liabilities, or (h) the default by Guarantor under the terms of any other obligation of Guarantor to Lender, or (i) any representation or warranty contained herein or in any other document delivered by or on behalf of Guarantor or Obligor to Lender shall be false or misleading in any material respect, or (j) there shall be a material default or event of default under any other agreement or document securing or guaranteeing any of the obligations secured by this Guaranty, or (k) if Guarantor is a partnership or joint venture, the sale, pledge, transfer or assignment by any of the partners or joint venturers of Guarantor of any of their partnership or joint venture interest in Guarantor; the withdrawal of any general partner(s) or joint venturer(s); or the admittance of any additional partner(s) or joint venturer(s) into Guarantor without the prior written consent of Lender. Upon and after the occurrence of a default hereunder, the Liabilities shall be automatically accelerated and shall become immediately due and payable by Guarantor, or Guarantors successor or estate, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment to or for the benefit of Lender of the Liabilities, or any part thereof, is rescinded or must otherwise be returned by Lender due to the insolvency, bankruptcy or reorganization of Obligor or otherwise, all as though such payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any amount shall be due and payable hereunder by Guarantor, appropriate and apply toward the payment of such amount, and in such order of application as Lender may from time to time elect, any property, balances, credits, deposits, accounts, instruments or moneys of Guarantor in the possession or control of Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional guaranty of payment and performance and not of collectibility and shall remain in full force and effect as to Guarantor, subject to discontinuance only as follows: Guarantor, or any person duly authorized and acting on behalf of Guarantor, may give written notice to Lender of discontinuance of this Guaranty, but no such notice shall be effective in any respect until it is actually received by Lender and no such notice shall affect or impair the obligations hereunder of Guarantor with respect to any Liabilities existing at the date of receipt of such notice by Lender (or any Liabilities required or permitted to be advanced by Lender on or after such date), or for renewals or extensions of such Liabilities made after Lender receives Guarantors notice, or any interest thereon or any expenses paid or incurred by Lender in endeavoring to collect such Liabilities, or any part thereof, or in enforcing this Guaranty against Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor shall not affect, impair or release the obligations hereunder of any other guarantor with respect to any of the Liabilities.
9. If requested by Lender, Guarantor hereby agrees to provide Lender, within 90 days after the end of each calendar year a financial statement prepared in accordance with generally accepted accounting principles, and within thirty (30) days of filing, a certified copy of Guarantors most recent federal tax return, and concurrently therewith a certificate to the effect that such Guarantor is not aware of any condition or event which constitutes a default under this Guaranty, or under any notes or other obligations of Guarantor or which, with the mere passage of time or notice, or both, would constitute a default under this Guaranty.
10. Lender may at any time and from time to time, without the consent of, or notice to, Guarantor, and without affecting, impairing or releasing the obligations of Guarantor hereunder, do any or all of the following: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligations hereunder, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Guarantor, with respect to any of the Liabilities, (c) renew, extend (including extensions beyond the original term), modify, alter, change the interest rate of, release or discharge any of the Liabilities, (d) settle, release or compromise any liability of any other guarantor of any of the Liabilities or any liability of any nature of any other party or parties with respect to the Liabilities or any security therefor, (e) accept partial payments of the Liabilities, (f) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Liabilities and any property securing any of the Liabilities, (g) consent to the transfer of any property securing any of the Liabilities, (h)
resort to Guarantor for payment of any of the Liabilities, whether or not Lender shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other guarantor or any other party primarily or secondarily liable on any of the Liabilities, (i) make any other changes in its agreements with Obligor, and (j) stop lending money or extending other credit to Obligor.
11. Any amount received by Lender from whatsoever source and applied by it to the payment of the Liabilities may be applied in such a manner as provided in the Loan Agreement executed of even date herewith.
12. Guarantor is now adequately informed of Obligors financial condition, and Guarantor agrees to keep so informed. Guarantor agrees that Lender has no obligation to provide Guarantor with any present or future information concerning the financial condition of Obligor. Guarantor has not relied on financial information furnished by Lender in deciding to execute this Guaranty.
13. Guarantor hereby agrees that any debt of Obligor to Guarantor is expressly subordinate to the right of Lender to payment of the Liabilities, and that Lender shall be entitled to full payment of all of the Liabilities prior to the exercise by Guarantor of any rights to payment or performance of any debt which the Obligor may owe Guarantor. Guarantor assigns to Lender all rights Guarantor may have in any proceeding under the Federal Bankruptcy Code or any receivership or insolvency proceeding of Obligor, including all rights of Guarantor to be paid by Obligor. This assignment does not prevent Lender from enforcing Guarantors obligations hereunder in any way.
14. Guarantor hereby expressly waives: (a) notice of the acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all defenses based on suretyship or impairment of collateral, and (f) all events and circumstances which might otherwise constitute a defense or discharge of the obligations of Obligor, Guarantor or any other guarantor. Guarantor shall not be released or discharged, either in whole or in part, by Lenders failure to perfect, delay in perfection or failure to continue the perfection of any security interest in any property that secures any of the Liabilities or any obligation of Guarantor hereunder, or to protect the property covered by any such security interest.
15. Lender may, without notice to Guarantor or Obligor of any kind, sell, assign, or transfer all or any of the Liabilities, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Liabilities shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee, or holder, as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. Lender shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of Lender as to so much of the Liabilities as it has not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect, impair or release this Guaranty.
18. For purposes of this Guaranty, Liabilities shall include all obligations of Obligor to Lender stated herein, notwithstanding any right or power of Obligor or anyone else to assert any claim or defense as to the payment or performance of such Liabilities, and no such claim or defense shall affect, impair or release the obligations of Guarantor hereunder.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal representatives, successors and assigns of Guarantor. If more than one party shall execute this Guaranty, the term Guarantor shall mean all parties executing this Guaranty, and all such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s), lease(s), or other financial accommodation(s) by Lender to Obligor and as a material inducement to Lender to make or enter into the loan(s), lease(s), or other financial accommodation(s) and accept this Guaranty, and notwithstanding anything to the contrary contained in this Guaranty or any other document delivered in connection with this Guaranty, Guarantor hereby irrevocably waives, disclaims and relinquishes any and all claims, rights or remedies which Guarantor may now have or hereafter acquire against Obligor that arise in connection with this Guaranty and/or the performance by Guarantor hereunder, including without limitation any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Obligor or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be directed to the addresses set forth herein or such other address as may be specified in a notice given in accordance with the requirements of this paragraph. Except as otherwise specifically provided herein, notices shall be deemed to be given three (3) days after mailing by certified or registered mail, return receipt requested, or one (1) business day after deposit with a recognized overnight courier, or when personally delivered to and received at the required address.
22. In the event any provision contained in this Guaranty is invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.
23. The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided in O.C.G.A. § 10-7-24.
24. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE
STATE OF ARIZONA AND/OR OHIO, EXCEPT AND ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND ENFORCEMENT OF LENDERS RIGHTS AND REMEDIES AGAINST THE REAL AND PERSONAL PROPERTY COLLATERAL, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. HOWEVER, IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS AGREEMENT IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY WHICH WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS EVIDENCED BY THIS AGREEMENT HAS BEEN APPLIED FOR, CONSIDERED, APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY LENDER IN THE STATE OF ARIZONA.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date written below.
November 4, 2011 |
AdCare Health Systems, Inc. |
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By: |
/s/ Martin Brew |
Address of Guarantor: |
Martin Brew, Chief Financial Officer |
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Exhibit 10.130
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U.S. Small Business Administration |
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U.S. Small Business Administration NOTE (CDC/504 LOANS) |
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SBA Loan # |
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48507750-04 |
SBA Loan Name |
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Mt. Kenn Nursing, LLC |
Date |
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2011 |
Loan Amount |
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$ 2,274,000.00 |
Borrower |
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Mt. Kenn Property Holdings, LLC |
Operating Company |
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Mt. Kenn Nursing, LLC |
CDC |
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Economic Development Corporation of Fulton County |
Funding Date: December 14, 2011 |
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* Interest Rate: % |
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First Payments Due: January 1, 2012 |
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* P&I Amount: $ |
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Note Maturity Date: December 1, 2031 |
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* Monthly Payment: $ |
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(* blank at signing) |
1. PROMISE TO PAY:
In return for the Loan, Borrower promises to pay to the order of CDC the amount of Two Million Two Hundred Seventy-Four Thousand and No/100 Dollars ($2,274,000.00), interest on the unpaid principal balance, the fees specified in the Servicing Agent Agreement, and all other amounts required by this Note.
2. DEFINITIONS:
Collateral means any property taken as security for payment of this Note or any guarantee of this Note. |
Debenture means the debenture issued by CDC to fund the Loan. |
Guarantor means each person or entity that signs a guarantee of payment of this Note. |
Loan means the loan evidenced by this Note. |
Loan Documents means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral. |
SBA means the Small Business Administration, an Agency of the United State of America. |
Servicing Agent Agreement means the agreement between the Borrower and the CDC that, among other things, appoints a servicing agent (Servicing Agent) for this Note. |
3. INTEREST RATE AND PAYMENTS:
The terms of the Debenture sale will establish the interest rate, P&I amount, and Monthly Payment for this Note. Borrower acknowledges that these terms are unknown when Borrower signs this Note.
A. Once established, the interest rate is fixed. Interest begins to accrue on the Funding Date.
B. Monthly Payments are due on the first business day of each month, beginning on the First Payment Date and continuing until the Note Maturity Date, when all unpaid amounts will be due. Borrower must pay at the place and by the method the Servicing Agent or CDC designates. The Monthly Payment includes the monthly principal and interest installment (P & I Amount), and the monthly fees in the Servicing Agent Agreement. The Servicing Agent will apply regular Monthly Payments in the following order: 1) monthly fees, 2) accrued interest, and 3) principal.
4. LATE-PAYMENT FEE:
CDC charges a late fee if the Servicing Agent receives a Monthly Payment after the fifteenth day of the month when it is due. The late fee is five percent of the payment amount, or $100.00, whichever is greater. The late fee is in addition to the regular Monthly Payment.
5. RIGHT TO PREPAY:
Borrower may prepay this Note in full on a specific date each month set by the Servicing Agent. Borrower may not make partial prepayments. Borrower must give CDC at least 45 days prior written notice. When it receives the notice, CDC will give Borrower prepayment instructions. At least 10 days before the payment date, Borrower must wire a non-refundable deposit of $1,000 to the Servicing Agent. The Servicing Agent will apply the deposit to the prepayment if Borrower prepays. In any prepayment, Borrower must pay the sum of all of the following amounts due and owing through the date of the next semi-annual Debenture payment:
A. Principal balance;
B. Interest;
C. SBA guarantee fees;
D. Servicing agent fees;
E. CDC servicing fees;
F. Late fees;
G. Expenses incurred by CDC for which Borrower is responsible; and
H. Any prepayment premium.
6. PREPAYMENT PREMIUM:
If Borrower prepays during the first half of the Note term, Borrower must pay a prepayment premium. The formula for the prepayment premium is specified in the Debenture and may be obtained from CDC.
7. DEFAULT:
Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower or Operating Company:
A. Fails to do anything required by this Note and other Loan Documents;
B. Defaults on any other loan made or guaranteed by SBA;
C. Does not preserve, or account to CDCs satisfaction for, any of the Collateral or its proceeds;
D. Does not disclose, or anyone acting on their behalf does not disclose, any material fact to CDC or SBA;
E. Makes, or anyone acting on their behalf makes, a materially false or misleading representation to CDC or SBA;
F. Defaults on any loan or agreement with another creditor, if CDC believes the default may materially affect Borrowers ability to pay this Note.
G. Fails to pay any taxes when due;
H. Becomes the subject of a proceeding under any bankruptcy or insolvency law;
I. Has a receiver or liquidator appointed for any part of their business or property;
J. Makes an assignment for the benefit of creditors;
K. Has any adverse change in financial condition or business operation that CDC believes may materially affect Borrowers ability to pay this Note;
L. Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without CDCs prior written consent, except for ownership changes of up to 5 percent beginning six months after the Loan closes; or
M. Becomes the subject of a civil or criminal action that CDC believes may materially affect Borrowers ability to pay this Note.
8. CDCS RIGHTS IF THERE IS A DEFAULT:
Without notice or demand and without giving up any of its rights, CDC may:
A. Require immediate payment of all amounts owing under this Note;
B. Collect all amounts owing from any Borrower or Guarantor;
C. File suit and obtain judgment;
D. Take possession of any Collateral; or
E. Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or without advertisement.
9. CDCS GENERAL POWERS:
Without notice and without Borrowers consent, CDC may:
A. Bid or buy at any sale of Collateral by Lender or another lienholder, at any price it chooses;
B. Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorneys fees and costs. If CDC incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance;
C. Release anyone obligated to pay this Note;
D. Compromise, release, renew, extend or substitute any of the Collateral; and
E. Take any action necessary to protect the Collateral or collect amounts owing on this Note.
10. FEDERAL LAW:
When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. CDC or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.
11. SUCCESSORS AND ASSIGNS:
Under this Note, Borrower and Operating Company include the successors of each, and CDC includes its successors and assigns.
12. GENERAL PROVISIONS:
A. All individuals and entities signing this Note are jointly and severally liable.
B. Borrower authorizes CDC, the Servicing Agent, or SBA to complete any blank terms in this Note and any other Loan Documents. The completed terms will bind Borrower as if they were completed prior to this Note being signed.
C. Borrower waives all suretyship defenses.
D. Borrower must sign all documents necessary at any time to comply with the Loan Documents and to enable CDC to acquire, perfect, or maintain CDCs liens on Collateral.
E. CDC may exercise any of its rights separately or together, as many times and in any order it chooses. CDC may delay or forgo enforcing any of its rights without giving any up.
F. Borrower may not use an oral statement to contradict or alter the written terms of, or raise a defense to, this Note.
G. If any part of this Note is unenforceable, all other parts remain in effect.
H. To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that CDC did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at a sale.
13. STATE-SPECIFIC PROVISIONS:
Time is of the essence of this Note.
14. BORROWERS NAME(S) AND SIGNATURE(S):
By signing below, each individual or entity becomes obligated under this Note as Borrower.
IN WITNESS WHEREOF, Mt. Kenn Property Holdings, LLC has executed this Note under seal this 4th day of November, 2011.
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BORROWER: |
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Mt. Kenn Property Holdings, LLC |
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BY: |
/s/ Christopher F. Brogdon |
(L.S.) |
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Christopher F. Brogdon, Manager |
ASSIGNMENT: CDC assigns this Note to SBA.
Economic Development Corporation of Fulton County
By: |
/s/ Eugene Merriday |
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Date: November 4,2011 |
Typed Name: Eugene Merriday , authorized officer of CDC.
Exhibit 10.131
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and entered into this 4th day of November, 2011, by and between Mt. Kenn Property Holdings, LLC (the Borrower), Mt. Kenn Nursing, LLC, AdCare Health Systems, Inc. and Hearth & Home of Ohio, Inc. (collectively Guarantor or Guarantors) and Economic Development Corporation of Fulton County (Lender or CDC).
W I T N E S S E T H :
WHEREAS, Borrower desires financing on certain real property located in Cobb County, Georgia, more particularly described in Exhibit A attached hereto and by this reference made a part hereof (Property);
WHEREAS, of even date herewith, Lender and Borrower entered into that certain loan wherein the Lender agreed to provide a loan (the Loan) to Borrower for up to Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) for the refinance of existing debt, closing costs and other permissible uses; and
WHEREAS, in order to loan funds to Borrower, Lender enters into this Loan Agreement with Borrower for the purposes herein contained; and
WHEREAS, the loan made hereunder will be secured in part by a second security interest in the Property and a second priority security interest in all the furniture, fixtures and equipment, now owned or hereafter acquired and located at the Property.
NOW, THEREFORE, for and in consideration of the premises, the sum of Ten ($10.00) Dollars and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
AMOUNT AND TERMS OF LOAN
1.1 RECITALS. Each of the above recitals are hereby incorporated into and made a part of this Agreement by this reference.
1.2 LOAN AND NOTE. The term Loan herein shall refer to the indebtedness of Borrower to Lender evidenced by a Note in the original principal amount of Two Million Two Hundred Twenty-Two Thousand Six Hundred Forty and No/100 Dollars ($2,222,640.00) in form satisfactory to Lender (the Note). The term of this Loan shall be for twenty (20) years.
ARTICLE II
CONDITION OF LENDING
2.1 CONDITIONS PRECEDENT TO THE LOAN. As a condition precedent to Lender making the Loan, the Borrower shall deliver to Lender on or before the date of the Loan closing, the following, in form and substance satisfactory to Lender:
(a) The SBA 504 Note (SBA Form 1505) (Note);
(b) The Deed to Secure Debt and Security Agreement to be filed on the Property;
(c) Assignment of Leases and Rents to be filed on the Property;
(d) UCC-1 Financing Statements;
(e) Evidence satisfactory to Lender of ownership of the Collateral by Borrower free and clear of encumbrances of any kind;
(f) Corporate guaranties from Mt. Kenn Nursing, LLC, AdCare Health Systems, Inc. and Hearth & Home of Ohio, Inc. (collectively, the Guarantor);
(g) Executed SBA 504 Authorization;
(h) Executed Central Servicing Agent Agreement (SBA Form 1506), in a form satisfactory to Lender;
(i) Such other documents as reasonably may be required by the Lender or Lenders counsel.
The Loan documents as provided above (collectively, the Loan Documents), when prepared, shall set forth the matters contained in the Loan Agreement and contain such other provisions as are deemed necessary or desirable by Lender. The form and substance of all such documents must be satisfactory to Lender prior to disbursement by Lender of any of the proceeds of the Loan.
Further, this Loan Agreement will be automatically amended to include each and every term and condition of the SBA 504 Authorization, as may be amended from time to time. In the event between any conflict between the terms of the SBA 504 Authorization and this Loan Agreement, the SBA 504 Authorization shall control.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to, and agrees with the Lender as follows:
3.1 POWER AND AUTHORIZATION.
(a) The Borrower has authorized the execution and delivery of the Note and all other documents contemplated by this Loan Agreement, and such execution and delivery will not violate any law, or any other agreement to which Borrower is a party.
(b) This Loan Agreement constitutes, and upon execution and delivery thereof, the Note, the Deed to Secure Debt and Security Agreement and the ancillary documents will constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower.
3.2 FINANCIAL CONDITION. The reports and financial statements of Borrower and Guarantors submitted to Lender in connection with the Loan have been prepared from Borrowers or Guarantors books and records in accordance with generally accepted accounting principles and practices, consistently applied, and fairly reflect the financial condition of Borrower and Guarantors for the periods therein defined. No material adverse changes have since occurred.
Except as disclosed in the aforesaid reports and financial statements, Borrower:
(a) Has not incurred any debts, liabilities or other obligations nor committed to incur any debts, liabilities or obligations;
(b) Has no liabilities, direct or contingent;
(c) Has made no investments in, advances to, or guaranties or obligations of any other company, person, firm, corporation, or other entity;
(d) Is not subject to any judgment, nor are there any liens, encumbrances or security interests outstanding against Borrower or any of its properties.
3.3 LITIGATION. There is no litigation, proceeding, claim or dispute pending or threatened against Borrower, the adverse determination of which would materially affect Borrowers ability to repay the loan or otherwise perform hereunder.
3.4 NO ADVERSE CHANGE. The Borrower certifies that there has been no un-remedied substantial adverse change since the date of the Borrowers original loan application made in conjunction with this transaction in the financial condition, organization, operation, business prospects, fixed properties, or the personnel of the Borrower.
ARTICLE IV
COVENANTS BY BORROWER
Until all the obligations of Borrower under this Agreement have been performed and paid in full, Borrower covenants and agrees as follows:
4.1 INSURANCE. Borrower shall maintain or require Guarantors to maintain insurance on the Collateral (hereinafter defined) as described in Article VII hereof in such
amounts and against such hazards and liabilities as is customarily maintained by other companies in the same geographical area operating similar businesses or as may be otherwise requested by the Lender. All such policies of insurance shall be in form and substance and with insurance companies satisfactory to Lender, and Borrower shall deliver evidence thereof to Lender upon request. Further, upon request, Lender shall be designated as loss payee or as Mortgagor under any such policies, as its interests may appear.
4.2 MAINTENANCE OF BUSINESS AND CORPORATE EXISTENCE. Borrower shall comply with all valid and applicable statutes, ordinances, rules and regulations and shall keep in force and effect all licenses, permits, bonds and franchises necessary for the proper conduct of its business.
4.3 ADVERSE CHANGES AND LITIGATION. Borrower shall immediately inform Lender of any material adverse change in its financial condition, or the financial condition of Guarantors, and shall promptly inform Lender of any litigation or threatened litigation or of the occurrence of any other event or circumstance which might substantially affect the financial condition or business of Borrower or Guarantors.
4.4 MANAGEMENT AND OWNERSHIP. No material adverse change shall be made without the prior written consent of Lender in the management or ownership of Borrower, or in the manner in which its business is conducted. Said consent shall not be unreasonably withheld by Lender.
4.5 FINANCIAL STATEMENTS. Within one hundred twenty (120) days of Borrowers and Guarantors fiscal year end, Borrower shall furnish to Lender a copy of its compiled financial statement. Borrowers and Guarantors financial statements shall contain a balance sheet, profit and loss statement and aging of accounts receivable and accounts payable, all in reasonable detail, prepared in accordance with generally accepted accounting principles, consistently applied. Each set of financial statements shall be prepared by a certified public accountant or accountants acceptable to Lender and certified by a duly authorized officer of Borrower and Guarantor to be correct and accurate. Borrower and Guarantor shall also furnish a copy of its income tax returns, and such other or additional financial information as Lender may from time to time request. Borrower and Guarantor shall also furnish evidence of payment of real estate taxes on the Property to Lender on an annual basis. Borrower shall maintain a debt service coverage ratio of 1.25 to 1 for the duration of the Loan.
4.6
OTHER DEBTS. Other than the loan from Lender of even date herein in the principal amount of $2,274,000.00 and that certain first lien in favor of THE BANK OF LAS VEGAS in the principal amount of $3,175,200.00, the Borrower shall not directly or indirectly incur, create, assume or permit to exist any obligation for payment of borrowed money, excepting only unsecured current liabilities incurred in the ordinary course of business and obligations contemplated by this Agreement, without the express written consent of Lender, which consent shall not be unreasonably withheld; provided, however, Borrower shall have the right to pledge its accounts receivable to a third party working capital lender, including, without limitation,
Gemino Healthcare Finance, LLC. Further, Borrower shall not guarantee the obligations of any person or entity, excepting only obligations contemplated by this Agreement.
4.7 SALE OF COLLATERAL. Borrower shall not sell, lease, transfer or otherwise dispose of any of the Collateral as described in ARTICLE VII hereof, other than in the ordinary course of Borrowers business. If Borrower should desire to sell any of the Collateral, a release price therefor will be determined at the sole discretion of Lender, and upon the sale of that Collateral, the release price will be paid over by Borrower to Lender and applied by Lender to payments due on the Note, in inverse order of the due dates, and Lender shall thereupon release its lien or security interest upon the Collateral sold.
4.8 BULK SALE. The Borrower shall not, without the prior written consent of the Lender, sell, transfer or convey all or any part of its interest in its assets to another entity.
4.9 ENCUMBRANCES. Borrower shall not incur or permit to exist nor allow Guarantors to incur or permit to exist any encumbrance, pledge or lien upon or against any of the Collateral, except:
(a) Liens or security interests required or expressly contemplated or permitted by this Agreement;
(b) Liens for taxes, assessments and other governmental charges not yet due and liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due; and
(c) Tax liens which are being contested in good faith.
4.10 TAXES. Borrower shall pay promptly, when due, all taxes, assessments and governmental charges or levies imposed upon the Borrower or upon the income or any property of the Borrower, as well as all claims of any kind (including claims for labor, material, supplies or rent) which, if unpaid, might become a lien upon any or all of the Collateral.
4.11 EXAMINATION OF RECORDS. Borrower shall permit any representative of Lender to examine and to audit any or all of Borrowers books and records and to copy portions thereof, and to visit and inspect any of the Collateral upon receipt of reasonable notification and request.
4.12 CENTRAL SERVICING AGENT. The Borrower agrees to use the services of the institution appointed by the SBA as the Central Servicing Agent (hereafter the CSA) as agent for the Lender. In consideration of the CSAs expenses associated with the origination and servicing of the Loan, the Borrower agrees to pay monthly to the CSA a combined servicing charge in the form of monthly fee, calculated at a rate of 0.10% of the outstanding principal balance of the loan determined at five (5) year intervals. This percentage remains constant throughout the life of the Debenture. Such charge shall be included in the monthly loan installment as determined by the CSA.
4.13 PAYMENT OF LENDERS FEES. In consideration of the Lenders expenses associated with processing and servicing this Loan, the Borrower agrees to pay to the Lender a
processing fee of 1-1/2%, if applicable, of the Debenture amount at Loan closing, together with an annual servicing fee of .625 % to be paid to the CDC and an ongoing guarantee fee of 0.749% to be paid to the U.S. Small Business Administration, each such fee based upon the unpaid Loan balance as determined at inception and redetermined at the beginning of each five year anniversary date of the Loan, payable on a monthly basis.
4.14: CONFORMITY WITH 13 CFR 108/SBA AUTHORIZATION AND DEBENTURE GUARANTY. The Borrower agrees to at all times be in conformity with the provisions of Title 13, Code of Federal Regulations, part 108 and each and every requirement of the SBA Authorization.
4.15: JOBS CERTIFICATION. The Borrower certifies that as a result of this project it will use its best efforts to create or retain 140 full-time equivalent jobs within 2 years of project completion.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an Event of Default:
(a) Nonpayment, when due, of any principal, accrued interest, premium, fee or other charge due under the Note.
(b) Default by Borrower in the due observance or performance of any term, covenant, condition or agreement on its part to be performed under this Loan Agreement, the Note, or under any other document contemplated by this Loan Agreement.
(c) If Borrower shall:
(1) Make a general assignment for the benefit of its creditors;
(2) File a voluntary petition in bankruptcy;
(3) Be adjudicated as bankrupt or insolvent;
(4) File any petition or answer seeking, consenting to, or acquiescing in, reorganization, arrangement, composition, liquidation, dissolution or similar relief, under any present or future statute, law or regulation;
(5) File an answer admitting or failing to deny the material allegations of the petition against it for any such relief;
(6) Admit in writing its inability to pay its debts as they mature;
(7) Discontinue business; or
(8) Be unable to pay debts as they become due.
(d) Borrower fails to have vacated or set aside within thirty (30) days of its entry any court order appointing a receiver or trustee for all or a substantial portion of the Borrowers property.
(e) Any warranty, representation or statements made or furnished to Lender by Borrower in connection with the Loan or in connection with this Agreement (including any warranty, representation or statement in the application of Borrower for the Loan or in any accompanying financial statements) or to induce Lender to make the Loan, proves to be untrue, misleading or false in any material respect.
(f) Borrower suffers or permits any lien, encumbrance or security interest to attach to any of its property, except as herein otherwise expressly permitted, or if any judgment shall be entered against Borrower or any attachment shall be made against any property of Borrower, which judgment or attachment shall remain undischarged, unbonded, or undismissed for a period of thirty (30) days.
(g) Borrower defaults in the payment of any principal or interest on any obligation to Lender.
(h) Borrower shall sell, lease, or otherwise transfer or convey any of the Collateral, or any interest therein without Lenders prior written approval, except as herein otherwise expressly permitted.
(i) Borrower or Mt. Kenn Nursing, LLC defaults under or causes to be revoked, any state or local license or permit which is required in order to operate a skilled nursing facility.
(j) If Borrower or any affiliate thereof should acquire, directly or indirectly, in excess of ten (10%) percent ownership or interest in Lender.
ARTICLE VI
REMEDIES ON EVENT OF DEFAULT
6.1 DECLARE NOTE DUE. Upon the occurrence of any Event of Default as defined in this Agreement, the Note, the Deed to Secure Debt and Security Agreements, Security Agreement or any other document contemplated by this Agreement, then in any such event (subject however to any notice and cure provision or any grace period), Lender at its option, may declare the entire unpaid balance of the Note to be forthwith due and payable, and thereupon such balance shall become so due and payable without presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived, and Borrower will forthwith pay to Lender the entire principal of and interest accrued on the Note.
6.2 OTHER REMEDIES. Upon the occurrence or discovery of an Event of Default, the Lender shall, in addition to its option to declare the entire unpaid amount of the Note due and payable, at its option:
(a) Move to protect its rights and remedies as a secured party under the Deeds to Secure Debt and Security Agreements and Security Agreement, by extrajudicial authority as set forth in those instruments, by action at law or equity, or by any other lawful remedy to enforce payment.
(b) Apply the proceeds from any disposition of the Collateral to the satisfaction of the following items in the order in which they are listed:
(1) The expenses of taking, preserving, insuring, repairing, holding and selling the Collateral, including any legal costs and attorneys fees. If any of the Note shall be referred to an attorney for collection, Borrower and all others liable on the Note, jointly and severally agree to pay reasonable attorneys fees and all costs of collection.
(2) The unpaid amount of any interest due on the Note, and all other expenses of Lender.
(3) The unpaid principal amounts of the Note.
(4) Any other indebtedness of Borrower to Lender.
(5) The remainder, if any, to Borrower, it being understood and agreed that if the proceeds realized from the disposition of the Collateral shall fail to satisfy items (1) through (4) above, Borrower shall forthwith pay any such deficiency to Lender upon demand.
(c) Exercise any and all rights of setoff which Lender may have against any account, fund or property of any kind, tangible or intangible, belonging to Borrower and which shall be in Lenders possession or under Lenders control.
ARTICLE VII
COLLATERAL
Borrowers obligation for payment of the Note shall be collateralized by the following (the Collateral):
7.1 DEED TO SECURE DEBT AND SECURITY AGREEMENT. A second Deed to Secure Debt and Security Agreement on the Property.
7.2 UCC FINANCING STATEMENT. A second lien on all the furniture, fixtures, and equipment now owned or hereafter acquired and located at the Property.
ARTICLE VIII
MISCELLANEOUS
8.1 CLOSING. The Lender shall not be obligated to make the Loan or advance any funds until Borrower has fully met all requirements herein set forth to be met by Borrower, and
until Borrower has paid to Lender and any other parties entitled thereto, all fees and other charges due in connection with the Loan.
8.2 AMENDMENTS. No amendment of any provisions of this Loan Agreement, nor consent to any departure of Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.3 NOTICES. All notices and other communications provided for hereunder shall be in writing and mailed or telegraphed or delivered.
If to Borrower:
3050 Peachtree Road, NW, Suite 355
Two Buckhead Plaza
Atlanta, Georgia 30305
If to Lender:
5534 Old National Highway
College Park, GA 30349
8.4 GOVERNING LAW AND PARTIES BOUND. This Agreement shall be governed by and construed and enforced in accordance with federal law and the substantive, and not the conflict laws of the State of Georgia.
8.5 ATTORNEYS FEES AND EXPENSES. If Lender shall incur any cost or expense, including, without limitation, reasonable attorneys fees, in connection with this Agreement, the Note or the Loan, in any manner whatsoever, direct or indirect, whether with regard to the collection of amounts due, protection of Collateral, defense of Lender or otherwise, upon demand by Lender, Borrower shall pay the same or shall reimburse Lender therefor in full.
8.6 CHANGES IN OWNERSHIP. Transfers or changes of majority beneficial ownership in Borrower will be permitted, subject to satisfactory underwriting and compliance with applicable rating agency criteria, subject to the payment of a 1% transfer fee. Transfers of minority interests in the Borrower will be permitted without the payment of a transfer fee.
8.7 ASSIGNMENT BY BORROWER. No commitment issued by Lender to Borrower for the Loan nor any of Borrowers rights hereunder shall be assignable by Borrower without the prior written consent of Lender.
8.8 NO WAIVER: REMEDIES. No failure on the part of the Lender, and no delay in exercising any right under this Loan Agreement, shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Loan Agreement preclude any other or further exercise thereof or the exercise of any other right.
8.9 SEVERABILITY. In the event that any clause or provisions of this Loan Agreement or any document or instrument contemplated by this Agreement shall be held to be invalid by any court of competent jurisdiction, the invalidity of such clause or provision shall not affect any of the remaining portions or provisions of this Loan Agreement.
8.10 TIME. Time is of the essence of this Agreement.
8.11 GRACE AND NOTICE OF CURE RIGHTS. Notwithstanding any other provision to the contrary contained in this Agreement or in any of the other Loan Documents, upon the occurrence of a monetary default or a monetary Event of Default under any of the Loan Documents, Lender shall not be required to send written notice to Borrower and/or Guarantors. All loan payments are due on the first (1 st ) day of each month, however; payments will not be considered late until ten (10) days thereafter. In the event the default does not involve the payment of money by Borrower to Lender, Borrower and Guarantors shall have thirty (30) days following receipt of such notice to fully cure such default. In the event the default is cured within such period, it shall be as if no default had occurred.
8.12 OCCUPANCY. By execution of this document Borrower certifies that Borrower and Mt. Kenn Nursing, LLC will comply with the following provisions: (a) Borrower must lease 100% of the rentable property to Mt. Kenn Nursing, LLC; (b) Mt. Kenn Nursing, LLC may sublease up to 49% of the rentable property; (c) Borrower will not use Loan proceeds to improve or renovate any of the rentable property to be sub-leased.
8.13 PAYMENTS. Borrower will make payments to the Lender in accordance with the terms and conditions and instructions contained in the Central Servicing Agent Agreement (SBA Form 1506).
8.14 MISCELLANEOUS. Notwithstanding anything contained in this Loan Agreement or in the loan documents, including, without limitation, any security agreement executed in connection with this Loan Agreement (collectively, the Loan Documents) evidencing the Loan, Lender agrees that its collateral for the loan expressly excludes (and any definition of Collateral in the Loan Documents shall also expressly exclude) all or part of the following property of Mt. Kenn Nursing, LLC:
(a) all Accounts; (b) all Payment Intangibles; (c) all Instruments, Chattel Paper (including Electronic Chattel Paper), Documents, Letter-of-Credit Rights, Supporting Obligations and Commercial Tort Claims, in each case to the extent arising out of, relating to or given in exchange for or settlement of or to evidence the obligation to pay any Account or Payment Intangible; (d) all General Intangibles (including contract rights and trademarks, copyrights, patents and other intellectual property) that arise out of or relate to any Account or Payment Intangible or from which any Account or Payment Intangible arises; (e) all remedies, guarantees and collateral evidencing, securing or otherwise relating to or associated with any Account or Payment Intangible, including all rights of enforcement and collection; (f) all Commercial Lockboxes, Governmental Lockboxes, Collection Accounts and other Deposit Accounts into which Collections or other proceeds of Collateral or Advances are deposited, and all checks or Instruments from time to time representing or evidencing the same; (g) all cash, currency and
other monies at any time in the possession or under the control of Mt. Kenn Nursing, LLCs working capital or operating lender [the Operations Lender] or a bailee of such Operations Lender; (h) all books and records evidencing or relating to or associated with any of the foregoing; (i) all information and data compiled or derived with respect to any of the foregoing (other than any such information and data subject to legal restrictions of patient confidentiality); and (j) all Collections, Accessions, receipts and Proceeds derived from any of the foregoing, all words with capitalized letters being defined in the Uniform Commercial Code or the loan agreement between Mt. Kenn Nursing, LLC and Operations Lender.
IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the date first above written.
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BORROWER: |
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Signed, sealed and delivered in the presence of: |
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Mt. Kenn Property Holdings, LLC |
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/s/ [Illegible] |
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By: |
/s/ Christopher F. Brogdon |
(L.S.) |
Witness |
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Christopher F. Brogdon, Manager |
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/s/ Ellen Smith |
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Notary Public |
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LENDER: |
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Signed, sealed and delivered in the presence of: |
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Economic Development Corporation of Fulton County |
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/s/ [Illegible] |
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By: |
/s/ Eugene Merriday |
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Witness |
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Eugene Merriday |
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TITLE: Executive Director |
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/s/ Karen Rivers |
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Notary Public |
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[CORPORATE SEAL] |
The undersigned hereby expressly agree and consent to all of the terms and conditions contained herein and further agree to be bound by all of the terms and conditions contained herein. This 4th day of November, 2011.
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GUARANTORS: |
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MT. KENN NURSING, LLC |
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By: |
/s/ Christopher F. Brogdon |
(L.S.) |
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Christopher F. Brogdon, Manager |
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ADCARE HEALTH SYSTEMS, INC. |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Vice Chairman
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[CORPORATE SEAL] |
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HEARTH & HOME OF OHIO, INC. |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Designated Representative |
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[CORPORATE SEAL] |
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Exhibit 10.132
U.S. Small Business Administration |
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U.S. Small Business Administration
UNCONDITIONAL GUARANTEE |
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SBA Loan # |
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48507750-04 |
SBA Loan Name |
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Mt. Kenn Nursing, LLC |
Guarantor |
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Mt. Kenn Nursing, LLC |
Borrower |
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Mt. Kenn Property Holdings, LLC |
Lender |
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Economic Development Corporation of Fulton County |
Date |
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November 4, 2011 |
Note Amount |
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$ 2,274,000.00 |
1. GUARANTEE:
Guarantor unconditionally guarantees payment to Lender of all amounts owing under the Note. This Guarantee remains in effect until the Note is paid in full. Guarantor must pay all amounts due under the Note when Lender makes written demand upon Guarantor. Lender is not required to seek payment from any other source before demanding payment from Guarantor.
2. NOTE:
The Note is the promissory note dated of even date in the principal amount of Two Million Two Hundred Seventy-Four Thousand and No/100 Dollars ($2,274,000.00), from Borrower to Lender. It includes any assumption, renewal, substitution, or replacement of the Note, and multiple notes under a line of credit.
3. DEFINITIONS:
Collateral means any property taken as security for payment of the Note or any guarantee of the Note.
Loan means the loan evidenced by the Note.
Loan Documents means the documents related to the Loan signed by Borrower, Guarantor or any other guarantor, or anyone who pledges Collateral.
SBA means the Small Business Administration, an Agency of the United States of America.
4. LENDERS GENERAL POWERS:
Lender may take any of the following actions at any time, without notice, without Guarantors consent, and without making demand upon Guarantor:
A. |
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Modify the terms of the Note or any other Loan Document except to increase the amounts due under the Note; |
B. |
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Refrain from taking any action on the Note, the Collateral, or any guarantee; |
C. |
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Release any Borrower or any guarantor of the Note; |
D. |
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Compromise or settle with the Borrower or any guarantor of the Note; |
E. |
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Substitute or release any of the Collateral, whether or not Lender receives anything in return; |
F. |
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Foreclose upon or otherwise obtain, and dispose of, any Collateral at public or private sale, with or without advertisement; |
G. |
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Bid or buy at any sale of Collateral by Lender or any other lienholder, at any price Lender chooses; and |
H. |
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Exercise any rights it has, including those in the Note and other Documents. |
These actions will not release or reduce the obligations of Guarantor or create any rights or claims against Lender.
5. FEDERAL LAW:
When SBA is the holder, the Note and this Guarantee will be construed and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Guarantee, Guarantor may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.
6. RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:
To the extent permitted by law,
A. Guarantor waives all rights to:
1) |
|
Require presentment, protest, or demand upon Borrower; |
2) |
|
Redeem any Collateral before or after Lender disposes of it; |
3) |
|
Have any disposition of Collateral advertised; and |
4) |
|
Require a valuation of Collateral before or after Lender disposes of it. |
B. Guarantor waives any notice of:
1) |
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Any default under the Note; |
2) |
|
Presentment, dishonor, protest, or demand; |
3) |
|
Execution of the Note; |
4) |
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Any action or inaction on the Note or Collateral, such as disbursements, payment, nonpayment, acceleration, intent to accelerate, assignment, collection activity, and incurring enforcement expenses; |
5) |
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Any change in the financial condition or business operations of Borrower or any guarantor; |
6) |
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Any changes in the terms of the Note or other Loan Documents, except increases in the amounts due under the Note; and |
7) |
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The time or place of any sale or other disposition of Collateral. |
C. Guarantor waives defenses based upon any claim that:
1) |
|
Lender failed to obtain any guarantee; |
2) |
|
Lender failed to obtain, perfect, or maintain a security interest in any property offered or taken as Collateral; |
3) |
|
Lender or others improperly valued or inspected the Collateral; |
4) |
|
The Collateral changed in value or was neglected, lost, destroyed, or underinsured; |
5) |
|
Lender impaired the Collateral; |
6) |
|
Lender did not dispose of any of the Collateral; |
7) |
|
Lender did not conduct a commercially reasonable sale; |
8) |
|
Lender did not obtain the fair market value of the Collateral; |
9) |
|
Lender did not make or perfect a claim upon the death or disability of Borrower or any guarantor of the Note; |
10) |
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The financial condition of Borrower or any guarantor was overstated or has adversely changed; |
11) |
|
Lender made errors or omissions in Loan Documents or administration of the Loan; |
12) |
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Lender did not seek payment from the Borrower, any other guarantors, or any Collateral before demanding payment from Guarantor; |
13) |
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Lender impaired Guarantors suretyship rights; |
14) |
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Lender modified the Note terms, other than to increase amounts due under the Note. If Lender modifies the Note to increase the amounts due under the Note without Guarantors consent, Guarantor will not be liable for the increased amounts and related interest and expenses, but remains liable for all other amounts; |
15) |
|
Borrower has avoided liability on the Note; or |
16) |
|
Lender has taken an action allowed under the Note, this Guarantee, or other Loan Documents. |
7. DUTIES AS TO COLLATERAL:
Guarantor will preserve the Collateral pledged by Guarantor to secure this Guarantee. Lender has no duty to preserve or dispose of any Collateral.
8. SUCCESSORS AND ASSIGNS:
Under this Guarantee, Guarantor includes heirs and successors, and Lender includes its successors and assigns.
9. GENERAL PROVISIONS:
A. |
|
ENFORCEMENT EXPENSES. Guarantor promises to pay all expenses Lender incurs to enforce this Guarantee, including, but not limited to, attorneys fees and costs. |
B. |
|
SBA NOT A CO-GUARANTOR. Guarantors liability will continue even if SBA pays Lender. SBA is not a co-guarantor with Guarantor. Guarantor has no right of contribution from SBA. |
C. |
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SUBROGATION RIGHTS. Guarantor has no subrogation rights as to the Note or the Collateral until the Note is paid in full. |
D. |
|
JOINT AND SEVERAL LIABILITY. All individuals and entities singing as Guarantor are jointly and severally liable. |
E. |
|
DOCUMENT SIGNING. Guarantor must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lenders liens on Collateral. |
F. |
|
FINANCIAL STATEMENTS. Guarantor must give Lender financial statements as Lender requires. |
G. |
|
LENDERS RIGHTS CUMULATIVE, NOT WAIVED. Lender may exercise any of its rights separately or together, as many times as it chooses. Lender may delay or forgo enforcing any of its rights without losing or impairing any of them. |
H. |
|
ORAL STATEMENTS NOT BINDING. Guarantor may not use oral statement to contradict or alter the written terms of the Note or this Guarantee, or to raise a defense to this Guarantee. |
I. |
|
SEVERABILITY. If any part of this Guarantee is found to be unenforceable, all other parts will remain in effect. |
J. |
|
CONSIDERATION. The consideration for this Guarantee is the Loan or any accommodation by Lender as to the Loan. |
10. STATE-SPECIFIC PROVISIONS:
Time is of the essence of this Guaranty.
The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided for in O.C.G.A. § 10-7-24.
11. GUARANTOR ACKNOWLEDGEMENT OF TERMS:
Guarantor acknowledges that Guarantor has read and understands the significance of all terms of the Note and this Guarantee, including all waivers.
12. GUARANTOR NAME(S) AND SIGNATURE(S):
By signing below, each individual or entity becomes obligated as Guarantor under this Guarantee.
IN WITNESS WHEREOF, GUARANTOR has executed this Guaranty under seal as of the 4th day of November, 2011.
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GUARANTOR: |
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Mt. Kenn Nursing, LLC |
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||
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By: |
/s/ Christopher F. Brogdon |
(L.S.) |
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Christopher F. Brogdon, Manager |
Exhibit 10.133
U.S. Small Business Administration |
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U.S. Small Business Administration
UNCONDITIONAL GUARANTEE |
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SBA Loan # |
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48507750-04 |
SBA Loan Name |
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Mt. Kenn Nursing, LLC |
Guarantor |
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Hearth & Home of Ohio, Inc. |
Borrower |
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Mt. Kenn Property Holdings, LLC |
Lender |
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Economic Development Corporation of Fulton County |
Date |
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November 4, 2011 |
Note Amount |
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$ 2,274,000.00 |
1. GUARANTEE:
Guarantor unconditionally guarantees payment to Lender of all amounts owing under the Note. This Guarantee remains in effect until the Note is paid in full. Guarantor must pay all amounts due under the Note when Lender makes written demand upon Guarantor. Lender is not required to seek payment from any other source before demanding payment from Guarantor.
2. NOTE:
The Note is the promissory note dated of even date in the principal amount of Two Million Two Hundred Seventy-Four Thousand and No/100 Dollars ($2,274,000.00), from Borrower to Lender. It includes any assumption, renewal, substitution, or replacement of the Note, and multiple notes under a line of credit.
3. DEFINITIONS:
Collateral means any property taken as security for payment of the Note or any guarantee of the Note.
Loan means the loan evidenced by the Note.
Loan Documents means the documents related to the Loan signed by Borrower, Guarantor or any other guarantor, or anyone who pledges Collateral.
SBA means the Small Business Administration, an Agency of the United States of America.
4. LENDERS GENERAL POWERS:
Lender may take any of the following actions at any time, without notice, without Guarantors consent, and without making demand upon Guarantor:
A. Modify the terms of the Note or any other Loan Document except to increase the amounts due under the Note;
B. Refrain from taking any action on the Note, the Collateral, or any guarantee;
C. Release any Borrower or any guarantor of the Note;
D. Compromise or settle with the Borrower or any guarantor of the Note;
E. Substitute or release any of the Collateral, whether or not Lender receives anything in return;
F. Foreclose upon or otherwise obtain, and dispose of, any Collateral at public or private sale, with or without advertisement;
G. Bid or buy at any sale of Collateral by Lender or any other lienholder, at any price Lender chooses; and
H. Exercise any rights it has, including those in the Note and other Documents.
These actions will not release or reduce the obligations of Guarantor or create any rights or claims against Lender.
5. FEDERAL LAW:
When SBA is the holder, the Note and this Guarantee will be construed and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Guarantee, Guarantor may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.
6. RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:
To the extent permitted by law,
A. Guarantor waives all rights to:
1) |
|
Require presentment, protest, or demand upon Borrower; |
2) |
|
Redeem any Collateral before or after Lender disposes of it; |
3) |
|
Have any disposition of Collateral advertised; and |
4) |
|
Require a valuation of Collateral before or after Lender disposes of it. |
B. Guarantor waives any notice of:
1) |
|
Any default under the Note; |
2) |
|
Presentment, dishonor, protest, or demand; |
3) |
|
Execution of the Note; |
4) |
|
Any action or inaction on the Note or Collateral, such as disbursements, payment, nonpayment, acceleration, intent to accelerate, assignment, collection activity, and incurring enforcement expenses; |
5) |
|
Any change in the financial condition or business operations of Borrower or any guarantor; |
6) |
|
Any changes in the terms of the Note or other Loan Documents, except increases in the amounts due under the Note; and |
7) |
|
The time or place of any sale or other disposition of Collateral. |
C. Guarantor waives defenses based upon any claim that:
1) |
|
Lender failed to obtain any guarantee; |
2) |
|
Lender failed to obtain, perfect, or maintain a security interest in any property offered or taken as Collateral; |
3) |
|
Lender or others improperly valued or inspected the Collateral; |
4) |
|
The Collateral changed in value or was neglected, lost, destroyed, or underinsured; |
5) |
|
Lender impaired the Collateral; |
6) |
|
Lender did not dispose of any of the Collateral; |
7) |
|
Lender did not conduct a commercially reasonable sale; |
8) |
|
Lender did not obtain the fair market value of the Collateral; |
9) |
|
Lender did not make or perfect a claim upon the death or disability of Borrower or any guarantor of the Note; |
10) |
|
The financial condition of Borrower or any guarantor was overstated or has adversely changed; |
11) |
|
Lender made errors or omissions in Loan Documents or administration of the Loan; |
12) |
|
Lender did not seek payment from the Borrower, any other guarantors, or any Collateral before demanding payment from Guarantor; |
13) |
|
Lender impaired Guarantors suretyship rights; |
14) |
|
Lender modified the Note terms, other than to increase amounts due under the Note. If Lender modifies the Note to increase the amounts due under the Note without Guarantors consent, Guarantor will not be liable for the increased amounts and related interest and expenses, but remains liable for all other amounts; |
15) |
|
Borrower has avoided liability on the Note; or |
16) |
|
Lender has taken an action allowed under the Note, this Guarantee, or other Loan Documents. |
7. DUTIES AS TO COLLATERAL:
Guarantor will preserve the Collateral pledged by Guarantor to secure this Guarantee. Lender has no duty to preserve or dispose of any Collateral.
8. SUCCESSORS AND ASSIGNS:
Under this Guarantee, Guarantor includes heirs and successors, and Lender includes its successors and assigns.
9. GENERAL PROVISIONS:
A. ENFORCEMENT EXPENSES. Guarantor promises to pay all expenses Lender incurs to enforce this Guarantee, including, but not limited to, attorneys fees and costs.
B. SBA NOT A CO-GUARANTOR. Guarantors liability will continue even if SBA pays Lender. SBA is not a co-guarantor with Guarantor. Guarantor has no right of contribution from SBA.
C. SUBROGATION RIGHTS. Guarantor has no subrogation rights as to the Note or the Collateral until the Note is paid in full.
D. JOINT AND SEVERAL LIABILITY. All individuals and entities singing as Guarantor are jointly and severally liable.
E. DOCUMENT SIGNING. Guarantor must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lenders liens on Collateral.
F. FINANCIAL STATEMENTS. Guarantor must give Lender financial statements as Lender requires.
G. LENDERS RIGHTS CUMULATIVE, NOT WAIVED. Lender may exercise any of its rights separately or together, as many times as it chooses. Lender may delay or forgo enforcing any of its rights without losing or impairing any of them.
H. ORAL STATEMENTS NOT BINDING. Guarantor may not use oral statement to contradict or alter the written terms of the Note or this Guarantee, or to raise a defense to this Guarantee.
I. SEVERABILITY. If any part of this Guarantee is found to be unenforceable, all other parts will remain in effect.
J. CONSIDERATION. The consideration for this Guarantee is the Loan or any accommodation by Lender as to the Loan.
10. STATE-SPECIFIC PROVISIONS:
Time is of the essence of this Guaranty.
The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided for in O.C.G.A. § 10-7-24.
11. GUARANTOR ACKNOWLEDGEMENT OF TERMS:
Guarantor acknowledges that Guarantor has read and understands the significance of all terms of the Note and this Guarantee, including all waivers.
12. GUARANTOR NAME(S) AND SIGNATURE(S):
By signing below, each individual or entity becomes obligated as Guarantor under this Guarantee.
IN WITNESS WHEREOF, GUARANTOR has executed this Guaranty under seal as of the 4th day of November, 2011.
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GUARANTOR: |
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Hearth & Home of Ohio, Inc. |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Designated Representative |
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[CORPORATE SEAL] |
Exhibit 10.134
U.S. Small Business Administration |
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U.S. Small Business Administration
UNCONDITIONAL GUARANTEE |
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SBA Loan # |
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48507750-04 |
SBA Loan Name |
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Mt. Kenn Nursing, LLC |
Guarantor |
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AdCare Health Systems, Inc. |
Borrower |
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Mt. Kenn Property Holdings, LLC |
Lender |
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Economic Development Corporation of Fulton County |
Date |
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November 4, 2011 |
Note Amount |
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$ 2,274,000.00 |
1. GUARANTEE:
Guarantor unconditionally guarantees payment to Lender of all amounts owing under the Note. This Guarantee remains in effect until the Note is paid in full. Guarantor must pay all amounts due under the Note when Lender makes written demand upon Guarantor. Lender is not required to seek payment from any other source before demanding payment from Guarantor.
2. NOTE:
The Note is the promissory note dated of even date in the principal amount of Two Million Two Hundred Seventy-Four Thousand and No/100 Dollars ($2,274,000.00), from Borrower to Lender. It includes any assumption, renewal, substitution, or replacement of the Note, and multiple notes under a line of credit.
3. DEFINITIONS:
Collateral means any property taken as security for payment of the Note or any guarantee of the Note.
Loan means the loan evidenced by the Note.
Loan Documents means the documents related to the Loan signed by Borrower, Guarantor or any other guarantor, or anyone who pledges Collateral.
SBA means the Small Business Administration, an Agency of the United States of America.
4. LENDERS GENERAL POWERS:
Lender may take any of the following actions at any time, without notice, without Guarantors consent, and without making demand upon Guarantor:
A. Modify the terms of the Note or any other Loan Document except to increase the amounts due under the Note;
B. Refrain from taking any action on the Note, the Collateral, or any guarantee;
C. Release any Borrower or any guarantor of the Note;
D. Compromise or settle with the Borrower or any guarantor of the Note;
E. Substitute or release any of the Collateral, whether or not Lender receives anything in return;
F. Foreclose upon or otherwise obtain, and dispose of, any Collateral at public or private sale, with or without advertisement;
G. Bid or buy at any sale of Collateral by Lender or any other lienholder, at any price Lender chooses; and
H. Exercise any rights it has, including those in the Note and other Documents.
These actions will not release or reduce the obligations of Guarantor or create any rights or claims against Lender.
5. FEDERAL LAW:
When SBA is the holder, the Note and this Guarantee will be construed and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Guarantee, Guarantor may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.
6. RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES:
To the extent permitted by law,
A. Guarantor waives all rights to:
1) |
|
Require presentment, protest, or demand upon Borrower; |
2) |
|
Redeem any Collateral before or after Lender disposes of it; |
3) |
|
Have any disposition of Collateral advertised; and |
4) |
|
Require a valuation of Collateral before or after Lender disposes of it. |
B. Guarantor waives any notice of:
1) |
|
Any default under the Note; |
2) |
|
Presentment, dishonor, protest, or demand; |
3) |
|
Execution of the Note; |
4) |
|
Any action or inaction on the Note or Collateral, such as disbursements, payment, nonpayment, acceleration, intent to accelerate, assignment, collection activity, and incurring enforcement expenses; |
5) |
|
Any change in the financial condition or business operations of Borrower or any guarantor; |
6) |
|
Any changes in the terms of the Note or other Loan Documents, except increases in the amounts due under the Note; and |
7) |
|
The time or place of any sale or other disposition of Collateral. |
C. Guarantor waives defenses based upon any claim that:
1) |
|
Lender failed to obtain any guarantee; |
2) |
|
Lender failed to obtain, perfect, or maintain a security interest in any property offered or taken as Collateral; |
3) |
|
Lender or others improperly valued or inspected the Collateral; |
4) |
|
The Collateral changed in value or was neglected, lost, destroyed, or underinsured; |
5) |
|
Lender impaired the Collateral; |
6) |
|
Lender did not dispose of any of the Collateral; |
7) |
|
Lender did not conduct a commercially reasonable sale; |
8) |
|
Lender did not obtain the fair market value of the Collateral; |
9) |
|
Lender did not make or perfect a claim upon the death or disability of Borrower or any guarantor of the Note; |
10) |
|
The financial condition of Borrower or any guarantor was overstated or has adversely changed; |
11) |
|
Lender made errors or omissions in Loan Documents or administration of the Loan; |
12) |
|
Lender did not seek payment from the Borrower, any other guarantors, or any Collateral before demanding payment from Guarantor; |
13) |
|
Lender impaired Guarantors suretyship rights; |
14) |
|
Lender modified the Note terms, other than to increase amounts due under the Note. If Lender modifies the Note to increase the amounts due under the Note without Guarantors consent, Guarantor will not be liable for the increased amounts and related interest and expenses, but remains liable for all other amounts; |
15) |
|
Borrower has avoided liability on the Note; or |
16) |
|
Lender has taken an action allowed under the Note, this Guarantee, or other Loan Documents. |
7. DUTIES AS TO COLLATERAL:
Guarantor will preserve the Collateral pledged by Guarantor to secure this Guarantee. Lender has no duty to preserve or dispose of any Collateral.
8. SUCCESSORS AND ASSIGNS:
Under this Guarantee, Guarantor includes heirs and successors, and Lender includes its successors and assigns.
9. GENERAL PROVISIONS:
A. |
|
ENFORCEMENT EXPENSES. Guarantor promises to pay all expenses Lender incurs to enforce this Guarantee, including, but not limited to, attorneys fees and costs. |
B. |
|
SBA NOT A CO-GUARANTOR. Guarantors liability will continue even if SBA pays Lender. SBA is not a co-guarantor with Guarantor. Guarantor has no right of contribution from SBA. |
C. |
|
SUBROGATION RIGHTS. Guarantor has no subrogation rights as to the Note or the Collateral until the Note is paid in full. |
D. |
|
JOINT AND SEVERAL LIABILITY. All individuals and entities singing as Guarantor are jointly and severally liable. |
E. |
|
DOCUMENT SIGNING. Guarantor must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lenders liens on Collateral. |
F. |
|
FINANCIAL STATEMENTS. Guarantor must give Lender financial statements as Lender requires. |
G. |
|
LENDERS RIGHTS CUMULATIVE, NOT WAIVED. Lender may exercise any of its rights separately or together, as many times as it chooses. Lender may delay or forgo enforcing any of its rights without losing or impairing any of them. |
H. |
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ORAL STATEMENTS NOT BINDING. Guarantor may not use oral statement to contradict or alter the written terms of the Note or this Guarantee, or to raise a defense to this Guarantee. |
I. |
|
SEVERABILITY. If any part of this Guarantee is found to be unenforceable, all other parts will remain in effect. |
J. |
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CONSIDERATION. The consideration for this Guarantee is the Loan or any accommodation by Lender as to the Loan. |
10. STATE-SPECIFIC PROVISIONS:
Time is of the essence of this Guaranty.
The Guarantor hereby waives the right to require the Holder of the obligations hereby guaranteed to take action against the Debtor as provided for in O.C.G.A. § 10-7-24.
11. GUARANTOR ACKNOWLEDGEMENT OF TERMS:
Guarantor acknowledges that Guarantor has read and understands the significance of all terms of the Note and this Guarantee, including all waivers.
12. GUARANTOR NAME(S) AND SIGNATURE(S):
By signing below, each individual or entity becomes obligated as Guarantor under this Guarantee.
IN WITNESS WHEREOF, GUARANTOR has executed this Guaranty under seal as of the 4th day of November, 2011.
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GUARANTOR: |
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AdCare Health Systems, Inc. |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Vice Chairman and Chief |
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Acquisitions Officer |
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[CORPORATE SEAL] |
Exhibit 10.135
JOINDER AGREEMENT, FIFTH AMENDMENT
and
SUPPLEMENT TO CREDIT AGREEMENT
THIS JOINDER AGREEMENT, FIFTH AMENDMENT AND SUPPLEMENT TO CREDIT AGREEMENT (this Agreement ) dated November 29, 2011, is made by and among ADK GEORGIA, LLC , a Georgia limited liability company ( ADK Georgia ), ADK POWDER SPRINGS OPERATOR, LLC , a Georgia limited liability company ( Powder Springs ), ADK LUMBER CITY OPERATOR, LLC , a Georgia limited liability company ( Lumber City ), ADK JEFFERSONVILLE OPERATOR, LLC , a Georgia limited liability company ( Jeffersonville ), ADK LAGRANGE OPERATOR, LLC , a Georgia limited liability company ( LaGrange ), ADK THOMASVILLE OPERATOR, LLC , a Georgia limited liability company ( Thomasville ), ADK OCEANSIDE OPERATOR, LLC , a Georgia limited liability company ( Oceanside ), ADK SAVANNAH BEACH OPERATOR, LLC , a Georgia limited liability company ( Savannah ), ADK THUNDERBOLT OPERATOR, LLC , a Georgia limited liability company ( Thunderbolt ), ATTALLA NURSING ADK, LLC , a Georgia limited liability company ( Attalla ADK ), MOUNTAIN TRACE NURSING ADK, LLC , an Ohio limited liability company ( Mountain Trace ), MT. KENN NURSING, LLC , a Georgia limited liability company ( Mt. Kenn ), ERIN NURSING, LLC , a Georgia limited liability company ( Erin ; ADK Georgia, Powder Springs, Lumber City, Jeffersonville, LaGrange, Thomasville, Oceanside, Savannah, Thunderbolt, Attalla ADK, Mountain Trace, Mt. Kenn and Erin are hereinafter referred to collectively as Existing Borrowers and each individually as an Existing Borrower ), CP NURSING, LLC , a Georgia limited liability company ( New Borrower ; New Borrower and Existing Borrowers are hereinafter referred to collectively as Borrowers and each individually as a Borrower ), ADCARE OPERATIONS, LLC , a Georgia limited liability company ( Operations ), and GEMINO HEALTHCARE FINANCE, LLC , a Delaware limited liability company ( Lender ). Each capitalized term used herein, unless otherwise defined herein, shall have the meaning ascribed to such term in that certain Credit Agreement dated October 29, 2010 (as at any time amended, restated, supplemented or otherwise modified, the Credit Agreement ), among Existing Borrowers and Lender. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings ascribed to them in the Credit Agreement. The terms herein, hereof and hereunder and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. All references to any Person shall mean and include the successors and permitted assigns of such Person. All references to any of the Loan Documents shall include any and all amendments or modifications thereto and any and all restatements, extensions or renewals thereof. Wherever the phrase including shall appear in this Agreement, such word shall be understood to mean including, without limitation.
Borrowers have requested that Lender join New Borrower to the Credit Agreement and extend credit to New Borrower as a Borrower under the Credit Agreement. New Borrower is executing this Agreement to become a party to the Credit Agreement in order to induce Lender to continue to extend credit under the Credit Agreement and as consideration for the Revolving Loans previously made.
Accordingly, and for Ten Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the parties hereto, Lender and Borrowers agree as follows:
1. Joinder of New Borrower . In accordance with the Credit Agreement, New Borrower by its signature below becomes a Borrower under the Credit Agreement with the same force and effect as if originally named therein as a Borrower, and New Borrower hereby agrees to all the terms and provisions of the Credit Agreement applicable to it as a Borrower thereunder. Each reference to a Borrower in the Credit Agreement shall be deemed to include New Borrower. The Credit Agreement is hereby incorporated herein by reference.
2. Conversion of Operations to Secured Guarantor . Each Borrower, Operations and Lender (by their signatures below), and Guarantor (by its execution of the consent and ratification hereto), hereby agrees that, upon satisfaction of the conditions precedent set forth in Section 8 hereof, (i) Operations shall cease to constitute a Borrower under the Credit Agreement and shall thereafter constitute a Guarantor, and (ii) each reference to a Borrower in the Credit Agreement shall be deemed to exclude Operations. Effective concurrently with such conversion from a Borrower to a Guarantor, Operations ratifies and reaffirms the security interest granted by Operations in favor of Lender pursuant to that certain Joinder Agreement, Third Amendment and Supplement to Credit Agreement dated June 2, 2011, among Existing Borrowers, Operations and Lender, and agrees that such security interest shall remain in full force and effect notwithstanding Operations conversion to a Guarantor pursuant to this Agreement.
3. Amendments to Credit Agreement . The Credit Agreement is hereby amended as follows:
(a) By deleting the first sentence of Section 2.01(b) of the Credit Agreement and by substituting in lieu thereof the following:
(b) On November 29, 2011, Borrowers shall execute and deliver a promissory note to Lender in the principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000) (as may be amended, modified or replaced from time to time, the Revolving Note ).
(b) By deleting Section 8.01(w) of the Credit Agreement and by substituting in lieu thereof the following:
(w) CHOW . The CHOW with respect to (i) each Healthcare Facility of ADK Georgia, Powder Springs, Lumber City, Jeffersonville, LaGrange and Thomasville shall not have been unconditionally and in writing approved by each of the appropriate Governmental Authorities, intermediaries or other designated agents with respect to each such Borrower and each such Healthcare Facility on or before February 28, 2011, (ii) each Healthcare Facility of Attalla Nursing ADK, LLC, ADK Oceanside Operator, LLC, ADK Savannah Beach Operator, LLC, and ADK Thunderbolt Operator, LLC shall not have been unconditionally and in writing approved by each of the appropriate Governmental Authorities, intermediaries or other designated agents with respect to each such Borrower and each such Healthcare Facility on or before April 30, 2011, (iii) each Healthcare Facility of Mountain Trace Nursing ADK, LLC, Mt. Kenn Nursing, LLC, and Erin Nursing, LLC shall not have been unconditionally and in writing approved by each of the appropriate Governmental Authorities, intermediaries or other designated agents with respect to each such Borrower and each such Healthcare Facility on or before September 30, 2011, or (iv) each Healthcare Facility of CP Nursing, LLC shall not have been unconditionally and in writing approved by each of the appropriate Governmental Authorities, intermediaries or other designated agents with respect to such Borrower and each such Healthcare Facility on or before November 29, 2011; or
(c) By deleting the definitions of Collateral Assignment of Transition Services Agreement and Transition Services Agreement set forth in Annex 1 to the Credit Agreement and by substituting in lieu thereof the following:
Collateral Assignment of Transition Services Agreement means, collectively, (i) the Collateral Assignment of Operations Transfer Agreement of even date herewith among ADK Georgia and Lender, and the written acknowledgment thereof by Transferor, (ii) the Collateral Assignment of Transfer Agreements dated February 25, 2011, among ADK Georgia, Attalla
Nursing ADK, LLC, Mountain Trace Nursing ADK, LLC, ADK and Lender, and the written acknowledgment thereof by Transferor, (iii) the Collateral Assignment of Transfer Agreements dated June 2, 2011, among Mt. Kenn Nursing, LLC, Erin Nursing, LLC, and Lender, and the written acknowledgment thereof by Transferor, and (iv) the Collateral Assignment of Operations Transfer Agreement dated November 29, 2011, between CP Nursing, LLC, and Lender, and the written acknowledgment thereof by Transferor.
Transition Services Agreement means, as applicable, any or all of (i) the Operations Transfer Agreement entered into as of July 31, 2010, among ADK Georgia, Triad Health Management of Georgia, LLC, Triad at Jeffersonville I, LLC, Triad at LaGrange I, LLC, Triad at Lumber City I, LLC, Triad at Powder Springs I, LLC, and Triad at Thomasville I, LLC, (ii) the Operations Transfer Agreement dated as of October 1, 2010, between Attalla Health Care, Inc., and Attalla Nursing ADK, LLC; (iii) the Operations Transfer Agreement dated as of July 31, 2010, among ADK Georgia, Triad Health Management of Georgia, LLC, Triad Health Management of Georgia III, LLC, and Triad at Tara, LLC; (iv) the Operations Transfer Agreement dated as of October 27, 2010, between Mountain Trace Enterprise LLC, and Mountain Trace Nursing ADK, LLC; (v) the Operations Transfer Agreement dated as of May 1, 2011, between Five Star Quality Care-GA, LLC, and Mt. Kenn Nursing, LLC; (vi) the Operations Transfer Agreement dated as of May 1, 2011, between Five Star Quality Care-GA, LLC and Erin Nursing, LLC; and (vii) the Operations Transfer Agreement dated as of June 1, 2011, between Five Star Quality Care-GA, LLC and CP Nursing, LLC.
4. Consent to Erin and Mt. Kenn Guaranties . Borrowers have requested that Lender consent to (a) the guaranty by Erin of certain indebtedness of Erin Property Holdings, LLC ( Erin Holdings ), and (b) the guaranty by Mt. Kenn of certain indebtedness of Mt. Kenn Property Holdings, LLC ( Mt. Kenn Holdings ), notwithstanding the fact that such guaranties are prohibited by Sections 7.05 and 7.12 of the Credit Agreement. Upon satisfaction of all conditions precedent to the effectiveness of this Agreement as set forth in Section 8 hereof, Lender hereby:
(a) consents, effective July 27, 2011, to the guaranties by Erin of certain indebtedness of Erin Holdings owing to Bank of Atlanta pursuant to that certain Term Note dated July 27, 2011, by Erin Holdings in favor of Bank of Atlanta in the principal sum of $5,000,000, and that certain U.S. Small Business Administration Note dated July 27, 2011, by Erin Holdings in favor of Bank of Atlanta in the principal sum of $800,000, in each case in the form presented to Lender prior to the date hereof; provided , that such guaranties, and the actions taken by Erin in connection therewith, do not at any time otherwise violate the terms of the Credit Agreement, including, without limitation, Section 7.02 thereof;
(b) consents, effective November 4, 2011, to the guaranty by Mt. Kenn of certain indebtedness of Mt. Kenn Holdings owing to The Bank of Las Vegas pursuant to that certain Loan Agreement dated November 4, 2011, among Mt. Kenn Holdings, Mt. Kenn Nursing, LLC, ADK, Hearth & Home of Ohio, Inc., and The Bank of Las Vegas, in the form presented to Lender prior to the date hereof, evidencing a loan in the principal sum of $3,175,200; provided , that such guaranty, and the actions taken by Mt. Kenn in connection therewith, does not at any time otherwise violate the terms of the Credit Agreement, including, without limitation, Section 7.02 thereof;
(c) consents, effective November 4, 2011, to the guaranty by Mt. Kenn of certain indebtedness of Mt. Kenn Holdings owing to Apax Capital, LLC pursuant to that certain Loan Agreement dated November 4, 2011 (as at any time amended, restated, modified or supplemented, the Apax Loan Agreement ), among Mt. Kenn Holdings, Mt. Kenn Nursing,
LLC, ADK, Hearth & Home of Ohio, Inc., and Apax Capital, LLC, in the form presented to Lender prior to the date hereof, evidencing a loan in the principal sum of $2,222,640; provided , that such guaranty, and the actions taken by Mt. Kenn in connection therewith, does not at any time otherwise violate the terms of the Credit Agreement, including, without limitation, Section 7.02 thereof; and
(d) consents, effective November 4, 2011, to the guaranty by Mt. Kenn of certain indebtedness of Mt. Kenn Holdings owing to Economic Development Corporation of Fulton County pursuant to that certain Loan Agreement dated November 4, 2011 (as at any time amended, restated, modified or supplemented, the CDC Loan Agreement ), among Mt. Kenn Holdings, Mt. Kenn Nursing, LLC, ADK, Hearth & Home of Ohio, Inc., and Economic Development Corporation of Fulton County, in the form presented to Lender prior to the date hereof, evidencing a loan in the principal sum of $2,274,000; provided , that such guaranty, and the actions taken by Mt. Kenn in connection therewith, does not at any time otherwise violate the terms of the Credit Agreement, including, without limitation, Section 7.02 thereof; provided , further, that no loan may be advanced, or any other Indebtedness incurred, under or in connection with the CDC Loan Agreement until all Indebtedness arising under and in connection with the Apax Loan Agreement has been repaid in full.
5. Acknowledgments of New Borrower . New Borrower acknowledges that it has requested Lender to extend financial accommodations to Borrowers on a combined basis in accordance with the provisions of the Credit Agreement, as hereby amended. In accordance with the terms of Article 10 of the Credit Agreement, New Borrower acknowledges and agrees that it shall be jointly and severally liable for any and all Revolving Loans and other Obligations heretofore or hereafter made by Lender to any Borrower and for all interest, fees and other charges payable in connection therewith. New Borrower hereby appoints and designates ADK Georgia as, and ADK Georgia shall continue to act under the Credit Agreement as, the Borrower Representative of New Borrower and each other Borrower for all purposes, including requesting borrowings and receiving accounts statements and other notices and communications to Borrowers (or any of them) from Lender. Each Loan made by Lender under the Credit Agreement or any of the other Loan Documents shall be disbursed in accordance with the Credit Agreement.
6. Security Interest . To secure the prompt payment and performance to Lender of all of the Obligations, New Borrower hereby grants to Lender a continuing security interest in and Lien upon all of New Borrowers assets, including all of the following Property and interests in Property of such Borrower, whether now owned or existing or hereafter created, acquired or arising and wheresoever located:
(a) all Accounts; (b) all Payment Intangibles; (c) all Instruments, Chattel Paper (including Electronic Chattel Paper), Documents, Letter-of-Credit Rights, Supporting Obligations and Commercial Tort Claims set forth on Schedule 5.23 to the Credit Agreement, in each case to the extent arising out of, relating to or given in exchange for or settlement of or to evidence the obligation to pay any Account or Payment Intangible; (d) all General Intangibles (including contract rights and trademarks, copyrights, patents and other intellectual property) that arise out of or relate to any Account or Payment Intangible or from which any Account or Payment Intangible arises; (e) all remedies, guarantees and collateral evidencing, securing or otherwise relating to or associated with any Account or Payment Intangible, including all rights of enforcement and collection; (f) all Commercial Lockboxes, Governmental Lockboxes, Collection Accounts and other Deposit Accounts into which Collections or other proceeds of Collateral or Advances are deposited, and all checks or Instruments from time to time representing or evidencing the same; (g) all cash, currency and other monies at any time in the possession or under the control of Lender or a bailee of Lender; (h) all books and records evidencing or relating
to or associated with any of the foregoing; (i) all information and data compiled or derived with respect to any of the foregoing (other than any such information and data subject to legal restrictions of patient confidentiality); and (j) all Collections, Accessions, receipts and Proceeds derived from any of the foregoing.
7. Representations and Warranties . New Borrower represents and warrants to Lender that New Borrower is a wholly owned Subsidiary of Operations. New Borrower represents and warrants to Lender that New Borrower is engaged in the same business as the other Borrowers as part of a joint and common enterprise; that this Agreement has been duly authorized, executed and delivered by New Borrower and constitutes a legal, valid and binding obligation of New Borrower, enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); and that the Schedules attached hereto contain true, accurate and complete information with respect to New Borrower and the matters covered therein and such Schedules shall be deemed to supplement and be a part of the Schedules to the Credit Agreement. In addition, New Borrower represents and warrants to Lender that no Event of Default or Unmatured Event of Default exists on the date hereof; that the execution, delivery and performance of this Agreement have been duly authorized by all requisite company action on the part of Borrowers and this Agreement has been duly executed and delivered by Borrowers; and that all of the representations and warranties made by Borrowers in the Credit Agreement are true and correct on and as of the date hereof.
8. Conditions Precedent . The effectiveness of this Agreement is subject to the satisfaction of each of the following conditions precedent, in form and substance satisfactory to Lender, unless satisfaction thereof is specifically waived in writing by Lender:
(a) No Event of Default or Unmatured Event of Default shall exist other than the Designated Default;
(b) Lender shall have received from Borrowers a duly executed counterpart of this Agreement;
(c) Lender shall have received from Borrowers a duly executed Third Amended and Restated Revolving Note in the amount of $7,500,000;
(d) Lender shall have received, reviewed and found acceptable in all respects all organizational documents for New Borrower, including certified resolutions, a copy of the Articles of Organization for New Borrower certified by New Borrowers state of formation, a copy of New Borrowers Operating Agreement, a good standing certificate of New Borrower certified by New Borrowers state of formation, and a good standing certificate of New Borrower certified by each other state in which New Borrower is qualified to transact business;
(e) Lender shall have received from New Borrower authorization to file UCC-1 financing statements and any other appropriate documentation to perfect or continue the perfection of Lenders liens with respect to the assets of New Borrower and Lender shall have received confirmation from each appropriate jurisdiction that such financing statements have been filed in the appropriate records;
(f) Lender shall have completed its due diligence to ensure that Lenders security interests and liens are or will be first priority liens on the assets of New Borrower and that there are no other liens on such assets other than those that are acceptable to Lender in its sole
discretion, and in connection therewith shall have obtained such intercreditor and subordination agreements (if any) as may be deemed necessary by Lender, in form and substance satisfactory to Lender;
(g) Lender shall have received from New Borrower evidence of New Borrowers liability, property and casualty insurance coverage and insurance binders and lenders loss payable endorsements with respect thereto naming Lender as certificate holder, lenders loss payee and additional insured, as applicable;
(h) Lender shall have received from New Borrower such other documents, instruments and agreements (including, without limitation, Depository Agreements in respect of the Government Lockbox) as Lender may require in its sole discretion in form and substance satisfactory to Lender;
(i) New Borrower shall have delivered to Lender such financial, business and other information with respect to New Borrower as Lender may have requested;
(j) There shall not have occurred any material adverse change in the operations or financial condition of Borrowers or Guarantors;
(k) Lender shall have received an opinion letter from Borrowers and Guarantors legal counsel with respect to such matters as Lender may request;
(l) New Borrower shall have signed and delivered to Lender notices, in the form of Exhibit 4.02(d) to the Credit Agreement, directing the Obligors to make payment to the Government Lockbox;
(m) Lender shall have received from Operations a duly executed Guaranty Agreement in favor of Lender, and related documents requested by Lender (including, without limitation, certified resolutions), in each case in form and substance satisfactory to Lender; and
(n) Lender shall have completed its due diligence with respect to New Borrower and the Properties of New Borrower, the results of which shall be satisfactory to Lender.
9. Ratification and Reaffirmation . Each Borrower hereby ratifies and reaffirms the Obligations, each of the Loan Documents and all of such Borrowers covenants, duties, indebtedness and liabilities under the Loan Documents.
10 Additional Covenants . To induce Lender to enter into this Agreement, Borrowers covenant and agree that, within thirty (30) days after the later of (i) the date that the Centers for Medicare & Medicaid Services has made the electronic funds transfers ( EFTs ) available to a Borrower in connection with the CHOW process, or (ii) the date of this Agreement, Borrowers shall deliver to the Centers for Medicare & Medicaid Services (and provide evidence to Lender of the delivery thereof) a completed copy of Form CMS-588, together with all other documentation necessary to cause the Centers for Medicare & Medicaid Services to direct EFTs to the Government Lockbox.
11. Acknowledgments of All Borrowers . Each Borrower acknowledges and stipulates that the Credit Agreement and the other Loan Documents executed by Borrowers are legal, valid and binding obligations of Borrowers that are enforceable against Borrowers in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by
Borrowers); and the security interests and liens granted by Borrowers in favor of Lender are duly perfected, first priority security interests and liens.
12. No Novation, etc. Except as otherwise expressly provided in this Agreement, nothing herein shall be deemed to amend or modify any provision of the Credit Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This Agreement is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Credit Agreement as herein modified shall continue in full force and effect.
13. Severability . In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
14. Expenses of Lender . In consideration of Lenders willingness to enter into this Agreement, Borrowers agree to reimburse Lender for Lenders reasonable out-of-pocket expenses in connection with this Agreement, including, without limitation, the fees, disbursements and other charges of counsel for Lender.
15. Entire Agreement . This Agreement and the other Loan Documents, together with all other instruments, agreements and certificates executed by the parties in connection therewith or with reference thereto, embody the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and inducements, whether express or implied, oral or written. Each of the Schedules attached hereto is incorporated into this Agreement and by this reference made a part hereof.
16. Counterparts; Electronic Signatures . This Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. Any manually-executed signature page hereto delivered by a party by facsimile or other electronic transmission shall be deemed to be an original signature hereto.
17. Effectiveness; Governing Law . This Agreement shall be effective when accepted by Lender (New Borrower hereby waiving notice of such acceptance) and thereupon shall be deemed a contract made in Pennsylvania, and shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to the conflict of laws principles thereof.
18. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, executors, successors and assigns.
19. Section Titles . Section titles and references used in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto.
20. Manager Certification of Existing Borrowers and Operations . By their execution and delivery of this Agreement, Boyd P. Gentry and Christopher F. Brogdon each hereby certifies that: (a) in their respective capacities as the Chief Executive Officer and Chief Financial Officer of ADK, Boyd P. Gentry and Martin Brew are authorized designees of each Existing Borrower and of Operations, (b) the following Unanimous Consents in Lieu of a Special Meeting (collectively, the Consents ) each remain in full force and effect: (i) Unanimous Consents of the Sole Member and the Managers of each of ADK
Georgia, Powder Springs, Lumber City, Jeffersonville, LaGrange, and Thomasville dated as of October 29, 2010; (ii) Unanimous Consents of the Sole Member and the Managers of each of Oceanside, Savannah, Thunderbolt, Attalla ADK and Mountain Trace dated as of February 21, 2011; and (iii) Unanimous Consents of the Sole Member and the Managers of each of Mt. Kenn, Erin and Operations dated as of June 2, 2011; (c) pursuant to the Consents, the Managers or designees of each Existing Borrower and Operations are authorized and empowered (either alone or in conjunction with any one or more of the other Managers of such Existing Borrower or Operations) to take, from time to time, all or any part of the following actions on or in behalf of such Existing Borrower or Operations, as applicable: (i) to make, execute and deliver to Lender this Agreement and all other agreements, documents and instruments contemplated by or referred to herein or executed by such Existing Borrower or Operations in connection herewith; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing between Lender and such Existing Borrower or Operations, as applicable; (d) any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to this Agreement by David A. Tenwick, Boyd P. Gentry, Christopher F. Brogdon or any other Manager of such Existing Borrower or Operations, by Martin Brew as Chief Financial Officer of such Existing Borrower or Operations, or by the Chief Executive Officer of ADK (currently, Boyd P. Gentry), Chief Financial Officer of ADK (currently, Martin Brew) or an employee of such Existing Borrower or Operations acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine; (e) the Chief Executive Officer of ADK is a designee of each Existing Borrower and Operations who is authorized and empowered (either alone or in conjunction with any one or more of the Managers or Chief Financial Officer of such Existing Borrower or Operations) to take any action on behalf of such Existing Borrower or Operations in conjunction with the Credit Agreement and this Agreement; (f) the Chief Financial Officer of ADK (currently, Martin Brew) and the Controller of ADK (currently, Susan Criswell) each are designees of each Existing Borrower who are authorized and empowered to borrow money from time to time under the revolving line of credit per the terms of the Credit Agreement and this Agreement, to endorse the name of any Borrower to any checks, drafts and other instruments or orders for the payment of money, payable to such Borrower or its order for the purpose of depositing the same in any account or accounts of Lender with any bank, banker, or trust company or any of the branches of any said bank, and to deal with any and all checks, drafts, and other instruments or orders (including but not limited to preparation of Borrowing Base Certificate documentation) for the payment of money and the proceeds thereof as the property of Lender; and (g) set forth below is the name and signature of the current Chief Financial Officer of ADK, Martin Brew, one designated representative and Chief Financial Officer of each Existing Borrower and Operations, who is authorized to sign all Credit Agreements, security agreements, instruments, assignments, pledges, mortgages, security deeds, trust deeds and other documents among Lender and any Existing Borrower or Operations:
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Martin Brew |
Chief Financial Officer |
/s/ Martin Brew |
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of ADK, each Existing |
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Borrower and Operations |
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21. Release of Claims . To induce Lender to enter into this Agreement, each Borrower hereby releases, acquits and forever discharges Lender, and all officers, directors, agents, employees, successors and assigns of Lender, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that Borrowers now have or ever had against Lender arising under or in connection with any of the Loan Documents or otherwise. Each Borrower represents and warrants to Lender that none of them have transferred or assigned to any Person any claim that any of them has ever had or claimed to have against Lender.
22. Waiver of Jury Trial . The parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this Agreement.
[Signatures commence on following page.]
IN WITNESS WHEREOF, Borrowers and Lender have duly executed this Agreement under seal as of the date and year first above written.
NEW BORROWER: |
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Address for notices to New Borrower: |
CP NURSING, LLC |
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5057 Troy Road |
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Springfield, Ohio 45502 |
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Attn: |
Mr. Martin Brew |
By: |
/s/ Martin Brew |
Fax: |
(937) 964-8222 |
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Martin Brew , Chief Financial Officer |
[Signatures continued on following page.]
Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement (AdCare)
For purposes of the Manager Certification of Existing Borrowers in Section 20 above: |
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/s/ Boyd P. Gentry |
(SEAL) |
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Boyd P. Gentry |
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/s/ Christopher F. Brogdon |
(SEAL) |
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Christopher F. Brogdon |
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EXISTING BORROWERS: |
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ADK GEORGIA, LLC |
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ADK POWDER SPRINGS OPERATOR, LLC |
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ADK LUMBER CITY OPERATOR, LLC |
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ADK JEFFERSONVILLE OPERATOR, LLC |
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ADK LAGRANGE OPERATOR, LLC |
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ADK THOMASVILLE OPERATOR, LLC |
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ADK OCEANSIDE OPERATOR, LLC |
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ADK SAVANNAH BEACH OPERATOR, LLC |
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ADK THUNDERBOLT OPERATOR, LLC |
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ATTALLA NURSING ADK, LLC |
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MOUNTAIN TRACE NURSING ADK, LLC |
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MT. KENN NURSING, LLC |
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ERIN NURSING, LLC |
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By: |
/s/ Martin Brew |
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Martin Brew , Chief Financial Officer |
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OPERATIONS: |
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ADCARE OPERATIONS, LLC |
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By: |
/s/ Martin Brew |
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Martin Brew , Chief Financial Officer |
[Signatures continued on following page.]
Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement (AdCare)
LENDER: |
GEMINO HEALTHCARE FINANCE, LLC |
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By: |
/s/ Jeffrey M. Joslin |
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Jeffrey M. Joslin , Senior Portfolio |
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Manager |
[Consent and Reaffirmation of Guarantor appears on next page]
Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement (AdCare)
CONSENT AND REAFFIRMATION
The undersigned guarantor of the Obligations of Borrowers at any time owing to Lender hereby (i) acknowledges receipt of a copy of the foregoing Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement; (ii) consents to Borrowers execution and delivery thereof and of the other documents, instruments or agreements Borrowers agree to execute and deliver pursuant thereto; (iii) agrees to be bound thereby; and (iv) affirms that nothing contained therein shall modify in any respect whatsoever its guaranty of the Obligations and reaffirms that such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has caused its duly authorized officers to execute this Consent and Reaffirmation on and as of the date of such Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement.
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ADCARE HEALTH SYSTEMS, INC. |
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By: |
/s/ Martin Brew |
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Martin Brew , Chief Financial Officer |
Joinder Agreement, Fifth Amendment and Supplement to Credit Agreement (AdCare)
Exhibit 10.136
THIRD AMENDED AND RESTATED REVOLVING NOTE
$7,500,000.00 |
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Date: November 29, 2011 |
FOR VALUE RECEIVED, the undersigned (the Borrowers ), hereby promise to pay to GEMINO HEALTHCARE FINANCE, LLC , a Delaware limited liability company (the Lender ), or its successors or assigns, the principal amount of each Revolving Loan from time to time made in accordance with the provisions of the Credit Agreement dated October 29, 2010 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the Credit Agreement the terms defined therein being used herein as therein defined), among the Borrowers and Lender.
The Borrowers promise to pay interest on the unpaid principal amount of each Revolving Loan from the date of such Revolving Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Credit Agreement. All payments of principal and interest shall be made to the Lender in Dollars in immediately available funds. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement.
This Third Amended and Restated Revolving Note (this Revolving Note) is one of the Revolving Notes referred to in the Credit Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Revolving Note is secured by the Collateral. Upon the occurrence and during the continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Revolving Note shall become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement. Revolving Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Revolving Note and endorse thereon the date, amount and maturity of its Revolving Loans and payments with respect thereto.
The Borrowers, for themselves, their successors and assigns, hereby waive diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Revolving Note.
This Third Amended and Restated Revolving Note is an amendment and restatement of that certain Second Amended and Restated Revolving Note issued by certain of the Borrowers and AdCare Operations, LLC, in favor of Lender on June 2, 2011, in the maximum principal amount of $7,500,000 (the Prior Note ). This Revolving Note is not intended nor shall it be construed to be a novation or an accord and satisfaction of the indebtedness evidenced by the Prior Note.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
[Remainder of Page Intentionally Left Blank]
Signature Page to Third Amended and Restated Revolving Note
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ADK GEORGIA, LLC |
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ADK POWDER SPRINGS OPERATOR, LLC |
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ADK LUMBER CITY OPERATOR, LLC |
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ADK JEFFERSONVILLE OPERATOR, LLC |
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ADK LAGRANGE OPERATOR, LLC |
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ADK THOMASVILLE OPERATOR, LLC |
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ADK OCEANSIDE OPERATOR, LLC |
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ADK SAVANNAH BEACH OPERATOR, LLC |
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ADK THUNDERBOLT OPERATOR, LLC |
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ATTALLA NURSING ADK, LLC |
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MOUNTAIN TRACE NURSING ADK, LLC |
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MT. KENN NURSING, LLC |
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ERIN NURSING, LLC |
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CP NURSING, LLC |
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By: |
/s/ Martin Brew |
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Martin Brew , Chief Financial Officer |
Exhibit 10.137
GUARANTY AGREEMENT
This GUARANTY AGREEMENT (as the same may from time to time be amended, restated, supplemented or otherwise modified, this Guaranty ) is made as of November 29, 2011 by ADCARE OPERATIONS, LLC , a Georgia limited liability company ( Guarantor ), in favor of GEMINO HEALTHCARE FINANCE, LLC , a Delaware limited liability company (together with its successors and assigns, the Lender ).
W I T N E S S E T H :
WHEREAS , Lender has made or is about to make an extension of credit to ADK Georgia, LLC, a Georgia limited liability company, ADK Powder Springs Operator, LLC, a Georgia limited liability company, ADK Lumber City Operator, LLC, a Georgia limited liability company, ADK Jeffersonville Operator, LLC, a Georgia limited liability company, ADK LaGrange Operator, LLC, a Georgia limited liability company, ADK Thomasville Operator, LLC, a Georgia limited liability company, ADK Oceanside Operator, LLC, a Georgia limited liability company, ADK Savannah Beach Operator, LLC, a Georgia limited liability company, ADK Thunderbolt Operator, LLC, a Georgia limited liability company, Attalla Nursing ADK, LLC, a Georgia limited liability company, Mountain Trace Nursing ADK, LLC, an Ohio limited liability company, Mt. Kenn Nursing, LLC, a Georgia limited liability company, Erin Nursing, LLC, a Georgia limited liability company, and CP Nursing, LLC, a Georgia limited liability company (hereinafter collectively, together with their respective successors and permitted assigns and any other Person from time to time joined to the Credit Agreement as a borrower, referred to as Borrowers and individually referred to as a Borrower ), under that certain Credit Agreement dated October 29, 2010 (as amended, restated, modified and supplemented from time to time, the Credit Agreement ) by and among the Lender and the Borrowers;
WHEREAS , Guarantor is an affiliate of each Borrower and will derive both direct and indirect economic benefit from the financial accommodations made to the Borrowers under the Credit Agreement;
WHEREAS , the Lender has required, as a condition to it entering into the Credit Agreement, that the Guarantor executes and delivers this Guaranty; and
WHEREAS , capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them under the Credit Agreement.
NOW THEREFORE , for and in consideration of the foregoing and of any financial accommodations or extensions of credit (including, without limitation, any loan or advance by renewal, refinancing or extension of the agreements described hereinabove or otherwise) heretofore, now or hereafter made to or for the benefit of the Borrowers pursuant to the Credit Agreement or any other Loan Document executed pursuant to or in connection therewith, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as follows:
1. Guaranty of Payment . Guarantor hereby guarantees the full and prompt payment and performance when due, whether by acceleration or otherwise, and at all times thereafter, of all Obligations of the Borrowers to the Lender, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due (all such obligations, together with any extensions or renewals thereof, being hereinafter collectively called the Liabilities ), and Guarantor further agrees to pay all expenses (including reasonable attorneys and legal assistants fees and legal expenses) paid or incurred by the Lender in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this Guaranty. The right of recovery against Guarantor is unlimited. Notwithstanding any provisions of this Guaranty to the contrary, it is intended that this Guaranty not constitute a Fraudulent Conveyance (as defined below). Consequently, Guarantor agrees that if this Guaranty would, but for the application of this sentence, constitute a Fraudulent Conveyance, this Guaranty shall be valid and enforceable only to the maximum extent that would not cause this Guaranty to constitute a Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have been amended accordingly at all relevant times. For purposes hereof, Fraudulent Conveyance means a fraudulent conveyance under Section 548 of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law, order, ruling, decision or similar law, order, ruling or decision binding upon the undersigned of any foreign, federal, state, municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof or any court or arbitrator, as in effect from time to time.
2. Primary Liability of the Guarantor . Guarantor agrees that this Guaranty may be enforced by the Lender without the necessity at any time of resorting to or exhausting any other security or collateral. This is a guaranty of payment and not merely of collection.
3. Acceleration of the Time of Payment of Amount Payable Under Guaranty . Guarantor agrees that, in the event of the death, incompetency, dissolution or insolvency of any Borrower or Guarantor, or the inability of any Borrower or Guarantor to pay debts as they mature, or an assignment by any Borrower or Guarantor for the benefit of creditors, or the institution of any proceeding by or against any Borrower or Guarantor alleging that such Borrower or Guarantor is insolvent or unable to pay debts as they mature, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, Guarantor will pay to the Lender forthwith the full amount which would be payable hereunder by Guarantor if all of the Liabilities were then due and payable.
4. Continuing Guaranty . This Guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect, subject to discontinuance as to Guarantor only upon actual receipt by the Lender of the indefeasible payment in full of the Liabilities and the termination of the Credit Agreement (the date of such receipt, the Termination Date ).
5. Rescission or Return of Payment on Liabilities . Guarantor further agrees that, if at any time all or any part of any payment theretofore applied by the Lender to any of the Liabilities is or must be rescinded or returned by the Lender for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Guarantor or any Borrower), such Liabilities shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Lender, and this Guaranty shall continue to be effective
or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Lender had not been made.
6. Lender Permitted to Take Certain Actions . The Lender may, from time to time (but shall not be obligated to), whether before or after any discontinuance of this Guaranty, at its sole discretion and without notice to Guarantor, take any or all of the following actions: (a) retain (including, without limitation, retention of the security interest granted by Guarantor in favor of Lender pursuant to that certain Joinder Agreement, Third Amendment and Supplement to Credit Agreement among Lender, Guarantor and certain other parties dated June 2, 2011) or obtain a security interest in any property to secure any of the Liabilities or any obligation hereunder; (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the Guarantor, with respect to any of the Liabilities; (c) extend or renew for one or more periods (whether or not longer than the original period), alter or exchange any of the Liabilities, or release or compromise any obligation of Guarantor or any obligation of any nature of any other obligor with respect to any of the Liabilities; (d) release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property; and (e) resort to the Guarantor for payment of any of the Liabilities, whether or not the Lender (i) shall have resorted to any property securing any of the Liabilities or any obligation hereunder or (ii) shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in preceding clauses (i) and (ii) being hereby waived by Guarantor).
7. Application of Payments . Any amounts received by the Lender from whatsoever source on account of the Liabilities may be applied by it toward the payment of such Liabilities, and in such order of application, as the Lender may from time to time elect, subject to the terms of the Credit Agreement.
8. Subrogation . Until such time as this Guaranty shall have been discontinued as to Guarantor and the Lender shall have received payment of the full amount of all of the Liabilities, no payment made by or for the account of Guarantor pursuant to this Guaranty shall entitle Guarantor by subrogation or otherwise to any payment by the Borrowers or from or out of any property of the Borrowers, and Guarantor shall not exercise any right or remedy against the Borrowers or any property of the Borrowers by reason of any performance by Guarantor of this Guaranty.
9. Waiver of Notice and Other Matters . Guarantor waives: (a) notice of the acceptance by the Lender of this Guaranty; (b) notice of the existence or creation or non-payment of all or any of the Liabilities; (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever; and (d) all diligence in collection or protection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing.
10. Assignment of Liabilities . The Lender may, from time to time, whether before or after any discontinuance of this Guaranty, without notice to Guarantor, assign or transfer any
or all of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this Guaranty, and each and every immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Liabilities, be entitled to the benefits of this Guaranty to the same extent as if such assignee or transferee were the Lender; provided, however, that, unless the Lender shall otherwise consent in writing, the Lender shall have an unimpaired right, prior and superior to that of any such assignee or transferee, to enforce this Guaranty, for the benefit of the Lender, as to those of the Liabilities which the Lender has not assigned or transferred.
11. Information Concerning Borrowers; No Reliance on Representations by Lender . Guarantor hereby warrants to the Lender that Guarantor now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Borrowers. The Lender shall not have any duty or responsibility to provide Guarantor with any credit or other information concerning the affairs, financial condition or business of the Borrowers which may come into the Lenders possession. Guarantor has executed and delivered this Guaranty without reliance upon any representation by the Lender with respect to (a) the due execution, validity, effectiveness or enforceability of any instrument, document or agreement evidencing or relating to any of the Liabilities or any loan or other financial accommodation made or granted to the Borrowers; (b) the validity, genuineness, enforceability, existence, value or sufficiency or any property securing any of the Liabilities or the creation, perfection or priority of any lien or security interest in such property; or (c) the existence, number, financial condition or creditworthiness of other guarantors or sureties with respect to any of the Liabilities.
12. Waiver and Modifications . No delay on the part of the Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Guaranty be binding upon the Lender except as expressly set forth in a writing duly signed and delivered on behalf of the Lender.
13. Obligations Under Guaranty . No action of the Lender permitted hereunder shall in any way affect or impair the rights of the Lender and the obligations of Guarantor under this Guaranty. For the purposes of this Guaranty, Liabilities shall include all Obligations of the Borrowers to the Lender, notwithstanding any right or power of the Borrowers or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such Obligation, and no such claim or defense shall affect or impair the obligations of Guarantor hereunder. The obligations of Guarantor under this Guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of Guarantor. Guarantor acknowledges that there are no conditions to the effectiveness of this Guaranty.
14. Successors . This Guaranty shall be binding upon Guarantor, and upon the successors and assigns of Guarantor.
15. Representations and Warranties . Guarantor warrants that:
(a) Guarantor has the full and absolute power to execute and deliver this Guaranty and to perform his obligations hereunder.
(b) The execution and delivery of this Guaranty and the performance by Guarantor of Guarantors obligations hereunder do not and will not conflict with any provision of law or of any agreement binding upon Guarantor.
(c) The Guaranty is the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors rights or by general principles of equity limiting the availability of equitable remedies.
16. Reserved .
17. Law . THIS GUARANTY, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS GUARANTY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS, AND SHALL BE CONSTRUED WITHOUT THE AID OF ANY CANON, CUSTOM OR RULE OF LAW REQUIRING CONSTRUCTION AGAINST THE DRAFTSMAN.
18. Warrant of Attorney to Confess Judgment .
(a) Acknowledgment of Warrant of Attorney . THE FOLLOWING PARAGRAPH SETS FORTH A GRANT OF AUTHORITY FOR ANY ATTORNEY TO CONFESS JUDGMENT AGAINST GUARANTOR. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST GUARANTOR, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR GUARANTOR AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, GUARANTOR HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS GUARANTOR HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF AMERICA, COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE INCLUDING, WITHOUT LIMITATION, A HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF GUARANTORS BANK ACCOUNTS AND OTHER ASSETS. GUARANTOR ACKNOWLEDGES AND UNDERSTANDS THAT BY ENTERING INTO THIS AGREEMENT CONTAINING A CONFESSION OF JUDGMENT CLAUSE THAT GUARANTOR IS VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL RIGHTS, INCLUDING CONSTITUTIONAL RIGHTS, THAT GUARANTOR HAS OR MAY HAVE TO NOTICE AND A HEARING BEFORE JUDGMENT CAN BE ENTERED AGAINST GUARANTOR AND BEFORE GUARANTORS ASSETS, INCLUDING, WITHOUT LIMITATION, BANK ACCOUNTS, MAY BE GARNISHED, LEVIED, EXECUTED UPON AND/OR ATTACHED.
GUARANTOR UNDERSTANDS THAT ANY SUCH GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL RENDER THE PROPERTY GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY UNAVAILABLE TO GUARANTOR. IT IS SPECIFICALLY ACKNOWLEDGED BY GUARANTOR THAT THE PAYEE HAS RELIED ON THIS WARRANT OF ATTORNEY AND THE RIGHTS WAIVED BY GUARANTOR HEREIN IN CONSENTING TO THIS AGREEMENT AND AS AN INDUCEMENT TO GRANT THE ACCOMMODATIONS OUTLINED HEREIN TO GUARANTOR.
(b) Warrant Of Attorney To Confess Judgment Money . GUARANTOR HEREBY AUTHORIZES AND EMPOWERS, UPON AN EVENT OF DEFAULT HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS, ANY ATTORNEY OF ANY COURT OF RECORD OR THE PROTHONOTARY OR CLERK OF ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA, OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, OR THE CLERK OF ANY UNITED STATES DISTRICT COURT, TO APPEAR FOR GUARANTOR IN ANY AND ALL ACTIONS WHICH MAY BE BROUGHT HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS, AND ENTER AND CONFESS JUDGMENT AGAINST GUARANTOR IN FAVOR OF THE LENDER OR ITS ASSIGNEE FOR THE ENTIRE AMOUNT OF THE INDEBTEDNESS THEN DUE AND OUTSTANDING UNDER THE TERMS OF THE NOTES, AND/OR UNDER THE TERMS OF THE OTHER LOAN DOCUMENTS, TOGETHER WITH ATTORNEYS FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE FOREGOING SUMS THEN DUE AND OWING, BUT IN NO EVENT LESS THAN FIVE THOUSAND ($5,000.00) DOLLARS, ALL WITH OR WITHOUT DECLARATION, WITHOUT PRIOR NOTICE, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL PROCEDURAL ERRORS AND THE RIGHT TO ISSUE EXECUTIONS FORTHWITH. TO THE EXTENT PERMITTED BY LAW, GUARANTOR WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON, VOLUNTARILY CONDEMNS THE SAME, AUTHORIZES THE PROTHONOTARY OR CLERK TO ENTER UPON THE WRIT OF EXECUTION THIS VOLUNTARY CONDEMNATION AND AGREES THAT SUCH REAL ESTATE MAY BE SOLD ON A WRIT OF EXECUTION; AND ALSO WAIVES ANY RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED. IF COPIES OF THE NOTES AND/OR THE OTHER LOAN DOCUMENTS VERIFIED BY AFFIDAVIT OF ANY REPRESENTATIVE OF THE LENDER SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINALS THEREOF AS A WARRANT OF ATTORNEY, ANY PRACTICE OR USAGE TO THE CONTRARY NOTWITHSTANDING. THE AUTHORITY HEREIN GRANTED TO CONFESS JUDGMENT SHALL NOT BE EXHAUSTED BY ANY SINGLE EXERCISE THEREOF, BUT SHALL CONTINUE AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE LENDER SHALL FIND IT NECESSARY AND DESIRABLE AND AT ALL TIMES UNTIL FULL PAYMENT OF ALL AMOUNTS DUE HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS. THE LENDER MAY CONFESS ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME INDEBTEDNESS OR OBLIGATIONS. IN THE EVENT
THAT ANY JUDGMENT CONFESSED AGAINST GUARANTOR IS STRICKEN OR OPENED UPON APPLICATION BY OR ON BEHALF OF GUARANTOR FOR ANY REASON, THE LENDER IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST GUARANTOR FOR ANY PART OR ALL OF THE INDEBTEDNESS DUE AND OWING TO THE LENDER HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS.
(c) Warrant of Attorney to Confess Judgment General Provisions . IN ANY ACTION OR PROCEEDING DESCRIBED IN SECTION 18 HEREIN OR IN CONNECTION THEREWITH, IF COPIES OF THIS AND/OR THE OTHER LOAN DOCUMENTS ARE THEREIN VERIFIED BY THE LENDER OR SOMEONE ACTING FOR THE LENDER TO BE TRUE AND CORRECT COPIES OF THIS INSTRUMENT AND/OR THE OTHER LOAN DOCUMENTS (AND SUCH COPIES SHALL BE CONCLUSIVELY PRESUMED TO BE TRUE AND CORRECT BY VIRTUE OF SUCH VERIFICATION), THEN IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL OF THIS INSTRUMENT AND/OR THE OTHER LOAN DOCUMENTS, ANY STATUTE, RULE OF COURT OF LAW, CUSTOM OR PRACTICE TO THE CONTRARY NOTWITHSTANDING. GUARANTOR HEREBY RELEASES TO THE LENDER, ANYONE ACTING FOR THE LENDER AND ALL ATTORNEYS WHO MAY APPEAR FOR GUARANTOR, ALL ERRORS IN PROCEDURE REGARDING THE ENTRY OF JUDGMENT OR JUDGMENTS BY CONFESSION OR OTHERWISE BY VIRTUE OF THE WARRANTS OF ATTORNEY CONTAINED IN THIS INSTRUMENT AND/OR THE OTHER LOAN DOCUMENTS, AND ALL LIABILITY THEREFOR. THE RIGHT TO ENTER JUDGMENT OR JUDGMENTS BY CONFESSION OR OTHERWISE BY VIRTUE OF THE WARRANTS OF ATTORNEY CONTAINED IN THIS INSTRUMENT AND/OR THE OTHER LOAN DOCUMENTS, AND TO ENFORCE ALL OF THE OTHER PROVISIONS OF THE AFORESAID DOCUMENTS MAY BE EXERCISED BY ANY ASSIGNEE OF THE LENDERS RIGHT, TITLE AND INTEREST IN THIS INSTRUMENT AND/OR THE OTHER LOAN DOCUMENTS IN SUCH ASSIGNEES OWN NAME, ANY STATUTE, RULE OF COURT OR LAW, CUSTOM OR PRACTICE TO THE CONTRARY NOTWITHSTANDING.
19. Severability . Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty.
20. Captions . Section captions used in this Guaranty are for convenience only, and shall not affect the construction of this Guaranty.
21. Waiver of Jury Trial . GUARANTOR WAIVES, AND, BY ACCEPTING THIS GUARANTY, THE LENDER SHALL BE DEEMED TO WAIVE, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (B) ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND
GUARANTOR AGREES, AND, BY ACCEPTING THIS GUARANTY, THE LENDER SHALL BE DEEMED TO AGREE, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
22. Consent to Jurisdiction . GUARANTOR AND LENDER HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE JURISDICTION OF, AND VENUE IN, ANY STATE OR FEDERAL COURT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING. BORROWERS WAIVE ANY OBJECTION TO IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT OR COURTS AND ALL RIGHTS TO TRANSFER FOR ANY REASON. GUARANTOR IRREVOCABLY AGREES TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY SET FORTH HEREIN.
[SIGNATURE PAGE FOLLOWS]
Signature Page to Guaranty Agreement
IN WITNESS WHEREOF , this Guaranty Agreement has been duly executed as of the day and year first above written.
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GUARANTOR : |
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ADCARE OPERATIONS, LLC |
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By: |
/s/ Martin Brew |
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Martin Brew , Chief Financial Officer |
Exhibit 10.138
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LOAN AGREEMENT
Dated as of December 30, 2011
by and between
WOODLAND MANOR PROPERTY HOLDINGS, LLC ,
a Georgia limited liability company,
as Borrower
and
THE PRIVATEBANK AND TRUST COMPANY ,
an Illinois banking corporation,
as Lender
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TABLE OF CONTENTS
Article |
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Page |
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ARTICLE 1 INCORPORATION AND DEFINITIONS |
1 |
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1.1. |
Incorporation and Definitions. |
1 |
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ARTICLE 2 REPRESENTATIONS AND WARRANTIES |
6 |
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2.1. |
Representations and Warranties |
6 |
2.2. |
Continuation of Representations and Warranties |
11 |
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ARTICLE 3 THE LOAN |
12 |
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3.1. |
Agreement to Borrow and Lend |
12 |
3.2. |
Interest |
12 |
3.3. |
Maturity Date |
12 |
3.4. |
Uniform Commercial Code Matters |
12 |
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ARTICLE 4 LOAN DOCUMENTS |
13 |
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4.1. |
Loan Documents |
13 |
4.2. |
Interest Rate Protection |
14 |
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ARTICLE 5 CONDITIONS TO LOAN DISBURSEMENTS |
14 |
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5.1. |
Conditions to Loan Opening |
14 |
5.2. |
Additional Conditions to Loan Opening |
17 |
5.2. |
Termination of Agreement |
17 |
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ARTICLE 6 PAYMENT OF LOAN EXPENSES |
17 |
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6.1. |
Payment of Loan Expenses at Loan Opening |
17 |
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ARTICLE 7 FURTHER AGREEMENTS OF BORROWER |
18 |
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7.1. |
Mechanics Liens, Taxes and Contest Thereof |
18 |
7.2. |
Fixtures and Personal Property |
18 |
7.3. |
Insurance Policies |
18 |
7.4. |
Furnishing Information |
19 |
7.5. |
Excess Indebtedness |
20 |
7.6. |
Certain Title Related Matters |
20 |
7.7. |
Compliance with Laws |
21 |
7.8. |
ERISA Liabilities; Employee Plans |
21 |
7.9. |
Licensure; Notices of Agency Actions |
21 |
7.10. |
Project and Facility Accounts and Revenues |
22 |
7.11. |
Single-Asset Entity; Indebtedness; Distributions |
22 |
7.12. |
Restrictions on Transfer |
23 |
7.13. |
Leasing, Operation and Management of Project |
24 |
7.14. |
Debt Service Coverage Ratio |
24 |
7.15. |
Fixed Charge Coverage Ratio |
25 |
7.16. |
Rental Income Coverage of Debt Service Ratio |
25 |
7.17. |
Security Interest Matters |
25 |
7.18. |
Further Assurance |
26 |
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ARTICLE 8 CASUALTIES AND CONDEMNATION |
26 |
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8.1. |
Application of Insurance Proceeds and Condemnation Awards |
26 |
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ARTICLE 9 ASSIGNMENTS, SALE AND ENCUMBRANCES |
26 |
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9.1. |
Lenders Right to Assign |
26 |
9.2. |
Prohibition of Assignments and Encumbrances by Borrower |
26 |
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ARTICLE 10 EVENTS OF DEFAULT BY BORROWER |
27 |
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10.1. |
Event of Default Defined |
27 |
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ARTICLE 11 LENDERS REMEDIES UPON EVENT OF DEFAULT |
29 |
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11.1. |
Remedies Conferred upon Lender |
29 |
11.2. |
Right of Lender to Make Advances to Cure Event of Defaults; Obligatory Advances |
30 |
11.3. |
Attorneys Fees |
30 |
11.4. |
No Waiver |
30 |
11.5. |
Default Rate |
30 |
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ARTICLE 12 MISCELLANEOUS |
31 |
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12.1. |
Time is of the Essence |
31 |
12.2. |
Lenders Determination of Facts; Lender Approvals and Consents |
31 |
12.3. |
Prior Agreements; No Reliance; Modifications |
31 |
12.4. |
Disclaimer by Lender |
31 |
12.5. |
Loan Expenses; Indemnification |
32 |
12.6. |
Captions |
32 |
12.7. |
Inconsistent Terms and Partial Invalidity |
32 |
12.8. |
Gender and Number |
32 |
12.9. |
Notices |
32 |
12.10. |
Effect of Agreement |
33 |
12.11. |
Refinancing Proposal |
33 |
12.12. |
Construction |
33 |
12.13. |
Governing Law |
34 |
12.14. |
Waiver of Defenses |
34 |
12.15. |
Consent to Jurisdiction |
34 |
12.16. |
Waiver of Jury Trial |
34 |
12.17. |
Counterparts; Facsimile Signatures |
35 |
12.18. |
Customer Identification-USA Patriot Act Notice; OFAC and Bank Secrecy Act |
35 |
EXHIBITS |
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EXHIBIT A |
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THE LAND |
EXHIBIT B |
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PERMITTED EXCEPTIONS |
EXHIBIT C |
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DIRECT AND INDIRECT OWNERSHIP OF BORROWER |
EXHIBIT D |
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INSURANCE REQUIREMENTS |
LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of December 30, 2011 (this Agreement ), is executed by and between WOODLAND MANOR PROPERTY HOLDINGS, LLC , a Georgia limited liability company ( Borrower ), and THE PRIVATEBANK AND TRUST COMPANY , an Illinois banking corporation ( Lender ).
RECITALS
A. Borrower has contracted to purchase the property described in Exhibit A attached hereto and the building located thereon, which is designed to be used as a skilled nursing facility (collectively, the Project ).
B. Borrower has applied to Lender for the Loan (as hereinafter defined) to provide mortgage financing for the Project, and Lender is willing to make the Loan upon the terms and conditions hereinafter set forth.
AGREEMENTS
In consideration of the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
INCORPORATION AND DEFINITIONS
1.1 Incorporation and Definitions . The foregoing recitals and all exhibits hereto are hereby made a part of this Agreement. The following terms shall have the following meanings in this Agreement:
AdCare : AdCare Health Systems, Inc., an Ohio corporation.
ALF : The assisted living facility which is located adjacent to the Project.
Affiliate : As to a person or entity, any other person or entity which, directly or indirectly, Controls, is Controlled by or is under common Control with such first person or entity.
Agreement : This Loan Agreement by and between Borrower and Lender.
Assignment of Rents : As defined in Section 4.1 hereof.
Bank Product Agreements : Those certain cash management service agreements entered into from time to time between Borrower and Lender or its Affiliates in connection with any of the Bank Products.
Bank Product Obligations : All obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by Borrower to Lender or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that Borrower is obligated to reimburse to Lender as a result of Lender purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to Borrower pursuant to the Bank Product Agreements.
Bank Products : Any service or facility extended to Borrower by Lender or its Affiliates, including, without limitation, (i) deposit accounts, (ii) cash management services, including, without limitation, controlled disbursement, lockbox, electronic funds transfers (including, without limitation, book transfers, fedwire transfers, ACH transfers), online reporting and other services relating to accounts maintained with Lender or its Affiliates, (iii) debit cards, and (iv) Hedging Agreements.
Borrower : Woodland Manor Property Holdings, LLC, a Georgia limited liability company.
Capital Expenditures Reserve Account : The account so designated that is created in Section 7.18 of this Agreement.
Capital Lease : With respect to any party, a lease of any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, by such party, as lessee, that is or should be recorded as a capital lease on the financial statements of such party prepared in accordance with GAAP.
Capitalized Lease Obligations : With respect to any party, all rental obligations of such party as lessee under a Capital Lease which are or will be required to be capitalized on the books of such party.
Code : The Uniform Commercial Code of the State of Illinois as from time to time in effect; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the security interest in any collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, the term Code shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement or the other Loan Documents relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.
Control : Possession by a person or an entity, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether by contract, ownership of voting securities, membership or partnership interests or otherwise.
Declarations : Any documents containing covenants, conditions, restrictions, easements, operating agreements or the like, which benefit or burden the Land, or both, whether or not recorded, including, without limitation, the following: .
Default : When used in reference to this Agreement or any other document, or in reference to any provision of or obligation under this Agreement or any other document, the occurrence of an event or the existence of a condition which, with the passage of time or the giving of notice, or both, would constitute an Event of Default under this Agreement or such other document, as the case may be.
Default Rate : As defined in the Note.
Depreciation : With respect to any party, for any period, the total amounts added to depreciation, amortization, obsolescence, valuation and other proper reserves, as reflected on such partys financial statements for such period and determined in accordance with GAAP.
Distribution : In the case of any entity with respect to which the term is used, any of the following: (i) any dividend or distribution of money or property to any owner of a direct or indirect interest in such entity (each a Principal ) or to any Affiliate of any Principal, (ii) any loan or advance to any Principal or to any Affiliate of any Principal, (iii) any payment of principal or interest on any indebtedness due to any Principal or to any Affiliate of any Principal, and (iv) any payment of any fees or other compensation to any Principal or to any Affiliate of any Principal.
EBITDA : With respect to any party, for any period, the sum for such period of the following of or payable by such party, as the case may be: (i) Net Income, plus (ii) Interest Charges, plus (iii) federal and state income taxes, plus (iv) Depreciation.
EBITDAR : With respect to any party, for any period, the sum for such period of the following of or payable by such party, as the case may be: (i) Net Income, plus (ii) Interest Charges, plus (iii) federal and state income taxes, plus (iv) Depreciation, plus (v) Rental Expense.
Employee Plan : Any pension, stock bonus, employee stock ownership plan, retirement, profit sharing, deferred compensation, stock option, bonus or other incentive plan, whether qualified or nonqualified, or any disability, medical, dental or other health plan, life insurance or other death benefit plan, vacation benefit plan, severance plan or other employee benefit plan or arrangement, including, without limitation, those pension, profit-sharing and retirement plans of Borrower or Operator described from time to time in its financial statements, and any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or multi-employer plan, maintained or administered by Borrower or Operator or to which Borrower or Operator is a party, or under which Borrower or Operator may have any liability, or by which Borrower or Operator may be bound.
Environmental Indemnity : As defined in Section 4.1 hereof.
Environmental Laws : As defined in the Environmental Indemnity.
ERISA : The Employee Retirement Income Security Act of 1974, as amended.
Event of Default : The following: (i) when used in reference to this Agreement, one or more of the events or occurrences referred to in Section 10.1 of this Agreement; and (ii) when
used in reference to any other document, a default or event of default under such document that has continued after the giving of any applicable notice and the expiration of any applicable grace or cure periods.
Facility : A skilled nursing facility containing 99 active beds (licensed for 113 beds) known as Woodland Manor, a/k/a known as Eaglewood Care Center, 2000 Villa Road, Springfield, Ohio, which is operated by Operator in the Project.
GAAP : Generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination, provided, however, that interim financial statements or reports shall be deemed in compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required by GAAP.
Gross Revenues : All income and receipts from all sources, including, without limitation, with respect to the Project, and in the case of the Project, including, without limitation, all base rent, additional rent, security deposits and other amounts paid by tenants of the Project.
Guarantors : Operator and AdCare.
Guaranty : As defined in Section 4.1 hereof.
Hazardous Substance : As defined in the Environmental Indemnity.
Hedging Agreements : The following: (i) any ISDA Master Agreement between Borrower and Lender or any other provider, (ii) any Schedule to Master Agreement between Borrower and Lender or any other provider, and (iii) all other agreements entered into from time to time by Borrower and Lender or any other provider relating to Hedging Transactions.
Hedging Transaction : Any transaction (including an agreement with respect thereto) now existing or hereafter entered into between Borrower and Lender or any other provider which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.
Interest Charges : With respect to any party, for any period, the sum of: (i) all interest, charges and related expenses payable with respect to that period to a lender in connection with borrowed money or the deferred purchase price of assets that are treated as interest in accordance with GAAP, plus (ii) the portion of Capitalized Lease Obligations with respect to that period that
should be treated as interest in accordance with GAAP, plus (iii) all charges paid or payable (without duplication) during that period with respect to any hedging agreements.
Land : That certain parcel or parcels of real estate legally described in Exhibit A to this Agreement, together with all improvements presently located thereon and all easements and other rights appurtenant thereto.
Lease : The Facility Lease dated as of December 30, 2011, by and between Borrower, as Landlord, and Operator, as Tenant.
Legal Requirements : As to any person or party, the organizational and governing documents of such person or party, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such person or party or any of its property or to which such person or party or any of its property is subject.
Lender : The PrivateBank and Trust Company, an Illinois banking corporation.
Loan : The loan to be made pursuant to this Agreement.
Loan Amount : $4,800,000.
Loan Documents : This Agreement, the documents specified in Article 4 hereof and any other instruments evidencing, securing or guarantying obligations of any party under the Loan, and any Bank Product Agreements to which Lender or any of its Affiliates is a party, including, without limitation, any Hedging Agreements to which Lender is a party.
Loan Expenses : All interest, charges, costs and expenses incurred by Lender in connection with the Loan, including, but not limited to, (i) interest due on the Loan and any points, loan fees, service charges, commitment fees or other fees due to Lender in connection with the Loan; (ii) all title examination, survey, escrow, filing, search, recording and registration fees and charges; (iii) all fees and disbursements of architects, engineers and consultants engaged by Borrower and Lender; (iv) all documentary stamp and other taxes and charges imposed by law on the issuance or recording of any of the Loan Documents; (v) all appraisal fees; (vi) all title, casualty, liability, payment, performance or other insurance or bond premiums; (vii) the cost of a real estate tax monitoring service; (viii) all reasonable fees and disbursements of legal counsel engaged by Lender in connection with the Loan, including, without limitation, counsel engaged in connection with the origination, negotiation, document preparation, consummation, enforcement or administration of this Agreement or any of the Loan Documents; and (ix) any amounts required to be paid by Borrower under this Agreement, the Mortgage or any Loan Document after the occurrence of an Event of Default under this Agreement or any of the other Loan Documents.
Loan Opening : The first disbursement of Loan Proceeds.
Loan Proceeds : All amounts advanced as part of the Loan, whether advanced directly to Borrower or otherwise.
Maturity Date : December 30, 2016.
Mortgage : As defined in Section 4.1 hereof.
Net Income : With respect to any party, for any period, the net income (or loss) of such party for such period as determined in accordance with GAAP, excluding any gains from dispositions of assets, any extraordinary gains and any gains from discontinued operations.
Note : As defined in Section 4.1 hereof.
Old Operator : Woodland Manor, Ltd., an Ohio limited liability company.
Operations Transfer Agreement : The Operations Transfer Agreement dated as of December 30, 2011, by and between Old Operator and Operator.
Operator : Woodland Manor Nursing, LLC, a Georgia limited liability company.
Operator Loan : Any future loan by Lender to Operator, whether to Operator alone or to Operator and other borrowers.
Operator Loan Documents : All documents at any time evidencing or securing any Operator Loan, and all as heretofore and hereafter modified, amended, restated, increased, renewed and extended.
Permitted Exceptions : The title exceptions specified in Exhibit B hereto, together with such additional exceptions as may be permitted by the express terms of this Agreement or any of the other Loan Documents.
Permitted Substance : As defined in the Environmental Indemnity.
Prohibited Transfer : As defined in Section 7.12 hereof.
Project : The Land and the building and other improvements located on the Land.
Rental Expense : With respect to any party, for any period, the rental expense for real estate leased by such party as lessee for such period as determined in accordance with GAAP.
Rental Income : With respect to any party, for any period, the rental income for real estate leased by such party as lessor for such period, minus the operating expenses of such real estate for such period, all as determined in accordance with GAAP.
Required Loan Opening Date : December 30, 2011.
Signing Entity : Each entity (other than Borrower itself) that appears in the signature block of Borrower in this Agreement, if any.
State : The state in which the Project is located.
Title Insurance Company : Chicago Title Insurance Company.
Title Insurance Policy : As defined in Section 5.1 hereof.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties . To induce Lender to execute and perform this Agreement, Borrower hereby represents, covenants and warrants to Lender as follows:
(a) At the Loan Opening and at all times thereafter until the Loan is paid in full, Borrower will have good and merchantable fee simple title to the Land, subject only to the Permitted Exceptions. Borrower has legal power and authority to encumber and convey the Project. The Declarations are in full force and effect and have not been modified or amended. No Default or Event of Default under the Declarations on the part of Borrower has occurred and is continuing.
(b) Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Georgia and duly registered to transact business and in good standing in the State of Ohio. Borrower has full power and authority to conduct its business as presently conducted, to own and operate the Project, to enter into this Agreement and to perform all of its duties and obligations under this Agreement and under the Loan Documents, all of which has been duly authorized by all necessary Legal Requirements applicable to Borrower. Each Signing Entity is duly organized, validly existing and in good standing under the laws of the State in which it is organized, has full power and authority to conduct its business as presently conducted and to execute this Agreement and the other Loan Documents to which Borrower is a party in the capacity shown in the signature block of Borrower contained in this Agreement, and such execution has been duly authorized by all necessary Legal Requirements applicable to such Signing Entity. Neither Borrower nor any Guarantor has been convicted of a felony and there are no proceedings or investigations being conducted involving criminal activities of Borrower or any Guarantor. The direct and indirect ownership of Borrower and Operator is as shown in Exhibit C attached to this Agreement.
(c) Operator is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Georgia and duly registered to transact business and in good standing in the State of Ohio. Operator has full power and authority to conduct its business as presently conducted, to lease the Project from Borrower and operate the Facility, and to enter into and to perform the Guaranty and the other Loan Documents to which it is a party and to perform all of its duties and obligations thereunder, all of which has been duly authorized by all necessary Legal Requirements applicable to Operator.
(d) AdCare is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. AdCare has full power and authority to conduct its business as presently conducted and to enter into and to perform the Guaranty
and the other Loan Documents to which it is a party and to perform all of its duties and obligations thereunder, all of which has been duly authorized by all necessary Legal Requirements applicable to AdCare.
(e) Borrower and each Guarantor is able to pay its or his debts as such debts become due, and each has capital sufficient to carry on its or his respective present businesses and transactions and all businesses and transactions in which it or he is about to engage. Neither Borrower nor any Guarantor (i) is bankrupt or insolvent, (ii) has made an assignment for the benefit of its or his respective creditors, (iii) has had a trustee or receiver appointed, (iv) has had any bankruptcy, reorganization or insolvency proceedings instituted by or against it or him, or (v) shall be rendered insolvent by its or his execution, delivery or performance of the Loan Documents or by the transactions contemplated thereunder. There is no Uniform Commercial Code financing statement on file that names Borrower or any Guarantor as debtor and covers any of the collateral for the Loan, and there is no judgment or tax lien outstanding against Borrower or any Guarantor.
(f) This Agreement, the Note, the Mortgage, the other Loan Documents and any other documents and instruments required to be executed and delivered by Borrower or any Guarantor in connection with the Loan, when executed and delivered, will constitute the duly authorized, valid and legally binding obligations of the party required to execute the same and will be enforceable strictly in accordance with their respective terms (except to the extent that enforceability may be affected or limited by applicable bankruptcy, insolvency and other similar debtor relief laws affecting the enforcement of creditors rights generally); and no basis exists for any claim against Lender under this Agreement, under the Loan Documents or with respect to the Loan; and enforcement of this Agreement and the Loan Documents is subject to no defenses of any kind.
(g) The execution, delivery and performance of this Agreement, the Note, the Mortgage, the other Loan Documents and any other documents or instruments to be executed and delivered by Borrower or any Guarantor pursuant to this Agreement or in connection with the Loan and the use and occupancy of the Project will not: (i) violate any Legal Requirements applicable to Borrower or any Signing Entity, or (ii) conflict with, be inconsistent with, or result in any breach or default of any of the terms, covenants, conditions or provisions of any indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind to which Borrower, any Guarantor or any Signing Entity is a party or by which any of them may be bound. Neither Borrower, any Guarantor nor any Signing Entity is in default (without regard to grace or cure periods) under any contract or agreement to which it is a party, the effect of which default will adversely affect the performance by Borrower or any Guarantor of its or his obligations pursuant to and as contemplated by the terms and provisions of this Agreement or the other Loan Documents.
(h) No condition, circumstance, event, agreement, document, instrument, restriction, litigation or proceeding, or threatened litigation or proceeding or basis therefor, exists which could (i) adversely affect the validity or priority of the liens and security interests granted Lender under the Loan Documents; (ii) materially adversely
affect the ability of Borrower or any Guarantor to perform their obligations under the Loan Documents; or (iii) constitute a Default or Event of Default under this Agreement or any of the other Loan Documents.
(i) It is a condition of this Agreement and the Loan that the Project and the use and occupancy of the Project do not violate or conflict with any applicable law, statute, ordinance, rule, regulation or order of any kind, including, without limitation, Environmental Laws, zoning, building, land use, noise abatement, occupational health and safety or other laws, any building permit or any Declarations, and if a third-party is required under any Declarations or other documents, to consent to use or operation of the Project, Borrower has obtained such approval from such party, and to the best of Borrowers knowledge, such condition is satisfied. In addition, and without limiting the foregoing, Borrower shall (i) ensure that no person or entity which owns a controlling interest in or otherwise controls Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control ( OFAC ), the Department of the Treasury or included in any Executive Orders, (ii) not use or permit the use of any Loan Proceeds to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (iii) comply with all applicable Bank Secrecy Act laws and regulations, as amended.
(j) Each of the following is a condition of this Agreement and the Loan: Except as disclosed in the environmental site assessment referred to below, the Project has never been used for any activities which, directly or indirectly, involve the use, generation, treatment, storage, transportation or disposal of any Hazardous Substances, and no Hazardous Substances exist on the Project or under the Project or in any surface waters or groundwaters on or under the Project. The Project and its existing and prior uses have at all times complied with all Environmental Laws, and Borrower has not violated any Environmental Laws. The environmental site assessment referred to above is as follows: Phase I Environmental Site Assessment dated December 23, 2011, prepared by Environmental Corporation of America. To the best of Borrowers knowledge, each of such conditions is satisfied.
(k) There are no facilities on the Project which are subject to reporting under any State laws or Section 312 of the Federal Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. Section 11022), and federal regulations promulgated thereunder. Except as disclosed in the environmental site assessment referred to above, the Project does not contain any underground or above ground storage tanks.
(l) All financial statements submitted by Borrower, Operator or any Guarantor to Lender in connection with the Loan are true and correct in all material respects, have been prepared in accordance with GAAP consistently applied, and fairly present the respective financial conditions and results of operations of the entities and persons which are their subjects.
(m) This Agreement and all financial statements, budgets, schedules, opinions, certificates, confirmations, applications, rent rolls, affidavits, agreements, and other materials submitted to Lender in connection with or in furtherance of this Agreement by or on behalf of Borrower, Operator or any Guarantor fully and fairly state the matters with which they purport to deal, and neither misstate any material fact nor, separately or in the aggregate, fail to state any material fact necessary to make the statements made not misleading in any material respect.
(n) The Land is taxed as one or more separate tax parcels which do not include any property other than the Land.
(o) Under applicable law, the Land may be encumbered, conveyed and otherwise dealt with as a separate legal parcel.
(p) All utility and municipal services required for the construction, occupancy and operation of the Project, including, but not limited to, water supply, storm and sanitary sewage disposal systems, cable services, gas, electric and telephone facilities are available for use by and currently provide service to the Project.
(q) Subject to the provisions of Section 7.9(b) of this Agreement, all governmental permits and licenses required by applicable law in order for Borrower to own and lease the Project, and for Operator to operate the Facility, have been validly issued and are in full force.
(r) Each of the following is a condition of this Agreement and the Loan: The storm and sanitary sewage disposal system, water system, drainage system and all mechanical systems of the Project comply with all applicable laws, statutes, ordinances, rules and regulations, including, without limitation, all Environmental Laws. The applicable environmental protection agency, pollution control board and/or other governmental agencies having jurisdiction of the Project have issued their permits for the construction, tap-on and operation of those systems. To the best of Borrowers knowledge, each of such conditions is satisfied.
(s) It is a condition of this Agreement and the Loan that all utility, parking, access (including curb-cuts and highway access), construction, recreational and other permits and easements required for the use of the Project have been granted and issued, and to the best of Borrowers knowledge, such condition is satisfied.
(t) With the exception of Permitted Exceptions, the improvements located on the Land do not encroach upon any building line, set back line, sideyard line, or any recorded or visible easement (or other easement of which Borrower is aware or has reason to believe may exist) which exists with respect to the Project.
(u) The Loan, including interest rate, fees and charges as contemplated hereby, is a business loan within the meaning of subparagraph (1)(c) contained in Section 205/4 of Chapter 815 of the Illinois Compiled Statutes, as amended. The Loan is a loan for a commercial enterprise within the meaning of Section 1343.01(B)(6)(b) of the Ohio Revised Code and is a business loan to a borrower described in Section
1343.01(B)(6)(a) of the Ohio Revised Code. The Loan is an exempted transaction under the Truth In Lending Act, 12 U.S.C. §1601 et seq. The Loan does not, and when disbursed will not, violate the provisions of the usury laws of the State, any consumer credit laws or the usury laws of any state which may have jurisdiction over this transaction, Borrower or any property securing the Loan.
(v) There are no leases for use or occupancy of the Project other than the Lease, with the exception of agreements entered into with residents and occupants in the ordinary course of business of operating the Facility.
(w) The Lease is in full force and effect; no Defaults or Events of Default on the part of Borrower have occurred and are continuing thereunder; the tenant has no right of set-off against payment of rent due thereunder; and enforcement of the Lease by Borrower or by Lender pursuant to an exercise of Lenders rights under the Assignment of Rents would be subject to no defenses of any kind. The Operations Transfer Agreement is in full force and effect and no Defaults or Events of Default on the part of Operator or Old Operator have occurred and are continuing thereunder.
(x) All Employee Plans of Borrower and Operator meet the minimum funding standards of Section 302 of ERISA and 412 of the Internal Revenue Code where applicable, and each such Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified. No withdrawal liability has been incurred under any such Employee Plans and no Reportable Event or Prohibited Transaction (as such terms are defined in ERISA), has occurred with respect to any such Employee Plans, unless approved by the appropriate governmental agencies. Borrower and Operator have promptly paid and discharged all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed might result in the imposition of a lien against any of their properties or assets.
(y) Each of the following is a condition of this Agreement and the Loan: There are no strikes, lockouts or other labor disputes pending or threatened against Borrower or Operator; hours worked by and payment made to employees of Borrower and Operator have not been in violation of the Fair Labor Standards Act or any other applicable law; and no unfair labor practice complaint is pending or threatened against Borrower or Operator before any governmental authority. To the best of Borrowers knowledge, each of such conditions is satisfied.
(z) Subject to the provisions of Section 7.9(b) of this Agreement, the Facility has all necessary licenses, permits and certifications required by any applicable governmental authority to operate and maintain a skilled nursing facility therein with its current number of beds in service, and participates in the Medicare and Medicaid programs. Operator has complied with all applicable requirements of the United States of America, the State of Ohio and all applicable local governments, and of its agencies and instrumentalities, necessary to operate and maintain the Facility as such a facility. All utilities necessary for use, operation and occupancy of the Project and the Facility are available to the Project and the Facility. All requirements for unrestricted use of the
Project and the Facility as a skilled nursing facility under the rules and regulations of the State of Ohio Department Health and of any other department or agency of the State of Ohio having jurisdiction over the Project or the Facility have been fulfilled. All building, zoning, safety, health, fire, water district, sewerage and environmental protection agency and any other permits or licenses which are required by any governmental authority for use, occupancy and operation of the Project and the Facility as a skilled nursing facility have been obtained and are maintained in full force and effect. Neither Borrower, Operator, the Project, the Facility nor any Guarantor is subject to any corporate integrity agreement, compliance agreement or other agreement governing the operation of the Project or the Facility or the operations of Borrower, Operator or any Guarantor.
(w) Borrower and Operator are in compliance in all material respects with all laws, orders, regulations and ordinances of all federal, foreign, state and local governmental authorities binding upon or affecting the business, operation or assets of Borrower or Operator. Neither Borrower nor Operator: (i) has had a civil monetary penalty assessed against it under the Social Security Act (the SSA ) Section 1128(a), other than nominal amounts for violations which were not of a material nature, (ii) has been excluded from participation under the Medicare program or under a State health care program as defined in the SSA Section 1128(h) ( State Health Care Program ), or (iii) has been convicted (as that term is defined in 42 C.F.R. Section 1001.2) of any of the following categories of offenses as described in the SSA Section 1127(a) and (b)(l), (2), (3): (A) criminal offenses relating to the delivery of an item or service under Medicare or any State Health Care Program; (B) criminal offenses under federal or state law relating to patient neglect or abuse in connection with the delivery of a health care item or service; (C) criminal offenses under federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service or with respect to any act or omission in a program operated by or financed in whole or in part by any federal, state or local government agency; (D) federal or state laws relating to the interference with or obstruction of any investigations into any criminal offense described in (A) through (C) above; or (E) criminal offenses under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. Without limiting the generality of the foregoing, neither Borrower nor Operator is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Medicare or Medicaid Provider Agreement or other agreement or instrument to which Borrower or Operator is a party, which default has resulted in, or if not remedied within any applicable grace period could result in, the revocation, termination, cancellation or suspension of the Medicare or Medicaid Certification of Borrower or Operator.
2.2 Continuation of Representations and Warranties . Borrower hereby covenants, warrants and agrees that the representations and warranties made in Section 2.1 hereof shall be and shall remain true and correct in all material respects at the time of the Loan Opening and at all times thereafter so long as any part of the Loan shall remain outstanding. Each request for disbursement of Loan Proceeds shall constitute a reaffirmation that these representations and warranties are true in all material respects as of the date of such request and will be true in all material respects on the date of the disbursement.
ARTICLE 3
THE LOAN
3.1 Agreement to Borrow and Lend .
(a) On the terms of and subject to the conditions of this Agreement, Borrower agrees to borrow from Lender, and Lender agrees to lend to Borrower, an amount not to exceed the Loan Amount. The proceeds of the Loan shall be used by Borrower for the purchase of the Project. Notwithstanding any other provision of this Agreement, the amount of the Loan shall not exceed an amount equal to 80% of the as is appraised value of the Project as shown in the appraisal required by this Agreement.
(b) The Loan shall be evidenced by the Note executed by Borrower and shall be secured by the Mortgage and the Assignment of Rents. The Loan shall be guaranteed by Guarantors pursuant to the Guaranty, and Borrower and Guarantors shall protect Lender with respect to environmental matters pursuant to the Environmental Indemnity. If Lender extends any Operator Loan to Operator, the Loan shall be secured by the Operator Loan Documents and the Loan Documents shall secure the Operator Loan; provided, however, that notwithstanding any other provision of the Loan Documents or the Operator Loan Documents, (i) if the Loan is repaid at a time when the Operator Loan is outstanding, and if there is no existing Default or Event of Default under any of the Operator Loan Documents, the Operator Loan shall no longer be secured by the liens and encumbrances created under the Loan Documents, and (ii) if the Operator Loan is repaid and terminated at a time when the Loan is outstanding, and no there is no existing Default or Event of Default under any of the Loan Documents, the Loan shall no longer be secured by the liens and encumbrances created under the Operator Loan Documents. At any time that Lender does not have an Operator Loan extended to Operator, the references in this Agreement and the other Loan Documents to the Operator Loan shall be of no force or effect. Nothing contained in this Agreement shall constitute a commitment or agreement by Lender to extend any Operator Loan to Operator.
3.2 Interest . Interest on funds advanced hereunder shall
(i) From the Loan Opening until the Maturity Date, accrue at the interest rates provided for in the Note;
(ii) Be computed upon advances of the Loan from and including the date of each advance by Lender to or for the account of Borrower (whether to an escrow or otherwise), on the basis of a 360-day year and the actual number of days elapsed in any portion of a month in which interest is due; and
(iii) Be paid by Borrower to Lender together with principal payments, if any, in the manner set forth in the Note.
3.3 Principal Payments; Maturity Date; Prepayment .
(a) Prior to the Maturity Date, principal payments, if any, shall be made as provided in the Note. The entire principal balance of the Note and all accrued and unpaid interest thereon shall be due, if not sooner paid, on the Maturity Date.
(b) The Loan may be prepaid prior to the Maturity Date on the terms and upon payment of the charges and fees set forth in the Note.
3.4 Uniform Commercial Code Matters .
(a) All references in this Agreement and the other Loan Documents to the Code are to the Code as from time to time in effect.
(b) Borrower represents and warrants to Lender as follows:
(i) The exact legal name of Borrower is as stated in the first paragraph of this Agreement.
(ii) The nature of the Borrower entity and the State in which it is organized is as stated in the first paragraph of this Agreement. The organizational number of Borrower in such State is as follows: 11070727.
(iii) The address of Borrowers chief executive office is the address for notices to Borrower set forth in Section 12.10 of this Agreement.
(iv) Borrower has no place of business other than the chief executive office referred to in (iii) above, at the address for notices set forth in Section 12.10 of this Agreement, and at the Project in Springfield, Ohio.
(c) Borrower shall not, without not less than 30 days prior written notice to Lender, change its legal name, the nature of the Borrower entity, the State in which it is organized, its organizational number in the State in which it is organized, if any, the address of its chief executive office, or the addresses of its other place of business, from those referred to in paragraph (b) of this Section.
(d) Borrower acknowledges that by entering into the security agreements contained in this Agreement and the other Loan Documents, Borrower has authorized the filing of financing statements and amendments under the Code covering the collateral described in such security agreements, without the signature of Borrower.
(e) As additional security for the payment and performance of all of the obligations Borrower under this Agreement and the other Loan Documents and all of the obligations of Operator under the Operator Loan Documents, Borrower hereby grants to Lender a security interest in all Deposit Accounts (as defined in the Code) from time to time maintained by Borrower with Lender, all cash and investments from time to time on deposit in all such Deposit Accounts, and all proceeds of all of the foregoing.
ARTICLE 4
LOAN DOCUMENTS
4.1 Loan Documents . As a condition precedent to the Loan Opening, Borrower agrees that it will deliver the following Loan Documents to Lender at or prior to the Loan Opening, all of which must be satisfactory to Lender and Lenders counsel in form, substance and execution:
(a) Promissory Note . A Promissory Note dated the date hereof (the Note ), executed by Borrower and made payable to the order of Lender, in the Loan Amount.
(b) Mortgage . A Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of even date herewith (the Mortgage ), duly executed by Borrower to and for the benefit of Lender, conveying good and marketable title to the Land and creating a first lien on the Land to secure the Note, the Loan and all obligations of Borrower in connection therewith.
(c) Assignment of Rents and Leases . An Assignment of Rents and Leases dated as of even date herewith (the Assignment of Rents ), duly executed by Borrower to and for the benefit of Lender, collaterally assigning to Lender all of Borrowers rents, leases and profits of the Project as security for the Note, the Loan and all obligations of Borrower in connection therewith.
(d) Financing Statements . Uniform Commercial Code Financing Statements as required by Lender to perfect all security interests granted by this Agreement, the Mortgage and the other Loan Documents.
(e) Environmental Indemnity . An Environmental Indemnity Agreement dated as of even date herewith (the Environmental Indemnity ), executed by Borrower and each Guarantor jointly and severally to and for the benefit of Lender, indemnifying Lender for all risks, liabilities, costs and expenses which may be incurred as a result of environmental matters at the Project.
(f) Guaranty . A Guaranty of Payment and Performance dated as of even date herewith (the Guaranty ), executed by each Guarantor jointly and severally to and for the benefit of Lender, guaranteeing to Lender the payment and performance of all obligations of Borrower in connection with the Loan.
(g) Collateral Assignments . Collateral assignments of such agreements, leases, contracts and other rights or interests of Borrower with respect to the Project as Lender may reasonably request.
(h) Other Loan Documents . Such other documents and instruments as further security for the Loan as Lender may reasonably require.
4.2 Interest Rate Protection .
(a) Any and all obligations, contingent or otherwise, whether now existing or hereafter arising, of Borrower arising under or in connection with all Hedging Transactions and Hedging Agreements to which Lender is a party shall be secured by all of the collateral for the Loan.
(b) As additional security for the payment and performance of all of the obligations of Borrower under this Agreement and the other Loan Documents and all of the obligations of Operator under the Operator Loan Documents, Borrower hereby pledges and assigns to Lender, and grants to Lender a first lien on and a first priority security interest in, (i) all Hedging Transactions from time to time entered into by Borrower with Lender or any other provider, (ii) all contracts from time to time entered into by Borrower with Lender or any other provider with respect to such Hedging Transactions, (iii) all amounts from time to time payable to Borrower under such Hedging Transactions and contracts, and (iv) all proceeds of all of the foregoing.
ARTICLE 5
CONDITIONS TO LOAN DISBURSEMENTS
5.1 Conditions to Loan Opening . As conditions precedent to the Loan Opening, (i) Borrower shall satisfy all applicable conditions and requirements contained in other Sections of this Agreement, and (ii) Borrower shall furnish the following to Lender at or prior to the Loan Opening or at such time as is set forth below, all of which must be satisfactory to Lender and Lenders counsel in form, content and execution:
(a) Title Insurance Policy . A loan title insurance policy for the Land, issued on the date of the Loan Opening by the Title Insurance Company to Lender, in the full amount of the Loan, insuring the Mortgage to be a valid first, prior and paramount lien upon the fee title to the Project subject only to the Permitted Exceptions, and containing such endorsements as Lender may require, each in form and substance satisfactory to Lender (the Title Insurance Policy ).
(b) Survey . A current plat of survey of the Land (the Survey ) which shall (i) be made by a land surveyor licensed in the State, (ii) be prepared in accordance with the 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted by ALTA and NSPS, (iii) include such Table A Items as Lender shall require, (iv) be made such that the relative positional accuracy of the Survey does not exceed that which is specified in the Accuracy Standards as adopted by ALTA and NSPS and in effect on the date of the Survey, (v) contain a certificate acceptable to Lender naming Borrower, Lender and the Title Insurance Company, and (v) contain such additional information as may be required by Lender or the Title Insurance Company.
(c) Insurance Policies . Evidence satisfactory to Lender in its reasonable judgment that the insurance coverages required by Section 7.3 hereof are in force.
(d) Utilities; Licenses; Permits . Evidence satisfactory to Lender that
(i) All utility and municipal services required for the occupancy and operation of the Project are available and currently servicing the Project;
(ii) Subject to the provisions of Section 7.9(b) of this Agreement, all permits, licenses and governmental approvals required by applicable law to occupy and operate the Project and the Facility have been issued, are in full force and all fees therefor have been fully paid;
(iii) The storm and sanitary sewage disposal system, the water system and all mechanical systems serving the Project comply with all applicable laws, ordinances, rules and regulations, including Environmental Laws and the applicable environmental protection agency, pollution control board and/or other governmental agencies having jurisdiction of the Project have issued their permits for the operation thereof; and
(iv) All utility, parking, access (including curb-cuts and highway access), recreational and other easements and permits required or, in Lenders judgment, necessary for the use of the Project have been granted or issued;
which evidence shall include such evidence as Lender shall reasonably request.
(e) Environmental Report . An environmental site assessment (the Environmental Report ) prepared at Borrowers sole cost and expense by an independent professional environmental consultant approved by Lender in its sole and absolute discretion. The Environmental Report shall be subject to Lenders approval in its sole and absolute discretion. If the Environmental Report reveals contamination or conditions warranting further investigation in order to establish baseline data, Lender may also require as a condition to the Loan Opening, in its sole and absolute discretion, a written report (also referred to herein as the Environmental Report ) based on additional testing and investigation in order to define the source and extent of the contamination or to establish baseline data, as well as to provide relevant detailed information on the areas geological and hydrogeological conditions. Any additional Environmental Report prepared pursuant to this requirement shall be subject to Lenders approval, in its sole and absolute discretion.
(f) Appraisal . An appraisal of the Project addressed to Lender and satisfactory to Lender, prepared by a certified or licensed appraiser who is approved by Lender, each in its sole and absolute discretion, which appraisal must show an as is appraised value of the Project of not less than $6,000,000, such that the Loan Amount will not exceed an amount equal to 80% of the as is appraised value of the Project.
(g) Documents of Record . Copies of all documents of record which affect the Project, including, without limitation, the Declarations, and estoppel letters from the other parties thereto covering such matters as Lender shall reasonably require.
(h) Searches . A report from the appropriate filing officers of the state and county in which the Land is located, indicating that no judgments, tax or other liens, security interests, leases of personalty, financing statements or other encumbrances (other than Permitted Exceptions and liens and security interests in favor of Lender) are of record or on file encumbering any portion of the Land, and that there are no judgments, tax liens, pending litigation or bankruptcy actions outstanding with respect to Borrower and Guarantors.
(i) Attorneys Opinion . An opinion of counsel to Borrower and Guarantors addressing such issues as Lender may request, subject to assumptions and qualifications satisfactory to Lender.
(j) Organizational Documents . Organizational documents, any resolutions required by such documents, and good standing certificates, for Borrower and the other parties to the Loan Documents, and for any entities executing Loan Documents on behalf of Borrower or any other parties to the Loan Documents.
(k) Lease . A copy of the Lease and a lease subordination agreement with Operator in a form satisfactory to Lender. In addition, Borrower shall deposit all security deposits required under the Lease with Lender in an account in Borrowers name.
(l) Management and Consulting Agreements . If Operator has entered into a management or consulting agreement with respect to the Facility, a copy of such management or consulting agreement and a subordination agreement from the manager or consultant in a form satisfactory to Lender.
(m) Operations Transfer Agreement . A copy of the Operations Transfer Agreement, and such agreements between Lender and Old Operator as Lender shall require.
(n) Real Estate Taxes . Copies of the most recent real estate tax bills for the Land and evidence satisfactory to Lender that the Land is separately assessed for real estate taxing purposes.
(o) Broker . Evidence satisfactory to Lender that all brokers commissions or fees due with respect to the Loan or the Project have been paid in full in cash.
(p) Property Condition Report . A property condition report prepared at Borrowers sole cost and expense by an independent consultant approved by Lender in its sole and absolute discretion, and which shall be subject to Lenders approval in its sole and absolute discretion.
(q) Operator Loan Documents . If Lender has extended the Operator Loan to Operator, copies of the executed Operator Loan Documents.
(r) Additional Documents . Such other papers and documents regarding Borrower, the Project or the Facility as Lender may require.
5.2 Additional Conditions to Loan Opening . The following are additional conditions precedent to the Loan Opening:
(a) Written Request . Borrower shall have delivered to Lender a written request for disbursement prepared in such form and detail, and accompanied by such supporting information and documents, as shall be strictly satisfactory to Lender.
(b) Representations and Warranties . All representations and warranties of Borrower contained in this Agreement, the other Loan Documents and other documents delivered to Lender shall be true and correct in all material respects as of the date of the Loan Opening.
(c) Financial Condition . There shall be no material adverse change in the financial condition of Borrower or any Guarantor as of the date of the Loan Opening.
(d) Accounts Set Up with Lender; Capital Expenditures Reserve Account . Without limitation on the generality of paragraph (f) below, Borrower and Operator shall have set up all of their respective operating and other accounts with Lender as required by Section 7.10 of this Agreement, and Borrower shall have caused the Capital Expenditures Reserve Account to be established and funded as required by Section 7.18 of this Agreement.
(e) Interest Rate Protection . Borrower shall have purchased from a qualified counterparty one or more contracts for interest rate protection for such portion or all of the Loan as Lender may require, which contracts shall be in effect for the full term of the Loan and for a rate and otherwise in form and substance satisfactory to Lender in all respects. Lender agrees that interest rate protection is not required for the Loan.
(f) No Default or Event of Default . No Default or Event of Default under this Agreement or under any other Loan Document, or if the Operator Loan has been extended by Lender to Operator, under any Operator Loan Document, shall have occurred and be continuing as of the date of the Loan Opening.
5.3 Termination of Agreement . Borrower agrees that all conditions precedent to the Loan Opening will be complied with on or prior to the Required Loan Opening Date. If all of the conditions precedent to the Loan Opening hereunder shall not have been performed on or before the Required Loan Opening Date, Lender, at its option at any time thereafter and prior to the Loan Opening, may terminate this Agreement and all of its obligations hereunder by giving a written notice of termination to Borrower. In the event of such termination, Borrower shall pay all Loan Expenses which have accrued or been charged as of the date of such termination.
ARTICLE 6
PAYMENT OF LOAN EXPENSES
6.1 Payment of Loan Expenses at Loan Opening . At the Loan Opening, Lender may pay from Loan Proceeds all Loan Expenses, to the extent the same have not been previously paid.
ARTICLE 7
FURTHER AGREEMENTS OF BORROWER
7.1 Mechanics Liens, Taxes and Contest Thereof . Borrower agrees that it will not suffer or permit any mechanics lien claims to be filed or otherwise asserted against the Project and will promptly discharge the same in case of the filing of any claims for lien or proceedings for the enforcement thereof, and will pay all special assessments which have been placed in collection and all real estate taxes and assessments of every kind (regardless of whether the same are payable in installments) upon the Project, before the same become delinquent; provided, however, that Borrower shall have the right to contest in good faith and with reasonable diligence the validity of any such lien, claim, tax or assessment if the right to contest such matters is expressly granted in the Mortgage. If Borrower shall fail promptly either to discharge or to contest claims, taxes or assessments asserted or give security or indemnity in the manner provided in the Mortgage, or having commenced to contest the same, and having given such security or indemnity shall fail to prosecute such contest with diligence, or to maintain such indemnity or security so required by the Mortgage, or upon the adverse conclusion of any such contest, to cause any judgment or decree to be satisfied and lien to be released, then and in any such event Lender may, at its election (but shall not be required to), procure the release and discharge of any such claim and any judgment or decree thereon and, further, in its sole discretion, effect any settlement or compromise of the same. Any amounts so expended by Lender, including premiums paid or security furnished in connection with the issuance of any surety bonds, shall be deemed to constitute disbursement of Loan Proceeds hereunder. In settling, compromising, discharging or providing indemnity or security for any claim for lien, tax or assessment, Lender shall not be required to inquire into the validity or amount thereof.
7.2 Fixtures and Personal Property . Except for a security interest granted to Lender, Borrower agrees that all of the personal property, fixtures, attachments, furnishings and equipment delivered in connection with the construction, equipping or operation of the Project will be kept free and clear of all chattel mortgages, vendors liens, and all other liens, claims, encumbrances and security interests whatsoever, and that Borrower will be the absolute owner of said personal property, fixtures, attachments and equipment, subject to the rights of Operator under the Lease. Borrower, on request, shall furnish Lender with satisfactory evidence of such ownership, and of the terms of purchase and payment therefor.
7.3 Insurance Policies . Borrower shall, at its expense, during the term of this Agreement, procure and keep in force, or cause to be procured and kept in force by Operator, the
insurance coverages described in Exhibit D attached to this Agreement and conforming to the insurance requirements contained in the Mortgage, and in addition thereto, professional liability insurance covering the operations in the Project in such amounts and with such deductibles as shall be approved by Lender. In addition, all insurance shall be in form, content and amounts approved by Lender and written by an insurance company or companies licensed to do business in the state in which the Project is located and domiciled in the United States or a governmental agency or instrumentality approved by Lender. The policies for such insurance shall have attached thereto standard mortgagee clauses in favor of and permitting Lender to collect any and all proceeds payable thereunder and shall include a 30 day (except for nonpayment of premium, in which case, a 10 day) notice of cancellation clause in favor of Lender. All policies or certificates of insurance shall be delivered to and held by Lender as further security for the payment of the Note and any other obligations arising under the Loan Documents, with evidence of renewal coverage delivered to Lender at least 30 days before the expiration date of any policy.
7.4 Furnishing Information .
(a) Borrower shall promptly supply Lender with such information concerning its assets, liabilities and affairs, and the assets, liabilities and affairs of Guarantors, as Lender may reasonably request from time to time hereafter; which shall include:
(i) Without necessity of any request by Lender, as soon as available and in no event later than 120 days after the end of each fiscal year, annual financial statements of Borrower showing the results of operations of the Project and consisting of a balance sheet, statement of income and expense and statement of cash flows, prepared in accordance with GAAP, and certified by an officer of Borrower.
(ii) Without necessity of any request by Lender, as soon as available and in no event later than 45 days after the end of each fiscal quarter, financial statements of Operator showing the results of operations of the Facility and consisting of a balance sheet, statement of income and expense, statement of cash flows and statement of payor mix, prepared in accordance with GAAP, and certified by an officer of Operator.
(iii) Without necessity of any request by Lender, as soon as available and in no event later than 120 days after the end of each fiscal year, annual financial statements of Operator showing the results of operations of the Facility and consisting of a balance sheet, statement of income and expense, statement of cash flows and statement of payor mix, prepared in accordance with GAAP, and certified by an officer of Operator, and accompanied by a review report of a firm of independent certified public accountants acceptable to Lender.
(iv) Without necessity of any request by Lender, with each quarterly financial statement of Operator required to be furnished hereunder, a duly completed compliance certificate, dated the date of such financial statements and certified as true and correct by appropriate officers of Borrower and Operator, containing a computation of each of the financial covenants set forth in Sections 7.14, 7.15 and 7.16 hereof, and stating that Borrower has not become aware of any Default or Event of Default under this Agreement
or any of the other Loan Documents that has occurred and is continuing or, if there is any such Default or Event of Default describing it and the steps, if any, being taken to cure it.
(b) Borrower shall promptly notify Lender of any condition or event which constitutes a Default or Event of Default under this Agreement or any of the other Loan Documents, and of any material adverse change in the financial condition of Borrower or any Guarantor.
(c) It is a condition of this Agreement and the Loan that Borrower and Operator shall each maintain a standard and modern system of accounting in accordance with GAAP consistently applied.
(d) It is a condition of this Agreement and the Loan that Borrower and Operator shall each permit Lender or any of its agents or representatives to have access to and to examine all books and records regarding the Project and the Facility at any time or times hereafter upon reasonable prior notice during business hours.
(e) It is a condition of this Agreement and the Loan that Borrower and Operator shall each permit Lender to copy and make abstracts from any and all of said books and records.
7.5 Excess Indebtedness . Borrower agrees to pay to Lender on demand the amount by which the indebtedness hereunder, at any time, may exceed the Loan Amount.
7.6 Certain Title Related Matters .
(a) Borrower shall comply with all recorded or other covenants affecting the Project, including, without limitation, the Declarations. Borrower shall not record or permit to be recorded any document, instrument, agreement or other writing against the Land other than Permitted Exceptions.
(b) Borrower shall at all times duly perform and observe all of the terms, provisions, conditions and agreements on its part to be performed and observed under the Declarations, and shall not suffer or permit any Default or Event or Default on the part of Borrower to exist thereunder, and shall not agree or consent to, or suffer or permit, any modification, amendment or termination thereof without the prior written consent of Lender. Borrower shall promptly furnish to Lender copies of all notices of default and other material documents and communications sent or received by Borrower under or relating to any Declaration.
(c) Borrower shall cause the Project to be taxed as one or more separate tax parcels which do not include any property other than the Project.
(d) Borrower shall ensure that under applicable law, the Project may be encumbered, conveyed and otherwise dealt with as a separate legal parcel.
7.7 Compliance with Laws; Environmental Matters . Each of the following is a condition of this Agreement and the Loan:
(a) Borrower and Operator shall comply, in all respects, including the conduct of their business and operations and the use of their properties and assets, with all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, including without limitation, Environmental Laws, Titles XVIII and XIX of the Social Security Act, Medicare Regulations, Medicaid Regulations, and all laws, rules and regulations of any governmental authorities pertaining to the licensing of professional and other health care providers.
(b) With the exception of Permitted Substances, the Project will not be used, for any activities which, directly or indirectly, involve the use, generation, treatment, storage, transportation or disposal of any Hazardous Substances, and no Hazardous Substances will exist on the Project or under the Project or in any surface waters or groundwaters on or under the Project. The Project and its existing and future uses will comply with all Environmental Laws, and Borrower and Operator will not violate any Environmental Laws.
7.8 ERISA Liabilities; Employee Plans . It is a condition of this Agreement and the Loan that Borrower and Operator shall (i) keep in full force and effect any and all Employee Plans which are presently in existence or may, from time to time, come into existence under ERISA, and not withdraw from any such Employee Plans, unless such withdrawal can be effected or such Employee Plans can be terminated without liability to Borrower or Operator; (ii) make contributions to all of such Employee Plans in a timely manner and in a sufficient amount to comply with the standards of ERISA, including the minimum funding standards of ERISA; (iii) comply with all material requirements of ERISA which relate to such Employee Plans; (iv) notify Lender immediately upon receipt by Borrower or Operator of any notice concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the termination of any such Employee Plans or the appointment of a trustee to administer such Employee Plans; (v) promptly advise Lender of the occurrence of any Reportable Event or Prohibited Transaction (as such terms are defined in ERISA), with respect to any such Employee Plans; and (vi) amend any Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 to the extent necessary to keep the Employee Plan qualified, and to cause the Employee Plan to be administered and operated in a manner that does not cause the Employee Plan to lose its qualified status.
7.9 Licensure; Notices of Agency Actions . The following are conditions of this Agreement and the Loan:
(a) Subject to the provisions of paragraph (b) of this Section, Operator shall be fully qualified by all necessary permits, licenses, certifications, accreditations and qualifications and shall be in compliance with all annual filing requirements of all regulatory authorities.
(b) The State of Ohio licenses for the operation of the Facility and the Medicare and Medicaid certifications for the Facility are currently held by Old Operator. It is a condition of this Agreement and the Loan that within a period of 90 days after the date of this Agreement, Operator shall have obtained a State of Ohio license for the
Facility in the name of Operator, and that within a period of 180 days after the date of this Agreement, Operator shall have obtained Medicare and Medicaid certifications for the Facility. Pending the receipt of such license and Medicare and Medicaid certifications by Operator, (i) Old Operator shall retain the existing license and Medicare and Medicaid certifications for the Facility, and (ii) Operator shall operate the Facility under the license and Medicare and Medicaid certifications of Old Operator under the Operations Transfer Agreement. Upon the issuance of the license and Medicare and Medicaid certifications to Operator, the arrangements described above under the Operations Transfer Agreement shall terminate and Operator shall thereafter operate the Facility under its own license and Medicare and Medicaid certifications.
(c) Borrower and Operator shall within five days after receipt, furnish to Lender copies of all adverse notices from any licensing, certifying, regulatory, reimbursing or other agency which has jurisdiction over the Project or the Facility or over any license, permit or approval under which the Project or the Facility operates, and if Borrower or Operator becomes aware that any such notice is to be forthcoming before receipt thereof, it shall promptly inform Lender thereof.
7.10 Project and Facility Accounts and Revenues .
(a) It is a condition of this Agreement and the Loan that Borrower and Operator shall each set up and maintain all of their respective operating accounts and other accounts related to the Project and the Facility with Lender, shall deposit all of their respective income and receipts promptly upon receipt in such accounts, and shall maintain all of their respective cash and investments on deposit in deposit accounts with Lender.
(b) Borrower shall deposit all Gross Revenues promptly upon receipt thereof, into a bank account or accounts maintained by Borrower with Lender. As additional security for the payment and performance of all of the obligations of Borrower under this Agreement and the other Loan Documents and all of the obligations of Operator under the Operator Loan Documents, Borrower hereby pledges and assigns to Lender, and grants to Lender a first lien on and a first priority security interest in, the Gross Revenues, all of Borrowers present and future Accounts (as defined in the Code), and the proceeds of all of the foregoing.
7.11 Single-Asset Entity; Indebtedness; Distributions .
(a) Borrower shall not at any time own any asset or property other than the Project and property related thereto, and shall not at any time engage in any business other than the ownership, development, construction, leasing and operation of the Project. The articles of organization and operating agreement of Borrower shall not be modified or amended, nor shall any member of Borrower be released or discharged from its, his or her obligations under the operating agreement of Borrower.
(b) Borrower shall not at any time have outstanding any indebtedness or obligations, secured or unsecured, direct or indirect, absolute or contingent, including any guaranty, other than the following: (i) obligations to Lender; (ii) obligations under interest rate protection agreements to which Lender is a party; (iii) obligations, other than borrowings, incurred in the
ordinary course of the ownership and operation of the Project; and (iv) obligations under the Lease.
(c) If any Default or Event of Default shall occur and be continuing under this Agreement or any of the other Loan Documents, Borrower shall not, directly or indirectly, make any Distribution. In addition, Borrower shall not, directly or indirectly, at any time make any Distribution that would cause Borrowers cash and cash equivalents remaining after such Distribution to be less than an amount equal to the aggregate of (i) the total amount of the security and other deposits received by Borrower from tenants of the Project, (ii) the total amount of accrued but unpaid real estate taxes on the Project, based on the last full year tax bill or bills received by Borrower, minus any amount held in a real estate tax escrow by Lender, and (iii) a reasonable working capital reserve.
7.12 Restrictions on Transfer .
(a) Borrower shall not effect, suffer or permit any Prohibited Transfer. Any conveyance, sale, assignment, transfer, lien, pledge, mortgage, security interest or other encumbrance or alienation (or any agreement to do any of the foregoing) of any of the following properties or interests shall constitute a Prohibited Transfer :
(i) The Project or any part thereof or interest therein, excepting only sales or other dispositions of collateral for the Loan no longer useful in connection with the operation of the Project, provided that prior to the sale or other disposition thereof, such collateral has been replaced by collateral of at least equal value and utility and which is subject to the lien of the Mortgage with the same priority as with respect to the original collateral;
(ii) Any shares of capital stock of a corporate Borrower, or a corporation which is a direct or indirect owner of an ownership interest in Borrower (other than the shares of capital stock of a corporate trustee or a corporation whose stock is publicly traded on a national securities exchange or on the National Association of Securities Dealers Automated Quotation System);
(iii) All or any part of the membership interests in a limited liability company Borrower, or a limited liability company which is a direct or indirect owner of an ownership interest in Borrower;
(iv) All or any part of the general partner or the limited partner interest, as the case may be, of a partnership or limited partnership Borrower, or a partnership or limited partnership which is a direct or indirect owner of an ownership interest in Borrower;
(v) If there shall be any change in Control (by way of transfers of stock, partnership or member interests or otherwise) in any partner, member, manager or shareholder, as applicable, which directly or indirectly Controls the day to day operations and management of Borrower or any Guarantor that is not a natural person and/or owns a Controlling interest in Borrower or any such Guarantor; provided, however, that this subparagraph shall not apply to AdCare; or
(vi) If any Guarantor who is a natural person shall die or be declared a legal incompetent;
in each case whether any such conveyance, sale, assignment, transfer, lien, pledge, mortgage, security interest, encumbrance or alienation is effected directly, indirectly (including the nominee agreement), voluntarily or involuntarily, by operation of law or otherwise; provided, however, that the foregoing provisions of this Section shall not apply to (i) liens securing obligations to Lender, (ii) the lien of current taxes and assessments not in default, (iii) any transfers of the Project, or part thereof, or interest therein, or any shares of stock or partnership or limited liability company interests, as the case may be, by or on behalf of an owner thereof who is deceased or declared judicially incompetent, to such owners heirs, legatees, devisees, executors, administrators, estate or personal representatives, (iv) the Lease, or (v) Permitted Exceptions.
(b) In determining whether or not to make the Loan, Lender evaluated the background and experience of Borrower and its members in owning and operating property such as the Project, found it acceptable and relied and continues to rely upon same as the means of maintainin g the value of the Project. Borrower and its members are well experienced in borrowing money and owning and operating property such as the Project, were ably represented by a licensed attorney at law in the negotiation and documentation of the Loan and bargained at arms length and without duress of any kind for all of the terms and conditions of the Loan, including this provision. Borrower recognizes that Lender is entitled to keep its loan portfolio at current interest rates by either making new loans at such rates or collecting assumption fees and/or increasing the interest rate on a loan, the security for which is purchased by a party other than the original Borrower. Borrower further recognizes that any further junior financing placed upon the Project (a) may divert funds which would otherwise be used to pay the Note; (b) could result in acceleration and foreclosure by any such junior encumbrancer which would force Lender to take measures and incur expenses to protect its security; (c) would detract from the value of the Project should Lender come into possession thereof with the intention of selling same; and (d) would impair Lenders right to accept a deed in lieu of foreclosure, as a foreclosure by Lender would be necessary to clear the title to the Project. In accordance with the foregoing and for the purposes of (i) protecting Lenders security, both of repayment and of value of the Project; (ii) giving Lender the full benefit of its bargain and contract with Borrower; (iii) allowing Lender to raise the interest rate and collect assumption fees; and (iv) keeping the Project free of subordinate financing liens, Borrower agrees that if this Section is deemed a restraint on alienation, that it is a reasonable one.
7.13 Leasing, Operation and Management of Project .
(a) The Project shall at all times be owned by Borrower and leased to Operator under the Lease (with the result that Borrower shall not operate the Facility). Borrower shall not agree or consent to or suffer or permit any modification, amendment or termination of the Lease, and shall not suffer or permit any Event of Default on the part of Borrower to exist at any time under the Lease.
(b) It is a condition of this Agreement and the Loan that the Facility shall at all times be operated as a skilled nursing facility under the management of Operator.
(c) It is a condition of this Agreement and the Loan that the ALF shall at all times be owned by an Affiliate of Borrower and operated by an Affiliate of Borrower.
7.14 Operator Minimum EBITDAR . It is a condition of this Agreement and the Loan that for each fiscal quarter commencing with the fiscal quarter ending March 31, 2012, the amount of EBITDAR for Operator for such quarter shall be not less than $250,000. Notwithstanding the definition of the term Net Income in Section 1.1 of this Agreement, the Net Income for Operator used in calculating EBITDAR of Operator for the purpose of this Section for any period, shall be computed by taking into account (i) management fees equal to the greater of Operators actual management fees for such period or imputed management fees equal to 5% of Operators gross income for such period as determined in accordance with GAAP, and (ii) an annual capital expenditures reserve allowance of $350 per licensed bed in the Facility.
7.15 Operator Fixed Charge Coverage Ratio . It is a condition of this Agreement and the Loan that as of the end of each fiscal quarter commencing with the fiscal quarter ending March 31, 2012, the ratio of
(i) the amount of EBITDAR for Operator for the 12-month period ending on the last day of such quarter, to
(ii) the sum of the amounts of the following for Operator for the 12-month period ending on the last day of such quarter: (A) Rental Expense, plus (B) Distributions, other than any amounts which were treated as an expense for accounting purposes,
shall be not less than 1.10 to 1.00. Notwithstanding the definition of the term Net Income in Section 1.1 of this Agreement, the Net Income for Operator used in calculating EBITDAR of Operator for the purpose of this Section for any period, shall be computed by taking into account an annual capital expenditures reserve allowance of $350 per licensed bed in the Facility. For the avoidance of doubt, unlike Section 7.14 hereof, the Net Income for Operator used in calculating EBITDAR of Operator for the purpose of this Section for any period shall be computed by taking into account Operators actual management fees for such period only and not taking into account any imputed management fees. Notwithstanding the foregoing provisions of this Section, in the case of the fiscal quarters ending March 31, 2012, June 30, 2012, September 30, 2012, and December 31, 2012, the calculation of such ratio shall be made for the period commencing on the date of this Agreement and ending on the last day of such quarter, instead of for the full quarter.
7.16 Borrower Coverage of Debt Service . It is a condition of this Agreement and the Loan that for each fiscal year commencing with the fiscal year ending December 31, 2012, the ratio of
(i) the amount of EBITDA for Borrower for such year, to
(ii) the total amount of principal and interest required to be paid on the Loan for such year,
shall be not less than 1.20 to 1.00.
7.17 Concerning Operator .
(a) It is a condition of this Agreement and the Loan that Operator shall not at any time own any asset or property other than the assets of the Facility and property related thereto, and shall not at any time engage in any business other than the operation of the Facility.
(b) It is a condition of this Agreement and the Loan that Operator shall not at any time have outstanding any indebtedness or obligations, secured or unsecured, direct or indirect, absolute or contingent, including any guaranty, other than the following: (i) obligations to Lender; (ii) obligations under interest rate protection agreements to which Lender is a party; (iii) obligations, other than borrowings, incurred in the ordinary course of the ownership and operation of the Facility; (iv) obligations under the Lease; and (v) obligations under the Operations Transfer Agreement.
(c) It is a condition of this Agreement and the Loan that with the exception of security interests granted to secure any future financing which Lender may provide to Operator, all of Operators property and assets shall at all times be free and clear of all liens, encumbrances and security interests.
7.18 Capital Expenditures Reserve Account . Borrower shall establish and maintain a capital expenditures reserve account held by Lender (the Capital Expenditures Reserve Account ). The Capital Expenditures Reserve Account shall be held as additional security for the payment and performance of all of the obligations of Borrower under this Agreement and the other Loan Documents, and as security for all of the obligations of Operator under the Operator Loan Documents, and Borrower hereby pledges and assigns to Lender, and grants to Lender a first lien on and a first priority security interest in, the Capital Expenditures Reserve Account, all cash and investments from time to time on deposit in the Capital Expenditures Reserve Account, and all proceeds of all of the foregoing. On the date of this Agreement, Borrower shall make a deposit in the Capital Expenditures Reserve Account in the amount of $7,800. Commencing on February 1, 2012, Borrower shall make a deposit in the Capital Expenditures Reserve Account on the first day of each month in the amount of $3,295. Lender shall disburse amounts on deposit in the Capital Expenditures Reserve Account from time to time at the written request of Borrower for the purpose of paying or reimbursing the cost of capital expenditures made by Borrower for the Project upon submission of invoices or receipts for such capital expenditures, provided that in the case of each disbursement that no Default or Event of Default under this Agreement or any of the other Loan Documents or under any of the Operator Loan Documents has occurred and is continuing. Amounts on deposit in the Capital Expenditures Reserve Account may be invested at the written request of Borrower in certificates of deposit issued by Lender. Provided that no Default or Event of Default under this Agreement or any of the other Loan Documents or any of the Operator Loan Documents has occurred and is continuing, interest earned on amounts on deposit in the Capital Expenditures Reserve Account shall be released by Lender to Borrower at its written request. Except as provided above in this Section, all amounts on deposit in the Capital Expenditures Reserve Account shall be released by Lender to Borrower at such time, and only at such time, as all of the principal of and interest on the Loan have been paid in full and all of the other obligations to Lender under this Agreement, the other Loan Documents and the Operator Loan Documents have been fully paid and performed..
7.19 Security Interest Matters . This Agreement is intended to be a security agreement under the Code for the purpose of creating the security interests provided for herein. Borrower shall execute and deliver such additional security agreements and other documents as Lender shall from time to time request in order to create and perfect such security interests. Borrower shall keep all collateral in which security interests are created under this Agreement free and clear of all other liens, security interests and encumbrances.
7.20 Further Assurance . Borrower, on request of Lender, from time to time, shall execute and deliver such documents as may be necessary to perfect and maintain perfected as valid liens upon the Project and the personal property owned by Borrower located thereon the liens granted to Lender pursuant to this Agreement or any of the other Loan Documents, and to fully consummate the transactions contemplated by this Agreement.
ARTICLE 8
CASUALTIES AND CONDEMNATION
8.1 Application of Insurance Proceeds and Condemnation Awards . The proceeds of any insurance policies collected or claims as a result of any loss or damage to any portion of the Project resulting from fire, vandalism, malicious mischief or any other casualty or physical harm and any awards, judgments or claims resulting from the exercise of the power of condemnation or eminent domain shall be applied to reduce the outstanding balance of the Loan or to rebuild and restore the Project, as provided in the Mortgage. Borrower shall not settle and adjust any claims under policies of insurance except as provided in the Mortgage.
ARTICLE 9
ASSIGNMENTS, SALE AND ENCUMBRANCES
9.1 Lenders Right to Assign . Lender may assign, negotiate, pledge or otherwise hypothecate this Agreement or any of its rights and security hereunder, including the Note, the Mortgage and the other Loan Documents, to any bank, participant, financial institution or other person or entity, and in case of such assignment, negotiation, pledge or other hypothecation, Borrower shall accord full recognition thereto and agrees that all rights and remedies of Lender in connection with the interest so assigned, negotiated, pledged or otherwise hypothecated shall be enforceable against Borrower by such bank, financial institution or other person or entity, with the same force and effect and to the same extent as the same would have been enforceable by Lender but for such assignment, negotiation, pledge or other hypothecation.
9.2 Prohibition of Assignments and Encumbrances by Borrower . Except as expressly permitted by this Agreement, Borrower shall not create, effect, consent to, attempt, contract for, agree to make, suffer or permit any Prohibited Transfer.
ARTICLE 10
EVENTS OF DEFAULT BY BORROWER
10.1 Event of Default Defined . The occurrence of any one or more of the following shall constitute an Event of Default under this Agreement, and any Event of Default which may occur hereunder shall constitute an Event of Default under each of the other Loan Documents:
(a) Borrower fails to pay (i) any installment of principal or interest payable pursuant to the Note on the date when due, or (ii) any other amount payable to Lender under the Note, this Agreement or any of the other Loan Documents when any such payment is due in accordance with the terms hereof or thereof;
(b) If there is any failure to perform, observe or satisfy any obligation, covenant, agreement, term, condition or provision contained in any of the following provisions of this Agreement: Section 7.9(a), 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17, 7.18 or 7.19;
(c) If there is any failure to perform, observe or satisfy any obligation, covenant, agreement, term, condition or provision contained in this Agreement and not otherwise described in this Section; provided, however, that
(i) If such failure can be cured solely by the payment of money, such failure shall not constitute an Event of Default unless it shall continue for a period of five days after written notice to Borrower;
(ii) If such failure cannot be cured solely by the payment of money and does not pose an emergency or dangerous condition or a material threat to the security for the Loan, such failure shall not constitute an Event of Default unless it shall continue for a period of 30 days after written notice to Borrower; and
(iii) If a failure described in (ii) above is of such a nature that it cannot reasonably be cured within such 30-day period, and if such failure is susceptible of cure, it shall not constitute an Event of Default if corrective action is instituted by Borrower within such 30-day period and is diligently pursued and such failure is cured within 90 days after the occurrence of such failure;;
(d) The existence of any inaccuracy or untruth in any material respect in any representation or warranty contained in this Agreement or any of the other Loan Documents or of any statement or certification as to facts delivered to Lender by Borrower or Guarantors; provided, however, that
(i) If such inaccuracy or untruth can be cured solely by the payment of money, such failure shall not constitute an Event of Default unless it shall continue for a period of 10 days after Borrower becomes aware of inaccuracy or untruth, whether by notice from Lender or otherwise;
(ii) If such inaccuracy or untruth cannot be cured solely by the payment of money and does not pose an emergency or dangerous condition or a material threat to the security for the Loan, such failure shall not constitute an Event of Default unless it shall continue for a period of 30 days after Borrower becomes aware of inaccuracy or untruth, whether by notice from Lender or otherwise; and
(iii) If a failure described in (ii) above is of such a nature that it cannot reasonably be cured within such 30-day period, and if such failure is susceptible of cure, it shall not constitute an Event of Default if corrective action is instituted by Borrower within such 30-day period and is diligently pursued and such failure is cured within 120 days after Borrower becomes aware of such inaccuracy or untruth, whether by notice from Lender or otherwise;;
(e) The occurrence of a Prohibited Transfer;
(f) The existence of any collusion, fraud, dishonesty or bad faith by or with the acquiescence of Borrower or any Guarantor which in any way relates to or affects the Loan, the Project or the Facility;
(g) The occurrence of a material adverse change in the financial condition of Borrower, Operator or any Guarantor;
(h) Borrower or any Guarantor (i) files a voluntary petition in bankruptcy or is adjudicated a bankrupt or insolvent or files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal, state, or other statute or law, or (ii) seeks or consents to or acquiesces in the appointment of any trustee, receiver or similar officer of Borrower or any Guarantor or of all or any substantial part of the property of Borrower or any Guarantor or any portion of the Project or the Facility; or all or a substantial part of the assets of Borrower or any Guarantor are attached, seized, subjected to a writ or distress warrant or are levied upon unless the same is released or vacated within 30 days;
(i) The commencement of any involuntary petition in bankruptcy against Borrower or any Guarantor or the institution against Borrower or any Guarantor of any reorganization, arrangement, composition, readjustment, dissolution, liquidation or similar proceedings under any present or future federal, state or other statute or law, or the appointment of a receiver, trustee or similar officer for all or any substantial part of the property of Borrower or any Guarantor, which shall remain undismissed or undischarged for a period of 30 days;
(j) The entry against Borrower or any Guarantor of any final judgment for the payment of money in an amount in excess of $100,000 and such judgment shall not have been, within 30 days from the entry thereof, vacated, satisfied or appealed from and stayed pending appeal;
(k) The dissolution, termination or merger of Borrower or any Guarantor which is an entity, or the occurrence of the death or declaration of legal incompetency of any Guarantor who is a natural person;
(l) The validity or enforceability of this Agreement or any of the other Loan Documents shall be contested by Borrower, any Guarantor or any other party thereto (other than Lender), or Borrower, any Guarantor or any other party thereto (other than Lender) shall deny that it has any or further liability or obligation hereunder or thereunder;
(m) The occurrence of an Event of Default under the Note or any of the other Loan Documents, including, without limitation, any Bank Product Agreement to which Lender or any of its Affiliates is a party, including, without limitation, any Hedging Agreement to which Lender is a party, or any Event of Default or other similar condition or event (however described) shall occur and be continuing with respect to any Bank Product Obligation, including, without limitation, any Hedging Transaction, to which Lender or any of its Affiliates is a party;
(n) The occurrence of an Event of Default on the part of Operator under the Operations Transfer Agreement;
(o) The occurrence of any Event of Default on any obligation of the owner of the ALF for borrowed money or the deferred purchase price any property;
(p) The occurrence of an Event of Default under any document or agreement evidencing or securing the Operator Loan, or any modification, amendment, restatement, increase, renewal, extension or refinancing of the Operator Loan; or
(q) The occurrence of any Event of Default under any document or agreement evidencing or securing any other obligation or indebtedness of Borrower or any Guarantor to Lender.
ARTICLE 11
LENDERS REMEDIES UPON EVENT OF DEFAULT
11.1 Remedies Conferred upon Lender . During the continuance of any Event of Default under this Agreement, Lender, in addition to all remedies conferred upon Lender by law and by the terms of the Note, the Mortgage and the other Loan Documents, may pursue any one or more of the following remedies concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any others:
(a) Take possession of the Project and do anything required, necessary or advisable in Lenders sole judgment to fulfill the obligations of Borrower hereunder, including the rights to employ watchmen to protect the Project from injury. Without restricting the generality of the foregoing and for the purposes aforesaid, Borrower
hereby appoints and constitutes Lender as Borrowers lawful attorney-in-fact with full power of substitution in the premises to perform the following actions:
(i) without inquiring into and without respect to the validity thereof, to pay, settle or compromise all existing bills and claims which may be liens, or to avoid such bills and claims becoming liens, against the Project or any portion of the Project or as may be necessary or desirable for the completion of the construction and equipping of the Project or for the clearance of title to the Project;
(ii) to prosecute and defend actions or proceedings in connection with the Project; and
(iii) to do any and every act which Borrower might do in its own behalf with respect to the Project, it being understood and agreed that this power of attorney shall be a power coupled with an interest and cannot be revoked;
(b) Withhold further disbursement of Loan Proceeds and terminate any of its obligations to Borrower;
(c) Declare the Note to be due and payable forthwith, without presentment, demand, protest or other notice of any kind, all of which Borrower hereby expressly waives;
(d) In addition to any rights of setoff that Lender may have under applicable law, without notice of any kind to Borrower, appropriate and apply to the payment of the Note or of any sums due under this Agreement any and all balances, deposits, credits, accounts, certificates of deposit, instruments or money of Borrower then or thereafter in the possession of Lender; and
(e) Exercise or pursue any other remedy or cause of action permitted at law or in equity or under this Agreement or any other Loan Document, including, but not limited to, foreclosure of the Mortgage and enforcement of all Loan Documents.
11.2 Right of Lender to Make Advances to Cure Event of Defaults; Obligatory Advances . If Borrower shall fail to perform any of its covenants or agreements herein or in any of the other Loan Documents contained, Lender may (but shall not be required to) perform any of such covenants and agreements, and any amounts expended by Lender in so doing, and any amounts expended by Lender pursuant to Section 11.1 hereof and any amounts advanced by Lender pursuant to this Agreement shall be deemed advanced by Lender under an obligation to do so regardless of the identity of the person or persons to whom said funds are disbursed. Loan Proceeds advanced by Lender to complete any work at the Project or to protect its security for the Loan are obligatory advances hereunder and shall constitute additional indebtedness payable on demand and evidenced and secured by the Loan Documents.
11.3 Attorneys Fees . Borrower shall pay Lenders reasonable attorneys fees and costs in connection with the negotiation, preparation and administration of this Agreement and shall pay Lenders reasonable attorneys fees and costs in connection with the administration and
enforcement of this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, if at any time or times hereafter Lender employs counsel for advice or other representation with respect to any matter concerning Borrower, this Agreement, the Project or the Loan Documents or if Lender employs one or more counsel to protect, collect, lease, sell, take possession of, or liquidate any portion of the Project, or to attempt to enforce or protect any security interest or lien or other right in any portion of the Project or under any of the Loan Documents, or to enforce any rights of Lender or obligations of Borrower or any other person, firm or corporation which may be obligated to Lender by virtue of this Agreement or under any of the Loan Documents or any other agreement, instrument or document, heretofore or hereafter delivered to Lender in furtherance hereof, then in any such event, all of the attorneys fees arising from such services and actually incurred, and any expenses, costs and charges relating thereto and actually incurred, shall constitute an additional indebtedness owing by Borrower to Lender payable on demand and evidenced and secured by the Loan Documents.
11.4 No Waiver . No failure by Lender to exercise, or delay by Lender in exercising, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies provided in this Agreement and in the Loan Documents are cumulative and not exclusive of each other or of any right or remedy provided at law or in equity. No notice to or demand on Borrower in any case, in itself, shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Lender to any other or further action in any circumstances without notice or demand.
11.5 Default Rate . During the continuance of any Event of Default under this Agreement or any of the other Loan Documents, interest on funds outstanding hereunder shall accrue at the Default Rate and be payable on demand. The failure of Lender to charge interest at the Default Rate shall not be evidence of the absence of an Event of Default or waiver of an Event of Default by Lender.
ARTICLE 12
MISCELLANEOUS
12.1 Time is of the Essence . Borrower agrees that time is of the essence in all of its covenants under this Agreement.
12.2 Concerning the Operator Loan Documents .
(a) This Agreement, the Mortgage and the other Loan Documents and the undertakings of Borrower hereunder and thereunder and the security interests, mortgage, assignments and other liens created hereby and thereby as security for the Operator Loan and the Operator Loan Documents shall be continuing and shall be binding upon Borrower, the Project and the other collateral described herein and therein, and shall remain in full force and effect, and shall not be discharged, impaired or affected by (i) the power or authority of Operator to issue or to execute, acknowledge or deliver the Operator Loan Documents; (ii) the existence or
continuance of any obligation on the part of Operator on or with respect to the obligations under the Operator Loan Documents; (iii) the validity or invalidity of the obligations under the Operator Loan Documents; (iv) any defense, set-off or counterclaim whatsoever that Operator may or might have to the performance or observance of the obligations under the Operator Loan Documents or to the performance or observance of any of the terms, provisions, covenants and agreements contained in any of the Operator Loan Documents, including, without limitation, any defense based on any alleged failure of Lender to comply with the implied covenant of good faith and fair dealing, or any limitation or exculpation of liability on the part of Operator; (v) the existence or continuance of any Operator as a legal entity; (vi) the transfer by any Operator of all or any part of any property encumbered by the Operator Loan Documents; (vii) any sale, pledge, assignment, surrender, indulgence, alteration, substitution, exchange, extension, renewal, release, compromise, change in, modification or other disposition of any of the obligations under the Operator Loan Documents or of any of the Operator Loan Documents, all of which Lender is hereby expressly authorized to make from time to time without notice to Borrowers, or to anyone; (viii) the acceptance by Lender of the primary or secondary obligation of any party with respect to, or any security for, or any guarantors upon, all or any part of the obligations under the Operator Loan Documents; or (ix) any failure, neglect or omission on the part of Lender to realize or protect any of the obligations under the Operator Loan Documents or any collateral or appropriation of any moneys, credits or property of Operator toward the liquidation of the obligations under the Operator Loan Documents or by any application of any moneys received by Lender under the Operator Loan Documents. The obligations of Borrowers under this Agreement, the Mortgage and the other Loan Documents and the and the undertakings of Borrowers hereunder and thereunder and the security interests, mortgage, assignments and other liens on the Projects and other collateral created hereby and thereby as security for the Operator Loan and the Operator Loan Documents shall not be affected, discharged, impaired or varied by any act, omission or circumstance whatsoever, whether or not specifically enumerated above, except the due and punctual payment and performance of all of the obligations hereby and thereby secured and then, in each case, only to the extent thereof.
(b) Lender shall have the right to enforce this Agreement, the Mortgage and the other Loan Documents for and to the full extent of the amounts hereby and thereby secured for the Operator Loan and the Operator Loan Documents, whether or not other proceedings or steps are pending or have been taken or have been concluded to enforce or otherwise realize upon the obligations of Operator under the Operator Loan Documents. The enforcement of this Agreement, the Mortgage and the other Loan Documents against the Projects or other collateral for the collection of the obligations of Operator under the Operator Loan Documents hereby and thereby secured shall not in any way entitle Borrowers, either at law, or in equity or otherwise, to any right, title or interest in and to the Operator Loan Documents or any of the other obligations hereby or thereby secured, or in and to any security therefor, or to any right of recovery against Operator, in each case whether by way of indemnity, reimbursement, contribution, subrogation or otherwise.
12.2 Lenders Determination of Facts; Lender Approvals and Consents .
(a) Lender at all times shall be free to establish independently to its satisfaction and in its sole and absolute discretion the existence or nonexistence of any fact or facts, the existence or nonexistence of which is a condition of this Agreement.
(b) Wherever in this Agreement or any of the other Loan Documents provision is made for the approval or consent of Lender or counsel to Lender, or that any matter is to be to the satisfaction of or as required by Lender or counsel to Lender, or that any matter is to be as estimated or determined by Lender, or the like, unless specifically stated to the contrary, such approval, consent, satisfaction, requirement, estimate or determination or the like shall be in the sole and absolute discretion of Lender or counsel to Lender, as the case may be.
(c) Notwithstanding any other provision of this Agreement or the other Loan Documents, wherever in this Agreement or any of the other Loan Documents provision is made for the approval or consent of Lender with respect to a matter, if Lender elects to grant such approval or consent, it shall not be unreasonable for Lender to make such approval or consent subject to the condition that such matter must also be approved or consented to in writing by any one of more of Guarantors, any other guarantors of the Loan, and any parties other than Borrower that have provided collateral for the Loan.
12.4 Prior Agreements; No Reliance; Modifications . This Agreement and the other Loan Documents, and any other documents or instruments executed pursuant thereto or contemplated thereby, shall represent the entire, integrated agreement between the parties hereto with respect to the subject matter of this Agreement, and shall supersede all prior negotiations, representations or agreements pertaining thereto, either oral or written. Borrower acknowledges that it is executing this Agreement without relying on any statements, representations or warranties, either oral or written, that are not expressly set forth herein. This Agreement and any provision hereof shall not be modified, amended, waived or discharged in any manner other than by a written amendment executed by all parties to this Agreement.
12.5 Disclaimer by Lender . Borrower is not or shall not be an agent of Lender for any purposes, and Lender is not a venture partner with Borrower in any manner whatsoever. Approvals granted by Lender for any matters covered under this Agreement shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be solely for the benefit of Borrower.
12.6 Loan Expenses; Indemnification . Borrower shall pay all Loan Expenses promptly upon demand therefor by Lender. To the fullest extent permitted by law, Borrower hereby agrees to protect, indemnify, defend and save harmless, Lender and its directors, officers, agents and employees from and against any and all liability, expense or damage of any kind or nature and from any suits, claims or demands, including legal fees and expenses on account of any matter or thing or action or failure to act by Lender, whether or not arising from a claim by a third party, and whether or not in litigation, arising out of this Agreement or in connection herewith, unless such suit, claim or damage is caused solely by any act, omission or willful malfeasance of Lender, its directors, officers, agents and authorized employees. This indemnity is not intended to excuse Lender from performing hereunder. This obligation on the part of Borrower shall survive the closing of the Loan, the repayment thereof and any cancellation of this Agreement. Borrower shall pay, and hold Lender harmless from, any and all claims of any brokers, finders or agents claiming a right to any fees in connection with arranging the financing contemplated hereby. Lender hereby represents and warrants that it has not employed a broker or other finder in connection with the Loan. Borrower hereby represents and warrants that no brokerage commissions or finders fees are to be paid in connection with the Loan.
12.7 Captions . The captions and headings of various Articles and Sections of this Agreement and exhibits pertaining hereto are for convenience only and are not to be considered as defining or limiting in any way the scope or intent of the provisions hereof.
12.8 Inconsistent Terms and Partial Invalidity . In the event of any inconsistency among the terms hereof (including incorporated terms), or between such terms and the terms of any other Loan Document, Lender may elect which terms shall govern and prevail. If any provision of this Agreement, or any section, paragraph, sentence, clause, phrase or word, or the application thereof, in any circumstances, is adjudicated by a court of competent jurisdiction to be invalid, the validity of the remainder of this Agreement shall be construed as if such invalid part were never included herein.
12.9 Gender and Number . Any word herein which is expressed in the masculine or neuter gender shall be deemed to include the masculine, feminine and neuter genders. Any word herein which is expressed in the singular or plural number shall be deemed, whenever appropriate in the context, to include the singular and the plural.
12.10 Notices . All notices and other communications provided for in this Agreement ( Notices ) shall be in writing. The Notice Addresses of the parties for purposes of this Agreement are as follows:
Borrower: |
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Woodland Manor Property Holdings, LLC Two Buckhead Plaza 3050 Peachtree Road NW Suite 355 Atlanta, Georgia 30305 Attention: Boyd P. Gentry |
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With a copy to: |
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Holt Ney Zatcoff & Wasserman, LLP 100 Galleria Parkway, Suite 1800 Atlanta, Georgia 30339 Attention: Gregory P. Youra |
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Lender: |
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The PrivateBank and Trust Company 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bluma Broner |
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With a copy to: |
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Seyfarth Shaw LLP 131 South Dearborn Street Suite 2400 Chicago, Illinois 60603 Attention: Alvin L. Kruse |
or such other address as a party may designate by notice duly given in accordance with this Section to the other parties. A Notice to a party shall be effective when delivered to such partys Notice Address by any means, including, without limitation, personal delivery by the party
giving the Notice, delivery by United States regular, certified or registered mail, or delivery by a commercial courier or delivery service. If the Notice Address of a party includes a facsimile number or electronic mail address, Notice given by facsimile or electronic mail shall be effective when delivered at such facsimile number or email address. If delivery of a Notice is refused, it shall be deemed to have been delivered at the time of such refusal of delivery. The party giving a Notice shall have the burden of establishing the fact and date of delivery or refusal of delivery of a Notice.
12.11 Effect of Agreement . The submission of this Agreement and the Loan Documents to Borrower for examination does not constitute a commitment or an offer by Lender to make a commitment to lend money to Borrower; this Agreement shall become effective only upon execution and delivery hereof by Lender to Borrower.
12.12 Construction . Each party to this Agreement and legal counsel to each party have participated in the drafting of this Agreement, and accordingly the general rule of construction to the effect that any ambiguities in a contract are to be resolved against the party drafting the contract shall not be employed in the construction and interpretation of this Agreement.
12.13 Governing Law . This Agreement has been negotiated, executed and delivered at Chicago, Illinois, and shall be construed and enforced in accordance with the laws of the State of Illinois.
12.14 Litigation Provisions .
(a) BORROWER CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, AND OF ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH THE PROJECT IS LOCATED, IN WHICH ANY LEGAL PROCEEDING MAY BE COMMENCED OR PENDING RELATING IN ANY MANNER TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.
(b) BORROWER AGREES THAT ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT AGAINST BORROWER IN ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH THE PROJECT IS LOCATED. BORROWER WAIVES ANY OBJECTION TO VENUE IN ANY SUCH COURT AND WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE FROM ANY SUCH COURT.
(c) BORROWER AGREES THAT IT WILL NOT COMMENCE ANY LEGAL PROCEEDING AGAINST LENDER RELATING IN ANY MANNER TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR IF A LEGAL PROCEEDING IS COMMENCED BY LENDER AGAINST BORROWER IN A COURT IN ANOTHER LOCATION, BY WAY OF A COUNTERCLAIM IN SUCH LEGAL PROCEEDING.
(d) BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.
12.15 Counterparts; Electronic Signatures . This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by Lender shall deemed to be originals thereof.
12.16 Customer Identification-USA Patriot Act Notice; OFAC and Bank Secrecy Act . Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the Act ), and Lenders policies and practices, Lender is required to obtain, verify and record certain information and documentation that identifies Borrower, which information includes the name and address of Borrower and such other information that will allow Lender to identify Borrower in accordance with the Act. In addition, Borrower shall (i) ensure that no person who owns a controlling interest in or otherwise controls Borrower or any subsidiary of Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control ( OFAC ), the Department of the Treasury, or included in any Executive Orders, (ii) not use or permit the use of Loan Proceeds to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (iii) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act laws and regulations, as amended.
[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]
IN WITNESS WHEREOF , Borrower and Lender have caused this Agreement to be executed the day and year first above written.
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WOODLAND MANOR PROPERTY HOLDINGS, LLC |
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By |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Manager |
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THE PRIVATEBANK AND TRUST COMPANY |
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By |
/s/ Bluma Broner |
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Bluma Broner, Managing Director |
Exhibit 10.139
PROMISSORY NOTE
$4,800,000
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December 30, 2011 |
1. AGREEMENT TO PAY . For value received, WOODLAND MANOR PROPERTY HOLDINGS, LLC , a Georgia limited liability company (the Borrower ), hereby promises to pay to the order of THE PRIVATEBANK AND TRUST COMPANY , an Illinois banking corporation (the Lender ), the principal sum of $4,800,000 (the Loan ), or so much of the Loan as may be advanced under and pursuant to that certain Loan Agreement dated as of even date herewith (the Loan Agreement ), executed by and between the Borrower and the Lender, on or before December 30, 2016 (the Maturity Date ), at the time and place and in the manner hereinafter provided, together with interest thereon at the rate or rates described below, and any and all other amounts which may be due and payable hereunder or under any of the Loan Documents (as defined in the Loan Agreement) from time to time. All capitalized terms used and not otherwise defined in this Note shall have the same meanings as in the Loan Agreement. Each disbursement on the Loan made by the Lender, and all payments on account of the principal and interest thereof, shall be recorded on the books and records of the Lender and the principal balance as shown on such books and records, or any copy thereof certified by an officer of the Lender, shall be rebuttably presumptive evidence of the principal amount owing hereunder.
2. INTEREST RATE .
2.1 Interest Prior to Default .
(a) Certain Defined Terms . In addition to the terms defined in paragraphs (b) and (c) of this Section and elsewhere in this Note, for purposes of this Note, the following terms shall have and be subject to the following respective meanings and provisions:
Applicable Margin means 4.00%.
Business Day means any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Chicago, Illinois.
Floating Rate means a floating per annum rate of interest equal to the greater of (i) the Prime Rate, or (ii) 6.00%. Changes in the Floating Rate to be charged hereunder based on the Prime Rate shall take effect immediately upon the occurrence of any change in the Prime Rate.
LIBOR Loan means any portion of the principal balance of this Note at any time bearing interest at the LIBOR Rate.
LIBOR Loan Request means a written request by the Borrower which sets forth the amount and Interest Period for a LIBOR Loan.
Prime Loan means any portion of the principal amount of this Note bearing interest at the Floating Rate.
Prime Rate means the floating per annum rate of interest most recently announced by the Lender at Chicago, Illinois as its prime or base rate. A certificate made by an officer of the Lender stating the Prime Rate in effect on any given day, for the purposes hereof, shall be conclusive evidence of the Prime Rate in effect on such day. The Prime Rate is a base reference rate of interest adopted by the Lender as a general benchmark from which the Lender determines the floating interest rates chargeable on various loans to borrowers with varying degrees of creditworthiness and the Borrower acknowledges and agrees that the Lender has made no representations whatsoever that the Prime Rate is the interest rate actually offered by the Lender to borrowers of any particular creditworthiness.
(b) LIBOR Rate . Except as otherwise expressly provided in this Note, interest shall accrue on the principal balance of this Note through the Maturity Date at a rate of interest equal to the greater of (i) a per annum rate of interest (the LIBOR Rate ) equal to LIBOR (as defined in paragraph (c) below) for the relevant Interest Period (as defined in paragraph (c) below), plus the Applicable Margin, such LIBOR Rate to remain fixed for such Interest Period, or (ii) 6.00% per annum.
(c) Additional Provisions Relating to LIBOR Rate . The following provisions shall apply with respect to the LIBOR Rate:
(i) At the Loan Opening, the Borrower shall deliver to the Lender a single LIBOR Loan Request, which shall establish a single LIBOR Loan in an amount equal to the entire amount of proceeds disbursed on this Note at the Loan Opening, with an Interest Period of one month. At the time of each subsequent disbursement of proceeds disbursed on this Note, the Borrower shall deliver to the Lender a single LIBOR Loan Request, which shall establish a single LIBOR Loan in an amount equal to the entire amount of such disbursement, with an Interest Period of one month. If on the first day of any Interest Period more than one LIBOR Loan is outstanding, such multiple LIBOR Loans shall be combined into a single LIBOR Loan.
(ii) If pursuant to the LIBOR Loan Request, the initial Interest Period of any LIBOR Loan commences on any day other than the first Business Day of any month, then the initial Interest Period of such LIBOR Loan shall end on the first day of the following calendar month, notwithstanding the Interest Period specified in the LIBOR Loan Request, and the LIBOR Rate for such LIBOR Loan shall be a per annum rate of interest equal to the greater of (i) LIBOR for an interest period equal to the length of such partial month, plus the Applicable Margin, or (ii) 6.00%. Thereafter, each LIBOR Loan shall automatically renew (a LIBOR Rollover ) for the Interest Period specified in the LIBOR Loan Request at the then current LIBOR Rate, except that an Interest Period for a LIBOR Loan shall not automatically renew with respect to any principal amount which is scheduled to be repaid before the last day of the applicable Interest Period, and any such amounts shall bear interest at the Floating Rate, until repaid.
(iii) LIBOR shall mean a rate of interest equal to (A) the per annum rate of interest at which United States dollar deposits in an amount comparable to the amount of the relevant LIBOR Loan and for a period equal to the relevant Interest Period are offered in the London Interbank Eurodollar market at 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period (or three Business Days prior to the commencement of such Interest Period if banks in London, England were not open and dealing in offshore United States dollars on such second preceding Business Day), as displayed in the Bloomberg Financial Markets system (or other authoritative source selected by the Lender in its sole discretion), divided by (B) a number determined by subtracting from 1.00 the then stated maximum reserve percentage for determining reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D), such rate to remain fixed for such Interest Period, or as LIBOR is otherwise determined by the Lender in its sole and absolute discretion. The Lenders determination of LIBOR shall be conclusive, absent manifest error.
(iv) Interest Period shall mean, with regard to any LIBOR Loan, successive one month periods; provided, however, that: (A) each Interest Period occurring after the initial Interest Period of any LIBOR Loan shall commence on the day on which the preceding Interest Period for such LIBOR Loan expires, with interest for such day to be calculated at the LIBOR Rate in effect for the new Interest Period; (B) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; (C) whenever the first day of any Interest Period occurs on a date for which there is no numerically corresponding date in the month in which such Interest Period terminates, such Interest Period shall end on the last day of such month, unless such day is not a Business Day, in which case the Interest Period shall terminate on the first Business Day of the following month, provided, however, that so long as the LIBOR Rollover remains in effect, all subsequent Interest Periods shall terminate on the date of the month numerically corresponding to the date on which the initial Interest Period commenced; and (D) if at any time the Interest Period for a LIBOR Loan expires less than one month before the Maturity Date, such LIBOR Loan shall automatically renew at the then current LIBOR Rate for an Interest Period terminating on the Maturity Date.
(v) If the Lender determines in good faith (which determination shall be conclusive, absent manifest error) prior to the commencement of any Interest Period that (A) the making or maintenance of any LIBOR Loan would violate any applicable law, rule, regulation or directive, whether or not having the force of law, (B) United States dollar deposits in the principal amount, and for periods equal to the Interest Period, of any LIBOR Loan are not available in the London Interbank Eurodollar market in the ordinary course of business, (C) by reason of circumstances affecting the London Interbank Eurodollar market, adequate and fair means do not exist for ascertaining the LIBOR Rate to be applicable to the relevant LIBOR Loan, (D) the LIBOR Rate does not accurately reflect the cost to the Lender of a LIBOR Loan, or (E) a Default or an Event of Default (each as defined in Section 5 hereof) has occurred and is continuing, the Lender shall promptly notify the Borrower thereof and, so long as any of the
foregoing conditions continue, the Lender will have no obligation to permit any principal of this Note to become a LIBOR Loan. Following such a notice by the Lender, each existing LIBOR Loan, at the Borrowers option, shall be (1) converted to a Prime Loan on the last Business Day of the then existing Interest Period, or (2) due and payable on the last Business Day of the then existing Interest Period, without further demand, presentment, protest or notice of any kind, all of which are hereby waived by the Borrower.
(vi) If, after the date hereof, a Regulatory Change (as hereinafter defined) shall, in the reasonable determination of the Lender, make it unlawful for the Lender to make or maintain any LIBOR Loans, the Lender will have no obligation to permit any principal of this Note to become a LIBOR Loan, and in such event, at the Borrowers option, each existing LIBOR Loan shall be immediately (A) converted to a Prime Loan on the last Business Day of the then existing Interest Period or on such earlier date as required by law, or (B) due and payable on the last Business Day of the then existing Interest Period or on such earlier date as required by law, all without further demand, presentment, protest or notice of any kind, all of which are hereby waived by the Borrower. As used herein, Regulatory Change shall mean the introduction of, or any change in any applicable law, treaty, rule, regulation or guideline or in the interpretation or administration thereof by any governmental authority or any central bank or other fiscal, monetary or other authority having jurisdiction over the Lender or its lending office.
(vii) If any Regulatory Change (whether or not having the force of law) shall (A) impose, modify or deem applicable any assessment, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, or any other acquisition of funds or disbursements by, the Lender; (B) subject the Lender or any LIBOR Loan to any tax, duty, charge, stamp tax or fee, or change the basis of taxation of payments to the Lender of principal or interest due from the Borrower hereunder (other than a change in the taxation of the overall net income of the Lender); or (C) impose on the Lender any other condition regarding any LIBOR Loan or the Lenders funding thereof, and the Lender shall determine (which determination shall be conclusive, absent manifest error) that the result of the foregoing is to actually increase the cost to the Lender of making or maintaining any LIBOR Loan or to reduce the amount of principal or interest received by the Lender hereunder on any LIBOR Loan, then the Borrower shall pay to the Lender, on demand, such additional amounts as the Lender shall from time to time determine are sufficient to compensate and indemnify the Lender for such increased costs or reduced amounts.
2.2 Interest After Default . From and after the Maturity Date or upon the occurrence and during the continuance of an Event of Default, interest shall accrue on the unpaid principal balance during any such period at an annual rate (the Default Rate ) 5.0% greater than the interest rate which would otherwise be in effect under the terms of this Note. However, in no event shall the Default Rate exceed the maximum rate permitted by law. The interest accruing under this Section shall be immediately due and payable by the Borrower to the holder of this Note upon demand and shall be additional indebtedness evidenced by this Note.
2.3 Interest Calculation . Interest on this Note shall be calculated on the basis of a 360-day year and the actual number of days elapsed in any portion of a month in which interest is due. If any payment to be made by the Borrower hereunder shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment.
3. PAYMENT TERMS .
3.1 Payment of Principal and Interest . Payments of principal and interest due under this Note, if not sooner declared to be due in accordance with the provisions hereof, shall be made as follows:
(a) On the first day of the month of February, 2012, and on the first day of each month thereafter through and including the month in which the Maturity Date occurs, interest accrued on this Note shall be due and payable.
(b) On the first day of the month of February, 2012, and on the first day of each month thereafter through and including the month in which the Maturity Date occurs, in addition to accrued interest on this Note payable as provided in paragraph (a) above, a payment of principal on this Note shall be due and payable in the amount of $8,500.
(c) The unpaid principal balance of this Note, if not sooner paid or declared to be due in accordance with the terms hereof, together with all accrued and unpaid interest thereon and any other amounts due and payable hereunder or under any of the Loan Documents shall be due and payable in full on the Maturity Date.
3.2 Application of Payments . Prior to the occurrence of an Event of Default, all payments and prepayments on account of the indebtedness evidenced by this Note shall be applied as follows: (a) first, to fees, expenses, costs and other similar amounts then due and payable to the Lender, including, without limitation any prepayment premium, exit fee or late charges due hereunder, (b) second, to accrued and unpaid interest on the principal balance of this Note, (c) third, to the payment of principal due in the month in which the payment or prepayment is made, (d) fourth, to any escrows, impounds or other amounts which may then be due and payable under the Loan Documents, (e) fifth, to any other amounts then due the Lender hereunder or under any of the Loan Documents, and (f) last, to the unpaid principal balance of this Note in the inverse order of maturity. Any prepayment on account of the indebtedness evidenced by this Note shall not extend or postpone the due date or reduce the amount of any subsequent monthly payment of principal and interest due hereunder. After an Event of Default has occurred and is continuing, payments may be applied by the Lender to amounts owed hereunder and under the Loan Documents in such order as the Lender shall determine, in its sole discretion.
3.3 Method of Payments . All payments of principal and interest hereunder shall be paid by automatic debit, wire transfer, check or in coin or currency which, at the time or times of payment, is the legal tender for public and private debts in the United States of America and shall be made at such place as the Lender or the legal holder or holders of this Note may from time to
time appoint in the payment invoice or otherwise in writing, and in the absence of such appointment, then at the offices of the Lender at 120 South LaSalle Street, Chicago, Illinois 60603. Payment made by check shall be deemed paid on the date the Lender receives such check; provided, however, that if such check is subsequently returned to the Lender unpaid due to insufficient funds or otherwise, the payment shall not be deemed to have been made and shall continue to bear interest until collected. Notwithstanding the foregoing, the final payment due under this Note must be made by wire transfer or other immediately available funds. With the exception of interest which under the terms of the Loan Documents is to be paid from a disbursement of proceeds of the Loan, interest, principal payments and any fees and expenses owed the Lender from time to time will be deducted by the Lender automatically on the due date from an account of the Borrower with the Lender. The Borrower shall maintain sufficient funds in the account on the dates the Lender enters debits authorized by this Note. If there are insufficient funds in the account on the date the Lender enters any debit authorized by this Note, the debit will be reversed.
3.4 Late Charge . If any payment of interest or principal due hereunder is not made within five days after such payment is due in accordance with the terms hereof, then, in addition to the payment of the amount so due, the Borrower shall pay to the Lender a late charge of five cents for each whole dollar so overdue to defray part of the cost of collection and handling such late payment. The Borrower agrees that the damages to be sustained by the holder hereof for the detriment caused by any late payment are extremely difficult and impractical to ascertain, and that the amount of five cents for each one dollar due is a reasonable estimate of such damages, does not constitute interest, and is not a penalty.
3.5 Principal Prepayments . The principal of this Note may be prepaid, either in whole or in part, at any time and from time to time, provided that such prepayment is accompanied by payment to the Lender of all accrued and unpaid interest on this Note as of the date of such prepayment. If the principal of this Note is prepaid in whole from the proceeds of a loan which is insured, guaranteed or extended by any agency of the United States of America, no prepayment premium or penalty shall be payable in connection with such prepayment. Otherwise, any prepayment of the principal of this Note, in whole or in part, shall be accompanied by payment to the Lender of a prepayment premium in an amount equal to a percentage of the amount of principal being prepaid determined as follows:
Date of Prepayment |
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Prepayment Premium,
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Prior to the First Anniversary of the Date of this Note |
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5.0 |
% |
On or After the First Anniversary of the Date of this Note But Prior to the Second Anniversary of the Date of this Note |
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4.0 |
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On or After the Second Anniversary of the Date of this Note But Prior to the Third Anniversary of the Date of this Note |
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3.0 |
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On or After the Third Anniversary of the Date of this Note But Prior to the Fourth Anniversary of the Date of this Note |
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2.0 |
% |
On or After the Fourth Anniversary of the Date of this Note |
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0.0 |
% |
Any amounts prepaid on this Note may not be borrowed again.
3.6 Loan Fees . In consideration of the Lenders agreement to make the Loan, the Borrower shall pay to the Lender a non-refundable fee in the amount of $48,000, which shall be due and payable in full as a condition precedent to any disbursement of proceeds under this Note.
4. SECURITY; LOAN DOCUMENTS . This Note is secured by the Loan Agreement, the Mortgage, the Assignment of Rents and the other Loan Documents. Reference is hereby made to the Loan Agreement, the Mortgage, the Assignment of Rents and the other Loan Documents (all of which are incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a statement of the covenants and agreements contained therein, a statement of the rights, remedies, and security afforded thereby, and all matters therein contained. If any Operator Loan is extended by the Lender to the Operator, this Note and the Loan will also secured by all of the collateral provided to the Lender for the Operator Loan, and all of the collateral for this Note and the Loan will also secure the Operator Loan.
5. EVENTS OF DEFAULT . The occurrence of any one or more of the following events shall constitute an Event of Default under this Note:
(a) The failure by the Borrower to pay (i) any installment of principal or interest payable pursuant to this Note on the date when due, or (ii) any other amount payable to the Lender under this Note, the Loan Agreement, the Mortgage or any of the other Loan Documents on the date when any such payment is due in accordance with the terms hereof or thereof; or
(b) The occurrence of any Event of Default under the Loan Agreement, the Mortgage or any of the other Loan Documents.
For purposes of this Note, the term Default means the occurrence or existence of any event or circumstance which, with the giving of notice or passage of time, or both, would constitute an Event of Default.
6. REMEDIES . At the election of the holder hereof, and without notice, the principal balance remaining unpaid under this Note, and all unpaid interest accrued thereon and any other amounts due hereunder, shall be and become immediately due and payable in full upon the occurrence of any Event of Default. Failure to exercise this option shall not constitute a waiver of the right to exercise same in the event of any subsequent Event of Default. No holder hereof shall, by any act of omission or commission, be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by the holder hereof, and then only to the extent specifically set forth therein. The rights, remedies and powers of the holder hereof, as provided in this Note, the Mortgage and in all of the other Loan Documents are cumulative and concurrent, and may be pursued singly, successively or together against the Borrower, any Guarantor hereof, the Project and any other security given at any time to secure the repayment hereof, all at the sole discretion of the holder hereof. If any suit or action is instituted or attorneys are employed to collect this Note or any part hereof, the Borrower promises and agrees to pay all costs of collection, including reasonable attorneys fees and court costs.
7. COVENANTS AND WAIVERS . The Borrower and all others who now or may at any time become liable for all or any part of the obligations evidenced hereby, expressly agree hereby to be jointly and severally bound, and jointly and severally: (i) waive and renounce any and all homestead, redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor, and notice of protest; (iii) waive any and all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default, or enforcement of the payment hereof or hereunder; (iv) waive any and all lack of diligence and delays in the enforcement of the payment hereof; (v) agree that the liability of the Borrower and each guarantor, endorser or obligor shall be unconditional and without regard to the liability of any other person or entity for the payment hereof, and shall not in any manner be affected by any indulgence or forbearance granted or consented to by the Lender to any of them with respect hereto; (vi) consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by the Lender with respect to the payment or other provisions hereof, and to the release of any security at any time given for the payment hereof, or any part thereof, with or without substitution, and to the release of any person or entity liable for the payment hereof; and (vii) consent to the addition of any and all other makers, endorsers, guarantors, and other obligors for the payment hereof, and to the acceptance of any and all other security for the payment hereof, and agree that the addition of any such makers, endorsers, guarantors or other obligors, or security shall not affect the liability of the Borrower, any guarantor and all others now liable for all or any part of the obligations evidenced hereby. This provision is a material inducement for the Lender making the Loan to the Borrower.
8. GENERAL AGREEMENTS .
8.1 Incorporation of Section 12.2 of Loan Agreement . The provisions of Section 12.2 of the Loan Agreement are hereby incorporated into and made a part of this Note.
8.2 Usury and Truth in Lending . The Loan is a business loan within the meaning of subparagraph (1)(c) contained in Section 205/4 of Chapter 815 of the Illinois Compiled Statutes, as amended. The Loan is a loan for a commercial enterprise within the meaning of Section 1343.01(B)(6)(b) of the Ohio Revised Code and is a business loan to a borrower described in Section 1343.01(B)(6)(a) of the Ohio Revised Code. The Loan is an exempted transaction under the Truth In Lending Act, 12 U.S.C. §1601 et seq. The Loan does not, and when disbursed will not, violate the provisions of the usury laws of the State, any consumer credit laws or the usury laws of any state which may have jurisdiction over this transaction, the Borrower or any property securing the Loan.
8.3 Time . Time is of the essence hereof.
8.4 Governing Law . This Note is governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the statutes, laws and decisions of the State of Illinois, without regard to its conflict of laws provisions.
8.5 Entire Agreement; Amendments . This Note sets forth all of the covenants, promises, agreements, conditions and understandings of the parties relating to the subject matter of this Note, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them other than as are herein set forth. The Borrower acknowledges that it is executing this Note without relying on any statements, representations or warranties, either oral or written, that are not expressly set forth herein. This Note may not be changed or amended orally but only by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought.
8.6 No Joint Venture . The Lender shall not be construed for any purpose to be a partner, joint venturer, agent or associate of the Borrower or of any lessee, operator, concessionaire or licensee of the Borrower in the conduct of its business, and by the execution of this Note, the Borrower agrees to indemnify, defend, and hold the Lender harmless from and against any and all damages, costs, expenses and liability that may be incurred by the Lender as a result of a claim that the Lender is such partner, joint venturer, agent or associate.
8.7 Disbursement . This Note has been made and delivered at Chicago, Illinois and all funds disbursed to or for the benefit of the Borrower will be disbursed in Chicago, Illinois.
8.8 Joint and Several Obligations; Successors and Assigns . If this Note is executed by more than one party, the obligations and liabilities of each Borrower under this Note shall be joint and several. This Note shall be binding upon and enforceable against each Borrower and their respective successors and assigns. This Note shall inure to the benefit of and may be enforced by the Lender and its successors and assigns.
8.9 Severable Provisions . If any provision of this Note is deemed to be invalid by reason of the operation of law, or by reason of the interpretation placed thereon by any
administrative agency or any court, the Borrower and the Lender shall negotiate an equitable adjustment in the provisions of the same in order to effect, to the maximum extent permitted by law, the purpose of this Note, and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby and shall remain in full force and effect.
8.10 Interest Limitation . If the interest provisions herein or in any of the Loan Documents shall result, at any time during the Loan, in an effective rate of interest which, for any month, exceeds the limit of usury or other laws applicable to the Loan, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied upon principal immediately upon receipt of such monies by the Lender, with the same force and effect as though the payer has specifically designated such extra sums to be so applied to principal and the Lender had agreed to accept such extra payment(s) as a premium-free prepayment. Notwithstanding the foregoing, however, the Lender may at any time and from time to time elect by notice in writing to the Borrower to reduce or limit the collection to such sums which, when added to the said first-stated interest, shall not result in any payments toward principal in accordance with the requirements of the preceding sentence. In no event shall any agreed to or actual exaction as consideration for this Loan transcend the limits imposed or provided by the law applicable to this transaction or the maker hereof for the use or detention of money or for forbearance in seeking its collection.
8.11 Assignability . The Lender may at any time assign its rights in this Note and the Loan Documents, or any part thereof and transfer its rights in any or all of the collateral, and the Lender thereafter shall be relieved from all liability with respect to such collateral. In addition, the Lender may at any time sell one or more participations in this Note. The Borrower may not assign its interest in this Note, or any other agreement with the Lender or any portion thereof, either voluntarily or by operation of law, without the prior written consent of the Lender.
9. NOTICES . All notices required under this Note will be in writing and will be transmitted in the manner and to the addresses required by the Loan Agreement, or to such other addresses as the Lender and the Borrower may specify from time to time in writing.
10. LITIGATION PROVISIONS .
10.1 Consent to Jurisdiction . THE BORROWER CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, AND OF ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH THE PROJECT IS LOCATED, IN WHICH ANY LEGAL PROCEEDING MAY BE COMMENCED OR PENDING RELATING IN ANY MANNER TO THIS NOTE, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.
10.2 Consent to Venue . THE BORROWER AGREES THAT ANY LEGAL PROCEEDING RELATING TO THIS NOTE, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT AGAINST THE BORROWER IN ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN
WHICH THE PROJECT IS LOCATED. THE BORROWER WAIVES ANY OBJECTION TO VENUE IN ANY SUCH COURT AND WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE FROM ANY SUCH COURT.
10.3 No Proceedings in Other Jurisdictions . THE BORROWER AGREES THAT IT WILL NOT COMMENCE ANY LEGAL PROCEEDING AGAINST THE LENDER RELATING IN ANY MANNER TO THIS NOTE, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR IF A LEGAL PROCEEDING IS COMMENCED BY THE LENDER AGAINST THE BORROWER IN A COURT IN ANOTHER LOCATION, BY WAY OF A COUNTERCLAIM IN SUCH LEGAL PROCEEDING.
10.4 Waiver of Jury Trial . THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS NOTE, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.
11. CUSTOMER IDENTIFICATION - USA PATRIOT ACT NOTICE; OFAC AND BANK SECRECY ACT . The Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the Act ), and the Lenders policies and practices, the Lender is required to obtain, verify and record certain information and documentation that identifies the Borrower, which information includes the name and address of the Borrower and such other information that will allow the Lender to identify the Borrower in accordance with the Act. In addition, the Borrower shall (a) ensure that no person who owns a controlling interest in or otherwise controls the Borrower or any subsidiary of the Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control ( OFAC ), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act ( BSA ) laws and regulations, as amended.
12. EXPENSES AND INDEMNIFICATION . The Borrower shall pay all costs and expenses incurred by the Lender in connection with the preparation of this Note and the Loan Documents, including, without limitation, reasonable attorneys fees and time charges of attorneys who may be employees of the Lender or any affiliate or parent of the Lender. The Borrower shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Note and the other instruments and documents to be delivered hereunder, and agrees to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses. The Borrower hereby authorizes the Lender to charge any account of the Borrower with the Lender for all sums due under this Section. The Borrower also agrees to defend (with counsel satisfactory to the Lender), protect, indemnify and hold harmless the Lender, any parent corporation, affiliated corporation or subsidiary of the Lender, and each of their respective officers, directors, employees, attorneys and agents (each an Indemnified Party ) from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and distributions of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Indemnified Party thereto, which shall also include, without limitation, attorneys fees and time charges of attorneys who may be employees of the Lender, any parent corporation or affiliated corporation of the Lender), which may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct, indirect or consequential and whether based on any federal, state or local laws or regulations, including, without limitation, securities, environmental laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Note or any of the Loan Documents, or any act, event or transaction related or attendant thereto, the preparation, execution and delivery of this Note and the Loan Documents, the making or issuance and management of the Loan, the use or intended use of the proceeds of this Note and the enforcement of the Lenders rights and remedies under this Note, the Loan Documents any other instruments and documents delivered hereunder, or under any other agreement between the Borrower and the Lender; provided, however, that the Borrower shall not have any obligations hereunder to any Indemnified Party with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party. To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrower shall satisfy such undertaking to the maximum extent permitted by applicable law. Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party on demand, and failing prompt payment, together with interest thereon at the Default Rate from the date incurred by each Indemnified Party until paid by the Borrower, shall be added to the obligations of the Borrower evidenced by this Note and secured by the collateral securing this Note. The provisions of this Section shall survive the satisfaction and payment of this Note.
[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]
IN WITNESS WHEREOF , the Borrower has executed and delivered this Promissory Note as of the day and year first above written.
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WOODLAND MANOR PROPERTY HOLDINGS, LLC |
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By |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Manager |
- Woodland Manor Property Holdings, LLC Note -
- Signature Page -
Exhibit 10.140
GUARANTY OF PAYMENT AND PERFORMANCE
THIS GUARANTY OF PAYMENT AND PERFORMANCE dated as of December 30, 2011 (this Guaranty ), is executed by WOODLAND MANOR NURSING, LLC , a Georgia limited liability company (the Operator ), and ADCARE HEALTH SYSTEMS, INC., an Ohio corporation ( AdCare ) (the Operator and AdCare being sometimes referred to herein collectively as the Guarantors ), jointly and severally, to and for the benefit of THE PRIVATEBANK AND TRUST COMPANY , an Illinois banking corporation (the Lender ).
RECITALS
A. The Lender has agreed to make a loan in the principal amount of $4,800,000 (the Loan ) to Woodland Manor Property Holdings, LLC, a Georgia Limited Liability Company (the Borrower ), pursuant to the terms and conditions of a Loan Agreement of even date herewith (the Loan Agreement ) by and between the Borrower and the Lender. The Loan is evidenced by a Promissory Note of even date herewith (the Note ) from the Borrower to the Lender in the principal amount of $4,800,000. All terms used and not otherwise defined herein shall have the meanings set forth in the Loan Agreement.
B. As a condition precedent to the making of the Loan to the Borrower by the Lender and in consideration therefor, the Lender has required the execution and delivery of this Guaranty by the Guarantors.
C. The Operator is the lessee of the Project and is deriving a benefit from the making of the Loan by the Lender, and has agreed to execute and deliver this Guaranty to the Lender. AdCare has an ownership interest in the Borrower, either directly or indirectly through one or more intermediary entities, and, having a financial interest in the Borrower, has agreed to execute and deliver this Guaranty to the Lender.
AGREEMENTS
For good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, each Guarantor hereby agrees as follows:
1. Guaranty of Payment . Each Guarantor hereby unconditionally, absolutely and irrevocably guarantees, jointly and severally, the punctual payment and performance when due, whether at stated maturity or by acceleration or otherwise, of the indebtedness and other obligations of the Borrower to the Lender evidenced by the Note and any other amounts that may become owing by the Borrower under the Loan Documents (such indebtedness, obligations and other amounts are hereinafter referred to as the Payment Obligations ). This Guaranty is a present and continuing guaranty of payment and not of collectability, and the Lender shall not be required to prosecute collection, enforcement or other remedies against the Borrower, any Guarantor, or any other guarantor of the Payment Obligations, or to enforce or resort to any collateral for the repayment of the Payment Obligations or other rights or remedies pertaining thereto, before calling on any Guarantor for payment. If for any reason the Borrower shall fail or be unable to pay, punctually and fully, any of the Payment Obligations, the Guarantors shall
jointly and severally pay such obligations to the Lender in full immediately upon demand. One or more successive actions may be brought against the Guarantors, or any of them, as often as the Lender deems advisable, until all of the Payment Obligations are paid and performed in full. The Payment Obligations and the Performance Obligations (as defined below) are referred to herein as the Guaranteed Obligations .
2. Guaranty of Performance . In addition to the guaranty of the Payment Obligations, each Guarantor hereby unconditionally, absolutely and irrevocably guarantees, jointly and severally, (i) the full and prompt performance and observance by the Borrower of each and every other obligation, undertaking, liability, promise, warranty, covenant and agreement of the Borrower in and under the terms of the Loan Documents; and (ii) the truth of each and every representation and warranty made by the Borrower in the Loan Documents or in other certificates or documents delivered in connection with the Loan (the matters described in (i) and (ii) above being collectively referred to herein as the Performance Obligations ).
3. Representations and Warranties . The following shall constitute representations and warranties of each Guarantor and each Guarantor hereby acknowledges that the Lender intends to make the Loan in reliance thereon:
(a) The Operator is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Georgia and duly registered to transact business and in good standing in the State of Ohio. The Operator has full power and authority to conduct its business as presently conducted, to execute and deliver the Loan Documents to which it is a party, and to perform all of its duties and obligations under the Loan Documents to which it is a party; and such execution and performance have been duly authorized by all necessary Legal Requirements. The articles of organization and operating agreement of the Operator, each as amended to date, copies of which have been furnished to the Lender, are in effect, have not been further amended, and are the true, correct and complete documents relating to the Operators creation and governance.
(b) AdCare is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. AdCare has full power and authority to conduct its business as presently conducted, to execute and deliver the Loan Documents to which it is a party, and to perform all of its duties and obligations under the Loan Documents to which it is a party; and such execution and performance have been duly authorized by all necessary Legal Requirements. The articles of incorporation and bylaws of AdCare, each as amended to date, copies of which have been furnished to the Lender, are in effect, have not been further amended, and are the true, correct and complete documents relating to AdCares creation and governance.
(c) Each Guarantor is not in default and no event has occurred that with the passage of time or the giving of notice will constitute a default under any agreement to which such Guarantor is a party, the effect of which will impair performance by such Guarantor of its obligations under this Guaranty. Neither the execution and delivery of this Guaranty nor compliance with the terms and provisions hereof will violate any applicable law, rule, regulation, judgment, decree or order, or will conflict with or result
in any breach of any of the terms, covenants, conditions or provisions of the articles of organization or operating agreement of the Operator, the articles of incorporation or bylaws of AdCare, any indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind that creates, represents, evidences or provides for any lien, charge or encumbrance upon any of the property or assets of any Guarantor, or any other indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind to which any Guarantor is a party or to which any Guarantor or the property of any Guarantor may be subject.
(d) There is no litigation, arbitration, governmental or administrative proceedings, actions, examinations, claims or demands pending, or to the Guarantors knowledge, threatened that could adversely affect performance by any Guarantor of its obligations under this Guaranty.
(e) Neither this Guaranty nor any statement or certification as to facts previously furnished or required herein to be furnished to the Lender by any Guarantor, contains any material inaccuracy or untruth in any representation, covenant or warranty or omits to state a fact material to this Guaranty.
4. Continuing Guaranty . Each Guarantor agrees that performance by such Guarantor of the obligations under this Guaranty shall be a primary obligation, shall not be subject to any counterclaim, set-off, abatement, deferment or defense based upon any claim that such Guarantor may have against the Lender, the Borrower, any other guarantor of the Guaranteed Obligations or any other person or entity, and shall remain in full force and effect without regard to, and shall not be released, discharged or affected in any way by, any circumstance or condition (whether or not such Guarantor shall have any knowledge thereof), including without limitation
(a) Any lack of validity or enforceability of any of the Loan Documents;
(b) Any termination, amendment, modification or other change in any of the Loan Documents, including, without limitation, any modification of the interest rate or rates described therein;
(c) Any furnishing, exchange, substitution or release of any collateral securing repayment of the Loan, or any failure to perfect any lien in such collateral;
(d) Any failure, omission or delay on the part of the Borrower, any Guarantor, any other guarantor of the Guaranteed Obligations or the Lender to conform or comply with any term of any of the Loan Documents or any failure of the Lender to give notice of any Event of Default;
(e) Any waiver, compromise, release, settlement or extension of time of payment or performance or observance of any of the obligations or agreements contained in any of the Loan Documents;
(f) Any action or inaction by the Lender under or in respect of any of the Loan Documents, any failure, lack of diligence, omission or delay on the part of the
Lender to perfect, enforce, assert or exercise any lien, security interest, right, power or remedy conferred on it in any of the Loan Documents, or any other action or inaction on the part of the Lender;
(g) Any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, liquidation, marshalling of assets and liabilities or similar events or proceedings with respect to the Borrower, any Guarantor or any other guarantor of the Guaranteed Obligations, as applicable, or any of their respective property or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding;
(h) Any merger or consolidation of the Borrower into or with any entity, or any sale, lease or transfer of any of the assets of the Borrower, any Guarantor or any other guarantor of the Guaranteed Obligations to any other person or entity;
(i) Any change in the ownership of the Borrower, or any change in the relationship between the Borrower and any Guarantor or any other guarantor of the Guaranteed Obligations, or any termination of any such relationship;
(j) Any release or discharge by operation of law of the Borrower, any Guarantor or any other guarantor of the Guaranteed Obligations from any obligation or agreement contained in any of the Loan Documents; or
(k) Any other occurrence, circumstance, happening or event, whether similar or dissimilar to the foregoing and whether foreseen or unforeseen, which otherwise might constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which otherwise might limit recourse against the Borrower or any Guarantor to the fullest extent permitted by law.
5. Waivers . Each Guarantor expressly and unconditionally waives (i) notice of any of the matters referred to in Section 4 above, (ii) all notices which may be required by statute, rule of law or otherwise, now or hereafter in effect, to preserve intact any rights against the Guarantors, including, without limitation, any demand, presentment and protest, proof of notice of non-payment under any of the Loan Documents and notice of any Event of Default or any failure on the part of the Borrower, any Guarantor or any other guarantor of the Guaranteed Obligations to perform or comply with any covenant, agreement, term or condition of any of the Loan Documents, (iii) any right to the enforcement, assertion or exercise against the Borrower, any Guarantor or any other guarantor of the Guaranteed Obligations of any right or remedy conferred under any of the Loan Documents, (iv) any requirement of diligence on the part of any person or entity, (v) to the fullest extent permitted by law and except as otherwise expressly provided in this Guaranty or the other Loan Documents, any claims based on allegations that the Lender has failed to act in a commercially reasonable manner or failed to exercise the Lenders obligation of good faith and fair dealing, (vi) any requirement to exhaust any remedies or to mitigate the damages resulting from any default under any of the Loan Documents, and (vii) any notice of any sale, transfer or other disposition of any right, title or interest of the Lender under any of the Loan Documents. Each Guarantor agrees that such Guarantor is a guarantor and not a
surety within the meaning of the Illinois Sureties Act, and also waives any and all rights under the Illinois Sureties Act.
6. Subordination . Each Guarantor agrees that any and all present and future debts and obligations of the Borrower to such Guarantor hereby are subordinated to the claims of the Lender and hereby are assigned by such Guarantor to the Lender as security for the Guaranteed Obligations and such Guarantors obligations under this Guaranty.
7. Subrogation Waiver . Until the Guaranteed Obligations are paid in full and all periods under applicable bankruptcy law for the contest of any payment by the Guarantors or the Borrower as a preferential or fraudulent payment have expired, each Guarantor knowingly, and with advice of counsel, waives, relinquishes, releases and abandons all rights and claims to indemnification, contribution, reimbursement, subrogation and payment which such Guarantor may now or hereafter have by and from the Borrower and the successors and assigns of the Borrower, for any payments made by such Guarantor to the Lender, including, without limitation, any rights which might allow the Borrower, the Borrowers successors, a creditor of the Borrower, or a trustee in bankruptcy of the Borrower to claim in bankruptcy or any other similar proceedings that any payment made by the Borrower or the Borrowers successors and assigns to the Lender was on behalf of or for the benefit of such Guarantor and that such payment is recoverable by the Borrower, a creditor or trustee in bankruptcy of the Borrower as a preferential payment, fraudulent conveyance, payment of an insider or any other classification of payment which may otherwise be recoverable from the Lender.
8. Reinstatement . The obligations of each Guarantor pursuant to this Guaranty shall continue to be effective or automatically be reinstated, as the case may be, if at any time payment of any of the Guaranteed Obligations or any Guarantors obligations under this Guaranty is rescinded or otherwise must be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Guarantor or the Borrower or otherwise, all as though such payment had not been made.
9. Financial Statements . Each Guarantor represents and warrants to the Lender that (i) the financial statements of such Guarantor previously submitted to the Lender are true, complete and correct in all material respects, disclose all actual and contingent liabilities, and fairly present the financial condition of such Guarantor, and do not contain any untrue statement of a material fact or omit to state a fact material to the financial statements submitted or this Guaranty, and (ii) no material adverse change has occurred in the financial statements from the dates thereof until the date hereof. Each Guarantor shall furnish to the Lender financial statements and other information as provided in Section 7.4 of the Loan Agreement.
10. Transfers, Sales, Etc. Each Guarantor shall not sell, lease, transfer, convey or assign any of its or his assets, unless (i) if the Guarantor is a natural person, such sale, lease, transfer, conveyance or assignment is of a non-material asset of such Guarantor and will not have a material adverse effect on such Guarantors financial condition, or (ii) if the Guarantor is a limited liability company, corporation, partnership or other entity, such sale, lease, transfer, conveyance or assignment will not have a material adverse effect on the business or financial condition of such Guarantor or its ability to perform its obligations hereunder.
11. Default; Remedies . An Event of Default shall occur hereunder if any Guarantor shall fail to pay or perform any of its covenants, agreements and obligations hereunder, or if any representation or warranty contained herein shall prove to be untrue or incorrect in any material respect. When any Event of Default hereunder has occurred and is continuing, the Lender may exercise any of the rights and remedies provided for herein or in any of the other Loan Documents, or provided to it by law, including, without limitation, the right of setoff.
12. Enforcement Costs and Interest . If: (i) this Guaranty is placed in the hands of one or more attorneys for collection or is collected through any legal proceeding; (ii) one or more attorneys is retained to represent the Lender in any bankruptcy, reorganization, receivership or other proceedings affecting creditors rights and involving a claim under this Guaranty, or (iii) one or more attorneys is retained to represent the Lender in any other proceedings whatsoever in connection with this Guaranty, then the Guarantors shall pay to the Lender upon demand all fees, costs and expenses incurred by the Lender in connection therewith, including, without limitation, reasonable attorneys fees, court costs and filing fees , in addition to all other amounts due hereunder. Amounts due from a Guarantor under this Guaranty shall bear interest until paid at the Default Rate.
13. Successors and Assigns; Joint and Several Liability . This Guaranty shall inure to the benefit of the Lender and its successors and assigns. This Guaranty shall be binding on each Guarantor and the heirs, legatees, successors and assigns of such Guarantor. If this Guaranty is executed by more than one Guarantor, it shall be the joint and several undertaking of each of the undersigned. Regardless of whether this Guaranty is executed by more than one Guarantor, it is agreed that the liability of the undersigned hereunder is several and independent of any other guarantees or other obligations at any time in effect with respect to the Guaranteed Obligations or any part thereof and that the liability of any Guarantor hereunder may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guarantees or other obligations.
14. No Waiver of Rights . No delay or failure on the part of the Lender to exercise any right, power or privilege under this Guaranty or any of the other Loan Documents shall operate as a waiver thereof, and no single or partial exercise of any right, power or privilege shall preclude any other or further exercise thereof or the exercise of any other power or right, or be deemed to establish a custom or course of dealing or performance between the parties hereto. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstance.
15. Prior Agreements; No Reliance; Modification . This Guaranty shall represent the entire, integrated agreement between the parties hereto relating to the subject matter hereof, and shall supersede all prior negotiations, representations or agreements pertaining thereto, either oral or written. The Guarantors acknowledge that they are executing this Guaranty without relying on any statements, representations or warranties, either oral or written, that are not expressly set forth herein. The terms of this Guaranty may be waived, discharged, or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. No amendment, modification, waiver or other
change of any of the terms of this Guaranty shall be effective without the prior written consent of the Lender.
16. Joinder . Any action to enforce this Guaranty may be brought against any Guarantor without any joinder of the Borrower, any other Guarantor, or any other guarantor of the Guaranteed Obligations in such action.
17. Incorporation of Recitals . The Recitals to this Guaranty are hereby incorporated into and made a part of this Guaranty.
18. Severability . If any provision of this Guaranty is deemed to be invalid by reason of the operation of law, or by reason of the interpretation placed thereon by any administrative agency or any court, the Guarantors and the Lender shall negotiate an equitable adjustment in the provisions of the same in order to effect, to the maximum extent permitted by law, the purpose of this Guaranty and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby and shall remain in full force and effect.
19. Applicable Law . This Guaranty is governed as to validity, interpretation, effect and in all other respects by laws and decisions of the State of Illinois.
20. Captions . The captions and headings of various Sections of this Guaranty pertaining hereto are for convenience only and are not to be considered as defining or limiting in any way the scope or intent of the provisions hereof.
21. Counterparts; Electronic Signatures . This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same document. Receipt of an executed signature page to this Guaranty by facsimile or other electronic transmission shall constitute effective delivery thereof. An electronic record of this executed Guaranty maintained by the Lender shall be deemed to be an original.
22. Construction . Each party to this Guaranty and legal counsel to each party have participated in the drafting of this Guaranty, and accordingly the general rule of construction to the effect that any ambiguities in a contract are to be resolved against the party drafting the contract shall not be employed in the construction and interpretation of this Guaranty.
23. Notice . All notices and other communications provided for in this Guaranty ( Notices ) shall be in writing. The Notice Addresses of the parties for purposes of this Guaranty are as follows:
Guarantors: |
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Woodland Manor Nursing, LLC Two Buckhead Plaza 3050 Peachtree Road NW, Suite 355 Atlanta, Georgia 30305 Attention: Boyd P. Gentry
AdCare Health Systems, Inc. |
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5057 Troy Road Springfield, Ohio 45502 Attention: Boyd P. Gentry
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With a copy to: |
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Holt Ney Zatcoff & Wasserman, LLP 100 Galleria Parkway, Suite 1800 Atlanta, Georgia 30339 Attention: Gregory P. Youra
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Lender: |
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The PrivateBank and Trust Company 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bluma Broner
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With a copy to: |
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Seyfarth Shaw LLP 131 South Dearborn Street Suite 2400 Chicago, Illinois 60603 Attention: Alvin L. Kruse |
or such other address as a party may designate by notice duly given in accordance with this Section to the other parties. A Notice to a party shall be effective when delivered to such partys Notice Address by any means, including, without limitation, personal delivery by the party giving the Notice, delivery by United States regular, certified or registered mail, or delivery by a commercial courier or delivery service. If the Notice Address of a party includes a facsimile number or electronic mail address, Notice given by facsimile or electronic mail shall be effective when delivered at such facsimile number or email address. If delivery of a Notice is refused, it shall be deemed to have been delivered at the time of such refusal of delivery. The party giving a Notice shall have the burden of establishing the fact and date of delivery or refusal of delivery of a Notice.
24. Litigation Provisions .
(a) EACH GUARANTOR CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, AND OF ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH THE PROJECT IS LOCATED, IN WHICH ANY LEGAL PROCEEDING MAY BE COMMENCED OR PENDING RELATING IN ANY MANNER TO THIS GUARANTY.
(b) EACH GUARANTOR AGREES THAT ANY LEGAL PROCEEDING RELATING TO THIS GUARANTY MAY BE BROUGHT AGAINST SUCH GUARANTOR IN ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH THE PROJECT IS LOCATED. EACH GUARANTOR WAIVES ANY OBJECTION TO VENUE IN ANY SUCH COURT AND
WAIVES ANY RIGHT SUCH GUARANTOR MAY HAVE TO TRANSFER OR CHANGE THE VENUE FROM ANY SUCH COURT.
(c) EACH GUARANTOR AGREES THAT SUCH GUARANTOR WILL NOT COMMENCE ANY LEGAL PROCEEDING AGAINST THE LENDER RELATING IN ANY MANNER TO THIS GUARANTY IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR IF A LEGAL PROCEEDING IS COMMENCED BY THE LENDER AGAINST SUCH GUARANTOR IN A COURT IN ANOTHER LOCATION, BY WAY OF A COUNTERCLAIM IN SUCH LEGAL PROCEEDING.
(d) EACH GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS GUARANTY.
[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]
IN WITNESS WHEREOF , the Guarantors have executed this Guaranty as of the date first above written.
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WOODLAND MANOR NURSING, LLC |
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By |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Manager |
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ADCARE HEALTH SYSTEMS, INC. |
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By |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon |
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Vice Chairman and Chief Acquisition Officer |
- Woodland Manor Property Holdings, LLC Owner Loan Guaranty -
- Signature Page -
Exhibit 10.141
COGNOVIT PROMISSORY NOTE
$500,000.00 |
Columbus, Ohio |
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January 1, 2012 |
FOR VALUE RECEIVED, the undersigned, EAGLEWOOD PROPERTY HOLDINGS, LLC , a Georgia limited liability company, and EAGLEWOOD VILLAGE, LLC , a Georgia limited liability company, with a principal place of business as Two Buckhead Plaza, 3050 Peachtree Road NW, Suite 355, Atlanta, Georgia 30305 (collectively, the Makers ), jointly and severally, promise to pay to EAGLEWOOD VILLA, LTD., an Ohio limited partnership (the Lender ) or order, the principal sum of Five Hundred Thousand Dollars ($500,000.00), with interest at the rate of six and one-half percent (6½%) per annum, both principal and interest payable in lawful money of the United States of America, to the Lender at 6880 Tussing Road, Reynoldsburg, Ohio 43068, or at such place as the legal holder hereof may designate in writing. Principal and interest payments in the amount of Three Thousand Seven Hundred Twenty Seven and 87/100 Dollars ($3,727.87) shall be due and payable in twenty-four (24) consecutive monthly installments beginning on February 1, 2012 and continuing on the first day of each calendar month thereafter based on a twenty (20) year amortization schedule set forth on Exhibit A , attached hereto and made a part hereof by reference, with the balance of principal and accrued interest due at maturity.
All principal and interest due on this Note shall be payable on January 1, 2014. This note may be prepaid in full or in part at any time without penalty or premium.
In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within five (5) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within five (5) days after written notice to Makers, then in either such event the holder may without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of the Note or any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of eighteen percent (18%) per annum after default until paid.
All parties to this Note, including Makers and any sureties, endorsers, or guarantors, hereby waive protest, presentment, notice of dishonor, and notice of acceleration of maturity and agree to continue to remain bound for the payment of principal, interest and all other sums due under this Note notwithstanding any change or changes by way of release, surrender, exchange, modification or substitution of any security for this Note or by way of any extension or extensions of time for the payment of principal and interest; and all such parties waive all and every kind of notice of such change or changes and agree that the same may be made without notice or consent of any of them.
Upon default, the holder of this Note may employ an attorney to enforce the holders rights and remedies and the Makers, principal, surety, guarantor and endorsers of this Note hereby agree to pay to the holder reasonable attorneys fees incurred not exceeding a sum equal to fifteen percent (15%) of the outstanding balance owing on said Note, plus all other reasonable expenses incurred by the holder in exercising any of the holders rights and remedies upon default. The rights and remedies of the holder as provided in this Note and any instrument securing this Note shall be cumulative and may be pursued singly, successively, or together against the property described in the Pledge and Security Agreement of even date herewith issued by AdCare Property Holdings, LLC, an Ohio limited liability company, to Eaglewood Villa, Ltd . , an Ohio limited partnership (the Pledge Agreement ) or any other funds, property or security held by the holder for payment or security, in the sole discretion of the holder. The failure to
exercise any such right or remedy shall not be a waiver or release of such rights or remedies or the right to exercise any of them at another time.
This Note is to be governed and construed in accordance with the laws of the State of Ohio. Makers agree that this Note shall be delivered to Lender or their counsel in Ohio, and the delivery of this Note, the Pledge Agreement, a Guaranty Agreement issued to Lender by Adcare Health Systems, Inc., an Ohio corporation, and Adcare Property Holdings, LLC, an Ohio limited liability company, and a Mortgage issued to Lender by Eaglewood Property Holdings, LLC, a Georgia limited liability company (collectively, the Loan Documents ), the terms and conditions of the Loan Documents are incorporated herein by reference, shall constitute sufficient minimum contacts of Makers to the State of Ohio for the purpose of conferring jurisdiction upon the federal and state courts presiding in such state. Makers hereby assent and submit to the personal jurisdiction of any such Ohio court in any action or proceeding involving this Note or the security for this Note. Nothing herein shall affect the right of Lender to serve process in any manner permitted by law or shall limit the right of Lender to bring proceedings against such Makers or any of them in the courts of any other jurisdiction having jurisdiction, including any jurisdiction in which the security is located for purposes of exercising rights and remedies with respect to such security.
This Note is given in consideration for the purchase of certain assets and the assignment of certain assets of Lender as provided in the Purchase and Sale Agreement dated as of August 15, 2011, as amended, and is secured by a security interest in 100% of AdCare Property Holdings, LLCs membership interest in each Maker pursuant to the Pledge Agreement, which security interest is a first lien upon said membership interests.
Makers, by this Note, waive the right to any jury trial in any action, proceeding or counterclaim arising under this Note or agreement or collateral securing this Note or in any way related or incidental to the dealings of the parties to this Note or any of them with respect to this Note or agreement or collateral securing this Note, in each case whether now existing or after the date of this Note arising and whether sounding in contract or tort or otherwise; and each Maker, by this Note, agrees and consents that any such action, proceeding or counterclaim must be decided by court trial without a jury and that any party to this Note may file an original counterpart or copy of this Section with any court as written evidence of the consent of the parties to this Note to the waiver of their right to trial by jury.
Each Maker hereby authorizes any attorney at law to appear for such Maker, in an action on this Note, at any time after the same becomes due, as herein provided, in any court of record in or of the State of Ohio, or elsewhere, to waive the issuing and service of process against such Maker and to confess judgment in favor of the holder of this Note against such Maker for the amount that may be due, with interest at the rate herein provided and costs of suit, and to waive and release all errors in said proceedings and judgment, and all petitions in error, and right of appeal from the judgment rendered.
COGNOVIT PROMISSORY NOTE
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
IN TESTIMONY WHEREOF, the Makers have executed this instrument as of the day and year first above written.
Maker : |
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Maker : |
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EAGLEWOOD PROPERTY HOLDINGS, LLC , |
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EAGLEWOOD VILLAGE, LLC , |
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a Georgia limited liability company |
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a Georgia limited liability company |
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By: |
/s/ Christopher F. Brogdon |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Manager |
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Christopher F. Brogdon, Manager |
Exhibit 10.142
COGNOVIT PROMISSORY NOTE
$4,500,000.00 |
Columbus, Ohio |
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January 1, 2012 |
FOR VALUE RECEIVED the undersigned EAGLEWOOD PROPERTY HOLDINGS, LLC , a Georgia limited liability company, and EAGLEWOOD VILLAGE, LLC , a Georgia limited liability company, with a principal place of business as Two Buckhead Plaza, 3050 Peachtree Road NW, Suite 355, Atlanta, Georgia 30305 (collectively, the Makers ), jointly and severally, promise to pay to EAGLEWOOD VILLA, LTD., an Ohio limited partnership (the Lender ) or order, the principal sum of Four Million Five Hundred Thousand Dollars ($4,500,000.00), with interest from January 1, 2012 to February 29, 2012 at the rate of six and one-half percent (6½%) per annum, and interest from March 1, 2012 to April 30, 2012 at the rate of eight and one-half percent (8½%) per annum, and interest after May 1, 2012 at the rate of ten and one-half percent (10½%) per annum, both principal and interest payable in lawful money of the United States of America, to the Lender at 6880 Tussing Road, Reynoldsburg, Ohio 43068, or at such place as the legal holder hereof may designate in writing. Interest payments shall be due and payable in consecutive monthly installments beginning on February 1, 2012 and continuing on the first day of each calendar month thereafter based on the amounts set forth on the amortization schedule attached as Exhibit A , attached hereto and made a part hereof by reference, with the balance of principal and accrued interest due at maturity.
All principal and interest due on this Note shall be payable on June 30, 2012. This note may be prepaid in full or in part at any time without penalty or premium.
In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within five (5) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within five (5) days after written notice to Makers, then in either such event the holder may without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of the Note or any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of eighteen percent (18%) per annum after default until paid.
All parties to this Note, including Makers and any sureties, endorsers, or guarantors, hereby waive protest, presentment, notice of dishonor, and notice of acceleration of maturity and agree to continue to remain bound for the payment of principal, interest and all other sums due under this Note notwithstanding any change or changes by way of release, surrender, exchange, modification or substitution of any security for this Note or by way of any extension or extensions of time for the payment of principal and interest; and all such parties waive all and every kind of notice of such change or changes and agree that the same may be made without notice or consent of any of them.
Upon default, the holder of this Note may employ an attorney to enforce the holders rights and remedies and the Makers, principal, surety, guarantor and endorsers of this Note hereby agree to pay to the holder reasonable attorneys fees incurred not exceeding a sum equal to fifteen percent (15%) of the outstanding balance owing on said Note, plus all other reasonable expenses incurred by the holder in exercising any of the holders rights and remedies upon default. The rights and remedies of the holder as provided in this Note and any instrument securing this Note shall be cumulative and may be pursued singly, successively, or together against the property described in the Pledge and Security Agreement of even date herewith issued by AdCare Property Holdings, LLC, an Ohio limited liability company, to Eaglewood Villa, Ltd . , an Ohio limited partnership (the Pledge Agreement ) or any other funds, property or security held by the holder for payment or security, in the sole discretion of the holder. The failure to
exercise any such right or remedy shall not be a waiver or release of such rights or remedies or the right to exercise any of them at another time.
This Note is to be governed and construed in accordance with the laws of the State of Ohio. Makers agree that this Note shall be delivered to Lender or their counsel in Ohio, and the delivery of this Note, the Pledge Agreement, a Guaranty Agreement issued to Lender by Adcare Health Systems, Inc., an Ohio corporation, and Adcare Property Holdings, LLC, an Ohio limited liability company, and a Mortgage issued to Lender by Eaglewood Property Holdings, LLC, a Georgia limited liability company (collectively, the Loan Documents ), the terms and conditions of the Loan Documents are incorporated herein by reference, shall constitute sufficient minimum contacts of Makers to the State of Ohio for the purpose of conferring jurisdiction upon the federal and state courts presiding in such state. Makers hereby assent and submit to the personal jurisdiction of any such Ohio court in any action or proceeding involving this Note or the security for this Note. Nothing herein shall affect the right of Lender to serve process in any manner permitted by law or shall limit the right of Lender to bring proceedings against such Makers or any of them in the courts of any other jurisdiction having jurisdiction, including any jurisdiction in which the security is located for purposes of exercising rights and remedies with respect to such security.
This Note is given in consideration for the purchase of certain assets and the assignment of certain assets of Lender as provided in the Purchase and Sale Agreement dated as of August 15, 2011, as amended, and is secured by a security interest in 100% of AdCare Property Holdings, LLCs membership interest in each Maker pursuant to the Pledge Agreement, which security interest is a first lien upon said membership interests.
Makers, by this Note, waive the right to any jury trial in any action, proceeding or counterclaim arising under this Note or agreement or collateral securing this Note or in any way related or incidental to the dealings of the parties to this Note or any of them with respect to this Note or agreement or collateral securing this Note, in each case whether now existing or after the date of this Note arising and whether sounding in contract or tort or otherwise; and each Maker, by this Note, agrees and consents that any such action, proceeding or counterclaim must be decided by court trial without a jury and that any party to this Note may file an original counterpart or copy of this Section with any court as written evidence of the consent of the parties to this Note to the waiver of their right to trial by jury.
Each Maker hereby authorizes any attorney at law to appear for such Maker, in an action on this Note, at any time after the same becomes due, as herein provided, in any court of record in or of the State of Ohio, or elsewhere, to waive the issuing and service of process against such Maker and to confess judgment in favor of the holder of this Note against such Maker for the amount that may be due, with interest at the rate herein provided and costs of suit, and to waive and release all errors in said proceedings and judgment, and all petitions in error, and right of appeal from the judgment rendered.
COGNOVIT PROMISSORY NOTE
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
IN TESTIMONY WHEREOF, the Makers have executed this instrument as of the day and year first above written.
Maker : |
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Maker : |
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EAGLEWOOD PROPERTY HOLDINGS, LLC , |
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EAGLEWOOD VILLAGE, LLC , |
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a Georgia limited liability company |
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a Georgia limited liability company |
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By: |
/s/ Christopher F. Brogdon |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Manager |
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Christopher F. Brogdon, Manager |
Exhibit 10.143
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this Guaranty ) is dated December 30, 2011, but effective as of 12:01 a.m. on January 1, 2012 by ADCARE HEALTH SYSTEMS, INC. , an Ohio corporation, and ADCARE PROPERTY HOLDINGS, LLC , an Ohio limited liability company (collectively, the Guarantors and each, a Guarantor ), to and for the benefit of EAGLEWOOD VILLA, LTD., an Ohio limited partnership (the Lender).
WHEREAS, AdCare Property Holdings, LLC, an Ohio limited liability company, and the Lender have entered a Purchase and Sale Agreement dated August 15, 2011, as amended (the PSA ), pursuant to which AdCare Property Holdings, LLC has agreed to purchase and the Lender has agreed to sell certain assets and real property, expressly including that certain assisted living facility commonly known as Eaglewood Village located at 3001 Middle Urbana Road, Springfield, Ohio 45502 (the Facility ); and
WHEREAS, AdCare Property Holdings, LLC has assigned its rights under the PSA to acquire the Facility to Eaglewood Property Holdings, LLC, a Georgia limited liability company, and Eaglewood Village, LLC, a Georgia limited liability company (collectively, the Borrowers and each, a Borrower ) and AdCare Property Holdings, LLC is the sole member and owner of all equity interest of each such Borrower; and
WHEREAS, in connection with the sale of the Facility and payment therefor Borrowers have executed and delivered to Lender a Cognovit Promissory Note of even date herewith (the Note ) pursuant to which Borrowers have agreed to borrow from Lender, and Lender has agreed to lend to Borrowers $500,000.00 (the Principal Amount ); and
WHEREAS, Lender is willing to make the Principal Amount available to Borrowers by way of a loan only upon the condition that Guarantors execute and deliver to Lender this Guaranty and agree to perform and to comply with their obligations under this Guaranty; and
NOW, THEREFORE, in consideration of the foregoing and of the covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, and as an inducement for Lender to loan the Principal Amount to Borrowers, the Guarantors, intending to be legally bound hereby, agree as follows:
1. All capitalized terms in this Guaranty and not defined herein shall have the defined meanings provided in the Pledge and Security Agreement entered by AdCare Property Holdings, LLC, as Pledgor, as of the date of this Guaranty. Whenever the context so requires, each reference to gender includes the masculine and feminine, the singular number includes the plural and vice versa. The words hereof, herein and hereunder and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and not to any particular provision of this Guaranty, and references to section, article, annex, schedule, exhibit and like references are references to this Guaranty unless otherwise specified. A Default or Event of Default shall continue or be continuing until such Default or Event of Default has been cured within any applicable cure period or otherwise waived in writing by Lender. References in this Guaranty to any Person shall include such Person and its successors and permitted assigns.
2. Guarantors, jointly and severally, unconditionally, irrevocably and absolutely guarantee the due and punctual payment and performance when due of the Note and the interest thereon and of the Guaranteed Obligations (as defined below) and any and all other monies and amounts due or which may become due on or with respect to any of the foregoing, and the due and punctual performance and observance by Borrowers of all of the other terms, covenants, agreements and conditions of the Note, in
any case whether according to the present terms thereof, at any earlier or accelerated date or dates or pursuant to any extension of time or to any change in the terms, covenants, agreements and conditions thereof now or at any time hereafter made or granted (collectively, such items being the Guaranteed Obligations ). Guarantors acknowledge that this Guaranty shall be deemed a continuing guaranty of the Guaranteed Obligations.
3. This Guaranty is a guaranty of payment, not of collection. Guarantors agree that this Guaranty may be enforced by Lender without the necessity at any time of resorting to or exhausting any other security or collateral and without the necessity at any time of having recourse to the debt through foreclosure proceedings under the Loan Documents or otherwise, and Guarantors hereby waive any rights to require Lender to proceed against Borrowers or to require Lender to pursue any other remedy or enforce any other right. Guarantors further agree that nothing contained herein shall prevent Lender from suing on the Note or foreclosing any of the Loan Documents or from exercising any other rights available to them under the Loan Documents, or any other instrument of security if neither Borrowers nor Guarantors timely perform the obligations of Borrowers thereunder, and the exercise of any of the aforesaid rights and the completion of any foreclosure or other proceedings shall not constitute a discharge of Guarantors obligations hereunder; it being the purpose and intent of Guarantors that the Guarantors obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. Neither the Guarantors obligations under this Guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release, or limitation of the liability of Borrowers or any Borrower, or any co-guarantors or by reason of the Borrowers or any co-guarantors bankruptcy or insolvency.
If any Guaranteed Obligation is not satisfied when due, whether by acceleration or otherwise, the Guarantors shall forthwith satisfy such Guaranteed Obligation, upon demand, and no such satisfaction shall discharge the obligations of the Guarantors hereunder until all Guaranteed Obligations have been indefeasibly paid in cash and performed and satisfied in full and the Note fully satisfied. The liability of Guarantors under this Guaranty shall be primary and direct and not conditional or contingent upon the enforceability of any obligation, the solvency of Borrowers or any other Person, any obligation or circumstance which might otherwise constitute a legal or equitable discharge or defense of a surety or guaranty or the pursuit by Lender of any remedies they may have against Borrowers or any other guarantor of the Guaranteed Obligations or any other Person. Lender shall not be required to make any demand on Borrowers or any other guarantor of the Guaranteed Obligations or any other Person or to sell at foreclosure or otherwise pursue or exhaust its remedies against any collateral of Borrowers or any other guarantor of the Guaranteed Obligations or any other Person before, simultaneously with or after enforcing its rights and remedies hereunder against Guarantors or either Guarantor, and any one or more successive and/or concurrent actions may be brought against Guarantors in the same action brought against Borrowers or any other guarantor of the Guaranteed Obligations or any other Person or in separate actions, as often as Lender may deem advisable, in their sole discretion.
4. Each Guarantor hereby represents and warrants to Lender (which representations and warranties shall survive the execution and delivery of this Guaranty) the following:
(A) AdCare Healthcare Systems, Inc., is a corporation, duly organized, validly existing and in good standing under the laws of the State of Ohio, and AdCare Property Holdings, LLC, is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Ohio;
(B) Guarantor (i) has all requisite power and authority to own its properties and assets and to carry on its business as now being conducted, and (ii) is duly qualified to do business in
every jurisdiction in which failure so to qualify could reasonably be expected to have or result in a Material Adverse Change;
(C) Guarantor has all requisite power and authority (i) to execute, deliver and perform this Guaranty, and (ii) to consummate the transactions contemplated hereunder, and Guarantor is under no legal restriction, limitation or disability that would prevent it from doing any of the foregoing;
(D) The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary actions on the part of Guarantor (including any required approval of shareholders or members or other equity holders, if applicable) (none of which actions have been modified or rescinded, and all of which actions are in full force and effect), and this Guaranty has been duly executed and delivered by Guarantor and constitute the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms;
(E) The execution, delivery and performance by Guarantor of this Guaranty and the other Loan Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not (1) violate any provision of any applicable law, statute, rule, regulation, ordinance, license or tariff or any judgment, decree or order of any court or other Governmental Authority binding on or applicable to Guarantor or any of its properties or assets; (2) result in a breach of any indenture, agreement or other instrument to which Guarantor is a party; or (3) conflict with or violate any provision of the certificate of incorporation or formation, by-laws, or operating agreement of Guarantor; and
(F) During the five years prior to the date hereof, Guarantor has not conducted business under or used any other name (whether corporate, partnership or assumed).
5. Guarantors hereby waive demand, setoff, counterclaim, presentment, protest, notice of dishonor or non-payment, as well as all defenses with respect to any and all instruments, notice of acceptance hereof, credit extended, collateral received or delivered, or any other action taken by Lender in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein, it being the intention hereof that Guarantors shall remain liable as a principal until the full amount of all Guaranteed Obligations shall have been indefeasibly paid in full in cash and performed and satisfied in full, notwithstanding any act, omission, or anything else which might otherwise operate as a legal or equitable discharge of Guarantor. The pleading of any statute of limitations as a defense to any demand against Guarantors or either Guarantor hereunder and under the other Loan Documents is expressly waived by Guarantors.
6. Guarantors acknowledge and agree that Lender shall have the full right and power, in their sole discretion and without any notice to or consent from Guarantors and without affecting or discharging, in whole or in part, the liability of Guarantors hereunder to deal in any manner with the Guaranteed Obligations and any security or guaranties therefor, including, without limitation, to (A) release, extend, renew, accelerate, compromise or substitute and administer the Guaranteed Obligations and other obligations under the Loan Documents in any manner they see fit, (B) release any or all collateral for the Guaranteed Obligations, (C) release any guarantor of or other obligor of the Guaranteed Obligations, (D) extend the time for payment of the Guaranteed Obligations or any part thereof (E) change the interest rate on the Guaranteed Obligations, (F) reduce or increase the outstanding principal amount of the Guaranteed Obligations, (G) accelerate the Guaranteed Obligations, (H) make any change, amendment or modification whatsoever to the terms or conditions of the Note or other Loan Documents, (f) extend, in whole or in part, on one or any number of occasions, the time for the payment of any principal or interest or any other amount pursuant to any Note or for the performance of any term or
condition of the Loan Documents, (I) settle, compromise, release, substitute, impair, enforce or exercise, or fail or refuse to enforce or exercise, any claims, rights, or remedies, of any kind or nature, which Lender may at any time have against Borrowers or any Borrower or any other guarantor of the Guaranteed Obligations or any other Person, or with respect to any security interest of any kind held by Lender at any time, whether under any Loan Document or otherwise, (K) release or substitute any security interest of any kind held by Lender at any time, (L) collect and retain or liquidate any collateral subject to such security interest, (M) make advances for the purpose of performing any term or covenant contained in the Loan Documents with respect to which the Borrowers or any other guarantor of the Guaranteed Obligations is in default, (N) foreclose on any of the collateral, (O) grant waivers or indulgences, (P) take additional collateral, (Q) obtain any additional guarantors, (R) take a deed in lieu of foreclosure and/or (S) take or fail to take any other action whatsoever with respect to the Guaranteed Obligations. Guarantors hereby waive and agree not to assert against Lender any rights which a guarantor or surety could exercise.
7. Guarantors agree that they shall have no right of subrogation whatever with respect to the Guaranteed Obligations guaranteed hereby or to any collateral securing such Guaranteed Obligations unless and until such Guaranteed Obligations have been irrevocably and indefeasibly paid in full in cash and performed in full and the Note and this Guaranty have been terminated.
8. Guarantors agree that this Guaranty shall inure to the benefit of and may be enforced by Lender, all future holders of any Note or any of the Guaranteed Obligations or any of the collateral and all Transferees (as defined below), and each of their respective successors and permitted assigns, and shall be binding upon and enforceable against Guarantors and Guarantors assigns and successors. GUARANTORS ACKNOWLEDGE THAT LENDER AT ANY TIME AND FROM TIME TO TIME MAY SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY PART OF THEIR RIGHTS OR OBLIGATIONS OR THE RIGHTS OR OBLIGATIONS OF ANY ONE OR MORE OF THEM UNDER, THIS GUARANTY, THE NOTE, THE GUARANTEED OBLIGATIONS, ANY COLLATERAL AND/OR THE LOAN DOCUMENTS TO ONE OR MORE OTHER PERSONS (EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A TRANSFEREE ). In such case, the Transferee shall have all of the rights and benefits with respect to the portion of such Guaranteed Obligations, the Note, this Guaranty, any collateral and the Loan Documents held by it as fully as if such Transferee were the original holder thereof (including without limitation rights of set-off and recoupment), and shall become vested with all of the powers and rights given to Lender hereunder with respect thereto, and shall be deemed to be a Lender for all purposes hereunder, the predecessor Lender or Lenders shall thereafter be forever released and fully discharged from any liability or responsibility hereunder with respect to the rights and interests so assigned. Any Lender or any Transferee may be designated as the sole agent to manage the transactions and obligations contemplated herein.
9. Any notice or request under this Guaranty shall be given to Guarantors at the address set forth beneath its signature on the signature page to this Guaranty, and if to Lender, at the address set forth below, or at such other address as such party may hereafter specify in a notice given in the manner required under this Section 9. Any notice or request hereunder shall be given only by, and shall be deemed to have been received upon (each a Receipt ): (i) registered or certified mail, return receipt requested, on the date on which such is received as indicated in such return receipt, or (ii) delivery by a nationally recognized overnight courier, one (1) Business Day after deposit with such courier.
c/o The Wallick Companies
6800 Tussing Road
Reynoldsburg, Ohio 43068
Attn: Thomas A. Feusse
with a copy to:
Dinsmore & Shohl LLP
191 West Nationwide Blvd., Suite 300
Columbus, Ohio 43215
Attn: Jodi Diewald Dyer, Esq.
10. If any term or provision of this Guaranty is adjudicated to be invalid under applicable laws or regulations, such provision shall be inapplicable to the extent of such invalidity or unenforceability without affecting the validity or enforceability of, the remainder of this Guaranty which shall be given effect so far as possible.
11. This Guaranty shall be governed by and construed in accordance with the internal laws of the State of Ohio without giving effect to its choice of law provisions. Any judicial proceeding brought by or against Guarantors or either of them with respect to any of the Guaranteed Obligations or any of the rights or obligations hereunder, this Guaranty or any related agreement may be brought in any federal or state court of competent jurisdiction located in the State of Ohio, and, by execution and delivery of this Guaranty, each Guarantor accepts for itself and in connection with its properties generally and unconditionally the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Guaranty and/or any of the other Loan Documents or any such other agreement. Each Guarantor waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Each Guarantor acknowledges that Guarantors participated in the negotiation and drafting of this Guaranty and that, accordingly, Guarantors shall not move or petition a court construing this Guaranty to construe it more stringently against Lender than against Guarantors.
12. This Guaranty may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument. This Guaranty may be executed by facsimile or electronic mail transmission, which facsimile or electronic mail signatures shall be considered original executed counterparts for purposes of this Section 12, and each Guarantor agrees that it will be bound by its own facsimile or e-mail signature and that it accepts the facsimile signature of each other party to this Guaranty.
13. EACH GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION (A) ARISING UNDER THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR (B) IN ANY WAY RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS EVIDENCED HEREBY OR THEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND EACH GUARANTOR HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT EITHER GUARANTOR OR LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
14. This Guaranty and the other Loan Documents to which either Guarantor is a party constitute the entire agreement between Guarantors and Lender with respect to the subject matter hereof and thereof, and supersede all prior agreements and understandings, if any, relating to the subject matter hereof or thereof. Neither this Guaranty nor any provision hereof may be changed, modified, amended, waived, restated, supplemented, canceled or terminated other than by an agreement in writing signed by both Lender and Guarantors. Guarantors acknowledge that Guarantors have been advised by counsel in connection with the negotiation and execution of this Guaranty and the other Loan Documents to which either Guarantor is a party and neither Guarantor is relying upon oral representations or statements inconsistent with the terms and/or provisions of this Guaranty or such documents. Any waiver of this Guaranty by Lender shall be limited solely to the express terms and provisions of such waiver.
15. CONFESSION OF JUDGMENT . Guarantor authorizes any attorney of record to appear for him/her in any court of record, after a Guaranteed Obligations becomes due and payable whether by its terms or upon default, waive the issuance and service of process, and release all errors, and confess a judgment against it in favor of the holder of such Guaranteed Obligations, for the principal amount of such Guaranteed Obligations plus interest thereon, together with court costs and attorneys fees. Stay of execution and all exemptions are hereby waived. If a Guaranteed Obligations is referred to an attorney for collection, and the payment is obtained without the entry of a judgment, the obligors shall pay to the holder of such obligation its attorneys fees. GUARANTOR AGREES THAT AN ATTORNEY WHO IS COUNSEL TO LENDER OR ANY OTHER HOLDER OF SUCH GUARANTEED OBLIGATION MAY ALSO ACT AS ATTORNEY OF RECORD FOR GUARANTOR WHEN TAKING THE ACTIONS DESCRIBED ABOVE IN THIS PARAGRAPH. GUARANTOR AGREES THAT ANY ATTORNEY TAKING SUCH ACTIONS MAY BE PAID FOR THOSE SERVICES BY LENDER OR THE HOLDER OF SUCH OBLIGATION. GUARANTOR WAIVES ANY CONFLICT OF INTEREST THAT MAY BE CREATED BECAUSE THE ATTORNEY WHO ACTS FOR GUARANTOR PURSUANT TO THIS PARAGRAPH IS ALSO REPRESENTING LENDER OR THE HOLDER OF SUCH GUARANTEED OBLIGATION, OR BECAUSE SUCH ATTORNEY IS BEING PAID BY LENDER OR THE HOLDER OF SUCH GUARANTEED OBLIGATION.
[Signature page follows]
GUARANTY AGREEMENT
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE .
IN WITNESS WHEREOF, Guarantors have executed this Guaranty Agreement as of the day and year first above written.
GUARANTOR : |
GUARANTOR : |
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ADCARE HEALTH SYSTEMS, INC.
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ADCARE PROPERTY HOLDINGS, LLC
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By: |
/s/ Christopher F. Brogdon |
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By: |
/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Vice President and Chief Acquisitions Officer |
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Christopher F. Brogdon, Vice President and Chief Acquisitions Officer of ADCare Health Systems, Inc., authorized representative |
Address for Notices for Guarantors:
Two Buckhead Plaza
3050 Peachtree Road NW, Suite 355
Atlanta, Georgia 30305
Attn: Boyd P. Gentry
with a copy to:
Gregory P. Youra, Esq.
Holt Ney Zatcoff & Wasserman, LLP
100 Galleria Pkwy, Suite 1800
Atlanta, Georgia 30339
Exhibit 10.144
THIRD AMENDED AND RESTATED MULTIPLE FACILITIES LEASE
GEORGIA LESSOR BONTERRA/PARKVIEW, INC.
AND
ADK BONTERRA/PARKVIEW, LLC
DATED: OCTOBER 29, 2010
Facilities :
(Parkview Manor Nursing Home (Atlanta, Georgia))
(Bonterra Nursing Center (East Point, Georgia))
THIRD AMENDED AND RESTATED MULTIPLE FACILITIES LEASE
(Parkview Manor Nursing Home (Atlanta, Georgia))
(Bonterra Nursing Center (East Point, Georgia))
THIS THIRD AMENDED AND RESTATED MULTIPLE FACILITIES LEASE ( Lease ) is executed and delivered as of this 29th day of October, 2010, and is entered into by GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Lessor ), and ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( Lessee ).
RECITALS
The circumstances underlying the execution and delivery of this Lease are as follows:
A. Capitalized terms used and not otherwise defined herein have the respective meanings given them in Article II below.
B. Lessor and TRIAD HEALTH MANAGEMENT OF GEORGIA II, LLC, a Georgia limited liability company ( Prior Lessee ), are parties to that certain Second Amended and Restated Multiple Facilities Lease dated as of May 10, 2010 (the Existing Lease ), pursuant to which Lessee leases from Lessor the Leased Properties.
C. Prior Lessee has assigned its interest in the Existing Lease to Lessee pursuant to the Assumption Agreement.
D. Pursuant to the Assumption Agreement, Lessor and Lessee have agreed to amend and restate the Existing Lease effective as of November 1, 2010 (the Effective Date ) on the terms and conditions of this Lease.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in hand paid by each party to the other, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee agree to amend and restate the Existing Lease in its entirety effective as of the Effective Date as follows:
ARTICLE I
1.1 Lease . Upon and subject to the terms and conditions set forth in this Lease, Lessor leases to Lessee, and Lessee leases from Lessor, the Leased Properties. The Leased Properties is leased subject to Permitted Encumbrances.
1.1.1 Subleases . As of the Effective Date, the Leased Properties are not subleased. In the event all or any portion of the Leased Properties are subleased pursuant to Subleases, (i) Lessee will have as of such date assigned the Subleases to Lessor, (ii) Lessee shall not amend or modify the terms of any Sublease without the prior written consent of Lessor, which Lessor may in its sole discretion grant, withhold or condition, and (iii) Lessee agrees that a default by a Sublessee under an Sublease shall be deemed a default by Lessee under this Lease which, if not cured within any applicable cure or grace period shall constitute an Event of Default and entitle Lessor to exercise any and all remedies provided by this Lease or by law. Each Sublessee under an Sublease
will agree in the Sublease that it assumes and agrees to be bound by and perform each and every obligation of the Lessee under this Lease; provided, however, that obligations of a Sublessee related to the operation, maintenance and repair of a Facility are assumed only with respect to the Facility being operated by such Sublease. Any Notice given by Lessor to Lessee shall be deemed a Notice given to each Sublessee of a Leased Property.
1.1.2 Single, Indivisible Lease . This Lease constitutes one indivisible lease of the Leased Properties and not separate leases governed by similar terms. The Leased Properties constitute one economic unit, and the Base Rent and all other provisions have been negotiated and agreed to based on a demise of all of the Leased Properties to Lessee as a single, composite, inseparable transaction and would have been substantially different had separate leases or a divisible lease been intended. Except as expressly provided in this Lease for specific, isolated purposes (and then only to the extent expressly otherwise stated), all provisions of this Lease apply equally and uniformly to all of the Leased Properties as one unit. An Event of Default with respect to any Leased Property is an Event of Default as to all of the Leased Properties. The parties intend that the provisions of this Lease shall at all times be construed, interpreted and applied so as to carry out their mutual objective to create an indivisible lease of all of the Leased Properties and, in particular but without limitation, that, for purposes of any assumption, rejection or assignment of this Lease under 11 U.S.C. 365, this is one indivisible and non-severable lease and executory contract dealing with one legal and economic unit and that this Lease must be assumed, rejected or assigned as a whole with respect to all (and only as to all) of the Leased Properties.
1.2 Term . The initial term of this Lease ( Initial Term ) shall be from March 1, 2003 thru April 30, 2010, subject to extension or termination as set forth in Sections 1.3 and 1.4 below.
1.3 Option to Renew . Lessee is hereby granted three (3) successive options to renew this Lease (each a Renewal Term ). The first option to renew has been exercised and is for the period of May 1, 2010 thru April 30, 2022. Two additional options to renew shall be for a period of ten (10) Lease Years each, for a maximum Term if such options are exercised of approximately thirty-nine (39) Lease Years. Lessees exercise of the second and third options to renew this Lease are subject to the following terms and conditions (which conditions may be waived by Lessor in its sole discretion):
(a) An option to renew is exercisable only by Notice to Lessor at least one hundred and eighty (180) days, and not more than three hundred sixty (360) days, prior to the expiration of the Initial Term (or prior to the expiration of the preceding Renewal Term, as the case may be);
(b) No Event of Default or Unmatured Event of Default shall have occurred and be continuing either at the time a renewal option is exercised or at the commencement of a Renewal Term;
(c) During a Renewal Term, all of the terms and conditions of this Lease shall remain in full force and effect; and
(d) Lessee may exercise its options to renew with respect to all (and no fewer than all) of the Leased Properties.
1.4 Limitation of Liability . Lessee is the Assignee as set forth in the Assumption Agreement. Notwithstanding anything in this Lease to the contrary, certain obligations of Lessee under this Lease arising prior to the Effective Date are limited as set forth in the Assumption Agreement.
ARTICLE II
2.1 Definitions . For all purposes of this Lease, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP as at the time applicable; (c) all references in this Lease to designated Articles, Sections and other subdivisions are to the designated Articles, Sections and other subdivisions of this Lease; and (d) the words herein, hereof and hereunder and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or other subdivision.
AdCare : AdCare Health Systems Inc., an Ohio corporation.
Additional Charges : All Impositions and other amounts, liabilities and obligations that Lessee assumes or agrees to pay under this Lease.
Affiliate : Any Person who, directly or indirectly, Controls or is Controlled by or is under common Control with another Person.
Approval Threshold : One Hundred Thousand Dollars ($100,000).
Assessment : Any governmental assessment on the Leased Properties or any part of any of them for public or private improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not to be completed within the Term.
Assumed Indebtedness : Any indebtedness or other obligations expressly assumed in writing by Lessor and secured by a mortgage, deed of trust or other security agreement to which Lessors title to the Leased Properties is subject.
Assumption Agreement : The Assignment and Assumption of Second Amended and Restated Multiple Facilities Lease and Consent of Lessor dated as of the date of this Lease by and among Lessor, Prior Lessee, Lessee and Guarantor.
Award : All compensation, sums or anything of value awarded, paid or received in connection with a Taking or Partial Taking.
Base Rent : During the Term, the Base Rent shall be:
(1) During the period of May 1, 2010 thru April 30, 2011, One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000);
(2) For the Lease Year commencing on May 1, 2011, and for each succeeding Lease Year in the Term, the Base Rent for the previous Lease Year, multiplied by (i) one hundred percent (100%) plus (ii) three percent (3%).
Business Day : Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which national banks in the City of New York, New York are authorized or obligated, by law or executive order, to close.
Cash Flow : For any period, the sum of (a) Net Income of Lessee arising solely from the operation of the Facilities for the applicable period, and (b) the amounts deducted in computing Lessees Net Income for the period for (i) depreciation, (ii) amortization, (iii) Base Rent, (iv) interest (including payments in the nature of interest under any leases that in accordance with GAAP are required to be capitalized for financial reporting purposes and interest on any Purchase Money Financing), (v) income taxes (or, if greater, income tax actually paid during the period) and (vi) management fees.
Cash Flow to Rent Ratio : For any fiscal period, the ratio of Cash Flow to Base Rent.
Citation : Any operational or physical plant deficiency set forth in writing with respect to the Facilities by any governmental body or agency, or Medicare intermediary, having regulatory oversight over the Facilities, Lessee, or any Sublessee or Manager, with respect to which the scope and severity of the potential penalty for such deficiency is one or more of the following: loss of licensure, decertification of the Facilities from participation in the Medicare and/or Medicaid programs, appointment of a temporary manager or denial of payment for new admissions
Clean-Up : The investigation, removal, restoration, remediation and/or elimination of, or other response to, Contamination, in each case to the satisfaction of all governmental agencies having jurisdiction, in compliance with or as may be required by Environmental Laws.
Code : The Internal Revenue Code of 1986, as amended.
Commencement Date : March 1, 2003.
Condemnor : Any public or quasi-public authority, or private corporation or individual, having the power of condemnation.
Construction Funds : The Net Proceeds and such additional funds as may be deposited with Lessor by Lessee pursuant to Section 14.6 for restoration or repair work pursuant to this Lease.
Contamination : The presence, Release or threatened Release of any Hazardous Substance at the Leased Properties in violation of any Environmental Law, or in a quantity that would give rise to any affirmative Clean-Up obligations under an Environmental Law, including, but not limited to, the existence of any injury or potential injury to public health, safety, natural resources or the environment associated therewith, or any other environmental condition at, in, about, under or migrating from or to the Leased Properties.
Control (and its corollaries Controlled by and under common Control with): Possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, through the ownership or control (such as a proxy or voting agreement) of voting securities, partnership interests or other equity interests.
CPI : The United States Department of Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City Average, All Items, or, if that index is not available at the time in question, the index designated by such Department as the successor to such index, and if there is no index so designated, an index for an area in the United States that most closely corresponds to the entire United States, published by such Department, or if none, by any other instrumentality of the United States.
Date of Taking : The date on which the Condemnor has the right to possession of the Leased Properties that is the subject of the Taking or Partial Taking.
Distribution : Any payment, transfer or distribution of cash or any assets of any Person to one or more equity holders of such Person or to any Affiliate of such Person, or return any capital, redemption any of security, or making or assumption of any loans, advances or extension of credit or capital contribution to, or any other investment in, any Affiliate of such Person, including, but not limited to, a fee for management, a payment for services rendered, a reimbursement for expenditures or overhead incurred on behalf of such Person or a payment on any debt.
Encumbrance : Any mortgage, deed of trust, lien, encumbrance or other matter affecting title to the Leased Properties, or any portion thereof or interest therein, securing any borrowing or other means of financing or refinancing.
Environmental Audit : A written certificate that (a) is in form and substance satisfactory to Lessor, (b) is from an environmental consulting or engineering firm acceptable to Lessor and (c) states that there is no Contamination on the Leased Properties and that the Leased Properties is otherwise in strict compliance with Environmental Laws.
Environmental Documents : Each and every (a) material document received by Lessee or any Affiliate from, or submitted by Lessee or any Affiliate to, the United States Environmental Protection Agency and/or any other federal, state, county or municipal agency responsible for enforcing or implementing Environmental Laws with respect to the condition of the Leased Properties, or Lessees operations at the Leased Properties; and (b) review, audit, report, or other analysis data pertaining to environmental conditions, including, but not limited to, the presence or absence of Contamination, at, in, under or with respect to the Leased Properties that have been prepared by, for or on behalf of Lessee.
Environmental Laws : All federal, state and local laws (including, without limitation, common law), statutes, codes, ordinances, regulations, rules, orders, permits or decrees now or at any time in effect and relating to (a) the introduction, emission, discharge or release of Hazardous Substances into the indoor or outdoor environment (including without limitation, air, surface water, groundwater, land or soil), (b) the manufacture, processing, distribution, use, treatment, storage, transportation or disposal of Hazardous Substances or (c) the Clean-Up of Contamination.
Event of Default : The occurrence of any of the following:
(a) Lessee fails to pay or cause to be paid the Rent when due and payable;
(b) Lessee, any Sublessee or any Guarantor, on a petition in bankruptcy filed against it, is adjudicated as bankrupt or has an order for relief thereunder entered against it, or a court of competent jurisdiction enters an order or decree appointing a receiver of Lessee, any
Sublessee or any Guarantor or of the whole or substantially all of its property, or approving a petition filed against Lessee, any Sublessee or any Guarantor seeking reorganization or arrangement of Lessee, any Sublessee or any Guarantor under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof, and such judgment, order or decree is not vacated or set aside or stayed within sixty (60) days from the date of the entry thereof, subject to the applicable provisions of the Bankruptcy Code (11 USC § 101 et. seq.) and to the provisions of Section 16.6 below;
(c) Lessee, any Sublessee or any Guarantor: (i) admits in writing its inability to pay its debts generally as they become due; (ii) files a petition in bankruptcy or a petition to take advantage of any insolvency law; (iii) makes a general assignment for the benefit of its creditors; (iv) consents to the appointment of a receiver of itself or of the whole or any substantial part of its property; or (v) files a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof, subject to the applicable provisions of the Bankruptcy Code (11 USC § 101 et. seq.) and to the provisions of Section 16.6 below;
(d) Lessee, any Sublessee or any Guarantor is liquidated or dissolved, or begins proceedings toward liquidation or dissolution, or has filed against it a petition or other proceeding to cause it to be liquidated or dissolved and the proceeding is not dismissed within thirty (30) days thereafter, or Lessee, any Sublessee or any Guarantor in any manner permits the sale or divestiture of all or substantially all of its assets;
(e) The estate or interest of Lessee or any Sublessee in the Leased Properties or any part thereof is levied upon or attached in any proceeding and the same is not vacated or discharged within sixty (60) days thereafter (unless Lessee is in the process of contesting such lien or attachment in good faith in accordance with Article XII hereof);
(f) Lessee ceases operation of any Facility except upon prior Notice to, and with the express prior written consent of, Lessor (which consent Lessor may withhold in its absolute discretion), or as the unavoidable consequence of damage or destruction as a result of a casualty, or a Partial or total Taking;
(g) Any representation or warranty made by Lessee in the Lease, any Sublessee or any Guarantor, in any Transaction Document or in any certificates delivered in connection with this Lease or the Transaction Documents proves to be untrue when made in any material respect, Lessor is materially and adversely affected thereby and Lessee, any Sublessee or any Guarantor or any Affiliate, as the case may be, fails within thirty (30) days after Notice from Lessor or Omega, as the case may be, to cure such condition by terminating such adverse effect and making Lessor or Omega, as the case may be, whole for any damage suffered therefrom, or, if with due diligence such cure cannot be effected within thirty (30) days, if Lessee, any Sublessee or any Guarantor has failed to commence to cure the same within the thirty (30) days or failed thereafter to proceed promptly and with due diligence to cure such condition and complete such cure prior to the time that such condition causes a default in any Facility Mortgage and prior to the time that the same results in civil or criminal penalties to Lessor, Lessee, any Sublessee, a Guarantor, any Affiliates of any of them or the Leased Properties;
(h) Lessee (or, if applicable, any Sublessee or Manager):
(i) has any license, permit, approval, certificate of need, certificate of reimbursement or other authorization necessary to operate any Facility as a provider of health care services in accordance with its Primary Intended Use suspended or revoked, or its right to so operate a Facility or to accept patients suspended, and Lessee fails to remedy any condition causing such revocation or suspension within any cure period allowed therefor by the applicable agency or authority or, if no such cure period is allowed or specified by the applicable agency or authority, Lessee fails to remedy the condition promptly and diligently following Lessees receipt of notice of such condition and, in any event, prior to the final, nonappealable revocation or suspension of any such license, permit, approval, certificate of need, certificate of reimbursement , other authorization or right to operate the Facilities in question or to accept patients at the Facilities in question; or
(ii) receives a Citation with respect to a Facility and fails to cure the condition that is the subject of the Citation within the period of time required for such cure by the issuer of the Citation or, but in any event prior to the final, nonappealable revocation or suspension of any license, permit, approval, certificate of need, certificate of reimbursement or other authorization necessary to operate a Facility as a provider of health care services in accordance with its Primary Intended Use or to receive Medicare or Medicaid payments with respect to residents of any Facility, or prior to the appointment of a temporary manager, as the case may be; or
(iii) fails to give Lessor Notice that any event set forth in clauses (i) and (ii) above has occurred, as required pursuant to Section 23.1(h) below.
(i) A Transfer occurs without the prior written consent of Lessor;
(j) A default occurs under any Transaction Document and such default is not cured prior to the expiration of any applicable grace or cure period provided therein;
(k) A default occurs under any other contract affecting any Facility, Lessee, or any Sublessee, and such default has, or could reasonably expected to have, a Material Adverse Effect;
(l) Lessee breaches any of the financial covenants set forth in Article VIII hereof, the breach is capable of cure and the breach is not cured within a period of thirty (30) days after the Notice thereof from Lessor;
(m) Lessee fails to observe or perform any other term, covenant or condition of this Lease or any of the other Transaction Documents and the failure is not cured by Lessee within a period of thirty (30) days after Notice thereof from Lessor, unless the failure cannot with due diligence be cured within a period of thirty (30) days, in which case such failure shall not be deemed an Event of Default if and for so long as Lessee proceeds promptly and with due diligence
to cure the failure and completes the cure prior to the time that the same causes a Material Adverse Effect, a default in any Facility Mortgage, or in civil or criminal penalties to Lessor, Lessee, or to the Leased Properties; or
(n) A default under the Line of Credit Documents.
Expiration Date : means April 30, 2022, or April 30, 2032, if the second renewal option has been exercised, or April 30, 2042 if the second and third renewal options have been exercised.
Facilit(y)(ies) : Each health care facility on the Land, including the Leased Property associated with such Facility, and together, all such facilities on the Leased Properties.
Facility Mortgage : Any mortgage, deed of trust or other security agreement that with the express, prior, written consent of Lessor is a lien upon any or all of the Leased Properties, whether such lien secures an Assumed Indebtedness or another obligation or obligations.
Facility Mortgagee : The secured party to a Facility Mortgage, its successors and assigns, any servicer acting on behalf of a Facility Mortgagee with respect to a Facility Mortgage and, if any Facility Mortgage is deposited with a trust, then the trustee acting on behalf of the certificate holders of such trust.
Financial Statement :
(A) For each quarter during Lessees fiscal year, on a consolidated basis for Lessee, (i) a statement of earnings for the current period and fiscal year to the end of such period, with a comparison to the corresponding figures for the corresponding period in the preceding fiscal year from the beginning of the fiscal year to the end of such period, and (ii) a balance sheet as of the end of the period, with a comparison to the corresponding figures for the corresponding period in the preceding fiscal year from the beginning of the fiscal year to the end of such period.
(B) For Lessees fiscal year, a financial report for Lessee on a consolidated basis, prepared by a big four accounting firm or any other firm of independent certified public accountants reasonably acceptable to Lessor, containing Lessees balance sheet as of the end of that year, its related profit and loss, a statement of shareholders equity for that year, a statement of cash flows for that year, any management letter prepared by the certified public accountants, such comments and financial details as customarily are included in reports of like character and the unqualified opinion of the certified public accountants as to the fairness of the statements therein. If any such financial report has been prepared, reviewed or audited by a firm of independent certified public accountants, then such financial statement shall be provided. Lessor may, at its own expense, cause any financial statement to be audited.
(C) For AdCares fiscal year, a financial report for AdCare on a consolidated basis, prepared by a big four accounting firm or any other firm of independent certified public accountants reasonably acceptable to Lessor, containing AdCares balance sheet as of the end of that year, its related profit and loss, a statement of shareholders equity for that year, a statement of cash flows for that year, any management letter prepared by the certified
public accountants, such comments and financial details as customarily are included in reports of like character and the unqualified opinion of the certified public accountants as to the fairness of the statements therein. If any such financial report has been prepared, reviewed or audited by a firm of independent certified public accountants, then such financial statement shall be provided. Lessor may, at its own expense, cause any financial statement to be audited. So long as AdCare remains a reporting company under the Securities and Exchange Act of 1934, AdCare may satisfy this requirement by delivering to Lessor the audited financial statements contained in its Annual Report on Form 10-K.
Fixtures : Collectively, all permanently affixed equipment, machinery, fixtures, and other items of real and/or personal property (excluding Lessors Personal Property), including all components thereof, now and hereafter located in, on or used in connection with, and permanently affixed to or incorporated into the Leased Improvements, including, without limitation, all furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating, refrigerating, incineration, air and water pollution control, waste disposal, air-cooling and air-conditioning systems and apparatus (other than individual units), sprinkler systems and fire and theft protection equipment, built-in oxygen and vacuum systems, towers and other devices for the transmission of radio, television and other signals, all of which, to the greatest extent permitted by law, are hereby deemed by the parties hereto to constitute real estate, together with all replacements, modifications, alterations and additions thereto.
Force Majeure : An event or condition beyond the control of a Person, including without limitation a flood, earthquake, or other Act of God; a fire or other casualty resulting in a complete or partial destruction of the Facility in question; a war, revolution, riot, civil insurrection or commotion, terrorism, or vandalism; unusual governmental action, delay, restriction or regulation not reasonably to be expected; a contractor or supplier delay or failure in performance (not arising from a failure to pay any undisputed amount due), or a delay in the delivery of essential equipment or materials; bankruptcy or other insolvency of a contractor, subcontractor or construction manager (not an Affiliate of the party claiming Force Majeure); a strike, slowdown or other similar labor action; or any other similar event or condition beyond the reasonable control of the party claiming that Force Majeure is delaying or preventing such party from timely and fully performing its obligations under this Lease; provided that in any such event, the party claiming the existence of Force Majeure shall have given the other party Notice of such claim within fifteen (15) days after becoming aware thereof, and if the party claiming Force Majeure shall fail to give such Notice, then the event or condition shall not be considered Force Majeure for any period preceding the date such Notice shall be given. No lack of funds shall be construed as Force Majeure.
GAAP : Generally accepted accounting principles in effect at the time in question.
Guarantor : means each Person who has guaranteed or otherwise become liable for the obligations of Lessee under this Lease.
Guaranties : means (i) the Guaranty dated as of the date of this Lease from AdCare, (ii) the Guaranty dated as of the date of this Lease from HEARTH & HOME OF OHIO, INC., an Ohio corporation, and (iii) any other guaranty of this Lease delivered in the future.
Hazardous Substance : Dangerous, toxic or hazardous material, substance, pollutant, contaminant, chemical, waste (including medical waste), including petroleum products, asbestos and PCBs defined, listed or described as such under any Environmental Law.
Initial Term : As defined in Section 1.2.
Impositions : Collectively, all taxes (including, without limitation, all capital stock and franchise taxes of Lessor and all ad valorem, sales and use, single business, gross receipts, business privilege, transaction privilege, rent or similar taxes to the extent the same are assessed against Lessor the value of the Leased Properties, but excluding any tax based on the net income or net profit of Lessor derived from any such rents), assessments (including Assessments), ground rents, water, sewer or other rents and charges, excises, tax levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character that at any time prior to, during or in respect of the Term are assessed or imposed on or in respect of, or constitute a lien upon (a) Lessor or Lessors interest in the Leased Properties; (b) the Leased Properties or any part thereof or any rent therefrom or any estate, right, title or interest therein; (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on or in connection with the Leased Properties or the leasing or use of the Leased Properties or any part thereof; or (d) Rent, but excluding any transfer or other tax imposed with respect to the sale, exchange or other disposition by Lessor of the Leased Properties or any part thereof or the proceeds thereof. However, nothing contained in this Lease shall be construed to require Lessee to pay (1) any tax based on net income (whether denominated as a franchise or capital stock or other tax) imposed on Lessor or any Affiliate of Lessor or (2) any transfer, or net revenue tax of Lessor or any Affiliate of Lessor or (3) any tax imposed with respect to the sale, exchange or other disposition by Lessor of the Leased Properties or the proceeds thereof.
Insurance Requirements : All terms of any insurance policy required by this Lease and all requirements of the issuer of any such policy.
Investments : of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person.
Investigation : Soil and chemical tests or any other environmental investigations, examinations or analyses.
Judgment Date : The date on which a judgment is entered against Lessee that establishes, without the possibility of appeal, the amount of liquidated damages to which Lessor is entitled under this Lease.
Land : The real property described in attached Exhibit A .
Lease : As defined in the Preamble.
Lease Year : Each twelve-month period from and including May 1 through April 30 during the Term of this Lease.
Leased Improvements : Collectively, all buildings, structures, Fixtures and other improvements of every kind on the Land, including, but not limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site), parking areas and roadways appurtenant to such buildings and structures.
Leased Property : The portion of the real property described in attached Exhibit A on which a Facility is located, the Leased Improvements on such portion of such real property, the Related Rights with respect to such portion of the real property, and Lessors Personal Property with respect to such Facility.
Leased Properties : All of the Land, Leased Improvements, Related Rights and Lessors Personal Property.
Legal Requirements : All federal, state, county, municipal and other governmental statutes, laws, rules, orders, waivers, regulations, ordinances, judgments, decrees and injunctions affecting the Leased Properties or any portion thereof, Lessees Personal Properties or the construction, use or alteration of the Leased Properties (including but not limited to the Americans with Disabilities Act), whether enacted and in force before, after or on the Commencement Date, and including any that may (a) require repairs, modifications, alterations or additions in or to any portion or all of the Facilities, or (b) in any way adversely affect the use and enjoyment thereof, and all permits, licenses and authorizations and regulations relating thereto, including, but not limited to, (i) those relating to existing health care licenses, (ii) those authorizing the current number of licensed beds for the Leased Properties and (iii) all Permitted Encumbrances in force at any time during the Term.
Lessees Certificate : A statement in writing in substantially the form of Exhibit B attached hereto (with such changes thereto as may reasonably be requested by the person relying on such certificate).
Lessees Personal Property : Personal Property owned or leased by Lessee that is not included within the definition of the term Lessors Personal Property but is used by Lessee in the operation of the Facilities, including Personal Property provided by Lessee in compliance with Section 6.3 hereof.
Lessors Future Rent Loss : An amount equal to the Rent that would have been payable by Lessee from and after the Judgment Date through the Expiration Date had the Lease not been terminated, plus such additional amount as may be necessary in order to compensate Lessor for all other damages that are proximately caused by, and in the ordinary course of things would be likely to result from, Lessees failure to perform its obligations under this Lease.
Lessors Interim Rent Loss : An amount equal to the Rent that would have been payable by Lessee from the Termination Date through the Judgment Date had the Lease not been terminated (including interest and late charges determined on the basis of the date or dates on which Lessors Interim Rent Loss is actually paid by Lessee), plus such additional amount as may be necessary in order to compensate Lessor for all other damages that are proximately caused by, and
in the ordinary course of things would be likely to result from, Lessees failure to perform its obligations under this Lease.
Lessors Monthly Rent Loss : For any month, an amount equal to the installment of Rent that would have been due in such month under the Lease if it had not been terminated, plus, if such amount is not paid on or before the day of the month on which such installment of Rent would have been due, the amount of interest and late charges thereon that also would have been due under the Lease, plus such additional amount as may be necessary in order to compensate Lessor for all other damages that are proximately caused by, and in the ordinary course of things would be likely to result from, Lessees failure to perform its obligations under this Lease.
Lessors Personal Property : All Personal Property and intangibles, if any, owned by Lessor and leased to Lessee on the Commencement Date, together with any and all replacements thereof, and all Personal Property that pursuant to the terms of the Lease becomes the property of Lessor during the Term.
Line of Credit : As defined in Section 6.4.
Line of Credit Documents : As defined in Section 6.4.
Management Agreement : Any agreement pursuant to which management of a Facility is delegated by Lessee to an Affiliate of Lessee or to any unrelated party. As of the Effective Date, there is no Management Agreement.
Manager : The Person to whom management of the operation of a Facility is delegated pursuant to a Management Agreement. As of the Effective Date, there is no Manager.
Material Adverse Effect : means any material adverse effect whatsoever upon (a) the validity, performance or enforceability of any Transaction Document, (b) the properties, contracts, business operations, profits or condition (financial or otherwise) of Lessee, a Sublessee or any Guarantor, or (c) the ability of Lessee, a Sublessee, any Guarantor or any of their Affiliates to fulfill its obligations under the Transaction Documents.
Maximum Principal Amount : An amount equal to eighty-five percent (85%) of eligible receivables (as customarily defined in the working capital loan agreements for skilled nursing facilities) as determined at the time of entry into the Line of Credit Documents; provided, however, that eligible receivables shall not include any account receivable which:
(i) has been outstanding more than one hundred fifty (150) days since the date the underlying services were provided or goods were delivered;
(ii) is a liability of an account debtor which is not (a) a commercial insurance company, organized under the laws of any jurisdiction in the United States, having its principal office in the United States, (b) a Blue Cross/Blue Shield Plan, (c) CHAMPUS, Medicare or Medicaid, or (d) an HMO, PPO, or an institutional account debtor, or any other type of obligor, not included in the categories of obligors listed in the foregoing clauses (a) - (c), organized under the laws of any jurisdiction in the United States, having its principal office in the United States;
(iii) was not generated from the sale of goods or the delivery of services in the ordinary course of business in the operation of the Facilities in the name of the Lessee or a Sublessee; or
(iv) has not been billed.
Net Income : For any period, Lessees net income (or loss) for such period attributable to the operation of the Facilities, determined in accordance with GAAP; provided, however, that Lessees Net Income shall not include any extraordinary gains (or losses) or nonrecurring gains (or losses).
Net Proceeds : All proceeds, net of any reasonable costs incurred by Lessor in obtaining such proceeds, payable under any policy of insurance required by Article XIII of this Lease (including any proceeds with respect to Lessees Personal Property that Lessee is required or elects to restore or replace pursuant to Section 14.3) or paid by a Condemnor for a Taking or Partial Taking of the Leased Properties.
Net Reletting Proceeds : Proceeds of the reletting of any portion of the Leased Properties received by Lessor, net of Reletting Costs.
Notice : A notice given in accordance with Article XXXI hereof.
Notice of Termination : A Notice from Lessor that it is terminating this Lease by reason of an Event of Default.
Officer : Any of the Chairman of the Board of Directors, the President, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, and the Secretary of any corporation, a general partner of any partnership and a managing member of any limited liability company upon which service of a Notice is to be made.
Officers Certificate : A certificate signed by an Officer.
Omega : Omega Healthcare Investors, Inc., a Maryland corporation.
Overdue Rate : On any date, the interest rate that is equal to the greater of (i) thirteen percent (13%) and (ii) three percent (3%) (three hundred (300) basis points) above the Prime Rate, but in no event greater than the maximum rate then permitted under applicable law.
Partial Taking : A taking of less than the entire fee of a Leased Property that either (a) does not render such Leased Property Unsuitable for its Primary Use, or (b) renders such Leased Property Unsuitable for its Primary Intended Use, but neither Lessor nor Lessee elects pursuant to Section 15.1 hereof to terminate this Lease.
Payment Date : Any due date for the payment of the installments of Base Rent or for the payment of Additional Charges or any other amount required to be paid by Lessee hereunder.
Permitted Encumbrances : means all covenants, conditions, restrictions, easements and other matters affecting any Leased Property of record as of the date of this Lease, all other
matters which would be disclosed by an inspection or accurate survey of such Leased Property, and the matters listed on attached Exhibit C .
Person : Any natural person, trust, partnership, corporation, joint venture, limited liability company or other legal entity.
Personal Property : All machinery, equipment, furniture, furnishings, movable walls or partitions, computers (and all associated software), trade fixtures and other personal property (but excluding consumable inventory and supplies owned by Lessee) used in connection with a Leased Property, together with all replacements and alterations thereof and additions thereto, except items, if any, included within the definition of Fixtures or Leased Improvements.
Pledge Agreement : The Pledge Agreement dated as of the date of this Lease from Hearth & Home of Ohio, Inc., an Ohio corporation, in favor of Lessor.
Pre-Existing Hazardous Substances : means Hazardous Substances located on, under about or with respect to a Leased Property prior to the Commencement Date.
Pre-Existing Environmental Conditions : means any Contamination or other environmental condition on, under, about or with respect to a Leased Property existing prior to Commencement Date.
Present Value : The value of future payments, determined by discounting each such payment at a rate equal to the yield on the specified date on securities issued by the United States Treasury (bills, notes and bonds) maturing on the date closest to December 31 in the year in which such future payment would have been due.
Primary Intended Use : Licensed skilled nursing facility.
Prime Rate : On any date, an interest rate equal to the prime rate published by the Wall Street Journal, but in no event greater than the maximum rate then permitted under applicable law. If the Wall Street Journal ceases to be in existence, or for any reason no longer publishes such prime rate, the Prime Rate shall be the rate announced by a national bank selected by Lessor and Lessee.
Proceeding : Any action, proposal or investigation by any agency or entity, or any complaint to such agency or entity.
Purchase Money Financing : Any financing provided by a Person to Lessee or a Sublessee in connection with the acquisition of Personal Property used in connection with the operation of the Facilities, whether by way of installment sale or otherwise.
Qualified Capital Expenditures : upgrades or improvements to each Facility that have the effect of maintaining or improving its competitive position in its respective marketplace, including new or replacement wallpaper, tiles, window coverings, lighting fixtures, painting, upgraded landscaping, carpeting, architectural adornments, common area amenities and the like, and including capital improvements or repairs, such as repairs or replacements of the roof, structural elements of the walls, parking area or the electrical, plumbing, HVAC or other mechanical or structural systems.
Regulatory Actions : Any claim, demand, notice, action or proceeding brought, threatened or initiated by any governmental authority in connection with any Environmental Law, including, without limitation, civil, criminal and administrative proceedings, whether or not the remedy sought is costs, damages, equitable remedies, penalties or expenses.
Related Rights : All easements, rights and appurtenances relating to the Land and the Leased Improvements.
Release : The intentional or unintentional spilling, leaking, dumping, pouring, emptying, seeping, disposing, discharging, emitting, depositing, injecting, leaching, escaping, abandoning, or any other release or threatened release, however defined, of any Hazardous Substance.
Reletting Costs : Expenses incurred by Lessor in connection with the reletting of a Leased Property in whole or in part after an Event of Default, including without limitation reasonable attorneys fees and expenses, reasonable brokerage fees and expenses, reasonable marketing expenses and the cost of repairs and renovations reasonably required for such reletting.
Rent : Collectively, Base Rent and Additional Charges.
Replacement Cost : The actual replacement cost of a Leased Property, including an increased cost of construction endorsement, less exclusions provided in the standard form of fire insurance policy. In all events Replacement Cost shall be an amount sufficient that neither Lessor nor Lessee is deemed to be a co-insurer of such Leased Property.
SEC : Securities and Exchange Commission.
Security Agreements : The Security Agreement dated as of the date of this Agreement, between Lessor, as secured party, and Lessee, as debtor, and the Security Agreement dated as of the date of this Agreement, between Lessor, as secured party, and AdCare, as debtor.
Special Risk Insurance : The insurance that Lessee is required to maintain pursuant to Section 13.2.1 of this Lease.
State : Georgia.
Sublease : Subleases expressly approved in writing by Lessor prior to execution by Lessee. As of the Effective Date, there are no Subleases.
Sublessee : A Sublessee under a Sublease.
Subordination Agreement : The Subordination Agreement dated as of the date of this Lease from Lessee, the Sublessees and Pledgors in favor of Lessor.
Subsidiary : of a Person means (i) any corporation more than 10% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 10% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a Subsidiary shall mean a Subsidiary of Lessee or any Sublessee.
Taken : Conveyed pursuant to a Taking or Partial Taking.
Taking : A taking or voluntary conveyance during the Term of all of a Leased Property, or any interest therein or right accruing thereto or use thereof, as the result of, or in settlement of any condemnation or other eminent domain proceeding affecting such Leased Property, whether or not the proceeding actually has been commenced.
Term : The Initial Term and any Renewal Term
Termination Date : The date specified in the Termination Notice as set forth in Section 16.1.
Termination Notice : A notice given pursuant to Section 16.1.
Third Party Claims : Any claims, actions, demands or proceedings (other than Regulatory Actions) howsoever based (including without limitation those based on negligence, trespass, strict liability, nuisance, toxic tort or detriment to health welfare or property) due to Contamination, whether or not the remedy sought is costs, damages, penalties or expenses, brought by any person or entity other than a governmental agency.
Transaction Documents : means the following documents: this Lease, the Guaranties, the Letter of Credit Agreement, the Security Agreement, the Pledge Agreement, the Subordination Agreements, and any security agreements, pledge agreements, letter of credit agreements, guarantees, notes or other documents which evidence, secure or otherwise relate to this Lease, or the transactions contemplated by this Lease; and any and all amendments, modifications, extensions and renewals of any of the foregoing documents.
Transfer: The (a) assignment, mortgaging or other encumbering of all or any part of Lessees or any Sublessees interest in this Lease or in the Leased Properties; (b) subletting of the whole or any part of any Leased Property; (c) entering into of any Management Agreement or other arrangement under which any Facility is operated by or licensed to be operated by an entity other than Lessee or a Sublessee; (d) merger, consolidation or reorganization of a corporate Lessee, corporate Guarantor, corporate Sublessee or corporate Manager, or the sale, issuance, transfer and/or redemption, cumulatively or in one transaction, of any voting stock by Lessee, any Guarantor, any Sublessee or Manager or by Persons who are stockholders (whether beneficially or of record) of Lessee, any Guarantor, any Sublessee or Manager, if such event or events result(s) in a change of Control of Lessee, any Guarantor, any Sublessee or Manager; or (e) sale, issuance, transfer or redemption, cumulatively or in one transaction, of any interest, or the termination of any interest (in each case, whether held directly or indirectly), in Lessee, any Guarantor, any Sublessee or Manager, if Lessee, such Guarantor, such Sublessee or such Manager is a joint venture, partnership, limited liability company or other association and such sale, issuance, transfer, redemption or termination of interest results in a change of Control of such joint venture, partnership, limited liability company or other association.
Transferee : An assignee, subtenant or other occupant of a Leased Property pursuant to a Transfer.
Unmatured Event of Default : means the occurrence of an event which upon its occurrence, or with the giving of notice, the passage of time, or both, would constitute an Event of Default.
Unsuitable for Its Primary Intended Use : A state or condition of a Facility such that by reason of a Partial Taking, the Facility cannot be operated on a commercially practicable basis for its Primary Intended Use, taking into account, among other relevant factors, the number of usable beds permitted by applicable law and regulation in such Facility after the Partial Taking, the square footage Taken and the estimated revenue impact of such Partial Taking.
ARTICLE III
3.1 Base Rent; Monthly Installments . In addition to all other payments to be made by Lessee under this Lease, Lessee shall pay Lessor the Base Rent in lawful money of the United States of America which is legal tender for the payment of public and private debts, Lessee shall pay the Base Rent in advance, in equal, consecutive monthly installments, each of which shall be in an amount equal to monthly Base Rent payable for the Lease Year in which such installment is payable. The first installment of Base Rent shall be payable on the Commencement Date, together with a prorated amount of Base Rent for the period from the Commencement Date until the last day of the first full calendar month of the Term. Thereafter, installments of Base Rent shall be payable on the first (1 st ) day of each calendar month. Base Rent shall be paid to Lessor, or to such other Person as Lessor from time to time may designate by Notice to Lessee, by wire transfer of immediately available federal funds to the bank account designated in writing by Lessor. If Lessor directs Lessee to pay any Base Rent or Additional Charges to any Person other than Lessor, Lessee shall send to Lessor, simultaneously with payment of the Base Rent or Additional Charges, a copy of the transmittal letter or invoice and check evidencing such, or such other evidence of payment as Lessor requires.
3.2 Additional Charges . In addition to the Base Rent, Lessee also will pay as and when due all Additional Charges.
3.3 Late Charge; Interest. If any Rent payable to Lessor is not paid when due, Lessee shall pay Lessor on demand, as an Additional Charge, a late charge equal to the greater of (a) five percent (5%) of the amount not paid when due and (b) any and all charges, expenses, fees or penalties imposed on Lessor by a Facility Mortgagee for late payment, and, in addition, if such Rent (including the late charge) is not paid within thirty (30) days of the date on which such Rent was due, interest thereon at the Overdue Rate from the date when due until such Rent (including the late charge and interest) is paid in full.
3.4 Net Lease.
3.4.1 The Rent shall be paid absolutely net to Lessor, so that this Lease shall yield to Lessor the full amount of the Rent payable to Lessor under this Lease throughout the Term.
3.4.2 If Lessor commences any proceedings for non-payment of Rent, Lessee will not interpose any counterclaim or cross complaint or similar pleading of any nature or description in such proceedings unless Lessee would lose or waive such claim by the failure
to assert it, but Lessee does not waive any rights to assert such claim in a separate action brought by Lessee. The covenants to pay Rent are independent covenants, and Lessee shall have no right to hold back, offset or fail to pay any Rent because of any alleged default by Lessor or for any other reason.
3.5 Payments In The Event of a Rent Adjustment . Upon the adjustment, pursuant to the definition of the term Base Rent, in the Base Rent payable pursuant to this Lease with respect to any Lease Year, the adjustment shall be effective as of the first payment of Base Rent due in the Lease Year as to which such adjustment pertains.
ARTICLE IV
4.1 Payment of Impositions . Subject to Section 12.1, Lessee will pay all Impositions before any fine, penalty, interest or cost is added for non-payment, and will promptly, upon request, furnish to Lessor copies of official receipts or other satisfactory proof evidencing such payments. If at the option of the taxpayer any Imposition may be paid in installments, Lessee may pay the same in the required installments provided it also pays any and all interest due thereon as and when due.
Lessee shall prepare and file as and when required all tax returns and reports required by governmental authorities with respect to all Impositions. Lessor and Lessee shall each, upon request, provide the other with such data, including without limitation cost and depreciation records, as is maintained by the party to whom the request is made as is necessary to prepare any required returns and reports.
Lessee shall be entitled to receive and retain any refund from a taxing authority in respect of an Imposition paid by Lessee if at the time of the refund no Event of Default has occurred, but if an Event of Default has occurred at the time of the refund, Lessee shall not be entitled to receive or retain such refund, and if and when received by Lessor such refund shall be applied as provided in Article XVI.
Lessee may, upon Notice to and with the consent of Lessor (which consent shall not be withheld unreasonably), at Lessees sole cost and expense, protest, appeal or institute such other proceedings as Lessee deems appropriate to effect a reduction of real estate or personal property assessments and Lessor, at Lessees expense as aforesaid, shall cooperate with Lessee in such protest, appeal or other action.
4.2 Adjustment of Impositions . Impositions imposed in respect of the tax fiscal period during which the Term ends shall be adjusted and prorated between Lessor and Lessee, whether or not imposed before or after the expiration or earlier termination of the Term, and Lessees obligation to pay its prorated share thereof shall survive the expiration or earlier termination of the Term.
4.3 Utility Charges . Lessee will pay or cause to be paid when due all charges for electricity, power, gas, oil, water and other utilities imposed upon a Leased Property or upon Lessor or Lessee with respect to such Leased Property.
4.4 Insurance Premiums . Lessee shall pay or cause to be paid when due all premiums for the insurance coverage required to be maintained pursuant to Article XIII during the Term.
ARTICLE V
5.1 No Termination, Abatement, etc . Lessee shall not take any action without the consent of Lessor and any Facility Mortgagee to modify, surrender or terminate this Lease, and shall not seek or be entitled to any abatement, deduction, deferment or reduction of Rent, or setoff against Rent. Except as may be otherwise specifically provided for in this Lease, the respective obligations of Lessor and Lessee shall not be affected by reason of (a) any damage to, or destruction of, a Leased Property or any portion thereof from whatever cause or any Taking or Partial Taking of a Leased Property, except as expressly set forth herein; (b) the lawful or unlawful prohibition of, or restriction upon, Lessees use of a Leased Property, or any portion thereof, or the interference with such use by any Person or by reason of eviction by paramount title; (c) any claim that Lessee has or might have against Lessor or by reason of any default or breach of any warranty by Lessor under this Lease or any other agreement between Lessor and Lessee, or to which Lessor and Lessee are parties; (d) any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceedings affecting Lessor or any assignee or transferee of Lessor; or (e) any other cause, whether similar or dissimilar to any of the foregoing, other than a discharge of Lessee from any such obligations as a matter of law. Lessee hereby specifically waives all rights, arising from any occurrence whatsoever, that now or hereafter may be conferred upon it by law to (a) modify, surrender or terminate this Lease or quit or surrender any Leased Property or any portion thereof, or (b) entitle Lessee to any abatement, reduction, suspension or deferment of the Rent or other sums payable by Lessee hereunder.
ARTICLE VI
6.1 Ownership of the Leased Properties . Lessee acknowledges that the Leased Properties are the property of Lessor and that Lessee has only the right to the possession and use of the Leased Properties upon the terms and conditions of this Lease. Lessee will not (a) file any income tax return or other associated documents, (b) file any other document with or submit any document to any governmental body or authority, (c) enter into any written contractual arrangement with any Person or (d) release any financial statements of Lessee, in any case that take any position other than that throughout the Term Lessor is the owner of the Leased Properties for federal, state and local income tax purposes and this Lease is a true lease, and an operating lease and not a capital lease.
6.2 Lessors Personal Property . Lessee shall, during the entire Term, maintain all of Lessors Personal Property in good order, condition and repair as shall be necessary in order to operate the Facilities for the Primary Intended Use in compliance with all applicable licensure and certification requirements, all applicable Legal Requirements and Insurance Requirements, and customary industry practice for the Primary Intended Use. If any of Lessors Personal Property requires replacement in order to comply with the foregoing, Lessee shall replace it with similar property of the same or better quality at Lessees sole cost and expense, and when such replacement property is placed in service with respect to the Leased Properties it shall become Lessors Personal Property. Lessee shall not permit or suffer Lessors Personal Property to be subject to any lien, charge, encumbrance, financing statement, contract of sale or the like, except for any purchase money security interest. At the expiration or earlier termination of this Lease, all of Lessors Personal Property shall be surrendered to Lessor with the Leased Properties at or before the time of the surrender of the Leased Properties in at least as good a condition as at the Commencement Date except for ordinary wear and tear.
6.3 Lessees Personal Property . Lessee shall provide and maintain during the Term such Personal Property, in addition to Lessors Personal Property, as shall be necessary and appropriate in order to operate the Facilities for the Primary Intended Use in compliance with all licensure and certification requirements, in compliance with all applicable Legal Requirements and Insurance Requirements and otherwise in accordance with customary practice in the industry for the Primary Intended Use. Upon the expiration of the Term or the earlier termination of this Lease, without the payment of any additional consideration by Lessor, Lessee shall be deemed to have sold, assigned, transferred and conveyed to Lessor all of Lessees right, title and interest in and to any and all of Lessees Personal Property whether or not integral to the Primary Intended Use of the Facilities and wherever located. Lessee shall not remove any of Lessees Personal Property that is in use at the expiration or earlier termination of the Lease from the Leased Properties.
6.4 Grant of Security Interest in Lessees Personal Property and Accounts . Lessee has concurrently granted to Lessor a security interest in the Collateral as defined in the Security Agreement, which includes, without limitation, the Personal Property as defined herein and Lessees Accounts as defined in the Security Agreement. If Lessee and/or the Sublessees obtain, concurrently with or after the Effective Date, a working capital line of credit (the Line of Credit) from a third-party working capital lender that requires that, in order to secure the Line of Credit, Lessee and/or the Sublessees must grant to the working capital lender a first priority security interest in the accounts receivable from the Facilities accruing during the Term, then Lessor will subordinate its security interest in the accounts receivable from the Facilities accruing during the Term, provided that:
(a) The working capital lender executes and delivers to Lessor an intercreditor agreement in form and substance reasonably satisfactory to Lessor;
(b) The lien of Lessor in accounts receivable from the Facilities shall be subordinated to the lien of the working capital lender therein only to the extent of amounts advanced from time to time by the working capital lender to Lessee and/or the Sublessees with respect to the Facilities and only in the Maximum Principal Amount, plus interest, penalties and other charges under the loan documents evidencing the Line of Credit (the Line of Credit Documents ) with respect to principal amounts advanced; and
(c) As of the date of entry by Lessor into the intercreditor agreement, no Event of Default or Unmatured Event of Default has occurred and is continuing.
ARTICLE VII
7.1 Condition of the Leased Properties . Lessee acknowledges that it has inspected and otherwise has knowledge of the condition of the Leased Properties prior to the execution and delivery of this Lease. Lessee is leasing the Leased Properties as is in their condition on the Effective Date. Lessee waives any claim or action against Lessor in respect of the condition of the Leased Properties. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTIES OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH
RISKS ARE TO BE BORNE BY LESSEE. Lessee further acknowledges that throughout the Term Lessee is responsible for the condition of the Leased Properties as set forth in this Lease.
7.2 Use of the Leased Properties . Throughout the Term Lessee shall use the Leased Properties continuously for the Primary Intended Use and uses incidental thereto. Lessee shall not use the Leased Properties or any portion thereof for any other use without the prior written consent of Lessor. No use shall be made or permitted to be made of, or allowed in, the Leased Properties, and no acts shall be done, which will cause the cancellation of, or be prohibited by, any insurance policy covering the Leased Properties or any part thereof, nor shall the Leased Properties or Lessees Personal Property be used for any unlawful purpose. Lessee shall not commit or suffer to be committed any waste on the Leased Properties, or cause or permit any nuisance thereon, or suffer or permit the Leased Properties or any portion thereof, or Lessees Personal Property, to be used in such a manner as (a) might reasonably tend to impair Lessors (or Lessees, as the case may be) title thereto or to any portion thereof, or (b) may reasonably make possible a claim or claims of adverse usage or adverse possession by the public, as such, or of implied dedication of the Leased Properties or any portion thereof.
7.3 Certain Environmental Matters .
(a) Prohibition Against Use of Hazardous Substances . Lessee shall not permit, conduct or allow the generation, introduction, presence, maintenance, use, receipt, acceptance, treatment, manufacture, production, installation, management, storage, disposal or release of any Hazardous Substance on the Leased Properties, except for (i) those types and quantities of Hazardous Substances necessary for and ordinarily associated with the conduct of Lessees business and used in full compliance with all Environmental Laws and (ii) any Pre-Existing Hazardous Substances.
(b) Notice of Environmental Claims, Actions or Contaminations . Lessee shall notify Lessor, in writing, immediately upon learning of any existing, pending or threatened: (i) investigation, inquiry, claim or action by any governmental authority in connection with any Environmental Laws, (ii) Third Party Claims, (iii) Regulatory Actions, and/or (iv) Contamination of any portion of the Leased Properties.
(c) Costs of Remedial Actions with Respect to Environmental Matters . If any investigation and/or Clean-Up of any Hazardous Substance or other environmental condition on, under, about or with respect to a Leased Property (other than Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions) is required by any Environmental Law, Lessee shall complete, at its own expense, such investigation and/or Clean-Up or cause any other Person who may be legally responsible to complete such investigation and/or Clean-Up.
(d) Delivery of Environmental Documents . Lessee shall deliver to Lessor complete copies of any and all material Environmental Documents that may now be in, or at any time hereafter come into, the possession of Lessee.
(e) Environmental Audit . At Lessees expense, Lessee shall, upon and within thirty (30) days of a written request therefor from Lessor or any Facility Mortgagee, deliver an Environmental Audit to Lessor and the Facility Mortgagee, if any. All tests and
samplings shall be conducted using generally accepted and scientifically valid technology and methodologies. Lessee shall give the engineer or environmental consultant conducting the Environmental Audit reasonable and complete access to the Leased Properties and to all records in the possession of Lessee that may indicate the presence (whether current or past) of a Release or threatened Release of any Hazardous Substances on, in, under, about and adjacent to any Leased Property. Lessee also shall provide the engineer or environmental consultant full access to and the opportunity to interview such persons as may be employed in connection with the Leased Properties as the engineer or consultant deems appropriate. However, neither Lessor nor any Facility Mortgagee shall be entitled to request an Environmental Audit from Lessee unless (i) after the Commencement Date there have been changes, modifications or additions to Environmental Laws as applied to or affecting any of the Leased Properties and Lessor has a reasonable basis for requesting an Environmental Audit; (ii) a significant change in the environmental condition of any of the Leased Properties has occurred; (iii) there are fewer than six (6) months remaining in the Term; or (iv) Lessor or a Facility Mortgagee has another reasonable basis requesting such certificate or certificates. If the Environmental Audit discloses the presence of Contamination or any noncompliance with Environmental Laws, Lessee shall immediately perform all of Lessees obligations under this Lease with respect to such Hazardous Substances or noncompliance.
(f) Entry onto Leased Properties for Environmental Matters . Upon the prior reasonable request of Lessor, Lessee shall permit Lessor and any Facility Mortgagee from time to time, by its employees, agents, contractors or representatives, to enter upon the Leased Properties for the purpose of conducting such Investigations as Lessor may desire, the expense of which shall be paid by Lessor. Lessor, any Facility Mortgagee exercising such right of entry and the employees, agents, contractors, consultants and/or representatives thereof, shall conduct any such Investigation in a manner that does not unreasonably interfere with Lessees use of and operations on the Leased Properties (however, reasonable temporary interference with such use and operations is permissible if the investigation cannot otherwise be reasonably and inexpensively conducted). Other than in an emergency, Lessor and any Facility Mortgagee exercising such right of entry shall provide Lessee prior notice before entering any of the Leased Properties to conduct such Investigation, and shall provide copies of any reports or results to Lessee, and Lessee shall cooperate fully in such Investigation.
(g) Environmental Matters Upon Termination of the Lease or Expiration of Term . Upon the expiration or earlier termination of the Term, Lessee shall cause the Leased Properties to be delivered free of any and all Regulatory Actions and Third Party Claims and otherwise in compliance with all Environmental Laws with respect thereto; provided, that Lessee shall not be required to take any of the foregoing actions with respect to Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions.
(h) Compliance with Environmental Laws . Lessee shall comply with, and cause its agents, servants and employees to comply with, and shall use reasonable efforts to cause each occupant and user of the Leased Properties, and the agents, servants and employees of such occupants and users to comply with, each and every Environmental Law applicable to Lessee, the Leased Properties and each such occupant or user with respect to the Leased Properties. Specifically, but without limitation:
(i) Maintenance of Licenses and Permits . Lessee shall obtain and maintain (and Lessee shall use reasonable efforts to cause each tenant, occupant and user to obtain and maintain) all permits, certificates, licenses and other consents and approvals required by any applicable Environmental Law from time to time with respect to Lessee, each and every part of the Leased Properties and/or the conduct of any business at a Facility or related thereto;
(ii) Contamination . Lessee shall not cause, suffer or permit any Contamination (other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions);
(iii) Clean-Up . If a Contamination occurs as a result of Lessees actions or inactions (other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions), Lessee promptly shall Clean-Up and remove any Hazardous Substance or cause the Clean-Up and the removal of any Hazardous Substance and in any such case such Clean-Up and removal of the Hazardous Substance shall be effected to Lessors reasonable satisfaction and in any event in strict compliance with applicable Environmental Laws;
(iv) Discharge of Lien . Within twenty (20) days of the date any lien is imposed against the Leased Properties or any part thereof under any Environmental Law (other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions), Lessee shall cause such lien to be discharged (by payment, by bond or otherwise to Lessors absolute satisfaction);
(v) Notification of Lessor . Within three (3) Business Days after receipt by Lessee of Notice or discovery by Lessee of any fact or circumstance that might result in a breach or violation of any Environmental Law, Lessee shall give Lessor Notice of such fact or circumstance; and
(vi) Requests, Orders and Notices . Within three (3) Business Days after receipt of any request, order or other notice relating to a Leased Property under any Environmental Law, Lessee shall forward a copy thereof to Lessor.
(i) Environmental Related Remedies . In the event of a breach by Lessee beyond any applicable notice and/or grace period of its covenants with respect to environmental matters, Lessor may, in its sole discretion, do any one or more of the following (the exercise of one right or remedy hereunder not precluding the simultaneous or subsequent exercise of any other right or remedy hereunder):
(i) Cause a Clean-Up . Cause the Clean-Up of any Hazardous Substance or other environmental condition on or under a Leased Property, or both, at Lessees cost and expense (except to the extent such Clean-Up relates to Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions); or
(ii) Payment of Regulatory Damages . Pay on behalf of Lessee any damages, costs, fines or penalties imposed on Lessee or Lessor as a result of any Regulatory Actions; or
(iii) Payments to Discharge Liens . On behalf of Lessee, make any payment or perform any other act or cause any act to be performed that will prevent a lien in favor of any federal, state or local governmental authority from attaching to a Leased Property or that will cause the discharge of any lien then attached to such Leased Property; or
(iv) Payment of Third Party Damages . Pay, on behalf of Lessee, any damages, cost, fines or penalties imposed on Lessee as a result of any Third Party Claims; or
(v) Demand of Payment . Demand that Lessee make immediate payment of all of the costs of such Clean-Up and/or exercise of the remedies set forth in this Section 7.3 incurred by Lessor and not paid by Lessee as of the date of such demand.
(j) Environmental Indemnification . Except to the extent of Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions, Lessee shall and does hereby indemnify, and shall defend and hold harmless, Lessor, each Facility Mortgagee and the principals, officers, directors, agents and employees of Lessor and each Facility Mortgagee, from each and every incurred and potential claim, cause of action, damage, demand, obligation, fine, laboratory fee, liability, loss, penalty, imposition settlement, levy, lien removal, litigation, judgment, proceeding, disbursement, expense and/or cost (including without limitation the cost of each and every Clean-Up), however defined and of whatever kind or nature, known or unknown, foreseeable or unforeseeable, contingent, incidental, consequential or otherwise (including, but not limited to, attorneys fees, consultants fees, experts fees and related expenses, capital, operating and maintenance costs, incurred in connection with (i) any Investigation or monitoring of site conditions, and (ii) any Clean-Up required or performed by any federal, state or local governmental entity or performed by any other entity or person because of the presence of any Hazardous Substance, Release, threatened Release or any Contamination on, in, under or about any of the Leased Properties) that may be asserted against, imposed on, suffered or incurred by, each and every indemnitee arising out of or in any way related to, or allegedly arising out of or due to any environmental matter, including, but not limited to, any one or more of the following:
(i) Release Damage or Liability . The presence of Contamination in, on, at, under or near the Leased Properties or migrating to a Leased Property from another location, except to the extent that such Contamination existed prior to the Commencement Date;
(ii) Injuries . All injuries to health or safety (including wrongful death), or to the environment, by reason of environmental matters relating to the condition of or activities past or present on, at, in or under the Leased Properties, other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions;
(iii) Violations of Law . All violations, and alleged violations, of any Environmental Law relating to a Leased Property or any activity on, in, at or under the Leased Properties, other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions;
(iv) Misrepresentation . All material misrepresentations relating to environmental matters in any documents or materials furnished by Lessee to Lessor and/or its representatives in connection with the Lease;
(v) Event of Default . Each and every Event of Default relating to environmental matters;
(vi) Lawsuits . Any and all lawsuits brought or threatened, settlements reached and governmental orders relating to any Hazardous Substances at, on, in or under the Leased Properties, and all demands of governmental authorities, and all policies and requirements of Lessors, based upon or in any way related to any Hazardous Substances at, on, in or under the Leased Properties, other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions; and
(vii) Presence of Liens . All liens imposed upon a Leased Property in favor of any governmental entity or any person as a result of the presence, disposal, release or threat of release of Hazardous Substances at, on, in, from or under such Leased Property, other than with respect to or resulting from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions.
(k) Rights Cumulative and Survival . The rights granted Lessor under this Section are in addition to and not in limitation of any other rights or remedies available to Lessor under this Lease or allowed at law or in equity or rights of indemnification provided to Lessor in any agreement pursuant to which Lessor purchased any of the Leased Properties. The payment and indemnification obligations set forth in this Section 7.3 shall survive the expiration or earlier termination of the Term.
(j) Exculpation. Notwithstanding anything to the contrary in this Lease, Lessee shall not be liable for any costs, loss, liability, damage or expense arising from or in connection with the Clean-Up of any Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions. If any Clean-Up is required to be performed by any federal, state or local governmental entity solely because of the presence of any Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions and if a Facility will no longer be permitted under applicable law to operate for their Primary Intended Use unless such Clean-Up is performed (a Required Clean-Up ), then Lessee shall promptly notify Lessor of such Required Clean-Up. If Lessor elects in writing not to perform such Required Clean-Up, then Lessee may elect within thirty (30) days of such determination to terminate this Lease. If Lessor elects to perform such Required Clean-Up, then Lessor shall immediately undertake and diligently pursue the remediation of the applicable Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions.
7.4. Liens . Lessor represents and warrants that, except as described on Exhibit C , as of March 1, 2003, the Leased Properties were free and clear of any and all Encumbrances.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements . In its use, maintenance, operation and any alteration of the Leased Properties, Lessee, at its expense, promptly will (a) comply with all Legal Requirements and Insurance Requirements, whether or not compliance with them requires structural changes in any of the Leased Improvements (which structural changes shall be subject to Lessors prior written approval, which Lessor shall not unreasonably withhold or delay) or interferes with or prevents the use and enjoyment of the Leased Properties, and (b) procure, maintain and comply with all licenses, certificates of need, provider agreements and other authorizations required for the use of the Leased Properties and Lessees Personal Property for the Primary Intended Use, and for the proper erection, installation, operation and maintenance of the Leased Property or any part thereof. The judgment of any court of competent jurisdiction, or the admission of Lessee in any action or proceeding against Lessee, whether or not Lessor is a party thereto, that Lessee has violated any such Legal Requirements or Insurance Requirements shall be conclusive of that fact as between Lessor and Lessee.
8.2 Certain Covenants .
8.2.1 Lessees Tangible Net Worth . At all times during the Term Lessee shall maintain a positive Tangible Net Worth. If at any time Lessees Tangible Net Worth is not positive, within thirty (30) days Lessee shall cause the holders of its outstanding equity interests to contribute to Lessee sufficient equity capital in the form of cash to cause Lessees Tangible Net Worth to become positive. For purposes of calculating Lessees Tangible Net Worth, Tangible Net Worth includes the amount of any cash Security Deposit.
8.2.2 Guarantors Tangible Net Worth . At all times during the Term, Guarantor shall maintain a Tangible Net Worth of at least Five Million Dollars ($5,000,000). If at any time Guarantors Tangible Net Worth is not at least Five Million Dollars ($5,000,000), within thirty (30) days Lessee shall cause the holders of Guarantors outstanding equity interests to contribute to Guarantor sufficient equity capital in the form of cash to cause Guarantors Tangible Net Worth to become at least Five Million Dollars ($5,000,000). For purposes of calculating Guarantors Tangible Net Worth, Tangible Net Worth includes the amount of any cash Security Deposit.
8.2.3 Cash Flow to Rent Ratio . Lessee and the Sublessees shall maintain, on a consolidated basis, a Cash Flow to Rent Ratio (in each case, for the immediately preceding 12 month period) not less than 1.30:1.
8.2.4 Debt . None of the Lessee or any Sublessee will, or will permit any Subsidiary to, create, incur or suffer to exist any Debt, except (i) Debt owed to Lessor (or one of its Affiliates) or trade credit incurred in the ordinary course of business, (ii) the Line of Credit if permitted under Section 6.4, and (iii) the equipment financing permitted under Section 8.2.4.
8.2.5 Limitation of Distributions . None of Lessee or any Sublessee shall make any Distributions to the holders of its equity securities or any Affiliate if, as of the date of such Distribution or upon giving effect to such Distribution, (a) an Event of Default has occurred and is continuing or (b) an Unmatured Event of Default has occurred and is continuing.
8.2.6 Guarantees Prohibited . Neither Lessee, nor any Sublessee shall guarantee any indebtedness of any Affiliate or other third party.
8.2.4 Equipment Financing . The aggregate amount of principal, interest and lease payments due from Lessee and the Sublessees on any equipment financing shall not exceed Twenty Five Thousand Dollars ($25,000) annually per Facility.
8.2.5 Loans from Affiliates . Neither Lessee nor any Sublessee shall borrow money from any Affiliate unless the obligations of Lessee or such Sublessee and the rights of its Affiliates with respect to any such loan are subordinated to the rights of Lessor pursuant to a written subordination agreement in form and substance acceptable to Lessor .
8.3 Minimum Qualified Capital Expenditures . From and after the Effective Date, each Lease Year Lessee shall expend with respect to each Facility at least Three Hundred Seventy Five Dollars ($375.00) per-licensed-bed for Qualified Capital Expenditures to improve the Facilities, which amount shall be increased each Lease Year, beginning with the second Lease Year commencing on May 1, 2011, in proportion to increases in the CPI. At least annually, at the request of Lessor, Lessor and Lessee shall review capital expenditures budgets and agree on modifications, if any, required by changed circumstances and the changed conditions of the Leased Properties.
8.4 Management Agreements . Lessee shall not enter into, amend or terminate any Management Agreement without the prior written consent of Lessor and any Facility Mortgagee.
8.5 Other Facilities . Neither Lessee nor any Affiliate shall own, operate or manage any nursing home, rest home, assisted living facility, subacute facility, retirement center or similar health care facility within a five (5) mile radius of any Facility.
8.6 No Other Business . None of Lessee or any Sublessee shall engage in any business other than the operation of the Facilities.
8.7 Tax Returns . During the Term, the Lessee, Guarantor and the Sublessees shall timely file, or cause to be timely filed, all required tax returns for the operation of their business and shall pay all taxes required to be paid in connection such returns, including but not limited to, employee withholding taxes, before any penalty or interest for failure to file arises.
8.8 Existence; No Fundamental Change . Lessee, the Sublessees, and Guarantor shall preserve and maintain their legal existence and such of their rights, licenses and privileges as are material to their business and operations; and qualify and remain qualified to do business in each jurisdiction in which such qualification is material to their business and operations or the ownership of their properties. Except with the prior written approval of Lessor, which may be withheld in Lessors sole and absolute discretion, none of Lessee or the Sublessees will fundamentally change the nature of its business, enter into any amalgamation, merger, consolidation, reorganization or recapitalization, or reclassify its capital stock or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, assign, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its business, property or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or assets, of any Person or any shares of stock or other equity securities of any Person.
8.9 No Investments . Without the prior written consent of Lessor, neither Lessee, nor any Sublessees will, or will they permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person.
8.10 Bank Accounts . Lessee and the Sublessees shall maintain separate bank accounts from any other Person. None of Lessee and the Sublessees shall permit its or their assets, including cash, cash equivalents, and the cash proceeds arising out of the operation of the Facilities, to be commingled with the assets of any Person (other than Lessee and the Sublessees); provided, however, that the personal allowance accounts of the residents of the Facilities need not be maintained separately and may be commingled so long as Lessee and the Sublessees maintain adequate written records with respect to such personal allowance accounts.
8.11 Liens . Subject to the provisions of Section 12.1 relating to permitted contests, Lessee and the Sublessees shall not directly or indirectly create or allow to remain, and shall promptly discharge at their expense, any lien, encumbrance, attachment, title retention agreement or claim upon any assets of Lessee and the Sublessees, excluding, however, (a) the liens and security interests in favor of Lessor and its Affiliates, (b) liens for Impositions or for sums resulting from noncompliance with Legal Requirements so long as (i) the same are not yet payable, or (ii) such liens are in the process of being contested as permitted by Section 12.1, (c) liens of mechanics, laborers, materialmen, suppliers or vendors for sums either disputed or not yet due, provided that any such liens are in the process of being contested as permitted by Section 12.1, and (g) liens permitted under Section 6.4 of this Agreement.
ARTICLE IX
9.1 Maintenance and Repair .
9.1.1 Lessee, at its expense, will keep the Leased Properties, and all appurtenant landscaping, private roadways, sidewalks and curbs that are under Lessees control and Lessees Personal Property in good order and repair, whether or not the need for such repairs arises out of Lessees use, any prior use, the elements or the age of the Leased Properties or any portion thereof, or any cause whatsoever except the act or negligence of Lessor, and with reasonable promptness shall make all necessary and appropriate repairs. Lessee shall maintain, operate and otherwise manage the Leased Properties at all times on a basis and in a manner consistent with the standards of the other competing healthcare facilities in the market areas served by the Leased Properties. All repairs shall, to the extent reasonably achievable, be at least equivalent in quality to the original work or the property to be repaired shall be replaced. Lessee will not take or omit to take any action the taking or omission of which might materially impair the value or the usefulness of the Leased Properties or any parts thereof for the Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to maintain, build or rebuild any improvements on a Leased Property (or any private roadways, sidewalks or curbs appurtenant thereto), or to make any repairs, replacements, alterations, restorations or renewals of any nature or description to a Leased Property, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or upon any adjoining property, whether to provide lateral or other support or abate a nuisance, or otherwise, or to make any expenditure whatsoever with respect thereto, in connection with this Lease. Lessee hereby waives, to the extent permitted by law, the right to make repairs at the expense of Lessor pursuant to any law in effect at the time of the execution of this Lease or hereafter enacted.
9.1.3 Nothing contained in this Lease shall be construed as (a) constituting the consent or request of Lessor, expressed or implied, to any contractor, subcontractor, laborer, materialmen or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to a Leased Property or any part thereof, or (b) giving Lessee any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Lessor in respect thereof or to make any agreement that may create, or in any way be the basis for, any right, title, interest, lien, claim or other encumbrance upon the estate of Lessor in the Leased Properties or any portion thereof. Lessor shall have the right to give, record and post, as appropriate, notices of non-responsibility under any mechanics and construction lien laws now or hereafter existing.
9.1.4 Lessee promptly shall replace any of the Leased Improvements or Lessors Personal Property that becomes worn out or unusable or unavailable for the purpose for which intended. All replacements shall have a value and utility at least equal to that of the items replaced and shall become part of the Leased Properties immediately upon their acquisition by Lessee. Upon Lessors request, Lessee promptly shall execute and deliver to Lessor a bill of sale or other instrument establishing Lessors lien-free ownership of such replacements. Lessee promptly shall repair all damage to a Leased Property incurred in the course of such replacement.
9.1.5 Lessee will, upon the expiration or earlier termination of the Term, vacate and surrender the Leased Properties to Lessor in the condition in which they were originally received from Lessor, in good operating condition, ordinary wear and tear excepted, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Lease.
ARTICLE X
10.1 Construction of Alterations and Additions to the Leased Properties .
10.1.1 Lessee shall not (a) make or permit to be made any structural alterations, improvements or additions of or to the Leased Properties or any part thereof, or (b) materially alter the plumbing, HVAC or electrical systems thereon or (c) make any other alterations, improvements or additions the cost of which exceeds (i) Fifty Thousand ($50,000.00) Dollars per alteration, improvement or addition, or (ii) One Hundred Thousand ($100,000.00) Dollars in any Lease Year, unless and until Lessee has (x) caused complete plans and specifications therefor to have been prepared by a licensed architect and submitted to Lessor at least sixty (60) Business Days before the
planned start of construction thereof, (y) obtained Lessors written approval thereof and the approval of any Facility Mortgagee and (z), if required to do so by Lessor, provided Lessor with reasonable assurance of the payment of the cost of any such alterations, improvements or additions, in the form of a bond, letter of credit or cash deposit. If Lessor requires a deposit, Lessor shall retain and disburse the amount deposited in the same manner as is provided for insurance proceeds in Section 14.6. If the deposit is reasonably determined by Lessor at any time to be insufficient for the completion of the alteration, improvement or addition, Lessee immediately shall increase the deposit to the amount reasonably required by Lessor. Lessee shall be responsible for the completion of such improvements in accordance with the plans and specifications approved by Lessor, and promptly shall correct any failure with respect thereto.
10.1.2 Alterations and improvements, other than normal maintenance and repair of a Facility, not falling within the categories described in the first sentence of Section 10.1.1 may be made by Lessee without the prior approval of Lessor.
10.1.3 All alterations, improvements and additions shall (a) be constructed in good, workmanlike, manner, in compliance with all Insurance Requirements and Legal Requirements, (b) be in keeping with the character of the Leased Properties and the area in which a Leased Property in question is located and (c) be designed and constructed so that the value of the Leased Property will not be diminished and the Primary Intended Use of a Leased Property will not be changed. All improvements, alterations and additions immediately shall become a part of such Leased Property.
10.1.4 Lessee shall have no claim against Lessor at any time in respect of the cost or value of any improvement, alteration or addition. There shall be no adjustment in the Rent by reason of any such improvement, alteration or addition.
10.1.5 In connection with any alteration that involves the removal, demolition or disturbance of any asbestos-containing material, Lessee shall cause to be prepared at its expense a full asbestos assessment applicable to such alteration and shall carry out such asbestos monitoring and maintenance program as reasonably shall be required thereafter in light of the results of such assessment.
ARTICLE XI
11.1 Liens . Without the consent of Lessor or as expressly permitted elsewhere herein, Lessee will not directly or indirectly create or allow to remain and will promptly discharge at its expense any lien, encumbrance, attachment, title retention agreement or claim upon a Leased Property, and any attachment, levy, claim or encumbrance in respect of the Rent, except for (a) Permitted Encumbrances, (b) liens of mechanics, laborers, materialmen, suppliers or vendors for sums not yet due, and (c) liens created by the malfeasance or negligence of Lessor.
ARTICLE XII
12.1 Permitted Contests . Lessee, on its own or on Lessors behalf (or in Lessors name), but at Lessees sole cost and expense, shall have the right to contest, by appropriate legal proceedings conducted in good faith and with due diligence, the amount or validity of any real or personal property assessment, Imposition, Legal Requirement or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or claim or any encroachment or restriction burdening a
Leased Property, provided: (a) prior Notice of such contest is given to Lessor; (b) a Leased Property would not be in any danger of being sold, forfeited or attached as a result of such contest, and there is no risk to Lessor of a loss of or interruption in the payment of Rent; (c) in the case of an unpaid Imposition or other lien, attachment, levy, encumbrance, charge or claim, collection thereof is suspended during the pendency of such contest; (d) in the case of a contest of a Legal Requirement, compliance may legally be delayed pending such contest and pending such contest no license, permit, approval, certificate of need, certificate of reimbursement or other authorization necessary to operate the Facilities as a provider of health care services in accordance with its Primary Intended Use may be irrevocably suspended or revoked, or its right to so operate a Facility or to accept patients irrevocably suspended. Upon request of Lessor, Lessee shall deposit funds or assure Lessor in some other manner reasonably satisfactory to Lessor (such as paying eighty-five percent of the amount claimed due to the Governmental Authority in the case of real property taxes and assessments) that the amount to be paid by Lessee that is the subject of a contested Imposition, Legal Requirement, Insurance Requirement or Claim, together with interest and penalties, if any, thereon, and any and all costs for which Lessee is responsible will be paid if and when required upon the conclusion of such contest. Lessee shall defend, indemnify and save harmless Lessor from all costs or expenses arising out of or in connection with any such contest, including but not limited to attorneys fees. If at any time Lessor reasonably determines that payment of any Imposition or other lien, attachment, levy, encumbrance, charge or claim, or compliance with any Legal or Insurance Requirement being contested by Lessee is necessary in order to prevent loss of a Leased Property or Rent or civil or criminal penalties or other damage (including revocation or suspension of any license, permit, approval, certificate of need, certificate of reimbursement or other authorization necessary to operate the Facilities as a provider of health care services in accordance with its Primary Intended Use or suspension of any right to accept patients), upon such prior Notice to Lessee as is reasonable in the circumstances Lessor may pay such amount, require Lessee to comply with such Legal or Insurance Requirement or take such other action as it may deem necessary to prevent such loss or damage. If reasonably necessary, upon Lessees written request, Lessor, at Lessees expense, shall cooperate with Lessee in a permitted contest, provided Lessee upon demand makes arrangements satisfactory to Lessor to assure the reimbursement of any and all Lessors costs incurred in cooperating with Lessee in such contest.
ARTICLE XIII
13.1 General Insurance Requirements . Lessee shall keep the Leased Properties, and all property located in or on the Leased Properties, including Lessors Personal Property and Lessees Personal Property, insured with insurance meeting the following requirements: (a) all insurance shall be written by companies authorized to do insurance business in the applicable States and having a rating classification of not less than A- and a financial size category of Class VIII, according to the then most recent issue of Bests Key Rating Guide; (b) all property and general liability policies (but not professional liability, criminal liability or worker compensation policies) must name Lessor as an additional insured, and name as an additional insured any Facility Mortgagee by way of a standard form of mortgagees loss payable endorsement in use in the applicable States and in accordance with any such other requirements as may be established by such Facility Mortgagee. However, if requested by Lessor and available on a commercially reasonable basis, all public liability and property damage insurance shall contain a provision that Lessor, although named as an insured, nevertheless shall be entitled to recovery for loss, damage or injury to Lessor, its servants, agents and employees by reason of the negligence of Lessee or Lessor; (c) losses must be payable to Lessor or Lessee as provided in Article XIV, and loss adjustments shall
require the written consent of Lessor, any Facility Mortgagee and, provided it is not then in default, Lessee, which consent shall not be unreasonably withheld by either Lessor or Lessee; (d) each insurer must agree that it will give Lessor and any Facility Mortgagee at least sixty (60) days written Notice before its policy shall be altered, allowed to expire or canceled; (e) if the deductible exceeds $50,000, then the amount of any deductible or retention must be approved by Lessor prior to the issuance of any policy; and (f) the form of all policies shall be approved by Lessor, whose approval shall not unreasonably be withheld, and by any Facility Mortgagee.
13.2 Risks to be Insured . The policies covering the Leased Properties and Lessees Personal Property shall insure against the following risks:
13.2.1 Loss or damage by fire, vandalism and malicious mischief, earthquake, extended coverage perils commonly known as Special Risk, and all physical loss perils normally included in such Special Risk insurance, including but not limited to sprinkler leakage, in an amount not less than one hundred percent (100%) of Replacement Cost;
13.2.2 Broad form comprehensive boiler and machinery insurance on a blanket repair and replace basis, with limits for each accident in an amount not less than one hundred percent (100%) of Replacement Cost;
13.2.3 Loss of rental under a rental value insurance policy covering risk of loss during reconstruction necessitated by the occurrence of any of the hazards described in Sections 13.2.1 or 13.2.2 (but in no event for a period less than twelve (12) months) in an amount sufficient to prevent Lessor and Lessee from becoming a co-insurer;
13.2.4 Claims for bodily injury (including resulting death), personal injury or property damage under a policy of commercial general public liability insurance, in such amounts and on such terms, as Lessee may determine in its sole discretion;
13.2.5 Claims arising out of malpractice, in such amounts and on such terms, as Lessee may determine in its sole discretion;
13.2.6 Flood (with respect to any portions of the Leased Properties located in whole or in part within a designated flood plain area) and such other hazards and in such amounts as may be customary for comparable properties in the area;
13.2.7 During such time as Lessee is constructing any improvements, (a) workers compensation insurance and employers liability insurance covering all persons employed in connection with the improvements in statutory limits, (b) a completed operations endorsement to the commercial general liability and property damage insurance policies referred to above, (c) builders risk insurance, completed value form, covering all physical loss, in an amount satisfactory to Lessor, and (d) such other reasonable insurance, in such amounts, as Lessor deems reasonably necessary to protect Lessors interest in the Leased Properties from any act or omission of Lessees contractors or subcontractors, and certificates of insurance evidencing such coverage, in form satisfactory to Lessor, shall be presented to Lessor prior to the commencement of construction of such improvements; provided, however, that with regard to the insurance coverage required by subsections (a) and (b) of this Section 13.2.7, Lessee shall be in compliance with these subsections
if it causes the applicable contractors constructing any improvements to provide such insurance in a manner consistent with the requirements of this Lease;
13.2.8 Primary automobile liability insurance with limits of One Million Dollars ($1,000,000.00) per occurrence each for owned and non-owned and hired vehicles;
13.2.9 Loss or damage commonly covered by blanket crime insurance including dishonesty, loss of money orders or paper currency and depositors forgery, with a limit of not less than One Hundred Fifty Thousand Dollars ($150,000.00).
13.3 Payment of Premiums; Copies of Policies; Certificates. Subject to Section 12.2 of this Lease, Lessee shall pay when due all of the premiums for the insurance required by this Lease, and shall deliver to Lessor and to any Facility Mortgagee requesting such evidence, certificates of insurance in form satisfactory to Lessor and such Facility Mortgagee. Copies of the policies of insurance required by this Lease and certificates thereof shall be delivered to Lessor when available to Lessee, and in the event of the failure of Lessee either to carry the required insurance or pay the premiums therefor, or to deliver copies of policies or certificates to Lessor as required, Lessor shall be entitled, but shall have no obligation, to obtain such insurance and pay the premiums therefor when due, in which event Lessee shall repay to Lessor the premiums upon written demand therefor as Additional Charges.
13.4 Umbrella Policies . If Lessee chooses to carry umbrella liability coverage to obtain the limits of liability required under this Lease, the umbrella policies must provide coverage in substantially the same manner as the primary commercial general liability policy and must contain no exclusions or limitations materially different than, those of the primary policy.
13.5 Additional Insurance . In addition to the insurance described above, Lessee shall maintain such insurance as may be reasonably required from time to time by any Facility Mortgagee and shall at all times comply with all Legal Requirements with respect to workers compensation insurance coverage.
13.6 No Liability; Waiver of Subrogation . Lessor shall have no liability to Lessee, and, provided Lessee provides the insurance required of it by this Lease, Lessee shall have no liability to Lessor, regardless of the cause, for any loss or expense resulting from or in connection with damage to or the destruction or other loss of the Leased Properties or Lessees Personal Property, and neither party will have any right or claim against the other for any such loss or expense by way of subrogation. Each insurance policy carried by either party covering any of the Leased Properties and Lessees Personal Property, including without limitation, contents, fire and casualty insurance, shall contain an express waiver of any right of subrogation on the part of the insurer against the other party. Lessee shall pay any additional costs or charges for obtaining such waiver.
13.7 Intentionally omitted .
13.8 Blanket Policy . Any insurance required by this Lease may be provided by so-called blanket policies of insurance carried by Lessee; provided, however, that the coverage afforded Lessor thereby may not be less than or materially different from that which would be provided by separate policies meeting the requirements of this Lease.
13.9 No Separate Insurance .
13.9.1 Lessee shall not, on its own initiative or pursuant to the request or requirement of any third party, take out separate insurance concurrent in form or contributing in the event of loss with that required by this Lease, to be furnished by, or that may reasonably be required to be furnished by, Lessee, or increase the amount of any then existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Lessor and all Facility Mortgagees, are named therein as additional insureds, and losses are payable thereunder in the same manner as losses are payable under this Lease.
13.9.2 Nothing herein shall prohibit Lessee, upon Notice to Lessor, from (a) securing insurance required to be carried hereby with higher limits of liability than required in this Lease, or (b) securing insurance against risks not required to be insured pursuant to this Lease, and as to such insurance, Lessor and any Facility Mortgagee need not be included therein as additional insureds, nor must losses thereunder be payable in the same manner as losses are payable under this Lease.
ARTICLE XIV
14.1 Insurance Proceeds . Net Proceeds shall be paid to Lessor and held, disbursed or retained by Lessor as provided herein. If the Net Proceeds are less than the Approval Threshold, and no Event of Default has occurred and is continuing, Lessor shall pay the Net Proceeds to Lessee promptly upon Lessees request. If the Net Proceeds equal or exceed the Approval Threshold, and no Event of Default has occurred and is continuing, the Net Proceeds shall be made available for restoration or repair as provided in Section 14.6. Within fifteen (15) days of the receipt of the Net Proceeds of Special Risk Insurance, Lessor and Lessee shall agree as to the portion thereof, if any, attributable to the Lessees Personal Property that Lessee is not required and does not elect to restore or replace, and if they cannot agree they shall submit the matter to arbitration pursuant to Article XXXV hereof, and the portion of the proceeds of such Special Risk Insurance agreed or determined by arbitration to be attributable to the Lessees Personal Property that Lessee is not required and does not elect to restore or replace shall be paid to Lessee.
14.2 Restoration in the Event of Damage or Destruction . If all or any portion of a Leased Property is damaged by fire or other casualty, Lessee shall: (a) give Lessor Notice of such damage or destruction within five (5) Business Days of the occurrence thereof; (b) within thirty (30) Business Days of the occurrence commence the restoration of such Leased Property; and (c) thereafter proceed diligently to complete such restoration as quickly as reasonably possible to the end that such Leased Property is in substantially the same (or better) condition as such Leased Property was in immediately prior to the damage or destruction. Regardless of the anticipated cost thereof, if the restoration of such Leased Property requires any modification of structural elements, prior to commencing such modification Lessee shall obtain Lessors written approval of the plans and specifications therefor.
14.3 Restoration of Lessees Property . If Lessee is required to restore a Leased Property, Lessee also concurrently shall restore any of Lessees Personal Property that is integral to the Primary Intended Use of such Leased Property at the time of the damage or destruction.
14.4 No Abatement of Rent . There shall be no abatement of Rent by reason of any damage to or the partial or total destruction of a Leased Property.
14.5. Waiver . Except as provided elsewhere in this Lease, Lessee hereby waives any statutory or common law rights of termination that may arise by reason of any damage to or destruction of a Leased Property.
14.6. Disbursement of Insurance Proceeds Equal to or Greater Than The Approval Threshold . If Lessee restores or repairs a Leased Property pursuant to this Article XIV, and if the Net Proceeds equal or exceed the Approval Threshold, the restoration or repair and disbursement of funds to Lessee shall be in accordance with the following procedures:
(a) The restoration or repair work shall be done pursuant to plans and specifications approved by Lessor and a certified construction cost statement, to be obtained by Lessee from a contractor reasonably acceptable to Lessor, showing the total cost of the restoration or repair.
(b) Construction Funds shall be made available, subject to a ten percent (10%) holdback, to Lessee upon request, but no more frequently than monthly, as the restoration and repair work progresses pursuant to certificates, in form and substance reasonably acceptable to Lessor, of an architect selected by Lessee and reasonably acceptable to Lessor (such architect to be, in the reasonable judgment of Lessor, highly qualified in the design and construction of the type of facility being repaired).
(c) After the first disbursement to Lessee, sworn statements and lien waivers in an amount at least equal to the amount of Construction Funds previously paid to Lessee shall be delivered to Lessor from all contractors, subcontractors and material suppliers covering all labor and materials furnished through the date of the previous disbursement.
(d) Lessee shall deliver to Lessor such other evidence as Lessor reasonably may request, from time to time during the course of the restoration and repair, as to the progress of the work, compliance with the approved plans and specifications, the cost of restoration and repair and the total amount needed to complete the restoration and repair, and showing that there are no liens against any Leased Property arising in connection with the restoration and repair and that the cost of the restoration and repair at least equals the total amount of Construction Funds then disbursed to Lessee hereunder.
(e) The Construction Funds may be disbursed by Lessor to Lessee or to the persons entitled to receive payment thereof from Lessee, and such disbursement in either case may be made directly or through a third party escrow agent, such as, but not limited to, a title insurance company, or its agent, all as Lessor may determine in its sole discretion. Provided Lessee is not in default hereunder, any excess Construction Funds shall be paid to Lessee upon completion of the restoration or repair.
(f) If Lessee at any time fails to perform promptly and fully the conditions and covenants set forth in subparagraphs (a) through (f) above, and the failure is not corrected within ten (10) days of written Notice thereof, or if during the restoration or repair an Event
of Default occurs, Lessor may, at its option, immediately cease making any further payments to Lessee for the restoration and repair.
(g) Lessor may reimburse itself out of the Construction Funds for its reasonable expenses incurred in administering the Construction Funds and inspecting the restoration and repair work, including without limitation attorneys and other professional fees and escrow fees and expenses.
ARTICLE XV
15.1 Total Taking or Other Taking with Leased Properties Rendered Unsuitable for Its Primary Intended Use . If title to the fee of the whole of any Leased Property is Taken, this Lease shall cease and terminate as of the Date of Taking by the Condemnor, and Rent shall be apportioned as of the Date of Taking. If title to the fee of less than the whole of a Leased Property is Taken, but such Leased Property is rendered Unsuitable for Its Primary Intended Use as a result of the Partial Taking, each of Lessee and Lessor shall have the option, which shall be exercisable by written Notice to the other at any time prior to the first to occur of the taking of possession by, or the date of vesting of title in, the Condemnor, to terminate this Lease with respect to such Leased Property as of the date so determined, in which event this Lease shall so cease and terminate as of the earlier of the date specified in the Notice or the date on which possession is taken by the Condemnor.
15.2 Allocation of Award . The total Award made with respect to all or any portion of a Leased Property or for loss of Rent, or for loss of business, shall be solely the property of and payable to Lessor or, if so provided in a Facility Mortgage, to the Facility Mortgagee. Nothing contained in this lease will be deemed to create any additional interest in Lessee, or entitle Lessee to any payment based on the value of the unexpired term or so-called bonus value to Lessee of this Lease. Any Award made for the taking of Lessees Personal Property, or for removal and relocation expenses of Lessee in any such proceedings, shall be payable to Lessee. In any proceedings with respect to an Award, each of Lessor and Lessee shall seek its own Award in conformity herewith, at its own expense. Notwithstanding the foregoing, Lessee may pursue a claim for loss of its business, provided that under the laws of the State, such claim will not diminish the Award to Lessor.
15.3 Partial Taking . In the event of a Partial Taking, Lessee, at its own cost and expense, shall (a) give Lessor Notice of such Partial Taking; (b) within thirty (30) Business Days of the first to occur of the taking of possession by, or the date of vesting of title in, the Condemnor provide Lessor with the Estimated Cost with respect to restore of such Leased Property to a complete architectural unit of the same general character and condition (as nearly as may be possible under the circumstances) as existed immediately prior to the Partial Taking. If the Estimated Cost is less than the Approval Threshold and the Award, then Lessee shall commence upon receipt of the Award from Lessor the restoration of such Leased Property immediately and thereafter proceed diligently to complete such restoration as quickly as reasonably possible, but in any event within one hundred eighty (180) days of the date on which such Notice is given. Lessor shall contribute to the cost of restoration that portion of the Award not in excess of the Estimated Cost. As long as no Event of Default has occurred and is continuing, if such portion of the Award is in an amount less than the Approval Threshold, Lessor shall pay the same to Lessee to fund completion of such restoration. If the Estimated Cost exceeds the either the Award or the Approval Threshold, then prior to commencing such restoration, Lessee shall obtain Lessors written approval of the plans and
specifications therefor. If the Estimated Cost exceeds the either the Award or the Approval Threshold, then Lessor shall provide Lessee within thirty (30) days of receipt of the Estimated Cost of Lessors decision whether to reconstruct such Leased Property. If Lessor elects to have Lessee reconstruct such Leased Property, then (1) Lessee shall commence the restoration of such Leased Property immediately, (2) Lessor shall make the Award available therefor, (3) Lessor shall fund any amount by which the Estimated Cost exceeds the Award, and (4) Lessee shall thereafter proceed diligently to complete such restoration as quickly as reasonably possible. If Lessor elects not to have Lessee reconstruct such Leased Property, (1) Lessor shall be entitled to retain the Award, and (2) if no Event of Default exists, then Lessee may terminate the Lease.
15.4 Temporary Taking . If there is a Partial Taking of possession or the use of all or part of a Leased Property, but the fee of such Leased Property is not Taken in whole or in part, until such Partial Taking of possession or use continues for more than two (2) months, all the provisions of this Lease shall remain in full force and effect and the entire amount of any Award made for such Partial Taking shall be paid to Lessee provided there is then no Event of Default. Upon the termination of any such period of temporary use or occupancy, Lessee at its sole cost and expense shall restore the affected Leased Property, as nearly as may be reasonably possible, to the condition existing immediately prior to such Partial Taking. If any such Partial Taking continues for longer than two (2) months, and thirty percent (30%) or more of the patient capacity of such Facility is thereby rendered Unsuitable for Its Primary Use, this Lease shall cease and terminate as of the last day of the second (2nd) month, but if less than thirty percent (30%) of the patient capacity of such Facility is thereby rendered Unsuitable for Its Primary Use, each of Lessee and Lessor shall have the option, which shall be exercisable by giving written Notice to the other at least sixty (60) days prior written Notice to the other, at any time prior to the end of the temporary Partial Taking, to terminate this Lease as of the date set forth in such Notice, and Lessee shall be entitled to any Award made for the period of such temporary Partial Taking prior to the date of termination of the Lease. Rent shall not abate during the period of any temporary Partial Taking.
ARTICLE XVI
16.1 Lessors Rights Upon an Event of Default . If an Event of Default occurs, Lessor may terminate this Lease by giving Lessee a Notice of Termination, and in such event the Term shall end and all rights of Lessee under this Lease shall cease on the Termination Date. The Notice of Termination shall be in lieu of and not in addition to any notice required by the laws of any State as a condition to bringing an action for possession of the Leased Premises or to recover damages under this Lease. In addition to Lessors right to terminate this Lease, Lessor shall have all other rights set forth in this Lease and all remedies available at law and in equity.
Lessee shall, to the extent permitted by law, pay as Additional Charges all costs and expenses incurred by or on behalf of Lessor, including, without limitation, reasonable attorneys fees and expenses (whether or not litigation is commenced, and if litigation is commenced, including fees and expenses incurred in appeals and post-judgment proceedings) as a result of any default of Lessee hereunder.
No Event of Default (other than a failure to make payment of money) shall be deemed to exist if and for so long as Lessee is unable to prevent such Event of Default because of Force Majeure, provided that, upon the cessation of the Force Majeure, Lessee immediately shall
proceed to remedy the action or condition giving rise to the Event of Default within the applicable cure period as extended by the Force Majeure.
16.2 Certain Remedies . If an Event of Default occurs, whether or not this Lease has been terminated pursuant to Section 16.1, if required to do so by Lessor Lessee immediately shall surrender such Leased Property to Lessor in the condition required by Section 9.1.5 and quit the same, and Lessor may enter upon and repossess such Leased Property by reasonable force, summary proceedings, ejectment or otherwise, and may remove Lessee and all other persons and any and all personal properties from such Leased Property, subject to rights of any residents or patients and to any Legal Requirements.
16.3 Damages . None of (a) the termination of this Lease pursuant to Section 16.1, (b) the repossession of a Leased Property, (c) the failure of Lessor to relet a Leased Property, (d) the reletting of all or any portion thereof, or (v) the failure of Lessor to collect or receive any rentals due upon such any reletting, shall relieve Lessee of its liability and obligations hereunder, all of which shall survive any such termination, repossession or reletting. If this Lease is terminated by Lessor, Lessee immediately shall pay to Lessor all Rent due and payable with respect to a Leased Property to and including the Termination Date, including without limitation all interest and late charges payable under Section 3.3 hereof with respect to any late payment of such Rent. Lessee also shall pay to Lessor, as liquidated damages, at Lessors option, either:
(A) The sum of:
(i) Lessors Interim Rent Loss, minus Net Reletting Proceeds for such period, and minus the portion of Lessors Interim Rent Loss, if any, that Lessee proves reasonably could have been mitigated by Lessor, plus
(ii) the Present Value on the Judgment Date of Lessors Future Rent Loss, assuming the Cost of Living Index were to increase four (4) percentage points per Lease Year from the Judgment Date through the Expiration Date, minus the Present Value on the Termination Date of the portion of Lessors Future Rent Loss that Lessee proves reasonably could be mitigated by Lessor;
or
(B) Each month between the Termination Date and the Expiration Date, Lessors Monthly Rent Loss, minus the Net Reletting Proceeds for such month, and minus the portion, if any, of Lessors Monthly Rent Loss that Lessee proves reasonably could have been avoided. Any suit brought to recover liquidated damages payable under this subsection (B) shall not prejudice Lessors right to collect liquidated damages for subsequent months in a similar proceeding.
16.4 Waiver . If this Lease is terminated pursuant to Section 16.1, Lessee waives, to the extent permitted by applicable law, (a) any right of reentry, repossession or redesignation, (b) any right to a trial by jury in the event of summary proceedings to enforce the remedies set forth in this Article XVI, and (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt. Acceptance of Rent at any time does not prejudice or remove any right of Lessor as to any right or remedy. No course of conduct shall be held to bar Lessor from literal enforcement of the terms of this Lease.
16.5 Application of Funds . Any payments received by Lessor under any of the provisions of this Lease during the existence or continuance of any Event of Default shall be applied to Lessees obligations in the order that Lessor determines in its sole discretion or as may be prescribed by law.
ARTICLE XVII
17.1 Lessors Right to Cure Lessees Default . If Lessee fails to make any payment or perform any act required to be made or performed under this Lease, and fails to cure the same within any grace or cure period applicable thereto, upon such Notice as may be expressly required herein (or, if Lessor reasonably determines that the giving of Notice would risk material loss to a Leased Property or cause material damage to Lessor, upon such Notice as is practical under the circumstances), and without waiving or releasing any obligation of Lessee, Lessor may make such payment or perform such act for the account and at the expense of Lessee, and may, to the extent permitted by law, enter upon a Leased Property for such purpose and take all such action thereon as, in Lessors sole opinion, may be necessary or appropriate. No such entry shall be deemed an eviction of Lessee. All amounts so paid by Lessor and all costs and expenses (including, without limitation, reasonable attorneys fees and expenses) so incurred, together with the late charge and interest provided for in Section 3.3 thereon, shall be paid by Lessee to Lessor on demand. The obligations of Lessee and rights of Lessor contained in this Article shall survive the expiration or earlier termination of this Lease.
ARTICLE XVIII
18.1 Holding Over . If Lessee remains in possession of a Leased Property after the expiration of the Term or earlier termination of this Lease, such possession shall be as a month-to-month tenant, and throughout the period of such possession Lessee shall pay as Rent for each month one and one half (1 ½) times the sum of:(a) one-twelfth (1/12 th ) of the Base Rent payable during the Lease Year in which such expiration or termination occurs, plus (b) all Additional Charges accruing during the month, plus (c) any and all other sums payable by Lessee pursuant to this Lease. During such period of month-to-month tenancy, Lessee shall be obligated to perform and observe all of the terms, covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to the extent given by applicable law to month-to-month tenancies, to continue its occupancy and use of such Leased Property until the month-to-month tenancy is terminated. Nothing contained herein shall constitute the consent, express or implied, of Lessor to the holding over of Lessee after the expiration or earlier termination of this Lease.
18.2 Indemnity . If Lessee fails to surrender the Leased Properties in a timely manner and in accordance with the provisions of Section 9.1.5 upon the expiration or termination of this Lease, in addition to any other liabilities to Lessor accruing therefrom, Lessee shall defend, indemnify and hold Lessor, its principals, officers, directors, agents and employees harmless from loss or liability resulting from such failure, including, without limiting the generality of the foregoing, loss of rental with respect to any new lease in which the rental payable thereunder exceeds the Rent paid by Lessee pursuant to this Lease during Lessees hold-over and any claims by any proposed new tenant founded on such failure. The provisions of this Section 18.2 shall survive the expiration or earlier termination of the Term.
18.3 If Lessor fails to find a new lessee, manager, operator or owner for the Leased Properties in a timely manner prior to the expiration of the Term, and Lessee is required by its obligations as the licensed operator of the Facilities to, or is requested by Lessor to, hold over, then Lessee shall have no obligation to pay Rent during such period. In such circumstances, Lessee shall not be obligated to remain in possession and operating the Facilities for a period in excess of six months after the expiration of the Term.
ARTICLE XIX
19.1 Subordination . This Lease is subject and subordinate to any Facility Mortgage. This clause shall be self-operative and no further instrument of subordination need be required by any Facility Mortgagee; provided, however, that Lessor or any Facility Mortgagee may elect to make this Lease superior to a Facility Mortgage at any time by Notice to Lessee. As to any Facility Mortgage to which this Lease is subordinate, Lessor shall provide Lessee with a non-disturbance agreement reasonably acceptable to such Facility Mortgagee and Lessee providing that, if such Facility Mortgagee acquires the Leased Properties by way of foreclosure or deed in lieu of foreclosure, such Facility Mortgagee will not disturb Lessees possession under this Lease and will recognize Lessees rights hereunder if and for so long as no Event of Default has occurred under this Lease and is continuing. Lessee agrees that it shall not withhold or delay its consent unreasonably to any amendment of this Lease reasonably required by a Facility Mortgagee, and Lessee shall be deemed to have withheld or delayed its consent unreasonably if Lessee has received the non-disturbance agreement provided for above and the requested amendment does not materially (a) alter the economic terms of this Lease, (b) diminish the rights of Lessee under this Lease or (c) increase the obligations of Lessee under this Lease.
19.2 Attornment . If a Facility Mortgagee enforces the remedies provided for by law or by a Facility Mortgage, Lessee shall, at the option of the party succeeding to the interest of Lessor as a result of such enforcement or as a result of a deed or delivery of possession of the Leased Properties in lieu of such enforcement, attorn to such successor and recognize such successor as Lessor under this Lease; provided, however, that such successor in interest shall not (a) be bound by any payment of Rent for more than one (1) month in advance, except for any such advance payments as may be expressly required by this Lease; (b) be bound by any modification of this Lease made without the written consent of the Facility Mortgagee or successor in interest; (c) be liable for any act or omission of Lessor (provided, that nothing in this Section 19.2 shall release Lessor of any such liability); or (d) be subject to any offset or defense arising prior to the date such successor in interest acquired title to the Leased Properties. Upon request, Lessee shall execute and deliver an instrument or instruments confirming the attornment provided for herein.
19.3 Lessees Certificate . Lessee shall, upon not less than twenty (20) days prior Notice from Lessor, execute, acknowledge and deliver to Lessor Lessees Certificate containing then-current facts. It is intended that any Lessees Certificate delivered pursuant hereto may be relied upon by Lessor, any prospective tenant or purchaser of the Leased Properties, any mortgagee or prospective mortgagee and any other party who reasonably may rely on such statement. Lessees failure to deliver the Lessees Certificate within such time shall constitute an Event of Default.
ARTICLE XX
20.1 Risk of Loss . During the Term, the risk of loss or of decrease in the enjoyment and beneficial use of the Leased Properties in consequence of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures, attachments, levies or executions (other than those caused by Lessor and those claiming from, through or under Lessor) is assumed by Lessee, and, in the absence of gross negligence, willful misconduct or material breach of this Lease by Lessor, Lessor in no event shall be answerable or accountable therefor nor shall any of the events mentioned in this Section entitle Lessee to any abatement of Rent.
ARTICLE XXI
21.1 Indemnification by Lessee . Notwithstanding the existence of any insurance or self-insurance provided for in Article XIII, and without regard to the policy limits of any such insurance or self-insurance, Lessee shall protect, indemnify, save harmless and defend Lessor and any Facility Mortgagee, and the principals, officers, directors and agents and employees of Lessor and of any Facility Mortgagee, from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including, without limitation, reasonable attorneys fees and expenses), to the extent permitted by law, imposed upon or incurred by or asserted against Lessor or any Facility Mortgagee by reason of: (a) any accident, injury to or death of persons or loss of or damage to property occurring on or about the Leased Properties or adjoining sidewalks, including without limitation any claims of malpractice; (b) any use, misuse, non-use, condition, maintenance or repair by Lessee of the Leased Properties; (c) the failure to pay any Impositions; (d) any failure on the part of Lessee to perform or comply with any of the terms of this Lease; (e) the management and operation of the Facilities from and after the Commencement Date; and (f) the nonperformance of any contractual obligation, express or implied, assumed or undertaken by Lessee or any party in privity with Lessee with respect to the Leased Properties or any business or other activity carried on with respect to the Leased Properties during the Term or thereafter during any time in which Lessee or any such other party is in possession of the Leased Properties or thereafter to the extent that any conduct by Lessee or any such person (or failure of such conduct thereby if the same should have been undertaken during such time of possession and leads to such damage or loss) causes such loss or claim. Any amounts that become payable by Lessee under this Section shall be paid within ten (10) days after the date of demand, and, if not timely paid, shall bear interest (to the extent permitted by law) at the Overdue Rate from the date of such determination to the date of payment. Nothing herein shall be construed as indemnifying either Lessor or any Facility Mortgagee against its own grossly negligent acts or omissions or willful misconduct.
21.2 Survival of Indemnification . Lessees liability under this Article shall survive the expiration or any earlier termination of this Lease.
ARTICLE XXII
22.1 General Prohibition against Transfers . Lessee acknowledges that a significant inducement to Lessor to enter into this Lease with Lessee on the terms set forth herein is the combination of financial strength, experience, skill and reputation possessed by Lessee. Therefore, there shall be no Transfer except as specifically permitted by this Lease or consented to in advance by Lessor in writing. Any attempted Transfer that is not specifically permitted by this Lease or
consented to by Lessor in advance in writing shall be null and void and of no force and effect whatsoever. In the event of a Transfer, Lessor may collect Rent and other charges from the Transferee and apply the amounts collected to the Rent and other charges herein reserved, but no Transfer or collection of Rent and other charges shall be deemed to be a waiver of Lessors rights to enforce Lessees covenants or an acceptance of the Transferee as Lessee, or a release of the Lessee named herein from the performance of its covenants. Notwithstanding any Transfer, Lessee shall remain fully liable for the performance of all terms, covenants and provisions of this Lease. Any violation of this Lease by any Transferee shall be deemed to be a violation of this Lease by Lessee. Notwithstanding the foregoing, Lessor shall grant its consent to a transfer by AdCare of 100% of the outstanding equity interests in AdCare to a new owner ( New Parent ) provided that (i) New Parent meets the threshold requirements set forth on Exhibit D and (ii) New Parent delivers a guaranty of this Lease and a security agreement substantially in the forms of guaranty and security agreement delivered by AdCare.
22.3 Subordination and Attornment . Lessee shall insert in any sublease permitted by Lessor provisions to the effect that (a) such sublease is subject and subordinate to all of the terms and provisions of this Lease and to the rights of Lessor hereunder, (b) if this Lease terminates before the expiration of such sublease, the sublessee thereunder will, at Lessors option, attorn to Lessor and waive any right the sublessee may have to terminate the sublease or to surrender possession thereunder, as a result of the termination of this Lease, and (c) if the sublessee receives a written Notice from Lessor or Lessors assignee, if any, stating that Lessee is in default under this Lease, the sublessee thereafter shall be obligated to pay all rentals accruing under the sublease directly to the party giving such Notice, or as such party may direct, and such payments shall be credited against the amounts owing by Lessee under this Lease.
22.4 Sublease Limitation . Anything contained in this Lease to the contrary notwithstanding, even if a sublease of a Leased Property is permitted, Lessee shall not sublet such Leased Property on any basis such that the rental to be paid by the sublessee thereunder would be based, in whole or in part, on either (a) the income or profits derived by the business activities of the sublessee, or (b) any other formula such that any portion of the sublease rental received by Lessor would fail to qualify as rents from real property within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto. The parties agree that this Section shall not be deemed waived or modified by implication, but may be waived or modified only by an instrument in writing explicitly referring to this Section by number.
ARTICLE XXIII
23.1 Financial Statements and Other Reports and Materials Required by Lessor . Lessee shall furnish to Lessor, in paper form and by electronic means, in the form customarily provided by Lessee or its Affiliates to their lenders or other landlords:
(a) Within ninety (90) days after the end of each of Lessees fiscal years: (i) Lessees Financial Statements; (ii) Guarantors Financial Statements; and (iii) an Officers Certificate stating that Lessee is not in default in the performance or observance of any of the terms of this Lease, or if Lessee is in default, specifying all such defaults, the nature thereof, and the steps being taken to remedy the same;
(b) Within thirty (30) days after the end of each month, monthly financial reports for the Facilities, including detailed statements of income and expense and detailed operational statistics regarding occupancy rates, patient mix and patient rates by type for the Facilities;
(c) If applicable, within fifteen (15) days of filing a copy of each cost report filed with a governmental agency for the Facility;
(d) If applicable, within fifteen (15) days of Lessees receipt thereof, copies of Medicare and Medicaid Rate Letters and correspondence;
(e) Within thirty (30) days of Lessees or Managers receipt thereof, copies of surveys performed by the appropriate governmental agencies for licensing or certification purposes which show any material deficiencies, including, without limitation, annual surveys, revisits and complaint surveys, copies of any plans of correction and all related correspondence;
(f) Immediate Notice to Lessor of any action, proposal or investigation by any agency or entity, or complaint to such agency or entity, known to Lessee, the result of which could be to (i) modify in a way materially adverse to Lessee or revoke or suspend or terminate, or fail to renew or fully continue in effect, any license or certificate or operating authority pursuant to which Lessee carries on any part of the Primary Intended Use of the Facilities, or (ii) suspend, terminate, adversely modify, or fail to renew or fully continue in effect any cost reimbursement or cost sharing program by any state or federal governmental agency, including but not limited to Medicaid or Medicare or any successor or substitute therefor, or seek return of or reimbursement for any funds previously advanced or paid pursuant to any such program, or (iii) impose any bed hold, limitation on patient admission or similar restriction on a Leased Property;
(g) As soon as it is prepared in each Lease Year, but not later than the last day of the first (1 st ) month in each Lease Year, a capital and operating budget for the Facilities for that Lease Year;
(h) Upon Lessors request from time to time, such additional information and unaudited quarterly financial information concerning the Leased Properties and Lessee as Lessor may reasonably require for its on-going filings with the Securities and Exchange Commission, under both the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, including, but not limited to, 10-Q Quarterly Reports, 10-K Annual Reports and registration statements to be filed by Lessor during the Term of this Lease; and
(i) Within fifteen (15) Business Days after the expiration of each license and permit required for the operation of the Facilities for The Primary Intended Use, evidence satisfactory to Lessor that such license or permit has been renewed by the issuer thereof.
23.2 Public Offering Information . Lessee specifically agrees that Lessor may include financial information and information concerning the operation of the Facilities that does not violate the confidentiality of the facility-patient relationship and the physician-patient privilege under
applicable laws, in offering memoranda or prospectus, or similar publications in connection with syndications or public offerings of Lessors securities or interests, and any other reporting requirements under applicable Federal and State Laws, including those of any successor to Lessor. Lessee agrees to provide such other reasonable information necessary with respect to Lessee and the Leased Properties to facilitate a public offering or to satisfy SEC or regulatory disclosure requirements. Upon request of Lessor, Lessee shall notify Lessor of any necessary corrections to information Lessor proposes to publish within a reasonable period of time (not to exceed three (3) days) after being informed thereof by Lessor.
ARTICLE XXIV
24.1 Lessors Right to Inspect . Lessee shall permit Lessor and its authorized representatives to inspect the Leased Properties during normal business hours upon five (5) days prior notice to Lessee, except in the event of an emergency when no notice is required.
ARTICLE XXV
25.1 No Waiver . No failure by Lessor to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a breach hereof, and no acceptance of full or partial payment of Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of any such term. No waiver of any breach shall affect or alter this Lease, which shall continue in full force and effect with respect to any other then existing or subsequent breach.
ARTICLE XXVI
26.1 Remedies Cumulative . To the extent permitted by law, each legal, equitable or contractual right, power and remedy of Lessor now or hereafter provided either in this Lease or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power and remedy, and the exercise or beginning of the exercise by Lessor of any one or more of such rights, powers and remedies shall not preclude the simultaneous or subsequent exercise by Lessor of any or all of such other rights, powers and remedies.
ARTICLE XXVII
27.1 Acceptance of Surrender . No surrender to Lessor of this Lease or of the Leased Properties or any part thereof, or of any interest therein, shall be valid or effective unless agreed to and accepted in writing by Lessor, and no act by Lessor or any representative or agent of Lessor, other than such a written acceptance by Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXIII
28.1 No Merger of Title . There shall be no merger of this Lease or of the leasehold estate created hereby by reason of the fact that the same person, firm, corporation or other entity may acquire, own or hold, directly or indirectly, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, and (b) the fee estate in the Leased Properties.
28.2 No Partnership . Nothing contained in this Lease will be deemed or construed to create a partnership or joint venture between Lessor and Lessee or to cause either party to be
responsible in any way for the debts or obligations of the other or any other party, it being the intention of the parties that the only relationship hereunder is that of Lessor and Lessee.
ARTICLE XXIX
29.1 Conveyance by Lessor . If Lessor or any successor owner of the Leased Properties conveys the Leased Properties other than as security for a debt, Lessor or such successor owner, as the case may be, shall be released from all future liabilities and obligations of Lessor under this Lease arising or accruing from and after the date of such conveyance or other transfer, and all such future liabilities and obligations shall be binding upon the new owner.
ARTICLE XXX
30.1 Quiet Enjoyment . So long as Lessee pays all Rent as it becomes due and complies with all of the terms of this Lease and performs its obligations hereunder, Lessee shall peaceably and quietly have, hold and enjoy the Leased Properties for the Term, free of any claim or other action by Lessor or anyone claiming by, through or under Lessor, but subject to all liens and encumbrances of record as of the date hereof or hereafter provided for in this Lease or consented to by Lessee. Except as otherwise provided in this Lease, no failure by Lessor to comply with the foregoing covenant will give Lessee any right to cancel or terminate this Lease or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Lease, or to fail to perform any other obligation of Lessee. Lessee shall, however, have the right, by separate and independent action, to pursue any claim it may have against Lessor as a result of a breach by Lessor of the covenant of quiet enjoyment contained in this Section.
ARTICLE XXXI
31.1 Notices . Any notice, request or other communication to be given by any party hereunder shall be in writing and shall be sent by registered or certified mail, postage prepaid, or by hand delivery or facsimile transmission to the following address:
To Lessee : |
ADK Georgia, LLC |
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Two Buckhead Plaza |
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3050 Peachtree Road NW, Suite 570 |
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Atlanta, Georgia 30305 |
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Attention: Chris Brogdon |
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Tel: (770) 650-7086, ext. 12 |
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Fax: (770) 650-8883 |
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With a copy to: |
Gregory P. Youra, Esq. |
(which shall not |
Holt Ney Zatcoff & Wasserman, LLP |
constitute notice) |
100 Galleria Parkway, Suite 600 |
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Atlanta, Georgia 30339 |
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Tel: (770) 956-9600 |
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Fax: (770) 956-1490 |
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To Lessor: |
c/o Omega Healthcare Investors, Inc. |
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200 International Circle, Suite 3500 |
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Hunt Valley, MD 21030 |
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Attn.: Daniel J. Booth |
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Telephone No.: (410) 427-1700 |
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Facsimile No.: (410) 427-8800 |
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And with copy to |
Mark E. Derwent, Esq. |
(which shall not |
Doran Derwent, PLLC |
constitute notice) : |
5960 Tahoe Drive, SE, Suite 101 |
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Grand Rapids, MI 49546 |
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Telephone No.: (616) 451-8690 |
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Facsimile No.: (616) 451-8697 |
or to such other address as either party may hereafter designate. Notice shall be deemed to have been given on the date of delivery if such delivery is made on a Business Day, or if not, on the first Business Day after delivery. If delivery is refused, Notice shall be deemed to have been given on the date delivery was first attempted. Notice sent by facsimile transmission shall be deemed given upon confirmation that such Notice was received at the number specified above or in a Notice to the sender.
ARTICLE XXXII
32.1 Intentionally deleted.
ARTICLE XXXIII
33.1 Intentionally deleted.
ARTICLE XXXIV
34.1 Intentionally omitted.
34.2 Transfer of Operational Control of the Facilities .
34.2.1 Lessee acknowledges and agrees that, subject to applicable law, the certificates of need and licenses necessary to operate the Leased Properties for the Primary Intended Use are appurtenant to the Leased Properties, both during and following the expiration or earlier termination of the Term. If the certificates of need or licenses to operate the Leased Properties for the Primary Intended Use are issued to Lessee or any Affiliate of Lessee, Lessee agrees that it will cooperate with Lessor to turn over, or to cause to turn over, to Lessor or its designee, upon the expiration or earlier termination of the Term, all of Lessees or its Affiliates rights in connection with the certificate of need and/or licenses.
34.2.3 Upon the expiration or earlier termination of the Term, Lessee shall cooperate fully in transferring operational control of the Facilities to Lessor or Lessors nominee and shall use its best efforts to cause the business conducted at the Facility to continue without interruption. Upon the request of Lessor, Lessee shall execute and deliver an Operations Transfer Agreement to Lessor and any new operator identified by Lessor in substantially the same form as the Operations Transfer Agreement attached as Exhibit E . The obligation of Lessee regarding the
Operations Transfer Agreement shall survive the termination of this Lease. To that end, pending completion of the transfer of the operational control of the Facility to Lessor or its nominee:
(a) Lessee will provide all necessary information requested by Lessor or its nominee for the preparation and filing of any and all necessary applications or notifications of any federal or state governmental authority having jurisdiction over a change in the operational control of the Facilities, and any other information reasonably required to effect an orderly transfer of the Facilities, and Lessee will use reasonable, good faith efforts to cause all operating health care licenses to be transferred to Lessor or to Lessors nominee if permitted by law;
(b) Lessee shall engage only in transactions or other activities with respect to the Facilities that are in the ordinary course of its business and shall perform all maintenance and repairs reasonably necessary to keep the Facilities in satisfactory operating condition and repair, and shall maintain the supplies and foodstuffs at levels that are consistent and in compliance with all applicable health care regulations, and shall not sell or remove any personal property except in the ordinary course of business and in accordance with the terms and conditions of this Lease; and
(c) Upon the request of Lessor, Lessee shall, and shall cause the applicable Sublessee to, execute and deliver an Operations Transfer Agreement to Lessor and any new operator identified by Lessor which is no less favorable to the former operator as the Operations Transfer Agreement pursuant to which operations were transferred to Lessee and/or the Sublessees on the Commencement Date.
34.3 Intangibles and Personal Property . Notwithstanding any other provision of this Lease, Lessors Personal Property shall not include goodwill nor shall it include any other intangible personal property that is severable from Lessors interests in real property within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto.
ARTICLE XXXV
35.1 Arbitration . Except with respect to the payment of Rent under this Lease, and any proceedings to recover possession of one or more of the Leased Properties, if any controversy arises between the parties hereto as to any of the provisions of this Lease or the performance thereof, and if the parties are unable to settle the controversy by agreement or as otherwise provided herein, the controversy shall be decided by arbitration. The arbitration shall be conducted by three arbitrators selected in accordance with the rules and procedures of the American Arbitration Association. The decision of the arbitrators shall be final and binding, and judgment may be entered thereon in any court of competent jurisdiction. The decision shall set forth in writing the basis for the decision. In rendering the decision and award, the arbitrators shall not add to, subtract from or otherwise modify the provisions of this Lease. The expense of the arbitration shall be divided between Lessor and Lessee unless otherwise specified in the award. Each party in interest shall pay the fees and expenses of its own counsel. The arbitration shall be conducted in Baltimore, Maryland. In any arbitration, the parties shall be entitled to conduct discovery in the same manner as permitted under Federal Rules of Civil Procedure 26 through 37, as amended. No provision in this Article shall limit the right of any party to this Agreement to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after or during the pendency of any arbitration, and the exercise of such remedies does not constitute a waiver of the right of either party to arbitration.
ARTICLE XXXVI
36.1 Miscellaneous .
36.1.1 Survival, Choice of law . Anything contained in this Lease to the contrary notwithstanding, all claims against, and liabilities of, Lessee or Lessor arising prior to the date of expiration or termination of this Lease shall survive such expiration or termination. If any term or provision of this Lease or any application thereof is held invalid or unenforceable, the remainder of this Lease and any other application of such term or provisions shall not be affected thereby. Neither this Lease nor any provision hereof may be changed, waived, discharged or terminated except by an instrument in writing and in recordable form signed by Lessor, any Facility Mortgagee and Lessee. All the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The headings in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. This Lease shall be governed by and construed in accordance with the laws of the state of Maryland, except as to matters which, under applicable procedural conflicts of laws rules require the application of laws of another State.
LESSEE CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATES OF MARYLAND AND GEORGIA, AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATES OF MARYLAND AND GEORGIA. LESSEE AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATES OF MARYLAND AND GEORGIA AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATES OF MARYLAND AND GEORGIA.
36.1.2 Limitation on Recovery . Lessee specifically agrees to look solely to Lessors interest in the Leased Properties for recovery of any judgment from Lessor, it being specifically agreed that no constituent shareholder, officer or director of Lessor shall ever be personally liable for any such judgment or for the payment of any monetary obligation to Lessee. Furthermore, Lessor (original or successor) shall never be liable to Lessee for any indirect or consequential damages suffered by Lessee from whatever cause.
36.1.3 Waivers. Lessee waives any defense by reason of any disability of Lessee, and waives any other defense based on the termination of Lessees (including Lessees successors) liability from any cause. Lessee waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance, and waives all notices of the existence, creation, or incurring of new or additional obligations.
36.1.4 Lessee to Pay Reasonable Expenses . Lessee shall pay or reimburse Lessor for all reasonable costs and expenses incurred by Lessor in connection with or relating in any way to the administration of this Lease, including without limitation, search costs, audit fees, appraisal fees, attorneys fees, and other costs paid or incurred by Lessor in the analysis, administration and enforcement of this Lease and the other Transaction Documents, the protection and defense of the
rights of Lessor in and to the Leased Properties, the Collateral and the other Transaction Documents, or as otherwise referred to in this Lease or in the other Transaction Documents, and all costs and expenses relating to extensions, amendments, waivers, or consents requested by Lessee, pursuant to this Lease or any other Transaction Document or any agreements with other parties or termination of this Lease (collectively, Reasonable Expenses ). All Reasonable Expenses for which Lessee is liable shall be reasonably documented in a manner that generally describes the services rendered, disbursements advanced, or fees charged or any other amounts for which any party is or may be obligated pursuant to the terms of this Lease or any other Transaction Document, it being understood and agreed that certain documentation may be redacted to exclude confidential or strategic information. All such Reasonable Expenses shall be due on demand; provided, however, that so long as no Event of Default has occurred hereunder, Reasonable Expenses incurred after the date of this Lease which are unrelated to the closing shall be paid on or before the earlier of (i) 30 days following written notice thereof to Lessee or (ii) the date of expiration or earlier termination of this Lease. Any Reasonable Expenses not paid when due shall bear interest at the Overdue Rate.
36.1.5 Counterparts . This Lease may be executed in separate counterparts, each of which shall be considered an original when each party has executed and delivered to the other one or more copies of this Lease.
36.1.6 Options Personal . The renewal options granted to Lessee in this Lease are granted solely to Lessee and are not assignable or transferable except in connection with a Transfer permitted in Article XXII.
36.1.7 Rights Cumulative . Except as provided herein to the contrary, the respective rights and remedies of the parties specified in this Lease shall be cumulative and in addition to any rights and remedies not specified in this Lease.
36.1.8 Entire Agreement . There are no oral or written agreements or representations between the parties hereto affecting this Lease. This Lease supersedes and cancels any and all previous negotiations, arrangements, representations, brochures, agreements and understandings, if any, between Lessor and Lessee.
36.1.9 Amendments in Writing . No provision of this Lease may be amended except by an agreement in writing signed by Lessor, any Facility Mortgagee and Lessee.
36.1.10 Severability . If any provision of this Lease or the application of such provision to any person, entity or circumstance is found invalid or unenforceable by a court of competent jurisdiction, such determination shall not affect the other provisions of this Lease and all other provisions of this Lease shall be deemed valid and enforceable.
36.1.11 Time of the Essence . Except for the delivery of possession of the Facilities to Lessee, time is of the essence with respect to all provisions of this Lease of which time is an element.
ARTICLE XXXVII
37.1 Commissions . Lessor and Lessee represents and warrants to each other that no real estate commission, finders fee or the like is due and owing to any person in connection with this Lease. Lessor and Lessee agrees to save, indemnify and hold the other respective party harmless from and against any and all claims, liabilities or obligations for brokerage, finders fees or the like in connection with this Lease or the transactions contemplated hereby, asserted by any person on the basis of any statement or act alleged to have been made or taken by Lessor/Lessee.
ARTICLE XXXVIII
38.1 Memorandum or Short Form of Lease . Lessor and Lessee shall, promptly upon the request of either, enter into a Memorandum or Short Form of this Lease, substantially in the form of attached Exhibit F, with such modifications as may be appropriate under the laws and customs of the States and in the customary form suitable for recording under the laws of each of the States. Lessee shall pay all costs and expenses of recording such memorandum or short form of this Lease.
ARTICLE XXXIX
39.1 Security Deposit . As of the date of this Lease, Lessee has delivered Three Hundred Seventy Thousand Dollars ($375,000) ( Security Deposit ), which Lessor shall hold as security for the full and faithful performance by Lessee of each and every term, provision, covenant and condition of this Lease in accordance with, and subject to, the terms and conditions of this Lease. The initial Security Deposit shall be in the form of cash; provided, however, that Lessee shall have the option at any time during the Term to substitute for such cash Security Deposit an irrevocable and unconditional Letter of Credit (together with all replacements thereof, the Letter of Credit ). The initial Letter of Credit shall be in the form required by the Letter of Credit Agreement and shall remain, as extended and replaced, continually in existence during the entire Term (or such portion thereof as Tenant desires to have the Security Deposit in the form of a Letter of Credit; Tenant may replace not less than thirty (30) days prior to the end of any Letter of Credit period the same with cash, in its sole discretion). If at any time the Security Deposit is in the form of cash, it may be deposited by Lessor into an interest-bearing account. The Security Deposit shall not be considered an advance payment of Rent (or of any other sum payable to Lessee under this Lease) or a measure of Lessors damages in case of a default by Lessee. The Security Deposit shall not be considered a trust fund, and Lessee expressly acknowledges and agrees that Lessor is not acting as a trustee or in any fiduciary capacity in controlling or using the Security Deposit. Lessor shall have no obligation to maintain the Security Deposit separate and apart from Lessors general and/or other funds. The Security Deposit, less any portion thereof applied as provided in Section 39.2, shall be returned to Lessee within sixty (60) days following the expiration of the Term.
39.2 Application of Security Deposit . If Lessee defaults in respect of any of the terms, provisions, covenants and conditions of this Lease or of any agreement or instrument with which this Lease is cross-defaulted), including, but not limited to, payment of any Rent and other sums of money payable by Lessee, 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 (or draw the Letter of Credit, in whole or in part) to the payment of any sum in default, or any other
sum that Lessor may expend or be required to expend by reason of Lessees default, including but not limited to, any damages or deficiency in reletting the Leased Properties,. Whenever, and as often as, Lessor has applied any portion of the Security Deposit to cure Lessees default hereunder or under any agreement with which this Lease is cross-defaulted, Lessee shall, within ten (10) days after Notice from Lessor, deposit additional money or deliver a new Letter of Credit with Lessor sufficient to restore the Security Deposit to the full amount then required to be deposited with Lessor pursuant to Section 39.1 above, and Lessees failure to do so shall constitute an Event of Default without any further Notice.
39.3 Transfer of Security Deposit . If Lessor transfers its interest under this Lease, Lessor shall assign the Security Deposit to the new lessor and thereafter 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. The provisions of the preceding sentence shall apply to every transfer or assignment of Lessors interest under this Lease. 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 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.
SIGNATURE PAGES FOLLOW
Signature Page to
THIRD AMENDED AND RESTATED MULTIPLE FACILITIES LEASE
(Parkview Manor Nursing Home (Atlanta, Georgia))
(Bonterra Nursing Center (East Point, Georgia))
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LESSOR : |
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC. |
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By: |
/s/ Daniel J. Booth |
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Name: |
Daniel J. Booth |
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Title: |
Chief Operating Officer |
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THE STATE OF MARYLAND |
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COUNTY OF BALTIMORE |
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This instrument was acknowledged before me on the 29 day of September, 2010, by Daniel J. Booth, the Chief Operating Officer of Georgia Lessor Bonterra/Parkview, Inc., a Maryland corporation, on behalf of said corporation.
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/s/ Jennie M. Bathras |
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Notary Public |
Signature Page to
THIRD AMENDED AND RESTATED MULTIPLE FACILITIES LEASE
(Parkview Manor Nursing Home (Atlanta, Georgia))
(Bonterra Nursing Center (East Point, Georgia))
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LESSEE : |
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ADK BONTERRA/PARKVIEW, LLC |
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By: |
/s/ Chris Brogdon |
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Name: |
Chris Brogdon |
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Title: |
Manager |
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THE STATE OF GEORGIA |
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COUNTY OF COBB |
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This instrument was acknowledged before me on the 29 day of October, 2010, by Chris Brogdon, the Manager, of ADK Bonterra/Parkview, LLC, a Georgia limited liability company, on behalf of said company.
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Notary Public |
Exhibit 10.145
GUARANTY
(AdCare Health Systems Inc.)
This GUARANTY ( Guaranty ) is given as of October 29, 2010 ( Effective Date ), by ADCARE HEALTH SYSTEMS INC., an Ohio corporation ( Guarantor ), in favor of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Lesso r).
RECITALS
A. ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( Lessee ), has executed and delivered to Lessor a Third Amended and Restated Master Lease dated as of the date of this Guaranty ( Master Lease ), pursuant to which Lessee is leasing from Lessor certain healthcare facilities located in the State of Georgia and identified in the Master Lease (the Facilities ).
B. Guarantor owns 100% of the outstanding equity interests of HEARTH & HOME OF OHIO, INC., an Ohio corporation, which in turns owns 100% of the outstanding equity interests of Lessee, and it is to the advantage of Guarantor that Lessor enter into the Master Lease.
C. As a material inducement to Lessor to enter into the Master Lease, Guarantor has agreed to guaranty the payment of all amounts due from, and the performance of all obligations undertaken by the Lessee under the Master Lease and the other Transaction Documents (as defined in the Master Lease) on the terms and conditions of this Guaranty.
WHEREFORE, the parties hereby agree as follows.
1. Defined Terms . All capitalized terms used herein and not defined herein shall have the meaning for such terms set forth in the Master Lease.
2. Guaranty . Guarantor hereby unconditionally and irrevocably guarantees to Lessor (i) the payment when due of all Rent and all other sums payable by the Lessee under the Master Lease and the other Transaction Documents, and (ii) the faithful and prompt performance when due of each and every one of the terms, conditions and covenants to be kept and performed by Lessee and its Affiliates under the Transaction Documents, any and all amendments, modifications, extensions and renewals of the Transaction Documents, including without limitation all indemnification obligations, insurance obligations, and all obligations to operate, rebuild, restore or replace any facilities or improvements now or hereafter located on the real estate covered by the Master Lease (collectively, the Liabilities ). In the event of the failure of Lessee to pay any such amounts owed, or to render any other performance required of Lessee or its Affiliates under the Transaction Documents, when due, Guarantor shall forthwith perform or cause to be performed all provisions of the Transaction Documents to be performed by Lessee and its Affiliates thereunder, and pay all damages that may result from the non-performance thereof to the full extent provided under the Transaction Documents. As to the Liabilities, Guarantors liability under this Guaranty is without limit.
3. Survival of Obligations . The obligations of Guarantor under this Guaranty with respect to the Transaction Documents shall survive and continue in full force and effect notwithstanding:
(a) any amendment, modification, or extension by Lessee or, as applicable, any Affiliate, and Lessor of any Transaction Document;
(b) any compromise, release, consent, extension, indulgence or other action or inaction in respect of any terms of any Transaction Document or any other guarantor of the Liabilities;
(c) any substitution or release, in whole or in part, of any security for this Guaranty which Lessor may hold at any time;
(d) any exercise or nonexercise by Lessor of any right, power or remedy under or in respect of any Transaction Document or any security held by Lessor with respect thereto, or any waiver of any such right, power or remedy;
(e) any bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation, or the like of the Lessee or any other guarantor of the Liabilities;
(f) any limitation of Lessees liability under any Transaction Document or any limitation of Lessees liability thereunder which may now or hereafter be imposed by any statute, regulation or rule of law, or any illegality, irregularity, invalidity or unenforceability, in whole or in part, of any Transaction Document or any term thereof, unless such statute, regulation or rule of law expressly imposes by its terms any limitation on the Guarantors liability under this Guaranty;
(g) any sale, lease, or transfer of all or any part of any interest in any Facility to any other person, firm or entity;
(h) any act or omission by Lessor with respect to any of the security instruments or any failure to file, record or otherwise perfect any of the same;
(i) any extensions of time to Lessee, any Affiliate of Lessee, or any other guarantor of the Liabilities for performance under the Transaction Documents, whether prior to or after maturity;
(j) the release of any collateral from any lien in favor of Lessor held with respect to any of the Transaction Documents, or the release of Lessee from performance or observation of any of the agreements, covenants, terms or conditions contained in any Transaction Document by operation of law or otherwise;
(k) the fact that Lessee may or may not be personally liable, in whole or in part, under the terms of any Transaction Document to pay any money judgment;
(l) the failure to give Guarantor any notice of acceptance, default or otherwise;
(m) any other guaranty now or hereafter executed by Guarantor or anyone else in connection with any Transaction Document;
(n) any rights, powers or privileges Lessor may now or hereafter have against any other person, entity or collateral with respect to the Transaction Documents; or
(o) any other circumstances, whether or not Guarantor had notice or knowledge thereof, other than the payment or performance of all of the Liabilities.
4. Primary Liability . The liability of Guarantor with respect to the Liabilities shall be primary, direct and immediate, and Lessor may proceed against Guarantor: (i) prior to or in lieu of proceeding against Lessee, its assets, any security deposit, or any other guarantor of the Liabilities; and (ii) prior to or in lieu of pursuing any other rights or remedies available to Lessor. All rights and remedies afforded to Lessor by reason of this Guaranty or by law are separate, independent and cumulative, and the exercise of any rights or remedies shall not in any way limit, restrict or prejudice the exercise of any other rights or remedies. In the event of any default under any Transaction Document, a separate action or actions may be brought and prosecuted against Guarantor whether or not Lessee is joined therein or a separate action or actions are brought against Lessee. Lessor may maintain successive actions for other defaults. Lessors rights hereunder shall not be exhausted by its exercise of any of its rights or remedies or by any such action or by any number of successive actions until and unless all indebtedness and obligations the payment and performance of which are hereby guaranteed have been paid and fully performed.
5. Obligations Not Affected . In such manner, upon such terms and at such times as Lessor in its sole discretion deems necessary or expedient, and without notice to Guarantor, Lessor may: (a) amend, alter, compromise, accelerate, extend or change the time or manner for the payment or the performance of any obligation hereby guaranteed; (b) extend, amend or terminate any of the Transaction Documents; or (c) release Lessee by consent to any assignment (or otherwise) as to all or any portion of the Liabilities. Any exercise or non-exercise by Lessor of any right hereby given Lessor, dealing by Lessor with Guarantor or any other guarantor, Lessee or any other person, or change, impairment, release or suspension of any right or remedy of Lessor against any person including Lessee and any other guarantor will not affect any of the obligations of Guarantor hereunder or give Guarantor any recourse or offset against Lessor.
6. Waiver . With respect to the Transaction Documents, Guarantor hereby waives and relinquishes all rights and remedies accorded by applicable law to sureties and/or guarantors or any other accommodation parties, under any statutory provisions, common law or any other provision of law, custom or practice, and agrees not to assert or take advantage of any such rights or remedies including, but not limited to:
(a) any right to require Lessor to proceed against the Lessee or any other person or to proceed against or exhaust any security held by Lessor at any time or to pursue any other remedy in Lessors power before proceeding against Guarantor or to require that Lessor cause a marshaling of Lessees assets or the assets, if any, given as collateral for this Guaranty or to proceed against Lessee and/or any
collateral, including collateral, if any, given to secure Guarantors obligation under this Guaranty, held by Lessor at any time or in any particular order;
(b) any defense that may arise by reason of the incapacity or lack of authority of any other person or persons acting on behalf of Guarantor, Lessee, any Affiliate of Lessee, or any other guarantor of the Liabilities;
(c) notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Lessee, Lessor, any creditor of Lessee or Guarantor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lessor or in connection with any of the Liabilities;
(d) any defense based upon an election of remedies by Lessor which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor to proceed against Lessee for reimbursement, or both;
(e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal;
(f) any duty on the part of Lessor to disclose to Guarantor any facts Lessor may now or hereafter know about Lessee, regardless of whether Lessor has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume or has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Lessee and of all circumstances bearing on the risk of non-payment or non-performance of any obligations or indebtedness hereby guaranteed;
(g) any defense arising because of Lessors election, in any proceeding instituted under the federal Bankruptcy Code, of the application of Section 1111 (b)(2) of the federal Bankruptcy Code; and
(h) any defense based on any borrowing or grant of a security interest under Section 364 of the federal Bankruptcy Code.
(i) all rights and remedies accorded by applicable law to guarantors, including without limitation, any extension of time conferred by any law now or hereafter in effect and any requirement or notice of acceptance of this Guaranty or any other notice to which the undersigned may now or hereafter be entitled to the extent such waiver of notice is permitted by applicable law.
7. Warranties . With respect to the Transaction Documents, Guarantor warrants that: (a) this Guaranty is executed at Lessees request; and (b) Guarantor has established adequate means of obtaining from Lessee on a continuing basis financial and other information pertaining
to Lessees financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantors risks hereunder, and Guarantor further agrees that Lessor shall have no obligation to disclose to Guarantor information or material acquired in the course of Lessors relationship with Lessee.
8. No-Subrogation . Until all obligations of Lessee under Transaction Documents have been satisfied and discharged in full for one (1) year (provided, however, that Lessees obligations under Section 7.3 of the Master Lease which expressly survive expiration or termination thereof shall, so long as there is no currently pending claim under such section, not be considered in determining whether the Lessees obligations have been satisfied or discharged), Guarantor shall have no right of subrogation and waives any right to enforce any remedy which Lessor now has or may hereafter have against Lessee and any benefit of, and any right to participate in, any security now or hereafter held by Lessor with respect to the Master Lease.
9. Subordination . Upon the occurrence of an Event of Default under any Transaction Document, which is not cured by Guarantor, the indebtedness or obligations of Lessee to Guarantor shall not be paid in whole or in part nor will Guarantor accept any payment of or on account of any amounts owing, without the prior written consent of Lessor and at Lessors request, Guarantor shall cause Lessee to pay to Lessor all or any part of the subordinated indebtedness until the obligations under the Transaction Documents have been paid in full. Any payment by Lessee in violation of this Guaranty shall be received by Guarantor in trust for Lessor, and Guarantor shall cause the same to be paid to Lessor immediately on account of the amounts owing from Lessee to Lessor. No such payment will reduce or affect in any manner the liability of Guarantor under this Guaranty.
10. No Delay . Any payments required to be made by Guarantor hereunder shall become due on demand in accordance with the terms hereof immediately upon the happening of an Event of Default under any Transaction Document.
11. Application of Payments . With respect to the Transaction Documents, and with or without notice to Guarantor, Lessor, in Lessors sole discretion and at any time and from time to time and in such manner and upon such terms as Lessor deems appropriate, may (a) apply any or all payments or recoveries from Lessee or from any other guarantor of the Liabilities under any other instrument or realized from any security, in such manner and order of priority as Lessor may determine, to any indebtedness or other obligation of the Lessee with respect to the Transaction Documents and whether or not such indebtedness or other obligation is guaranteed hereby or is otherwise secured or is due at the time of such application, and (b) refund to Lessee any payment received by Lessor under the Transaction Documents.
12. Guaranty Default .
(a) As used herein, the term Guaranty Default shall mean one or more of the following events (subject to applicable cure periods):
(i) the failure of Guarantor to pay the amounts required to be paid hereunder at the times specified herein;
(ii) the failure of Guarantor to observe and perform any covenants, conditions or agreement on its part to be observed or performed, other than as referred to in Subsection (i) above, for a period of thirty (30) days after written notice of such failure has been given to Guarantor by Lessor, unless Lessor agrees in writing to an extension of such time prior to its expiration;
(iii) the occurrence of an Event of Default under the Master Lease or any of the other Transaction Documents.
(b) Upon the occurrence of a Guaranty Default, Lessor shall have the right to bring such actions at law or in equity, including appropriate injunctive relief, as it deems appropriate to compel compliance, payment or deposit, and among other remedies to recover its reasonable attorneys fees in any proceeding, including any appeal therefrom and any post-judgement proceedings.
13. Financial Covenants . At all times while any Obligations guaranteed by Guarantor remain outstanding, Guarantor shall comply with any and all financial covenants of the Master Lease applicable to Guarantor, as the same may be amended, modified or restated from time to time.
14. Financial Statements . As and when required under the Master Lease, Guarantor shall deliver to Lessor such Financial Statements of Guarantor as are required under the Master Lease.
15. Notices . All notices, demands or requests required or permitted to be given to either party hereto shall be in writing and shall be deemed given if delivered personally, sent by reputable overnight courier, with acknowledgment of receipt requested, or mailed by registered, overnight or certified mail, with full postage paid thereon, return receipt requested (such notice to be effective on the date such receipt is acknowledged), as follows:
Guarantor : |
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AdCare Health Systems Inc.
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With copy to: |
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Gregory P. Youra, Esq.
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Lessor |
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c/o Omega Healthcare Investors, Inc.
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With copy to: |
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Doran Derwent, PLLC
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or to such place and with such other copies as Guarantor or Lessor may designate for itself by written notice to the other.
16. Miscellaneous .
(a) No term, condition or provision of this Guaranty may be waived except by an express written instrument to that effect signed by Lessor. No waiver of any term, condition or provision of this Guaranty will be deemed a waiver of any other term, condition or provision, irrespective of similarity, or constitute a continuing waiver of the same term, condition or provision, unless otherwise expressly provided.
(b) If any one or more of the terms, conditions or provisions contained in this Guaranty is found in a final award or judgment rendered by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms, conditions and provisions of this Guaranty shall not in any way be affected or impaired thereby, and this Guaranty shall be interpreted and construed as if the invalid, illegal, or unenforceable term, condition or provision had never been contained in this Guaranty.
(c) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE IN WHICH A FACILITY IS LOCATED SHALL GOVERN THIS AGREEMENT TO THE EXTENT NECESSARY (i) TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO SUCH FACILITY, AND (ii) FOR PROCEDURAL REQUIREMENTS WHICH MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH SUCH FACILITY IS LOCATED. GUARANTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED AND AGREES THAT ALL DISPUTES CONCERNING THIS GUARANTY BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED. GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED AND IRREVOCABLY
WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED.
(d) GUARANTOR AND LESSOR 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 GUARANTY OR THE INTERPRETATION, BREACH OR ENFORCEMENT THEREOF.
(e) In the event of any suit, action, arbitration or other proceeding to interpret this Guaranty, or to determine or enforce any right or obligation created hereby, the prevailing party in the action shall recover such partys actual costs and expenses reasonably incurred in connection therewith, including, but not limited to, attorneys fees and costs of appeal, post judgment enforcement proceedings (if any) and bankruptcy proceedings (if any). Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit, action, arbitration or other proceeding, in addition to any and all other relief awarded to such prevailing party, include in such-judgment or award such partys costs and expenses as provided in this paragraph.
(f) Guarantor (i) represents that it has been represented and advised by counsel in connection with the execution of this Guaranty; (ii) acknowledges receipt of a copy of the Transaction Documents; and (iii) further represents that Guarantor has been advised by counsel with respect thereto. This Guaranty shall be construed and interpreted in accordance with the plain meaning of its language, and not for or against Guarantor or Lessor, and as a whole, giving effect to all of the terms, conditions and provisions hereof.
(g) Except as provided in any other written agreement now or at any time hereafter in force between Lessor and Guarantor, this Guaranty shall constitute the entire agreement of Guarantor with Lessor with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof will be binding upon Lessor or Guarantor unless expressed herein.
(h) All stipulations, obligations, liabilities and undertakings under this Guaranty shall be binding upon Guarantor and its respective successors and assigns and shall inure to the benefit of Lessor and to the benefit of Lessors successors and assigns.
(i) Whenever the singular shall be used hereunder, it shall be deemed to include the plural (and vice-versa) and reference to one gender shall be construed to include all other genders, including neuter, whenever the context of this Guaranty so requires. Section captions or headings used in the Guaranty are for convenience and reference only, and shall not affect the construction thereof.
Signatures on following page.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty in favor of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, as of the date first written above.
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GUARANTOR: |
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ADCARE HEALTH SYSTEMS INC., an Ohio corporation |
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By: |
/s/ David A. Tenwick |
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David A. Tenwick |
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Chairman |
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STATE OF OHIO |
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) SS |
COUNTY OF DELAWARE |
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This instrument was acknowledged before me on the 29th day of October, 2010, by David A. Tenwick, the Chairman of ADCARE HEALTH SYSTEMS INC., an Ohio corporation, on behalf of said corporation.
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/s/ Amanda R. Norris |
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Notary Public, Marion County, Ohio |
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My Commission Expires: April 1, 2015 |
Exhibit 10.146
GUARANTY
(Hearth & Home of Ohio, Inc.)
This GUARANTY ( Guaranty ) is given as of October 29, 2010 ( Effective Date ), by HEARTH & HOME OF OHIO, INC., an Ohio corporation ( Guarantor ), in favor of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Lesso r).
RECITALS
A. ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( Lessee ), has executed and delivered to Lessor a Third Amended and Restated Master Lease dated as of the date of this Guaranty ( Master Lease ), pursuant to which Lessee is leasing from Lessor certain healthcare facilities located in the State of Georgia and identified in the Master Lease (the Facilities ).
B. Guarantor owns 100% of the outstanding equity interests of Lessee, and it is to the advantage of Guarantor that Lessor enter into the Master Lease.
C. As a material inducement to Lessor to enter into the Master Lease, Guarantor has agreed to guaranty the payment of all amounts due from, and the performance of all obligations undertaken by the Lessee under the Master Lease and the other Transaction Documents (as defined in the Master Lease) on the terms and conditions of this Guaranty.
WHEREFORE, the parties hereby agree as follows.
1. Defined Terms . All capitalized terms used herein and not defined herein shall have the meaning for such terms set forth in the Master Lease.
2. Guaranty . Guarantor hereby unconditionally and irrevocably guarantees to Lessor (i) the payment when due of all Rent and all other sums payable by the Lessee under the Master Lease and the other Transaction Documents, and (ii) the faithful and prompt performance when due of each and every one of the terms, conditions and covenants to be kept and performed by Lessee and its Affiliates under the Transaction Documents, any and all amendments, modifications, extensions and renewals of the Transaction Documents, including without limitation all indemnification obligations, insurance obligations, and all obligations to operate, rebuild, restore or replace any facilities or improvements now or hereafter located on the real estate covered by the Master Lease (collectively, the Liabilities ). In the event of the failure of Lessee to pay any such amounts owed, or to render any other performance required of Lessee or its Affiliates under the Transaction Documents, when due, Guarantor shall forthwith perform or cause to be performed all provisions of the Transaction Documents to be performed by Lessee and its Affiliates thereunder, and pay all damages that may result from the non-performance thereof to the full extent provided under the Transaction Documents. As to the Liabilities, Guarantors liability under this Guaranty is without limit.
3. Survival of Obligations . The obligations of Guarantor under this Guaranty with respect to the Transaction Documents shall survive and continue in full force and effect notwithstanding:
(a) any amendment, modification, or extension by Lessee or, as applicable, any Affiliate, and Lessor of any Transaction Document;
(b) any compromise, release, consent, extension, indulgence or other action or inaction in respect of any terms of any Transaction Document or any other guarantor of the Liabilities;
(c) any substitution or release, in whole or in part, of any security for this Guaranty which Lessor may hold at any time;
(d) any exercise or nonexercise by Lessor of any right, power or remedy under or in respect of any Transaction Document or any security held by Lessor with respect thereto, or any waiver of any such right, power or remedy;
(e) any bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation, or the like of the Lessee or any other guarantor of the Liabilities;
(f) any limitation of Lessees liability under any Transaction Document or any limitation of Lessees liability thereunder which may now or hereafter be imposed by any statute, regulation or rule of law, or any illegality, irregularity, invalidity or unenforceability, in whole or in part, of any Transaction Document or any term thereof, unless such statute, regulation or rule of law expressly imposes by its terms any limitation on the Guarantors liability under this Guaranty;
(g) any sale, lease, or transfer of all or any part of any interest in any Facility to any other person, firm or entity;
(h) any act or omission by Lessor with respect to any of the security instruments or any failure to file, record or otherwise perfect any of the same;
(i) any extensions of time to Lessee, any Affiliate of Lessee, or any other guarantor of the Liabilities for performance under the Transaction Documents, whether prior to or after maturity;
(j) the release of any collateral from any lien in favor of Lessor held with respect to any of the Transaction Documents, or the release of Lessee from performance or observation of any of the agreements, covenants, terms or conditions contained in any Transaction Document by operation of law or otherwise;
(k) the fact that Lessee may or may not be personally liable, in whole or in part, under the terms of any Transaction Document to pay any money judgment;
(l) the failure to give Guarantor any notice of acceptance, default or otherwise;
(m) any other guaranty now or hereafter executed by Guarantor or anyone else in connection with any Transaction Document;
(n) any rights, powers or privileges Lessor may now or hereafter have against any other person, entity or collateral with respect to the Transaction Documents; or
(o) any other circumstances, whether or not Guarantor had notice or knowledge thereof, other than the payment or performance of all of the Liabilities.
4. Primary Liability . The liability of Guarantor with respect to the Liabilities shall be primary, direct and immediate, and Lessor may proceed against Guarantor: (i) prior to or in lieu of proceeding against Lessee, its assets, any security deposit, or any other guarantor of the Liabilities; and (ii) prior to or in lieu of pursuing any other rights or remedies available to Lessor. All rights and remedies afforded to Lessor by reason of this Guaranty or by law are separate, independent and cumulative, and the exercise of any rights or remedies shall not in any way limit, restrict or prejudice the exercise of any other rights or remedies. In the event of any default under any Transaction Document, a separate action or actions may be brought and prosecuted against Guarantor whether or not Lessee is joined therein or a separate action or actions are brought against Lessee. Lessor may maintain successive actions for other defaults. Lessors rights hereunder shall not be exhausted by its exercise of any of its rights or remedies or by any such action or by any number of successive actions until and unless all indebtedness and obligations the payment and performance of which are hereby guaranteed have been paid and fully performed.
5. Obligations Not Affected . In such manner, upon such terms and at such times as Lessor in its sole discretion deems necessary or expedient, and without notice to Guarantor, Lessor may: (a) amend, alter, compromise, accelerate, extend or change the time or manner for the payment or the performance of any obligation hereby guaranteed; (b) extend, amend or terminate any of the Transaction Documents; or (c) release Lessee by consent to any assignment (or otherwise) as to all or any portion of the Liabilities. Any exercise or non-exercise by Lessor of any right hereby given Lessor, dealing by Lessor with Guarantor or any other guarantor, Lessee or any other person, or change, impairment, release or suspension of any right or remedy of Lessor against any person including Lessee and any other guarantor will not affect any of the obligations of Guarantor hereunder or give Guarantor any recourse or offset against Lessor.
6. Waiver . With respect to the Transaction Documents, Guarantor hereby waives and relinquishes all rights and remedies accorded by applicable law to sureties and/or guarantors or any other accommodation parties, under any statutory provisions, common law or any other provision of law, custom or practice, and agrees not to assert or take advantage of any such rights or remedies including, but not limited to:
(a) any right to require Lessor to proceed against the Lessee or any other person or to proceed against or exhaust any security held by Lessor at any time or to pursue any other remedy in Lessors power before proceeding against Guarantor or to require that Lessor cause a marshaling of Lessees assets or the assets, if any, given as collateral for this Guaranty or to proceed against Lessee and/or any collateral, including collateral, if any, given to secure Guarantors obligation under this Guaranty, held by Lessor at any time or in any particular order;
(b) any defense that may arise by reason of the incapacity or lack of authority of any other person or persons acting on behalf of Guarantor, Lessee, any Affiliate of Lessee, or any other guarantor of the Liabilities;
(c) notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Lessee, Lessor, any creditor of Lessee or Guarantor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lessor or in connection with any of the Liabilities;
(d) any defense based upon an election of remedies by Lessor which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor to proceed against Lessee for reimbursement, or both;
(e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal;
(f) any duty on the part of Lessor to disclose to Guarantor any facts Lessor may now or hereafter know about Lessee, regardless of whether Lessor has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume or has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Lessee and of all circumstances bearing on the risk of non-payment or non-performance of any obligations or indebtedness hereby guaranteed;
(g) any defense arising because of Lessors election, in any proceeding instituted under the federal Bankruptcy Code, of the application of Section 1111 (b)(2) of the federal Bankruptcy Code; and
(h) any defense based on any borrowing or grant of a security interest under Section 364 of the federal Bankruptcy Code.
(i) all rights and remedies accorded by applicable law to guarantors, including without limitation, any extension of time conferred by any law now or hereafter in effect and any requirement or notice of acceptance of this Guaranty or any other notice to which the undersigned may now or hereafter be entitled to the extent such waiver of notice is permitted by applicable law.
7. Warranties . With respect to the Transaction Documents, Guarantor warrants that: (a) this Guaranty is executed at Lessees request; and (b) Guarantor has established adequate means of obtaining from Lessee on a continuing basis financial and other information pertaining to Lessees financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantors risks hereunder,
and Guarantor further agrees that Lessor shall have no obligation to disclose to Guarantor information or material acquired in the course of Lessors relationship with Lessee.
8. No-Subrogation . Until all obligations of Lessee under Transaction Documents have been satisfied and discharged in full for one (1) year (provided, however, that Lessees obligations under Section 7.3 of the Master Lease which expressly survive expiration or termination thereof shall, so long as there is no currently pending claim under such section, not be considered in determining whether the Lessees obligations have been satisfied or discharged), Guarantor shall have no right of subrogation and waives any right to enforce any remedy which Lessor now has or may hereafter have against Lessee and any benefit of, and any right to participate in, any security now or hereafter held by Lessor with respect to the Master Lease.
9. Subordination . Upon the occurrence of an Event of Default under any Transaction Document, which is not cured by Guarantor, the indebtedness or obligations of Lessee to Guarantor shall not be paid in whole or in part nor will Guarantor accept any payment of or on account of any amounts owing, without the prior written consent of Lessor and at Lessors request, Guarantor shall cause Lessee to pay to Lessor all or any part of the subordinated indebtedness until the obligations under the Transaction Documents have been paid in full. Any payment by Lessee in violation of this Guaranty shall be received by Guarantor in trust for Lessor, and Guarantor shall cause the same to be paid to Lessor immediately on account of the amounts owing from Lessee to Lessor. No such payment will reduce or affect in any manner the liability of Guarantor under this Guaranty.
10. No Delay . Any payments required to be made by Guarantor hereunder shall become due on demand in accordance with the terms hereof immediately upon the happening of an Event of Default under any Transaction Document.
11. Application of Payments . With respect to the Transaction Documents, and with or without notice to Guarantor, Lessor, in Lessors sole discretion and at any time and from time to time and in such manner and upon such terms as Lessor deems appropriate, may (a) apply any or all payments or recoveries from Lessee or from any other guarantor of the Liabilities under any other instrument or realized from any security, in such manner and order of priority as Lessor may determine, to any indebtedness or other obligation of the Lessee with respect to the Transaction Documents and whether or not such indebtedness or other obligation is guaranteed hereby or is otherwise secured or is due at the time of such application, and (b) refund to Lessee any payment received by Lessor under the Transaction Documents.
12. Guaranty Default .
(a) As used herein, the term Guaranty Default shall mean one or more of the following events (subject to applicable cure periods):
(i) the failure of Guarantor to pay the amounts required to be paid hereunder at the times specified herein;
(ii) the failure of Guarantor to observe and perform any covenants, conditions or agreement on its part to be observed or performed, other than as
referred to in Subsection (i) above, for a period of thirty (30) days after written notice of such failure has been given to Guarantor by Lessor, unless Lessor agrees in writing to an extension of such time prior to its expiration;
(iii) the occurrence of an Event of Default under the Master Lease or any of the other Transaction Documents.
(b) Upon the occurrence of a Guaranty Default, Lessor shall have the right to bring such actions at law or in equity, including appropriate injunctive relief, as it deems appropriate to compel compliance, payment or deposit, and among other remedies to recover its reasonable attorneys fees in any proceeding, including any appeal therefrom and any post-judgement proceedings.
13. Financial Covenants . At all times while any Obligations guaranteed by Guarantor remain outstanding, Guarantor shall comply with any and all financial covenants of the Master Lease applicable to Guarantor, as the same may be amended, modified or restated from time to time.
14. Financial Statements . As and when required under the Master Lease, Guarantor shall deliver to Lessor such Financial Statements of Guarantor as are required under the Master Lease.
15. Notices . All notices, demands or requests required or permitted to be given to either party hereto shall be in writing and shall be deemed given if delivered personally, sent by reputable overnight courier, with acknowledgment of receipt requested, or mailed by registered, overnight or certified mail, with full postage paid thereon, return receipt requested (such notice to be effective on the date such receipt is acknowledged), as follows:
Guarantor : |
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c\o AdCare Health Systems Inc.
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With copy to: |
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Gregory P. Youra, Esq.
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Lessor |
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c/o Omega Healthcare Investors, Inc.
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With copy to: |
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Doran Derwent, PLLC
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or to such place and with such other copies as Guarantor or Lessor may designate for itself by written notice to the other.
16. Miscellaneous .
(a) No term, condition or provision of this Guaranty may be waived except by an express written instrument to that effect signed by Lessor. No waiver of any term, condition or provision of this Guaranty will be deemed a waiver of any other term, condition or provision, irrespective of similarity, or constitute a continuing waiver of the same term, condition or provision, unless otherwise expressly provided.
(b) If any one or more of the terms, conditions or provisions contained in this Guaranty is found in a final award or judgment rendered by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms, conditions and provisions of this Guaranty shall not in any way be affected or impaired thereby, and this Guaranty shall be interpreted and construed as if the invalid, illegal, or unenforceable term, condition or provision had never been contained in this Guaranty.
(c) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE IN WHICH A FACILITY IS LOCATED SHALL GOVERN THIS AGREEMENT TO THE EXTENT NECESSARY (i) TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO SUCH FACILITY, AND (ii) FOR PROCEDURAL REQUIREMENTS WHICH MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH SUCH FACILITY IS LOCATED. GUARANTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED AND AGREES THAT ALL DISPUTES CONCERNING THIS GUARANTY BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED. GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED AND IRREVOCABLY
WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED.
(d) GUARANTOR AND LESSOR 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 GUARANTY OR THE INTERPRETATION, BREACH OR ENFORCEMENT THEREOF.
(e) In the event of any suit, action, arbitration or other proceeding to interpret this Guaranty, or to determine or enforce any right or obligation created hereby, the prevailing party in the action shall recover such partys actual costs and expenses reasonably incurred in connection therewith, including, but not limited to, attorneys fees and costs of appeal, post judgment enforcement proceedings (if any) and bankruptcy proceedings (if any). Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit, action, arbitration or other proceeding, in addition to any and all other relief awarded to such prevailing party, include in such-judgment or award such partys costs and expenses as provided in this paragraph.
(f) Guarantor (i) represents that it has been represented and advised by counsel in connection with the execution of this Guaranty; (ii) acknowledges receipt of a copy of the Transaction Documents; and (iii) further represents that Guarantor has been advised by counsel with respect thereto. This Guaranty shall be construed and interpreted in accordance with the plain meaning of its language, and not for or against Guarantor or Lessor, and as a whole, giving effect to all of the terms, conditions and provisions hereof.
(g) Except as provided in any other written agreement now or at any time hereafter in force between Lessor and Guarantor, this Guaranty shall constitute the entire agreement of Guarantor with Lessor with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof will be binding upon Lessor or Guarantor unless expressed herein.
(h) All stipulations, obligations, liabilities and undertakings under this Guaranty shall be binding upon Guarantor and its respective successors and assigns and shall inure to the benefit of Lessor and to the benefit of Lessors successors and assigns.
(i) Whenever the singular shall be used hereunder, it shall be deemed to include the plural (and vice-versa) and reference to one gender shall be construed to include all other genders, including neuter, whenever the context of this Guaranty so requires. Section captions or headings used in the Guaranty are for convenience and reference only, and shall not affect the construction thereof.
Signatures on following page.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty in favor of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, as of the date first written above.
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GUARANTOR: |
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HEARTH & HOME OF OHIO, INC., an Ohio corporation |
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By: |
/s/ David A. Tenwick |
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David A. Tenwick |
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Secretary |
STATE OF OHIO |
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) SS |
COUNTY OF DELAWARE |
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This instrument was acknowledged before me on the day of October, 2010, by David A. Tenwick, the Secretary of HEARTH & HOME OF OHIO, INC., an Ohio corporation, on behalf of said corporation.
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/s/ Amanda R. Norris |
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Notary Public, Marion County, Ohio |
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My Commission Expires: April 1, 2015 |
Exhibit 10.147
SECURITY AGREEMENT
( AdCare - Guarantor )
THIS SECURITY AGREEMENT (the Security Agreement ) is made and entered into as of October 29, 2010 by and between ADCARE HEALTH SYSTEMS INC., an Ohio corporation ( Debtor ), and GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Secured Party ).
RECITALS:
A. Capitalized terms used and not otherwise defined herein shall have the meanings given them in Article I below.
B. Lessee has executed and delivered to Secured Party the Lease pursuant to which the Facilities are leased from Secured Party.
C. As a condition to Secured Partys agreement to enter into the Lease, Secured Party has required Debtor to enter into this Security Agreement and to grant security interests to Secured Party as herein provided.
NOW, THEREFORE, in order to induce Secured Party to enter into the Lease, and for other good and valuable consideration the receipt and sufficiency of which hereby are acknowledged, the parties agree as follows:
ARTICLE I - DEFINITIONS
This Security Agreement is executed and delivered in connection with the Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given them in Lease. Terms defined in the Commercial Code (as hereinafter defined) and not otherwise defined in this Security Agreement or in the Lease shall have the meanings ascribed to those terms in the Commercial Code. In addition to the other definitions contained herein, when used in this Security Agreement the following terms shall have the following meanings:
Collateral means the collateral described in Article II, Section 2 below.
Commercial Code means the Uniform Commercial Code, as enacted and in force from time to time in the State of Maryland.
Facilities means the healthcare facilities identified on attached Schedule 1 .
Lease means the Third Amended and Restated Master Lease dated as of the date of this Agreement by Secured Party, as lessor, and Lessee, as lessee of the Facilities, as such Lease may be amended, modified, renew, or replaced from time to time.
Lessee means ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company.
ARTICLE II - AGREEMENT
1. GRANT OF SECURITY INTEREST .
(a) Debtor hereby grants to Secured Party a security interest in the Collateral to secure the payment of all amounts now or hereafter due and owing to Secured Party from Debtor, Lessee and its Affiliates under the Lease and the other Transaction Documents, or any extension or renewal thereof, and any and all other obligations incurred in connection therewith, together with all other obligations or indebtedness of Debtor and its Affiliates to Secured Party and its Affiliates however created, evidenced or arising, whether direct or indirect, whether primary, secondary, absolute, contingent or otherwise, now or hereafter existing (including future advances), due or to become due, plus all interest, costs, out-of-pocket expenses and reasonable attorneys fees which may be made or incurred by Secured Party in the disbursement, administration, and collection thereof, and in the protection, maintenance, and liquidation of the Collateral (the Liabilities ).
(b) If the Debtor shall at any time acquire a commercial tort claim, as defined in Article 9 of the Commercial Code ( Article 9 ), Debtor shall immediately notify the Secured Party, in a writing signed by Debtor, of the details thereof and grant to Secured Party in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance satisfactory to Secured Party.
2. COLLATERAL . The Collateral covered by this Security Agreement is all of the personal property described below that Debtor now owns or shall hereafter acquire or create, immediately upon the acquisition or creation thereof, which is located at, used in connection with, or arises out of the operation of, the Facilities, and consisting of the following:
All personal and fixture property of every kind and nature including, without limitation, all furniture, fixtures, equipment, raw materials, inventory, other goods, accounts, accounts receivable, contract rights (including rights under any management agreement or franchise agreement with respect to the Facilities) , rights to the payment of money, prepaid items, choses in action, insurance refund claims and all other insurance claims and proceeds, commercial tort claims, chattel paper, electronic chattel paper, documents, instruments, securities and all other investment property, deposits, deposit accounts, rights to proceeds of letters of credit, letter-of-credit rights, supporting obligations of every nature, and general intangibles, including, without limitation, to the extent permitted by applicable law:
(i) all tax refund claims, license fees, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, rights to sue and recover for past infringement of patents, trademarks and copyrights, computer programs, computer software, engineering drawings, service marks, customer lists, goodwill, and all licenses, permits, agreements of any kind or nature pursuant to which (a) the Debtor operates or has authority to operate, (b) the Debtor possesses, uses or has authority to possess or use property (whether tangible or intangible) of others, or (c) others possess, use, or have authority to possess or use property (whether tangible or intangible) of the Debtor; and
(ii) all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications, and schematics; and
(iii) all rights under that certain program of medical assistance, funded jointly by the federal government and the states, for impoverished individuals who are aged, blind and/or disabled, and/or members of families with dependent children, which program is more fully described in Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and the regulations promulgated thereunder; and
(iv) all rights under that certain federal program providing health insurance for eligible elderly and other individuals, under which physicians, hospitals, skilled nursing homes, home health care, and other providers are reimbursed for certain covered services they provide to the beneficiaries of such program, which program is more fully described in Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and the regulations promulgated thereunder; and
(v) any and all contracts, authorizations, agreements or consents made by or on behalf of any patient or resident of any of the Facilities, or any other person seeking or obtaining services or goods from Debtor, pursuant to which Debtor provides skilled nursing care, intermediate care, personal care and/or assisted living facilities, or any form of patient or residential care, as well as related services at any of the Facilities (as such contracts, authorizations, agreements or consents may be amended, supplemented, renewed, replaced, extended or modified from time to time); including consents to treatment and assignments of payment of benefits; and
(vi) the (a) operating licenses for each of the Facilities, any certificate of need, any other license, permit, approval or certificate which from time to time, may be issued or is required to be issued by the United States, any state or local government, or any agency or instrumentality of any of the foregoing with respect to the construction, installation or operation of any of the Facilities or any portion or component of any of the Facilities, the providing of any professional or other services by the Debtor, the purchase, sale, dispensing, storage, prescription or use of drugs, medications or the like by Debtor, or any other operations or businesses of Debtor; and (b) certifications and eligibility for participation by Debtor, in respect of its operation of any of the Facilities and any related businesses or operations, in programs or arrangements of or reimbursement from any third-party payors, including Medicare and Medicaid; and (c) all other licenses permits and certificates used or useful in connection with the ownership, operation, use or occupancy of any of the Facilities; and
(vii) all rights to third-party reimbursement contracts for the Facilities which are now or hereafter in effect with respect to residents or patients qualifying for coverage under the same, including Medicare and Medicaid, managed care plans and private insurance agreements, and any successor program or other similar
reimbursement program and/or private insurance agreements, now or hereafter existing; and
(viii) all ledgers, printouts, papers, data, file materials and information pertaining to any of the above described property, relating to any account debtors in respect thereof, and/or to the operation of the Debtors business relating to the Facilities, and all rights of access to such books, records, ledgers, printouts, data, file materials and information, and all property in which such books, records, ledgers, printouts, data, file materials and information are stored, including but not limited to any computer readable memory and any computer hardware or software necessary to process such memory, wherever located.
and all rights, remedies, powers and/or privileges of Debtor with respect to any of the foregoing and all proceeds therefrom owned by Debtor or in which Debtor has an interest, including proceeds which are now or at any time hereafter in possession or under the control of Secured Party or in transit by mail or carrier to or from Secured Party or in the possession of any third party acting on behalf of Secured Party, without regard to whether Secured Party received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Secured Party has conditionally released the same.
The Debtor acknowledges and agrees that, with respect to any term used herein that is defined in either (i) Article 9 in effect as of the date this Security Agreement is signed by the Debtor, or (ii) Article 9 as in force at any time hereafter, the meaning ascribed thereto with respect to any particular item of property shall be that under the more encompassing of the two definitions.
The description of the Collateral to be included on any financing statements executed in connection herewith shall be as follows: All personal property of Debtor which is located at, used in connection with, or arises out of the operation of, the Facilities.
3. PERFECTION OF SECURITY INTEREST .
(a) Perfection by Filing . Debtor hereby irrevocably authorizes Secured Party, at any time and from time to time, pursuant to the provisions of this Security Agreement, to take any and all actions Secured Party may reasonably determine to be necessary to assure that the security interests granted hereby are and remain perfected, including without limitation, filing financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of Debtor or words of similar effect and which contain any other information required by Part 5 of Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether that Debtor is an organization, the type of organization and any organization identification number(s) issued to the Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon request. Any such financing statements, continuation statements or amendments may be signed by Secured Party on behalf of Debtor, and may be filed at any time in any jurisdiction deemed appropriate by Secured Party. Debtor further agrees to execute and deliver to Secured Party, concurrently with Debtors execution of this Security Agreement, and at any time or times
hereafter at the request of Secured Party, all financing statements and continuation financing statements (where not covered by the first sentence of this paragraph), assignments, affidavits, reports, notices, letters of authority, vehicle title notations and all other documents that Secured Party may reasonably request, in a form reasonably satisfactory to Secured Party, to perfect and maintain perfected Secured Partys security interests in the Collateral. Debtor also agrees to make appropriate entries on its books and records disclosing Secured Partys security interests in the Collateral.
(b) Other Perfection, etc . Debtor shall at any time and from time to time take such steps as Secured Party may reasonably request for Secured Party (i) to obtain an acknowledgment, in form and substance reasonably satisfactory to Secured Party, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the benefit of Secured Party, (ii) to obtain control of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper, with any agreements establishing control to be in form and substance reasonably satisfactory to Secured Party, and (iii) otherwise to insure the continued perfection and priority of Secured Partys security interest in any of the Collateral and of the preservation of its rights therein. Debtor authorizes Secured Party to file financing statements describing any statutory liens held by Secured Party.
4. WARRANTIES AND COVENANTS . In addition to the warranties and representations, if any, made in the Lease, Debtor warrants, represents and agrees that:
(a) Debtor has rights in or the power to transfer the Collateral, and is and will be the lawful owner of all of the Collateral, with the right to subject the Collateral to the security interests of Secured Party hereunder;
(b) Except for the security interests in the Collateral herein granted to Secured Party and the security interests permitted pursuant to Sections 6.4 and 8.2.5 of the Master Lease, there are no other adverse claims, liens, restrictions on transfer or pledge, or security interests in the Collateral that are known to Debtor, and there are no currently effective financing statements covering any of the Collateral filed in any public office created by or known to Debtor prior to the date hereof. Debtor shall defend Secured Party against any claims and demands of any and all other persons to the Collateral inconsistent with this Security Agreement;
(c) All of the Collateral that constitutes tangible personal property is or will be (upon delivery) located at the Facilities;
(d) Except as permitted under the Lease or under this Agreement, Debtor shall not remove the Collateral from the Facilities without Secured Partys prior written consent and shall not use or permit the Collateral to be used for any unlawful purpose whatsoever. Except as permitted under the Lease or hereunder, Debtor shall not remove any Collateral from the state in which the Facilities are located, without the prior written consent of Secured Party;
(e) Except as permitted under the Lease, Debtor shall not conduct business under any name at the Facilities other than that given above or set forth on attached
Schedule 1, nor will Debtor change or reorganize the type of business entity under which it presently does business, except upon prior and express written approval of Secured Party, such approval not to be unreasonably withheld, conditioned or delayed, and, if such approval is granted, Debtor agrees that all documents, instruments and agreements reasonably requested by Secured Party and relating to such change shall be prepared, filed and recorded at Debtors expense before the change occurs;
(f) Debtor shall not remove any records concerning the Collateral located at the Facilities nor keep any of its records concerning the same at any other location other than the principal business office of Debtor in the State of Ohio unless written notice thereof is given to Secured Party at least ten (10) days prior to the removal of such records to any new addresses; and
(g) Debtor has the right and power and is duly authorized to enter into this Security Agreement. The execution of this Security Agreement does not and will not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound or affected.
(h) Debtor shall not change its location (as that term is defined in Section 9.307 of the Commercial Code) without the prior written consent of Secured Party, such consent not to be unreasonably withheld. Debtor shall not change its corporate name without providing Secured Party thirty (30) days prior written notice.
(i) Debtors (i) chief executive office is located in the state of Ohio, (ii) location (as that term is defined in Section 9.307 of the Commercial Code) is the State of Ohio (the Debtor State ), (iii) exact legal name is as set forth in the first paragraph of this Security Agreement, and (iv) filing number with the Debtor State is 801461.
(j) The Debtor shall maintain the Collateral in good order and repair and with reasonable promptness make all necessary and appropriate repairs thereto of every kind and nature whether ordinary or extraordinary, foreseen or unforeseen, or arising by reason of a condition whether or not existing prior to the date of this Security Agreement. It is the intention of this provision that the level of maintenance of the Collateral shall be not less than that of a first class nursing home operator making use of the Collateral for its intended use.
(k) Intentionally omitted.
(l) Except as otherwise permitted pursuant to the terms of this Security Agreement or the Lease, Debtor will not sell, lease assign, transfer, grant any other security interest in, pledge, license or otherwise dispose of or encumber any Collateral to any third party while this Security Agreement is in effect without the prior and express written consent of Secured Party.
(m) To Debtors knowledge, no part of the Collateral is classified or classifiable as hazardous waste under Federal, Debtor State and the state in which the Facilities are located environmental laws and regulations. Debtor is in full compliance with all Federal, Debtor State and the state in which the Facilities are located environmental laws and regulations.
5. COLLECTION OF ACCOUNTS .
(a) Secured Party conditionally authorizes Debtor to collect accounts from Debtors account debtors provided, however, after any Event of Default and while it continues, this privilege may be terminated by Secured Party at any time upon written notice from Secured Party and, upon mailing such notice, Secured Party shall have all of Debtors rights, title, and interest in the accounts, including a right of stoppage in transit. After notice as aforesaid or upon the occurrence of an Event of Default (as subsequently defined), and subject to the terms of any written intercreditor agreement entered into by Secured Party with any other creditor of Debtor, Secured Party may notify any account debtor(s) of Secured Partys security interest in Debtors accounts and shall be entitled to collect same, and Debtor will thereafter receive all accounts payments as the agent of and as trustee for Secured Party and will deliver to Secured Party on the day of receipt, all checks, cash, drafts, acceptances, notes and other accounts payments and, until such delivery, Debtor shall not use or commingle any accounts payments and shall at all times keep all such remittances separate and apart from Debtors own funds, capable of identification as the Secured Partys property. After any Event of Default and while it continues, Debtor shall open all mail only in the presence of a Secured Party representative, who may remove therefrom any accounts remittance(s). Subject to the terms of any written intercreditor agreement entered into by Secured Party with any other creditor of Debtor, Secured Party and its representatives are hereby authorized to endorse in Debtors name, any item received by the Secured Party representing any payment on or proceeds of any of the Collateral, and may sign Debtors name upon all accounts, invoices, assignments, financing statements, notices to debtors, bills of lading, storage receipts, or other instruments or documents in respect to the account debtors, the proceeds therefrom, or property related thereto. Debtor shall promptly give Secured Party copies of all accounts statements, accompanied by such additional information, documents, or copies thereof, as Secured Party may request. Debtor shall maintain all records with respect to the accounts and with respect to the general conduct and operation of Debtors business, including balance sheets, operating statements and other financial information, in accordance with generally accepted accounting principles and as Secured Party may request.
(b) Until such time as Secured Party shall notify Debtor of the revocation of such power and authority by reason of an Event of Default (and effective only during the continuance thereof), Debtor (i) may, only in the ordinary course of business, at its own expense, sell, lease or furnish under contracts of service any of the inventory normally held by Debtor for such purpose; (ii) may use and consume any raw materials, work in process or materials, the use and consumption of which is necessary in order to carry on Debtors business; (iii) replace or dispose of equipment in accordance with the provisions of the Lease; and (iv) shall, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as Secured Party may request or, in the absence of such request, as Debtor may deem advisable. A sale, lease, furnishing of
services or other transfer of the Collateral as a partial or total satisfaction of any debt of Debtor shall not constitute a sale in the ordinary course of business.
6. INSPECTIONS/INFORMATION . Debtor shall permit Secured Party or its agents upon reasonable written request and during business hours to have access to and to inspect any of the Collateral. Secured Party may from time to time upon reasonable written request and during business hours inspect, check, make copies of, or extracts from the books, records and files of Debtor relating to the Collateral, and Debtor shall make the same available to Secured Party at any reasonable time for such purposes. Secured Party is hereby authorized to conduct from time to time such investigation of Debtors continuing creditworthiness as Secured Party deems appropriate including, without limitation, contact with Debtors accountants or other third parties, and Secured Party is also authorized to respond to any credit inquiries received from trade creditors or other credit granting institutions. Debtor agrees to promptly supply Secured Party with such financial and other information concerning its financial and business affairs, assets and liabilities as Secured Party may from time to time reasonably request, and Debtor agrees that Secured Party or its agents may from time to time verify Debtors continuing compliance with any of Debtors warranties and covenants made in Paragraph 4 above, at Debtors cost and expense.
7. DEFAULT/REMEDIES .
(a) The occurrence of any of the following shall constitute an Event of Default under this Security Agreement:
(i) An Event of Default as defined in the Lease;
(ii) Debtor fails to observe or perform any other term, covenant or condition of this Security Agreement and the failure is not cured by Debtor within a period of thirty (30) days after written notice thereof from Secured Party; or
(iii) Any representation or warranty of the Debtor contained in this Agreement proves to be untrue in any material respect.
(b) Whenever an Event of Default shall have occurred and so long as its continues, Secured Party may exercise from time to time any rights and remedies, including the right to immediate possession of the Collateral, available to it under the Lease, this Security Agreement or applicable law. Secured Party shall have the right to hold any property then in or upon the Facilities (but excluding any property belonging to patients at the Facilities) at the time of repossession not covered by this Security Agreement until return is demanded in writing by Debtor. Debtor agrees, in case of the occurrence of an Event of Default and upon the request of Secured Party, to assemble, at its expense, all of the Collateral at a convenient place acceptable to Secured Party and to pay all costs of Secured Party of collection of all the Liabilities, and enforcement of rights hereunder, including reasonable attorneys fees and legal expenses, including participation in bankruptcy proceedings, and the expenses of locating the Collateral and the expenses of any repairs to any realty or other property to which any of the Collateral may be affixed or be a part. If the Collateral is disposed of at a public sale, the parties agree that (i) a public sale with at least ten (10) calendar days prior notice to Debtor and notice to the public by
one publication in a local newspaper is commercially reasonable, and (ii) a disclaimer of warranties at a public or private sale is commercially reasonable. If any notification of intended disposition of any of the Collateral is required by law, such notification, if mailed, shall be deemed reasonably and properly given if sent at least ten (10) days before such disposition, by first class mail, postage prepaid, addressed to the Debtor either at the address set forth in the notice section hereof, or at any other address of the Debtor appearing on the records of Secured Party.
(c) TO THE EXTENT PERMITTED BY LAW, DEBTOR AGREES THAT SECURED PARTY SHALL, UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, HAVE THE RIGHT TO PEACEFULLY RETAKE ANY OF THE COLLATERAL. DEBTOR WAIVES ANY RIGHT IT MAY HAVE, IN SUCH INSTANCE, TO A JUDICIAL HEARING PRIOR TO SUCH RETAKING.
(d) The obligations of Debtor under this Security Agreement, the Lease and other Transaction Documents are cross-defaulted and cross-collateralized such that upon an Event of Default under the Lease, this Security Agreement and/or any such other Transaction Documents, the Secured Party has the right to declare such Event of Default to be an Event of Default without the benefit of any notice or grace periods contained under any or all of this Security Agreement, the Lease and the other Transaction Documents and without limitation to resort to any or all of the Collateral and the other collateral securing such obligations in pursuit of its remedies thereunder.
(e) Debtor acknowledges and agrees that in the event that any of the Collateral is sold by the Secured Party for credit, then credit shall be made against the Liabilities only as, if and when cash payments are actually received by the Secured Party for such Collateral.
8. INDEMNITY . In addition to the indemnities set forth in the Lease, Debtor shall protect, indemnify and hold harmless Secured Party and its officers, employees, directors and agents from and against all liabilities, obligations, claims, damages, penalties, causes of action, and out-of-pocket costs and expenses whatsoever (including, without limitation, reasonable attorneys fees and expenses) imposed upon or incurred by or asserted against Secured Party or its officers, employees, directors or agents, by reason of the ownership, use, construction and operation of the Collateral by Debtor, its officers, directors, servants, agents and employees or by reason of enforcement of Secured Partys rights hereunder or under the Lease. As used in this Security Agreement, the term attorneys fees includes fees incurred in any appeal and/or enforcement proceedings. In case any action, suit or proceeding is brought against Secured Party by reason of the enforcement of Secured Partys rights hereunder or under the Lease, Debtor, upon request of Secured Party, shall at Debtors expense cause such action, suit or proceeding to be resisted and defended by counsel approved by Secured Party with respect to proceedings and matters involving Secured Party. Any amounts payable to Secured Party under this Section 8 which are not paid within thirty (30) days after written demand therefore shall bear interest at the Overdue Rate as specified in the Lease from the date of such demand, and such amounts, together with such interest, shall be indebtedness secured by this Security Agreement. The obligations of Debtor under this Section 8 shall survive the expiration or earlier termination of the Term of the Lease.
9. GENERAL .
(a) Time . Time shall be deemed of the essence with respect to this Security Agreement.
(b) Condition of Collateral . Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Debtor requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care. Failure of Secured Party to preserve or protect any rights with respect to such Collateral against any prior parties shall not be deemed a failure to exercise reasonable care in the custody and preservation of such Collateral.
(c) Waivers . Any delay on the part of Secured Party in exercising any power, privilege or right under the Lease, this Security Agreement or under any other Transaction Document shall not operate as a waiver thereof. No single or partial exercise thereof, or the exercise of any other power, privilege or right shall preclude other or further exercise thereof, or the exercise of any other power, privilege or right. The waiver by Secured Party in writing of any default by Debtor shall not constitute a waiver of any subsequent defaults but shall be restricted to the default so waived.
(d) Rights Cumulative . All rights, remedies and powers of Secured Party hereunder are irrevocable and cumulative, and nothing contained herein shall be construed as in any way modifying, limiting, creating an alternative to or exclusive of, and shall be in addition to all rights, remedies and power is given by the Lease, any other Transaction Document or the Commercial Code, or any other applicable rules of decision, regulations or laws now existing or hereafter enacted.
(e) Rules of Construction . In this Security Agreement, words in the singular include the plural, and in the plural include the singular; words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any gender and the word or is disjunctive but not exclusive; and the words include, including or includes are not limiting terms. The captions and section numbers appearing in this Security Agreement are inserted only as a matter of convenience. They do not define, limit or describe the scope or intent of the provisions of this Security Agreement.
(f) Severability . If any term or provision set forth in this Security Agreement shall be held invalid or unenforceable, the remainder of this Security Agreement, or the application of such terms or provisions to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.
(g) Counterparts . This Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Security Agreement by signing and delivering one or more counterparts.
(h) Successors . The terms of this Security Agreement shall be binding upon the Debtor, its successors, assigns, heirs, executors and personal representatives, including all new debtors within the meaning of the Commercial Code, and shall inure to the benefit of Secured Party, its successors and any holder, owner or assignee of any rights in the Lease and will be enforceable by them as their interest may appear.
(i) Enforcement Expenses . In the event of any action to enforce this Security Agreement or to protect the security interest of Secured Party in the Collateral, or to protect, preserve, maintain, process, assemble, develop, insure, market or sell any Collateral, Debtor agrees to pay the costs owed and expenses thereof, together with reasonable and documented attorneys fees (including fees incurred in appeals and post judgment enforcement proceedings).
(j) Choice of Law . THIS SECURITY AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF THE DEBTOR AND SECURED PARTY SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE WHERE THE COLLATERAL IS LOCATED SHALL GOVERN THIS SECURITY AGREEMENT (A) TO THE EXTENT NECESSARY TO PERFECT AND/OR ENFORCE THE LIENS CREATED BY THIS SECURITY AGREEMENT AND TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO THE COLLATERAL, AND (B) FOR PROCEDURAL REQUIREMENTS THAT MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED.
(k) Jurisdiction, Venue, Service of Process . DEBTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND AND AGREES THAT ALL DISPUTES CONCERNING THIS SECURITY AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE IN WHICH THE COLLATERAL IS LOCATED OR IN MARYLAND. DEBTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED OR MARYLAND, AND DEBTOR IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND.
(l) Amendments . No amendment to this Security Agreement shall be effective unless the same shall be in writing and signed by the party to be charged.
(m) Notices . All notices, demands or requests required or permitted to be given to either party hereto shall be in writing and shall be deemed given if delivered personally, sent by reputable overnight courier, with acknowledgment of receipt requested, or mailed by registered, overnight or certified mail, with full postage paid thereon, return receipt requested (such notice to be effective on the date such receipt is acknowledged), as follows:
Debtor : |
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AdCare Health Systems Inc.
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With copy to: |
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Gregory P. Youra, Esq.
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Secured Party : |
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c/o Omega Healthcare Investors, Inc.
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With copy to: |
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Doran Derwent, PLLC
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or to such place and with such other copies as a Debtor or Secured Party may designate for itself by written notice to the other. The parties hereby agree that a notice sent as specified in this paragraph at least ten (10) days before the date of any intended public sale or the date after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to be reasonable notice of such sale or other disposition.
(n) Joint Preparation . This Security Agreement shall be deemed to have been prepared jointly by the parties hereto. Any ambiguity herein shall not be interpreted against any party hereto and shall be interpreted as if each of the parties hereto had prepared this Security Agreement.
(o) Entire Agreement . This Security Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Security Agreement.
(p) Joint and Several . If more than one Debtor has signed this Security Agreement, their obligations shall be joint and several.
Signatures follow.
SECURED PARTY:
GEORGIA LESSOR BONTERRA/PARKVIEW, INC.
By: |
/s/ Daniel J. Booth |
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Name: |
Daniel J. Booth |
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Title: |
Chief Operating Officer |
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STATE OF MARYLAND |
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) SS |
COUNTY OF BALTIMORE |
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This instrument was acknowledged before me on the 28th day of October, 2010, by Daniel J. Booth, the Chief Operating Officer of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, on behalf of said corporation.
Notary Public
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/s/ Judith A. Jacobs |
DEBTOR:
ADCARE HEALTH SYSTEMS INC., an Ohio corporation
By: |
/s/ David A. Tenwick |
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David A. Tenwick |
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Chairman |
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STATE OF OHIO |
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) SS |
COUNTY OF DELAWARE |
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The foregoing instrument was acknowledged before me this 29 day of October, 2010, by David A. Tenwick, who is the Chairman of ADCARE HEALTH SYSTEMS INC., an Ohio corporation, on behalf of such corporation.
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/s/ Amanda R. Norris |
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Notary Public, Marion County, Ohio |
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My Commission Expires: April 1, 2015 |
Exhibit 10.148
SECURITY AGREEMENT
(AdCare - Lessee)
THIS SECURITY AGREEMENT (the Security Agreement ) is made and entered into as of October 29, 2010 by and between ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( Debtor ), and GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Secured Party ).
RECITALS:
A. Capitalized terms used and not otherwise defined herein shall have the meanings given them in Article I below.
B. Debtor has executed and delivered to Secured Party the Lease pursuant to which the Facilities are leased from Secured Party.
C. As a condition to Secured Partys agreement to enter into the Lease, Secured Party has required Debtor to enter into this Security Agreement and to grant security interests to Secured Party as herein provided.
NOW, THEREFORE, in order to induce Secured Party to enter into the Lease, and for other good and valuable consideration the receipt and sufficiency of which hereby are acknowledged, the parties agree as follows:
ARTICLE I - DEFINITIONS
This Security Agreement is executed and delivered in connection with the Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given them in Lease. Terms defined in the Commercial Code (as hereinafter defined) and not otherwise defined in this Security Agreement or in the Lease shall have the meanings ascribed to those terms in the Commercial Code. In addition to the other definitions contained herein, when used in this Security Agreement the following terms shall have the following meanings:
Collateral means the collateral described in Article II, Section 2 below.
Commercial Code means the Uniform Commercial Code, as enacted and in force from time to time in the State of Maryland.
Facilities means the healthcare facilities identified on attached Schedule 1 .
Lease means the Third Amended and Restated Master Lease dated as of the date of this Agreement by Secured Party, as lessor, and Debtor, as lessee of the Facilities, as such Lease may be amended, modified, renew, or replaced from time to time.
ARTICLE II - AGREEMENT
1. GRANT OF SECURITY INTEREST .
(a) Debtor hereby grants to Secured Party a security interest in the Collateral to secure the payment of all amounts now or hereafter due and owing to Secured Party from Debtor and its Affiliates under the Lease and the other Transaction Documents, or any extension or renewal thereof, and any and all other obligations incurred in connection therewith, together with all other obligations or indebtedness of Debtor and its Affiliates to Secured Party and its Affiliates however created, evidenced or arising, whether direct or indirect, whether primary, secondary, absolute, contingent or otherwise, now or hereafter existing (including future advances), due or to become due, plus all interest, costs, out-of-pocket expenses and reasonable attorneys fees which may be made or incurred by Secured Party in the disbursement, administration, and collection thereof, and in the protection, maintenance, and liquidation of the Collateral (the Liabilities ).
(b) If the Debtor shall at any time acquire a commercial tort claim, as defined in Article 9 of the Commercial Code ( Article 9 ), Debtor shall immediately notify the Secured Party, in a writing signed by Debtor, of the details thereof and grant to Secured Party in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance satisfactory to Secured Party.
2. COLLATERAL . The Collateral covered by this Security Agreement is all of the personal property described below that Debtor now owns or shall hereafter acquire or create, immediately upon the acquisition or creation thereof, wherever located, and consisting of the following:
All personal and fixture property of every kind and nature including, without limitation, all furniture, fixtures, equipment, raw materials, inventory, other goods, accounts, accounts receivable, contract rights (including rights under any management agreement or franchise agreement with respect to the Facilities), rights to the payment of money, prepaid items, choses in action, insurance refund claims and all other insurance claims and proceeds, commercial tort claims, chattel paper, electronic chattel paper, documents, instruments, securities and all other investment property, deposits, deposit accounts, rights to proceeds of letters of credit, letter-of-credit rights, supporting obligations of every nature, and general intangibles, including, without limitation, to the extent permitted by applicable law:
(i) all tax refund claims, license fees, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, rights to sue and recover for past infringement of patents, trademarks and copyrights, computer programs, computer software, engineering drawings, service marks, customer lists, goodwill, and all licenses, permits, agreements of any kind or nature pursuant to which (a) the Debtor operates or has authority to operate, (b) the Debtor possesses, uses or has authority to possess or use property (whether tangible or intangible) of others, or (c) others possess, use, or have authority to possess or use property (whether tangible or intangible) of the Debtor; and
(ii) all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications, and schematics; and
(iii) all rights under that certain program of medical assistance, funded jointly by the federal government and the states, for impoverished individuals who are aged, blind and/or disabled, and/or members of families with dependent children, which program is more fully described in Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and the regulations promulgated thereunder; and
(iv) all rights under that certain federal program providing health insurance for eligible elderly and other individuals, under which physicians, hospitals, skilled nursing homes, home health care, and other providers are reimbursed for certain covered services they provide to the beneficiaries of such program, which program is more fully described in Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and the regulations promulgated thereunder; and
(v) any and all contracts, authorizations, agreements or consents made by or on behalf of any patient or resident of any of the Facilities, or any other person seeking or obtaining services or goods from Debtor, pursuant to which Debtor provides skilled nursing care, intermediate care, personal care and/or assisted living facilities, or any form of patient or residential care, as well as related services at any of the Facilities (as such contracts, authorizations, agreements or consents may be amended, supplemented, renewed, replaced, extended or modified from time to time); including consents to treatment and assignments of payment of benefits; and
(vi) the (a) operating licenses for each of the Facilities, any certificate of need, any other license, permit, approval or certificate which from time to time, may be issued or is required to be issued by the United States, any state or local government, or any agency or instrumentality of any of the foregoing with respect to the construction, installation or operation of any of the Facilities or any portion or component of any of the Facilities, the providing of any professional or other services by the Debtor, the purchase, sale, dispensing, storage, prescription or use of drugs, medications or the like by Debtor, or any other operations or businesses of Debtor; and (b) certifications and eligibility for participation by Debtor, in respect of its operation of any of the Facilities and any related businesses or operations, in programs or arrangements of or reimbursement from any third- party payors, including Medicare and Medicaid; and (c) all other licenses permits and certificates used or useful in connection with the ownership, operation, use or occupancy of any of the Facilities; and
(vii) all rights to third-party reimbursement contracts for the Facilities which are now or hereafter in effect with respect to residents or patients qualifying for coverage under the same, including Medicare and Medicaid, managed care plans and private insurance agreements, and any successor program or other similar
reimbursement program and/or private insurance agreements, now or hereafter existing; and
(viii) all ledgers, printouts, papers, data, file materials and information pertaining to any of the above described property, relating to any account debtors in respect thereof, and/or to the operation of the Debtors business relating to the Facilities, and all rights of access to such books, records, ledgers, printouts, data, file materials and information, and all property in which such books, records, ledgers, printouts, data, file materials and information are stored, including but not limited to any computer readable memory and any computer hardware or software necessary to process such memory, wherever located.
and all rights, remedies, powers and/or privileges of Debtor with respect to any of the foregoing and all proceeds therefrom owned by Debtor or in which Debtor has an interest, including proceeds which are now or at any time hereafter in possession or under the control of Secured Party or in transit by mail or carrier to or from Secured Party or in the possession of any third party acting on behalf of Secured Party, without regard to whether Secured Party received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Secured Party has conditionally released the same.
The Debtor acknowledges and agrees that, with respect to any term used herein that is defined in either (i) Article 9 in effect as of the date this Security Agreement is signed by the Debtor, or (ii) Article 9 as in force at any time hereafter, the meaning ascribed thereto with respect to any particular item of property shall be that under the more encompassing of the two definitions.
The description of the Collateral to be included on any financing statements executed in connection herewith shall be as follows: All personal property of Debtor or All assets of Debtor.
3. PERFECTION OF SECURITY INTEREST .
(a) Perfection by Filing . Debtor hereby irrevocably authorizes Secured Party, at any time and from time to time, pursuant to the provisions of this Security Agreement, to take any and all actions Secured Party may reasonably determine to be necessary to assure that the security interests granted hereby are and remain perfected, including without limitation, filing financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of Debtor or words of similar effect and which contain any other information required by Part 5 of Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether that Debtor is an organization, the type of organization and any organization identification number(s) issued to the Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon request. Any such financing statements, continuation statements or amendments may be signed by Secured Party on behalf of Debtor, and may be filed at any time in any jurisdiction deemed appropriate by Secured Party. Debtor further agrees to execute and deliver to Secured Party, concurrently with Debtors execution of this Security Agreement, and at any time or times
hereafter at the request of Secured Party, all financing statements and continuation financing statements (where not covered by the first sentence of this paragraph), assignments, affidavits, reports, notices, letters of authority, vehicle title notations and all other documents that Secured Party may reasonably request, in a form reasonably satisfactory to Secured Party, to perfect and maintain perfected Secured Partys security interests in the Collateral. Debtor also agrees to make appropriate entries on its books and records disclosing Secured Partys security interests in the Collateral.
(b) Other Perfection, etc . Debtor shall at any time and from time to time take such steps as Secured Party may reasonably request for Secured Party (i) to obtain an acknowledgment, in form and substance reasonably satisfactory to Secured Party, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the benefit of Secured Party, (ii) to obtain control of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper, with any agreements establishing control to be in form and substance reasonably satisfactory to Secured Party, and (iii) otherwise to insure the continued perfection and priority of Secured Partys security interest in any of the Collateral and of the preservation of its rights therein. Debtor authorizes Secured Party to file financing statements describing any statutory liens held by Secured Party.
4. WARRANTIES AND COVENANTS . In addition to the warranties and representations, if any, made in the Lease, Debtor warrants, represents and agrees that:
(a) Debtor has rights in or the power to transfer the Collateral, and is and will be the lawful owner of all of the Collateral, with the right to subject the Collateral to the security interests of Secured Party hereunder;
(b) Except for the security interests in the Collateral herein granted to Secured Party and the security interests permitted pursuant to Sections 6.4 and 8.2.5 of the Master Lease, there are no other adverse claims, liens, restrictions on transfer or pledge, or security interests in the Collateral that are known to Debtor, and there are no currently effective financing statements covering any of the Collateral filed in any public office created by or known to Debtor prior to the date hereof. Debtor shall defend Secured Party against any claims and demands of any and all other persons to the Collateral inconsistent with this Security Agreement;
(c) All of the Collateral that constitutes tangible personal property is or will be (upon delivery) located at the Facilities;
(d) Except as permitted under the Lease or under this Agreement, Debtor shall not remove the Collateral from the Facilities without Secured Partys prior written consent and shall not use or permit the Collateral to be used for any unlawful purpose whatsoever. Except as permitted under the Lease or hereunder, Debtor shall not remove any Collateral from the state in which the Facilities are located, without the prior written consent of Secured Party;
(e) Except as permitted under the Lease, Debtor shall not conduct business under any name at the Facilities other than that given above or set forth on attached
Schedule 1, nor will Debtor change or reorganize the type of business entity under which it presently does business, except upon prior and express written approval of Secured Party, such approval not to be unreasonably withheld, conditioned or delayed, and, if such approval is granted, Debtor agrees that all documents, instruments and agreements reasonably requested by Secured Party and relating to such change shall be prepared, filed and recorded at Debtors expense before the change occurs;
(f) Debtor shall not remove any records concerning the Collateral located at the Facilities nor keep any of its records concerning the same at any other location other than the principal business office of Debtor in the State of Georgia unless written notice thereof is given to Secured Party at least ten (10) days prior to the removal of such records to any new addresses; and
(g) Debtor has the right and power and is duly authorized to enter into this Security Agreement. The execution of this Security Agreement does not and will not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound or affected.
(h) Debtor shall not change its location (as that term is defined in Section 9.307 of the Commercial Code) without the prior written consent of Secured Party, such consent not to be unreasonably withheld.. Debtor shall not change its corporate name without providing Secured Party thirty (30) days prior written notice.
(i) Debtors (i) chief executive office is located in the state of Ohio, (ii) location (as that term is defined in Section 9.307 of the Commercial Code) is the State of Georgia (the Debtor State ), (iii) exact legal name is as set forth in the first paragraph of this Security Agreement, and (iv) filing number with the Debtor State is 10049690.
(j) The Debtor shall maintain the Collateral in good order and repair and with reasonable promptness make all necessary and appropriate repairs thereto of every kind and nature whether ordinary or extraordinary, foreseen or unforeseen, or arising by reason of a condition whether or not existing prior to the date of this Security Agreement. It is the intention of this provision that the level of maintenance of the Collateral shall be not less than that of a first class nursing home operator making use of the Collateral for its intended use.
(k) Intentionally omitted.
(1) Except as otherwise permitted pursuant to the terms of this Security Agreement or the Lease, Debtor will not sell, lease assign, transfer, grant any other security interest in, pledge, license or otherwise dispose of or encumber any Collateral to any third party while this Security Agreement is in effect without the prior and express written consent of Secured Party.
(m) To Debtors knowledge, no part of the Collateral is classified or classifiable as hazardous waste under Federal, Debtor State and the state in which the Facilities are located environmental laws and regulations. Debtor is in full compliance with all Federal, Debtor State and the state in which the Facilities are located environmental laws and regulations.
5. COLLECTION OF ACCOUNTS .
(a) Secured Party conditionally authorizes Debtor to collect accounts from Debtors account debtors provided, however, after any Event of Default and while it continues, this privilege may be terminated by Secured Party at any time upon written notice from Secured Party and, upon mailing such notice, Secured Party shall have all of Debtors rights, title, and interest in the accounts, including a right of stoppage in transit. After notice as aforesaid or upon the occurrence of an Event of Default (as subsequently defined), and subject to the terms of any written intercreditor agreement entered into by Secured Party with any other creditor of Debtor, Secured Party may notify any account debtor(s) of Secured Partys security interest in Debtors accounts and shall be entitled to collect same, and Debtor will thereafter receive all accounts payments as the agent of and as trustee for Secured Party and will deliver to Secured Party on the day of receipt, all checks, cash, drafts, acceptances, notes and other accounts payments and, until such delivery, Debtor shall not use or commingle any accounts payments and shall at all times keep all such remittances separate and apart from Debtors own funds, capable of identification as the Secured Partys property. After any Event of Default and while it continues, Debtor shall open all mail only in the presence of a Secured Party representative, who may remove therefrom any accounts remittance(s). Subject to the terms of any written intercreditor agreement entered into by Secured Party with any other creditor of Debtor, Secured Party and its representatives are hereby authorized to endorse in Debtors name, any item received by the Secured Party representing any payment on or proceeds of any of the Collateral, and may sign Debtors name upon all accounts, invoices, assignments, financing statements, notices to debtors, bills of lading, storage receipts, or other instruments or documents in respect to the account debtors, the proceeds therefrom, or property related thereto. Debtor shall promptly give Secured Party copies of all accounts statements, accompanied by such additional information, documents, or copies thereof, as Secured Party may request. Debtor shall maintain all records with respect to the accounts and with respect to the general conduct and operation of Debtors business, including balance sheets, operating statements and other financial information, in accordance with generally accepted accounting principles and as Secured Party may request.
(b) Until such time as Secured Party shall notify Debtor of the revocation of such power and authority by reason of an Event of Default (and effective only during the continuance thereof), Debtor (i) may, only in the ordinary course of business, at its own expense, sell, lease or furnish under contracts of service any of the inventory normally held by Debtor for such purpose; (ii) may use and consume any raw materials, work in process or materials, the use and consumption of which is necessary in order to carry on Debtors business; (iii) replace or dispose of equipment in accordance with the provisions of the Lease; and (iv) shall, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as Secured Party may request or, in the absence of such request, as Debtor may deem advisable. A sale, lease, furnishing of
services or other transfer of the Collateral as a partial or total satisfaction of any debt of Debtor shall not constitute a sale in the ordinary course of business.
6. INSPECTIONS/INFORMATION . Debtor shall permit Secured Party or its agents upon reasonable written request and during business hours to have access to and to inspect any of the Collateral. Secured Party may from time to time upon reasonable written request and during business hours inspect, check, make copies of, or extracts from the books, records and files of Debtor relating to the Collateral, and Debtor shall make the same available to Secured Party at any reasonable time for such purposes. Secured Party is hereby authorized to conduct from time to time such investigation of Debtors continuing creditworthiness as Secured Party deems appropriate including, without limitation, contact with Debtors accountants or other third parties, and Secured Party is also authorized to respond to any credit inquiries received from trade creditors or other credit granting institutions. Debtor agrees to promptly supply Secured Party with such financial and other information concerning its financial and business affairs, assets and liabilities as Secured Party may from time to time reasonably request, and Debtor agrees that Secured Party or its agents may from time to time verify Debtors continuing compliance with any of Debtors warranties and covenants made in Paragraph 4 above, at Debtors cost and expense.
7. DEFAULT/REMEDIES .
(a) The occurrence of any of the following shall constitute an Event of Default under this Security Agreement:
(i) An Event of Default as defined in the Lease;
(ii) Debtor fails to observe or perform any other term, covenant or condition of this Security Agreement and the failure is not cured by Debtor within a period of thirty (30) days after written notice thereof from Secured Party; or
(iii) Any representation or warranty of the Debtor contained in this Agreement proves to be untrue in any material respect.
(b) Whenever an Event of Default shall have occurred and so long as its continues, Secured Party may exercise from time to time any rights and remedies, including the right to immediate possession of the Collateral, available to it under the Lease, this Security Agreement or applicable law. Secured Party shall have the right to hold any property then in or upon the Facilities (but excluding any property belonging to patients at the Facilities) at the time of repossession not covered by this Security Agreement until return is demanded in writing by Debtor. Debtor agrees, in case of the occurrence of an Event of Default and upon the request of Secured Party, to assemble, at its expense, all of the Collateral at a convenient place acceptable to Secured Party and to pay all costs of Secured Party of collection of all the Liabilities, and enforcement of rights hereunder, including reasonable attorneys fees and legal expenses, including participation in bankruptcy proceedings, and the expenses of locating the Collateral and the expenses of any repairs to any realty or other property to which any of the Collateral may be affixed or be a part. If the Collateral is disposed of at a public sale, the parties agree that (i) a public sale with at least ten (10) calendar days prior notice to Debtor and notice to the public by
one publication in a local newspaper is commercially reasonable, and (ii) a disclaimer of warranties at a public or private sale is commercially reasonable. If any notification of intended disposition of any of the Collateral is required by law, such notification, if mailed, shall be deemed reasonably and properly given if sent at least ten (10) days before such disposition, by first class mail, postage prepaid, addressed to the Debtor either at the address set forth in the notice section hereof, or at any other address of the Debtor appearing on the records of Secured Party.
(c) TO THE EXTENT PERMITTED BY LAW, DEBTOR AGREES THAT SECURED PARTY SHALL, UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, HAVE THE RIGHT TO PEACEFULLY RETAKE ANY OF THE COLLATERAL. DEBTOR WAIVES ANY RIGHT IT MAY HAVE, IN SUCH INSTANCE, TO A JUDICIAL HEARING PRIOR TO SUCH RETAKING.
(d) The obligations of Debtor under this Security Agreement, the Lease and other Transaction Documents are cross-defaulted and cross-collateralized such that upon an Event of Default under the Lease, this Security Agreement and/or any such other Transaction Documents, the Secured Party has the right to declare such Event of Default to be an Event of Default without the benefit of any notice or grace periods contained under any or all of this Security Agreement, the Lease and the other Transaction Documents and without limitation to resort to any or all of the Collateral and the other collateral securing such obligations in pursuit of its remedies thereunder.
(e) Debtor acknowledges and agrees that in the event that any of the Collateral is sold by the Secured Party for credit, then credit shall be made against the Liabilities only as, if and when cash payments are actually received by the Secured Party for such Collateral.
8. INDEMNITY . In addition to the indemnities set forth in the Lease, Debtor shall protect, indemnify and hold harmless Secured Party and its officers, employees, directors and agents from and against all liabilities, obligations, claims, damages, penalties, causes of action, and out-of-pocket costs and expenses whatsoever (including, without limitation, reasonable attorneys fees and expenses) imposed upon or incurred by or asserted against Secured Party or its officers, employees, directors or agents, by reason of the ownership, use, construction and operation of the Collateral by Debtor, its officers, directors, servants, agents and employees or by reason of enforcement of Secured Partys rights hereunder or under the Lease. As used in this Security Agreement, the term attorneys fees includes fees incurred in any appeal and/or enforcement proceedings. In case any action, suit or proceeding is brought against Secured Party by reason of the enforcement of Secured Partys rights hereunder or under the Lease, Debtor, upon request of Secured Party, shall at Debtors expense cause such action, suit or proceeding to be resisted and defended by counsel approved by Secured Party with respect to proceedings and matters involving Secured Party. Any amounts payable to Secured Party under this Section 8 which are not paid within thirty (30) days after written demand therefore shall bear interest at the Overdue Rate as specified in the Lease from the date of such demand, and such amounts, together with such interest, shall be indebtedness secured by this Security Agreement. The obligations of Debtor under this Section 8 shall survive the expiration or earlier termination of the Term of the Lease.
9. GENERAL .
(a) Time . Time shall be deemed of the essence with respect to this Security Agreement.
(b) Condition of Collateral . Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Debtor requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care. Failure of Secured Party to preserve or protect any rights with respect to such Collateral against any prior parties shall not be deemed a failure to exercise reasonable care in the custody and preservation of such Collateral.
(c) Waivers . Any delay on the part of Secured Party in exercising any power, privilege or right under the Lease, this Security Agreement or under any other Transaction Document shall not operate as a waiver thereof. No single or partial exercise thereof, or the exercise of any other power, privilege or right shall preclude other or further exercise thereof, or the exercise of any other power, privilege or right. The waiver by Secured Party in writing of any default by Debtor shall not constitute a waiver of any subsequent defaults but shall be restricted to the default so waived.
(d) Rights Cumulative . All rights, remedies and powers of Secured Party hereunder are irrevocable and cumulative, and nothing contained herein shall be construed as in any way modifying, limiting, creating an alternative to or exclusive of, and shall be in addition to all rights, remedies and power is given by the Lease, any other Transaction Document or the Commercial Code, or any other applicable rules of decision, regulations or laws now existing or hereafter enacted.
(e) Rules of Construction . In this Security Agreement, words in the singular include the plural, and in the plural include the singular; words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any gender and the word or is disjunctive but not exclusive; and the words include, including or includes are not limiting terms. The captions and section numbers appearing in this Security Agreement are inserted only as a matter of convenience. They do not define, limit or describe the scope or intent of the provisions of this Security Agreement.
(f) Severability . If any term or provision set forth in this Security Agreement shall be held invalid or unenforceable, the remainder of this Security Agreement, or the application of such terms or provisions to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.
(g) Counterparts . This Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Security Agreement by signing and delivering one or more counterparts.
(h) Successors . The terms of this Security Agreement shall be binding upon the Debtor, its successors, assigns, heirs, executors and personal representatives, including all new debtors within the meaning of the Commercial Code, and shall inure to the benefit of Secured Party, its successors and any holder, owner or assignee of any rights in the Lease and will be enforceable by them as their interest may appear.
(i) Enforcement Expenses . In the event of any action to enforce this Security Agreement or to protect the security interest of Secured Party in the Collateral, or to protect, preserve, maintain, process, assemble, develop, insure, market or sell any Collateral, Debtor agrees to pay the costs owed and expenses thereof, together with reasonable and documented attorneys fees (including fees incurred in appeals and post judgment enforcement proceedings).
(j) Choice of Law . THIS SECURITY AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF THE DEBTOR AND SECURED PARTY SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE WHERE THE COLLATERAL IS LOCATED SHALL GOVERN THIS SECURITY AGREEMENT (A) TO THE EXTENT NECESSARY TO PERFECT AND/OR ENFORCE THE LIENS CREATED BY THIS SECURITY AGREEMENT AND TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO THE COLLATERAL, AND (B) FOR PROCEDURAL REQUIREMENTS THAT MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED.
(k) Jurisdiction, Venue, Service of Process . DEBTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND AND AGREES THAT ALL DISPUTES CONCERNING THIS SECURITY AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE IN WHICH THE COLLATERAL IS LOCATED OR IN MARYLAND. DEBTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED OR MARYLAND, AND DEBTOR IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND.
(l) Amendments . No amendment to this Security Agreement shall be effective unless the same shall be in writing and signed by the party to be charged.
(m) Notices . All notices, demands or requests required or permitted to be given to any party hereto shall be given and deemed effective as provided in the Lease. The parties hereby agree that a notice sent as specified in this paragraph at least ten (10) days before the date of any intended public sale or the date after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to be reasonable notice of such sale or other disposition.
(n) Joint Preparation . This Security Agreement shall be deemed to have been prepared jointly by the parties hereto. Any ambiguity herein shall not be interpreted against any
party hereto and shall be interpreted as if each of the parties hereto had prepared this Security Agreement.
(o) Entire Agreement . This Security Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Security Agreement.
(p) Joint and Several . If more than one Debtor has signed this Security Agreement, their obligations shall be joint and several.
Signatures follow.
Signature Page to
SECURITY AGREEMENT
(AdCare - Lessee)
SECURED PARTY:
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC. |
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By: |
/s/ Daniel J. Booth |
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Name: |
Daniel J. Booth |
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Title: |
Chief Operating Officer |
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STATE OF MARYLAND |
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COUNTY OF BALTIMORE |
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This instrument was acknowledged before me on the 28 th day of October, 2010, by Daniel J. Booth, the Chief Operating Officer of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, on behalf of said corporation.
Notary Public |
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/s/ Judith A. Jacobs |
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JUDITH A. JACOBS
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Signature Page to
SECURITY AGREEMENT
(AdCare - Lessee)
LESSEE:
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ADK BONTERRA/PARKVIEW, LLC |
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By: |
/s/ Chris Brogdon |
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Name: |
Chris Brogdon |
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Title: |
Manager |
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STATE OF GEORGIA |
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COUNTY OF COBB |
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The foregoing instrument was acknowledged before me this 28 day of October, 2010, by Chris, who is the Manager of ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company, on behalf of such limited liability company.
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/s/ Damaris Marriaga |
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Notary Public, County,
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Exhibit 10.149
SECURITY AGREEMENT
( Hearth & Home of Ohio, Inc. - Guarantor )
THIS SECURITY AGREEMENT (the Security Agreement ) is made and entered into as of October 29, 2010 by and between HEARTH & HOME OF OHIO, INC., an Ohio corporation ( Debtor ), and GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Secured Party ).
RECITALS:
A. Capitalized terms used and not otherwise defined herein shall have the meanings given them in Article I below.
B. Lessee has executed and delivered to Secured Party the Lease pursuant to which the Facilities are leased from Secured Party.
C. As a condition to Secured Partys agreement to enter into the Lease, Secured Party has required Debtor to enter into this Security Agreement and to grant security interests to Secured Party as herein provided.
NOW, THEREFORE, in order to induce Secured Party to enter into the Lease, and for other good and valuable consideration the receipt and sufficiency of which hereby are acknowledged, the parties agree as follows:
ARTICLE I - DEFINITIONS
This Security Agreement is executed and delivered in connection with the Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given them in Lease. Terms defined in the Commercial Code (as hereinafter defined) and not otherwise defined in this Security Agreement or in the Lease shall have the meanings ascribed to those terms in the Commercial Code. In addition to the other definitions contained herein, when used in this Security Agreement the following terms shall have the following meanings:
Collateral means the collateral described in Article II, Section 2 below.
Commercial Code means the Uniform Commercial Code, as enacted and in force from time to time in the State of Maryland.
Facilities means the healthcare facilities identified on attached Schedule 1 .
Lease means the Third Amended and Restated Master Lease dated as of the date of this Agreement by Secured Party, as lessor, and Lessee, as lessee of the Facilities, as such Lease may be amended, modified, renew, or replaced from time to time.
Lessee means ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company.
ARTICLE II - AGREEMENT
1. GRANT OF SECURITY INTEREST .
(a) Debtor hereby grants to Secured Party a security interest in the Collateral to secure the payment of all amounts now or hereafter due and owing to Secured Party from Debtor, Lessee and its Affiliates under the Lease and the other Transaction Documents, or any extension or renewal thereof, and any and all other obligations incurred in connection therewith, together with all other obligations or indebtedness of Debtor and its Affiliates to Secured Party and its Affiliates however created, evidenced or arising, whether direct or indirect, whether primary, secondary, absolute, contingent or otherwise, now or hereafter existing (including future advances), due or to become due, plus all interest, costs, out-of-pocket expenses and reasonable attorneys fees which may be made or incurred by Secured Party in the disbursement, administration, and collection thereof, and in the protection, maintenance, and liquidation of the Collateral (the Liabilities ).
(b) If the Debtor shall at any time acquire a commercial tort claim, as defined in Article 9 of the Commercial Code ( Article 9 ), Debtor shall immediately notify the Secured Party, in a writing signed by Debtor, of the details thereof and grant to Secured Party in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance satisfactory to Secured Party.
2. COLLATERAL . The Collateral covered by this Security Agreement is all of the personal property described below that Debtor now owns or shall hereafter acquire or create, immediately upon the acquisition or creation thereof, which is located at, used in connection with, or arises out of the operation of, the Facilities, and consisting of the following:
All personal and fixture property of every kind and nature including, without limitation, all furniture, fixtures, equipment, raw materials, inventory, other goods, accounts, accounts receivable, contract rights (including rights under any management agreement or franchise agreement with respect to the Facilities) , rights to the payment of money, prepaid items, choses in action, insurance refund claims and all other insurance claims and proceeds, commercial tort claims, chattel paper, electronic chattel paper, documents, instruments, securities and all other investment property, deposits, deposit accounts, rights to proceeds of letters of credit, letter-of-credit rights, supporting obligations of every nature, and general intangibles, including, without limitation, to the extent permitted by applicable law:
(i) all tax refund claims, license fees, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, rights to sue and recover for past infringement of patents, trademarks and copyrights, computer programs, computer software, engineering drawings, service marks, customer lists, goodwill, and all licenses, permits, agreements of any kind or nature pursuant to which (a) the Debtor operates or has authority to operate, (b) the Debtor possesses, uses or has authority to possess or use property (whether tangible or intangible) of others, or (c) others possess, use, or have authority to possess or use property (whether tangible or intangible) of the Debtor; and
(ii) all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications, and schematics; and
(iii) all rights under that certain program of medical assistance, funded jointly by the federal government and the states, for impoverished individuals who are aged, blind and/or disabled, and/or members of families with dependent children, which program is more fully described in Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and the regulations promulgated thereunder; and
(iv) all rights under that certain federal program providing health insurance for eligible elderly and other individuals, under which physicians, hospitals, skilled nursing homes, home health care, and other providers are reimbursed for certain covered services they provide to the beneficiaries of such program, which program is more fully described in Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and the regulations promulgated thereunder; and
(v) any and all contracts, authorizations, agreements or consents made by or on behalf of any patient or resident of any of the Facilities, or any other person seeking or obtaining services or goods from Debtor, pursuant to which Debtor provides skilled nursing care, intermediate care, personal care and/or assisted living facilities, or any form of patient or residential care, as well as related services at any of the Facilities (as such contracts, authorizations, agreements or consents may be amended, supplemented, renewed, replaced, extended or modified from time to time); including consents to treatment and assignments of payment of benefits; and
(vi) the (a) operating licenses for each of the Facilities, any certificate of need, any other license, permit, approval or certificate which from time to time, may be issued or is required to be issued by the United States, any state or local government, or any agency or instrumentality of any of the foregoing with respect to the construction, installation or operation of any of the Facilities or any portion or component of any of the Facilities, the providing of any professional or other services by the Debtor, the purchase, sale, dispensing, storage, prescription or use of drugs, medications or the like by Debtor, or any other operations or businesses of Debtor; and (b) certifications and eligibility for participation by Debtor, in respect of its operation of any of the Facilities and any related businesses or operations, in programs or arrangements of or reimbursement from any third-party payors, including Medicare and Medicaid; and (c) all other licenses permits and certificates used or useful in connection with the ownership, operation, use or occupancy of any of the Facilities; and
(vii) all rights to third-party reimbursement contracts for the Facilities which are now or hereafter in effect with respect to residents or patients qualifying for coverage under the same, including Medicare and Medicaid, managed care plans and private insurance agreements, and any successor program or other similar
reimbursement program and/or private insurance agreements, now or hereafter existing; and
(viii) all ledgers, printouts, papers, data, file materials and information pertaining to any of the above described property, relating to any account debtors in respect thereof, and/or to the operation of the Debtors business relating to the Facilities, and all rights of access to such books, records, ledgers, printouts, data, file materials and information, and all property in which such books, records, ledgers, printouts, data, file materials and information are stored, including but not limited to any computer readable memory and any computer hardware or software necessary to process such memory, wherever located.
and all rights, remedies, powers and/or privileges of Debtor with respect to any of the foregoing and all proceeds therefrom owned by Debtor or in which Debtor has an interest, including proceeds which are now or at any time hereafter in possession or under the control of Secured Party or in transit by mail or carrier to or from Secured Party or in the possession of any third party acting on behalf of Secured Party, without regard to whether Secured Party received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Secured Party has conditionally released the same.
The Debtor acknowledges and agrees that, with respect to any term used herein that is defined in either (i) Article 9 in effect as of the date this Security Agreement is signed by the Debtor, or (ii) Article 9 as in force at any time hereafter, the meaning ascribed thereto with respect to any particular item of property shall be that under the more encompassing of the two definitions.
The description of the Collateral to be included on any financing statements executed in connection herewith shall be as follows: All personal property of Debtor which is located at, used in connection with, or arises out of the operation of, the Facilities.
3. PERFECTION OF SECURITY INTEREST .
(a) Perfection by Filing . Debtor hereby irrevocably authorizes Secured Party, at any time and from time to time, pursuant to the provisions of this Security Agreement, to take any and all actions Secured Party may reasonably determine to be necessary to assure that the security interests granted hereby are and remain perfected, including without limitation, filing financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of Debtor or words of similar effect and which contain any other information required by Part 5 of Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether that Debtor is an organization, the type of organization and any organization identification number(s) issued to the Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon request. Any such financing statements, continuation statements or amendments may be signed by Secured Party on behalf of Debtor, and may be filed at any time in any jurisdiction deemed appropriate by Secured Party. Debtor further agrees to execute and deliver to Secured Party, concurrently with Debtors execution of this Security Agreement, and at any time or times
hereafter at the request of Secured Party, all financing statements and continuation financing statements (where not covered by the first sentence of this paragraph), assignments, affidavits, reports, notices, letters of authority, vehicle title notations and all other documents that Secured Party may reasonably request, in a form reasonably satisfactory to Secured Party, to perfect and maintain perfected Secured Partys security interests in the Collateral. Debtor also agrees to make appropriate entries on its books and records disclosing Secured Partys security interests in the Collateral.
(b) Other Perfection, etc . Debtor shall at any time and from time to time take such steps as Secured Party may reasonably request for Secured Party (i) to obtain an acknowledgment, in form and substance reasonably satisfactory to Secured Party, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the benefit of Secured Party, (ii) to obtain control of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper, with any agreements establishing control to be in form and substance reasonably satisfactory to Secured Party, and (iii) otherwise to insure the continued perfection and priority of Secured Partys security interest in any of the Collateral and of the preservation of its rights therein. Debtor authorizes Secured Party to file financing statements describing any statutory liens held by Secured Party.
4. WARRANTIES AND COVENANTS . In addition to the warranties and representations, if any, made in the Lease, Debtor warrants, represents and agrees that:
(a) Debtor has rights in or the power to transfer the Collateral, and is and will be the lawful owner of all of the Collateral, with the right to subject the Collateral to the security interests of Secured Party hereunder;
(b) Except for the security interests in the Collateral herein granted to Secured Party and the security interests permitted pursuant to Sections 6.4 and 8.2.5 of the Master Lease, there are no other adverse claims, liens, restrictions on transfer or pledge, or security interests in the Collateral that are known to Debtor, and there are no currently effective financing statements covering any of the Collateral filed in any public office created by or known to Debtor prior to the date hereof. Debtor shall defend Secured Party against any claims and demands of any and all other persons to the Collateral inconsistent with this Security Agreement;
(c) All of the Collateral that constitutes tangible personal property is or will be (upon delivery) located at the Facilities;
(d) Except as permitted under the Lease or under this Agreement, Debtor shall not remove the Collateral from the Facilities without Secured Partys prior written consent and shall not use or permit the Collateral to be used for any unlawful purpose whatsoever. Except as permitted under the Lease or hereunder, Debtor shall not remove any Collateral from the state in which the Facilities are located, without the prior written consent of Secured Party;
(e) Except as permitted under the Lease, Debtor shall not conduct business under any name at the Facilities other than that given above or set forth on attached
Schedule 1, nor will Debtor change or reorganize the type of business entity under which it presently does business, except upon prior and express written approval of Secured Party, such approval not to be unreasonably withheld, conditioned or delayed, and, if such approval is granted, Debtor agrees that all documents, instruments and agreements reasonably requested by Secured Party and relating to such change shall be prepared, filed and recorded at Debtors expense before the change occurs;
(f) Debtor shall not remove any records concerning the Collateral located at the Facilities nor keep any of its records concerning the same at any other location other than the principal business office of Debtor in the State of Ohio unless written notice thereof is given to Secured Party at least ten (10) days prior to the removal of such records to any new addresses; and
(g) Debtor has the right and power and is duly authorized to enter into this Security Agreement. The execution of this Security Agreement does not and will not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound or affected.
(h) Debtor shall not change its location (as that term is defined in Section 9.307 of the Commercial Code) without the prior written consent of Secured Party, such consent no to be unreasonably withheld. Debtor shall not change its corporate name without providing Secured Party thirty (30) days prior written notice.
(i) Debtors (i) chief executive office is located in the state of Ohio, (ii) location (as that term is defined in Section 9.307 of the Commercial Code) is the State of Ohio (the Debtor State ), (iii) exact legal name is as set forth in the first paragraph of this Security Agreement, and (iv) filing number with the Debtor State is 923018.
(j) The Debtor shall maintain the Collateral in good order and repair and with reasonable promptness make all necessary and appropriate repairs thereto of every kind and nature whether ordinary or extraordinary, foreseen or unforeseen, or arising by reason of a condition whether or not existing prior to the date of this Security Agreement. It is the intention of this provision that the level of maintenance of the Collateral shall be not less than that of a first class nursing home operator making use of the Collateral for its intended use.
(k) Intentionally omitted.
(l) Except as otherwise permitted pursuant to the terms of this Security Agreement or the Lease, Debtor will not sell, lease assign, transfer, grant any other security interest in, pledge, license or otherwise dispose of or encumber any Collateral to any third party while this Security Agreement is in effect without the prior and express written consent of Secured Party.
(m) To Debtors knowledge, no part of the Collateral is classified or classifiable as hazardous waste under Federal, Debtor State and the state in which the Facilities are located environmental laws and regulations. Debtor is in full compliance with all Federal, Debtor State and the state in which the Facilities are located environmental laws and regulations.
5. COLLECTION OF ACCOUNTS .
(a) Secured Party conditionally authorizes Debtor to collect accounts from Debtors account debtors provided, however, after an Event of Default and while it continues, this privilege may be terminated by Secured Party at any time upon written notice from Secured Party and, upon mailing such notice, Secured Party shall have all of Debtors rights, title, and interest in the accounts, including a right of stoppage in transit. After notice as aforesaid or upon the occurrence of an Event of Default (as subsequently defined), and subject to the terms of any written intercreditor agreement entered into by Secured Party with any other creditor of Debtor, Secured Party may notify any account debtor(s) of Secured Partys security interest in Debtors accounts and shall be entitled to collect same, and Debtor will thereafter receive all accounts payments as the agent of and as trustee for Secured Party and will deliver to Secured Party on the day of receipt, all checks, cash, drafts, acceptances, notes and other accounts payments and, until such delivery, Debtor shall not use or commingle any accounts payments and shall at all times keep all such remittances separate and apart from Debtors own funds, capable of identification as the Secured Partys property. After any Event of Default and while it continues, Debtor shall open all mail only in the presence of a Secured Party representative, who may remove therefrom any accounts remittance(s). Subject to the terms of any written intercreditor agreement entered into by Secured Party with any other creditor of Debtor, Secured Party and its representatives are hereby authorized to endorse in Debtors name, any item received by the Secured Party representing any payment on or proceeds of any of the Collateral, and may sign Debtors name upon all accounts, invoices, assignments, financing statements, notices to debtors, bills of lading, storage receipts, or other instruments or documents in respect to the account debtors, the proceeds therefrom, or property related thereto. Debtor shall promptly give Secured Party copies of all accounts statements, accompanied by such additional information, documents, or copies thereof, as Secured Party may request. Debtor shall maintain all records with respect to the accounts and with respect to the general conduct and operation of Debtors business, including balance sheets, operating statements and other financial information, in accordance with generally accepted accounting principles and as Secured Party may request.
(b) Until such time as Secured Party shall notify Debtor of the revocation of such power and authority by reason of an Event of Default (and effective only during the continuance thereof), Debtor (i) may, only in the ordinary course of business, at its own expense, sell, lease or furnish under contracts of service any of the inventory normally held by Debtor for such purpose; (ii) may use and consume any raw materials, work in process or materials, the use and consumption of which is necessary in order to carry on Debtors business; (iii) replace or dispose of equipment in accordance with the provisions of the Lease; and (iv) shall, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as Secured Party may request or, in the absence of such request, as Debtor may deem advisable. A sale, lease, furnishing of
services or other transfer of the Collateral as a partial or total satisfaction of any debt of Debtor shall not constitute a sale in the ordinary course of business.
6. INSPECTIONS/INFORMATION . Debtor shall permit Secured Party or its agents upon reasonable written request and during business hours to have access to and to inspect any of the Collateral. Secured Party may from time to time upon reasonable written request and during business hours inspect, check, make copies of, or extracts from the books, records and files of Debtor relating to the Collateral, and Debtor shall make the same available to Secured Party at any reasonable time for such purposes. Secured Party is hereby authorized to conduct from time to time such investigation of Debtors continuing creditworthiness as Secured Party deems appropriate including, without limitation, contact with Debtors accountants or other third parties, and Secured Party is also authorized to respond to any credit inquiries received from trade creditors or other credit granting institutions. Debtor agrees to promptly supply Secured Party with such financial and other information concerning its financial and business affairs, assets and liabilities as Secured Party may from time to time reasonably request, and Debtor agrees that Secured Party or its agents may from time to time verify Debtors continuing compliance with any of Debtors warranties and covenants made in Paragraph 4 above, at Debtors cost and expense.
7. DEFAULT/REMEDIES .
(a) The occurrence of any of the following shall constitute an Event of Default under this Security Agreement:
(i) An Event of Default as defined in the Lease;
(ii) Debtor fails to observe or perform any other term, covenant or condition of this Security Agreement and the failure is not cured by Debtor within a period of thirty (30) days after written notice thereof from Secured Party; or
(iii) Any representation or warranty of the Debtor contained in this Agreement proves to be untrue in any material respect.
(b) Whenever an Event of Default shall have occurred and so long as its continues, Secured Party may exercise from time to time any rights and remedies, including the right to immediate possession of the Collateral, available to it under the Lease, this Security Agreement or applicable law. Secured Party shall have the right to hold any property then in or upon the Facilities (but excluding any property belonging to patients at the Facilities) at the time of repossession not covered by this Security Agreement until return is demanded in writing by Debtor. Debtor agrees, in case of the occurrence of an Event of Default and upon the request of Secured Party, to assemble, at its expense, all of the Collateral at a convenient place acceptable to Secured Party and to pay all costs of Secured Party of collection of all the Liabilities, and enforcement of rights hereunder, including reasonable attorneys fees and legal expenses, including participation in bankruptcy proceedings, and the expenses of locating the Collateral and the expenses of any repairs to any realty or other property to which any of the Collateral may be affixed or be a part. If the Collateral is disposed of at a public sale, the parties agree that (i) a public sale with at least ten (10) calendar days prior notice to Debtor and notice to the public by
one publication in a local newspaper is commercially reasonable, and (ii) a disclaimer of warranties at a public or private sale is commercially reasonable. If any notification of intended disposition of any of the Collateral is required by law, such notification, if mailed, shall be deemed reasonably and properly given if sent at least ten (10) days before such disposition, by first class mail, postage prepaid, addressed to the Debtor either at the address set forth in the notice section hereof, or at any other address of the Debtor appearing on the records of Secured Party.
(c) TO THE EXTENT PERMITTED BY LAW, DEBTOR AGREES THAT SECURED PARTY SHALL, UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, HAVE THE RIGHT TO PEACEFULLY RETAKE ANY OF THE COLLATERAL. DEBTOR WAIVES ANY RIGHT IT MAY HAVE, IN SUCH INSTANCE, TO A JUDICIAL HEARING PRIOR TO SUCH RETAKING.
(d) The obligations of Debtor under this Security Agreement, the Lease and other Transaction Documents are cross-defaulted and cross-collateralized such that upon an Event of Default under the Lease, this Security Agreement and/or any such other Transaction Documents, the Secured Party has the right to declare such Event of Default to be an Event of Default without the benefit of any notice or grace periods contained under any or all of this Security Agreement, the Lease and the other Transaction Documents and without limitation to resort to any or all of the Collateral and the other collateral securing such obligations in pursuit of its remedies thereunder.
(e) Debtor acknowledges and agrees that in the event that any of the Collateral is sold by the Secured Party for credit, then credit shall be made against the Liabilities only as, if and when cash payments are actually received by the Secured Party for such Collateral.
8. INDEMNITY . In addition to the indemnities set forth in the Lease, Debtor shall protect, indemnify and hold harmless Secured Party and its officers, employees, directors and agents from and against all liabilities, obligations, claims, damages, penalties, causes of action, and out-of-pocket costs and expenses whatsoever (including, without limitation, reasonable attorneys fees and expenses) imposed upon or incurred by or asserted against Secured Party or its officers, employees, directors or agents, by reason of the ownership, use, construction and operation of the Collateral by Debtor, its officers, directors, servants, agents and employees or by reason of enforcement of Secured Partys rights hereunder or under the Lease. As used in this Security Agreement, the term attorneys fees includes fees incurred in any appeal and/or enforcement proceedings. In case any action, suit or proceeding is brought against Secured Party by reason of the enforcement of Secured Partys rights hereunder or under the Lease, Debtor, upon request of Secured Party, shall at Debtors expense cause such action, suit or proceeding to be resisted and defended by counsel approved by Secured Party with respect to proceedings and matters involving Secured Party. Any amounts payable to Secured Party under this Section 8 which are not paid within thirty (30) days after written demand therefore shall bear interest at the Overdue Rate as specified in the Lease from the date of such demand, and such amounts, together with such interest, shall be indebtedness secured by this Security Agreement. The obligations of Debtor under this Section 8 shall survive the expiration or earlier termination of the Term of the Lease.
9. GENERAL .
(a) Time . Time shall be deemed of the essence with respect to this Security Agreement.
(b) Condition of Collateral . Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Debtor requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care. Failure of Secured Party to preserve or protect any rights with respect to such Collateral against any prior parties shall not be deemed a failure to exercise reasonable care in the custody and preservation of such Collateral.
(c) Waivers . Any delay on the part of Secured Party in exercising any power, privilege or right under the Lease, this Security Agreement or under any other Transaction Document shall not operate as a waiver thereof. No single or partial exercise thereof, or the exercise of any other power, privilege or right shall preclude other or further exercise thereof, or the exercise of any other power, privilege or right. The waiver by Secured Party in writing of any default by Debtor shall not constitute a waiver of any subsequent defaults but shall be restricted to the default so waived.
(d) Rights Cumulative . All rights, remedies and powers of Secured Party hereunder are irrevocable and cumulative, and nothing contained herein shall be construed as in any way modifying, limiting, creating an alternative to or exclusive of, and shall be in addition to all rights, remedies and power is given by the Lease, any other Transaction Document or the Commercial Code, or any other applicable rules of decision, regulations or laws now existing or hereafter enacted.
(e) Rules of Construction . In this Security Agreement, words in the singular include the plural, and in the plural include the singular; words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any gender and the word or is disjunctive but not exclusive; and the words include, including or includes are not limiting terms. The captions and section numbers appearing in this Security Agreement are inserted only as a matter of convenience. They do not define, limit or describe the scope or intent of the provisions of this Security Agreement.
(f) Severability . If any term or provision set forth in this Security Agreement shall be held invalid or unenforceable, the remainder of this Security Agreement, or the application of such terms or provisions to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.
(g) Counterparts . This Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Security Agreement by signing and delivering one or more counterparts.
(h) Successors . The terms of this Security Agreement shall be binding upon the Debtor, its successors, assigns, heirs, executors and personal representatives, including all new debtors within the meaning of the Commercial Code, and shall inure to the benefit of Secured Party, its successors and any holder, owner or assignee of any rights in the Lease and will be enforceable by them as their interest may appear.
(i) Enforcement Expenses . In the event of any action to enforce this Security Agreement or to protect the security interest of Secured Party in the Collateral, or to protect, preserve, maintain, process, assemble, develop, insure, market or sell any Collateral, Debtor agrees to pay the costs owed and expenses thereof, together with reasonable and documented attorneys fees (including fees incurred in appeals and post judgment enforcement proceedings).
(j) Choice of Law . THIS SECURITY AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF THE DEBTOR AND SECURED PARTY SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE WHERE THE COLLATERAL IS LOCATED SHALL GOVERN THIS SECURITY AGREEMENT (A) TO THE EXTENT NECESSARY TO PERFECT AND/OR ENFORCE THE LIENS CREATED BY THIS SECURITY AGREEMENT AND TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO THE COLLATERAL, AND (B) FOR PROCEDURAL REQUIREMENTS THAT MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED.
(k) Jurisdiction, Venue, Service of Process . DEBTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND AND AGREES THAT ALL DISPUTES CONCERNING THIS SECURITY AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE IN WHICH THE COLLATERAL IS LOCATED OR IN MARYLAND. DEBTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED OR MARYLAND, AND DEBTOR IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND.
(l) Amendments . No amendment to this Security Agreement shall be effective unless the same shall be in writing and signed by the party to be charged.
(m) Notices . All notices, demands or requests required or permitted to be given to either party hereto shall be in writing and shall be deemed given if delivered personally, sent by reputable overnight courier, with acknowledgment of receipt requested, or mailed by registered, overnight or certified mail, with full postage paid thereon, return receipt requested (such notice to be effective on the date such receipt is acknowledged), as follows:
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c/o AdCare Health Systems Inc. Two Buckhead Plaza 3050 Peachtree Road NW, Suite 570 Atlanta, Georgia 30305 Attention: Chris Brogdon Tel: (770) 650-7086, ext. 12 Fax: (770) 650-8883 |
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With copy to: |
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Gregory P. Youra, Esq. Holt Ney Zatcoff & Wasserman, LLP 100 Galleria Parkway, Suite 600 Atlanta, Georgia 30339 Tel: (770) 956-9600 Fax: (770) 956-1490 |
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Secured Party : |
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c/o Omega Healthcare Investors, Inc. 200 International Circle, Suite 3500 Hunt Valley, MD 21030 Attn: Daniel J. Booth Telephone No.: (410) 427-1700 Facsimile No.: (410) 427-8800 |
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With copy to: |
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Doran Derwent, PLLC 5960 Tahoe Dr., SE, Suite 101 Grand Rapids, Michigan 49546 Attn: Mark E. Derwent Telephone No.: (616) 451-8690 Facsimile No.: (616) 451-8697 |
or to such place and with such other copies as a Debtor or Secured Party may designate for itself by written notice to the other. The parties hereby agree that a notice sent as specified in this paragraph at least ten (10) days before the date of any intended public sale or the date after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to be reasonable notice of such sale or other disposition.
(n) Joint Preparation . This Security Agreement shall be deemed to have been prepared jointly by the parties hereto. Any ambiguity herein shall not be interpreted against any party hereto and shall be interpreted as if each of the parties hereto had prepared this Security Agreement.
(o) Entire Agreement . This Security Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Security Agreement.
(p) Joint and Several . If more than one Debtor has signed this Security Agreement, their obligations shall be joint and several.
Signatures follow.
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC. |
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/s/ Daniel J. Booth |
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Daniel J. Booth |
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Chief Operating Officer |
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STATE OF MARYLAND |
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This instrument was acknowledged before me on the 28th day of October, 2010, by Daniel J. Booth, the Chief Operating Officer of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, on behalf of said corporation.
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Notary Public |
/s/ Judith A. Jacobs |
DEBTOR: |
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HEARTH & HOME OF OHIO, INC., an Ohio corporation |
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/s/ David A. Tenwick |
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David A. Tenwick |
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Secretary |
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STATE OF OHIO |
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COUNTY OF DELAWARE |
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The foregoing instrument was acknowledged before me this 29 day of October, 2010, by David A. Tenwick, who is the Secretary of HEARTH & HOME OF OHIO, INC., an Ohio corporation, on behalf of such corporation.
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/s/ Amanda R. Norris |
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Notary Public, Marion County, Ohio |
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My Commission Expires: April 1, 2015 |
Exhibit 10.150
PLEDGE AGREEMENT
( Hearth & Home of Ohio, Inc. )
This Pledge Agreement (this Agreement ) is made as of October 29, 2010, between HEARTH & HOME OF OHIO, INC., an Ohio corporation ( Pledgor ), and GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Creditor ).
STATEMENT OF FACTS
A. Pledgor is the owner of 100% of the outstanding equity interests in ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company (the Company ).
B. The Company has executed and delivered to Creditor a Third Amended and Restated Master Lease dated as of the date of this Agreement (as amended, the Master Lease ), pursuant to which the Company is leasing from Creditor certain healthcare facilities identified therein (the Facilities ).
C. Pledgor is the sole member of the Company, and it is to the advantage of Pledgor that Creditor enter into the Master Lease with the Company.
D. The Master Lease provides that due performance and observance of the Companys and its Affiliates obligations under the Master Lease and the other Transaction Documents (as defined in the Master Lease) will be secured by a lien on the Pledged Collateral (as that term is defined below) granted pursuant to this Agreement.
The parties therefore agree as follows:
1. Pledge ; Grant of Security Interest . Pledgor hereby grants to Creditor a security interest, on the following terms and subject to the following conditions, in:
(a) all of Pledgors right, title and interest in and to the membership or other ownership interests in the Company (the Pledged Securities );
(b) any equity securities issued by the Company and any options, warrants or rights to acquire such securities, owned or acquired by Pledgor, directly or indirectly, now or at any time in the future;
(c) any securities or other property issued or distributed to Pledgor with respect to any securities described in clauses (a) or (b) above as a dividend or distribution or as a result of any amendment of the certificate of incorporation or other charter documents, merger, consolidation, redesignation, reclassification, purchase or sale of assets, dissolution, or plan of arrangement, compromise or reorganization of the issuer thereof;
(d) any rights incidental to the ownership of any of the securities described in clauses (a), (b) or (c) above, such as voting, conversion and registration rights and rights of recovery for violations of applicable securities laws; and
(e) the proceeds of the exercise, redemption, sale or exchange of any of the foregoing, or any dividend, interest payment or other distribution of cash or property in respect thereof.
All of the foregoing may be referred to herein as the Pledged Collateral .
2. Secured Obligations . The security interest described in Section 1 of this Agreement secures the prompt and full payment when due (and not merely the ultimate collectibility) of all amounts now or hereafter due and owing by the Company to Creditor pursuant to the Master Lease, or any extension or renewal thereof, and prompt and full performance of all obligations of the Company and its Affiliates under the Transaction Documents (the Secured Obligations ).
3. Delivery . (a) Before, or at the same time as the Pledgor has executed and delivered this Agreement to Creditor, Pledgor has delivered to Creditor a fully executed Assignment in Blank (substantially in the form of Exhibit A hereto) and with all necessary transfer tax stamps affixed.
(b) If, at any time, Pledgor obtains possession of any certificate or instrument constituting or representing any of the Pledged Collateral (other than interest and cash dividends), Pledgor shall deliver such certificate or instrument to Creditor forthwith duly endorsed in blank without restriction or with a fully executed Assignment in Blank (substantially in the form of Exhibit A hereto) and with all necessary transfer tax stamps affixed.
(c) If no Event of Default (as defined in Section 10 below) has occurred and is continuing, Pledgor may retain for its own use and shall not be required to deliver to Creditor any interest payments on or any cash dividends or other cash distributions received by or otherwise distributed in respect of the Pledge Collateral; if an Event of Default has occurred and is continuing, then all such interest, dividends and cash distributions received by or otherwise distributed in respect of the Pledge Collateral shall be delivered to the Creditor for application by Creditor toward payment of the Secured Obligations as Creditor may determine.
(d) If any of the Pledged Collateral is uncertificated securities, Pledgor shall either (a) procure the issuance of security certificates to represent such Pledged Collateral and endorse and deliver such certificates as required by paragraph (b) of this Section 3, or (b) cause the issuer thereof to register Creditor as the registered owner of such securities, or (c) cause the issuer thereof to enter into an agreement, in form and substance satisfactory to Creditor, among Creditor, the registered owner of such security, and the issuer to the effect that the issuer will comply with instructions originated by Creditor without further consent by the registered owner.
(e) Pledgor hereby irrevocably authorizes Creditor, at any time and from time to time, to take any and all actions Creditor may reasonably determine to be necessary to assure that the security interests granted hereby are and remain perfected, including without limitation, filing financing statements, continuation statements and amendments thereto. Pledgor shall deliver to Creditor such financing statements, continuation statements or other instruments as are
reasonably deemed necessary by Creditor to enable it to perfect, and to maintain the perfection of, its security interest in the Pledged Collateral under applicable law. The form of description of the Pledged Collateral to be attached to financing statements is attached hereto as Schedule 1 .
4. Voting Rights . If no Event of Default has occurred and is continuing, the Pledged Collateral will be registered in the name of Pledgor, and Pledgor may exercise any voting or consensual rights that Pledgor may have as the owner of the Pledged Collateral for any purpose which is not inconsistent with this Agreement. Creditor shall execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies, powers of attorney, dividend orders, and other instruments as Pledgor may request for the purpose of enabling Pledgor to exercise the voting and/or consensual rights and powers which it is entitled to exercise pursuant to this Section 4. If an Event of Default has occurred and is continuing, Creditor may exercise all voting or consensual rights of the owners of any of the Pledged Collateral and Pledgor shall deliver to Creditor all notices, proxy statements, proxies and other information and instruments relating to the exercise of such rights received by Pledgor from the issuers of any of the Pledged Collateral promptly upon receipt thereof and shall at the request of Creditor execute and deliver to Creditor any proxies or other instruments which are, in the judgment of Creditor, necessary for Creditor to validly exercise such voting and consensual rights.
5. Duty of Creditor . The duty of the Creditor with respect to the Pledged Collateral shall be solely to use reasonable care in the physical custody thereof, and the Creditor shall not be under any obligation to take any action with respect to any of the Pledged Collateral or to preserve rights against prior parties. The powers conferred on Creditor hereunder are solely to protect its interest in the Pledged Collateral and do not impose any duty upon it to exercise any such powers. Pledgor is not looking to the Creditor to provide it with investment advice. Creditor shall have no duty to ascertain or take any action with respect to calls, conversions, exchanges, maturities, tenders or other matters concerning any Pledged Collateral, whether or not Creditor has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve any rights pertaining to any Pledged Collateral.
6. Subsequent Changes Affecting Pledged Collateral . Pledgor acknowledges that it has made its own arrangements for keeping informed of changes or potential changes affecting the Pledged Collateral (including, but not limited to, conversions, subscriptions, exchanges, reorganizations, dividends, tender offers, mergers, consolidations and shareholder or other meetings) and Pledgor agrees that Creditor has no responsibility to inform Pledgor of such matters or to take any action with respect thereto even if any of the Pledged Collateral has been registered in the name of Creditor or its agent or nominee.
7. Return of Pledged Collateral . The security interest granted to Creditor hereunder shall not terminate and Creditor shall not be required to return the Pledged Collateral to Pledgor unless and until (a) the Secured Obligations have been fully paid or performed (provided, however, that the Companys obligations under Section 7.3 of the Master Lease which expressly survive expiration or termination thereof shall, so long as there is no currently pending claim under such section, not be considered in determining whether the Companys obligations have been satisfied or discharged), (b) all of Pledgors obligations hereunder have been fully paid or
performed, and (c) Pledgor has reimbursed Creditor for any expenses of returning the Pledged Collateral and filing such termination statements and other instruments as are required to be filed in public offices under applicable laws.
8. Representations and Warranties . Pledgor hereby represents and warrants to Creditor as follows:
(a) Enforceability . This Agreement has been duly executed and delivered by Pledgor, constitutes its valid and legally binding obligation and is enforceable against Pledgor in accordance with its terms. Pledgor has the legal capacity to enter into and perform all of its obligations and agreements under this Agreement. No consent or approval for the entry into and performance by Pledgor of its obligations and agreements under this Agreement is necessary.
(b) No Conflict . The execution, delivery and performance of this Agreement, the grant of the security interest in the Pledged Collateral hereunder and the consummation of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, (a) violate any material law applicable to Pledgor; (b) violate any judgment, writ, injunction or order of any court or governmental body or officer applicable to Pledgor; (c) violate or result in the breach of any material agreement to which Pledgor is a party or by which any of its properties, including the Pledged Collateral, is bound; (d) violate Pledgors articles of incorporation or organization, bylaws, partnership, shareholder or operating agreement; nor (e) violate any restriction on the transfer of any of the Pledged Collateral. Pledgor has the full and unrestricted right to pledge, assign and create a security interest in the Pledged Collateral as described in and contemplated by this Agreement. The execution, delivery and performance of this Agreement by Pledgor will not affect or in any way impair the Pledged Collateral or Pledgors or Creditors rights or interests therein.
(c) No Consents . No consent, approval, license, permit or other authorization of any third party or any governmental body or officer is required for the valid and lawful execution and delivery of this Agreement, the valid and lawful creation and perfection of the Creditors security interest in the Pledged Collateral or the valid and lawful exercise by Creditor of remedies available to it under this Agreement or applicable law or of the voting and other rights granted to it in this Agreement except as may be required for the offer or sale of those items of Pledged Collateral which are securities under applicable securities laws.
(d) Organization . Pledgor is duly organized, validly existing and in good standing under the laws of the State of Ohio. The Company is duly organized, validly existing and in good standing under the laws of the State of Georgia. The Pledged Securities are all of the issued and outstanding securities issued by the Company. The Pledged Securities have been duly authorized and validly issued by the Company and are fully paid and non-assessable. The certificates which represent
the Pledged Securities are valid and genuine and have not been altered and Pledgor is the appropriate person to endorse them. Except for this Agreement, neither Pledgor nor Company is bound by any certificate of incorporation or organization, bylaw, agreement or instrument (including options, warrants, and convertible securities) which relates to the voting of; restricts the transfer of; requires Pledgor or the Company to issue or sell; or creates rights in any person (other than the record owner) with respect to; any securities issued by the Company.
(e) Security Interest . Pledgor is the sole record and beneficial owner of the Pledged Securities free and clear of all liens, encumbrances and adverse claims, except for (i) transfer restrictions, if any, under applicable federal and state securities laws, and (ii) the security interest created by this Agreement. Pledgor has the unrestricted right to grant the security interest provided for herein to the Creditor. Pledgor has duly endorsed and delivered to Creditor all of the certificates representing the Pledged Securities, if any, and has granted to Creditor a valid and perfected first priority security interest in the Pledged Securities, free of all liens, encumbrances, transfer restrictions and adverse claims, except for transfer restrictions, if any, under applicable federal and state securities laws. The certificates, instruments and other writings delivered by Pledgor to Creditor pursuant to this Agreement are all of the certificates, instruments and other writings representing the Pledged Collateral and all rights and interests with respect thereto. The security interest granted hereby to Creditor does now and shall at all times during the term of this Agreement continue to constitute a first and prior lien on the Pledged Collateral, subject only to such matters as may be specifically agreed to in writing by Creditor. This representation shall be deemed made with respect to each item of property that becomes Pledged Collateral after the date hereof.
(f) Information . None of the information, documents, or financial statements which has been furnished by Pledgor or its representatives to Creditor or any of its representatives in connection with the transactions contemplated by this Agreement or the Transaction Documents contains any untrue statement of material fact or omits to state any material fact required to be stated hereby or thereby to make such statements not misleading.
(g) Pledgors (i) chief executive office is located in the state of Ohio, (ii) location (as that term is defined in Section 9.307 of the Uniform Commercial Code) is the State of Ohio (the Debtor State ), (iii) exact legal name is as set forth in the first paragraph of this Pledge Agreement, and (iv) filing number with the Debtor State is 923018.
(h) Address . Pledgors principal place of business is correctly set forth under its signature at the end of this Agreement.
9. Agreements . So long as this Agreement is in effect, Pledgor shall:
(a) Maintain the Pledged Collateral free from all pledges, liens, encumbrances and security interests or other claims in favor of others, other than the security interest in favor of Creditor and any transfer restrictions under applicable federal and state securities laws, and Pledgor will defend the Pledged Collateral against all claims and demands of all persons.
(b) Comply with the requirements of all applicable state, local and federal laws necessary to grant to Creditor a valid lien upon, and a duly perfected security interest in, the Pledged Collateral in compliance with the requirements of this Agreement.
(c) Pay all reasonable costs and expenses of whatever kind and nature that Creditor may incur, including reasonable attorneys fees, in protecting, maintaining, preserving, enforcing or foreclosing the Pledged Collateral or the security interest granted to Creditor hereunder, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or relating to any of the Secured Obligations.
(d) Appear in and defend any action or proceeding arising out of or connected with this Agreement, and pay all reasonable costs and expenses of Creditor (including, without limitation, reasonable attorneys fees) in any such action or proceeding in which Creditor appears or determines to become involved.
(e) Not, without the prior written consent of Creditor, sell, assign, encumber, pledge, hypothecate, transfer or otherwise dispose of the Pledged Collateral or any part thereof or any interest therein.
(f) Provide Creditor, and Creditors agents and attorneys, reasonable access to the books and records of Pledgor at Pledgors office during normal business hours for inspection purposes and permit Creditor and Creditors agents and attorneys to make copies hereof.
(g) Notify the Creditor at least thirty (30) days before Pledgor changes its name or the address of its principal place of business.
(h) At Pledgors expense, do such further acts and execute and deliver such additional financing statements, continuations, conveyances, certificates, instruments, legal opinions and other assurances as Creditor may at any time request or require Pledgor to protect, assure or enforce its interests, rights and remedies under this agreement.
10. Events of Default . The occurrence of any of the following shall constitute an Event of Default under this Agreement:
(a) If the Pledgor or the Company fails to pay or perform, as the case may be, any of the Secured Obligations when the same become due and payable or performable, as the case may be; or
(b) If an Event of Default occurs under any of the Transaction Documents or any other promissory note, security agreement, guaranty or other agreement between Creditor and Pledgor or the Company; or
(c) If any representation or warranty made by Pledgor in this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading in light of the circumstances in which they were made; or
(d) If Pledgor:
(i) makes an assignment for the benefit of, or enters into any composition or arrangement with, creditors; or
(ii) generally does not pay its debts as such debts become due; or
(iii) conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law, or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or
(e) The filing of a petition by or against Pledgor seeking relief under the Federal Bankruptcy Code, 11 U.S.C. Section 101, et seq ., and any amendments thereto, or any similar law or regulation, whether federal, state or local, not dismissed within 30 days.
(f) The commencement of a proceeding by or against Pledgor under any statute or other law providing for an assignment for the benefit of creditors, the appointment of a receiver, or any other similar law or regulation, whether federal, state or local, not dismissed within 30 days.
(g) The garnishment, attachment, levy or other similar action taken by or on behalf of any creditor of the Pledgor, or any of its properties which could have a Material Adverse Effect (as that term is defined in the Master Lease) on the Pledgor.
11. Remedies . (a) Upon and at any time after an Event of Default under this Agreement, Creditor shall, at its option and without further notice to Pledgor (except for such further notices, if any, that may be required by law) be entitled to exercise any or all rights and remedies provided hereunder or by law, including without limitation the rights and remedies of a
secured party under the Maryland Uniform Commercial Code. Any requirement under the Maryland Uniform Commercial Code or otherwise of reasonable notice shall be met if Creditor sends Pledgor notice of sale and other notices required by law at least ten (10) days prior to the date of sale, disposition or other event giving rise to the required notice. Any sale held pursuant to the exercise of Creditors rights hereunder may be public or private, and at such sale Creditor shall have the right, at any time and from time to time, to the extent permitted by law, to sell, assign and deliver all or any part of the Pledged Collateral, at Creditors office or elsewhere, without demand of performance, advertisement of notice of intention to sell or of the time or place of sale or adjournment thereof or any other notice (all of which are hereby waived by Pledgor to the extent permitted by law), except such notice as is required by applicable law and cannot be waived, for cash, on credit or for other property, for immediate or future delivery, without any assumption or credit risk, and, provided that such is not in violation of applicable law, for such terms as Creditor in its absolute and uncontrolled discretion may determine. In furtherance of Creditors rights hereunder, Creditor shall have the right, for and in the name, place and stead of Pledgor, to execute endorsements, assignments or other instruments of conveyance or transfer with respect to all or any of the Pledged Collateral. All amounts collected by Creditor as the result of any action taken pursuant to this Section 11, and the liquidation value of any other property received as a result of such action, shall be applied by Creditor as follows:
(i) First, to the payment of all fees and costs including, without limitation, reasonable attorneys fees, incurred in connection with the collection of the Secured Obligations or in connection with the exercise or enforcement of Creditors rights, powers or remedies under this Agreement.
(ii) Second, to the payment and satisfaction of all of the Secured Obligations.
(b) Creditor shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Creditor may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. If, under the Maryland Uniform Commercial Code, the Creditor may purchase any part of the Pledged Collateral, it may, in payment of any part of the purchase price thereof cancel any part of the Secured Obligations. If any of the Pledged Collateral is sold on credit or for future delivery, it need not be retained by Creditor until the purchase price is paid and Creditor shall incur no liability if the purchaser fails to take up or pay for such collateral. In case of any such failure, such collateral may be sold again.
(c) Pledgor shall execute and deliver to the purchasers of the Pledged Collateral all instruments and other documents necessary or proper to sell, convey, and transfer title to such Pledged Collateral and, if approval of any sale of Pledged Collateral by any governmental body or officer is required, Pledgor shall prepare or cooperate fully in the preparation of and cause to be filed with such governmental body or officer all necessary or proper applications, reports, and forms and do all other things necessary or proper to expeditiously obtain such approval.
(d) The remedies provided in this Agreement in favor of Creditor shall not be deemed exclusive, but shall be cumulative, and shall be in addition to all other remedies in favor of Creditor existing at law or in equity.
12. Appointment of Creditor as Agent . Pledgor hereby appoints and constitutes Creditor, its successors and assigns, as its agent and attorney-in-fact for the purpose of carrying out the provisions of this Agreement and taking any action or executing any instrument that Creditor considers necessary or convenient for such purpose, including the power to endorse and deliver checks, notes and other instruments for the payment of money in the name of and on behalf of Pledgor, to endorse and deliver in the name of and on behalf of Pledgor securities certificates and execute and deliver in the name of and on behalf of Pledgor instructions to the issuers of uncertificated securities, and to execute and file in the name of and on behalf of Pledgor financing statements (which may be photocopies of this Agreement) and continuations and amendments to financing statements in the State of Delaware or elsewhere and Forms 144 with the United States Securities and Exchange Commission. This appointment is coupled with an interest and is irrevocable and will not be affected by the dissolution or bankruptcy of Pledgor or by the lapse of time. If Pledgor fails to perform any act required by this Agreement, Creditor may perform such act in the name of and on behalf of Pledgor and at its expense which shall be chargeable to Pledgor under this Agreement. Pledgor hereby consents and agrees that the issuers of or obligors of the Pledged Collateral or any registrar or transfer agent or trustee for any of the Pledged Collateral shall be entitled to accept the provisions hereof as conclusive evidence of the rights of Creditor to effect any transfer pursuant to this Agreement and the authority granted to Creditor herein, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by Pledgor, or any other person, to any of such issuers, obligors, registrars, transfer agents, or trustees.
13. Impact of Regulations . Pledgor acknowledges that compliance with the Securities Act of 1933 and the rules and regulations thereunder and any relevant state securities laws and other applicable laws may impose limitations on the right of Creditor to sell or otherwise dispose of securities included in the Pledged Collateral. For this reason, Pledgor hereby authorizes Creditor to sell any securities included in the Pledged Collateral in such manner and to such persons as would, in the judgment of Creditor, help to ensure that the transfer of such securities will be given prompt and effective approval by any relevant regulatory authorities and will not require any of the securities to be registered or qualified under any applicable securities laws. Pledgor understands that a sale under the foregoing circumstances may yield a substantially lower price for such Pledged Collateral than would otherwise be obtainable if the same were registered and sold in the open market, and Pledgor shall not attempt to hold Creditor responsible for selling any of the Pledged Collateral at an inadequate price even if Creditor accepts the first offer received or if only one possible purchaser appears or bids at any such sale. If Creditor shall sell any securities included in the Pledged Collateral at such sale, Creditor shall have the right to rely upon the advice and opinion of any qualified appraiser or investment banker as to the commercially reasonable price obtainable on the sale thereof but shall not be obligated to obtain such advice or opinion. Pledgor hereby assigns to Creditor any registration rights or similar rights Pledgor may have from time to time with respect to any of the Pledged Collateral.
14. Expenses . Pledgor will forthwith upon demand pay to Creditor:
(i) the amount of any taxes which Creditor may have been required to pay by reason of holding the Pledged Collateral or to free any of the Pledged Collateral from any lien encumbrance or adverse claim thereon, and
(ii) the amount of any and all reasonable out-of-pocket expenses, including the fees and disbursements of counsel and of any brokers, investment brokers, appraisers or other experts, that Creditor may incur in connection with (A) the administration or enforcement of this Agreement, including such expenses as are incurred to preserve the value of the Pledged Collateral and the validity, perfection, rank and value of Creditors security interest therein, (B) the collection, sale or other disposition of any of the Pledged Collateral, (C) the exercise by Creditor of any of the rights conferred upon it hereunder, or (D) any action or proceeding to enforce its rights under this Agreement or in pursuit of any non-judicial remedy hereunder including the sale of the Pledged Collateral.
Any such amount not paid on demand shall bear interest (computed on the basis of the number of days elapsed over a year of three hundred sixty-five (365) days) at a rate per annum equal to the Overdue Rate (as that term is defined in the Master Lease).
15. Indemnity . The Pledgor shall indemnify the Creditor and its directors, officers, employees, agents and attorneys against, and hold them harmless from, any liability, cost or expense, including the fees and disbursements of their legal counsel, incurred by any of them under the corporate or securities laws applicable to holding or selling any of the Pledged Collateral, except for liability, cost or expense arising out of the recklessness or willful misconduct of the indemnified parties.
16. Performance by Creditor . If Pledgor fails to duly and punctually perform, observe or comply with any condition, term or covenant contained in this Agreement, Creditor, without notice to or demand upon Pledgor and without waiving or releasing any of the Secured Obligations, may at any time thereafter perform such condition, term or covenant for the account and at the expense of Pledgor. All sums paid or advanced in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys fees) incurred in connection therewith shall be paid by Pledgor to Creditor on demand, and shall constitute and become a part of the Secured Obligations and Pledgor agrees to reimburse Creditor for any payment made or any expense incurred (including reasonable attorneys fees to the extent permitted by law) by Creditor pursuant to this Agreement.
17. Registration Rights . In the event Borrower proposes to register any securities under the Securities Act of 1933, Pledgor will give the Creditor notice of that fact. In addition, and at no cost to Creditor, Pledgor will cause Borrower to register the Securities so that they may be disposed of by public sale or other public disposition. Upon the completion of the registration, Pledgor will deliver certificates without any restrictive legend in exchange for the
unregistered Securities. Pledgor shall indemnify and hold Creditor harmless against any loss, claim, damage, or liability arising out of the registration process, and will reimburse Creditor for any legal or other expenses incurred by Creditor as a result.
18. Waivers . Pledgor hereby waives presentment, demand, protest, notice of any default under the Transaction Documents. Neither the failure of nor any delay by any party to this Agreement to enforce any right hereunder or to demand compliance with its terms is a waiver of any right hereunder. No action taken pursuant to this Agreement on one or more occasions is a waiver of any right hereunder or constitutes a course of dealing that modifies this Agreement. No waiver of any right or remedy under this Agreement shall be binding on any party unless it is in writing and is signed by the party to be charged. No such waiver of any right or remedy under any term of this Agreement shall in any event be deemed to apply to any subsequent default under the same or any other term contained herein.
19. Entire Agreement . This Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Agreement.
20. Amendments . No amendment, modification or termination of this Agreement shall be binding on any party hereto unless it is in writing and is signed by the party to be charged.
21. Severability . If any term or provision set forth in this Agreement shall be invalid or unenforceable, the remainder of this Agreement, or the application of such terms or provisions to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.
22. Successors . The terms of this Agreement shall be binding upon the Pledgor, its heirs and personal representatives, and shall inure to the benefit of Creditor, its corporate successors and any holder, owner or assignee of any rights in any of the Transaction Documents and will be enforceable by them as their interest may appear.
23. Third Parties . Nothing herein expressed or implied is intended or shall be construed to give any person other than the parties hereto any rights or remedies under this Agreement.
24. Saturdays, Sundays and Holidays . Where this Agreement authorizes or requires a payment or performance on a Saturday, Sunday or public holiday, such payment or performance shall be deemed to be timely if made on the next succeeding business day.
25. Joint Preparation . This Agreement shall be deemed to have been prepared jointly by the parties hereto. Any ambiguity herein shall not be interpreted against any party hereto and shall be interpreted as if each of the parties hereto had prepared this Agreement.
26. Rules of Construction . In this Agreement, words in the singular number include the plural, and in the plural include the singular; words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any gender and the word or is disjunctive but not exclusive. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit or describe the scope or intent of the provisions of this Agreement.
27. Notices . All notices, demands or requests required or permitted to be given to either party hereto shall be in writing and shall be deemed given if delivered personally, sent by reputable overnight courier, with acknowledgment of receipt requested, or mailed by registered, overnight or certified mail, with full postage paid thereon, return receipt requested (such notice to be effective on the date such receipt is acknowledged), as follows:
To Pledgor: |
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c/o ADCARE HEALTH SYSTEMS INC. |
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Two Buckhead Plaza |
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3050 Peachtree Road NW, Suite 570 |
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Atlanta, Georgia 30305 |
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Attention: Chris Brogdon |
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Tel: (770) 650-7086, ext. 12 |
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Fax: (770) 650-8883 |
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With a copy to: |
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Gregory P. Youra, Esq. |
(which shall not constitute notice) |
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Holt Ney Zatcoff & Wasserman, LLP |
100 Galleria Parkway, Suite 600 |
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Atlanta, Georgia 30339 |
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Tel: (770) 956-9600 |
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Fax: (770) 956-1490 |
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To Creditor: |
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c/o Omega Healthcare Investors, Inc. |
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9690 Deereco Road, Suite 100 |
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Timonium, MD 21093 |
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Attn.: Daniel J. Booth |
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Telephone No.: (410) 427-1700 |
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Facsimile No.: (410) 427-8800 |
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And with copy to: |
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Doran Derwent, PLLC |
(which shall not constitute notice) |
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5960 Tahoe Dr., SE, Suite 101 |
Grand Rapids, Michigan 49546 |
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Attn: Mark E. Derwent |
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Telephone No.: (616) 451-8690 |
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Facsimile No.: (616) 451-8697 |
or to such place and with such other copies as Pledgor or Creditor may designate for itself by written notice to the other.
28. Counterparts . This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts.
29. Choice of Law; Jurisdiction, Venue, Service of Process . The parties hereto agree that certain material events, occurrences and transactions relating to this Agreement bear a reasonable relationship to the State of Maryland. The validity, terms, performance and enforcement of this Agreement shall be governed by those laws of the State of Maryland which are applicable to agreements which are negotiated, executed, delivered and performed solely in the State of Maryland. The State and Federal District Courts located in the State of Maryland shall have jurisdiction and venue of any action or proceeding arising out of or related to the negotiation, execution, delivery, performance, breach or enforcement of this Agreement or any other agreement, document or instrument negotiated, executed, delivered, entered into or performed in connection with this Agreement or any of the transactions contemplated hereby or thereby; any waiver, modification, amendment or termination hereof or thereof or any action taken or omission made by the Pledgor or the Creditor or any of their respective directors, officers, employees, agents or attorneys in connection with the payment, performance, exercise or enforcement of any right, duty or obligation created or implied hereby or thereby or arising hereunder or thereunder; regardless of whether any claim, counterclaim or defense in any such action, suit or proceeding is characterized as arising out of fraud, negligence, recklessness, intentional misconduct, a breach of contract or fiduciary duty, or violation of a statute, law, ordinance, rule or regulation. The parties hereto hereby irrevocably consent to the personal jurisdiction of such courts, to such venue and to the service of process in the manner provided for the giving of notices in this Agreement. The parties hereto hereby waive all objections to such jurisdiction and venue including those which might be based upon inconvenience or the nature of the forum.
30. Waiver of Jury Trial . The Pledgor hereby voluntarily, knowingly, irrevocably and unconditionally waives and relinquishes its Right to Trial by Jury under the Constitution of the United States of America or of the State of Maryland or any other constitution, statute or law in any civil legal action, suit or proceeding arising out of or related to the negotiation, execution, delivery, performance, breach or enforcement of this Agreement or any other agreement, document or instrument negotiated, executed, delivered, entered into or performed in connection with this Agreement or any of the transactions contemplated hereby or thereby; any waiver, modification, amendment or termination hereof or thereof or any action taken or omission made by the Pledgor or the Creditor or any of their respective directors, officers, employees, agents or attorneys in connection with the payment, performance, exercise or enforcement of any right, duty or obligation created or implied hereby or thereby or arising hereunder or thereunder; regardless of whether any claim, counterclaim or defense in any such action, suit or proceeding
is characterized as arising out of fraud, negligence, recklessness, intentional misconduct, a breach of contract or fiduciary duty, or violation of a statute, law, ordinance, rule or regulation.
Signatures and Acknowledgements follow.
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CREDITOR: |
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation |
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Chief Operating Officer |
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This instrument was acknowledged before me on the 28th day of October, 2010, by Daniel J. Booth, the Chief Operating Officer of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, on behalf of said corporation.
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PLEDGOR: |
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HEARTH & HOME OF OHIO, INC., an Ohio corporation |
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David A. Tenwick |
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This instrument was acknowledged before me on the 29th day of October, 2010, by David A. Tenwick, the Secretary of HEARTH & HOME OF OHIO, INC., an Ohio corporation, on behalf of said corporation.
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Exhibit 10.151
SUBORDINATION AGREEMENT
( AdCare )
THIS SUBORDINATION AGREEMENT (the Agreement ) is made as of October 29, 2010, by Triad Entities ), ADCARE HEALTH SYSTEMS INC., an Ohio corporation ( Guarantor ), ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( Lessee ), on their behalf and on behalf of all Affiliates of Lessee and Guarantor (as that term is defined below - each a AdCare Affiliate and, collectively, the AdCare Affiliates ), in favor of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Lessor ).
RECITALS
A. Lessee and Lessor have entered into to a Third Amended and Restated Master Lease dated the same date as this Agreement (the Master Lease ) pursuant to which Lessee is leasing from Lessor certain healthcare facilities identified in the Master Lease (each a Facility and collectively, the Facilities ). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings given them in the Master Lease.
B. Guarantor is under common control with Lessee and will benefit from the entry by Lessor into the Master Lease and the other Transaction Documents (as defined in the Master Lease). Lessee and Guarantor are each referred to in this Agreement as an Obligor and, collectively, as the Obligors .
C. In consideration of the benefits that the AdCare Affiliates acknowledge will inure to them on account of Lessors agreement to enter into the Master Lease and the other Transaction Documents, and as an inducement to Lessor to do so, the AdCare Affiliates agree to subordinate, to the extent and in the manner hereinafter set forth, all indebtedness and obligations of the Obligors to each other and to the other AdCare Affiliates to the obligations of the Obligors to Lessor.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the AdCare Affiliates and Lessor hereby agree as follows:
1. As used herein:
(a) Senior Obligations means all indebtedness and obligations of the Obligors to Lessor or any of its Affiliates under the Master Lease, the other Transaction Documents or otherwise. The Senior Obligations include, but shall not be limited to, all payments of rent, additional, expenses, fees, principal, interest and other charges due Lessor from the Obligors and every subsequent amendment, extension or renewal, of the Master Lease and the other the Transaction Documents in whole or in part (the Transaction Obligations ), all Transaction Obligations from time to time after the commencement of any Proceeding, whether or not such Transaction Obligations are allowable as a claim in such Proceeding, and all Transaction Obligations made after the commencement of a Proceeding.
(b) Junior Obligations means all indebtedness and obligations of an Obligor to any AdCare Affiliate, individually or with others, and whether now existing or
hereafter incurred, including, but not limited to, all indebtedness or other obligations accruing from time to time after the commencement of any Proceeding, whether or not such indebtedness or obligation is allowable as a claim in such Proceeding, and all other amounts arising thereunder after the commencement of a Proceeding.
(c) Proceeding means any assignment by an Obligor for the benefit of creditors, or any filing of a voluntary case by, or of an involuntary case against, an Obligor pursuant to any chapter of the federal bankruptcy code, 11 USC Section 101, et seq., as may be amended from time to time, or any institution of a voluntary proceeding by, or of an involuntary proceeding against, an Obligor under any other federal or state law relating to relief of debtors, or any appointment of a receiver, trustee or liquidator of an Obligor or of all or a substantial part of any of its assets under any other federal or state law relating to relief of debtors, or any liquidation or dissolution of an Obligor, or any foreclosure or similar action or proceeding and/or any other marshaling of an Obligors assets and liabilities.
(d) Affiliate means, when used with respect to any corporation, limited liability company or partnership, any person who directly or indirectly controls or is controlled by or is under common control with such corporation, limited liability company or partnership. For the purposes of this definition, control (including the correlative meanings of the terms controlled by and under common control with), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, through the majority ownership of voting securities, partnership interests or other equity interests. The term person shall mean any natural person, trust, partnership, corporation, joint venture or other legal entity.
2. The AdCare Affiliates, for themselves, their successors and assigns and every other holder of the Junior Obligations, hereby subordinates the payment and satisfaction of the Junior Obligations to the prior payment and satisfaction in full of the Senior Obligations.
3. After the occurrence of an Event of Default under the Master Lease or the other Transaction Documents and while it is continuing, the AdCare Affiliates will not, without first obtaining the written consent of Lessor: (i) accept any security for the Junior Obligations or any part thereof; (ii) take any action of any kind to accelerate, assert, collect or enforce the Junior Obligations or any guaranty thereof; or (iii) accept any note or other writing to evidence the Junior Obligations or any part thereof.
4. During any period in which an Obligor is in default under the Master Lease or the other Transaction Documents, (i) the AdCare Affiliates will not demand or accept, directly or indirectly, any payment or property in respect or on account of the Junior Obligations; and (ii) the Obligors agree that they will not directly or indirectly make payments to the AdCare Affiliates on the Junior Obligations, whether in cash or any other property.
5. Any payment of cash or transfer of property in violation of this Agreement will be deemed to have been made or transferred in trust for Lessor, and the AdCare Affiliates will forthwith pay or transfer the same to Lessor, in precisely the form received (but with such endorsements as may be necessary), to be applied upon the Senior Obligations.
6. In any Proceeding, the AdCare Affiliates shall have the right to prepare and file a proof of claim, answer or other pleading based upon the Junior Obligations, but in all such instances giving effect to this instrument, and to enforce and use the same, provided that if the AdCare Affiliates shall fail to file such proof of claim, answer or other pleading on or before the 30th day preceding the last day permitted for such filing, Lessor shall have the right (but not the duty) to prepare and file a proof of claim, answer or other pleading based on the Junior Obligations and giving effect to this instrument. To effectuate the foregoing, the AdCare Affiliates, and each holder of any of the Junior Obligations, hereby irrevocably authorizes and appoints Lessor, and each of its officers, its true and lawful attorney or attorneys, with full power of substitution and with full authority on behalf of the AdCare Affiliates, and each holder of any of the Junior Obligations, and in its name, place and stead, to prove all claims and to receive and collect all fees, expenses and other property to which the AdCare Affiliates or any of its assigns would be otherwise entitled, to accept or reject any plan or reorganization or arrangement, and generally to do any act in connection with any Proceeding that the AdCare Affiliates or any of its successors or assigns might otherwise do.
7. Notwithstanding any rights of subrogation that the AdCare Affiliates may have to the rights of Lessor, the AdCare Affiliates agree that Lessor may make all determinations and take or omit to take all actions and exercise or refrain from exercising all remedies that Lessor may have with respect to collateral security for, or guaranties of, any of the Senior Obligations without any consultation with, or participation or joinder by, or any consideration of the interests of the AdCare Affiliates, and without any liability or loss of right or remedy to the AdCare Affiliates.
8. To the extent that Lessor is required to restore or return any payment received by it from an Obligor or any other person for any reason, for the purposes of this Agreement, such payments shall be deemed never to have been made to Lessor. As used in this Agreement the words paid, paid in full, payment in full, or similar phrases, when applied or relating to the Senior Obligations shall, in all instances, unless the context requires otherwise, be deemed to mean indefeasibly paid or indefeasible payment.
9. The AdCare Affiliates consent and agree that until the payment in full of the Senior Obligations, the AdCare Affiliates will not sell, assign or otherwise transfer or encumber the Junior Obligations without the prior written consent of Lessor. Any attempted sale, assignment, transfer or encumbrance in violation of the preceding sentence will be void and without force or effect.
10. In the event of any acceleration of the Senior Obligations pursuant to the terms of any agreement now or hereafter in effect between an Obligor and Lessor or any distribution of an Obligors assets of any kind or character, or any dissolution, winding-up, liquidation or reorganization of an Obligor (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise), the Senior Obligations shall be paid and satisfied in full before the holder of the Junior Obligations is entitled to receive any payment thereunder, and any payment or distribution to which the holder thereof would be entitled thereunder but for the subordination provisions hereof shall be paid directly to Lessor.
11. Any notice, request or other communication to be given by any party hereunder shall be given as provided in the Master Lease with the AdCare Affiliates address being the same as the Lessees address.
12. The AdCare Affiliates acknowledge and agree that (i) Lessor makes no representation or warranty to the AdCare Affiliates with respect to the value or adequacy of their collateral or otherwise, and (ii) without notice to the AdCare Affiliates, Lessor may (a) amend, renew, or extend the any of the Transaction Documents, (b) exercise, fail to exercise, waive or amend any of its rights under any of the Transaction Documents, (c) release collateral or any guarantor or other obligor of the Senior Obligations, and (d) apply any amounts paid to Lessor in such order of application as Lessor, in its sole discretion, deems appropriate.
13. In the event of any amendment to the Master Lease or the other Transaction Documents, the AdCare Affiliates agree, from time to time upon the request of an Obligor or Lessor, to execute substitute subordination agreements substantively equivalent to this Agreement in favor of the Lessor.
14. No amendment, modification, termination, or waiver of any provisions of this Agreement, nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the party against whom enforcement is sought. Further, any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Lessor and the AdCare Affiliates may amend this Agreement in the manner provided above without the consent or approval of all AdCare Affiliates, and without impairing the obligation of a AdCare Affiliate which does not consent or approve to abide by all provisions hereof not so amended, but no such amendment shall be binding upon a AdCare Affiliate unless such AdCare Affiliate has approved same.
15. In the event of any suit, action, arbitration or other proceeding to interpret this Agreement, or to determine or enforce any right or obligation created hereby, the prevailing party in the action shall recover such partys actual costs and expenses reasonably incurred in connection therewith, including, but not limited to, attorneys fees and costs of appeal, post judgment enforcement proceedings (if any) and bankruptcy proceedings (if any). Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit, action, arbitration or other proceeding, in addition to any and all other relief awarded to
such prevailing party, include in such-judgment or award such partys costs and expenses as provided in this section.
16. The provisions of this Agreement shall be cumulative to the rights Lessor may otherwise have or acquire by operation of law, by contract, or otherwise. This instrument shall be governed by and construed in accordance with the laws of the State of Maryland (excluding all Maryland conflicts of law principles or other principles of Maryland law that would result in the application of any substantive law, other than the law of Maryland) and shall bind the AdCare Affiliates and each other holder of all or any portion of the Junior Obligations, and their respective heirs, personal representatives, successors and assigns, and shall benefit no creditor of the AdCare Affiliates other than Lessor and its successors and assigns, including without limitation, other holders of all or any portion of the Senior Obligations.
Signatures appear on following page.
Signature to
Subordination Agreement
(AdCare)
in favor of
GEORGIA LESSOR BONTERRA/PARKVIEW, INC..
GUARANTOR: |
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ADCARE HEALTH SYSTEMS INC., |
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An Ohio corporation |
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David A. Tenwick, Chairman |
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ADK BONTERRA/PARKVIEW, LLC |
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Chris Brodgon |
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Manager |
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STATE OF OHIO |
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COUNTY OF DELAWARE |
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The foregoing instrument was acknowledged before me this 29th day of October, 2010, by David A. Tenwick, who is the Secretary of AdCare health Systems, Inc., on behalf of such corporation.
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/s/ Amanda R. Norris |
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Notary Public, Marion County, Ohio |
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My Commission Expires: April 1, 2015 |
Signature to
Subordination Agreement
(AdCare)
in favor of
GEORGIA LESSOR BONTERRA/PARKVIEW, INC..
GUARANTOR: |
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ADCARE HEALTH SYSTEMS INC., |
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David A. Tenwick, Chairman |
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LESSEE: |
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ADK BONTERRA/PARKVIEW, LLC |
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Chris Brodgon |
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Manager |
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STATE OF GEORGIA |
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The foregoing instrument was acknowledged before me this 28th day of October, 2010, by Chris Brogdon, who is the Manager of ADK BONTERRA/PARKVIEW, LLC on behalf of each such company.
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/s/ Damaris Marriaga |
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Notary Public, Fayette County, Georgia |
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My Commission Expires: March 6, 2011 |
Exhibit 10.152
LETTER OF CREDIT AGREEMENT
( AdCare )
THIS LETTER OF CREDIT AGREEMENT (the Agreement ), made and entered into as of October 29, 2010 by and between GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Lessor ), and ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( Lessee ).
RECITALS:
A. Lessee has leased the Facilities from Lessor pursuant to a Third Amended and Restated Master Lease with Lessor dated as of the date of this Agreement (as amended, the Master Lease ).
B. Pursuant to the Master Lease, Lessee agreed to deliver the security deposit (the Security Deposit ) referred to in the Master Lease in the amount of Three Hundred Seventy Five Thousand and 00/100 Dollars ($375,000) (the Letter of Credit Amount ).
C. As of the date of this Agreement, Lessee is fulfilling its obligations by funding the Security Deposit by depositing cash with Lessor on the terms and conditions hereinafter set forth in this Agreement and the Master Lease.
D. Under the Master Lease, Lessee may at a future date fulfill the requirement by delivering a Letter of Credit on the terms and conditions hereinafter set forth in this Agreement and the Master Lease.
NOW, THEREFORE, in order to induce Lessor to enter into the Assignment & Assumption Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions . Terms used but not otherwise defined in this Agreement shall have the respective meanings given them in the Master Lease. In addition, the following terms used in this Agreement shall have the meanings set forth below:
Bank means a commercial bank that has a rating of A or better by Standard & Poors Corporation or Moodys Investors Service, or similar, nationally recognized, credit rating agency, and that serves as the issuer of the Letter of Credit.
Facilities means the skilled nursing facilities set forth on Exhibit A attached hereto.
Letter of Credit means an irrevocable letter of credit that (a) is issued by a Bank in the form of attached Exhibit B (with such changes thereto as Lessor may approve in its sole discretion), (b) names Lessor and its assigns as beneficiary and (c) is delivered by Lessee to Lessor pursuant to this Agreement, together with any and all substitutes and replacements for such irrevocable letter of credit. The form of Letter of Credit delivered to Lessor by Lessee on the date of this Agreement has been approved by Lessor.
2. Letter of Credit . Concurrently with the execution of this Agreement, Lessee shall deliver or cause to be delivered to Lessor cash in the Letter of Credit Amount. If, at any time hereafter, the cash Security Deposit is to be replaced by a Letter of Credit, such replacement Letter of Credit shall be issued by a Bank. The term of the Letter of Credit shall be for a minimum of one (1) year. The Letter of Credit shall contain a provision providing for the automatic renewal of the Letter of Credit for additional periods of one (1) year in the Letter of Credit Amount; however, to the extent permitted by the Master Lease, if Lessee, before the expiration of the Letter of Credit, provides to Lessor, pursuant to the Master Lease, a cash Security Deposit or a separate replacement Letter of Credit in an amount equal to all or any portion of the Letter of Credit Amount, then the automatic renewal of the Letter of Credit shall be in an amount equal to the difference, if any, between the Letter of Credit Amount and the sum of the cash Security Deposits and/or substitute Letter of Credits provided to Lessor by Lessee pursuant to the Master Lease.
3. Replacement or Substitution of Letter of Credit . If Lessor reasonably determines that the credit rating of the Bank (or its holding company) has been reduced by one or more nationally recognized credit rating agencies to a level lower than such agencys or agencies A rating, then at any time thereafter Lessor may give notice of such event to Lessee. Within thirty (30) days of the delivery of such notice by Lessor, Lessee shall deliver or cause to be delivered to Lessor (a) a replacement Letter of Credit in the Letter of Credit Amount that has an expiration date that is at least twelve (12) months after the scheduled expiration date of the then unacceptable Letter of Credit or an expiration date that otherwise is acceptable to Lessor in its sole discretion or (b) to the extent permitted under the Master Lease, a cash Security Deposit in the Letter of Credit Amount. Lessor hereby approves the delivery of a Letter of Credit from First Republic Bank (Lessee having informed Lessor that it currently holds an AA- rating); provided, however, that such approval does not preclude Lessor from exercising its rights under this Section if the rating of First Republic Bank is reduced.
4. Drafts under the Letter of Credit . Lessor shall have the right to draw upon any Letter of Credit provided by Lessee to Lessor at any time from and after (i) a failure by Lessee to deliver to Lessor, when and if required by Section 3 of this Agreement, a cash Security Deposit and/or a replacement Letter of Credit in an aggregate amount equal to the Letter of Credit Amount; or (ii) Lessors receipt of a notice of non-renewal from the issuer of the Letter of Credit; or (iii) the expiration or termination of the Term of the Master Lease if any amount remains owing from Lessee under the Master Lease; or (iv) the occurrence of an Event of Default under the Master Lease. Lessor shall provide Lessee with notice of any drawing under a Letter of Credit after any drawing has been made, but the giving of any such notice shall not be a condition to the making of a draw under any Letter of Credit. The Letter of Credit shall permit Lessor to make multiple draws from time to time, provided that the total of such draws shall not exceed the Letter of Credit Amount.
5. Application of Amounts Drawn Under Letter of Credit . Lessor shall apply the amounts drawn under the Letter of Credit to pay Rent, Additional Charges and any other sums due under the Master Lease, the other Transaction Documents and any notes, obligations, leases or agreements which are cross-defaulted with the Master Lease. If for any reason the amount drawn exceeds the amount owing at the time of the drawing under the Letter of Credit, Lessor shall retain the excess amount so drawn as a Security Deposit under the Master Lease and shall
hold such cash pursuant to the terms of the Master Lease providing for the treatment of cash held as a Security Deposit under the Master Lease.
6. Transferability . The Letter of Credit shall provide that it is transferrable by Lessor in connection with any transfer by Lessor of its interest in the Master Lease; however, if Lessor wishes to transfer the Letter of Credit with respect to the Master Lease it shall notify Lessee, who shall, within fifteen (15) business days of such Notice, deliver to Lessor or Lessors assignee one or more replacement Letters of Credit in the Letter of Credit Amount.
7. Bankruptcy or Insolvency of Lessee . None of (a) the dissolution, insolvency or business failure of Lessee, (b) an assignment for the benefit of creditors of Lessee, (c) the commencement of any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding by or against Lessee, (d) the appointment of a receiver for any property of Lessee or (e) the issuance of a writ of attachment or the enforcement of any order of any court of legal process affecting any property of Lessee shall in any manner affect or impair the Letter of Credit or Lessors rights thereunder, or under this Agreement. Lessee acknowledges and agrees that (a) the Letter of Credit is a distinct and separate contract between Lessor and the Bank, (b) the Letter of Credit is not and shall not be deemed or construed to be an asset, property, possession or contract of any kind whatsoever owned or held by Lessee, (c) any payments received by Lessor pursuant to the Letter of Credit shall not constitute a preferential payment and (d) all funds paid by the Bank pursuant to the Letter of Credit are the separate funds of the Bank.
8. Notices . Any notice, request or other communication to be given by any party hereunder shall be delivered as provided in the Master Lease.
9. Miscellaneous .
9.1 Any delay on the part of Lessor in exercising any power, privilege or right under the Master Lease, this Agreement or any other instrument or document executed by Lessee in connection herewith shall not operate as a waiver thereof. Neither a single or partial exercise thereof, nor the exercise of any other power, privilege or right shall preclude other or further exercise thereof or the exercise of any other power, privilege or right. The waiver by Lessor of any default by Lessee shall not constitute a waiver of any subsequent defaults or a waiver of the same or any similar default by Lessee but shall be restricted to the default so waived.
9.2 All rights, remedies and powers of Lessor hereunder are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all rights, remedies and powers given by the Master Lease, any other document executed and/or delivered in connection therewith or any other applicable laws now existing or hereafter enacted.
9.3 Whenever the singular shall be used hereunder, it shall be deemed to include the plural (and vice versa ), and reference to one gender shall be construed to include all other genders, including neuter, whenever the context of this Agreement so requires. Section captions or headings used in this Agreement are for convenience and reference only and shall not affect the construction hereof.
9.4 Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision of the remaining provisions of this Agreement.
9.5 This Agreement may be executed in separate counterparts, each of which shall be considered as original when each party has executed and delivered to the other one or more copies of this Agreement but all of which taken together shall constitute one agreement.
9.6 The rights and privileges of Lessor and Lessee hereunder shall inure to the benefit of their successors and assigns, and this Agreement shall be binding on all assigns and successors of Lessee.
9.7 Lessee shall, at the request of Lessor, execute such other agreement, documents or instruments in connection with this Agreement as Lessor reasonably requires.
9.8 In the event of any action to enforce this Agreement, the party that does not prevail agrees to pay the costs and expenses of the party that prevails in such action, together with reasonable attorneys fees (including fees incurred in appeals and post-judgment enforcement proceedings).
9.9 No amendment of this Agreement shall be effective unless it is in writing and signed by the parties.
9.10 Nothing contained in this Agreement shall be construed as in any way modifying or limiting the effect of terms or conditions set forth in the Master Lease, but each and every term and condition hereof shall be in addition thereto. Lessee waives, to the fullest extent permitted by law, any right to (i) require Lessor to proceed against or exhaust any collateral or security held by Lessor pursuant to the Master Lease and/or any of the other documents executed and/or delivered by Lessee to Lessor in connection therewith or with which the Master Lease is cross-defaulted or (ii) pursue any other remedy in Lessors power.
9.11 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE IN WHICH A FACILITY COVERED BY THE MASTER LEASE IS LOCATED SHALL GOVERN THIS AGREEMENT (i) TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES OF LESSOR WITH RESPECT TO SUCH FACILITY AND (ii) WITH RESPECT TO PROCEDURAL REQUIREMENTS THAT ARE GOVERNED BY THE LAWS OF SUCH STATE.
9.12 LESSEE CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE RESPECTIVE STATES IN WHICH THE FACILITIES COVERED BY THE MASTER LEASE ARE LOCATED AND IN MARYLAND AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE RESPECTIVE STATES IN WHICH SUCH FACILITIES ARE LOCATED AND IN MARYLAND. LESSEE AGREES
THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE RESPECTIVE STATES IN WHICH SUCH FACILITIES ARE LOCATED OR MARYLAND AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE, AND FEDERAL COURTS OF SUCH STATES.
Signatures follow.
LESSEE: |
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ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company |
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By: |
/s/ Christopher Brogdon |
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Christopher Brogdon, Manager |
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STATE OF GEORGIA |
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COUNTY OF COBB |
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The foregoing instrument was acknowledged before me this 28 day of October, 2010, by Christopher Brogdon, who is a Manager of ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company, on behalf of such limited liability company.
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/s/ Damaris Marriaga |
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Notary Public, Fayette County, Georgia |
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My Commission Expires: March 6, 2011 |
LESSOR: |
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation |
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/s/ Daniel J. Booth |
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Name: |
Daniel J. Booth |
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Title: |
Chief Operating Officer |
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STATE OF MARYLAND |
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COUNTY OF BALTIMORE |
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This instrument was acknowledged before me on the 28th day of October, 2010, by Daniel J. Booth, the COO of GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation, on behalf of said corporation.
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Notary Public |
/s/ Judith A. Jacobs |
Exhibit 10.153
After Recording Please Return to: |
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Cross Reference: |
Gregory P. Youra, Esq. |
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Deed Book 24103, page 122, |
Holt Ney Zatcoff & Wasserman, LLP |
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Fulton County, Georgia records |
100 Galleria Parkway, Suite 600 |
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Atlanta, Georgia 30339 |
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Telephone: (770) 956-9600 |
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e-mail: gyoura@hnzw.com |
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SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this Agreement ) is made and entered into by and among Omega Healthcare Investors, Inc. ( Lender ), ADK Bonterra/Parkview, LLC, a Georgia limited liability company ( Tenant ), and Georgia Lessor-Bonterra/Parkview, Inc. ( Landlord ) and is effective as of the date (the Effective Date ) executed by the last of Lender, Tenant and Landlord.
RECITALS:
A. Landlord and Tenant entered into that certain Third Amended and Restated Multiple Facilities Lease dated as of October 29, 2010 (the Lease ), pursuant to which Landlord leased to Tenant certain health care facilities (collectively, the Premises ) being commonly known as Parkview Manor Nursing Home in Atlanta, Georgia and Bonterra Nursing Center in East Point, Georgia. The land on which the Premises are located is legally described on Exhibit A (the Property ).
B. Lender has made a loan (the Loan ), which is secured by, among other things, that certain Deed to Secure Debt and Assignment of Leases and Rents dated as of March 13, 1998, recorded on March 16, 1998, at Deed Book 24103, page 122, Fulton County, Georgia records (the Security Document ) encumbering the Property. The Security Document and other documents executed in connection with the Loan shall be referred to in this Agreement as the Loan Documents .
C. Tenant and Lender desire to enter into this Agreement to provide for the subordination of the Lease to the lien of the Security Document and to provide for the protection of the Lease and Tenants rights under the Lease in the event of any exercise by Lender of any rights or remedies under the Loan Documents, on and subject to the terms of this Agreement.
STATEMENT OF THE AGREEMENT:
In consideration of the premises, the mutual agreements set out below and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Lender, Tenant and Landlord agrees as follows:
1. Subordination of the Lease . The Lease is subject and subordinate to the lien of the Security Document, as to the Property encumbered by the lien of the Security Document. The Security Document includes any renewals, modifications, extensions and amendments thereof and thereto. The advancement of additional monies by Lender, the repayment of which is secured by the Security Document, shall not affect the subordination provided for in this Agreement.
2. Non-Disturbance . So long as there is no then existing Lease Default (as defined below), Lender shall not, in the exercise of any right, remedy, or privilege granted by the Security Document, or the other Loan Documents, or otherwise available to Lender at law or in equity, disturb or otherwise interfere with Tenants quiet enjoyment or possession of the Premises or any of Tenants other rights under the Lease. As used in this Agreement a Lease Default means a default by Tenant under the Lease which was not cured during the applicable grace and cure periods provided for in the Lease, such that Landlord would have the right to terminate the Lease as a result of such default. Without limitation of the foregoing, and so long as no Lease Default then exists, Lender agrees that (i) Tenant will not be named as a party to or otherwise joined in any foreclosure or other enforcement proceeding instituted by Lender under the Loan Documents; (ii) any sale or other transfer of the Premises, pursuant to foreclosure or any voluntary conveyance or other proceeding in lieu of foreclosure, will be subject to the Lease and all of Tenants rights thereunder; and (iii) upon any sale or other transfer of the Premises the Lease will continue in full force and effect as a direct lease between Tenant and the Successor Landlord pursuant to Section 3 below. Should Tenant be joined as a party by Lender or Landlord in any action or proceeding in violation of this Agreement, Lender agrees to pay Tenants actual and reasonable costs and expenses, including but not limited to taxable costs and reasonable attorneys fees.
3. Attornment . Tenant shall attorn to any person or entity that acquires the Premises pursuant to the foreclosure of the Security Document, or by any proceeding or voluntary conveyance in lieu of foreclosure (a Successor Landlord ). Upon any attornment under this Section 3, the Lease shall continue in full force and effect as a direct lease between Tenant and the Successor Landlord, except that the Successor Landlord shall not be:
(a) liable for any breach of the Lease by any prior landlord; provided that this is not intended to release any Successor Landlord from the obligation to cure any condition that exists as of the date the Successor Landlord becomes the Landlord under the Lease, if the condition violates the obligations of the landlord under the Lease, subject, however, to the Successor Landlord being provided the notice and opportunity to cure such condition, as provided for in the Lease; or
(b) bound by any rent or additional rent applicable to the period following the date that Successor Landlord becomes the landlord under the Lease, which Tenant might have paid to any prior landlord more than thirty (30) days in advance of its due date under the Lease; or
(c) bound by any amendment to the Lease made without Lenders or the Successor Landlords consent; provided that for purposes of this item, an amendment does not include (i) any assignment or subletting permitted under the Lease, or (ii) the exercise of any option to renew or extend the term of the Lease, of (iii) Landlords and Tenants agreement to extend any of the time periods provided for in the Lease (for example, Tenants contingency periods or the time to complete any work to be performed by Tenant or Landlord); or
(d) bound by any notice given by Tenant to any prior Landlord, whether or not such notice is given pursuant to the terms of the Lease, unless notice is also given to Lender or the Successor Landlord; or
(e) subject to any accrued off-set right, unless expressly provided for by the Lease or by court order; or
(f) liable for any security deposit held by any prior Landlord, unless actually received by Lender or the Successor Landlord.
4. Payment of Rent . Landlord and Tenant acknowledge that the Loan Documents provide for the direct payment to Lender of all rental and other monies due and to become due to Landlord under the Lease ( Rent ) upon the occurrence of certain conditions as set forth in the Loan Documents. If Tenant receives a written notice from Lender (a Rent Demand Notice ) to pay all Rent to or at the direction of Lender, Landlord agrees that Tenant shall pay all Rent as directed in the Rent Demand Notice. Upon receipt of the Rent Demand Notice and until otherwise directed by Lender or court order, Tenant agrees to pay the Rent due and payable by Tenant under the Lease to or at the direction of Lender, as provided for in the Rent Demand Notice. Landlord (i) consents to such payment in accordance with the Rent Demand Notice, notwithstanding any dispute between Landlord and Lender or contrary instructions from Landlord; (ii) releases and agrees to hold Tenant harmless from and against any claims or liability as a result of making payments to or as directed by Lender; and (iii) agrees that Tenant shall be fully credited with such payments under the Lease. Notwithstanding the foregoing, if conflicting demands are made upon Tenant or Tenant is unsure as to its obligations under this Agreement, the Lease or applicable law as to the payment of Rent, Tenant may petition the court for a determination of who is the proper party to receive the Rent or for leave to pay the Rent into the registry of the court and Landlord and Lender consent to the payment of the Rent as ordered or approved by the court.
5. Lenders Notice of Default . Tenant shall send to Lender a copy of any default notice given to Landlord under the Lease (a Duplicate Default Notice ). Tenant agrees to accept a cure of the default by Lender with the same effects as if by Landlord. In addition, Tenant agrees not to terminate this Lease as a result of any default by Landlord under the Lease, until Tenant has provided a Duplicate Default Notice to Lender and the default has still not been cured by the date thirty (30) days following the date the Duplicate Default Notice is given to Lender (the
Lender Cure Period ); provided that if the default is of a non-monetary nature (i.e. it cannot be cured by the payment of money) and Lender promptly commences and is diligently and continually pursuing the cure, the Lender Cure Period shall be extended for such additional time as is reasonably required to cure such default using diligence and all commercially reasonable efforts, but not beyond an additional sixty (60) days. Nothing in this Section 5 is intended to suspend or otherwise limit Tenants ability to exercise any other rights and remedies (other than the termination of the Lease) Tenant may have against Landlord as a result of such default.
6. Limitation on Subordination . Nothing in this Agreement or in the Security Document or in any other Loan Documents shall be construed to (i) grant to Lender any lien on, right to or interest in the improvements constructed (or to be constructed) by Tenant on, or adjacent to, the Premises, as contemplated by the Lease or any of Tenants other property (including proceeds therefrom), except to the extent of Lenders lien on Landlords reversionary interest (if any) in such property, subject, however to the terms of the Lease; or (ii) alter or affect any obligation of Landlord to Tenant or any rights or remedies of Tenant against Landlord under the Lease, except as provided for in Section 5, as it relates to the termination of the Lease and Section 3, as it relates to a Successor Landlord becoming the landlord under the Lease.
7. Notices . All requests, notices and demands that are given or made in connection with this Agreement shall be in writing and shall be given by certified mail, return receipt requested; or by nationally recognized overnight courier service, with the ability to confirm delivery; or by hand delivery, evidence by a signed receipt for delivery and shall be addressed as follows:
If to Lender: |
Omega Healthcare Investors, Inc. |
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9690 Deereco Road, Suite 100 |
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Timonium, MD 21093 |
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Attn.: Daniel J. Booth |
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Telephone No.: (410) 427-1700 |
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Facsimile No.: (410) 427-8800 |
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To Landlord: |
c/o Omega Healthcare Investors, Inc. |
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9690 Deereco Road, Suite 100 |
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Timonium, MD 21093 |
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Attn.: Daniel J. Booth |
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Telephone No.: (410) 427-1700 |
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Facsimile No.: (410) 427-8800 |
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And with copy to |
Mark E. Derwent, Esq. |
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(which shall not |
Doran Derwent, PLLC |
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constitute notice) : |
5960 Tahoe Drive, SE, Suite 101 |
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Grand Rapids, MI 49546 |
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Telephone No.: (616) 451-8690 |
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Facsimile No.: (616) 451-8697 |
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The addresses set out above may be changed by notice sent pursuant to this Section 7.
8. Successors and Assigns . This Agreement shall bind and inure to the benefit of Landlord, Tenant and Lender, and their respective successors and assigns.
9 . Attorneys Fees . In any proceeding arising under this Agreement, the prevailing party shall be entitled to recover all reasonable attorneys fees and costs incurred.
10. Counterparts . This Agreement may be executed in multiple counterparts, all of which together shall constitute one document and this Agreement. The parties authorize signature pages from separate identical counterparts to be detached and attached to one counterpart to form one document.
11. Entire Agreement and Amendment . This Agreement includes and incorporates the entire agreement between Lender, Tenant and Landlord relative to the relationship between the Lease and the Loan Documents. This Agreement may only be amended by a written document signed by Lender, Tenant and Landlord.
12. Severability . A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provisions, and a determination that the application of any other provisions of this Agreement in any particular circumstances is unenforceable or invalid shall not affect the enforceability or validity of such provision as it may apply to the other circumstances.
13. Governing Law . This Agreement shall be governed by and enforced and construed in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Lender, Tenant and Landlord have executed this Agreement.
Signed, sealed and delivered in the |
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LENDER : |
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presence of: |
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/s/ Carolyn M. Fillmore |
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OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation |
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Unofficial Witness |
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By: |
/s/ Daniel J. Booth |
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/s/ Judith A. Jacobs |
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Name: |
Daniel J. Booth |
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Notary Public |
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Title: |
Chief Operating Officer |
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(NOTARY SEAL) |
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My Commission Expires: May 12, 2012 |
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Signed, sealed and delivered in the |
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LANDLORD : |
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presence of: |
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/s/ Carolyn M. Fillmore |
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation |
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Unofficial Witness |
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By: |
/s/ Daniel J. Booth |
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/s/ Judith A. Jacobs |
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Name: |
Daniel J. Booth |
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Notary Public |
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Title: |
Chief Operating Officer |
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(NOTARY SEAL) |
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My Commission Expires: May 12, 2012 |
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Signed, sealed and delivered in the |
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TENANT : |
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presence of: |
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/s/ Ellen Smith |
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ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company |
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Unofficial Witness |
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By: |
/s/ Chris Brogdon |
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/s/ Damaris Marriaga |
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Chris Brogdon, Manager |
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Notary Public |
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(NOTARY SEAL) |
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My Commission Expires: March 6, 2011 |
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Exhibit 10.154
ASSIGNMENT AND ASSUMPTION OF SECOND AMENDED AND RESTATED MULTIPLE FACILITIES LEASE AND CONSENT OF LESSOR
(Triad AdCare)
THIS ASSIGNMENT AND ASSUMPTION OF SECOND AMENDED AND RESTATED MULTIPLE FACILITIES LEASE AND CONSENT OF LESSOR (this Agreement ) is made and given as of this 29th day of October, 2010 by and among GEORGIA LESSOR BONTERRA/PARKVIEW, INC., a Maryland corporation ( Lessor ), TRIAD HEALTH MANAGEMENT OF GEORGIA II, LLC, a Georgia limited liability company ( Assignor ), the Other Triad Entities listed on the signature page to this Agreement (together with Assignor, each a Triad Entity , and collectively, the Triad Entities ), ADCARE HEALTH SYSTEMS INC., an Ohio corporation ( New Guarantor ), HEARTH & HOME OF OHIO, INC., an Ohio corporation ( New Lessee Parent ), ADK BONTERRA/PARKVIEW, LLC, a Georgia limited liability company ( New Lessee ).
RECITALS:
A. Lessor, as landlord, and Assignor, as lessee, are parties to that certain Second Amended and Restated Multiple Facilities Lease dated May 10, 2010 (as subsequently amended, the Master Lease ), pursuant to which Assignor leases from Lessor the licensed nursing facilities commonly known as (i) Parkview Manor Nursing Home, and (ii) Bonterra Nursing Center. All terms used in this Agreement and not defined herein shall have the meanings assigned to them in the Master Lease.
B. On July 31, 2010, Assignor and certain of its Affiliates, collectively as sellers, and New Guarantor and certain of its Affiliates, as buyer, entered into that certain Assignment and Transfer Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time, the Transfer Agreement ). New Guarantor owns 100% of the outstanding equity interests in New Lessee Parent and New Lessee Parent owns 100% of the outstanding equity interests in New Lessee. New Lessee is the entity designated by New Guarantor to be the new master tenant under the Master Lease.
C. Pursuant to the Transfer Agreement, effective as of November 1, 2010 (the Assignment Date ), Assignor will transfer substantially all of its assets to New Lessee and, in connection with such transfer, Assignor is required to assign to New Lessee all of Assignors right, title and interest under the Master Lease, and Lessor has agreed to permit such assignment under the following terms and conditions.
D. The Triad Entities, New Guarantor, and New Lessee have requested that Lessor (i) consent to the assignment by Assignor to New Lessee of all of Assignors right, title, interest in, and assumption of certain obligations and liabilities as lessee by New Lessee under, the Master Lease pursuant to this Agreement (the Assignment and Assumption ), and (ii) amend and restate the Master Lease concurrently with such Assignment and Assumption, and Lessor is willing to do so on the terms and conditions of this Agreement.
NOW, THEREFORE , for and in consideration of the agreements, covenants and representations set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I. ASSIGNMENT & ASSUMPTION
1.1 Assignment and Assumption .
(a) Effective as of the Assignment Date, Assignor assigns to New Lessee Assignors entire right, title and interest in the Master Lease, including, but not limited to, the unapplied portion of any reserve accounts of any natures and entitlements under the Master Lease.
(b) For the benefit of Lessor and Assignor, New Lessee hereby assumes and agrees to duly and punctually observe and perform, from and after the Assignment Date, all obligations and liabilities of the Lessee under the Master Lease either arising on or after the Assignment Date or constituting Assumed Obligations (as defined below), and all of the terms and provisions with which Assignor, as lessee, is bound to comply under the Master Lease shall be binding directly upon New Lessee, including, but not limited to, the obligation to deliver to Lessor concurrently with the execution of this Agreement, the Security Deposit (as defined in the Master Lease). New Lessee acknowledges and agrees that New Lessee shall be fully liable for the obligations of Assignor under the Master Lease, including, without limitation, any monetary or other existing defaults under the Master Lease, arising on or after the Assignment Date, and for the Assumed Obligations. It is the intention of the parties that, except only as otherwise specifically provided herein, the relationship between Lessor and New Lessee shall be governed by the provisions of the Master Lease as if the New Lessee were Assignor
(c) As used in this Agreement, the Assumed Obligations means (i) all obligations arising under Section 7.3 of the Master Lease, and (ii) all obligations under Section 21.1 of the Master Lease with respect to any accident, injury to or death of persons or loss of or damage to property occurring on or about the Leased Properties or adjoining sidewalks, including without limitation any claims of malpractice, in each case, without regard to whether such obligations accrued before, on or after the Assignment Date.
1.2 Consent . In reliance upon, and subject to, the representations and warranties, covenants and agreements of the Triad Entities, New Lessee and New Guarantor (the Lessee Entities ) contained in this Agreement and the documents contemplated by this Agreement, Lessor hereby consents to the Assignment and Assumption.
1.3 Third Amended and Restated Master Lease; Additional Transaction Documents . As an inducement to enter into this Agreement and consent to the Assignment, New Guarantor, New Lessee and New Lessee Parent (each a New Lessee Entity , and collectively the New Lessee Entities ) are concurrently executing and delivering to Lessor the following (the Additional Transaction Documents ):
(a) A Third Amended and Restated Master Lease in form and substance acceptable to Lessor;
(b) A Security Agreement from New Lessee granting to Lessor a first priority security interest in all assets of New Lessee to secure all of the obligations of the New Lessee Entities under the Transaction Documents;
(c) A Security Agreement from New Guarantor, granting to Lessor a first priority security interest in all assets of New Guarantor which are located at, used in connection with, or arises out of the operation of, the Facilities to secure all of the obligations of the New Lessee Entities under the Transaction Documents;
(d) A Security Agreement from New Lessee Parent, granting to Lessor a first priority security interest in all assets of New Lessee Parent which are located at, used in connection with, or arises out of the operation of, the Facilities to secure all of the obligations of the New Lessee Entities under the Transaction Documents;
(e) A Guaranty from New Guarantor guarantying to Lessor the payment and performance of all of the obligations of the New Lessee Entities under the Transaction Documents (such guaranty being without limit);
(f) A Guaranty from New Lessee Parent guarantying to Lessor the payment and performance of all of the obligations of the New Lessee Entities under the Transaction Documents (such guaranty being without limit)
(g) A Subordination Agreement (Affiliates) from the New Lessee, New Lessee Parent, and New Guarantor in favor of Lessor;
(h) A Pledge Agreement from New Lessee Parent in favor of Lessor pledging the equity interests in the New Lessee to secure all of the New Lessee Entities obligations under the Transaction Documents; and
(i) From and after the Assignment Date, New Lessee, New Lessee Parent and New Guarantor shall execute and deliver such other certificates, documents and agreements as are reasonably requested by Lessor in connection with the consummation of the transactions contemplated by this Agreement.
The Lessee Entities acknowledge and agree that each of this Agreement and the Additional Transaction Documents constitute Transaction Documents as defined in the Master Lease.
1.4 Limited Release of Liabilities and Obligations of Assignor . Lessor hereby releases Lessee, the other Triad Entities, Ronald M. Herbert, Jr., and Adam T. Ashpes of all obligations arising under the Master Lease from and after the Assignment Date; provided however, that neither this Agreement, nor its execution, delivery or performance by Lessor, shall release the Triad Entities from their obligations and liabilities under the Master Lease and the other Transaction Documents arising prior to the Assignment Date, and the Triad Entities shall remain fully liable for the observance and performance of all of the lessees obligations and liabilities under the Master Lease and the other Transaction Documents accruing prior to the Assignment Date. For the purposes of this Section 1.4 and the determination of Lessee and the
other Triad Entities obligations under the Master Lease and the other Transaction Documents accruing prior to the Assignment Date, the term Transaction Documents does not include the Additional Transaction Documents or the obligations of the New Lessee Entities under this Agreement, but it does include the Triad Entities obligations under this Agreement.
1.5 One-Time Consent . Lessors consent pursuant to this Agreement does not and shall not be deemed to, constitute, or be construed as, consent to any future or further assignment or Transfer.
1.6 Repayment of Working Capital Loan . Concurrently with the execution and delivery of this Agreement, and as a condition to the grant of Lessors consent to the Assignment and Assumption by Lessor pursuant to this Agreement, the Triad Entities shall pay in full all outstanding principal, interest and other sums evidenced by that certain Amended and Restated Secured Promissory Note dated as of January 7, 2010 in the original principal amount of $2,000,000. Assignor, Assignee and Lessor agree to apply the unapplied portion of the Security Deposit made by Assignor and held by Lessor to the payoff of such indebtedness.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF TRIAD ENTITIES
The Triad Entities, jointly and severally, represent and warrant to Lessor, as of the Assignment Date, that:
2.1 Status of Triad Entities . Each Triad Entity is a limited liability company duly organized, validly existing and in good standing under the laws of the state in which it is organized. If a Facility is located in a state other than the state in which it is organized, each Triad Entity is duly qualified to do business as a foreign corporation in the state in which the Facility are operated by it is located.
2.2 Validity and Conflicts . This Agreement is, and all documents to be executed by the Triad Entities pursuant to this Agreement will be, their valid and binding obligations, enforceable against each of them in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to the enforcement of creditors rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The execution of this Agreement and the consummation of the transactions contemplated in this Agreement in accordance with its terms have been approved by all necessary action of each of the Triad Entities under its articles of organization, operating agreement or such other documents and agreements pursuant to which it is organized and operates (collectively, the Charter Documents ), and do not and will not result in a breach of the terms and conditions of, nor constitute a default under or violation of, the Triad Entities Charter Documents or any law, regulation, court order, mortgage, note, bond, indenture, agreement, license, contract or other instrument or obligation to which a Triad Entity is now a party or by which any of its assets may be bound or affected.
2.3 Authority . Each Triad Entity has full power and authority to execute and to deliver this Agreement and all related documents and to carry out the transactions contemplated
herein and therein. Each has full power and authority to conduct its business as the same currently is being conducted.
2.4 Necessary Action . Each Triad Entity has duly and properly taken or obtained or caused to be taken or obtained all action necessary for it (a) to enter into and to deliver this Agreement and any and all documents and agreements executed by an Triad Entity in connection herewith, and (b) to carry out the terms of this Agreement and the transactions contemplated by it. No other action by or on behalf of any Triad Entity is or will be necessary to authorize the execution, delivery and performance of this Agreement and any documents and agreements executed or to be executed by a Triad Entity in connection herewith or to authorize the transactions contemplated by this Agreement. No consent of any third party is or will be necessary in connection with the execution, delivery and performance of this Agreement and any documents and agreements executed or to be executed by a Triad Entity in connection herewith or in connection with the consummation of the transactions contemplated by this Agreement.
2.5 Taxes and Tax Returns . To the knowledge of the Triad Entities, each Triad Entity has (i) timely filed all federal, state, local and foreign tax returns, reports, statements and other similar filings (the Tax Returns ) which are required to be filed by such Triad Entity with respect to any federal, state, or local foreign income, payroll, withholding, excise, sales, use, personal property, occupancy, business, mercantile, real estate, or other taxes (the Taxes ); and (ii) paid all Taxes, interest, penalties, assessments and deficiencies due or assessed pursuant to the Tax Returns. All Tax Returns properly reflect the liabilities of Triad Entities for Taxes for the periods, properties or events covered thereby. Except as set forth on Schedule 2.5, no extensions of time in which to file any Tax Returns have been executed or filed with any taxing authority. There are no claims, examinations, proceedings or proposed deficiencies for Taxes pending or, to the knowledge of the Triad Entities, threatened against a Triad Entity. The Triad Entities are current in the payment of all withholding and other employee Taxes which are due and payable. To the knowledge of the Triad Entities, the Triad Entities have accruals for Taxes which are adequate to cover all liabilities for Taxes of the Triad Entities for all periods ending on or before the Assignment Date, and include adequate provisions for all deferred Taxes. To the knowledge of the Triad Entities, all Taxes have been paid or are adequately reserved against on the books of the Triad Entities.
2.6 Environmental Issues . To the knowledge of the Triad Entities, none of the Triad Entities has released into the environment or discharged, placed or disposed of any Hazardous Substances or caused the same to be so released into the environment or discharged, placed or disposed of at, on or under a Facility, except (a) to the extent the same will not have a material and adverse affect on the condition, financial or otherwise, of such Facility and (b) in accordance, and in compliance, with any and all applicable Environmental Laws. To the knowledge of the Triad Entities, no Hazardous Substances are located on or at a Facility or have been released into the environment or discharged, placed or disposed of in, on or under the Facility, except to the extent permitted by applicable Environmental Laws. Each Facility complies with, and at all times during the period of its operation by the Triad Entities has complied with, all Environmental Laws in all material respects. None of the Triad Entities has received from any governmental authority or third party written notice or a written complaint alleging the failure of such Facility to comply with, or the potential liability of a Triad Entity as a result of the noncompliance of such Facility with, any Environmental Laws or, if a Triad Entity
has received such a written notice or written complaint from any governmental authority or third party, the alleged noncompliance of the Facility and/or liability of the Triad Entity with respect thereto has been resolved as of the Assignment Date.
2.7 Litigation . Except as set forth on Schedule 2.7 (the Disclosed Proceedings ), no pending, or to each Triad Entitys knowledge, threatened litigation, administrative investigation or other proceeding with respect to or affecting, or arising out of the operations of, a Facility, except where the amount claimed is less than $25,000 in any single action or $50,000 in the aggregate. Except for the Disclosed Proceedings, no Triad Entity is a party to, nor is a Triad Entity or, to the knowledge of the Triad Entities, any Facility bound by, any orders, judgments, injunctions, decrees or settlement agreements under which it or they may have continuing obligations as of the Assignment Date and that are likely to materially restrict or affect the present or future business operations of such Facility. The right or ability of any of the Triad Entities to consummate the transaction contemplated in this Agreement and the Transfer Agreement has not been challenged by any governmental agency or any other person. The applicable Triad Entity which is a party to a Disclosed Proceeding has assumed the defense thereof. With respect to each Disclosed Proceeding, there is adequate insurance coverage or reserves maintained by the Triad Entities to cover any reasonably anticipated losses, expenses or judgements arising of out of such Disclosed Proceeding.
2.8 Healthcare Licenses . There is not currently pending or, to the Triad Entities knowledge, threatened, (a) any action or proceeding to revoke, withdraw or suspend any of the Healthcare Licenses (as defined below) or to terminate the participation of one or more of the Facilities in either the Medicare or Medicaid Programs, or (b) any judicial or administrative agency judgment or decision not to renew any of the Healthcare Licenses applicable to one or more of the Facilities, or (c) any licensure or certification action of any other type applicable to one or more of the Facilities other than to transfer or issue Healthcare Licenses to New Lessee. As used in this Agreement, Healthcare Licenses means all licenses, permits and authorizations necessary to (x) lawfully operate all beds contained in the Facilities as nursing home beds; (y) provide licensed nursing services at each of the Facilities; and (z) receive payment under the Medicare and applicable state Medicaid programs for goods and services provided at the Facilities.
2.9 Sensitive Payments . None of the Triad Entities has (a) made any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the laws of the United States or the jurisdiction in which it was made, (b) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books, (c) given or received any payments or other forms of remuneration in connection with the referral of patients that would violate the Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act, 42 USC Section 1320a-7b(b), or any analogous state statute, or (d) made any payments to any person with the intention, or understanding, that any part of such payment was to be used for any purpose other than that described in the documents supporting the payment.
2.10 Inventories . On the Assignment Date, each Facility has an inventory of perishable and non-perishable food, central supplies, linens, housekeeping supplies, kitchen supplies and nursing supplies sufficient in condition and quantity as required under all applicable
laws and, to the extent there exists no applicable laws that specifically identifies the condition and/or required quantity for any such supplies or inventory, then such inventory and supplies shall be in such condition and quantity as are customarily maintained by the skilled nursing facilities.
2.11 Previous Operation . During the one year period immediately preceding the Assignment Date, the Triad Entities:
(a) did not (i) make any material change in the operation of any Facility, (ii) sell or agree to sell any items of machinery, equipment or other fixed assets of any Facility (other than pursuant to the Transfer Agreement), or (c) otherwise enter into any agreements materially affecting any Facility, except in each case in the ordinary course of business;
(b) did not, except in the ordinary course of business, enter into any lease, tenancy, contract or other commitment affecting any of Facility (other than with Lessor);
(c) to the knowledge of the Triad Entities, (i) filed all required returns, reports and filings of any kind or nature (the Returns, Reports and Filings ) with respect to the Facilities and the operations of their businesses, including state and federal tax returns and Medicare and Medicaid cost reports, and (ii) will timely pay all taxes or other obligations that are due and payable with respect thereto, except to the extent that the same are being duly contested in good faith in accordance with applicable law and the Master Lease and such contest does not materially affect either a Facility or are being assumed by the New Lessee Entities pursuant to the Transfer Agreement;
(d) operated each Facility in compliance with all applicable municipal, county, state and federal laws, regulations, ordinances and orders (including all applicable building, zoning and life safety codes with respect thereto) where the failure to comply therewith would have a material adverse effect on the business, property, condition (financial or otherwise); and
(e) paid in the ordinary course of business the accounts payable related to each Facility, except to the extent that the amount owing is being duly contested by a Triad Entity and such contest does not materially affect such Facility.
2.12 No Event of Default or Unmatured Event of Default . As of the Assignment Date, no Event of Default or Unmatured Event of Default exists under the Master Lease or any of the other Transaction Documents.
2.13 Solvency and Payments of Debts . Each of the Triad Entities is solvent and has paid its debts as they have come due in the ordinary course of business.
2.14 Management Agreements . All of the Management Agreements among the Triad Entities and any Affiliate, as manager, have been terminated.
2.15 Disclosure . No representation or warranty by or on behalf of a Triad Entity contained in this Agreement, and no statement contained in any certificate, list, exhibit or other instrument furnished or to be furnished to Lessor pursuant hereto, contains or will contain any
untrue statement of a material fact, or omits or will omit to state any material facts that are necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NEW LESSEE ENTITIES
The New Lessee Entities, jointly and severally, represent and warrant to Lessor, as of the Assignment Date, that:
3.1 Status of New Lessee Entities . Each New Lessee Entity is a corporation or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the state in which it is organized. New Lessee is duly qualified to do business in the state in which each Facility is located.
3.2 Validity and Conflicts . This Agreement is, and all documents to be executed by the New Lessee Entities pursuant to this Agreement will be, their valid and binding obligations, enforceable against each of them in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to the enforcement of creditors rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The execution of this Agreement and the consummation of the transactions contemplated in this Agreement in accordance with its terms have been approved by all necessary action of each New Lessee Entities under its articles of incorporation or organization, bylaws, operating agreement or such other documents and agreements pursuant to which it is organized and operates (collectively, the Charter Documents ), and do not and will not result in a breach of the terms and conditions of, nor constitute a default under or violation of, the New Lessee Entities Charter Documents or any law, regulation, court order, mortgage, note, bond, indenture, agreement, license, contract or other instrument or obligation to which a New Lessee Entity is now a party or by which any of its assets may be bound or affected.
3.3 Authority . Each New Lessee Entity has full power and authority to execute and to deliver this Agreement and all related documents and to carry out the transactions contemplated herein and therein. Each has full power and authority to conduct its business as the same currently is being conducted.
3.4 Necessary Action . Each New Lessee Entity has duly and properly taken or obtained or caused to be taken or obtained all action necessary for it (a) to enter into and to deliver this Agreement and any and all documents and agreements executed by an New Lessee Entity in connection herewith and (b) to carry out the terms of this Agreement and the transaction contemplated by it. No other action by or on behalf of a New Lessee Entity is or will be necessary to authorize the execution, delivery and performance of this Agreement and any documents and agreements executed or to be executed by a New Lessee Entity in connection herewith or to authorize the transactions contemplated by this Agreement. No consent of any third party is or will be necessary in connection with the execution, delivery and performance of this Agreement and any documents and agreements executed or to be executed by a New Lessee Entity in connection herewith or in connection with the consummation of the transactions contemplated by this Agreement.
3.5 Sensitive Payments; Other Matters . None of the New Lessee Entities has (a) made any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the laws of the United States or the jurisdiction in which made, (b) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books, (c) given or received any payments or other forms of remuneration in connection with the referral of patients that would violate the Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act, 42 USC Section 1320a-7b(b), or any analogous state statute, or (d) made any payments to any person with the intention or understanding that any part of such payment was to be used for any purpose other than that described in the documents supporting the payment, or (e) is, or was, affiliated with any entity which had a healthcare license, permit or certificate of need for a long term care facility rescinded or revoked and not reinstated.
3.6 Adverse Matters . No New Lessee Entity has been disqualified from participating in either the Medicare or Medicaid programs. Without limitation of the foregoing, no New Lessee Entity has engaged in any activities that are prohibited under criminal law, or are cause for civil penalties or mandatory or permissive exclusion from Medicare, or any other state health care program. There is no, and there shall continue to be no, threatened, existing or pending revocation, suspension, termination, probation, restriction, corporate integrity agreement, limitation or non-renewal affecting any New Lessee Entity with regard to participation in Medicare, Medicaid or any other Third Party Payor Programs or the applicable Healthcare Licenses to which any New Lessee Entity presently is/are subject.
3.7 The Licenses . The New Lessee has all Healthcare Licenses necessary or appropriate to occupy, use and operate such Facility as a skilled nursing facility from and after the Assignment Date. True and correct copies of the documents evidencing the Healthcare Licenses issued to the New Lessee Entities by the applicable health care authorities with respect to the operation of the Facilities shall be delivered to Lessor promptly upon receipt of same by the New Lessee Entities. There is not currently pending, or to the New Lessee Entities knowledge threatened, (a) any action or proceeding to revoke, withdraw or suspend any of the Healthcare Licenses or to terminate the participation of one or more of the Facilities in either the Medicare or Medicaid Programs, or (b) any judicial or administrative agency judgment or decision not to renew any of the Healthcare Licenses applicable to one or more of the Facilities, or (c) any licensure or certification action of any other type applicable to one or more of the Facilities.
3.8 Litigation . No New Lessee Entity is a party to, nor is a New Lessee Entity or, to the knowledge of the New Lessee Entities, the Facilities bound by, any orders, judgments, injunctions, decrees or settlement agreements under which it or they may have continuing obligations as of the date hereof or as of the Assignment Date and that are likely to materially restrict or affect the present business operations of the Facilities. The right or ability of the New Lessee Entities to consummate the transactions contemplated by this Agreement and the Transfer Agreement has not been challenged by any governmental agency or any other person.
3.9 Capital Structure of New Lessee Entities . New Guarantor owns all of the issued and outstanding equity interests of New Lessee Parent. New Lessee Parent owns all of the issued and outstanding equity interests of New Lessee. There is no Person, which together with
its Affiliates, Controls New Guarantor. New Lessee does not own stock of any other corporation or beneficial interests in any other Person.
3.10 Tangible Net Worth . New Lessee has a positive Tangible Net Worth. New Guarantor has a Tangible Net Worth of at least Five Million Dollars ($5,000,000).
3.11 Outstanding Indebtedness . New Lessee does not have any Debt, except Debt permitted under Section 8.2.4 of the Master Lease. Except for Indebtedness that is covered by an intercreditor agreement entered into by Lessor under Section 6.4 of the Master Lease, none of the Indebtedness of the New Lessee is cross-collateralized or cross-defaulted with any Debt of any other Person.
3.12 Guaranties . New Lessee has not guaranteed any indebtedness of any Affiliate or other third party.
3.13 Management Agreements . None of the New Lessee Entities has entered into any Management Agreement.
3.14 Newly Formed Entities; No Other Business . New Lessee is newly formed and has not engaged in business operations prior to the Assignment Date and is engaging only in the business of operating of the Facilities.
3.15 Transactions with Affiliates . New Lessee has not entered into any documents, agreements or transactions with Affiliates.
3.16 Disclosure . No representation or warranty by or on behalf of a New Lessee Entity contained in this Agreement, and no statement contained in any certificate, list, exhibit or other instrument furnished or to be furnished to Lessor pursuant hereto, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material facts that are necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.
ARTICLE IV. NO REPRESENTATIONS AND WARRANTIES BY LESSOR
Each New Lessee Entity acknowledges and agrees that it has inspected and otherwise has knowledge of the condition of the Facilities prior to the execution and delivery of this Agreement and such New Lessee Entity has found the same to be satisfactory for its purposes. New Lessee is leasing the Facilities as is in their condition on the Assignment Date. Each New Lessee Entity waives any claim or action against Lessor in respect of the condition of the Facilities. LESSOR MAKES NO WARRANTY OR REPRESENTATION OF ANY KIND, EXPRESS OR IMPLIED, IN CONNECTION WITH THIS AGREEMENT, THE ASSIGNMENT OR THE TRANSFER AGREEMENT, OR IN RESPECT OF ANY FACILITY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, OR AS TO ANY OTHER MATTER WHATSOEVER, IT BEING AGREED THAT ALL SUCH RISKS ARE TO
BE BORNE BY THE LESSEE ENTITIES. New Lessee further acknowledges that throughout the Term New Lessee is solely responsible for the condition of the Facilities.
ARTICLE V. ESTOPPEL OF LESSOR
To the knowledge of the executive officers of Lessor (consisting of C. Taylor Pickett, Chief Executive Officer, Daniel J. Booth, Chief Operating Officer, and Robert O. Stephenson, Chief Financial Officer), Lessor hereby states to the New Lessee Entities that Lessor has no knowledge that an Event of Default exists under the Master Lease. Such statement is made solely to effect an estoppel against Lessor, and not as an inducement to the New Lessee Entities, the New Lessee Entities lender or any other party to enter into any transaction. The sole remedy for the New Lessee Entities if the foregoing statement is not true is to prevent Lessor from asserting facts to the contrary of such statement. Lessor reserves, and is not waiving, any and all of its rights and remedies under the Master Lease and the other Transaction Documents with respect to any existing Events of Defaults or Unmatured Events of Default that may exist but, with respect to which, the executive officers of Lessor do not have knowledge.
ARTICLE VI. INDEMNIFICATION OF LESSOR
6.1 Triad Entities Indemnification . The Triad Entities shall jointly and severally indemnify and hold Lessor and its Affiliates harmless from and against any and all damages, losses, liabilities, costs, actions, suits, proceedings, demands, assessments, and judgments, including, but not limited to, reasonable attorneys fees and reasonable costs and expenses of litigation, arising out of or in any manner related to any of the following:
(a) Any misrepresentation of a material fact, breach of warranty or nonfulfillment of any agreement on the part of a Triad Entity under this Agreement or from any misrepresentations in any certificate or document furnished or to be furnished to Lessor under this Agreement;
(b) Any failure by a Triad Entity in connection with the transaction contemplated in this Agreement or the Transfer Agreement to comply with the requirements of any laws or regulations, including laws and regulations relating to sales or transfers;
(c) Any breach of any covenant of a Triad Entity contained in this Agreement requiring performance after the Assignment Date;
(d) Any claims by parties other than Lessor to the extent caused by acts or omissions of a Triad Entity or one or more of their Affiliates;
(e) Any Disclosed Proceeding;
(f) The failure to pay any Taxes or to file any Returns, Reports and Filings; or
(g) Enforcement of this Section.
The Triad Entities obligations under this Article shall survive the execution and delivery of this Agreement.
6.2 New Lessee Entities Indemnification . The New Lessee Entities shall jointly and severally indemnify and hold Lessor and its Affiliates harmless from and against any and all damages, losses, liabilities, costs, actions, suits, proceedings, demands, assessments, and judgments, including, but not limited to, reasonable attorneys fees and reasonable costs and expenses of litigation, arising out of or in any manner related to any of the following:
(a) Any misrepresentation of a material fact, breach of warranty or nonfulfillment of any agreement on the part of a New Lessee Entity under this Agreement or from any misrepresentations in any certificate or document furnished or to be furnished to Lessor under this Agreement;
(b) Any failure by a New Lessee Entity in connection with the transaction contemplated in this Agreement or the Transfer Agreement to comply with the requirements of any laws or regulations, including laws and regulations relating to sales or transfers;
(c) Any breach of any covenant of a New Lessee Entity contained in this Agreement requiring performance after the Assignment Date;
(d) Any claims by parties other than Lessor to the extent caused by acts or omissions of a New Lessee Entity or one or more of their Affiliates;
(e) Any Disclosed Proceeding;
(f) Any Assumed Obligation; or
(g) Enforcement of this Section.
The New Lessee Entities obligations under this Article shall survive the execution and delivery of this Agreement.
6.3 Procedure . If Lessor asserts that a Triad Entity, a New Lessee Entity and/or Manager (each an Indemnitor ) is subject to a claim for indemnification pursuant to this Article (a Claim ), Lessor promptly shall notify the Indemnitor in writing of the Claim and shall describe in the notice the Claim in sufficient detail in order to permit the Indemnitor to evaluate the nature and cause of the Claim. If the asserted Claim arises or is in connection with a claim, suit or demand filed by a third party, the Indemnitor shall be entitled to defend against the Claim with counsel reasonably satisfactory to Lessor. Lessor may continue to employ counsel of its own and such costs shall be borne by Indemnitor. If the Indemnitor fails to respond or does not admit responsibility for indemnification, Lessor may take such necessary steps to defend itself and any reasonable costs associated therewith may be included as part of the asserted Claim for indemnification. For all Claims that are not Claims arising from a third party, Indemnitor shall notify Lessor as to its assertion of whether the Claim is covered by this Article, including specific reasons for non-coverage, within 30 days of receipt of written notice from Lessor describing the Claim in reasonable detail. Any investigations made by or on behalf of Lessor
shall not affect or limit the Indemnitors representations and warranties and indemnification obligations under this Agreement.
ARTICLE VII. MISCELLANEOUS
7.1 Entire Agreement . This Agreement together with the Transaction Documents is intended by the parties to be a complete and exclusive statement of the agreement and understanding of the parties in respect of the subject matter contained herein and therein.
7.2 Notices . Any notice, request or other communication to be given by any party hereunder shall be in writing and shall be sent by registered or certified mail, postage prepaid, by overnight delivery, hand delivery or facsimile transmission to the following address:
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Attn.: Daniel J. Booth |
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Telephone No.: (410) 427-1700 |
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Facsimile No.: (410) 427-8800 |
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And with copy to: |
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Doran Derwent, PLLC |
(which shall not |
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5960 Tahoe Dr., SE, Suite 101 |
constitute notice) |
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Grand Rapids, Michigan 49546 |
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Attn: Mark E. Derwent |
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Telephone No.: (616) 451-8690 |
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Facsimile No.: (616) 451-8697 |
Notices shall be deemed given three (3) business days after deposit in the mail as provided herein or upon actual receipt if sent by overnight delivery, facsimile transmission or hand delivery.
7.3 Assignment . No party may assign, directly or indirectly, its rights or obligations hereunder without the prior written consent of the other parties. Notwithstanding anything in this Agreement to the contrary, the New Lessee Entities shall not have any rights or remedies under this Agreement for any breach by the Triad Entities of any representation, warranty or covenant (excluding Section 1.1(a)) in this Agreement whether by a direct right of enforcement, as a third party beneficiary or an assignee of Landlord. Any claim that the New Lessee Entities may have against the Triad Entities is under, through and solely governed by the Transfer Agreement and this Agreement shall not be deemed to enlarge or otherwise modify the rights and remedies of the New Lessee Entities under the Transfer Agreement.
7.4 Sole Agreement . This Agreement may not be amended or modified in any respect whatsoever except by an instrument in writing signed by the parties hereto. This Agreement, the disclosure schedules for each of the parties and the documents executed and delivered pursuant hereto constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior negotiations, discussions, writings and agreements between them.
7.5 Captions . The captions of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.
7.6 Severability . Should any one or more of the provisions of this Agreement be determined to be invalid, unlawful or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.
7.7 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.
7.8 Knowledge Defined . To the extent that any of the representations and warranties contained in this Agreement is limited by the phrases to the best knowledge of or a party has no knowledge of or words or phrases of similar import, the same shall mean to the actual conscious awareness of any of the corporate officers, managers, members or directors of the party or its subsidiaries making said representation or warranty. To the extent that any of the
representations and warranties contained in this Agreement refers to verbal notice to a party, such notice shall be deemed to have been received if delivered to any officer of such party or to an officer of one of its subsidiaries.
7.9 Third Party Beneficiary . Except for the Affiliates of Lessor, nothing in this Agreement is intended to or shall not be construed to confer upon or create in any person (other than the parties hereto) any rights or remedies under or by reason of this Agreement, including without limitation, any right to enforce this Agreement.
7.10 Attorneys Fees . In the event of a dispute between the parties hereto with respect to the interpretation or enforcement of the terms hereof, the prevailing party in any action resulting therefrom shall be entitled to collect from the other its reasonable costs and attorneys fees, including its costs and fees on appeal.
7.11 Construction . The parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state or local statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word including shall mean including without limitation.
7.12 Survival . The representations and warranties set forth herein shall survive the Assignment Date.
7.13 Governing Law . THIS AGREEMENT AND THE TRANSACTION DOCUMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND. EACH TRIAD ENTITY, NEW LESSEE ENTITY AND MANAGER CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE OF MARYLAND AND GEORGIA AND THE STATE IN WHICH ANY FACILITY IS LOCATED, AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT MAY BE HEARD, AT LESSORS OPTION, IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF MARYLAND OR THE STATE IN WHICH ANY FACILITY IS LOCATED. EACH TRIAD ENTITY, NEW LESSEE ENTITY AND MANAGER AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON SUCH PARTY UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OF MARYLAND OR THE STATE IN WHICH ANY FACILITY IS LOCATED AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE OF MARYLAND OR THE STATE IN WHICH ANY FACILITY IS LOCATED.
7.14 Arbitration of Disputes . If a Controversy shall arise, the Controversy shall be determined by arbitration, which shall be conducted in accordance with the rules and procedures of the American Arbitration Association by three (3) arbitrators selected in accordance with its procedures. The decision of the arbitrators shall be final and binding and shall be enforceable in any court of competent jurisdiction. The decision of the arbitrators shall set forth in writing the basis for the decision, and in rendering such decision, the arbitrators shall not add to, subtract from or otherwise modify the provisions of this Agreement and any other agreements, documents
and instruments executed pursuant to or in connection with this Agreement. The expense of the arbitration shall be divided equally between parties to the Controversy unless otherwise specified in award. The prevailing party, as determined by the arbitrators, shall be entitled to recover its costs and expenses, including attorney fees. The arbitration shall be conducted in Baltimore, Maryland. In any such arbitration, the parties shall be entitled to conduct discovery in the same manner as permitted under Federal Rules of Civil Procedure 27 through 37. No provision in this Section shall limit the right of any party to this Agreement to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of any arbitration. The exercise of such a remedy does not waive the right of any party to arbitration. As used in this Agreement, Controversy means a controversy between either of the Triad Entities, the New Lessee Entities or Manager, on the one hand, and Lessor, on the other hand, that (a) arises following the Assignment Date, (b) relates to this Agreement, any other agreement between such parties, any instrument or document delivered pursuant to or in connection with this Agreement or the transactions contemplated by this Agreement, and (c) the parties are unable to settle between themselves.
Signatures on following page.
Schedule 2.7
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ASSIGNMENT AND ASSUMPTION OF THIRD AMENDED AND RESTATED MASTER LEASE AND SUBLEASE AND CONSENT OF LESSOR
(Triad Adcare)
ASSIGNOR: |
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Triad Health Management of Georgia II, LLC |
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By: |
/s/ Ronald M. Herbert, Jr. |
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Name: |
Ronald M. Herbert, Jr. |
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Title: |
Chief Operating Officer |
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By: |
/s/ Adam T. Ashpes |
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Name: |
Adam T. Ashpes |
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Title: |
President and CEO |
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OTHER TRIAD ENTITIES: |
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Triad at Bonterra, LLC |
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Triad at Parkview, LLC |
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Triad Health Management of Georgia, LLC |
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Triad Health Management of Georgia III, LLC |
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Triad at Tara, LLC |
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By: |
/s/ Ronald M. Herbert, Jr. |
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Name: |
Ronald M. Herbert, Jr. |
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Title: |
Chief Operating Officer |
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By: |
/s/ Adam T. Ashpes |
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Name: |
Adam T. Ashpes |
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Title: |
President and CEO |
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THE STATE OF GEORGIA |
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COUNTY OF PAULDING |
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This instrument was acknowledged before me on the 28th day of September, 2010, by Ronald M. Hebert, Jr., the Chief Operating Officer, and Adam T. Ashpes, the President and CEO, of Triad Health Management of Georgia II, LLC, a Georgia limited liability company, Triad at Bonterra, LLC, a Georgia limited liability company, Triad at Parkview, LLC, a Georgia limited liability company, Triad Health Management of Georgia, LLC, a Georgia limited liability company, Triad Health Management of Georgia III, LLC, a Georgia limited liability company, Triad at Tara, LLC, a Georgia limited liability company, on behalf of said companies.
Notary Public |
/s/ [Illegible] |
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Schedule 2.7
to
ASSIGNMENT AND ASSUMPTION OF THIRD AMENDED AND RESTATED MASTER LEASE AND SUBLEASE AND CONSENT OF LESSOR
(Triad Adcare)
The undersigned hereby ratify and affirm their obligations as Guarantors under that certain Guaranty dated as of November 30, 2006 with respect to all obligations arising prior to the Assignment Date.
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/s/ Ronald M. Herbert, Jr. |
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Ronald M. Herbert, Jr., individually |
THE STATE OF GEORGIA |
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COUNTY OF PAULDING |
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This instrument was acknowledged before me on the 28th day of September, 2010, by Ronald M. Herbert, Jr., individually.
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Notary Public |
/s/ [Illegible] |
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/s/ Adam T. Ashpes |
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Adam T. Ashpes, individually |
THE STATE OF GEORGIA |
) |
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COUNTY OF PAULDING |
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This instrument was acknowledged before me on the 28th day of September, 2010, by Adam T. Ashpes.
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Notary Public |
/s/ [Illegible] |
Schedule 2.7
to
ASSIGNMENT AND ASSUMPTION OF THIRD AMENDED AND RESTATED MASTER LEASE AND SUBLEASE AND CONSENT OF LESSOR
(Triad Adcare)
STATE OF OHIO |
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COUNTY OF DELAWARE |
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The foregoing instrument was acknowledged before me this 29th day of October, 2010, by David A. Tenwick, who is the Chairman and Secretary of each of the above referenced corporations, on behalf of each such companies.
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/s/ Amanda R. Norris |
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Notary Public, Marion County, Ohio |
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My Commission Expires: April 1, 2015 |
Schedule 2.7
to
ASSIGNMENT AND ASSUMPTION OF THIRD AMENDED AND RESTATED MASTER LEASE AND SUBLEASE AND CONSENT OF LESSOR
(Triad Adcare)
LESSOR: |
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GEORGIA LESSOR BONTERRA/PARKVIEW, INC. |
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By: |
/s/ Daniel J. Booth |
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Name: |
Daniel J. Booth |
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Title: |
Chief Operating Officer |
THE STATE OF MARYLAND |
) |
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COUNTY OF BALTIMORE |
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This instrument was acknowledged before me on the 29th day of September, 2010, by Daniel J. Booth, the COO of Georgia Lessor Bonterra/Parkview, Inc., a Maryland corporation, on behalf of said corporation.
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Notary Public |
/s/ Jennie M. Bathras |
Exhibit 10.155
STATE OF GEORGIA
COUNTY OF TWIGGS
LEASE AGREEMENT
THIS LEASE AGREEMENT (this Lease) is entered into on this1 st day of August, 2010 by and between
William M. Foster,
an individual residing in Twiggs County, Georgia
(Lessor),
and
ADK Georgia, LLC,
a Georgia limited liability company
(Lessee)
WHEREAS, Lessor is the owner of certain nursing home facilities (each such facility being referred to herein as a Facility and collectively as the Facilities) identified as follows:
The Powder Springs Facility , located in Powder Springs, Georgia, consisting of 208 licensed beds;
The Thomasville Facility , located in Thomasville, Georgia, consisting of 52 licensed beds;
The Jeffersonville Facility , located in Jeffersonville, Georgia, consisting of 131 licensed beds;
The Lumber City Facility , located in Lumber City, Georgia, consisting of 86 licensed beds;
The LaGrange Facility , located in LaGrange, Georgia, consisting of 138 licensed beds;
The Tara Facility located in Thunderbolt, Georgia, Chatham County, consisting of 134 licensed beds; and 11 assisted living beds.
The Oceanside Facility , located on Tybee Island, Georgia, consisting of 85 licensed beds; and
The Savannah Beach Facility , located on Tybee Island, Georgia, consisting of 50 licensed beds;
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WHEREAS, in addition to the Facilities, Lessor also owns all personal property located therein, and all furniture, fixtures, systems, appliances, equipment, easements and other rights appurtenant to said Facilities;
WHEREAS, the Facilities are located on real property more particularly described on Exhibit A attached hereto, and the personal property and equipment located at the Facilities shall be further identified by the parties by conducting an inventory of said property upon conveyance of possession, with such inventory to be affixed hereto as Exhibit B upon its completion, said exhibits being incorporated herein by reference and expressly made part hereof (all foregoing being hereinafter referred to as the Leased Premises); and
WHEREAS, Lessor desires to lease the Leased Premises to Lessee, and Lessee desires to lease the Leased Premises from Lessor, NOW THEREFORE, the parties hereby covenant and agree as follows:
SECTION 1.
AGREEMENT TO LEASE; RENT; SECURITY DEPOSIT, ADVANCE RENT; AND CONDITIONS.
(a) Agreement to Lease .
Lessor hereby leases, demises and rents the Leased Premises to Lessee for a term as set forth in Section 3 hereof; and Lessee hereby takes, accepts and rents the Leased Premises AS IS, WHERE IS from Lessor effective as of the commencement date of this Lease hereinafter stated, subject to satisfaction of the conditions precedent to the commencement date as set forth herein and subject to the other terms, conditions and provisions hereof. This lease is for the entirety of the Leased Premises and the Lessee; Lessee must take, accept and rent throughout the term each and all of the Facilities herein identified.
(b) Rent .
(i) Rental Rate . The lease period shall be for a period of 10 years. The rent for the Leased Premises shall be (1) $270,650 per month commencing on August 1 st , 2010, with respect to the Powder Springs, Thomasville, Jeffersonville, Lumber City and LaGrange Facilities (the First Five Facilities), as prorated below, and (2) an additional rent on a per Facility basis commencing on the date upon which Lessor obtains possession of each of the Tara, Oceanside and Savannah Beach Facilities (the Remaining Facilities). Parties agree to extend time as necessary for possession. Parties also agree that Lessee will take timely possession of said Facilities as each Facility becomes available and, notwithstanding the first sentence of this section 1(b)(i), rent shall be paid on a per Facility basis (as allocated below) as each Facility becomes available and possession is delivered to Lessee. From the date of possession by Lessee
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the rent shall increase by two percent (2%) every yearly anniversary until the end of the lease term.
If for reasons of insurance, property destruction, eminent domain, or equitable judgments, the rental rate is required to be allocated or pro-rated among the homes and/or beds, then the parties agree that the following initial rates shall apply:
The Powder Springs Facility
208 licensed beds @ $550/bed = $114,400
The Thomasville Facility
52 licensed beds @ $350/bed = $18,200
The Jeffersonville Facility
131 licensed beds @ $350/bed = $45,850
The Lumber City Facility
86 licensed beds @ $350/bed = $30,100
The LaGrange Facility
138 licensed beds @ $450/bed = $62,100
The Tara Facility
145 licensed beds @ $550/bed = $79,750
The Oceanside Facility
85 licensed beds @ $350/bed = $29,750
The Savannah Beach Facility
50 licensed beds @$350/bed = $17,500
Lessor shall deliver and Lessee shall take possession of the First Five Facilities at 12:01 a.m. August 1, 2010.
(ii) Due Date and Late Penalty . Rent shall be due on the first day of each month. Rent shall be considered late if not received by the tenth (10 th ) day of each month. Thereafter, a late fee of five percent (5%) of the delinquent rent shall be due, in addition to, and not as a limitation on, other remedies available to the Lessor at law or equity.
(iii) Default for Non-Payment . Non-payment of monthly rent on or before the fifteenth (15 th ) day of the month shall constitute a default under this Lease Agreement and Lessor may, at his discretion, terminate the Lease Agreement immediately without notice or demand. Lessee agrees that a default under any one leased Facility shall constitute a default in all 8 of
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the leased Facilities. Any litigation between the parties regarding the lease shall be held in Twiggs County GA Superior Court.
(iv) Additional Rent for Taxes . Lessee agrees to pay, as additional rental hereunder, all ad valorem taxes as well as any other taxes applicable to the properties during the Lease Term that may be assessed, charged or levied against the property. The additional rental for taxes shall be payable by Lessee no later than the due date for such taxes. Failure to pay the additional rent for taxes when due shall constitute a default under this Lease Agreement, and Lessor may, at his discretion, terminate the Lease Agreement immediately without notice or demand.
Taxes shall be prorated for fractions of a year covered by this Lease. Lessor hereby grants Lessee the right, but not the obligation, to contest in Lessors name any tax assessment, charge or levy. Lessee shall notify Lessor of its intent to contest the tax obligation in writing, and Lessor thereafter shall provide Lessee with copies of all notices of assessments, charges and levies in timely manner so as to permit Lessee to exercise its right to contest the same.
(c) Security Deposit .
Lessee shall owe to Lessor a security deposit in the amount of $500,000, payable as follows: Upon execution of the Lease Agreement and delivery of possession of the First Five Facilities, Lessee shall pay to Lessor ($350,000), three hundred fifty thousand dollars. Upon conveyance of possession of each of the Remaining Facilities to Lessee, Lessee shall pay an additional ($50,000), fifty thousand dollars of the security deposit per Facility (for a total of $150,000 when all three Remaining Facilities have been delivered).
(d) Advance Rent .
Upon taking possession of a Facility, Lessee shall pay to Lessor advance rent equal to two (2) months rent (based on the initial monthly rent amount specified in item 1(b)(i) per Facility ). Advance rent will be applied to the final two months rent when due.
(e) Special Conditions Regarding Transfer of Possession and Return of Security Deposit .
The parties acknowledge the Lessor currently has pending dispossessory actions against current tenants for holding over the Leased Premises after Foster terminated Triad leases. Lessee Triad is now appealing to GA State Supreme Court having lost appeals at the Superior Court level as well as GA State Appeals Court, Parties agree that Lessor shall use his best efforts to convey possession of each of the Facilities to Lessee as each Facility becomes available, which date of
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possession shall be the beginning of the Lease term with respect to the Facility so delivered.
Lessor anticipates being able to deliver possession of all the First Five Facilities to Lessee on or before August 1, 2010.
SECTION 2. MAINTENANCE OF LEASED PREMISES.
Lessee, at its expense, will keep and maintain the Leased Premises in good repair during the Lease Term. Lessee shall promptly make, or cause to be made, ail repairs, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen, necessary to keep the Leased Premises in good and lawful order and condition, wear and tear from reasonable use excepted, whether or not such repairs are required by any laws, rules, regulations or ordinances hereafter enacted which involve a change of policy on any pan of the governmental body enacting the same. Further, Lessor agrees either to assign to Lessee (if permitted) or to demand and institute any legal proceedings through counsel selected by Lessee necessary to enforce any warranties pertaining to the furnishings, appliances, fixtures, machinery, equipment and any system, including but not limited to the heating, air conditioning, electrical and plumbing systems, contained in the nursing home hereby leased. Provided however, Lessee shall be financially responsible for any legal proceeding required to enforce such warranties. Any decoration or repainting of the Leased Premises will be the responsibility of the Lessee.
SECTION 3. TERM.
Lessor demises the property to Lessee to have and to hold the Property, together with all improvements, appurtenances and easements thereunto belonging, and all furniture, fixtures, appliances and equipment located thereon, for a period commencing on the date on which the first Facility is delivered to Lessee and ending midnight July 31, 2020, subject only to those conditions set out in Section 1(e) above.
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SECTION 4. /Not Applicable/
SECTION 5. UTILITIES AND MAINTENANCE.
Lessee shall pay, in addition to the rents reserved herein, all water, gas, heat, electricity, and all other public utilities furnished it or consumed by it, in or upon the Leased Premises during the Lease Term, and shall keep the interior of the Leased Premises and all furniture, fixtures, appliances and equipment now or hereafter located on the Leased Premises in good order and repair and in a clean and safe condition (excepting, however, ordinary wear and tear and all repairs made necessary by reason of the happening of fire and other casualties normally covered by fire and extended coverage insurance, which repairs shall be completed in accordance with SECTION 9 hereof) at its own cost and expense. Lessee shall have the option at any time of replacing, at its expense, any equipment or other personal property constituting part of the Leased Premises.
SECTION 6. LESSEES RIGHTS AT END OF LEASE TERM.
(a) Lessees Rights Upon Lessors Intent to Sell .
Prior to the end of the Lease term, Lessor shall notify Lessee if Lessor intends to offer the Facilities for purchase. In such case, Lessee shall have the right of first refusal to purchase the Facilities on the terms and conditions hereinafter set forth. If during the term of this Lease Lessor receives a bona fide third party offer (the Offer) to purchase all or any part of the Leased Premises on terms that are acceptable to Lessor in Lessors sole discretion, within five (5) business days after Lessors receipt of the Offer, Lessor agree to notify Lessee in writing (the Notice) by certified mail of the terms of the Offer. Lessee will have fifteen (15) days after the date of receipt of the Notice within which to notify Lessor that Lessee elects to purchase the Leased Premises (or the portion thereof which is the subject of the Offer) on the terms of the Offer as described in the Notice. If Lessee so elects, the closing of such sale will take place at the offices of Lessors counsel, pursuant to the terms of the Offer; provided, however, the closing date shall be the later of the date set forth in the Offer or 90 days after the date that Lessee accepts the Offer. If Lessee does not elect to purchase the Leased Premises within fifteen (15) days after the date of Lessees receipt of the Notice, Lessor may sell or transfer the Leased Premises to the offeror at the price and on substantially the terms stated in the Offer; provided however if said transaction fails to close within six (6) months of the date of the Notice or if Lessor receives another Offer that it desires to accept, Lessor shall again send a Notice to Lessee and Lessee shall again have the right to accept or reject the Offer as set forth above.
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(b) Lessees Rights Upon Lessors Intent to Re-Lease .
At least one hundred twenty (120) days prior to the end of the Lease Term, Lessor shall notify Lessee if lessor intends to re-lease the Facilities at the end of the Lease Term. In such case, Lessee shall have the right of first opportunity to lease the Facilities on the terms and conditions to be agreed upon between Lessor and Lessee.
(c) Lessors Rights to Convey to Family Members .
Notwithstanding the foregoing, Lessees right of first refusal under subsection (a) above shall not be triggered with respect to any sale, conveyance or disposition of the Facilities to any of Lessors natural children or grandchildren; or corporate entity wholly-owned by the same; provided that Lessor shall give Lessee prior written notice of such transaction. Provided, however, Lessees rights of first refusal shall survive any such sale, conveyance or disposition described in this subsection (c).
SECTION 7. LESSEES TRADE FIXTURES AND PERSONAL PROPERTY
Except as hereinafter provided, all trade fixtures, furniture, equipment and personal property owned by Lessee and installed or placed by it upon the property, may be removed by Lessee at any time during the Lease Term, or upon the expiration thereof; provided, however, that any such fixtures or equipment placed upon the property by Lessee in accordance with the provisions of SECTION 5 hereof, in replacement of any fixtures or equipment presently located on the Leased Premises, shall thereupon become the sole property of Lessor unless the property so replaced has been earlier delivered to Lessor if requested or stored for replacement in the Facility. Lessee agrees to repair any damage on the Leased Premises caused by the removing of trade fixtures and/or other property belonging to Lessee.
SECTION 8. DAMAGE OR DESTRUCTION
(a) Damage or Destruction
In the event any improvements on the Leased Premises are damaged or destroyed by fire, casualty or disaster, the Lease Term shall not be affected thereby, except as hereinafter provided. Lessee shall give prompt written notice of any such damage or destruction to Lessor.
(b) Total Destruction
If a Facility should be totally destroyed by fire or any other casualty during the Lease Term, or if all or a material portion (meaning in excess of thirty percent (30%) of the beds in the Facility) should be so badly damaged by fire or other casualty as to become un-tenantable and such damage cannot reasonably be expected to be repaired within ninety (90) working days from the date of written notification by Lessee to Lessor of the occurrence of the damage, Lessee may at its sole option, by giving notice in writing of such election within thirty (30) days
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following such damage or destruction, terminate the Lease as to that Facility according to the pro-rated terms set forth In Section 1, and rent shall be abated from the date of destruction and all insurance proceeds with respect to such damage or destruction with respect to the Facility (but not including insurance proceeds paid or payable with respect to Lessees property and leasehold improvements) shall be paid over to Lessor.
If Lessee does not exercise such option to terminate, this Lease shall continue in full force and effect and Lessor, subject to the other provisions of this Section, shall be assigned the insurance proceeds payable from such casualty damage and Lessor shall promptly and diligently repair, replace and restore the Facility (including personal property) to substantially the same condition existing prior to such damage or destruction. For the period Lessee is deprived of the use of any portion of the Facility by reason of such damage or destruction and the repair or restoration of same, the annual rental hereunder shall be equitably abated or reduced, taking Into account the portion and amount of the Facility so damaged and the effect of such, damage upon the operation of Lessees business at the Facility.
(c) Partial Destruction .
If the Facility should be damaged by fire or other casualty during the term of the Lease but the same are not made un-tenantable, or if made un-tenantable, they can reasonably be expected to be repaired within ninety (90) working days from the date of written notification by Lessee to Lessor of the occurrence of the damage, then this Lease shall continue in full force and effect and Lessor shall be assigned the insurance proceeds payable from such casualty damage with respect to such Facility (but not including insurance proceeds paid or payable with respect to Lessees property and leasehold Improvements) and Lessor shall promptly and diligently repair, replace end restore the Facility (including Lessors personal property) to substantially the same condition existing prior to such damage.
For the period Lessee is deprived of the use of any portion of the Premises by reason of such damage and the repair or restoration of same, the rental hereunder shall be equitably abated and reduced, pursuant to the terms of Section 1, taking into account the portion and amount of the Facility so damaged and the effect of such damage upon the operation of Lessees business at the Facility, except to the extent any such rents are covered and payable under a Business Interruption Insurance policy Carried by Lessee.
(d) Proceeds .
Notwithstanding any of the foregoing to the contrary, Lessor shall be obligated to undertake the repair, replacement or restoration work under this SECTION 9 at the lowest bid that is reasonably acceptable to the insurance carrier. All insurance proceeds with respect to the Lessees property shall be paid to Lessee, without any claim thereto by Lessor, except that Lessee may direct any Business
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Interruption Insurance proceeds payable under Section 20(b) to be paid directly to Lessor. However, if Lessee elects to have such proceeds paid to itself, it hereby agrees to promptly remit the amount due under Section 20(b) hereof to Lessor.
SECTION 9. QUIET ENJOYMENT.
So long as Lessee performs all its obligations hereunder, Lessor agrees that it will not permit the disturbance of, or interference with, Lessees peaceful and quiet possession and enjoyment of the property during the Lease Term, subject to Lessors right under Section 17 of this Lease. To this end, Lessor hereby warrants to Lessee that Lessor owns good and marketable fee simple title to the Property except as otherwise noted herein, that Lessor has full right and authority to execute and perform this Lease and that there are no agreements, options, laws, zoning ordinances, regulations, restrictions, covenants, claims, proceedings, lawsuits or orders which in any way would prevent or hinder or adversely affect the use of the Property by Lessee, pursuant to the terms of this Lease (other than the dispossessory actions disclosed in Section 1).
SECTION 10. ASSIGNMENT AND SUBLETTING.
Except as hereinafter provided, Lessee may not assign this Lease or sublease all or any portion of the Property without the prior written consent of Lessor.
SECTION 11. ALTERATIONS AND IMPROVEMENTS.
During the Lease term, Lessee may not, without Lessors prior written consent, make any changes, improvements, alterations and additions to the structural elements of any Facility involving expenditure by Lessee in excess of twenty-five thousand dollars ($25,000.00). All such structural changes, improvements, alterations and additions shall, upon the termination of this Lease, become the sole and exclusive property of Lessor.
SECTION 12. LIENS.
If any mechanics or other lien shall be filed against the Property, or any buildings or improvements therein, by reason of any actions made or alleged to have been made by or for Lessee, Lessee shall cause the same to be canceled and discharged of record, by bond or otherwise, at the expense of Lessee, and shall also defend on behalf of Lessor, at Lessees sole cost and expense, any action, suit or proceedings which may be brought for the enforcement of such lien, and save harmless Lessor from any claim, attorneys fees or damage therefrom.
In the event that any such mechanics or other lien is not removed by Lessee within thirty (30) days after notice is given by Lessor to remove same, Lessor shall have the right to discharge said lien by payment or otherwise, and any reasonable sums expended by Lessor for such discharge, including attorneys fees, shall be paid by Lessee to Lessor upon demand, and shall be deemed to be additional rent due under this lease.
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SECTION 13. REQUIREMENTS OF PUBLIC AUTHORITIES.
(a) Lessees Obligations .
Subject to the obligation of Lessor contained in subparagraph (b) of this Section 14, Lessee agrees at its own cost and expense, during the Lease Term, to comply with all orders, rules, regulations and requirements of every kind of nature relating to the Leased Premises, which shall come into effect after the commencement date of this Lease, of federal, state, municipal or other governmental authorities, applicable to the buildings, its structural components, improvements and land, comprising any part of the Leased Premises.
(b) Lessors Obligations .
In the event Lessee is required to expend funds to meet the requirements of any federal, state, municipal or other governmental authority under subparagraph (a) above and insufficient time remains in the Lease Term to allow Lessee to recover said expenditures through reimbursement from the State of Georgia or other payors during the Lease Term, Lessor shall pay any sums exceeding the amount reimbursable to the Lessee during the remainder of the Lease Term.
(c) Lessors Right to Construct .
Lessor shall have the right of first refusal, to be exercised within thirty (30) days after notice from Lessee specifying the terms of an offer to construct those improvements required by any Public Authority, to match any such offer with responsibility for payment to be as provided for in subparagraphs (a) and (b) of this SECTION.
SECTION 14. LIABILITY INSURANCE.
(a) Lessees Indemnity .
Lessee shall defend and indemnify Lessor and hold it harmless against all claims, demands and judgments for loss, damage or injury to property or persons resulting from or accruing by reason of Lessees negligence or intentional wrong-doing during the Lease Term. Lessee agrees that at its own cost and expense, it shall procure and continue in force, in the name of Lessor and Lessee, general liability insurance insuring against any and all liabilities claims for injuries to patients, persons or property occurring during the Lease Term, In, upon or about the Leased Premises, including all damage from signs, glass, awnings, fixtures or other appurtenances now or hereafter upon the Leased Premises, such insurance at all times to be in face amount of not less than Two Million Dollars ($2,000,000.00) for injuries to persons in one accident and not less than Two Million and no/100 Dollars ($2,000,000.00) for injury to one person, and Two Million and no/100 ($2,000,000.00) for damage to property. Such insurance shall
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be written by a company or companies authorized to engage in the business of general liability insurance in the State of Georgia.
(b) Lessors Indemnity .
Lessor shall defend, indemnify and hold Lessee harmless against all loss, liability, expense or cost that Lessee may suffer or incur as a result of or in connection with any and all claims, demands, and Judgments for: any loss damage or injury to property or persons resulting from or occurring by reason of Lessors negligence or intentional wrongdoing, any breach of any of Lessors warranties or agreements contained in this Lease, and any liability incurred by Lessor, or accrued with respect to the Facilities prior to the commencement date of this Lease. Lessee shall have the right, in addition to any other rights or remedies at law or in equity, to offset the amount of any such loss, liability, expense or cost against any remaining installments of rent.
SECTION 15. DEFAULT.
(a) Lessees Default .
Lessee shall be in default under this Lease Option Agreement upon the happening of any of the following events:
(i) If Lessee fails to pay rent timely, as set forth in Section 1(b)(iii);
(ii) If Lessee fails to pay additional rents timely, as set forth in Section 1(b)(iv), and in other sections of the Lease;
(iii) if Lessee is adjudicated bankrupt;
(iv) if a permanent receiver is appointed for Lessees property located on the Leased Premises and such receivership is not dissolved within sixty (60) days after written notice from Lessor to Lessee to obtain such dissolution;
(v) if, whether voluntarily or involuntarily, Lessee takes advantage of any debtor relief proceedings under any present or future law whereby the rent, or any part thereof, is, or is proposed to be, reduced or payment thereof deferred;
(vi) if Lessee makes any assignment for the benefit of creditors;
(vii) if Lessees property located on the Leased Premises should be levied upon or attached under any process not satisfied or otherwise disposed of within thirty (30) days after such levy or attachment;
(viii) if Lessee, or any of its subsidiaries or affiliates, is in default of any other Lease with Lessor;
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(ix) if Lessee breaches any other covenant or requirement of this Lease and fails to commence to cure such breach within fifteen (15) days after written notice from Lessor specifying the default (and after having commenced such cure, fails to diligently pursue cure to completion In a reasonable time); this fifteen (15) day cure period shall not apply to those defaults and breaches set forth in subsections (i) through (viii) above.
In the event of default, Lessors remedies shall be termination of this Lease, together with any and all other remedies available to Lessor at law or in equity as a result of such, breach.
Upon termination of this Lease, possession of the Property shall be returned to Lessor.
(b) Lessors Default .
If Lessor shall be in default in performing any of Lessors covenants hereunder and fail to commence cure of such default within fifteen (15) days after written notice from Lessee specifying such default (and after having so commenced such cure, fail to diligently pursue cure to completion in a reasonable time), then Lessee, at its option, may at once or at any time thereafter, in addition to any other rights and remedies it may have at law or in equity, terminate this Lease by giving written notice of termination to Lessor and Lessor shall immediately refund to Lessee any unearned Advance Rents as applicable.
SECTION 16. INSPECTION BY LESSOR.
Lessor may enter upon the Leased Premises, at any reasonable time upon reasonable written notice, to inspect the same and/or to make any alternations or repairs required to be made by Lessor hereunder; and at any time during the six (6) months immediately preceding the expiration of this Lease, may affix to any suitable part of said Leased Premises a notice of this Lease and a notice for re-letting or selling the same, and Lessee shall cause the said notice to remain affixed without hindrances or molestation.
SECTION 17. NOTICES.
Any notices, writing or other communication required or permitted to be given hereunder shall be given by certified mail, postage prepaid, return receipt requested, to the addresses below:
If to Lessor, to:
William M. Foster
Drawer F
Jeffersonville, GA 31044
With a copy to:
John Strickland
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Post Office Box 1846
Dublin, Georgia 31404-1846
If to Lessee, to:
ADK Georgia, LLC
593 Atlanta Street
Roswell, Georgia 30075
With a copy to:
Gregory P. Youra, Esq.
Holt Ney Zatcoff & Wasserman, LLP
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339
Notices shall be deemed given on the third day after the same is deposited in the United States mail.
Any notice not given in strict conformity to this section may nevertheless be deemed effective upon the date actually received by the other party.
Any party may change its address for the purpose of notices hereunder by giving the other party notice of such change of address in accordance with the provisions hereof,
SECTION 18. SIGNS.
Lessee shall have the right to install, maintain, and replace in, on, over or In front of the Leased Premises such outside signs and advertising matter, at Lessees own cost and expense, as Lessee may desire, provided that Lessee shall comply with all applicable requirements of governmental authorities having jurisdiction and shall obtain any necessary permits. Provided, however, Lessor hereby acknowledges and consents to Lessee placing a sign or signs on the property designating each Facility as appropriate and does further agree that such name may be proprietary to Lessee and shall be discontinued upon the termination of the Lease Term.
SECTION 19. INSURANCE.
(a) Property Insurance .
Lessee shall procure and maintain during the Lease Term a policy or policies of insurance by which the Property shall be insured against fire and other casualty, including flood with broad form extended coverage, to the full insurable value of each Facility as stated thereof but not less than the following for each Facility (except for flood coverage, which shall be the maximum obtainable by law):
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7,350,000.00 |
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3,200,000.00 |
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12,400,000.00 |
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1,750,000.00 |
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11,000,000.00 |
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2,250,000.00 |
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1,850,000.00 |
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Lessor reserves the right to require an increase in insurance coverage as property values increase. Lessor and Lessors mortgage lender shall be added as an additional insured on all such policies and such policies shall be non-cancelable without at least thirty (30) days prior written notice to Lessor. All insurance proceeds shall be payable to Lessor and Lessee as their interests shall appear. To the extent obtainable, such policy or policies shall contain a waiver, on the part of the insurance carrier, of subrogation against Lessor and Lessee.
(b) Business Interruption Insurance.
Lessee shall procure and maintain during the Lease Term a policy or policies of business interruption insurance. Lessor shall be named as an additional insured under such policy or policies to provide Lessor with protection against loss of rental income hereunder due to an insurable casualty for a maximum of one hundred eighty (180) days.
(c) General .
If Lessee fails to maintain any of the insurance coverage required in this Section, Lessor, after notice to Lessee, may obtain such coverage and Lessee shall pay the cost therefor to Lessor as additional rent hereunder. To the extent any insurance obtained by Lessee hereunder provides for co-insurance or deductibles, Lessee shall be liable for the payment of such amounts when and if (whether before or after any termination of this Lease) claim payments are made pursuant to such insurance coverage.
SECTION 20. EMINENT DOMAIN.
In the event that a Facility is taken in whole or in part by condemnation proceedings or eminent domain or conveyed under threat thereof, the rent otherwise payable hereunder shall abate in proportion to the portion of the Facility so condemned or conveyed, pursuant to the terms of Section 1.1
If the portion so condemned or conveyed exceeds thirty percent (30%) (in terms of number of beds) of the Facility, Lessee may, at its option, by giving written notice thereof to Lessor within thirty (30) days after such condemnation or conveyance, that it intends to abandon said Facility and rent shall be abated from the date of condemnation pursuant to the terms of Section 1. Any amounts received by reason of any condemnation of conveyance under this section shall be apportioned between Lessor and Lessee in accordance with any agreement or judicial decree.
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SECTION 21. ENTIRE AGREEMENT.
This Lease contains the entire agreement between the parties and supersedes all prior discussions and agreements between the parties and any such prior agreements shall, from and after the date hereof, be null and void.
SECTION 22. PARTIES BENEFITED.
This Lease shall insure to the benefit of and be binding upon Lessor, its successors and assigns and Lessee, its successors and assigns.
SECTION 23. LESSEES RIGHT TO CURE DEFAULTS.
In the event Lessor fails to pay when due any amounts payable with respect to any promissory notes, deeds to secure debt, contracts, agreements, liens or other instruments secured by or relating to the Leased Premises, or otherwise fails to perform any of Its obligations or responsibilities under such promissory notes, deeds to secure debt, contracts, agreements, liens or other instruments, Lessee may, at its option, pay such amounts and render such performance and upon presenting canceled checks or invoices or other proof of such payment of performance reasonably satisfactory to Lessor, may deduct the amount of said payments or cost of such performance from the rental payments thereafter due hereunder.
SECTION 24. SUBORDINATION.
Lessee agrees that this Lease and Lessees interest herein shall (so long as the debt encumbering said Facility does not exceed the then appraised fair market value of such Facility) on written request by Lessor or the holder of any first mortgage or proposed first mortgage on a Facility, be made subordinate and subject to such first mortgage or first lien, whether same be in the form of a mortgage, deed to secure debt, deed of trust, or any similar method of financing or refinancing, placed by Lessor against any part of the Facility; and to all renewals, modifications replacements, consolidations and extensions thereof and to any and all advances made thereunder and the interest thereon.
If Lessor is not in default under the terms of this Lease, upon written request by Lessor, Lessee shall subordinate this Lease to an existing or future first mortgage or similar interest to secure financing as aforesaid; provided that Lessor shall deliver to Lessee from the holder or proposed holder of such mortgage or lien, an agreement, in form and substance reasonably satisfactory to Lessee, (i) recognizing the existence of this Lease and providing that so long as Lessee complies with the obligations imposed on it in this Lease and is not in default hereunder, neither Lessee nor its successors and assigns shall he disturbed or molested in its possession of the Facility or in the full enjoyment of the rights granted Lessee hereunder, (ii) agreeing to give Lessee notice of any default by Lessor and to give Lessee at least thirty (30) days in which to cure Lessors default, and (iii) agreeing that casualty proceeds and condemnation process shall be applied in accordance with this Lease.
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SECTION 25. SHORT FORM LEASE.
If agreed to by the parties, the parties hereto shall execute at the time of the commencement date of this lease a short form memorandum of lease, which shall reflect the basic terms of the Lease and which shall be recorded on the real estate records of the counties where the Facilities are located. If the parties cannot so agree, Lessee shall have the right to record an original, executed counterpart of this Lease on the real estate records of the counties where the Facilities are located.
SECTION 26. LIQUIDATED DAMAGES.
Lessor and Lessee agree that Lessors sole and exclusive remedy in the event of a breach or default by Lessee of this Lease or as a result of any other matter arising in connection with this Lease, shall be termination of this Lease pursuant to the provisions of Section 16 (a) hereof and retention of the Advance Rent and Security Deposit made pursuant to the provisions of Section 1 hereof.
The foregoing amounts shall be liquidated damages and not a penalty, Due to the complexity of the business being leased to Lessee, the parties acknowledge that It would be impossible to determine precisely the damages that would be suffered as a result of any such breach or default or matter pertaining to this Lease.
SECTION 27. RATE INCREASES.
The parties agree to continue to work cooperatively throughout the Lease Term to negotiate increases in the property component of the reimbursement rate applicable to the Facilities whenever possible and appropriate, and, if successful, to increase rent payable hereunder during the Term in an amount equal to any such increase so that Lessor will be entitled to the full amount of any increase in the Facilitys allowed per diem resulting from an increase in the property rate component for which Lessee shall be reimbursed.
SECTION 28. FINANCIAL STATEMENTS.
Lessee hereby agrees to provide Lessor during the Lease Term with monthly internally-generated, financial statements on the Facilities within sixty (60) days after the end of each month during the term of this lease.
Additionally, Lessee further agrees to provide Lessor during the Lease Term with Medicaid and Medicare cost reports within ninety (90) after Lessees cost reporting period.
Lessee further agrees to provide a copy of all. Medicaid R-10 Rate Sheets applicable to the Facilities within fourteen (14) days after receipt of the same by Lessee, and to provide such other information as Lessor requests within (30) thirty days of each such request.
Lessee agrees to provide to Lessor within two (2) weeks following the end of every month, beginning in the 2 nd quarter of Lessees operation of the Facilities, an Operation and Clinical report to include, but not be limited to the following:
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Current Census |
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Any Change In Regulatory Status |
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All Complaints |
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Any Capital Improvements Which Are In Excess Of Five Thousand Dollars ($5,000.00) |
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Any Change In Agency Utilization |
SECTION 29. CHOICE OF LAW AND VENUE
This agreement is entered into in Georgia, and is to be construed under the laws of the State of Georgia. The parties agree that any disputes arising under or connected with this Lease Agreement shall be brought and heard in the Superior Court of Twiggs County.
SECTION 30. MISCELLANEOUS DUTIES OF LESSEE
(a) Georgia Health Care Association Membership
Lessee shall at all times maintain a full membership in the Georgia Health Care Association for all Leased Facilities.
(b) Management Contracts
Lessee will not contract or consent to have a management or consultant company manage in any way any of the Leased Facilities without the prior written consent of Lessor, except to an affiliate of Lessee or Chris Brogdon. For purposes hereof, an affiliate means any entity in which Chris Brogdon, directly or indirectly, has an equity interest (or an affiliate of such entity) or which controls, is controlled by or is under common control with Lessee.
(c) Change in Corporate Ownership
Lessee agrees to disallow any transfer of beneficial ownership in its company by its owners without the prior written consent of Lessor. Any change in Lessors corporate ownership during the Lease Term with the prior written consent of Lessor shall constitute a default under this Lease.
SECTION 31. NO WAIVER
No waiver of any default of Lessor or Lessee hereunder shall be Implied from any omission to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the express waiver and that only for the time and to the extent therein stated. One or more waivers by Lessor or Lessee shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition,
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IN WITNESS WHEREOF, the parties have hereunto put their hands and seals on the date and year first above written.
LESSOR:
/s/ William M. Foster |
(SEAL) |
William M. Foster |
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to before me this 30 |
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day of July, 2010 |
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/s/ [Illegible] |
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Witness |
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/s/ [Illegible] |
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LESSEE:
ADK GEORGIA, LLC, a Georgia limited liability company
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/s/ Christopher F. Brogdon |
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Christopher F. Brogdon, Manager |
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/s/ [Illegible] |
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Witness |
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/s/ Ellen Smith |
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Exhibit 10.156
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the Amendment ) is made and entered into as of the 31 st day of August, 2010, by and between WILLIAM M. FOSTER ( Lessor ) and ADK GEORGIA, LLC , a Georgia limited liability company ( Lessee ).
W I T N E S S E T H:
WHEREAS , Lessor and Lessee are parties to that certain Lease Agreement dated August 1, 2010 (the Lease ), whereby Lessee leased certain Facilities as defined therein; and
WHEREAS , Lessor is delivering and Lessee is taking possession of the Remaining Facilities effective as of 12:01 a.m. September 1, 2010;
WHEREAS , Lessor and Lessee desire to amend and modify certain terms and conditions of the Lease relating to the payment of the Security Deposit and Advance Rent with respect to the Remaining Facilities.
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, Lessor and Lessee, 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 Lease.
2. Remaining Facilities Security Deposit and Advance Rent . Under the terms of the Lease, Lessee owes Lessor a total amount of $404,000 (such amount representing $150,000 towards the Security Deposit and $254,000 of Advance Rent) with respect to the Remaining Facilities. Notwithstanding the terms of Sections 1(c) and (d) the Lease, the parties agree that Lessee shall have the right to pay such total amount over the next six months in equal monthly installments of $67,333.33 commencing on September 1, 2010 and ending on February 1, 2011.
3. Effect . Except as herein specifically provided, all other terms and provisions of the Lease shall remain in full force and effect, and are hereby ratified by the parties.
[SIGNATURES COMMENCE ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the date first above written.
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LESSEE: |
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ADK GEORGIA, LLC, |
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a Georgia limited liability company |
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By: |
/s/ Chris Brogdon |
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Chris Brogdon |
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Manager |
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LESSOR: |
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/s/ William M. Foster |
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William M. Foster |
Exhibit 10.157
Mr. Martin D. Brew
6838 South Bluff Court
Gainesville, GA 30506
Via EMAIL: martybrew@bellsouth.net
RE: Senior Vice President, Chief Financial Officer and Treasurer of AdCare Health Systems, Inc.
Dear Marty,
I am pleased to offer you the position of Senior Vice President, Chief Financial Officer and Treasurer of AdCare Health Systems, Inc. As we discussed, initially when you join us effective May 17, 2011 you will have the title of Senior Vice President; when the Board of Directors next convenes on June 3, 2011 you will be elected to the additional positions of Chief Financial Officer and Treasurer.
Set forth below are the some of the specifics of our offer and AdCares policies as they pertain to executive employees:
1. You will be paid an annual salary of $175,000. You will be eligible for an increase in salary of $25,000 or more no later than your first employment anniversary based on your work performance.
2. You will be eligible to participate in an incentive compensation program with a target of 75% of your base annual salary (i.e. $131,000 for 2011) with specified goals that will be the same as set for the CEO. Any incentive compensation awarded will be prorated during your first year of service and will be subject to all provisions of AdCares incentive compensation program.
3. You will receive an initial grant of 50,000 stock options vesting over three years and eligible for future grants under AdCares Option Plan detailed in the current proxy to be voted on at the AdCare annual meeting on June 3, 2011 or warrants with similar features should AdCares shareholders not approve the Option Plan.
4. You will be eligible to participate in AdCares executive expense allowance program and will be reimbursed $15,000 on an annual basis for expenses incurred in connection with performing duties for the Company.
5. You will be eligible to participate in all benefit programs made available to AdCare employees including, but not limited to health care, vacation, flexible spending accounts, 401(k) plan, etc. With respect to health care coverage, the Company will at its option either waive the waiting period required under its plan, or subsidize you under your COBRA plan such that your out- of-pocket expense does not exceed the employee payment required under our health care plan.
6. Your employment will be at will, so that you may resign, or AdCare may terminate your employment at any time and for any reason whatsoever. If your employment is terminated by AdCare without cause during the first six months of your employment you will receive salary continuation for 3 months. If your employment is terminated by AdCare without cause during the second six months of your employment you will receive salary continuation for 6 months. If your employment is terminated by AdCare without cause after your first employment anniversary you will receive salary continuation for 12 months. If you are terminated by AdCare or an acquiring company due to a change in control event, you will receive salary continuation for two times these amounts (i.e.: if you are terminated without cause in connection with a change of control event during your first six months of service the salary continuation will be for six months). Salary continuation will be paid at the rate of your annual
Employment Offer
May 15, 2011
salary on the date of the without cause or change in control termination. You will be eligible for a formal employment contract that will further codify these arrangements on your first anniversary of employment.
7. The Company will indemnify you for your actions and omissions associated with the performance of your responsibilities as Chief Financial Officer (not to include gross negligence or willful misconduct). Additionally, you will be a covered officer under AdCares Directors & Officers Insurance Policy a copy of which has been provided to you. Adcare agrees to continue to secure Directors & Officers insurance coverage.
8. You will report to AdCares President and Chief Executive Officer and will be located in AdCares Buckhead Office.
9. You will be expected to execute AdCares Non-Competition Agreement as a condition of employment.
10. You will be expected to cooperate and comply with all of AdCares background check and other pre and post employment policies and procedures.
If you have any questions or comments regarding any of the matters addressed in this letter, please feel free to contact me. If you accept AdCares employment offer and agree to the terms contained herein, please execute in the space provided below and email back a pdf countersigned copy to me at the e-address below. If we do not receive your acceptance before 5:00p.m., May 16, 2011 this offer will be rescinded.
We very much look forward to you joining the AdCare team and I personally look forward to a successful working relationship.
Sincerely, |
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/s/ Boyd P. Gentry |
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Boyd P. Gentry |
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Co-Chief Executive Officer |
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AdCare Health Services, Inc. |
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5057 Troy Road |
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Springfield, Ohio 45502 |
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bpg@adcarehealth.com |
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404.394.6596 |
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ACKNOWLEDGED AND AGREED: |
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/s/ Martin D. Brew |
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Martin D. Brew |
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Dave Tenwick |
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Lynn Dombrosky |
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Exhibit 10.158
ADCARE HEALTH SYSTEMS, INC.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF ADCARE HEALTH SYSTEMS, INC.
Dated as of January 10, 2011
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS.
ADCARE HEALTH SYSTEMS, INC.
No. ASW185
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF ADCARE HEALTH SYSTEMS, INC.
This Warrant, granted by the Board of Directors of AdCare Health Systems, Inc. as of January 10, 2011 (the Grant Date), certifies that, FOR VALUE RECEIVED, Boyd P. Gentry (the Holder), is entitled to purchase up to 250,000 voting common shares, no par value (the Common Stock), of AdCare Health Systems, Inc. (the Company) at a per share purchase price (the Exercise Price) of $4.13. This Warrant is exercisable upon a vesting schedule and shall terminate and expire unless exercised on or before the tenth anniversary of the grant date. The shares of the Companys Common Stock issuable upon the exercise of this Warrant are called herein the Underlying Common Stock. The Holder may exercise this Warrant as to all or any portion of the shares of the Underlying Common Stock which it shall have the right to acquire hereunder.
(a) Vesting Schedule . Subject to the terms and conditions set forth herein, this Warrant shall vest with respect to one-third of the warrants upon issuance with the remaining warrants vesting equally over a period of two years provided that Holder has not ceased employment with the Company as of the date of vesting as set forth herein. Except as otherwise provided herein, if the Holder ceases to be an employee of the Company, then no additional shares of Underlying Common Stock shall vest and the right to purchase such additional shares under this Warrant shall terminate. Notwithstanding the foregoing, this Warrant shall vest and become immediately exercisable with respect to one hundred percent (100%) of the Underlying Common Stock if Company undergoes a Change in Control. For purposes of this Warrant, a Change in Control shall be deemed to occur if Company executes an agreement providing for (i) the sale, conveyance, disposal, or encumbrance of all or substantially all of the Companys assets or business; or (ii) the merger, reorganization, consolidation or any other transaction that results in the transfer of ownership of more than fifty percent (50%) of the Companys Common Stock.
(b) Exercise of Warrant . In order to exercise all or any portion of this Warrant, the Holder must surrender for exercise this Warrant with the Purchase Form annexed hereto duly executed, together with payment in full of the Exercise Price then in effect for each share of Common Stock purchasable upon exercise of this Warrant. Payment may be made (i) in cash or by certified or official bank check payable to the order of the Company
or by wire transfer of immediately available funds to an account designated by the Company for such purpose, (ii) without the payment of cash (a Cashless Exercise), by reducing the number of shares of Common Stock that would be obtainable upon the exercise of this Warrant and payment of the Exercise Price in cash so as to yield a number of shares of Common Stock upon the exercise of this Warrant equal to the product of (a) the number of shares of Common Stock for which this Warrant is exercisable as of the date of exercise (if the Exercise Price were being paid in cash) and (b) the Cashless Exercise Ratio, or (iii) a combination of (i) and (ii). The date upon which the Holder exercises this Warrant is hereinafter referred to as the Exercise Date.
The Cashless Exercise Ratio shall equal a fraction, the numerator of which is the excess of the Current Market Value (as defined in Section (f)(v) hereof) per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Price per share of the Common Stock on the Exercise Date. Upon surrender of this Warrant in connection with the Holders option to elect a Cashless Exercise, the number of shares of Common Stock deliverable upon a Cashless Exercise shall be equal to the number of shares of Common Stock issuable upon the exercise of Warrants that the Holder specifies are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio.
If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this Warrant at the office of the Company, in proper form for exercise, accompanied by payment of the Exercise Price, the Holder shall be deemed to be the Holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. If the stock transfer books of the Company shall be closed on the date of receipt of this Warrant and the Exercise Price as aforesaid, the Holder shall be deemed to be the Holder of such shares of Common Stock on the next succeeding day on which the stock transfer books of the Company shall be opened.
(c) Reservation of Shares; Stock Fully Paid . The Company agrees that at all times there shall be authorized and reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance or delivery upon exercise of this Warrant. All shares which may be issued upon exercise hereof will, upon issuance, be fully paid and nonassessable. The Company shall pay all United States and state documentary stamp taxes, if any, in respect of the issue of the Common Stock.
(d) Fractional Shares . This Warrant shall be exercisable in such manner so as not to require the issuance of fractional shares of scrip representing fractional shares. If, as a result of adjustment in the Underlying Common Stock or for any other reason, fractional shares would be issuable, no such fractional shares shall be issued. In lieu thereof the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share.
(e) Rights of the Holder . The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant.
(f) Adjustment of Exercise Rights . The Exercise Price or the number of shares of Underlying Common Stock to be received upon the exercise of this Warrant, or both, shall be subject to adjustment from time to time as hereinafter in this Section (f) provides.
The Exercise Price shall be adjusted from time to time as follows:
(i) In case the Company shall, at any time or from time to time while any of the Warrants are outstanding, (1) pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (2) subdivide or split its outstanding shares of Common Stock, or (3) combine its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior thereto shall be adjusted so that the holder of any Warrant thereafter surrendered for exercise shall be entitled to receive the number of shares of Common Stock or other securities of the Company which she would have owned or have been entitled to receive after the effectiveness of any of the events described above, had such Warrant been converted immediately prior to the effectiveness of such event. An adjustment made pursuant to this subdivision (i) shall become effective, in the case of a dividend, on the payment date retroactively to immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such dividend, and shall become effective in the case of a subdivision, split or combination immediately after the opening of business on the day following the day when such subdivision or combination, as the case may be, becomes effective.
(ii) In case the Company shall, at any time or from time to time while any of the Warrants are outstanding, issue Common Stock, convertible securities (convertible or exercisable into Common Stock) or debentures (except debentures issued simultaneously with the Warrants) to subscribe for or purchase shares of Common Stock at a price per share less than the Exercise Price then in effect at the record date mentioned below, the Exercise Price in effect immediately prior to the issuance of such Common Stock, convertible securities or debentures shall be adjusted as follows; provided, however, that if such issuance is in connection with the sale of such securities by the Company, such adjustment will be made only if the Warrant holder purchases her pro rata portion of the shares to be issued in such financing as provided in paragraph (vi) below. The Exercise Price shall be multiplied by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to such record date, plus the quotient determined by dividing the aggregate offering price of the total number of shares so offered by the Exercise Price, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective on the date of such issuance retroactively to immediately after the opening of business on the day following the record date for
the determination of shareholders entitled to receive such Common Stock, convertible securities or debentures.
(iii) In case the Company shall, at any time or from time to time while any of the Warrants are outstanding, distribute to all holders of shares of its Common Stock evidences of its indebtedness or securities or assets (excluding cash dividends), the Exercise Price in effect immediately prior to such distribution shall be adjusted by multiplying the Exercise Price by a fraction, of which the numerator shall be the Current Market Price per share of the Common Stock on the record date mentioned below less than the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness distributed applicable to one share of Common Stock, and of which the denominator shall be such Current Market Price per share of Common Stock. Such adjustment shall become effective on the date of such distribution retroactively to immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such distribution.
(iv) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price.
(v) The Current Market Price at any date shall mean the price per share of Common Stock on such date determined by the Board of Directors as provided below. The Current Market Price shall be the average of the daily closing prices per share of Common Stock for thirty (30) consecutive business days ending no more than fifteen (15) business days before the day in question (as adjusted for any stock dividend, split, combination or reclassification that took effect during such thirty (30) business day period). The closing price for each day shall be the last reported sales price regular way or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices regular way, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, the average of the highest bid and the lowest asked prices quoted on the NYSE AMEX Equities (AMEX). In the event that the Common Stock is not listed on a National Securities Exchange or traded on AMEX, but the shares are traded on the over-the-counter market, then the Current Market Price will mean the average of the last bid and asked prices for the Common Stock on the over-the-counter market. If the Common Stock is not traded in such manner that the quotations referred to above are available for the period required hereunder, the Current Market Price per share of Common Stock shall be deemed to be fair value as determined by the Board of Directors (whose determination shall be conclusive), irrespective of any accounting treatment.
(vi) (A) Notwithstanding the provisions of paragraph (ii) above, no future adjustments shall be made in the Exercise Price of any holder or transferee of such holder who does not purchase his or its pro rata portion of the shares to be issued in
future financings of the Company but only where the shares to be issued are offered so as to result in a reduction of the Exercise Price (a Non-Participating Holder).
(B) All of such Non-Participating Holders Warrants shall automatically and without further action on the part of such holder be converted into a like principal amount of a newly created series of warrants, which new warrants shall be identical in all respect to the Warrants, except that the Exercise Price of such series shall be fixed immediately prior to the subsequent financing and shall be subject to no further adjustments as provided herein. The Board of Directors shall take all necessary actions to designate such new series.
(g) Statement of Adjusted Exercise Price . Whenever the Exercise Price of Underlying Common Stock are adjusted pursuant to Section (f), the Company shall forthwith prepare a written statement signed by the President or the Treasurer of the Company setting forth such adjustment. Such statement shall be filed among the permanent records of the Company and shall be delivered to the Holder.
(h) Dissolution or Liquidation . In case the Company shall liquidate or wind up its affairs, the Holder of this Warrant shall be entitled, upon the exercise thereof, to receive, in lieu of the Underlying Common Stock of the Company which he would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to him upon any such dissolution, liquidations or winding up with respect to such shares of Common Stock of the Company, had he been the holder of record of such Underlying Common Stock on the record date for the determination of those entitled to receive any such liquidating distribution; provided, however, that all rights under this Warrant shall terminate on a date fixed by the Company, such date to be not earlier than the date of commencement of proceedings for dissolution, liquidation, or winding up and not later than 30 days after such commencement date, unless the Holder shall have, prior to such termination date, exercised this Warrant. Notice of such termination of rights under this Warrants shall be given to the last registered Holder hereof, as the same shall appear on the books of the Company, by mail at least 30 days prior to such termination date.
(i) Piggyback Registration Rights . The Company hereby grants to the Holder piggyback registration rights with respect to all or any portion of the shares of Underlying Common Stock which Holder shall have the right to acquire hereunder. In the event Company proposes to register any of its Common Stock or other securities under the Securities Act of 1933, as amended (the Act), in connection with the public offering of such securities, the Company shall, prior to the filing of any such registration, promptly give Holder written notice of such registration. Upon the written request of Holder given within ten (10) days after receipt of such notice by the Company, the Company shall cause to be registered under the Act any of the Underlying Common Stock that have then vested under this Warrant that Holder has requested to be registered. If Holder decides not to include all of its Underlying Common Stock in any registration statement filed by Company, Holder shall nevertheless continue to have the right to include any Underlying Common Stock that have then vested under this Warrant in any subsequent registration statement or registration
statements as may be filed by the Company with respect to the offering of its Common Stock or other securities under the Act, all upon the terms and conditions set forth herein.
In connection with any offering involving an underwriting of shares of the Companys Common Stock in which Holder makes a written request pursuant to the provisions of the preceding paragraph, the Company shall not be required to include any of Holders Underlying Common Stock in such underwriting unless Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as the underwriters determine in their sole reasonable discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Holders Underlying Common Stock, requested to be included in such registration exceeds the amount of securities that the underwriters determine in their sole reasonable discretion is compatible with the success of the offering, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first securities proposed by the Company to be sold for its own account, and (ii) second Underlying Common Stock of the Holder and securities of other selling security holders requested to be included in such registration pro-rata on the basis of the number of share of such securities so proposed to be sold and so requested to be included; provided, however, that the Holder shall have pro-rata rights of registration with all shares sought to be included by officers and directors of the Company as well as holders of ten percent (10%) or more of the Companys Common Stock.
(j) Notices . All notices, payments, requests and demands and other communications required or permitted under this Warrant shall be deemed to have been duly given, delivered and made if in writing and if served either by personal delivery to the party for whom it is intended or by being deposited postage prepaid, certified or registered mail, return receipt requested, to the address shown below or such other address as may be designated in writing hereafter by such party:
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AdCare Health Systems, Inc.
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Boyd P. Gentry
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(k) Governing Law . This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Ohio.
(l) Further Assurances . The parties agree to execute, acknowledge and deliver any and all such other documents and to take any and all such other actions as may, in the reasonable opinion of either of the parties hereto, be necessary or convenient to carry out more efficiently any or all of the purposes of this Warrant.
(m) Severability . Any provisions of this Warrant which shall be prohibited by law or otherwise held invalid shall be ineffective only to the extent of such prohibition or invalidity and shall not invalidate or otherwise render ineffective any or all of the remaining provisions of this Warrant.
(n) Parties in Interest; Assignment . This Warrant and the various rights and obligations arising hereunder shall be binding upon and shall inure to the benefit of the parties hereto and to each and all of their respective successors and assigns.
(o) Warrants Transferable . This Warrant and the rights granted to the Holder hereof are transferable, in whole or in part, upon execution and delivery of the Notice of Assignment attached hereto and surrender of this Warrant at the office of the Company. Upon receipt of the duly executed Notice of Assignment, the Company shall execute and deliver, in the name of the designated transferee or transferees, one or more new Warrants representing the right to purchase a like aggregate number of shares of Common Stock subject to the terms hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be signed by its President, attested by its Secretary as of the 31st day of March 2011.
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ADCARE HEALTH SYSTEMS, INC. |
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Gary Wade, President |
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/s/ Carol Groeber |
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Carol Groeber, Corporate Secretary |
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PURCHASE FORM
The undersigned, pursuant to the provisions of this Warrant hereby elects to purchase shares of Common Stock of AdCare Health Systems, Inc.
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NOTICE OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered Holder of the within Warrant hereby sells, assigns and transfers unto , whose address is all of the rights of the undersigned under the Warrant, with respect to shares of Common Stock (as defined therein) of AdCare Health Systems, Inc., and, if such shares of Common Stock shall not include all the shares of Common Stock issuable as provided in the Warrant, that a new Warrant of like tenor for the number of shares of Common Stock not being transferred hereunder be issued in the name of and delivered to the undersigned, and does hereby irrevocably constitute and appoint attorney to register such transfer on the books of AdCare Health Systems, Inc. maintained for that purpose, with full power of substitution in the premises.
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Exhibit 10.159
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this Agreement), dated as of June 1, 2010, is made and entered into by ADCARE HEALTH SYSTEMS, INC., an Ohio corporation (the Guarantor), to and for the benefit of BANK OF OKLAHOMA, N.A., as trustee under a Trust Indenture, dated as of June 1, 2010, the address of which is One Williams Center, Tulsa Oklahoma 74192 (together with its successors and assigns, the Trustee),
W I T N E S S E T H :
Background. Pursuant to a resolution adopted by The Medical Clinic Board of the City of Hoover (the Issuer) and the Trust Indenture reference above (the Indenture), the Issuer expects to issue its: (i) $5,845,000 The Medical Clinic Board of the City of Hoover First Mortgage Revenue Bonds (Riverchase Village, ADK, LLC Project) Series 2010A (the Series 2010A Bonds); and (ii) $520,000 The Medical Clinic Board of the City of Hoover First Mortgage Revenue Bonds (Riverchase Village, ADK, LLC Project) Series 2010B (Taxable) (the Series 2010B (Taxable) Bonds and, together with the Series 2010A Bonds, the Series 2010 Bonds).
The Issuer will use the proceeds from the sale of the Series 2010 Bonds to undertake a project (the Project) for the benefit of Riverchase Village, ADK, LLC, a Georgia limited liability company (the Lessee), consisting of: (i) the Issuers costs of the acquisition and rehabilitation of the 108-unit assisted living facility located at 1851 Data Drive, Hoover, Alabama 35244 (the Facility) (as more particularly described in the Security Agreement), (ii) providing deposits into certain of the funds and accounts established under the Indenture, including a deposit to the Debt Service Reserve Fund for the Series 2010 Bonds, and (iii) the payment of certain costs of issuance of the Bonds, such Project to be financed through the Issuer for the Lessee.
The Issuer will lease the Facility to the Lessee pursuant to a Lease Agreement, dated as of June 1, 2010 (the Lease Agreement). The Lessee will be required to make all of its payment obligations under the Lease Agreement (the Lease Payments) directly to the Trustee in such amounts as will enable the Trustee to pay, when due, the principal of, premium if any, and interest on, the Series 2010 Bonds and all other amounts, fees, penalties, premiums, adjustments, expenses, counsel fees and other payments due pursuant to the terms of the Indenture. The source of funds available to the Lessee to make the Lease Payments will be the revenues generated by the operation of the Facility (the Gross Revenues).
As security for the Series 2010 Bonds, the Issuer will, pursuant to a Mortgage and Security Agreement, dated as of June 1, 2010 (the Mortgage and Security Agreement), (i) grant the Trustee (subject to Permitted Encumbrances) a first lien on and security interest in all of the land, buildings and other improvements that constitute the Facility, and (ii) assign to the Trustee all of the Issuers rights under the Lease Agreement (except for certain Reserved Rights of the Issuer), but including all of its rights to collect and receive the Lease Payments thereunder. In addition, the Lessee will join in the Mortgage and Security Agreement to subject to the lien thereof,
and the security interest created thereby, all of its right, title and interest in and to the Facility, and in, to and under the Lease Agreement, and in and to the Gross Revenues and all of its other personal property now or hereafter located in the Facility.
In order to enhance the marketability of the Series 2010 Bonds, the underwriter of the Series 2010 Bonds (the Underwriter) has requested that the Guarantor execute and deliver this Agreement, and the Guarantor is willing to do so.
NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt of which is acknowledged by the Guarantor hereby, and as an inducement to the purchasers of the Series 2010 Bonds to purchase the same, the Guarantor, hereby agrees as follows:
Section 1. Representations and Warranties .
1.01. The Guarantor represents and warrants that the Guarantor has all requisite power and authority to execute and deliver this Agreement, that such execution and delivery has been duly authorized by or on behalf of the Guarantor, and that this Agreement constitutes the valid, binding and enforceable obligation of the Guarantor.
1.02. The Guarantor further represents and warrants that neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby nor the fulfillment of or compliance with the terms or conditions of this Agreement conflicts with or results in a breach of any of the terms, conditions or provisions of the Guarantors operating agreement, or any agreement or instrument to which the Guarantor is a party or by which the Guarantor or any of the Guarantors property is bound.
1.03. The Guarantor further represents and warrants that it is affiliated with the Lessee (in that (i) it has an option to purchase the membership interests in the Lessee for significantly less than fair market value, and (ii) it is the Management Company, under the Lease Agreement, of the Facility through its wholly owned subsidiary, Adcare Management Company, Inc., an Ohio corporation), and that the sale of the Series 2010 Bonds and the execution and delivery of this Agreement will result in direct and material financial benefits to the Guarantor.
Section 2. Covenants and Guaranties .
2.01. The Guarantor hereby absolutely and unconditionally guarantees to the Trustee, for the benefit of the holders of the Series 2010 Bonds, all of the obligations of the Lessee under the Lease Agreement, including specifically, but without limitation, the obligation to make payments from time to time to the Trustee in amounts sufficient for the Trustee to pay, as and when due, all principal of, premium if any, and interest on, the Series 2010 Bonds. The Guarantor hereby further absolutely and unconditionally guarantees to the Trustee that if, on or at any time after the fifteenth (15th) day next preceding that date on which a payment on account of the
principal of or interest on the Series 2010 Bonds shall be due and payable (each such payment being herein called a Bond Payment, and the date on which the same shall be due and payable being herein called a Bond Payment Date), the Trustee shall notify the Guarantor (i) that there are insufficient funds in the Interest Account of the Bond Fund for the Series 2010 Bonds, or the Principal Account of the Bond Fund for the Series 2010 Bonds, as the case may be (both established under the Indenture), to make such Bond Payment, and (ii) the amount of such insufficiency (the Bond Payment Shortfall), the Guarantor will, no later than the fifth (5th) day next preceding the Bond Payment Date referenced in the aforesaid notification, pay over, or cause to be paid over, to the Trustee, in immediately available funds, for deposit into the aforesaid Interest Account for the Series 2010 Bonds, or the aforesaid Principal Account for the Series 2010 Bonds, as the case may be, monies equal to the Bond Payment Shortfall.
2.02. The Guarantor agrees that payments required of it by the provisions of Paragraph 2.01 hereof shall be made prior to any withdrawal by the Trustee of funds now or hereafter on deposit in any debt service reserve fund for the Series 2010 Bonds that has been established, or hereafter may be established, under the Indenture.
2.03. The Guarantor further agrees with the Trustee that the Guarantor will pay all expenses and charges (including court costs and reasonable attorneys fees) paid or incurred by the Trustee in enforcing the obligations of the Guarantor under this Agreement, whether the same shall be enforced by suit or otherwise.
2.04. The obligations of the Guarantor under this Agreement shall be joint and several, continuing, absolute and unconditional, and shall not be affected, modified or impaired upon the happening from time to time of any event, including, without limitation, any of the following, whether or not with notice to or the consent of the Guarantor:
(a) The compromise, settlement, release or termination of any of the obligations, covenants or agreements of the Issuer, the Trustee, the Lessee, the Guarantor, or the Underwriter (collectively, the Transaction Parties) under this Agreement or any of the documents relating to the Series 2010 Bonds (collectively, the Transaction Documents);
(b) The failure to give notice to the Guarantor of the occurrence of a default under the terms and provisions of this Agreement or any of the other Transaction Documents, except as specifically provided in this Agreement;
(c) The surrender or impairment of any collateral held by any Transaction Party for any obligation guaranteed hereby, or for the Series 2010 Bonds;
(d) The waiver of the payment, performance or observance by any Transaction Party of any of its obligations, covenants or agreements contained in any of the Transaction Documents;
(e) The extension of the time for payment of any amount owing or payable under any of the Transaction Documents, or of the time for performance of any other obligation, covenant or agreement under or arising out of any of the Transaction Documents, or the
extension or the renewal of any thereof;
(f) The modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in any of the Transaction Documents;
(g) Any failure, omission, delay or lack on the part of any Transaction Party to enforce, assert or exercise any right, power or remedy conferred with respect to any other Transaction Party by any of the Transaction Documents;
(h) The voluntary or involuntary liquidation, dissolution, partition, sale or other disposition of all or substantially all of the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment of, or other similar proceedings affecting, any Transaction Party, or any of the assets of any of them, or any allegation or contest of the validity of this Agreement or any of the other Transaction Documents in any proceeding; or
(i) The invalidity, irregularity, illegality or unenforceability or any defect in (i) any of the Transaction Documents or (ii) any collateral security for any obligation contained therein.
2.05. No set-off, counterclaims, reductions, or diminution of obligation, or any defense of any kind or nature which the Guarantor has or may have against any other Transaction Party shall affect, modify or impair the Guarantors obligations hereunder. Nothing in this Agreement shall be interpreted or construed as a waiver by the Guarantor of any rights or claims the Guarantor may have against any other Transaction Party, or any third party under this Agreement or otherwise, but any recovery upon such rights and claims shall be had from such persons by virtue of the Guarantors independent action, it being the intent of this Agreement that the Guarantor shall be unconditionally and absolutely obligated to perform fully all of its obligations, agreements and covenants under this Agreement without set-off.
2.06. If the Guarantor shall fail to make any payment required of it hereunder, the Trustee, in its sole discretion, shall have the right to proceed first and directly against the Guarantor under this Agreement without being required to proceed against or exhaust any other remedies which it may have and without resorting to any other security then held by it.
2.07. Upon any payment by the Guarantor pursuant to Paragraph 2.01 hereof, the Guarantor shall be subrogated to the Trustee in respect of, and shall be deemed an assignee of, the Trustees right (and all remedies in respect of such right) to commence proceedings against the Lessee to collect the amount of the Bond Payment Shortfall (together with interest thereon at the per annum rate of eleven percent (11%)) that relates to such payment made by the Guarantor, but such commencement and collection of any such amount by the Guarantor shall be subject to the provisions of Paragraph 2.08 hereof.
2.08. The repayment to the Guarantor of any amounts paid by it pursuant to the provisions of this Agreement is, and at all times and in all events and circumstances shall be, subject, junior and subordinate to the prior payment in full of all principal and premium (if any) of,
and interest on, the Series 2010 Bonds. The Guarantor may not commence proceedings against the Lessee or the Facility to collect any amounts owed it pursuant to the provisions of Paragraph 2.07 hereof until (i) the entire principal amount of the Series 2010 Bonds, together with all interest accrued thereon and premium, if any, payable in connection therewith, shall have been paid in full, or (ii) the Trustee shall have commenced proceeding against the Lessee or the Facility to collect any such principal, interest or premium, whichever shall first occur. For the purposes of this Agreement all references to the principal amount of the Series 2010 Bonds and other phrases of similar import shall mean and include not only the Series 2010 Bonds themselves, but all other indebtedness, if any, incurred to refund, repay or otherwise replace any of the Series 2010 Bonds.
2.09. The Guarantor hereby expressly waives notice in writing, or otherwise, from the Trustee of its acceptance and reliance on this Agreement.
2.10. This Agreement is entered into by the Guarantor for the benefit of the Trustee (as trustee for the holders of the Series 2010 Bonds), and its successors and assigns, and the Trustee shall be entitled to enforce performance and observance of this Agreement and of the guaranty and other provisions herein contained to the same extent as if it was a signatory hereto.
2.11. The terms of this Agreement may be enforced as to any one or more breaches either separately or cumulatively.
Section 3. Extent of Liability; Suspension; Termination .
3.01. The obligations of the Guarantor hereunder shall be with full recourse against the Guarantor, and the maximum liability of the Guarantor hereunder shall equal the aggregate of: (a) the sum of (i) the unpaid principal amount of the Series 2010 Bonds, plus (ii) all premium, if any, payable in respect of such principal amount, plus (iii) all interest accrued or to accrue, from time to time, in respect of such principal amount; plus (b) all amounts for which the Guarantor may become obligated pursuant to the provisions of Paragraph 2.03 hereof.
3.02. At such time as there no longer shall be outstanding any principal amount of the Series 2010 Bonds, nor premium payable in respect thereof, nor any interest accrued thereon, and thereafter a period of one full year shall have passed without any proceeding under the Bankruptcy Code or any law of the United States or of any state relating to insolvency, receivership, or debt adjustment, having been instituted by or against the Lessee or the Guarantor, this Agreement shall terminate, and the Guarantor shall have no further liability hereunder.
Section 4. Amendments, Remedies .
4.01. No amendment, change, modification, alteration or termination of any of the Transaction Documents shall be made which would in any way increase the burden of the Guarantors obligations under this Agreement without obtaining the prior written consent of the Guarantor.
4.02. Without the prior written consent of the Underwriter, which may not be unreasonably withheld, the Guarantor may not assign any of his, her or its obligations hereunder to any other person or entity. Each of the Trustee and the Underwriter may assign its rights and obligations hereunder to any successor in interest.
4.03. No remedy herein conferred upon or reserved to the Trustee hereunder or under any applicable law is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. If any provision contained in this Agreement should be breached by any party and thereafter duly waived by the other party so empowered to act, such waiver shall be limited to the particular breach so waived at that particular time, and shall not be deemed to waive such breach at any other time or any other breach hereunder at any time. No amendment, release or modification of this Agreement shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by the parties thereunto duly authorized by this Agreement.
Section 5. Miscellaneous .
5.01. This Agreement and the rights and obligations of the parties hereto (including third party beneficiaries) shall be governed, construed and interpreted according to the laws of the State of Georgia, other than its rules regarding the choice of law.
5.02. This Agreement constitutes the entire agreement of the Transaction Parties with regard to the subject matter hereof, and this Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
5.03. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any Constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever.
5.04. This Agreement may be amended only by a written agreement signed by the Trustee and the Guarantor.
5.05. References herein to attorneys fees shall be deemed to include attorneys fees through all proceedings, including, but not limited to, negotiations, administrative hearings, trials, and appeals.
5.06. All notices or other communications to be given under this Agreement shall be in writing, shall be sent by certified mail, postage pre-paid and return receipt requested, to the applicable address set forth in the heading of this Agreement (or to any other address as the Guarantor, the Trustee or the Underwriter may, from time to time, elect by the giving of such notice), and shall be deemed given when delivered to such address.
lN WITNESS WHEREOF, the Guarantor has executed this Agreement as of the date and year first above written.
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ADCARE HEALTH SYSTEMS, INC. |
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By: |
/s/ Scott Cunningham |
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Chief Financial Officer and Treasurer |
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Exhibit 10.160
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this Agreement), dated as of the 15 day of September, 2011 (the Effective Date), is made by and between JRT Group Properties, LLC, a Georgia limited liability company (Seller) and AdCare Hembree Road Property, LLC, a Georgia limited liability company (Purchaser).
W I T N E S S E T H :
WHEREAS, Seller owns that certain parcel of real property located at 1145 Hembree Road, Roswell, Fulton County, Georgia 30076, being Units 110, 120, 130, 140, 210, 220, 230 and 240 of Building 1145 of the Offices at Hembree, a condominium, as more particularly described on Exhibit A attached hereto and incorporated herein by reference (the Real Property) and all personal property located on and used in connection with the Real Property except for the personal property identified on Exhibit B (the Personal Property) (hereinafter, the Real Property and the Personal Property are collectively referred to as the Property);
WHEREAS, Seller wishes to sell and Purchaser wishes to purchase the Property subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Purchase . Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, the Property, pursuant to the terms and conditions hereinafter set forth.
SECTION 2. Purchase Price . The purchase price for the Property shall be the sum of the following: (i) all outstanding indebtedness as of the Closing Date, which is secured by a first priority deed to secure debt on the Real Property and (ii) all unpaid and past due real and personal property taxes on the Property as of the Closing Date, to be paid in immediately available funds at Closing.
SECTION 3. [Intentionally Omitted].
SECTION 4. Sellers Covenants, Representations and Warranties.
(A) As a material inducement to Purchaser to enter into this Agreement and to pay the Purchase Price for the Property as set forth herein, Seller hereby covenants, warrants and represents to Purchaser as follows:
(i) Seller is authorized to enter into and perform all its obligations under this Agreement. This Agreement is, and all documents to be executed by Seller pursuant hereto will be, the valid and binding obligations of Seller enforceable in accordance with their respective terms.
(ii) The Seller is not a party to any litigation or administrative proceedings nor, is Seller aware of a threat of any litigation or administrative proceedings, which could affect the Property or Sellers right to enter into this Agreement or to consummate the transactions contemplated by this Agreement. The Seller is not subject to any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental department, agency, board, bureau or instrumentality issued or entered in a proceeding to which the Seller is or was a party which is binding upon Seller.
(iii) The Property is not subject to any lease, tenancy or other arrangement and from the date hereof to the Closing Date, no lease, tenancy, or other arrangement applicable to the Property, will be entered into by Seller without the prior written approval of Purchaser.
(iv) The Property shall, on the Closing Date, be in the same condition as it was on the date of Purchasers execution of this Agreement, normal wear excepted. Immediately prior to Closing (as hereinafter defined) Seller will have good and marketable fee simple title to the Property.
(v) All documents required by this Agreement to be delivered by Seller to Purchaser are and will be true, correct and complete in all material respects and contain no material omissions that make such documents false or misleading.
(vi) To the best of Sellers knowledge and belief, without actual examination or review having been made, that (a) the Property is in compliance with all applicable zoning and building laws, ordinances and regulations and (b) the Property has all necessary legal rights, utility service, and access to a public street.
(vii) Except for encumbrances described in the Title Commitment, Seller holds good and marketable title to the Property, free and clear of restrictions on or conditions to transfer or assignment, and free and clear of liens, pledges, charges, or encumbrances.
(viii) There is no litigation, proceeding, or governmental investigation pending or threatened in eminent domain, for rezoning or otherwise against Seller that relates to or affects the Property.
(ix) During the time in which Seller has owned the Property, Seller has not used, generated, transported, treated, constructed, deposited, stored, disposed, placed or located at, on, under or from the Property any flammable explosives, radioactive materials, hazardous or toxic substances, materials or wastes, pollutants or contaminants defined, listed or regulated by any local, state or federal environmental laws.
(x) Seller is not a foreign person for purposes of § 1455 of the Internal Revenue Code.
(B) All of the foregoing representations and warranties shall be applicable, true, correct and complete, both as of the date hereof and as of the Closing Date, and Seller shall, as stated in Section 11(B) of this Agreement, certify in writing at Closing that each and all of said representations and warranties are true, correct and complete as of and with respect to that date.
(C) Notwithstanding anything else to the contrary herein, the parties acknowledge and agree that the improvements on the property are being purchased as-is with no representations or warranties regarding their condition(s).
SECTION 5. Purchasers Covenants, Representations and Warranties .
(A) As a material inducement to Seller to enter into this Agreement and to sell the Property to Purchaser as set forth herein, Purchaser hereby covenants, warrants and represents to Seller as follows:
(i) The Purchaser is a Georgia limited liability company and has full power and authority to carry on its business as now being conducted and to enter into and perform all its obligations under the Agreement. This Agreement and all documents to be executed by Purchaser pursuant hereto will be the valid and binding obligations of Purchaser enforceable with their respective terms. All action required by law and by any agreement, arrangement or document to authorize the execution and delivery of this Agreement by Purchaser and the consummation of the transactions contemplated hereby has been or will be taken and the execution and delivery of this Agreement or the consummation of any of the transactions contemplated herein shall not violate or conflict with any provisions of any lease, mortgage, note or any other agreement or arrangement to or of which Purchaser is subject.
(ii) The Purchaser is not a party to any litigation nor is Purchaser aware of a threat of any litigation that would affect Purchasers right to enter into this Agreement or to consummate the transaction contemplated by this Agreement.
(B) All of the foregoing representations and warranties shall be applicable, true, correct and complete, both as of the date hereof and as of the Closing Date, and Purchaser shall, as stated in Section 12(B) of this Agreement, certify in writing at Closing that each and all of said representations and warranties are true, correct and complete as of and with respect to that date.
SECTION 6. Condition of Title and Survey .
(A) The Property shall be conveyed to Purchaser by Limited Warranty Deed to be delivered to Purchaser at Closing, free and clear of all liens and encumbrances, except those caused by or on behalf of Purchaser and except that the Property may be subject to the lien for taxes for the current year, if not yet due and payable, and other matters of record acceptable to Purchaser in its sole discretion. Purchaser shall have the option to obtain a title insurance commitment for a title insurance policy on behalf of a title company acceptable to Purchaser (the Title Commitment). Should the Title
Commitment disclose exceptions to title unacceptable to Purchaser, other than liens and encumbrances which Seller shall cause to be released at Closing and the lien for current year taxes, Purchaser shall so notify Seller in writing at least 10 days before Closing and Seller shall be given a reasonable time in which to correct any such exceptions. If Seller fails to correct such exceptions within such time period, Purchaser may elect, as its sole remedy, to either (i) grant Seller additional time within which to cure any exception, if Seller requests such additional time; or (ii) accept title in its existing condition; or (iii) terminate this Agreement and have returned to Purchaser all Earnest Money.
(B) Prior to Closing, Purchaser may obtain a current survey of the Property prepared and certified by a surveyor registered and licensed in the State of Georgia (the Survey). The Survey shall certify as to any flood plain restrictions affecting the Property and shall identify and locate all easements or encroachments which traverse or affect the Property and shall set forth the location, availability and, where appropriate, dimensions or diameters of all utilities servicing the land, including, without limitation, water, sewer, electric and telephone. The legal description for documents necessary or appropriate to consummate the purchase or sale contemplated herein shall be based upon the Survey, as revised if applicable. The Survey shall be sufficient to enable the title insurer to delete the general exception relating to survey matters.
(C) Prior to Closing, Purchase may obtain an environmental assessment of the Property (the Environmental Report). Should the Environmental Report disclose environmental conditions unacceptable to Purchaser, Purchaser shall so notify Seller in writing before Closing and Seller shall be given a reasonable time in which to correct any such conditions. If Seller fails to correct such conditions within such time period, Purchaser may elect, as its sole remedy, to either (i) grant Seller additional time within which to cure any condition, if Seller requests such additional time; or (ii) accept the Property in its existing condition; or (iii) terminate this Agreement and have returned to Purchaser all Earnest Money.
SECTION 7. Closing Costs . Purchaser shall pay for all closing costs including, without limitation, the cost of any title examination, the Title Commitment and title insurance premium, the Survey, the Environmental Report, the transfer taxes required for the transfer of the Real Property to Purchaser and all recording fees.
SECTION 8. [Intentionally Omitted.]
SECTION 9. Date of Closing . The Purchaser shall close the transaction contemplated herein (the Closing) on or before October 31, 2011; the exact time and date of which to be determined by Purchaser (the Closing Date) at the offices of Purchasers counsel in Atlanta Georgia. The above date may be further extended as may be agreed to in writing by the parties.
SECTION 10. Waivers . The waiver by any party of any breach by the other of any term, covenant or condition herein contained shall not be deemed to be a waiver of any other condition or of any subsequent breach of the same or of any other term, covenant or condition herein contained. No delay or omission in the exercise of any right or remedy accruing to any party as a result of a breach by the other party under this Agreement shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring.
SECTION 11. Conditions Precedent to Obligations of Purchaser . The obligations of Purchaser under this Agreement are subject to, and shall be conditioned upon, the satisfaction (or the waiver in writing by Purchaser) prior to the Closing of each of the following conditions:
(A) Compliance by Seller and Representations Correct . All of the covenants and obligations of this Agreement to be complied with and performed by Seller at or before the Closing shall have been complied with and performed, and the representations and warranties made by Seller in this Agreement shall be true and correct (i) on and as of the date of this Agreement, and (ii) on and as of the Closing, with the same force and effect as though such representations and warranties had been made on and as of the Closing.
(B) Certificate . Seller shall have delivered to Purchaser a certificate, dated the Closing Date, certifying to the fulfillment of the conditions set forth in subparagraph (A) above.
(C) No Legal Action . No action, suit, investigation, other proceeding or claim shall have been threatened or instituted before any court or before or by any government or governmental agency or instrumentality either (i) to impose any restriction, limitations or conditions with respect to the transactions contemplated by this Agreement, or (ii) to obtain damages or other relief in connection with such transactions. No action, suit, investigation, or other proceeding or claim against Seller shall have been instituted before any court or before or by any government or governmental agency or instrumentality, domestic or foreign which might adversely affect the Property or the Facility.
(D) Approval . Purchasers Board of Directors or Executive Committee shall have approved the transactions contemplated hereunder,
(E) Additional Documents . Seller shall have furnished such other duly executed documents as may be required, in the reasonable opinion of Purchaser, (i) to evidence the accuracy of Sellers representations and warranties and (ii) to perfect or evidence the performance of the covenants and agreements made and to be performed by Seller and the compliance by Seller with all conditions to be satisfied by Seller.
SECTION 12. Conditions Precedent To Obligations of Seller . The obligations of Seller under this Agreement are subject to, and shall be conditioned upon the satisfaction (or the waiver in writing by Seller) prior to the Closing of each of the following conditions:
(A) Compliance by Purchaser and Representations Correct . All of the covenants and obligations of this Agreement to be complied with and performed by Purchaser at or before the Closing shall have been complied with and performed, and the representations and warranties made by Purchaser in this Agreement, shall be correct (a) on and as of the date of this Agreement, and (b) on and as of the Closing, with the same force and effect as though such representations and warranties had been made on and as of the Closing.
(B) Certificate . Purchaser shall have delivered to Seller a certificate, dated the Closing Date, duly executed by Purchaser, certifying to the fulfillment of the conditions set forth in subparagraph (A) above.
(C) No Legal Action . No action, suit, investigation, other proceeding or claim shall have been threatened or instituted before any court or before or by any government or governmental agency or instrumentality either (1) to impose any restrictions, limitations or conditions with respect to the transaction contemplated by this Agreement or (2) to obtain damages or other relief in connection with such transactions. No action, suit, investigation or other proceeding or claim against Purchaser shall have been instituted before any court or before or by any government or governmental agency or instrumentality, domestic or foreign, which might adversely affect the Property or the Facility.
(D) Additional Documents . Purchaser shall have furnished Seller with such other duly executed documents as may be required, in the reasonable opinion of Seller (i) to evidence the accuracy of Purchasers representations and warranties and (ii) to perfect or evidence the performance of the covenants and agreements made and to be performed by Purchaser and the compliance by Purchaser with all conditions to be satisfied by Purchaser.
SECTION 13. Deliveries at Closing . At Closing, Seller shall deliver to Purchaser, in consideration of payment to Seller of the Purchase Price, the following:
(A) Limited Warranty Deed conveying the Real Property.
(B) Bill of Sale conveying Personal Property.
SECTION 14. Assignment . Neither party may assign any of its right, title, or interest in and to this Agreement without the written consent of the other party.
SECTION 15. Commissions and Fees . Purchaser hereby represents and warrants to Seller that it has not dealt with any real estate agent, broker or finder in connection with this transaction and agrees to indemnify Seller for all damages, costs and liability that may result from breach of this warranty and representation. Seller hereby represents and warrants to Purchaser that, Seller has not dealt with any real estate agent, broker or finder in connection with this transaction and agrees to indemnify Purchaser for all damages, costs and liability that may result from breach of this warranty and representation.
SECTION 16. Condemnation . Seller represents that it has received no notice of any condemnation proceedings against the whole or any part of the Property. If prior to the Closing Date, all or a substantial portion of either the Property shall be condemned or taken by eminent domain by any competent authority for any public or quasi-public use or purpose, then, in such event, Purchaser shall have the option to terminate this Agreement or close the transactions herein provided for. If Purchaser shall elect pursuant to such option to terminate this Agreement, this Agreement shall be null and void and the Earnest Money shall be returned to Purchaser, If, however, Purchaser shall elect to close this transaction, then there shall be an abatement in the Purchase Price equal to the amount of proceeds of any condemnation award allowed.
SECTION 17. Default . If either party defaults under this Agreement, the other party shall have all rights or remedies permitted in law or at equity. Before a party may declare a default hereunder, it shall give written notice to the other party specifying the failure of the other
party under this Agreement and the other party shall have ten (10) days from the receipt of such notice to cure such default.
SECTION. 18. Notices . All notices provided for herein shall be made either by certified or registered mail and deposited in the U.S. Mail, postage prepaid, or by overnight delivery service, to the following addresses:
Any notices sent as provided herein shall be deemed delivered when actually received.
SECTION 19. Miscellaneous .
(A) This Agreement sets forth all promises, agreements, conditions, inducements and understanding between and among the parties and there are no promises, agreements, conditions, inducements, warranties, representations, oral or written, express or implied, between them, other than as herein set forth. This Agreement shall not be modified or amended in any manner except by an instrument in writing executed by the parties.
(B) The headings contained in this Agreement are for convenience and reference only, and in no way modify, interpret or construe the meaning of the parties.
(C) All terms, agreements, covenants, conditions, representations, warranties and provisions herein made shall survive the Closing.
(D) This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but such counterparts shall together constitute hut one and the same instrument.
(E) This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia. If any provision of this Agreement is determined to be illegal or unenforceable, such determination shall not affect the remaining terms of this Agreement. If litigation is instituted based upon this Agreement, the prevailing party shall be entitled to recover all expenses, including reasonable attorney fees.
(F) Each of the parties shall execute such other documents as may be reasonably necessary to carry out the intent as well as comply with the provisions of this Agreement.
(G) Subject to Section 14, this Agreement shall be binding upon and inure to the benefit of the respective parties and their heirs, executors, personal representatives, successors and assigns.
[Signatures on Next Page]
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first set forth.
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PURCHASER: |
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ADCARE HEMBREE ROAD PROPERTY, LLC, |
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a Georgia limited liability company |
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By: |
/s/ Boyd P. Gentry |
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Boyd P. Gentry, Manager |
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SELLER: |
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JRT GROUP PROPERTIES, LLC,
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By: |
/s/ Rob Lancaster |
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Name: |
Rob Lancaster |
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Title: |
Member |
Exhibit 10.161
FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT (this Amendment), dated as of the 31 st day of October, 2011 (the Effective Date), is made by and between JRT Group Properties, LLC, a Georgia limited liability company (Seller) and AdCare Hembree Road Property, LLC, a Georgia limited liability company (Purchaser).
W I T N E S S E T H :
WHEREAS, Seller and Purchaser are parties to that certain Purchase Agreement dated September 15, 2011, with respect to that certain parcel of real property located at 1145 Hembree Road, Roswell, Fulton County, Georgia 30076, and certain personal property, as more particularly described in the Agreement (the Property); and
WHEREAS, the parties desire to amend the Agreement to extend the Closing Date on the terms and conditions hereinafter set forth.
NOW, THEREFORE , in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Sellers and Purchaser, intending to be legally bound, hereby agree as follows:
1. Recitals; Terms . The foregoing recitals are true and correct and incorporated into this Amendment as if fully set forth herein. Capitalized but undefined terms used in this Amendment shall have the meanings set forth in the Purchase Agreement.
2. Closing Date . The parties hereby agree that the Closing Date under the Agreement shall be extended to on or before March 31, 2012.
IN WITNESS WHEREOF , the parties have executed this Amendment effective as of the date first set forth.
PURCHASER : |
SELLER : |
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ADCARE HEMBREE ROAD PROPERTY, LLC, |
JRT GROUP PROPERTIES, LLC, |
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a Georgia limited liability company |
a Georgia limited liability company |
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By: |
/s/ Boyd Gentry |
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By: |
/s/ Robert Lancaster |
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Boyd P. Gentry, Manager |
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Robert Lancaster, Member |
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Exhibit 21.1
Subsidiaries of the Registrant
Entity |
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Jurisdiction of Organization |
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AdCare Acquisition, Inc. |
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Ohio |
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AdCare Administrative Services, LLC |
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Georgia |
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AdCare Consulting, LLC |
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Georgia |
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AdCare Employee Leasing, LLC |
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Georgia |
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AdCare Financial Management, LLC |
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Georgia |
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AdCare Management Company, Inc. |
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Ohio |
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AdCare Oklahoma Management, LLC |
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Georgia |
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AdCare Operations, LLC |
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Georgia |
Entity |
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Jurisdiction of Organization |
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AdCare Property Holdings, LLC |
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Ohio |
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ADK Administrative Property, LLC |
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Georgia |
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ADK Bonterra/Parkview, LLC |
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Georgia |
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ADK Georgia, LLC |
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Georgia |
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ADK Hembree Road Property, LLC |
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Georgia |
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ADK Jeffersonville Operator, LLC |
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Georgia |
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ADK LaGrange Operator, LLC |
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Georgia |
Entity |
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Jurisdiction of Organization |
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ADK Lumber City Operator, LLC |
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Georgia |
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ADK Oceanside Operator, LLC |
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Georgia |
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ADK Powder Springs Operator, LLC |
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Georgia |
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ADK Savannah Beach Operator, LLC |
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Georgia |
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ADK Thomasville Operator, LLC |
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Georgia |
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ADK Thunderbolt Operator, LLC |
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Georgia |
Entity |
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Jurisdiction of Organization |
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Arkansas ADK, LLC |
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Georgia |
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Assured Health Care, Inc. |
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Ohio |
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Attalla Nursing ADK, LLC |
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Georgia |
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Benton Nursing, LLC |
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Georgia |
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Benton Property Holdings, LLC |
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Georgia |
Entity |
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Jurisdiction of Organization |
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Communitys Hearth & Home. Ltd. |
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Ohio |
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Coosa Nursing ADK, LLC |
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Georgia |
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CP Nursing, LLC |
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Georgia |
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CP Property Holdings, LLC |
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Georgia |
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Eaglewood Property Holdings, LLC |
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Georgia |
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Eaglewood Village, LLC |
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Georgia |
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Erin Nursing, LLC |
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Georgia |
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Erin Property Holdings, LLC |
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Georgia |
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Hearth & Care of Greenfield, LLC |
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Ohio |
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Hearth & Home of Ohio, Inc. |
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Ohio |
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Hearth & Home of Urbana, LLC |
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Ohio |
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Hearth & Home of Van Wert, LLC |
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Ohio |
Entity |
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Jurisdiction of Organization |
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Hearth & Home of Vandalia, Inc. |
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Ohio |
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Home Office Property Holdings, LLC |
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Georgia |
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Homestead Nursing, LLC |
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Georgia |
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Homestead Property Holdings, LLC |
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Georgia |
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Mountain Top ALF, LLC |
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Georgia |
Entity |
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Jurisdiction of Organization |
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Mountain Top Property Holdings, LLC |
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Georgia |
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Mountain Trace Nursing ADK, LLC |
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Ohio |
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Mountain View Nursing, LLC |
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Georgia |
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Mt. V Property Holdings, LLC |
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Georgia |
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Mt. Kenn Nursing, LLC |
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Georgia |
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Mt. Kenn Property Holdings, LLC |
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Georgia |
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New Lincoln Ltd. |
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Ohio |
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Park Heritage Nursing, LLC |
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Georgia |
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Park Heritage Property Holdings, LLC |
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Georgia |
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Pavilion Care Center, LLC, The |
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Ohio |
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Rose Missouri Nursing, LLC |
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Georgia |
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Valley River Nursing, LLC |
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Georgia |
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Valley River Property Holdings, LLC |
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Georgia |
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West Toledo Management, Inc. |
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Ohio |
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Woodland Manor Nursing, LLC |
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Georgia |
CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements (File No.'s 333-131542, 333-166488, 333-171184, 333-177531 and 333-175541) of AdCare Health Systems, Inc. of our report dated March 19, 2012, relating to the consolidated financial statements which appears in this Form 10-K.
/s/ BATTELLE & BATTELLE LLP
Dayton,
Ohio
March 19, 2012
I, Boyd P. Gentry, certify that:
Date: March 19, 2012 | By |
/s/ BOYD P. GENTRY
Chief Executive Officer |
I, Martin D. Brew, certify that:
Date: March 19, 2012 | By |
/s/ MARTIN D. BREW
Chief Financial Officer |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AdCare Health Systems, Inc. (the "Company") on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission (the "Report"), I, Boyd P. Gentry, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as added by § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: March 19, 2012 | By: |
/s/ BOYD P. GENTRY
Boyd P. Gentry, Chief Executive Officer |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AdCare Health Systems, Inc. (the "Company") on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission (the "Report"), I, Martin D. Brew, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as added by § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: March 19, 2012 | By: |
/s/ MARTIN D. BREW
Martin D. Brew, Chief Financial Officer |