Exhibit 10.12

 

Execution Version

 

FIRST AMENDMENT TO SECURED LOAN AGREEMENT

AND PAYMENT GUARANTY

 

This FIRST AMENDMENT TO SECURED LOAN AGREEMENT AND PAYMENT GUARANTY (this
“Amendment”), made this 31st day of May, 2013, by and among WOODLAND HILLS HC
PROPERTY HOLDINGS, LLC, NORTHRIDGE HC&R PROPERTY HOLDINGS, LLC, APH&R PROPERTY
HOLDINGS, LLC, WOODLAND HILLS HC NURSING, LLC, NORTHRIDGE HC&R NURSING, LLC, and
APH&R NURSING, LLC, each a Georgia limited liability company (each a “Borrower,”
and together, the “Borrowers”), ADCARE HEALTH SYSTEMS, INC., an Ohio
corporation, ADCARE PROPERTY HOLDINGS, LLC, an Ohio limited liability company,
and ADCARE OPERATIONS, LLC, a Georgia limited liability company (each a
“Guarantor”, and together, the “Guarantors”), and KEYBANK NATIONAL ASSOCIATION,
a national banking association, its successors and assigns (“Lender”).

 

W I T N E S S E T H:

 

WHEREAS, Borrowers entered into that certain Secured Loan Agreement dated as of
December 28, 2012 (the “Loan Agreement”), pursuant to which Lender made a
$16,500,000 term loan to Borrowers (the “Loan”); and

 

WHEREAS, all capitalized terms used herein have the meanings ascribed thereto in
the Loan Agreement unless otherwise provided herein; and

 

WHEREAS, the Obligations of Borrowers are guaranteed by the Guarantors pursuant
to the Guaranties; and

 

WHEREAS, Loan Parties have requested that certain terms of the Loan Agreement
and the Parent Guaranty be modified and amended as hereinafter set forth; and

 

WHEREAS, Lender has agreed to such modifications and amendments as set forth
herein, subject to the terms and conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this
Amendment hereby agree as follows:

 

1.                                      Amendments to §2.1 of the Loan
Agreement.  Section 2.1 of the Loan Agreement, Defined Terms, is hereby modified
and amended as follows:

 

(a)         the existing definition of “Projects” is deleted in its entirety and
the following new definition is substituted in lieu thereof:

 

“Projects.  The Abington Project, the Northridge Project and the Woodland Hills
Project.  The term “Project,” as used herein, shall mean any of the Projects.”

 

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(b)         the following new definitions are inserted in their appropriate
alphabetical order:

 

AdCare Administrative Services:  AdCare Administrative Services, LLC, a Georgia
limited liability company.

 

AdCare Consulting:  AdCare Consulting, LLC, a Georgia limited liability company.

 

CHP:  CHP Acquisition Company LLC, an Ohio limited liability company.

 

CHP Note:  Secured Promissory Note dated December 28, 2012, made by CHP and
payable to Parent in the original principal amount of $3,600,000.00, as amended
by Amendment to Secured Promissory Note dated as of February 28, 2013.

 

CHP Note Collateral:  One hundred percent (100%) of the ownership interest in
H&H of Vandalia LLC, an Ohio limited liability company, which was pledged to
secure the CHP Note pursuant to a Pledge and Security Agreement dated December
28, 2012 from CHP in favor of Parent.

 

First Amendment:  First Amendment to Secured Loan Agreement and Payment Guaranty
dated May 31, 2013 by and among the Borrowers, the Guarantors and Lender.

 

First Amendment Effective Date:  The date on which the conditions to
effectiveness of the First Amendment, as described in Paragraph 12 of the First
Amendment, are satisfied.  The First Amendment Effective Date shall be not later
than May 31, 2013.

 

Mountain Top Property Holdings:  Mountain Top Property Holdings, LLC, a Georgia
limited liability company, and the owner of the Stone County Property.

 

Note Pledge Agreement:  Pledge and Security Agreement from Parent in favor of
Lender pledging and granting to Lender a first priority security interest in and
to the CHP Note and the CHP Note Collateral.

 

Special Collateral Account:  As such term is defined in Section 9.5.

 

Stone County Indemnity:  Indemnity Agreement Regarding Hazardous Materials from
Mountain Top Property Holdings in favor of Lender with respect to the Stone
County Property.

 

Stone County Lease:  Facility Lease dated November 30, 2011 between Mountain Top
Property Holdings, as landlord, and Mountain Top ALF, LLC, a

 

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Georgia limited liability company, as tenant, covering the Stone County Property
and improvements thereon.

 

Stone County Lease Assignment:  Absolute Assignment of Leases and Rents from
Mountain Top Property Holdings in favor of Lender with respect to the Stone
County Property Lease.

 

Stone County Mortgage:  A Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing executed by Mountain Top Property Holdings for the benefit of
Lender securing the Obligations, granting a first priority lien on the Stone
County Property, subject to such title exceptions as are shown on the Stone
County Title Policy.

 

Stone County Property:  That parcel of land located in Stone County, Arkansas
having a physical address of 414 Massey, Mountain View, Arkansas and being owned
by Mountain Top Property Holdings.

 

Stone County Title Policy:  A policy of title insurance (or commitment to issue
title insurance) issued by First American Title Insurance Company insuring the
lien of the Stone County Mortgage, in form and substance satisfactory to Lender.

 

2.                                      Amendment to Article 9 of the Loan
Agreement.  Article 9 of the Loan Agreement, SPECIAL PROVISIONS, is hereby
modified and amended by adding new Sections 9.5 and 9.6 thereto as follows:

 

“9.5  Special Collateral Account.  From and after the First Amendment Effective
Date, the Tenants shall, on a monthly basis on or before the first day of each
month, transfer from the Tenant Operating Accounts the sum of $75,000,
increasing to $90,000 after January 1, 2014, to a deposit account established by
Tenants with Lender, which account shall be under the sole dominion and control
of Lender and with respect to which Tenants shall have no withdrawal rights (the
“Special Collateral Account”).  Pursuant to an amendment to each of the
Subordination of Management Agreements dated December 28, 2012, entered into by
AdCare Consulting, AdCare Administrative Services and each of the Tenants for
the benefit of Lender, AdCare Consulting and AdCare Administrative Services
shall agree to waive the monthly fees payable to them under their respective
Management Agreements to the extent of $75,000 per month, or $90,000 per month,
as applicable, in the aggregate.  Any Tenant may request that Lender release
funds from the Special Collateral Account to pay costs of renovation,
refurbishment and similar improvements to its Project, subject to review and
approval by, and satisfactory evidence delivered to, Lender of such improvements
and the costs thereof; provided that such Lender approval requirement shall not
prohibit any Tenant from expending its own funds for improvement costs. 
Provided no Default or Event of Default is then existing, Lender will release
funds from time to time from the Special Collateral Account to Tenants to pay
costs of renovation, refurbishment and similar improvements

 

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that Lender shall have approved as provided in the immediately preceding
sentence.  Any of the foregoing to the contrary notwithstanding, Lender may at
any time and from time to time in its sole discretion apply any funds on deposit
in the Special Collateral Account to the then current outstanding principal
balance of the Loan.

 

9.6  Pledge of CHP Note.  On or before the First Amendment Effective Date,
Parent shall execute and deliver the Note  Pledge Agreement, an allonge executed
in blank and any certificate evidencing the CHP Note Collateral accompanied by
an assignment separate from certificate executed in blank.  Parent shall perfect
its security interest created under the pledge agreement securing the CHP Note. 
Parent shall notify CHP in writing of the collateral assignment of the CHP Note
to Lender and direct CHP to make all payments (or prepayments) of principal and
interest on the CHP Note to Lender for application to the Obligations; provided,
however, that Lender agrees that principal payments or prepayments on the CHP
Note in excess of $2,000,000.00 are made, Parent shall be entitled to the excess
over $2,000,000.00.  Parent shall provide Lender all necessary consents to such
assignment of the CHP Note, including, but not limited to, the consent of
Huntington National Bank (“Huntington”), as the “Senior Creditor” under that
certain Debt Subordination Agreement dated as of December 28, 2012 by and among
Parent, Huntington and CHP.  If any such consent is not obtained within thirty
(30) days following the First Amendment Effective Date, Borrowers shall pay to
Lender the amount of $500,000.00 to be applied to the outstanding principal
balance of the Loan.”

 

3.                                      Amendment to §10.1(l) of the Loan
Agreement. Section 10.1(l) of the Loan Agreement, Appraisals, is hereby modified
and amended by adding, at the end of the paragraph, the following sentence:

 

“The foregoing provisions of this Section 10.1(l) shall apply in all respects to
the Stone County Property.”

 

4.                                      Amendment to §10.1(m) of the Loan
Agreement. Section 10.1(m) of the Loan Agreement, Furnishing Information, is
hereby modified and amended by:

 

(a)                                 adding, at the end of paragraph (ii)
thereof, the following proviso:

 

“provided, however, that the quarterly unaudited financial statements for the
fiscal quarter ended March 31, 2013 as required by this paragraph shall be
delivered to Lender not later than August 15, 2013”; and

 

(b)                                 adding, at the end of paragraph (iii)
thereof, the following proviso:

 

“provided, however, that the annual audited financial statements for the fiscal
year ended December 31, 2012 as required by this paragraph shall be delivered to
Lender not later than July 16, 2013,”

 

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5.                                      Amendment to §10.1(w) of the Loan
Agreement.  Section 10.1(w) of the Loan Agreement, Implied Debt Service
Coverage, is hereby modified and amended by deleting the existing language
thereof in its entirety and substituting the following in lieu thereof:

 

“(w) Implied Debt Service Coverage.  Borrower shall not permit the Implied Debt
Service Coverage for the Projects, tested quarterly at the end of each fiscal
quarter commencing with the fiscal quarter ending June 30, 2013, to be less than
(i) 1.0 to 1.0 for the fiscal quarter ending June 30, 2013, (ii) 1.20 to 1.0 for
the two (2) fiscal quarters ending September 30, 2013, (iii) 1.20 to 1.0 for the
three (3) fiscal quarters ending December 31, 2013, and (iv) 1.40 to 1.0 for the
four (4) fiscal quarters ending March 31, 2014 and thereafter on a rolling four
(4) quarter basis.”

 

6.                                      Amendment to Section 10.1(z) of the Loan
Agreement.  Section 10.1(z) of the Loan Agreement, Health Care Permits and
Reimbursement Approvals, is modified and amended by deleting the existing
language thereof in its entirety and substituting the following in lieu thereof:

 

“(z)  Health Care Permits and Reimbursement Approvals.  No Tenant shall (i) fail
to maintain in effect all Health Care Permits and Reimbursement Approvals
necessary to the operation of its business, or (ii) receive payment under the
appropriate Medicare, Medicaid, or any other federal, state or local government
sponsored health care program, or any related reimbursement programs, or engage
in any activity that constitutes or, with the giving of notice, the passage of
time, or both, would result in a material violation of any Health Care Permit
necessary for the lawful conduct of its business or operations.  If any Borrower
or Tenant shall receive a “denial of payment for new admissions” (“DPNA”) or any
other material notice affecting any Project from any applicable regulatory
agency or otherwise, a copy of such DPNA or such other notice shall be promptly
delivered to Lender.”

 

7.                                      Amendment to Article 10 of the Loan
Agreement. Article 10 of the Loan Agreement, BORROWERS’ AGREEMENTS, is hereby
modified and amended by adding a new Section 10.1(cc) thereto as follows:

 

“(cc) Environmental Reporting.  Lender shall have the right, at Borrowers’
expense, to obtain (i) updates to that certain Phase I Environmental Site
Assessment Report dated November 18, 2011 by Partner Engineering and Science,
Inc. covering the Stone County Property or (ii) such new environmental site
assessment(s) covering the Stone County Property from time to time as  Lender
may request in Lender’s sole and absolute discretion. Borrowers shall cooperate
with Lender in connection with obtaining any and all such environmental reports
or updates.

 

8.                                      Amendment to Section 16.13 of the Loan
Agreement.  Section 16.13 of the Loan Agreement, Set-Offs, is modified and
amended by adding the following new sentence at the end thereof as follows:

 

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“Any of the forgoing to the contrary notwithstanding, Lender may at any time and
from time to time in its sole discretion apply any funds on deposit in the Cash
Collateral Account or Special Collateral Account to the outstanding principal
balance of the Loan, provided that Lender shall give Borrowers one (1) Business
Day’s prior notice by telecopier of any such application of funds in the Cash
Collateral Account.”

 

9.                                      Amendments to the Parent Guaranty.  The
Parent Guaranty is hereby modified and amended as follows:

 

(a)         Subparagraph 6(b)(i) is amended by deleting the second sentence
thereof in its entirety and substituting the following in lieu thereof:

 

“The term, “AdCare Tangible Net Worth,” means, as of any date of determination,
total assets minus intangible assets (as defined below) and minus total
liabilities of Guarantor and its consolidated Subsidiaries.”

 

(b)         Subparagraph 6(b)(ii)(A) is amended by deleting the amount
“$2,000,000.00” therein and substituting the amount “$1,000,000.00” in lieu
thereof.

 

(c)          The language of subparagraph 6(c) is deleted in its entirety and
the following is substituted in lieu thereof:

 

“(c)(i) Guarantor shall not permit the ratio of AdCare Total EBITDAR (as
hereinafter defined) to AdCare Fixed Charges (as hereinafter defined), in each
case tested as of the end of each fiscal quarter, to be less than (A) .85 to 1.0
on a trailing one (1) fiscal quarter basis commencing with the fiscal quarter
ending June 30, 2013, (B) 1.0 to 1.0 on a trailing two (2) quarter basis for the
test period ending September 30, 2013, (C) 1.15 to 1.0 on a trailing three (3)
quarter basis for the test period ending December 31, 2013, and (D) 1.15 to 1.0
on a trailing four (4) quarter basis thereafter.

 

(ii)  For purposes of subparagraph 6(c)(i) hereof:

 

(A)                               AdCare Fixed Charges means, for any period, on
a consolidated basis for Guarantor and its consolidated Subsidiaries, the sum of
the following amounts (without duplication): (i) scheduled payments of principal
on AdCare Total Debt, (ii) AdCare Interest Expense, (iii) AdCare Rent Expense,
and (iv) provisions for taxes based on income.

 

(B)                               AdCare Interest Expense means, for any period,
the interest expense of the Guarantor and its Subsidiaries on a consolidated
basis during such period, determined in accordance with GAAP, consistently
applied, and shall in any event include, without limitation, (i) the
amortization or write-off of debt discounts, and (ii) the portion of payments
under Capital Lease Obligations allocable to interest expense; provided that
AdCare Interest Expense

 

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shall not include amortization of debt issuance costs, commissions and other
fees payable in connection with the incurrence of Indebtedness.

 

(C)                               AdCare Rent Expense means, for any period, the
aggregate amount of fixed and contingent rentals payable by Guarantor and its
consolidated Subsidiaries for such period with respect to leases of real and
personal property, determined on a consolidated basis in accordance with GAAP,
consistently applied.

 

(D)                               AdCare Total Debt means, as of any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
Guarantor and its consolidated Subsidiaries, determined on a consolidated basis
in accordance with GAAP, consistently applied.

 

(E)                                AdCare Total EBITDAR means, for the
Guarantor, with respect to any period (without duplication): (a) Net Income (or
Loss) on a Consolidated basis, in accordance with GAAP, exclusive of any income
or losses from minority interests and the following (but only to the extent
included in determination of such Net Income (or Loss)): (i) depreciation and
amortization expense; (ii) Interest Expense; (iii) income tax expense; (iv) rent
expense and (v) extraordinary or non-recurring gains and losses (including,
without limitation, gains and losses on the sale of assets); and (vi) up to
$800,000 in the aggregate for all periods of non-operating special charges
related to Guarantor’s recent change of auditors and Guarantor’s Audit Committee
review and inquiry with respect to accounting and financial reporting issues;
minus (b) a capital expenditure reserve in an amount equal to the greater of (i)
actual capital expenditures for maintenance during such period, or (ii) $500.00
per bed, based on the total number of beds at the beginning of the most recent
quarter.”

 

(d)         Subparagraph 6(d) is amended by deleting the first sentence thereof
in its entirety and substituting the following in lieu thereof:

 

“At all times from and after the First Amendment Effective Date, Guarantor shall
not permit Liquidity (as hereinafter defined) to be less than $5,000,000.00;
provided, however, that Liquidity may be less than $5,000,000.00 for up to five
(5) five different (5) consecutive Business Day periods during the third fiscal
quarter of 2013 and two (2) different five (5) consecutive Business Day periods
per fiscal quarter at all other times so long as (i) Liquidity is never less
than $3,000,000.00, and (ii) Parent provides written notice by telecopier to
Lender not later than one (1) Business Day after the date Liquidity falls below
$5,000,000.00.”

 

(e)          A new Subparagraph 6(f) is added to the Parent Guaranty as follows:

 

“Guarantor covenants and agrees to (i) provide to Lender, promptly after receipt
by Guarantor, copies of any written notices or correspondence received by, from
or on behalf of the New York Stock Exchange relating to Guarantor’s listing

 

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status on such exchange, and (ii) provide to Lender within five (5) days after
Lender’s request, evidence satisfactory to Lender of the amount of unrestricted
cash and Cash Equivalents not pledged or unencumbered and the use of which is
not restricted by any agreement then held by Guarantor and its consolidated
subsidiaries.”

 

10.                               Certain Acknowledgments and Waivers.  Lender
acknowledges that (a) Parent failed to timely file with the Securities and
Exchange Commission its Annual Report on Form 10-K for the year ended December
31, 2012 (the “Form 10-K”) and Parent’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2013 (“Form 10-Q”); (b) Parent’s previously issued
financial statements for the quarters ended March 31, 2012, June 30, 2012 and
September 30, 2012 (the “Relevant Financial Statements”) should no longer be
relied upon due to certain errors therein; (c) Parent is in the process of
restating the Relevant Financial Statements and will amend its Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September
30, 2012; (d) Parent’s Audit Committee of the Board of Directors (the “Audit
Committee”) initiated a further review of, and inquiry with respect to, the
accounting and financial issues related to these and other potential errors in
Parent’s financial statements and engaged counsel to assist the Audit Committee
with such matters; (e) in connection with such review and inquiry, the Audit
Committee identified certain material weaknesses in Parent’s internal control
over financial reporting; (f) Parent is not in compliance with the continued
listing standards of the NYSE MKT LLC (the “Exchange”) and, therefore, the
Exchange is authorized to suspend, and unless prompt corrective action is taken,
remove Parent’s securities from the Exchange; and (g) subject to the Exchange’s
acceptance of a compliance plan submitted by Parent to the Exchange on May 1,
2013, and subject to Parent making progress consistent with its compliance plan
by July 16, 2013, Parent will have until July 16, 2013, with respect to the
filing of the Form 10-K, and until August 15, 2013, with respect to the filing
of the Form 10-Q, to regain compliance with the Exchange’s continued listing
standards (the events described in clauses (a) through (g), collectively, the
“Events”). Lender waives any Default or Event of Default that may exist as a
result of the Events described in clauses (a) through (e) only.

 

11.                               No Other Amendments, Waivers.  The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided or permitted herein, operate as an amendment or waiver of any right,
power or remedy of Lender under the Loan Agreement, the Parent Guaranty or any
of the other Loan Documents, nor constitute an amendment or waiver of any
provision of the Loan Agreement, the Parent Guaranty or any of the other Loan
Documents.  Except for the amendments expressly set forth above, the text of the
Loan Agreement, the Parent Guaranty and all other Loan Documents shall remain
unchanged and in full force and effect, and Borrowers and Guarantors hereby
ratify and confirm their respective obligations thereunder, as herein modified
and amended.  This Amendment shall not constitute a course of dealing with
Lender at variance with the Loan Agreement, the Parent Guaranty or the other
Loan Documents such as to require further notice by Lender to require strict
compliance with the terms of the Loan Agreement, the Parent Guaranty and the
other Loan Documents in the future.

 

12.                               Conditions of Effectiveness.  This Amendment
shall become effective as of the date hereof when, and only when, the following
conditions have been met to the satisfaction of Lender:

 

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(a)                                 Counterparts of this Amendment duly executed
by each Borrower and each Guarantor have been received by Lender;

 

(b)                                 Tenants shall have established the Special
Collateral Account;

 

(c)                                  Tenants shall have made the first monthly
transfer of funds from the Tenant Operating Accounts to the Special Collateral
Account pursuant to Section 9.5 of the Loan Agreement;

 

(d)                                 AdCare Consulting and AdCare Administrative
Services shall have entered into the amendment to the Subordination of
Management Agreements described in Section 9.5 of the Loan Agreement in form and
substance satisfactory to Lender;

 

(e)                                  Parent shall have delivered the Note Pledge
Agreement and the other items required by Section 9.6 of the Loan Agreement, and
Parent shall have provided evidence of the written notification to CHP required
by such Section 9.6;

 

(f)                                   Mountain Top Property Holdings shall have
executed the Stone County Mortgage, the Stone County Lease Assignment and the
Stone County Indemnity, each in form and substance satisfactory to Lender, and
Lender shall have received the Stone County Title Policy and an opinion of
Arkansas counsel with respect to the enforceability of the Stone County Mortgage
and the Stone County Lease Assignment in form and substance satisfactory to
Lender;

 

(g)                                  The representations and warranties made
pursuant to Section 13 of this Amendment shall be true and correct; and

 

(h)                                 The Loan Parties have paid all reasonable
and documented expenses incurred by Lender in connection with the execution and
delivery of this Amendment, together with reasonable fees and actually incurred
expenses of Lender’s counsel with respect to this Amendment and other
post-closing matters.

 

13.                               Post First Amendment Effective Date Covenant. 
Parent covenants and agrees to deliver to Lender, no later than June 15, 2013,
(i) the original CHP Note, (ii) the most recent balance sheet of H&H of Vandalia
LLC, and (iii) an organizational chart showing the organizational structure of,
and listing of assets for, H&H of Vandalia LLC.  Failure to comply with this
covenant shall constitute an Event of Default.

 

14.                               Representations and Warranties.  Each of the
Loan Parties represents and warrants as follows:

 

(a)                                 The execution, delivery and performance by
each Borrower and each Guarantor of this Amendment are within each such party’s
legal powers, have been duly authorized by all necessary shareholder, partner or
member action and do not contravene (i) any such Borrower’s or any such
Guarantor’s organizational documents, respectively, or (ii) any law or
contractual restriction binding on or affecting such Person;

 

(b)                                 No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body, except for those already obtained or made,

 

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is required for the due execution, delivery and performance by any Borrower or
any Guarantor of  this Amendment;

 

(c)                                  This Amendment constitutes the legal, valid
and binding obligations of each such party, enforceable against such Person in
accordance with their respective terms, provided that enforcement may be limited
by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other
similar laws affecting enforcement of creditor’s rights generally and except to
the extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefore may be brought;

 

(d)                                 All of the representations and warranties of
the Loan Parties in the Loan Documents are true and correct in all material
respects as of the date hereof (or if such representations and warranties by
their terms relate solely to an earlier date, then as of such earlier date); and

 

(e)                                  No Default or Event of Default is existing
and none would result, in each case upon this Amendment becoming effective and
after giving effect hereto.

 

15.                               Reaffirmation of Guaranties.  By execution of
this Amendment, each Guarantor reaffirms and restates its guaranty of the
Obligations pursuant to its Guaranty and agrees that its obligations thereunder
are not released, diminished, impaired or reduced or otherwise adversely
affected by this Amendment, except as expressly provided herein with respect to
the Parent Guaranty.

 

16.                               Release of Claims.  As further consideration
to induce the Lender to execute, deliver and perform this Amendment, each
Borrower and each Guarantor hereby represents and warrants that there are no
claims, causes of action, suits, debts, obligations, liabilities, defenses,
counterclaims, or demands of any kind, character or nature whatsoever, fixed or
contingent, which such Borrower or such Guarantor may have, or claim to have,
against the Lender in connection with the Loan, the Loan Agreement and the other
Loan Documents, and each Borrower and each  Guarantor hereby releases, acquits,
and forever discharges the Lender, and each and every past and present
subsidiary, affiliate, stockholder, officer, director, agent, servant, employee,
representative, and attorney of the Lender (collectively, the “Released
Parties”), from any and all claims, causes of action, suits, debts, liens,
obligations, liabilities, demands, losses, costs and expenses (including
attorneys’ fees) of any kind, character, or nature whatsoever, known or unknown,
fixed or contingent, which such Borrower or such Guarantor may have or claim to
have now against each of such Released Parties from the beginning of time until
and through the First Amendment Effective Date.

 

17.                               Reference to and Effect on the Loan
Documents.  Upon the effectiveness of this Amendment, on and after the date
hereof: (a) each reference in the Loan Agreement to “this Agreement,”
“hereunder,” “hereof” or words of like import referring to the Loan Agreement,
and each reference in the other Loan Documents to the “Loan Agreement,”
“thereunder,” “thereof” or words of like import referring to the Loan Agreement,
shall mean and be a reference to the Loan Agreement as amended and modified
hereby, and (b) each reference in the Parent Guaranty to “this Guaranty,”
“hereunder,” “hereof” or words of like import referring to the Parent

 

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Guaranty, and each reference in the other Loan Documents to the “Parent
Guaranty,” “thereunder,” “thereof” or words of like import referring to the
Parent Guaranty, shall mean and be a reference to the Parent Guaranty as amended
and modified hereby.

 

18.                               Costs, Expenses and Taxes.  Borrowers agree to
pay on demand all reasonable out-of-pocket expenses of Lender actually incurred
in connection with the preparation, execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of Lender’s
counsel with respect thereto and with respect to advising Lender as to its
rights and responsibilities hereunder and thereunder.

 

19.                               Governing Law.  This Amendment shall be
governed by and construed in accordance with the laws of the State of Ohio,
without regard to the conflict of laws principles thereof.

 

20.                               Loan Document.  This Amendment shall be deemed
to be a Loan Document for all purposes.

 

21.                               Counterparts.  This Amendment may be executed
by one or more of the parties hereto on any number of separate counterparts,
each of which shall be deemed an original and all of which, taken together,
shall be deemed to constitute one and the same instrument.  Delivery of an
executed counterpart of this Amendment by facsimile or other electronic
transmission shall be as effective as delivery of a manually executed
counterpart hereof.

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as of the
date first set forth above.

 

BORROWERS:

WOODLAND HILLS HC PROPERTY HOLDINGS, LLC

 

NORTHRIDGE HC&R PROPERTY HOLDINGS, LLC

 

APH&R PROPERTY HOLDINGS, LLC

 

 

 

By:

/s/ Ronald W. Fleming

 

Name:

Ronald W. Fleming

 

Title:

Chief Financial Officer of AdCare Health

 

 

Systems, Inc.

 

 

 

 

 

 

 

WOODLAND HILLS HC NURSING, LLC

 

NORTHRIDGE HC&R NURSING, LLC

 

APH&R NURSING, LLC

 

 

 

 

By:

/s/ Ronald W. Fleming

 

Name:

Ronald W. Fleming

 

Title:

Chief Financial Officer of AdCare Health

 

 

Systems, Inc.

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Signature Page to First Amendment To Secured Loan Agreement and Payment Guaranty

 

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[Execution of First Amendment to Secured Loan Agreement

and Payment Guaranty Continued]

 

GUARANTORS:

ADCARE HEALTH SYSTEMS, INC.

 

 

 

 

 

 

By:

/s/ Ronald W. Fleming

 

Name:

Ronald W. Fleming

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

ADCARE OPERATIONS, LLC

 

 

 

 

 

 

 

 

By:

/s/ Ronald W. Fleming

 

Name:

Ronald W. Fleming

 

Title:

Chief Financial Officer of AdCare Health

 

 

Systems, Inc.

 

 

 

 

 

 

 

ADCARE PROPERTY HOLDINGS, LLC

 

 

 

 

 

 

By:

/s/ Ronald W. Fleming

 

Name:

Ronald W. Fleming

 

Title:

Chief Financial Officer of AdCare Health

 

 

Systems, Inc.

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Signature Page to First Amendment To Secured Loan Agreement and Payment Guaranty

 

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[Execution of First Amendment to Secured Loan Agreement

and Payment Guaranty Continued]

 

LENDER:

KEYBANK NATIONAL ASSOCIATION

 

 

 

By:

/s/ Amy L. MacLearie

 

 

Name:

Amy L. MacLearie

 

 

Title:

AVP — Senior Closing Officer

 

Signature Page to First Amendment To Secured Loan Agreement and Payment Guaranty

 

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