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”).

 

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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 Lender’s 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.

 

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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 Borrower’s 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 Borrower’s 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

 

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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 Borrower’s and Guarantor’s fiscal year end, Borrower shall furnish to
Lender a copy of its compiled financial statement.  Borrower’s and Guarantor’s
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 Borrower’s
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.

 

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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 Borrower’s
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;

 

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(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 Borrower’s 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
Lender’s 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

 

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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 attorney’s 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 attorney’s 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 Lender’s possession or
under Lender’s control.

 

ARTICLE VII

COLLATERAL

 

Borrower’s 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.

 

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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 Lender’s 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                               ATTORNEY’S FEES AND EXPENSES.  If Lender shall
incur any cost or expense, including, without limitation, reasonable attorney’s
fees, in connection with this Agreement, the Note or the Loan, in any manner
whatsoever, direct or indirect, whether with

 

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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 Borrower’s 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 (1st) 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

 

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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,
LLC’s 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.

 

 

 

 

BORROWER:

 

 

 

Signed, sealed and delivered in the presence of: 

 

Mt. Kenn Property Holdings, LLC

 

 

 

 

 

 

/s/ [Illegible]

 

By:

/s/ Martin Brew

(L.S.)

Witness

 

Martin Brew, Chief Financial Officer

 

 

 

 

 

 

/s/ Ellen Smith

 

 

Notary Public

 

 

 

 

 

 

LENDER:

 

 

 

Signed, sealed and delivered in the presence of: 

 

THE BANK OF LAS VEGAS

 

 

 

 

 

 

/s/ [Illegible]

 

 

Witness

 

By:

/s/ Gilbert N. Vallejos

(L.S.)

 

 

Name:

Gilbert N. Vallejos

 

 

Title:

Executive Vice President

/s/ Rosita P. Chavez

 

 

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.

 

 

GUARANTORS:

 

 

 

MT. KENN NURSING, LLC

 

 

 

 

 

By:

/s/ Martin Brew

(L.S.)

 

Martin Brew, Chief Financial Officer

 

 

 

 

 

 

ADCARE HEALTH SYSTEMS, INC.

 

 

 

 

 

By:

/s/ Martin Brew

 

Martin Brew, Chief Financial Officer

 

 

 

[Corporate Seal]

 

 

 

HEARTH & HOME OF OHIO, INC.

 

 

 

 

 

By:

/s/ Martin Brew

 

Martin Brew, Chief Financial Officer

 

 

 

[CORPORATE SEAL]

 

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