Exhibit 10.23

 

PROMISSORY NOTE

 

$1,385,000

March 31, 2011

 

FOR VALUE RECEIVED, ADCARE HEALTH SYSTEMS, INC., an Ohio corporation (the
“Maker”), hereby promises to pay to the order of ANTHONY CANTONE (the “Payee”)
the principal amount of one million three hundred eighty-five thousand Dollars
($1,385,000).

 

The entire principal amount of this Note shall mature and shall be due and
payable in full on July 1, 2011 (the “Stated Maturity Date”).

 

The Maker promises to pay interest on the unpaid principal amount of this Note
from the date hereof until paid in full at a rate per annum equal to twelve
percent (12%). Interest on this Note shall be payable in arrears on the last day
of each month, commencing with April 30, 2011, upon any prepayment in accordance
with the terms of the immediately succeeding paragraph of this Note and upon the
Stated Maturity Date.

 

The Maker may prepay this Note in whole or in part, at any time, provided that
this Note will bear interest at twelve percent (12%) per annum for the full
period from the date of this Note, to, and including, the Stated Maturity Date,
even if the prepayment occurs prior to the Stated Maturity Date. In the event
this Note is not fully repaid on or before the Stated Maturity Date, the Maker
hereby agrees that this Note will bear interest at eighteen percent (18%) per
annum for the full period from the date of this Note, to, and including, the
date such payment occurs after the Stated Maturity Date.

 

In addition, upon the occurrence of an Event of Default (as hereinafter
defined), the Payee shall be entitled to collect a late charge of one and
one-half percent (1.50%) of such principal and accrued interest for each month
or part thereof that principal or accrued interest remains past due and unpaid.

 

The Maker represents and warrants to and covenants and agrees with the Payee
that, as of the date hereof and the date of this Note and the date the
conditions to close this transaction are satisfied in the sole discretion of the
Payee that:

 

(a)           The Maker is, and will continue to be, a corporation, duly
organized, validly existing, in good standing under the laws of the State of
Ohio, with full power and authority to own its properties and conduct its
business as and where the same are now owned and conducted.

 

(b)           The Maker has, and will maintain, all consents and grants of
approval required to have been granted by any person in connection with the
execution, delivery and performance of this Note, the Warrant (as defined
hereinafter) and any other document required

 

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by the terms hereof or thereof to be executed and delivered by the Maker
(collectively, the “Transaction Documents”).

 

(c)           The Maker has the requisite power and authority to enter into and
consummate all of the transactions contemplated on their respective parts by
this Note and the other Transaction Documents.

 

(d)           This Note and the other Transaction Documents have been duly
executed and delivered by the Maker and are the legal, valid and binding
agreements of the Maker, enforceable in accordance with their terms, subject as
to enforcement of remedies to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws in effect from time to time affecting the rights of
creditors generally and to the availability of equitable relief.

 

(e)           The acceptance, execution and delivery of this Note and the other
Transaction Documents, and the compliance with the provisions hereof and thereof
(i) do not, and will not, violate or conflict with any resolution adopted by the
Maker’s board of directors or any organizational document of the Maker, (ii) do
not, and will not, conflict with or violate, or result in or constitute a
material breach of or default under, any indenture, mortgage, deed of trust,
guaranty, lease, agreement or other instrument to which the Maker is a party or
by which the Maker or any of its property is bound, and (iii) do not, and will
not, conflict with or violate any provision of any law, administrative rule or
regulation, or any judgment, order or decree to which the Maker or any of its
property is subject.

 

(f)            There is no action, suit or proceeding or governmental
investigation pending, or to the knowledge of the Maker, threatened against the
Maker or any of its assets, which if adversely determined could have a material
adverse effect on the business, operations, properties, assets, condition
(financial or otherwise) or prospects of the Maker, or the ability of the Maker
to comply with its obligations hereunder or under any other Transaction
Document.

 

(g)           The Maker is in compliance in all material respects with all
applicable federal, state and local laws and ordinances (including rules and
regulations) that are applicable to it or its business operations and financial
affairs.

 

The following conditions must be met on or prior to the date of funding of this
Note:  (a) receipt of the fully executed Note; and (b) such additional
certificates, opinions of counsel and other documents as the Payee may
reasonably request.

 

Each of the following events is hereby defined as, and is declared to be and to
constitute, an “Event of Default”:

 

(a)           Failure of the Maker to make a payment of interest or principal as
required herein for a period of five (5) days after receipt of notice from the
Payee that the same was not paid when due.

 

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(b)           Any proceeding under the Bankruptcy Code or any law of the United
States or of any state relating to insolvency, receivership, or debt adjustment
being instituted by the Maker or any such proceeding being instituted against
the Maker and being consented to by the Maker as the case may be, or remaining
undismissed for sixty (60) days, or the Maker’s making an assignment for the
benefit of creditors, admitting in writing an inability to pay debts generally
as they become due, or becoming insolvent.

 

(c)           The occurrence of any event of default which remains uncured after
the expiration of any applicable cure period under any instrument creating,
evidencing or guarantying any other indebtedness for borrowed money of the
Maker.

 

(d)           The failure of the Maker to have timely filed with the Securities
and Exchange Commission any required report or other filing.

 

Whenever any Event of Default shall have happened, any of the following remedial
steps may be taken:

 

(a)           The Payee may declare immediately due and payable all sums which
the Maker is obligated to pay to the Payee pursuant to this Note or otherwise,
together with any interest accrued thereon, late charges, as provided for
herein, and reasonable counsel fees and costs of suit incurred for the
collection of the same.

 

(b)           Upon the occurrence of any Event of Default and upon acceleration
of the entire unpaid principal balance of the amount owned by the Maker to the
Payee hereunder, interest shall continue to accrue thereafter, to the extent
legally permissible, at a rate of six (6) percentage points per annum in excess
of the then-applicable interest rate under this Note, until the principal amount
hereof, together will all interest accrued thereon, shall be paid in full,
including the period following entry of any judgment; provided, however, that in
no event will the default rate of interest exceed 18% per annum.  Both before
and after any Event of Default, interest shall be computed on the basis of a
360-day year and the actual number of days elapsed.

 

(c)           If the Payee shall retain the services of counsel in order to cure
any Event of Default under this Note, the Maker shall pay the costs incurred by
the Payee in connection with proceedings to recover any sums due hereunder.

 

No right or remedy herein conferred upon or reserved to the Payee is intended to
be exclusive of any other right or remedy herein or by law provided, but each
shall be cumulative and in addition to every other right or remedy herein given
or now or hereafter existing at law or in equity or by statute, and may be
pursued singly, successively or together at the sole discretion of the Payee and
may be exercised as often as the occasion shall occur.

 

The Maker waives presentment, demand and protest, and consents to any number of
renewals or extensions of the time of payment hereof without notice.  The
granting, without notice, of any extension of time for the payment of any sum
due under this Note or for the performance of any covenant, condition or
agreement thereof, or the taking or release of any

 

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other security shall in no way release or discharge the liability of the Maker. 
No waiver by the Payee of any breach by the Maker of any of its obligations,
agreements or covenants herein shall be a waiver of any subsequent breach or of
any obligation, agreement or covenant, nor shall any forbearance by the Payee of
its rights or remedies be a waiver with respect to that or any other breach.

 

Upon execution of this Note, Maker will pay to the Payee, (a) a commitment fee
in the amount of 4% of the principal advanced pursuant to this Note, (b) a
$15,000 non-accountable expense allowance, and (c) the legal fees to counsel for
the Payee in an amount equal to $7,500.

 

The Maker agrees to indemnify Payee against any losses, claims, damages and
liabilities and related expenses, including counsel fees and expenses, incurred
by Payee arising out of or in connection with or as a result of the transactions
contemplated by this Note, except to the extent that such losses, claims,
damages or liabilities result from Payee’s gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction.  In
particular, the Payee promises to pay all costs and expenses, including
reasonable attorneys’ fees, incurred in connection with the collection and
enforcement of this Note.

 

Any notices or other communication to be given under this Note may be given by
delivering the same in writing as follows:

 

If to the Maker:

Adcare Health Systems, Inc.

 

5057 Troy Road

 

Springfield, Ohio 45502

 

 

 

Attn: Christopher F. Brogdon

 

Vice-Chairman

 

 

If to the Payee:

Anthony J. Cantone

 

766 Shrewsbury Avenue

 

Tinton Falls, NJ 07724

 

Whenever used in this Note, unless the context clearly indicates a contrary
intent:

 

(a)           The use of the masculine gender shall include the feminine or
neuter genders, and vice versa, as the context may require; and

 

(b)           The singular number shall include the plural and the plural the
singular as the context may require.

 

This Note shall be governed and construed in accordance with the substantive
laws of the State of New Jersey.

 

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No failure or delay on the part of the Payee to exercise any right, power or
privilege under this Note and no course of dealing between Maker and Payee shall
impair such right, power or privilege or operate as a waiver of any default or
an acquiescence therein, nor shall any single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies
expressly provided in this Note are cumulative to, and not exclusive of, any
rights or remedies that Payee would otherwise have.  No notice to or demand on
the Maker in any case shall entitle the Maker to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
the Payee to any other or further action in any circumstances without notice or
demand.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Maker has duly executed this Note on the day and year
first above written.

 

 

 

ADCARE HEALTH SYSTEMS, INC.

 

 

 

 

 

By:

/s/ David A. Tenwick

 

 

David A. Tenwick

 

 

Chairman

 

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