Exhibit 10.9

 

PROMISSORY NOTE

 

$ 3,500,000.00

 

March 30, 2012

 

FOR VALUE RECEIVED, ADCARE HEALTH SYSTEMS, INC., an Ohio corporation (the
“Maker”), hereby promises to pay to the order of CANTONE ASSET MANAGEMENT LLC
(the “Payee”) the principal amount of Three Million Five Hundred Thousand
Dollars ($3,500,000.00).

 

The entire principal amount of this Note shall mature on the earlier of: (i)
October 1, 2012 (the “Stated Maturity Date”); or (ii) that date on which the
Company shall receive proceeds, in an amount not less than $6,000,000, from a
public offering or private placement of its common stock.

 

The stated interest rate on this Note is ten percent (10%) per annum. However,
the interest rate on this Note shall automatically be increased by one
percentage point commencing on July 1, 2012 and continuing for each month or
part thereof during which any of the principal amount of this Note shall remain
unpaid. Interest on the principal amount of this Note outstanding from time to
time, from the date hereof, to the day on which all such principal shall be
repaid (whether on the Stated Maturity Date, or otherwise), shall be paid in
arrears, contemporaneously with each payment of such principal amount. 
Provided, however, that, if any of the principal amount of this Note shall
remain unpaid after the Stated Maturity Date, then, and in such event, interest
on such unpaid principal amount shall be payable in arrears on the first day of
each October, January, April and July, beginning October 1, 2012.

 

The Maker may prepay this Note in whole or in part, at any time, without notice,
penalty, premium.  Provided, however, that, if this Note should be prepaid
before the Stated Maturity Date, then, contemporaneously with such prepayment,
the Maker shall pay interest on this Note through the Stated Maturity Date.

 

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.

 

(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, 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.

 

1

--------------------------------------------------------------------------------

 

(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 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. 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 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.

 

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

 

2

--------------------------------------------------------------------------------

 

If to the Maker:

 

Adcare Health Systems, Inc.

 

 

5057 Troy Road

 

 

Springfield, Ohio 45502

 

 

 

 

 

Attn:

Boyd P. Gentry

 

 

 

Chief Executive Officer

 

 

 

If to the Payee:

 

Cantone Asset Management LLC

 

 

c/o Cantone Research, Inc.

 

 

766 Shrewsbury Avenue

 

 

Tinton Falls, NJ 07724

 

 

 

 

 

Attention:

Anthony J. Cantone

 

 

 

Managing Member

 

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.

 

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

 

 

 

ADCARE HEALTH SYSTEMS, INC.

 

 

 

 

 

By:

/s/ Boyd P. Gentry

 

 

Boyd P. Gentry

 

 

Chief Executive Officer

 

3

--------------------------------------------------------------------------------