Document:

rhe-ex1010_655.htm

Exhibit 10.10

 

FORBEARANCE AGREEMENT

This FORBEARANCE AGREEMENT (as amended, restated, amended or restated, supplemented or otherwise modified from time to time, this “Agreement”) is entered into as of May 18, 2018 by and among CP PROPERTY HOLDINGS, LLC, a Georgia limited liability company, as borrower (the “CP Borrower”), NORTHWEST PROPERTY HOLDINGS, LLC, a Georgia limited liability company, as borrower (the “Northwest Borrower”), ATTALLA NURSING ADK, LLC, a Georgia limited liability company, as borrower (the “Attalla Borrower”), ADCARE PROPERTY HOLDINGS, LLC, a Georgia limited liability company, as borrower and guarantor (“AdCare Holdco”; the CP Borrower, the Northwest Borrower, the Attalla Borrower and AdCare Holdco are collectively referred to herein as “Borrowers” and each as a “Borrower”), HEARTH & HOME OF OHIO, INC., a Georgia corporation, as guarantor (the “HHO Guarantor”), REGIONAL HEALTH PROPERTIES, INC. a Georgia corporation, as guarantor (the “RHP Guarantor”; the HHO Guarantor, AdCare Holdco and the RHP Guarantor are collectively referred to herein as “Guarantors” and each as a “Guarantor”), and PINECONE REALTY PARTNERS II, LLC, a Delaware limited liability company, as lender (together with its successors and assigns, the “Lender”).

RECITALS

WHEREAS, the Credit Parties and the Lender are parties to that certain Loan Agreement, dated as of February 15, 2018 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”);

WHEREAS, as of the date hereof, certain Events of Default under the Loan Agreement have occurred and are continuing; and

WHEREAS, upon the request of the Credit Parties, the Lender, subject to the terms and conditions set forth herein, has agreed to forbear during the Forbearance Period (as defined below) from exercising certain of its default-related rights and remedies against the Credit Parties with respect to the Specified Defaults (as defined below).

NOW, THEREFORE, in consideration of the foregoing, the terms, covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.Definitions.  Unless otherwise defined herein, all capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Loan Agreement, as amended, supplemented or otherwise modified by this Agreement. 

SECTION 2.Forbearance; Forbearance Default Rights and Remedies.

(a)Specified Defaults.  For purposes of this Agreement, the term “Specified Defaults” shall mean the following, collectively, and the term “Specified Default” shall mean any of the following:

(i)the Events of Default under Section 11.1(c) of the Loan Agreement as a result of the Borrowers’ failure to comply with the following provisions of the Loan 

 

 

Agreement: (A) Sections 8.17(a) and 8.29 of the Loan Agreement as a result of the entry into that certain Second Amendment to Master Sublease Agreement among ADK Georgia, LLC, OS Tybee, LLC, SB Tybee, LLC, and JV Jeffersonville, LLC without the prior written consent of the Lender (the “Peach Amendment Default”); (B) Section 10.2(n) of the Loan Agreement as a result of the Credit Parties’ failure to deliver copies of all reports and notices provided by the Operators to the RHP Parties under the Operating Leases (the “Reporting Default”); (C) Section 10.3(c) of the Loan Agreement as a result of the Borrowers’ failure to furnish to the Lender a certificate of an Authorized Officer for the fiscal year ended December 31, 2017 stating that no Default or Event of Default by the RHP Guarantor exists as of the filing date of its Form 10-K for the fiscal year ended December 31, 2017, or if any such Default or Event of Default does exist, specifying the nature and extent thereof and what action the RHP Guarantor proposes to take with respect thereto (the “Certificate Default”); (D) Sections 10.2(a), 10.2(b), 10.2(g), 10.2(j), 10.2(l), and 10.2(m) of the Loan Agreement as a result of (collectively, the “DPNA Notice Defaults”) (i) Borrowers’ failure to give prompt notice of the denial of payment for new admissions in force at the Healthcare Facility owned by QC Property Holdings, LLC (“Quail Creek”) and the Healthcare Facility owned by Northwest Property Holdings, LLC (“Northwest”), and (ii) Borrowers’ failure to give notice of ongoing correspondence and notice of pending decertification of the Healthcare Facilities owned by Quail Creek and Northwest from participation in one or more Government Reimbursement Programs; (E) Section 7.11(j) of the Loan Agreement as a result of Borrowers’ failure to provide copies of plans of correction filed with the applicable Governmental Authority and evidence of the filings thereof in connection with the Healthcare Facilities owned by Quail Creek and Northwest; (F) Section 8.18 of the Loan Agreement as a result of Quail Creek entering into the Seventh Amendment to Loan and Security Agreement with Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC, and the Third Amendment to Promissory Note with  Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC (the “Debt Amendment Default”); and (G) Section 10.2(f) of the Loan Agreement as a result of the applicable Credit Parties’ failure to give notice of the Reporting Default, the Beacon Ohio Lease Defaults, the Post-Closing Obligations Defaults, the Operator Insurance Defaults, the Operator Estoppel Defaults, the CP SNDA Default, the Attalla SNDA Default, the Northwest SNDA Default, the Northwest DPNA Default, the Quail Creek DPNA Default, the Healthcare Authorizations Default, the Debt Amendment Default and the Symmetry Lease Defaults (each as defined herein).

(ii)the Event of Default under Section 11.1(d) of the Loan Agreement as a result of (A) the representation and warranties made by the Credit Parties pursuant to Sections 6.5 and 6.10 of the Loan Agreement having been false at the time made due to there being an event or circumstance having occurred or existing that with the passage of time or giving of notice would constitute a default under the following Operating Leases as a result of non-payment of rent thereunder by the lessees thereunder (collectively, the “Beacon Ohio Lease Defaults”): (1) Lease Agreement, dated August 1, 2015, by and between Eaglewood Village, LLC and EW ALF, LLC; (2) Lease Agreement, dated August 1, 2015, by and between RMC HUD Master Tenant, LLC and PV SNF, LLC; (3) Lease Agreement, dated August 1, 2015, by and between 2014 HUD Master Tenant, LLC and EW SNF, LLC; and (4) Lease Agreement, dated August 1, 2015, by and between AdCare Health  Systems, Inc. and CC SNF, LLC, (B) the representations and warranties made by 

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the Credit Parties pursuant to Sections 6.5, 6.10 and 6.25 of the Loan Agreement having been false at the time made due to the limitation, suspension or revocation of a Healthcare Authorization by a Governmental Authority at Quail Creek (the “Quail Creek R&W Default”) and (C) the representations and warranties made by the Credit Parties pursuant to Section 6.19 of the Loan Agreement having been false at the time made due to inaccuracies in the organizational chart included in Schedule 6.19 to the Loan Agreement; 

(iii)the Events of Default under Section 11.1(i) of the Loan Agreement due to the denial of payment for new admissions in force at each of Quail Creek and Northwest (the “Healthcare Authorizations Default”);

(iv)the Events of Default under Section 11.1(s) of the Loan Agreement as a result of the Borrowers’ failure to deliver or satisfy the following post-closing obligations set forth on Schedule 5.3 to the Loan Agreement within the time periods set forth therein (collectively, the “Post-Closing Obligations Defaults”): (A) Item 5 related to Tenant Estoppels; (B) Item 6 related to SNDAs; (C) Item 7 related to insurance coverage; (D) Item 8 related to the resolution of the Actions (as defined therein); (E) Item 9 related to intercompany Indebtedness; (F) Item 10 related to the Lease Assignments; (G) Item 15 related to Provider Network Agreements; (H) Item 16 related to Managed Care Agreements; (I) Item 17 related to UCC terminations; and (J) Item 18 related to written opinions by Borrowers’ legal counsel; and 

(v)the Events of Default under Section 11.1(w) of the Loan Agreement as a result of: (A) the Beacon Ohio Lease Defaults; (B) an “Event of Default” under Section 11(g) of that certain Lease Agreement, dated as of September 22, 2014 (as amended by that certain First Amendment to Lease Agreement, dated as of November 21, 2014, and that certain Second Amendment to Lease Agreement, dated as of September 14, 2015, the “Attalla Lease”), by and between Attalla Nursing ADK, LLC and C.R. of Attalla, LLC (the “Attalla Tenant”) due to the filing by the Attalla Tenant of a voluntary petition under federal bankruptcy law for debtor’s relief (the “Attalla Bankruptcy Default”); (C) an “Event of Default” under Sections 12(b) and 12(c) of that certain Sublease Agreement, dated as of May 1, 2015 (as amended by that certain First Amendment to Sublease Agreement, dated as of December 1, 2015, the “Northwest Lease”), by and between NW 61st Nursing, LLC and Southwest LTC-NW OKC, LLC as a result of the denial of payment for new admissions at Northwest (the “Northwest DPNA Default”); (D) an “Event of Default” under Sections 12(b) and 12(c) of that certain Sublease Agreement, dated as of May 1, 2015 (as amended by that certain First Amendment to Sublease Agreement, dated December 1, 2015, the “Quail Creek Lease”), by and between QC Nursing, LLC and Southwest LTC-Quail Creek, LLC as a result of the denial of payment for new admissions in force at Quail Creek (the “Quail Creek DPNA Default”); (E) the “Events of Default” under each of the Operating Leases listed in Exhibit A hereto due to the failure by the Operator thereunder to (i) satisfy the insurance requirements of such Operating Lease (collectively, the “Operator Insurance Defaults”) and (ii) deliver to the Credit Parties fully executed Estoppel Certificates as requested by Credit Parties (collectively, the “Operator Estoppel Defaults”), as applicable; (F) an “Event of Default” under Section 12(f) of that certain Sublease Agreement, dated as of February 18, 2015 (the “CP Lease”), by and between CP Nursing, LLC and C.R. of College Park, LLC (the “CP Tenant”) due to the 

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CP Tenant’s failure to comply with the provisions of Section 15 of the CP Lease (the “CP SNDA Default”); (G) an “Event of Default” under Section 11(f) of the Attalla Lease as a result of the Attalla Tenant’s failure to comply with the provisions of Section 14 of the Attalla Lease (the “Attalla SNDA Default”); (H) an “Event of Default” under Section 12(f) of the Northwest Lease as a result of the Northwest Tenant’s failure to comply with the provisions of Section 15 of the Northwest Lease (the “Northwest SNDA Default”); and (I) an “Event of Default” under each of the following Operating Leases as a result of non-payment of rent thereunder by the lessees thereunder (collectively, the “Symmetry Lease Defaults”): (1) Lease Agreement, dated as of February 27, 2015 (as amended by that certain First Amendment to Lease Agreement, dated as of March 20, 2015), by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC; and (2) Lease Agreement, dated as of February 27, 2015 (as amended by that certain First Amendment to Lease Agreement, dated as of March 20, 2015, and that certain Second Amendment to Lease Agreement, dated as of May 31, 2015), by and between Mountain Trace Nursing ADK, LLC and Blue Ridge on the Mountain, LLC.

Each Borrower and each other Credit Party hereby acknowledges and agrees that each of the Specified Defaults is continuing and in existence as of the date of this Agreement, notwithstanding any cure periods set forth in the Loan Agreement (it being understood and agreed that all applicable cure periods in the Loan Agreement have expired prior to the date hereof).

(b)Effective as of the Forbearance Effective Date (as hereinafter defined), the Lender hereby agrees, that during the Forbearance Period, except as otherwise provided herein, the Lender will forbear from the exercise of any and all default-related rights and remedies (including, without limitation, (x) the acceleration of the outstanding Loans or any obligations of the Credit Parties under the Loan Agreement or any other Loan Document and (y) charging interest at the Default Rate pursuant to Section 2.2(b)(i) of the Loan Agreement) against the Borrowers and the other Credit Parties under the Loan Agreement, the other Loan Documents and/or applicable law to the extent the availability of such remedies arises from the Specified Defaults. As used herein, the term “Forbearance Period” shall mean the period beginning on the Forbearance Effective Date and ending upon the occurrence of a Termination Event (as hereinafter defined).  As used herein, “Termination Event” shall mean the earlier to occur of (i) July 20, 2018 at 11:59 p.m. New York time and (ii) the occurrence of any Forbearance Default (as hereinafter defined).  As used herein, the term “Forbearance Default” shall mean the occurrence of any one or more of the following:

(i)the occurrence of any Default (other than any Specified Default or any Default under Section 10.3(b) of the Loan Agreement due to the failure by the RHP Guarantor to furnish to Lender a Form 10-Q for the fiscal quarter ended March 31, 2018 and the other information required by Section 10.3(b) of the Loan Agreement, in each case, by no later than May 30, 2018) or Event of Default (other than any Specified Default) under and as defined in the Loan Agreement;

(ii)the failure of any representation or warranty made by the Borrowers or any other Credit Party under or in connection with this Agreement, the AdCare Opco Guaranty, the AdCare Opco Pledge Agreement or any of the Post-Forbearance Effective Date 

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Agreements (each, as defined herein) to be true and correct in any respect as of the date when made;

(iii)the failure by any Borrower or any of the other Credit Parties to perform or comply with any of its covenants or obligations contained in this Agreement (including, without limitation, any of the covenants or obligations contained in Section 5);

(iv)5:00 p.m. (New York City time) on July 6, 2018, if the Credit Parties shall have failed, prior to such time, to enter into a support agreement with the Lender, pursuant to which the Lender agrees to support a transaction or series of transactions (such transaction or series of transactions, the “Specified Transaction”) that remedies the Specified Defaults through a refinancing of the Loans or otherwise, which support agreement shall be in form and substance and shall contain terms and conditions (including terms and conditions regarding the Specified Transaction) that are acceptable to the Lender; provided that the Specified Transaction shall be commenced no later than July 16, 2018;

(v)any Borrower or any other Credit Party enters into any agreement or understanding outside the ordinary course of business (including, without limitation, an agreement to pursue a financing transaction (debt or equity), offer to purchase, acquisition, merger, consolidation, business combination, joint venture, sale of substantially all assets or equity interests, dissolution, wind-up, liquidation, reorganization, or restructuring relating to any such Borrower or any other Credit Party) that is not acceptable to the Lender or publicly announces its intention to do any of the foregoing; 

(vi)any third-party announces an intention to acquire (directly or indirectly) or makes an offer to acquire (directly or indirectly), or makes a public or private offer to acquire (directly or indirectly), beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) of more than 35% of the equity securities of RHP Guarantor that are entitled to vote for members of the board of directors or equivalent governing body of RHP Guarantor; or

(vii)any Borrower or any other Credit Party takes any action in any manner to repudiate or assert a defense to this Agreement, the Loan Agreement or any of the other Loan Documents or any liabilities or obligations (including any Obligations) under this Agreement, the Loan Agreement or any of the other Loan Documents or asserting any claim or cause of action or initiating any judicial, administrative or arbitration proceeding against the Lender related to the foregoing.

(c)Upon the occurrence of a Termination Event, the agreement of the Lender to forbear from exercising its default-related rights and remedies shall immediately and automatically terminate without the requirement of any demand, presentment, protest, or notice of any kind, all of which the Borrowers and each other Credit Party hereby waive. The Borrowers and each other Credit Party agree that the Lender may at any time after the occurrence of a Termination Event proceed to exercise any and all of its rights and remedies under any or all of the Loan Agreement, any other Loan Document and/or applicable law, including, without limitation, any and all rights and remedies that the Lender is, or may become entitled to, as a 

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consequence of any Default or Event of Default that has occurred prior to, during or after the Forbearance Period (including the Specified Defaults), all of which rights and remedies are fully reserved by the Lender.

SECTION 3.Conditions.  This Agreement shall be effective on the first day (the “Forbearance Effective Date”) upon which each of the following conditions precedent shall have been satisfied:

(a)(i) the Lender shall have received a counterpart signature of the Credit Parties to this Agreement and (ii) the Credit Parties shall have received a counterpart signature of the Lender to this Agreement; 

(b)AdCare Operations, LLC (“AdCare Opco”) shall have executed and delivered to the Lender (x) the Guaranty Agreement attached hereto as Exhibit B, pursuant to which AdCare Opco shall have guaranteed all Obligations and other amounts outstanding under the Loan Agreement from time to time (the “AdCare Opco Guaranty”) and (y) the Pledge Agreement attached hereto as Exhibit C, pursuant to which AdCare Opco shall have secured the AdCare Opco Guaranty by granting a security interest in the Pledged Collateral (as defined in Exhibit C) (the “AdCare Opco Pledge Agreement”); 

(c)the Credit Parties shall have delivered to the Lender such certificates of resolutions or other action, incumbency certificates and/or other certificates of Authorized Officers of each Credit Party as Lender may require evidencing the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with this Agreement, the AdCare Opco Guaranty and the AdCare Opco Pledge Agreement; and

	

	
(d)the Borrowers shall have paid to Lender a non-refundable payment as additional interest, payable in-kind by increasing the outstanding principal amount of Loans held by such Lender by an amount equal to 2.50% of the Loans outstanding on the date hereof (with such increase being applied to each outstanding Loan on a pro rata basis in accordance with the outstanding principal amount thereof prior to such payment), whereupon from and after such date such amounts shall be added to and constitute Obligations (the “PIK Payment”).

SECTION 4.Representations and Warranties.  Each Credit Party represents and warrants to the Lender, on the Forbearance Effective Date, that the following statements are true and correct in all material respects on and as of such date:

(a)the execution, delivery and performance of this Agreement has been duly authorized by all requisite corporate or limited liability company action on the part of such Credit Party; this Agreement has been duly executed and delivered by such Credit Party; and this Agreement constitutes a valid and binding agreement of such Credit Party, enforceable against such Credit Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability;

(b)no approval, consent, exemption, authorization or other action by, or material notice to, or material filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower or any other Credit Party of this Agreement;

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(c)the execution, delivery and performance by each Borrower and the other Credit Parties of this Agreement do not (i) contravene the terms of the Borrowers’ or any other Credit Party’s certificate or articles of incorporation, certificate of formation, limited liability company agreement or by-laws (or equivalent constitutional, organizational and/or formation documents), as applicable; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, (A) any indenture, mortgage, deed of trust, Loan Agreement or loan agreement, or any other material agreement, contract or instrument to which any Borrower or any other Credit Party is a party or by which it or any of its properties or assets is bound or to which it may be subject or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which any Borrower or any other Credit Party or the properties or assets of any Borrower or any other Credit Party is subject; (iii) violate any applicable law; or (iv) result in a limitation on any governmental approvals applicable to the business, operations or properties of any Borrower or any other Credit Party;

(d)all of the Obligations are secured by a legal, valid and enforceable first priority security interest in and Lien on the Collateral in favor of the Lender;

(e)there are no offsets, counterclaims or defenses to the liabilities or obligations (including any Obligations) under any of the Loan Documents, or to the rights, remedies or powers of the Lender in respect of any of the Obligations or any of the Loan Documents;

(f)the execution and delivery of this Agreement has not established any course of dealing between the parties hereto or created any obligation, commitment or agreement of the Lender with respect to any future modification, amendment, waiver, forbearance or restructuring with respect to the Obligations, the Collateral or any of the Loan Documents; 

(g)except for the Specified Defaults, no Default or Event of Default has occurred or is continuing under this Agreement, the Loan Agreement or any other Loan Document; and 

	

	
(h)after giving effect to the PIK Payment on the Forbearance Effective Date, (i) the outstanding Principal amount of the Loan to CP Borrower is $2,562,500, (ii) the outstanding Principal amount of the Loan to Northwest Borrower is $2,050,000, (iii) the outstanding Principal amount of the Loan to Atalla Borrower is $8,456,250 and (iv) the outstanding Principal amount of the Loan to AdCare Holdco is $3,587,500. 

SECTION 5.Covenants; Loan Agreement Amendment.

(a)Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Loan Agreement is hereby amended by:

(i)Item 10 in Schedule 5.3 of the Loan Agreement is hereby amended and restated as follows:

“10.[Reserved]”.

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(ii)amending Schedule 1 of the Loan Agreement by adding the following to the end of Item 1 appearing therein:

“(e)All Indebtedness outstanding under (i) the Sixth Amendment to Loan and Security Agreement, dated as of March 2, 2018, between QC Property Holdings, LLC and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC and (ii) the Second Amendment to Promissory Note, dated as of March 2, 2018, by and between QC Property Holdings, LLC, and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC.

(f)All Indebtedness outstanding under (i) the Seventh Amendment to Loan and Security Agreement, dated as of April 30, 2018, between QC Property Holdings, LLC and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC; and (ii) the Third Amendment to Promissory Note, dated as of April 30, 2018, by and between QC Property Holdings, LLC, and Congressional Bank, as successor in interest to Housing & Healthcare Funding, LLC.”

(iii)amending and restating Section 8.18 of the Loan Agreement in its entirety as follows:

“Cancel or otherwise forgive, release, extend, amend or otherwise modify any claim or debt owed to it by any Person, except for reasonably equivalent consideration and in the ordinary course of its business.”

(iv)deleting the reference to “first anniversary of the Closing Date” in Section 2.10(e) of the Loan Agreement and inserting “date that is thirteen (13) months after the Closing Date” in lieu thereof; 

(v)amending the second sentence of Section 2.10(f) of the Loan Agreement by deleting the period at the end of such sentence and inserting the following in lieu thereof:

	
 
	

	
“; provided, however that the Break-Up Fee shall be due and payable only to the extent that (x) any Loan is prepaid or repaid in full (other than to the extent such prepayment or repayment is financed with the proceeds of Indebtedness provided by Lender or any of its Affiliates or upon the consummation of a Change of Control) or is accelerated as a result of an Event of Default under Section 11.1(c) due to any RHP Party incurring Indebtedness in violation of Article VIII or (y) upon the occurrence of a Change of Control, including an acceleration as a result of an Event of Default pursuant to Section 11.1(l) due to such Change of Control.”

(vi)amending and restating Section 2.10(d) of the Loan Agreement in its entirety as follows:

“(d)Prepayment Premium/Break-Up Fee. Each Borrower shall pay the following amounts to the Lender: (i) upon any repayment or prepayment by any Borrower of any principal of its Loan, including in connection with an acceleration of such Loan (expressly including acceleration as a result of an Event of Default pursuant to Section 11.(f)), before the Scheduled Maturity Date, such Borrower shall pay to Lender on the date 

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of such repayment or prepayment the Prepayment Premium applicable thereto pursuant to Section 2.5, except if a prepayment is the result of a Casualty or Condemnation; and (ii) upon (x) the prepayment or repayment of any Loan in full (other than any such prepayment or repayment that is financed with the proceeds of Indebtedness provided by Lender or any of its Affiliates or in connection with a Change of Control) or an acceleration as a result of an Event of Default under Section 11.1(c) due to any RHP Party incurring Indebtedness in violation of Article VIII or (y) the occurrence of a Change of Control, including an acceleration as a result of an Event of Default pursuant to Section 11.1(l) due to such Change of Control, in each case of clauses (x) and (y), an amount equal to the Break-Up Fee.”

(vii)deleting the reference to “(the “Ongoing Rate”)” in Section 2.2(a) of the Loan Agreement and inserting the following immediately after the reference to “three (3) months after the Closing Date” appearing therein:

“until the Business Day immediately preceding the Forbearance Effective Date (as defined in the Forbearance Agreement, dated as of May 11, 2018, by and between the Credit Parties and the Lender) and thirteen and one-half percent (13.5%) per annum from and after the Forbearance Effective Date (the “Ongoing Rate”)”

(viii)amending the definition of “Obligations” in Section 1.1 of the Loan Agreement by inserting the following immediately after the reference to “in respect of the Loans”: 

“(including Default Rate interest, Late Payment Charges, Prepayment Premium, the Break-Up Fee, Finance Fees and Early Termination Fees)”

(ix)amending and restating the definition of “Guarantor or Guarantors” in Section 1.1 of the Loan Agreement in its entirety as follows:

“Guarantor or Guarantors: the meaning set forth in the preamble to this Agreement, and shall also include AdCare Operations, LLC and each other Person, if any, who on or after the Closing Date guarantees the payment and performance of the Obligations, including as contemplated by the Forbearance Agreement or otherwise.”

(x)amending the definition of “Early Termination Fee” in Section 1.1 of the Loan Agreement by deleting the reference to “first anniversary of the Closing Date” appearing therein and inserting “date that is thirteen (13) months after the Closing Date” in lieu thereof; 

(xi)amending Section 1.1 of the Loan Agreement by inserting the following definitions in alphabetical order therein:

Break-Up Fee: (a) in connection with a prepayment or repayment of all Loans in full (other than with the proceeds of Indebtedness provided by Lender or any of its Affiliates or upon consummation of a Change of Control), an amount equal to 1.0% of the Loans outstanding at such time; and (b) in connection with a Change of Control, an amount equal to the following (which amount shall not be less than zero): (i) 10% of the Principal 

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outstanding as of the Closing Date multiplied by the price per share that is paid to holders of RHP Guarantor’s 10.875% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) upon the consummation of such Change of Control, minus (ii) 10% of the Principal outstanding as of the Closing Date multiplied by the lesser of (x) the last quoted price per share by NYSE American LLC of RHP Guarantor’s Series A Preferred Stock on the Forbearance Effective Date and (y) the volume weighted average price of RHP Guarantor’s Series A Preferred Stock as quoted by NYSE American LLC for the consecutive 90-day period after the Forbearance Effective Date.”

Forbearance Agreement: that certain Forbearance Agreement, dated as of May 18, 2018, by and among the Credit Parties and the Lender.

(xii)amending and restating the definition of “Change of Control” in Section 1.1 of the Loan Agreement in its entirety as follows:

“Change of Control:  the occurrence of any of the following: (A) with respect to each Credit Party, the result caused by the occurrence of any event or series of events which results in (i) a majority of the members of the board of directors or other equivalent governing body ceased to be composed of individuals (a) who were members of that board or equivalent governing body on the Closing Date, (b) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (a) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (c) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (a) and (b) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body, or (ii) the pledge, hypothecation, encumbrance or transfer of any interest in such Credit Party (directly or indirectly, beneficially, legally or otherwise) other than RHP Guarantor, unless approved in writing by Lender in its sole and absolute discretion or (B) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 35% of the equity securities of RHP Guarantor entitled to vote for members of the board of directors or equivalent governing body of RHP Guarantor.”

(xiii)amending and restating the definition of “Loan Documents” in Section 1.1 of the Loan Agreement in its entirety as follows:

“Loan Documents:  this  Agreement, all Collateral Documents, the Notes, the Guaranty, the Pledge Agreement, the RHP Guarantor Note, the Tenant Estoppels, the SNDAs, the Forbearance Agreement and all other documents, agreements and instruments now or hereafter evidencing, securing or delivered to Lender or any Lender in connection with the Loans or the transactions contemplated by this Agreement and/or the Forbearance Agreement, as each of the foregoing may be (and each of the foregoing defined terms shall refer to such documents as they may be) amended, restated, replaced, severed, split, supplemented or otherwise modified from time to time.”

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(xiv)amending and restating the definition of “Collateral” in Section 1.1 of the Loan Agreement in its entirety as follows:

“Collateral:  the meaning set forth in Section 4.1(b) and also includes any assets of any RHP Party in which Liens are granted or purported to granted to Lender to secure all or part of the Obligations from time to time, including pursuant to agreements, instructions and/or documents contemplated by the Forbearance Agreement or otherwise.”

(xv)amending and restating the definition of “Collateral Documents” in Section 1.1 of the Loan Agreement in its entirety as follows:

“Collateral Documents:  all Mortgages, agreements, instruments and documents now or hereafter executed and delivered in connection with this Agreement and/or the Forbearance Agreement pursuant to which Liens are granted or purported to be granted to Lender in Collateral securing all or part of the Obligations each in form and substance satisfactory to Lender, including the Guaranty, the Mortgages, the Pledge Agreement, the Tenant Estoppels, the SNDAs and all UCC financing statements.”

(xvi)amending Section 11.1(c) of the Loan Agreement by including the following proviso at the end thereof:

“provided, further, that any Default under Section 10.3(b) due to the failure by the RHP Guarantor to furnish to Lender a Form 10-Q for the fiscal quarter ended March 31, 2018 and the other information required by Section 10.3(b) of the Loan Agreement, in each case, by no later than May 30, 2018 shall not constitute an Event of Default unless RHP Guarantor shall not have cured such Default by July 6, 2018;”.

(xvii)amending and restating Section 9.1 of the Loan Agreement in its entirety as follows:

“Fixed Charge Coverage Ratio.  Commencing with the Fiscal Quarter ending June, 2018, the RHP Guarantor shall not permit the Fixed Charge Coverage Ratio as of the last day of each Fiscal Quarter during which any Loan is outstanding (calculated for each Test Period ending on such date) to be less than 1.2 to 1.0.”

(xviii)amending Section 11.1(w) of the Loan Agreement by deleting the “.” at the end of such clause and inserting the following in lieu thereof:

“; provided that, solely during the Forbearance Period (as defined in the Forbearance Agreement), a default under any Operating Lease with any of the following Operators due to the failure of such Operator to pay any amount required to be paid by such Operator under such Operating Lease shall not constitute an Event of Default unless such default has not been cured within thirty (30) calendar days after the original date on which such amount required to be paid by such Operator under such Operating Lease became due (it being understood that (i) a waiver by the lessor thereunder shall not constitute a cure of such default, and (ii) the original date on which such amount was required to be paid shall exclude all cure periods, grace periods and other similar allowances, if any, provided for under 

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such Operating Lease): C.R. of College Park, LLC; C.R. of Attalla, LLC; C.R. of Coosa Valley, LLC; CRM of Meadowood, LLC; C.R. of Glenvue, LLC; C.R. of Autumn Breeze, LLC; C.R. of LaGrange, LLC; C.R. of Thomasville, LLC; SL SNF, LLC; LC SNF, LLC; Blue Ridge on the Mountain, LLC; Blue Ridge of Sumter, LLC; and Blue Ridge in Georgetown, LLC.”

(b)Each Borrower and each other Credit Party hereby agrees that to the extent that the Loan Agreement and/or any other Loan Document prohibits, restricts or limits any action or omission by any Borrower or any other Credit Party, or imposes any condition, certification or notification requirement on any Borrower or any other Credit Party upon the occurrence and during the continuance of a Default or Event of Default (including, without limitation, any prohibition, restriction or condition imposed on the use of any “basket” in Article VIII of the Loan Agreement), then such prohibition, restriction, limitation, condition, certification or notification requirement is currently in effect.

(c)To the extent any provision of Article XI of the Loan Agreement provides for a cure period with respect to any Default prior to such Default constituting an Event of Default, each Borrower and each other Credit Party hereby acknowledges and agrees that, with respect to the Specified Defaults, any such cure period has expired and such Specified Defaults are Events of Default that have occurred and are continuing as of the date hereof.

(d)As soon as reasonably practicable following execution of this Agreement and in no event later than May 23, 2018, the Credit Parties shall engage a nationally recognized, leading consulting firm that is mutually acceptable to the Credit Parties and the Lender on terms that are mutually acceptable to the Credit Parties and the Lender, with any such acceptance by the Lender being evidenced in writing. 

(e)As soon as reasonably practicable following the execution of this Agreement but in any event by not later than June 4, 2018, the Credit Parties shall have complied with the following post-closing items set forth on Schedule 5.3 to the Loan Agreement: (i) Item 5 related to Tenant Estoppels; (ii) Item 6 related to SNDAs; (iii) Item 7 related to insurance coverage; (iv) Item 8 related to the resolution of the Actions (as defined therein); (v) Item 9 related to intercompany Indebtedness; (vi) Item 15 related to Provider Network Agreements; (vii) Item 16 related to Managed Care Agreements; (viii) Item 17 related to UCC terminations; and (ix) Item 18 related to written opinions by Borrowers’ legal counsel.

(f)The Credit Parties shall give notice to the Lender not later than one (1) calendar day after (i) the entry of any agreement referred to in Section 2(b)(v) (it being understood that any such agreement that is not acceptable to the Lender shall result in a Termination Event) and/or (ii) any Credit Party receives, or otherwise has knowledge of, an offer of the type described in Section 2(b)(vi), regardless of whether such offer is made to any Credit Party or any holder of RHP Guarantor’s equity securities. 

(g)RHP Guarantor shall not declare, effectuate or otherwise consummate any of the following on account of, or in respect of, its 10.875% Series A Cumulative Redeemable Preferred Stock without the prior written consent of Lender: (i) any stock split or reverse stock split or recapitalization, combination, subdivision, reorganization or other reclassification; (ii) any 

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dividend or other distribution of cash, indebtedness or other securities or property; or (iii) any other transaction that would customarily trigger anti-dilution protections in equity or equity-linked securities.

(h)Within seven (7) calendar days after the Forbearance Effective Date, the Credit Parties shall have:

(i)paid to the Lender $50,000 as a non-refundable payment in Dollars as additional interest; and

(ii)delivered to the Lender each of the following, which shall be in form and substance satisfactory to the Lender (the following clauses (A) through (M), collectively, the “Post-Forbearance Effective Date Agreements”):

(A)a guaranty agreement executed by HHO Guarantor pursuant to which HHO Guarantor shall guarantee the Loans made by Lender to CP Borrower, Northwest Borrower and AdCare Holdco (the “New HHO Guaranty”);

(B)a pledge agreement executed by HHO Guarantor pursuant to which HHO Guarantor shall pledge the Equity Interests in all of its Subsidiaries as collateral for its existing Guaranty and the New HHO Guaranty;

(C)a guaranty agreement executed by AdCare Holdco pursuant to which AdCare Holdco shall guarantee the Loans made by Lender to the Attalla Borrower (the “New AdCare Holdco Guaranty”);

(D)a pledge agreement executed by AdCare Holdco pursuant to which AdCare Holdco shall pledge (i) the Pledged Collateral as collateral for the New AdCare Holdco Guaranty and (ii) as collateral for its Loan, its existing Guaranty and the New AdCare Holdco Guaranty, its Subsidiaries’ Equity Interests that do not constitute Pledged Collateral as of the Forbearance Effective Date; 

(E)one or more new guaranty agreements executed by AdCare Administrative Services, LLC, AdCare Consulting, LLC, AdCare Financial Management, LLC, AdCare Oklahoma Management, LLC, AdCare Acquisition, Inc., Hearth & Home of Vandalia, Inc., New Lincoln Ltd., AdCare Management Company, Inc. and AdCare Employee Leasing, LLC (collectively, the “New Guarantors”) pursuant to which the New Guarantors shall guarantee the Loans made by Lender to the Borrowers (the “New Guarantor Guaranty”);

(F)a security agreement executed by the New Guarantors pursuant to which the New Guarantors shall grant liens on substantially all of their assets to secure the New Guarantor Guaranty; 

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(G)each of the HHO Guarantor and the New Guarantors shall have caused to be filed in the Office of the Secretary of State for the State of Georgia UCC-1 financing statements naming HHO Guarantor and each of the New Guarantors as debtors and the Lender as secured party;

(H)if requested by Lender, (x) AdCare Holdco will cause to be filed one or more UCC-1 financing statements naming AdCare Holdco as debtor and Lender as secured party and/or one or more UCC-3 amendments with respect to UCC-1 financing statements naming AdCare Holdco as debtor and Lender as secured party and (y) deliver to Lender any other executed documents, agreements, instruments, amendments or supplements relating to any Collateral Document or take such other action to the extent necessary or advisable to ensure the Obligations are and continue to be secured by perfected first-priority liens on the Collateral; 

(I)such certificates of resolutions or other action, incumbency certificates and/or other certificates of Authorized Officers of each Credit Party and/or New Guarantor as Lender may require evidencing the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with the other Post-Forbearance Effective Date Agreements;

(J)Organization Documents and certifications as Lender may require to evidence that each New Guarantor is duly organized or formed, and that each Credit Party is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification;

(K)an executed opinion from Georgia counsel and Ohio counsel to the Credit Parties, AdCare Opco and the New Guarantors that is addressed to the Lender; 

(L)a certificate signed by an Authorized Officer of each Credit Party stating that no event or circumstance has occurred or exists that constitutes a Default or Event of Default (other than the Specified Defaults) and either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Credit Party and the validity against such Credit Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required; and 

(M)an updated organizational chart, with an associated opinion by legal counsel attesting to the accuracy of aforementioned organizational chart.

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(i)Within one (1) Business Day of the Forbearance Effective Date, AdCare Opco shall have caused to be filed in the Office of the Secretary of State for the State of Georgia a UCC-1 financing statement naming AdCare Opco as debtor and the Lender as secured party that is in form and substance satisfactory to Lender. 

SECTION 6.Ratification of Liability.

Each of the Borrowers and each other Credit Party hereby ratifies and reaffirms all of its payment and performance obligations and obligations to indemnify, contingently or otherwise, under this Agreement and each other Loan Document to which such party is a party, and each such party hereby ratifies and reaffirms its grant of Liens on, or security interests in, its properties pursuant to such Loan Documents to which it is a party as security for the Obligations, and confirms and agrees that such Liens and security interests hereafter secure all of the Obligations.  This Agreement shall in no manner affect or impair the Obligations or the Liens securing the payment and performance thereof.  Each of the Borrowers and each other Credit Party (a) acknowledges receipt of a copy of this Agreement and all other agreements, documents and instruments executed and/or delivered in connection herewith, (b) consents to the terms and conditions of the same, and (c) agrees and acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and confirmed.

SECTION 7.Release.  Each of the Credit Parties (on behalf of itself and its Affiliates) for itself and for its successors in title and assignees and for its past, present and future employees, agents, representatives (other than legal representatives), officers, directors, shareholders, and trustees (each, a “Releasing Party” and collectively, the “Releasing Parties”), does hereby remise, release and discharge, and shall be deemed to have forever remised, released and discharged, the Lender, the Lender’s successors-in-title, legal representatives and assignees, past, present and future officers, directors, partners, general partners, limited partners, managing directors, members, affiliates, shareholders, trustees, agents, employees, consultants, principals, experts, advisors, attorneys and other professionals and all other persons and entities to whom the Lender or its successors-in-title, legal representatives and assignees, past, present and future officers, directors, affiliates, shareholders, trustees, agents, employees, consultants, experts, advisors, attorneys and other professionals would be liable if such persons or entities were found to be liable to any Releasing Party or any of them (collectively, hereinafter the “Releasees”), from any and all manner of action and actions, cause and causes of action, claims, charges, demands, counterclaims, crossclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, rights of setoff and recoupment, controversies, damages, judgments, expenses, executions, liens, claims of liens, claims of costs, penalties, attorneys’ fees, or any other compensation, recovery or relief on account of any liability, obligation, demand or cause of action of whatever nature, whether in law, equity or otherwise (including, without limitation, any claims relating to (i) the making or administration of the Loans, including, without limitation, any such claims and defenses based on fraud, mistake, duress, usury or misrepresentation, or any other claim based on so-called “lender liability” theories, (ii) any covenants, agreements, duties or obligations set forth in the Loan Documents, (iii) increased financing costs, interest or other carrying costs, (iv) penalties, (v) lost profits or loss of business opportunity, (vi) legal, accounting and other administrative or professional fees and expenses and incidental, consequential and punitive damages payable to third parties, (vii) damages to business reputation, or (viii) any claims arising under 11 U.S.C. §§ 541-550 or any claims for avoidance or recovery under any other federal, state 

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or foreign law equivalent), whether known or unknown, fixed or contingent, joint and/or several, secured or unsecured, due or not due, primary or secondary, liquidated or unliquidated, contractual or tortious, direct, indirect, or derivative, asserted or unasserted, foreseen or unforeseen, suspected or unsuspected, now existing, heretofore existing or which may heretofore accrue against any of the Releasees, and which are, in each case, based on any act, fact, event or omission or other matter, cause or thing occurring at any time prior to or on the date hereof in any way, directly or indirectly arising out of, connected with or relating to the Loan Agreement or any other Loan Document and the transactions contemplated thereby, and all other agreements, certificates, instruments and other documents and statements (whether written or oral) related to any of the foregoing (each, a “Claim” and collectively, the “Claims”).  Each of the Releasing Parties further stipulates and agrees with respect to all Claims, that it hereby waives, to the fullest extent permitted by applicable law, any and all provisions, rights, and benefits conferred by any applicable U.S. federal or state law, or any principle of common law, that would otherwise limit a release or discharge of any unknown Claims pursuant to this Section 7. Each of the Credit Parties, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by the Borrowers or any other Credit Party pursuant to this Section 7.  If any Credit Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, the Borrowers and other Credit Parties, each for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Releasee as a result of such violation. For the avoidance of doubt, this provisions of this Section 7 shall survive the occurrence of a Termination Event.

SECTION 8.Construction.  This Agreement and all other agreements and documents executed and/or delivered in connection herewith have been prepared through the joint efforts of all of the parties hereto.  Neither the provisions of this Agreement or any such other agreements and documents nor any alleged ambiguity herein or therein shall be interpreted or resolved against any party on the ground that such party or its counsel drafted this Agreement or such other agreements and documents, or based on any other rule of strict construction.  Each of the parties hereto represents and declares that such party has carefully read this Agreement and all other agreements and documents executed in connection therewith and that such party knows the contents thereof and signs the same freely and voluntarily.  The parties hereto acknowledge that they have been represented by legal counsel of their own choosing in negotiations for and preparation of this Agreement and all other agreements and documents executed in connection herewith and that each of them has read the same and had their contents fully explained by such counsel and is fully aware of their contents and legal effect.

SECTION 9.Execution of Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument.

SECTION 10.Continuing Effect of the Loan Agreement.

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(a)The Lender has not waived, is not by this Agreement waiving, and has no intention of waiving any of the Specified Defaults, any other Defaults or Events of Default or any of the liabilities or obligations (including any Obligations) under any of the Loan Documents, and the Lender has not agreed to forbear with respect to any rights or remedies concerning any Defaults or Events of Default (other than, during the Forbearance Period, the Specified Defaults solely to the extent expressly set forth herein), which may have occurred or are continuing as of the date hereof or which may occur after the date hereof, all of which rights are ratified and affirmed in all respects and shall continue in full force and effect.  Subject to Section 2(b) above (solely with respect to the Specified Defaults and only during the Forbearance Period), the Lender reserves the right, in its discretion, to exercise any or all of their rights and remedies under the Loan Agreement and the other Loan Documents, at law or otherwise as a result of any Defaults or Events of Default which may be continuing on the date hereof or any Defaults or Events of Default that may occur after the date hereof, and the Lender has not waived any of such rights or remedies, and nothing in this Agreement, and no delay on the Lender’s part in exercising any such rights or remedies, should be construed as a waiver of any such rights or remedies.

(b)Nothing herein shall be deemed to entitle the Borrowers to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Loan Agreement in similar or different circumstances.

(c)This Agreement shall apply and be effective only with respect to the provisions of the Loan Agreement specifically referred to herein.  After the effectiveness of this Agreement, any reference to the Loan Agreement shall mean the Loan Agreement as amended and modified hereby.

SECTION 11.Governing Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 12.Loan Document.  This Agreement shall constitute a Loan Document.  It shall be an immediate Event of Default under the Loan Agreement if any Borrower or any other Credit Party fails to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Agreement or if any representation or warranty made by any Borrower or any other Credit Party under or in connection with this Agreement shall be untrue, false or misleading in any respect when made.

SECTION 13.Assignments; No Third Party Beneficiaries.  This Agreement shall be binding upon and inure to the benefit of the Borrowers, the other Credit Parties, the Lender and their respective successors and assigns; provided that neither the Borrowers nor any other Credit Party shall be entitled to delegate any of its duties hereunder and shall not assign any of its rights or remedies set forth in this Agreement without the prior written consent of the Lender, in its sole discretion.  No person other than the parties hereto and the Lender shall have any rights hereunder or be entitled to rely on this Agreement and all third-party beneficiaries rights are hereby expressly disclaimed.

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SECTION 14.Amendment.  No amendment, modification or waiver of the terms of this Agreement shall be effective except in a writing signed by the Credit Parties and the Lender.

SECTION 15.Arms-Length/Good Faith; Review and Construction of Documents. This Agreement has been negotiated at arms-length and in good faith by the parties hereto. The Credit Parties (a) have had the opportunity to consult with legal counsel of their own choice and have been afforded an opportunity to review this Agreement with their legal counsel, (b) have reviewed this Agreement and fully understand the effects thereof and all terms and provisions contained in this Agreement, and (c) have executed this Agreement of their own free will and volition. Furthermore, the Credit Parties acknowledge that (i) this Agreement shall be construed as if jointly drafted by the Credit Parties and the Lender, and (ii) the recitals contained in this Agreement shall be construed to be part of the operative terms and provisions of this Agreement.

SECTION 16.Submission to Jurisdiction; Waiver of Venue; Waiver of Trial by Jury; Headings; Severability; Preferences; Prior Agreements.  The provisions of Sections 14.4, 14.6, 14.8, 14.9, 14.10 and 14.13  of the Loan Agreement are hereby incorporated into this amendment, mutatis mutandis.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first written above.

 

		
	
BORROWERS:

	
 

	
CP PROPERTY HOLDINGS, LLC,
a Georgia limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

	
 

	
 

	
NORTHWEST PROPERTY HOLDINGS, LLC, a Georgia limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

	
 

	
 

	
ATTALLA NURSING ADK, LLC, a Georgia limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

	
 

	
 

	
ADCARE PROPERTY HOLDINGS, LLC, a Georgia limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

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GUARANTORS:

	
 

	
REGIONAL HEALTH PROPERTIES, INC., a Georgia corporation

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

	
 

	
 

	
ADCARE PROPERTY HOLDINGS, LLC, a Georgia limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

	
 

	
 

	
HEARTH & HOME OF OHIO, INC., a Georgia limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

	
 

	
 

	
 

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LENDER:

	
 

	
PINECONE REALTY PARTNERS II, LLC, a Delaware limited liability company

	
 

	
 

	
By:
	
 

	
 
	
Name:

	
 
	
Title:

 

 

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Exhibit A

 

Operating Leases with Operator Insurance Defaults

 

Healthcare Facility OwnerLease Description

	
CP Property Holdings, LLC
	
Lease Agreement, dated February 18, 2015 by and between CP NURSING, LLC and C. R. OF COLLEGE PARK, LLC, as amended by the extension letter, dated February 16, 2017, by and between CP NURSING, LLC and C. R. OF COLLEGE PARK, LLC

Northwest Property 

	
Holdings, LLC
	
Lease Agreement, dated May 1, 2015, by and between NW 61st NURSING, LLC and SOUTHWEST LTC-NW OKC, LLC, as amended by the First Amendment to Lease Agreement, dated December 1, 2015, by and between NW 61st NURSING, LLC and SOUTHWEST LTC-NW OKC, LLC

	
Attalla Nursing ADK, LLC
	
Lease Agreement, dated September 22, 2014, by and between ATTALLA NURSING ADK, LLC and C.R. OF ATTALLA, LLC, as amended by the First Amendment to Lease Agreement, dated November 21, 2014, by and between ATTALLA NURSING ADK, LLC and C.R. OF ATTALLA, LLC, as amended by the Second Amendment to Lease Agreement, dated September 14, 2015 by and between ATTALLA NURSING ADK, LLC and C.R. OF ATTALLA, LLC

	
Coosa Nursing ADK, LLC
	
Lease Agreement, dated September 22, 2014 by and between Coosa Nursing ADK, LLC, and C.R. of Coosa Valley, LLC, as amended by the First Amendment to Lease Agreement, dated November 21, 2014, by and between Coosa Nursing ADK, LLC, and C.R. of Coosa Valley, LLC, as amended by the Second Amendment to Lease Agreement, dated September 14, 2015, by and between Coosa Nursing ADK, LLC and C.R. of Coosa Valley, LLC

Meadowood Property 

	
Holdings, LLC 
	
Lease Agreement, dated March 22, 2017, by and between Meadowood Property Holdings, LLC and CRM of Meadowood, LLC

	
Erin Property Holdings, LLC
	
Lease Agreement, dated October 22, 2014, by and between ERIN NURSING, LLC and SL SNF, LLC

Mountain Trace 

	
Nursing ADK, LLC
	
Lease Agreement dated February 22, 2015 by and between Mountain Trace Nursing ADK, LLC and Blue Ridge on the Mountain, LLC, as amended by the First Amendment to Lease Agreement, dated March 20, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain , LLC, as amended by the Second Amendment to 

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Lease Agreement, dated May 31, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain, LLC

	
QC Property Holdings, LLC
	
Lease Agreement dated May 1, 2015, by and between QC NURSING, LLC and SOUTHWEST LTC-QUAIL CREEK, LLC, as amended by the First Amendment to Lease Agreement dated December 1, 2015, by and between QC NURSING, LLC and SOUTHWEST LTC-QUAIL CREEK, LLC

Eaglewood Property 

	
Holdings, LLC
	
Lease Agreement dated August 1, 2015, by and between EAGLEWOOD VILLAGE, LLC and EW ALF, LLC

Glenvue H&R Property 

	
Holdings, LLC
	
Lease Agreement dated July 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended by the First Amendment to Lease Agreement dated August 14, 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended by the Second Amendment to Lease Agreement dated October 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended and replaced by the Third Amendment to Lease Agreement dated July 27, 2016, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC

Mt. Kenn Property 

	
Holdings, LLC
	
Lease Agreement dated October 1, 2015, by and between KB HUD MASTER TENANT 2014, LLC and C.R. OF AUTUMN BREEZE, LLC

Hearth & Care of 

	
Greenfield, LLC
	
Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and HC SNF, LLC

The Pavilion Care 

	
Center, LLC
	
Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and PV SNF, LLC

Woodland Manor Property 

	
Holdings, LLC
	
Lease Agreement dated August 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and EW SNF, LLC

Sumter Valley Property 

	
Holdings, LLC
	
Lease Agreement, dated February 27, 2015 by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter LLC, as amended by the First Lease Amendment to Lease Agreement, dated March 20, 2015, by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC

 

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Georgetown HC&R 

	
Property Holdings, LLC
	
Lease Agreement, dated February 27, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown LLC, as amended by the First Amendment to Lease Agreement, dated March 20, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC, as amended by the Second Amendment to Lease Agreement, dated September 24, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC

Leased Healthcare FacilityLease Description

	
Powder Springs Nursing
	
Lease Agreement, dated January 31, 2015, by and between ADK GEORGIA, LLC and 3460 POWDER SPRINGS ROAD ASSOCIATES, L.P, as amended by the First Amendment to Lease Agreement, dated September 23, 2015, by and between ADK GEORGIA, LLC and 3460 POWDER SPRINGS ROAD ASSOCIATES, L.P

	
Tara at Thunderbolt
	
Lease Agreement, dated January 31, 2015, by and between ADK GEORGIA, LLC and 3223 FALLIGANT AVENUE ASSOCIATES, L.P, as amended by the First Amendment to Lease Agreement, dated September 23, 2015, by and between ADK GEORGIA, LLC and 3223 FALLIGANT AVENUE ASSOCIATES, L.P

	
Lumber City Nursing
	
Lease Agreement, dated October 22, 2014, by and between ADK GEORGIA, LLC and LC SNF, LLC, as amended by the First Amendment to Lease Agreement, dated September 10, 2015, by and between ADK GEORGIA, LLC and LC SNF, LLC

	
LaGrange Nursing
	
Lease Agreement, dated April 1, 2015, by and between ADK GEORGIA, LLC and C.R. OF LAGRANGE, LLC, as amended by the First Amendment to Lease Agreement, dated September 14, 2015, by and between ADK GEORGIA, LLC and C.R. OF LAGRANGE, LLC

	
Savannah Beach Nursing
	
Lease Agreement, dated June 18, 2016, by and between ADK GEORGIA, LLC and SB TYBEE, LLC

	
Oceanside Nursing
	
Lease Agreement, dated June 18, 2016, by and between ADK GEORGIA, LLC and OS TYBEE, LLC

	
Jeffersonville Nursing
	
Lease Agreement, dated June 18, 2016, by and between ADK GEORGIA, LLC and JV JEFFERSONVILLE, LLC

	
Thomasville Nursing
	
Lease Agreement, dated July 1, 2014, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC, as amended by the First Amendment to Lease Agreement, dated July 1, 2014, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC, as amended by the Second Amendment to Lease Agreement, dated February 9, 2015, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC, as amended by the Third Amendment to Lease 

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Agreement, dated September 9, 2015, by and between ADK GEORGIA, LLC and C.R. OF THOMASVILLE, LLC

	
Bonterra Nursing
	
Lease Agreement, dated July 20, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 2801 FELTON AVENUE, L.P., as amended by First Amendment to Lease Agreement, dated September 1, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 2801 FELTON AVENUE, L.P.

	
Parkview Manor Nursing
	
Lease Agreement, dated July 20, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 460 AUBURN AVENUE, L.P, as amended by the First Amendment to Lease Agreement, dated September 1, 2015, by and between ADK BONTERRA/PARKVIEW, LLC and 460 AUBURN AVENUE, L.P

	
Covington Care Center
	
Lease Agreement, dated August 1, 2015, by and between ADCARE HEALTH SYSTEMS, INC and CC SNF, LLC

Operating Leases with Operator Estoppel Defaults

Healthcare Facility OwnerLease Description

	
CP Property Holdings, LLC
	
Lease Agreement, dated February 18, 2015 by and between CP NURSING, LLC and C. R. OF COLLEGE PARK, LLC, as amended by the extension letter, dated February 16, 2017, by and between CP NURSING, LLC and C. R. OF COLLEGE PARK, LLC

Glenvue H&R Property 

	
Holdings, LLC
	
Lease Agreement dated July 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended by the First Amendment to Lease Agreement dated August 14, 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended by the Second Amendment to Lease Agreement dated October 2015, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC, as amended and replaced by the Third Amendment to Lease Agreement dated July 27, 2016, by and between 2014 HUD MASTER TENANT, LLC and C.R. OF GLENVUE, LLC

Mt. Kenn Property 

	
Holdings, LLC
	
Lease Agreement dated October 1, 2015, by and between KB HUD MASTER TENANT 2014, LLC and C.R. OF AUTUMN BREEZE, LLC

Hearth & Care of 

	
Greenfield, LLC
	
Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and HC SNF, LLC

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The Pavilion Care 

	
Center, LLC
	
Lease Agreement dated August 1, 2015, by and between RMC HUD MASTER TENANT, LLC and PV SNF, LLC

Woodland Manor Property 

	
Holdings, LLC
	
Lease Agreement dated August 1, 2015, by and between 2014 HUD MASTER TENANT, LLC and EW SNF, LLC

Sumter Valley Property 

	
Holdings, LLC
	
Lease Agreement, dated February 27, 2015 by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter LLC, as amended by the First Lease Amendment to Lease Agreement, dated March 20, 2015, by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC

Georgetown HC&R 

	
Property Holdings, LLC
	
Lease Agreement, dated February 27, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown LLC, as amended by the First Amendment to Lease Agreement, dated March 20, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC, as amended by the Second Amendment to Lease Agreement, dated September 24, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC

 

 

 

-26-

 

Exhibit B

 

AdCare Opco Guaranty

 

[See attached]

 

 

 

-27-

 

Exhibit C

 

AdCare Opco Pledge Agreement

 

[See attached]

 

-28-rhe-ex1011_656.htm

Exhibit 10.11

GUARANTY AGREEMENT

 

This GUARANTY AGREEMENT (this “Guaranty”) is made as of May 18, 2018 by ADCARE OPERATIONS, LLC, a Georgia limited liability company, as guarantor (the “New Guarantor”), to and for the benefit of PINECONE REALTY PARTNERS, II, LLC, a Delaware limited liability company (together with its successors and assigns, “Lender”). 

 

W I T N E S S E T H:

 

A.Pursuant to that certain Loan Agreement, dated as of February 15, 2018, by and among CP Property Holdings, LLC, a Georgia limited liability company, as borrower (the “CP Borrower”), Northwest Property Holdings, LLC, a Georgia limited liability company, as borrower (the “Northwest Borrower”), Attalla Nursing ADK, LLC, a Georgia limited liability company, as borrower (the “Attalla Borrower”), AdCare Property Holdings, LLC, a Georgia limited liability company, as borrower and guarantor (“AdCare Holdco”; the CP Borrower, the Northwest Borrower, the Attalla Borrower and AdCare Holdco are collectively referred to herein as “Borrowers” and each as a “Borrower”), Hearth & Home of Ohio, Inc., a Georgia corporation, as guarantor (the “HHO Guarantor”), Regional Health Properties, Inc., a Georgia corporation, as guarantor (the “RHP Guarantor”; the HHO Guarantor, AdCare Holdco and the RHP Guarantor are collectively referred to herein as the “Existing Guarantors” and each as an “Existing Guarantor”), and Lender (the “Loan Agreement”), Lender has made loans, advances and other extensions of credit to each Borrower.  All capitalized terms used but not otherwise defined in this Guaranty shall have the meanings provided to such terms in the Loan Agreement.

 

B.A portion of the loans, advances and other extensions of credit under the Loan Agreement were used to settle or otherwise satisfy certain litigation claims against the New Guarantor, which litigation claims, if adversely determined, could have reasonably been expected to have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of RHP Guarantor and its Subsidiaries (collectively, the “Existing RHP Parties”), including New Guarantor, taken as a whole, by (i) causing one or more defaults under the definitive documentation governing the outstanding Indebtedness of one or more Existing RHP Parties, (ii) enabling the lenders of such Indebtedness to accelerate such Indebtedness and foreclose on the collateral therefor and (iii) causing RHP Guarantor and its Subsidiaries to attempt to restructure such Indebtedness by commencing an Insolvency Proceeding, which would have reasonably been expected to result in the termination or rejection of the Operating Leases. 

 

C.In connection with the initial loans, advances and other extensions of credit, the Credit Parties agreed, pursuant to Section 5.3 of the Loan Agreement, to cause, within 90 days of the date of the Loan Agreement, each subsidiary of New Guarantor to transfer and assign to the appropriate subsidiary of AdCare Holdco the Operating Leases to which such subsidiary of New Guarantor is a party, all of which Operating Leases are material to the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole (the “AdCare Opco Assignment”).  

 

D.The Credit Parties have informed Lender that, as of the date hereof, several Events of Default have occurred and are continuing under the Loan Agreement. As a result of the foregoing, Lender is currently entitled to accelerate all Obligations and other amounts outstanding under the Loan Agreement, which acceleration would have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole. The Credit Parties have requested Lender enter into that certain Forbearance Agreement, dated as of the date hereof, with the Borrowers and the Existing Guarantors, pursuant to which, among other things, Lender will agree to forbear from exercising certain rights with respect to the Specified Defaults (as defined in the Forbearance Agreement). 

 

E.The Credit Parties have informed Lender that the AdCare Opco Assignment will not be able to be completed within such 90-day period and an Event of Default that is not a Specified Default will occur as a result of such failure to comply with Section 5.3 of the Loan Agreement, which would result in a Termination Event under the Forbearance Agreement and enable Lender to accelerate all Obligations and other amounts outstanding under the Loan Agreement, which acceleration would have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties, taken as a whole. As a result, the Credit Parties have requested Lender to agree to amend the Loan Agreement to eliminate the requirement to consummate the AdCare Opco Assignment. 

 

F.As consideration for Lender’s agreement to forbear from exercising remedies with respect to the Specified Defaults and to eliminate the requirement in the Loan Agreement to consummate the AdCare Opco Assignment (each of which, if not agreed to by Lender, would reasonably be expected to have a material adverse effect on, and cause irreparable harm to, the operations, business, properties, condition (financial or otherwise) or prospects of the Existing RHP Parties (including New Guarantor), taken as a whole, New Guarantor has agreed to, among other things, (i) enter into this Guaranty to provide security for the payment and performance of the full and prompt payment of each Loan to and other sums owed by, and all other Obligations of, each Borrower under the Loan Agreement and the other Loan Documents and (ii) secure its obligations under this Guaranty by granting a security interest in the Pledged Collateral under, and as defined in, that certain Pledge Agreement, dated as of the date hereof, by the New Guarantor in favor of Lender (the “Pledge Agreement”).

 

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and intending to be legally bound, the New Guarantor agrees as follows:

 

1.Guaranty. The New Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender (i) the full and prompt payment in cash of each Loan made to each Borrower pursuant to the Loan Agreement and all other sums owed by each such Borrower under the Loan Agreement and the other Loan Documents and (ii) the full and prompt performance by each Borrower of its other Obligations under the Loan Agreement and the other Loan Documents, in each case, whether now in existence or hereafter arising, and including any such Obligations incurred after the commencement of any proceeding under any Debtor Relief Law (including any interest accruing under any Loan Document after the filing of a petition with 

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respect to each such Borrower under any Debtor Relief Law, whether or not allowed or allowable as a claim in the related proceeding), as and when the same shall become due and payable, whether at maturity, by acceleration or otherwise, or otherwise be required to be performed.  This is a guaranty of payment and performance and not merely of collection.

 

2.Continuing Nature. This Guaranty shall be continuing and shall not be discharged, impaired or affected by (i) the power or authority or lack thereof of any Borrower or any other Credit Party to incur or contract for any Obligations or to execute, acknowledge or deliver any document, agreement or other instrument evidencing, securing or otherwise executed in connection with any Obligations; (ii) the regularity or irregularity, validity or invalidity, or enforceability or unenforceability of any Obligations; (iii) any defenses or counterclaims whatsoever that any Borrower or any other Credit Party may or might have to the payment or performance of any Obligations or to the assertion of a default under any document, agreement or other instrument evidencing, securing or otherwise executed in connection with any Obligations including, but not limited to, lack of consideration, statute of frauds, infancy, breach of warranty, lender liability, usury, fraud and statute of limitations; (iv) the existence or non‐existence of any Borrower or any other Credit Party as a legal entity; (v) the transfer by any Borrower or any other Credit Party of all or any part of the property securing any Obligations; (vi) any right of setoff, counterclaim or defense (other than the payment and performance of any Obligations in full) that the New Guarantor may or might have to its respective undertakings, liabilities and obligations under this Guaranty, each and every such defense being hereby waived by the New Guarantor; or (vii) the inability of Lender to claim any amount of interest, fees, costs, or charges from any Borrower or any other Credit Party pursuant to Section 506(b) of the Bankruptcy Code.

 

3.Guarantor’s Agreement to Pay.  The New Guarantor further agrees, as the principal obligor and not as a guarantor or surety only, to pay to Lender, on demand, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by Lender in connection with the enforcement of this Guaranty against the New Guarantor.

 

4.Obligations Absolute.  The obligations of the New Guarantor hereunder shall remain in full force and effect without regard to, and shall not be affected or impaired by, the following, any of which may be taken without the consent of, or notice to, the New Guarantor, nor shall any of the following give the New Guarantor any recourse or right of action against Lender:

 

(a)Any express or implied amendment, modification, renewal, addition, supplement, extension (including extensions beyond the original term) or acceleration of or to any of the Loan Documents;

(b)Any exercise or non-exercise by Lender of any right or privilege under this Guaranty or any of the Loan Documents;

(c)Any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to any Borrower or any other Credit Party or any other guarantor (which term shall include any other party at any time directly or contingently liable for any Borrower’s or any other Credit Party’s obligations under the Loan 

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Documents) or any affiliate of any Borrower or any other Credit Party or any action taken with respect to this Guaranty by any trustee or receiver, or by any court, in any such proceeding, whether or not the New Guarantor shall have had notice or knowledge of any of the foregoing;

(d)Any release or discharge of any Borrower or any other Credit Party from its liability under any of the Loan Documents or any release or discharge of any endorser or guarantor or of any other party at any time directly or contingently liable for the Obligations;

(e)Any subordination, compromise, release (by operation of law or otherwise), discharge, compound, collection, or liquidation of any Property or other collateral described in any of the Loan Documents or otherwise in any manner, or any substitution with respect thereto;

(f)Any assignment or other transfer of this Guaranty in whole or in part or of any of the Loan Documents;

(g)Any acceptance of partial performance of the Obligations;

(h)Any consent to the transfer of any Property or any portion thereof or any other collateral described in the Loan Documents or otherwise; and

(i)Any bid or purchase at any sale of any Property or any other collateral described in the Loan Documents or otherwise.

5.Waivers.

The New Guarantor unconditionally waives any defense to the enforcement of this Guaranty, including:

(a)All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty;

(b)Any right to require Lender to proceed against any Borrower, any other Credit Party or any guarantor at any time or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy whatsoever at any time;

(c)The defense of any statute of limitations affecting the liability of the New Guarantor hereunder or the liability of any Borrower, any other Credit Party or any guarantor under the Loan Documents, or the enforcement hereof, to the extent permitted by law;

(d)Any defense arising by reason of any invalidity or unenforceability of (or any limitation of liability in) any of the Loan Documents or any disability of any Borrower, any other Credit Party or any guarantor or of any manner in which Lender has exercised its rights and remedies under the Loan Documents, or by any cessation from any cause whatsoever of the liability of any Borrower, any other Credit Party or any guarantor;

(e)Without limitation on clause (d) above, any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of 

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any Borrower or any other Credit Party or any principal of any Borrower or any other Credit Party or any defect in the formation of any Borrower or any other Credit Party or any principal of any Borrower or any other Credit Party;

(f)Any defense based upon the application by any Borrower of the proceeds of the Loan for purposes other than the purposes represented by such Borrower to Lender or intended or understood by Lender or the New Guarantor;

(g)Any defense based upon an election of remedies by Lender, including any election to proceed by judicial or nonjudicial foreclosure of any security, whether real property or personal property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of remedies, including remedies relating to real property or personal property security, which destroys or otherwise impairs the subrogation rights of the New Guarantor or the rights of the New Guarantor to proceed against any Borrower, any other Credit Party or any guarantor for reimbursement, or a combination of the foregoing;

(h)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 any other aspects more burdensome than that of a principal;

(i)Any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute;

(j)Any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code;

(k)Any duty of Lender to advise the New Guarantor of any information known to Lender regarding the financial condition of any Borrower or any other Credit Party and all other circumstances affecting any Borrower’s and any other Credit Party’s ability to perform its obligations to Lender, it being agreed that the New Guarantor assumes the responsibility for being and keeping informed regarding such condition or any such circumstances; and

(l)Any right of subrogation, reimbursement, exoneration, contribution or indemnity, or any right to enforce any remedy which Lender now has or may hereafter have against Borrower or any other Credit Party or any benefit of, or any right to participate in, any security now or hereafter held by Lender.

6.Subrogation.

The New Guarantor understands that the exercise by Lender of certain rights and remedies may affect or eliminate the New Guarantor’s right of subrogation against any Borrower or any other Credit Party or any guarantor and that the New Guarantor may therefore incur partially or totally nonreimbursable liability hereunder.  Nevertheless, the New Guarantor hereby authorizes and empowers Lender, its successors, endorsees and assigns, to exercise in its or their sole discretion, any rights and remedies, or any combination thereof, which may then be available, it being the purpose and intent of the New Guarantor that the obligations hereunder shall be absolute, continuing, independent and unconditional under any and all circumstances.  Notwithstanding any other provision of this Guaranty to the contrary, 

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until all Obligations have been repaid and the Mortgages have been released or reconveyed, the New Guarantor hereby waives and releases, to the fullest extent permitted by law, any claim or other rights which the New Guarantor may now have or hereafter acquire against any Borrower or any other Credit Party or any other guarantor of all or any of the obligations of the New Guarantor hereunder that arise from the existence or performance of the New Guarantor’s obligations under this Guaranty or any of the other Loan Documents, including any right of subrogation, reimbursement, exoneration, contribution or indemnification, any right to participate in any claim or remedy of Lender against any Borrower or any other Credit Party or any collateral which Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including the right to take or receive from any Borrower or any other Credit Party, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights.

7.Additional Waivers.

The New Guarantor shall not be released or discharged, either in whole or in part, by Lender’s failure or delay to (i) perfect or continue the perfection of any lien or security interest in any collateral which secures the obligations of any Borrower, the New Guarantor or any other Credit Party or any other guarantor, or (ii) protect the property covered by such lien or security interest.

8.Subordination.

Without limitation on the waivers and releases contained herein:

(a)The New Guarantor subordinates all present and future indebtedness owing by any Borrower or any other Credit Party to the New Guarantor to the obligations at any time owing by such Borrower or any other Credit Party to Lender under the Loan Documents.  The New Guarantor assigns all such indebtedness to Lender as security for this Guaranty.

(b)The New Guarantor agrees to make no claim on such indebtedness until all obligations of any Borrower or any other Credit Party under the Loan Documents have been fully discharged.

(c)The New Guarantor further agrees not to assign all or any part of such indebtedness without the prior written consent of Lender, which consent may be granted or withheld by Lender in its sole and absolute discretion.  If Lender so requests, (i) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Lender, (ii) all security for such indebtedness shall be duly assigned and delivered to Lender, (iii) such indebtedness shall be enforced, collected and held by the New Guarantor as trustee for Lender and shall be paid over to Lender on account of the Loans but without reducing or affecting in any manner the liability of the New Guarantor under the other provisions of this Guaranty, and (iv) the New Guarantor shall execute, file and record such documents and instruments and take such other action as Lender deems necessary or appropriate to perfect, preserve and enforce Lender’s rights in and to such indebtedness and any security therefor.  If the New Guarantor fails to take any such action, Lender, as attorney in fact for the New Guarantor, is hereby authorized to do so in the name of the New Guarantor.  The foregoing power of attorney is coupled with an interest and cannot be revoked.

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9.Proceedings on Default.  Upon the failure of any Borrower or any other Credit Party to promptly and completely make any required payment and performance of its Obligations, Lender may, at its option: (a) proceed directly and at once without notice of such default, against the New Guarantor to collect and recover the full amount of the liability hereunder, or any portion thereof, without proceeding against such Borrower, such other Credit Party or any other person, or endorser, surety or guarantor, or foreclosing upon, selling, or otherwise disposing of, or enforcing, or collecting or applying any property, real or personal, Lender may then have as security for such Obligations, and without enforcing or proceeding under any other guaranty; or (b) sell the real and personal property Lender may then have as security for such Obligations under the power of sale contained in any mortgage deed, security agreement or similar instrument pursuant to which such property is held or to which such property is subject or sell such property through judicial foreclosure, as Lender may elect, notice of any such election being expressly waived by the New Guarantor, and proceed against the New Guarantor for an amount equal to the difference between the net proceeds of such sale to Lender and the amount of such Obligations then due and owing.  Nothing herein shall prohibit Lender from exercising its rights against the New Guarantor, any other guarantor, endorser, or surety, the security, if any, for the Obligations, and any Borrower or other Credit Party simultaneously, jointly and/or severally.

 

10.Representations.  The New Guarantor represents and warrants to Lender that: this Guaranty does not violate the provisions of any document, agreement or other instrument by which the New Guarantor is bound; no consent or authorization is required as a condition to the execution of this Guaranty; the New Guarantor is fully aware of the financial condition of each Borrower and each other Credit Party; the New Guarantor delivers this Guaranty based solely upon the New Guarantor’s own independent investigation and understanding of the transaction of which this Guaranty is a part and in no part upon any representation or statement of Lender with respect thereto; the New Guarantor is in a position to and hereby assumes full responsibility for obtaining any additional information concerning any Borrower’s and other Credit Party’s financial condition or business operations as the New Guarantor may deem material to its obligations hereunder and the New Guarantor is not relying upon, nor expecting Lender to furnish the New Guarantor with, any information in Lender’s possession concerning any Borrower’s and other Credit Party’s financial condition or business operations.  The New Guarantor acknowledges and agrees that it hereby knowingly accepts the full range of risk encompassed within a contract of “continuing guaranty”, which risk includes, without limitation, the possibility that any Borrower or any other Credit Party will incur or contract for additional indebtedness for which the New Guarantor will be liable hereunder.

 

11.Independent, Separate and Secured Obligations.  The obligations of the New Guarantor hereunder shall be absolute and unconditional and are independent of the obligations of any Borrower, any other Credit Party or of any other person, endorser, surety or guarantor; and, in the event of any default hereunder, a separate action or actions may be brought and prosecuted against the New Guarantor whether or not the New Guarantor is the alter ego of a Borrower or any other Credit Party and whether or not a Borrower or any other Credit Party is joined therein or a separate action or actions are brought against such Borrower or other Credit Party.  Lender’s rights hereunder shall not be exhausted until all of the Obligations have been 

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fully paid and performed.  This Guaranty is secured, and shall be deemed to be secured, pursuant to the Pledge Agreement.

 

12.Bankruptcy.  

 

(a)All of the Obligations shall, at the option of Lender, forthwith become due and payable if there shall be filed by or against the New Guarantor or any other Credit Party a petition in bankruptcy or for insolvency proceedings or for reorganization, dissolution or liquidation, or for appointment of a receiver or trustee, or if the New Guarantor or any other Credit Party makes an assignment for the benefit of creditors.  This Guaranty shall remain in full force and effect, without abatement, until the Obligations have been paid or performed in full and all other obligations guaranteed hereunder have been performed to the satisfaction of Lender, it being expressly understood and agreed to by the New Guarantor that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligations is rescinded, invalidated, declared to be fraudulent or preferential, set aside or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the New Guarantor or any other Credit Party all as though such payment had not been made, to such Borrower or any other Credit Party or a trustee, receiver or any other party.  The New Guarantor understands and agrees that in the event Lender is required to so return all or any portion of a payment received from any Borrower, the New Guarantor shall be required to pay Lender for such amount.

 

(b)So long as any of the obligations guaranteed hereunder shall be owing to Lender, the New Guarantor shall not, without the prior written consent of Lender, commence or join with any other party in commencing any bankruptcy, reorganization or insolvency proceedings of or against any Borrower or any other Credit Party.  The New Guarantor understands and acknowledges that by virtue of this Guaranty, it has specifically assumed any and all risks of a bankruptcy or reorganization case or proceeding with respect to any Borrower or any other Credit Party.  As an example and not in any way of limitation, a subsequent modification of the Obligations in any reorganization case concerning any Borrower or any other Credit Party shall not affect the obligation of the New Guarantor to pay and perform such Borrower’s Obligations in accordance with its original terms.  In any bankruptcy or other proceeding in which the filing of claims is required by law, the New Guarantor shall file all claims which the New Guarantor may have against such Borrower or relating to any indebtedness of such Borrower to the New Guarantor and shall assign to Lender all rights of the New Guarantor thereunder.  If the New Guarantor does not file any such claim, Lender, as attorney in fact for the New Guarantor, is hereby authorized to do so in the name of the New Guarantor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee.  The foregoing power of attorney is coupled with an interest and cannot be revoked.  Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do.  In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount payable on such claim and, to the full extent necessary for that purpose, the New Guarantor hereby assigns to Lender all of the New Guarantor’s rights to any such payments or distributions; provided, however, the New Guarantor’s obligations hereunder shall not be 

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satisfied except to the extent that Lender receives cash by reason of any such payment or distribution.  If Lender receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty.  Notwithstanding anything to the contrary herein, the liability of the New Guarantor hereunder shall be reinstated and revised, and the rights of Lender shall continue, with respect to any amount at any time paid by or on behalf of any Borrower or any other Credit Party on account of the Loan Documents which Lender shall restore or return by reason of the bankruptcy, insolvency or reorganization of such Borrower or any other Credit Party or for any other reasons, all as though such amount had not been paid.

 

13.Unenforceability of Obligations Against Borrower.  If for any reason any Borrower has no legal existence or is under no legal obligation to discharge any of its Obligations, or if any of the Obligations have become irrecoverable from any Borrower by operation of law or for any other reason, this Guaranty shall nevertheless be binding on the New Guarantor to the same extent as if the New Guarantor at all times had been the principal obligor on all such Obligations.  In the event that acceleration of the time for payment of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of any Borrower or for any other reason, all such amounts otherwise subject to acceleration under the terms of any document, agreement or other instrument evidencing, securing or otherwise executed in connection with any of the Obligations shall be immediately due and payable by the New Guarantor.

 

14.Payments.  The New Guarantor covenants and agrees that any payments by the New Guarantor of the Obligations will be paid strictly in accordance with their respective terms regardless of any law, regulation or order now or hereinafter in effect in any jurisdiction affecting any of such terms of the rights of Lender with respect thereto.  Without limiting the generality of the foregoing, the New Guarantor’s obligations hereunder with respect to any Obligation shall not be discharged by a payment in a currency other than Dollars or at a place other than the place specified or designated by Lender for the payment of the Obligations.

 

15.Taxes.  All payments hereunder shall be made without any counterclaim of setoff, free and clear of, and without reduction by reason of, any taxes, levies, imposts, charges and withholdings, restrictions or conditions of any nature (other than on the income of Lender) (“Taxes”), which are now or may hereafter be imposed, levied or assessed by any country, political subdivision or taxing authority, all of which will be for the account of and paid by the New Guarantor hereunder.  If for any reason, any such reduction is made or any Taxes are paid by Lender, the New Guarantor will pay to Lender the additional amounts as may be necessary to ensure that it receives the same net amount that it would have received had no reduction been made of Taxes paid.

 

16.Further Assurances.  The New Guarantor agrees that it will promptly provide to Lender information relating to the financial condition of the New Guarantor from time to time as Lender may reasonably request, including but not being limited to, the provision of financial statements and tax returns on an annual basis and all reports that its Subsidiaries are entitled to under their respective leases with Operators.

17.Successors and Assigns.  This Guaranty shall be binding upon the New Guarantor and its heirs, executors, personal representatives, successors and assigns, and shall inure to the benefit of and be enforceable by Lender and its successors, transferees and assigns.  

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18.Amendments and Waivers.  No amendment or waiver of any provision of this Guaranty nor consent to any departure by the New Guarantor therefrom shall be effective unless the same shall be in writing and signed by Lender.  No failure on the part of Lender to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise of any other right.

19.Notices.  All notices, consents, approvals and requests required or permitted under this Guaranty or any other Loan Document (a “Notice”) shall be given in writing and shall be effective for all purposes if either hand delivered with receipt acknowledged, or by a nationally recognized overnight delivery service (such as Federal Express), or by certified or registered United States mail, return receipt requested, postage prepaid, or, with respect to routine or administrative notices (but specifically excluding notices of Default, Events of Default or acceleration of the Obligations) by electronic mail, in each case addressed as follows (or to such other address or Person as a party shall designate from time to time by notice to the other party):  

If to Lender: 

 

Pinecone Realty Partners II, LLC

315 S. Beverly Drive, Suite 404

Beverly Hills, CA 90212

 

If to the New Guarantor:

454 Satellite Boulevard

Suite 100

Suwanee, GA 30024

 

A Notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; in the case of overnight delivery, upon the first attempted delivery on a Business Day; or, in the case of electronic mail, at the time of delivery.

20.Amendments and Modifications.  The provisions of this Guaranty shall extend and be applicable to all renewals, amendments, extensions and modifications of the Obligations and the documents, agreements and other instruments evidencing, securing or otherwise executed in connection with the Obligations, and all references to the Obligations and such documents, agreements or instruments shall be deemed to include any renewal, extension, amendment or modification thereof.

21.Assignment.  Lender may, upon written notice to the New Guarantor, assign or otherwise transfer any document, agreement or other instrument held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein to any other Person or entity, and such other person or entity shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all rights in respect thereof granted to Lender herein.  The New Guarantor 

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acknowledges that it may not assign any of its rights or delegate any of its duties under this Guaranty.

22.Governing Law; Venue, etc.

(a)THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, THE NEW GUARANTOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS GUARANTY AND THE OTHER LOAN DOCUMENTS, AND THIS GUARANTY AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(b)ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR THE NEW GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND THE NEW GUARANTOR WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE NEW GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  

(c)The New Guarantor expressly acknowledge and agree that the provisions of this Section 22 are reasonable and made for the express benefit of Lender.

23.Trial by Jury.  THE NEW GUARANTOR AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE NEW GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION 23 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

24.No Oral Modifications or Waivers.  This Guaranty shall not be modified nor any of its provisions waived except by a writing signed by the party against whom such modification or waiver is sought to be enforced.

25.Termination of Agreement.  Upon the satisfaction in full in cash of all amounts owing under the Loan Agreement and all other Obligations, this Guaranty shall terminate without further action by Lender; provided, however, that this Guaranty shall remain in full force 

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and effect and continue to be effective should any petition be filed by or against the New Guarantor for liquidation or reorganization, should the New Guarantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of the New Guarantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to Applicable Laws, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.  Upon termination of this Guaranty, Lender will execute and deliver to the New Guarantor any releases, termination statements or similar instruments of reconveyance as the New Guarantor may reasonably request.  All such instruments and documents shall be prepared by the New Guarantor and filed or recorded by the New Guarantor, at the New Guarantor’s sole expense, and Lender shall not have any duty, obligation or liability with respect thereto.

26.Severability.  Any provision of this Guaranty or of any related instrument or document executed pursuant hereto which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by Applicable Laws, the New Guarantor hereby waives any provision of law which renders any provision hereof or thereof prohibited or unenforceable in any respect; provided, however, that to the extent any provision of this Guaranty violates any contract in effect as of the date hereof to which the New Guarantor is a party or Applicable Law and such waiver is ineffective, such provision of this Guaranty shall be deemed automatically amended or modified to the extent necessary, and only to the extent necessary, to ensure this Guaranty does not violate such contract or Applicable Law.

27.Headings.  The section headings in this Guaranty are included herein for convenience of reference only and shall not constitute a part of this Guaranty for any other purpose.  

28.Counterparts.  This Guaranty may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier, facsimile machine, portable document format (“PDF”) or other electronic means shall be as effective as delivery of a manually executed counterpart of this Guaranty.  The effectiveness of any such documents and signatures shall, subject to Applicable Laws, have the same force and effect as manually signed originals and shall be binding on the New Guarantor and Lender.  Lender may also require that any such documents and signatures be confirmed by a manually signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.  No party may raise the use of a telecopier, facsimile machine, PDF or other electronic means, or the fact that any signature was transmitted through the use of a telecopier, facsimile machine, PDF or other electronic means, as a defense to the enforcement of this Guaranty.

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29.Loan Document. This Guaranty shall constitute a Loan Document. It shall be an immediate Event of Default under the Loan Agreement if the New Guarantor or any other Credit Party fails to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Agreement or if any representation or warranty made by the New Guarantor or any other Credit Party under or in connection with this Agreement shall be untrue, false or misleading in any respect when made.  

[remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, the New Guarantor has executed this Guaranty as of the date first set forth above.

 

ADCARE OPERATIONS, LLC, a Georgia limited liability company

 

 

By: ________________________________ 

       Name: Brent Morrison

       Title: Manager

 

 

 

 

 

 

[Signature Page to Guaranty Agreement]

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