Document:

Exhibit 10.23

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”) is made August 17, 2012, by and among CSCC PROPERTY HOLDINGS, LLC, a Georgia limited liability company, and CSCC NURSING, LLC,  a Georgia limited liability company (with their respective successors and assigns, being collectively referred to as “Borrowers”) and CONTEMPORARY HEALTHCARE SENIOR LIEN FUND I, L.P., a Delaware limited partnership (with its successors and assigns, “Secured Party”).

 

R E C I T A L S:

 

WHEREAS, Borrowers are borrowing $5,000,000 (the “Loan”) from Secured Party evidenced by a promissory note of even date herewith (as amended from time to time, the “Note”), a Loan Agreement by and between Borrowers and Secured Party dated of even date herewith (as amended from time to time, the “Loan Agreement”) and certain other agreements and instruments (collectively, with the Note, the Loan Agreement and this Agreement, the “Loan Documents”);

 

WHEREAS, to induce Secured Party to make the Loan to Borrowers upon the terms and conditions set forth in the Loan Agreement and other Loan Documents and as security for the payment and performance of Borrowers’ obligations to Secured Party under the Loan Agreement and the other Loan Documents, it is the intent of Borrowers to pledge and to grant to Secured Party for the benefit of Secured Party, a security interest in certain property of Borrowers and to create such a security interest as hereinafter provided;

 

WHEREAS, capitalized terms used herein but not defined herein shall have the meanings as set forth in the Loan Agreement;

 

NOW, THEREFORE, it is hereby agreed as follows:

 

ARTICLE I
 GRANT OF SECURITY INTEREST; COLLATERAL

 

1.1.         Grant of Security Interest.  Borrowers hereby pledge and grant to Secured Party for the benefit of Secured Party, a lien and security interest in and to the property described in Section 1.2 below (collectively and severally, the “Collateral”) to secure payment and performance of the Loan Obligations of Borrowers to Secured Party.

 

1.2.         Collateral.  The Collateral shall consist of all of Borrowers’ tangible and intangible property and all other tangible and intangible assets of Borrowers wherever located, whether now owned or hereafter acquired, and any additions, replacements, accessions, or substitutions thereof and all cash and non-cash proceeds and products thereof as set forth on Exhibit A hereto.

 

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ARTICLE II
 REPRESENTATIONS AND WARRANTIES

 

2.1.         Representations and Warranties. Each Borrower hereby represents and warrants to Secured Party that at all times from the date of this Agreement to and including the date payment and performance of the Loan Obligations has been completed in full:

 

(a)           Each Borrower is a limited liability company, duly organized, validly existing, and possessing all powers and authority to own its property and to conduct the business in which it is engaged as well as all other rights and privileges generally granted by the states of their organization. Borrowers have the full right and power to grant the security interest contemplated hereunder subject to any limitations which may be imposed by applicable law on the assignment of Medicare and Medicaid accounts receivable.

 

(b)           There is no action, suit or proceeding pending or, to the best of the Borrower’s knowledge, threatened against Borrowers that Borrowers would be expected to have a Material Adverse Effect on the Collateral, or Borrowers’ rights and interests therein.

 

(c)           Borrower warrants that the Collateral consisting of Contract Rights, Chattel Paper, Accounts, or General Intangibles is (i) genuine and enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium, or other laws relating to the rights of creditors generally and by general principles of equity; (ii) not subject to any defense, set-off, claim or counterclaim (other than write-offs in the ordinary course of business and other than recoupment rights possessed by any Health Regulatory Authority) of a material nature against Borrowers, except as to which Borrowers have notified Secured Party prior to the execution of this Agreement; and (iii) not subject to any other circumstances that would impair the validity, enforceability, value, or amount of the Collateral except for Permitted Encumbrances which exist or may exist upon the Collateral.

 

ARTICLE III
 COVENANTS OF BORROWERS

 

3.1.         Covenants of Borrowers.  So long as the Note remains unpaid, Borrowers shall:

 

(a)           ensure that all acts that may be necessary to maintain, preserve and protect the Collateral are done;

 

(b)           perform all of their obligations hereunder and under the other Loan Documents when due and before any such obligations are delinquent;

 

(c)           procure, execute and deliver from time to time any endorsements, assignments, financing statements or other writings Secured Party deems necessary or appropriate to perfect, maintain and protect its interest hereunder and the priority thereof except to the extent such delivery would conflict with Borrowers’ obligations to another creditor which is a party to a subordination agreement with Secured Party;

 

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(d)           except as permitted in the Loan Documents or as otherwise approved in writing by Secured Party, not surrender, sell, encumber, assign, pledge or otherwise dispose of or transfer the Collateral and keep the Collateral free of all levies and security interests or other liens or charges other than Permitted Encumbrances;

 

(e)           subject to Borrowers’ right to contest the same in accordance with applicable law, provided such contest does not present a risk of forfeiture of any of the Collateral, pay all taxes, assessments, charges, encumbrances and liens now or hereafter imposed upon or affecting the Collateral prior to the time the same becomes delinquent;

 

(f)            permit Secured Party and/or its authorized representatives access to the Facility on advance written notice and during normal business hours to inspect and copy Borrowers’ books and records related to the Collateral provided no material disturbance or damage is caused to the operation of the Facility, as defined in the Loan Agreement.

 

(g)           except as permitted in, or required by, the Loan Documents or as otherwise approved in writing by Secured Party, not amend, modify or supplement in any material respect any lease, contract or agreement contained in the Collateral or waive any material provision therein, without prior written consent of Secured Party;

 

(h)           with respect to any Collateral that is instruments, chattel paper and negotiable documents, properly assign to, and, to the extent necessary to perfect Secured Party’s interest therein, and deposit originals to be held by Secured Party, unless Secured Party shall hereafter otherwise direct or consent in writing or except to the extent such delivery would conflict with Borrowers’ obligations to another creditor which is a party to a subordination agreement with Secured Party;

 

(i)            with respect to any Collateral that is uncertificated securities of Borrowers that have been pledged, by the holder registered on the books of the Borrowers as the owner thereof, as further inducement of Secured Party to make the Loan, from and after the occurrence of an Event of Default and during the continuance thereof, Borrowers shall comply with instructions originated by Secured Party without further consent or action by the registered owner thereof; provided, further that, at no time during the term of this Agreement, shall Borrowers issue certificated securities of Borrowers with regard to ownership interests in either Borrower; and

 

(j)            to permit Secured Party, at Borrowers’ cost and expense, to obtain periodic lien searches, no more frequently than quarterly.

 

ARTICLE IV
 DEFAULT AND REMEDIES

 

4.1.         Events of Default.  The occurrence of any of the following events shall constitute an event of default under the terms of this Agreement (an “Event of Default”):

 

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(a)           any representation or warranty of Borrowers contained herein or otherwise made in connection with the transactions contemplated by this Agreement shall be false or misleading in any material respect on the date as of which made;

 

(b)           Borrowers shall fail to perform or observe any of the terms, provisions, covenants, conditions, agreements or obligations contained in this Agreement within any time periods specified in the Loan Agreement; or

 

(c)           an “Event of Default” shall occur and be continuing under the Loan Agreement.

 

4.2.         Remedies.  Upon the occurrence of an Event of Default and during the continuance thereof Secured Party may and without notice to or demand on Borrowers and in addition to all rights and remedies available to Secured Party under the terms of this Agreement and the other Loan Documents do any one or more of the following:

 

(a)           foreclose or otherwise enforce Secured Party’s security interests in any manner permitted by law, or provided for in this Agreement;

 

(b)           extend the time of payment of, compromise, or settle for cash, credit, or otherwise upon any terms, any part or all of the Collateral;

 

(c)           take possession of, and require Borrowers to endorse in the name of Secured Party, as appropriate, any notes, checks, money orders, drafts, cash, insurance payments, and any other instruments received in payment of the Collateral, or any part thereof; collect, sue for, and give satisfactions for, monies due on account of the Collateral; and withdraw any claims, suits, or proceedings pertaining to, or arising out of Borrowers’ and/or Secured Party’s right to the Collateral;

 

(d)           recover from Borrowers all costs and expenses including, without limitation, attorneys’ fees, incurred or paid by Secured Party in exercising any right, power or remedy provided by this Agreement or under law;

 

(e)           if and to extent the Collateral includes Accounts and subject to the rights therein of the AR Lender holding a senior security interest therein as permitted by the terms of the Loan Agreement, notify the Accounts and contract parties obligated on any or all of the Collateral to make payment thereof directly to Secured Party and Secured Party may take control of all proceeds including, without limitation, all Cash collected of any such Collateral, all of which rights Secured Party may exercise at any time. The cost of such collection and enforcement, including attorneys’ fees and expenses, shall be borne solely by Borrowers whether the same is incurred by Secured Party or Borrowers.  If an Event of Default should occur and be continuing, Borrowers will, upon receipt of all checks, drafts, cash and other remittances in payment on the Collateral, deposit the same in a special Secured Party account maintained with a bank of Secured Party’s choice, over which Secured Party also has the power of withdrawal.

 

4.3.         Additional Remedies.  If an Event of Default should occur at a time when Secured Party has a security interest in Borrowers’ Accounts, during the continuance of any such Event of Default, no discount, credit, or allowance shall be granted by either Borrower to any

 

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Account or contract party and no return of merchandise other than in the ordinary course of the business of Borrowers shall be accepted by Borrowers without Secured Party’s consent, which consent shall be not withheld if Borrowers, pursuant to the Loan Agreement obligating Borrowers to obtain the following consent, secure the consent thereto of any lenders having a senior security interest therein. Secured Party may, after and during the continuance of such Event of Default and subject to the limitations on its rights with respect to the Accounts of Borrowers as set forth in this Section 4.3, settle or adjust disputes and claims directly with Account contract parties for amounts and upon terms that Secured Party considers advisable, and in such cases Secured Party will credit the Loan Obligations with the net amounts received by Secured Party, after deducting all of the expenses incurred by Secured Party it being understood and agreed that Secured Party shall have no rights under this Section 4.3 unless it has a security interest in the Accounts and, even then, any such rights shall be subject to the rights of any lenders holding a senior security interest therein.  Borrowers agree to indemnify and defend Secured Party and hold it harmless with respect to any claim or proceeding arising out of any matter related to collection of Collateral.

 

ARTICLE V
 MISCELLANEOUS

 

5.1.         Uniform Commercial Code Filings.  Secured Party is hereby authorized, without further action of Borrowers, and in its own name and on behalf of Borrowers, to file any and all financing statements under the Uniform Commercial Code as in effect from time-to-time in the applicable state relating to all or any part of the Collateral (the “UCC”) and other documents deemed by Secured Party to be necessary to protect Secured Party’s interests in the Collateral. Secured Party agrees to provide Borrowers with a copy of, and the right to review and comment, each financing or continuation statement prior to the filing thereof; provided, however, that if Borrowers fail to respond to such proposed filing within seven (7) business days of its deemed receipt, the rights of Borrowers under this Section 5.1 shall expire.

 

5.2.         Further Assurances.  At any time and from time to time, at the expense of Borrowers, Borrowers promptly shall execute and deliver all further instruments and documents, and will take all further action, that may be necessary or desirable, or that Secured Party may request, in order to perfect and protect the pledge and grant of security interest made by this Agreement or to enable Secured Party to exercise and enforce its rights and remedies under this Agreement with respect to any Collateral.

 

5.3.         Cumulative Rights.  The rights, powers and remedies of Secured Party under this Agreement shall be in addition to all rights, powers and remedies available to Secured Party at law or in equity or by virtue of any of the Note, the other Loan Documents or any other agreement contemplated hereunder or thereunder, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party’s security interests in the Collateral.  It is intended that this clause shall be broadly construed so that all remedies herein provided or otherwise available to Secured Party shall continue to be each and all available to Secured Party until the full and final satisfaction of the Loan Obligations.

 

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5.4.         Collateral Duties.  Secured Party shall have no custodial or ministerial duties to perform with respect to Collateral pledged except as set forth herein; and by way of explanation and not by way of limitation, absent gross negligence or willful misconduct, Secured Party shall incur no liability for any of the following: (i) loss or depreciation of Collateral, (ii) failure to present any paper for payment or protest, to protest or give notice of nonpayment, or any other notice with respect to any Collateral, (iii) failure to ascertain, notify Borrowers of, or take any action in connection with any conversion, call, redemption, retirement or any other event relating to any of the Collateral, or failure to notify any party hereto that Collateral should be presented or surrendered for any such reason.  Borrowers acknowledge that Secured Party is not an investment advisor or insurer with respect to the Collateral and Secured Party has no duty to advise Borrowers of any actual or anticipated changes in the value of the Collateral.

 

5.5.         Continuing Security Interest.  This Agreement shall create a continuing security interest in the Collateral in accordance with its terms and shall remain in full force and effect until full and final satisfaction of the Loan Obligations.  This Agreement shall terminate automatically and without the need for either party to execute any further documents or take any further action and be of no further force and effect upon the full and final satisfaction of the Loan Obligations by Borrowers.

 

5.6.         Waiver.  Exercise or omission to exercise any right of Secured Party shall not affect any subsequent right of Secured Party to exercise the same.  No course of dealing between Borrowers and Secured Party or any delay on Secured Party’s part in exercising any rights shall operate as a waiver of any of Secured Party’s rights.  No waiver of any Event of Default under this Agreement or any of the other Loan Documents shall be valid unless in writing and signed by Secured Party nor shall any such waiver extend to or shall affect any subsequent or other existing Event of Default or shall impair any rights, remedies or powers of Secured Party in respect thereof.

 

5.7.         Headings.  The headings of the Sections of this Agreement are for convenience of reference only, are not to be considered a part hereof, and shall not limit or otherwise affect any of the terms hereof.

 

5.8.         Survival of Covenants.  All covenants, agreements, representations and warranties made herein and in certificates or reports delivered by Borrowers pursuant hereto and all other information heretofore or hereafter supplied by Borrowers to Secured Party in connection with the Loan and Borrowers, whether written or unwritten, shall be deemed to have been material and relied on by Secured Party, notwithstanding any investigation made by or on behalf of Secured Party, and shall survive the execution and delivery to Secured Party of the Note and this Agreement.

 

5.9.         Notices, etc.  Any notice or other communication required or permitted to be given by this Agreement or by applicable law shall be given as described in the Loan Agreement.

 

5.10.       Benefits.  All of the terms and provisions of this Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.  No Person other than Borrowers or Secured Party shall be entitled to rely upon this Agreement or be entitled to the benefits of this Agreement.

 

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5.11.       Supersedes Prior Agreements; Counterparts.  This Agreement and the Loan Documents referred to herein supersede and incorporate all representations, promises, and statements, oral or written, made by Secured Party in connection with the Loan.  This Agreement may not be varied, altered, or amended except by a written instrument executed by an authorized officer of each of Secured Party and Borrowers.  This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but such counterparts shall together constitute one and the same instrument.

 

5.12.       Construction of Provisions of this Agreement.  Secured Party has not agreed to make any loan other than that specifically described herein.  All requirements herein shall be deemed material to Secured Party.  Except as specified herein, all conditions and requirements must be satisfied by Borrowers prior to the Closing Date.  Except as specified herein, whenever this Agreement refers to a matter being “satisfactory” to Secured Party, subject to Secured Party’s “approval” or “consent,” at Secured Party’s “option,” at Secured Party’s “determination,” “required” by Secured Party, at Secured Party’s “request,” as Secured Party shall “deem necessary,” or similar terminology, it is deemed that each of the aforesaid shall be in the sole discretion of Secured Party, and if any term or condition requires Secured Party’s approval, consent, or satisfaction (the “Secured Party’s Approval”), Secured Party’s Approval shall not be implied, but shall be evidenced only by a written notice from Secured Party specifically addressed to the particular requirement or condition and expressing Secured Party’s Approval. Loan Agreement.

 

5.13.       Loan Agreement. The parties hereby acknowledge that the security interests granted herein are subject to the terms of the Loan Agreement

 

5.14.       Controlling Law.  THE PARTIES HERETO AGREE THAT THE VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY AND THE PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF NEW JERSEY, FOR THE ENFORCEMENT OF ANY AND ALL OBLIGATIONS UNDER THE LOAN DOCUMENTS EXCEPT THAT IF ANY SUCH ACTION OR PROCEEDING ARISES UNDER THE CONSTITUTION, LAWS OR TREATIES OF THE UNITED STATES OF AMERICA, OR IF THERE IS A DIVERSITY OF CITIZENSHIP BETWEEN THE PARTIES THERETO, SO THAT IT IS TO BE BROUGHT IN A UNITED STATES DISTRICT COURT, IT SHALL BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY OVER SHREWSBURY, NEW JERSEY OR ANY SUCCESSOR FEDERAL COURT HAVING ORIGINAL JURISDICTION.

 

5.15.       Waiver of Jury Trial.  .  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF BORROWERS HEREBY WAIVE ANY RIGHT IT THEY MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS OR THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED

 

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TO OR INCIDENTAL TO ANY DEALINGS OF SECURED PARTY AND/OR BORROWERS WITH RESPECT TO THE LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF SUCH PARTY’S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR  THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  EACH OF BORROWERS AGREE THAT THE LENDER MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF BORROWERS AND SECURED PARTY IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT FOR SECURED PARTY TO MAKE THE LOAN AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN BORROWERS AND SECURED PARTY SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

*          *          *

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
BORROWERS:
    
	
 
    	
 
    
	
 
    	
CSCC   PROPERTY HOLDINGS, LLC, a Georgia limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christopher F. Brogdon
    
	
 
    	
Name:
    	
Christopher   F. Brogdon
    
	
 
    	
Title:
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
CSCC   NURSING, LLC, a Georgia limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christopher F. Brogdon
    
	
 
    	
Name:
    	
Christopher   F. Brogdon
    
	
 
    	
Title:
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
SECURED   PARTY:
    
	
 
    	
 
    	
 
    
	
 
    	
CONTEMPORARY   HEALTHCARE SENIOR LIEN FUND I, L.P., a Delaware limited   partnership
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
CHSL-GP,   LLC, a Delaware limited liability company
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Eric Smith
    
	
 
    	
 
    	
 
    	
Eric   Smith
    
	
 
    	
 
    	
 
    	
Member
    

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT — ADCARE - SENIORExhibit 10.24

 

 

 

 

LOAN AND SECURITY AGREEMENT

 

Dated as of September 20, 2012

 

by and among

 

	
ADK THOMASVILLE OPERATOR, LLC,

a Georgia limited liability company,

ADK LUMBER CITY OPERATOR, LLC,

a Georgia limited liability company,

ADK JEFFERSONVILLE OPERATOR, LLC,

a Georgia limited liability company,

ADK LAGRANGE OPERATOR, LLC,

a Georgia limited liability company,

ADK POWDER SPRINGS OPERATOR, LLC,

a Georgia limited liability company,

ADK OCEANSIDE OPERATOR, LLC,

a Georgia limited liability company,

ADK THUNDERBOLT OPERATOR, LLC,

a Georgia limited liability company,

ADK SAVANNAH BEACH OPERATOR, LLC,

a Georgia limited liability company,

ATTALLA NURSING ADK, LLC,

a Georgia limited liability company,

MOUNTAIN TRACE NURSING ADK, LLC,

an Ohio limited liability company,

MT. KENN NURSING, LLC,

a Georgia limited liability company,

ERIN NURSING, LLC,

a Georgia limited liability company,

CP NURSING, LLC,

a Georgia limited liability company,
    	
 
    	
BENTON NURSING, LLC,

a Georgia limited liability company,

VALLEY RIVER NURSING, LLC,

a Georgia limited liability company,

PARK HERITAGE NURSING, LLC,

a Georgia limited liability company,

HOMESTEAD NURSING, LLC,

a Georgia limited liability company,

WOODLAND MANOR NURSING, LLC,

a Georgia limited liability company,

MOUNTAIN VIEW NURSING, LLC,

a Georgia limited liability company,

NORTHRIDGE HC&R NURSING, LLC,

a Georgia limited liability company,

LITTLE ROCK HC&R NURSING, LLC,

a Georgia limited liability company,

WOODLAND HILLS HC NURSING, LLC,

a Georgia limited liability company,

APH&R NURSING, LLC,

a Georgia limited liability company,

GLENVUE H&R NURSING, LLC,

a Georgia limited liability company,

and

COOSA NURSING ADK, LLC,

a Georgia limited liability company,

 
    

 

as Borrowers

 

and

 

THE PRIVATEBANK AND TRUST COMPANY,

an Illinois banking corporation,

as Lender

 

 

 

 

TABLE OF CONTENTS

 

	
Article
    	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1 INCORPORATION AND DEFINITIONS
    	
3
    
	
1.1.
    	
Incorporation   and Definitions.
    	
3
    
	
1.2.
    	
Other   Terms Defined in Code
    	
15
    
	
 
    	
 
    
	
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
    	
15
    
	
2.1.
    	
Representations   and Warranties
    	
15
    
	
2.2.
    	
Continuation   of Representations and Warranties
    	
21
    
	
 
    	
 
    
	
ARTICLE 3 THE LOAN
    	
21
    
	
3.1.
    	
Agreement   to Lend
    	
21
    
	
3.2.
    	
Letter   of Credit
    	
22
    
	
3.3.
    	
Interest
    	
23
    
	
3.4.
    	
Principal   Payments; Maturity Date
    	
23
    
	
3.5
    	
Loan   Fee
    	
24
    
	
3.6
    	
Non-Utilization   Fee
    	
24
    
	
3.7
    	
Uniform   Commercial Code Matters
    	
24
    
	
 
    	
 
    
	
ARTICLE 4 LOAN DOCUMENTS
    	
26
    
	
4.1.
    	
Loan   Documents
    	
26
    
	
4.2.
    	
Interest   Rate Protection
    	
26
    
	
 
    	
 
    
	
ARTICLE 5 LOAN DISBURSEMENTS
    	
27
    
	
5.1.
    	
Conditions   to Loan Opening
    	
27
    
	
5.2.
    	
Termination   of Agreement
    	
28
    
	
5.3.
    	
Additional   Conditions to Loan Opening and Subsequent Disbursements
    	
28
    
	
 
    	
 
    
	
ARTICLE 6 PAYMENT OF LOAN EXPENSES
    	
29
    
	
6.1.
    	
Payment   of Loan Expenses at Loan Opening
    	
29
    
	
 
    	
 
    
	
ARTICLE 7 FURTHER AGREEMENTS OF BORROWER
    	
29
    
	
7.1.
    	
Fixtures   and Personal Property; Concerning the Leases and Operations Transfer   Agreement
    	
29
    
	
7.2.
    	
Insurance   Policies
    	
30
    
	
7.3.
    	
Furnishing   Information
    	
31
    
	
7.4.
    	
Excess   Indebtedness
    	
33
    
	
7.5.
    	
Compliance   with Laws; Environmental Matters
    	
33
    
	
7.6.
    	
ERISA   Liabilities; Employee Plans
    	
33
    
	
7.7.
    	
Licensure;   Notices of Agency Actions
    	
34
    
	
7.8.
    	
Facility   Project Accounts and Revenues
    	
34
    
	
7.9.
    	
Single-Asset   Entity; Indebtedness; Distributions
    	
35
    
	
7.10.
    	
Restrictions   on Transfer
    	
35
    
	
7.11.
    	
Leasing,   Operation and Management of Projects
    	
36
    

 

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7.12.
    	
Minimum   Coverage of Rent and Debt Service
    	
37
    
	
7.13
    	
Minimum   Fixed Charge Coverage Ratio of Borrowers
    	
37
    
	
7.14.
    	
AdCare   Leverage Ratio
    	
38
    
	
7.15.
    	
AdCare   Debt Service Coverage Ratio
    	
38
    
	
7.16.
    	
Security   Interest Matters
    	
38
    
	
7.17.
    	
Field   Audits
    	
38
    
	
 
    	
 
    
	
ARTICLE 8 SECURITY
    	
39
    
	
8.1.
    	
Security   for the Loan
    	
39
    
	
8.2.
    	
Possession   and Transfer of Collateral
    	
40
    
	
8.3.
    	
Preservation   of the Collateral
    	
41
    
	
8.4.
    	
Other   Actions as to any and all Collateral
    	
41
    
	
8.5.
    	
Collateral   in the Possession of a Warehouseman or Bailee
    	
41
    
	
8.6.
    	
Letter-of-Credit   Rights
    	
42
    
	
8.7.
    	
Commercial   Tort Claims
    	
42
    
	
8.8.
    	
Electronic   Chattel Paper and Transferable Records
    	
42
    
	
8.9.
    	
Directions   for Payment of Accounts to Account at Lender; Court Order for Payment of   Accounts to Lender
    	
42
    
	
 
    	
 
    	
 
    
	
ARTICLE 9 ASSIGNMENTS, SALE AND ENCUMBRANCES
    	
43
    
	
9.1.
    	
Lender’s   Right to Assign
    	
43
    
	
9.2.
    	
Prohibition   of Assignments and Encumbrances by Borrowers
    	
43
    
	
 
    	
 
    
	
ARTICLE 10 EVENTS OF DEFAULT BY BORROWER
    	
43
    
	
10.1.
    	
Event   of Default Defined
    	
43
    
	
 
    	
 
    
	
ARTICLE 11 LENDER’S REMEDIES UPON EVENT OF   DEFAULT
    	
46
    
	
11.1.
    	
Remedies   Conferred upon Lender
    	
46
    
	
11.2.
    	
Possession   and Assembly of Collateral
    	
47
    
	
11.3.
    	
Sale   of Collateral
    	
47
    
	
11.4.
    	
Standards   for Exercising Remedies
    	
48
    
	
11.5.
    	
Code   and Offset Rights
    	
49
    
	
11.6.
    	
Additional   Remedies
    	
49
    
	
11.7.
    	
Right   of Lender to Make Advances to Cure Event of Defaults; Obligatory Advances
    	
50
    
	
11.8.
    	
Attorney-in-Fact
    	
51
    
	
11.9.
    	
No   Marshaling
    	
51
    
	
11.10.
    	
Application   of Proceeds
    	
51
    
	
11.11
    	
Attorneys’   Fees
    	
51
    
	
11.12.
    	
No   Waiver
    	
52
    
	
11.13.
    	
Default   Rate
    	
52
    
	
 
    	
 
    
	
ARTICLE 12 MISCELLANEOUS
    	
52
    
	
12.1.
    	
Time   is of the Essence
    	
52
    
	
12.2.
    	
Joint   and Several Obligations; Full Collateralization
    	
52
    
	
12.3.
    	
Lender’s   Determination of Facts; Lender Approvals and Consents
    	
54
    
	
12.4.
    	
Prior   Agreements; No Reliance; Modifications
    	
54
    

 

ii

 

	
12.5.
    	
Disclaimer   by Lender
    	
55
    
	
12.6.
    	
Loan   Expenses; Indemnification
    	
55
    
	
12.7.
    	
Captions
    	
55
    
	
12.8.
    	
Inconsistent   Terms and Partial Invalidity
    	
55
    
	
12.9.
    	
Gender   and Number
    	
55
    
	
12.10.
    	
Notices
    	
55
    
	
12.11.
    	
Effect   of Agreement
    	
56
    
	
12.12.
    	
Construction
    	
56
    
	
12.13.
    	
Governing   Law
    	
56
    
	
12.14.
    	
Litigation   Provisions
    	
57
    
	
12.15.
    	
Counterparts;   Electronic Signatures
    	
57
    
	
12.16.
    	
Customer   Identification-USA Patriot Act Notice; OFAC and Bank Secrecy Act
    	
57
    

 

	
EXHIBITS
    	
 
    	
 
    
	
EXHIBIT A
    	
-
    	
DIRECT AND INDIRECT OWNERSHIP OF BORROWERS
    

 

iii

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT dated as of September 20, 2012 (this “Agreement”), is executed by and among —

 

ADK THOMASVILLE OPERATOR, LLC, a Georgia limited liability company (“Borrower 1”),

 

ADK LUMBER CITY OPERATOR, LLC, a Georgia limited liability company (“Borrower 2”),

 

ADK JEFFERSONVILLE OPERATOR, LLC, a Georgia limited liability company (“Borrower 3”),

 

ADK LAGRANGE OPERATOR, LLC, a Georgia limited liability company (“Borrower 4”),

 

ADK POWDER SPRINGS OPERATOR, LLC, a Georgia limited liability company (“Borrower 5”),

 

ADK OCEANSIDE OPERATOR, LLC, a Georgia limited liability company (“Borrower 6”),

 

ADK THUNDERBOLT OPERATOR, LLC, Georgia limited liability company (“Borrower 7”),

 

ADK SAVANNAH BEACH OPERATOR, LLC, a Georgia limited liability company (“Borrower 8”),

 

ATTALLA NURSING ADK, LLC, a Georgia limited liability company (“Borrower 9”),

 

MOUNTAIN TRACE NURSING ADK, LLC, an Ohio limited liability company (“Borrower 10”),

 

MT. KENN NURSING, LLC, a Georgia limited liability company (“Borrower 11”),

 

ERIN NURSING, LLC, a Georgia limited liability company (“Borrower 12”),

 

CP NURSING, LLC, a Georgia limited liability company (“Borrower 13”),

 

BENTON NURSING, LLC, a Georgia limited liability company (“Borrower 14”),

 

VALLEY RIVER NURSING, LLC, a Georgia limited liability company (“Borrower 15”),

 

 

PARK HERITAGE NURSING, LLC, a Georgia limited liability company (“Borrower 16”),

 

HOMESTEAD NURSING, LLC, a Georgia limited liability company (“Borrower 17”),

 

WOODLAND MANOR NURSING, LLC, a Georgia limited liability company (“Borrower 18”),

 

MOUNTAIN VIEW NURSING, LLC, a Georgia limited liability company (“Borrower 19”),

 

NORTHRIDGE HC&R NURSING, LLC, a Georgia limited liability company (“Borrower 20”),

 

LITTLE ROCK HC&R NURSING, LLC, a Georgia limited liability company (“Borrower 21”),

 

WOODLAND HILLS HC NURSING, LLC, a Georgia limited liability company (“Borrower 22”),

 

APH&R NURSING, LLC, a Georgia limited liability company (“Borrower 23”),

 

GLENVUE H&R NURSING, LLC, a Georgia limited liability company (“Borrower 24”),

 

and COOSA NURSING ADK, LLC, a Georgia limited liability company (“Borrower 25”)

 

(collectively, “Borrowers”), and THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (“Lender”).

 

RECITALS

 

A.                                    Borrowers are the lessees or sublessees of the Projects (as hereinafter defined), which are improved with the “Facilities” (as hereinafter defined).

 

B.                                    Borrowers are the operators of the Facilities and have applied to Lender for the Loan (as hereinafter defined), to provide working capital to Borrowers for the operation of the Facilities, and Lender is willing to make the Loan upon the terms and conditions hereinafter set forth.

 

2

 

AGREEMENTS

 

In consideration of the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE 1

 

INCORPORATION AND DEFINITIONS

 

1.1                               Incorporation and Definitions.  The foregoing recitals and all exhibits hereto are hereby made a part of this Agreement.  The following terms shall have the following meanings in this Agreement:

 

AdCare:  AdCare Health Systems, Inc., an Ohio corporation.

 

Affiliate:  As to a person or entity, any other person or entity which, directly or indirectly, Controls, is Controlled by or is under common Control with such first person or entity.

 

Agreement:  This Loan and Security Agreement by and among Borrowers and Lender.

 

Application:  An Application for Irrevocable Standby Letter of Credit which either originally or after the joinder contained in Section 3.2(b) of this Agreement, is from Borrowers to Lender.

 

Availability:  At any time, an amount equal to the lesser of (i) the Loan Amount, or (ii) the Borrowing Base Amount; and as such amount may be reduced pursuant to the provisions of Section 3.1(b) of this Agreement.

 

Bank Product Agreements:  Those certain cash management service agreements entered into from time to time between Borrower and Lender or its Affiliates in connection with any of the Bank Products.

 

Bank Product Obligations:  All obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by Borrower to Lender or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that Borrower is obligated to reimburse to Lender as a result of Lender purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to Borrower pursuant to the Bank Product Agreements.

 

Bank Products:  Any service or facility extended to Borrower by Lender or its Affiliates, including, without limitation, (i) deposit accounts, (ii) cash management services, including, without limitation, controlled disbursement, lockbox, electronic funds transfers (including, without limitation, book transfers, fedwire transfers, ACH transfers), online reporting and other services relating to accounts maintained with Lender or its Affiliates, (iii) debit cards, and (iv) Hedging Agreements.

 

3

 

Borrower 1:  As defined in the Preamble hereto.

 

Borrower 2:  As defined in the Preamble hereto.

 

Borrower 3:  As defined in the Preamble hereto.

 

Borrower 4:  As defined in the Preamble hereto.

 

Borrower 5:  As defined in the Preamble hereto.

 

Borrower 6:  As defined in the Preamble hereto.

 

Borrower 7:  As defined in the Preamble hereto.

 

Borrower 8:  As defined in the Preamble hereto.

 

Borrower 9:  As defined in the Preamble hereto.

 

Borrower 10:  As defined in the Preamble hereto.

 

Borrower 11:  As defined in the Preamble hereto.

 

Borrower 12:  As defined in the Preamble hereto.

 

Borrower 13:  As defined in the Preamble hereto.

 

Borrower 14:  As defined in the Preamble hereto.

 

Borrower 15:  As defined in the Preamble hereto.

 

Borrower 16:  As defined in the Preamble hereto.

 

Borrower 17:  As defined in the Preamble hereto.

 

Borrower 18:  As defined in the Preamble hereto.

 

Borrower 19:  As defined in the Preamble hereto.

 

Borrower 20:  As defined in the Preamble hereto.

 

Borrower 21:  As defined in the Preamble hereto.

 

Borrower 22:  As defined in the Preamble hereto.

 

Borrower 23:  As defined in the Preamble hereto.

 

Borrower 24:  As defined in the Preamble hereto.

 

Borrower 25:  As defined in the Preamble hereto.

 

4

 

Borrowers:  Borrower 1 through Borrower 25.

 

Borrowing Base Amount:  An amount equal to (i) 80% of the amount of all Eligible Accounts, minus (ii) the amounts of such reserves and allowances as Lender deems proper and necessary, including, without limitation, reserves and allowances for credit amounts in any of the Eligible Accounts categories to provide for amounts that may become due to the Medicare, Medicaid or other payor programs.

 

Borrowing Base Certificate:  A certificate to be signed by Borrowers certifying to the accuracy of the Borrowing Base Amount in form and substance satisfactory to Lender.

 

Capital Lease:  With respect to any party, a lease of any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, by such party, as lessee, that is, or should be recorded as a “capital lease” on the financial statements of such party prepared in accordance with GAAP.

 

Capitalized Lease Obligations:  With respect to any party, all rental obligations of such party as lessee under a Capital Lease which are or will be required to be capitalized on the books of such party.

 

Code:  The Uniform Commercial Code of the State of Illinois as from time to time in effect; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the security interest in any collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, the term “Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement or the other Loan Documents relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

 

Collateral:  As defined in Section 8.1 hereof.

 

Control:  Possession by a person or an entity, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether by contract, ownership of voting securities, membership or partnership interests or otherwise.

 

Debt Service:  With respect to any party, for any period, the sum of (i) Interest Charges, plus (ii) all principal payable to a lender in connection with borrowed money or the deferred purchase price of assets that are treated as interest in accordance with GAAP, plus (iii) the portion of Capitalized Lease Obligations with respect to that period that should be treated as principal in accordance with GAAP.

 

Declarations:  Any documents containing covenants, conditions, restrictions, easements, operating agreements or the like, which benefit or burden the a Project, or both, whether or not recorded.

 

Default:  When used in reference to this Agreement or any other document, or in reference to any provision of or obligation under this Agreement or any other document, the occurrence of an event or the existence of a condition which, with the passage of time or the 

 

5

 

giving of notice, or both, would constitute an Event of Default under this Agreement or such other document, as the case may be.

 

Default Rate:  As defined in the Note.

 

Depreciation:  With respect to any party, for any period, the total amounts added to depreciation, amortization, obsolescence, valuation and other proper reserves, as reflected on such party’s financial statements for such period and determined in accordance with GAAP.

 

“Distribution”:  In the case of any entity with respect to which the term is used, any of the following: (i) any dividend or distribution of money or property to any owner of a direct or indirect interest in such entity (each a “Principal”) or to any Affiliate of any Principal, (ii) any loan or advance to any Principal or to any Affiliate of any Principal, (iii) any payment of principal or interest on any indebtedness due to any Principal or to any Affiliate of any Principal, and (iv) any payment of any fees or other compensation to any Principal or to any Affiliate of any Principal.

 

EBITDA:  With respect to any party, for any period, the sum for such period of the following of or payable by such party, as the case may be: (i) Net Income, plus (ii) Interest Charges, plus (iii) federal and state income taxes, plus (iv) Depreciation.

 

EBITDAR:  With respect to any party, for any period, the sum for such period of the following of or payable by such party, as the case may be: (i) Net Income, plus (ii) Interest Charges, plus (iii) federal and state income taxes, plus (iv) Depreciation, plus (v) Rental Expense.

 

Eligible Account and Eligible Accounts:  Each Account and all such Accounts (exclusive of sales, excise or other similar taxes) owing to a Borrower which meets each of the following requirements:

 

(a)                                 It is genuine in all respects and has arisen in the ordinary course of such Borrower’s business as occupancy charges and from the performance of services by such Borrower, which services have been fully performed, acknowledged and accepted by the Account Debtor, and sales of Inventory related to such occupancy charges and services;

 

(b)                                 It is subject to a perfected, first priority security interest in favor of Lender and is not subject to any other assignment, claim, security interest, lien or encumbrance;

 

(c)                                  It is the valid, legally enforceable and unconditional obligation of the Account Debtor with respect thereto, and is not subject to the fulfillment of any condition whatsoever or any counterclaim, credit, trade or volume discount, allowance, discount, rebate or adjustment by the Account Debtor with respect thereto, or to any claim by such Account Debtor denying liability thereunder in whole or in part and the Account Debtor has not refused to accept or has not returned or offered to return any of the Inventory or services which are the subject of such Account; provided, however, that this paragraph shall not apply with respect to the general terms and conditions of the Medicare or the Medicaid program, including the right to recoup prior overpayments from payments due 

 

6

 

on other claims, as opposed to matters relating to the status of a particular Account due from the Medicare or the Medicaid program;

 

(d)                                 The Account Debtor with respect thereto is a resident or citizen of, and is located within, the United States, or is the Medicare or the Medicaid program;

 

(e)                                  It is not an Account arising from a “sale on approval”, “sale or return”, “consignment”, “guaranteed sale” or “bill and hold”, or are subject to any other repurchase or return agreement;

 

(f)                                   It is not an Account with respect to which possession or control of the goods sold giving rise thereto is held, maintained or retained by such Borrower (or by any agent or custodian of such Borrower) for the account of, or subject to, further or future direction from the Account Debtor with respect thereto;

 

(g)                                  It has not arisen out of contracts with the United States or any department, agency or instrumentality thereof, or any state, county, city or other governmental body, or any department, agency or instrumentality thereof, in each case unless such Borrower  has assigned its right to the proceeds of the payment of such Account to Lender in a manner consistent with applicable law governing the assignment of amounts payable under such contracts;

 

(h)                                 If such Borrower maintains a credit limit for an Account Debtor, the aggregate dollar amount of Accounts due from such Account Debtor, including such Account, does not exceed such credit limit;

 

(i)                                     If the Account is evidenced by chattel paper or an instrument, the originals of such chattel paper or instrument shall have been endorsed or assigned and delivered to Lender or, in the case of electronic chattel paper, shall be in the control of Lender, in each case in a manner satisfactory to Lender;

 

(j)                                    Such Account is not due from a so-called private pay person who is not covered by Medicare, Medicaid or commercial insurance, or from a person who has applied for Medicare or Medicaid benefits but has not yet been approved for such benefits, or has been submitted to but has not yet been approved for payment by Medicare, Medicaid or commercial insurance;

 

(k)                                 Such Account is evidenced by an invoice delivered to the related Account Debtor, and is not more than 120 days past the billing date thereof in the case of Accounts due from the Medicaid program, not more than 120 days past the billing date thereof in the case of Accounts due from the Medicare program, and not more than 120 days past the billing date thereof in the case of all other Accounts;

 

(l)                                     It is not an Account with respect to an Account Debtor that is located in any jurisdiction which has adopted a statute or other requirement with respect to which any person that obtains business from within such jurisdiction must file a notice of business activities report or make any other required filings in a timely manner in order to enforce its claims in such jurisdiction’s courts unless (i) such notice of business activities 

 

7

 

report has been duly and timely filed or such Borrower is exempt from filing such report and has provided Lender with satisfactory evidence of such exemption or (ii) the failure to make such filings may be cured retroactively by such Borrower  for a nominal fee;

 

(m)                             The Account Debtor with respect thereto is not such Borrower or an Affiliate of such Borrower;

 

(n)                                 Such Account does not arise out of a contract or order which, by its terms, forbids or makes void or unenforceable the assignment thereof by such Borrower  to Lender and is not unassignable to Lender for any other reason;

 

(o)                                 There is no bankruptcy, insolvency or liquidation proceeding pending by or against the Account Debtor with respect thereto, nor has the Account Debtor suspended business, made a general assignment for the benefit of creditors or failed to pay its debts generally as they come due, or no condition or event has occurred having a material adverse effect on the Account Debtor which would require the Accounts of such Account Debtor to be deemed uncollectible in accordance with GAAP; and

 

(p)                                 It does not violate the negative covenants and does satisfy the affirmative covenants of such Borrower contained in this Agreement, and it is otherwise not unacceptable to Lender for any other reason.

 

An Account which is at any time an Eligible Account, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be an Eligible Account.  Further, with respect to any Account, if Lender at any time hereafter determines in its discretion that the prospect of payment or performance by the Account Debtor with respect thereto is materially impaired for any reason whatsoever, such Account shall cease to be an Eligible Account after notice of such determination is given to such Borrower.

 

Employee Plan:  Any pension, stock bonus, employee stock ownership plan, retirement, profit sharing, deferred compensation, stock option, bonus or other incentive plan, whether qualified or nonqualified, or any disability, medical, dental or other health plan, life insurance or other death benefit plan, vacation benefit plan, severance plan or other employee benefit plan or arrangement, including, without limitation, those pension, profit-sharing and retirement plans of any Borrower described from time to time in its financial statements, and any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or multi-employer plan, maintained or administered by any Borrower or to which any Borrower is a party, or under which any Borrower may have any liability, or by which any Borrower may be bound.

 

Environmental Laws:  Any and all federal, state and local laws (whether under common law, statute, rule, regulation or otherwise), requirements under permits or other authorizations issued with respect thereto, and other orders, decrees, judgments, directives or other requirements of any governmental authority relating to or imposing liability or standards of conduct (including disclosure or notification) concerning protection of human health or the environment or Hazardous Substances or any activity involving Hazardous Substances, all as previously and in the future amended from time to time, as the case may be.

 

ERISA:  The Employee Retirement Income Security Act of 1974, as amended.

 

8

 

Event of Default:  The following: (i) when used in reference to this Agreement, one or more of the events or occurrences referred to in Section 10.1 of this Agreement; and (ii) when used in reference to any other document, a default or event of default under such document that has continued after the giving of any applicable notice and the expiration of any applicable grace or cure periods.

 

Facility:  Each of the 25 Facilities which are operated by Borrowers in the Projects, described as follows:

 

	
Facility
    	
 
    	
Borrower
    	
 
    	
Facility Name
    	
 
    	
Location
    	
 
    	
Beds
    
	
1
    	
 
    	
Borrower   1
    	
 
    	
Thomasville   Nursing and Rehab Center
    	
 
    	
120   Skyline Drive, Thomasville, Thomas County, Georgia
    	
 
    	
52
    
	
2
    	
 
    	
Borrower   2
    	
 
    	
Lumber   City Nursing and Rehabilitation Center
    	
 
    	
93   Highway 19, Lumber City, Telfair County, Georgia
    	
 
    	
86
    
	
3
    	
 
    	
Borrower   3
    	
 
    	
Jeffersonville   Nursing and Rehabilitation Center
    	
 
    	
113   Spring Valley Drive, Jeffersonville, Twiggs County, Georgia
    	
 
    	
131
    
	
4
    	
 
    	
Borrower   4
    	
 
    	
LaGrange   Nursing and Rehab Center
    	
 
    	
2111   West Point Road, LaGrange, Troup County, Georgia
    	
 
    	
138
    
	
5
    	
 
    	
Borrower   5
    	
 
    	
Powder   Springs Nursing and Rehab Center
    	
 
    	
3460   Powder Springs Road, Powder Springs, Cobb County, Georgia
    	
 
    	
208
    
	
6
    	
 
    	
Borrower   6
    	
 
    	
Oceanside   Nursing and Rehab Center
    	
 
    	
7   Rosewood Avenue, a/k/a 77 Van Horne Street, Tybee Island, Chatham County,   Georgia
    	
 
    	
85
    
	
7
    	
 
    	
Borrower   7
    	
 
    	
Tara   at Thunderbolt Nursing and Rehabilitation Center
    	
 
    	
3223   Falligant Avenue, Thunderbolt, Chatham County, Georgia
    	
 
    	
134
    
	
8
    	
 
    	
Borrower   8
    	
 
    	
Savannah   Beach Nursing and Rehab Center
    	
 
    	
26   Van Horne Street, a/k/a 90 Van Horne Street, Tybee Island, Chatham County,   Georgia
    	
 
    	
50
    
	
9
    	
 
    	
Borrower   9
    	
 
    	
Attalla   Health Care
    	
 
    	
915   Stewart Avenue SE, Attalla, Etowah County, Alabama
    	
 
    	
182
    
	
10
    	
 
    	
Borrower   10
    	
 
    	
Mountain   Trace Nursing and Rehabilitation Center
    	
 
    	
417   Mountain Trace Road, Sylva, Jackson County, North Carolina
    	
 
    	
106
    

 

9

 

	
11
    	
 
    	
Borrower   11
    	
 
    	
Autumn   Breeze Healthcare Center
    	
 
    	
1480   Sandtown Road, Marietta, Cobb County, Georgia
    	
 
    	
109
    
	
12
    	
 
    	
Borrower   12
    	
 
    	
Southland   Healthcare and Rehab Center
    	
 
    	
606   Simmons Street, Dublin, Laurens County, Georgia
    	
 
    	
126
    
	
13
    	
 
    	
Borrower   13
    	
 
    	
College   Park Healthcare Center
    	
 
    	
1765   Temple Avenue, College Park, Fulton County, Georgia
    	
 
    	
100
    
	
14
    	
 
    	
Borrower   14
    	
 
    	
Bentonville   Manor Nursing Home
    	
 
    	
224   South Main Street, Bentonville, Benton County, Arkansas
    	
 
    	
95
    
	
15
    	
 
    	
Borrower   15
    	
 
    	
River   Valley Health and Rehabilitation Center
    	
 
    	
5301   Wheeler Ave, Fort Smith, Sebastian County, Arkansas
    	
 
    	
117
    
	
16
    	
 
    	
Borrower   16
    	
 
    	
Heritage   Park Nursing Center
    	
 
    	
1513   South Dixieland Road, Rogers, Benton County, Arkansas
    	
 
    	
100
    
	
17
    	
 
    	
Borrower   17
    	
 
    	
Homestead   Manor Nursing Home
    	
 
    	
826   North Street, Stamps, LaFayette County, Arkansas
    	
 
    	
94
    
	
18
    	
 
    	
Borrower   18
    	
 
    	
Eaglewood   Care Center
    	
 
    	
2000   Villa Road, Springfield, Clark County, Ohio
    	
 
    	
113
    
	
19
    	
 
    	
Borrower   19
    	
 
    	
Stone   County Nursing and Rehabilitation Center
    	
 
    	
706   Oak Grove Street, Mountain View, Stone County, Arkansas
    	
 
    	
97
    
	
20
    	
 
    	
Borrower   20
    	
 
    	
Northridge   Healthcare and Rehabilitation
    	
 
    	
2501   John Ashley Drive, North Little Rock, Pulaski County, Arkansas
    	
 
    	
140
    
	
21
    	
 
    	
Borrower   21
    	
 
    	
Little   Rock Healthcare and Rehab, a/k/a West Markham Sub Acute & Rehab Center
    	
 
    	
5720   W. Markham, Little Rock, Pulaski County, Arkansas
    	
 
    	
157
    
	
22
    	
 
    	
Borrower   22
    	
 
    	
Woodland   Hills HC Nursing
    	
 
    	
8701   Riley Drive, Little Rock, Pulaski County, Arkansas
    	
 
    	
140
    
	
23
    	
 
    	
Borrower   23
    	
 
    	
Abington   Place Health & Rehab Center
    	
 
    	
1516   South Cumberland Street, Little Rock, Pulaski County, Arkansas
    	
 
    	
120
    
	
24
    	
 
    	
Borrower   24
    	
 
    	
Glenvue   Health and Rehabilitation
    	
 
    	
721   N. Veterans Boulevard, Glennville, Tatnall County, Georgia
    	
 
    	
160
    

 

10

 

	
25
    	
 
    	
Borrower   25
    	
 
    	
Coosa   Valley Healthcare
    	
 
    	
513   Pineview Avenue, Glencoe, Etowah County, Alabama 35905
    	
 
    	
124
    

 

GAAP:  Generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination, provided, however, that interim financial statements or reports shall be deemed in compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required by GAAP.

 

Gross Revenues:  All income and receipts from all sources, including, without limitations, with respect to each Facility.

 

Guarantor:  AdCare.

 

Guaranty:  As defined in Section 4.1 hereof.

 

Hazardous Substance:  Any substance, chemical, material or waste (i) the presence of which causes a nuisance or trespass of any kind; ii) which is regulated by any federal, state or local governmental authority because of its toxic, flammable, corrosive, reactive, carcinogenic, mutagenic, infectious, radioactive, or other hazardous property or because of its effect on the environment, natural resources or human health and safety, including, but not limited to, petroleum and petroleum products, asbestos containing materials, polychlorinated biphenyls, lead and lead based paint, radon, radioactive materials, flammables and explosives; or (iii) which is designated, classified, or regulated as being a hazardous or toxic substance, material, pollutant, waste (or a similar such designation) under any federal, state or local law, regulation or ordinance, including under any Environmental Law such as the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. §9601 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. §11001 et seq.), the Hazardous Substances Transportation Act (49 U.S.C. §1801 et seq.), or the Clean Air Act (42 U.S.C. §7401 et seq.).

 

Hedging Agreements:  The following: (i) any ISDA Master Agreement between any Borrower and Lender or any other provider, (ii) any Schedule to Master Agreement between any Borrower and Lender or any other provider, and (iii) all other agreements entered into from time to time by any Borrower and Lender or any other provider relating to Hedging Transactions.

 

Hedging Transaction:  Any transaction (including an agreement with respect thereto) now existing or hereafter entered into between any Borrower and Lender or any other provider which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or 

 

11

 

any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

 

Interest Charges:  With respect to any party, for any period, the sum of: (i) all interest, charges and related expenses payable with respect to that period to a lender in connection with borrowed money or the deferred purchase price of assets that are treated as interest in accordance with GAAP, plus (ii) the portion of Capitalized Lease Obligations with respect to that period that should be treated as interest in accordance with GAAP, plus (iii) all charges paid or payable (without duplication) during that period with respect to any hedging agreements.

 

Leases:  Leases by Owners to each of Borrower 11 through Borrower 24 of the respective Projects and subleases by Sublessor to each of Borrower 1 through Borrower 8 of the respective Projects dated as follows:

 

	
Facility
    	
 
    	
Borrower
    	
 
    	
Owner/Sublessor
    	
 
    	
Date of Lease/Sublease
    
	
1
    	
 
    	
Borrower   1
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - August 1, 2010
    
	
2
    	
 
    	
Borrower   2
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - August 1, 2010
    
	
3
    	
 
    	
Borrower   3
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - August 1, 2010
    
	
4
    	
 
    	
Borrower   4
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - August 1, 2010
    
	
5
    	
 
    	
Borrower   5
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - August 1, 2010
    
	
6
    	
 
    	
Borrower   6
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - September 1, 2010
    
	
7
    	
 
    	
Borrower   7
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - September 1, 2010
    
	
8
    	
 
    	
Borrower   8
    	
 
    	
Owner,   Master Lease Lessor - William Foster

Sublessor   - ADK Georgia, LLC
    	
 
    	
Master   Lease - August 1, 2010

Sublease   - September 1, 2010
    
	
9
    	
 
    	
Borrower   9
    	
 
    	
Owner,   Borrower 9
    	
 
    	
None
    
	
10
    	
 
    	
Borrower   10
    	
 
    	
Owner,   Borrower 10
    	
 
    	
None
    

 

12

 

	
11
    	
 
    	
Borrower   11
    	
 
    	
Owner,   Mt. Kenn Property Holdings, LLC
    	
 
    	
May   1, 2011
    
	
12
    	
 
    	
Borrower   12
    	
 
    	
Owner,   Erin Property Holdings, LLC
    	
 
    	
May   1, 2011
    
	
13
    	
 
    	
Borrower   13
    	
 
    	
Owner,   CP Property Holdings, LLC
    	
 
    	
September   6, 2011
    
	
14
    	
 
    	
Borrower   14
    	
 
    	
Owner,   Benton Property Holdings, LLC
    	
 
    	
August   31, 2011
    
	
15
    	
 
    	
Borrower   15
    	
 
    	
Owner,   Valley River Property Holdings, LLC
    	
 
    	
August   31, 2011
    
	
16
    	
 
    	
Borrower   16
    	
 
    	
Owner,   Park Heritage Property Holdings, LLC
    	
 
    	
August   31, 2011
    
	
17
    	
 
    	
Borrower   17
    	
 
    	
Owner,   Homestead Property Holdings, LLC
    	
 
    	
August   31, 2011
    
	
18
    	
 
    	
Borrower   18
    	
 
    	
Owner,   Woodland Manor Property Holdings, LLC
    	
 
    	
December   29, 2011
    
	
19
    	
 
    	
Borrower   19
    	
 
    	
Owner,   Mount V Property Holdings, LLC
    	
 
    	
November   30, 2011
    
	
20
    	
 
    	
Borrower   20
    	
 
    	
Owner,   Northridge HC&R Property Holdings, LLC
    	
 
    	
April   1, 2012
    
	
21
    	
 
    	
Borrower   21
    	
 
    	
Owner,   Little Rock HC&R Property Holdings, LLC
    	
 
    	
April   1, 2012
    
	
22
    	
 
    	
Borrower   22
    	
 
    	
Owner,   Woodland Hills HC Property Holdings, LLC
    	
 
    	
April   1, 2012
    
	
23
    	
 
    	
Borrower   23
    	
 
    	
Owner,   APH&R Property Holdings, LLC
    	
 
    	
June   1, 2012
    
	
24
    	
 
    	
Borrower   24
    	
 
    	
Owner,   Glenvue H&R Property Holdings, LLC
    	
 
    	
June   19, 2012
    
	
25
    	
 
    	
Borrower   25
    	
 
    	
Owner,   Borrower 25
    	
 
    	
None
    

 

Legal Requirements:  As to any person or party, the organizational and governing documents of such person or party, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such person or party or any of its property or to which such person or party or any of its property is subject.

 

Lender:  The PrivateBank and Trust Company, an Illinois banking corporation.

 

Letter of Credit:  An Irrevocable Standby Letter of Credit in the Letter of Credit Amount, issued by Lender in favor one or more commercial insurance companies as beneficiary, for the account of one or more of Borrowers or AdCare.

 

Letter of Credit Amount:  $100,000, it being understood that the Letter of Credit Amount is a part of the Loan Amount and not in addition to the Loan Amount.

 

Letter of Credit Documents:  The following: (i) the Master Letter of Credit Agreement dated as of February 14, 2012, originally from Borrowers 14 through 19, and joined in herein by 

 

13

 

the other Borrowers, and (ii) any Application for the issuance of a Letter of Credit from Borrowers in favor of Lender.

 

Loan:  The loan to be made pursuant to this Agreement, including, without limitation, the issuance of any Letter of Credit

 

Loan Amount:  $10,600,000, which includes the $100,000 Letter of Credit Amount.

 

Loan Documents:  This Agreement, the documents specified in Article 4 hereof, the Letter of Credit Documents, and any other instruments evidencing, securing or guarantying obligations of any party under the Loan, and any Bank Product Agreements to which Lender or any of its Affiliates is a party, including, without limitation, any Hedging Agreements to which Lender is a party.

 

Loan Expenses:  All interest, charges, costs and expenses incurred by Lender in connection with the Loan, including, but not limited to, (i) interest due on the Loan and any points, loan fees, service charges, commitment fees or other fees due to Lender in connection with the Loan; (ii) all title examination, survey, escrow, filing, search, recording and registration fees and charges; (iii) all fees and disbursements of architects, engineers and consultants engaged by any Borrower and Lender; (iv) all documentary stamp and other taxes and charges imposed by law on the issuance or recording of any of the Loan Documents; (v) all appraisal fees; (vi) all title, casualty, liability, payment, performance or other insurance or bond premiums; (vii) all reasonable fees and disbursements of legal counsel engaged by Lender in connection with the Loan, including, without limitation, counsel engaged in connection with the origination, negotiation, document preparation, consummation, enforcement or administration of this Agreement or any of the Loan Documents; and (viii) any amounts required to be paid by any Borrower under this Agreement or any Loan Document after the occurrence of an Event of Default under this Agreement or any of the other Loan Documents.

 

Loan Opening:  The first disbursement of Loan Proceeds.

 

Loan Proceeds:  All amounts advanced as part of the Loan, whether advanced directly to Borrowers or otherwise, it being understood that any amount drawn on the Letter of Credit shall constitute Loan Proceeds.

 

Master Lease:  The Lease Agreement dated as of August 1, 2010, as amended by a First Amendment to Lease dated as of August 31, 2010, by and between William M. Foster, as Lessor, and Sublessor, as Lessee.

 

Maturity Date:  September 20, 2015.

 

Net Income:  With respect to any party, for any period, the net income (or loss) of such party for such period as determined in accordance with GAAP, excluding any gains from dispositions of assets, any extraordinary gains and any gains from discontinued operations.

 

Note:  As defined in Section 4.1 hereof.

 

14

 

Old Operator:  A prior operator of a Facility which is being operated by a Borrower under an Operations Transfer Agreement.

 

Operations Transfer Agreement:  An agreement under which, for a temporary period, a Borrower operates its Facility under the license or billing numbers, or both, of a prior operator of such Facility.

 

Owners:  In the case of each Facility, the Owner shown in the definition of the term Lease in this Section.

 

Permitted Substance:  Substances used by any Borrower or any Owner in the ordinary course of its business, or by any Borrower, any Owner and their contractors and subcontractors in the course of construction on or at any Facility or any Project, including, without limitation, medical waste, and in the case of all of the foregoing, used in compliance with all Environmental Laws.

 

Prohibited Transfer:  As defined in Section 7.10 hereof.

 

Project:  With respect to each Facility, the land, building and other improvements on and within which such Facility is located, the ownership, leasing and subleasing of each of which is as shown in the definition of the term Leases in this Section.

 

Rental Expense:  With respect to any party, for any period, the rental expense for real estate leased by such party as lessee for such period as determined in accordance with GAAP.

 

Signing Entity:  Each entity (other than a Borrower itself) that appears in the signature block of any Borrower in this Agreement, if any.

 

State:  In the case of each Facility, the State in which such Facility is located.

 

Sublessor:  ADK Georgia, LLC, a Georgia limited liability company

 

1.2          Other Terms Defined in Code.  All other capitalized words and phrases used herein and not otherwise specifically defined herein shall have the respective meanings assigned to such terms in the Code, to the extent the same are used or defined therein.

 

ARTICLE 2

 

REPRESENTATIONS AND WARRANTIES

 

2.1          Representations and Warranties.  To induce Lender to execute and perform this Agreement, each Borrower hereby represents, covenants and warrants to Lender as follows:

 

(a)           Each Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of which is stated in the Preambles to this Agreement, and if such State is not the State in which its Facility is located, such Borrower is duly registered or qualified to transact business and in good 

 

15

 

standing in the State in which its Facility is located.  Each Borrower has full power and authority to conduct its business as presently conducted, to lease and operate its Facility, to enter into this Agreement and to perform all of its duties and obligations under this Agreement and under the Loan Documents, all of which has been duly authorized by all necessary Legal Requirements applicable to such Borrower.  Each Signing Entity is duly organized, validly existing and in good standing under the laws of the State in which it is organized, has full power and authority to conduct its business as presently conducted and to execute this Agreement and the other Loan Documents to which the applicable Borrower is a party in the capacity shown in the signature block of such Borrower contained in this Agreement, and such execution has been duly authorized by all necessary Legal Requirements applicable to such Signing Entity.  Neither any Borrower nor Guarantor has been convicted of a felony and there are no proceedings or investigations being conducted involving criminal activities of either any Borrower or Guarantor.  The direct and indirect ownership of Borrowers is as shown in Exhibit A attached to this Agreement.

 

(b)           AdCare is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio.  AdCare has full power and authority to conduct its business as presently conducted and to enter into and to perform the Guaranty and the other Loan Documents to which it is a party and to perform all of its duties and obligations thereunder, all of which has been duly authorized by all necessary Legal Requirements applicable to AdCare.

 

(c)           Each Borrower and Guarantor is able to pay its debts as such debts become due, and each has capital sufficient to carry on its respective present businesses and transactions and all businesses and transactions in which it is about to engage.  Neither any Borrower nor Guarantor (i) is bankrupt or insolvent, (ii) has made an assignment for the benefit of its respective creditors, (iii) has had a trustee or receiver appointed, (iv) has had any bankruptcy, reorganization or insolvency proceedings instituted by or against it, or (v) shall be rendered insolvent by its execution, delivery or performance of the Loan Documents or by the transactions contemplated thereunder.  There is no Uniform Commercial Code financing statement on file that names any Borrower or Guarantor as debtor and covers any of the collateral for the Loan, and there is no judgment or tax lien outstanding against any Borrower or Guarantor.

 

(d)           This Agreement, the Note, the other Loan Documents and any other documents and instruments required to be executed and delivered by any Borrower or Guarantor in connection with the Loan, when executed and delivered, will constitute the duly authorized, valid and legally binding obligations of the party required to execute the same and will be enforceable strictly in accordance with their respective terms (except to the extent that enforceability may be affected or limited by applicable bankruptcy, insolvency and other similar debtor relief laws affecting the enforcement of creditors’ rights generally); and no basis exists for any claim against Lender under this Agreement, under the Loan Documents or with respect to the Loan; and enforcement of this Agreement and the Loan Documents is subject to no defenses of any kind.

 

16

 

(e)           The execution, delivery and performance of this Agreement, the Note, the other Loan Documents and any other documents or instruments to be executed and delivered by any Borrower or Guarantor pursuant to this Agreement or in connection with the Loan and the use and occupancy of any Facility will not:  (i) violate any Legal Requirements applicable to any Borrower or any Signing Entity, or (ii) conflict with, be inconsistent with, or result in any breach or default of any of the terms, covenants, conditions or provisions of any indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind to which any Borrower, Guarantor or any Signing Entity is a party or by which any of them may be bound.  Neither any Borrower, Guarantor nor any Signing Entity is in default (without regard to grace or cure periods) under any contract or agreement to which it is a party, the effect of which default will adversely affect the performance by any Borrower or Guarantor of its obligations pursuant to and as contemplated by the terms and provisions of this Agreement or the other Loan Documents.

 

(f)            No condition, circumstance, event, agreement, document, instrument, restriction, litigation or proceeding, or threatened litigation or proceeding or basis therefor, exists which could (i) adversely affect the validity or priority of the liens and security interests granted Lender under the Loan Documents; (ii) materially adversely affect the ability of any Borrower or Guarantor to perform their obligations under the Loan Documents; or (iii) constitute a Default or Event of Default under this Agreement or any of the other Loan Documents.

 

(g)           It is a condition of this Agreement and the Loan that each Facility and the use and occupancy of each Facility do not violate or conflict with any applicable law, statute, ordinance, rule, regulation or order of any kind, including, without limitation, Environmental Laws, zoning, building, land use, noise abatement, occupational health and safety or other laws, any building permit or any Declarations, and if a third-party is required under any Declarations or other documents, to consent to use or operation of such Facility, the Borrower which is the lessee thereof has obtained such approval from such party, and to the best of Borrowers’ knowledge, such condition is satisfied.  In addition, and without limiting the foregoing, each Borrower shall (i) ensure that no person or entity which owns a controlling interest in or otherwise controls such Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (ii) not use or permit the use of any Loan Proceeds to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (iii) comply with all applicable Bank Secrecy Act laws and regulations, as amended.

 

(h)           Each of the following is a condition of this Agreement and the Loan:  Except as disclosed in writing to Lender, including, without limitation, in any environmental site assessment delivered to Lender, the Facilities have never been used for any activities which, directly or indirectly, involve the use, generation, treatment, storage, transportation or disposal of any Hazardous Substances other than Permitted Substances, and no Hazardous Substances other than Permitted Substances exist on the Facilities or under the Facilities or in any surface waters or groundwaters on or under the 

 

17

 

Facilities.  The Facilities and their existing and prior uses have at all times complied with and will comply with all Environmental Laws, and Borrowers have not violated any Environmental Laws.  To the best of Borrowers’ knowledge, each of such conditions is satisfied.

 

(i)            There are no facilities on any Facility which are subject to reporting under any State laws or Section 312 of the Federal Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. Section 11022), and federal regulations promulgated thereunder.  Except as disclosed in writing to Lender, including, without limitation, in any environmental site assessment delivered to Lender, each Facility does not contain any underground or above ground storage tanks.

 

(j)            All financial statements submitted by any Borrower or Guarantor to Lender in connection with the Loan are true and correct in all material respects, have been prepared in accordance with GAAP consistently applied, and fairly present the respective financial conditions and results of operations of the entities and persons which are their subjects.

 

(k)           This Agreement and all financial statements, budgets, schedules, opinions, certificates, confirmations, applications, rent rolls, affidavits, agreements, and other materials submitted to Lender in connection with or in furtherance of this Agreement by or on behalf of any Borrower or Guarantor fully and fairly state the matters with which they purport to deal, and neither misstate any material fact nor, separately or in the aggregate, fail to state any material fact necessary to make the statements made not misleading in any material respect.

 

(l)            All utility and municipal services required for the construction, occupancy and operation of each Facility, including, but not limited to, water supply, storm and sanitary sewage disposal systems, cable services, gas, electric and telephone facilities are available for use by and currently provide service to such Facility.

 

(m)          Subject to the provisions of Section 7.7(b) of this Agreement, all governmental permits and licenses required by applicable law in order for (i) the applicable Owners to own and lease their Projects to Borrower 11 through Borrower 24 and to Sublessor under the Master Lease, (ii) Sublessor to sublease the applicable Projects to Borrower 1 through Borrower 8, and (iii) each Borrower to operate its Facility, have been validly issued and are in full force.

 

(n)           Each of the following is a condition of this Agreement and the Loan:  The storm and sanitary sewage disposal system, water system, drainage system and all mechanical systems of each Facility comply with all applicable laws, statutes, ordinances, rules and regulations, including, without limitation, all Environmental Laws.  The applicable environmental protection agency, pollution control board and/or other governmental agencies having jurisdiction of such Facility have issued their permits for the construction, tap-on and operation of those systems.  To the best of Borrowers’ knowledge, each of such conditions is satisfied.

 

18

 

(o)                                 It is a condition of this Agreement and the Loan that all utility, parking, access (including curb-cuts and highway access), construction, recreational and other permits and easements required for the use of each Facility have been granted and issued, and to the best of Borrowers’ knowledge, such condition is satisfied.

 

(p)                                 The Loan, including interest rate, fees and charges as contemplated hereby, is a “business loan” within the meaning of subparagraph (1)(c) contained in Section 205/4 of Chapter 815 of the Illinois Compiled Statutes, as amended; the Loan is an exempted transaction under the Truth In Lending Act, 12 U.S.C. §1601 et seq.; and the Loan does not, and when disbursed will not, violate the provisions of the usury laws of the State, any consumer credit laws or the usury laws of any state which may have jurisdiction over this transaction, any Borrower or any property securing the Loan.

 

(q)                                 The Master Lease is in full force and effect and no Defaults or Events of Default on the part of Sublessor have occurred and are continuing thereunder. Each Lease is in full force and effect and no Defaults or Events of Default on the part of the applicable Borrower have occurred and are continuing thereunder.  No Borrower other than Borrower 23 and Borrower 24 is operating its Facility under any Operations Transfer Agreement.  Each Operations Transfer Agreement is in full force and effect and no Defaults or Events of Default on the part of any Borrower or any Old Operator have occurred and are continuing thereunder.

 

(r)                                    All Employee Plans of each Borrower meet the minimum funding standards of Section 302 of ERISA and 412 of the Internal Revenue Code where applicable, and each such Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified.  No withdrawal liability has been incurred under any such Employee Plans and no “Reportable Event” or “Prohibited Transaction” (as such terms are defined in ERISA), has occurred with respect to any such Employee Plans, unless approved by the appropriate governmental agencies.  Each Borrower has promptly paid and discharged all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed might result in the imposition of a lien against any of its properties or assets.

 

(s)                                   Each of the following is a condition of this Agreement and the Loan:  There are no strikes, lockouts or other labor disputes pending or threatened against any Borrower, hours worked by and payment made to employees of any Borrower have not been in violation of the Fair Labor Standards Act or any other applicable law, and no unfair labor practice complaint is pending, or threatened, against any Borrower before any governmental authority.  To the best of Borrowers’ knowledge, each of such conditions is satisfied

 

(t)                                    Subject to the provisions of Section 7.7(b) of this Agreement, each Facility has all necessary licenses, permits and certifications required by any applicable governmental authority to operate and maintain a skilled nursing facility therein with its current number of beds in service, and participates in the Medicare and Medicaid programs.  Each Borrower has complied and will comply with all applicable requirements of the United States of America, the State of Arkansas and all applicable 

 

19

 

local governments, and of its agencies and instrumentalities, necessary to operate and maintain its Facility as such a facility.  All utilities necessary for use, operation and occupancy of each Project and each Facility are available to such Project and such Facility.  All requirements for unrestricted use of each Project and each Facility as a skilled nursing facility under the rules and regulations of each department and agency of the State having jurisdiction over such Project or such Facility, have been and will continue to be fulfilled.  All building, zoning, safety, health, fire, water district, sewerage and environmental protection agency and any other permits or licenses which are required by any governmental authority for use, occupancy and operation of each Project and each Facility as a skilled nursing facility have been obtained and are and will be maintained in full force and effect.  Neither any Borrower, any Owner, any Facility, any Project nor Sublessor or Guarantor is subject to any corporate integrity agreement, compliance agreement or other agreement with any governmental authority or agency governing the operation of any Project or any Facility or the operations of any Borrower, any Owner, Sublessor or Guarantor.

 

(u)                                 This Agreement creates a valid security interest in favor of Lender in the Collateral and, when properly perfected by filing in the appropriate jurisdictions, or by possession or control of such Collateral by Lender or delivery of such Collateral to Lender, shall constitute a valid, perfected, first-priority security interest in such Collateral, to the extent that a valid, perfected, first-priority security interest in such Collateral may be perfected by filing or by possession or control of such Collateral.

 

(v)                                 Each Borrower, each Owner and Sublessor are in compliance in all material respects with all laws, orders, regulations and ordinances of all federal, foreign, state and local governmental authorities binding upon or affecting the business, operation or assets of any Borrower, any Owner or Sublessor.  Neither any Borrower nor any Owner or Sublessor: (i) has had a civil monetary penalty assessed against it under the Social Security Act (the “SSA”) Section 1128(a), other than nominal amounts for violations which were not of a material nature, (ii) has been excluded from participation under the Medicare program or under a State health care program as defined in the SSA Section 1128(h) (“State Health Care Program”), or (iii) has been convicted (as that term is defined in 42 C.F.R. Section 1001.2) of any of the following categories of offenses as described in the SSA Section 1127(a) and (b)(l), (2), (3): (A) criminal offenses relating to the delivery of an item or service under Medicare or any State Health Care Program; (B) criminal offenses under federal or state law relating to patient neglect or abuse in connection with the delivery of a health care item or service; (C) criminal offenses under federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service or with respect to any act or omission in a program operated by or financed in whole or in part by any federal, state or local government agency; (D) federal or state laws relating to the interference with or obstruction of any investigations into any criminal offense described in (A) through (C) above; or (E) criminal offenses under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance.  Without limiting the generality of the foregoing, neither any Borrower nor any Owner or Sublessor is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in 

 

20

 

any Medicare or Medicaid Provider Agreement or other agreement or instrument to which any Borrower or any Owner or Sublessor is a party, which default has resulted in, or if not remedied within any applicable grace period could result in, the revocation, termination, cancellation or suspension of the Medicare or Medicaid Certification of any Borrower or any Owner or Sublessor.

 

2.2                               Continuation of Representations and Warranties.  Each Borrower hereby covenants, warrants and agrees that the representations and warranties made in Section 2.1 hereof shall be and shall remain true and correct in all material respects at the time of the Loan Opening and at all times thereafter so long as any part of the Loan shall remain outstanding.  Each request for disbursement of Loan Proceeds shall constitute a reaffirmation that these representations and warranties are true in all material respects as of the date of such request and will be true in all material respects on the date of the disbursement.

 

ARTICLE 3

 

THE LOAN

 

3.1                               Agreement to Lend.

 

(a)                                 On the terms of and subject to the conditions of this Agreement, Lender agrees to make advances on the Loan at such times as Borrowers may from time to time request until, but not including, the Maturity Date, and in such amounts as Borrowers may from time to time request, provided, however, that at any time, the aggregate principal balance outstanding on the Loan, plus the combined face amount of all outstanding Letters of Credit, shall not exceed the Availability.  The Loan shall be a revolving loan and may be repaid and, subject to the terms and conditions hereof, borrowed again up to, but not including the Maturity Date unless the Loan is otherwise accelerated, terminated or extended as provided in this Agreement.  The Loan shall be used by Borrowers as working capital for the operation of the Facilities.  The Loan shall be disbursed in accordance with Article 5 of this Agreement, including, without limitation, the borrowing procedures contained in Section 5.3 of this Agreement.  A portion of the Loan may be used for the issuance of the Letter of Credit in accordance with Section 3.2 of this Agreement.  The Loan shall be evidenced by the Note executed by Borrowers and shall be guaranteed by Guarantor pursuant to the Guaranty.

 

(b)                                 The provisions of this paragraph (b) shall apply notwithstanding any other provisions of this Agreement.  AdCare or certain of its Affiliates, or both, have a liability to the State of Georgia for certain taxes in the amount of $1,250,145 (the “Taxes”).  The parties have determined that on the date of this Agreement there is sufficient Availability for a disbursement to be made on the Loan to pay the Taxes.  On or as soon as practicable after the date of this Agreement, Lender shall make a disbursement on the Loan in the amount of the Taxes and Borrowers shall promptly use such disbursement to pay the Taxes.  Borrowers shall provide Lender with copies of the checks which are issued to pay the Taxes at the time the checks are issued, and shall within 30 days after the date of this Agreement provide Lender with copies of cancelled checks evidencing the payment of the Taxes.  If within 30 days after the date of this Agreement Borrowers have not provided Lender with such cancelled checks or other evidence of 

 

21

 

the payment of the Taxes satisfactory to Lender, or any portion thereof, the Taxes or such portion thereof shall be deemed to be unpaid, and the Availability shall be deemed to be reduced by the amount of the unpaid Taxes or such portion thereof until such time as Borrowers have provided Lender with such cancelled checks or other evidence of the payment of the Taxes or such portion thereof satisfactory to Lender.

 

3.2                               Letter of Credit.

 

(a)                                 Lender previously issued the Letter of Credit in the amount of $100,000 pursuant to the Master Letter of Credit Agreement to which Borrowers 14 through 19 were a party, and an Application.  The Letter of Credit is currently outstanding in the face amount of $100,000.  Such Letter of Credit shall be deemed to be a Letter of Credit for all purposes of this Agreement.

 

(b)                                 Borrowers 1 through 13 and Borrowers 20 through 25 hereby join in and agree to be jointly and severally obligated under and bound by each of the Letter of Credit Documents.

 

(c)                                  Any amounts drawn on any Letter of Credit shall be evidenced by the Letter of Credit Documents and the Note and shall be deemed to be amounts disbursed and outstanding thereunder as of the date such amounts are drawn.  Notwithstanding anything to the contrary contained in this Agreement or the Note, amounts drawn on the Letter of Credit shall bear interest at the rate provided in the Letter of Credit Documents, and shall be payable by Borrowers on the terms provided in the Letter of Credit Documents.

 

(d)                                 The Letter of Credit Documents shall be secured by the security interests created under this Agreement, and the obligations of Borrowers under the Letter of Credit Documents shall be guaranteed pursuant to the Guaranty.  For the avoidance of doubt, the security interests created in Sections 3.2(i), 3.7(f), 4.2(b), 7.8(b) and 8.1 of this Agreement shall secure the reimbursement by Borrowers of all amounts drawn on any Letter of Credit and the payment and performance of all of the obligations of Borrowers under the Letter of Credit Documents.

 

(e)                                  Borrowers paid a non-refundable annual letter of credit fee to Lender in advance on the date of the issuance of the Letter of Credit.  Borrowers shall pay a non-refundable annual letter of credit fee to Lender in advance on each anniversary of the date of the issuance of the Letter of Credit, in an amount equal to 2.5% of the face amount of the Letter of Credit.

 

(f)                                   Borrowers hereby covenant and agree with Lender that Borrowers shall promptly pay any amount due under the Letter of Credit Documents as and when the same shall become due and payable.

 

(g)                                  Each of the Letter of Credit Documents shall be subject to the provisions of Section 12.2 of this Agreement, which Section is hereby incorporated into and made of part of each of the Letter of Credit Documents.

 

(h)                                 If any Letter of Credit has not been presented for a draw pursuant to its terms, such Letter of Credit shall terminate upon the earlier to occur of the stated expiry date thereof or the date such Letter of Credit is returned to the Lender for cancellation.  Except as provided in paragraph (i) of this Section, in no event shall the Lender be required to release the liens and 

 

22

 

security interests created by this Agreement and the other Loan Documents prior to the time that all Letters of Credit have so terminated.

 

(i)                                     If at a time when a Letter of Credit is outstanding, the Maturity Date of the Loan and the Note occurs and is not extended, or the obligation of Lender to make additional cash disbursements on the Loan (other than by paying draws on Letters of Credit) under the Loan Agreement otherwise terminates, Borrowers shall immediately deposit into an interest-bearing cash collateral deposit account in the name of Borrowers held by Lender (the “L/C Cash Collateral Account”), an amount equal to the then face amount of such Letter of Credit (a “Deposit”).  Borrowers acknowledge and agree that the L/C Cash Collateral Account and amounts on deposit therein will be subject to the security interests in the Borrowers’ Deposit Accounts (as defined in the Code) and amounts on deposit therein which are created under Section 3.7(f) of this Agreement.  The failure of Borrowers to make any Deposit as provided above shall constitute an Event of Default under this Agreement, and upon or at any time after the occurrence of such Event of Default, Lender may exercise any or all of its remedies under the Loan Documents and under applicable law.  Provided that Borrowers have made any required Deposit as provided above, and Lender no longer has any obligation to make any additional cash disbursements on the Loan (other than by paying draws on Letters of Credit), and the Loan has otherwise been paid in full, and no Default or Event of Default under this Agreement has occurred and is continuing, Lender shall release the liens and security interests created by this Agreement and the other Loan Documents, other than the security interest in the L/C Cash Collateral Account.  Provided that no Default or Event of Default under this Agreement has occurred and is continuing, Lender shall release the L/C Cash Collateral Account at such time as Lender no longer has any liability under any Letter of Credit and all obligations to Lender under this Agreement and the other Loan Documents have been fully paid and performed.

 

3.3                               Interest.  Interest on funds advanced hereunder shall —

 

(i)                                     From the Loan Opening until the Maturity Date, accrue at the interest rates provided for in the Note;

 

(ii)                                  Be computed upon advances of the Loan from and including the date of each advance by Lender to or for the account of Borrowers (whether to an escrow or otherwise), on the basis of a 360-day year and the actual number of days elapsed in any portion of a month in which interest is due; and

 

(iii)                               Be paid by Borrowers to Lender together with principal payments, if any, in the manner set forth in the Note.

 

3.4                               Principal Payments; Maturity Date.

 

(a)                                 Prior to the Maturity Date, principal payments, if any, shall be made as provided in the Note.

 

(b)                                 In the event the outstanding principal balance of the Loan together with the combined face amount of all outstanding Letters of Credit at any time exceeds the Availability, Borrowers shall make such repayments of the Loan as shall be necessary to eliminate such excess.  In the event that at any time there is no principal balance outstanding on the Loan and 

 

23

 

the combined face amount of all outstanding Letters of Credit exceeds the Availability, then Borrowers shall immediately deposit the amount of such excess in a cash collateral account as security for the Loan in the name of one or more of Borrowers with Lender, and shall maintain such amount on deposit in such cash collateral account so long as and to the extent that the face amount of the combined face amount of all outstanding Letters of Credit exceeds the Availability.

 

(c)                                  The entire principal balance of the Note and all accrued and unpaid interest thereon shall be due, if not sooner paid, on the Maturity Date.

 

3.5                               Loan Fee.  In consideration of Lender’s agreement to make the Loan, on the date of the execution and delivery of this Agreement, Borrowers shall pay to Lender a non-refundable fee in the amount of $79,500.  Borrowers shall also pay fees to Lender in connection with the Letter of Credit as provided in Section 3.2(e) of this Agreement.

 

3.6                               Non-Utilization Fee.  Borrowers agree to pay to Lender a non-utilization fee in an equal to 0.50% per annum calculated on the difference between the Loan Amount and the sum of the daily average amount of principal outstanding on the Loan plus the daily average face amount of the outstanding Letter of Credit.  Such non-utilization fee shall be (i) calculated on the basis of a year consisting of 360 days, (ii) paid for the actual number of days elapsed, and (iii) payable quarterly in arrears on the last day of each March, June, September and December, commencing on September 30, 2012, on the Maturity Date of the Loan, and on the date of the occurrence of any Event of Default under this Agreement.  The amount of such fee payable on September 30, 2012, shall be calculated for the period commencing on the date of this Agreement and ending on September 30, 2012.

 

3.7                               Uniform Commercial Code Matters.

 

(a)                                 All references in this Agreement and the other Loan Documents to the Code are to the Code as from time to time in effect.

 

(b)                                 Each Borrower represents and warrants to Lender as follows:

 

(i)                                     The exact legal name of such Borrower is as stated in the first paragraph of this Agreement.

 

(ii)                                  The nature of the Borrower entity and the State in which it is organized is as stated in the first paragraph of this Agreement.  The organizational numbers of Borrowers in such State are as follows:

 

	
Borrower
    	
 
    	
Organizational Number
    
	
Borrower 1
    	
 
    	
10049720
    
	
Borrower 2
    	
 
    	
10049712
    
	
Borrower 3
    	
 
    	
10049698
    
	
Borrower 4
    	
 
    	
10049705
    
	
Borrower 5
    	
 
    	
10049694
    
	
Borrower 6
    	
 
    	
10049766
    

 

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Borrower 7
    	
 
    	
10049762
    
	
Borrower 8
    	
 
    	
10049771
    
	
Borrower 9
    	
 
    	
10010525
    
	
Borrower 10
    	
 
    	
1970736
    
	
Borrower 11
    	
 
    	
10081155
    
	
Borrower 12
    	
 
    	
10081149
    
	
Borrower 13
    	
 
    	
10081152
    
	
Borrower 14
    	
 
    	
11036042
    
	
Borrower 15
    	
 
    	
11036049
    
	
Borrower 16
    	
 
    	
11036045
    
	
Borrower 17
    	
 
    	
11036039
    
	
Borrower 18
    	
 
    	
11070717
    
	
Borrower 19
    	
 
    	
11064313
    
	
Borrower 20
    	
 
    	
12008905
    
	
Borrower 21
    	
 
    	
12008900
    
	
Borrower 22
    	
 
    	
12008912
    
	
Borrower 23
    	
 
    	
12013594
    
	
Borrower 24
    	
 
    	
12030306
    
	
Borrower 25
    	
 
    	
10010522
    

 

(iii)                               The address of such Borrower’s chief executive office is Two Buckhead Plaza, 3050 Peachtree Road NW, Suite 355, Atlanta, Georgia 30305.

 

(iv)                              Each Borrower has no place of business other than the chief executive office referred to in (iii) above, at the address for notices set forth in Section 12.10 of this Agreement, at its Facility in the State, and at 1145 Hembree Road, Roswell, Georgia 30076.

 

(c)                                  Each Borrower shall not, without not less than 30 days’ prior written notice to Lender, change its legal name, the nature of the Borrower entity, the State in which it is organized, its organizational number in the State in which it is organized, if any, the address of its chief executive office, or the addresses of its other places of business, from those referred to in paragraph (b) of this Section.

 

(d)                                 Except as otherwise disclosed to Lender in writing, the location of each Borrower’s books and records and all Collateral is at its Facility, and each Borrower shall promptly notify Lender of any change in such location.  Each Borrower shall not remove or permit the Collateral to be removed from such location without the prior written consent of Lender, except for Inventory sold in the usual and ordinary course of such Borrower’s business.

 

(e)                                  Each Borrower acknowledges that by entering into the security agreements contained in this Agreement and the other Loan Documents, such Borrower has authorized the filing of financing statements and amendments under the Code covering the collateral described in such security agreements, without the signature of such Borrower.

 

(f)                                   As additional security for the payment and performance of all of the obligations of Borrowers under this Agreement and the other Loan Documents, each Borrower hereby grants

 

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to Lender a security interest in all Deposit Accounts (as defined in the Code) from time to time maintained by such Borrower with Lender, all cash and investments from time to time on deposit in all such Deposit Accounts, and all proceeds of all of the foregoing.

 

ARTICLE 4

 

LOAN DOCUMENTS

 

4.1                               Loan Documents.  As a condition precedent to the Loan Opening, Borrowers agree that they will deliver the following Loan Documents to Lender at or prior to the Loan Opening, all of which must be satisfactory to Lender and Lender’s counsel in form, substance and execution:

 

(a)                                 Promissory Note.  A Promissory Note (the “Note”) dated the date hereof, executed by Borrowers jointly and severally and made payable to the order of Lender, in the Loan Amount.

 

(b)                                 Financing Statements.  Uniform Commercial Code Financing Statements as required by Lender to perfect all security interests granted by this Agreement and the other Loan Documents.

 

(c)                                  Guaranty.  A Guaranty of Payment and Performance dated as of even date herewith (the “Guaranty”), executed by Guarantor to and for the benefit of Lender, guaranteeing to Lender the payment and performance of all obligations of Borrowers in connection with the Loan.

 

(d)                                 Borrowing Base Certificate.  A Borrowing Base Certificate in the form prepared by Lender, certified as accurate by Borrowers and acceptable to Lender.

 

(e)                                  Letter of Credit Documents.  The Letter of Credit Documents.

 

(f)                                   Other Loan Documents.  Such other documents and instruments as further security for the Loan as Lender may reasonably require.

 

4.2                               Interest Rate Protection.

 

(a)                                 Any and all obligations, contingent or otherwise, whether now existing or hereafter arising, of each Borrower arising under or in connection with all Hedging Transactions and Hedging Agreements to which Lender is a party shall be secured by all of the collateral for the Loan.

 

(b)                                 As additional security for the payment and performance of all of the obligations of Borrowers under this Agreement and the other Loan Documents, Borrowers hereby pledge and assign to Lender, and grant to Lender a first lien on and a first priority security interest in, (i) all Hedging Transactions from time to time entered into by any Borrower with Lender or any other provider, (ii) all contracts from time to time entered into by any Borrower with Lender or any other provider with respect to such Hedging Transactions, (iii) all amounts from time to time 

 

26

 

payable to any Borrower under such Hedging Transactions and contracts, and (iv) all proceeds of all of the foregoing.

 

ARTICLE 5

 

LOAN DISBURSEMENTS

 

5.1                               Conditions to Loan Opening.  As conditions precedent to the Loan Opening, Borrowers (i) shall satisfy all applicable conditions and requirements contained in other Sections of this Agreement, and (ii) shall furnish the following to Lender at or prior to the Loan Opening, all of which must be satisfactory to Lender and Lender’s counsel in form, content and execution:

 

(a)                                 Insurance Policies.  Evidence satisfactory to Lender that the insurance coverages required by Section 7.2 hereof are in force.

 

(b)                                 Utilities; Licenses; Permits.  Evidence satisfactory to Lender that —

 

(i)                                     All utility and municipal services required for the occupancy and operation of each Facility are available and currently servicing such Facility;

 

(ii)                                  Subject to the provisions of Section 7.7(b) of this Agreement, all permits, licenses and governmental approvals required by applicable law to occupy and operate each Project and each Facility have been issued, are in full force and all fees therefor have been fully paid;

 

(iii)                               The storm and sanitary sewage disposal system, the water system and all mechanical systems serving each Facility comply with all applicable laws, ordinances, rules and regulations, including Environmental Laws and the applicable environmental protection agency, pollution control board and/or other governmental agencies having jurisdiction of each Facility have issued their permits for the operation thereof; and

 

(iv)                              All utility, parking, access (including curb-cuts and highway access), recreational and other easements and permits required or, in Lender’s judgment, necessary for the use of each Facility have been granted or issued.

 

(c)                                  Searches.  A report from the appropriate filing officers of the state and counties in which the Facilities are located, indicating that no judgments, tax or other liens, security interests, leases of personalty, financing statements or other encumbrances are of record or on file encumbering any collateral for the Loan, and that there are no judgments, tax liens, pending litigation or bankruptcy actions outstanding with respect to Borrowers and Guarantor.

 

(d)                                 Attorney’s Opinion.  Opinions of counsel to Borrowers and Guarantor addressing such issues as Lender may request, subject to assumptions and qualifications satisfactory to Lender.

 

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(e)                                  Organizational Documents.  Organizational documents, any resolutions required by such documents, and good standing certificates, for Borrowers and the other parties to the Loan Documents, and for any entities executing Loan Documents on behalf of Borrowers or any other parties to the Loan Documents.

 

(f)                                   Master Lease and Leases.  Copies of the Master Lease and of the Leases and such agreements between Lender, Owners and Sublessor as Lender shall require.

 

(g)                                  Management and Consulting Agreements.  If any Borrower has entered into a management or consulting agreement with respect to its Facility, a copy of such management or consulting agreement and a subordination agreement from the manager or consultant in a form satisfactory to Lender.

 

(h)                                 Operations Transfer Agreements.  Copies of the Operations Transfer Agreements and such agreements between Lender and Old Operators as Lender shall require.

 

(i)                                     Broker.  Evidence satisfactory to Lender that all brokers’ commissions or fees due with respect to the Loan or the Facilities have been paid in full in cash.

 

(j)                                    Additional Documents.  Such other papers and documents regarding Borrowers, the Projects or the Facilities as Lender may require.

 

5.2                               Termination of Agreement.  Borrowers agree that all conditions precedent to the Loan Opening will be complied with on or prior to the date of this Agreement.  If all of the conditions precedent to the Loan Opening hereunder shall not have been performed on or before the date of this Agreement, Lender, at its option at any time thereafter and prior to the Loan Opening, may terminate this Agreement and all of its obligations hereunder by giving a written notice of termination to Borrowers.  In the event of such termination, Borrowers shall pay all Loan Expenses which have accrued or been charged as of the date of such termination.

 

5.3                               Additional Conditions to Loan Opening and Subsequent Disbursements.  The following are additional conditions precedent to the Loan Opening and to each subsequent disbursement of Loan Proceeds:

 

(a)                                 Borrowing Procedures.  Each disbursement of Loan Proceeds may be made available to Borrowers upon any written, electronic or telecopy loan request which Lender in good faith believes to emanate from a properly authorized representative of Borrowers, whether or not that is in fact the case.  Each such request shall be effective upon receipt by Lender, shall be irrevocable, and shall specify the date and amount of the borrowing.  A request for a disbursement must be received by Lender no later than 11:00 a.m. Chicago, Illinois  time, on the day it is to be funded.  The proceeds of each disbursement shall be made available at the office of Lender by credit to the account of Borrowers or by other means requested by Borrowers and acceptable to Lender.  Borrowers do hereby irrevocably confirm, ratify and approve all such advances by Lender and does hereby indemnify Lender against losses and expenses (including court costs, and reasonable fees of attorneys and paralegals) and shall hold Lender harmless with respect thereto.

 

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(b)                                 Representations and Warranties.  All representations and warranties of Borrowers contained in this Agreement, the other Loan Documents and other documents delivered to Lender shall be true and correct in all material respects.

 

(c)                                  Financial Condition.  There shall be no material adverse change in the financial condition of any Borrower or Guarantor.

 

(d)                                 Accounts Set Up with Lender.  Without limitation on the generality of paragraph (f) below, Borrowers shall have set up all of their respective operating and other accounts with Lender as required by Section 7.8 of this Agreement.

 

(e)                                  Interest Rate Protection.  If required by Lender, Borrowers shall have purchased from a qualified counterparty one or more contracts for interest rate protection for such portion or all of the Loan as Lender may require, which contracts shall be in effect for the full term of the Loan and for a rate and otherwise in form and substance satisfactory to Lender in all respects.  Lender agrees that interest rate protection is not required for the Loan.

 

(f)                                   Field Audit.  In the case of the Loan Opening, Lender shall have completed a field audit as described in Section 7.17 of this Agreement and the results of such field audit shall be acceptable to Lender.

 

(g)                                  No Default or Event of Default.  No Default or Event of Default under this Agreement, any other Loan Document or any Lease shall have occurred and be continuing.

 

ARTICLE 6

 

PAYMENT OF LOAN EXPENSES

 

6.1                               Payment of Loan Expenses at Loan Opening.  At the Loan Opening, Lender may pay from Loan Proceeds all Loan Expenses, to the extent the same have not been previously paid.

 

ARTICLE 7

 

FURTHER AGREEMENTS OF BORROWER

 

7.1                               Fixtures and Personal Property; Concerning the Leases and Operations Transfer Agreements.

 

(a)                                 Except for a security interest granted to Lender, each Borrower agrees that all of the personal property, fixtures, attachments, furnishings and equipment owned by it will be kept free and clear of all chattel mortgages, vendor’s liens, and all other liens, claims, encumbrances and security interests whatsoever, and that such Borrower will be the absolute owner of said personal property, fixtures, attachments and equipment.  Borrowers, on request, shall furnish

 

29

 

Lender with satisfactory evidence of such ownership, and of the terms of purchase and payment therefor.

 

(b)                                 Each Borrower shall at all times maintain, preserve and keep its plant, properties and equipment, including its Facility and all Collateral, in good repair, working order and condition, normal wear and tear excepted, and shall from time to time make all needful and proper repairs, renewals, replacements, and additions thereto so that at all times the efficiency thereof shall be fully preserved and maintained.  Each Borrower shall permit Lender to examine and inspect such plant, properties and equipment, including its Facility and all Collateral, at all reasonable times and in such manner so as not to cause unreasonable interference with the operations in its Facility.

 

(c)                                  Each Borrower shall comply with its Lease.  Each Borrower shall at all times duly perform and observe all of the terms, provisions, conditions and agreements on its part to be performed and observed under its Lease, and shall not suffer or permit any Default or Event or Default on the part of such Borrower to exist thereunder.  Without the prior written consent of Lender, which may be given or withheld in its sole and absolute discretion, each Borrower shall not agree or consent to, or suffer or permit, any modification, amendment or termination of its Lease.  Each Borrower shall promptly furnish to Lender copies of all notices of default and other material documents and communications sent or received by such Borrower under or relating to its Lease.

 

(d)                                 Each Borrower shall comply with its Operations Transfer Agreement.  Each Borrower shall at all times duly perform and observe all of the terms, provisions, conditions and agreements on its part to be performed and observed under its Operations Transfer Agreement, and shall not suffer or permit any Default or Event or Default on the part of such Borrower to exist thereunder.  Without the prior written consent of Lender, which may be given or withheld in its sole and absolute discretion, each Borrower shall not agree or consent to, or suffer or permit, any modification, amendment or termination of its Operations Transfer Agreement, except that a termination of any Operations Transfer Agreement after the time that neither any Borrower nor any Old Operator has any remaining unperformed obligations thereunder shall not require Lender’s prior written consent.  Each Borrower shall promptly furnish to Lender copies of all notices of default and other material documents and communications sent or received by such Borrower under or relating to its Operations Transfer Agreement.

 

7.2                               Insurance Policies.

 

(a)                                 Each Borrower shall at all times maintain with insurance companies acceptable to Lender in its reasonable judgment, such insurance coverage as may be required by any law or governmental regulation or court decree or order applicable to it and such other insurance, to such extent and against such hazards and liabilities, including employers’, public and professional liability risks, as is customarily maintained by companies similarly situated, and shall have insured amounts no less than, and deductibles no higher than, are acceptable to Lender in its reasonable judgment.  Each Borrower shall furnish to Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by such Borrower, which shall be acceptable in all respects to Lender in its reasonable judgment.  Each Borrower shall cause each issuer of an insurance policy to provide Lender with an endorsement (i) showing Lender as

 

30

 

lender’s loss payee with respect to each policy of property or casualty insurance; and (ii) providing that 30 days’ notice will be given to Lender prior to any cancellation of, material reduction or change in coverage provided by or other material modification to such policy.  Each Borrower shall execute and deliver to Lender a collateral assignment, in form and substance satisfactory to Lender, of each business interruption insurance policy maintained by such Borrower.

 

(b)                                 In the event any Borrower either fail to provide Lender with evidence of the insurance coverage required by this Section or at any time hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay any premium in whole or in part relating thereto, then Lender, without waiving or releasing any obligation or default by Borrowers hereunder, may at any time (but shall be under no obligation to so act), obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto, which Lender deems advisable.  This insurance coverage (i) may, but need not, protect such Borrower’s interests in such property, including the Collateral, and (ii) may not pay any claim made by, or against, such Borrower in connection with such property, including the Collateral.  Such Borrower may later cancel any such insurance purchased by Lender, but only after providing Lender with evidence that such Borrower has obtained the insurance coverage required by this Section.  If Lender purchases insurance, Borrowers will be responsible for the costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance.  The costs of the insurance may be added to the principal amount of the Loan owing hereunder.  The costs of the insurance may be more than the cost of the insurance Borrowers may be able to obtain on their own.

 

7.3                               Furnishing Information.

 

(a)                                 Each Borrower shall promptly supply Lender with such information concerning its assets, liabilities and affairs, and the assets, liabilities and affairs of Guarantor, as Lender may reasonably request from time to time hereafter; which shall include:

 

(i)                                     Without the necessity of any request by Lender, as soon as available and in no event later than 45 days after the end of each fiscal quarter commencing with the fiscal quarter ending September 30, 2012, consolidated and consolidating financial statements of Borrowers showing the results of operations of the Facilities and consisting of a balance sheet, statement of income and expense and statement of payor mix, prepared in accordance with GAAP, and certified by an officer of Borrowers.

 

(ii)                                  Without the necessity of any request by Lender, as soon as available and in no event later than 120 days after the end of each fiscal year commencing with the fiscal year ending December 31, 2012, an annual financial statement of each Borrower showing the results of operations of its Facility and consisting of a balance sheet, statement of income and expense, statement of cash flows and statement of payor mix, prepared in accordance with GAAP, certified by an officer of such Borrower.

 

(iii)                               Without the necessity of any request by Lender, as soon as available and in no event later than 120 days after the end of each fiscal year commencing with the

 

31

 

fiscal year ending December 31, 2012, an annual consolidated financial statement of Borrowers showing the results of operations of the Facilities and consisting of a balance sheet, statement of income and expense, statement of cash flows and statement of payor mix, prepared in accordance with GAAP, certified by an officer of Borrowers.

 

(iv)                              Without the necessity of any request by Lender, as soon as available and in no event later than 120 days after the end of each fiscal year commencing with the fiscal year ending December 31, 2012, annual consolidated financial statements of AdCare, consisting of a balance sheet, statement of income and expense and a statement of cash flows, prepared in accordance with GAAP, and certified by an officer of AdCare, and accompanied by an audit report of a firm of independent certified public accountants.

 

(v)                                 Without the necessity of any request by Lender, with the annual consolidated financial statements of AdCare required to be furnished hereunder, copies of the schedules and other financial information for Borrowers which were used in the preparation of such financial statements of AdCare, and a letter from the firm of independent certified public accountants which audited such consolidated financial statements of AdCare stating that such schedules and other financial information for Borrowers were used in the preparation of such consolidated financial statements of AdCare.

 

(vi)                              Without the necessity of any request by Lender, with each quarterly financial statement of Borrowers required to be furnished hereunder, a duly completed compliance certificate, dated the date of such financial statements and certified as true and correct by appropriate officers of Borrowers and AdCare, containing a computation of each of the financial covenants set forth in Sections 7.12, 7.13, 7.14 and 7.15 hereof, and stating that Borrowers have not become aware of any Default or Event of Default under this Agreement or any of the other Loan Documents that has occurred and is continuing or, if there is any such Default or Event of Default describing it and the steps, if any, being taken to cure it.

 

(vi)                              Without the necessity of any request by Lender, within 30 days after the end of each month commencing with the month of September, 2012, a Borrowing Base Certificate dated as of the last business day of such month, certified as true and correct by an authorized representative of Borrowers and in a form acceptable to Lender in its sole and absolute discretion, provided, however, that at any time an Event of Default exists under this Agreement, Lender may require Borrowers to deliver Borrowing Base Certificates more frequently.

 

(vii)                           Within 30 days after the end of each month, an aged schedule of the Accounts of each Borrower, listing the name and amount due from each Account Debtor and showing the aggregate amounts due each Borrower from (A) 0-30 days, (B) 31-60 days, (C) 61-90 days, (D) 91-120 days, and (E) more than 120 days, and certified as accurate by each Borrower’s treasurer or chief financial officer.

 

(b)                                 Borrowers shall promptly notify Lender of any condition or event which constitutes a Default or Event of Default under this Agreement or any of the other Loan

 

32

 

Documents, and of any material adverse change in the financial condition of any Borrower or Guarantor.

 

(c)                                  It is a condition of this Agreement and the Loan that each Borrower shall each maintain a standard and modern system of accounting in accordance with GAAP consistently applied.

 

(d)                                 It is a condition of this Agreement and the Loan that Borrowers shall each permit Lender or any of its agents or representatives to have access to and to examine all books and records regarding the Facilities at any time or times hereafter during business hours.

 

(e)                                  It is a condition of this Agreement and the Loan that Borrowers shall each permit Lender to copy and make abstracts from any and all of said books and records.

 

7.4                               Excess Indebtedness.  Reference is made to Section 3.4(b) of this Agreement for provisions relating to payment and cash collateralization of amounts of the principal balance of the Loan and the face amount of the outstanding Letter of Credit which at any time exceed the Availability.

 

7.5                               Compliance with Laws; Environmental Matters.  Each of the following is a condition of this Agreement and the Loan:

 

(a)                                 Borrowers and Owners shall comply, in all respects, including the conduct of their business and operations and the use of their properties and assets, with all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, including without limitation, Environmental Laws, Titles XVIII and XIX of the Social Security Act, Medicare Regulations, Medicaid Regulations, and all laws, rules and regulations of any governmental authorities pertaining to the licensing of professional and other health care providers.

 

(b)                                 With the exception of Permitted Substances, the Facilities will not be used, for any activities which, directly or indirectly, involve the use, generation, treatment, storage, transportation or disposal of any Hazardous Substances, and no Hazardous Substances will exist on the Facilities or under the Facilities or in any surface waters or groundwaters on or under the Facilities.  The Facilities and their existing and future uses will comply with all Environmental Laws, and Borrowers and Owners will not violate any Environmental Laws.

 

7.6                               ERISA Liabilities; Employee Plans.  It is a condition of this Agreement and the Loan that Borrowers shall (i) keep in full force and effect any and all Employee Plans which are presently in existence or may, from time to time, come into existence under ERISA, and not withdraw from any such Employee Plans, unless such withdrawal can be effected or such Employee Plans can be terminated without liability to any Borrower; (ii) make contributions to all of such Employee Plans in a timely manner and in a sufficient amount to comply with the standards of ERISA, including the minimum funding standards of ERISA; (iii) comply with all material requirements of ERISA which relate to such Employee Plans; (iv) notify Lender immediately upon receipt by any Borrower of any notice concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the

 

33

 

termination of any such Employee Plans or the appointment of a trustee to administer such Employee Plans; (v) promptly advise Lender of the occurrence of any “Reportable Event” or “Prohibited Transaction” (as such terms are defined in ERISA), with respect to any such Employee Plans; and (vi) amend any Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 to the extent necessary to keep the Employee Plan qualified, and to cause the Employee Plan to be administered and operated in a manner that does not cause the Employee Plan to lose its qualified status.

 

7.7                               Licensure; Notices of Agency Actions.  The following are conditions of this Agreement and the Loan:

 

(a)                                 Subject to the provisions of paragraph (b) of this Section, each Borrower shall be fully qualified by all necessary permits, licenses, certifications, accreditations and qualifications and shall be in compliance with all annual filing requirements of all regulatory authorities.

 

(b)                                 No Borrower except Borrower 23 and Borrower 24 shall at any time be operating its Facility under any Operations Transfer Agreement.  It is a condition of this Agreement and the Loan that within a period of 180 days after a Borrower becomes a borrower under this Agreement, such Borrower shall have obtained all licenses and billing numbers for its Facility in its own name and shall no longer be operating under any Operations Transfer Agreement.  During the time that any Borrower is permitted under the terms of this Agreement to be operating its Facility under an Operations Transfer Agreement, it shall be permissible for such Borrower to be operating under the license or billing numbers, or both, of an Old Operator in accordance with the terms and conditions of such Operations Transfer Agreement.

 

(c)                                  Borrowers shall within five days after receipt, furnish to Lender copies of all adverse notices from any licensing, certifying, regulatory, reimbursing or other agency which has jurisdiction over any Facility or any Project or over any license, permit or approval under which any Facility or any Project operates, and if any Borrower becomes aware that any such notice is to be forthcoming before receipt thereof, it shall promptly inform Lender thereof.

 

7.8                               Facility Accounts and Revenues.

 

(a)                                 It is a condition of this Agreement and the Loan that Borrowers shall set up and maintain all of their respective operating accounts and other accounts related to the Facilities with Lender, shall deposit all of their respective income and receipts promptly upon receipt in such accounts, and shall maintain all of their respective cash and investments on deposit in deposit accounts with Lender.

 

(b)                                 Borrowers shall deposit all Gross Revenues promptly upon receipt thereof, into a bank account or accounts maintained by Borrowers with Lender.  As additional security for the payment and performance of all of the obligations of Borrowers under this Agreement and the other Loan Documents, Borrowers hereby pledge and assign to Lender, and grant to Lender a

 

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first lien on and a first priority security interest in, the Gross Revenues, all of Borrowers’ present and future Accounts (as defined in the Code), and the proceeds of all of the foregoing.

 

7.9                               Single-Asset Entity; Indebtedness; Distributions.

 

(a)                                 Each Borrower shall not at any time own any asset or property other than its interest under its Lease, property located in and used in the operation of its Facility and property related thereto, and shall not at any time engage in any business other than the operation of its Facility.  The articles of organization and operating agreement of each Borrower shall not be modified or amended, nor shall any member of any Borrower be released or discharged from its his or her obligations under the operating agreement of such Borrower.

 

(b)                                 Each Borrower shall not at any time have outstanding any indebtedness or obligations, secured or unsecured, direct or indirect, absolute or contingent, including any guaranty, other than the following: (i) obligations to Lender; (ii) obligations under interest rate protection agreements to which Lender is a party; (iii) obligations, other than borrowings, incurred in the ordinary course of the ownership and operation of its Facility; (iv) obligations under its Lease; (v) in the case of Borrowers 9, 10 and 25 and Borrowers 11, 13, 17 and 19, obligations as guarantor, borrower or co-borrower under mortgage financing for the Project in which its Facility is located, provided that such financing is not secured by any assets of which are a part of the Collateral for the Loan, other than property which under applicable law is or may become a fixture and furniture, fixtures, equipment and inventory and proceeds thereof, and provided that such financing does not contain restrictions which would be violated by such Borrower undertaking its obligations and granting security interests under this Agreement and the other Loan Documents; and (vi) obligations under any Operations Transfer Agreement under which such Borrower is permitted by the terms of this Agreement to be operating its Facility.

 

(c)                                  If any Default or Event of Default shall occur and be continuing under this Agreement or any of the other Loan Documents, each Borrower shall not, directly or indirectly, make any Distribution.  In addition, each Borrower shall not, directly or indirectly, at any time make any Distribution that would cause such Borrower’s cash and cash equivalents remaining after such Distribution to be less than an amount equal to a reasonable working capital reserve.

 

7.10                        Restrictions on Transfer.

 

(a)                                 Each Borrower shall not effect, suffer or permit any Prohibited Transfer.  Any conveyance, sale, assignment, transfer, lien, pledge, mortgage, security interest or other encumbrance or alienation (or any agreement to do any of the foregoing) of any of the following properties or interests shall constitute a “Prohibited Transfer”:

 

(i)                                     Tangible assets, excepting only sales or other dispositions of property no longer useful in connection with the operation of a Facility, provided that prior to the sale or other disposition thereof, such property has been replaced by property of at least equal value and utility;

 

(ii)                                  Any shares of capital stock of a corporate Borrower, or a corporation which is a direct or indirect owner of an ownership interest in any Borrower (other than the shares of capital stock of a corporate trustee or a corporation whose stock is publicly 

 

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traded on a national securities exchange or on the National Association of Securities Dealers’ Automated Quotation System);

 

(iii)                               All or any part of the membership interests in a limited liability company Borrower, or a limited liability company which is a direct or indirect owner of an ownership interest in any Borrower;

 

(iv)                              All or any part of the general partner or the limited partner interest, as the case may be, of a partnership or limited partnership Borrower, or a partnership or limited partnership which is a direct or indirect owner of an ownership interest in any Borrower;

 

(v)                                 If there shall be any change in Control (by way of transfers of stock, partnership or member interests or otherwise) in any partner, member, manager or shareholder, as applicable, which directly or indirectly Controls the day to day operations and management of any Borrower or Guarantor that is not a natural person and/or owns a Controlling interest in any Borrower or any such Guarantor; provided, however, that this subparagraph shall not apply to AdCare; or

 

(vi)                              If any Guarantor who is a natural person shall die or be declared a legal incompetent;

 

in each case whether any such conveyance, sale, assignment, transfer, lien, pledge, mortgage, security interest, encumbrance or alienation is effected directly, indirectly (including the nominee agreement), voluntarily or involuntarily, by operation of law or otherwise; provided, however, that the foregoing provisions of this Section shall not apply to (i) liens securing obligations to Lender, or (ii) any transfers of any shares of stock or partnership or limited liability company interests, as the case may be, by or on behalf of an owner thereof who is deceased or declared judicially incompetent, to such owner’s heirs, legatees, devisees, executors, administrators, estate or personal representatives.

 

(b)                                 In determining whether or not to make the Loan, Lender evaluated the background and experience of each Borrower and its members in operating property such as the Facilities, found it acceptable and relied and continues to rely upon same as the means of maintaining the value of the Facilities.  Each Borrower and its members are well experienced in borrowing money and owning and operating property such as the Facilities, were ably represented by a licensed attorney at law in the negotiation and documentation of the Loan and bargained at arm’s length and without duress of any kind for all of the terms and conditions of the Loan, including this provision.  Each Borrower recognizes that Lender is entitled to keep its loan portfolio at current interest rates by either making new loans at such rates or collecting assumption fees and/or increasing the interest rate on a loan, the security for which is purchased by a party other than the original Borrowers.  In accordance with the foregoing, each Borrower agrees that if this Section is deemed a restraint on alienation, that it is a reasonable one.

 

7.11                        Leasing, Operation and Management of Projects.

 

(a)                                 Each Project shall at all times be owned and leased or subleased to the applicable Borrower under the applicable Lease as described in the definition of the term Lease in Section 1.1 of this Agreement, with the result that no Borrower except Borrower 9, Borrower 10 and

 

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Borrower 25 shall own a Project.  Each Borrower shall not agree or consent to or suffer or permit any modification, amendment or termination of its Lease, and shall not suffer or permit any Event of Default on the part of such Borrower to exist at any time under such Lease.

 

(b)                                 Each Facility shall at all times be operated as a skilled nursing facility under the management of the applicable Borrower.

 

7.12                        Minimum Coverage of Rent and Debt Service.  It is a condition of this Agreement and the Loan that for each fiscal quarter commencing with the fiscal quarter ending December 31, 2012, the ratio of —

 

(i)                                     the amount of the combined EBITDAR for Borrowers for such quarter, to

 

(ii)                                  the sum of the combined amounts of the following for Borrowers for such quarter: (A) Rental Expense, plus (B) Debt Service,

 

shall be not less than 1.25 to 1.00.  Notwithstanding the definition of the term Net Income in Section 1.1 of this Agreement, the Net Income for each Borrower used in calculating EBITDAR of such Borrower for the purpose of this Section for any period, shall be computed by taking into account (i) management fees equal to the greater of such Borrower’s actual management fees for such period or imputed management fees equal to 5% of such Borrower’s gross income for such period as determined in accordance with GAAP, and (ii) an imputed capital expenditures reserve allowance at the annual rate of $350 per licensed bed in such Borrower’s Facility.

 

7.13                        Minimum Fixed Charge Coverage Ratio of Borrowers.  It is a condition of this Agreement and the Loan that as of the end of each fiscal quarter commencing with the fiscal quarter ending December 31, 2012, that the ratio of —

 

(i)                                     the amount of the combined EBITDAR for Borrowers for the 12-month period ending on the last day of such quarter, to

 

(ii)                                  the sum of the combined amounts of the following for Borrowers for the 12-month period ending on the last day of such quarter: (A) Rental Expense, plus (B) Interest Charges, plus (C) Distributions, other than any amounts which were treated as an expense for accounting purposes,

 

shall be not less than 1.05 to 1.00.  Notwithstanding the definition of the term Net Income in Section 1.1 of this Agreement, the Net Income for each Borrower used in calculating EBITDAR of such Borrower for the purpose of this Section for any period, shall be computed by taking into account an imputed capital expenditures reserve allowance at the annual rate of $350 per licensed bed in such Borrower’s Facility.  For the avoidance of doubt, (i) unlike Section 7.12 hereof, the Net Income for Borrowers used in calculating EBITDAR of Borrowers for the purpose of this Section for any period shall be computed by taking into account each Borrower’s actual management fees for such period only and not taking into account any imputed management fees.  Notwithstanding the foregoing provisions of this Section, in the case of the fiscal quarters ending December 31, 2012, March 31, 2013, and June 30, 2013, the calculation of such ratio shall be made for the period commencing on October 1, 2012, and ending on the last

 

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day of such quarter, instead of for the full 12-month period ending on the last day of such quarter.

 

7.14                        AdCare Leverage Ratio.  It is a condition of this Agreement and the Loan that for each fiscal year commencing with the fiscal year ending December 31, 2012, the ratio of —

 

(i)                                     the total amount of long term senior secured indebtedness of AdCare, including the current portion thereof, each as determined in accordance with GAAP, outstanding on the last day of such year, to

 

(ii)                                  the amount of EBITDA for AdCare for such year,

 

shall be not more than 11.00 to 1.00.

 

7.15                        AdCare Debt Service Coverage Ratio.  It is a condition of this Agreement and the Loan that for each fiscal year commencing with the fiscal year ending December 31, 2012, the ratio of —

 

(i)                                     the amount of EBITDAR for AdCare for such year, to

 

(ii)                                  the total amount Debt Service required to be paid by AdCare for such year,

 

shall be not less than 1.00 to 1.00.  Notwithstanding the foregoing provisions of this Section, if such ratio for any fiscal year is less than 1.00 to 1.00, the condition provided for in this Section shall nevertheless be deemed to be satisfied if the amount of unencumbered, unrestricted cash shown as an asset in AdCare’s audited financial statements as at the end of such fiscal year is not less than an amount equal to the sum of (i) $2,000,000, plus (ii) the total additional amount of EBITDAR for AdCare that would have been necessary in order for such ratio to have been not less than 1.00 to 1.00 for such fiscal year and for all prior fiscal years ending after on and after December 31, 2012 (the “Cumulative Shortfall”); provided, however, that the foregoing provisions of this sentence shall not apply if the Cumulative Shortfall is more than $3,000,000.

 

7.16                        Security Interest Matters.  This Agreement is intended to be a security agreement under the Code for the purpose of creating the security interests provided for herein.  Borrowers shall execute and deliver such additional security agreements and other documents as Lender shall from time to time request in order to create and perfect such security interests.  Borrowers shall keep all of the Collateral free and clear of all other liens, security interests and encumbrances.

 

7.17                        Field Audits.  Each Borrower shall permit Lender to inspect the Inventory, other tangible assets and/or other business operations of such Borrower, to perform appraisals of the Equipment of such Borrower, and to inspect, audit, check and make copies of, and extracts from, the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to Inventory, Accounts and any other Collateral, the results of which must be satisfactory to Lender in Lender’s sole and absolute discretion.  All such inspections or audits by Lender shall be conducted at such Borrower’s sole expense.

 

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7.18        Collateral Records.  Each Borrower shall keep full and accurate books and records relating to the Collateral and shall mark such books and records to indicate Lender’s security interest in the Collateral, including placing a legend, in form and content acceptable to Lender, on all Chattel Paper created by such Borrower indicating that Lender has a security interest in such Chattel Paper.

 

7.19        Further Assurance.  Each Borrower, on request of Lender, from time to time, shall execute and deliver such documents as may be necessary to perfect and maintain perfected as valid liens upon the Collateral the liens granted to Lender pursuant to this Agreement or any of the other Loan Documents, and to fully consummate the transactions contemplated by this Agreement.

 

ARTICLE 8

 

SECURITY

 

8.1          Security for the Loan.  As security for the payment of all of the principal of and interest on the Loan and the Note and all other amounts coming due under this Agreement or any of the other Loan Documents, and the performance by Borrowers of all obligations under this Agreement and the other Loan Documents, each Borrower does hereby pledge, assign, transfer, deliver and grant to Lender, for its own benefit and as agent for its Affiliates, a continuing and unconditional first priority security interest in and to any and all property of such Borrower, of any kind or description, tangible or intangible, wheresoever located and whether now existing or hereafter arising or acquired, including the following (all of which property, along with the products and proceeds therefrom, are individually and collectively referred to as the “Collateral”), except that (i) the real property owned by Borrowers 9, 10 and 25 is excluded, and (ii) in the case of Borrowers 9, 10 and 25 and Borrowers 11, 13, 17 and 19, the security interest in furniture, fixtures, equipment, inventory and proceeds thereof may be a second priority security interest:

 

(a)           All property of, or for the account of, such Borrower now or hereafter coming into the possession, control or custody of, or in transit to, Lender or any agent or bailee for Lender or any parent, Affiliate or subsidiary of Lender or any participant with Lender in the Loan (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), including all earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom, including the proceeds of insurance thereon; and

 

(b)           The additional property of such Borrower, whether now existing or hereafter arising or acquired, and wherever now or hereafter located, together with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds therefrom, and all of such Borrower’s books and records and recorded data relating thereto (regardless of the medium of recording or storage), together with all of such Borrower’s right, title and interest in and to all computer software required to utilize, create, maintain and process any such records or data on electronic media, identified and set forth as follows:

 

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(i)            All Accounts and all Goods whose sale, lease or other disposition by such Borrower has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, such Borrower, or rejected or refused by an Account Debtor;

 

(ii)           All Inventory, including raw materials, work-in-process and finished goods;

 

(iii)          All Goods (other than Inventory), including embedded software, Equipment, vehicles, furniture and Fixtures;

 

(iv)          All Software and computer programs;

 

(v)           All Securities, Investment Property, Financial Assets and Deposit Accounts;

 

(vi)          All Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance Receivables, Supporting Obligations, notes secured by real estate, Commercial Tort Claims and General Intangibles, including Payment Intangibles;

 

(vii)         Without limitation on the generality of the foregoing, any Operations Transfer Agreement to which such Borrower is a party, all rights of such Borrower under such Operations Transfer Agreement, and all amounts from time to time payable to such Borrower under such Operations Transfer Agreement; and

 

(viii)        All Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing property, including all insurance policies and proceeds of insurance payable by reason of loss or damage to the foregoing property, including unearned premiums, and of eminent domain or condemnation awards.

 

Reference is made to Section 7.7(b) of this Agreement.  Until such time as the billing numbers for any Facility referred to in such Section are issued to the applicable Borrower, Accounts for services rendered by such Borrower may be in the name of the applicable Old Operator, in which case such Old Operator is obligated by the provisions of the Operations Transfer Agreement to pay collections on such Accounts to such Borrower.  In order to further secure the Loan, each such Borrower shall cause each such Old Operator to grant a direct security interest to Lender in such Accounts and related collateral pursuant to an agreement in a form acceptable to Lender.

 

8.2          Possession and Transfer of Collateral.  Unless an Event of Default exists hereunder, Borrowers shall be entitled to possession or use of the Collateral (other than Instruments or Documents, Tangible Chattel Paper, Investment Property consisting of certificated securities and other Collateral required to be delivered to Lender pursuant to this Article 8).  The cancellation or surrender of the Note, upon payment or otherwise, shall not affect the right of Lender to retain the Collateral for any other obligations secured by the Collateral.  Borrowers shall not sell, assign (by operation of law or otherwise), license, lease or otherwise 

 

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dispose of, or grant any option with respect to any of the Collateral, except that Borrowers may sell Inventory in the ordinary course of business.

 

8.3          Preservation of the Collateral.  Lender may, but is not required, to take such actions from time to time as Lender deems appropriate to maintain or protect the Collateral.  Lender shall have exercised reasonable care in the custody and preservation of the Collateral if Lender takes such action as Borrowers shall reasonably request in writing which is not inconsistent with Lender’s status as a secured party, but the failure of Lender to comply with any such request shall not be deemed a failure to exercise reasonable care; provided, however, Lender’s responsibility for the safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral is accorded treatment substantially equal to that which Lender accords its own property, and (ii) not extend to matters beyond the control of Lender, including acts of God, war, insurrection, riot or governmental actions.  In addition, any failure of Lender to preserve or protect any rights with respect to the Collateral against prior or third parties, or to do any act with respect to preservation of the Collateral, not so requested by Borrowers, shall not be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.  Borrowers shall have the sole responsibility for taking such action as may be necessary, from time to time, to preserve all rights of Borrowers and Lender in the Collateral against prior or third parties.  Without limiting the generality of the foregoing, where Collateral consists in whole or in part of securities, each Borrower represents to, and covenants with, Lender that such Borrower has made arrangements for keeping informed of changes or potential changes affecting the securities (including rights to convert or subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and each Borrower agrees that Lender shall have no responsibility or liability for informing such Borrower of any such or other changes or potential changes or for taking any action or omitting to take any action with respect thereto.

 

8.4          Other Actions as to Any and All Collateral.  Each Borrower further agrees to take any other action reasonably requested by Lender to ensure the attachment, perfection and first priority of, and the ability of Lender to enforce, Lender’s security interest in any and all of the Collateral, including (i) causing Lender’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Lender to enforce, Lender’s security interest in such Collateral, (ii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Lender to enforce, Lender’s security interest in such Collateral, (iii) obtaining governmental and other third party consents and approvals, including any consent of any licensor, lessor or other person obligated on Collateral, (iv) obtaining waivers from mortgagees and landlords in form and substance satisfactory to Lender, and (v) taking all actions required by the Code in effect from time to time or by other law, as applicable in any relevant Code jurisdiction, or by other law as applicable in any foreign jurisdiction.  Each Borrower further agrees to indemnify and hold Lender harmless against claims of any persons not a party to this Agreement concerning disputes arising over the Collateral.

 

8.5          Collateral in the Possession of a Warehouseman or Bailee.  If any of the Collateral at any time is in the possession of a warehouseman or bailee, Borrowers shall promptly notify Lender thereof, and shall promptly obtain an agreement acceptable to Lender

 

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under which such person acknowledges the security interest of Lender and waives any liens held by such person on such property.

 

8.6          Letter-of-Credit Rights.  If any Borrower, on its own behalf and not as agent for a client of such Borrower, at any time is a beneficiary under a letter of credit now or hereafter issued in favor of such Borrower, such Borrower shall promptly notify Lender thereof and, at the request and option of Lender, such Borrower shall, pursuant to an agreement in form and substance satisfactory to Lender, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to Lender of the proceeds of any drawing under the letter of credit, or (ii) arrange for Lender to become the transferee beneficiary of the letter of credit, with Lender agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in this Agreement.

 

8.7          Commercial Tort Claims.  If any Borrower shall at any time hold or acquire a Commercial Tort Claim, such Borrower shall immediately notify Lender in writing signed by such Borrower of the details thereof and grant to Lender in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, in each case in form and substance satisfactory to Lender, and shall execute any amendments hereto deemed reasonably necessary by Lender to perfect its security interest in such Commercial Tort Claim.

 

8.8          Electronic Chattel Paper and Transferable Records.  If any Borrower at any time holds or acquires an interest in any electronic chattel paper or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Borrower shall promptly notify Lender thereof and, at the request of Lender, shall take such action as Lender may reasonably request to vest in Lender control under Section 9-105 of the Code of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  Lender agrees with Borrowers that Lender will arrange, pursuant to procedures satisfactory to Lender and so long as such procedures will not result in Lender’s loss of control, for Borrowers to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the Code or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control.

 

8.9          Directions for Payment of Accounts to Account at Lender; Court Order for Payment of Accounts to Lender.

 

(a)           Subject to the provisions of Section 7.7(b) of this Agreement, in the case of all Account Debtors which are State or federal government or private healthcare payment programs, including, without limitation, Medicare, Medicaid and private insurance companies, each Borrower shall at all times cause such Account Debtors to be directed to pay, and to pay, all Accounts, including, without limitation, all Health-Care-Insurance Receivables, to a deposit account in the name of such Borrower at Lender.  The failure of any Borrower to give any such direction, or the withdrawal by any Borrower of any such direction, shall constitute an immediate Event of Default.

 

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(b)           In addition to all other remedies under the this Agreement and under applicable law, upon the occurrence of any Event of Default, Lender shall be entitled to an immediate order of court for the payment of all Accounts, including, without limitation, all Health-Care-Insurance Receivables, directly to Lender by all Account Debtors.

 

ARTICLE 9

 

ASSIGNMENTS, SALE AND ENCUMBRANCES

 

9.1          Lender’s Right to Assign.  Lender may assign, negotiate, pledge or otherwise hypothecate this Agreement or any of its rights and security hereunder, including the Note and the other Loan Documents, to any bank, participant, financial institution, or any other person or entity, and in case of such assignment, negotiation, pledge or other hypothecation, Borrowers shall accord full recognition thereto and agrees that all rights and remedies of Lender in connection with the interest so assigned, negotiated, pledged or otherwise hypothecated shall be enforceable against Borrowers by such bank, financial institution or other person or entity, with the same force and effect and to the same extent as the same would have been enforceable by Lender but for such assignment, negotiation, pledge or other hypothecation.

 

9.2          Prohibition of Assignments and Encumbrances by Borrowers.  Except as expressly permitted by this Agreement, Borrowers shall not create, effect, consent to, attempt, contract for, agree to make, suffer or permit any Prohibited Transfer.

 

ARTICLE 10

 

EVENTS OF DEFAULT BY BORROWER

 

10.1        Event of Default Defined.  The occurrence of any one or more of the following shall constitute an Event of Default under this Agreement, and any Event of Default which may occur hereunder shall constitute an Event of Default under each of the other Loan Documents:

 

(a)           Borrowers fail to (i) pay any installment of principal or interest payable pursuant to the Note on the date when due, (ii) reimburse to Lender any amount drawn on the Letter of Credit when required by the Letter of Credit Documents, or (iii) pay any other amount payable to Lender under the Note, the Letter of Credit Documents, this Agreement or any of the other Loan Documents when any such payment is due in accordance with the terms hereof or thereof;

 

(b)           If there is any failure to perform, observe or satisfy any obligation, covenant, agreement, term, condition or provision contained in any of the following provisions of this Agreement: Section 7.7(a), 7.7(b), 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16 or 8.9;

 

(c)           If there is any failure to perform, observe or satisfy any obligation, covenant, agreement, term, condition or provision contained in this Agreement and not

 

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otherwise described in this Section and such failure is not cured within 30 days after written notice to Borrowers; provided, however, that —

 

(i)            If such failure can be cured solely by the payment of money, such failure shall not constitute an Event of Default unless it shall continue for a period of five days after written notice to Borrowers;

 

(ii)           If such failure cannot be cured solely by the payment of money and does not pose an emergency or dangerous condition or a material threat to the security for the Loan, such failure shall not constitute an Event of Default unless it shall continue for a period of 30 days after written notice to Borrowers; and

 

(iii)          If a failure described in (ii) above is of such a nature that it cannot reasonably be cured within such 30-day period, and if such failure is susceptible of cure, it shall not constitute an Event of Default if corrective action is instituted by Borrowers within such 30-day period and is diligently pursued and such failure is cured within 90 days after the occurrence of such failure;

 

(d)           The existence of any inaccuracy or untruth in any material respect in any representation or warranty contained in this Agreement or any of the other Loan Documents or of any statement or certification as to facts delivered to Lender by Borrowers or Guarantor; provided, however, that —

 

(i)            If such inaccuracy or untruth can be cured solely by the payment of money, such failure shall not constitute an Event of Default unless it shall continue for a period of 10 days after any Borrower becomes aware of inaccuracy or untruth, whether by notice from Lender or otherwise;

 

(ii)           If such inaccuracy or untruth cannot be cured solely by the payment of money and does not pose an emergency or dangerous condition or a material threat to the security for the Loan, such failure shall not constitute an Event of Default unless it shall continue for a period of 30 days after any Borrower becomes aware of inaccuracy or untruth, whether by notice from Lender or otherwise; and

 

(iii)          If a failure described in (ii) above is of such a nature that it cannot reasonably be cured within such 30-day period, and if such failure is susceptible of cure, it shall not constitute an Event of Default if corrective action is instituted by Borrowers within such 30-day period and is diligently pursued and such failure is cured within 120 days after any Borrower becomes aware of such inaccuracy or untruth, whether by notice from Lender or otherwise;

 

(e)           The occurrence of a Prohibited Transfer;

 

(f)            The existence of any collusion, fraud, dishonesty or bad faith by or with the acquiescence of any Borrower or Guarantor which in any way relates to or affects the Loan, any Project or any Facility;

 

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(g)           The occurrence of a material adverse change in the financial condition of any Borrower or Guarantor;

 

(h)           Any Borrower or Guarantor (i) files a voluntary petition in bankruptcy or is adjudicated a bankrupt or insolvent or files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal, state, or other statute or law, or (ii) seeks or consents to or acquiesces in the appointment of any trustee, receiver or similar officer of any Borrower or Guarantor or of all or any substantial part of the property of any Borrower or Guarantor or any portion of any Project or any Facility; or all or a substantial part of the assets of any Borrower or Guarantor are attached, seized, subjected to a writ or distress warrant or are levied upon unless the same is released or vacated within 30 days;

 

(i)            The commencement of any involuntary petition in bankruptcy against any Borrower or Guarantor or the institution against any Borrower or Guarantor of any reorganization, arrangement, composition, readjustment, dissolution, liquidation or similar proceedings under any present or future federal, state or other statute or law, or the appointment of a receiver, trustee or similar officer for all or any substantial part of the property of any Borrower or Guarantor, which shall remain undismissed or undischarged for a period of 30 days;

 

(j)            Any of the following: (i) the entry of any judgment, decree, levy, attachment, garnishment or other process, or the filing of any lien or encumbrance, against any of the Collateral, and the same shall not have been, within 30 days from the entry or filing thereof, vacated, satisfied or appealed from and stayed pending appeal; (ii) the loss, theft, destruction, seizure or forfeiture of, or the occurrence of any material deterioration or impairment of, any of the Collateral, (iii) any material decline or depreciation in the value or market price thereof (whether actual or reasonably anticipated), which causes the Collateral, in the sole opinion of Lender acting in good faith, to become unsatisfactory as to value or character, or which causes Lender to reasonably believe that it is insecure and that the likelihood for repayment of the Loan is or will soon be impaired, time being of the essence (it being understood that the cause of such deterioration, impairment, decline or depreciation shall include, but is not limited to, the failure by the Borrowers to do any act deemed necessary by Lender to preserve and maintain the value and collectability of the Collateral);

 

(k)           The entry against any Borrower or Guarantor of any final judgment for the payment of money in an amount in excess of $100,000 and such judgment shall not have been, within 30 days from the entry thereof, vacated, satisfied or appealed from and stayed pending appeal;

 

(l)            The dissolution, termination or merger of any Borrower or Guarantor which is an entity, or the occurrence of the death or declaration of legal incompetency of any Guarantor who is a natural person;

 

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(m)          The validity or enforceability of this Agreement or any of the other Loan Documents shall be contested by any Borrower, Guarantor or any other party thereto (other than Lender), or any Borrower, Guarantor or any other party thereto (other than Lender) shall deny that it has any or further liability or obligation hereunder or thereunder;

 

(n)           The occurrence of any Default or Event of Default on the part of Sublessor under the Master Lease, any Borrower under its Lease, or on the part of any Borrower under any Operations Transfer Agreement, or on the part of any Old Operator under any Operations Transfer Agreement if such Default or Event of Default has a material adverse effect on the security for the Loan, or the termination of any Lease, Master Lease or any Operations Transfer Agreement, other than any termination of any Operations Transfer Agreement after the time that neither any Borrower nor any Old Operator has any remaining unperformed obligations thereunder;

 

(o)           The occurrence of an Event of Default under the Note or any of the other Loan Documents, including, without limitation, any Bank Product Agreement to which Lender or any of its Affiliates is a party, including, without limitation, any Hedging Agreement to which Lender is a party, or any Event of Default or other similar condition or event (however described) shall occur and be continuing with respect to any Bank Product Obligation, including, without limitation, any Hedging Transaction, to which Lender or any of its Affiliates is a party;

 

(p)           The occurrence of any Event of Default under any document or agreement evidencing or securing any other obligation or indebtedness of any Borrower, Guarantor or any Owner to Lender; or

 

(q)           The occurrence of any Event of Default under any document or agreement evidencing or securing any loan extended by any other lender and under which loan any Borrower is a borrower, co-borrower or guarantor.

 

ARTICLE 11

 

LENDER’S REMEDIES UPON EVENT OF DEFAULT

 

11.1        Remedies Conferred upon Lender.  During the continuance of any Event of Default under this Agreement, Lender, in addition to all remedies conferred upon Lender by law and by the terms of the Note and the other Loan Documents, may pursue any one or more of the following remedies concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any others:

 

(a)           Withhold further disbursement of Loan Proceeds and terminate any of its obligations to Borrowers;

 

46

 

(b)           Declare the Note to be due and payable forthwith, without presentment, demand, protest or other notice of any kind, all of which Borrowers hereby expressly waive;

 

(c)           In addition to any rights of setoff that Lender may have under applicable law, without notice of any kind to Borrowers, appropriate and apply to the payment of the Note or of any sums due under this Agreement any and all balances, deposits, credits, accounts, certificates of deposit, instruments or money of any Borrower then or thereafter in the possession of Lender;

 

(d)           Exercise all of the rights of a secured party under the Code;

 

(e)           Exercise collection remedies against Account Debtors directly or through the use of collection agencies and other collection specialists;

 

(f)            Instruct Borrowers, at their own expense, to notify any parties obligated on any of the Collateral, including any Account Debtors, to make payment directly to Lender of any amounts due or to become due thereunder, or Lender may directly notify such obligors of the security interest of Lender, or of the assignment to Lender of the Collateral and direct such obligors to make payment to Lender of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts due on the Collateral directly from such persons obligated thereon;

 

(g)           Enforce collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder; or

 

(h)           Exercise or pursue any other remedy or cause of action permitted at law or in equity or under this Agreement or any other Loan Document, including, but not limited to, enforcement of all Loan Documents.

 

11.2        Possession and Assembly of Collateral.  During the continuance of any Event of Default under this Agreement, Lender may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which Lender already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may at any time enter into any of the premises of any Borrower where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of and Lender shall have the right to store and conduct a sale of the same in any of any Borrower’s premises without cost to Lender.  At Lender’s request, Borrowers will, at Borrowers’ sole expense, assemble the Collateral and make it available to Lender at a place or places to be designated by Lender which is reasonably convenient to Lender and Borrowers.

 

11.3.       Sale of Collateral.  During the continuance of any Event of Default under this Agreement, Lender may sell any or all of the Collateral at public or private sale, upon such terms and conditions as Lender may deem proper, and Lender may purchase any or all of the Collateral

 

47

 

at any such sale.  Borrowers acknowledge that Lender may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one or more private sales to a restricted group of offerees and purchasers.  Borrowers consent to any such private sale so made even though at places and upon terms less favorable than if the Collateral were sold at public sale.  Lender shall have no obligation to clean-up or otherwise prepare the Collateral for sale.  Lender may apply the net proceeds, after deducting all costs, expenses, and reasonable fees of attorneys and paralegals incurred or paid at any time in the collection, protection and sale of the Collateral and the obligations secured by the Collateral, to the payment of the Note or any of the other obligations secured by the Collateral, returning the excess proceeds, if any, to Borrowers.  Borrowers shall remain liable for any amount remaining unpaid after such application, with interest at the Default Rate.  Any notification of intended disposition of the Collateral required by law shall be conclusively deemed reasonably and properly given if given by Lender at least 10 calendar days before the date of such disposition.  Borrowers hereby confirm, approve and ratify all acts and deeds of Lender relating to the foregoing, and each part thereof, and expressly waives any and all claims of any nature, kind or description which it have or may hereafter have against Lender or its representatives, by reason of taking, selling or collecting any portion of the Collateral.  Borrowers consent to releases of the Collateral at any time (including prior to default) and to sales of the Collateral in groups, parcels or portions, or as an entirety, as Lender shall deem appropriate.  Borrowers expressly absolve Lender from any loss or decline in market value of any Collateral by reason of delay in the enforcement or assertion or nonenforcement of any rights or remedies under this Agreement.

 

11.4        Standards for Exercising Remedies.  To the extent that applicable law imposes duties on Lender to exercise remedies in a commercially reasonable manner, Borrowers acknowledge and agree that it is not commercially unreasonable for Lender (i) to fail to incur expenses reasonably deemed significant by Lender to prepare Collateral for disposition or otherwise to complete raw material or work-in-process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Account Debtors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against Account Debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as Borrowers, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, including any warranties of title, (xi) to purchase insurance or credit enhancements to insure Lender against risks of loss, collection or disposition of Collateral or to provide to Lender a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Lender, to obtain the services of other brokers, investment bankers, consultants

 

48

 

and other professionals to assist Lender in the collection or disposition of any of the Collateral.  Borrowers acknowledge that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Lender would not be commercially unreasonable in Lender’s exercise of remedies against the Collateral and that other actions or omissions by Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section.  Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to Borrowers or to impose any duties on Lender that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

 

11.5                        Code and Offset Rights.  Lender may exercise, from time to time, any and all rights and remedies available to it under the Code or under any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any other Loan Document, and may, without demand or notice of any kind, appropriate and apply toward the payment of such of the obligations under the Loan Documents, whether matured or unmatured, including costs of collection and reasonable fees of attorneys and paralegals, and in such order of application as Lender may, from time to time, elect, any indebtedness of Lender to Borrowers or any other person obligated for any of the obligations under the Loan Documents, however created or arising, including balances, credits, deposits, accounts or moneys of Borrowers or any such other person in the possession, control or custody of, or in transit to Lender.  Borrowers, on behalf of themselves and each such other person, hereby waive the benefit of any law that would otherwise restrict or limit Lender in the exercise of its right, which is hereby acknowledged, to appropriate at any time hereafter any such indebtedness owing from Lender to any such other person.

 

11.6                        Additional Remedies.  Lender shall have the right and power to —

 

(a)                                 Instruct Borrowers, at their own expense, to notify any parties obligated on any of the Collateral, including any Account Debtors, to make payment directly to Lender of any amounts due or to become due thereunder, or Lender may directly notify such obligors of the security interest of Lender, or of the assignment to Lender of the Collateral, and direct such obligors to make payment to Lender of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts due on the Collateral directly from such persons obligated thereon;

 

(b)                                 Enforce collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder;

 

(c)                                  Take possession or control of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon;

 

(d)                                 Extend, renew or modify for one or more periods (whether or not longer than the original period) the Note, any other obligations under any of the Loan

 

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Documents, or any obligation of any nature of any other obligor with respect to the Note or any of the Obligations;

 

(e)                                  Grant releases, compromises or indulgences with respect to the Note or any of the other obligations under any of the Loan Documents, or any extension or renewal of any of the Note or such other obligations, or any security therefor, or to any other obligor with respect to the Note or any of such other obligations;

 

(f)                                   Transfer the whole or any part of securities which may constitute Collateral into the name of Lender or Lender’s nominee without disclosing, if Lender so desires, that such securities so transferred are subject to the security interest of Lender, and any corporation, association, or any of the managers or trustees of any trust issuing any of such securities, or any transfer agent, shall not be bound to inquire, in the event that Lender or such nominee makes any further transfer of such securities, or any portion thereof, as to whether Lender or such nominee has the right to make such further transfer, and shall not be liable for transferring the same;

 

(g)                                  Vote the Collateral;

 

(h)                                 Make an election with respect to the Collateral under Section 1111 of Bankruptcy Code or take action under Section 364 or any other section of Bankruptcy Code; provided, however, that any such action of Lender as set forth herein shall not, in any manner whatsoever, impair or affect the liability of Borrowers hereunder, nor prejudice, waive, nor be construed to impair, affect, prejudice or waive Lender’s rights and remedies at law, in equity or by statute, nor release, discharge, nor be construed to release or discharge, Borrowers, any guarantor or other person liable to Lender for the Loan or any of the other obligations under the Loan Documents; and

 

(i)                                     At any time, and from time to time, accept additions to, releases, reductions, exchanges or substitution of the Collateral, without in any way altering, impairing, diminishing or affecting the provisions of this Agreement, the Loan Documents, or any of the obligations under the Loan Documents, or Lender’s rights hereunder or under the Note.

 

Borrowers hereby ratify and confirm whatever Lender may do with respect to the Collateral and agrees that Lender shall not be liable for any error of judgment or mistakes of fact or law with respect to actions taken in connection with the Collateral.

 

11.7                        Right of Lender to Make Advances to Cure Event of Defaults; Obligatory Advances.  If Borrowers shall fail to perform any of their covenants or agreements herein or in any of the other Loan Documents contained, Lender may (but shall not be required to) perform any of such covenants and agreements, and any amounts expended by Lender in so doing, and any amounts expended by Lender pursuant to Sections 11.1 through 11.6 hereof and any amounts advanced by Lender pursuant to this Agreement shall be deemed advanced by Lender under an obligation to do so regardless of the identity of the person or persons to whom said funds are disbursed.  Loan Proceeds advanced by Lender to protect its security for the Loan are

 

50

 

obligatory advances hereunder and shall constitute additional indebtedness payable on demand and evidenced and secured by the Loan Documents.

 

11.8                        Attorney-in-Fact.  Each Borrower hereby irrevocably makes, constitutes and appoints Lender (and any officer of Lender or any person designated by Lender for that purpose) as such Borrower’s true and lawful proxy and attorney-in-fact (and agent-in-fact) in such Borrower’s name, place and stead, with full power of substitution, to (i) take such actions as are expressly permitted in this Agreement, (ii) execute such financing statements and other documents and to do such other acts as Lender may require to perfect and preserve Lender’s security interest in, and during the existence of an Event of Default hereunder, to enforce such interests in the Collateral, and (iii) during the existence of an Event of Default hereunder, carry out any remedy provided for in this Agreement, including endorsing such Borrower’s name to checks, drafts, instruments and other items of payment, and proceeds of the Collateral, executing change of address forms with the postmaster of the United States Post Office serving the address of such Borrower, changing the address of such Borrower to that of Lender, opening all envelopes addressed to such Borrower and applying any payments contained therein to the amounts due to Lender.  Each Borrower hereby acknowledges that the constitution and appointment of such proxy and attorney-in-fact are coupled with an interest and are irrevocable.  Each Borrower hereby ratifies and confirms all that such attorney-in-fact may do or cause to be done by virtue of any provision of this Agreement.

 

11.9                        No Marshalling.  Lender shall not be required to marshal any present or future collateral security (including this Agreement and the Collateral) for, or other assurances of payment of, the obligations of Borrowers, or any of them or to resort to such collateral security or other assurances of payment in any particular order.  To the extent that it lawfully may, Borrowers hereby agree that they will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of Lender’s rights under this Agreement or under any other instrument creating or evidencing any of Borrowers’ obligations or under which any of such obligations is outstanding or by which any of such obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Borrowers hereby irrevocably waive the benefits of all such laws.

 

11.10                 Application of Proceeds.  Lender will within three business days after receipt of cash or solvent credits from collection of items of payment, proceeds of Collateral or any other source, apply the whole or any part thereof against the obligations secured hereby.  Lender shall further have the exclusive right to determine how, when and what application of such payments and such credits shall be made on such obligations, and such determination shall be conclusive upon Borrowers.  Any proceeds of any disposition by Lender of all or any part of the Collateral may be first applied by Lender to the payment of expenses incurred by Lender in connection with the Collateral, including attorneys’ fees and legal expenses as provided for in Section 11.11 hereof.

 

11.11                 Attorneys’ Fees.  Borrowers shall pay Lender’s reasonable attorneys’ fees and costs in connection with the negotiation, preparation and administration of this Agreement and shall pay Lender’s reasonable attorneys’ fees and costs in connection with the administration and enforcement of this Agreement and the other Loan Documents, which shall also include reasonable attorneys’ fees and time charges of attorneys who may be employees of Lender or

 

51

 

any affiliate of Lender.  Without limiting the generality of the foregoing, if at any time or times hereafter Lender employs counsel for advice or other representation with respect to any matter concerning Borrowers, this Agreement, the Projects, the Facilities or the Loan Documents or if Lender employs one or more counsel to protect, collect, lease, sell, take possession of, or liquidate any portion of any Project or any Facility, or to attempt to enforce or protect any security interest or lien or other right in any portion of any Project or any Facility or under any of the Loan Documents, or to enforce any rights of Lender or obligations of Borrowers or any other person, firm or corporation which may be obligated to Lender by virtue of this Agreement or under any of the Loan Documents or any other agreement, instrument or document, heretofore or hereafter delivered to Lender in furtherance hereof, then in any such event, all of the attorneys’ fees arising from such services and actually incurred, and any expenses, costs and charges relating thereto and actually incurred, shall constitute an additional indebtedness owing by Borrowers to Lender payable on demand and evidenced and secured by the Loan Documents.

 

11.12                 No Waiver.  No failure by Lender to exercise, or delay by Lender in exercising, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof, or the exercise of any other right, power or privilege.  The rights and remedies provided in this Agreement and in the Loan Documents are cumulative and not exclusive of each other or of any right or remedy provided at law or in equity.  No notice to or demand on Borrowers in any case, in itself, shall entitle Borrowers to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Lender to any other or further action in any circumstances without notice or demand.

 

11.13                 Default Rate.  During the continuance of any Event of Default under this Agreement or any of the other Loan Documents, interest on funds outstanding hereunder shall accrue at the Default Rate and be payable on demand.  The failure of Lender to charge interest at the Default Rate shall not be evidence of the absence of an Event of Default or waiver of an Event of Default by Lender.

 

ARTICLE 12

 

MISCELLANEOUS

 

12.1                        Time is of the Essence.  Borrowers agree that time is of the essence in all of its covenants under this Agreement.

 

12.2                        Joint and Several Obligations; Full Collateralization.

 

(a)                                 Each Borrower shall be jointly and severally liable for all of the obligations of all Borrowers under this Agreement and the other Loan Documents, regardless of the amount of the Loan Proceeds that is actually disbursed to or for the benefit of each Borrower, or the manner in which Borrowers or Lender account for the Loan in their respective books and records.  All of the collateral provided by each Borrower shall secure all of the obligations of all Borrowers under this Agreement and the other Loan Documents, regardless of the amount of the Loan Proceeds that is actually disbursed to or for the benefit of each Borrower.

 

52

 

(b)                                 Each Borrower acknowledges that Lender has advised Borrowers that Lender is unwilling to provide the Loan to Borrowers unless each Borrower agrees to the joint and several liability and full collateralization described in paragraph (a) above.  Each Borrower has determined that it is in its best interest to undertake such joint and several liability and full collateralization, because of, among other things (i) the benefit to each Borrower of being able to obtain the Loan and the desirability of the terms and conditions of the Loan, (ii) the benefit and economies to be realized by Borrowers in obtaining the Loan as a single loan facility as compared to each Borrower’s obtaining an individual loan facility for its Facility, and (iii) the fact that each Borrower is an Affiliate of each of the other Borrowers.

 

(c)                                  The obligations of each of Borrowers under this Agreement and the other Loan Documents, including, without limitation, the joint and several liability and full collateralization as described in paragraph (a) above, shall be continuing and shall be binding upon each of them, and shall remain in full force and effect, and shall not be discharged, impaired or affected by (i) the power or authority of any other Borrower to execute, acknowledge or deliver this Agreement or any of the other Loan Documents; (ii) the existence or continuance of any obligation on the part of any other Borrower under this Agreement or any of the other Loan Documents; (iii) the validity or invalidity of the obligations of any other Borrower under this Agreement or any of the other Loan Documents; (iv) any defense, setoff or counterclaim whatsoever that any other Borrower may or might have to the performance or observance of the obligations under this Agreement or any of the other Loan Documents or to the performance or observance of any of the terms, provisions, covenants and agreements contained in this Agreement or any of the other Loan Documents, including, without limitation, any defense based on any alleged failure of Lender to comply with the implied covenant of good faith and fair dealing, or any limitation or exculpation of liability on the part of any other Borrower; (v) the existence or continuance of any other Borrower as a legal entity; (vi) the transfer by any other Borrower of all or any part of the property encumbered by the Loan Documents; (vii) any sale, pledge, assignment, surrender, indulgence, alteration, substitution, exchange, extension, renewal, release, compromise, change in, modification or other disposition of any of the obligations of any other Borrower or of any of the Loan Documents, all of which Lender is hereby expressly authorized to make from time to time without notice to Borrowers or any of them, or to anyone; (viii) the acceptance by Lender of the primary or secondary obligation of any party with respect to, or any security for, all or any part of the obligations under this Agreement or any of the other Loan Documents; or (ix) any failure, neglect or omission on the part of Lender to realize or protect any of the obligations under this Agreement or any of the other Loan Documents or any collateral or appropriation of any moneys, credits or property of Borrowers toward the liquidation of the obligations under this Agreement or any of the other Loan Documents or by any application of any moneys received by Lender under the Loan Documents.  The obligations of Borrowers and each of them under this Agreement and under the other Loan Documents, including, without limitation, the joint and several liability and full collateralization as described in paragraph (a) above, shall not be affected, discharged, impaired or varied by any act, omission or circumstance whatsoever, whether or not specifically enumerated above, except the due and punctual payment, performance and observance of all of the obligations of Borrowers under this Agreement and the other Loan Documents, and then, in each case, only to the extent thereof.

 

(d)                                 Lender shall have the right to enforce this Agreement and the other Loan Documents against any Borrower with or without enforcing or attempting to enforce the same

 

53

 

against any other Borrower or any security for the obligation of any of them, and whether or not other proceedings or steps are pending or have been taken or have been concluded to enforce or otherwise realize upon any security for the Loan or any guaranty of the Loan.  The payment of any amount or amounts by any Borrower, pursuant to its obligation under this Agreement or any of the other Loan Documents, including, without limitation, pursuant to the joint and several liability provided for herein, shall not in any way entitle such Borrower, either at law, or in equity or otherwise, to any right, title or interest in and to this Agreement, the Note, or any of the other Loan Documents, or any principal or interest payments theretofore, then or thereafter at any time made by anyone on behalf of any of Borrowers, or in and to any security therefor, or to any right of recovery against any Borrower, in each case whether by way of indemnity, reimbursement, contribution, subrogation or otherwise, and Borrowers hereby waive and relinquish any and all such right, title and interest in and to the Note, such other obligations, such principal and interest payments, and such security and any and all such rights of recovery against Borrowers In addition, each Borrower hereby subordinates all obligations of every sort whatsoever now or hereafter coming due to such Borrower from any other Borrower, to the Loan and the Note and to all other amounts coming due to Lender under the Loan Documents.

 

12.3                        Lender’s Determination of Facts; Lender Approvals and Consents.

 

(a)                                 Lender at all times shall be free to establish independently to its satisfaction and in its sole and absolute discretion the existence or nonexistence of any fact or facts, the existence or nonexistence of which is a condition of this Agreement.

 

(b)                                 Wherever in this Agreement or any of the other Loan Documents provision is made for the approval or consent of Lender or counsel to Lender, or that any matter is to be to the satisfaction of or as required by Lender or counsel to Lender, or that any matter is to be as estimated or determined by Lender, or the like, unless specifically stated to the contrary, such approval, consent, satisfaction, requirement, estimate or determination or the like shall be in the sole and absolute discretion of Lender or counsel to Lender, as the case may be.

 

(c)                                  Notwithstanding any other provision of this Agreement or the other Loan Documents, wherever in this Agreement or any of the other Loan Documents provision is made for the approval or consent of Lender with respect to a matter, if Lender elects to grant such approval or consent, it shall not be unreasonable for Lender to make such approval or consent subject to the condition that such matter must also be approved or consented to in writing by Guarantor, any other guarantors of the Loan, and any parties other than Borrowers that have provided collateral for the Loan.

 

12.4                        Prior Agreements; No Reliance; Modifications.  This Agreement and the other Loan Documents, and any other documents or instruments executed pursuant thereto or contemplated thereby, shall represent the entire, integrated agreement between the parties hereto with respect to the subject matter of this Agreement, and shall supersede all prior negotiations, representations or agreements pertaining thereto, either oral or written.  Borrowers acknowledge that they executing this Agreement without relying on any statements, representations or warranties, either oral or written, that are not expressly set forth herein.  This Agreement and any provision hereof shall not be modified, amended, waived or discharged in any manner other than by a written amendment executed by all parties to this Agreement.

 

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12.5                        Disclaimer by Lender.  Borrowers are not or shall not be an agent of Lender for any purposes, and Lender is not a venture partner with Borrowers in any manner whatsoever.  Approvals granted by Lender for any matters covered under this Agreement shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be solely for the benefit of Borrowers.

 

12.6                        Loan Expenses; Indemnification.  Borrowers shall pay all Loan Expenses promptly upon demand therefor by Lender.  To the fullest extent permitted by law, Borrowers hereby agree to protect, indemnify, defend and save harmless, Lender and its directors, officers, agents and employees from and against any and all liability, expense or damage of any kind or nature and from any suits, claims or demands, including legal fees and expenses on account of any matter or thing or action or failure to act by Lender, whether or not arising from a claim by a third party, and whether or not in litigation, arising out of this Agreement or in connection herewith, unless such suit, claim or damage is caused solely by any act, omission or willful malfeasance of Lender, its directors, officers, agents and authorized employees.  This indemnity is not intended to excuse Lender from performing hereunder.  This obligation on the part of Borrowers shall survive the closing of the Loan, the repayment thereof and any cancellation of this Agreement.  Borrowers shall pay, and hold Lender harmless from, any and all claims of any brokers, finders or agents claiming a right to any fees in connection with arranging the financing contemplated hereby.  Lender hereby represents and warrants that it has not employed a broker or other finder in connection with the Loan.  Borrowers hereby represent and warrant that no brokerage commissions or finder’s fees are to be paid in connection with the Loan.

 

12.7                        Captions.  The captions and headings of various Articles and Sections of this Agreement and exhibits pertaining hereto are for convenience only and are not to be considered as defining or limiting in any way the scope or intent of the provisions hereof.

 

12.8                        Inconsistent Terms and Partial Invalidity.  In the event of any inconsistency among the terms hereof (including incorporated terms), or between such terms and the terms of any other Loan Document, Lender may elect which terms shall govern and prevail.  If any provision of this Agreement, or any section, paragraph, sentence, clause, phrase or word, or the application thereof, in any circumstances, is adjudicated by a court of competent jurisdiction to be invalid, the validity of the remainder of this Agreement shall be construed as if such invalid part were never included herein.

 

12.9                        Gender and Number.  Any word herein which is expressed in the masculine or neuter gender shall be deemed to include the masculine, feminine and neuter genders.  Any word herein which is expressed in the singular or plural number shall be deemed, whenever appropriate in the context, to include the singular and the plural.

 

12.10                 Notices.  All notices and other communications provided for in this Agreement (“Notices”) shall be in writing.  The “Notice Addresses” of the parties for purposes of this Agreement are as follows:

 

	
Borrowers:
    	
Name   of Borrower

Two Buckhead Plaza

3050 Peachtree Road NW
    

 

55

 

	
 
    	
Suite 355

Atlanta, Georgia 30305

Attention: Boyd P. Gentry
    
	
 
    	
 
    
	
With a copy to:
    	
Holt   Ney Zatcoff & Wasserman, LLP

100   Galleria Parkway, Suite 1800

Atlanta,   Georgia 30339

Attention:   Gregory P. Youra

 
    
	
Lender:
    	
The PrivateBank and Trust Company

120 South LaSalle Street

Chicago, Illinois 60603

Attention: Amy K. Hallberg

 
    
	
With a copy to:
    	
Seyfarth Shaw LLP

131 South Dearborn Street

Suite 2400

Chicago, Illinois 60603

Attention: Alvin L. Kruse

 
    

 

or such other address as a party may designate by notice duly given in accordance with this Section to the other parties.  A Notice to a party shall be effective when delivered to such party’s Notice Address by any means, including, without limitation, personal delivery by the party giving the Notice, delivery by United States regular, certified or registered mail, or delivery by a commercial courier or delivery service.  If the Notice Address of a party includes a facsimile number or electronic mail address, Notice given by facsimile or electronic mail shall be effective when delivered at such facsimile number or email address.  If delivery of a Notice is refused, it shall be deemed to have been delivered at the time of such refusal of delivery.  The party giving a Notice shall have the burden of establishing the fact and date of delivery or refusal of delivery of a Notice.

 

12.11                 Effect of Agreement.  The submission of this Agreement and the Loan Documents to Borrowers for examination does not constitute a commitment or an offer by Lender to make a commitment to lend money to Borrowers; this Agreement shall become effective only upon execution and delivery hereof by Lender to Borrowers.

 

12.12                 Construction.  Each party to this Agreement and legal counsel to each party have participated in the drafting of this Agreement, and accordingly the general rule of construction to the effect that any ambiguities in a contract are to be resolved against the party drafting the contract shall not be employed in the construction and interpretation of this Agreement.

 

12.13                 Governing Law.  This Agreement has been negotiated, executed and delivered at Chicago, Illinois, and shall be construed and enforced in accordance with the laws of the State of Illinois.

 

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12.14                 Litigation Provisions.

 

(a)                                 EACH BORROWER CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, AND OF ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH ITS FACILITY IS LOCATED, IN WHICH ANY LEGAL PROCEEDING MAY BE COMMENCED OR PENDING RELATING IN ANY MANNER TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.

 

(b)                                 EACH BORROWER AGREES THAT ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT AGAINST SUCH BORROWER IN ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR ANY STATE OR FEDERAL COURT LOCATED OR HAVING JURISDICTION IN THE COUNTY IN WHICH ITS FACILITY IS LOCATED.  EACH BORROWER WAIVES ANY OBJECTION TO VENUE IN ANY SUCH COURT AND WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE FROM ANY SUCH COURT.

 

(c)                                  EACH BORROWER AGREES THAT IT WILL NOT COMMENCE ANY LEGAL PROCEEDING AGAINST LENDER RELATING IN ANY MANNER TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, OR IF A LEGAL PROCEEDING IS COMMENCED BY LENDER AGAINST BORROWER IN A COURT IN ANOTHER LOCATION, BY WAY OF A COUNTERCLAIM IN SUCH LEGAL PROCEEDING.

 

(d)                                 EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.

 

12.15                 Counterparts; Electronic Signatures.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.  Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof.  Electronic records of executed Loan Documents maintained by Lender shall be deemed to be originals thereof.

 

12.16                 Customer Identification-USA Patriot Act Notice; OFAC and Bank Secrecy Act.  Lender hereby notifies Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and Lender’s policies and practices, Lender is required to obtain, verify and record certain information and documentation that identifies Borrowers, which information includes the name and address of Borrowers and such other information that will allow Lender to identify Borrowers in accordance with the Act.  In addition, Borrowers shall (i) ensure that no person who owns a controlling interest in or otherwise controls Borrowers or any subsidiary of Borrowers is or shall 

 

57

 

be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury, or included in any Executive Orders, (ii) not use or permit the use of Loan Proceeds to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (iii) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act laws and regulations, as amended.

 

[SIGNATURE PAGE(S) AND EXHIBIT(S),

IF ANY, FOLLOW THIS PAGE]

 

58

 

IN WITNESS WHEREOF, Borrowers and Lender have caused this Agreement to be executed the day and year first above written.

 

	
 
    	
ADK   THOMASVILLE OPERATOR, LLC
    
	
 
    	
ADK   LUMBER CITY OPERATOR, LLC
    
	
 
    	
ADK   JEFFERSONVILLE OPERATOR, LLC
    
	
 
    	
ADK   LAGRANGE OPERATOR, LLC
    
	
 
    	
ADK POWDER   SPRINGS OPERATOR, LLC
    
	
 
    	
ADK   OCEANSIDE OPERATOR, LLC
    
	
 
    	
ADK   THUNDERBOLT OPERATOR, LLC
    
	
 
    	
ADK   SAVANNAH BEACH OPERATOR, LLC
    
	
 
    	
ATTALLA   NURSING ADK, LLC
    
	
 
    	
MOUNTAIN   TRACE NURSING ADK, LLC
    
	
 
    	
MT.   KENN NURSING, LLC
    
	
 
    	
ERIN   NURSING, LLC
    
	
 
    	
CP   NURSING, LLC
    
	
 
    	
BENTON   NURSING, LLC
    
	
 
    	
VALLEY   RIVER NURSING, LLC
    
	
 
    	
PARK   HERITAGE NURSING, LLC
    
	
 
    	
HOMESTEAD   NURSING, LLC
    
	
 
    	
WOODLAND   MANOR NURSING, LLC
    
	
 
    	
MOUNTAIN   VIEW NURSING, LLC
    
	
 
    	
NORTHRIDGE   HC&R NURSING, LLC
    
	
 
    	
LITTLE   ROCK HC&R NURSING, LLC
    
	
 
    	
WOODLAND   HILLS HC NURSING, LLC
    
	
 
    	
APH&R   NURSING, LLC
    
	
 
    	
GLENVUE   H&R NURSING, LLC
    
	
 
    	
COOSA   NURSING ADK, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Christopher F. Brogdon
    
	
 
    	
 
    	
Christopher   F. Brogdon, Manager of Each Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
THE   PRIVATEBANK AND TRUST COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/   Amy K. Hallberg
    
	
 
    	
 
    	
Amy K. Hallberg, Managing Director
    

 

- AdCare Portfolio Operator Loan Agreement -

- Signature Page -

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