Document:

Exhibit 10.8

 

PROMISSORY NOTE

 

	
$5,000,000.00
    	
 
    	
April 1, 2012
    

 

FOR VALUE RECEIVED, ADCARE HEALTH SYSTEMS, INC., an Ohio corporation (the “Maker”), hereby promises to pay to the order of STROME ALPHA OFFSHORE LTD. (the “Payee”) the principal amount of Five Million Dollars ($5,000,000.00).

 

The entire principal amount of this Note shall mature on November 1, 2012 (the “Maturity Date”), at which time the principal and all interest due shall be paid in full. The interest rate on the unpaid principal amount of this Note is ten percent (10%) per annum. Interest on the principal amount of this Note outstanding from time to time, from the date hereof, to the day on which all such principal shall be repaid (whether on the Maturity Date, or otherwise), shall be paid in arrears quarterly, on the first day of each July and October 2012.

 

Maker may prepay this Note in whole or in part, at any time, without notice, penalty, or premium.

 

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

 

(a)           Failure of Maker to make a payment of interest or principal as required herein for a period of thirty (30) days after receipt of notice from Payee that the same was not paid when due.

 

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

 

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

 

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

 

(b)           Upon the occurrence of any Event of Default and upon acceleration of the entire unpaid principal balance of the amount owned by Maker to Payee hereunder, interest shall continue to accrue thereafter, to the extent legally permissible, at a rate equal to eighteen percent (18%) per annum, until the principal amount hereof, together will all interest accrued thereon, shall be paid in full. Both before and after any Event of Default, interest shall be computed on the basis of a 360-day year and the actual number of days elapsed.

 

 

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

 

In the event that Maker does not pay the principal and interest due under this Note by the Maturity Date to Payee or within thirty (30) days after receipt of notice from Payee that the same was not paid when due, then Maker shall also do the following:

 

(a)           Maker shall execute and deliver to Lender warrants to purchase up to an additional 50,000 shares of Maker’s common stock at $4.00 per share, exercisable at any time through and including November 1, 2022, which warrants shall be in substantially the same form as those previously issued;

 

(b)           Maker shall sign and deliver to Lender a Stipulation of Judgment for Judgment to be entered against Maker and in favor of Payee in accordance with the terms of this Note, in the form attached hereto as Exhibit A.

 

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

 

Concurrently with the execution and delivery of this Note, Maker shall execute and deliver to Lender warrants to purchase up to 312,500 shares of Maker’s common stock at $4.00 per share, exercisable at any time through and including April 1, 2022.

 

Maker waives presentment, demand and protest, and consents to any number of renewals or extensions of the time of payment hereof without notice.

 

The granting, without notice, of any extension of time for the payment of any sum due under this Note or for the performance of any covenant, condition or agreement thereof, or the taking or release of any other security shall in no way release or discharge the liability of Maker.

 

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

 

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

 

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If   to Maker:
    	
 
    	
AdCare   Health Systems, Inc.
    
	
 
    	
 
    	
Two   Buckhead Plaza
    
	
 
    	
 
    	
3050   Peachtree Road NW, Suite 355
    
	
 
    	
 
    	
Atlanta,   Georgia 30305
    
	
 
    	
 
    	
Attn:   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
With   a copy to:
    	
 
    	
Gregory   P. Youra, Esq.
    
	
 
    	
 
    	
Holt   Ney Zatcoff & Wasserman, LLP
    
	
 
    	
 
    	
100   Galleria Parkway, Suite 1800
    
	
 
    	
 
    	
Atlanta,   Georgia 30339
    
	
 
    	
 
    	
 
    
	
If   to Payee:
    	
 
    	
Dania   M. Alvarenga, Esq.
    
	
 
    	
 
    	
Alvarenga   Law
    
	
 
    	
 
    	
1671   The Alameda Ste 307
    
	
 
    	
 
    	
San   Jose Ca 95126
    
				

 

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

 

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

 

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

 

All payments due under this Note shall be paid to Payee at 100 Wilshire Blvd. Ste 1750 Santa Monica Ca 90401 or at such other place as Payee may direct.  Whenever a payment is due on a day other than a business day (all days except Saturday, Sunday and legal holidays under federal or Georgia law), the maturity thereof shall be extended to the next succeeding business day and interest shall accrue thereon at the rate described herein.

 

This Note shall be governed and construed in accordance with the substantive laws of the State of California. Any disputes arising out of this Note shall be resolved by a Court of Competent Jurisdiction in State of California, city of Los Angeles.  Time is of the essence with respect to each and every covenant and obligation of Maker under this Note.

 

[Remainder of page intentionally blank; signature on following page.]

 

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PROMISSORY NOTE TO STROME ALPHA OFFSHORE LTD.

SIGNATURE PAGE

 

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

 

 

	
 
    	
ADCARE   HEALTH SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Boyd P. Gentry
    
	
 
    	
 
    	
Boyd   P. Gentry, Chief Executive Officer
    

 

4Exhibit 10.9

 

PROMISSORY NOTE

 

	
$ 3,500,000.00
    	
 
    	
March   30, 2012
    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)           Upon the occurrence of any Event of Default and upon acceleration of the entire unpaid principal balance of the amount owned by the Maker to the Payee hereunder, interest shall continue to accrue thereafter, to the extent legally permissible, at a rate of six percentage points per annum in excess of the then-applicable interest rate under this Note, until the principal amount hereof, together will all interest accrued thereon, shall be paid in full, including the period following entry of any judgment. Both before and after any Event of Default, interest shall be computed on the basis of a 360-day year and the actual number of days elapsed.

 

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

 

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

 

The Maker waives presentment, demand and protest, and consents to any number of renewals or extensions of the time of payment hereof without notice. The granting, without notice, of any extension of time for the payment of any sum due under this Note or for the performance of any covenant, condition or agreement thereof, or the taking or release of any other security shall in no way release or discharge the liability of the Maker. No waiver by the Payee of any breach by the Maker of any of its obligations, agreements or covenants herein shall be a waiver of any subsequent breach or of any obligation, agreement or covenant, nor shall any forbearance by the Payee of its rights or remedies be a waiver with respect to that or any other breach.

 

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

 

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If   to the Maker:
    	
 
    	
Adcare   Health Systems, Inc.
    
	
 
    	
 
    	
5057   Troy Road
    
	
 
    	
 
    	
Springfield,   Ohio 45502
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Attn:
    	
Boyd   P. Gentry
    
	
 
    	
 
    	
 
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
If   to the Payee:
    	
 
    	
Cantone   Asset Management LLC
    
	
 
    	
 
    	
c/o   Cantone Research, Inc.
    
	
 
    	
 
    	
766   Shrewsbury Avenue
    
	
 
    	
 
    	
Tinton   Falls, NJ 07724
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Attention:
    	
Anthony   J. Cantone
    
	
 
    	
 
    	
 
    	
Managing   Member
    
					

 

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

 

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

 

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

 

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

 

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

 

 

	
 
    	
ADCARE   HEALTH SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Boyd P. Gentry
    
	
 
    	
 
    	
Boyd   P. Gentry
    
	
 
    	
 
    	
Chief   Executive Officer
    

 

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