Document:

Exhibit 10.278

 

SECOND MODIFICATION AGREEMENT

 

THIS SECOND MODIFICATION AGREEMENT dated as of December 28, 2012 (this “Agreement”), is entered into by and among LITTLE ROCK HC&R PROPERTY HOLDINGS, LLC, a Georgia limited liability company (the “Borrower”), ADCARE HEALTH SYSTEMS, INC., an Ohio corporation (“AdCare”), LITTLE ROCK HC&R NURSING, LLC, a Georgia limited liability company (the “Operator”) (AdCare and the Operator being sometimes referred to herein collectively as the “Guarantors”) (the Borrower and the Guarantors being sometimes referred to herein collectively as the “Borrower/Guarantor Parties”), and THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (“Lender”).

 

RECITALS

 

A.            The Borrower/Guarantor Parties and the Lender heretofore entered into the following documents (collectively, the “Documents”):

 

(i)            Loan Agreement dated as of March 30, 2012 (the “Loan Agreement”), by and among the Borrower, Northridge HC&R Property Holdings, LLC, a Georgia limited liability company (“Northridge”), Woodland Hills HC Property Holdings, LLC, a Georgia limited liability company (“Woodlands”) and the Lender.

 

(ii)           Promissory Note A dated March 30, 2012 (“Note A”), from the Borrower to the Lender in the principal amount of $13,664,956, which, along with Note B and Note C described below, replaced the Promissory Note dated March 30, 2012 (the “Original Note”), from the Borrower, Northridge and Woodlands to the Lender in the principal amount of $21,800,000.

 

(iii)          Promissory Note B dated March 30, 2012 (“Note B”) from Northridge to the Lender in the principal amount of $4,507,038, which, along with Note A and Note C described below, replaced the Original Note.

 

(iv)          Promissory Note C dated March 30, 2012 (“Note C”) from Woodlands to the Lender in the principal amount of $3,628,006, which, along with Note A and Note B, replaced the Original Note.

 

(v)           Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of April 1, 2012 (“Mortgage 1”), by Borrower to and for the benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019925.

 

(vi)          Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of April 1, 2012 (“Mortgage 2”), by Northridge to and for the

 

 

benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019978.

 

(vii)         Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of April 1, 2012 (“Mortgage 3”), by Woodlands to and for the benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019971.

 

(viii)        Absolute Assignment of Rents and Leases dated as of April 1, 2012 (“Assignment of Rents 1”), by Borrower to and for the benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019926.

 

(ix)          Absolute Assignment of Rents and Leases dated as of April 1, 2012 (“Assignment of Rents 2”), by Northridge to and for the benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019979.

 

(x)           Absolute Assignment of Rents and Leases dated as of April 1, 2012 (“Assignment of Rents 3”), by Woodlands to and for the benefit of the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on April 5, 2012, as Document No. 2012019972.

 

(xi)          Environmental Indemnity Agreement dated as of March 30, 2012 (the “Indemnity Agreement”), by the Borrower, Northridge, Woodlands, the Guarantors, Northridge HC&R Nursing, LLC, a Georgia limited liability company (the “Northridge Operator”), and Woodland Hills HC Nursing, LLC, a Georgia limited liability company (the “Woodlands Operator”), to and for the benefit of the Lender.

 

(xii)         Guaranty of Payment and Performance dated as of March 30, 2012 (the “Guaranty”), by the Guarantors, the Northridge Operator and the Woodlands Operator to and for the benefit of the Lender.

 

B.            The Documents were previously modified and amended by the Modification Agreement dated as of June 15, 2012, but effective as of March 30, 2012 (the “Previous Modification”), by and among the Borrower/Guarantor Parties and the Lender, recorded in the Official Records of Larry Crane, Pulaski County Circuit/County Clerk, on June 22, 2012, as Document No. 2012038003.

 

C.            The Documents, as modified and amended by the Previous Modification, encumber the real estate described in Exhibit A attached hereto and the personal property located thereon.

 

D.            The parties desire to make certain modifications and amendments to the Documents, as modified and amended by the Previous Modification, as more fully provided for herein, all as modifications, amendments and continuations of, but not as novations of, the Documents.

 

2

 

AGREEMENTS

 

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

 

Section 1.              Recitals Part of Agreement; Defined Terms; References to Documents.

 

(a)           The foregoing Recitals are hereby incorporated into and made a part of this Agreement.

 

(b)           All capitalized terms used and not otherwise defined in this Agreement shall have the meanings set forth in the Loan Agreement.

 

(c)           Except as otherwise stated herein, all references in this Agreement to any one or more of the Documents shall be deemed to include the previous modifications and amendments to the Documents provided for in the Previous Modification, whether or not express reference is made to such previous modifications and amendments.

 

Section 2.              Change in Maturity Date.  The maturity date of the Loan and Note A, as previously changed by the Previous Modification, is hereby extended from March 30, 2013, to December 31, 2016, and all of the Documents, as modified and amended by the Previous Modification are hereby further modified and amended accordingly.  Without limitation on the generality of the foregoing provisions of this Section, the date “March 30, 2013” is hereby extended to “December 31, 2016” each time it appears in the Documents, as modified and amended by the Previous Modification, in reference to the maturity date of the Loan and Note A, including, without limitation in the definition of the term “Maturity Date” in Section 1.1 of the Loan Agreement, in Section 1 of Note A, and in Recital Paragraph A in Mortgage 1, each as modified and amended by the Previous Modification.

 

Section 3.              Payment on Loan; Release of Security; Removal of Guarantors and Indemnitors.

 

(a)           As a condition precedent to the agreements of the Lender provided for in this Agreement, on the date of the execution and delivery of this Agreement, Northridge shall pay to Lender the full amount outstanding on Note B.  Upon receipt of such payment, the Lender will take such action as is necessary to release Mortgage 2 and Assignment of Rents 2.  From and after the date of this Agreement, Northridge shall no longer be a Borrower under the Loan, the Northridge Operator shall no longer be a guarantor under the Guaranty, and Northridge and the Northridge Operator shall no longer be environmental indemnitors under the Indemnity Agreement.

 

(b)           As a condition precedent to the agreements of the Lender provided for in this Agreement, on the date of the execution and delivery of this Agreement, Woodlands shall  pay to Lender the full amount outstanding on Note C.  Upon receipt of such payment, the Lender will take such action as is necessary to release Mortgage 3 and Assignment of Rents 3.  From and after the date of this Agreement, Woodlands a Borrower under the Loan, the Woodland Operator

 

3

 

shall no longer be a guarantor under the Guaranty, and Woodlands and the Woodlands Operator shall no longer be environmental indemnitors under the Indemnity Agreement.

 

(c)           The payments made by Northridge and Woodlands pursuant to Sections 3(a) and (b) will cause the principal balance outstanding on the Loan and Note A to be $13,664,956.

 

Section 4.              Reduction in Loan Amount.  The amount of the Loan and Note A is hereby reduced from $21,800,000 to $13,664,956, and all of the Documents, as modified and amended by the Previous Modification, are hereby further modified and amended accordingly.  Without limitation on the generality of the foregoing provisions of this Section, the amount “$21,800,000” is hereby changed to “$13,664,956” each time it appears in the Documents in reference to amount of the Loan, including, without limitation in the definition of the term “Loan Amount” in Section 1.1 of the Loan Agreement and in Recital Paragraph A in Mortgage 1, and in the definition of the term “Loan” in Recital Paragraph A in Assignment 1, in Recital Paragraph A in the Guaranty and in Recital Paragraph A in the Indemnity Agreement, each as modified and amended by the Previous Modification.

 

Section 5.              Amendment of Loan Agreement.

 

(a)           Without limitation on the foregoing provisions of this Section, the following defined terms in Section 1.1 of the Loan Agreement, as modified and amended by the Previous Modification, are hereby further modified and amended in their entirety to read as follows:

 

Borrower:  Borrower 1.

 

Facility:  Skilled nursing facility which is operated by Borrower in the Project described as follows:

 

	
Facility Name
    	
 
    	
Location
    	
 
    	
Beds
    
	
Little   Rock Healthcare and Rehab a/k/a West Markham Sub Acute and Rehabilitation   Center
    	
 
    	
5720   West Markham Street, Little Rock, Pulaski County, Arkansas
    	
 
    	
154
    

 

Guarantors:  AdCare and Operator 1.

 

Land:  The parcel of real estate legally described in Exhibit A, together with all improvements presently located thereon and all easements and other rights appurtenant thereto.

 

Lease:  Lease by Borrower 1 to Operator 1 of the Project dated April 1, 2012.

 

Loan Amount: $13,664,956

 

Note:  Promissory Note A dated March 30, 2012, from Borrower to the Lender in the principal amount of $13,664,956.

 

4

 

Operator:  Operator 1.

 

(b)           From and after the date of this Agreement, all references in the Documents, as modified and amended by the Previous Modification, to the “Borrowers” shall be deemed to be references to Borrower 1, and the “Operators” shall be deemed to be references to Operator 1, and all of the Documents, as modified and amended by the Previous Modification, are hereby further modified and amended accordingly

 

(c)           All of the Documents, as modified and amended by the Previous Modification, are hereby further modified and amended to incorporate the foregoing provisions of this Section.

 

Section 6.              Amendment of Mortgage 1.  Without limitation on any other provision of this Agreement, Recital Paragraph A in Mortgage 1, as modified and amended by the Previous Modification, is hereby further modified and amended in its entirety to read as follows:

 

A.            Pursuant to the terms and conditions of a Loan Agreement of even date herewith by and among the Mortgagor (the “Borrower”) and the Lender, as modified and amended by a Modification Agreement dated as of June 15, 2012, and a Second Modification Agreement dated as of December           , 2012 (as so modified and amended, the “Loan Agreement”), the Lender has agreed to make a loan to the Borrower in the maximum principal amount of $13,664,956 (the “Loan”).  The Loan will bear interest at variable interest rates based on the per annum rate of interest at which United States dollar deposits are offered in the London Interbank Eurodollar market, subject to being converted to interest at a variable rate based on the Lender’s prime rate of interest from time to time in effect under certain circumstances as provided in the Note referred to below.  The Loan shall be evidenced by a Promissory Note dated March 30, 2012 (the “Note”), executed by the Borrower and made payable to the order of the Lender in the principal amount of $13,664,956 and due on December 31, 2016 (the “Maturity Date”), except as it may be accelerated pursuant to the terms hereof, or of the Note or the Loan Agreement or any of the other “Loan Documents” (as defined in the Loan Agreement).

 

Section 7.              Amendment of Assignment of Rents 1.  Without limitation on any other provision of this Agreement, Recital Paragraph A in Assignment of Rents 1, as modified and amended by the Previous Modification, is hereby further modified and amended in its entirety to read as follows:

 

A.            Pursuant to the terms of a Loan Agreement of even date herewith by and among the Assignor (the “Borrower”) and the Assignee, as modified and amended by a Modification Agreement dated as of June 15, 2012, and a Second Modification Agreement dated as of December         , 2012 (as so modified and amended, the “Loan Agreement”), the Assignee has agreed to make a loan to the Borrower in the principal amount of $13,664,956 (the “Loan”).  The Loan shall be evidenced by a Promissory Note dated March 30, 2012, in the principal amount of $13,664,956 (the “Note”) executed by the Borrower and made payable to the order of the Lender.

 

5

 

Section 8.              Amendment of Guaranty.                Without limitation on any other provision of this Agreement, Recital Paragraph A in the Guaranty, as modified and amended by the Previous Modification, is hereby further modified and amended in its entirety to read as follows:

 

A.            The Lender has agreed to make a loan to Little Rock HC&R Property Holdings, LLC, a Georgia limited liability company (the “Borrower”), in the principal amount of $13,664,956 (the “Loan”) pursuant to the terms and conditions of a Loan Agreement of even date herewith by and among the Borrower and the Lender, as modified and amended by a Modification Agreement dated as of June 15, 2012 and a Second Modification Agreement dated as of December           , 2012 (as so modified and amended, the “Loan Agreement”).  The Loan is evidenced by a Promissory Note dated March 30, 2012 (the “Note”), executed by the Borrower and payable to the order of the Lender, in the principal amount of $13,664,956, which is secured by a Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of April 1, 2012 (the “Mortgage”), executed by Borrower to and for the benefit of the Lender.  All terms used and not otherwise defined herein shall have the meanings set forth in the Loan Agreement.  For the avoidance of doubt, all references in this Guaranty to the “Loan Documents” include, without limitation, any Bank Product Agreements (as defined in the Loan Agreement) to which the Lender or any of its Affiliates is a party, including, without limitation, any Hedging Agreements (as defined in the Loan Agreement) to which the Lender is a party.

 

Section 9.              Amendment of Indemnity Agreement.  Without limitation on any other provision of this Agreement, Recital Paragraph A in the Indemnity Agreement is hereby modified and amended in its entirety to read as follows:

 

A.            The Lender has agreed to make a loan to the Little Rock HC&R Property Holdings, LLC, a Georgia limited liability company (the “Borrower”), in the principal amount of $13,664,956 (the “Loan”) pursuant to the terms and conditions of a Loan Agreement of even date herewith by and among the Borrower and the Lender, as modified and amended by a Modification Agreement dated as of June 15, 2012, and a Second Modification Agreement dated as of December           , 2012 (as so modified and amended, the “Loan Agreement”).  The Loan is evidenced by a Promissory Note dated March 30, 2012 (the “Note”), executed by Borrower and payable to the order of the Lender, in the principal amount of $13,664,956, which is secured by a Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of April 1, 2012 (the “Mortgage”), executed by Borrower to and for the benefit of the Lender.  All terms used and not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

 

Section 10.  Change in Terms of Collateral Account.  Section 3.4 of the Loan Agreement is hereby modified and amended in its entirety to read as follows:

 

3.4          Collateral Account.  Borrower shall establish and maintain a collateral account in the name of Borrower held by Lender (the “Collateral

 

6

 

Account”).  The amount of the Collateral Account shall be $1,340,000, and on the date of this Agreement, Borrower shall deposit the sum of $1,340,000 into the Collateral Account.  The Collateral Account shall be held as additional security for the payment and performance of all of the obligations of Borrower under this Agreement and the other Loan Documents and all of the obligations of Operator under the Operator Loan Documents, and Borrower hereby pledges and assigns to Lender, and grants to Lender a first lien on and a first priority security interest in the Collateral Account, all cash and investments from time to time on deposit in the Collateral Account, and all proceeds of all of the foregoing.  Amounts on deposit in the Collateral Account shall be held in a certificate of deposit issued by Lender.  Interest earned on amounts on deposit in the Collateral Account shall be added to the Collateral Account.  All amounts on deposit in the Collateral Account shall be released by Lender to Borrower at such time as all of the principal of and interest on the Loan have been paid in full and all of the other obligations to Lender under this Agreement and the other Loan Documents have been fully paid and performed, or at such earlier time as the amount of the EBITDAR/Fully Adjusted for Operator for a fiscal year is not less than $2,300,000, as shown in an annual reviewed financial statement of the Operator and a compliance certificate furnished to Lender as provided in Section 7.4 of this Agreement.

 

Section 11.            Change in Minimum EBITDAR of Operator.  Section 7.16 of the Loan Agreement is hereby modified and amended in its entirety to read as follows effective as of November 1, 2012, with the existing Section 7.16 of the Loan Agreement to continue to be effective for periods prior to the date of this Agreement:

 

7.16                        Minimum EBITDAR of Operator.

 

(a)                                 It is a condition of this Agreement and the Loan that the EBITDAR/Management Fee Adjusted for Operator for each calendar month set forth in the table below, shall be not less than the amount set forth opposite such month in the table below:

 

	
Calendar Months
    	
 
    	
Minimum EBITDAR
   for Operator
    	
 
    
	
November, 2012
    	
 
    	
$
    	
25,000
    	
 
    
	
December, 2012
    	
 
    	
$
    	
75,000
    	
 
    
	
January, 2013
    	
 
    	
$
    	
100,000
    	
 
    
	
February, March and April, 2013
    	
 
    	
$
    	
150,000
    	
 
    

 

(b)                                 Until such time as paragraph (c) of this Section becomes effective, it is a condition of this Agreement and the Loan that the EBITDAR/Fully Adjusted for Operator for each calendar month commencing with the calendar month ending May 31, 2013, shall be not less than $160,000.

 

(c)                                  Effective for the first fiscal quarter ending after the EBITDAR/Fully Adjusted for Operator has been not less than $160,000 for each

 

7

 

of six consecutive calendar months, as shown in monthly financial statements of Operator and compliance certificates furnished to Lender as provided in Section 7.4 of this Agreement, it is a condition of this Agreement and the Loan that the EBITDAR/Fully Adjusted for Operator for each fiscal quarter shall be not less than $480,000.

 

Section 12.            Change in Amount of Deposits to Capital Expenditures Reserve Account.  The last sentence of Section 7.19(b) of the Loan Agreement is hereby modified and amended in its entirety to read as follows:

 

Commencing on April 1, 2013, Borrowers shall make a deposit in the Capital Expenditures Reserve Account on the first day of each month in the amount of $4,580.

 

Section 13.            Representations and Warranties.  The term “Signing Entity” as used in this Section means any entity (other than a Borrower/Guarantor Party itself) that appears in the signature block of any Borrower/Guarantor Party in this Agreement, any of the Documents or the Previous Modification, if any.  In order to induce the Lender to enter into this Agreement, the Borrower/Guarantor Parties hereby represent and warrant to the Lender as follows as of the date of this Agreement and if different, as of the date of the execution and delivery of this Agreement:

 

(a)           Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Georgia, has all necessary power and authority to carry on its present business, and has full right, power and authority to enter into this Agreement, each of the Documents to which it is a party and the Previous Modification, and to perform and consummate the transactions contemplated hereby and thereby.

 

(b)           AdCare is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio, has all necessary power and authority to carry on its present business, and has full right, power and authority to enter into this Agreement, each of the Documents to which it is a party and the Previous Modification, and to perform and consummate the transactions contemplated hereby and thereby.

 

(c)           Operator is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Georgia and duly registered to transact business and in good standing in the state of Arkansas.  Operator has full power and authority to carry on its present business, and has full right, power and authority to enter into this Agreement and each of the Documents to which it is a party and to perform and consummate the transactions contemplated hereby and thereby.

 

(d)           Each Signing Entity is duly organized, validly existing and in good standing under the laws of the State in which it is organized, has all necessary power and authority to carry on its present business, and has full right, power and authority to execute this Agreement, the Documents and the Previous Modification  in the capacity shown in each signature block contained in this Agreement, the Documents and the

 

8

 

Previous Modification in which its name appears, and such execution has been duly authorized by all necessary legal action applicable to such Signing Entity.

 

(e)           This Agreement, each of the Documents and the Previous Modification have been duly authorized, executed and delivered by such of the Borrower/Guarantor Parties as are parties thereto, and this Agreement, each of the Documents and the Previous Modification constitute a valid and legally binding obligation enforceable against such of the Borrower/Guarantor Parties as are parties thereto.  The execution and delivery of this Agreement, the Documents and the Previous Modification and compliance with the provisions thereof under the circumstances contemplated therein do not and will not conflict with or constitute a breach or violation of or default under the organizational documents of any Borrower/Guarantor Party or any Signing Entity, or any agreement or other instrument to which any of the Borrower/Guarantor Parties or any Signing Entity is a party, or by which any of them is bound, or to which any of their respective properties are subject, or any existing law, administrative regulation, court order or consent decree to which any of them is subject.

 

(f)            The Borrower/Guarantor Parties are in full compliance with all of the terms and conditions of the Documents to which they are a party and the Previous Modification, and no Default or Event of Default has occurred and is continuing with respect to any of the Documents or the Previous Modification.

 

(g)           There is no litigation or administrative proceeding pending or threatened to restrain or enjoin the transactions contemplated by this Agreement or any of the Documents or the Previous Modification, or questioning the validity thereof, or in any way contesting the existence or powers of any of the Borrower/Guarantor Parties or any Signing Entity, or in which an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by this Agreement or any of the Documents or the Previous Modification, or would result in any material adverse change in the financial condition, properties, business or operations of any of the Borrower/Guarantor Parties.

 

(h)           The statements contained in the Recitals to this Agreement are true and correct.

 

Section 14.            Documents to Remain in Effect; Confirmation of Obligations; References.  The Documents shall remain in full force and effect as originally executed and delivered by the parties, except as previously modified and amended by the Previous Modification and as expressly modified and amended herein.  In order to induce the Lender to enter into this Agreement, the Borrower/Guarantor Parties hereby (i) confirm and reaffirm all of their obligations under the Documents, as previously modified and amended by the Previous Modification and as modified and amended herein; (ii) acknowledge and agree that the Lender, by entering into this Agreement, does not waive any existing or future default or event of default under any of the Documents, or any rights or remedies under any of the Documents, except as expressly provided herein; (iii) acknowledge and agree that the Lender has not heretofore waived any default or event of default under any of the Documents, or any rights or remedies under any of the Documents; and (iv) acknowledge and agree that they do not have any defense, setoff or counterclaim to the payment or performance of any of their obligations under, or to the

 

9

 

enforcement by the Lender of, the Documents, as previously modified and amended by the Previous Modification and as modified and amended herein, including, without limitation, any defense, setoff or counterclaim based on the covenant of good faith and fair dealing.  All references in the Documents to any one or more of the Documents, or to the “Loan Documents,” shall be deemed to refer to such Document, Documents or Loan Documents, as the case may be, as previously modified and amended by the Previous Modification and as modified and amended by this Agreement.  Electronic records of executed documents maintained by the Lender shall be deemed to be originals thereof.

 

Section 15.            Certifications, Representations and Warranties.  In order to induce the Lender to enter into this Agreement, the Borrower/Guarantor Parties hereby certify, represent and warrant to the Lender that all certifications, representations and warranties contained in the Documents and the Previous Modification and in all certificates heretofore delivered to the Lender are true and correct as of the date of this Agreement and if different, as of the date of the execution and delivery of this Agreement, and all such certifications, representations and warranties are hereby remade and made to speak as of the date of this Agreement and if different, as of the date of the execution and delivery of this Agreement.

 

Section 16.            Entire Agreement; No Reliance.  This Agreement sets forth all of the covenants, promises, agreements, conditions and understandings of the parties relating to the subject matter of this Agreement, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them relating to the subject matter of this Agreement other than as are herein set forth.  The Borrower/Guarantor Parties acknowledge that they are executing this Agreement without relying on any statements, representations or warranties, either oral or written, that are not expressly set forth herein.

 

Section 17.            Successors.  This Agreement shall inure to the benefit of and shall be binding upon the parties and their respective successors, assigns and legal representatives.

 

Section 18.            Severability.  In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

 

Section 19.            Amendments, Changes and Modifications.  This Agreement may be amended, changed, modified, altered or terminated only by a written instrument executed by all of the parties hereto.

 

Section 20.            Construction.

 

(a)           The words “hereof,” “herein,” and “hereunder,” and other words of a similar import refer to this Agreement as a whole and not to the individual Sections in which such terms are used.

 

(b)           References to Sections and other subdivisions of this Agreement are to the designated Sections and other subdivisions of this Agreement as originally executed.

 

(c)           The headings of this Agreement are for convenience only and shall not define or limit the provisions hereof.

 

10

 

(d)           Where the context so requires, words used in singular shall include the plural and vice versa, and words of one gender shall include all other genders.

 

(e)           The Borrower/Guarantor Parties and the Lender, and their respective legal counsel, 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.

 

Section 21.            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 document.  Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof.  An electronic record of this executed Agreement maintained by the Lender shall be deemed to be an original.

 

Section 22.            Governing Law.  This Agreement is prepared and entered into with the intention that the law of the State of Illinois shall govern its construction and enforcement, except that insofar as this Agreement relates to a Document which by its terms is governed by the law of the State of Arkansas, this Agreement shall also be governed by the law of the State of Arkansas.

 

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

IF ANY, FOLLOW THIS PAGE]

 

11

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

 

	
 
    	
LITTLE   ROCK HC&R PROPERTY HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/   Christopher F. Brogdon
    
	
 
    	
 
    	
Christopher   F. Brogdon, Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ADCARE   HEALTH SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/   Christopher F. Brogdon
    
	
 
    	
 
    	
Christopher   F. Brogdon, Vice Chairman and
    
	
 
    	
 
    	
Chief   Acquisition Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LITTLE   ROCK HC&R NURSING, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/   Christopher F. Brogdon
    
	
 
    	
 
    	
Christopher   F. Brogdon, Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
THE   PRIVATEBANK AND TRUST COMPANY
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/   Amy K. Hallberg
    
	
 
    	
 
    	
Amy   K. Hallberg, Managing DirectorExhibit 10.279

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) is entered into effective as of the 31st day of December, 2012, by and between AdCare Health Systems, Inc., an Ohio corporation (“AdCare”), and Christopher F. Brogdon (the “Consultant”). AdCare and the Consultant are sometimes hereinafter individually referred to as a “Party” and collectively as the “Parties.”

 

In consideration of the mutual covenants set forth below, the Parties agree as follows:

 

1                                              Engagement.  AdCare hereby engages the Consultant to provide the following services to AdCare (the “Consulting Services”):

 

(i)                                  Source and recommend potential acquisitions in line with AdCare’s business.

 

(ii)                               Recommend and arrange financing for targeted acquisitions.

 

(iii)                            Work with AdCare executives to complete acquisitions and financing.

 

(iv)                           Such other services requested by AdCare which are reasonably related or incidental to the above-described services.

 

The Consultant hereby accepts such engagement and agrees from time to time upon AdCare’s request and reasonable prior notice to provide the Consulting Services to AdCare on the terms set forth in this Agreement.

 

2                                              Term.  Subject to earlier termination with or without cause as provided for in Section 11 below, this Agreement shall be in effect for the three year period from December 31, 2012, through December 31, 2015 (“the Initial Term”).  In the event the Agreement has not been terminated prior to the expiration of this or any Term this Agreement will extend automatically for successive one-year terms. (hereinafter each one-year additional term is referred to as a “Renewal Term”) (the Initial Term and any Renewal Term are collectively referred to as the “Term”)

 

3                                              Commitment.  The Consultant represents that he is not currently bound by any agreements or other commitments that might interfere with or impair his performance of his consulting responsibilities hereunder or that are inconsistent with his obligations hereunder The Consultant will devote such time and attention to the performance of the Consulting Services as are reasonably required (it being acknowledged that the Consultant’s time commitment is part-time, not full-time).  The Consultant shall perform all Consulting Services diligently, in the best interests of AdCare and to the best of his professional ability and judgment.  The Consultant shall not enter into any agreement or other obligations on behalf of AdCare without its express prior consent.

 

 

As part of the Consulting Services, Consultant agrees to provide to AdCare a Right of First Refusal on all skilled nursing facility acquisitions that the Consultant originates, becomes aware of, or in which he has an opportunity to invest. This will include both fee simple properties and leaseholds where the existing lease can be cancelled or is about to expire and AdCare could become the tenant within six months after the closing of the transaction.  The Right of First Refusal will also apply to any campuses which include a skilled nursing facility even though there may also be assisted living or other facilities on the property However, stand alone assisted living facility opportunities will not be subject to the Right of First Refusal.

 

4.                                           Compensation.  As consideration for the Consulting Services to be provided by the Consultant hereunder, AdCare shall pay to the Consultant $10,000.00 per month in year one, $15,000 per month in year two, and $20,000 per month in year three, all without any deductions or withholdings, during the Term.  In addition to the monthly payments advanced the Consultant will also receive a success fee in the amount of $20,000 on a transaction by transaction basis; however, barring a majority vote of the Board of the Directors indicating otherwise, the parties agree the total amount of success fee(s) on a yearly basis will not exceed the following: $80,000 in year one, $120,000 in year two, and $160,000 in year three.  Additionally, the parties agree no success fee(s) will be paid to the Consultant for leased facilities or fee simple real estate properties where the overall consideration for the transaction is less than $2,500,000.  The Consultant agrees that the amount set forth in this Section is the total amount of compensation to which he is entitled for the Consulting Services and his other undertakings pursuant to this Agreement. Unless otherwise agreed to by the parties, the Consultant’s compensation during any Renewal Term shall be the same as the compensation paid during the previous twelve-month period.

 

5                                           Expense Reimbursement.  In performing the Consulting Services hereunder, the Consultant will engage in such travel, entertainment, attendance at industry related conventions and meetings, and other similar activities as are required to perform the Consulting Services hereunder AdCare will reimburse the Consultant for all reasonable travel, lodging, meal or any other expenses incurred by the Consultant in the performance of the Consulting Services hereunder.

 

6.                                           Nondisclosure.  Both during and after the Term, the Consultant shall not, and the Consultant shall not permit any employee, agent, or other representative of the Consultant or of any other entity which is controlled by the Consultant (collectively, “Affiliates of the Consultant,”) to disclose to any person other than Affiliates of the Consultant, or use for the benefit of the Consultant or any Affiliates of the Consultant, any non-public information concerning AdCare which has been learned or has come into the possession of the Consultant or an Affiliate of the Consultant as a result of the Consultant’s or such Affiliate’s association with AdCare pursuant to this Agreement.  In the event of any disclosure required by any applicable law, regulation or judicial or regulatory order or threat of such an order, the Consultant shall provide AdCare written notice of any such disclosure request, and shall further notify AdCare as expeditiously as possible to enable AdCare to authorize such disclosure, to limit such disclosure, or to take action necessary to prevent and/or enjoin such disclosure.

 

2

 

7                                          Indemnification and Liability Limitation.

 

(a)                                           AdCare. Both during and after the Term, AdCare shall indemnify, defend, and hold harmless the Consultant and all Affiliates of the Consultant from and with respect to all actions, suits, proceedings, judgments, demands, claims, liabilities, losses, or expenses whatsoever (including reasonable attorneys’ fees) arising from the business and/or activities of AdCare and/or from defects in products or services of AdCare that are the result of willful misconduct or gross negligence on the part of AdCare.

 

(b)                                           The Consultant.  Both during and after the Term, the Consultant shall indemnify, defend, and hold harmless AdCare from and with respect to all actions, suits, proceedings, judgments, demands, claims, liabilities, losses, or expenses whatsoever (including reasonable attorneys’ fees) arising from the business and/or activities of the Consultant or Affiliates of the Consultant that are the result of willful misconduct or gross negligence on the part of the Consultant or Affiliates of the Consultant.

 

8                                           Termination.

 

(a)                            Pre Change of Control.

 

i.                       Without Cause

 

AdCare may terminate this Agreement, at any time, without cause, upon providing 30 days written notice to the Consultant and a vote of the majority of the Board being in Agreement.  In the event AdCare terminates this Agreement without cause prior to the end of the Term provided for in Section 2 of this Agreement, the severance pay shall be an amount equal to eighteen (18) months of the Consultant’s maximum total compensation (including success fees) under this Agreement payable in a lump sum at the time the Consultant’s services are formally terminated

 

ii.                        With Cause

 

Either Party may terminate this Agreement at any time upon a material breach of the terms of this Agreement by the other Party, if such breach is not cured within 30 days after receipt of written notice of such breach from the non-breaching Party; provided that where a breach can be completely cured, but cannot be completely cured within 30 days, the breaching Party shall have an additional 30 days to completely cure if the cure process has been started within the first 30-day period and the breaching Party has been diligent in its efforts to cure throughout the first 30-day period.  Termination due to an uncured material breach shall be effective as of midnight on the last day of the applicable cure period.  The Consultant may unilaterally terminate this Agreement effective as of any other date upon at least 60 days advance written notice to that effect to AdCare, in which case the Consultant shall be paid through the date of termination.

 

3

 

(b)                                   Post Change of Control.  If after a Change in Control, (i) the Consultant resigns his position for any reason or (ii) AdCare terminates the Consultant’s position within six (6) months without Cause (other than due to Consultant’s disability), or (iii) the entity acquiring a controlling interest in AdCare terminates the Consultant’s position without Cause (other than due to the Consultant’s disability) the Consultant, or his successors and assigns, shall receive the severance pay and benefits hereafter provided.  The severance pay shall be an amount equal to three (3) years of his maximum total compensation (including success fees) under this Agreement payable in a lump sum at the time of closing resulting in the formal Change of Control if such termination is concurrent with such closing or (ii) at the time of termination if such termination occurs after a Change of Control.  For example, if Consultant is terminated in year one he would receive the aggregate of $900,000 which is the sum of his maximum compensation for the next three years ($200,000 + $300,000 + $400,000); in year two he would receive $1,100,000 ($300,000 + $400,000 + $400,000) and in year three or during any Renewal Term the Consultant he would receive $1,200,000 ($400,000 + $400,000 + $400,000).  For purposes of this Agreement, termination and similar terms means a termination constituting a “separation from service” within the meaning of Code Section 409A.  Notwithstanding the foregoing, to the extent necessary to avoid the Consultant incurring a tax under Code Section 409A, any amount that is otherwise due within six (6) months following termination of employment shall be delayed until six months after termination of employment.  The provisions contained in this Section shall survive the termination of the Consultant’s position.  For purposes of this Agreement, the following terms shall have the following meanings. “Cause” means the Consultant’s fraud, dishonesty, willful misconduct, or gross negligence in his performance of his duties hereunder, or the Consultant’s conviction for a crime of moral turpitude, or material breach by the Consultant of this Agreement which the Consultant fails to cure within thirty (30) days after AdCare gives the Consultant written notice of such breach.  “Change in Control” means one or more sales or dispositions, within a twelve (12) month period, of assets representing a majority of the value of the assets of AdCare or the acquisition (whether by purchase or through a merger or otherwise) of common stock of AdCare immediately following which the holders of common stock of AdCare immediately prior to such acquisitions cease to own directly or indirectly common stock of AdCare or its legal successor representing more than fifty percent (50%) of the voting power of the common stock of AdCare or its legal successor

 

4

 

9                                           Independent Contractor.

 

(a)                                           No Employment Relationship.  This Agreement shall not establish any employment, partnership or joint venture relationship between the Parties. The Consultant acknowledges that the relationship of the Consultant to AdCare is solely that of an independent contractor, and not of an employee, agent, partner, or otherwise for any purpose.  The Consultant is not, by reason of this Agreement, and will not hold himself out, by reason of this Agreement, as being an employee of AdCare and acknowledges and agrees that he will not be entitled to any employee rights or benefits of any kind whatsoever from AdCare. The Consultant shall not have any right or ability to sign any document for or on behalf of AdCare, or otherwise to bind or create or enter into any obligation on the part of AdCare

 

(b)                                           Indemnification and Acknowledgement.  The Consultant acknowledges and agrees that he is and shall be solely responsible for the payment of any and all applicable federal, state, local, and other taxes relating to any compensation, fees or other amounts or rights granted to the Consultant under this Agreement.  The Consultant further agrees to indemnify, defend, and hold harmless AdCare and the Indemnified Parties (as defined below) for and against: (i) any and all federal, state, local, or other tax liability including, without limitation, liability for back withholding, penalties, interest, and attorneys’ fees (“Tax Liability”), incurred by any of the Indemnified Parties relating in any way to Consultant’s Tax Liability for or with respect to any compensation, fees or other rights granted under this Agreement, (ii) any and all claims, liabilities, demands, losses, damages, suits and judgments (including without limitation costs, expenses, and attorneys’ fees) (collectively “Claims”) arising out of or relating to the Consultant’s provision of the Consulting Services or to any breach by the Consultant of any covenants, representations or warranties under this Agreement, and (iii) any and all Claims by any person including the Consultant because of injury or death to person(s) or loss or destruction of property attributable in whole or in part to any acts or omissions by the Consultant (whether negligent, insured or otherwise) or any fault of the Consultant, regardless of whether any such Claims are or are found to be unsuccessful, groundless, or fraudulent. The term “Indemnified Parties” as used in this Agreement includes AdCare and its past, present, and future affiliates, partnerships and other related entities (whether or not wholly owned); each of their respective past, present, and future owners, trustees, fiduciaries, administrators, shareholders, directors, officers, partners, associates, agents, representatives, employees, and attorneys; and the predecessors, successors, and assigns of each of the foregoing.

 

10                                       Section 409A.  This Agreement is intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code (“Section 409A”), as applicable, and shall be administered and construed consistent with this intent. Solely for purposes of complying with Section 409A, any reference to the Consultant’s termination shall mean the Consultant’s “separation from service” as that term is defined in Section 409A.

 

11                                       Notices.  Any notice, election or other written communication required or desired to be given hereunder shall be deemed given or made at such time as it (a) is delivered personally to the intended recipient, or (b) is delivered to Federal Express,

 

5

 

UPS or any similar express delivery service, or is deposited in the United States mails, by registered or certified mail, return receipt requested, bearing proper postage, addressed to the intended recipient at the address set forth on the signature page of this Agreement. Any Party may specify some other address for the receipt of such written communications by giving written notice of such change to the other Parties.  Although a notice, election or other communication shall be deemed given or made when delivered to an express delivery service or deposited in the mails as provided above, any time period that is to begin running by reason of such communication shall not commence until such communication actually is received by the intended recipient.

 

12                                       Entire Agreement.  Except as otherwise specifically indicated herein, this document contains the entire agreement of the Parties and supersedes any and all prior understandings, agreements, representations and negotiations between them respecting the subject matters hereof.

 

13                                       Successors in Interest.  Except as otherwise provided herein, all provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the Parties and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns.

 

14.                                    Counterparts, Facsimiles and Electronic Mail.  This Agreement and any other documents related to this Agreement may be executed in several counterparts, and each executed counterpart shall be considered as an original of this Agreement or such other document, as the case may be A counterpart executed and transmitted by facsimile device or electronic mail by any person to the intended recipient thereof shall constitute and be accepted as an executed and delivered original of this Agreement or such other document, as the case may be

 

15                                       Severability.  In the event any provision of this Agreement or any application thereof is held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the other provisions hereof and of any other application of the specific provision involved shall not be affected or impaired in any manner

 

16.                                    No Third Party Benefit or Assignment.  Except as otherwise specifically provided herein, this Agreement is intended for the exclusive benefit of the Parties and their respective successors and permitted assigns, and nothing contained in this Agreement shall be construed as creating any right or benefit in or to any third party This Agreement may not be assigned by either Party without the advance written consent of the other Party

 

17.                                    Survival.  If any provision of this Agreement establishes with respect to any Party any rights and/or obligations which are to be in effect after the termination or expiration of this Agreement, such provision shall survive the termination or expiration of this Agreement and shall be binding upon all persons affected by such provision for such period of time as may reasonably be required in order to give full effect to the intended application of such provision.

 

6

 

18.                                    Waiver.  Any waiver by either Party of a breach of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any other breach of such provision or of any breach of any other provision herein.  Failure by either Party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered as a waiver or deprive that Party of the right thereafter to insist upon strict adherence to that term or any other term herein. Any waiver must be in writing.

 

19                                       Venue.  The Parties hereby designate the courts sitting in Fulton County, Georgia, as the courts of proper and exclusive subject matter and personal jurisdiction and venue of and for any and all actions and proceedings relating to this Agreement; hereby irrevocably consent to such designation, jurisdiction and venue; hereby waive any objections or defenses relating to jurisdiction or venue with respect to any action or proceeding initiated in any of said courts; and agree that service of process or notice in any such action or proceeding shall be effective if delivered or mailed in accordance with the notice provisions of this Agreement.

 

20.                                    Applicable Law.  All rights, duties and obligations of the Parties under this Agreement shall be determined in accordance with the laws of the State of Georgia.

 

7

 

This Agreement has been executed and delivered effective as of the date first set forth above.

 

	
THE VICE CHAIRMAIN CONSULTANT:
    	
ADCARE:
    
	
 
    	
 
    	
 
    	
 
    
	
/s/   Christopher F. Brogdon
    	
 
    	
By:
    	
/s/   Boyd P. Gentry
    
	
Christopher   F. Brogdon
    	
 
    	
It’s:
    	
PRESIDENT   & CEO
    

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00219-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00219-of-00352.parquet"}]]