Document:

9.30.2014 - Ex 10.18 PrivateBank 6th Mod

Exhibit 10.18
17987406.2
09-24-14

SIXTH MODIFICATION AGREEMENT

THIS SIXTH MODIFICATION AGREEMENT dated as of September 24, 2014 (this "Agreement"), is entered into by and among ADK THOMASVILLE OPERATOR, LLC ("Borrower   1"), ADK LUMBER CITY OPERATOR, LLC ("Borrower 2"), ADK LAGRANGE OPERATOR, LLC ("Borrower 4"), ADK POWDER SPRINGS OPERATOR,    LLC ("Borrower    5"), ADK THUNDERBOLT OPERATOR,    LLC ("Borrower 7"), ATTALLA NURSING ADK, LLC ("Borrower 9"), MOUNTAIN TRACE NURSING  ADK,  LLC,  an  Ohio  limited  liability  company  ("Borrower  10"), MT.  KENN NURSING,    LLC ("Borrower   11"),  ERIN NURSING, LLC ("Borrower 12"), CP NURSING, LLC ("Borrower 13"), BENTON NURSING, LLC ("Borrower 14"), VALLEY RIVER    NURSING, LLC ("Borrower   15"),  PARK HERITAGE NURSING, LLC ("Borrower   16"),  HOMESTEAD NURSING,    LLC ("Borrower 17"), WOODLAND MANOR NURSING, LLC ("Borrower 18"), MOUNTAIN VIEW NURSING, LLC ("Borrower 19"), LITTLE ROCK HC&R NURSING, LLC ("Borrower 21"), GLENVUE H&R NURSING, LLC ("Borrower 24") and COOSA  NURSING  ADK,  LLC  ("Borrower 25"), QC NURSING, LLC ("Borrower 26"), each a Georgia limited liability company except as hereinabove set forth (the "Borrowers"), ADCARE HEALTH SYSTEMS, INC., a Georgia corporation (the "Guarantor") (the Borrowers and the Guarantor 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 and Security Agreement dated as of September 20, 2012 (the “Loan Agreement”), by and among the Borrowers, ADK Jeffersonville Operator, LLC (“Borrower 3”), ADK Oceanside Operator, LLC (“Borrower 6”), ADK Savannah Beach Operator, LLC (“Borrower 8”), Northridge HC&R Nursing, LLC (“Borrower 20”), Woodland Hills HC Nursing, LLC (“Borrower 22”), and APH&R Nursing, LLC, each a Georgia limited liability company (“Borrower 23” and together with Borrowers 3, 6, 8, 20 and 22, the “Released Borrowers”; the Released Borrowers together with the Borrowers, the “Original Borrowers”), and the Lender.
(ii)    Promissory Note dated September 20, 2012 (the “Note”), from the Original Borrowers to the Lender in the principal amount of $10,600,000.
(iii)    Guaranty of Payment and Performance dated as of September 20, 2012, by the Guarantor to and for the benefit of the Lender.

B.    The Documents were previously modified and amended by the following documents (the  “Previous Modifications”): (i) the Modification Agreement dated as of October 26, 2012 (the “Modification”), by and among the Original Borrowers, the Guarantor and the Lender; (ii) the Memorandum of Agreement dated January 25, 2013 (the “Second Modification”), by and among Borrower 20, Borrower 22, Borrower 23 and the Lender;  (iii) the Third Modification Agreement dated as of September 30, 2013, by and among the Borrowers, Borrower 3, Borrower 6, Borrower 8, the Guarantor and the Lender (the “Third Modification”); (iv) the Fourth Modification Agreement dated as of November 26, 2013, by and among the Borrowers, the Guarantor and the Lender (the “Fourth Modification”); and (v) the Fifth Modification dated as of July 22, 2014, by and among the Borrowers, the Guarantor and the Lender.
C.    Borrower 20, Borrower 22 and Borrower 23 were released from their respective obligations under the Documents pursuant to the Second Modification.
D.    Borrower 3, Borrower 6 and Borrower 8 were released from their respective obligations under the Documents pursuant to the Third Modification.
E.    Borrower 1, Borrower 18 and Borrower 24 are being released from their respective obligations under the Documents pursuant to this Agreement.
F.    The parties desire to make certain modifications and amendments to the Documents, as modified and amended by the Previous Modifications, as more fully provided for herein, all as modifications, amendments and continuations of, but not as novations of, the Documents.

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 hav e

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 Modifications , whether or not express reference is made to such previous modifications  and amendments.

Section 2.    Reduction of Loan Amount. The amount of the Loan and the Note and the Loan Amount are hereby reduced from $ 10,600,000 to $9,100,000, and all of the Documents,

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as they may have been modified  and amended by the Previous Modifications , are  hereby modified and amended accordingly. Without limitation on the generality of the foregoing provisions of this Section, the amount "$10,600,000" is hereby  changed  to  "$9, 100,000" each time it appears in the Documents, as they may have been modified and amended by the Previous Modification, in reference to the amount of the Loan and the Note, including, without limitation, in the defined term "Loan Amount" in Section 1.1 of the Loan  Agreement,  in the upper  left corner of page 1 of the Note, in the definition of the term "Loan" in Section 1 of the Note, and in Recital paragraph  A of the Guaranty.

Section 3.    Release  of  ADK  Thomasville  Operator,  LLC,   Woodland   Manor Nursing,  LLC and Glenvue    H&R    Nursing,  LLC.    ADK Thomasville Operator, LLC ("Borrower 1") has  requested  that it be released  from its obligations  under the Documents  due to the fact that Borrower 1 no longer operates a Facility. Woodland Manor Nursing, LLC ("Borrower 18") and Glenvue H&R Nursing,  LLC  ("Borrower  24")  have  each  requested  that they be released from their respective obligations under the Documents due to the fact that their respective facilities are being financed by the Department  of Housing  and Urban  Development and they are entering into a new loan agreement with the Lender with respect to such Facilities. The Lender is agreeable to such request and hereby releases Borrower 1, Borrower 18 and Borrower 24 as Borrowers under the Loan Agreement , and releases the Collateral which is the property of Borrower  1, Borrower  18 and Borrower 24 as security for the Loan.

Section 4.    Change in Definitions. The following defined terms in Section 1.1 of the Loan Agreement, as modified and amended by  the Previous Modifications, are hereby further modified and amended in their entirety to read as follows effective as of the date of this Agreement, with the existing defined terms to continue to be effective for periods prior  to the date of this Agreement:
Loan  Amount:    $9,100,000, which includes the $3,750,000 Letter of
Credit Amount.

Borrowers:  Borrowers 1 through 26, except for Borrowers 1, 3, 6, 8, 18,
20, 22, 23 and 24.

Facility:   Each of the 17 Facilities which are operated by Borrowers in the
Projects, described as follows:

	
					
	Facility
	Borrower
	Facilitv Name
	Location
	Beds

	1
	Borrower  1
	Released
	 
	52

	2
	Borrower 2
	Lumber City Nursing
and Rehabilitation Center
	93 Highway 19,
Lumber City, Telfair County, Georgia
	86

	3
	Borrower 3
	Released
	 
	 

	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,
	208

3

	
					
	 
	 
	 
	Cobb County, Georgia
	 

	6
	Borrower 6
	Released    ,
	 
	85

	7
	Borrower 7
	Tara at Thunderbolt Nursing and Rehabilitation  Center
	3223 Falligant Avenue, Thunderbolt , Chatham County, Georgia
	134

	8
	Borrower 8
	Released
	 
	50

	9
	Borrower 9
	Attalla Health Care
	915 Stewart Avenue SE, Attalla, Etowah County , Alabama
	182

4

	
					
	10
	Borrower 10
	Mountain Trace Nursing and Rehabilitation Center
	417 Mountain Trace Road, Sylva, Jackson County, North Carolina
	106

	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 Hom e
	224 South Main Street, Bentonville, Benton County, Arkansas
	95

	15
	Borrower  15
	River Valley Health and Rehabilitation  Center
	5301 Whee ler 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
	Released
	 
	 

	19
	Borrower  19
	Stone County Nursing and Rehabilitation Center
	706 Oak Grove Street, Mountain View, Stone County, Arkansas
	97

	20
	Borrower 20
	Released
	 
	 

	21
	Borrower 2 1
	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
	Released
	 
	 

	23
	Borrower 23
	Released
	 
	 

	24
	Borrower 24
	Released
	 
	 

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

5

	
					
	26
	Borrower 26
	Quail Creek Nursing and Rehabilitation Center
	13500 Brandon Place, Oklahoma City, Oklahoma County, Oklahoma
	118

Leases: Leases by Owners to each of Borrower 11 through Borrower 26 (except for Borrowers 18, 20, 22, 23, 24 and 25) of the respective Projects and subleases by Sublessor  to each of Borrower 1 through Borrower 8 (except for Borrowers 1, 3, 6 and 8) of the respective Projects dated as follows:

	
				
	Facility
	Borrower
	Owner/Sublessor
	Date of Lease/Sublease

	1
	Borrower 1
	Released
	 

	2
	Borrower 2
	Owner, Master Lease Lessor -
William Foster
Sublessor - ADK Georgia, LLC
	Master Lease - August 1, 20 10
Sublease-August1'
20 10

	3
	Borrower 3
	Released
	 

	4
	Borrower 4
	Owner, Master Lease Lessor -
William Foster
Sublessor - ADK Georgia, LLC
	Master Lease - August 1,
2010
Sublease-August1'
20 10

	5
	Borrower 5
	Owner, Master Lease Lessor -
William Foster
Sublessor - ADK Georgia, LLC
	Master Lease - August 1,
2010
Sublease-August1'
2010

	6
	Borrower 6
	Released
	 

	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
	Released
	 

	9
	Borrower 9
	Owner, Borrower 9
	None

	10
	Borrower  10
	Owner, Borrower  10
	None

	11
	Borrower 11
	Owner, Mt. Kenn Property
Holdings, LLC
	May 1, 2011

6

	
				
	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
	 Released
	 

	19
	Borrower  19
	Owner , Mount V Property Holdings , LLC
	November 30, 2011

	20
	Borrower 20
	 Released
	 

	21
	Borrower 2 1
	Owner, Little Rock HC&R
Property Holdings, LLC
	April 1,2012

	22
	Borrower 22
	 Released
	 

	23
	Borrower 23
	 Released
	 

	24
	Borrower 24
	 Released
	 

	25
	Borrower 25
	Owner , Borrower 25
	None

	26
	Borrower 26
	Owner , QC Property Holdings,
LLC
	June 25, 2012, amended
July 1, 2012

Section 5.    Change in Section ll.l(b) of the Loan Agreement.    Section 11.1(b) of the Loan Agreement, as modified and amended by the Previous Modifications , is hereby further modified and amended in its entirety to read as follows:

(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 , and in the event of the occurrence of an Event of Default under Section 10.1(h) or 10. 1(i) of this Agreement, the Note shall automatically become due and payable immediately;

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Section 6.    Change in Section 6 of the Note. The first sentence of Section 6 of the Note, as modified and amended by the Previous Modifications, is hereby further modified and amended in its entirety to read as follows:

At the election of the holder hereof, and without notice, the  principal balance remaining unpaid under this Note, and all unpaid interest accrued thereon and any other amounts due hereunder, shall be and become immediately due and payable in full upon the occurrence of any Event of Default, and in the event of the occurrence of certain Events of Default under the Loan Agreement, this Note shall automatically become due and payable immediately as provided in the Loan Agreement.

Section 7.    Change in Minimum Fixed Charge Coverage Ratio of Borrowers. 
Section 7.13 of the Loan Agreement, as modified and amended by the Previous Modifications, is hereby further modified and amended in its entirety to read as follows:

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) Debt  Service, 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, 20 12, and ending on the last day of such quarter, instead of for the full 12-month period ending on the last day of such quarter.

Section 8.    Change in Exhibit A.   Exhibit A to the Loan Agreement,  as modified
and  amended  by  the  Previous  Modifications,  is hereby  further  modified  and  amended  in  its

8

entirety to be as attached to this Agreement effective as of the date of this Agreement, with the existing Exhibit A to the Loan Agreement , as modified and amended by the Previous Modifications ,  to continue to be effective for periods prior to the date of this Agreement.

Section 9.    Attachment to Note. The Lender may, and prior to any transfer by it of the Note shall, attach a copy of this Agreement to the original Note and place an endorsement on the original Note making reference to the fact that such attachment has been made.

Section 10.    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 any of the Previous Modifications, 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)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 standing in the State in which its Facility is located.  Each Borrower 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 Modifications, and to  perform  and consummate the transactions contemplated hereby and thereby.

(b)The Guarantor is a corporation 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 Modifications, and to perform and consummate the transactions contemplated hereby and thereby .

(c)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 Modifications in the capacity shown in each signature block contained in this Agreement, the Documents and the Previous Modifications in which its name appears, and such execution has been duly authorized by all necessary legal action applicable to such Signing Entity.

(d)This Agreement , the Documents and the Previous Modifications have been duly authorized , executed and delivered by such of the Borrower/Guarantor Parties  as  are parties thereto , and this Agreement, the Documents and the Previous Modifications constitute valid and legally binding obligations enforceable against such of the Borrower/Guarantor Parties as  are parties thereto. The execution and delivery of this Agreement , the Documents and the Previous Modifications 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

9

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 respect ive properties are subject, or any existing law, administrative regulation, court order or consent decree to which any of them is subject.

(e)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 Modifications, and no Default or Event of Default has occurred and is continuing with respect to any of the Documents or the Previous  Modifications.

(f)There is no litigation or administrative proceeding pending or threatened to restrain or enjoin the transactions contemplated by this Agreement, any of the Documents or the Previous Modifications, 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, any of the Documents or the Previous Modifications, or would result in any material adverse change in the financial condition, properties, business or operations of any of the Borrower/Guarantor Parties.

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

Section 11.    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 Modifications 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 Modifications 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 enforcement by the Lender of, the Documents, as previous ly modified  and amended by the Previous Modifications 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  Modifications  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 12.    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  Modifications  and  in  all  certificates  heretofore  delivered  to  the

10

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 13.    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 14.    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 15.     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 16.    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 17.    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.

(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 18.    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

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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 19.    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.

[SIGNATURE PAGE(S) AND EXHIBIT(S), IF ANY, FOLLOW THIS PAGE]

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

ADK Lumber City Operator, LLC
ADK LaGrange Operator, LLC
ADK Powder Springs Operator, LLC
ADK Thunderbolt 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
Mountain View Nursing, LLC
Little Rock HC&R Nursing, LLC
COOSA NURSING ADK, LLC
QC NURSING, LLC

	
		
	 

	 
	 

	By
	/s/ David Rubenstein

	 
	David Rubenstein, Manager of each Borrower

	
		
	ADCARE HEALTH SYSTEMS, INC.

	 
	 

	By
	/s/ Ronald W. Fleming

	 
	Ronald W. Fleming, Chief Financial Officer

- AdCare Portfolio Operator Loan Sixth Modification Agreement -
- Signature Page 1 -

	
		
	THE PRIVATEBANK AND TRUST COMPANY

	 
	 

	By
	/s/ Amy K. Hallberg

	 
	Amy K. Hallberg, Managing Director

- AdCare Portfolio Operator Loan Sixth Modification Agreement -
- Signature Page 2 -

EXHIBIT A

DIRECT AND INDIRECT OWNERSHIP OF BORROWERS

[See Attached Organization Chart]

- AdCare Portfolio Operator Loan Sixth Modification Agreement -
- Signature Page 2 -9.30.2014 - Ex 10.19 PrivateBank Prom Note

Exhibit 10.19
17614131.3    
09-10-14

PROMISSORY NOTE

	
		
	$1,500,000
Chicago, Illinois
	September 24, 2014

1.    AGREEMENT TO PAY.  For value received, WOODLAND MANOR NURSING, LLC and GLENVUE H&R NURSING, LLC, each a Georgia limited liability company (collectively, the “Borrowers”), hereby jointly and severally promise to pay to the order of THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (the “Lender”), the principal sum of $1,500,000 (the “Loan”), or so much of the Loan as may be advanced under and pursuant to that certain Loan and Security Agreement dated as of even date herewith (the “Loan Agreement”), executed by and among the Borrowers and the Lender, on or before September 24, 2017 (the “Maturity Date”), at the time and place and in the manner hereinafter provided, together with interest thereon at the rate or rates described below, and any and all other amounts which may be due and payable hereunder or under any of the “Loan Documents” (as defined in the Loan Agreement) from time to time.  All capitalized terms used and not otherwise defined in this Note shall have the same meanings as in the Loan Agreement.  Each disbursement on the Loan made by the Lender, and all payments on account of the principal and interest thereof shall be recorded on the books and records of the Lender and the principal balance as shown on such books and records, or any copy thereof certified by an officer of the Lender, shall be rebuttably presumptive evidence of the principal amount owing hereunder.
2.    INTEREST RATE.
2.1    Interest Prior to Default.  Except as otherwise expressly provided in this Note, interest shall accrue on the principal balance of this Note through the Maturity Date at a rate of interest equal to the greater of (i) a floating per annum rate of interest equal to the “Prime Rate” (as defined below), plus 1.0%, or (ii) 5.0% per annum.  Changes in the rate of interest to be charged hereunder based on the Prime Rate shall take effect immediately upon the occurrence of any change in the Prime Rate.  For purposes of this Note, the term “Prime Rate” means the floating per annum rate of interest most recently announced by the Lender at Chicago, Illinois as its prime or base rate.  A certificate made by an officer of the Lender stating the Prime Rate in effect on any given day, for the purposes hereof, shall be conclusive evidence of the Prime Rate in effect on such day.  The Prime Rate is a base reference rate of interest adopted by the Lender as a general benchmark from which the Lender determines the floating interest rates chargeable on various loans to borrowers with varying degrees of creditworthiness and the Borrowers acknowledge and agree that the Lender has made no representations whatsoever that the Prime Rate is the interest rate actually offered by the Lender to borrowers of any particular creditworthiness.
2.2    Interest After Default.  From and after the Maturity Date or upon the occurrence and during the continuance of an Event of Default, interest shall accrue on the unpaid principal balance during any such period at an annual rate (the “Default Rate”) 5.0% greater than the 

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interest rate which would otherwise be in effect under the terms of this Note.  However, in no event shall the Default Rate exceed the maximum rate permitted by law.  The interest accruing under this Section shall be immediately due and payable by the Borrowers to the holder of this Note upon demand and shall be additional indebtedness evidenced by this Note.
2.3    Interest Calculation.  Interest on this Note shall be calculated 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.  If any payment to be made by the Borrowers hereunder shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment.
3.    PAYMENT TERMS.
3.1    Payment of Principal and Interest.  Payments of principal and interest due under this Note, if not sooner declared to be due in accordance with the provisions hereof, shall be made as follows:
(a)    On the first day of the month of November, 2014, and on the first day of each month thereafter through and including the month in which the Maturity Date occurs, interest accrued on this Note shall be due and payable.
(b)    Principal shall be payable on this Note in accordance with the provisions of Section 3.3 of the Loan Agreement.
(c)    The unpaid principal balance of this Note, if not sooner paid or declared to be due in accordance with the terms hereof, together with all accrued and unpaid interest thereon and any other amounts due and payable hereunder or under any of the Loan Documents shall be due and payable in full on the Maturity Date.
3.2    Application of Payments.  Prior to the occurrence of an Event of Default, all payments and prepayments on account of the indebtedness evidenced by this Note shall be applied as follows: (a) first, to fees, expenses, costs and other similar amounts then due and payable to the Lender, including, without limitation any prepayment premium, exit fee or late charges due hereunder, (b) second, to accrued and unpaid interest on the principal balance of this Note, (c) third, to the payment of principal due in the month in which the payment or prepayment is made, (d) fourth, to any escrows, impounds or other amounts which may then be due and payable under the Loan Documents, (e) fifth, to any other amounts then due the Lender hereunder or under any of the Loan Documents, and (f) last, to the unpaid principal balance of this Note in the inverse order of maturity.  Any prepayment on account of the indebtedness evidenced by this Note shall not extend or postpone the due date or reduce the amount of any subsequent monthly payment of principal and interest due hereunder.  After an Event of Default has occurred and is continuing, payments may be applied by the Lender to amounts owed hereunder and under the Loan Documents in such order as the Lender shall determine, in its sole discretion.
3.3    Method of Payments.  All payments of principal and interest hereunder shall be paid by automatic debit, wire transfer, check or in coin or currency which, at the time or times of payment, is the legal tender for public and private debts in the United States of America and shall 

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be made at such place as the Lender or the legal holder or holders of this Note may from time to time appoint in the payment invoice or otherwise in writing, and in the absence of such appointment, then at the offices of the Lender at 120 South LaSalle Street, Chicago, Illinois 60603.  Payment made by check shall be deemed paid on the date the Lender receives such check; provided, however, that if such check is subsequently returned to the Lender unpaid due to insufficient funds or otherwise, the payment shall not be deemed to have been made and shall continue to bear interest until collected.  Notwithstanding the foregoing, the final payment due under this Note must be made by wire transfer or other immediately available funds.  With the exception of interest which under the terms of the Loan Documents is to be paid from a disbursement of proceeds of the Loan, interest, principal payments and any fees and expenses owed the Lender from time to time will be deducted by the Lender automatically on the due date from the Borrowers’ account with the Lender, other than the Governmental AR Account and the Lessee Rent Account, as designated in writing by the Borrowers.  The Borrowers shall maintain sufficient funds in the account on the dates the Lender enters debits authorized by this Note.  If there are insufficient funds in the account on the date the Lender enters any debit authorized by this Note, the debit will be reversed.  The Borrowers may terminate this direct debt arrangement at any time by sending written notice to the Lender at the address specified above.
3.4    Late Charge.  If any payment of interest or principal due hereunder is not made within five days after such payment is due in accordance with the terms hereof, then, in addition to the payment of the amount so due, the Borrowers shall pay to the Lender a “late charge” of five cents for each whole dollar so overdue to defray part of the cost of collection and handling such late payment.  The Borrowers agree that the damages to be sustained by the holder hereof for the detriment caused by any late payment are extremely difficult and impractical to ascertain, and that the amount of five cents for each one dollar due is a reasonable estimate of such damages, does not constitute interest, and is not a penalty.
3.5    Principal Prepayments.  The principal of this Note may be prepaid, at any time, in whole or in part, without premium or penalty, provided that such prepayment is accompanied by a simultaneous payment of all accrued and unpaid interest on this Note through the date of prepayment.
4.    SECURITY; LOAN DOCUMENTS.  This Note is secured by the Loan Agreement and the other Loan Documents.  Reference is hereby made to the Loan Agreement and the other Loan Documents (all of which are incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a statement of the covenants and agreements contained therein, a statement of the rights, remedies, and security afforded thereby, and all matters therein contained.
5.    EVENTS OF DEFAULT.  The occurrence of any one or more of the following events shall constitute an “Event of Default” under this Note:
(a)    The failure by the Borrowers to pay (i) any installment of principal or interest payable pursuant to this Note on the date when due, or (ii) any other amount payable to the Lender under this Note, the Loan Agreement or any of the other Loan Documents on the date when any such payment is due in accordance with the terms hereof or thereof; or

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(b)    The occurrence of any “Event of Default” under the Loan Agreement or any of the other Loan Documents.
For purposes of this Note, the term “Default” means the occurrence or existence of any event or circumstance which, with the giving of notice or passage of time, or both, would constitute an Event of Default.
6.    REMEDIES.  At the election of the holder hereof, and without notice, the principal balance remaining unpaid under this Note, and all unpaid interest accrued thereon and any other amounts due hereunder, shall be and become immediately due and payable in full upon the occurrence of any Event of Default, and in the event of the occurrence of certain Events of Default under the Loan Agreement, this Note shall automatically become due and payable immediately as provided in the Loan Agreement.  Failure to exercise this option shall not constitute a waiver of the right to exercise same in the event of any subsequent Event of Default.  No holder hereof shall, by any act of omission or commission, be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by the holder hereof, and then only to the extent specifically set forth therein.  The rights, remedies and powers of the holder hereof, as provided in this Note and in all of the other Loan Documents are cumulative and concurrent, and may be pursued singly, successively or together against the Borrowers, any Guarantor hereof and any security given at any time to secure the repayment hereof, all at the sole discretion of the holder hereof.  If any suit or action is instituted or attorneys are employed to collect this Note or any part hereof, the Borrowers promise and agree to pay all costs of collection, including reasonable attorneys’ fees and court costs.
7.    COVENANTS AND WAIVERS.  The Borrowers and all others who now or may at any time become liable for all or any part of the obligations evidenced hereby, expressly agree hereby to be jointly and severally bound, and jointly and severally:  (i) waive and renounce any and all homestead, redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor, and notice of protest; (iii) except as expressly provided in the Loan Documents, waive any and all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default, or enforcement of the payment hereof or hereunder; (iv) waive any and all lack of diligence and delays in the enforcement of the payment hereof; (v) agree that the liability of the Borrowers and each guarantor, endorser or obligor shall be unconditional and without regard to the liability of any other person or entity for the payment hereof, and shall not in any manner be affected by any indulgence or forbearance granted or consented to by the Lender to any of them with respect hereto; (vi) consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by the Lender with respect to the payment or other provisions hereof, and to the release of any security at any time given for the payment hereof, or any part thereof, with or without substitution, and to the release of any person or entity liable for the payment hereof; and (vii) consent to the addition of any and all other makers, endorsers, guarantors, and other obligors for the payment hereof, and to the acceptance of any and all other security for the payment hereof, and agree that the addition of any such makers, endorsers, guarantors or other obligors, or security shall not affect the liability of the Borrowers, any guarantor and all others now liable for all or any part of the 

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obligations evidenced hereby.  This provision is a material inducement for the Lender making the Loan to the Borrowers.
8.    GENERAL AGREEMENTS.
8.1    Incorporation of Section 12.2 of Loan Agreement.  The provisions of Section 12.2 of the Loan Agreement are hereby incorporated into and made a part of this Note.  
8.2    Usury and Truth in Lending.  The Loan 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, and does 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, the Borrowers or any property securing the Loan.  The Loan is an exempted transaction under the Truth In Lending Act, 15 U.S.C., §1601, et seq., as amended.
8.3    Time.  Time is of the essence hereof.
8.4    Governing Law.  This Note is governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the statutes, laws and decisions of the State of Illinois, without regard to its conflict of laws provisions.
8.5    Entire Agreement; Amendments.  This Note sets forth all of the covenants, promises, agreements, conditions and understandings of the parties relating to the subject matter of this Note, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them other than as are herein set forth.  Each Borrower acknowledges that it is executing this Note without relying on any statements, representations or warranties, either oral or written, that are not expressly set forth herein.  This Note may not be changed or amended orally but only by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought.
8.6    No Joint Venture.  The Lender shall not be construed for any purpose to be a partner, joint venturer, agent or associate of the Borrowers or of any lessee, operator, concessionaire or licensee of the Borrowers in the conduct of their business, and by the execution of this Note, the Borrowers agree to indemnify, defend, and hold the Lender harmless from and against any and all damages, costs, expenses and liability that may be incurred by the Lender as a result of a claim that the Lender is such partner, joint venturer, agent or associate.
8.7    Disbursement.  This Note has been made and delivered at Chicago, Illinois and all funds disbursed to or for the benefit of the Borrowers will be disbursed in Chicago, Illinois.
8.8    Joint and Several Obligations; Successors and Assigns.  If this Note is executed by more than one party, the obligations and liabilities of each Borrower under this Note shall be joint and several.  This Note shall be binding upon and enforceable against each Borrower and their respective successors and assigns.  This Note shall inure to the benefit of and may be enforced by the Lender and its successors and assigns.
8.9    Severable Provisions.  If any provision of this Note is deemed to be invalid by reason of the operation of law, or by reason of the interpretation placed thereon by any 

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administrative agency or any court, the Borrowers and the Lender shall negotiate an equitable adjustment in the provisions of the same in order to effect, to the maximum extent permitted by law, the purpose of this Note, and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby and shall remain in full force and effect.
8.10    Interest Limitation.  If the interest provisions herein or in any of the Loan Documents shall result, at any time during the Loan, in an effective rate of interest which, for any month, exceeds the limit of usury or other laws applicable to the Loan, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied upon principal immediately upon receipt of such monies by the Lender, with the same force and effect as though the payer has specifically designated such extra sums to be so applied to principal and the Lender had agreed to accept such extra payment(s) as a premium-free prepayment.  Notwithstanding the foregoing, however, the Lender may at any time and from time to time elect by notice in writing to the Borrowers to reduce or limit the collection to such sums which, when added to the said first-stated interest, shall not result in any payments toward principal in accordance with the requirements of the preceding sentence.  In no event shall any agreed to or actual exaction as consideration for this Loan transcend the limits imposed or provided by the law applicable to this transaction or the maker hereof for the use or detention of money or for forbearance in seeking its collection.
8.11    Assignability.  The Lender may at any time assign its rights in this Note and the Loan Documents, or any part thereof and transfer its rights in any or all of the collateral, and the Lender thereafter shall be relieved from all liability with respect to such collateral.  In addition, the Lender may at any time sell one or more participations in this Note.  The Borrowers may not assign their interest in this Note, or any other agreement with the Lender or any portion thereof, either voluntarily or by operation of law, without the prior written consent of the Lender.
9.    NOTICES.  All notices required under this Note will be in writing and will be transmitted in the manner and to the addresses required by the Loan Agreement, or to such other addresses as the Lender and the Borrowers may specify from time to time in writing.
10.    LITIGATION PROVISIONS.
10.1    Consent to Jurisdiction.  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 NOTE, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.
10.2    Consent to Venue.  EACH BORROWER AGREES THAT ANY LEGAL PROCEEDING RELATING TO THIS NOTE, 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 

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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.
10.4    No Proceedings in Other Jurisdictions.  EACH BORROWER AGREES THAT IT WILL NOT COMMENCE ANY LEGAL PROCEEDING AGAINST THE LENDER RELATING IN ANY MANNER TO THIS NOTE, 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 THE LENDER AGAINST SUCH BORROWER IN A COURT IN ANOTHER LOCATION, BY WAY OF A COUNTERCLAIM IN SUCH LEGAL PROCEEDING.
10.5    Waiver of Jury Trial.  EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS NOTE, THE LOAN OR ANY OF THE OTHER LOAN DOCUMENTS.
11.    CUSTOMER IDENTIFICATION - USA PATRIOT ACT NOTICE; OFAC AND BANK SECRECY ACT.  The Lender hereby notifies the 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 the Lender’s policies and practices, the Lender is required to obtain, verify and record certain information and documentation that identifies the Borrowers, which information includes the name and address of the Borrowers and such other information that will allow the Lender to identify the Borrowers in accordance with the Act.  In addition, the Borrowers shall (a) ensure that no person who owns a controlling interest in or otherwise controls any Borrower or any subsidiary of any 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, (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.
12.    EXPENSES AND INDEMNIFICATION.  The Borrowers shall pay all costs and expenses incurred by the Lender in connection with the preparation of this Note and the Loan Documents, including, without limitation, reasonable attorneys’ fees and time charges of attorneys who may be employees of the Lender or any affiliate or parent of the Lender.  The Borrowers shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Note and the other instruments and documents to be delivered hereunder, and agrees to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.  Each Borrower hereby authorizes the Lender to charge any account of such Borrower with the Lender for all sums due under this Section, other than the account which is governed by the DAISA.  The Borrowers also agree to defend (with counsel satisfactory to the Lender), protect, indemnify and hold harmless the Lender and its officers, directors, employees, attorneys and agents (each an “Indemnified Party”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, 

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expenses and distributions of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Indemnified Party thereto, which shall also include, without limitation, attorneys’ fees and time charges of attorneys who may be employees of the Lender), which may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct, indirect or consequential and whether based on any federal, state or local laws or regulations, including, without limitation, securities, environmental laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Note or any of the Loan Documents, or any act, event or transaction related or attendant thereto, the preparation, execution and delivery of this Note and the Loan Documents, the making or issuance and management of the Loan, the use or intended use of the proceeds of this Note and the enforcement of the Lender’s rights and remedies under this Note and the other Loan Documents; provided, however, that the Borrowers shall not have any obligations hereunder to any Indemnified Party with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party.  To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrowers shall satisfy such undertaking to the maximum extent permitted by applicable law.  Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party on demand, and failing prompt payment, together with interest thereon at the Default Rate from the date incurred by each Indemnified Party until paid by the Borrowers, shall be added to the obligations of the Borrowers evidenced by this Note and secured by the collateral securing this Note.  The provisions of this Section shall survive the satisfaction and payment of this Note.  However, while the HUD Financing is in effect, in no event shall the cost of such indemnification come from Project proceeds, nor shall it become a lien against the Project, the FHA Mortgagee’s Priority Collateral, or the AR Lender Priority Collateral.  In no event shall any attorneys’ fees referred to in this or any other provision of this Note which are incurred in connection with any dispute relating to the HUD Financing be secured by the AR Lender Priority Collateral, and this sentence shall not be construed as permitting any attorneys’ fees which are incurred in connection with any dispute not relating to the HUD Financing to be secured by the AR Lender Priority Collateral so long as the HUD Financing is in effect.  

[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]

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IN WITNESS WHEREOF, the Borrowers have executed and delivered this Promissory Note as of the day and year first above written.

	
		
	 
	WOODLAND MANOR NURSING, LLC

	 
	By: /s/ David Rubenstein

	 
	David Rubenstein, Manager

	 
	 

	 
	GLENVUE H&R NURSING, LLC

	 
	By: /s/ David Rubenstein

	 
	David Rubenstein, Manager

                

AdCare Woodland/Glenvue HUD Operator Loan Note -
- Signature Page -

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