Document:

Exhibit 10.19

 

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT (this “Agreement”) made and entered into as of the 27th day of July, 2011, by and among Erin Property Holdings, LLC (“Borrower”), BANK OF ATLANTA (the “Lender”), and BANK OF ATLANTA (“Escrow Agent”);

 

W I T N E S S E T H:

 

WHEREAS, Borrower is the owner of those certain improvements known as 606 Simmons St., Dublin, Laurens County, Georgia 30121 (together with all improvements now or hereafter located thereon, the “Property”) of Borrower located in Laurens County, Georgia and being more particularly described on Exhibit “A” attached hereto and by reference made a part hereof; and

 

WHEREAS, Bank of Atlanta has made a loan (the “USDA Loan”) to Borrower in the amount of Five Million and No/100 Dollars ($5,000,000.00) and Bank of Atlanta has made a loan (“SBA Loan”) in the amount of Eight Hundred Thousand and No/100 Dollars ($800,000.00), evidenced by promissory notes made by Borrower to the order of Bank of Atlanta and secured by Deeds to Secure Debt and Security Agreement  given to Bank of Atlanta (such note and Deeds to Secure Debt and Security Agreement and any other documents evidencing, securing or relating to the Loan hereinafter referred to as the “Loan Documents”); and

 

WHEREAS, the Borrower shall complete certain capital improvements to the Property in the approximate amount of $250,000.00 the (“Renovations”); and

 

WHEREAS, to insure the completion of said Renovations, and as additional collateral for payment of the USDA Loan, Lender and Borrower desire that Borrower and/or Lender shall deposit with Escrow Agent the sum of One Hundred Twenty-Five Thousand and 00/100 ($125,000.00) as of the date hereof (the “Escrow Fund”);

 

WHEREAS, in addition to the Escrow Fund, Borrower shall allocate One Hundred Twenty-Five Thousand and 00/100 ($125,000.00) Additional Non-Escrowed Funds to complete the required Renovations;

 

WHEREAS, Borrower, Lender and Escrow Agent desire to evidence their agreement with respect to the holding and disbursement of the Escrow Fund and evidence of application of Additional Non-Escrowed Funds to the Renovations;

 

NOW, THEREFORE, in consideration of the covenants hereafter set forth, and other good and valuable considerations, the receipt and sufficiency whereof are hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.             Escrow Fund.  Escrow Agent does hereby acknowledge receipt of the Escrow Fund and does hereby agree to hold, and disburse the same in accordance with this Agreement.  Said Escrow Fund will be interest bearing.

 

2.             Disbursements of Escrow Fund for Work.  Borrower’s Additional Non-Escrowed Funds must be exhausted, subject to the terms of Paragraph 4, before there can be any disbursements from the Escrow Fund.  Once the  Additional Non-Escrowed Funds have been fully depleted, the Borrower shall be able to request and be entitled to receive a disbursement twice a

 

 

calendar month from the Escrow Fund upon the completion of the Renovations (the “Work”) pertaining to any work within the Renovations, subject to satisfaction of the requirements set forth in this Paragraph 2.  Lender shall direct Escrow Agent in writing to make each such disbursement, subject to and in accordance with the following conditions and requirements:

 

A.            Request for Advance.  At such time as Borrower shall desire to obtain a disbursement of any portion of the Escrow Funds, Borrower shall complete, execute and deliver to Lender and Escrow Agent a written request for an advance (“Draw Request”).

 

B.            Evidence of Progress of Work.  Said Draw Request shall be accompanied by evidence of work completion in form and content satisfactory to Lender, including but not limited to copies of all bills, invoices or statements for expenses for which the Draw Request is requested.

 

C.            Written Authorization of Disbursements.  Escrow Agent will not disburse Escrow Funds for Draw Requests without the express written consent of Lender.

 

D.            Draw Request Disbursements.  Each Draw Request may be paid to a maximum of three (3) different parties and will be made by joint payee checks or wire transfer, as applicable.  Additionally, Borrower may elect to pay qualified expenses out-of-pocket and request that reimbursement be included in a Draw Request.  Any such reimbursement request must be accompanied by evidence of Borrower payment, such as a copy of a cancelled check, acceptable to Lender.

 

E.             Lien Waivers.  Lender shall receive executed lien waivers from contractors for all work performed.

 

3.             Disbursements to Lender.  Failure of Borrower to complete the Work contemplated by this Agreement on or before July 27, 2013 shall constitute a default hereunder and under the Loan Documents.  Upon notification from Lender of such failure, the Escrow Agent shall immediately disburse the Escrow Fund to Lender to be applied at Lender’s election against the Lender’s loan, whether or not due and in whatever order Lender elects, or for purposes of completion of the Work contemplated by this Agreement.

 

4.             Additional Non-Escrowed Funds.   Borrower shall have two (2) years from the date of this agreement or July 27, 2013 to complete Renovations funded by Borrower’s Additional Non-Escrowed Funds.  Borrower shall provide Lender satisfactory proof of payment of Borrower’s Additional Non-Escrowed Funds for the Renovations.

 

5.             Termination.  This Agreement shall terminate upon that date (the “Termination Date” which is the earlier to occur of (a) July 27, 2013 or (b) the date upon which the Escrow fund is totally depleted by the final disbursement made pursuant to Paragraph 2 and upon which the depletion of Additional Non-Escrowed Funds, satisfactory to the Lender.

 

6.             Escrow Agent.  In order to induce Escrow Agent to hold and disburse the Escrow Fund as required by this Agreement, Borrower and Lender do hereby agree that:

 

(a)           The functions and duties of Escrow Agent with respect to disbursements hereunder are those of an independent contractor and include only those set forth in this Agreement.

 

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Escrow Agent is not entitled to act in any manner whatsoever except in accordance with the terms and conditions of this Agreement.

 

(b)           All checks or drafts deposited into the Escrow Fund with Escrow Agent under this Agreement will be processed for collection in the normal course of business.

 

(c)           Escrow Agent shall not be liable for any loss or damage resulting from the following:

 

(i)            Any default, error, action or omission of any other party.

 

(ii)           The expiration of any time limit or other delay, unless such time limit was known to Escrow Agent and the resulting loss was solely caused by failure of Escrow Agent to proceed in accordance herewith.

 

(iii)          Lack of authenticity, sufficiency and effectiveness of any documents delivered to it and lack of genuineness of any signature or authority of nay person to sign any such document.

 

(iv)          Compliance by Escrow Agent with any and all legal process, writs, orders, judgments, and decrees of any court whether issued with or without jurisdiction and whether or not subsequently vacated, modified, set aside or reversed.

 

(v)           Escrow Agent’s assertion or failure to assert any cause of action or defense in any judicial, administrative or other proceedings either in its own interest or in the interest of any other party or parties.

 

(d)           If written notice of default, nonperformance or dispute is given to Escrow Agent by Borrower or Lender within a reasonable time prior to any required performance of Escrow Agent hereunder, Escrow Agent shall notify in writing the remaining third party hereto of the receipt of such notice.  Borrower hereby indemnifies, saves and holds harmless the Escrow Agent from and against all expenses, costs and reasonable attorneys’ fees incurred in connection with any interpleader action.

 

(e)           If Escrow Agent is made a party to any judicial, nonjudicial or administrative action, hearing or process not based upon the malfeasance or negligence of Escrow Agent in performing its duties hereunder, which action, hearing or process seeks to attach, recover or direct the disbursement or release of the Escrow Fund, then the expenses, costs and reasonable attorneys’ fees incurred by Escrow Agent in responding to such action, hearing, or process shall by paid by the party or parties whose alleged acts are the basis for such proceedings and such party shall indemnify, save and hold Escrow Agent harmless from and against said expenses, costs and fees so incurred.

 

7.             Notices. Any and all notices, elections or demands permitted or required to be given under this Agreement shall be in writing, signed by or on behalf of the party giving such notice, election or demand, and shall be deemed to have been properly given and shall be effective upon being personally delivered, or upon being deposited in the United States mail, postage prepaid, certified with return receipt required, and shall be deemed to have been received

 

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on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof, or upon being deposited with an overnight delivery service requiring proof of delivery, to the other party at the address of such other party set forth below or such other address within the continental United States as such other party may designate by notice specifically designated as a notice of change of address and given in accordance herewith; provided, however, that the time period in which a response to any such notice, election, demand or request must be given shall commence on the date of receipt thereof; and provided further that no notice of change of address shall be effective until the date of receipt thereof.  Personal delivery to a partner or any officer, partnership, agent or employee of such party at said address shall constitute receipt.  Rejection or other refusal to accept or inability to deliver because of changed address of which no notice has been given shall also constitute receipt.  Copies of all notices shall be sent via fax.  Any such notice, election, demand, request or response shall be addressed as follows:

 

If given to Escrow Agent/Lender, shall be addressed as follows:

 

BANK OF ATLANTA

Attn: Thomas Dorman

1970 Satellite Blvd

Duluth, GA 30097

 

and, if given to Borrower, shall be addressed as follows:

 

Erin Property Holdings, LLC

Two Buckhead Plaza

3050 Peachtree Road, Suite 355

Atlanta, Georgia  30305

 

with a copy to:

 

HARBIN & MILLER, LLC

3085 E. Shadowlawn Ave.

Atlanta, GA 30305

Attn:  Reid Harbin, Esq.

 

8.             Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns.  This Agreement is made and intended as a Georgia contract and shall be so construed.

 

9.             Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.

 

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

 

	
 
    	
 
    	
BORROWER:
    
	
 
    	
 
    	
 
    
	
Signed,   sealed and delivered
    	
 
    	
Erin   Property Holdings, LLC
    
	
in   the presence of:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   ILLEGIBLE
    	
 
    	
BY:
    	
/s/   Chris Brogdon
    	
(L.S.)
    
	
Witness
    	
 
    	
Chris   Brogdon, Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Damaris Marriaga
    	
 
    	
 
    
	
Notary   Public
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ESCROW   AGENT/LENDER:
    
	
 
    	
 
    	
 
    
	
Signed,   sealed and delivered
    	
 
    	
BANK   OF ATLANTA
    
	
in   the presence of:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   ILLEGIBLE
    	
 
    	
BY:
    	
/s/   Thomas L. Dorman
    
	
Witness
    	
 
    	
NAME:
    	
Thomas   L. Dorman
    
	
 
    	
 
    	
TITLE:
    	
S.V.P.
    
	
 
    	
 
    	
 
    
	
/s/   Karen Rivers
    	
 
    	
 
    
	
Notary   Public
    	
 
    	
[BANK SEAL]
    
						

 

5Exhibit 10.23

 

PROMISSORY NOTE

 

	
$1,385,000
    	
March 31, 2011
    

 

FOR VALUE RECEIVED, ADCARE HEALTH SYSTEMS, INC., an Ohio corporation (the “Maker”), hereby promises to pay to the order of ANTHONY CANTONE (the “Payee”) the principal amount of one million three hundred eighty-five thousand Dollars ($1,385,000).

 

The entire principal amount of this Note shall mature and shall be due and payable in full on July 1, 2011 (the “Stated Maturity Date”).

 

The Maker promises to pay interest on the unpaid principal amount of this Note from the date hereof until paid in full at a rate per annum equal to twelve percent (12%). Interest on this Note shall be payable in arrears on the last day of each month, commencing with April 30, 2011, upon any prepayment in accordance with the terms of the immediately succeeding paragraph of this Note and upon the Stated Maturity Date.

 

The Maker may prepay this Note in whole or in part, at any time, provided that this Note will bear interest at twelve percent (12%) per annum for the full period from the date of this Note, to, and including, the Stated Maturity Date, even if the prepayment occurs prior to the Stated Maturity Date. In the event this Note is not fully repaid on or before the Stated Maturity Date, the Maker hereby agrees that this Note will bear interest at eighteen percent (18%) per annum for the full period from the date of this Note, to, and including, the date such payment occurs after the Stated Maturity Date.

 

In addition, upon the occurrence of an Event of Default (as hereinafter defined), the Payee shall be entitled to collect a late charge of one and one-half percent (1.50%) of such principal and accrued interest for each month or part thereof that principal or accrued interest remains past due and unpaid.

 

The Maker represents and warrants to and covenants and agrees with the Payee that, as of the date hereof and the date of this Note and the date the conditions to close this transaction are satisfied in the sole discretion of the Payee that:

 

(a)           The Maker is, and will continue to be, a corporation, duly organized, validly existing, in good standing under the laws of the State of Ohio, with full power and authority to own its properties and conduct its business as and where the same are now owned and conducted.

 

(b)           The Maker has, and will maintain, all consents and grants of approval required to have been granted by any person in connection with the execution, delivery and performance of this Note, the Warrant (as defined hereinafter) and any other document required

 

 

by the terms hereof or thereof to be executed and delivered by the Maker (collectively, the “Transaction Documents”).

 

(c)           The Maker has the requisite power and authority to enter into and consummate all of the transactions contemplated on their respective parts by this Note and the other Transaction Documents.

 

(d)           This Note and the other Transaction Documents have been duly executed and delivered by the Maker and are the legal, valid and binding agreements of the Maker, enforceable in accordance with their terms, subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws in effect from time to time affecting the rights of creditors generally and to the availability of equitable relief.

 

(e)           The acceptance, execution and delivery of this Note and the other Transaction Documents, and the compliance with the provisions hereof and thereof (i) do not, and will not, violate or conflict with any resolution adopted by the Maker’s board of directors or any organizational document of the Maker, (ii) do not, and will not, conflict with or violate, or result in or constitute a material breach of or default under, any indenture, mortgage, deed of trust, guaranty, lease, agreement or other instrument to which the Maker is a party or by which the Maker or any of its property is bound, and (iii) do not, and will not, conflict with or violate any provision of any law, administrative rule or regulation, or any judgment, order or decree to which the Maker or any of its property is subject.

 

(f)            There is no action, suit or proceeding or governmental investigation pending, or to the knowledge of the Maker, threatened against the Maker or any of its assets, which if adversely determined could have a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Maker, or the ability of the Maker to comply with its obligations hereunder or under any other Transaction Document.

 

(g)           The Maker is in compliance in all material respects with all applicable federal, state and local laws and ordinances (including rules and regulations) that are applicable to it or its business operations and financial affairs.

 

The following conditions must be met on or prior to the date of funding of this Note:  (a) receipt of the fully executed Note; and (b) such additional certificates, opinions of counsel and other documents as the Payee may reasonably request.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)           Upon the occurrence of any Event of Default and upon acceleration of the entire unpaid principal balance of the amount owned by the Maker to the Payee hereunder, interest shall continue to accrue thereafter, to the extent legally permissible, at a rate of six (6) percentage points per annum in excess of the then-applicable interest rate under this Note, until the principal amount hereof, together will all interest accrued thereon, shall be paid in full, including the period following entry of any judgment; provided, however, that in no event will the default rate of interest exceed 18% per annum.  Both before and after any Event of Default, interest shall be computed on the basis of a 360-day year and the actual number of days elapsed.

 

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

 

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

 

The Maker waives presentment, demand and protest, and consents to any number of renewals or extensions of the time of payment hereof without notice.  The granting, without notice, of any extension of time for the payment of any sum due under this Note or for the performance of any covenant, condition or agreement thereof, or the taking or release of any

 

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

 

Upon execution of this Note, Maker will pay to the Payee, (a) a commitment fee in the amount of 4% of the principal advanced pursuant to this Note, (b) a $15,000 non-accountable expense allowance, and (c) the legal fees to counsel for the Payee in an amount equal to $7,500.

 

The Maker agrees to indemnify Payee against any losses, claims, damages and liabilities and related expenses, including counsel fees and expenses, incurred by Payee arising out of or in connection with or as a result of the transactions contemplated by this Note, except to the extent that such losses, claims, damages or liabilities result from Payee’s gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction.  In particular, the Payee promises to pay all costs and expenses, including reasonable attorneys’ fees, incurred in connection with the collection and enforcement of this Note.

 

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

 

	
If   to the Maker:
    	
Adcare   Health Systems, Inc.
    
	
 
    	
5057   Troy Road
    
	
 
    	
Springfield,   Ohio 45502
    
	
 
    	
 
    
	
 
    	
Attn:   Christopher F. Brogdon
    
	
 
    	
Vice-Chairman
    
	
 
    	
 
    
	
If   to the Payee:
    	
Anthony   J. Cantone
    
	
 
    	
766   Shrewsbury Avenue
    
	
 
    	
Tinton   Falls, NJ 07724
    

 

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

 

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

 

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

 

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

 

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No failure or delay on the part of the Payee to exercise any right, power or privilege under this Note and no course of dealing between Maker and Payee shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies expressly provided in this Note are cumulative to, and not exclusive of, any rights or remedies that Payee would otherwise have.  No notice to or demand on the Maker in any case shall entitle the Maker to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Payee to any other or further action in any circumstances without notice or demand.

 

[Signature page follows]

 

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

 

 

	
 
    	
ADCARE   HEALTH SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David A. Tenwick
    
	
 
    	
 
    	
David A. Tenwick
    
	
 
    	
 
    	
Chairman
    

 

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