Exhibit 10.9

 

LOAN AGREEMENT

 

Between

 

BROTMAN MEDICAL CENTER INC.,

a California corporation, debtor-in-possession

 

as

 

“Borrower”

 

and

 

JHA EAST 7 LLC,

a Delaware limited liability company

 

as

 

“Lender”

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.1

Principal

7

 

 

 

1.2

Interest

7

 

 

 

1.3

Maturity

7

 

 

 

1.4

Current Bankruptcy

7

 

 

 

II.

CLOSING CONDITIONS

8

 

 

 

2.1

Conditions of Lender’s Obligation to Close

8

 

 

 

2.2

Conditions of Borrower’s Obligation to Close

9

 

 

 

III.

DISBURSEMENT OF LOAN AMOUNT

10

 

 

 

3.1

General

10

 

 

 

3.2

Inspections

10

 

 

 

3.3

Lender Responsibility

10

 

 

 

3.4

Direct Application of Proceeds

10

 

 

 

3.5

Insufficient Documentation

11

 

 

 

IV.

REPRESENTATIONS AND WARRANTIES OF LENDER AND BORROWER

11

 

 

 

4.1

Representations and Warranties of Borrower

11

 

 

 

4.2

Representations and Warranties of Lender

13

 

 

 

V.

COVENANTS OF BORROWER

14

 

 

 

5.1

Paying Costs of Loan

14

 

 

 

5.2

Using Loan Proceeds

14

 

 

 

5.3

Keeping of Records

14

 

 

 

5.4

Providing Financial Information

14

 

 

 

5.5

Providing Operating Budgets and Operating Statements

15

 

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Page

 

 

 

5.6

Complying with the Loan Documents and Other Agreements

15

 

 

 

5.7

Compliance with Laws

15

 

 

 

5.8

Ownership of Personal Property

15

 

 

 

5.9

Representations and Warranties

15

 

 

 

5.10

Trade Names

15

 

 

 

5.11

No Distributions

16

 

 

 

5.12

Future Development

16

 

 

 

5.13

Further Assurances

16

 

 

 

5.14

Notice of Litigation, Etc

16

 

 

 

5.15

Signage

16

 

 

 

5.16

Maintenance of Existence

17

 

 

 

5.17

Impound Account

17

 

 

 

5.18

Reserve Account

17

 

 

 

5.19

Existence; Change of Name; Location as a Registered Organization

17

 

 

 

5.20

Property Management

18

 

 

 

5.21

Prohibited Transactions

18

 

 

 

5.22

Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws

18

 

 

 

5.22

Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws

18

 

 

 

VI.

DEFAULTS

19

 

 

 

6.1

Events of Default

19

 

 

 

0.6.2

Rights and Remedies

20

 

 

 

VII.

SINGLE PURPOSE ENTITY REQUIREMENTS

21

 

 

 

VIII.

MISCELLANEOUS

21

 

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Page

 

 

 

8.1

Binding Effect; Waivers; Cumulative Rights and Remedies

21

 

 

 

8.2

Survival

21

 

 

 

8.3

Governing Law; Waiver of Jury Trial

21

 

 

 

8.4

Counterparts

21

 

 

 

8.5

Notices

22

 

 

 

8.6

Costs and Expenses; Indemnification; Reimbursement

22

 

 

 

8.7

No Third Party Reliance

22

 

 

 

8.8

Sale of Loan or Participations

22

 

 

 

8.9

Arrangement by Brokers

23

 

 

 

8.10

Recourse

23

 

 

 

8.11

Time of the Essence

24

 

 

 

8.12

Entire Agreement; No Oral Modifications

24

 

 

 

8.13

Captions

24

 

 

 

8.14

Joint and Several Liability

24

 

 

 

8.15

Borrower-Lender Relationship

24

 

 

 

8.16

Benefit of Lender

24

 

 

 

8.17

Single Purpose Entity

24

 

 

 

8.18

Pledge of Accounts

24

 

 

 

8.19

Prohibition Against Transfers

24

 

 

 

8.20

Lender Approval

25

 

 

 

8.21

Personal Property Financings

25

 

LIST OF EXHIBITS AND EXHIBITS

 

EXHIBIT A

—

 

Legal Description of Land

EXHIBIT B

—

 

Additional Required Items Prior to Funding

SCHEDULE 2.1(h)

—

 

Liabilities/Litigation

 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this “Agreement”) is made and entered into as of July 9,
2008, by and between BROTMAN MEDICAL CENTER INC., a California corporation,
debtor-in-possession (“Borrower”) and JHA EAST 7 LLC, a Delaware limited
liability company (“Lender”).

 

WITNESSETH THAT, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

 

DEFINITIONS

 

For the purposes of this Agreement, the following terms shall have the following
respective meanings, unless the context hereof clearly requires otherwise:

 

Accounts:  Means collectively the Reserve Account and the Tax and Insurance
Deposit Account.

 

Affiliate:  Means (x) with respect to a corporation, (i) any officer or director
thereof and any Person which is, directly or indirectly, the beneficial owner of
more than 10% of any class of shares or other equity security or (ii) any Person
which, directly or indirectly, controls or is controlled by or is under common
control with such corporation and (y) with respect to a partnership, venture or
limited liability company, any (i) general partner or member, (ii) general
partner of a general partner or member, (iii) partnership with a common general
partner or member, or (iv) co-venturer thereof, and if any general partner,
member or co-venturer is a corporation, any Person which is an Affiliate of such
corporation.  Controls (which includes the correlative meanings of “controlled
by” and “under common control with”) means effective power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person.

 

Agreement:  This Loan Agreement, including any amendments hereof and supplements
hereto executed by Borrower and Lender.

 

Anti-Terrorism Laws:  Shall mean, collectively, (a) the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Public Law 107 56) (The USA PATRIOT Act),
(b) Executive Order No. 13224 on Terrorist Financing, effective September 24,
2001, and relating to Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism, (c) the
International Emergency Economic Power Act, 50 U.S.C. §1701 et seq. and (d) all
other Legal Requirements relating to money laundering or terrorism.

 

Bankruptcy Code:  Means the United States Bankruptcy Code.

 

Bankruptcy Court Order:  Means the findings and order described in
Section 2.1(m).

 

Borrower:  BROTMAN MEDICAL CENTER INC., a California corporation,
debtor-in-possession, and its permitted successors and assigns.

 

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Brokers:  Shall have the meaning given such term in Section 4.1(m).

 

Business Day:  Any day other than a Saturday, a Sunday, or a legal holiday on
which Lender is not open for business.

 

Closing Date:  The date upon which the Loan Amount is funded by Lender into the
Escrow Account.

 

Collateral:  All Equipment, furniture, furnishings, machinery, inventory,
construction materials (if any), and any other item of personal property in
which Borrower now or hereafter owns or acquires any interest or right,
including any of the foregoing that are leased, which are used or useful in the
construction, operation, use or occupancy of the Property (or any portion
thereof); all of Borrower’s documents, instruments, contract rights (including
any rights under any development agreement) and general intangibles relating to
any future construction, use, operation or occupancy of the Property (or any
portion thereof); all insurance proceeds from any policies of insurance covering
any of the aforesaid; and such other collateral as may be described in the Deed
of Trust.  Notwithstanding anything to the contrary contained in any Loan
Document, Collateral shall not include, without limitation, any accounts
receivable.

 

Consultants:  Third party experts retained by Lender to assist it in connection
with closing, disbursing or administering the Loan.

 

Control:  Means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person whether
through ownership of voting securities, beneficial interests, by contract or
otherwise.  The definition is to be construed to apply equally to variations of
the word “Control” including “Controlled,” “Controlling” or “Controlled by.”

 

Current Bankruptcy:  Means the filing by Borrower on October 25, 2007 of a
Chapter 11 petition for bankruptcy under the Bankruptcy Code.

 

Deed of Trust:  That certain Deed of Trust With Assignment of Leases and Rents,
Security Agreement and Fixture Filing of even date herewith executed by Borrower
as trustor in favor of Lender as beneficiary to be recorded in the Official
Records, creating a first lien on the Property, and all buildings, fixtures and
improvements now or hereafter owned or acquired by Borrower and situated on the
Land, and all rights and easements appurtenant thereto, and a first lien on and
a security interest in the Collateral associated with and appurtenant to the
Land, which Deed of Trust shall secure the Note and the other obligations
specified therein, including any amendments to such Deed of Trust and
supplements thereto executed by Borrower and Lender.

 

Default Rate:  The Default Rate of interest payable under the Note, as that term
is defined in the Note.

 

Environmental Indemnity:  That certain Unsecured Environmental Indemnity of even
date herewith, executed by Borrower, in favor of Lender, setting forth certain
indemnification obligations relating to “Hazardous Substances” (as defined
therein).

 

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Equipment: All fixtures and equipment, if any, owned by Borrower and located or
to be located in or on, and used in connection with the management, maintenance
or operation of, the Land and the Improvements, and the business conducted at
the Land and the Improvements.

 

Equity Interests:  Means (a) partnership interests (whether general or limited)
in an entity which is a partnership; (b) membership interests in an entity which
is a limited liability company; or (c) the shares or stock interests in an
entity which is a corporation.

 

Escrow Account:  The interest-bearing escrow account opened by Borrower with
Escrow Holder.

 

Escrow Holder:  Fidelity National Title Company, Newport Beach, California.

 

Financing Statement:  A UCC-1 financing statement naming Borrower as debtor and
Lender as secured party, perfecting Lender’s security interest in the
Collateral, in form and substance satisfactory to Lender, in Lender’s sole
discretion, to be filed in the Office of the Secretary of State of the State of
the Borrower’s formation.

 

Governmental Requirements:  All laws, statutes, codes, ordinances, and
governmental rules, regulations and requirements applicable to Borrower, Lender
and the Property.

 

Improvements:  The improvements which currently exist or which may in the future
be placed or constructed upon the Land.

 

Initial Deposit:  The initial deposit in the amount determined pursuant to
Section 5.17(a), to be deposited by Borrower into the Taxes and Insurance
Deposit Account prior to the Closing Date.

 

Land:  The land consisting of approximately 1.1 acres, legally described on
Exhibit A attached hereto and incorporated herein by this reference, together
with all additions thereto and substitutions therefor agreed to by Borrower and
Lender.

 

Lender:  JHA EAST 7, LLC, a Delaware limited liability company, and its
successors and assigns.

 

Loan:  The loan of the Loan Amount evidenced by the Note and to be made as a
single lump sum pursuant to the terms of this Agreement and to be secured by the
Deed of Trust and other Loan Documents, as applicable.

 

Loan Amount:  Seven Million and No/100 Dollars ($7,000,000.00), provided that if
the Bankruptcy Court determines that the aggregate payoff amounts of Borrower’s
current debtor-in-possession financing and pre-petition financing (collectively,
the “Total BK Payoff Amount”) do not exceed Twenty Two Million and 00/100ths
Dollars ($22,000,000.00), in the aggregate, the Loan Amount shall be reduced by
the amount by which Twenty Two Million and 00/100ths Dollars ($22,000,000.00)
exceeds the Total BK Payoff Amount.

 

3

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Loan Documents:  The documents described in this Agreement, which evidence and
secure the Loan, including but not limited to the Note, the Deed of Trust, this
Agreement, the Environmental Indemnity,  and the Financing Statement and
including any amendments thereof and supplements thereto executed by Borrower
and Lender.

 

Material Adverse Effect:  Means, other than as a result of the Current
Bankruptcy, with respect to any circumstance, act, condition or event of
whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), whether singly or in
conjunction with any other event, act, condition, circumstances, whether or not
related, in Lender’s reasonable judgment, a material adverse change in, or a
materially adverse effect upon (a) the business, operations, or financial
condition of Borrower; (b) the ability of Borrower to perform its obligations
under any Loan Document to which it is a party; (c) the use, value or condition
of the Property; (d) compliance of the Property with any Requirements of Law; or
(e) the validity, priority or enforceability of any Loan Document or the liens,
rights (including, without limitation, recourse against the Property) or
remedies of Lender hereunder or thereunder.

 

Maturity Date:  Thirty-six (36) months from the Closing Date.

 

Note:  The Promissory Note, of even date herewith, executed and delivered by
Borrower to Lender in the Loan Amount, as the same may be amended, modified or
replaced from time to time.

 

OFAC List:  Means the list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained by the U.S. Treasury
Department, Office of Foreign Assets Control and any other similar list
maintained by the U.S. Treasury Department, Office of Foreign Assets Control
pursuant to any Requirements of Law, including, without limitation, trade
embargo, economic sanctions, or other prohibitions imposed by Executive Order of
the President of the United States.  The OFAC List is accessible through the
internet website www.treas.gov/ofac/t11sdn.pdf.

 

Official Records:  The Official Records of Los Angeles County, California.

 

Operating Statement:  A current, detailed statement of income and expenses from
and for managing, maintaining and operating the Property, in form and substance
acceptable to Lender, certified as true, correct and complete by Borrower.

 

Permits:  All governmental approvals, authorizations, permits and entitlements
which have been or will be issued with respect to the Property, including
building permits, annexation agreements, plot plan approvals, subdivision
approvals, environmental approvals (including an environmental impact report if
required under applicable law), sewer and water permits, and zoning and land use
entitlements.

 

Permitted Encumbrances:  The liens, charges and encumbrances on title to the
Land as shown on the Title Policy and as approved by Lender, or as otherwise
approved in writing by Lender, both in Lender’s sole discretion.

 

Permitted Transfer:  Means each of the following:

 

4

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a.             Transfers of Equity Interests which, in the aggregate over the
term of the Loan (i) do not exceed forty-nine percent (49%) of the total
interests in Borrower; (ii) do not result in any Person holding an Equity
Interest in Borrower which exceeds forty-nine percent (49%) of the total Equity
Interests in Borrower; and (iii) do not result in a change of Control.

 

b.             Transfers with respect to any Person whose stocks or certificates
are traded on a nationally recognized stock exchange.

 

c.             Transfers which have been approved by Lender in accordance with
Section 8.20 hereof.

 

d.             Permitted Encumbrances.

 

e.             All Transfers of worn out or obsolete Equipment that are promptly
replaced with property of equivalent value and functionality.

 

f.              All leases which have been approved by Lender in accordance with
this Agreement.

 

Person:  Means and includes an individual, a partnership, a corporation, a
limited liability company, a trust, an unincorporated association, a joint
venture or any other entity or a government or any agency or political
subdivision thereof.

 

Property:  The Land, the Improvements and the Collateral.

 

Requirements of Law:  Means (a) the organizational documents of an entity, and
(b) any law, regulation, ordinance, code, decree, treaty, ruling or
determination of an arbitrator, court or other Governmental Authority, or any
Executive Order issued by the President of the United States, in each case
applicable to or binding upon such Person or to which such Person, any of its
property or the conduct of its business is subject including, without
limitation, laws, ordinances and regulations pertaining to the zoning, occupancy
and subdivision of real property.

 

Reserve Account:  Means the interest-bearing account to be established by
Borrower at a financial institution approved by Lender to pay for capital
improvements, repairs and replacements to the Property.

 

Reserve Contribution:  Means the amount of Ten Thousand and 00/100ths Dollars
($10,000.00), to be deposited by Borrower into the Reserve Account each month in
accordance with Section 5.18.

 

Reserve Deposit:  The initial deposit in the amount of Twenty-Five Thousand and
00/100ths Dollars ($25,000.00), to be deposited into the Reserve Account on or
before the Closing Date.

 

Tax and Insurance Deposit Account:  Means an interest bearing demand deposit
account to be opened by Borrower at a financial institution approved by Lender
for the purpose of depositing payments of real estate taxes and assessments and
insurance premiums for the Property, in the amounts and in the manner provided
for in Section 5.17 hereof.

 

5

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Title Company:  Fidelity National Title Company, Newport Beach, California.

 

Title Policy:  A title insurance policy in the form of an American Land Title
Association Extended Coverage Loan Policy — 1970, amended 10-17-70 (without
further modification, revision or amendment), insuring that on the Closing Date,
Borrower owns fee simple title to the Land and that the Deed of Trust is a valid
first lien on the Property in the amount of the Note.  The Title Insurance
Policy must provide affirmative insurance against mechanics liens and contain
endorsements as Lender requires, in Lender’s sole discretion.  Except as
approved by Lender in writing prior to the Closing Date, the Title Insurance
Policy must not contain any survey exceptions, exceptions for rights of parties
in possession (other than pursuant to existing leases), easements not of record
or unpaid installments of special assessments, or any other exceptions to
coverage not approved by Lender.  The Title Insurance Policy must contain such
reinsurance agreements and direct access agreements as Lender may require.

 

Transfer:  Means any action by which either (a) the legal or beneficial
ownership of the Equity Interests in Borrower or (b) the legal or equitable
title to the Property, or any part thereof, or (c) the Property or any portion
thereof, is sold, assigned, transferred, hypothecated, pledged or otherwise
encumbered or dispose of, in each case (a), (b) or (c) whether undertaken,
directly or indirectly, or occurring by operation of law or otherwise,
including, without limitation, each of the following actions:

 

a.                                       the sale, conveyance, assignment, grant
of an option with respect to, mortgage, deed in trust, pledge, grant of a
security interest in, or any other transfer, as security or otherwise, of the
Property or with respect to leases or rents (or any thereof);

 

b.                                      the grant of an easement across the
Property or any other agreement granting rights in or restricting the use or
development of the Property (including, without limitation, air rights);

 

c.                                       an installment sale wherein Borrower
agrees to sell the Property for a price to be paid in installments; or

 

d.                                      an agreement by Borrower entered into
after the Closing Date leasing all or a part of the Property.

 

Transferees:  Shall have the meaning given such term in Section 8.8.

 

Transferred Interest:  Shall have the meaning given such term in Section 8.8.

 

UCC:  Means the Uniform Commercial Code as enacted and in effect in the state
where the Property is located (and as it may from time to time be amended);
provided that, to the extent that the UCC is used to define any term in this
Agreement or in any other Loan Document and such term is defined differently in
different Articles or Divisions of the UCC, the definition of such term
contained in Article or Division 9 shall govern; provided further, however, that
if, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of , or remedies with respect to, Lender’s liens on any
Collateral is governed by the Uniform Commercial Code as enacted an in effect in
a jurisdiction other than the state where the Property

 

6

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is located, the term “UCC” shall mean the Uniform Commercial Code as enacted and
in effect in such other jurisdiction solely for the purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions.

 

Capitalized terms used but not otherwise defined herein shall have the meanings
used and defined in the Note.

 

I.

 

LOAN; OPTION TO PURCHASE

 

1.1          PRINCIPAL.  LENDER AGREES TO LEND TO BORROWER, AND BORROWER AGREES
TO BORROW FROM LENDER, THE LOAN AMOUNT, IN ACCORDANCE WITH THE TERMS HEREOF
UNTIL THE MATURITY DATE, THE DISBURSEMENT OF WHICH IS EVIDENCED BY THE NOTE.

 

1.2          INTEREST.

 

(A)              COMPUTATION.  BORROWER SHALL PAY TO LENDER INTEREST ON THE LOAN
AT THE INTEREST RATE AND IN THE MANNER SPECIFIED IN THE NOTE.

 

(B)              USURY.  IN THE EVENT THAT THE INTEREST AND/OR CHARGES IN THE
NATURE OF INTEREST, IF ANY, PROVIDED FOR BY THIS AGREEMENT OR BY ANY OTHER LOAN
DOCUMENT, SHALL CONTRAVENE A LEGAL OR STATUTORY LIMITATION APPLICABLE TO THE
LOAN, IF ANY, BORROWER SHALL PAY ONLY SUCH AMOUNTS AS WOULD LEGALLY BE
PERMITTED; PROVIDED, HOWEVER, THAT IF THE DEFENSE OF USURY AND ALL SIMILAR
DEFENSES ARE UNAVAILABLE TO BORROWER, BORROWER SHALL PAY ALL AMOUNTS PROVIDED
FOR HEREIN.  IF, FOR ANY REASON, AMOUNTS IN EXCESS OF THE AMOUNTS PERMITTED IN
THE FOREGOING SENTENCE SHALL HAVE BEEN PAID, RECEIVED, COLLECTED OR APPLIED
HEREUNDER, WHETHER BY REASON OF ACCELERATION OR OTHERWISE, THEN, AND IN THAT
EVENT, ANY SUCH EXCESS AMOUNTS SHALL BE APPLIED TO PRINCIPAL, UNLESS PRINCIPAL
HAS BEEN FULLY PAID, IN WHICH EVENT SUCH EXCESS AMOUNT SHALL BE REFUNDED TO
BORROWER.

 

1.3          MATURITY.  THE PRINCIPAL BALANCE OWING ON THE LOAN, AND ALL ACCRUED
INTEREST AND OTHER SUMS OWING UNDER THE LOAN DOCUMENTS NOT OTHERWISE PAID WHEN
DUE, SHALL BE DUE AND PAYABLE IN FULL ON THE MATURITY DATE.

 

1.4          RELEASE OF DEED OF TRUST.  LENDER SHALL PROMPTLY RELEASE THE DEED
OF TRUST ON THE PROPERTY UPON REPAYMENT IN FULL OF THE LOAN.

 

1.5          CURRENT BANKRUPTCY.  NOTWITHSTANDING THE PROVISIONS OF
SECTION 1129(A)(9)(A) OR ANY OTHER PROVISION OF THE BANKRUPTCY CODE, THE LOAN
SHALL NOT BE REQUIRED TO BE REPAID BY BORROWER UPON CONFIRMATION OF A PLAN OF
REORGANIZATION FOR THE BORROWER IN THE CURRENT BANKRUPTCY.

 

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II.

 

CLOSING CONDITIONS

 

2.1          CONDITIONS OF LENDER’S OBLIGATION TO CLOSE.  THE CLOSING DATE SHALL
NOT OCCUR, AND LENDER SHALL NOT BE REQUIRED TO DISBURSE THE LOAN AMOUNT
HEREUNDER UNTIL THE CONDITIONS AND REQUIREMENTS SET FORTH BELOW HAVE BEEN
COMPLETED AND FULFILLED TO THE REASONABLE SATISFACTION OF LENDER (OR WAIVED BY
LENDER IN WRITING).

 

(A)              LOAN DOCUMENTS.  BORROWER SHALL EXECUTE AND DELIVER (OR CAUSE
TO BE EXECUTED AND DELIVERED) TO LENDER AND ESCROW HOLDER THE LOAN DOCUMENTS AND
SUCH OTHER DOCUMENTS AS LENDER MAY REQUIRE, IN FORM AND SUBSTANCE ACCEPTABLE TO
LENDER AND TO ITS COUNSEL, IN THEIR SOLE DISCRETION, TO EVIDENCE AND SECURE THE
LOAN.  LENDER MAY DESIGNATE WHICH OF THE LOAN DOCUMENTS ARE TO BE PLACED OF
RECORD, THE ORDER OF RECORDING THEREOF, AND THE OFFICES IN WHICH THE SAME ARE TO
BE RECORDED.  BORROWER SHALL PAY ALL DOCUMENTARY, INTANGIBLE, RECORDING AND/OR
REGISTRATION TAXES AND/OR FEES DUE UPON THE NOTE, THE DEED OF TRUST, THE
FINANCING STATEMENT AND/OR THE OTHER LOAN DOCUMENTS.

 

(B)              TITLE INSURANCE.  LENDER SHALL HAVE RECEIVED AN UNCONDITIONAL
COMMITMENT FROM THE TITLE COMPANY TO ISSUE THE TITLE POLICY.

 

(C)              BROKERS’ AFFIDAVIT.  BROKERS SHALL HAVE EXECUTED AND DELIVERED
TO LENDER AN AFFIDAVIT TO THE EFFECT THAT BROKERS HAVE ARRANGED THIS TRANSACTION
AND BEEN PAID A FEE IN CONNECTION THEREWITH AND THAT BROKERS ARE CURRENTLY
LICENSED REAL ESTATE BROKERS UNDER THE LAWS OF THE STATE OF CALIFORNIA TO WHICH
AFFIDAVIT A COPY OF SAID BROKERS’ LICENSES SHALL BE ATTACHED.

 

(D)              CONDITIONS FOR DISBURSEMENT.  BORROWER SHALL HAVE SATISFIED ALL
CONDITIONS FOR DISBURSEMENT SET FORTH IN ARTICLE III.

 

(E)              TAX AND INSURANCE DEPOSIT ACCOUNT.  BORROWER SHALL HAVE
ESTABLISHED IN BORROWER’S NAME, THE TAX AND INSURANCE DEPOSIT ACCOUNT WITH A
FINANCIAL INSTITUTION REASONABLY APPROVED BY LENDER, AND SHALL HAVE FUNDED THE
INITIAL DEPOSIT, AND PREMIUMS FOR THE 12-MONTH PERIOD FOLLOWING THE CLOSING DATE
SHALL HAVE BEEN PAID FOR ALL INSURANCE REQUIRED TO BE MAINTAINED BY BORROWER.

 

(F)               RECORDATION OF DEED OF TRUST.  THE DEED OF TRUST SHALL HAVE
BEEN RECORDED IN THE OFFICIAL RECORDS IN FULL COMPLIANCE WITH THE LETTER OF
TITLE AND ESCROW INSTRUCTIONS FROM THE LENDER TO THE ESCROW HOLDER.

 

(G)              NO DEFAULTS.  AS OF THE CLOSING DATE, NO DEFAULT OR EVENT OF
DEFAULT UNDER THIS AGREEMENT OR UNDER ANY OF THE OTHER LOAN DOCUMENTS SHALL HAVE
OCCURRED AND BE CONTINUING, AND NO EVENT SHALL HAVE OCCURRED WHICH, UPON THE
SERVICE OF NOTICE AND/OR THE LAPSE OF TIME, WOULD CONSTITUTE AN EVENT OF DEFAULT
THEREUNDER.

 

(H)              LIABILITIES.  EXCEPT FOR THE CURRENT BANKRUPTCY, AND EXCEPT AS
SET FORTH ON SCHEDULE 2.1(H) ATTACHED HERETO, THERE IS NO LITIGATION,
ADMINISTRATIVE PROCEEDING,

 

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INVESTIGATION OR OTHER LEGAL PROCEEDING PENDING OR, TO BORROWER’S KNOWLEDGE,
THREATENED, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.

 

(I)               RESERVE ACCOUNT.  BORROWER SHALL HAVE ESTABLISHED IN
BORROWER’S NAME, THE RESERVE ACCOUNT WITH A FINANCIAL INSTITUTION APPROVED BY
LENDER, AND SHALL HAVE FUNDED THE RESERVE DEPOSIT.

 

(J)               ADDITIONAL CONDITIONS TO DISBURSEMENT OF LOAN AMOUNT.  IN
ADDITION TO THE SATISFACTION OF EACH OF THE CONDITIONS SET FORTH ABOVE IN THIS
ARTICLE II, AND THE APPLICABLE CONDITIONS SPECIFIED IN ARTICLE III BELOW, LENDER
MAY CONDITION THE DISBURSEMENT OF THE LOAN AMOUNT UPON LENDER’S RECEIPT AND
APPROVAL OF EACH OF THE ADDITIONAL ITEMS SET FORTH IN EXHIBIT B HERETO.

 

(K)             REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND
WARRANTIES OF BORROWER UNDER ARTICLE IV SHALL BE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS THROUGH THE CLOSING DATE.

 

(L)               BANKRUPTCY COURT ORDER.  THE BANKRUPTCY COURT SHALL HAVE
ENTERED FINDINGS AND AN ORDER IN FORM AND SUBSTANCE REASONABLY APPROVED BY
LENDER APPROVING THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND PROVIDING THAT
THE LOAN AND THE TRANSACTION CONTEMPLATED HEREBY WAS EXTENDED BY LENDER IN GOOD
FAITH, AS PROVIDED IN SECTION 364(E) OF THE BANKRUPTCY CODE, AND THAT LENDER IS
ENTITLED TO ALL OF THE PROTECTIONS AFFORDED TO LENDER PROVIDED IN
SECTION 364(E) OF THE BANKRUPTCY CODE.  THE ORDER APPROVING THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL PROVIDE, AMONG OTHER THINGS, THAT THE LOAN
DOCUMENTS SHALL NOT BE ALTERED, EXTENDED OR OTHERWISE MODIFIED IN THIS, OR ANY
FUTURE, BANKRUPTCY CASE OF BORROWER.

 

2.2          CONDITIONS OF BORROWER’S OBLIGATION TO CLOSE.  THE CLOSING DATE
SHALL NOT OCCUR, AND BORROWER SHALL NOT BE REQUIRED COMPLETE THE TRANSACTION
CONTEMPLATED HEREBY UNTIL THE CONDITIONS AND REQUIREMENTS SET FORTH BELOW HAVE
BEEN COMPLETED AND FULFILLED TO THE REASONABLE SATISFACTION OF BORROWER (OR
WAIVED BY BORROWER IN WRITING):

 

(A)              LOAN DOCUMENTS.  LENDER SHALL EXECUTE AND DELIVER (OR CAUSE TO
BE EXECUTED AND DELIVERED) TO ESCROW HOLDER THE LOAN DOCUMENTS AND SUCH OTHER
DOCUMENTS REQUIRED TO BE DELIVERED BY LENDER TO ESCROW HOLDER PURSUANT TO THE
LOAN DOCUMENTS

 

(B)              REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND
WARRANTIES OF LENDER UNDER ARTICLE IV SHALL BE TRUE AND CORRECT IN ALL MATERIAL
RESPECTS THROUGH THE CLOSING DATE.

 

(C)              BANKRUPTCY COURT ORDER.  THE BANKRUPTCY COURT SHALL HAVE
ENTERED AN ORDER (I) DETERMINING THAT THE PAYOFF AMOUNTS OF BORROWER’S CURRENT
DEBTOR-IN-POSSESSION FINANCING AND PRE-PETITION FINANCING DO NOT EXCEED TWENTY
TWO MILLION AND 00/100THS DOLLARS ($22,000,00.00), IN THE AGGREGATE, AND
(II) EXPRESSLY DISALLOWING ANY CLAIM FOR NON-COMPLIANCE FEES IN CONNECTION
THEREWITH.

 

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III.

 

DISBURSEMENT OF LOAN AMOUNT

 

3.1          GENERAL.

 

(A)              REDUCTION OF LOAN AMOUNT.  THE LOAN AMOUNT SHALL BE DISBURSED
BY LENDER FOR THE BENEFIT OF BORROWER ON THE CLOSING DATE IN ACCORDANCE WITH THE
TERMS AND CONDITIONS SET FORTH IN THIS ARTICLE III.  BORROWER ACKNOWLEDGES THAT
THE LOAN AMOUNT SHALL BE DISBURSED MINUS ANY (I) DELINQUENT TAXES AND
ASSESSMENTS ON THE PROPERTY NOT SATISFIED AND REMOVED PRIOR TO THE CLOSING DATE,
AND (II) ANY MECHANIC’S LIENS ENCUMBERING THE PROPERTY.  ANY AMOUNTS WITHHELD BY
LENDER PURSUANT TO CLAUSE (I) OF THE PRECEDING SENTENCE SHALL PROMPTLY BE
APPLIED BY LENDER TO PAY AND DELINQUENT TAXES AND ASSESSMENTS ON THE PROPERTY
AND ANY AMOUNTS WITHHELD BY LENDER PURSUANT TO CLAUSE (II) OF THE PRECEDING
SENTENCE SHALL BE HELD IN AN INTEREST BEARING ACCOUNT WITH ESCROW HOLDER PENDING
BORROWER’S DIRECTION AS TO THE APPLICATION OF SUCH PROCEEDS.

 

(B)              ADVANCES TO LENDER.  LENDER MAY, AT LENDER’S OPTION, WITHOUT
ANY OBLIGATION TO DO SO, ADVANCE TO ITSELF ALL SUMS DUE TO LENDER UNDER THIS
AGREEMENT OR UNDER ANY OF THE OTHER LOAN DOCUMENTS.  LENDER SHALL ALSO HAVE THE
RIGHT, BUT NOT THE OBLIGATION, TO ADVANCE AND DIRECTLY APPLY THE PROCEEDS OF THE
LOAN TO THE SATISFACTION OF ANY OF BORROWER’S OTHER OBLIGATIONS HEREUNDER OR
UNDER ANY OF THE OTHER LOAN DOCUMENTS.

 

3.2          INSPECTIONS.

 

(A)              ACCESS TO THE PROPERTY.  UPON REASONABLE ADVANCE NOTICE,
LENDER, THE TITLE COMPANY, CONSULTANTS AND THEIR REPRESENTATIVES SHALL HAVE
ACCESS TO THE PROPERTY AT ALL REASONABLE TIMES AND SHALL HAVE THE RIGHT TO ENTER
THE PROPERTY AND TO CONDUCT SUCH INSPECTIONS THEREOF AS THEY SHALL DEEM
NECESSARY OR DESIRABLE FOR THE PROTECTION OF LENDER’S INTERESTS.

 

(B)              CONSULTANTS.  LENDER MAY RETAIN ANY CONSULTANTS DEEMED
NECESSARY OR DESIRABLE BY LENDER, AT BORROWER’S EXPENSE, TO MAKE PERIODIC
INSPECTIONS OF THE PROPERTY.  LENDER MAY ALSO RETAIN SUCH OTHER CONSULTANTS AS
LENDER DEEMS NECESSARY OR CONVENIENT TO PERFORM SUCH SERVICES AS MAY, FROM TIME
TO TIME, BE REQUIRED BY LENDER IN CONNECTION WITH THE LOAN, THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS OR THE PROPERTY.

 

(C)              NO RELIANCE BY BORROWER OR THIRD PARTY.  NEITHER BORROWER NOR
ANY THIRD PARTY SHALL HAVE THE RIGHT TO USE OR RELY UPON ANY REPORTS GENERATED
BY LENDER OR ITS CONSULTANTS FOR ANY PURPOSE WHATSOEVER.

 

3.3          LENDER RESPONSIBILITY.  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT
LENDER ASSUMES NO LIABILITY OR RESPONSIBILITY FOR PROTECTION OF THE PROPERTY, OR
FOR ANY REPRESENTATIONS MADE BY BORROWER.

 

3.4          DIRECT APPLICATION OF PROCEEDS.  LENDER SHALL HAVE THE RIGHT, BUT
NOT THE OBLIGATION, TO DISBURSE AND DIRECTLY APPLY THE PROCEEDS OF ANY PORTION
OF THE LOAN AMOUNT TO THE SATISFACTION OF ANY OF BORROWER’S OBLIGATIONS
HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS.

 

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ANY ADVANCE BY LENDER FOR SUCH PURPOSE SHALL BE PART OF THE LOAN AND SHALL BE
EVIDENCED AND SECURED BY THE LOAN DOCUMENTS.  LENDER MAY ADVANCE SUCH FUNDS AND
INCUR SUCH EXPENSES AS LENDER DEEMS NECESSARY TO PRESERVE THE PROPERTY AND ANY
SECURITY FOR THE LOAN, AND SUCH EXPENSES, EVEN THOUGH IN EXCESS OF THE AMOUNT OF
THE LOAN, SHALL BE SECURED BY ANY AND ALL DOCUMENTS SECURING THE LOAN AND THE
NOTE AND SHALL BE PAYABLE TO LENDER UPON DEMAND.

 

3.5          INSUFFICIENT DOCUMENTATION.  IN THE EVENT THAT LENDER SHALL
DETERMINE, IN ITS REASONABLE JUDGMENT, THAT PROPER DOCUMENTATION TO SUPPORT
DISBURSEMENT OF THE LOAN AMOUNT, AS REQUIRED BY THIS AGREEMENT, HAS NOT BEEN
FURNISHED, IT MAY WITHHOLD PAYMENT OF THE LOAN AMOUNT AS SHALL NOT BE SO
SUPPORTED BY PROPER DOCUMENTATION, AND SHALL PROMPTLY NOTIFY BORROWER OF THE
DISCREPANCY IN OR OMISSION OF SUCH DOCUMENTATION.  UNTIL SUCH TIME AS SUCH
DISCREPANCY OR OMISSION IS CORRECTED TO THE SATISFACTION OF LENDER, IT MAY
WITHHOLD DISBURSEMENT OF THE LOAN AMOUNT.

 

IV.

 

REPRESENTATIONS AND WARRANTIES OF LENDER AND BORROWER

 

4.1          REPRESENTATIONS AND WARRANTIES OF BORROWER.  AS AN INDUCEMENT TO
LENDER TO EXECUTE THIS AGREEMENT AND TO DISBURSE THE PROCEEDS OF THE LOAN,
BORROWER REPRESENTS AND WARRANTS TO LENDER THAT:

 

(A)              LEGAL STATUS OF BORROWER.  BORROWER IS A CORPORATION DULY
ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE OF
CALIFORNIA.

 

(B)              TITLE.  BORROWER IS THE OWNER, IN FEE SIMPLE, OF THE LAND AND
THE IMPROVEMENTS, SUBJECT TO NO LIEN, CHARGE, MORTGAGE, DEED OF TRUST,
RESTRICTION OR ENCUMBRANCE, EXCEPT PERMITTED ENCUMBRANCES.

 

(C)              NO BREACH OF APPLICABLE AGREEMENTS OR LAWS.  SUBJECT TO
OBTAINING THE APPROVAL OF THE BANKRUPTCY COURT, THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THE EXECUTION, DELIVERY AND/OR PERFORMANCE
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS WILL NOT RESULT IN ANY BREACH OF
OR CONSTITUTE A DEFAULT UNDER ANY MORTGAGE, DEED OF TRUST, LEASE, BANK LOAN,
CREDIT AGREEMENT, OR OTHER INSTRUMENT OR VIOLATE ANY GOVERNMENTAL REQUIREMENTS,
TO WHICH BORROWER IS A PARTY, OR BY WHICH BORROWER MAY BE BOUND OR AFFECTED.

 

(D)              NO LITIGATION OR DEFAULTS.  EXCEPT FOR THE CURRENT BANKRUPTCY,
AND EXCEPT AS SET FORTH ON SCHEDULE 2.1(H), THERE ARE NO ACTIONS, SUITS OR
PROCEEDINGS PENDING OR, TO THE KNOWLEDGE OF BORROWER, THREATENED AGAINST OR
AFFECTING BORROWER OR THE PROPERTY WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT,
OR INVOLVING THE VALIDITY OR ENFORCEABILITY OF THE LOAN DOCUMENTS OR THE
PRIORITY OF THE LIEN THEREOF, AT LAW OR IN EQUITY; AND BORROWER IS NOT IN
DEFAULT UNDER ANY ORDER, WRIT, INJUNCTION, DECREE OR DEMAND OF ANY COURT OR ANY
ADMINISTRATIVE BODY HAVING JURISDICTION OVER BORROWER.

 

(E)              FINANCIAL AND OTHER INFORMATION.  THE FINANCIAL STATEMENTS OF
BORROWER PREVIOUSLY OR HEREAFTER DELIVERED TO LENDER FAIRLY AND ACCURATELY
PRESENT, OR WILL FAIRLY AND ACCURATELY PRESENT, THE FINANCIAL CONDITION OF
BORROWER, AS OF THE DATES OF SUCH STATEMENTS,

 

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AND NEITHER THIS AGREEMENT NOR ANY DOCUMENT, FINANCIAL STATEMENT, FINANCIAL OR
CREDIT INFORMATION, CERTIFICATE OR STATEMENT REFERRED TO HEREIN OR FURNISHED TO
LENDER BY BORROWER CONTAINS, OR WILL CONTAIN, ANY UNTRUE STATEMENT OF A MATERIAL
FACT OR OMITS, OR WILL OMIT, A MATERIAL FACT, OR IS OR WILL BE MISLEADING IN ANY
MATERIAL RESPECT.

 

(F)               ERISA.  (A) BORROWER IS NOT AND WILL NOT BE AN “EMPLOYEE
BENEFIT PLAN,” AS DEFINED IN §3(3) OF ERISA, SUBJECT TO TITLE I OF ERISA,
(B) NONE OF THE ASSETS OF BORROWER CONSTITUTE OR WILL CONSTITUTE “PLAN ASSETS”
OF ONE OR MORE SUCH PLANS WITHIN THE MEANING OF 29 C.F.R. §2510.3-101,
(C) BORROWER IS NOT AND WILL NOT BE A “GOVERNMENTAL PLAN” WITHIN THE MEANING OF
§3(3) OF ERISA, AND (D) TRANSACTIONS BY OR WITH BORROWER ARE NOT AND WILL NOT BE
SUBJECT TO STATE STATUTES REGULATING INVESTMENT OF, AND FIDUCIARY OBLIGATIONS
WITH RESPECT TO, GOVERNMENTAL PLANS.

 

(G)              BOUNDARY LINES; CONFORMANCE WITH GOVERNMENTAL REQUIREMENTS AND
RESTRICTIONS.  EXCEPT AS DISCLOSED IN THE SURVEY PROVIDED TO LENDER, THE
EXTERIOR LINES OF THE IMPROVEMENTS ARE, AND AT ALL TIMES WILL BE, WITHIN THE
BOUNDARY LINES OF THE LAND, AND BORROWER HAS EXAMINED AND IS FAMILIAR WITH ALL
APPLICABLE COVENANTS, CONDITIONS, RESTRICTIONS AND RESERVATIONS, AND WITH ALL
APPLICABLE GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO BUILDING
CODES AND ZONING, ENVIRONMENTAL, HAZARDOUS SUBSTANCE, ENERGY AND POLLUTION
CONTROL LAWS, ORDINANCES AND REGULATIONS AFFECTING THE PROPERTY, AND THE
PROPERTY CONFORMS TO AND COMPLIES WITH SAID COVENANTS, CONDITIONS, RESTRICTIONS,
RESERVATIONS AND GOVERNMENTAL REQUIREMENTS.

 

(H)              UTILITIES, ETC.  TELEPHONE SERVICES, GAS, ELECTRIC POWER, STORM
SEWERS, SANITARY SEWER AND WATER FACILITIES ARE AVAILABLE TO THE BOUNDARIES OF
THE LAND, ADEQUATE TO SERVE THE PROPERTY AND NOT SUBJECT TO ANY CONDITIONS
(OTHER THAN NORMAL CHARGES TO THE UTILITY SUPPLIER) WHICH WOULD LIMIT THE USE OF
SUCH UTILITIES.  ALL STREETS AND EASEMENTS NECESSARY FOR THE OPERATION OF THE
PROPERTY ARE AVAILABLE TO THE BOUNDARIES OF THE PROPERTY.

 

(I)               COLLATERAL.  BORROWER IS NOW AND SHALL CONTINUE TO BE THE SOLE
OWNER OF THE COLLATERAL FREE FROM ANY LIEN, SECURITY INTEREST OR ADVERSE CLAIM
OF ANY KIND WHATSOEVER, EXCEPT FOR LIENS OR SECURITY INTERESTS IN FAVOR OF
LENDER, THE INTEREST OF A LESSOR PURSUANT TO A LEASE OF PERSONAL PROPERTY, ANY
LIENS DISCLOSED IN THE TITLE POLICY, OR LIENS OR SECURITY INTERESTS OTHERWISE
APPROVED BY LENDER IN LENDER’S SOLE DISCRETION.

 

(J)               CONDEMNATION.  NO CONDEMNATION PROCEEDING OR MORATORIUM IS
PENDING OR, TO THE KNOWLEDGE OF BORROWER, THREATENED AGAINST THE LAND OR THE
IMPROVEMENTS WHICH WOULD IMPAIR ANY CONSTRUCTION, USE, SALE OR OCCUPANCY OF THE
PROPERTY (OR ANY PORTION THEREOF) IN ANY MANNER WHATSOEVER.

 

(K)             GOVERNMENTAL REGULATIONS.  EXCEPT FOR THE CURRENT BANKRUPTCY,
BORROWER IS NOT SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY ACT OF 1940,
THE FEDERAL POWER ACT, THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, THE
INTERSTATE COMMERCE ACT OR ANY FEDERAL OR STATE STATUTE OR REGULATION LIMITING
ITS ABILITY TO INCUR INDEBTEDNESS FOR MONEY BORROWED.

 

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(L)               COMPLIANCE WITH ANTI-TERRORISM, EMBARGO, SANCTIONS AND ANTI
MONEY LAUNDERING LAWS.  BORROWER AND, TO BORROWER’S CURRENT KNOWLEDGE, (A) EACH
PERSON OWNING AN INTEREST IN BORROWER AND (B) EACH TENANT AT THE PROPERTY: 
(I) IS NOT CURRENTLY IDENTIFIED ON THE OFAC LIST, AND (II) IS NOT A PERSON WITH
WHOM A CITIZEN OF THE UNITED STATES IS PROHIBITED TO ENGAGE IN TRANSACTIONS BY
ANY TRADE EMBARGO, ECONOMIC SANCTION, OR OTHER PROHIBITION OF UNITED STATES LAW,
REGULATION, OR EXECUTIVE ORDER OF THE PRESIDENT OF THE UNITED STATES, INCLUDING,
WITHOUT LIMITATION, ANY ANTI-TERRORISM LAWS.  BORROWER AGREES TO CONFIRM THIS
REPRESENTATION AND WARRANTY IN WRITING ON AN ANNUAL BASIS IF REQUESTED BY LENDER
TO DO SO.

 

(M)             BROKERS.  BORROWER IS REPRESENTED BY HEALTHWEST REALTY ADVISORS
(“BROKER”) IN CONNECTION WITH THE MAKING AND ARRANGEMENT OF THE LOAN AND THE
TRANSACTION CONTEMPLATED HEREBY.  OTHER THAN ANY BROKERAGE COMMISSIONS OR FEES
WHICH MAY BE DUE BY BORROWER TO THE BROKER FOR SUCH SERVICES, THERE ARE NO OTHER
BROKERAGE COMMISSIONS OR FINDERS’ FEES DUE OR CLAIMED BY ANY PARTY TO BE DUE
FROM BORROWER IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTION CONTEMPLATED
HEREBY.  BORROWER SHALL BE FULLY RESPONSIBLE FOR ANY COMMISSIONS OR FEES DUE AND
OWING, IF ANY, TO BROKER.

 

(N)              DEFECTS AND HAZARDS.  BORROWER DOES NOT KNOW OF ANY DEFECTS,
FACTS OR CONDITIONS AFFECTING THE LAND THAT WOULD MAKE IT UNSUITABLE FOR THE USE
CONTEMPLATED HEREUNDER OR OF ANY ABNORMAL HAZARDS (INCLUDING EARTH MOVEMENT OR
SLIPPAGE) AFFECTING THE LAND.

 

(O)              PERMITS.  BORROWER HAS OBTAINED ALL PERMITS WHICH ARE NECESSARY
FOR THE OPERATION OF THE PROPERTY IN ACCORDANCE WITH ALL APPLICABLE BUILDING,
ENVIRONMENTAL, SUBDIVISION, LAND USE AND ZONING LAWS, INCLUDING ALL PERMITS FOR
THE IMPROVEMENTS, ANNEXATION AGREEMENTS, PLOT PLAN APPROVALS, SUBDIVISION
APPROVALS (INCLUDING THE APPROVAL AND RECORDATION OF ANY REQUIRED SUBDIVISION
MAP), ENVIRONMENTAL APPROVALS (INCLUDING A NEGATIVE DECLARATION OR AN
ENVIRONMENTAL IMPACT REPORT IF REQUIRED UNDER APPLICABLE LAW), SEWER AND WATER
PERMITS AND ZONING AND LAND USE ENTITLEMENTS.

 

4.2          REPRESENTATIONS AND WARRANTIES OF LENDER.  LENDER REPRESENTS AND
WARRANTS TO BORROWER THAT:

 

(A)              LEGAL STATUS OF LENDER.  LENDER IS A LIMITED LIABILITY COMPANY
DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF
DELAWARE.

 

(B)              NO BREACH OF APPLICABLE AGREEMENTS OR LAWS.  THE CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THE EXECUTION, DELIVERY AND/OR
PERFORMANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS WILL NOT RESULT IN
ANY BREACH OF OR CONSTITUTE A DEFAULT UNDER ANY MORTGAGE, DEED OF TRUST, LEASE,
BANK LOAN, CREDIT AGREEMENT, OR OTHER INSTRUMENT OR VIOLATE ANY GOVERNMENTAL
REQUIREMENTS, TO WHICH LENDER IS A PARTY, OR BY WHICH LENDER MAY BE BOUND OR
AFFECTED.

 

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V.

 

COVENANTS OF BORROWER

 

As an inducement to Lender to execute this Agreement and to make the Loan, and
while this Agreement is in effect, and until Lender has been paid in full the
principal of and interest on the Loan made by Lender hereunder and under the
other Loan Documents, Borrower hereby covenants as set forth in this Article V:

 

5.1          PAYING COSTS OF LOAN.  BORROWER SHALL PAY ALL REASONABLE EXPENSES
INCURRED BY LENDER IN CONNECTION WITH THE LOAN AND ITS DOCUMENTATION, CLOSING,
ADMINISTRATION AND ENFORCEMENT, INCLUDING, WITHOUT LIMITATION, ALL RECORDING
COSTS, TITLE INSURANCE PREMIUMS, ESCROW CHARGES, COSTS OF SURVEYS, APPRAISAL
FEES, COSTS ASSOCIATED WITH UPDATING EXISTING ENVIRONMENTAL REPORTS (AND, IF
REASONABLY NECESSARY, OBTAINING A PHASE II REPORT), AND REASONABLE EXPENSES AND
DISBURSEMENTS OF LENDER’S LEGAL COUNSEL.

 

5.2          USING LOAN PROCEEDS.  BORROWER SHALL USE THE LOAN SOLELY TO PAY
OFF, OR TO REIMBURSE BORROWER FOR PAYING OFF, (A) BORROWER’S CURRENT
DEBTOR-IN-POSSESSION FINANCING AND PRE-PETITION FINANCING AND (B) THE COSTS AND
EXPENSES INCURRED BY BORROWER IN CONNECTION WITH OBTAINING THE LOAN.  BORROWER
SHALL NOT USE THE LOAN PROCEEDS, OR ANY PORTION OF THEM, TO PAY ANY FEES OR
OTHER PAYMENTS TO ANY AFFILIATE OF BORROWER WITHOUT LENDER’S PRIOR WRITTEN
CONSENT, IN LENDER’S SOLE DISCRETION.

 

5.3          KEEPING OF RECORDS.  BORROWER SHALL SET UP AND MAINTAIN ACCURATE
AND COMPLETE BOOKS, ACCOUNTS AND RECORDS PERTAINING TO THE PROPERTY IN A MANNER
REASONABLY ACCEPTABLE TO LENDER.  BORROWER WILL PERMIT REPRESENTATIVES OF LENDER
TO HAVE FREE ACCESS TO AND TO INSPECT AND COPY ALL BOOKS, RECORDS AND CONTRACTS
OF BORROWER.  ANY SUCH INSPECTION BY LENDER SHALL BE FOR THE SOLE BENEFIT AND
PROTECTION OF LENDER, AND LENDER SHALL HAVE NO OBLIGATION TO DISCLOSE THE
RESULTS THEREOF TO BORROWER OR TO ANY THIRD PARTY.

 

5.4          PROVIDING FINANCIAL INFORMATION.  BORROWER SHALL FURNISH SUCH
FINANCIAL INFORMATION CONCERNING BORROWER AND THE PROPERTY AS LENDER MAY
REASONABLY REQUEST, AND SHALL FURNISH TO LENDER (A) QUARTERLY FINANCIAL
STATEMENTS FOR BORROWER WITHIN FORTY-FIVE (45) DAYS FOLLOWING THE END OF EACH
FISCAL QUARTER THEREOF, (B) QUARTERLY WRITTEN REPORTS, WITHIN FORTY-FIVE (45)
DAYS FOLLOWING THE END OF EACH FISCAL QUARTER, SETTING FORTH ANY NEW DIRECT
INDEBTEDNESS, OBLIGATIONS OR LIABILITIES INCURRED BY BORROWER (WHICH SHALL
INCLUDE CONTINGENT LIABILITIES AND GUARANTIES) SINCE THE DATE HEREOF (OR THE
DATE OF THE LAST SUCH WRITTEN REPORT AFTER THE FIRST SUCH WRITTEN REPORT IS SO
PROVIDED), AND (C) IF REQUIRED BY LENDER, COPIES OF ALL FEDERAL INCOME TAX
RETURNS (WITH ALL SUPPORTING SCHEDULES) OF BORROWER DUE DURING THE TERM OF THE
LOAN WITHIN FIFTEEN (15) DAYS AFTER THE DEADLINE (AS SUCH DEADLINE MAY BE
EXTENDED) FOR FILING THE SAME.  ALL SUCH FINANCIAL STATEMENTS SHALL BE IN
REASONABLE DETAIL, SHALL BE PREPARED FOR PARTNERSHIPS, CORPORATIONS AND LIMITED
LIABILITY COMPANIES IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CONSISTENTLY APPLIED AND FOR INDIVIDUALS IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES CONSISTENTLY APPLIED, SHALL BE CERTIFIED BY THE PARTY TO WHICH THEY
APPLY AS TRUE, CORRECT AND COMPLETE.

 

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5.5          PROVIDING OPERATING STATEMENTS.  BORROWER SHALL, WITHIN TEN
(10) DAYS FOLLOWING THE CLOSE OF EACH FISCAL QUARTER, DELIVER TO LENDER AN
OPERATING STATEMENT AND RENT ROLL, IN FORM AND DETAIL REASONABLY SATISFACTORY TO
LENDER, FOR THE PROPERTY FOR THE PRECEDING FISCAL QUARTER.  BORROWER SHALL ALSO
DELIVER TO LENDER AN ANNUAL OPERATING STATEMENT FOR THE PROPERTY WITHIN NINETY
(90) DAYS FOLLOWING THE END OF EACH FISCAL YEAR THEREOF.  ALL SUCH OPERATING
STATEMENTS, RENT ROLLS AND LEASING STATUS REPORTS SHALL BE CERTIFIED AS TRUE,
CORRECT AND COMPLETE BY BORROWER.

 

5.6          COMPLYING WITH THE LOAN DOCUMENTS AND OTHER AGREEMENTS.  BORROWER
SHALL COMPLY WITH AND PERFORM ALL OF ITS AGREEMENTS AND OBLIGATIONS UNDER THE
LOAN DOCUMENTS AND SHALL COMPLY WITH ALL REASONABLE REQUESTS BY LENDER WHICH ARE
CONSISTENT WITH THE TERMS THEREOF.  BORROWER SHALL COMPLY WITH AND PERFORM ALL
OF ITS AGREEMENTS AND OBLIGATIONS UNDER ANY MORTGAGE, DEED OF TRUST, LEASE, BANK
LOAN, CREDIT AGREEMENT, AND ANY OTHER AGREEMENT AND ANY GOVERNMENTAL
REQUIREMENTS TO WHICH BORROWER IS A PARTY, OR BY WHICH BORROWER MAY BE BOUND OR
AFFECTED.

 

5.7          COMPLIANCE WITH LAWS.  BORROWER WILL COMPLY AND, TO THE EXTENT IT
IS ABLE, WILL CAUSE OTHERS TO COMPLY WITH ALL LAWS AND REQUIREMENTS OF
GOVERNMENTAL AUTHORITIES HAVING JURISDICTION OVER THE PROCESSING, APPROVING AND
RECORDING OF ANY SUBDIVISION MAP, AND WILL FURNISH LENDER WITH REPORTS OF ANY
OFFICIAL SEARCHES FOR VIOLATION OF ANY REQUIREMENTS ESTABLISHED BY SUCH
GOVERNMENTAL AUTHORITIES.  BORROWER WILL COMPLY AND, TO THE EXTENT IT IS ABLE,
WILL CAUSE OTHERS TO COMPLY WITH ALL RESTRICTIVE COVENANTS AND ALL OBLIGATIONS
CREATED BY PRIVATE CONTRACTS AND LEASES WHICH AFFECT OWNERSHIP, DEVELOPMENT,
CONSTRUCTION, EQUIPPING, FIXTURING, USE, OCCUPANCY, SALE OR LEASING OF THE
PROPERTY (OR ANY PORTION THEREOF).  THE PROPERTY AND THE LEASING THEREOF SHALL
BE IN COMPLIANCE WITH ALL PERMITS AND APPROVALS ISSUED BY GOVERNMENTAL AGENCIES
WITH RESPECT TO THE PROPERTY, APPLICABLE BUILDING, ZONING AND USE LAWS,
REQUIREMENTS, REGULATIONS AND ORDINANCES, AND ANY DEVELOPMENT WILL NOT VIOLATE
ANY RESTRICTIONS OF RECORD AGAINST THE PROPERTY.  BORROWER WILL DELIVER TO
LENDER, PROMPTLY AFTER RECEIPT THEREOF, COPIES OF ALL PERMITS AND APPROVALS
RECEIVED FROM GOVERNMENTAL AUTHORITIES RELATING TO THE USE, CONSTRUCTION,
DEVELOPMENT, OR SALE OF THE PROPERTY.

 

5.8          OWNERSHIP OF PERSONAL PROPERTY.  BORROWER WILL BE THE SOLE OWNER OF
ALL COLLATERAL ACQUIRED AFTER THE DATE HEREOF, FREE FROM ANY ADVERSE LIEN,
SECURITY INTEREST OR ADVERSE CLAIM OF ANY KIND WHATSOEVER, EXCEPT FOR SECURITY
INTERESTS AND LIENS IN FAVOR OF LENDER, LIENS DISCLOSED IN THE TITLE POLICY, AND
OTHER LIENS APPROVED BY LENDER, IN LENDER’S SOLE DISCRETION.  BORROWER WILL NOT
CONVEY OR TRANSFER ANY PORTION OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN
CONSENT OF LENDER, OTHER THAN IN THE ORDINARY COURSE OF BUSINESS; PROVIDED,
HOWEVER, BORROWER MAY CONVEY OR TRANSFER SOME OR ALL OF THE COLLATERAL SO LONG
AS BORROWER OBTAINS A REPLACEMENT OF COMPARABLE OR GREATER UTILITY AND VALUE.

 

5.9          REPRESENTATIONS AND WARRANTIES.  UNTIL REPAYMENT OF THE NOTE AND
ALL OTHER OBLIGATIONS SECURED BY THE DEED OF TRUST, BORROWER SHALL ENSURE THAT
THE REPRESENTATIONS AND WARRANTIES OF ARTICLE IV REMAIN TRUE AND COMPLETE IN ALL
MATERIAL RESPECTS.

 

5.10        TRADE NAMES.  BORROWER SHALL IMMEDIATELY NOTIFY LENDER IN WRITING OF
ANY CHANGE IN THE JURISDICTION OF ORGANIZATION OR PLACE OF BUSINESS OF, OR THE
CHANGE IN THE LEGAL, TRADE OR FICTITIOUS BUSINESS NAMES USED BY BORROWER, AND
LENDER IS HEREBY AUTHORIZED TO FILE OR RECORD

 

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ANY ADDITIONAL FINANCING STATEMENTS, AMENDMENTS AND OTHER CERTIFICATES NECESSARY
TO REFLECT ANY SUCH CHANGES.

 

5.11        NO DISTRIBUTIONS.  DURING THE OCCURRENCE AND CONTINUATION OF ANY
EVENT OF DEFAULT, BORROWER WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER
IN ITS SOLE DISCRETION, MAKE ANY DISTRIBUTION OF ASSETS TO ANY SHAREHOLDER OF
BORROWER, WHETHER OR NOT SUCH A DISTRIBUTION IS PERMITTED UNDER THE TERMS OF
BORROWER’S BYLAWS, INCLUDING REPAYMENT OF ANY LOANS MADE BY A SHAREHOLDER OF
BORROWER TO BORROWER, RETURN OF CAPITAL CONTRIBUTIONS, DISTRIBUTIONS UPON
TERMINATION, LIQUIDATION OR DISSOLUTION OF BORROWER OR ANY DEVELOPMENT, PROPERTY
MANAGEMENT, ACCOUNTING OR OTHER FEES PAYABLE TO A SHAREHOLDER OF BORROWER.

 

5.12        FUTURE DEVELOPMENT.  BORROWER SHALL NOT UNDERTAKE ANY ON-SITE
CONSTRUCTION, DEMOLITION OR REHABILITATION WORK ON THE LAND AT A COST IN EXCESS
OF $500,000 WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER.  BORROWER SHALL NOTIFY
LENDER OF ITS INTENTION TO UNDERTAKE ANY MATERIAL ON-SITE CONSTRUCTION,
DEMOLITION OR REHABILITATION WORK ON THE LAND REGARDLESS OF THE COST THEREOF AND
SHALL DEMONSTRATE TO LENDER’S REASONABLE SATISFACTION THAT BORROWER HAS THE
FUNDS AVAILABLE TO PAY FOR SUCH COSTS.  UPON REQUEST, BORROWER SHALL DELIVER TO
LENDER COPIES OF ANY PLANS, SPECIFICATIONS AND CONTRACTS RELATING TO SUCH WORK
AS LENDER SHALL REASONABLY REQUEST.

 

5.13        FURTHER ASSURANCES.  BORROWER SHALL EXECUTE AND DELIVER FROM TIME TO
TIME, PROMPTLY AFTER ANY REQUEST THEREFOR BY LENDER, ANY AND ALL INSTRUMENTS,
AGREEMENTS AND DOCUMENTS AND SHALL TAKE SUCH OTHER ACTION AS MAY BE REASONABLY
NECESSARY OR DESIRABLE IN THE OPINION OF LENDER TO MAINTAIN, PERFECT OR INSURE
LENDER’S SECURITY PROVIDED FOR HEREIN AND IN THE OTHER LOAN DOCUMENTS, INCLUDING
THE FILING OR RECORDING OF UCC RENEWAL STATEMENTS OR AMENDMENTS, THE EXECUTION
OF SUCH AMENDMENTS TO THE DEED OF TRUST AND THE OTHER LOAN DOCUMENTS AND THE
DELIVERY OF SUCH ENDORSEMENTS TO THE TITLE COMPANY, ALL AS LENDER REASONABLY
REQUIRES, AND SHALL PAY ALL FEES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’
FEES) RELATED THERETO OR INCURRED BY LENDER IN CONNECTION THEREWITH.

 

5.14        NOTICE OF LITIGATION, ETC.  PROMPTLY UPON RECEIVING NOTICE THEREOF,
BORROWER WILL GIVE, OR CAUSE TO BE GIVEN, PROMPT WRITTEN NOTICE TO LENDER OF
(A) ANY ACTION OR PROCEEDING INSTITUTED BY OR AGAINST IT IN ANY FEDERAL OR STATE
COURT OR BEFORE ANY COMMISSION OR OTHER REGULATORY BODY, FEDERAL, STATE OR
LOCAL, FOREIGN OR DOMESTIC, WHICH, IF ADVERSELY DETERMINED, COULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT OR WHICH WOULD CONSTITUTE AN EVENT OF
DEFAULT OR A DEFAULT UNDER ANY OTHER MATERIAL CONTRACT, INSTRUMENT OR AGREEMENT
TO WHICH IT IS A PARTY OR BY OR TO WHICH IT OR ANY OF ITS PROPERTIES OR ASSETS
MAY BE BOUND OR SUBJECT; OR (B) ANY SUCH PROCEEDINGS THAT ARE THREATENED AGAINST
IT, WHICH, IF ADVERSELY DETERMINED, COULD REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT; OR (C) ANY ACTIONS, PROCEEDINGS OR NOTICES ADVERSELY
AFFECTING THE PROPERTY (OR ANY PORTION THEREOF) OR LENDER’S INTEREST THEREIN OR
ANY ZONING, BUILDING OR OTHER MUNICIPAL OFFICERS, OFFICES OR DEPARTMENTS HAVING
JURISDICTION WITH RESPECT TO THE PROPERTY OR THE LEASING OF IT.

 

5.15        SIGNAGE.  BORROWER SHALL NOT SELL, LEASE OR ASSIGN THE RIGHT TO ANY
SIGNAGE ON OR ABOUT THE PROPERTY WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER,
OTHER THAN RIGHTS OF TENANTS PURSUANT TO EXISTING LEASES.

 

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5.16        MAINTENANCE OF PROPERTY.  BORROWER SHALL MAINTAIN AND PRESERVE ALL
RIGHTS AND FRANCHISES MATERIAL TO ITS BUSINESS AT THE PROPERTY.

 

5.17        IMPOUND ACCOUNT.

 

(A)              BORROWER SHALL AT ALL TIMES MAINTAIN AND MAKE DEPOSITS INTO THE
TAXES AND INSURANCE DEPOSIT ACCOUNT AS FOLLOWS: COMMENCING ON THE FIRST DAY OF
THE MONTH IN WHICH BORROWER IS REQUIRED TO MAKE ITS FIRST INTEREST PAYMENT UNDER
THE NOTE (THE “FIRST PAYMENT DATE”), (I) BORROWER SHALL DEPOSIT INTO THE TAXES
AND INSURANCE DEPOSIT ACCOUNT AN AMOUNT EQUAL TO THE PRODUCT OF ONE-TWELFTH
(1/12TH) OF THE YEARLY REAL ESTATE TAXES AND ASSESSMENTS WHICH MAY BE LEVIED ON
THE PROPERTY MULTIPLIED BY THE NUMBER OF MONTHS WHICH HAVE ELAPSED SINCE THE END
OF THE PRIOR FISCAL TAX YEAR AND THE FIRST PAYMENT DATE (BORROWER SHALL RECEIVE
A CREDIT FOR THE INITIAL DEPOSIT), AND (II) THEREAFTER, ON THE FIRST DAY OF THE
MONTH THEREAFTER UNTIL THE MATURITY DATE, BORROWER SHALL DEPOSIT OR CAUSE TO BE
DEPOSITED INTO THE TAXES AND INSURANCE DEPOSIT ACCOUNT AN AMOUNT EQUAL TO
ONE-TWELFTH (1/12TH) OF THE YEARLY REAL ESTATE TAXES AND ASSESSMENTS WHICH MAY
BE LEVIED ON THE PROPERTY AND THE YEARLY PREMIUMS FOR ALL INSURANCE REQUIRED TO
BE MAINTAINED BY BORROWER.  IN CONNECTION WITH THE FOREGOING, BORROWER SHALL BE
RESPONSIBLE FOR ENSURING LENDER’S RECEIPT, AT LEAST THIRTY (30) DAYS PRIOR TO
THE RESPECTIVE DUE DATE FOR PAYMENT, OF ALL BILLS, INVOICES AND STATEMENTS FOR
ALL REAL ESTATE TAXES AND ASSESSMENTS AND INSURANCE PREMIUMS TO BE PAID.  IN ITS
SOLE DISCRETION, LENDER MAY RETAIN A THIRD PARTY TAX LIEN SERVICE TO OBTAIN TAX
CERTIFICATES AND OTHER EVIDENCE OR ESTIMATES OF TAX DUE OR TO BECOME DUE AND
BORROWER SHALL PROMPTLY REIMBURSE LENDER FOR THE COST OF SUCH SERVICE.  ANY
UNPAID REIMBURSEMENTS FOR ANY TAX LIEN SERVICE WILL BE ADDED TO THE NOTE.

 

(B)              LENDER SHALL WITHDRAW, AND BORROWER HEREBY AUTHORIZES LENDER TO
WITHDRAW, FUNDS FROM THE TAXES AND INSURANCE DEPOSIT ACCOUNT FROM TIME TO TIME
IN ORDER TO COVER THE PAYMENTS OF REAL ESTATE TAXES AND ASSESSMENTS AND
INSURANCE PREMIUMS AS THE SAME BECOME DUE AND PAYABLE.

 

5.18        RESERVE ACCOUNT.  COMMENCING ON THE FIRST DAY OF THE MONTH IN WHICH
BORROWER IS REQUIRED TO MAKE ITS FIRST INTEREST PAYMENT UNDER THE NOTE, AND
CONTINUING ON THE FIRST DAY OF EACH MONTH THEREAFTER  UNTIL THE MATURITY DATE,
BORROWER SHALL DEPOSIT THE RESERVE CONTRIBUTION INTO THE RESERVE ACCOUNT. 
BORROWER MAY DRAW UPON THE RESERVE ACCOUNT FOR PURPOSES OF MAKING CAPITAL
IMPROVEMENTS TO THE PROPERTY, UP TO FOUR (4) TIMES IN ANY GIVEN YEAR, PROVIDED
BORROWER GIVES LENDER AT LEAST THIRTY (30) DAYS PRIOR WRITTEN NOTICE OF SUCH
DRAW REQUEST, AND FURTHER PROVIDED THAT LENDER APPROVES OF THE AMOUNT OF THE
REQUESTED DRAW, THE PROPOSED COST, SCOPE AND NEED FOR THE REQUESTED
IMPROVEMENTS, REPAIRS AND/OR REPLACEMENTS, AND THE PROPOSED MANNER IN WHICH THE
WORK IS TO BE PERFORMED.

 

5.19        EXISTENCE; CHANGE OF NAME; LOCATION AS A REGISTERED ORGANIZATION. 
BORROWER SHALL CONTINUOUSLY MAINTAIN (A) ITS EXISTENCE AND SHALL NOT DISSOLVE OR
PERMIT ITS DISSOLUTION, AND (B) ITS RIGHTS AND FRANCHISES TO DO BUSINESS IN THE
STATE WHERE THE PROPERTY IS LOCATED.  BORROWER SHALL NOT CHANGE BORROWER’S NAME,
LEGAL ENTITY, OR ITS LOCATION AS A REGISTERED ORGANIZATION WITHIN THE MEANING OF
THE UCC, WITHOUT NOTIFYING LENDER OF SUCH CHANGE IN WRITING AT LEAST THIRTY (30)
DAYS PRIOR TO ITS EFFECTIVE DATE.  THE NOTIFICATION REQUIREMENTS SET FORTH IN
THIS SECTION ARE IN ADDITION TO, AND NOT IN LIMITATION OF, THE REQUIREMENTS OF
ARTICLE 7.  BORROWER

 

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SHALL PAY ALL COSTS AND EXPENSES INCURRED BY LENDER (INCLUDING, WITHOUT
LIMITATION, REASONABLE LEGAL FEES) IN CONNECTION WITH ANY CHANGE DESCRIBED
HEREIN.

 

5.20        RESERVED.

 

5.21        PROHIBITED TRANSACTIONS.  BORROWER SHALL NOT ENGAGE IN ANY
TRANSACTION WHICH WOULD CAUSE ANY OBLIGATION OR ACTION TAKEN OR TO BE TAKEN
HEREUNDER BY BORROWER (OR THE EXERCISE BY LENDER OF ANY OF ITS RIGHTS UNDER ANY
OF THE LOAN DOCUMENTS) TO BE A NON-EXEMPT (UNDER A STATUTORY OR ADMINISTRATIVE
CLASS EXEMPTION) PROHIBITED TRANSACTION UNDER ERISA.  BORROWER AGREES TO DELIVER
TO LENDER SUCH CERTIFICATIONS OR OTHER EVIDENCE THROUGHOUT THE TERM OF THE LOAN
AS REQUESTED BY LENDER IN ITS SOLE DISCRETION TO CONFIRM COMPLIANCE WITH
BORROWER’S OBLIGATIONS UNDER THIS SECTION 5.20 OR TO CONFIRM THAT BORROWER’S
REPRESENTATIONS AND WARRANTIES REGARDING ERISA REMAIN TRUE.

 

5.22        COMPLIANCE WITH ANTI-TERRORISM, EMBARGO, SANCTIONS AND ANTI-MONEY
LAUNDERING LAWS.  BORROWER SHALL COMPLY WITH ALL REQUIREMENTS OF LAW RELATING TO
MONEY LAUNDERING, ANTI-TERRORISM, TRADE EMBARGOS AND ECONOMIC SANCTIONS, NOW OR
HEREAFTER IN EFFECT, INCLUDING, WITHOUT LIMITATION, ANTI-TERRORISM LAWS. 
WITHOUT LIMITING THE FOREGOING, BORROWER SHALL NOT TAKE ANY ACTION, OR PERMIT
ANY ACTION TO BE TAKEN, THAT WOULD CAUSE BORROWER’S REPRESENTATIONS AND
WARRANTIES IN SECTION 4.1(L) OF THIS LOAN AGREEMENT TO BECOME UNTRUE OR
INACCURATE AT ANY TIME DURING THE TERM OF THE LOAN.  BORROWER SHALL NOTIFY
LENDER PROMPTLY OF BORROWER’S ACTUAL KNOWLEDGE THAT THE REPRESENTATIONS AND
WARRANTIES IN SECTION 4.1(L) OF THIS LOAN AGREEMENT MAY NO LONGER BE ACCURATE OR
THAT ANY OTHER VIOLATION OF THE FOREGOING REQUIREMENTS OF LAW HAS OCCURRED OR IS
BEING INVESTIGATED BY GOVERNMENTAL AUTHORITIES.  IN CONNECTION WITH SUCH AN
EVENT, BORROWER SHALL COMPLY WITH ALL REQUIREMENTS OF LAW AND DIRECTIVES OF
GOVERNMENTAL AUTHORITIES AND, AT LENDER’S REQUEST, PROVIDE TO LENDER COPIES OF
ALL NOTICES, REPORTS AND OTHER COMMUNICATIONS EXCHANGED WITH, OR RECEIVED FROM,
GOVERNMENTAL AUTHORITIES RELATING TO SUCH EVENT.  BORROWER SHALL ALSO REIMBURSE
LENDER FOR ANY EXPENSE INCURRED BY LENDER IN EVALUATING THE EFFECT OF SUCH AN
EVENT ON THE LOAN AND LENDER’S INTEREST IN THE COLLATERAL FOR THE LOAN, IN
OBTAINING ANY NECESSARY LICENSE FROM GOVERNMENTAL AUTHORITIES AS MAY BE
NECESSARY FOR LENDER TO ENFORCE ITS RIGHTS UNDER THE LOAN DOCUMENTS, AND IN
COMPLYING WITH ALL REQUIREMENTS OF LAW APPLICABLE TO LENDER AS THE RESULT OF THE
EXISTENCE OF SUCH AN EVENT AND FOR ANY PENALTIES OR FINES IMPOSED UPON LENDER AS
A RESULT THEREOF.

 

5.23        SINGLE PURPOSE ENTITY.  IN CONNECTION WITH THE EFFECTIVENESS OF
BORROWER’S PLAN OF REORGANIZATION IN THE CURRENT BANKRUPTCY, AND SUBJECT TO
BORROWER’S RECEIPT OF ALL NECESSARY REGULATORY AND OTHER APPROVALS, BORROWER
COVENANTS AND AGREES TO USE ITS COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE
PROPERTY TO BE TRANSFERRED TO A “SINGLE PURPOSE ENTITY” (“SPE”) AND TO CAUSE
SUCH SPE TO COMPLY WITH CUSTOMARY “SINGLE PURPOSE ENTITY” COVENANTS, INCLUDING,
WITHOUT LIMITATION, CORPORATE GOVERNANCE PROVISIONS, RATING AGENCY REQUIREMENTS,
AND THE ASSIGNMENT OF ANY APPLICABLE PROPERTY MANAGEMENT AGREEMENT.

 

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VI.

 

DEFAULTS

 

6.1          EVENTS OF DEFAULT.  ANY OF THE FOLLOWING EVENTS SHALL CONSTITUTE AN
“EVENT OF DEFAULT” UNDER THIS AGREEMENT:

 

(A)              BORROWER SHALL DEFAULT IN THE PAYMENT OF PRINCIPAL DUE
ACCORDING TO THE TERMS HEREOF OR OF THE NOTE.

 

(B)              BORROWER SHALL DEFAULT IN THE PAYMENT OF INTEREST ON THE
DISBURSEMENT OF THE LOAN AMOUNT MADE BY LENDER, OR IN THE PAYMENT OF FEES OR
OTHER AMOUNTS PAYABLE TO LENDER, HEREUNDER, UNDER THE NOTE OR UNDER ANY OF THE
OTHER LOAN DOCUMENTS, AND SUCH DEFAULT IS NOT CURED WITHIN FIVE (5) DAYS AFTER
RECEIPT OF WRITTEN NOTICE FROM LENDER.

 

(C)              BORROWER SHALL FAIL TO PERFORM OR OBSERVE ANY OBLIGATION OR
COVENANT (OTHER THAN THOSE OBLIGATIONS AND COVENANTS DESCRIBED IN SUBPARAGRAPHS
(A) AND (B), ABOVE, OR OTHERWISE SET FORTH IN SUBPARAGRAPHS (D) THROUGH (P),
BELOW, OF THIS SECTION 6.1) UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
WITHIN THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN NOTICE THAT SUCH OBLIGATION WAS
NOT PERFORMED; PROVIDED THAT, IF CURE CANNOT REASONABLY BE EFFECTED WITHIN SUCH
30-DAY PERIOD, SUCH FAILURE SHALL NOT BE AN EVENT OF DEFAULT HEREUNDER SO LONG
AS BORROWER COMMENCES CURE WITHIN SUCH 30-DAY PERIOD, AND THEREAFTER DILIGENTLY
PROSECUTES SUCH CURE TO COMPLETION; AND PROVIDED FURTHER, HOWEVER, THAT
NOTWITHSTANDING THE 30-DAY CURE PERIOD OR EXTENDED CURE PERIOD DESCRIBED ABOVE
IN THIS SUBPARAGRAPH (C), IF A DIFFERENT NOTICE OR CURE PERIOD IS SPECIFIED
UNDER ANY LOAN DOCUMENT OR UNDER ANY PROVISION OF THE LOAN DOCUMENTS AS TO ANY
SUCH FAILURE OR BREACH, THE SPECIFIC LOAN DOCUMENT OR PROVISION SHALL CONTROL,
AND BORROWER SHALL HAVE NO MORE TIME TO CURE THE FAILURE OR BREACH THAN IS
ALLOWED UNDER THE SPECIFIC LOAN DOCUMENT OR PROVISION AS TO SUCH FAILURE OR
BREACH.

 

(D)              ANY REPRESENTATION OR WARRANTY MADE BY BORROWER IN THIS
AGREEMENT, IN ANY OF THE OTHER LOAN DOCUMENTS, OR IN ANY CERTIFICATE OR DOCUMENT
FURNISHED UNDER THE TERMS OF THIS AGREEMENT OR IN CONNECTION WITH THE LOAN,
SHALL BE UNTRUE OR INCOMPLETE IN ANY MATERIAL RESPECT WHEN MADE.

 

(E)              AN EVENT OF DEFAULT, AFTER THE EXPIRATION OF ANY APPLICABLE
NOTICE AND/OR CURE PERIOD PROVIDED THEREUNDER, SHALL EXIST UNDER THE TERMS OF
ANY OTHER CREDIT FACILITY OR OTHER AGREEMENT NOW OR HEREAFTER EXISTING BETWEEN
BORROWER AND LENDER OR JHA WEST 16, LLC, AND/OR BETWEEN ANY OTHER AFFILIATE OF
BORROWER AND LENDER OR JHA WEST 16, LLC.

 

(F)               A DEFAULT SHALL EXIST UNDER THE TERMS OF BORROWER’S FORMATION
DOCUMENTS.

 

(G)              THE ENVIRONMENTAL INDEMNITY, AT ANY TIME AND FOR ANY REASON
CEASES TO BE IN FULL FORCE AND EFFECT, OR BORROWER CONTESTS OR DENIES THE
VALIDITY OR ENFORCEABILITY OF THE ENVIRONMENTAL INDEMNITY, OR GIVES NOTICE TO
LENDER TO SUCH EFFECT, OR OTHERWISE ATTEMPTS TO REVOKE OR REPUDIATE ANY OF THE
FOREGOING AS TO ANY EXISTING OR FUTURE OBLIGATIONS.

 

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(H)              BORROWER SHALL FAIL TO MAINTAIN INSURANCE AS REQUIRED BY THE
DEED OF TRUST OR SHALL FAIL TO FURNISH TO LENDER PROOF OF PAYMENT OF ALL
PREMIUMS FOR SUCH INSURANCE.

 

(I)               A TRANSFER, ENCUMBRANCE, LIEN, CHANGE OF OWNERSHIP OR OTHER
ACTION OR OCCURRENCE PROHIBITED BY THE DEED OF TRUST SHALL OCCUR.

 

(J)               LENDER FAILS TO HAVE AN ENFORCEABLE LIEN ON OR SECURITY
INTEREST IN ANY PROPERTY OR COLLATERAL GIVEN AS SECURITY FOR THE LOAN.

 

(K)             IF BORROWER SHALL (I) MAKE AN ASSIGNMENT FOR THE BENEFIT OF
CREDITORS; (II) GENERALLY NOT BE PAYING ITS DEBTS AS THEY BECOME DUE; OR
(III) ADMIT IN WRITING ITS INABILITY TO PAY ITS DEBTS AS THEY BECOME DUE;

 

(L)               OTHER THAN WITH RESPECT TO THE CURRENT BANKRUPTCY, IF
(I) BORROWER SHALL COMMENCE ANY CASE, PROCEEDING OR OTHER ACTION UNDER ANY
EXISTING OR FUTURE LAW OF ANY JURISDICTION, DOMESTIC OR FOREIGN, RELATING TO
BANKRUPTCY, INSOLVENCY, REORGANIZATION, CONSERVATORSHIP OR RELIEF OF DEBTORS
(A) SEEKING TO HAVE AN ORDER FOR RELIEF ENTERED WITH RESPECT TO IT, OR SEEKING
TO ADJUDICATE IT A BANKRUPT OR INSOLVENT, OR SEEKING REORGANIZATION,
ARRANGEMENT, ADJUSTMENT, WINDING-UP, LIQUIDATION, DISSOLUTION, COMPOSITION OR
OTHER RELIEF WITH RESPECT TO IT OR ITS DEBTS, OR (B) SEEKING APPOINTMENT OF A
RECEIVER, TRUSTEE, CUSTODIAN, CONSERVATOR OR OTHER SIMILAR OFFICIAL FOR IT OR
FOR ALL OR ANY SUBSTANTIAL PART OF ITS ASSETS; OR (II) THERE SHALL BE COMMENCED
AGAINST BORROWER ANY CASE, PROCEEDING OR OTHER ACTION OF A NATURE REFERRED TO IN
CLAUSE (I) ABOVE BY ANY PARTY OTHER THAN LENDER WHICH (A) RESULTS IN THE ENTRY
OF AN ORDER FOR RELIEF OR ANY SUCH ADJUDICATION OR APPOINTMENT, OR (B) REMAINS
UNDISMISSED, UNDISCHARGED OR UNBONDED FOR A PERIOD OF NINETY (90) DAYS; OR
(III) THERE SHALL BE COMMENCED AGAINST BORROWER ANY CASE, PROCEEDING OR OTHER
ACTION SEEKING ISSUANCE OF A WARRANT OF ATTACHMENT, EXECUTION, DISTRAINT OR
SIMILAR PROCESS AGAINST ALL OR ANY SUBSTANTIAL PART OF ITS ASSETS WHICH RESULTS
IN THE ENTRY OF ANY ORDER FOR ANY SUCH RELIEF WHICH SHALL NOT HAVE BEEN VACATED,
DISCHARGED, OR STAYED OR BONDED PENDING APPEAL WITHIN NINETY (90) DAYS FROM THE
ENTRY THEREOF; OR (IV) BORROWER SHALL TAKE ANY ACTION IN FURTHERANCE OF, OR
INDICATING ITS CONSENT TO, APPROVAL OF, OR ACQUIESCENCE IN, ANY OF THE ACTS SET
FORTH IN CLAUSE (I), (II), OR (III) ABOVE;

 

(M)             ANY JUDGMENT FOR MONETARY DAMAGES IS ENTERED AGAINST BORROWER
WHICH, IN LENDER’S SOLE JUDGMENT, HAS A MATERIAL ADVERSE EFFECT OR IS NOT
COVERED TO LENDER’S SATISFACTION BY COLLECTIBLE INSURANCE PROCEEDS;

 

(N)              IF A TRANSFER, OTHER THAN A PERMITTED TRANSFER, OCCURS WITHOUT
LENDER’S PRIOR WRITTEN CONSENT OR IN VIOLATION OF THE TERMS OF LENDER’S CONSENT;
OR

 

6.2          RIGHTS AND REMEDIES.  UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, UNLESS SUCH EVENT OF DEFAULT IS SUBSEQUENTLY
WAIVED IN WRITING BY LENDER, LENDER SHALL BE ENTITLED, AT THE OPTION OF LENDER,
TO EXERCISE ANY OR ALL OF THE FOLLOWING RIGHTS AND REMEDIES, CONSECUTIVELY OR
SIMULTANEOUSLY, AND IN ANY ORDER:

 

(A)              LENDER MAY DECLARE THE ENTIRE UNPAID PRINCIPAL BALANCE OF THE
LOAN AMOUNT TO BE IMMEDIATELY DUE AND PAYABLE, TOGETHER WITH ACCRUED AND UNPAID
INTEREST ON SUCH ADVANCES, WITHOUT NOTICE TO OR DEMAND ON BORROWER.

 

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(B)              LENDER MAY EXERCISE ANY OR ALL REMEDIES SPECIFIED HEREIN AND IN
THE OTHER LOAN DOCUMENTS, INCLUDING (WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING) THE RIGHT TO FORECLOSE THE DEED OF TRUST, AND/OR ANY OTHER REMEDIES
WHICH IT MAY HAVE THEREFOR AT LAW, IN EQUITY OR UNDER STATUTE.

 

(C)              LENDER MAY CURE THE EVENT OF DEFAULT ON BEHALF OF BORROWER,
AND, IN DOING SO, MAY ENTER UPON THE PROPERTY, AND MAY EXPEND SUCH SUMS AS IT
MAY DEEM DESIRABLE, INCLUDING ATTORNEYS’ FEES, EVEN THOUGH CAUSING THE LOAN TO
EXCEED THE FACE AMOUNT OF THE NOTE, SHALL BEAR INTEREST AT THE DEFAULT RATE AND
SHALL BE PAYABLE BY BORROWER ON DEMAND.

 

VII.

 

RESERVED

 

VIII.

 

MISCELLANEOUS

 

8.1          BINDING EFFECT; WAIVERS; CUMULATIVE RIGHTS AND REMEDIES.  THE
PROVISIONS OF THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON
THE PARTIES HERETO AND THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS,
PERSONAL REPRESENTATIVES, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS;
PROVIDED, HOWEVER, THAT NEITHER THIS AGREEMENT NOR THE PROCEEDS OF THE LOAN MAY
BE ASSIGNED BY BORROWER VOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE, WITHOUT
THE PRIOR WRITTEN CONSENT OF LENDER, IN LENDER’S SOLE DISCRETION.  NO DELAY ON
THE PART OF LENDER IN EXERCISING ANY RIGHT, REMEDY, POWER OR PRIVILEGE HEREUNDER
SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF
ANY RIGHT, REMEDY, POWER OR PRIVILEGE HEREUNDER CONSTITUTE SUCH A WAIVER OR
EXHAUST THE SAME, ALL OF WHICH SHALL BE CONTINUING.  THE RIGHTS AND REMEDIES OF
LENDER SPECIFIED IN THIS AGREEMENT SHALL BE IN ADDITION TO, AND NOT EXCLUSIVE
OF, ANY OTHER RIGHTS AND REMEDIES WHICH LENDER WOULD OTHERWISE HAVE AT LAW, IN
EQUITY OR BY STATUTE, AND ALL SUCH RIGHTS AND REMEDIES, TOGETHER WITH LENDER’S
RIGHTS AND REMEDIES UNDER THE OTHER LOAN DOCUMENTS, ARE CUMULATIVE AND MAY BE
EXERCISED INDIVIDUALLY, CONCURRENTLY, SUCCESSIVELY AND IN ANY ORDER.

 

8.2          SURVIVAL.  ALL AGREEMENTS, REPRESENTATIONS AND WARRANTIES MADE IN
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL SURVIVE THE EXECUTION OF THIS
AGREEMENT, THE MAKING OF THE ADVANCES BY LENDER, AND THE EXECUTION OF THE OTHER
LOAN DOCUMENTS, AND SHALL CONTINUE UNTIL LENDER RECEIVES PAYMENT IN FULL OF ALL
INDEBTEDNESS OF BORROWER INCURRED UNDER THIS AGREEMENT AND UNDER THE OTHER LOAN
DOCUMENTS.

 

8.3          GOVERNING LAW; WAIVER OF JURY TRIAL.  THIS AGREEMENT, THE RIGHTS OF
THE PARTIES HEREUNDER AND THE INTERPRETATION HEREOF SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, IN
ALL RESPECTS.  BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
RELATING TO THE LOAN AND/OR THE LOAN DOCUMENTS.

 

8.4          COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, ALL OF WHICH SHALL CONSTITUTE A SINGLE AGREEMENT.

 

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8.5          NOTICES.  ANY NOTICE REQUIRED OR PERMITTED TO BE GIVEN BY EITHER
PARTY HERETO TO THE OTHER UNDER THE TERMS OF THIS AGREEMENT, OR DOCUMENTS
RELATED HERETO, SHALL BE DEEMED TO HAVE BEEN GIVEN ON THE DATE THE SAME IS
DEPOSITED IN THE UNITED STATES MAIL, REGISTERED OR CERTIFIED, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, ADDRESSED TO THE PARTY TO WHICH THE NOTICE IS TO BE
GIVEN AT THE ADDRESS SET FORTH OPPOSITE ITS NAME BELOW, OR AT ANY OTHER ADDRESS
SPECIFIED IN A NOTICE GIVEN BY SUCH PARTY TO THE OTHER NOT LESS THAN TEN
(10) DAYS PRIOR TO THE EFFECTIVE DATE OF THE ADDRESS CHANGE.

 

8.6          COSTS AND EXPENSES; INDEMNIFICATION; REIMBURSEMENT.

 

(A)              UPON THE CLOSING AND FUNDING OF THE LOAN, BORROWER SHALL PAY
(I) ALL TAXES AND ASSESSMENTS AND ALL REASONABLE OUT-OF-POCKET EXPENSES,
CHARGES, COSTS AND FEES PROVIDED FOR IN THIS AGREEMENT, AND (II) ALL REASONABLE
OUT OF POCKET EXPENSES INCURRED BY LENDER (INCLUDING THE REASONABLE
OUT-OF-POCKET FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR LENDER), IN
CONNECTION WITH THE ENFORCEMENT OR PROTECTION OF ITS RIGHTS IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, INCLUDING ITS RIGHTS UNDER THIS
SECTION, AND (III) A LOAN FEE TO LENDER IN THE AMOUNT OF ONE PERCENT (1%) OF THE
ORIGINAL PRINCIPAL BALANCE OF THE LOAN (WHICH SHALL BE PAID OUT OF LOAN
PROCEEDS).

 

(B)              BORROWER SHALL INDEMNIFY LENDER (HEREINAFTER, “INDEMNITEE”)
AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
DAMAGES, LIABILITIES AND RELATED EXPENSES (INCLUDING THE REASONABLE FEES,
CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), INCURRED BY ANY
INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY BORROWER
OR INDEMNITOR ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
CONSUMMATION OF THE LOAN TRANSACTIONS, OR (II) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD
PARTY OR BY BORROWER, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY
THERETO, PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE
AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR
RELATED EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY
FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR (Y) RESULT FROM A CLAIM BROUGHT BY
BORROWER AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S
OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF BORROWER OR
INDEMNITOR HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH
CLAIM AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.

 

(C)              THE OBLIGATIONS ON THE PART OF BORROWER UNDER THIS SECTION 7.6
SHALL SURVIVE THE CLOSING OF THE LOAN AND THE REPAYMENT THEREOF.

 

8.7          NO THIRD PARTY RELIANCE.  NO THIRD PARTY SHALL BE ENTITLED TO RELY
UPON THIS AGREEMENT OR TO HAVE ANY OF THE BENEFITS OF LENDER’S INTEREST
HEREUNDER, UNLESS SUCH THIRD PARTY IS AN EXPRESS ASSIGNEE OF ALL OR A PORTION OF
LENDER’S INTEREST HEREUNDER.

 

8.8          SALE OF LOAN OR PARTICIPATIONS.  LENDER MAY AT ANY TIME SELL,
TRANSFER, SYNDICATE, GRANT PARTICIPATIONS IN OR OTHERWISE DISPOSE OF ANY PORTION
OF THE LOAN (EACH SUCH INTEREST SO

 

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DISPOSED OF BEING HEREIN CALLED A “TRANSFERRED INTEREST”) TO BANKS, INSURANCE
COMPANIES OR OTHER FINANCIAL INSTITUTIONS (HEREINAFTER CALLED “TRANSFEREES”),
PURSUANT TO SUCH TRANSFER AGREEMENTS, CO-LENDER AGREEMENTS, PARTICIPATIONS
AGREEMENTS AND/OR AGENCY AGREEMENTS INTO WHICH LENDER AND ITS TRANSFEREES MAY
ENTER AND BY WHICH BORROWER SHALL AGREE IN WRITING TO RECOGNIZE.  IN ADDITION,
LENDER MAY, AT ANY TIME AND FROM TIME TO TIME, IN ITS ORDINARY COURSE OF
BUSINESS AND IN ACCORDANCE WITH APPLICABLE LAW, (I) ASSIGN AN UNDIVIDED INTEREST
IN THE LOAN TO AN AFFILIATE OF LENDER OR TO A SUCCESSOR ENTITY BY REASON OF ANY
MERGER AFFECTING LENDER, OR (II) PLEDGE OR ASSIGN THE SAME TO ANY FEDERAL
RESERVE BANK IN ACCORDANCE WITH APPLICABLE LAW.  AT THE REQUEST OF LENDER, IN
THE EVENT OF ANY SUCH SALE, ASSIGNMENT, TRANSFER OR SYNDICATION, BORROWER SHALL
EXECUTE SEPARATE NEW NOTES TO THE ASSIGNOR AND ITS ASSIGNEE, IN THE AMOUNTS OF
THEIR RESPECTIVE INTERESTS IN THE LOAN AFTER SAID ASSIGNMENT, AND SHALL DELIVER
THE SAME TO THE ASSIGNOR AND THE ASSIGNEE, IN EXCHANGE FOR THE ASSIGNOR’S
EXISTING NOTE.  ALL SUCH SEPARATE NEW NOTES SHALL BE ENTITLED TO ALL THE RIGHTS
AND BENEFITS ACCORDED TO THE NOTE UNDER THE TERMS OF THE LOAN DOCUMENTS.  NO
SUCH ASSIGNMENT SHALL BE BINDING UPON BORROWER UNTIL LENDER GIVES WRITTEN NOTICE
THEREOF TO BORROWER.  LENDER MAY DIVULGE ALL INFORMATION RELATING TO BORROWER OR
THE PROPERTY WHICH LENDER HAS TO ANY ACTUAL OR POTENTIAL TRANSFEREE, AND
BORROWER SHALL COOPERATE WITH LENDER IN CONNECTION WITH THE TRANSFER.  BORROWER
AGREES THAT EACH TRANSFEREE SHALL BE ENTITLED TO THE BENEFITS HEREOF WITH
RESPECT TO ITS TRANSFERRED INTEREST AND THAT EACH TRANSFEREE MAY EXERCISE ANY
AND ALL RIGHTS OF BANKER’S LIEN, SETOFF AND COUNTERCLAIM AS IF SUCH TRANSFEREE
WERE A DIRECT LENDER TO BORROWER.  IF LENDER MAKES ANY ASSIGNMENT TO A
TRANSFEREE, THEN UPON NOTICE TO BORROWER SUCH TRANSFEREE, TO THE EXTENT OF SUCH
ASSIGNMENT (UNLESS OTHERWISE PROVIDED THEREIN), SHALL BECOME A LENDER HEREUNDER
AND SHALL HAVE ALL THE RIGHTS AND OBLIGATIONS OF LENDER HEREUNDER, AND LENDER
SHALL BE RELEASED FROM ITS DUTIES AND OBLIGATIONS UNDER THIS AGREEMENT TO THE
EXTENT OF SUCH ASSIGNMENT.

 

So long as (and only so long as) no event of default then exists at the time of
a disposition of a Transferred Interest, confidential information regarding
Borrower given to such Transferees shall be kept confidential except to the
extent such Transferee is required to disclose such information by reason of any
applicable law or regulation.

 

8.9          ARRANGEMENT BY BROKERS.  BORROWER ACKNOWLEDGES AND AGREES THAT THIS
LOAN AND THE TRANSACTION CONTEMPLATED HEREBY HAS BEEN MADE OR ARRANGED BY THE
BROKERS AS DESCRIBED IN SECTION 1916.1 OF THE CALIFORNIA CIVIL CODE, AND AS
SUCH, THIS TRANSACTION IS EXEMPT FROM SECTION 1 OF ARTICLE XV OF THE CALIFORNIA
CONSTITUTION.

 

8.10        RECOURSE.  UPON AN EVENT OF DEFAULT, LENDER WILL LOOK SOLELY TO THE
PROPERTY FOR THE REPAYMENT OF THE LOAN AND WILL NOT ENFORCE OR SEEK A JUDGMENT
AGAINST BORROWER; PROVIDED, HOWEVER, BORROWER SHALL BE PERSONALLY LIABLE TO
LENDER FOR: (I) FRAUD OR INTENTIONAL MISREPRESENTATION IN CONNECTION WITH THE
EXECUTION AND THE DELIVERY OF THIS AGREEMENT, OR THE OTHER LOAN DOCUMENTS;
(II) BORROWER’S MISAPPLICATION OR MISAPPROPRIATION OF RENTS RECEIVED BY BORROWER
AFTER THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT; (III) BORROWER’S
MISAPPLICATION OR MISAPPROPRIATION OF SECURITY DEPOSITS OR RENTS COLLECTED MORE
THAN THIRTY (30) DAYS IN ADVANCE; (IV) BORROWER’S MISAPPLICATION OR THE
MISAPPROPRIATION OF INSURANCE PROCEEDS OR CONDEMNATION AWARDS; (V) BORROWER’S
FAILURE TO PAY PRIOR TO DELINQUENCY ANY IMPOSITIONS (AS DEFINED IN THE DEED OF
TRUST) (EXCEPT TO THE EXTENT THAT SUMS SUFFICIENT TO PAY SUCH AMOUNTS HAVE BEEN
DEPOSITED IN ESCROW WITH LENDER), CHARGES FOR LABOR OR MATERIALS OR OTHER
CHARGES THAT CAN CREATE LIENS ON THE PROPERTY; (VI) BORROWER’S FAILURE TO RETURN
OR TO REIMBURSE LENDER FOR ALL COLLATERAL

 

23

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TAKEN FROM THE PROPERTY BY OR ON BEHALF OF BORROWER AND NOT REPLACED WITH
COLLATERAL OF THE SAME UTILITY AND OF THE SAME OR GREATER VALUE IN VIOLATION OF
THE TERMS OF THE LOAN DOCUMENTS; (VII) ANY ACT OF INTENTIONAL WASTE OR ARSON BY
BORROWER OR ANY AFFILIATE THEREOF WITH RESPECT TO THE PROPERTY; OR
(VIII) BORROWER’S FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 1.12 OF THE
DEED OF TRUST.

 

8.11        TIME OF THE ESSENCE.  TIME IS OF THE ESSENCE HEREOF WITH RESPECT TO
THE DATES, TERMS AND CONDITIONS OF THIS AGREEMENT.

 

8.12        ENTIRE AGREEMENT; NO ORAL MODIFICATIONS.  THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE OTHER DOCUMENTS MENTIONED HEREIN AND EXECUTED AS OF THE
DATE HEREOF SET FORTH THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE
LOAN AND SUPERSEDE ALL PRIOR WRITTEN OR ORAL UNDERSTANDINGS AND AGREEMENTS WITH
RESPECT THERETO.  NO MODIFICATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT
SHALL BE EFFECTIVE UNLESS SET FORTH IN WRITING AND SIGNED BY THE PARTIES HERETO.

 

8.13        CAPTIONS.  THE HEADINGS OR CAPTIONS OF THE ARTICLES AND SECTIONS SET
FORTH HEREIN ARE FOR CONVENIENCE ONLY, ARE NOT A PART OF THIS AGREEMENT AND ARE
NOT TO BE CONSIDERED IN INTERPRETING THIS AGREEMENT.

 

8.14        JOINT AND SEVERAL LIABILITY.  IF BORROWER CONSISTS OF MORE THAN ONE
(1) INDIVIDUAL AND/OR ENTITY, EACH OF SAID INDIVIDUALS AND/OR ENTITIES SHALL BE
JOINTLY AND SEVERALLY LIABLE FOR EACH COVENANT, AGREEMENT, REPRESENTATION AND
WARRANTY OF BORROWER HEREUNDER.

 

8.15        BORROWER-LENDER RELATIONSHIP.  THE RELATIONSHIP BETWEEN BORROWER AND
LENDER CREATED HEREBY AND BY THE OTHER LOAN DOCUMENTS SHALL BE THAT OF A
BORROWER AND A LENDER ONLY, AND IN NO EVENT SHALL LENDER BE DEEMED TO BE A
PARTNER OF, OR A JOINT VENTURER WITH, BORROWER.

 

8.16        BENEFIT OF LENDER.  THE RIGHTS OF THE LENDER UNDER THE LOAN
DOCUMENTS ARE FOR THE BENEFIT OF LENDER SOLELY IN ITS CAPACITY AS A LENDER IN
CONNECTION WITH THE LOAN AND ARE NOT INTENDED TO BENEFIT THE LENDER IN ITS
CAPACITY AS THE “BUYER” UNDER THE OPTION AGREEMENT.

 

8.17        RESERVED.

 

8.18        PLEDGE OF ACCOUNTS.  BORROWER SHALL GRANT TO LENDER A PERFECTED
SECURITY INTEREST IN THE ACCOUNTS AS ADDITIONAL SECURITY FOR THE LOAN.  UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER, LENDER SHALL BE ENTITLED TO
FORECLOSE UPON BORROWER’S INTEREST IN THE ACCOUNTS EITHER BEFORE, AFTER OR
TOGETHER WITH THE FORECLOSURE OF THE DEED OF TRUST.  UPON ANY SUCH FORECLOSURE,
ALL AMOUNTS CONTAINED IN THE ACCOUNTS SHALL BE APPLIED TO REDUCE THE BALANCE OF
LOAN AMOUNT.  ON OR PRIOR TO THE CLOSING DATE, LENDER, BORROWER AND THE
FINANCIAL INSTITUTIONS MAINTAINING THE ACCOUNTS SHALL ENTER INTO “CONTROL
AGREEMENTS” FOR THE PURPOSE OF PERFECTING THE SECURITY INTERESTS IN THE ACCOUNTS
AS PROVIDED UNDER THE UCC.

 

8.19        PROHIBITION AGAINST TRANSFERS.  BORROWER SHALL NOT PERMIT ANY
TRANSFER TO BE UNDERTAKEN OR CAUSE ANY TRANSFER TO OCCUR, OTHER THAN A PERMITTED
TRANSFER.  ANY TRANSFER MADE IN VIOLATION OF THIS LOAN AGREEMENT SHALL BE VOID.

 

24

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8.20        LENDER APPROVAL.  LENDER’S DECISION TO APPROVE ANY TRANSFER PROPOSED
BY BORROWER SHALL BE MADE IN LENDER’S SOLE DISCRETION AND LENDER SHALL NOT BE
OBLIGATED TO APPROVE ANY TRANSFER.

 

8.21        PERSONAL PROPERTY FINANCINGS.  LENDER HEREBY AGREES THAT BORROWER
SHALL BE PERMITTED TO SECURE FINANCINGS AND GRANT LIENS ON THE COLLATERAL BUT
NOT ON THE LAND AND IMPROVEMENTS TO OTHER LENDERS.  LENDER AGREES TO SUBORDINATE
ITS LIEN ON THE COLLATERAL TO SUCH OTHER LIENS IN ORDER TO FACILITATE SUCH
FINANCINGS; PROVIDED, HOWEVER, THE TERMS OF SUCH FINANCINGS SHALL BE
COMMERCIALLY REASONABLE.

 

[Signatures on following page]

 

25

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

 

 

Address:

“BORROWER”

 

 

Brotman Medical Center Inc.

BROTMAN MEDICAL CENTER INC.,

3828 Delmas Terrace

a California corporation, debtor-in-possession

Culver City, California 90231

 

Attn: Stanley Otake, CEO

 

 

By:

/s/ Stanley Otake

 

Name:

Stanley Otake

 

Its:

Chief Executive Officer

 

 

 

 

Address:

“LENDER”

 

 

JHA East 7, LLC

JHA EAST 7, LLC,

c/o Jewish Home for the Aging

a Delaware limited liability company

7150 Tampa Avenue

 

Reseda, California 91335

 

Attention: Loan Administration

By:

/s/ Richard S. Liman

 

Name:

Richard S. Liman

 

Its:

Manager

 

26

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EXHIBIT A

 

Legal Description of Land

 

PARCEL 1: (APN: 4207-2-27)

 

LOTS 9 TO 14 INCLUSIVE IN BLOCK 13 OF TRACT 2444, IN THE CITY OF CULVER CITY, IN
THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 24
PAGES 5 TO 7, INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.  EXCEPT FROM LOT 14, ALL OIL, GAS, MINERALS, HYDROCARBONS AND /OR
ASSOCIATED SUBSTANCES IN OR UNDER SAID LOT BELOW A DEPTH OF 500 FEET FROM THE
SURFACE THEREOF, BUT WITHOUT THE RIGHT TO ENTER UPON THE SURFACE OF THE TOP 500
FEET OF THE SUBSURFACE OF SAID LOT, AS RESERVED BY ELLA B. OLESON, A WIDOW, IN
THE DEED RECORDED February 1, 1963 IN BOOK D-1906 PAGE 919 OFFICIAL RECORDS.

 

PARCEL (APN: 2407-2-27)

 

THE SOUTHWESTERLY 5 FEET OF THAT PORTION OF THAT CERTAIN ALLEY NOW VACATED IN
BLOCK 13 OF TRACT N0.2444, IN THE CITY OF CULVER CITY, IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 24 PAGE 7 OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; BOUNDED ON THE SOUTHEAST BY
THE SOUTHWESTERLY PROLONGATION OF THE NORTHWESTERLY LIME OF LOT 28 IN BLOCK 13
OF SAID TRACT NO. 2444 AND BOUNDED ON THE NORTHWESTERLY PROLONGATION OF THE
NORTHWESTERLY LINE OF LOT 24 IN BLOCK 13 OF SAID TRACT NO. 2444.

 

APN: 4207-002-027

 

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EXHIBIT B

 

Additional Required Items Prior to Funding

 

a.             Proof of Lender’s right to rely upon any environmental report
that Borrower (or a predecessor of Borrower) has obtained with respect to the
Property.

 

b.             A Phase I Environmental Site Assessment shall be required, at no
cost to Lender.  Lender reserves the right to require a more extensive
environmental audit at Lender’s sole cost and expense.

 

c.             Copy of all organizational documents for the Borrower.

 

d.             Preliminary title report and all associated documents prior to
loan closing.  Title insurance policy containing all required endorsements at
closing.

 

e.             Current financial statements for the Borrower.

 

f.              UCC Lien Search.

 

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SCHEDULE 2.1(h)

 

[Liabilities/Litigation]

 

None.

 

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