Exhibit 10.7

 

LOAN AGREEMENT

 

Between

 

BROTMAN MEDICAL CENTER, INC.,
a California corporation, debtor-in-possession

 

as

 

“Borrower”

 

and

 

JHA WEST 16, LLC,
a Delaware limited liability company

 

as

 

“Lender”

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

 

I.

LOAN; OPTION TO PURCHASE

8

 

 

 

 

 

1.1

Principal

8

 

 

 

 

 

1.2

Interest

8

 

 

 

 

 

 

 

 

(a)

Computation

8

 

 

 

 

 

 

 

(b)

Usury

9

 

 

 

 

 

 

 

1.3

Maturity

9

 

 

 

 

 

 

 

1.4

Release of Deed of Trust

9

 

 

 

 

 

 

 

1.5

Option to Purchase

9

 

 

 

 

 

 

 

1.6

Current Bankruptcy

10

 

 

 

 

 

 

II.

CLOSING CONDITIONS

10

 

 

 

 

 

 

 

2.1

Conditions of Lender’s Obligation to Close

10

 

 

 

 

 

 

 

 

(a)

Loan Documents

10

 

 

 

 

 

 

 

 

(b)

Title Insurance

10

 

 

 

 

 

 

 

 

(c)

Broker’s Affidavit

10

 

 

 

 

 

 

 

 

(e)

Conditions for Disbursement

10

 

 

 

 

 

 

 

 

(f)

Tax and Insurance Deposit Account

10

 

 

 

 

 

 

 

 

(g)

Recordation of Deed of Trust

11

 

 

 

 

 

 

 

 

(h)

No Defaults

11

 

 

 

 

 

 

 

 

(i)

Liabilities

11

 

 

 

 

 

 

 

 

(j)

Reserve Account

11

 

 

 

 

 

 

 

 

(k)

Additional Conditions to Disbursement of Loan Amount

11

 

 

 

 

 

 

 

 

(l)

Representations and Warranties

11

 

 

 

 

 

 

 

 

(m)

Bankruptcy Court Order

11

 

i

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Page

 

 

 

 

 

 

 

2.2

Conditions of Borrower’s Obligation to Close

11

 

 

 

 

 

 

 

 

(a)

Loan Documents

11

 

 

 

 

 

 

 

 

(b)

Representations and Warranties

12

 

 

 

 

 

 

 

 

(c)

Bankruptcy Court Order

12

 

 

 

 

 

 

III.

DISBURSEMENT OF LOAN AMOUNT

12

 

 

 

 

 

 

 

3.1

General

12

 

 

 

 

 

 

 

 

(a)

Reduction of Loan Amount

12

 

 

 

 

 

 

 

 

(b)

Advances to Lender

12

 

 

 

 

 

 

 

3.2

Inspections

12

 

 

 

 

 

 

 

 

(a)

Access to the Property

12

 

 

 

 

 

 

 

 

(b)

Consultants

12

 

 

 

 

 

 

 

 

(c)

No Reliance by Borrower or Third Party

13

 

 

 

 

 

 

 

3.3

Lender Responsibility

13

 

 

 

 

 

 

 

3.4

Direct Application of Proceeds

13

 

 

 

 

 

 

 

3.5

Insufficient Documentation

13

 

 

 

 

 

 

IV.

REPRESENTATIONS AND WARRANTIES OF LENDER AND BORROWER

13

 

 

 

 

 

 

 

4.1

Representations and Warranties of Borrower

13

 

 

 

 

 

 

 

 

(a)

Legal Status of Borrower

13

 

 

 

 

 

 

 

 

(b)

Title

13

 

 

 

 

 

 

 

 

(c)

No Breach of Applicable Agreements or Laws

13

 

 

 

 

 

 

 

 

(d)

No Litigation or Defaults

14

 

 

 

 

 

 

 

 

(e)

Financial and Other Information

14

 

 

 

 

 

 

 

 

(f)

ERISA

14

 

ii

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Page

 

 

 

 

 

 

 

 

(g)

Boundary Lines; Conformance with Governmental Requirements and Restrictions

14

 

 

 

 

 

 

 

 

(h)

Utilities, Etc

14

 

 

 

 

 

 

 

 

(i)

Collateral

14

 

 

 

 

 

 

 

 

(j)

Condemnation

14

 

 

 

 

 

 

 

 

(k)

Governmental Regulations

15

 

 

 

 

 

 

 

 

(l)

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

15

 

 

 

 

 

 

 

 

(m)

Brokers

15

 

 

 

 

 

 

 

 

(n)

Defects and Hazards

15

 

 

 

 

 

 

 

 

(o)

Permits

15

 

 

 

 

 

 

 

4.2

Representations and Warranties of Lender

15

 

 

 

 

 

 

 

 

(a)

Legal Status of Lender

15

 

 

 

 

 

 

 

 

(b)

No Breach of Applicable Agreements or Laws

15

 

 

 

 

 

 

V.

COVENANTS OF BORROWER

16

 

 

 

 

 

 

 

5.1

Paying Costs of Loan

16

 

 

 

 

 

 

 

5.2

Using Loan Proceeds

16

 

 

 

 

 

 

 

5.3

Keeping of Records

16

 

 

 

 

 

 

 

5.4

Providing Financial Information

16

 

 

 

 

 

 

 

5.5

Providing Operating Statements

17

 

 

 

 

 

 

 

5.6

Complying with the Loan Documents and Other Agreements

17

 

 

 

 

 

 

 

5.7

Compliance with Laws

17

 

 

 

 

 

 

 

5.8

Ownership of Collateral

17

 

 

 

 

 

 

 

5.9

Representations and Warranties

17

 

 

 

 

 

 

 

5.10

Trade Names

18

 

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Page

 

 

 

 

 

 

 

5.11

No Distributions

18

 

 

 

 

 

 

 

5.12

Future Development

18

 

 

 

 

 

 

 

5.13

Further Assurances

18

 

 

 

 

 

 

 

5.14

Notice of Litigation, Etc

18

 

 

 

 

 

 

 

5.15

Signage

19

 

 

 

 

 

 

 

5.16

Maintenance of Existence

19

 

 

 

 

 

 

 

5.17

Impound Account

19

 

 

 

 

 

 

 

5.18

Reserve Account

19

 

 

 

 

 

 

 

5.19

Emergency Room Account

19

 

 

 

 

 

 

 

5.20

New Emergency Room

20

 

 

 

 

 

 

 

5.21

Release of Emergency Room Account

20

 

 

 

 

 

 

 

5.22

Parking Spaces

20

 

 

 

 

 

 

 

5.23

Existence; Change of Name; Location as a Registered Organization

20

 

 

 

 

 

 

 

5.24

Property Management

21

 

 

 

 

 

 

 

5.25

Prohibited Transactions

21

 

 

 

 

 

 

 

5.26

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

21

 

 

 

 

 

 

VI.

DEFAULTS

21

 

 

 

 

 

 

 

6.1

Events of Default

21

 

 

 

 

 

 

 

6.2

Rights and Remedies

23

 

 

 

 

 

 

VII.

RESERVED

24

 

 

 

 

 

 

VIII.

MISCELLANEOUS

24

 

 

 

 

 

 

 

8.1

Binding Effect; Waivers; Cumulative Rights and Remedies

24

 

 

 

 

 

 

 

8.2

Survival

24

 

 

 

 

 

 

 

8.3

Governing Law; Waiver of Jury Trial

24

 

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Page

 

 

 

 

 

 

 

8.4

Counterparts

24

 

 

 

 

 

 

 

8.5

Notices

24

 

 

 

 

 

 

 

8.6

Costs and Expenses; Indemnification; Reimbursement

25

 

 

 

 

 

 

 

8.7

No Third Party Reliance

25

 

 

 

 

 

 

 

8.8

Sale of Loan or Participations

25

 

 

 

 

 

 

 

8.9

Arrangement by Brokers

26

 

 

 

 

 

 

 

8.10

Recourse

26

 

 

 

 

 

 

 

8.11

Time of the Essence

27

 

 

 

 

 

 

 

8.12

Entire Agreement; No Oral Modifications

27

 

 

 

 

 

 

 

8.13

Captions

27

 

 

 

 

 

 

 

8.14

Joint and Several Liability

27

 

 

 

 

 

 

 

8.15

Borrower-Lender Relationship

27

 

 

 

 

 

 

 

8.16

Benefit of Lender

27

 

 

 

 

 

 

 

8.17

Single Purpose Entity

27

 

 

 

 

 

 

 

8.18

Pledge of Accounts

27

 

 

 

 

 

 

 

8.19

Prohibition Against Transfers

27

 

 

 

 

 

 

 

8.20

Lender Approval

27

 

LIST OF EXHIBITS AND SCHEDULES

 

EXHIBIT A

-

Legal Description of Land

 

 

 

 

 

EXHIBIT B

-

Additional Required Items Prior to Funding

 

 

 

 

 

SCHEDULE 2.1(h)

-

Liabilities/Litigation

 

 

v

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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 WEST 16, 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 Emergency Room Account, the Reserve Account
and the Tax and Insurance Deposit Account.

 

Adjacent Property Access Lease:  Means that certain Adjacent Property Access
Lease and easement agreement to be entered into between Borrower and Lender as a
condition to Lender’s exercise of the Option, and which shall contain the items
described in Section 1.5(b) hereof.

 

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.

 

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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.

 

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; 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, personal property or trade fixtures
notwithstanding the manner of annexation, including, without limitation, any
oxygen tanks, surgical lights, and generators.

 

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
(excluding trade 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.

 

2

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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.

 

Emergency Room Account:  Means the interest-bearing account to be established by
Borrower at a financial institution reasonably approved by Lender to reserve for
all soft and hard costs of design and construction of the Emergency
Room Facility to be located outside of the boundaries of the Land.

 

Emergency Room Contribution:  Means the amount of One Hundred Thirty Thousand
Dollars ($130,000), to be deposited by Borrower into the Emergency Room Account
in accordance with Section 5.19.

 

Emergency Room Permits.  Means all those permits and approvals necessary to
immediately commence construction of the Emergency Room Facility.

 

Emergency Room Facility:  Means the new emergency room facility to be located
outside the boundaries of the Land and to be constructed pursuant to the terms
of the Option Agreement.

 

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).

 

Equipment: All fixtures (excluding trade 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, as
opposed to the business conducted at the Land and the Improvements.

 

ERISA:  Means the Employee Retirement Income Security Act of 1974, and the
regulations issued thereunder, all as amended or restated from time to time.

 

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.

 

Funding End Date:  Means the earlier to occur of (i) the date upon which
Borrower has deposited the sum of $3,120,000 into the Emergency Room Account,
(ii) completion of construction of the Emergency Room Facility, (iii) the
expiration of the Option Period without exercise of the Option by the Lender, or
(iv) the Maturity Date.

 

3

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

 

Hospital:  Means the Brotman Medical Center which is located on approximately
1.1 acres of land in the cities of Los Angeles and Culver City, California,
which land is adjacent to the Land.

 

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 2.44 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 WEST 16, 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: Sixteen Million and No/100 Dollars ($16,000,000.00).

 

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: The later to occur of (i) twenty-four (24) months after the
Closing Date, (ii) one hundred and eighty (180) days after Lender’s exercise of
the Put Right, and (iii) if Lender, in its capacity as the “Buyer” under the
Option Agreement, exercises the Option during

 

4

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the Option Period (as such period may be extended pursuant to the terms
thereof), the date of the closing of the transaction contemplated by the Option
Agreement.

 

Note: The Promissory Note, of even date herewith, executed and delivered by
Borrower to Lender in the Loan Amount, to evidence the Loan, 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.

 

Option: Shall have the meaning given such term in Section 1.5.

 

Option Agreement:  Means that certain Option Agreement to be entered into
between Lender and Borrower, which shall describe and set forth the terms of
Lender’s Option.

 

Option Period:  Means the period commencing on (a) in the event Borrower is able
to obtain the Emergency Room Permits prior to the Maturity Date, the date that
Lender receives written notice from Borrower that Borrower has obtained the
Emergency Room Permits (as defined in the Loan Agreement), or (b) in the event
Borrower is unable to obtain the Emergency Room Permits prior to the Maturity
Date, the Maturity Date, and ending on (A) in the event Borrower is able to
obtain the Emergency Room Permits prior to the Maturity Date, the date which is
the later to occur of (i) twelve (12) months  after Lender’s receipt of such
written notice from Borrower, and (ii) twenty-four (24) months after the
“Closing Date” (as defined in the Loan Agreement), or (B) in the event Borrower
is unable to obtain the Emergency Room Permits prior to the Maturity Date, the
date which is twelve (12) months after the Maturity Date.  If Lender desires to
exercise the Option, then Lender must exercise the Option prior to the
expiration of the Option Period, provided, however, if an appeal (an “Appeal”)
is pending challenging the Bankruptcy Court Order at the expiration of the
Option Period, then the Option Period shall be extended to the date which is
ninety (90) days following dismissal of the Appeal; provided, further, if
Borrower wrongfully interferes with a foreclosure of the Deed of Trust following
an Event of Default (as defined in the Deed of Trust), then the Option Period
shall be extended by the period of delay resulting from such wrongful
interference.

 

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

 

5

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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:

 

(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.

 

(g)           Transfers contemplated by the Option 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 Equipment.

 

Put Right:  Means Lender’s right to declare the unpaid Loan Amount, including
any remaining interest and any other amounts due and payable under the Loan
Documents, immediately due and payable at any time following the first twelve
(12) months of the Closing Date (provided, that such twelve-month period shall
be extended to the extent that the period described in Section 1.5(a) hereof is
extended) and prior to the date which is twenty-four (24) months after the
Closing Date, subject to Lender providing written notification to Borrower of
its exercise of the Put Right at least one hundred and eighty (180) days in
advance.  Lender may not provide notification of its exercise of the Put Right
prior to the first (1st) anniversary of the Closing Date.

 

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

 

6

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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.

 

Securitization:  Means the sale of the Loan, by itself or as part of a pool with
other loans, in a transaction whereby mortgage pass-through certificates or
other securities evidencing a beneficial interest, backed by the Loan or such
pool of loans, will be sold as a rated or unrated public offering or private
placement.

 

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.

 

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:

 

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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 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 BUT SUBJECT TO LENDER’S PUT RIGHT, 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.

 

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(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, SUBJECT TO LENDER’S
PUT RIGHT.

 

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

 

1.5          OPTION TO PURCHASE.

 

(A)            BORROWER COVENANTS AND AGREES TO USE COMMERCIALLY REASONABLE
EFFORTS TO OBTAIN THE EMERGENCY ROOM PERMITS WITHIN TWELVE (12) MONTHS FOLLOWING
THE CLOSING DATE, UNLESS SUCH PERIOD OF TIME IS EXTENDED BY THE MUTUAL AGREEMENT
OF THE PARTIES, IT BEING UNDERSTOOD AND AGREED THAT THE PARTIES INTEND TO WORK
COLLABORATIVELY, IN GOOD FAITH, AND WITH ALL DILIGENCE DURING SUCH PERIOD OF
TIME TO OBTAIN THE EMERGENCY ROOM PERMITS, AT THE BORROWER’S SOLE EXPENSE, IT
BEING FURTHER UNDERSTOOD AND AGREED THAT, TO THE EXTENT THAT THE PARTIES ARE
WORKING COLLABORATIVELY, IN GOOD FAITH, AND WITH ALL DILIGENCE DURING SUCH
PERIOD OF TIME TO OBTAIN THE EMERGENCY ROOM PERMITS, IT IS THE INTENTION OF THE
PARTIES TO EXTEND SUCH TWELVE (12) MONTH PERIOD AS NECESSARY, PROVIDED THAT
THERE IS A REASONABLE EXPECTATION THAT SUCH PERMITS CAN BE OBTAINED WITHIN AN
ADDITIONAL SIX (6) MONTHS.

 

(B)            AT ANY TIME DURING THE OPTION PERIOD AND PURSUANT TO THE OPTION
AGREEMENT, LENDER SHALL HAVE THE OPTION (THE “OPTION”) TO PURCHASE THE PROPERTY
BY PROVIDING BUYER WITH NO LESS THAN ONE HUNDRED EIGHTY (180) DAYS’ PRIOR
WRITTEN NOTICE.  UPON EXERCISE OF THE OPTION, SO LONG AS BORROWER HAS OBTAINED
THE EMERGENCY ROOM PERMITS, BORROWER SHALL IMMEDIATELY COMMENCE CONSTRUCTION OF
THE EMERGENCY ROOM FACILITY IN ACCORDANCE WITH THE TERMS OF THE OPTION
AGREEMENT.  THE TERMS OF THE TRANSACTIONS CONTEMPLATED BY THE EXERCISE OF THE
OPTION, INCLUDING, WITHOUT LIMITATION, THE PURCHASE PRICE FOR THE PROPERTY,
SHALL BE AS SET FORTH IN THE OPTION AGREEMENT.  UNLESS LENDER EXERCISES THE PUT
RIGHT, LENDER SHALL HAVE THE RIGHT TO EXERCISE THE OPTION DURING THE OPTION
PERIOD NOTWITHSTANDING ANY PREPAYMENT OF THE LOAN.

 

(C)            LENDER ACKNOWLEDGES THAT CERTAIN PROPERTY ADJACENT TO THE
PROPERTY IS CURRENTLY OWNED BY BORROWER AND IMPROVED WITH, AMONG OTHER THINGS, A
HOSPITAL, EMERGENCY ROOM BUILDING, AND PARKING AREAS, AND CERTAIN PORTIONS OF
THE EMERGENCY ROOM BUILDING, A BUILDING ADJACENT TO THE EMERGENCY ROOM BUILDING,
AND PARKING AREAS EXTEND OVER AND ONTO THE PROPERTY.  AS SUCH, IF, AND ONLY IF,
LENDER EXERCISES THE OPTION, AND AS A CONDITION TO LENDER’S ACQUISITION OF THE
PROPERTY PURSUANT TO THE EXERCISE OF THE OPTION, BORROWER AND LENDER SHALL

 

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ENTER INTO AN ADJACENT PROPERTY ACCESS LEASE, PROVIDING FOR, AMONG OTHER THINGS,
A LEASE-BACK TO BORROWER OF AN AREA OF APPROXIMATELY 10,000 SQUARE FEET
CONSISTING OF THE EMERGENCY ROOM, AN AREA ADJACENT TO THE EMERGENCY ROOM FOR USE
AS A RADIOLOGY ROOM, AND CERTAIN PORTIONS OF THE ADJACENT BUILDING; A LICENSE TO
USE THE AREAS WHERE THE GENERATORS, OXYGEN TANKS AND SERVERS ARE CURRENTLY
LOCATED; ACCESS TO THE TUNNEL, HOSPITAL, PARKING AREAS, GENERATORS, SERVERS, AND
OXYGEN TANKS; AN EASEMENT TO USE ONE HUNDRED (100) PARKING SPACES AT THE
PROPERTY (SUBJECT TO THE RELOCATION RIGHT DESCRIBED IN SECTION 5.22); AND THE
USE OF CERTAIN OTHER APPURTENANT RIGHTS UPON TERMS AND CONDITIONS AS SET FORTH
IN THE ADJACENT PROPERTY ACCESS LEASE.

 

1.6          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.

 

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.

 

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(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, 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

 

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(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.

 

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.

 

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(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.  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.

 

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(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, 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, 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

 

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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.

 

(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.

 

(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 TO BROKER (WHICH SHALL BE PAID AT CLOSING
FROM THE LOAN PROCEEDS).

 

(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

 

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VIOLATE ANY GOVERNMENTAL REQUIREMENTS, TO WHICH LENDER IS A PARTY, OR BY WHICH
LENDER MAY BE BOUND OR AFFECTED.

 

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 (I) DOCUMENTATION
OF THE LOAN AND THE OPTION AGREEMENT, AND (II) 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, IN CONNECTION WITH THE LOAN.

 

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,
ALL AS REASONABLY APPROVED IN WRITING BY LENDER.  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

 

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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.

 

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 COLLATERAL.  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; PROVIDED, HOWEVER, BORROWER MAY CONVEY OR
TRANSFER SOME OR ALL OF THE EQUIPMENT 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.

 

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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 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 (UNLESS ANY SUCH FEE HAS BEEN APPROVED BY LENDER, IN
LENDER’S SOLE DISCRETION).

 

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 ACTIONS 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.

 

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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.

 

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 (LESS ANY SUCH AMOUNTS
AS ARE PAYABLE BY TENANTS UNDER LEASES OF 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                        EMERGENCY ROOM 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 FUNDING END DATE, BORROWER SHALL DEPOSIT THE EMERGENCY

 

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ROOM CONTRIBUTION INTO THE EMERGENCY ROOM ACCOUNT.  FROM AND AFTER COMMENCEMENT
OF CONSTRUCTION OF THE EMERGENCY ROOM FACILITY, BORROWER SHALL BE ENTITLED TO A
RELEASE OF PROCEEDS IN THE EMERGENCY ROOM ACCOUNT WHICH PROCEEDS SHALL BE USED
ONLY TO PAY INVOICES COVERING THE COST OF CONSTRUCTION OF THE EMERGENCY
ROOM FACILITY WHICH ARE THEN DUE AND PAYABLE OR WHICH HAVE PREVIOUSLY BEEN PAID
BY BORROWER, IN AN AMOUNT EQUAL TO THE AMOUNT OF THE INVOICES TO BE PAID OR
WHICH HAVE PREVIOUSLY BEEN PAID BY BORROWER MULTIPLIED BY A FRACTION, THE
NUMERATOR OF WHICH IS THE BALANCE THEN OUTSTANDING IN THE EMERGENCY ROOM ACCOUNT
AND THE DENOMINATOR OF WHICH IS THE CONTRACT PRICE UNDER THE CONSTRUCTION
CONTRACT COVERING CONSTRUCTION OF THE EMERGENCY ROOM FACILITY, AND IN ACCORDANCE
WITH DISBURSEMENT PROCEDURES REASONABLY ACCEPTABLE TO BORROWER, THE CONSTRUCTION
LOAN LENDER AND LENDER.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT, UPON THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN
CLAUSE (III) OF THE DEFINITION OF FUNDING END DATE, AND SO LONG AS NO EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING AT THE TIME OF THE OCCURRENCE OF ANY SUCH
EVENT, LENDER SHALL PROMPTLY CAUSE ALL OF THE FUNDS IN THE EMERGENCY
ROOM ACCOUNT TO BE RELEASED TO BORROWER.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, UPON THE OCCURRENCE OF ANY OF THE EVENTS
DESCRIBED IN CLAUSE (IV) OF THE DEFINITION OF FUNDING END DATE, AND PROVIDED
THAT BORROWER HAS REPAID THE LOAN ON THE MATURITY DATE, LENDER SHALL PROMPTLY
CAUSE ALL OF THE FUNDS IN THE EMERGENCY ROOM ACCOUNT TO BE RELEASED TO BORROWER.

 

5.20                        RESERVED.

 

5.21                        RELEASE OF EMERGENCY ROOM ACCOUNT.  AT SUCH TIME AS
BORROWER RECEIVES A CERTIFICATE OF OCCUPANCY FOR USE OF THE NEW EMERGENCY
ROOM FACILITY AND THE OLD EMERGENCY ROOM FACILITY HAS BEEN CLOSED, BORROWER
SHALL BE ENTITLED TO THE RETURN OF ANY MONIES REMAINING IN THE EMERGENCY
ROOM ACCOUNT.  AT SUCH TIME LENDER SHALL PAY TO BORROWER THE ADDITIONAL SUM OF
ONE MILLION DOLLARS ($1,000,000) TO OFFSET THE SOFT AND HARD COSTS OF DESIGN AND
CONSTRUCTION OF THE NEW EMERGENCY ROOM FACILITY TO THE EXTENT THE MONIES IN THE
EMERGENCY ROOM ACCOUNT WERE INSUFFICIENT TO PAY ALL OF SAID COSTS, INCLUDING,
WITHOUT LIMITATION, COSTS ASSOCIATED WITH FINANCING THE CONSTRUCTION OF THE
EMERGENCY ROOM FACILITY.  NOTWITHSTANDING ANYTHING IN THE LOAN DOCUMENTS TO THE
CONTRARY, LENDER SHALL SUBORDINATE ALL OF ITS RIGHTS AND INTERESTS TO THE
EMERGENCY ROOM ACCOUNT PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT TO BE
ENTERED INTO BY BORROWER AND ANY LENDER PROVIDING FINANCING TO BORROWER FOR
PURPOSES OF DESIGN AND CONSTRUCTION OF THE EMERGENCY ROOM FACILITY.

 

5.22                        PARKING SPACES.  SEVENTY-FIVE (75) OF THE ONE
HUNDRED (100) PARKING SPACES WHICH SHALL BE LEASED TO BORROWER UNDER THE
ADJACENT PROPERTY ACCESS LEASE MAY BE RELOCATED BY LENDER TO A PLACE OUTSIDE OF
THE BOUNDARIES OF THE LAND SO LONG AS THE LOCATION THEREOF, AND THE DISTANCE
THEREOF FROM THE EMERGENCY ROOM FACILITY, COMPLIES WITH ALL APPLICABLE LAWS AND
REGULATIONS AND PROVIDED, FURTHER, THAT SUCH RELOCATED PARKING IS WITHIN THREE
HUNDRED (300) YARDS OF THE ENTRANCE OF THE EMERGENCY ROOM FACILITY.

 

5.23                        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

 

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SECTION ARE IN ADDITION TO, AND NOT IN LIMITATION OF, THE REQUIREMENTS OF
ARTICLE 7.  BORROWER SHALL PAY ALL COSTS AND EXPENSES INCURRED BY LENDER
(INCLUDING, WITHOUT LIMITATION, REASONABLE LEGAL FEES) IN CONNECTION WITH ANY
CHANGE DESCRIBED HEREIN.

 

5.24                        RESERVED.

 

5.25                        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 5.24 OR TO CONFIRM
THAT BORROWER’S REPRESENTATIONS AND WARRANTIES REGARDING ERISA REMAIN TRUE.

 

5.26                        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.

 

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

 

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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 EAST 7 LLC, AND/OR BETWEEN ANY OTHER
AFFILIATE OF BORROWER AND LENDER OR JHA EAST 7 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.

 

(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;

 

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(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; OR

 

(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.

 

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.

 

(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.

 

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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.  TO THE EXTENT PERMITTED BY LAW, 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.

 

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.

 

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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,
(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, OR ANY OTHER LOAN DOCUMENT,
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.

 

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 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

 

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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 IN
VIOLATION OF THE TERMS OF THE LOAN DOCUMENTS; (III) BORROWER’S MISAPPLICATION OR
MISAPPROPRIATION OF SECURITY DEPOSITS OR RENTS COLLECTED MORE THAN THIRTY (30)
DAYS IN ADVANCE IN VIOLATION OF THE TERMS OF THE LOAN DOCUMENTS; (IV) BORROWER’S
MISAPPLICATION OR THE MISAPPROPRIATION OF INSURANCE PROCEEDS OR CONDEMNATION
AWARDS IN VIOLATION OF THE TERMS OF THE LOAN DOCUMENTS; (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 EQUIPMENT TAKEN FROM THE PROPERTY BY OR ON BEHALF
OF BORROWER AND NOT REPLACED WITH EQUIPMENT OF THE SAME UTILITY AND OF THE SAME
OR GREATER VALUE; (VII) ANY ACT OF INTENTIONAL WASTE OR ARSON BY BORROWER OR ANY
AFFILIATE THEREOF WITH RESPECT TO THE COLLATERAL, OR (VIII) BORROWER’S FAILURE
TO COMPLY WITH THE PROVISIONS OF SECTION 1.12 OF THE DEED OF TRUST.

 

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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.  NOTWITHSTANDING ANYTHING IN THE LOAN
DOCUMENTS TO THE CONTRARY, LENDER SHALL SUBORDINATE ALL OF ITS RIGHTS AND
INTERESTS TO THE EMERGENCY ROOM ACCOUNT PURSUANT TO THE TERMS OF A SUBORDINATION
AGREEMENT TO BE ENTERED INTO BY BORROWER AND ANY LENDER PROVIDING FINANCING TO
BORROWER FOR PURPOSES OF DESIGN AND CONSTRUCTION OF THE EMERGENCY ROOM FACILITY.

 

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.

 

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.

 

27

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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 West 16, LLC

 

JHA WEST 16, LLC,

c/o Jewish Home for the Aging

 

a Delaware limited liability company

7150 Tampa Avenue

 

 

Reseda, California 91335

 

By:

JHA Geriatric Services, Inc., a California corporation

 

 

Its:

Sole Member

Attention: Loan Administration

 

 

 

 

 

 

By:

/s/ M. M. Forrest

 

 

 

 

Name:

M. M. Forrest

 

 

 

 

Title:

CEO and President

 

28

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EXHIBIT A

 

Legal Description of Land

 

PARCEL A:  APN (4207-003-014)

 

LOTS 8 THROUGH 10, AND 14 THROUGH 17 INCLUSIVE , ALL IN BLOCK 12 OF TRACT NO.
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, 6 AND 7 OF MAPS , IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

PARCEL B: APN (4207-003-003, 004, 006, 007, 008, 015)

 

LOTS 4 AND 5 IN THE CITY OF LOS ANGELES AND LOTS 7, 11, 12, 18 AND 19 IN THE
CITY OF CULVER CITY, ALL IN BLOCK 12 OF TRACT NO. 2444, IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 24 PAGES 5, 6 AND 7 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.  EXCEPT FROM LOT 18,
ALL CRUDE OIL, PETROLEUM, GAS, BREA, ASPHALTUM AND ALL KINDRED

 

SUBSTANCES AND OTHER MINERALS UNDER AND IN SAID LAND, LYING BELOW A DEPTH OF 500
FEET FROM THE SURFACE OF SAID LAND, BUT WITHOUT RIGHT OF SURFACE ENTRY FOR THE
EXTRACTION THEREOF, AS RESERVED BY LORA MAC NAUGHTON FOSTER AND MARGARET MAC
NAUGHTON MOORE, BOTH MARRIED

 

WOMEN, IN DEED RECORDED MAY 15, 1960 IN BOOK D-846 PAGE 929, OFFICIAL RECORDS.

 

ALSO EXCEPT FROM LOT 19, ALL RIGHT, TITLE AND INTEREST IN AND TO ALL OIL,
NAPHTHA, GAS, PETROLEUM AND OTHER MINERAL SUBSTANCES DEPOSITED IN, LYING UNDER
OR FLOWING THROUGH OR THAT MAY BE PRODUCED FROM SAID LAND WITH NO RIGHT TO ENTER
UPON THE SURFACE OF SAID PROPERTY OR SUBSURFACE THEREOF AT ANY POINT ABOVE A
DEPTH OF 500 FEET FROM THE SURFACE THEREOF, AS RESERVED IN DEED EXECUTED BY MEAD
ROLAND JOHNSTON AND CORA M. JOHNSTON, HIS WIFE, RECORDED OCTOBER 14, 1960 IN
BOOK D-1006 PAGE 57, OFFICIAL RECORDS.

 

PARCEL C: APN (4207-003-005)

 

THAT PORTION OF LOT 6, BLOCK 12 OF TRACT NO. 2444, IN THE CITY OF LOS ANGELES,
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,
DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST SOUTHERLY CORNER THEREOF; THENCE
NORTHEASTERLY 53.85 FEET TO THE MOST EASTERLY CORNER THEREOF; THENCE
NORTHWESTERLY ALONG THE NORTHEASTERLY LINE OF SAID LOT, 125 FEET TO PROPOSED

 

A-1

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SOUTHEASTERLY LINE OF VENICE BOULEVARD, AS CONTEMPLATED IN ORDINANCE NO. 55691;
THENCE SOUTHWESTERLY ALONG SAID PROPOSED LINE, 40.31 FEET; THENCE SOUTHERLY
ALONG SAID PROPOSED LINE, 14.34 FEET TO A POINT ON THE SOUTHWESTERLY LINE OF
SAID LOT; THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY LINE, 115.05 FEET TO THE
POINT OF BEGINNING.

 

A-2

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EXHIBIT B

 

Additional Required Items Prior to Funding

 

1.                                       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.

 

2.                                       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.

 

3.                                       Copy of all organizational documents
for the Borrower.

 

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

 

5.                                       Current financial statements for the
Borrower.

 

6.                                       UCC Lien Search.

 

B-1

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SCHEDULE 2.1(h)

 

[Liabilities/Litigation]

 

None.

 

B-1

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