Document:

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”

 

 

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

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  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

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  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

  

 

iii

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  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

  

 

iv

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  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

 

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.

 

 

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

 

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

 

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

 

 

 

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

 

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

 

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:

 

7

 

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.

 

8

 

(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

 

9

 

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.

 

10

 

(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

 

11

 

(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.

 

12

 

(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.

 

13

 

(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

 

14

 

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 

 

15

 

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

 

16

 

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.

 

17

 

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.

 

18

 

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

 

19

 

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

 

20

 

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

 

21

 

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;

 

22

 

(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.

 

23

 

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.

 

24

 

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 

 

25

 

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.

 

26

 

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

 

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

 

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

 

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

 

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

 

SCHEDULE 2.1(h)

 

[Liabilities/Litigation]

 

None.

 

B-1Exhibit 10.8

 

AMENDMENT NO. 1 TO LOAN
AGREEMENT

 

THIS AMENDMENT NO. 1 TO LOAN AGREEMENT (this “Amendment”)
is entered into as of April 14, 2009, by and between BROTMAN MEDICAL CENTER, INC., a California
corporation (“Borrower”) and JHA WEST 16, LLC, a Delaware limited
liability company (“Lender”).

 

RECITALS

 

WHEREAS, Borrower and Lender (collectively, the “Parties”)
are parties to that certain Loan Agreement, dated as of July 9, 2008 (the “Loan
Agreement”);

 

WHEREAS, the Parties have determined that it is in
their respective best interests to amend the Loan Agreement as specified
herein; and

 

WHEREAS, capitalized terms used, but not otherwise
defined herein, shall have the meanings given to such terms in the Loan
Agreement.

 

NOW, THEREFORE, in consideration of the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties hereby agree as follows:

 

AGREEMENT

 

1.             The definition of “Accounts” in the Loan
Agreement is hereby deleted in its entirety.

 

2.             The following definition is hereby added
to the Loan Agreement:

 

“ACMs:  Shall have the meaning given such term in Section 5.27.”

 

3.             The definition of “Adjacent Real Property
Access Lease” in the Loan Agreement is hereby amended and restated as follows:

 

“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(c) hereof.”

 

4.             The definition of “Bankruptcy Court Order”
in the Loan Agreement is hereby amended and restated as follows:

 

“Bankruptcy Court Order:  Means that certain “Order Authorizing Debtor
To:  (1) Incur New Debtor In
Possession Financing; and (2) Pay Off Its Secured Debt” entered by the
Bankruptcy Court.”

 

5.             The definition of “Brokers” in the Loan
Agreement is hereby amended and restated as follows:

 

 

“Broker:  Shall have the meaning given such term in Section 4.1(m).”

 

6.             The definition of “Collateral” in the
Loan Agreement is hereby amended and restated as follows:

 

“Collateral:  All Equipment; all of Borrower’s Documents,
Negotiable Instruments, contract rights (including any rights under any
development agreement) and General Intangibles directly 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; the JHA Collateral Accounts; 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 (i) any personal property
or trade fixtures notwithstanding the manner of annexation, including, without
limitation, any oxygen tanks, surgical lights, and generators, and (ii) (a) any
Accounts; (b) any cash or currency (other than cash and currency deposited
in the JHA Collateral Accounts and other than any interest earned on any of the
JHA Collateral Accounts); (c) any Documents and General Intangibles, in
each case directly related to Borrowers’ Accounts or Deposit Accounts (other
than Documents and General Intangibles directly related to the JHA Collateral
Accounts); (d) any Deposit Accounts other than the JHA Collateral
Accounts; and (e) any Proceeds of any and all of the foregoing.  All capitalized terms used in this
definition, but not otherwise defined in this Agreement, shall have the
meanings given to such terms in the Uniform Commercial Code.”

 

7.             The definition of “Escrow Holder” in the
Loan Agreement is hereby amended and restated as follows:

 

“Escrow Holder:  Means Old Republic Title Company.”

 

8.             The following definition is hereby added
to the Loan Agreement:

 

“Event of Default: Shall have the
meaning given such term in Section 6.1.”

 

9.             The following definition is hereby added
to the Loan Agreement:

 

“JHA Collateral Accounts:  Means the Emergency Room Account, the
Reserve Account, and the Tax and Insurance Deposit Account.”

 

10.           The following definition is hereby added
to the Loan Agreement:

 

“O&M Program:  Shall have the meaning given such term in Section 5.27.”

 

11.           The definition of “Option Period” in the
Loan Agreement is hereby amended and restated as follows:

 

2

 

“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, 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, 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.”

 

12.           The definition of “Title Company” in the
Loan Agreement is hereby amended and restated as follows:

 

“Title Company:  Means Old Republic Title Company.”

 

13.           Section 2.1(k) of the Loan
Agreement is hereby amended and restated as follows:

 

“Representations and Warranties.  The representations and warranties of
Borrower under Article IV shall be true and correct in all material
respects as of the Closing Date.”

 

14.           Section 2.1(l) of the Loan
Agreement is hereby amended and restated as follows:

 

“The
Bankruptcy Court Order shall not have been modified or be subject to a stay.”

 

15.           Section 2.2(b) of the Loan
Agreement is hereby amended and restated as follows:

 

“Representations and Warranties.  The representations and warranties of Lender
under Article IV shall be true and correct in all material respects as of
the Closing Date.”

 

16.           The introductory language of Section 4.1
of the Loan Agreement is hereby amended and restated as follows:

 

3

 

“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 as of the Closing Date that:”

 

17.           Section 4.1(m) of the Loan
Agreement is hereby amended and restated as follows:

 

“Brokers.  Borrower is represented by HealthWest Realty
Advisors, Inc. (“Broker”) in connection with the making and arrangement of
the Loan and the transaction contemplated hereby.  Other than any brokerage commissions or fees
which may be due by Borrower to the Broker for such services, there are no
other brokerage commissions or finders’ fees due or claimed by any party to be
due from Borrower in connection with or with respect to the transaction
contemplated hereby.  Borrower shall be
fully responsible for any commissions or fees due and owing, if any, to Broker
(which shall be paid at Closing from the Loan proceeds).”

 

18.           The introductory phrase of Section 4.2
of the Loan Agreement is hereby amended and restated as follows:

 

“Representations and Warranties of Lender.  Lender represents and warrants to Borrower as
of the Closing Date that:”

 

19.           The introductory phrase of Article V
of the Loan Agreement is hereby amended and restated as follows:

 

“As
an inducement to Lender to execute this Agreement and to make the Loan, and
from and after the Closing Date 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:”

 

20.           Section 5.17 of the Loan Agreement
is hereby amended and restated as follows:

 

“(a)         Borrower shall
at all times maintain and make deposits into the Tax 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 Tax 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 Tax 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 casualty
insurance, commercial general liability insurance and automobile liability
insurance required 

 

4

 

to be maintained by Borrower pursuant to the terms of the Loan
Documents.  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 such 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 Tax
and Insurance Deposit Account from time to time in order to cover the payments
of such real estate taxes and assessments and insurance premiums as the same
become due and payable.

 

(c)           Lender hereby
covenants and agrees that, upon receipt of the bills, invoices and statements
for real estate taxes and assessments and insurance premiums to be paid from
the Tax and Insurance Deposit Account, Lender will promptly withdraw funds from
the Tax and Insurance Deposit Account and timely pay same to the appropriate
tax authority and/or insurance company. 
Lender shall have no liability for any late charges or other damages
which might be suffered by Borrower should such payments not be timely made due
to the failure of Borrower to timely submit such bills, invoices and statements
to Lender as required under Section 5.17(a) above or the
failure of the financial institution in which the Tax and Insurance Deposit
Account is being maintained to deliver to Lender the amount of the requested
withdrawal not later than five (5) Business Days from receipt by such
financial institution of Lender’s request for said withdrawal or ten (10) days
prior to the date upon which such payment will be delinquent, whichever is later.

 

(d)           Notwithstanding
the foregoing, Borrower shall, as of the Closing Date, either (i) deposit
sufficient funds into the Tax and Insurance Deposit Account to cover the
payment of all real estate taxes and assessments now due and payable or (ii) pay
all real estate taxes and assessments now due and payable.”

 

21.           Section 5.18 of the Loan Agreement
is hereby amended and restated as follows:

 

“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 (which approval shall not be unreasonably
withheld, conditioned or delayed) of the amount of the requested 

 

5

 

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.  Lender hereby covenants and
agrees that upon delivery of such approval of the amount of the requested draw,
Lender shall, pursuant to the terms of the “control agreement” applicable to
such account, promptly and without delay request that such funds be delivered
to Borrower.”

 

22.           Section 5.19 of the Loan Agreement
is hereby amended and restated as follows:

 

“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 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.  Lender hereby covenants and agrees that in
connection therewith, Lender shall, pursuant to the terms of the “control
agreement” applicable to such account, promptly and without delay request that
such proceeds be delivered to Borrower. 
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.”

 

23.           Section 5.21 of the Loan Agreement is
hereby amended and restated as follows:

 

“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 

 

6

 

Room Account were insufficient to pay all of said costs,
including, without limitation, costs associated with financing the construction
of the Emergency Room Facility.”

 

24.           Section 5.25 of the Loan Agreement
is hereby amended and restated as follows:

 

“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 5.25
or to confirm that Borrower’s representations and warranties regarding ERISA remain
true.”

 

25.           The Loan Agreement is hereby amended by
appending the below following Section 5.26 of the Loan Agreement:

 

“5.27       Monitoring
or Maintenance Program.  Borrower, at its sole expense, shall
establish and maintain continuously in effect until the Loan is paid in full,
an operations and maintenance program with respect to any asbestos-containing
materials (“ACMs”) at the Property (“O&M Program”), which is
reasonably acceptable to Lender and prepared by an environmental consultant
reasonably acceptable to Lender.  Without
limiting the foregoing, if ACMs are found to exist at the Property, the O&M
Program shall be undertaken consistent with the Guidelines for Controlling
Asbestos-Containing Materials in Buildings (USEPA, 1985) and other relevant guidelines
and applicable Environmental Regulations (as defined in the Environmental
Indemnity).  Lender may require (i) periodic
notices or reports to Lender in form, substance and at such intervals as Lender
may specify; (ii) amendments to such O&M Program to address changing
circumstances, laws or other matters, including without limitation variations
in response to reports provided by environmental consultants; and (iii) execution
of an Operations and Maintenance Agreement relating to such O&M Program reasonably
satisfactory to Lender.  The O&M
Program shall be implemented not later than June 15, 2009.”

 

26.           The introductory phrase of Section 6.1
of the Loan Agreement is hereby amended and restated as follows:

 

“Events of Default.  From and after the Closing Date, any of the
following events shall constitute an “Event of Default” under this Agreement:”

 

27.           Section 6.1(c) of the Loan
Agreement is hereby amended and restated as follows:

 

“Borrower
shall fail to perform or observe any obligation or covenant (other than those
obligations and covenants described in subparagraphs (a) and 

 

7

 

(b), above, or otherwise set forth in subparagraphs (d) through
(n), 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.”

 

28.           The introductory sentence of Section 6.2
of the Loan Agreement is hereby amended and restated as follows:

 

“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:”

 

29.           Section 6.2(c) of the Loan
Agreement is hereby amended and restated as follows:

 

“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 reasonable attorneys’ fees, even though causing the Loan to exceed
the face amount of the Note, which sums shall bear interest at the Default Rate
and shall be payable by Borrower on demand.”

 

30.           The final sentence of Section 8.6 of
the Loan Agreement is hereby amended and restated as follows:

 

“(c)         The obligations
on the part of Borrower under this Section 8.6 shall survive the closing
of the Loan and the repayment thereof.”

 

31.           The final paragraph of Section 8.8
of the Loan Agreement is hereby amended and restated as follows:

 

“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.”

 

32.           Section 8.10 of the Loan Agreement
is hereby amended and restated as follows:

 

8

 

“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 Property; or (viii) Borrower’s failure to comply with the
provisions of Section 1.12 of the Deed of Trust.”

 

33.           Section 8.18 of the Loan Agreement
is hereby amended and restated as follows:

 

“8.18  Pledge of JHA Collateral
Accounts.  Borrower shall
grant to Lender a perfected security interest in the JHA Collateral 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 JHA Collateral Accounts either
before, after or together with the foreclosure of the Deed of Trust.  Upon any such foreclosure, all amounts
contained in the JHA Collateral 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
JHA Collateral Accounts shall enter into “control agreements” for the purpose
of perfecting the security interests in the JHA Collateral 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; provided, however, that Lender shall have the
right to approve such financing, which approval shall not be unreasonably
denied or withheld.”

 

34.           The Loan Agreement is hereby amended by
appending the below following Section 8.20 of the Loan Agreement:

 

“8.21  Equipment Financings.  Lender hereby agrees that Borrower shall be
permitted to secure financings and grant liens securing purchase money

 

9

 

indebtedness incurred to enable Borrower to acquire Equipment in the
ordinary course of its business; provided, however, that no such lien shall
extend to or cover any other Collateral. 
Lender agrees to subordinate its lien on Equipment to such other liens
in order to facilitate such financings; provided, however, the terms of such
financings shall be commercially reasonable.

 

8.22  Access.  Lender shall permit any lender providing
financing to Borrower secured by Borrower’s Accounts to enter any premises of
Borrower where any Documents directly related to such Accounts are located for
the purpose of foreclosing on, and taking possession of, such Documents.  All capitalized terms used in this Section 8.22,
but not otherwise defined in this Agreement, shall have the meanings given to
such terms in the UCC.”

 

35.           Except as expressly set forth in this
Amendment, the Loan Agreement (as amended to date) shall remain in full force
and effect and shall not be deemed to have been modified or amended by this
Amendment.  Each of the Parties
understands and agrees that by executing and delivering this Amendment the
other Parties do not hereby waive any of their respective rights or remedies
under the Loan Agreement (as amended to date).

 

36.           From and after the date hereof, all
references in the Loan Agreement and each of the other Loan Documents to the
Loan Agreement shall be deemed to be references to the Loan Agreement as
modified hereby. This Amendment shall constitute a Loan Document for all
purposes under the Loan Agreement and the other Loan Documents.

 

37.           This Amendment, together with the Loan
Agreement (as amended to date), constitutes the entire understanding of the
Parties with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto are
expressly superseded hereby.

 

38.           This Amendment, 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 this Amendment.

 

39.           This Amendment may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.  Any signature delivered by facsimile or
electronic mail shall be deemed to be an original signature hereunder.

 

[Signature page follows]

 

10

 

IN WITNESS WHEREOF, the Parties have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

 

	
   

  	
   

  	
  “BORROWER”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BROTMAN MEDICAL CENTER, INC.,

  
	
   

  	
   

  	
  a
  California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Stanley Otake

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Stanley
  Otake

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “LENDER”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JHA WEST 16, LLC,

  
	
   

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  JHA
  Geriatric Services, Inc., a California corporation

  
	
   

  	
   

  	
  Its:

  	
  Sole
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  M. M. Forrest

  
	
   

  	
   

  	
   

  	
  Name:

  	
  M.
  M. Forrest

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer and President

  

 

 

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO LOAN AGREEMENT]

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