LOAN AGREEMENT

 

TABLE OF CONTENTS

 

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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

 

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	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

 

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		(g)	Boundary Lines; Conformance with Governmental Requirements and Restrictions		14
		(h)	Utilities, Etc		14
		(i)	Collateral		14
		(j)	Condemnation		14
		(k)	Governmental Regulations		15
		(l)	Compliance with Anti-Terrorism, Embargo, Sanctions and Anti Money Laundering Laws		15
		(m)	Brokers		15
		(n)	Defects and Hazards		15
		(o)	Permits		15
	4.2	Representations and Warranties of Lender			15
		(a)	Legal Status of Lender		15
		(b)	No Breach of Applicable Agreements or Laws		15
V.	COVENANTS OF BORROWER				16
	5.1	Paying Costs of Loan			16
	5.2	Using Loan Proceeds			16
	5.3	Keeping of Records			16
	5.4	Providing Financial Information			16
	5.5	Providing Operating Statements			17
	5.6	Complying with the Loan Documents and Other Agreements			17
	5.7	Compliance with Laws			17
	5.8	Ownership of Collateral			17
	5.9	Representations and Warranties			17
	5.10	Trade Names			18

 

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	5.11	No Distributions			18
	5.12	Future Development			18
	5.13	Further Assurances			18
	5.14	Notice of Litigation, Etc			18
	5.15	Signage			19
	5.16	Maintenance of Existence			19
	5.17	Impound Account			19
	5.18	Reserve Account			19
	5.19	Emergency Room Account			19
	5.20	New Emergency Room			20
	5.21	Release of Emergency Room Account			20
	5.22	Parking Spaces			20
	5.23	Existence; Change of Name; Location as a Registered Organization			20
	5.24	Property Management			21
	5.25	Prohibited Transactions			21
	5.26	Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws			21
VI.	DEFAULTS				21
	6.1	Events of Default			21
	6.2	Rights and Remedies			23
VII.	RESERVED				24
VIII.	MISCELLANEOUS				24
	8.1	Binding Effect; Waivers; Cumulative Rights and Remedies			24
	8.2	Survival			24
	8.3	Governing Law; Waiver of Jury Trial			24

 

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	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

 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this “ Agreement ”) is made and entered into as of July 9, 2008, by and between BROTMAN MEDICAL CENTER, INC. , a California corporation, debtor-in-possession (“ Borrower ”) and JHA WEST 16, LLC , a Delaware limited liability company (“ Lender ”).

 

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

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

Bankruptcy Code :  Means the United States Bankruptcy Code.

 

 

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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Land : The land consisting of approximately 2.44 acres, legally described on Exhibit A attached hereto and incorporated herein by this reference, together with all additions thereto and substitutions therefor agreed to by Borrower and Lender.

 

Lender :  JHA WEST 16, LLC, a Delaware limited liability company, and its successors and assigns.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Permits : All governmental approvals, authorizations, permits and entitlements which have been or will be issued with respect to the Property, including building permits, annexation agreements, plot plan approvals, subdivision approvals, environmental approvals (including an

 

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environmental impact report if required under applicable law), sewer and water permits, and zoning and land use entitlements.

 

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

 

Permitted Transfer :  Means each of the following:

 

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

 

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

 

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

 

(d)            Permitted Encumbrances.

 

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

 

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

 

(g)            Transfers contemplated by the Option Agreement.

 

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

 

Property :  The Land, the Improvements and the Equipment.

 

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

 

Requirements of Law :  Means (a) the organizational documents of an entity, and (b) any law, regulation, ordinance, code, decree, treaty, ruling or determination of an arbitrator, court or

 

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other Governmental Authority, or any Executive Order issued by the President of the United States, in each case applicable to or binding upon such Person or to which such Person, any of its property or the conduct of its business is subject including, without limitation, laws, ordinances and regulations pertaining to the zoning, occupancy and subdivision of real property.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

I.

LOAN; OPTION TO PURCHASE

 

1.1           Principal .  Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender, the Loan Amount, in accordance with the terms hereof until the Maturity Date but subject to Lender’s Put Right, the disbursement of which is evidenced by the Note.

 

1.2           Interest .

 

(a)             Computation .  Borrower shall pay to Lender interest on the Loan at the Interest Rate and in the manner specified in the Note.

 

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(b)             Usury .  In the event that the interest and/or charges in the nature of interest, if any, provided for by this Agreement or by any other Loan Document, shall contravene a legal or statutory limitation applicable to the Loan, if any, Borrower shall pay only such amounts as would legally be permitted; provided, however, that if the defense of usury and all similar defenses are unavailable to Borrower, Borrower shall pay all amounts provided for herein.  If, for any reason, amounts in excess of the amounts permitted in the foregoing sentence shall have been paid, received, collected or applied hereunder, whether by reason of acceleration or otherwise, then, and in that event, any such excess amounts shall be applied to principal, unless principal has been fully paid, in which event such excess amount shall be refunded to Borrower.

 

1.3           Maturity .  The principal balance owing on the Loan, and all accrued interest and other sums owing under the Loan Documents not otherwise paid when due, shall be due and payable in full on the Maturity Date, subject to Lender’s Put Right.

 

1.4           Release of Deed of Trust .  Lender shall promptly cause the release of the Deed of Trust upon repayment in full of the Loan.

 

1.5           Option to Purchase .

 

(a)             Borrower covenants and agrees to use commercially reasonable efforts to obtain the Emergency Room Permits within twelve (12) months following the Closing Date, unless such period of time is extended by the mutual agreement of the parties, it being understood and agreed that the parties intend to work collaboratively, in good faith, and with all diligence during such period of time to obtain the Emergency Room Permits, at the Borrower’s sole expense, it being further understood and agreed that, to the extent that the parties are working collaboratively, in good faith, and with all diligence during such period of time to obtain the Emergency Room Permits, it is the intention of the parties to extend such twelve (12) month period as necessary, provided that there is a reasonable expectation that such permits can be obtained within an additional six (6) months.

 

(b)             At any time during the Option Period and pursuant to the Option Agreement, Lender shall have the option (the “Option” ) to purchase the Property by providing Buyer with no less than one hundred eighty (180) days’ prior written notice.  Upon exercise of the Option, so long as Borrower has obtained the Emergency Room Permits, Borrower shall immediately commence construction of the Emergency Room Facility in accordance with the terms of the Option Agreement.  The terms of the transactions contemplated by the exercise of the Option, including, without limitation, the purchase price for the Property, shall be as set forth in the Option Agreement.  Unless Lender exercises the Put Right, Lender shall have the right to exercise the Option during the Option Period notwithstanding any prepayment of the Loan.

 

(c)             Lender acknowledges that certain property adjacent to the Property is currently owned by Borrower and improved with, among other things, a hospital, emergency room building, and parking areas, and certain portions of the emergency room building, a building adjacent to the emergency room building, and parking areas extend over and onto the Property.  As such, if, and only if, Lender exercises the Option, and as a condition to Lender’s acquisition of the Property pursuant to the exercise of the Option, Borrower and Lender shall

 

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enter into an Adjacent Property Access Lease, providing for, among other things, a lease-back to Borrower of an area of approximately 10,000 square feet consisting of the emergency room, an area adjacent to the emergency room for use as a radiology room, and certain portions of the adjacent building; a license to use the areas where the generators, oxygen tanks and servers are currently located; access to the tunnel, hospital, parking areas, generators, servers, and oxygen tanks; an easement to use one hundred (100) parking spaces at the Property (subject to the relocation right described in Section 5.22); and the use of certain other appurtenant rights upon terms and conditions as set forth in the Adjacent Property Access Lease.

 

1.6           Current Bankruptcy .  Notwithstanding the provisions of Section 1129(a)(9)(A) or any other provision of the Bankruptcy Code, the Loan shall not be required to be repaid by Borrower upon confirmation of a plan of reorganization for the Borrower in the Current Bankruptcy.

 

II.

CLOSING CONDITIONS

 

2.1           Conditions of Lender’s Obligation to Close .  The Closing Date shall not occur, and Lender shall not be required to disburse the Loan Amount hereunder until the conditions and requirements set forth below have been completed and fulfilled to the reasonable satisfaction of Lender (or waived by Lender in writing):

 

(a)             Loan Documents .  Borrower shall execute and deliver (or cause to be executed and delivered) to Lender and Escrow Holder the Loan Documents and such other documents as Lender may require, in form and substance acceptable to Lender and to its counsel, in their sole discretion, to evidence and secure the Loan.  Lender may designate which of the Loan Documents are to be placed of record, the order of recording thereof, and the offices in which the same are to be recorded.  Borrower shall pay all documentary, intangible, recording and/or registration taxes and/or fees due upon the Note, the Deed of Trust, the Financing Statement and/or the other Loan Documents.

 

(b)             Title Insurance .  Lender shall have received an unconditional commitment from the Title Company to issue the Title Policy.

 

(c)             Brokers’ Affidavit .  Brokers shall have executed and delivered to Lender an affidavit to the effect that Brokers have arranged this transaction and been paid a fee in connection therewith and that Brokers are currently licensed real estate brokers under the laws of the State of California to which affidavit a copy of said brokers’ licenses shall be attached.

 

(d)             Conditions for Disbursement .  Borrower shall have satisfied all conditions for disbursement set forth in Article III.

 

(e)             Tax and Insurance Deposit Account .  Borrower shall have established in Borrower’s name, the Tax and Insurance Deposit Account with a financial institution reasonably approved by Lender, and shall have funded the Initial Deposit, and premiums for the 12-month period following the Closing Date shall have been paid for all insurance required to be maintained by Borrower.

 

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(f)              Recordation of Deed of Trust .  The Deed of Trust shall have been recorded in the Official Records in full compliance with the letter of title and escrow instructions from the Lender to the Escrow Holder.

 

(g)             No Defaults .  As of the Closing Date, no default or event of default under this Agreement or under any of the other Loan Documents shall have occurred and be continuing, and no event shall have occurred which, upon the service of notice and/or the lapse of time, would constitute an event of default thereunder.

 

(h)             Liabilities .  Except for the Current Bankruptcy, and except as set forth on Schedule 2.1(h)  attached hereto, there is no litigation, administrative proceeding, investigation or other legal proceeding pending or, to Borrower’s knowledge, threatened, which would have a Material Adverse Effect.

 

(i)              Reserve Account .  Borrower shall have established in Borrower’s name, the Reserve Account with a financial institution approved by Lender, and shall have funded the Reserve Deposit.

 

(j)              Additional Conditions to Disbursement of Loan Amount .  In addition to the satisfaction of each of the conditions set forth above in this Article II, and the applicable conditions specified in Article III below, Lender may condition the disbursement of the Loan Amount upon Lender’s receipt and approval of each of the additional items set forth in Exhibit B hereto.

 

(k)             Representations and Warranties .  The representations and warranties of Borrower under Article IV shall be true and correct in all material respects through the Closing Date.

 

(l)              Bankruptcy Court Order .  The Bankruptcy Court shall have entered findings and an order in form and substance reasonably approved by Lender approving this Agreement and the other Loan Documents and providing that the Loan and the transaction contemplated hereby was extended by Lender in good faith, as provided in Section 364(e) of the Bankruptcy Code, and that Lender is entitled to all of the protections afforded to Lender provided in Section 364(e) of the Bankruptcy Code.  The order approving this Agreement and the other Loan Documents shall provide, among other things, that the Loan Documents shall not be altered, extended or otherwise modified in this, or any future, bankruptcy case of Borrower.

 

2.2           Conditions of Borrower’s Obligation to Close .  The Closing Date shall not occur, and Borrower shall not be required complete the transaction contemplated hereby, until the conditions and requirements set forth below have been completed and fulfilled to the reasonable satisfaction of Borrower (or waived by Borrower in writing):

 

(a)             Loan Documents .  Lender shall execute and deliver (or cause to be executed and delivered) to Escrow Holder the Loan Documents and such other documents required to be delivered by Lender to Escrow Holder pursuant to the Loan Documents

 

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(b)             Representations and Warranties .  The representations and warranties of Lender under Article IV shall be true and correct in all material respects through the Closing Date.

 

(c)             Bankruptcy Court Order .  The Bankruptcy Court shall have entered an order (i) determining that the payoff amounts of Borrower’s current debtor-in-possession financing and pre-petition financing do not exceed Twenty Two Million and 00/100ths Dollars ($22,000,00.00) in the aggregate, and (ii) expressly disallowing any claim for non-compliance fees in connection therewith.

 

III.

DISBURSEMENT OF LOAN AMOUNT

 

3.1           General .

 

(a)             Reduction of Loan Amount .  The Loan Amount shall be disbursed by Lender for the benefit of Borrower on the Closing Date in accordance with the terms and conditions set forth in this Article III.  Borrower acknowledges that the Loan Amount shall be disbursed minus any (i) delinquent taxes and assessments on the Property not satisfied and removed prior to the Closing Date, and (ii) any mechanic’s liens encumbering the Property.  Any amounts withheld by Lender pursuant to clause (i) of the