TABLE OF CONTENTS

 

			Page
1.1		Principal	7
1.2		Interest	7
1.3		Maturity	7
1.4		Current Bankruptcy	7
II.	CLOSING CONDITIONS		8
2.1		Conditions of Lender’s Obligation to Close	8
2.2		Conditions of Borrower’s Obligation to Close	9
III.	DISBURSEMENT OF LOAN AMOUNT		10
3.1		General	10
3.2		Inspections	10
3.3		Lender Responsibility	10
3.4		Direct Application of Proceeds	10
3.5		Insufficient Documentation	11
IV.	REPRESENTATIONS AND WARRANTIES OF LENDER AND BORROWER		11
4.1		Representations and Warranties of Borrower	11
4.2		Representations and Warranties of Lender	13
V.	COVENANTS OF BORROWER		14
5.1		Paying Costs of Loan	14
5.2		Using Loan Proceeds	14
5.3		Keeping of Records	14
5.4		Providing Financial Information	14
5.5		Providing Operating Budgets and Operating Statements	15

 

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			Page
5.6		Complying with the Loan Documents and Other Agreements	15
5.7		Compliance with Laws	15
5.8		Ownership of Personal Property	15
5.9		Representations and Warranties	15
5.10		Trade Names	15
5.11		No Distributions	16
5.12		Future Development	16
5.13		Further Assurances	16
5.14		Notice of Litigation, Etc	16
5.15		Signage	16
5.16		Maintenance of Existence	17
5.17		Impound Account	17
5.18		Reserve Account	17
5.19		Existence; Change of Name; Location as a Registered Organization	17
5.20		Property Management	18
5.21		Prohibited Transactions	18
5.22		Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws	18
5.22		Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws	18
VI.	DEFAULTS		19
6.1		Events of Default	19
0.6.2		Rights and Remedies	20
VII.	SINGLE PURPOSE ENTITY REQUIREMENTS		21
VIII.	MISCELLANEOUS		21

 

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		Page
8.1	Binding Effect; Waivers; Cumulative Rights and Remedies	21
8.2	Survival	21
8.3	Governing Law; Waiver of Jury Trial	21
8.4	Counterparts	21
8.5	Notices	22
8.6	Costs and Expenses; Indemnification; Reimbursement	22
8.7	No Third Party Reliance	22
8.8	Sale of Loan or Participations	22
8.9	Arrangement by Brokers	23
8.10	Recourse	23
8.11	Time of the Essence	24
8.12	Entire Agreement; No Oral Modifications	24
8.13	Captions	24
8.14	Joint and Several Liability	24
8.15	Borrower-Lender Relationship	24
8.16	Benefit of Lender	24
8.17	Single Purpose Entity	24
8.18	Pledge of Accounts	24
8.19	Prohibition Against Transfers	24
8.20	Lender Approval	25
8.21	Personal Property Financings	25

 

LIST OF EXHIBITS AND EXHIBITS

 

EXHIBIT A	—		Legal Description of Land
EXHIBIT B	—		Additional Required Items Prior to Funding
SCHEDULE 2.1(h)	—		Liabilities/Litigation

 

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LOAN AGREEMENT

 

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

 

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

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

Bankruptcy Code :  Means the United States Bankruptcy Code.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Permitted Transfer :  Means each of the following:

 

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

 

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

 

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

 

d.             Permitted Encumbrances.

 

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

 

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

 

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

 

Property :  The Land, the Improvements and the Collateral.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

I.

 

LOAN; OPTION TO PURCHASE

 

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

 

1.2          Interest .

 

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

 

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

 

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

 

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

 

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

 

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II.

 

CLOSING CONDITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)              Liabilities .  Except for the Current Bankruptcy, and except as set forth on Schedule 2.1(h)  attached hereto, there is no litigation, administrative proceeding,

 

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investigation or other legal proceeding pending or, to Borrower’s knowledge, threatened, which would have a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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III.

 

DISBURSEMENT OF LOAN AMOUNT

 

3.1          General .

 

(a)              Reduction of Loan Amount .  The Loan Amount shall be disbursed by Lender for the benefit of Borrower on the Closing Date in accordance with the terms and conditions set forth in this Article III.  Borrower acknowledges that the Loan Amount shall be disbursed minus any (i) delinquent taxes and assessments on the Property not satisfied and removed prior to the Closing Date, and (ii) any mechanic’s liens encumbering the Property.  Any amounts withheld by Lender pursuant to clause (i) of the preceding sentence shall promptly be applied by Lender to pay and delinquent taxes and assessments on the Property and any amounts withheld by Lender pursuant to clause (ii) of the preceding sentence shall be held in an interest bearing account with Escrow Holder pending Borrower’s direction as to the application of such proceeds.

 

(b)              Advances to Lender .  Lender may, at Lender’s option, without any obligation to do so, advance to itself all sums due to Lender under this Agreement or under any of the other Loan Documents.  Lender shall also have the right, but not the obligation, to advance and directly apply the proceeds of the Loan to the satisfaction of any of Borrower’s other obligations hereunder or under any of the other Loan Documents.

 

3.2          Inspections .

 

(a)              Access to the Property .  Upon reasonable advance notice, Lender, the Title Company, Consultants and their representatives shall have access to the Property at all reasonable times and shall have the right to enter the Property and to conduct such inspections thereof as they shall deem necessary or desirable for the protection of Lender’s interests.

 

(b)              Consultants .  Lender may retain any Consultants deemed necessary or desirable by Lender, at Borrower’s expense, to make periodic inspections of the Property.  Lender may also retain such other Consultants as Lender deems necessary or convenient to perform such services as may, from time to time, be required by Lender in connection with the Loan, this Agreement, the other Loan Documents or the Property.

 

(c)              No Reliance by Borrower or Third Party .  Neither Borrower nor any third party shall have the right to use or rely upon any reports generated by Lender or its Consultants for any purpose whatsoever.

 

3.3          Lender Responsibility .  It is expressly understood and agreed that Lender assumes no liability or responsibility for protection of the Property, or for any representations made by Borrower.

 

3.4          Direct Application of Proceeds .  Lender shall have the right, but not the obligation, to disburse and directly apply the proceeds of any portion of the Loan Amount to the satisfaction of any of Borrower’s obligations hereunder or under the other Loan Documents.

 

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Any advance by Lender for such purpose shall be part of the Loan and shall be evidenced and secured by the Loan Documents.  Lender may advance such funds and incur such expenses as Lender deems necessary to preserve the Property and any security for the Loan, and such expenses, even though in excess of the amount of the Loan, shall be secured by any and all documents securing the Loan and the Note and shall be payable to Lender upon demand.

 

3.5          Insufficient Documentation .  In the event that Lender shall determine, in its reasonable judgment, that proper documentation to support disbursement of the Loan Amount, as required by this Agreement, has not been furnished, it may withhold payment of the Loan Amount as shall not be so supported by proper documentation, and shall promptly notify Borrower of the discrepancy in or omission of such documentation.  Until such time as such discrepancy or omission is corrected to the satisfaction of Lender, it may withhold disbursement of the Loan Amount.

 

IV