SUBORDINATION AND NOTE CANCELLATION AGREEMENT
This SUBORDINATION AND NOTE CANCELLATION AGREEMENT (this "AGREEMENT"),
dated as of September 25, 1997, is entered into by and among SINNADURAI X.
XXXXXXX, M.D. ("XX. XXXXXXX"), KARUNYAN XXXXXXXXXXXX, M.D. ("XX. XXXXXXXXXXXX")
(Xx. Xxxxxxx and Xx. Xxxxxxxxxxxx are sometimes collectively referred to herein
as "SUBORDINATE CREDITORS" and individually as a "SUBORDINATE CREDITOR"),
PROSPECT MEDICAL HOLDINGS, INC., a Delaware corporation ("BORROWER"), PROSPECT
MEDICAL SYSTEMS, INC., a Delaware corporation ("MANAGER"), PROSPECT MEDICAL
GROUP, INC., a California professional corporation ("PURCHASER"), and IMPERIAL
BANK, a California banking corporation ("SENIOR CREDITOR"), with reference to
the following facts:
R E C I T A L S
A. Subordinate Creditors, The Xxxxxxxxxxxx Charitable Remainder Trust
("TRUST"), Purchaser, and Sierra Primary Care Medical Group, Inc., a California
professional corporation ("COMPANY"), are party to that certain Agreement for
the Purchase and Sale of Stock of Sierra Primary Care Medical Group, Inc., dated
as of September 23, 1997 (the "STOCK PURCHASE AGREEMENT"), pursuant to which
Purchaser is purchasing one hundred percent (100%) of the stock of Company from
Subordinate Creditors and Trust.
B. Pursuant to the terms of the Stock Purchase Agreement, Purchaser is
concurrently herewith executing and delivering to each Subordinate Creditor a
Contingent Promissory Note, dated as of September 25, 1997 (each as it may have
been renewed, extended or rearranged, a "SUBORDINATE NOTE" and collectively, the
"SUBORDINATE NOTES"), each in the original principal sum of One Million One
Hundred Twenty-Five Thousand Dollars ($1,125,000). In addition, pursuant to the
terms of the Stock Purchase Agreement, Borrower is concurrently herewith
executing and delivering to each Subordinate Creditor a Subordinated Guaranty,
dated as of September 25, 1997 (each, a "SUBORDINATE GUARANTY" and collectively,
the "SUBORDINATE GUARANTEES"), in order to guaranty the payment of the
Subordinate Notes. All liens, security interests and assignments now or
hereafter securing payment or performance of the Subordinate Notes and/or the
Subordinate Guarantees are herein called "SUBORDINATE LIENS."
C. Borrower has previously executed and delivered to Senior Creditor that
certain Secured Revolving Note, dated July 3, 1997 (as it may have been renewed,
extended and rearranged, the "NOTE"), in the original principal sum of Ten
Million Dollars ($10,000,000). The Note has been issued pursuant to that
certain Revolving Credit Agreement of even date with the Note (as it may have
been amended, supplemented or restated, the "LOAN AGREEMENT") between Borrower
and Senior Creditor. All liens, security interests and assignments now or
hereafter securing payment or performance of the Note and/or the Loan Agreement
are herein called "SENIOR LIENS." The Senior Liens include,
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without limitation, the security instruments described on EXHIBIT A, attached
hereto and incorporated herein.
D. Manager has previously executed and delivered to Senior Creditor that
certain Continuing Guaranty, dated as of even date with the Loan Agreement and
the Note ("MANAGER GUARANTY"), pursuant to which Manager has guaranteed the
payment and performance of Borrower's obligations owing to Senior Creditor under
the Note and the Loan Agreement.
E. Manager and Purchaser have previously executed and delivered that
certain Management Services Agreement, dated as of June 4, 1996, as amended (the
"MANAGEMENT AGREEMENT"), pursuant to which Manager provides management services
to Purchaser in consideration of certain management fees, all as more
particularly set forth in the Management Agreement. In order to secure
Purchaser's obligations owing to Manager, Manager and Purchaser have previously
executed and delivered that certain Security Agreement, dated as of July 3,
1997, as amended by that certain Amendment Number One, dated July 14, 1997 (the
"SECURITY AGREEMENT"), pursuant to which Purchaser has granted to Manager a
first priority security interest and lien upon certain assets of Company. Both
the Management Agreement and the Security Agreement have been collaterally
assigned by Manager to Senior Creditor, pursuant to a Collateral Assignment of
Transaction Documents, dated as of July 3, 1997, between Manager and Senior
Creditor, in order to secure Manager's obligations owing to Senior Creditor
under the Manager Guaranty.
F. Borrower, Manager and Purchaser are part of a group of companies under
common control which all benefit from the loans made by Senior Creditor under
the Loan Agreement and evidenced by the Note. Borrower has requested that
Senior Creditor make a loan under the Loan Agreement to Borrower, which Borrower
shall relend to Manager and Manager shall relend to Purchaser such that
Purchaser will be able to have funds necessary to pay the cash consideration to
Subordinate Creditors and Trust pursuant to the terms of the Stock Purchase
Agreement to acquire the stock of Company. As a condition to its making such
loan to Borrower, Senior Creditor has required that Borrower's obligations under
the Subordinate Guarantees and Purchaser's obligations under the Subordinate
Notes and the Stock Purchase Agreement, and the Subordinate Liens securing any
of the same, be subordinated to Borrower's indebtedness under the Loan Agreement
and the Note, the Senior Liens securing same, and Purchaser's obligations under
the Management Agreement and the Security Agreement.
G. The parties hereto now hereby agree to subordinate the lien position,
payment and performance of the Subordinate Notes, the Stock Purchase Agreement,
the Subordinate Guarantees and the Subordinate Liens to the payment and
performance of the Management Agreement, the Security Agreement, the Note, the
Loan Agreement and the Senior Liens, all as set forth in the succeeding
provisions of this Agreement (which shall control over any conflicting or
inconsistent recitals above).
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A G R E E M E N T S
In consideration of the premises and the mutual agreements herein set
forth, Borrower, Manager, Purchaser, Subordinate Creditors and Senior Creditor
hereby agree as follows:
1. All initially capitalized terms used but not defined in this Agreement
shall have the meanings given to such terms in the Loan Agreement. In addition,
as used in this Agreement, the following terms shall have the respective
meanings indicated:
"SENIOR DEBT" shall mean all Debt now existing or hereafter created of
Borrower or Purchaser to Senior Creditor, whether direct or indirect, primary or
secondary, joint or several, fixed or contingent and whether originally payable
to Senior Creditor or to Manager or any other third Person and subsequently
acquired by or assigned to Senior Creditor, and whether evidenced by note,
application for or agreement for reimbursement of advance under letter of
credit, open account, overdraft, indorsement, surety agreement, guaranty or
otherwise, including, without limitation, all indebtedness evidenced by the Note
and all renewals, extensions, rearrangements, refundings and modifications of
the Note, and all Debt arising under or incurred pursuant to the Loan Agreement
and any other documents executed or delivered in connection therewith, and all
Debt arising under or incurred pursuant to the Management Agreement or the
Security Agreement. The Senior Debt shall include amounts accruing subsequent
to the filing of any bankruptcy, receivership, insolvency or like petition.
Without limiting the generality of the foregoing, Senior Debt shall include all
obligations for fees, to indemnify, to reimburse for expenses and to reimburse
for advances (whether for the payment of taxes, insurance premiums, the
preservation or protection of property or the title thereto or for any other
reason).
"SUBORDINATED DEBT" shall mean all Debt now existing or hereafter
created of Borrower or Purchaser to Subordinate Creditors, whether direct or
indirect, primary or secondary, joint or several, fixed or contingent and
whether originally payable to Subordinate Creditors or to a third Person and
subsequently acquired by Subordinate Creditors, and whether evidenced by note,
application for or agreement for reimbursement of advance under letter of
credit, open account, overdraft, indorsement, surety agreement, guaranty or
otherwise, including, without limitation, all Debt evidenced by the Subordinate
Notes and all renewals, extensions, rearrangements, refundings and modifications
of the Subordinate Notes, and all Debt arising under or incurred pursuant to the
Subordinate Guarantees and any other documents executed or delivered in
connection therewith.
2. (a) Unless and until all Senior Debt shall have been fully paid and
satisfied and the obligation of Senior Creditor to make any further loans or
advances to Borrower shall have ceased and terminated, Subordinate Creditors
will not, except as otherwise provided in SECTION 2(b) hereof, (i) ask, demand,
xxx for, take or receive, or retain, from Borrower, Purchaser or any other
Person, by setoff or in any other manner, payment of all or any part of the
Subordinated Debt, (ii) forgive, cancel or discharge, or permit to be converted
into any evidence of equity or ownership, any of the Subordinated Debt, (iii)
ask,
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demand or receive any security for the Subordinated Debt in addition to the
security described on EXHIBIT B attached hereto and incorporated herein
("PERMITTED SUBORDINATED LIENS"), (iv) amend the Subordinate Notes, the
Subordinate Guarantees, or any other document existing in connection with the
Subordinated Debt, or (v) declare the Subordinated Debt due and payable by
reason of any default or for any other reason, or bring or join with any
creditor in bringing any proceeding against Borrower or Purchaser under any
bankruptcy, reorganization, readjustment or arrangement of debt, suspension of
payments, receivership, liquidation or insolvency or similar law or statute now
or hereafter in effect ("PROCEEDINGS"). Subordinate Creditors hereby direct
Borrower and Purchaser to make, and Borrower and Purchaser hereby agree to make,
such prior payment of the Senior Debt to Senior Creditor.
(b) Notwithstanding the foregoing, Purchaser may make regularly
scheduled payments (but no prepayments) of interest and principal due on the
Subordinate Notes, PROVIDED that on the date of the proposed payment, no Event
of Default has occurred and is continuing or will result from the making of such
payment. Upon the occurrence of an Event of Default and upon written notice
thereof given to Borrower, Purchaser and Subordinate Creditors by Senior
Creditor or its representative, no further payments shall be made by Purchaser
with respect to the principal of or interest on the Subordinate Notes, and the
Subordinate Notes shall thereupon be immediately and automatically cancelled,
and all unpaid obligations thereunder shall thereupon be immediately and
automatically extinguished, without further action required on the part of
Senior Creditor, Borrower, Purchaser, Subordinate Creditors or any other Person.
SUBORDINATE CREDITORS HEREBY ACKNOWLEDGE THAT THE TERMS OF THIS SECTION 2(b)
FORM A MATERIAL PART OF THE CONSIDERATION FOR SENIOR CREDITOR'S AGREEMENT TO
MAKE THE LOAN DESCRIBED IN RECITAL F HEREINABOVE WHICH ULTIMATELY PROVIDED THE
FUNDS TO PURCHASER FOR PAYMENT TO SUBORDINATE CREDITORS OF THE PURCHASE PRICE
UNDER THE STOCK PURCHASE AGREEMENT.
SEM KA
Initial here: ------------- -------------
Xx. Xxxxxxx Xx. Xxxxxxxxxxxx
3. (a) Upon any distribution of the assets of Borrower and/or Purchaser
in connection with any dissolution, winding up, liquidation or reorganization of
Borrower and/or Purchaser (whether in Proceedings or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities of
Borrower and/or Purchaser, or otherwise), Senior Creditor shall first be
entitled to receive payment in full of all Senior Debt before Subordinate
Creditors shall be entitled to receive any payment in respect of the
Subordinated Debt. Upon any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets of Borrower and/or
Purchaser of any kind or character, whether in cash, property or securities, to
which Subordinate Creditors would be entitled except for the provisions of this
Agreement (including any such payment or distribution which may be payable or
deliverable by virtue of the provisions of any securities which are subordinated
as junior in right of payment to the Subordinated Debt)
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shall be made by the liquidating trustee or agent or other Persons making such
payment or distribution (whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise) (a "PAYING PARTY"), or if received by either
Subordinate Creditor, by such Subordinate Creditor, directly to Senior Creditor,
to the extent necessary to pay in full the Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to Senior Creditor.
Subordinate Creditors hereby authorize and direct each Paying Party to pay over
to Senior Creditor upon demand by Senior Creditor, all such payments or
distributions without the necessity of any inquiry as to the status or balance
of the Senior Debt, and without further notice to or consent of Subordinate
Creditors. In furtherance of the foregoing, but not by way of limitation
thereof, in the event Borrower and/or Purchaser is subject to any Proceeding,
with the result that Borrower and/or Purchaser is excused from the obligation to
pay all or part of the interest otherwise payable in respect of the Senior Debt
during the period subsequent to the commencement of any such Proceeding,
Subordinate Creditors agree that all or such part of such interest, as the case
may be, shall be payable out of, and to that extent diminish and be at the
expense of, reorganization dividends or distributions in respect of the
Subordinated Debt.
(b) Subordinate Creditors hereby irrevocably authorize and empower
Senior Creditor to demand, xxx for, collect and receive every such payment or
distribution and give acquittance therefor, to execute, sign, endorse, transfer
and deliver any and all receipts and instruments, and to file claims and take
such other proceedings, all in the name of Subordinate Creditors, or otherwise,
as Senior Creditor may deem necessary or advisable for the enforcement of this
Agreement, but Senior Creditor has no obligation to do so. Each Subordinate
Creditor hereby (i) agrees duly and promptly to take such action as may be
required by Senior Creditor to collect the Subordinated Debt for the account of
Senior Creditor and/or to file appropriate proofs of claim in respect of the
Subordinated Debt, (ii) authorizes and empowers Senior Creditor to vote the full
amount of the Subordinated Debt in any bankruptcy, reorganization or similar
proceeding affecting Borrower and/or Purchaser and in any meeting of creditors
of Borrower and/or Purchaser, (iii) agrees to execute and deliver to Senior
Creditor or its representatives on demand such powers of attorney, proofs of
claim and other instruments as may be requested by Senior Creditor or its
representatives in order to enable Senior Creditor to enforce any and all claims
upon or with respect to the Subordinated Debt, to collect and receive any and
all such payments or distributions which may be payable or deliverable at any
time upon or with respect to the Subordinated Debt, and to vote the full amount
of the Subordinated Debt in any proceeding or meeting referred to in clause (ii)
of this subparagraph (b).
(c) In the event any payment or distribution of assets of Borrower
and/or Purchaser of any kind or character, whether in cash, property or
securities, and whether or not pursuant to any dissolution, winding up,
liquidation or reorganization, not permitted by or in accordance with the
provisions of this Agreement shall be received by either Subordinate Creditor,
such payment or distribution to such Subordinate Creditor shall not be
commingled with other funds and shall be held in trust for the benefit of, and
shall be paid over or delivered to, Senior Creditor, or to its representative,
in precisely the form received (except for the endorsement or assignment of such
Subordinate Creditor where
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necessary). In the event of any failure by such Subordinate Creditor to make
any such endorsement or assignment, Senior Creditor is hereby irrevocably
authorized to make same.
(d) Notwithstanding the terms and provisions of this Agreement,
Subordinate Creditors shall not be entitled to be subrogated to any of the
rights of Senior Creditor against Borrower, Purchaser or any other Person or any
Senior Liens or other collateral security or rights of offset held by Senior
Creditor for the payment of the Senior Debt, nor shall Subordinate Creditors
have any right of indemnity, reimbursement or contribution against Borrower,
Purchaser or any other Person for any payment of the Senior Debt, and
Subordinate Creditors hereby expressly waive each and every such right of
subrogation, indemnity, reimbursement and contribution.
(e) The provisions of this Agreement are and are intended solely for
the purpose of defining the relative rights of Subordinate Creditors and Senior
Creditor, and are solely for the benefit of Senior Creditor and may not be
relied upon or enforced by any party other than Senior Creditor, and nothing
contained in this Agreement is intended to or shall impair the obligation of
Borrower and/or Purchaser, which is unconditional and absolute, to pay to
Subordinate Creditors the principal of and interest on the Subordinated Debt as
and when the same shall become due and payable in accordance with its terms
(except as otherwise provided in Section 2(b) hereof), or to affect the relative
rights of Subordinate Creditors and creditors of Borrower and Purchaser other
than Senior Creditor.
(f) Senior Creditor may, at any time and from time to time, without
the consent of or notice to Subordinate Creditors, and without impairing or
releasing the obligations of Subordinate Creditors hereunder (i) change the
manner, place or terms of payment or change or extend the time of payment of, or
renew or alter, the Senior Debt or the security therefor, or otherwise amend in
any manner the Management Agreement, the Note, the Loan Agreement or any
document executed in connection therewith; (ii) exercise or refrain from
exercising any rights against Borrower, Purchaser and others; (iii) apply any
sums by whomsoever paid or however realized to the Senior Debt; (iv) sell,
exchange, release, surrender, realize upon or otherwise deal with in any manner
and in any order any property whatsoever and by whomsoever at any time pledged
or mortgaged to secure, or howsoever securing, any Senior Debt; (v) release
anyone liable in any manner for the payment or collection of any Senior Debt;
and (vi) settle or compromise all or any part of the Senior Debt, and
subordinate the payment of any part of the Senior Debt to the payment of any
other indebtedness (including any other part of the Senior Debt). No
invalidity, irregularity or unenforceability of all or any part of the Senior
Debt or of any of the Senior Liens shall affect, impair or be a defense to this
Agreement.
4. Subordinate Creditors jointly and severally represent and warrant that
no liens, security interests or assignments exist to secure any Subordinated
Debt other than the Permitted Subordinated Liens, and agree that no further
liens, security interests or assignments will arise or will be taken in the
future to secure any Subordinated Debt. Without limiting the foregoing,
Subordinate Creditors hereby agree (a) that Subordinate Creditors will not
enforce the Subordinate Liens without the prior written consent of Senior
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Creditor and (b) that the Subordinate Liens, to the extent enforceable, will be
enforceable by Senior Creditor. All amounts, whether in the form of cash,
proceeds, checks, drafts, orders or other instruments for the payment of money,
recovered with respect to any property of Borrower subject to the Subordinate
Liens by the enforcement of the Subordinate Liens shall immediately upon receipt
thereof by either Subordinate Creditor be paid over and delivered in the form
received, but with any necessary endorsements or instruments required for
payment to Senior Creditor, and, until so delivered shall not be commingled with
any other funds or property but shall be held by such Subordinate Creditor upon
an express trust for the benefit of Senior Creditor.
5. Subordinate Creditors do hereby expressly subordinate and make second,
junior and inferior any and all liens, rights, powers, titles and interests of
Subordinate Creditors under, pursuant to or by virtue of the Subordinate Liens
to all liens, rights, titles and interests of Senior Creditor under, pursuant to
or by virtue of the Senior Liens, and Subordinate Creditors agree that all
liens, rights, titles and interests of the Senior Liens shall be unconditionally
first, prior and superior to any and all liens, rights, powers, titles and
interests of Subordinate Creditors under, pursuant to or by virtue of the
Subordinate Liens. Subordinate Creditors further agree that any and all liens,
rights, titles and interests of Subordinate Creditors under, pursuant to or by
virtue of the Subordinate Liens shall be and remain expressly subject and
subordinate to any renewal, extension, refinancing, consolidation, modification
or supplement of the liens, rights, titles and interests of the Senior Liens, as
well as any and all increases thereof.
6. Subordinate Creditors, their successors or assigns or any other legal
holder of the Subordinated Debt shall not acquire by subrogation, contract or
otherwise any lien upon or other estate, right or interest in any property
(including but not limited to any which may arise in respect to real estate
taxes, assessments or other governmental charges) which is or may be prior in
right to the Senior Liens or any renewal, extension, refinancing, consolidation,
modification or supplement thereof.
7. Subordinate Creditors, their successors or assigns or any other legal
holder of the Subordinated Debt hereby assign and release to the legal holder of
the Senior Debt:
(i) all of their right, title, interest or claim, if any, in and to
the proceeds of all policies of insurance covering any property
for application upon the indebtedness secured by or other
disposition thereof in accordance with the provisions of the
Senior Liens;
(ii) all of their right, title and interest or claim, if any, in and
to all awards or other compensation made for any taking of any
part of any property covered by the Senior Liens to be applied
upon the indebtedness secured by or disposed of in accordance
with the provisions of the Senior Liens.
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In the event that following any such application and disposition of the
insurance proceeds and condemnation award and other compensation, any balance
remains, then, except as Borrower and Subordinate Creditors may otherwise agree,
such excess shall be made payable to the joint order of Subordinate Creditors
and Borrower or their successors or assigns. If the legal holder of the Senior
Liens shall at any time release to Borrower any such insurance proceeds or
condemnation award for the purpose of restoration, such release shall not be
deemed to be an additional advance under the Senior Liens nor shall it otherwise
be deemed to be in violation of any restriction of this instrument upon the
amount permitted to be secured by Senior Liens and to which the Subordinate
Liens are subordinate.
8. The Subordinate Liens shall be and the same are hereby are and shall
continue subject and subordinate to any and all leases upon all or any part of
any property covered by the Senior Liens and to which the Senior Liens shall now
be or shall hereafter have been made subject and subordinate.
9. Subordinate Creditors represent to Senior Creditor that the
Subordinated Debt is in good standing and in full force and effect and no
breaches or defaults exist thereunder which have not been cured or waived, that
all accrued interest on the Subordinate Notes has been paid in full through
September 25, 1997 and that the aggregate outstanding principal balance of the
Subordinate Notes on this date is $2,250,000.
10. This Agreement extends to and covers all amounts due on the Senior
Debt both before and after any filing of any Proceeding by or against Borrower
or Purchaser, and Senior Creditor shall be entitled to amounts accruing on the
Senior Debt from the date of filing of said Proceeding to the date of full and
final payment of the Senior Debt.
11. No part of the Subordinated Debt or any instrument evidencing or
securing the same has been heretofore transferred or assigned, and Subordinate
Creditors will not transfer or assign any part of the Subordinated Debt nor any
instrument evidencing the same while the Senior Debt remains unpaid.
Subordinate Creditors shall promptly deliver to Senior Creditor any instrument
evidencing the Subordinated Debt, including without limitation, the Subordinate
Notes and the Subordinate Guarantees for Senior Creditor to hold for the term of
this Agreement.
12. In the event of a breach by any party hereto of any of the provisions
of this Agreement, or in the event any representation or warranty contained
herein or furnished to Senior Creditor by any party hereto shall prove to have
been false when made, Senior Creditor shall have all rights provided to it under
law or equity, including without limitation the right to xxx the breaching party
or parties to recover damages suffered by Senior Creditor as a result of such
breach, and the right to obtain injunctive relief.
13. Subordinate Creditors shall give, execute and deliver any notice,
statement, instrument, document, agreement or other papers, and shall permit
Senior Creditor, upon request, to make any notation or endorsement upon any
promissory note or other instrument or documents evidencing or securing the
Subordinated Debt, that may be
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necessary or desirable, or that Senior Creditor any reasonably request, in order
to create, preserve or validate the rights of Senior Creditor hereunder, to
enable Senior Creditor to exercise or enforce its rights hereunder, or otherwise
to effect the purposes of this Agreement.
14. This Agreement is a continuing one, and all Senior Debt to which it
applies or may apply under the terms hereof shall conclusively be presumed to
have been created in reliance hereon.
15. Borrower hereby agrees to pay upon demand all attorneys' fees and
expenses reasonably incurred by Senior Creditor in connection with the
enforcement of its rights under this Agreement.
16. Subordinate Creditors and Borrower agree that, if at any time all or
any part of any payment previously applied by Senior Creditor to the Senior Debt
is or must be returned by Senior Creditor--or recovered from Senior
Creditor--for any reason (including the order of any bankruptcy court), this
Agreement shall automatically be reinstated to the same effect, as if the prior
application had not been made, and, in addition, Borrower hereby agrees to
indemnify Senior Creditor against, and to save and hold Senior Creditor harmless
from any required return by Senior Creditor--or recovery from Senior
Creditor--of any such payments because of its being deemed preferential under
applicable bankruptcy, receivership or insolvency laws, or for any other reason.
17. Each Subordinate Creditor acknowledges that he has received a copy and
is familiar with the terms of and conditions of the Note, the Loan Agreement,
the Management Agreement and the other Loan Documents, and that each Subordinate
Creditor approves all such terms and conditions and consents to the execution
and delivery thereof and of this Agreement by Borrower and Purchaser, and to the
performance of each thereof by Borrower and Purchaser.
18. All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile transmission or similar writing) and
shall be given to such party at its address or facsimile number set forth below
or such other address or facsimile number as such party may hereafter specify by
notice to the other party in accordance with this Section 18. Each such notice,
request or other communication shall be deemed given on the second business day
after mailing; PROVIDED that actual notice, however and from whomever given or
received, shall always be effective on receipt.
If to Xx. Xxxxxxx: 00000 00xx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
If to Xx. Xxxxxxxxxxxx: 0000 Xxxxxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
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If to Borrower, Manager or
Purchaser: c/o Prospect Medical Holdings, Inc.
00000 Xxxxx Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, M.D.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Senior
Creditor: 000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
19. This Agreement shall not be changed orally but shall be changed only
by agreement in writing signed by Subordinate Creditors and Senior Creditor
(without any necessity for notice to or consent by Borrower or Purchaser, which
are expressly WAIVED by Borrower and Purchaser). No course of dealing between
the parties, no usage of trade and no parole or extrinsic evidence of any nature
shall be used to supplement or modify any of the terms or provisions of this
Agreement.
20. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement constitutes the entire
agreement and understanding among the parties hereto and supersedes any and all
prior agreements and understandings, oral or written, relating to the subject
matter hereof and thereof.
21. The provisions of this Agreement are severable. The invalidity, in
whole or in part, of any provision of this Agreement shall not affect the
validity or enforceability of any other of its provisions. If one or more
provisions hereof shall be declared invalid or unenforceable, the remaining
provisions shall remain in full force and effect and shall be construed in the
broadest possible manner to effectuate the purposes hereof.
22. This Agreement shall be deemed to have been made in the State of
California and the validity, construction, interpretation, and enforcement
hereof, and the rights of the parties hereto, shall be determined under,
governed by, and construed in accordance with the internal laws of the State of
California, without regard to principles of conflicts of law.
23. (a) Each controversy, dispute or claim between the parties arising
out of or relating to this Agreement, which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "CLAIM DATE" (defined as
the date on which a party subject to this Agreement gives written notice to all
other parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 ET SEQ. of the California Code of Civil Procedure, or their
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successor section ("CCP"), which shall constitute the exclusive remedy for the
settlement of any controversy, dispute or claim concerning this Agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than Los Angeles County (the "COURT"). The referee shall be a retired
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his or her
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (i) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (ii) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section 644
in any court in the State of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim, by
filing a petition for a hearing and/or trial. All discovery permitted by this
Agreement shall be completed no later than fifteen (15) days before the first
hearing date established by the referee. The referee may extend such period in
the event of a party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No party
shall be entitled to "priority" in conducting discovery. Depositions may be
taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter except
that when any party so requests, a court reporter will be used at any hearing
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the
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reference proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies and to
enter equitable orders that will be binding upon the parties. The referee shall
issue a single judgment at the close of the reference proceeding which shall
dispose of all of the claims of the parties that are the subject of the
reference. The parties hereto expressly reserve the right to contest or appeal
from the final judgment or any appealable order or appealable judgment entered
by the referee. The parties hereto expressly reserve the right to findings of
fact, conclusions of laws, a written statement of decision, and the right to
move for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date set forth in the first paragraph hereof.
/s/ Sinnadurai X. Xxxxxxx, M.D.
Subordinate Creditors: ----------------------------------------------
SINNADURAI X. XXXXXXX, M.D.
/s/ Karunyan Xxxxxxxxxxxx, M.D.
----------------------------------------------
KARUNYAN XXXXXXXXXXXX, M.D.
Borrower: PROSPECT MEDICAL HOLDINGS, INC.,
a Delaware corporation
By /s/ Xxxxx XxXxxxxx
-----------------------------------------
Title President
-----------------------------------------
Manager: PROSPECT MEDICAL SYSTEMS, INC.,
a Delaware corporation
By /s/ Xxxxx XxXxxxxx
-----------------------------------------
Title President
-----------------------------------------
Purchaser: PROSPECT MEDICAL GROUP, INC.,
a California professional corporation
By /s/ Xxxxx XxXxxxxx
-----------------------------------------
Title President
-----------------------------------------
Senior Creditor: IMPERIAL BANK,
a California banking corporation
By /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Title SVP
-----------------------------------------
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