SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of September 25,
1997, is entered into by and among XXXXXXXXXX XXXXXXXXX, an individual
("SUBORDINATE CREDITOR"), PROSPECT MEDICAL HOLDINGS, INC., a Delaware
corporation ("BORROWER"), and IMPERIAL BANK, a California banking corporation
("SENIOR CREDITOR"), with reference to the following facts:
R E C I T A L S
A. Borrower, Sierra Medical Management Inc., a Delaware corporation,
Sinnadurai X. Xxxxxxx, M.D., Karunyan Xxxxxxxxxxxx, and Subordinate Creditor,
are concurrently herewith entering into that certain Agreement and Plan of
Reorganization, dated as of September 23, 1997 (the "REORGANIZATION AGREEMENT").
B. Pursuant to the terms of the Reorganization Agreement, Borrower is
concurrently herewith executing and delivering to Subordinate Creditor a
Subordinated Promissory Note, dated as of even date herewith, 1997 (as it may
have been renewed, extended or rearranged, "SUBORDINATE NOTE"), in the original
principal sum of Two Hundred Fifty Thousand Dollars ($250,000). All liens,
security interests and assignments now or hereafter securing payment or
performance of the Subordinate Note 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, without limitation,
the security instruments described on EXHIBIT A, attached hereto and
incorporated herein.
D. Borrower has requested that Senior Creditor make a loan under the Loan
Agreement to Borrower, which Borrower shall use to, among other things, fund its
obligations owing to Subordinate Creditor under the Reorganization Agreement.
As a condition to its making such loan to Borrower, Senior Creditor has required
that Borrower's obligations under the Subordinate Note and the Reorganization
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.
E. The parties hereto now hereby agree to subordinate the lien position,
payment and performance of the Subordinate Note, the Reorganization Agreement
and the
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Subordinate Liens to the payment and performance of 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).
A G R E E M E N T S
In consideration of the premises and the mutual agreements herein set
forth, Borrower, Subordinate Creditor 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 to Senior Creditor, whether direct or indirect, primary or secondary,
joint or several, fixed or contingent and whether originally payable to Senior
Creditor or any 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. 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 to Subordinate Creditor, whether direct or indirect, primary
or secondary, joint or several, fixed or contingent and whether originally
payable to Subordinate Creditor or to a third Person and subsequently acquired
by Subordinate 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 Debt evidenced by the Subordinate Note and all renewals,
extensions, rearrangements, refundings and modifications of the Subordinate Note
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 Creditor will
not, except as otherwise provided in SECTION 2(B) hereof, (i) ask, demand, xxx
for, take or receive, or retain, from Borrower 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
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any evidence of equity or ownership, any of the Subordinated Debt, (iii) ask,
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 Note 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 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 Creditor
hereby directs Borrower to make, and Borrower hereby agrees to make, such prior
payment of the Senior Debt to Senior Creditor.
(b) Notwithstanding the foregoing, Borrower may make regularly
scheduled payments (but no prepayments) of interest and principal due on the
Subordinate Note, 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 and Subordinate Creditor 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 Note.
3. (a) Upon any distribution of the assets of Borrower in connection
with any dissolution, winding up, liquidation or reorganization of Borrower
(whether in Proceedings or upon an assignment for the benefit of creditors or
any other marshalling of the assets and liabilities of Borrower or otherwise),
Senior Creditor shall first be entitled to receive payment in full of all Senior
Debt before Subordinate Creditor 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
of any kind or character, whether in cash, property or securities, to which
Subordinate Creditor 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) 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 Subordinate Creditor, by
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 Creditor
hereby authorizes and directs 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 Creditor. In furtherance of
the foregoing, but not by way of limitation thereof, in the event Borrower is
subject to any Proceeding, with the result that Borrower 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 Creditor agrees that all or such part of such interest,
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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 Creditor hereby irrevocably authorizes and empowers
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 Creditor, 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. 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 in any meeting of creditors of Borrower, (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 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 Subordinate Creditor, such payment or distribution to 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 Subordinate Creditor where necessary). In the event of any
failure by 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 Creditor shall not be entitled to be subrogated to any of the rights
of Senior Creditor against Borrower 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 Creditor have any right of
indemnity, reimbursement or contribution against Borrower or any other Person
for any payment of the Senior Debt, and Subordinate Creditor hereby expressly
waives 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 Creditor and Senior
Creditor, and are
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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, which is
unconditional and absolute, to pay to Subordinate Creditor 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 Creditor and
creditors of Borrower other than Senior Creditor.
(f) Senior Creditor may, at any time and from time to time, without
the consent of or notice to Subordinate Creditor, and without impairing or
releasing the obligations of Subordinate Creditor 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 Note, the Loan Agreement or any document executed in connection
therewith; (ii) exercise or refrain from exercising any rights against Borrower
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 Creditor represents and warrants 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 Creditor hereby
agrees (a) that Subordinate Creditor will not enforce the Subordinate Liens
without the prior written consent of Senior 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 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 Subordinate Creditor upon an express trust for the benefit of Senior
Creditor.
5. Subordinate Creditor does hereby expressly subordinate and make
second, junior and inferior any and all liens, rights, powers, titles and
interests of Subordinate Creditor 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 Creditor
agrees that all liens, rights, titles and interests of the Senior Liens shall
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be unconditionally first, prior and superior to any and all liens, rights,
powers, titles and interests of Subordinate Creditor under, pursuant to or by
virtue of the Subordinate Liens. Subordinate Creditor further agrees that any
and all liens, rights, titles and interests of Subordinate Creditor 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 Creditor, his 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, his successors or assigns or any other legal
holder of the Subordinated Debt hereby assigns and releases to the legal holder
of the Senior Debt:
(i) all of his 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 his 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.
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 Creditor may otherwise agree,
such excess shall be made payable to the joint order of Subordinate Creditor 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.
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9. Subordinate Creditor represents 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 Note has been paid in full through
September 25, 1997 and that the aggregate outstanding principal balance of the
Subordinate Note on this date is $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,
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
Creditor 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
Note 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 Creditor 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 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 Creditor 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
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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. Subordinate Creditor acknowledges that he has received a copy and is
familiar with the terms of and conditions of the Note, the Loan Agreement, and
the other Loan Documents, and that Subordinate Creditor approves all such terms
and conditions and consents to the execution and delivery thereof and of this
Agreement by Borrower and to the performance of each thereof by Borrower.
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 Subordinate Creditor: 00000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
If to Borrower: 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 Creditor and Senior Creditor
(without any necessity for notice to or consent by Borrower, which are expressly
WAIVED by Borrower). 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.
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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 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
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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 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.
[Remainder of this page intentionally left blank]
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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.
Subordinate Creditor: /s/ Xxxxxxxxxx Xxxxxxxxx
----------------------------------------
XXXXXXXXXX XXXXXXXXX
Borrower: PROSPECT MEDICAL HOLDINGS, INC.,
a Delaware corporation
By /s/ Xxxxx X. Xxxxxx
--------------------------------------
Title CEO
-----------------------------------
Senior Creditor: IMPERIAL BANK,
a California banking corporation
By /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Title SVP
-----------------------------------
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