GUARANTY (Secured Loan)
GUARANTY
(Secured Loan)
(Secured Loan)
THIS GUARANTY (Secured Loan) (this “Guaranty”) is made as of December 28, 2005, by MEDCATH
CORPORATION, a Delaware corporation (“Guarantor”) in favor of HCPI MORTGAGE CORP., a Delaware
corporation (“Lender”).
R E C I T A L S
A. Pursuant to the terms of that certain Loan Agreement of even date herewith, by and between
Harlingen Medical Center, Limited Partnership, a North Carolina limited partnership (“Borrower”),
as borrower, and Lender, as lender (the “Loan Agreement”), Borrower and Lender have agreed to the
terms and conditions of the Loan (as defined in the Loan Agreement). Those terms used herein with
their initial letter capitalized shall have the meanings given them in the Loan Agreement, unless
otherwise defined herein.
B. The Loan is evidenced by the Note and secured by certain other Loan Documents. The Loan
Documents include this Guaranty.
THEREFORE, to induce Lender to enter into the Loan Agreement and to consummate the
transactions contemplated thereby, and in consideration thereof, Guarantor unconditionally
guarantees and agrees as follows:
1. Guaranty. Guarantor hereby unconditionally and irrevocably guarantees, subject to
the limitations set forth in Paragraph 18 hereof, to Lender:
(a) Full and timely payment when due (whether at maturity, by acceleration, or
otherwise) of up to Ten Million Dollars ($10,000,000.00) of the indebtedness of Borrower now
or hereafter existing under the Loan Documents (or any of them), whether for principal,
interest, penalties, expenses, costs, and fees, including, without limitation, reasonable
attorneys’ fees, court costs, inspection fees, accounting costs, investigation expenses, and
other reasonable related costs and expenses incurred by, or on behalf of, Lender, together
with all renewals, extensions, modifications, rearrangements, and restatements of such
indebtedness.
2. Rights of Lender. Guarantor authorizes Lender, without giving notice to Guarantor
or obtaining Guarantor’s consent and without affecting the liability of Guarantor hereunder, from
time to time to: (a) renew or extend all or any portion of Borrower’s or any other person’s
obligations due under the Note or any of the other Loan Documents; (b) declare all sums owing to
Lender under the Note and any of the other Loan Documents due and payable upon the occurrence of a
default or event of default under the Loan Documents; (c) make changes in the dates specified for
payments of any sums payable in periodic installments under the Note or any of the other Loan
Documents, and accept or deny, in Lender’s sole discretion, partial payments on or performance of
the Note; (d) otherwise modify the terms of any of the Loan Documents, except
for (i) increases in the principal amount of the Note in excess of the Loan Amount as a result
of additional advances made directly to Borrower, (ii) changes in the manner by which
interest rates, fees or charges are calculated under the Note or any of the other Loan Documents (Guarantor
acknowledges that, if the Note or any of the other Loan Documents so provides, said interest rates,
fees and charges may vary from time to time), or (iii) accelerate the maturity date of the Note
where no default or event of default has occurred under the Loan Documents; (e) take and hold
additional security for the performance of Borrower’s or any other person’s obligations under the
Note and the other Loan Documents and abandon, fail to perfect, exchange, enforce, waive or release
any such additional or existing security; (f) apply such additional or existing security for the
Note and direct the order or manner of sale thereof as Lender in its sole discretion may determine;
(g) release, substitute or add any one or more endorsers of the Note or guarantors of Borrower’s or
any other person’s obligations under the Note or any of the other Loan Documents; (h) apply
payments received by Lender from Borrower or any other person to any obligations of Borrower or
such other person under the Note and the other Loan Documents, in such order as Lender shall
determine, in its sole discretion, whether or not any such obligations are covered by this
Guaranty; (i) consent, in the sole discretion of Lender, to the merger, consolidation,
restructuring, dissolution or other change in the structure of Borrower or any other person; and
(j) assign this Guaranty in whole or in part.
3. Guarantor’s General Waivers. Guarantor waives: (a) any defense now existing or
hereafter arising based upon any legal disability or other defense of Borrower, Guarantor or any
other guarantor or other person, or by reason of the cessation or limitation of the liability of
Borrower, Guarantor or any other guarantor or other person from any cause other than full payment
and performance of all obligations due under the Note or any of the other Loan Documents; (b) any
defense based upon any lack of authority of the officers, directors, partners or agents acting or
purporting to act on behalf of Borrower or any other person, or any defect in the formation of
Borrower or any other person; (c) the unenforceability or invalidity of any security or guaranty or
the lack of perfection or continuing perfection, or failure of priority of any security for the
obligations guarantied hereunder; (d) any defense based upon Lender’s election of any remedy
against Guarantor, Borrower or any other person; (e) any defense based upon Lender’s failure to
disclose to Guarantor any information concerning Borrower’s or any other person’s financial
condition or any other circumstances bearing on Borrower’s or any other person’s ability to pay and
perform all obligations due under the Note or any of the other Loan Documents; (f) any failure by
Lender to give notice to Borrower, Guarantor or any other person of the sale or other disposition
of security held for the Note, and any defect in notice given by Lender in connection with any such
sale or disposition of security held for the Note; (g) any failure of Lender to comply with
applicable laws in connection with the sale or disposition of security held for the Note,
including, without limitation, any failure by Lender to conduct a commercially reasonable sale or
other disposition of such security; (h) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in any other respects
more burdensome than that of a principal, or that reduces a surety’s or guarantor’s obligations in
proportion to the principal’s obligation; (i) any use of cash collateral under Section 363 of the
Federal Bankruptcy Code; (j) any defense based upon Lender’s election, in any proceeding instituted
under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal
Bankruptcy Code or any successor statute; (k) any defense based upon
any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy
Code; (l) prior to payment in full of all of the Obligations, any right of
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subrogation, any right
to enforce any remedy which Lender may have against Borrower or any other person and any right to
participate in, or benefit from, any security now or hereafter held by Lender for the obligations
due under the Note or any of the other Loan Documents; (m) presentment, demand, protest and notice
of any kind, including, without limitation, notice of acceptance of this Guaranty and of the
existence, creation or incurring of new or additional guaranteed obligations and notice of intent
to accelerate and of acceleration of the indebtedness under the Note; (n) the benefit of any
statute of limitations affecting the liability of Borrower or any other person, enforcement of the
Note or any other Loan Documents, the liability of Guarantor hereunder or the enforcement hereof;
and (o) any failure of Lender to pursue, or delay in pursuing, any other remedy in Lender’s power.
Guarantor agrees that the payment and performance of all obligations due under the Note or any of
the other Loan Documents or any part thereof or other act which tolls any statute of limitations
applicable to the Note or the other Loan Documents shall similarly operate to toll the statute of
limitations applicable to Guarantor’s liability hereunder. Without limiting the generality of the
foregoing or any other provision hereof, Guarantor hereby expressly waives the provisions of: (a)
Sections 34.02 and 34.03 of the Texas Business and Commerce Code; (b) Section 17.001 of the Texas
Civil Practice and Remedies Code; (c) Rule 31 of the Texas Rules of Civil Procedure, (d) comparable
provisions of the laws of any other jurisdiction, and (e) all other suretyship defenses to the
extent such laws are applicable to this Guaranty or the agreements, covenants, or obligations of
Guarantor hereunder.
4. Waiver of Rights of Subrogation. Notwithstanding anything to the contrary
contained herein or in any other document to which Guarantor is a party, until all obligations
under this Guaranty are fully paid and performed, Guarantor hereby expressly waives with respect to
Borrower and any other person (including any surety) any and all rights at law or in equity to
subrogation, to reimbursement, to exoneration, to contribution, to setoff or to any other rights
that could accrue to a surety against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, or to a holder or transferee against a maker,
and which Guarantor may have or hereafter acquire against Borrower or any other person in
connection with or as a result of Guarantor’s execution, delivery and/or performance of this
Guaranty or any other document to which Guarantor is a party. Guarantor agrees that Guarantor
shall not have or assert any such rights against Borrower or any other person (including any
surety), either directly or as an attempted setoff to any action commenced against Guarantor by
Borrower or any other person (whether as borrower or in any other capacity) or by Lender.
Guarantor hereby acknowledges and agrees that this waiver is intended to benefit Lender and shall
not limit or otherwise affect Guarantor’s liability hereunder, under any other document to which
Guarantor is a party, or the enforceability hereof or thereof.
5. Guarantor’s Warranties and Covenants. Guarantor warrants and acknowledges that:
(a) Lender would not enter into the Loan Agreement and consummate the transactions contemplated
thereby but for this Guaranty; (b) Guarantor has read and understands the Loan Agreement, the Note
and the other Loan Documents; (c) there are no conditions precedent to the effectiveness of this
Guaranty and this Guaranty shall be in full force and effect and binding on Guarantor as of the
date hereof, regardless of whether Lender obtains other collateral or any guaranties from others or
takes any other action not contemplated by Guarantor; (d) Guarantor
has established adequate means of obtaining from sources other than Lender, on a continuing
basis, financial and other information pertaining to Borrower’s financial condition, and the status
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of Borrower’s payment and performance of all obligations due under the Note and the other Loan
Documents, and Guarantor agrees to keep adequately informed from such means of any facts, events or
circumstances which might in any way affect Guarantor’s risks hereunder, and Lender has made no
representation to Guarantor as to any such matters; (e) the most recent financial statements of
Guarantor delivered to Lender are true and correct in all material respects, have been prepared in
accordance with generally accepted accounting principles consistently applied (or other principles
disclosed in writing and acceptable to Lender) and fairly present, in all material respects, the
financial condition of Guarantor as of the respective dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor since the respective dates thereof; and (f)
Guarantor has not and shall not, without the prior written consent of Lender, sell, lease, assign,
encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor’s
assets, or any interest therein, without Lender’s prior written consent, which consent may be given
or withheld in Lender’s sole discretion, unless either Guarantor or a successor entity remains
liable under the Guaranty.
6. Subordination. Except as otherwise agreed between Guarantor and Lender, until all
the obligations under this Guaranty are fully paid and performed, Guarantor hereby subordinates all
present and future indebtedness owing by Borrower to Guarantor to the obligations at any time owing
by Borrower to Lender under the Note and the other Loan Documents. Guarantor agrees to make no
claim for such indebtedness until all obligations of Borrower and any other person under the Note
and any of the other Loan Documents and all other direct and indirect obligations of Guarantor to
Lender have been fully discharged.
7. Bankruptcy of Borrower or Any Other Person; Reinstatement and Revival. In any
bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall
file, on or before the date which is twenty (20) days prior to the expiration of the prescribed
statutory period for filing of claims, all claims which Guarantor may have against Borrower or any
other person relating to any indebtedness of Borrower to Guarantor and shall assign to Lender all
rights of Guarantor thereunder. If Guarantor does not timely file any such claim, Lender, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in
Lender’s discretion, to assign the claim to a nominee and to cause a proof of claim to be filed in
the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and
cannot be revoked. Lender or its nominee shall have the right, in its reasonable discretion, to
accept or reject any plan proposed in such proceeding and to take any other action which a party
filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or
otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount
payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns
to Lender all of Guarantor’s rights to any such payments or distributions; provided,
however, Guarantor’s obligations hereunder shall not be satisfied except to the extent that
Lender receives cash by reason of any such payment or distribution. If Lender receives anything
hereunder other than cash, the same shall be held as collateral for amounts due under this
Guaranty. The liability of Guarantor hereunder shall be reinstated and revived, and the rights of
Lender shall continue, with respect to any amount at any time paid by Borrower or any other person
on account of the Note or any of the other Loan Documents, which Lender shall be required to
restore or return
upon the bankruptcy, insolvency or reorganization of Borrower or any other person or for any
other reason, all as though such amount had not been paid.
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8. Disclosure of Information. Lender shall have the right at any time to sell,
assign, transfer, negotiate or, so long as Lender continues to be the “lead lender”, grant
participations of at least $5 million each in, all or any part of the Loan, the Note and/or the
other Loan Documents, including, without limitation, this Guaranty, and Guarantor acknowledges and
agrees that, in connection with any such action by Lender, Lender may forward to each actual or
prospective assignee, transferee or participant all documents and information in Lender’s
possession, relating to this Guaranty or to Guarantor, whether such documents and information were
furnished by Borrower or Guarantor to Lender or otherwise, provided that such parties have executed
confidentiality agreements in form reasonably acceptable to Guarantor.
9. Additional, Independent and Unsecured Obligations. This is a guaranty of payment
and not of collection and the obligations of Guarantor hereunder shall be in addition to and shall
not limit or in any way affect the obligations of Guarantor under any other existing or future
guaranties unless said other guaranties are expressly modified or revoked in writing. This
Guaranty is independent of the obligations of Borrower and any other person under the Note and the
other Loan Documents. Lender may bring a separate action to enforce the provisions hereof against
Guarantor without taking action against Borrower or any other person or joining Borrower or any
other person as a party to such action, and without first or concurrently proceeding against any
security held by Lender. This Guaranty is secured and shall be deemed to be secured by any
security instrument which recites that it secures this Guaranty.
10. Attorneys’ Fees; Enforcement. Notwithstanding anything contained herein to the
contrary, if any attorney is engaged by Lender to enforce or defend any provision of this Guaranty
or any of the other Loan Documents, or as a consequence of any default or event of default under
this Guaranty or any of the other Loan Documents, with or without the filing of any legal action or
proceeding, then Guarantor shall immediately pay on demand all Attorneys’ Fees and Costs, as
defined below, incurred by Lender in connection therewith, together with interest thereon from the
date of such demand until paid, at the rate of interest then applicable to the principal owing
under the Note. As used in this Guaranty, “Attorneys’ Fees and Costs” shall mean all the
reasonable fees and expenses of counsel to Lender incurred after a Default, which may include,
without limitation, costs incurred for printing, photostating, duplicating, facsimile
transmissions, record searches, appraisals, air freight charges, discovery, investigation and other
expenses, and fees billed for law clerks, paralegals, experts and witnesses, accountants, and
others not admitted to the bar but performing services under the supervision of or on behalf of an
attorney. The term “Attorneys’ Fees and Costs” shall also include, without limitation, all such
reasonable fees and expenses incurred with respect to legal actions, appeals, arbitrations, and
bankruptcy proceedings, whether or not any action or proceeding is brought with respect to the
matter for which said fees and expenses were incurred.
11. Effect of Waivers. Guarantor warrants and agrees that each of the waivers set
forth in this Guaranty are made with Guarantor’s full knowledge of their significance and
consequences, and that under the circumstances the waivers are reasonable. If any of said waivers
shall hereafter be determined by a court of competent jurisdiction to be contrary to any applicable
law or against public policy, such waivers shall be effective only to the maximum extent
permitted by law.
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12. Rules of Construction. The word “Borrower” as used herein shall include the named
Borrower and any other person at any time assuming or otherwise becoming primarily liable for all
or any part of the obligations of the named Borrower under the Note or any of the other Loan
Documents. The term “person” as used herein shall include any individual, company, trust or other
legal entity of any kind whatsoever. If this Guaranty is executed by more than one person, the
term “Guarantor” shall include all such persons. When the context and construction so require, all
words used in the singular herein shall be deemed to have been used in the plural and vice versa.
All headings appearing in this Guaranty are for convenience only and shall be disregarded in
construing this Guaranty. Any capitalized term not defined in this Guaranty shall have the meaning
given to such term in the Loan Agreement or the other Loan Documents.
13. Governing Law. This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of Texas, except to the extent preempted by Federal laws. Guarantor
and all persons and entities in any manner obligated to Lender under this Guaranty consent to the
jurisdiction of any Federal or State Court within the State of Texas, and also consent to service
of process by any means authorized by Texas or Federal law.
14. No Third Party Beneficiaries. This Guaranty is solely for the benefit of Lender
and its successors and assigns, and is not intended to nor shall it be deemed to be for the benefit
of any third party, including, without limitation, Borrower.
15. Amendments. Neither this Guaranty nor any provision hereof may be amended,
modified, waived, discharged or terminated except by an instrument in writing duly signed by or on
behalf of Lender and Guarantor.
16. Miscellaneous. The provisions of this Guaranty shall bind and benefit the heirs,
executors, administrators, legal representatives, successors and assigns of Guarantor and Lender.
The liability of all persons and entities who are in any manner obligated hereunder shall be joint
and several. If any provision of this Guaranty shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from
this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or
unenforceable portion had never been part of this Guaranty.
17. Waiver of Right to Trial by Jury. GUARANTOR ACKNOWLEDGES THAT IT HAS HAD THE
ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTIONS
OF THE UNITED STATES AND THE STATE OF TEXAS. GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (2) IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LENDER AND GUARANTOR WITH RESPECT TO
THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
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GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT LENDER MAY FILE A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY.
Guarantor’s Initials:
18. Limitation of Liability.
(a) Notwithstanding anything contained in this Guaranty to the contrary, this Guaranty
shall be released upon the occurrence of both of following: (i) Borrower’s LTM EBITDA
exceeds Ten Million Five Hundred Thousand Dollars ($10,500,000.00) for two consecutive
fiscal quarters and (ii) Ten Million Dollars ($10,000,000) or more of the VBHS Notes have
converted to equity and such VBHS Notes have been released.
(b) In addition to the Guarantor’s liability for principal, as set forth above,
Guarantor shall also at all times remain liable for all fees, costs and other obligations
under this Guaranty without limit and for all interest on the principal amount guaranteed
hereunder (exclusive of interest payments satisfied by advances under the Loan and added to
the principal amount of the Loan as described in the Loan Agreement, which amounts will be
governed by the limitations set forth in subparagraphs (a) through (c) above). Any payments
received or recovery realized by Lender may, except to the extent paid by Guarantor on the
indebtedness for which Guarantor is liable under this Guaranty, be applied in Lender’s sole
discretion to indebtedness of Borrower to Lender other than the portion of the indebtedness
for which Guarantor is liable under this Guaranty.
19. Texas Statutory Waiver Provision. To the maximum extent permitted by applicable
law, the Guarantor hereby waives all rights, remedies, claims and defenses based upon or related to
Sections 51.003, 51.004 and 51.005 of the Texas Property Code to the extent the same pertains or
may pertain to any enforcement of this Guaranty.
20. SPECIFIC NOTICE. IT IS EXPRESSLY AGREED AND UNDERSTOOD THAT THIS GUARANTY
INCLUDES INDEMNIFICATION PROVISIONS WHICH, IN CERTAIN CIRCUMSTANCES, COULD INCLUDE AN
INDEMNIFICATION BY THE GUARANTOR OF LENDER FROM CLAIMS OR LOSSES ARISING AS A RESULT OF LENDER’S
OWN NEGLIGENCE.
21. Additional Provisions. Such additional terms, covenants and conditions as may be
set forth on any exhibit executed by Guarantor and attached hereto which recites that it is an
exhibit to this Guaranty are incorporated herein by this reference.
[Remainder of Page Intentionally Left Blank – Signature Follows]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first written above.
| GUARANTOR: | ||||||
| MEDCATH CORPORATION, | ||||||
| a Delaware corporation | ||||||
| By: | /s/ Xxxxx X. Xxxxxx | |||||
| Name: | ||||||
| Title: | Vice President | |||||
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