PERSONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS PERSONAL GUARANTY OF PAYMENT AND PERFORMANCE ("Guaranty"), is made as
of July 14, 1997, by Xxxxxx X. Xxxxx, D.O. ("Guarantor"), whose address is 0000
Xxxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, in favor of Prospect Medical
Group, Inc., a California professional corporation ("Purchaser"), whose address
is 00000 Xxxxx Xxxxx Xxxx., Xxxxx 000, Xxxxx Xxxxx, Xxxxxxxxxx 00000.
WITNESSETH:
WHEREAS, Guarantor is the sole shareholder of Santa Xxx/Tustin Physicians
Group, Inc., a California professional corporation ("Company"); and
WHEREAS, Purchaser is acquiring all of the shares of Company pursuant to
the terms of that certain Agreement for the Purchase and Sale of Stock, dated
June 23, 1997, by and among Purchaser, Company and Guarantor ("Stock Purchase
Agreement"); and
WHEREAS, Company, Guarantor, and Purchaser are also willing to enter into
certain ancillary agreements in the form attached as exhibits to the Stock
Purchase Agreement (the term "Stock Purchase Agreement" includes the exhibits,
schedules and ancillary agreements to be delivered at Closing; all capitalized
terms are as defined in the Stock Purchase Agreement unless otherwise defined
herein); and
WHEREAS, Guarantor makes certain representations, warranties, indemnities,
and covenants in the Stock Purchase Agreement, relating to the payment and
performance of certain liabilities and claims of Company which occurred or arose
prior to the Closing Date from the Reserve Account (collectively, the
"Obligations"); and
WHEREAS, to the extent that the Reserve Account is insufficient to provide
for the payment of such Obligations, Guarantor is willing to guarantee the
Obligations to induce Purchaser to enter into the Stock Purchase Agreement;
NOW, THEREFORE, to induce Purchaser to enter into the Stock Purchase
Agreement and in consideration of the foregoing promises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby covenants and agrees for the benefit of
Purchaser, as follows:
1. GUARANTY.
1.1 Notwithstanding anything to the contrary contained in this Guaranty,
pursuant to the terms of the Stock Purchase Agreement, in the event Purchaser is
required to provide for the payment of any Obligation, Purchaser is required to
exhaust all sums in the Reserve Account prior to making a demand upon Guarantor
for payment. In the event that the funds in the Reserve Account are
insufficient to pay any or all claims or liabilities of Company which were
incurred
prior to the Closing Date for which payment has not already been made, Guarantor
does hereby unconditionally and irrevocably guarantee to Purchaser the full and
prompt performance of the Obligations when such performance is due on a
dollar-for-dollar, after-tax basis (with such tax effects to be determined
within 20 days of the completion of an audit of Company's financial statements
for the first fiscal period following the Closing Date), including but not
limited to payment for breach of any of the Obligations. Purchaser and
Guarantor agree that Guarantor's liability for the Obligations shall be limited
to $1,000,000, exclusive of any amounts in the Reserve Account; provided
however, that the following shall not count toward such $1,000,000 limitation:
(i) any Obligation known by Guarantor to exist at the time of the execution of
the Stock Purchase Agreement which was not disclosed to Purchaser, or (ii)
Obligations resulting from fraud, tax liabilities, or a violation of state or
federal statutes or regulations governing the practice of medicine.
1.2 Subject to the limitations of Section 4 of this Guaranty, Guarantor
hereby agrees that if any performance of the Obligations is not rendered in
accordance with their terms for any reason whatsoever, Guarantor shall
immediately make such payments and performance. Guarantor further agrees to pay
Purchaser all expenses (including, without limitation, reasonable attorneys'
fees) paid or incurred by Purchaser in endeavoring to obtain performance of the
Obligations, to enforce any other obligations guaranteed hereby, or to enforce
this Guaranty.
2. REINSTATEMENT OF OBLIGATIONS. If at any time all or any part of any
payment or performance made by Guarantor or received by Purchaser from Guarantor
under or with respect to this Guaranty is or must be rescinded or returned for
any reason whatsoever (including, but not limited to, the insolvency, bankruptcy
or reorganization of Guarantor or Company), then the obligations of Guarantor
hereunder shall, to the extent of the payment or performance rescinded or
returned, be deemed to have continued in existence, notwithstanding such
previous payment or performance made by Guarantor, or receipt of payment or
performance by Purchaser, and the obligations of Guarantor hereunder shall
continue to be effective or be reinstated, as the case may be, as to such
payment or performance, all as though such previous payment or performance by
Guarantor had never been made.
3. WAIVERS BY GUARANTOR. To the extent permitted by law, Guarantor hereby
waives and agrees not to assert or take advantage of (as a defense or otherwise)
any one or more of the following:
3.1 Except as provided in Section 1.1 herein, any right to require
Purchaser to proceed against Company or any other person or to proceed against
or exhaust any security held by Purchaser at any time or to pursue any other
remedy in Purchaser's power or under any other agreement before proceeding
against Guarantor hereunder; and any right or claim or right to cause a
marshaling of the assets of Guarantor;
3.2 Any defense arising from the failure of Purchaser (i) to file or
enforce a claim against the estate (in administration, bankruptcy or any other
proceeding) of any other person or
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persons; (ii) to ascertain the extent or nature of the Collateral or other
rights with respect thereto, or the liability of any liable party or the
obligations evidenced or secured thereby; and
3.3 An assertion or claim that the automatic stay provided by 11 U.S.C.
Section 362 (arising upon the voluntary or involuntary bankruptcy proceeding of
Company) or any other stay provided under any other debtor relief law (whether
statutory, common law, case law or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, shall operate or
be interpreted to stay, interdict, condition, reduce or inhibit the ability of
Purchaser to enforce any of its rights, whether now or hereafter required, which
Purchaser may have against Guarantor.
4. TERM. The term of this Guaranty shall be three (3) years from the date
hereof, except for (i) any Obligation known by Guarantor to exist at the time of
the execution of the Stock Purchase Agreement which was not disclosed to
Purchaser, or (ii) Obligations resulting from fraud, tax liabilities, or a
violation of state or federal statutes or regulations governing the practice of
medicine, in which case the Guaranty shall continue.
5. GENERAL PROVISIONS.
5.1 FULL RECOURSE. Except as provided in Section 1.1 herein concerning
the requirement that Purchaser first exhaust all sums in the Reserve Account
prior to making demand on Guarantor, or in Section 4 covering the term of this
Guaranty, all of the terms and provisions of this Guaranty are recourse
obligations as to Guarantor and not restricted by any limitation on personal
liability.
5.2 KNOWLEDGE OF COMPANY AND COMPANY'S SHAREHOLDER. As the sole
shareholder, director, and officer of Company prior to the Closing, Guarantor
warrants and represents that Guarantor is fully aware of the financial and
other conditions and status of Company and is executing and delivering this
Guaranty based solely upon Guarantor's own knowledge and independent
investigation of all matters pertinent hereto, and that Guarantor is not relying
in any manner upon any representation or statement of Purchaser, except as set
forth in the Stock Purchase Agreement. Guarantor warrants, represents and
agrees that Guarantor is in a position to obtain, and Guarantor hereby assumes
full responsibility for obtaining, any additional information concerning the
financial and other conditions and status of Company and any other matter
pertinent hereto, and that Guarantor is not relying upon Purchaser to furnish,
and shall have no right to require Purchaser to obtain or disclose, any
information with respect to the Obligations guaranteed hereby, the financial
condition or character of Company or the ability of Company to pay or perform
the Obligations guaranteed hereby, the existence of any security for any or all
of such indebtedness or obligations, the existence or nonexistence of any other
guaranties of all or any part of such indebtedness or obligations, any actions
or non-action on the part of Purchaser, Company or any other person or entity,
or any other matter, fact or occurrence whatsoever. By executing this Guaranty,
Guarantor acknowledges and knowingly accepts the full range of risks encompassed
within a contract of guaranty.
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5.3 SURVIVAL/BREACH BY PURCHASER. Except for a material breach by
Purchaser of a provision of the Stock Purchase Agreement and Employment
Agreement, and subject to the term set forth herein, this Guaranty shall be and
shall remain in full force and effect and shall survive the exercise of any
remedy by Purchaser under law, in equity, and under the Stock Purchase
Agreement, including, without limitation, any foreclosure or deed in lieu
thereof. In the event of a material breach by Purchaser of a provision of the
Stock Purchase Agreement or the Employment Agreement, the obligations, waivers
and subrogation of Guarantor hereunder shall be suspended until such breach is
cured.
5.4 RESERVATION OF RIGHTS. Nothing contained in this Guaranty shall
prevent or in any way diminish or interfere with any rights or remedies,
including, without limitation, the right to contribution, which Purchaser may
have against Company, Guarantor or any other party under any applicable federal,
state or local laws, all such rights being hereby expressly reserved.
5.5 RIGHTS CUMULATIVE. Purchaser's rights under this Guaranty shall be
in addition to all rights of Purchaser under law, in equity, and any other
agreement.
5.6 MITIGATION. Purchaser must act in good faith to mitigate any
damages or costs suffered as a result of Guarantor's failure to perform the
Obligations.
5.7 ENTIRE AGREEMENT; AMENDMENT; SEVERABILITY. Except as set forth in
the Stock Purchase Agreement, this Guaranty contains the entire agreement
between the parties respecting the matters herein set forth and supersedes all
prior agreements, whether written or oral, between the parties respecting such
matters; and Guarantor and Purchaser acknowledge that there are no
contemporaneous oral agreements with respect to the subject matter hereof. This
Guaranty may not be changed, modified or amended, except by a writing executed
by the parties hereto; and no obligation of Guarantor can be released or waived
by Purchaser or any agent of Purchaser, except by a writing duly executed by
Purchaser. A determination that any provision of this Guaranty is unenforceable
or invalid shall not affect the enforceability or validity of any other
provision, and any determination that the application of any provision of this
Guaranty to any person or circumstance is illegal or unenforceable shall not
affect the enforceability or validity of such provision as it may apply to any
other persons or circumstances.
5.8 GOVERNING LAW; BINDING EFFECT; ASSIGNMENT; WAIVER OF ACCEPTANCE.
This Guaranty shall be governed by and construed in accordance with the laws of
the State of California, except to the extent that the applicability of any of
such laws may now or hereafter be preempted by Federal law, in which case such
Federal law shall so govern and be controlling. The provisions of this Guaranty
shall be binding upon Guarantor and its respective heirs, executors, legal
representatives, successors and assigns and shall inure to the benefit of
Purchaser, the heirs, executors, legal representatives, successors and assigns
of Purchaser. This Guaranty shall in no event be impaired by any change which
may arise by reason of the death of Guarantor or by reason of the dissolution of
Company. Except for an assignment to St. Joseph's Hospital Systems, St Joseph's
Foundation, St. Joseph's Medical Corporation, or any of their affiliates, this
Guaranty is assignable by Purchaser with Seller's consent, which consent shall
not
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be unreasonably withheld, and any full or partial assignment hereof by Purchaser
shall operate to vest in the assignee all rights and powers herein conferred
upon and granted to Purchaser and so assigned by Purchaser. Guarantor expressly
waives notice of transfer or assignment of this Guaranty and acknowledges that
the failure by Purchaser to give any such notice shall not affect the
liabilities of Guarantor hereunder. Notwithstanding the foregoing, Guarantor
shall not assign any of its rights or obligations under this Guaranty.
Guarantor hereby waives any acceptance of this Guaranty by Purchaser, and this
Guaranty shall immediately be binding upon Guarantor.
5.9 NOTICES. All notices, demands, requests or other communications to
be sent by one party to the other hereunder or required by law shall be in
writing and shall be deemed to have been validly given or served by delivery of
the same in person to the intended addressee, or by depositing the same with
Federal Express or another reputable private courier service for next business
day delivery to the intended addressee at its address set forth on the first
page of this Guaranty or at such other address as may be designated by such
party as herein provided, or by depositing the same in the United States mail,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the intended addressee at its address set forth on the first page
of this Guaranty or at such other address as may be designated by such party as
herein provided. All notices, demands and requests shall be effective upon such
personal delivery, or one (1) business day after being deposited with the
private courier service, or two (2) business days after being deposited in the
United States mail as required above. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
5.10 NO WAIVER; TIME OF ESSENCE; BUSINESS DAY. The failure of any party
hereto to enforce any right or remedy hereunder, or to promptly enforce any such
right or remedy, shall not constitute a waiver thereof nor give rise to any
estoppel against such party nor excuse any of the parties hereto from their
respective obligations hereunder. Any waiver of such right or remedy must be in
writing and signed by the party to be bound. This Guaranty is subject to
enforcement at law or in equity, including actions for damages or specific
performance. All damages sought shall be on a dollar-for-dollar, after-tax
basis, with such tax effects to be determined within 20 days of the completion
of an audit of Company's financial statements for the first fiscal period
following the Closing Date.. Time is of the essence hereof. The term "business
day" as used herein shall mean a weekday, Monday through Friday, except a legal
holiday.
5.11 SUCCESSIVE ACTIONS. A separate right of action hereunder shall
arise each time Purchaser acquires knowledge of any failure of payment or
performance of any matter guaranteed by Guarantor under this Guaranty. Separate
and successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time. No action hereunder shall preclude
any subsequent action, and Guarantor hereby waives and covenants not to assert
any defense in the nature of splitting of causes of action or merger of
judgments.
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6. ARBITRATION. The parties firmly desire to resolve all disputes arising
hereunder without resort to litigation in order to protect their respective
business reputations and the confidential nature of certain aspects of their
relationship. Accordingly, any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration as set
forth below.
6.1 All disputes which in any manner arise out of or relate to this
Agreement or the subject matter thereof, shall be resolved exclusively by
arbitration in accordance with the provisions of this Section 6. Either party
may commence arbitration by sending a written demand for arbitration to the
other party, setting forth the nature of the controversy, the dollar amount
involved, if any, and the remedies sought, and attaching a copy of this Section
to the demand.
6.2 The parties stipulate to arbitration before a single, mutually
agreed upon arbitrator sitting on the Los Angeles, California Judicial
Arbitration Mediation Services (JAMS) panel. In the event that the parties are
unable to agree upon the person chosen as arbitrator within 30 days of the
demand for arbitration, the arbitrator shall be selected in the sole discretion
of the JAMS administrator. The arbitrator shall be a member of the California
bar.
6.3 The parties shall share all costs of arbitration. The prevailing
party shall be entitled to reimbursement by the other party of such party's
attorneys' fees and costs and any arbitration fees and expenses incurred in
connection with the arbitration hereunder.
6.4 The substantive law of the State of California shall be applied by
the arbitrator. All proceedings in arbitration shall be in accordance with the
California Code of Civil Procedure, as amended, and the parties shall have the
right to legal discovery in any matter submitted to arbitration in satisfaction
of California Code of Civil Procedure Section 1283.05, as permitted by
California Code of Civil Procedure Section 1283.1(b).
6.5 Arbitration shall take place in Los Angeles, California unless the
parties otherwise agree. As soon as reasonably practicable, a hearing with
respect to the dispute or matter to be resolved shall be conducted by the
arbitrator. As soon as reasonably practicable thereafter, the arbitrator shall
arrive at a final decision, which shall be reduced to writing, signed by the
arbitrator and mailed to each of the parties and their legal counsel.
6.6 All decisions of the arbitrator shall be final, binding and
conclusive on the parties and shall constitute the only method of resolving
disputes or matters subject to arbitration pursuant to this Agreement. The
arbitrator or a court of appropriate jurisdiction may issue a writ of execution
to enforce the arbitrator's judgment. Judgment may be entered upon such a
decision in accordance with applicable law in any court having jurisdiction
thereof.
6.7 Notwithstanding the foregoing, because time is of the essence of
this Agreement, the parties specifically reserve the right to seek a judicial
temporary restraining order, preliminary injunction, or other similar equitable
relief.
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6.8 The decision and award of the arbitrator shall be kept confidential
by the parties to the greatest extent possible. No disclosure of such decision
or award shall be made by the parties except as required by law or as necessary
or appropriate to effect the enforcement thereof.
6.9 Should either Employer or Physician institute any action or
procedure to enforce this Agreement or any provision hereof, or for damages by
reason of any alleged breach of this Agreement or of any provision hereof, or
for a declaration of rights hereunder (including without limitation
arbitration), the prevailing party in any such action or proceeding shall be
entitled to receive from the other party all costs and expenses, including
without limitation reasonable attorneys' fees, incurred by the prevailing party
in connection with such action or proceeding.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as
of the day and year first above written.
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx, D.O.
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