Exhibit 10.4e
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of
February 18, 1997 between MAXICARE HEALTH PLANS, INC., a Delaware
corporation ("Lender"), and XXXXXX X. XXXXXXXX ("Borrower"), in
light of the following:
RECITALS
WHEREAS, Borrower has requested Lender to lend to Borrower the
sum of Two Million Two Hundred Twenty Nine Thousand Twenty Eight
Dollars and Thirteen Cents ($2,229,028.13) in order to enable
Borrower to exercise options to purchase common stock issued by
Lender;
WHEREAS, Lender has agreed to make such loan to Borrower in
accordance with the terms and conditions contained in this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
In addition to the terms defined above, the following terms
shall have the following definitions:
1.1 "Applicable Rate" shall mean the annual interest
rate in effect on the Loan from time to time during the term
thereof.
1.2 "Borrowing Rate" shall mean the weighted average
annual interest rate charged to the Company on any borrowed capital
during any calendar year during the term of the Loan.
1.3 "Company" shall mean the Lender and all of its
subsidiary companies and/or entities.
1.4 "Event of Default" is defined in Section 11 of the
Pledge Agreement.
1.5 "LIBOR" means the one-year London Interbank Offered
Rate, as published in the Wall Street Journal, in effect from time
to time.
1.6 "Loan" means the loan described in Section 2.1 of
this Agreement.
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1.7 "Loan Documents" means this Agreement, the Note,
the Pledge Agreement, and any other documents executed in connection
herewith or therewith.
1.8 "Maturity Date" shall be April 1, 2001 unless
otherwise expressly provided for in the Loan Documents.
1.9 "Note" means and refers to that certain Promissory
Note, dated of even date, in the principal amount of Two Million Two
Hundred Twenty Nine Thousand Twenty Eight Dollars and Thirteen Cents
($2,229,028.13), executed by Borrower to Lender, substantially in
the form of Exhibit "A" attached hereto and incorporated herein by
this reference, with appropriate insertions, and any amendments,
modifications and extensions thereof.
1.9 "Pledge Agreement" means and refers to that certain
Pledge Agreement, dated of even date, executed by Borrower and
Lender, substantially in the form of Exhibit "B" attached hereto and
incorporated herein by this reference, with appropriate insertions,
and any amendments, modifications and extensions thereof.
2. THE LOAN
2.1 On or after February 18, 1997, upon Borrower's
request, Lender shall make a recourse loan (the "Loan") to Borrower
in the principal amount of Two Million Two Hundred Twenty Nine
Thousand Twenty Eight Dollars and Thirteen Cents ($2,229,028.13).
2.2 The Loan shall be evidenced by the Note.
2.3 The Loan shall bear interest compounding monthly at
the following rates:
2.3.1 during the period commencing on the date of
the Loan and terminating on December 31, 1997 at fifty (50) basis
points greater than the LIBOR in effect on the date of the Loan;
2.3.2 during the period commencing on January 1,
1998 through the Maturity Date the Applicable Rate shall be as
follows and shall be fixed for each calendar year:
2.3.2.1 if the Company did not incur or
accrue any interest expenses for borrowed funds during the
immediately preceding calender year, the Applicable Rate for the
calendar year shall be fifty (50) basis points greater than the
LIBOR in effect on the first business day of such new calendar year;
or
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2.3.2.2 if the Company did incur or accrue
interest expenses for borrowed funds during the immediately
preceding calendar year, the Applicable Rate for the calendar year
shall be fifty (50) basis points above the greater of either:
2.3.2.2.1 the LIBOR in effect on the
first business day of such new calendar year; or
2.3.2.2.2 the Borrowing Rate for the
immediately preceding calendar year.
2.4 Each payment on the Note shall be credited first to
interest, if any then due, and the remainder to principal.
Principal and interest shall be payable in lawful money of the
United States of America. Borrower shall have the right to prepay
all or any portion of the principal sum of the Note at any time
without penalty.
2.5 All accrued interest and unpaid principal shall be
payable on the earlier to occur of the Maturity Date or an Event of
Default; provided, however, that if Borrower shall sell any shares
of stock of Lender included in the Collateral (as defined in the
Pledge Agreement), then Borrower shall cause proceeds of such sale
to be delivered immediately to Lender to prepay the Note in an
amount equal to the product of (x) the aggregate amount, including
accrued interest, unpaid fees and costs and unpaid principal, due on
the Note as of the date of such sale and (y) a fraction, the
numerator of which is the number of shares of stock of Lender
included in the Collateral which are to be sold by Borrower in such
sale, and the denominator of which is the number of shares of stock
of Lender included in the Collateral immediately prior to such sale.
2.6 Upon the occurrence of an Event of Default, the
whole principal sum shall become immediately due at the option of
the holder hereof.
3. CONDITIONS PRECEDENT
As conditions precedent to Lender's obligation to make
the Loan, Borrower shall have executed and delivered to Lender, in
form and substance satisfactory to Lender, the following:
3.1 The Note;
3.2 The Pledge Agreement; and
3.3 Such other documents as Lender may reasonably
require.
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4. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that, until full and
final payment of all indebtedness incurred hereunder:
4.1 The execution, delivery, and performance of this
Agreement and of any instrument or agreement required by this
Agreement are not in conflict with any law or any indenture,
agreement or undertaking to which Borrower is a party or by which
Borrower is bound or affected.
4.2 All financial information submitted by Borrower to
Lender is true and correct in all material respects and is complete
insofar as may be necessary to give Lender true and accurate
knowledge of the subject matter thereof.
4.3 No event has occurred and is continuing or would
result from the making of the Loan which constitutes or would
constitute a breach of any representation, warranty or covenant
contained in the Loan Documents or an Event of Default.
5. COVENANTS
5.1 Borrower covenants and agrees to deliver to Lender,
no later than ten (10) days following the making of the Loan, the
original stock certificate issued by Lender and described in the
recitals to the Pledge Agreement, and a stock assignment in blank,
referencing said stock certificate.
5.2 Borrower covenants and agrees that until the full
and final payment of all indebtedness incurred hereunder, Borrower
shall, unless Lender waives compliance in writing:
(a) Promptly give written notice to Lender of:
(i) Any breach of any representation,
warranty or covenant contained in the Loan Documents or any Event of
Default; and
(ii) Any other matter which has resulted
or might result in a material adverse change in Borrower's financial
condition or operations.
(b) Perform, on request of Lender, such acts as
may be necessary or advisable to carry out the intent of this
Agreement.
(c) Cause all financial information, upon
submission by Borrower to Lender, to be true and correct in all
material respects and complete to the extent necessary to give
Lender true and accurate knowledge of the subject matter.
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6. LENDER'S RIGHTS, POWER AND REMEDIES
6.1 Upon the occurrence of an Event of Default, Lender
may, at its option, exercise any and all rights, powers and remedies
provided in the Loan Documents and pursuant to any other present or
future agreement between Borrower and Lender, by law, equity, or
otherwise.
6.2 Lender shall have the right to enforce one or more
remedies partially, successively or concurrently, and Lender's
enforcement of any remedy or remedies shall not stop or prevent
Lender from pursuing any additional remedy or remedies that it may
have hereunder or by law.
6.3 In addition to all other sums which are otherwise
due under the Loan Documents, Borrower agrees to reimburse Lender
for collection costs, including without limitation attorneys' fees,
incurred by Lender.
7. MISCELLANEOUS
7.1 The Loan Documents shall bind and inure to the
benefit of the parties hereto and their respective heirs,
representatives, successors and assigns; provided, however, that
Borrower shall not assign any of the Loan Documents or any of the
rights, duties or obligations of Borrower under the Loan Documents
without the prior written consent of Lender.
7.2 No consent or waiver under the Loan Documents shall
be effective unless in writing. No waiver of any breach or Event of
Default shall be deemed a waiver of any breach or Event of Default
thereafter occurring. No delay by Lender shall constitute a waiver
or election or acquiescence by it.
7.3 The various headings used in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision thereof.
7.4 Neither the Loan Documents nor any uncertainty or
ambiguity therein shall be construed or resolved against Lender or
Borrower. The Loan Documents have been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning
of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
7.5 If any provision in the Loan Documents shall be
invalid, illegal or unenforceable, such provision shall be severable
from the remainder of such contract and the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
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7.6 This Agreement, the Note and any instrument or
agreement required under this Agreement shall be governed by and
construed under the laws of the State of California.
7.7 If either party files a legal proceeding against
the other predicated on a breach of this Agreement, the prevailing
party in such action shall be entitled to recover its attorneys'
fees, litigation expenses and proceeding costs.
7.8 This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the
terms and conditions mentioned herein or incidental hereto, and
supersede all oral negotiations and prior writings in respect to the
subject matter hereof.
7.9 Time is of the essence in the payment and
performance of the obligations of the Borrower under this Agreement
and all other documents executed in connection herewith.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
LENDER:
MAXICARE HEALTH PLANS, INC., a
Delaware corporation
/s/ XXXXXX X. XXXXXX
--------------------
TREASURER
BORROWER:
/s/ XXXXXX X. XXXXXXXX
----------------------
XXXXXX X. XXXXXXXX
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EXHIBIT A
SECURED PROMISSORY NOTE
$2,229,028.13 February 18, 1997
FOR VALUE RECEIVED, XXXXXX X. XXXXXXXX (the "Borrower")
promises to pay to the order of MAXICARE HEALTH PLANS, INC., a
Delaware corporation (the "Lender"), the sum of Two Million Two
Hundred Twenty Nine Thousand Twenty Eight Dollars and Thirteen
Cents ($2,229,028.13), together with interest thereon from the date
of the Loan at the Applicable Rate, compounded monthly.
Except as otherwise provided in the Loan Agreement, all
accrued interest and unpaid principal of this Note shall be due and
payable on the Maturity Date.
This Note is fully recourse to the Borrower.
All payments in respect of this Note shall be made in lawful
money of the United States of America in same day funds to the
office of the Lender located at 0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx
000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 or at such other place as shall
be designated in writing by the Lender to the Borrower. Until
notified in writing of the transfer of this Note, the Borrower
shall be entitled to deem the Lender, or such person who has been
so identified by the transferor in writing to the Borrower as the
holder of this Note, as the owner and holder of this Note. Each of
the Lender and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a
notation hereon of all payments previously made hereunder;
provided, however, that the failure to make notation of any payment
made on this Note shall not limit or otherwise affect the
obligation of the Borrower hereunder with respect to payment on
this Note.
This Note is the Note referred to in, and is entitled to all
of the rights, benefits and privileges provided for in the Loan
Agreement, dated as of February 18, 1997 (as amended, supplemented
or modified from time to time, the "Loan Agreement" ) between the
Borrower and the Lender. For the purposes hereof, unless otherwise
defined herein, all capitalized terms contained in this Note shall
have the meanings ascribed to them in the Loan Agreement. The Loan
Agreement, among other things, (a) provides for the making of the
Loan (the "Loan") by the Lender to the Borrower in the principal
amount of Two Million Two Hundred Twenty Nine Thousand Twenty Eight
Dollars and Thirteen Cents ($2,229,028.13), the indebtedness of the
Borrower resulting from such Loan being evidenced by this Note, and
(b) contains provisions for acceleration of the Maturity Date
hereof upon the happening of certain stated events.
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This Note is secured by that certain Pledge Agreement (the
"Pledge Agreement") of even date by and between the Borrower and
the Lender.
No reference herein to the Loan Agreement or the Pledge
Agreement and no provision of this Note, the Loan Agreement or the
Pledge Agreement shall alter or impair the obligation of the
Borrower, which is absolute and unconditional, to pay this Note at
the place and at the time herein prescribed.
The Borrower promises to pay all costs, expenses, including
reasonable attorneys' fees, incurred in the collection and
enforcement of this Note. The Borrower and endorsers of this Note
hereby consent to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind.
IN WITNESS WHEREOF, the Borrower has executed and delivered
this Note as of the day and year and place first above written.
---------------------------
XXXXXX X. XXXXXXXX
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EXHIBIT B
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is entered into as of
February 18, 1997 by and between XXXXXX X. XXXXXXXX ("Pledgor"), and
MAXICARE HEALTH PLANS, INC., a Delaware corporation (the "Lender").
WHEREAS, pursuant to that certain Loan Agreement (the "Loan
Agreement") of even date between the Lender and Pledgor, the Lender
has agreed to make a loan (the "Loan") to Pledgor in the sum of Two
Million Two Hundred Twenty Nine Thousand Twenty Eight Dollars and
Thirteen Cents ($2,229,028.13); capitalized terms, which are used
herein but not defined herein, shall have the meanings ascribed to
them in the Loan Agreement;
WHEREAS, Pledgor has agreed to repay the Loan pursuant to that
certain Promissory Note (the "Note") of even date;
WHEREAS, Pledgor is the legal and beneficial owner of 150,000
of the issued and outstanding shares of common stock of Lender
evidenced by the certificates set forth on Exhibit "A" attached
hereto and made part hereof (the "Pledged Shares");
WHEREAS, it is a condition to the Lender's making the Loan
that Pledgor shall have granted the pledge and security interest
contemplated by this Agreement; and
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, and in order to induce the Lender to make
the Loan, the parties hereto agree as follows:
SECTION 1. Grants of Security. Pledgor hereby assigns,
pledges and grants to the Lender a first priority security interest
in all of such Pledgor's right, title and interest in and to the
following (the "Collateral") to secure the Secured Obligations (as
defined in Section 2):
(i) the Pledged Shares and the certificates
representing the Pledged Shares and any interest of such Pledgor in
the entries on the books of any financial intermediary pertaining to
the Pledged Shares, and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; and
(ii) all proceeds of the foregoing items described in the
preceding clause (i).
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SECTION 2. Secured Obligations. This Agreement secures, and
the Collateral is collateral security for, the prompt payment or
performance in full when due, whether upon demand, at stated
maturity, by acceleration or otherwise, of: (a) all obligations of
Pledgor in respect of the Note, whether for principal, interest
(including, without limitation, interest that, but for the filing of
a petition in bankruptcy with respect to Pledgor, would accrue on
such obligations), fees, expenses or otherwise; and (b) all
obligations of Pledgor now or hereafter existing under this
Agreement and the Loan Agreement and any and all damages and claims
(including any third party claims) suffered by Lender which may
result from any breach by Pledgor of, or any misrepresentation
contained in this Agreement, the Loan Agreement or the Note (all
such obligations of Pledgor are referred to herein as the "Secured
Obligations").
SECTION 3. Delivery of Pledged Shares. All certificates or
instruments representing or evidencing the Pledged Shares shall be
delivered to and held by or on behalf of the Lender pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Lender. The
Lender shall have the right, at any time in its discretion and
without notice to Pledgor, whether prior to or following the
occurrence of an Event of Default (as defined herein), to transfer
to or to register in the name of the Lender or any of its nominees
any or all of the Pledged Shares. In addition, the Lender shall
have the right, subject to the reasonable approval of Lender's
transfer agent, at any time to exchange certificates or instruments
representing or evidencing Pledged Shares for certificates or
instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. Pledgor
represents and warrants to the Lender that the following statements
are true, correct and complete:
(a) Pledgor is the legal and beneficial owner of the
Collateral, free and clear of any lien or security interest except
for the security interest created by this Agreement. Pledgor shall
defend the Collateral against all claims and demands of all persons
at any time claiming any interest therein adverse to the Lender;
(b) Pledgor has full power, authority, and legal right to
pledge the Collateral pursuant to this Agreement;
(c) All of the Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable;
(d) The pledge and delivery of the Collateral to the Lender
pursuant to this Agreement creates a valid and perfected first
priority security interest in the Collateral, securing the payment
and performance of the Secured Obligations;
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(e) Except as have already been made or obtained, no consent
of any other party (including, without limitation, creditors of
Pledgor) and no consent, authorization, approval, or other action
by, and no notice to or filing with any governmental authority or
regulatory body is required either (i) for the pledge by Pledgor of
the Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Pledgor or (ii) for the
perfection of or exercise by the Lender of the rights provided for
in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement;
(f) The pledge of the Pledged Shares does not violate
Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System;
(g) Except as permitted under this Agreement, the Pledgor at
all times will be the sole beneficial owner of the Pledged Shares;
and
(h) The proceeds of the Loan shall be used for lawful
business purposes.
SECTION 5. Further Assurances. Pledgor agrees that at any
time and from time to time, at the expense of Pledgor, he will
promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or
that the Lender may request, in order to perfect and protect any
security interest granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 6. Voting Rights, Dividends, Etc.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Agreement; provided, however, that Pledgor shall give the
Lender at least five days' written notice of the manner in which he
intends to exercise, or the reasons for refraining from exercising,
any such right;
(ii) Pledgor shall be entitled to receive and retain
any and all dividends and other distributions paid in respect of the
Collateral; provided, however, that any and all
(A) dividends and other distributions paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect
of, or in exchange for, any Collateral,
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(B) dividends and other distributions paid or
payable in cash in respect of any Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Collateral, shall be, and
shall be forthwith delivered to the Lender to hold as, Collateral
and shall, if received by Pledgor, be received in trust for the
benefit of the Lender, be segregated from the other property or
funds of Pledgor, and be forthwith delivered to the Lender as
Collateral in the same form as so received (with any necessary
indorsement); and
(iii) the Lender shall execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies and other
instruments as Pledgor may reasonably request for the purpose of
enabling Pledgor to exercise the voting and other rights which he is
entitled to exercise pursuant to subsection 6(a)(i) and to receive
the dividends and other distributions which he is authorized to
receive and retain pursuant to subsection 6(a)(ii).
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) Upon written notice from the Lender to Pledgor,
all rights of Pledgor to exercise the voting and other consensual
rights which he would otherwise be entitled to exercise pursuant to
subsection 6(a)(i) shall cease, and all such rights shall thereupon
become vested in the Lender which shall thereupon have the sole
right to exercise such voting and other consensual rights.
(ii) All rights of Pledgor to receive the dividends and
other distributions which he would otherwise be authorized to
receive and retain pursuant to subsection 6(a)(ii) shall cease and
all such rights shall thereupon become vested in the Lender which
shall thereupon have the sole right to receive such dividends and
other distributions and the right to hold such dividends and other
distributions as Collateral during the continuance of such Event of
Default. All dividends and other distributions which are received
by Pledgor contrary to the provisions of this subsection 6(b)(ii)
shall be received in trust for the benefit of the Lender, shall be
segregated from other funds of Pledgor and shall be forthwith paid
over to the Lender as Collateral in the same form as so received
(with any necessary indorsement).
(iii) Pledgor shall execute and deliver (or cause to be
executed and delivered) to the Lender all such proxies and other
instruments as the Lender may reasonably request for the purpose of
enabling the Lender to exercise the voting and other rights which it
is entitled to exercise pursuant to subsection 6(b)(i) and to
receive the dividends and other distributions which it is authorized
to receive and retain pursuant to subsection 6(b)(ii).
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SECTION 7. Transfers and Other Liens; Additional Shares.
(a) Pledgor agrees that he will not (i) sell or otherwise
dispose of, or grant any option with respect to, any Collateral, or
(ii) create or permit to exist any lien or security interest upon
or with respect to any Collateral, except for the security interest
under this Agreement.
(b) Pledgor agrees that he will vote to cause the Lender not
to issue any additional stock or other securities or in substitution
for the Pledged Shares.
SECTION 8. Lender Appointed Attorney-in-Fact. Pledgor hereby
appoints the Lender as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of
Pledgor or otherwise, from time to time upon the occurrence and
continuation of an Event of Default, in the Lender's discretion to
take any action and to execute any instrument which the Lender may
deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(i) to receive, indorse and collect all instruments
made payable to Pledgor representing any dividend or other
distribution in respect of the Collateral or any part thereof and to
give full discharge for the same;
(ii) to ask, demand, collect, xxx for, recover,
compound, receive and give acquittance and receipts for money due
and to become due under or in respect of any of the Collateral;
(iii) to file any claims or take any action or institute
any proceedings which the Lender may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Lender with respect to any of the Collateral; and
(iv) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Lender were the
absolute owner thereof for all purposes, and to do, at the Lender's
option and Pledgor's expense, at any time, and from time to time,
all acts that the Lender deems necessary to protect, preserve or
realize upon the Collateral and the Lender's security interest
therein, in order to effect the intent of this Agreement, all as
full and effectively as Pledgor might do.
This appointment as attorney-in-fact is coupled with an interest and
is irrevocable. In performing its functions and duties under this
Agreement, the Lender has not assumed and shall not be deemed to
have assumed any obligation toward or relationship of agency or
trust with or for Pledgor.
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SECTION 9. Lender May Perform. If Pledgor fails to perform
any agreement contained herein, the Lender may itself perform, or
cause performance of, such agreement, and the expenses of the Lender
incurred in connection therewith shall be payable by Pledgor under
Section 14(b).
SECTION 10. The Lender's Duties and Liabilities.
(a) The powers conferred on the Lender hereunder are solely
to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. The Lender shall be
deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Lender
accords its own property, it being understood that the Lender shall
have no responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not the Lender
has or is deemed to have knowledge of such matters, or (ii) taking
any necessary steps to assert rights against any parties with
respect to any Collateral.
(b) The Lender shall not be liable to Pledgor (i) for any
loss or damage sustained by Pledgor or (ii) for any loss, damage,
depreciation or other diminution in the value of any of the
Collateral that may occur as a result of, in connection with or that
is in any way related to (x) any exercise by the Lender of any right
or remedy under this Agreement or (y) any other act or failure to
act of the Lender, except to the extent that the same shall be
determined by a judgment of a court of competent jurisdiction, that
is final and not subject to review on appeal, to be the result of
acts or omissions on the part of the Lender constituting gross
negligence or willful misconduct.
SECTION 11. Events of Default; Remedies Upon Default;
Decisions Relating to Exercise of Remedies.
11.1 Any one or more of the following events shall constitute
an Event of Default by Pledgor under this Agreement:
(a) Failure to Pay Obligations. If Pledgor fails to
pay, no later than fifteen (15) calendar days following the date
when due and payable or when declared due and payable, all or any
portion of the Secured Obligations owing to Lender (whether for
principal, interest, taxes, reimbursement of expenses, or
otherwise);
(b) Failure to Perform. If Pledgor fails to perform,
keep or observe any other term, provision, condition, covenant,
agreement, warranty or representation contained in this Agreement,
the Loan Agreement, the Note, or any other present or future
agreement between Pledgor and Lender, and such failure continues for
thirty (30) days following written notice from the Lender to
Pledgor;
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(c) Voluntary Insolvency Proceeding. If Pledgor
commences any Insolvency Proceeding (as defined below); and
(d) Involuntary Insolvency Proceeding. If any
Insolvency Proceeding is commenced against Pledgor and which is not
dismissed within sixty (60) days of the date of filing.
11.2 As used herein the term "Insolvency Proceeding" means
and includes any proceeding commenced by or against any person or
entity under any provision of the federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law,
including, but not limited to, assignments for the benefit of
creditors, formal or informal moratoriums, compositions or
extensions generally with his creditors.
11.3 If an Event of Default shall have occurred and be
continuing:
(a) the Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of
a secured party on default under the Uniform Commercial Code (the
"UCC") in effect in the State of California at that time;
(b) the Lender may transfer all or any part of the
Collateral into the Lender's name or the name of its nominee or
nominees;
(c) the Lender may give all consents, waivers and
ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were a party thereto or outright owner
thereof;
(d) the Lender may settle, adjust, compromise and
arrange all accounts, controversies, questions, claims and demands
whatsoever in relation to all or any part of the Collateral;
(e) the Lender may, in respect of the Collateral,
execute all such contracts, agreements, deeds, documents and
instruments; bring, defend and abandon all such actions, suits and
proceedings; and take all actions in relation to all or any part of
the Collateral as the Lender in its absolute discretion may
determine;
(f) (i) The Lender may without notice (except as
specified below), sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's
board or at any of the Lender's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such
price or prices and upon such other terms as the Lender may deem
commercially reasonable, irrespective of the impact of any such
sales on the market price of the Collateral. To the extent
permitted by law, the Lender may be the purchaser of any or all of
the Collateral at any such public or private sale. Pledgor agrees
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that, to the extent notice of sale shall be required by law, at
least five days' notice to Pledgor of the time and place of any
public sale or the time after which a private sale is to be made
shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of the Collateral regardless of notice
of sale having been given. The Lender may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned;
(ii) Pledgor recognizes that, by reason of
certain prohibitions contained in the Securities Act of 1933, as
from time to time amended (the "Securities Act"), and applicable
state securities laws, the Lender may be compelled, with respect to
any sale of all or any part of the Collateral conducted without
prior registration or qualification of such Collateral under the
Securities Act and/or such state securities laws, to limit
purchasers to those who will agree, among other things, to acquire
the Collateral for their own account, for investment and not with a
view to the distribution or resale thereof, and such purchasers may
have to be limited in number to possibly one purchaser and any
purchaser must be a sophisticated investor able to fend for
himself. Pledgor acknowledges that any such private sales may be
at prices and on terms less favorable to the Lender than those
obtainable through a public sale without such restrictions
(including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act) and,
notwithstanding such circumstances, Pledgor agrees that any such
private sale shall be deemed to have been made in a commercially
reasonable manner and that the Lender shall have no obligation to
engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the Lender to
register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws. The
Pledged Shares constitute or upon foreclosure may constitute
"restricted securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act and may
be subject to transfer restrictions under the Securities Act;
(g) The Lender may appoint managers, sub-agents,
officers and servants for any of the purposes mentioned in the
foregoing provisions of this Section 11 and to dismiss the same,
all as the Lender in its absolute discretion may determine; and
(h) The Lender may generally take all such other
action as the Lender in its absolute discretion may determine to be
incidental or conducive to any of the matters or powers mentioned
in the foregoing provisions of this Section 11 and which the Lender
may or can do lawfully.
SECTION 12. Remedies Cumulative. Each and every right,
power and remedy hereby specifically given to the Lender shall be
in addition to every other right, power and remedy specifically
given under this Agreement, the Loan Agreement or the Note or now
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or hereafter existing at law or in equity, or by statute, and each
and every right, power and remedy whether specifically herein given
or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed
expedient by the Lender. All such rights, powers and remedies
shall be cumulative, and the exercise or the beginning of exercise
of one shall not be deemed a waiver of the right to exercise of any
other or others. No delay or omission of the Lender in the
exercise of any such right, power or remedy and no renewal or
extension of any of the Secured Obligations shall impair any such
right, power or remedy or shall be construed to be a waiver of any
default or Event of Default or an acquiescence therein.
SECTION 13. Application of Proceeds. After and during the
continuance of an Event of Default, any cash held by the Lender as
Collateral and all cash proceeds received by the Lender (all such
cash being "Proceeds") in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral
pursuant to the exercise by the Lender of its remedies as a secured
creditor as provided in Section 11 of this Agreement shall promptly
be applied by the Lender from time to time as follows:
FIRST: To the payment of the costs and expenses of such
sale, collection or other realization, and all expenses,
liabilities and advances made or incurred by the Lender in
connection therewith, in accordance with Section 14(b);
SECOND: After payment in full of the amounts specified
in the preceding subparagraph, to the payment of the Secured
Obligations to the Lender; and
THIRD: After payment in full of the amounts specified
in the preceding subparagraphs, and any other amount required by
any provision of law, to Pledgor, or his heirs, representatives,
successors or assigns, or to whomever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may
direct, of any surplus then remaining from such Proceeds.
All applications of Proceeds to the Secured Obligations shall be
applied to the payment of interest before application to the
payment of principal. If any portion of the Secured Obligations
shall remain unpaid following application of the Proceeds, Pledgor
shall remain liable therefor.
SECTION 14. Indemnity and Expenses.
(a) Pledgor agrees to indemnify the Lender from and against
any and all claims, losses and liabilities growing out of or
resulting from Pledgor's breach of any term hereof or any
misrepresentation made hereunder or in connection with this
Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting from the
Lender's gross negligence or willful misconduct. This provision
shall remain in effect following payment of the Secured
Obligations.
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(b) Pledgor will upon demand pay to the Lender the amount
of any and all of the Lender's reasonable out-of-pocket expenses,
including fees and disbursements of its counsel, that the Lender
may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights
of the Lender hereunder or (iv) the failure by Pledgor to perform
or observe any of the provisions hereof.
SECTION 15. Amendments, Etc. No amendment, modification,
termination or waiver of any provision of this Agreement or consent
to any departure by Pledgor herefrom shall in any event be
effective without the written concurrence of the Lender. Any
waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 16. Addresses for Notices. Any communications
between the parties hereto or notices or requests provided herein
to be given may be given by mailing the same, postage prepaid, or
by facsimile transmission to each party at its address set forth on
the signature pages hereof or to such other addresses as each party
may in writing hereafter indicate. Any notice, request or demand
to or upon the Lender or Pledgor shall not be effective until
received (provided, in the case of facsimile transmission, that
receipt is confirmed).
SECTION 17. Effect of Disposition of Collateral. Any sale
of, or the grant of options to purchase, or any other realization
upon, any Collateral by Lender hereunder shall operate to divest
all right, title, interest, claim and demand, either at law or in
equity, of Pledgor therein and thereto, and shall be a perpetual
bar both at law and in equity against Pledgor and against any and
all persons claiming or attempting to claim the Collateral so sold,
optioned or realized upon, or any part thereof, from, through and
under Pledgor.
SECTION 18. Continuing Security Interest; Transfer of
Secured Obligations; Termination. This Agreement shall create a
continuing security interest in the Collateral and shall:
(i) remain in full force and effect until the
indefeasible payment and performance in full of the Secured
Obligations;
(ii) be binding upon Pledgor, his heirs,
representatives, successors and assigns; and
(iii) inure, together with the rights and remedies of
the Lender, to the benefit of the Lender and its successors,
transferees and assigns.
160 of 193
Without limiting the generality of the foregoing clause (iii), the
Lender may assign or otherwise transfer all or a portion of its
interests and rights under the Note to any other person or entity,
and such other person or entity shall thereupon become vested with
all the benefits in respect thereof granted to the Lender herein or
otherwise. Upon the date set forth in subsection 18(i), Pledgor
shall be entitled to the return, upon his request and at his
expense, of such of the Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
SECTION 19. Headings. Section and subsection headings in
this Agreement are included herein for convenience of reference
only and shall not constitute a part of this Agreement or be given
any substantive effect.
SECTION 20. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
SECTION 21. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same
agreement.
SECTION 22. Governing Law; Terms. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF PLEDGOR AND THE LENDER AND ALL OTHER
ASPECTS HEREOF SHALL BE DEEMED TO BE MADE UNDER, SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
Unless otherwise defined herein, in the Loan Agreement or in the
Note, terms defined in Divisions 8 and 9 of the UCC are used herein
as therein defined.
SECTION 23. Interpretation. Wherever in this Agreement the
context may require, the masculine gender shall be deemed to
include the feminine and/or neuter, and the singular to include the
plural.
SECTION 24. Consent to Jurisdiction and Service of Process;
Waiver of Trial by Jury. Pledgor hereby irrevocably submits to the
jurisdiction of any California State or Federal court sitting in
the Central District of California in any action or proceeding
arising out of or relating to the Loan Documents, and Pledgor
hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such California State
or Federal court. Pledgor hereby irrevocably waives, to the
fullest extent he may effectively do so, the defense of an
161 of 193
inconvenient forum to the maintenance of such action or proceeding.
Pledgor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 24 shall affect the right
of the Lender to bring any action or proceeding against Pledgor or
his property in the courts of any other jurisdiction. IN ANY
LITIGATION ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS, EACH
PARTY HERETO WAIVES TRIAL BY JURY.
SECTION 25. Security Interest Absolute. All rights of the
Lender and security interests hereunder, and all obligations of
Pledgor hereunder, shall be absolute and unconditional irrespective
of:
(i) any lack of validity or enforceability of the
Note or any other agreement or instrument relating thereto; (ii)
any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the
Note or any other related document;
(iii) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or
consent to any departure from any guaranty for all or any of the
Secured Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor.
SECTION 26. Pledgor Remains Liable. Anything herein to the
contrary notwithstanding, (i) Pledgor shall remain liable under the
contracts and agreements included in or relating to the Collateral
to the extent set forth therein to perform all of his duties and
obligations thereunder to the same extent as if this Agreement had
not been executed, (ii) the exercise by the Lender of any of the
rights hereunder shall not release Pledgor from any of his duties
or obligations under the contracts and agreements included in or
relating to the Collateral and (iii) the Lender shall not have any
obligation or liability under the contracts and agreements included
in or relating to the Collateral by reason of this Agreement, nor
shall the Lender be obligated to perform any of the obligations or
duties of Pledgor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 27. Facsimile Execution. Execution of this
Agreement shall be deemed binding upon the party executing this
Agreement notwithstanding that delivery of the executed document
may be by facsimile transmission. Any party shall be entitled to
rely on a faxed execution copy of this Agreement with the same
force and effect as if an originally inked execution copy were
delivered. Inked original documents shall be delivered to the
other parties by Federal Express mail within one business day of
the facsimile transmission.
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IN WITNESS WHEREOF, Pledgor and the Lender have caused this
Agreement to be duly executed and delivered as of the date first
above written.
PLEDGOR:
---------------------------
XXXXXX X. XXXXXXXX
Notice Address for Pledgor:
00000 Xxxxxx Xxxxx Xxxx.
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
LENDER:
MAXICARE HEALTH PLANS, INC.,
a Delaware corporation
/s/ XXXXXX X. XXXXXX
--------------------
TREASURER
Notice Address:
0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
with a copy to:
Jeffer, Mangels, Xxxxxx & Marmaro LLP
2121 Avenue of the Stars
Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
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