CONTINUING GUARANTY
This CONTINUING GUARANTY (this "GUARANTY"), dated as of July 3, 1997,
is executed and delivered by PROSPECT MEDICAL SYSTEMS, INC., a Delaware
corporation ("GUARANTOR"), with reference to the following facts:
R E C I T A L S
A. Prospect Medical Holdings, Inc., a Delaware corporation
("BORROWER"), and Imperial Bank, a California banking corporation ("BANK"), have
entered into that certain Loan Agreement, dated as of July 3, 1997 (as the same
may be amended, restated, supplemented or otherwise modified from time to time,
the "LOAN AGREEMENT").
B. Guarantor is materially interested in the financial success of
Borrower, agrees that the Loan Agreement is in Borrower's best interests, and
acknowledges that the execution and delivery of this Guaranty formed a material
part of the consideration to Bank to induce Bank to enter into the Loan
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of Bank, as follows:
1. DEFINITIONS AND CONSTRUCTION.
(a) DEFINITIONS. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Loan
Agreement. In addition, the following terms, as used in this Guaranty, shall
have the following meanings:
"GUARANTEED OBLIGATIONS" means any and all obligations,
indebtedness, or liabilities of any kind or character owed by Borrower to Bank
(including without limitation, all principal and interest owing under the Loans,
all Bank Expenses, the Fees, any other fees and expenses due under the Loan
Agreement, and all other indebtedness evidenced by the Loan Agreement and the
other Loan Documents), including all such obligations, indebtedness, or
liabilities, whether for principal, interest (including any interest which, but
for the application of the provisions of the Bankruptcy Code, would have accrued
on such amounts), premium, reimbursement obligations, fees, costs, expenses
(including, attorneys' fees and attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code), or indemnity obligations, whether
heretofore, now, or hereafter made, incurred, or created, whether voluntarily or
involuntarily made, incurred, or created, whether secured or unsecured (and if
secured, regardless of the nature or extent of the security), whether absolute
or contingent, liquidated or unliquidated, determined or indeterminate, whether
Borrower is liable individually or jointly with others, and whether
1
recovery is or hereafter becomes barred by any statute of limitations or
otherwise becomes unenforceable for any reason whatsoever, including any act or
failure to act by Bank.
"LOAN DOCUMENTS" shall mean the Loan Agreement, this
Guaranty, and the other Loan Documents (as defined in the Loan Agreement).
(b) CONSTRUCTION. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Loan Documents includes any and
all alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Guaranty nor any uncertainty or
ambiguity herein shall be construed or resolved against Bank or Guarantor,
whether under any rule of construction or otherwise. On the contrary, this
Guaranty has been reviewed by Guarantor, Bank, and their respective counsel, 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 Bank and
Guarantor.
2. GUARANTEED OBLIGATIONS. Guarantor hereby irrevocably and
unconditionally guarantees to Bank, as and for Guarantor's own debt, until final
and indefeasible payment thereof has been made, (a) payment of the Guaranteed
Obligations, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection, and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by Borrower of all of the agreements, conditions, covenants, and
obligations of Borrower contained in the Loan Documents.
3. CONTINUING GUARANTY. This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, Guarantor hereby waives and agrees not to
assert any right Guarantor has under Section 2815 of the California Civil Code,
or otherwise, to revoke this Guaranty as to future indebtedness.
4. PERFORMANCE UNDER THIS GUARANTY. In the event that Borrower
fails to make any payment of any Guaranteed Obligations on or before the due
date thereof, or if Borrower shall fail to perform, keep, observe, or fulfill
any other obligation referred to in clause (b) of Section 2 hereof in the manner
provided in the Loan Documents, Guarantor immediately shall cause such payment
to be made or each of such obligations to be performed, kept, observed, or
fulfilled.
2
5. PRIMARY OBLIGATIONS. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Guarantor agrees that
Guarantor is severally and not jointly and severally liable, with any other
guarantor of the Guaranteed Obligations, to Bank, to the extent set forth in
Section 2 hereof, that the obligations of Guarantor hereunder are independent of
the obligations of Borrower or any other guarantor, and that a separate action
may be brought against Guarantor whether such action is brought against Borrower
or any other guarantor or whether Borrower or any such other guarantor is joined
in such action. Guarantor agrees that Guarantor's liability hereunder shall be
immediate and shall not be contingent upon the exercise or enforcement by Bank
of whatever remedies it may have against Borrower or any other guarantor, or the
enforcement of any lien or realization upon any security Bank may at any time
possess. Guarantor agrees that any release which may be given by Bank to
Borrower or any other guarantor shall not release Guarantor. Guarantor consents
and agrees that Bank shall be under no obligation to marshal any assets of
Borrower or any other guarantor in favor of Guarantor, or against or in payment
of any or all of the Guaranteed Obligations.
6. WAIVERS.
(a) Guarantor absolutely, unconditionally, knowingly, and
expressly waives:
(i) (1) notice of acceptance hereof; (2) notice of any
loans or other financial accommodations made or extended under the Loan
Documents or the creation or existence of any Guaranteed Obligations; (3) notice
of the amount of the Guaranteed Obligations, subject, however, to Guarantor's
right to make inquiry of Bank to ascertain the amount of the Guaranteed
Obligations at any reasonable time; (4) notice of any adverse change in the
financial condition of Borrower or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any instruments among the Loan Documents;
(6) notice of any Unmatured Event of Default or Event of Default; and (7) all
other notices (except if such notice is specifically required to be given to
Guarantor hereunder or under the Loan Documents) and demands to which Guarantor
might otherwise be entitled.
(ii) its right, under Sections 2845 or 2850 of the
California Civil Code, or otherwise, to require Bank to institute suit against,
or to exhaust any rights and remedies which Bank has or may have against,
Borrower or any third party, or against any collateral for the Guaranteed
Obligations provided by Borrower or any third party. In this regard, Guarantor
agrees that Guarantor is bound to the payment of all Guaranteed Obligations,
whether now existing or hereafter accruing, as fully as if such Guaranteed
Obligations were directly owing to Bank by Guarantor. Guarantor further waives
any defense arising by reason of any disability or other defense (other than the
defense that the
3
Guaranteed Obligations shall have been fully and finally performed and
indefeasibly paid) of Borrower or by reason of the cessation from any cause
whatsoever of the liability of Borrower in respect thereof.
(iii) (1) any rights to assert against Bank any defense
(legal or equitable), set-off, counterclaim, or claim which Guarantor may now or
at any time hereafter have against Borrower or any other party liable to Bank;
(2) any defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense Guarantor has to performance hereunder, and
any right Guarantor has to be exonerated, provided by Sections 2819, 2822, or
2825 of the California Civil Code, or otherwise, arising by reason of: the
impairment or suspension of Bank's rights or remedies against Borrower; the
alteration by Bank of the Guaranteed Obligations; any discharge of Borrower's
obligations to Bank by operation of law as a result of Bank's intervention or
omission; or the acceptance by Bank of anything in partial satisfaction of the
Guaranteed Obligations; (4) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor's liability
hereunder.
(b) Guarantor absolutely, unconditionally, knowingly, and
expressly waives any defense arising by reason of or deriving from (i) any claim
or defense based upon an election of remedies by Bank including any defense
based upon an election of remedies by Bank under the provisions of
Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or
any similar law of California or any other jurisdiction; or (ii) any election by
Bank under Bankruptcy Code Section 1111(b) to limit the amount of, or any
collateral securing, its claim against Borrower. Pursuant to Section 2856 of
the California Civil Code:
Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and reimbursement
against Borrower by the operation of Section 580(d) of the California Code of
Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have
because Borrower's Obligations are secured by real property. This means, among
other things:
(1) Bank may collect from Guarantor without first foreclosing on
any real or personal property collateral pledged by Borrower.
(2) If Bank forecloses on any real property collateral pledged
by Borrower:
4
(A) The amount of the Guaranteed Obligations may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price.
(B) Bank may collect from Guarantor even if Bank, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because Borrower's Obligations are secured by real
property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code
of Civil Procedure.
If any of the Guaranteed Obligations at any time are secured by a mortgage or
deed of trust upon real property, Bank may elect, in its sole discretion, upon a
default with respect to the Guaranteed Obligations, to foreclose such mortgage
or deed of trust judicially or nonjudicially in any manner permitted by law,
before or after enforcing the Loan Documents, without diminishing or affecting
the liability of Guarantor hereunder except to the extent the Guaranteed
Obligations are repaid with the proceeds of such foreclosure. Guarantor
understands that (a) by virtue of the operation of California's antideficiency
law applicable to nonjudicial foreclosures, an election by Bank nonjudicially to
foreclose such a mortgage or deed of trust probably would have the effect of
impairing or destroying rights of subrogation, reimbursement, contribution, or
indemnity of Guarantor against Borrower or other guarantors or sureties, and
(b) absent the waiver given by Guarantor, such an election would prevent Bank
from enforcing the Loan Documents against Guarantor. Understanding the
foregoing, and understanding that Guarantor is hereby relinquishing a defense to
the enforceability of the Loan Documents, Guarantor hereby waives any right to
assert against Bank any defense to the enforcement of the Loan Documents,
whether denominated "estoppel" or otherwise, based on or arising from an
election by Bank nonjudicially to foreclose any such mortgage or deed of trust.
Guarantor understands that the effect of the foregoing waiver may be that
Guarantor may have liability hereunder for amounts with respect to which
Guarantor may be left without rights of subrogation, reimbursement,
contribution, or indemnity against Borrower or other guarantors or sureties.
Guarantor also agrees that the "fair market value" provisions of Section 580a of
the California Code of Civil Procedure shall have no applicability with respect
to the determination of Guarantor's liability under the Loan Documents.
(c) Guarantor hereby absolutely, unconditionally, knowingly, and
expressly waives: (i) any right of subrogation Guarantor has or may have as
against Borrower with respect to the Guaranteed Obligations; (ii) any right to
proceed against Borrower or any other person or entity, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against Borrower with respect
5
to the Guaranteed Obligations; and (iii) any right to proceed or seek recourse
against or with respect to any property or asset of Borrower.
(d) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY ABSOLUTELY, KNOWINGLY,
UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL
BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821,
2822, 2825, 2839, 2845, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE
SECTIONS 580A, 580B, 580C, 580D, AND 726, AND CHAPTER 2 OF TITLE 14 OF PART 4 OF
DIVISION 3 OF THE CALIFORNIA CIVIL CODE.
7. RELEASES. Guarantor consents and agrees that, without notice to
or by Guarantor, and without affecting or impairing the obligations of Guarantor
hereunder, Bank may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse
to or otherwise not enforce this Guaranty, the other Loan
Documents, or any part thereof, with respect to Borrower or
any other Person;
(b) release Borrower or any other Person or grant other
indulgences to Borrower or any other Person in respect
thereof;
(c) amend or modify in any manner and at any time (or from time
to time) any of the Loan Documents; or
(d) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or
waive any security for the Guaranteed Obligations or any
other guaranty of the Guaranteed Obligations, or any portion
thereof.
8. NO ELECTION. Bank shall have all of the rights to seek recourse
against Guarantor to the fullest extent provided for herein, and no election by
Bank to proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of Bank's right to proceed in any
other form of action or proceeding or against other parties unless Bank has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Bank under any document
or instrument evidencing the Guaranteed Obligations shall serve to diminish the
6
liability of Guarantor under this Guaranty except to the extent that Bank
finally and unconditionally shall have realized indefeasible payment by such
action or proceeding.
9. INDEFEASIBLE PAYMENT. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to Bank are no longer subject to any right on the part of any Person,
including Borrower, Borrower as a debtor in possession, or any trustee (whether
appointed under the Bankruptcy Code or otherwise) of any of Borrower's assets,
to invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. Upon such full and final performance and indefeasible payment of
the Guaranteed Obligations, whether by Borrower pursuant to the Loan Agreement
or by any other Person, Bank shall have no obligation whatsoever to transfer or
assign its interests in the Loan Documents to Guarantor. In the event that, for
any reason, any portion of such payments to Bank is set aside or restored,
whether voluntarily or involuntarily, after the making thereof, then the
obligation intended to be satisfied thereby shall be revived and continued in
full force and effect as if said payment or payments had not been made, and
Guarantor shall be liable for the full amount Bank is required to repay plus any
and all costs and expenses (including attorneys' fees and expenses and
attorneys' fees and expenses incurred pursuant to proceedings arising under the
Bankruptcy Code) paid by Bank in connection therewith.
10. FINANCIAL CONDITION OF BORROWER. Guarantor represents and
warrants to Bank that Guarantor is currently informed of the financial condition
of Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor further represents and warrants to Bank that Guarantor has read and
understands the terms and conditions of the Loan Documents. Guarantor hereby
covenants that Guarantor will continue to keep informed of Borrower's financial
condition, the financial condition of other guarantors, if any, and of all other
circumstances which bear upon the risk of nonpayment or nonperformance of the
Guaranteed Obligations.
11. SUBORDINATION. Guarantor hereby agrees that any and all present
and future indebtedness of Borrower owing to Guarantor is postponed in favor of
and subordinated to payment, in full, in cash, of the Guaranteed Obligations.
In this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. PAYMENTS; APPLICATION. All payments to be made hereunder by
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise) or offset. All payments made
by Guarantor hereunder shall be applied as follows: first, to all costs and
expenses (including attorneys' fees and expenses and attorneys' fees and
expenses incurred pursuant to proceedings arising under the Bankruptcy Code)
incurred by Bank in enforcing this Guaranty or in collecting the Guaranteed
Obligations; second, to all accrued and unpaid interest, premium, if any, and
7
fees owing to Bank constituting Guaranteed Obligations; and third, to the
balance of the Guaranteed Obligations.
13. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants to Bank that:
(a) Guarantor is a corporation duly organized and existing under
the laws of Delaware and has the power and authority to own its own properties
and assets, and to transact the business in which it is engaged, and is properly
licensed, qualified to do business and in good standing in every jurisdiction
where the conduct of its business requires it to be so qualified.
(b) The execution, delivery and performance of this Guaranty are
within Guarantor's powers, are not in conflict with the terms of any charter,
bylaw, [certificate/articles] of incorporation or other organization papers of
Guarantor, and do not result in a breach of or constitute a default under any
contract, obligation, indenture or other instrument to which Guarantor is a
party or by which Guarantor is bound or affected. There is no law, rule or
regulation, nor is there any judgment, decree or order of any court or
governmental authority binding on Guarantor which would be contravened by the
execution, delivery, performance or enforcement of this Guaranty and the other
Loan Documents to which Guarantor is a party.
(c) Guarantor has taken all corporate action necessary to
authorize the execution and delivery of this Guaranty and the other Loan
Documents to which Guarantor is a party, and the consummation of the
transactions contemplated hereby and thereby. Upon their execution and delivery
in accordance with their respective terms, this Guaranty and the other Loan
Documents to which Guarantor is a party will constitute legal, valid and binding
agreements and obligations of Guarantor enforceable against Guarantor in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, and similar laws and equitable
principles affecting the enforcement of creditors' rights generally.
(d) No approval, consent, exemption or other action by, or
notice to or filing with, any governmental authority is necessary in connection
with the execution, delivery, performance or enforcement of this Guaranty and
the other Loan Documents to which Guarantor is a party except as may have been
obtained by Guarantor and certified copies of which have been delivered to Bank.
(e) Guarantor has no Debt other than Debt owing to Bank
hereunder, and Guarantor covenants and agrees that until the indefeasible
payment, performance and satisfaction in full of the Guaranteed Obligations,
Guarantor will not create, incur, assume or suffer to exist any Debt without the
prior written consent of Bank.
14. ATTORNEYS' FEES AND COSTS. Guarantor agrees to pay, on demand,
all attorneys' fees (including attorneys' fees incurred pursuant to proceedings
arising under the
8
Bankruptcy Code) and all other costs and expenses which may be incurred by Bank
in the enforcement of this Guaranty or in any way arising out of, or
consequential to the protection, assertion, or enforcement of the Guaranteed
Obligations (or any security therefor), whether or not suit is brought.
15. NOTICES. All notices, requests and other communications to any
party hereunder shall be sent in accordance with Section 9.1 of the Loan
Agreement to the following addresses:
If to Guarantor: PROSPECT MEDICAL SYSTEMS, INC.
00000 Xxxxx Xxxxx Xxxx., Xxx. 000
Xxxxx Xxxxx, XX 00000
Attn: Chief Executive Officer
Facsimile No: (000) 000-0000
Telephone No: (000) 000-0000
If to Bank: (as set forth in Section 9.1 of the Loan
Agreement)
16. CUMULATIVE REMEDIES. No remedy under this Guaranty or under any
Loan Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder or under any Loan Document, and those provided by law or in
equity. No delay or omission by Bank to exercise any right under this Guaranty
shall impair any such right nor be construed to be a waiver thereof. No failure
on the part of Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
17. BOOKS AND RECORDS. Guarantor agrees Bank's books and records
showing the account between Bank and Borrower shall be admissible in any action
or proceeding and shall be binding upon Guarantor for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
thereof.
18. SEVERABILITY OF PROVISIONS. If any provision of this Guaranty is
for any reason held to be invalid, illegal or unenforceable in any respect, that
provision shall not affect the validity, legality or enforceability of any other
provision of this Guaranty.
19. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Guaranty
constitutes the entire agreement between Guarantor and Bank pertaining to the
subject matter contained herein. Any provision of this Guaranty may be amended
or waived if, but only if, such amendment or waiver is in writing and is signed
by the party asserted to be bound thereby, and then such amendment or waiver
shall be effective only in the specific instance and specific purpose for which
given.
9
20. SECURITY. This Guaranty is secured by that certain Security
Agreement and Collateral Assignment of Transaction Documents, each dated as of
even date herewith, between Guarantor and Bank, as the same may be amended from
time to time.
21. SUCCESSORS AND ASSIGNS. This Guaranty shall bind the successors
and assigns of Guarantor, and shall inure to the benefit of the respective
successors and assigns of Bank; PROVIDED, HOWEVER, Guarantor may not assign this
Guaranty or delegate any of his duties hereunder without Bank's prior written
consent and any such prohibited assignment shall be absolutely null and void.
Bank reserves its right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in, the rights and
benefits hereunder pursuant to and in accordance with the provisions of the Loan
Documents. In connection therewith, Bank may disclose all documents and
information which Bank now or hereafter may have relating to Guarantor,
Guarantor's business, or this Guaranty to any such prospective or actual
transferee.
22. GOVERNING LAW. This Guaranty shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
23. JUDICIAL REFERENCE.
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Guaranty, which controversy, dispute or claim is not settled in
writing within thirty (30) days after the "CLAIM DATE" (defined as the date on
either Guarantor or Bank gives written notice to the other that a controversy,
dispute or claim exists), will be settled by a reference proceeding in
California in accordance with the provisions of Section 638 ET SEQ. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Guaranty, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where any real property collateral for this Guaranty is located or Los
Angeles County if none (the "COURT"). The referee shall be a retired Judge of
the Court selected by mutual agreement of the parties, and if they cannot so
agree within forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his representative).
The referee shall be appointed to sit as a temporary judge, with all of the
powers for a temporary judge, as authorized by law, and upon selection should
take and subscribe to the oath of office as provided for in Rule 244 of the
California Rules of Court (or any subsequently enacted Rule). Each party shall
have one peremptory challenge
10
pursuant to CCP Section 170.6. The referee shall (a) be requested to set the
matter for hearing within sixty (60) days after the date of selection of the
referee and (b) try any and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Guaranty shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of
a party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(b) Except as expressly set forth in this Guaranty, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter except
that when any party so requests, a court reporter will be used at any hearing
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
11
(d) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, Section 1280 through Section
1294.2 of the CCP as amended from time to time. The limitations with respect
to discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
[Remainder of this page intentionally left blank.]
12
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
PROSPECT MEDICAL SYSTEMS, INC.,
a Delaware corporation
By /s/ Xxxxx X. Xxxxxx, M.D.
-------------------------------------------
Title: CEO
---------------------------------------
ACCEPTED AND AGREED:
IMPERIAL BANK,
a California banking corporation
By /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Title SVP
----------------------------------
13
