AMENDMENT NUMBER TWO TO REVOLVING CREDIT AGREEMENT
This AMENDMENT NUMBER TWO TO REVOLVING CREDIT AGREEMENT (this
"AMENDMENT"), dated as of September 25, 1997, is entered into by and between
PROSPECT MEDICAL HOLDINGS, INC., a Delaware corporation ("BORROWER"), and
IMPERIAL BANK, a California banking corporation ("BANK"), with reference to the
following facts:
A. Borrower and Bank have previously entered into that certain
Revolving Credit Agreement, dated as of July 3, 1997, as amended by that certain
Amendment Number One, dated as of July 14, 1997 (the "AGREEMENT"); and
B. Borrower and Bank desire to amend the Agreement in accordance
with the terms of this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINED TERMS. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Agreement.
In addition, Section 1.1 of the Agreement is hereby amended by amending the
definition of "LOAN DOCUMENTS" in its entirety as follows:
"'LOAN DOCUMENT(S)' means each of the following documents,
instruments, and agreements individually or collectively, as the
context requires:
(a) the Note;
(b) the Security Agreement (Borrower);
(c) the Guaranties;
(d) the Security Agreements (Guarantor);
(e) the Stock Pledge Agreements (Borrower);
(f) the Collateral Assignments of Transaction Documents;
(g) the Credit Succession Agreements;
(h) the Letter of Credit Applications;
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(i) each certain Subordination and Note Cancellation
Agreement, now or hereafter entered into by and among Bank, Borrower
and any other party or parties;
(j) each certain Subordination Agreement, now or hereafter
entered into by and among Bank, Borrower and any other party or
parties;
(k) the Warrant; and
(l) such other documents, instruments, and agreements
(including financing statements and fixture filings) as Bank may
reasonably request in connection with the transactions contemplated
hereunder or to perfect or protect the liens and security interests
granted to Bank in connection herewith."
All initially capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Agreement.
2. SCHEDULES. SCHEDULES 1.1P, 4.7, 4.9, 4.12, 4.18 AND 4.20 to the
Agreement are hereby deleted in their entirety and replaced, respectively, with
SCHEDULES 1.1P, 4.7, 4.9, 4.12, 4.18 AND 4.20 attached to this Amendment.
3. AMENDMENT TO SECTION 4.6. Section 4.6 of the Agreement is hereby
amended in its entirety as follows:
"4.6 DEBT. Borrower, each Subsidiary and each Physician
Group has no Debt other than (i) Permitted Debt and (ii) until
September 29, 1997, a $150,000 line of credit from Antelope Valley
Bank to Sierra Primary Care Medical Group, Inc., under which no
amounts are outstanding or owing."
4. AMENDMENT TO SECTION 5.11. Section 5.11 of the Agreement is
hereby amended in its entirety as follows:
"5.11 BANK ACCOUNTS. Maintain, and cause each
Subsidiary and each Physician Group to maintain, its cash on hand and
cash equivalent investments in deposit accounts at Bank, which
deposits accounts (other than the deposit accounts of the Physician
Groups) shall be subject to the security interests granted to Bank
under the Security Agreement and the Security Agreements (Guarantor),
and all funds in the deposit accounts of the Physician Groups shall be
swept daily into the deposit account of its Manager established at
Bank; PROVIDED, HOWEVER, the Subsidiary, Sierra Medical Management,
Inc., shall be permitted to maintain a deposit account at Bank of
America SO LONG AS all funds in such deposit account in excess of
Fifteen
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Thousand Dollars ($15,000) are swept on a daily basis into the account of
such Subsidiary maintained at Bank."
5. AMENDMENT TO SECTIONS 6.2 AND 6.11. Sections 6.2 and 6.11 of the
Agreement are hereby amended in their entirety as follows:
"6.2 DEBT. Create, incur, assume or suffer to exist, or
permit any Subsidiary or any Physician Group to create, incur, assume
or suffer to exist, any Debt except (i) Permitted Debt and (ii) a
$150,000 line of credit from Antelope Valley Bank to Sierra Primary
Care Medical Group, Inc., SO LONG AS (x) such line of credit remains
unsecured, (y) no amounts are outstanding or owing at any time, and
(y) such line of credit is terminated not later than 5:00 p.m., Los
Angeles time, September 29, 1997."
"6.11 GUARANTY. Assume, guaranty, endorse (other than
checks and drafts received by Borrower in the ordinary course of
business so long as an Event of Default has not occurred), or
otherwise be or become directly or contingently responsible or liable,
or permit any Subsidiary to assume, guaranty, endorse, or otherwise be
or become directly or contingently responsible or liable (including,
any agreement to purchase any obligation, stock, Assets, goods, or
services or to supply or advance any funds, Assets, goods, or
services, or any agreement to maintain or cause such Person to
maintain, a minimum working capital or net worth, or otherwise to
assure the creditors of any Person against loss) for the obligations
of any other Person; or pledge or hypothecate, or permit any
Subsidiary to pledge or hypothecate, any of its Assets as security for
any liabilities or obligations of any other Person; PROVIDED, HOWEVER,
notwithstanding the foregoing, Borrower shall be permitted to execute
and deliver the guarantees listed on SCHEDULE 1.1P."
6. REPRESENTATIONS AND WARRANTIES. In order to induce Bank to enter
into this Amendment, Borrower represents and warrants to Bank that:
(a) as of the date hereof, no Event of Default, Unmatured Event
of Default or Material Adverse Effect is continuing;
(b) all of the representations and warranties set forth in the
Agreement and the Loan Documents are true, complete and accurate in all respects
as of the date hereof (except for representations and warranties which are
expressly stated to be true and correct as of the Closing Date); and
(c) this Amendment has been duly executed and delivered by
Borrower, and after giving effect to this Amendment, the Agreement continues to
constitute the legal, valid and binding agreements and obligations of Borrower,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy,
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insolvency, and similar laws and equitable principles affecting the enforcement
of creditors' rights generally.
7. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The
effectiveness of this Amendment is subject to and contingent upon the
fulfillment of each and every one of the following conditions:
(a) Bank shall have received this Amendment, duly executed by
Borrower and Bank, and the Consent of Guarantor, duly executed by Prospect
Medical Systems, Inc.;
(b) Bank shall have received all outstanding and unpaid Bank
Expenses, including but not limited to the legal fees of Buchalter, Nemer,
Fields & Younger relating to the negotiation, preparation and documentation of
the Agreement, the Loan Documents and this Amendment;
(c) No Event of Default, Unmatured Event of Default or Material
Adverse Effect shall be continuing; and
(d) All of the representations and warranties set forth herein
and in the Agreement shall be true, complete and accurate in all respects as of
the date hereof (except for representations and warranties which are expressly
stated to be true and correct as of Closing Date).
8. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Amendment may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Amendment. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver a manually executed
counterpart of this Amendment but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Amendment.
9. REAFFIRMATION OF THE AGREEMENT. Except as expressly modified by
this Amendment, the Agreement and the Loan Documents shall remain in full force
and effect.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first hereinabove written.
PROSPECT MEDICAL HOLDINGS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: CFO
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IMPERIAL BANK,
a California banking corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: SVP
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CONSENT OF GUARANTOR
The undersigned, as "Guarantor" under that certain Continuing
Guaranty, dated as of July 3, 1997 (the "GUARANTY"), executed in favor of
IMPERIAL BANK, a California banking corporation ("BANK"), with respect to the
obligations of PROSPECT MEDICAL HOLDINGS, INC., a Delaware corporation
("BORROWER"), owing to Bank, hereby acknowledges notice of the foregoing
Amendment Number Two to Revolving Credit Agreement, dated as of September 25,
1997, between Borrower and Bank, consents to the terms contained therein, and
agrees that the Guaranty and all security therefor shall remain in full force
and effect.
Although Bank has informed us of the matters set forth above and we
have acknowledged same, we understand and agree that Bank has no duty under the
Agreement, the Guaranty or any other agreement between us to so notify us or to
seek an acknowledgement, and nothing herein is intended to or shall create such
a duty as to any advances or transactions hereafter.
PROSPECT MEDICAL SYSTEMS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: CFO
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