Exhibit 10.4
Execution
Copy
FIRST AMENDMENT TO FORBEARANCE
AGREEMENT
THIS FIRST AMENDMENT TO FORBEARANCE AGREEMENT
(this “ Amendment ”) is made and entered into as
of this 31 st day of March, 2008, by and among Prospect
Medical Holdings, Inc. (“ Holdings ”) and
Prospect Medical Group, Inc. (“ Prospect ”
and, collectively with Holdings, the “ Borrowers
” and each, individually, a “ Borrower ”),
Bank of America, N.A., as Administrative Agent (in such capacity,
the “ First Lien Administrative Agent ”) on
behalf of itself and the other lenders party to the Credit
Agreement defined below (the “ First Lien Lenders
”).
RECITALS
WHEREAS, the Borrowers, the First Lien Lenders
and the First Lien Administrative Agent have entered into that
certain First Lien Credit Agreement dated as of August 8, 2007
(as amended, restated, supplemented or otherwise modified, the
“ First Lien Credit Agreement ”), pursuant to
which the First Lien Lenders have agreed to make the Loans (such
term, together with each other capitalized term used in this
Amendment but not defined in this Amendment, shall be defined in
accordance with the First Lien Credit Agreement) and other
extensions of credit, all upon the terms and conditions set forth
in the First Lien Credit Agreement;
WHEREAS, as of the date hereof, certain
Defaults and Events of Default exist under the First Lien Credit
Agreement and, which as a result of such Defaults and Events of
Default, gave rise to the First Lien Lenders and the First Lien
Administrative Agent having the right, among other things, to
declare the commitment of each First Lien Lender to make Loans to
be terminated and to exercise any and all other remedies available
to the First Lien Lenders under the First Lien Credit
Agreement;
WHEREAS, the Borrowers, the First Lien
Administrative Agent and the First Lien Lenders entered into a
Forbearance Agreement on February 13, 2008 (as amended hereby,
and may be further amended, restated supplemented or otherwise
modified, the “ Forbearance Agreement ”)
pursuant to which the First Lien Lenders and the First Lien
Administrative Agent agreed to forbear from exercising such rights
for a limited period of time provided that Borrowers satisfied
certain conditions contained within such Forbearance
Agreement;
WHEREAS, the Borrowers have advised the First
Lien Administrative Agent that they will be unable to deliver the
Required Reporting Package (as such term is defined in the
Forbearance Agreement) by a time sufficient to allow a borrowing
under the Revolving Credit Facility in accordance with the terms of
the Forbearance Agreement, and accordingly, the Borrowers have
requested that they be permitted to borrow under the Revolving
Credit Facility in advance of their delivery of the Required
Reporting Package;
WHEREAS, the First
Lien Lenders and the First Lien Administrative Agent are willing to
grant such request on the terms and conditions set forth in this
Amendment;
NOW, THEREFORE, in
consideration of the foregoing, the parties agree as
follows:
ARTICLE I
AMENDMENT TO THE FORBEARANCE
AGREEMENT
Section 1.1
Definitions
. All
capitalized terms used and not defined herein shall have the
meanings assigned thereto in the Credit Agreement and/or the
Forbearance Agreement, as applicable.
Section 1.2
Amendment .
Section 2.1 of the Forbearance
Agreement is hereby amended by deleting subsection
“(c)” of such section in its entirety and replacing
such subsection with the following:
“(c) no Revolving Credit
Borrowing may be requested after March 31st, 2008; (or, if the
Forbearance Period is extended to April 10, 2008 in accordance
with Section 1.4(b) above, April 4,
2008);”
ARTICLE II
CONDITIONS TO
EFFECTIVENESS
Section 2.1
Conditions Precedent . This Amendment shall become
effective as of the date first written above upon the satisfaction
of each of the following conditions:
(a)
the First Lien Administrative Agent shall have received duly
executed counterparts of this Amendment from each of the Borrowers,
the Guarantors and written confirmation of agreement to the terms
hereof by the Required Lenders; and
(b)
the Second Lien Administrative Agent and the Second Lien Lenders
shall have consented in writing to this Amendment.
ARTICLE III
MISCELLANEOUS
Section 3.1
Representations and Warranties . Each Loan Party
hereby represents and warrants to the First Lien Administrative
Agent and the First Lien Lenders that (a) each Loan Party has
the legal power and authority to execute and deliver this
Amendment; (b) the officers of each Loan Party executing this
Amendment have been duly authorized to execute and deliver the same
and bind each Loan Party with respect to the provisions hereof;
(c) the execution and delivery hereof by each Loan Party and
the performance and observance by each Loan Party of the provisions
hereof do not violate or conflict with any organizational document
of any Loan Party or any law applicable to any Loan Party or result
in a breach of any provision of or
2
constitute a default under any other agreement,
instrument or document binding upon or enforceable against any Loan
Party; (d) except with respect to the Existing Events of
Default, no Default or Event of Default exists under the First Lien
Credit Agreement, nor will any occur immediately after the
execution and delivery of this Amendment or by the performance or
observance of any provision hereof; (e) no Loan Party is aware
of any claim or offset against, or defense or counterclaim to, any
Loan Party’s obligations or liabilities under the First Lien
Credit Agreement or any other Loan Document; (f) this
Amendment and each document executed by each Loan Party in
connection herewith constitute valid and binding obligations of the
applicable Loan Party in every respect, enforceable in accordance
with their terms; and (g) no Loan Party has received a notice
of default of any kind from any material account debtor or any
counterparty to a Material Contract and no material account debtor
or counterparty to a Material Contract has asserted any right of
set-off, deduction or counterclaim with respect to any account or
such Material Contract, respectively.
Section 3.2
Release . Each Loan Party hereby waives and releases
the First Lien Administrative Agent and the First Lien Lenders and
their respective directors, officers, employees, agents, attorneys,
affiliates and subsidiaries (each a “ Releasee
”) from any and all claims, offsets, defenses and
counterclaims, known and unknown, that any Loan Party may have as
of the date of this Amendment based upon, relating to, or arising
out of the Obligations and related transactions in any way.
Each Loan Party intends the foregoing release to cover,
enco
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