to “second amended chapter 11 center, inc. (dated
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THOMAS E. PATTERSON (State Bar No. 130723) DAVID A. FIDLER (State Bar No. 195648) COURTNEY E. POZMANTIER (State Bar No. 242103) KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 Avenue of the Stars, 39th Floor Los Angeles, California 90067 Telephone: (310) 407-4000 Facsimile: (310) 407-9090
Reorganization Counsel for Debtor and Debtor in Possession
Debtor's Mailing Address3828 Delmas Terrace Culver City, CA 90232
Federal Tax I.D. # XX-XXX3823
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
Case No.: LA 07-19705 (BB)
Chapter 11
NOTICE OF SUBMISSION OF EXHIBITS TO “SECOND AMENDED CHAPTER 11 PLAN OF REORGANIZATION PROPOSED BY BROTMAN MEDICAL CENTER, INC. (DATED: NOVEMBER 6, 2008)”
Plan Confirmation Hearing
Date: January 21, 2009 Time: 10:00 a.m.
In re
BROTMAN MEDICAL CENTER, INC., a California corporation,
Debtor.
Place: Courtroom 1475 255 East Temple Street Los Angeles, CA 90012
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TO THE HONORABLE SHERI BLUEBOND, UNITED STATES BANKRUPTCY
JUDGE, THE OFFICE OF THE UNTIED STATES TRUSTEE, THE OFFICIAL
COMMITTEE OF UNSECURED CREDITORS, PRIME HEALTHCARE SERVICES
LOS ANGELES LLC, ALL KNOWN EQUITY HOLDERS, AND ALL OTHER
PARTIES ENTITLED TO NOTICE:
PLEASE TAKE NOTICE that Brotman Medical Center, Inc., debtor and debtor in
possession in the above-captioned chapter 11 case, hereby respectfully submits the following
exhibits to the Second Amended Chapter 11 Plan of Reorganization Proposed by Brotman
Medical Center, Inc. (Dated: November 6, 2008).
EXHIBITNO. DESCRIPTION
A Articles of Incorporation and Bylaws
B Class 4 Note
C Creditor Trust Agreement
D List of Critical Vendors
E Commitment Letter re Exit Financing
F Release Agreement Between the Debtor and Prospect Medical Holdings, Inc.
G List of Initial Directors and Officers
H ADR and Mediation Procedures
DATED: December 17, 2008 /s/ Courtney E. Pozmantier COURTNEY E. POZMANTIER
KLEE, TUCHIN, BOGDANOFF & STERN LLP Reorganization Counsel for Debtor and Debtor in Possession
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OFBROTMAN MEDICAL CENTER, INC.
Samuel S. Lee and Michael Lane certify that:
ONE: They are the duly elected and acting Chairman of the Board and Secretary, respectively, of Brotman Medical Center, Inc., a California corporation (the “Corporation”).
TWO: On October 25, 2007, the Corporation filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Central District of California, Los Angeles Division (the “Bankruptcy Court”).
THREE: Provision for the making of these Amended and Restated Articles of Incorporation is contained in the Corporation’s Second Amended Plan of Reorganization, dated November 6, 2008 (the “Plan”).
FOUR: By Order Confirming Second Amended Plan of Reorganization (Dated November 6, 2008), Ch.11 Case No. 07-19705(BB) (Bankr. C.D.Cal. filed October 25, 2007, dated ______, 2009, issued by Sheri Bluebond, United States Bankruptcy Judge for the Central District of California (the “Order”), the Bankruptcy Court has authorized the adoption of these Amended and Restated Articles of Incorporation pursuant to the provisions of Sections 1123 and 1129 of the Bankruptcy Code and Section 1400 of the General Corporation Law of the State of California, and pursuant to the Order the voting rights of the existing capital stock of the Corporation have been extinguished.
FIVE: The Articles of Incorporation of the Corporation shall be amended and restated to read in full as follows:
I.
The name of the Corporation is Brotman Medical Center, Inc.
II.
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code.
III.
The name and address of the Corporation’s initial agent for service of process in the State of California is : CT Corporation System, 818 West Seventh Street, Los Angeles, CA 90017.
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IV.
Section 1. The total number of shares of all classes of stock that the Corporation is authorized to issue is Twenty Million (20,000,000) shares, consisting of Ten Million (10,000,000) shares of Common Stock and Ten Million (10,000,000) shares of Preferred Stock. The Preferred Stock may be issued in one or more series, and the Board of Directors of the Corporation is expressly authorized (i) to fix the designations, powers, preferences, rights, qualifications, limitations and restrictions with respect to any series of Preferred Stock and (ii) to specify the number of shares of any series of Preferred Stock.
Section 2. The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or of any of them. Subject to compliance with applicable protective voting rights which have been or may be granted to the Preferred Stock or series thereof in Certificates of Determination or the Corporation’s Articles of Incorporation (“Protective Provisions”), the rights, privileges, preferences and restrictions of any such unissued series may be subordinated to, pari passu with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption and/ or approval of matters by vote or written consent), or senior to any of those of any present or future class or series of Preferred or Common Stock. Subject to compliance with applicable Protective Provisions, the Board of Directors is also authorized to increase or decrease the number of shares of any series, prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.
Section 3. To the extent required by section 1123(a)(6) of the United States Bankruptcy Code (11 U.S.C. § 1123(a)(6)), no nonvoting equity securities of the Corporation shall be issued.
V.
Section 1. The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Section 2. The Corporation is authorized to provide indemnification of agents (as defined in Section of the California Corporations Code) through bylaw provisions, agreements with the agents, vote of shareholders or disinterested directors, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to the Corporation or its shareholders. The Corporation is further authorized to provide insurance for agents as set forth in Section 317(i) of the California Corporations Code, provided that, in cases where the Corporation owns all or a portion of the shares of the company issuing the insurance policy, the company and/or the policy must meet one of the two sets of conditions set forth in Section 317(i), as amended.
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Section 3. Any repeal or modification of the foregoing provisions of this Article V by the shareholders of this Corporation shall not adversely affect any right or protection of an agent of this Corporation existing at the time of such repeal or modification.
SIX: The foregoing Amended and Restated Articles of Incorporation have been duly approved by the Board of Directors.
SEVEN: The foregoing Amended and Restated Articles of Incorporation have been duly adopted pursuant to the Plan in accordance with Section 1400 of the General Corporation Law.
IN WITNESS WHEREOF, the undersigned have executed the foregoing Amended and Restated Articles of Incorporation on ____________, 20__.
The undersigned further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of their own knowledge.
Samuel S. Lee, Chairman of the Board
Michael Lane, Secretary
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AMENDED AND RESTATED BYLAWS OF
BROTMAN MEDICAL CENTER, INC.,a California corporation
ARTICLE IOFFICES
Section 1.1 Principal Executive Office. The principal executive office of the corporation is hereby fixed and located at 3828 Delmas Terrace, Culver City, CA 90232. The Board of Directors is hereby granted full power and authority to change said principal executive office from one location to another.
Section 1.2 Other Offices. Other business offices may at any time be established at any place or places specified by the Board of Directors.
Section 1.3 Corporate Purposes. The corporation’s purposes shall include, without limitation, the ownership and operation of a general acute care hospital (the “Hospital”) and to undertake all activities related thereto.
Section 1.4 Role and Purpose.
(a) The general role and purpose of the Hospital shall be to support, manage and furnish facilities, personnel and services; to provide diagnosis, medical, surgical and hospital care, outpatient care and other hospital and medically related services to sick, injured or disabled persons; and to provide well care programs as appropriate and feasible, without regard to race, color, sex, age, national origin or handicap, or in any other manner in violation of applicable law.
(b) The goals and objectives of the Hospital shall be:
(1) To provide appropriate facilities and needed services to best serve the needs of patients;
(2) To improve the standards of health care in the community;
(3) To establish and promote cost-effective health care delivery including timely adaptations to meet evolving Medicare and other regulations mandating data accumulation and cost control;
(4) To encourage educational activities related to rendering care to the sick and injured or to the promotion of health, as may be justified by the facilities, personnel, funds or other resources that are available;
(5) To manage, operate or participate in, so far as Hospital policy, circumstances and available funds may warrant, any activity designed to promote the general health of the community; and
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(6) To guard against any activity in or on behalf of the Hospital having, or tending to have, and undesirable effect upon the Hospital or the services it renders.
(c) Community Served: The community served by the Hospital consists primarily of the area within a five (5) mile radius of the Hospital, which includes Culver City and that portion of the City of Los Angeles adjacent to the Hospital, including the Palms - Mar Vista Area.
Section 1.5 Non-Discrimination. It is the policy of the corporation that all activities, including, but not limited to, patient access or admission, employment, Medical Staff membership and Board of Directors membership are performed without regard to race, color, sex, age, national origin or handicap, or in any other manner in violation of applicable law.
All patients with the same health problem shall receive the same level of care in the Hospital.
ARTICLE IIMEETINGS OF SHAREHOLDERS
Section 2.1 Place of Meetings. All meetings of shareholders shall be held at the principal executive office of the corporation, or at any other place, within or without the State of California, specified by the Board of Directors or by electronic video transmission.
Section 2.2 Annual Meeting. The annual meeting of the shareholders shall be held at the time and date in each year fixed by the Board of Directors. At the annual meeting, directors shall be elected, reports of the affairs of the corporation shall be considered, and any other business may be transacted that is within the power of the shareholders.
Section 2.3 Special Meetings. Special meetings of the shareholders for any purpose or purposes whatsoever may be called at any time by the Chairman of the Board (if there be such an officer appointed), by the Chief Executive Officer, by the Board of Directors, or by one or more shareholders entitled to cast not less than ten percent (10%) of the votes at the meeting.
Section 2.4 Notice of Annual or Special Meeting.
(a) Written notice of any meeting of the shareholders shall be given to each shareholder entitled to vote, either personally or by first-class mail, or, if the corporation has outstanding shares held of record by 500 or more persons (determined in accordance with Section 605 of the General Corporation Law) on the record date for the meeting, by third-class mail, or by other means of written communication, charges prepaid, addressed to such shareholder at the shareholder’s address appearing on the books of the corporation or given by such shareholder to the corporation for the purpose of notice. The notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the general nature of the business to be transacted or, in the case of the annual meeting, those matters which the Board of Directors, at the time of the giving of the notice, intend to present for action by the shareholders, including, whenever directors are to be elected at a meeting, the names of nominees intended at the time of giving of the notice to be presented by the Board of Directors for election.
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(b) If any notice or report addressed to a shareholder at the address of such shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice or report to all other shareholders. If a shareholder gives no address, notice shall be deemed to have been given to such shareholder if addressed to the shareholder at the place where the principal executive office of the corporation is situated, or if published at least once in some newspaper of general circulation in the county in which said principal executive office is located.
(c) All such notices shall be given to each shareholder entitled thereto not less than ten (10) days (or, if sent by third-class mail, thirty (30) days) nor more than sixty (60) days before each annual meeting. Any such notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any such notice in accordance with the foregoing provisions, executed by the Secretary, Assistant Secretary or any transfer agent of the corporation, shall be prima facie evidence of the giving of the notice.
Section 2.5 Quorum. The presence in person or by proxy of persons entitled to vote a majority of the voting shares at any meeting shall constitute a quorum for the transaction of business. If a quorum is present, the affirmative vote of a majority of the shares represented and voting at the meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a different number or voting by classes is required by the General Corporation Law, the Articles of Incorporation or these Bylaws. Any meeting of shareholders, whether or not a quorum is present, may be adjourned from time to time by the vote of the holders of a majority of the shares present in person or represented by proxy thereat and entitled to vote, but in the absence of a quorum no other business may be transacted at such meeting, except that the shareholders present or represented by proxy at a duly called or held meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum, or if required by the General Corporation Law or the Articles of Incorporation, the vote of a greater number or voting by classes.
Section 2.6 Adjourned Meeting and Notice. When any shareholders’ meeting, either annual or special, is adjourned for more than forty-five (45) days, or if after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. Except as provided above, it shall not be necessary to give any notice of the time and place of the adjourned meeting or electronic video screen communication, if any, by which the shareholders may participate), or of the business to be transacted thereat, other than by announcement of the time and place thereof at the meeting at which such adjournment is taken.
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Section 2.7 Record Date.
(a) The Board of Directors may fix a time in the future as a record date for the determination of the shareholders entitled to notice of and to vote at any meeting of shareholders or entitled to give consent to corporate action in writing without a meeting, to receive any report, to receive any dividend or other distribution, or allotment of any rights, or to exercise rights in respect of any other lawful action. The record date so fixed shall be not more than sixty (60) days nor less than ten (10) days prior to the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board of Directors shall fix a new record date if the meeting is adjourned for more than forty-five (45) days from the date set for the original meeting. When a record date is so fixed, only shareholders of record at the close of business on that date are entitled to notice of and to vote at any such meeting, to give consent without a meeting, to receive any report, to receive the dividend, distribution or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Articles of Incorporation or these Bylaws.
(b) If no record date is fixed:
(1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day preceding the day on which the meeting is held.
(2) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken, shall be the day on which the first written consent is given.
(3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later.
Section 2.8 Voting.
(a) Except as provided below with respect to cumulative voting and except as may be otherwise provided in the Articles of Incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders.
Any holders of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder’s approving vote is with respect to all shares such shareholder is entitled to vote.
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(b) Subject to the requirements of the next sentence, every shareholder entitled to vote at any election for directors shall have the right to cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder’s shares are normally entitled, or to distribute votes on the same principle among as many candidates as such shareholder thinks fit.No shareholder shall be entitled to cumulate votes unless such candidate’s name or candidates’ names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting, prior to the voting, of the shareholder’s intention to cumulate such shareholder’s votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination.
(c) The candidates for directors receiving the highest number of affirmative votes of shares entitled to be voted for them, up to the number of directors to be elected by such shares, shall be elected. Votes against a director and votes withheld shall have no legal effect.
Section 2.9 Proxies.
(a) Every person entitled to vote shares (including voting by written consent) may authorize another person or other persons to act by proxy with respect to such shares.“Proxy” means a written authorization signed or an electronic transmission authorized by a shareholder or the shareholder’s attorney-in-fact giving another person or persons power to vote with respect to the shares of such shareholder. “Signed” for the purpose of this Section 2.11means the placing of the shareholder’s name or other authorization on the proxy (whether by manual signature, typewriting, telegraphic, or electronic transmission or otherwise) by the shareholder or the shareholder’s attorney-in-fact. A proxy may be transmitted by an oral telephone transmission if it is submitted with information from which it may be determined that the proxy was authorized by the shareholder, or his or her attorney in fact.
(b) Any proxy duly executed is not revoked and continues in full force and effect until (i) a written instrument revoking it is filed with the Secretary of the corporation prior to the vote pursuant thereto, (ii) a subsequent proxy executed by the person executing the prior proxy is presented to the meeting, (iii) the person executing the proxy attends the meeting and votes in person, or (iv) written notice of the death or incapacity of the maker of such proxy is received by the corporation before the vote pursuant thereto is counted; provided that no such proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless otherwise provided in the proxy. Notwithstanding the foregoing sentence, a proxy that states that it is irrevocable, is irrevocable for the period specified therein to the extent permitted by Section 705(e) and (f) of the General Corporation Law. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed.
Section 2.10 Validation of Defectively Called or Noticed Meetings. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, provides waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents and
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approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by these Bylaws or by the General Corporation Law to be included in the notice if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the Articles of Incorporation or these Bylaws.
Section 2.11 Action Without Meeting.
(a) Directors may be elected without a meeting by a consent in writing, setting forth the action so taken, signed by all of the persons who would be entitled to vote for the election of directors, provided that, without notice except as hereinafter set forth, a director may be elected at any time to fill a vacancy not filled by the directors (other than a vacancy created by removal of a director) by the written consent of persons holding a majority of the outstanding shares entitled to vote for the election of directors.
Any other action that may be taken at a meeting of the shareholders may be taken without a meeting, and without prior notice except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
(b) Unless the consents of all shareholders entitled to vote have been solicited in writing:
(1) notice of any proposed shareholder approval of (i) a contract or other transaction with an interested director, (ii) indemnification of an agent of the corporation, (iii) a plan of conversion, (iv) a reorganization of the corporation as defined in Section 181 of the General Corporation Law, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, if any, without a meeting by less than unanimous written consent, shall be given at least ten (10) days before the consummation of the action authorized by such approval in accordance with Section 2.4 of the Bylaws; and
(2) prompt notice shall be given of the taking of any other corporate action approved by shareholders without a meeting by less than unanimous written consent to those shareholders entitled to vote who have not consented in writing. Such notices shall be given in the manner provided in Section 2.4 of these Bylaws.
Any shareholder giving a written consent, or the shareholder’s proxyholders, or a transferee of the shares or a personal representative of the shareholder or their respective proxyholders, may revoke the consent personally or by proxy by a writing received by the corporation prior to the time that written consents of the number of shares required to
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authorize the proposed action have been filed with the Secretary of the corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the corporation.
Section 2.12 Inspectors of Election.
(a) In advance of any meeting of shareholders, the Board of Directors may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any such meeting may, and on the request of any shareholder or the holder of such shareholder’s proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one or three. If inspectors are appointed at a meeting on the request of one or more shareholders or holders of proxies, the majority of shares represented in person or by proxy shall determine whether one inspector or three inspectors are to be appointed.
(b) The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; receive votes, ballots or consents; hear and determine all challenges and questions in any way arising in connection with the right to vote; count and tabulate all votes or consents; determine when the polls shall close; determine the result; and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.
(c) The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE IIIBOARD OF DIRECTORS
Section 3.1 Powers. Subject to the provisions of the General Corporation Law and any limitations in the Articles of Incorporation relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. The Board of Directors may delegate the management of the day-to-day operation of the business of the corporation to a management company or other person, provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board of Directors.
Section 3.2 Number and Qualification of Directors. The authorized number of directors shall be five (5) until changed by an amendment of the Articles of Incorporation or these Bylaws (which amends this Section 3.2) duly adopted by a vote or written consent of holders of a majority of the outstanding shares; provided that if the authorized number of directors is five or more, any proposal to reduce the authorized number of directors to a number less than five cannot be adopted if the votes cast against its adoption at a meeting, or the shares
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not consenting in the case of action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote.
The Board of Directors may provide by resolution, in addition to the number of directors provided herein, for one or more ex officio members of the Board of Directors, without voting rights. An ex officio director shall serve in an advisory capacity only and shall not be deemed a true voting member of the Board of Directors or counted as a member of the Board of Directors for purposes of computing the number of directors authorized pursuant to this section.
Unless otherwise already elected to the Board of Directors, the Chief Executive Officer of the corporation shall serve as an ex officio member of the Board of Directors.
Section 3.3 Election and Term of Office. The directors shall be elected at each annual meeting of shareholders, but, if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
Section 3.4 Vacancies. A vacancy in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any director, if a director has been declared of unsound mind by order of court or convicted of a felony, if the authorized number of directors is increased, if the incorporator or incorporators have failed to appoint the authorized number of directors in any resolution for appointment of directors upon the initial organization of the corporation, or if the shareholders fail, at any annual or special meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting.
Vacancies in the Board of Directors, except for a vacancy created by the removal of a director, may be filled by a majority of the directors present at a meeting at which a quorum is present, or if the number of directors then in office is less than a quorum, (a) by the unanimous written consent of the directors then in office, (b) by the vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice in compliance with these Bylaws, or (c) by a sole remaining director. Each director so elected shall hold office until his or her successor is elected at an annual or a special meeting of the shareholders. A vacancy in the Board of Directors created by the removal of a director may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of all of the holders of the outstanding shares.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Any such election by written consent other than to fill a vacancy created by removal shall require the consent of holders of a majority of the outstanding shares entitled to vote. Any such election by written consent to fill a vacancy created by removal shall require the unanimous written consent of all shares entitled to vote for the election of directors.
Any director may resign effective upon giving written notice to the Chairman of the Board (if there be such an officer appointed), the Chief Executive Officer, the Secretary or the
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Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of the director’s term of office.
Section 3.5 Time and Place of Meetings. The Board of Directors shall hold a regular meeting immediately after the meeting of shareholders at which it is elected and at the place where such meeting is held, or at such other place as shall be fixed by the Board of Directors, for the purpose of organization, election of officers of the corporation and the transaction of other business. Notice of such meeting is hereby dispensed with. Other regular meetings of the Board of Directors shall be held without notice at such times and places as are fixed by the Board of Directors. Special meetings of the Board of Directors may be held at any time whenever called by the Chairman of the Board (if there be such an officer appointed), the Chief Executive Officer, any Vice-President, the Secretary or any two directors.
Except as hereinabove provided in this Section 3.5, all meetings of the Board of Directors may be held at any place within or without the State of California that has been designated by resolution of the Board of Directors as the place for the holding of regular meetings, or by written consent of all directors as specified in the notice for the meeting. In the absence of such designation, meetings of the Board of Directors shall be held at the principal executive office of the corporation. Special meetings of the Board of Directors may be held either at a place so designated or at the principal executive office of the corporation.
Section 3.6 Notice of Special Meetings. Notice of the time and place of special meetings shall be delivered personally to each director or communicated to each director by telephone, telegraph, facsimile or mail, charges prepaid, addressed to the director at the director’s address as it is shown upon the records of the corporation or, if it is not so shown on such records or is not readily ascertainable, at the place at which the meetings of the directors are regularly held. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally or by telephone, telegraph, facsimile, as above provided, it shall be so delivered at least forty-eight (48) hours prior to the time of the holding of the meeting. Any such transmission of notice, as above provided, shall be due, legal and personal notice to such director. As used herein, notice by telephone shall be deemed to include a voice messaging system or other system or technology designed to record and communicate messages, or wireless, to the recipient, including the recipient’s designated voice mailbox or address on such a system.
Notice of a meeting need not be given to any director who provides a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof in writing, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meetings.
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Section 3.7 Action at a Meeting: Quorum and Required Vote.
(a) Presence of a majority of the authorized number of directors at a meeting of the Board of Directors constitutes a quorum for the transaction of business, except as hereinafter provided.
(b) Members of the Board of Directors may participate in a meeting through use of conference telephone or electronic video screen communication. Participation in a meeting through use of conference telephone or electronic video screen communication pursuant to this subsection (b) constitutes presence in person at such meeting as long as all members participating in the meeting are able to hear one another.
(c) Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board of Directors, unless a greater number, or the same number after disqualifying one or more directors from voting, is required by law, by the Articles of Incorporation, or by these Bylaws. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.
Section 3.8 Action Without a Meeting. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board of Directors shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board of Directors.Such action by written consent shall have the same force and effect as a unanimous vote of such directors. All members of board shall include an “interested director” or a “common director” as described in Sections 310(a) or (b) of the General Corporations Law, who abstains in writing from providing consent, where the material facts of the contract or transaction, and the interest or other directorship of the interested or common director are fully disclosed to the non-interested or non-common directors prior to their execution of the written consent or consents, such disclosures are conspicuously included in the written consent or consents executed by the noninterested or noncommon constituting a quorum approve the action.
Section 3.9 Adjourned Meeting and Notice. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.
Section 3.10 Fees and Compensation. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the Board of Directors.
Section 3.11 Appointment of Executive and Other Committees. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members
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of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any such committee, to the extent provided in the resolution of the Board of Directors or in these Bylaws, shall have all the authority of the Board of Directors, except with respect to:
(a) The approval of any action for which the General Corporation Law also requires shareholders’ approval or approval of the outstanding shares.
(b) The filling of vacancies on the Board of Directors or in any committee.
(c) The fixing of compensation of the directors for serving on the Board of Directors or on any committee.
(d) The amendment or repeal of these Bylaws or the adoption of new Bylaws.
(e) The amendment or repeal of any resolution of the Board of Directors that by its express terms is not so amendable or repealable.
(f) A distribution to the shareholders of the corporation, except at a rate, in a periodic amount or within a price range determined by the Board of Directors.
(g) The appointment of other committees of the Board of Directors or the members thereof.
The provisions of Sections 3.5 through 3.9 of these Bylaws apply also to committees of the Board of Directors and action by such committees, mutatis mutandis (with the necessary changes having been made in the language thereof).
Section 3.12 Joint Conference Committee. The Board of Directors shall, by resolution adopted by a majority of the authorized number of directors, establish a Joint Conference Committee that shall consist of one or more members of the Board of Directors, one or more members of the Medical Staff and such other persons as the Board of Directors may deem necessary.
Section 3.13 Local Governing Board.
(a) The Board of Directors shall establish an advisory committee of the Board of Directors of the Hospital comprised of Medical Staff, community leaders and the Hospital’s Chief Executive Officer (“Local Governing Board”). The individuals on the Local Governing Board shall (i) represent the Hospital in the community and represent the views of the community to the Local Governing Board in its deliberations, (ii) participate in the Hospital’s community outreach programs and (iii) supervise the Hospital’s charity care policies and practices.
(b) The Local Governing Board’s responsibilities shall include:
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(1) approving the selection of the Hospital’s Chief Executive Officer and the Hospital’s Medical Director;
(2) oversight of the preparation of the annual operating plan and budget (including capital expenditures) and monitoring performance on a periodic basis;
(3) review of a medical needs assessment prior to the termination or substantial change to any material service, program or type or level of care offered by the Hospital as of the date of the corporation’s acquisition of the Hospital;
(4) providing for the organization of the physicians and other practitioners granted clinical privileges at the Hospital into a Medical Staff under Medical Staff Bylaws approved by the local governing board;
(5) approving or disapproving Medical Staff appointments and privileges, subject to the bylaws and the rules and regulations of the Medical Staff;
(6) ensuring, through the Medical Staff, that appropriate professional care is provided to Hospital patients (this includes reviewing and, if necessary, acting upon reports of medical care evaluation, utilization management and other matters relating to the quality of care rendered in the Hospital); and
(7) directing all reasonable and necessary steps to be taken by the medical staff and Hospital management for meeting the Joint Commission (formerly, the Joint Commission on Accreditation of Healthcare Organizations) accreditation.
Section 3.14 Physicians Advisory Board. The Board of Directors shall establish a physician advisory board of the Hospital, which shall be a multidisciplinary committee of the Medical Staff. Its chief role will be to recommend programs, services and operational issues to the Hospital’s Chief Executive Officer. In turn, the Hospital’s Chief Executive Officer will report to the physician advisory board the status of various specialty programs and services. The physician advisory board will meet no less than four times per year.
ARTICLE IVOFFICERS
Section 4.1 Officers. The officers of the corporation shall consist of the Chief Executive Officer, the Secretary and a Chief Financial Officer, and each of them shall be appointed by the Board of Directors. The corporation may also have a Chairman of the Board, Treasurer, one or more Vice-Presidents, a Controller, one or more Assistant Secretaries and Assistant Chief Financial Officers and such other officers as may be appointed by the Board of Directors, or with authorization from the Board of Directors by the Chief Executive Officer. The order of the seniority of the Vice-Presidents shall be in the order of their nomination, unless otherwise determined by the Board of Directors. Any two or more of such offices may be held by the same person. The Board of Directors shall designate one officer as the chief financial officer of the corporation. In the absence of such designation, the Chief Financial Officer shall be the chief financial officer. The Board of Directors may appoint, and may empower the Chief Executive Officer to appoint, such other officers as the business of the corporation may require,
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each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.
All officers of the corporation shall hold office from the date appointed to the date of the next succeeding regular meeting of the Board of Directors following the meeting of shareholders at which the Board of Directors is elected, and until their successors are elected; provided that all officers, as well as any other employee or agent of the corporation, may be removed at any time at the pleasure of the Board of Directors, or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors, and upon the removal, resignation, death or incapacity of any officer, the Board of Directors or the Chief Executive Officer, in cases where he or she has been vested by the Board of Directors with power to appoint, may declare such office vacant and fill such vacancy. Nothing in these Bylaws shall be construed as creating any kind of contractual right to employment with the corporation.
Any officer may resign at any time by giving written notice to the Board of Directors, the Chief Executive Officer or the Secretary of the corporation, without prejudice, however, to the rights, if any, of the corporation under any contract to which such officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
The salary and other compensation of the officers shall be fixed from time to time by resolution of or in the manner determined by the Board of Directors.
Section 4.2 The Chairman of the Board. The Chairman of the Board (if there be such an officer appointed) shall, when present, preside at all meetings of the Board of Directors and shall perform all the duties commonly incident to that office. The Chairman of the Board shall have authority to execute, in the name of the corporation, bonds, contracts, deeds, leases and other written instruments to be executed by the corporation (except where by law the signature of the Chief Executive Officer is required), and shall perform such other duties as the Board of Directors may from time to time determine.
Section 4.3 The Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, the Chief Executive Officer shall be the chief executive officer of the corporation and shall perform all the duties commonly incident to that office. The Chief Executive Officer shall have authority to execute, in the name of the corporation, bonds, contracts, deeds, leases and other written instruments to be executed by the corporation. The Chief Executive Officer shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board or if there is none, at all meetings of the Board of Directors, and shall perform such other duties as the Board of Directors may from time to time determine.
Section 4.4 Vice-Presidents. The Vice-Presidents (if there be such officers appointed), in the order of their seniority (unless otherwise established by the Board of Directors), may assume and perform the duties of the Chief Executive Officer in the absence or disability of the Chief Executive Officer or whenever the offices of the Chairman of the Board
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and Chief Executive Officer are vacant. The Vice-Presidents shall have such titles, perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or these Bylaws may designate from time to time.
Section 4.5 The Secretary. The Secretary shall record or cause to be recorded, and shall keep or cause to be kept, at the principal executive office and such other place as the Board of Directors may order, a record of minutes of actions taken at all meetings of directors and committees thereof and of shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors’ meetings, the number of shares present or represented at shareholders’ meetings and the proceedings thereof. Minutes and other books and records shall be kept either in written form or in another form capable of being converted into clearly legible tangible form or in any a combination of the foregoing.
The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent, a share register or a duplicate share register in a form capable of being converted into written form, showing the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors and committees thereof required by these Bylaws or by law to be given, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.
The Chief Executive Officer may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer may designate from time to time.
Section 4.6 The Chief Financial Officer. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation. The books of account shall at all reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the Chief Executive Officer and directors, whenever they request it, an account of all of the Chief Financial Officer’s transactions as Chief Financial Officer and of the financial condition of the corporation and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.
The Chief Executive Officer may direct any Assistant Chief Financial Officer to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief
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Financial Officer, and each Assistant Chief Financial Officer shall perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer may designate from time to time.
Section 4.7 The Controller. The Controller (if there be such an officer appointed) shall be responsible for the establishment and maintenance of accounting and other systems required to control and account for the assets of the corporation and provide safeguards therefor, and to collect information required for management purposes, and shall perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer may designate from time to time.
The Chief Executive Officer may direct any Assistant Controller to assume and perform the duties of the Controller, in the absence or disability of the Controller, and each Assistant Controller shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board (if there be such an officer appointed) or the Chief Executive Officer may designate from time to time.
ARTICLE VEXECUTION OF CORPORATE INSTRUMENTS,
RATIFICATION AND VOTING OF STOCKSOWNED BY THE CORPORATION
Section 5.1 Execution of Corporate Instruments. In its discretion, the Board of Directors may determine the method and designate the signatory officer or officers or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation, or in special accounts of the corporation, shall be signed by such person or persons as the Board of Directors shall authorize to do so.
The Board of Directors shall designate an officer who personally, or through his or her representative, shall vote shares of other corporations standing in the name of this corporation. The authority to vote shares shall include the authority to execute a proxy in the name of the corporation for purposes of voting the shares.
Section 5.2 Ratification by Shareholders. In its discretion, the Board of Directors may submit any contract or act for approval or ratification of the shareholders at any annual meeting of shareholders, or at any special meeting of shareholders called for that purpose; and any contract or act that shall be approved or ratified by the holders of a majority of the voting power of the corporation shall be as valid and binding upon the corporation and upon the shareholders thereof as though approved or ratified by each and every shareholder of the corporation, unless a greater vote is required by law for such purpose.
Section 5.3 Voting of Stocks Owned by the Corporation. All stock of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized to do so
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by resolution of the Board of Directors, or in the absence of such authorization, by the Chairman of the Board (if there be such an officer appointed), the Chief Executive Officer or any Vice-President, or by any other person authorized to do so by the Chairman of the Board, the Chief Executive Officer or any Vice-President.
ARTICLE VIANNUAL AND OTHER REPORTS
Section 6.1 Reports to Shareholders. The Board of Directors of the corporation shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year, and at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) prior to the annual meeting of shareholders to be held during the next fiscal year. This report shall comply with the provisions of Section 1501(b) of the General Corporation Law. As long as the corporation has less than 100 holders of record of its shares (determined as provided in Section 605 of the General Corporation Law), the foregoing requirement of an annual report is hereby waived.
Section 6.2 Report of Shareholder Vote. For a period of sixty (60) days following the conclusion of an annual, regular or special meeting of shareholders, the corporation shall, upon written request from a shareholder, forthwith inform the shareholder of the result of any particular vote of shareholders taken at the meeting, including the number of shares voting for, the number of shares voting against and the number of shares abstaining or withheld from voting. If the matter voted on was the election of directors, the corporation shall report the number of shares (or votes if voted cumulatively) cast for each nominee for director. If more than one class or series of shares voted, the report shall state the appropriate numbers by class and series of shares.
ARTICLE VIISHARES OF STOCK
Section 7.1 Stock Certificates. Every holder of shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the Chairman or Vice Chairman of the Board (if there be such officers appointed) or the Chief Executive Officer or a Vice-President and by the Chief Financial Officer or any Assistant Chief Financial Officer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Any such certificate shall also contain such legends or other statements as may be required by Sections 417 and 418 of the General Corporation Law, the Corporate Securities Law of 1968, federal or other state securities laws, and any agreement between the corporation and the issuee of the certificate.
Certificates for shares may be issued prior to full payment, under such restrictions and for such purposes as the Board of Directors or these Bylaws may provide; provided, however, that
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the certificate issued to represent any such partly paid shares shall state on the face thereof the total amount of the consideration to be paid therefor, the amount remaining unpaid and the terms of payment.
No new certificate for shares shall be issued in lieu of an old certificate unless the latter is surrendered and canceled at the same time; provided, however, that a new certificate will be issued without the surrender and cancellation of the old certificate if (1) the old certificate is lost, apparently destroyed or wrongfully taken; (2) the request for the issuance of the new certificate is made within a reasonable time after the owner of the old certificate has notice of its loss, destruction or theft; (3) the request for the issuance of a new certificate is made prior to the receipt of notice by the corporation that the old certificate has been acquired by a bona fide purchaser; (4) the owner of the old certificate files a sufficient indemnity bond with or provides other adequate security to the corporation; and (5) the owner satisfies any other reasonable requirement imposed by the corporation. In the event of the issuance of a new certificate, the rights and liabilities of the corporation, and of the holders of the old and new certificates, shall be governed by the provisions of Sections 8104 and 8405 of the California Commercial Code.
Section 7.2 Uncertificated Shares. Notwithstanding Section 7.1, the corporation may adopt a system of issuance, recordation and transfer of its shares by electronic or other means not involving any issuance of certificates, including provisions for notice to purchasers in substitution for the required statements on certificates under Sections 417, 418, and 1302 of the California Corporations Code, and as may be required by the commissioner in administering the Corporate Securities Law of 1968, which system (1) has been approved by the United States Securities and Exchange Commission, (2) is authorized in any statute of the United States, or (3) is in accordance with Division 8 (commencing with Section 8101) of the California Commercial Code. Any system so adopted shall not become effective as to issued and outstanding certificated securities until the certificates therefor have been surrendered to the corporation.
Section 7.3 Restrictions on Transfer. No common stock issued pursuant to the terms of that certain Second Amended Chapter 11 Plan of Reorganization Proposed by Brotman Medical Center, Inc. (Dated November 6, 2008) (as amended, restated, modified or supplemented, the “Plan”) may be transferred by the holder thereof, except upon death of the holder or by operation of law, for a period of three (3) years beginning on the Effective Date (as such term is defined in the Plan).
ARTICLE VIIIINSPECTION OF CORPORATE RECORDS
Section 8.1 General Records. The accounting books and records and the minutes of proceedings of the shareholders, the Board of Directors and committees thereof of the corporation and any subsidiary of the corporation shall be open to inspection upon the written demand on the corporation of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to such holder’s interests as a shareholder or as the holder of such voting trust certificate. Such inspection by a shareholder or holder of a voting trust certificate may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. Minutes of proceedings
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of the shareholders, Board, and committees thereof shall be kept in written form. Other books and records shall be kept either in written form or in any other form capable of being converted into written form.
A shareholder or shareholders holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation shall have (in person, or by agent or attorney) the right to inspect and copy the record of shareholders’ names and addresses and shareholdings during usual business hours upon five (5) business days’ prior written demand upon the corporation or to obtain from the transfer agent for the corporation, upon written demand and upon the tender of its usual charges for such list, a list of the shareholders’ names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which it has been compiled or as of a date specified by the shareholder subsequent to the date of demand. The list shall be made available on or before the later of five (5) business days after the demand is received or the date specified therein as the date as of which the list is to be compiled.
Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation and its subsidiaries. Such inspection by a director may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts.
Section 8.2 Inspection of Bylaws. The corporation shall keep at its principal executive office in California, or if its principal executive office is not in California, then at its principal business office in California (or shall otherwise provide upon written request of any shareholder if it has no such office in California) the original or a copy of these Bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.
ARTICLE IXINDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
Section 9.1 Right to Indemnification. Each person who was or is a party or is threatened to be made a party to or is involved (as a party, witness or otherwise), in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereafter a “Proceeding”), by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise or was a director, officer, employee or agent of a foreign or domestic corporation that was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent (hereafter an “Agent”), shall be indemnified and held harmless by the corporation to the fullest extent authorized by statutory and decisional law, as the same exists or may hereafter be interpreted or amended (but, in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits
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the corporation to provide broader indemnification rights than were permitted prior thereto) against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon and any federal, state, local or foreign taxes imposed on any Agent as a result of the actual or deemed receipt of any payments under this Article) reasonably incurred or suffered by such person in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding (hereafter “Expenses”); provided, however, that except as to actions to enforce indemnification rights pursuant to Section 9.3 of these Bylaws, the corporation shall indemnify any Agent seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Article shall be a contract right. It is the corporation’s intention that these Bylaws provide indemnification in excess of that expressly permitted by Section 317 of the General Corporation Law, as authorized by the corporation’s Articles of Incorporation.
Section 9.2 Authority to Advance Expenses. Expenses incurred by an officer or director (acting in his or her capacity as such) in defending a Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding, provided, however, that if required by the General Corporation Law, as amended, such Expenses shall be advanced only upon delivery to the corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article or otherwise. Expenses incurred by other Agents of the corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon the receipt of a similar undertaking, if required by law, and upon such other terms and conditions as the Board of Directors deems appropriate. Any obligation to reimburse the corporation for Expense advances shall be unsecured, and no interest shall be charged thereon.
Section 9.3 Right of Claimant to Bring Suit. If a claim under Section 9.1 or 9.2 of these Bylaws is not paid in full by the corporation within thirty (30) days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including attorneys’ fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct that make it permissible under the General Corporation Law for the corporation to indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met the applicable standard of conduct set forth in the General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its shareholders) that the claimant
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had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.
Section 9.4 Provisions Nonexclusive. The rights conferred on any person by this Article shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. To the extent that any provision of the Articles, agreement or vote of the shareholders or disinterested directors is inconsistent with these Bylaws, the provision, agreement or vote shall take precedence.
Section 9.5 Authority to Insure. The corporation may purchase and maintain insurance to protect itself and any Agent against any Expense asserted against or incurred by such person, whether or not the corporation would have the power to indemnify the Agent against such Expense under applicable law or the provisions of this Article, provided that, in cases where the corporation owns all or a portion of the shares of the company issuing the insurance policy, the company and/or the policy must meet one of the two sets of conditions set forth in Section 317 of the General Corporation Law, as amended.
Section 9.6 Survival of Rights. The rights provided by this Article shall continue as to a person who has ceased to be an Agent and shall inure to the benefit of the heirs, executors, and administrators of such person.
Section 9.7 Settlement of Claims. The corporation shall not be liable to indemnify any Agent under this Article IX (a) for any amounts paid in settlement of any action or claim effected without the corporation’s written consent, which consent shall not be unreasonably withheld; or (b) for any judicial award, if the corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action.
Section 9.8 Effect of Amendment. Any amendment, repeal, or modification of this Article shall not adversely affect any right or protection of any Agent existing at the time of such amendment, repeal, or modification.
Section 9.9 Subrogation. In the event of payment under this Article, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Agent, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the corporation effectively to bring suit to enforce such rights.
Section 9.10 No Duplication of Payments. The corporation shall not be liable under this Article to make any payment in connection with any claim made against the Agent to the extent the Agent has otherwise actually received payment (under any insurance policy, agreement, vote or otherwise) of the amounts otherwise indemnifiable hereunder.
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ARTICLE XSPECIAL FUNCTIONS OF THE BOARD OF DIRECTORS
Section 10.1 Medical Staff Recommendations. Whenever the Board of Directors determines that it is in the best interests of quality of patient care to overrule a recommendation of the Medical Executive Committee of the Medical Staff of the Hospital or to decide in favor of the appellant on an appeal from a decision or recommendation of a hearing committee or arbitrator appointed pursuant to the Medical Staff Bylaws, the Board of Directors shall notify the Medical Executive Committee of the Medical Staff of the Hospital so that either a special meeting of the Board of Directors, the Local Governing Board or the Joint Conference Committee may be called and held to discuss the matter before a final decision is rendered by the Board of Directors. The decision of the Board of Directors, which shall be rendered within a reasonable period of time following such special meeting, shall be final.
Section 10.2 Orientation. Comprehensive orientation and continuing education programs shall be provided for members of the Board of Directors.
Section 10.3 Accreditation. The Board of Directors shall be actively involved in the accreditation process, including participation in the Hospital survey and the summation conference with respect thereto.
Section 10.4 Institutional Planning. The Board of Directors shall establish an institutional planning process to evaluate periodically the Hospital’s goals, policies and programs. This planning function shall be performed by the Board of Directors as a whole or by a committee which includes representatives of the Board of Directors, the administration, the Medical Staff, the nursing service, and other Hospital services designated by the Board of Directors. Such committee shall develop an overall plan for the Hospital, including an annual operating budget and three-year capital expenditure plan which shall be reviewed at least annually. Such operating budget, long-range plan and capital expenditure plan shall be subject to review and approval by the Board of Directors. As a separate part of this planning process, periodically the Board of Directors shall also independently evaluate its own performance.
Section 10.5 Conforming With Law. The Board of Directors shall take all reasonable steps to assure the operations of the Hospital conform to all applicable laws and safety regulations.
Section 10.6 Annual Budget. Subject to the review by and approval of the Board of Directors, a formal annual budget shall be developed with the participation of appropriate members of the administration and Medical Staff, and periodic financial reports shall be submitted to the Board of Directors, together with the budget, for analysis.
Section 10.7 Insurance. The Board of Directors shall ensure that the corporation carries property insurance which covers damage to or destruction of the Hospital’s property and any financial loss due to theft or business interruption, and that the corporation carries hospital professional liability insurance for all acts performed by employees of the corporation and volunteers acting within the scope of their official capacity as employees or volunteers of the Hospital.
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Section 10.8 Audit. An audit of the Hospital’s financial operations shall be conducted by a firm of independent certified public accountants at least annually, and the audited financial statements of the Hospital shall be reviewed by the Chief Executive Officer and the Board of Directors at least annually. Such financial statements shall be available to the Joint Commission at the time of the Hospital’s accreditation survey.
Section 10.9 Conflicts Policy. It is the Policy of the Board of Directors to avoid conflicts of interest. Accordingly, the Board of Directors shall be responsible for ensuring the development and implementation of a written conflict-of-interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest.
Section 10.10 Personnel Policies. The Board of Directors shall be responsible for ensuring the development of written personnel policies, which shall be reviewed at least annually and establish a procedure for notifying employees of changes in such personnel policies, and shall also provide for the following:
(a) The Hospital shall maintain for each Hospital employee current and complete personnel records which shall include at least a license verification, background information, periodic work performance evaluations and records of pre-employment health examinations;
(b) The Hospital shall have an evaluation process designed to assure that all individuals responsible for the assessment, treatment or care of patients are competent in the following, as appropriate to the ages of the patients served:
(1) The ability to obtain information and interpret information in terms of the patients’ needs;
(2) Acknowledgement of growth and development; and
(3) An understanding of the range of treatment needed by these patients.
(c) Orientation and in service training programs shall be provided for Hospital personnel; and
(d) Any auxiliary organization wishing to provide services of any kind at Hospital shall submit, for the approval of the Board of Directors, bylaws delineating the organization’s purpose and function. Individual volunteers wishing to provide such services shall do so only pursuant to policies approved by the Board of Directors.
Section 10.11 Review Of Documents. The Board of Directors shall review, at least annually, the Bylaws of the corporation and the bylaws, rules and regulations of the Medical Staff of Hospital. The purpose of such review shall be to amend or recommend the amendment of those provisions which are in need of alteration, clarification, amendment, repeal or replacement. The Board of Directors shall require the Medical Staff, staff of departments and services and others as appropriate to review and revise all department and service policies and procedures when warranted. The period between reviews shall not exceed three years.
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Section 10.12 Risk Management And Safety. The Board of Directors shall be responsible for ensuring the provision of the resources and support system for the quality assessment and improvement functions and risk management functions related to patient care and safety.
ARTICLE XIADMINISTRATOR
Section 11.1 Selection By Board. The Board of Directors may select and employ a competent and experienced Administrator who shall be its direct representative in the management of the Hospital. If selected by the Board of Directors, the Administrator shall be given the necessary authority to operate the Hospital in all its activities and departments and shall be held responsible for the administration of the Hospital, subject only to the policies adopted or orders issued by the Board of Directors or by any of the committees to which the Board of Directors has delegated authority for such action. Subject to the control of the Board of Directors, the Administrator shall act as the duly authorized representative of the Board of Directors in all matters in which the Board of Directors has not formally designated some other person to so act.
Section 11.2 Responsibilities. The Administrator shall be responsible for:
(a) Carrying out all policies established by the Board of Directors;
(b) Preparation of an annual budget showing the expected receipts and expenditures, as required by and subject to approval by the Board of Directors;
(c) Selection, employment, control, and discharge of employees, other than those required by the Bylaws to be selected by the Board of Directors, and development and maintenance of personnel policies and practices of the Hospital;
(d) Maintenance of the physical properties of the Hospital in a good state of repair and operating condition;
(e) Supervision of business affairs to ensure that funds are collected and expended to the best possible advantage;
(f) Cooperation with the Medical Staff, and with all those concerned with the rendering of professional service, to the end that high-quality care may be rendered to the patients;
(g) Presentation to the Board of Directors, or its authorized committee, of periodic reports reflecting the professional service and financial activities of the Hospital and preparation and submission of such special reports as may be required by the Board of Directors;
(h) Attendance at all meetings of the Board of Directors and committees thereof;
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(i) Serving as the liaison officer and channel of communication for all official communications between the Board of Directors or any of its committees and the Medical Staff;
(j) Providing for, in his or her temporary absence and subject to the approval of the Board of Directors, the delegation of his or her authority to the Director of Nurses or other employees of the Hospital;
(k) Reviewing and acting promptly upon the reports of authorized planning, regulatory, and inspection agencies, undertaking corrective action for any deficiencies reported by such agencies, and making documentation of such corrective action available for the Hospital’s accreditation survey; and
(l) Performance of such other duties that may be necessary or in the best interest of the Hospital.
Section 11.3 Performance Monitoring. The Board of Directors shall monitor the Administrator’s performance and document this evaluation in writing, at least annually.
Section 11.4 Chief Executive Officer as Administrator. In the absence of an Administrator, the duties set forth in this Article XI shall be performed by the Hospital’s Chief Executive Officer.
ARTICLE XIIMEDICAL STAFF
Section 12.1 Organization. The Board of Directors shall organize the physicians and other persons granted practice privileges in the Hospital into a Medical Staff under Medical Staff bylaws approved by the Board of Directors. The Board of Directors shall consider recommendations of the Medical Staff and appoint to the Medical Staff, in numbers not exceeding the Hospital’s needs, physicians and others who meet the qualifications for membership as set forth in the bylaws of the Medical Staff. Each member of the Medical Staff shall have appropriate authority and responsibility for the care of his or her patients subject to such limitations as are contained in the Bylaws and in the bylaws, rules and regulations for the Medical Staff and subject further to any limitation attached to his or her appointment.
Section 12.2 Application. All applications for appointment to the Medical Staff shall be in writing and addressed to the Chief Executive Officer. Such applications shall contain full information concerning the applicant’s education, licensure, practice, previous hospital experience, and any unfavorable history with regard to licensure and hospital privileges. This information shall be verified by the Credentials Committee function performed by the clinical departments of the Medical Staff.
Section 12.3 Appointments and Hearings. All initial appointments to the Medical Staff shall be provisional and shall be for one year. Upon the recommendation of the Executive Committee of the Medical Staff, members will be reappointed for a period of two years, with subsequent reappointment (if agreed to by the Board of Directors) to occur on the date of the appointee’s birthday occurring during the second year of the appointment, and with approximately fifty percent of the Medical Staff being reappointed each year. When the
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Executive Committee of the Medical Staff recommends that an appointment or a reappointment be denied, or that privileges be reduced, altered, suspended or terminated, the applicant or staff member shall have the right to a hearing to challenge such a recommendation, in accordance with the procedures set forth in the Medical Staff bylaws. These procedures shall assure fair procedure and afford the opportunity for the presentation of all pertinent information.
Section 12.4 Departmental Chairmen. All appointments for clinical department chairmen shall be made by the Board of Directors upon recommendation of the Medical Staff and shall for one year. Duties and responsibilities of the clinical department chairmen shall be set forth in the Medical Staff bylaws. Clinical department chairmen shall be required to maintain their qualification for Medical Staff membership and privileges appropriate to their assignments.
Section 12.5 Representation at Board of Directors Meetings. The Executive Committee of the Medical Staff may designate one or more Medical Staff members to represent the Medical Staff at meetings of the Board of Directors. If so designated, such Medical Staff representatives shall be entitled to attend and speak at Board of Directors meetings, without vote, at the invitation of the Board of Directors.
ARTICLE XIIIMEDICAL CARE AND ITS EVALUATION
Section 13.1 Responsibility For Care. The Board of Directors shall, in the exercise of its discretion, delegate to the Medical Staff the responsibility for providing appropriate professional care to the Hospital’s patients.
Section 13.2 Quality Assurance Committee. The Quality Assurance Committee of the Medical Staff shall conduct a continuing review and appraisal of the quality of professional patient care rendered in the Hospital, including care provided by professionals who are not members of the Medical Staff. The Board of Directors require that the Medical Staff, through the Quality Assurance Committee, shall implement and report on the activities and mechanisms for monitoring and evaluating the quality of patient care, for identifying opportunities to improve patient care, and for identifying and resolving problems. Such reports shall be made to the Board of Directors at each quarterly meeting. The reports of the Quality Assurance Committee shall include a summary of the deliberations and the findings of the meetings of the Quality Assurance Committee.
Section 13.3 Quality Assurance Criteria. As part of its review and appraisal of the quality of patient care provided at the Hospital, the Quality Assurance Committee shall apply criteria including the following:
(a) A professional’s ability to obtain information and interpret information in terms of the patient’s needs;
(b) Knowledge of growth and development; and
(c) An understanding of the range of treatment needed by patients.
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Section 13.4 Medical Staff Recommendations. The Medical Staff shall make recommendations to the Board of Directors concerning:
(a) The structure of the Medical Staff;
(b) The mechanism used to review credentials and to delineate individual clinical privileges;
(c) Recommendations of individuals for Medical Staff membership;
(d) Recommendations for delineated clinical privileges for each eligible individual;
(e) The organization of the quality assessment and improvement activities of the Medical Staff as well as the mechanism used to conduct, evaluate, and revise such activities;
(f) The mechanism by which membership of the Medical Staff may be terminated;
(g) The mechanism for fair hiring procedures;
(h) Appointments, reappointments and alteration of Medical Staff status;
(i) Disciplinary actions;
(j) All matters relating to professional competence; and
(k) All such specific matters as may be referred to it by the Board of Directors.
ARTICLE XIVMEDICAL STAFF BYLAWS
There shall be bylaws, rules and regulations for the Medical Staff setting forth its organization and government, subject to any contractual obligations with any governmental authorities or any other third party. Proposed bylaws, rules and regulations shall be recommended by the Medical Staff, but only those adopted by the Board of Directors shall become effective. The power of the Board of Directors to adopt and to amend Medical Staff bylaws, rules and regulations shall not be dependent upon ratification by the Medical Staff. The bylaws, rules and regulations of the Medical Staff are to be reviewed annually by the Board of Directors, and any proposed changes are to be submitted to the Board of Directors for approval. Approval shall not be unreasonably withheld.
ARTICLE XVFULL RISK CONTRACTS-EXCLUSIVITY
The Hospital shall jointly market full risk managed contracting arrangements with health maintenance organizations (“HMOs”) contracting with Prospect Medical Group, Inc., a California professional corporation, or its affiliates (“PMG). The Board of Directors of the
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corporation, exclusive of any member who is an affiliate of PMG, shall, prior to entering into any full risk contract, perform an independent review of each full risk contract with any or all of the HMOs contracting with PMG or PMG’s affiliates. In the event the Board of Directors of the corporation, exclusive of any member who is an affiliate of PMG, approves the particular full risk contract with the HMOs contracting with PMG or PMG’s affiliates, the Hospital shall enter into such full risk arrangement.
The Hospital shall exclusively contract with PMG and those affiliates of PMG as PMG may designate with regard to full risk contracting arrangements, and the Hospital shall be prohibited from entering into full risk contracting arrangements with any other entity. The Hospital shall be able to share risk, for the outpatient portion of any full risk contracts, only with PMG and the affiliates of PMG. The exclusivity restrictions set forth in this Article XV shall apply to all lines of business of the Hospital, including Medicare, Medicaid and commercial.
References to PMG in this Article XV shall include and inure to the benefit of successors in interest to PMG.
ARTICLE XVIADMISSION OF PATIENTS
No patient shall be admitted to the Hospital unless he or she is under the care of a member of the Medical Staff with admitting privileges. Individuals with such admitting privileges may practice only within the scope of the privileges granted by the Board of Directors.No patient shall be permitted to remain in the Hospital unless his or her general medical condition is the responsibility of a qualified physician member of the medical staff.
ARTICLE XVIIPATIENT’S BILL OF RIGHTS
The Board of Directors of the Hospital hereby adopts as its own Statement of Patient’s Rights the list of patient’s rights appearing in Title 22, California Code of Regulations, Section 70707(b).
ARTICLE XVIIIAMENDMENTS
Section 18.1 Power of Shareholders. New bylaws may be adopted or these Bylaws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote, or by the written assent of shareholders entitled to vote such shares, except as otherwise provided by law or by the Articles of Incorporation or by these Bylaws.
Section 18.2 Power of Directors. Subject to the right of shareholders as provided in Section 18.1 of this Article XVIII to adopt, amend or repeal these Bylaws, these Bylaws (other than a bylaw or amendment thereof changing the authorized number of directors, or providing for the approval by the Board, acting alone, of a loan or guarantee to any officer or an employee benefit plan providing for the same) may be adopted, amended or repealed by the Board of Directors.
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ARTICLE XIXDEFINITIONS
Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the California General Corporation Law as amended from time to time (the “General Corporation Law”) shall govern the construction of these Bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular number includes the plural and the plural number includes the singular and the term “person” includes a corporation as well as a natural person.
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CERTIFICATE OF SECRETARY
The undersigned, Secretary of Brotman Medical Center, Inc., a California corporation, hereby certifies that the foregoing is a full, true and correct copy of the Bylaws of the corporation with all amendments to date of this Certificate.
WITNESS the signature of the undersigned this _____ day of _____________, 200__.
Secretary
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EXHIBIT B
PROMISSORY NOTE
$4,000,000.00 ___________, 2009Culver City, California
FOR VALUE RECEIVED, BROTMAN MEDICAL CENTER, INC., a California corporation, (the “Company”), promises to pay to The Brotman Medical Center, Inc. Creditor Trust established pursuant to that certain Second Amended and Restated Plan of Reorganization Proposed by Brotman Medical Center, Inc. (Dated November 6, 2008) (as amended, restated, supplemented or modified, the “Plan”) (the “Holder”), at such place as the holder hereof may from time to time designate in writing, the principal sum of Four Million and No/100 Dollars ($4,000,000.00), together with accrued interest from the date of disbursement on the unpaid principal at the rate set forth in Paragraph 2 hereof (the “Loan Amount”). This Note is issued pursuant to, entitled to the benefits of and referred to as the “Class 4 Note” in the Plan. Initially capitalized terms used herein without definition are defined in the Plan.
1. Maturity Date. The unpaid principal balance hereof, together with all unpaid interest accrued thereon, is due and payable on each Payment Date as provided in Paragraph 3. Notwithstanding the foregoing, all outstanding principal and accrued interest shall be due and payable on the date that is four (4) years following the Effective Date (the “Maturity Date”). If the Maturity Date falls on a day that is not a Business Day, payment of the outstanding principal must be made on the next succeeding Business Day and such extension of time will be included in computing any interest in respect of such payment.
2. Interest Rate. The Loan Amount shall accrue interest at the rate of seven and one-half percent (7.5%) per annum (the “Interest Rate”).
3. Payments.
(a) The Loan Amount shall be payable in sixteen (16) equal installments on the following dates (each, a “Payment Date”):
Installment Payment Date
1 [March __,] 2009 [30 days after the Effective Date]
2 [June __,] 2009 [quarterly after the first Payment Date]
3 [September __,] 2009
4 [December __,] 2009
5 [March __,] 2010
6 [June __,] 2010
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Installment Payment Date
7 [September __,] 2010
8 [December __,] 2010
9 [March __,] 2011
10 [June __,] 2011
11 [September __,] 2011
12 [December __,] 2011
13 [March __,] 2012
14 [June __,] 2012
15 [September __,] 2012
16 [December __,] 2012
(b) Each payment of principal hereunder shall be accompanied by a payment of all accrued and unpaid interest as of such date.
(c) If any payment to be made by the Company hereunder becomes due on a day which is not a Business Day, such payment must be made on the next succeeding Business Day and such extension of time will be included in computing any interest in respect of such payment.
4. Prepayment. The Company may voluntarily prepay, in full or in part, principal advanced hereunder and accrued interest thereon, without premium or penalty. Any sums prepaid by the Company, whether prepaid voluntarily or involuntarily, may not be reborrowed by the Company.
5. Lawful Money. Principal and interest are payable in lawful money of the United States of America.
6. Unsecured Obligations. This Note is not secured by any security instruments.
7. Covenant. Until the principal amount of this Note has been paid in full, the Company shall not pay a consulting fee to Prospect Medical Holdings, Inc. of more than $100,000 per month, payable monthly in advance, unless the Holder otherwise agrees in writing.
8. Event of Default. The occurrence of any of the following will be deemed to be an event of default (“Event of Default”) hereunder:
(a) The Company shall default in the payment of principal or interest due according to the terms of this Note and such default is not cured within fifteen (15) days after such payment was due; or
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(b) The Company shall fail to perform any of its covenants or agreements under this Note and such failure is not cured within thirty (30) days after written notice thereof from the Holder.
9. Remedies. Upon the occurrence and during the continuance of an Event of Default which is not cured by the applicable deadline, at the option of the Holder, the entire balance of principal together with all accrued interest thereon shall, without demand or notice, immediately become due and payable and so long as such Event of Default continues, the entire balance of principal together with all accrued interest shall bear interest at the Default Rate. “Default Rate” means the Interest Rate plus two percent (2%). Upon the occurrence of an Event of Default, the Holder may exercise any and all rights and remedies it may have under applicable law and in equity. No delay or omission on the part of the Holder in exercising any right under this Note will operate as a waiver of such right.
10. Waiver. The Company hereby waives diligence, presentment, protest and demand, notice of protest, dishonor and nonpayment of this Note, and expressly agrees that, without in any way affecting the liability of the Company hereunder, the Holder may extend any maturity date or the time for payment of any installment due hereunder, accept additional security, release any party liable hereunder and release any security now or hereafter securing this Note.
11. Attorneys’ Fees. If this Note is not paid when due or if any Event of Default occurs, the Company promises to pay all reasonable costs of enforcement and collection actually incurred, including, without limitation, reasonable attorneys’ fees, whether or not any action or proceeding is brought to enforce the provisions hereof.
12. Severability. Every provision of this Note is intended to be severable. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal or invalid for any reason whatsoever, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable.
13. Interest Rate Limitation. It is the intent of the Company and the Holder in the execution of this Note that the loan evidenced hereby be exempt from the restrictions of the usury laws of the State of California. In the event that, for any reason, it should be determined that the California usury law is applicable to this Note, the Holder and the Company stipulate and agree that none of the terms and provisions contained herein shall ever be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of California. In such event, if any holder of this Note collects monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of California, all such sums deemed to constitute interest in excess of such maximum rate will be credited to the payment of the sums due hereunder or returned to the Company.
14. Number and Gender. In this Note the singular includes the plural and the masculine includes the feminine and neuter gender, and vice versa, if the context so requires.
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15. Headings. Headings at the beginning of each numbered Paragraph of this Note are intended solely for convenience and are not to be deemed or construed to be a part of this Note.
16. Choice of Law. This Note is governed by and construed and enforced in accordance with the internal laws of the State of California.
[Signature page follows]
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IN WITNESS WHEREOF, the Company has signed this Note and delivered this Note to Holder as of the date first written above.
“THE COMPANY”
BROTMAN MEDICAL CENTER INC., a California corporation
By: Name: Title:
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EXHIBIT C
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BROTMAN MEDICAL CENTER, INC. CREDITOR TRUST AGREEMENT
andDECLARATION OF TRUST
This Brotman Medical Center, Inc. Creditor Trust Agreement and Declaration of Trust (the “Creditor Trust Agreement”) is established and made, effective as of the Effective Date as that term is defined in the Second Amended Chapter 11 Plan of Reorganization (Dated November 6, 2008) (the “Plan”) proposed by Brotman Medical Center, Inc. (the “Debtor” or “Reorganized Debtor” as the case may be) in connection with Chapter 11 Case Number LA 07-19705 (BB) (the “Bankruptcy Case”) in the United States Bankruptcy Court for the Central District of California (the “Bankruptcy Court”).
The parties to this Creditor Trust Agreement are the Debtor and Reorganized Debtor, the Official Committee of Creditors Holding Unsecured Claims in the Bankruptcy Case (the “Committee”), Prospect Medical Holdings, Inc. (“Prospect”), and the trustees of the Creditor Trust (the “Creditor Trustees”) as provided for in the Plan.
RECITALS
A. A true and correct copy of the Plan as confirmed by the Bankruptcy Court is attached hereto as Exhibit A and incorporated herein by this reference. Capitalized terms in this Creditor Trust Agreement, unless otherwise indicated, shall have the same meanings ascribed to them in the Plan.
B. Pursuant to the provisions of Section IV(D) of the Plan (the “Trust Provision”) a creditor trust (the “Creditor Trust”) has been established. This Creditor Trust Agreement is intended to implement the Trust Provision and set forth such additional terms as are necessary and appropriate to supplement the Creditor Trust and provide for the administration of the Creditor Trust. In the event that any provision of this Creditor Trust Agreement differs from the Trust Provision, the Trust Provision shall control.
C. This Creditor Trust Agreement is intended to establish the provisions pursuant to which the Creditor Trustees shall hold, administer and distribute the Trust Assets (as defined below).
NOW THEREFORE, the Committee, the Debtor, Prospect and the Creditor Trustees declare that, as of the Effective Date and at all times thereafter, the Creditor Trustees, together with any successor Creditor Trustees, shall hold the Trust Assets, in trust upon the following terms and conditions:
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ARTICLE I DEFINITIONS
1.1 “Allowed General Unsecured Claim(s)” means any unsecured, nonpriority claim or claims in Classes 4 and 5, as defined in the Plan, allowed pursuant to 11 U.S.C. § 502 in the Case.
1.2 “Bankruptcy Case” means Chapter 11 Case Number LA 07-19705 (BB) filed in the Bankruptcy Court as set forth in the introductory paragraph.
1.3 “Bankruptcy Court” means United States Bankruptcy Court for the Central District of California as set forth in the introductory paragraph.
1.4 “Code” means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law).
1.5 “Committee” means the Official Committee of Creditors Holding Unsecured Claims in the Bankruptcy Case as set forth in the second introductory paragraph.
1.6 “Confirmation Order” means the order confirming the Plan.
1.7 “Creditor Trust” means the Brotman Medical Center, Inc. Creditor Trust which is established as of the Effective Date pursuant to the Confirmation Order and by the parties hereto in accordance with the terms of this Creditor Trust Agreement.
1.8 “Creditor Trust Agreement” means this Brotman Medical Center, Inc. Creditor Trust Agreement and Declaration of Trust as set forth in the introductory paragraph.
1.9 “Creditor Trustees” means (i) on the Effective Date, Luana Murphy of Exodus Management Services, Inc., Brad Kelly of Adex Medical Staffing, and Larry Whitley of Owens & Minor, Inc., each as appointed under the Confirmation Order to act as the Creditor Trustees to administer the Creditor Trust pursuant to this Creditor Trust Agreement and the Plan, and (ii) each person appointed in accordance with the terms hereof to act as a Creditor Trustee upon the death, resignation, incapacity or removal of any Creditor Trustee in accordance with the terms hereof.
1.10 “Creditor Trust Professional(s)” means all professionals retained by the Creditor Trustees. Such professionals may include, without limitation, administrators, agents, accountants, attorneys-in-fact, attorneys-at-law, experts, consultants, advisors, tax specialists, brokers, representatives, and other professionals and assistants who perform services for the Creditor Trust. The Creditor Trustees shall retain, as of the Effective Date, Buchalter Nemer, a professional corporation, as legal counsel to the Creditor Trust, the Preference Claims Professionals and Kurtzman Carson Consultants as administrator of the Creditor Trust.
1.11 “Debtor” means Brotman Medical Center, Inc. as set forth in the introductory paragraph.
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1.12 “Effective Date” means the effective date of the Plan.
1.13 “Final Distribution Date” means the date on which the last distribution of Trust Assets on account of Allowed General Unsecured Claims is made from the Creditor Trust.
1.14 “Liquidating Trust” means a liquidating trust within the meaning of Treasury Regulation Section 301.7701-4(d).
1.15 “Net Preference Claims Proceeds” means the actual cash proceeds received by the Creditor Trust with respect to the Preference Claims less any Preference Claims Expenses.
1.16 “Operating Accounts” has the meaning as defined in Section 3.4.1.
1.17 “Plan” means the Chapter 11 Plan of Reorganization of the Debtor as set forth in the introductory paragraph.
1.18 “Preference Claims” means any claims made pursuant to 11 U.S.C. § 547 relating to the Bankruptcy Case which are transferred to the Creditor Trust under the Plan.
1.19 “Preference Claims Expenses” means only such fees and expenses specifically incurred by the Creditor Trust in generating the Net Preference Claims Proceeds (including any attorneys’ fees and expenses, expert witness fees and expenses and court costs of the Creditor Trust), and specifically excludes any Trust Administrative Expenses.
1.20 “Preference Claim Professionals” has the meaning set forth in Section 2.6(c).
1.21 “Prospect” means Prospect Medical Holdings, Inc. as set forth in the second introductory paragraph.
1.22 “Reorganized Debtor” means the reorganized Debtor as defined in the Plan.
1.23 “Treasury Regulation(s)” means the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as such regulations may be amended from time to time (or any corresponding provisions of succeeding law).
1.24 “Trust Administrative Expenses” means all reasonable costs, expenses and fees incurred by the Creditor Trustees in connection with the Creditor Trust, including, without limitation: (a) the Creditor Trustee’s fees for services performed for the Creditor Trust (includingservices provided to create the Creditor Trust); (b) reimbursement of the Creditor Trustees and Creditor Trust Professionals for any loss or expense the Creditor Trustees and the Creditor Trust Professionals incur related to services performed for the Creditor Trust; (c) the reasonable fees or expenses incurred by the Creditor Trustees in employing and compensating Creditor Trust Professionals and Preference Claim Professionals; and (d) all taxes, if any, on any portion of the Trust Assets, the proceeds thereof or earnings thereon or, to the extent payable by the Creditor Trustees or the Creditor Trust, on any distribution from the Trust Assets.
1.25 “Trust Assets” means those assets described in Section (IV)(D)(1) of the Plan to which the Trust Beneficiaries are entitled under the Plan and as are distributed to the Creditor
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Trust in accordance with the terms of the Plan and any interest or earnings thereon or proceeds thereof.
1.26 “Trust Beneficiaries” (or singularly, “Trust Beneficiary”) means the holders of Allowed Class 4 and 5 Claims.
1.27 “Trust Provision” means Section IV(D) of the Plan as set forth in Recital B.
ARTICLE II ESTABLISHMENT AND PURPOSES
OF CREDITOR TRUST
2.1 Declaration of Trust. This Creditor Trust is established as of the Effective Date pursuant to the Confirmation Order and by the parties hereto in accordance with the terms of this Creditor Trust Agreement.
2.2 Appointment of the Creditor Trustees. The Creditor Trustees are appointed, effective on the Effective Date, by the Confirmation Order to administer the Creditor Trust pursuant to and in accordance with this Creditor Trust Agreement and the Plan.
2.3 Actions by the Creditor Trustees. The Creditor Trustees shall take all actions pursuant to and in accordance with this Creditor Trust Agreement and the Plan by a majority vote of the Creditor Trustees.
2.4 Effect of Trust. Except as otherwise set forth herein, the Trust Assets shall be subject only to the rights of the Trust Beneficiaries to distributions on account of their Allowed General Unsecured Claims or as their interest shall otherwise appear in the Trust Provision.
2.5 Creditor Trustees’ Acceptance. Each of the Creditor Trustees hereby accepts the Creditor Trust established hereunder on the terms and conditions set forth herein and agrees to perform only the duties explicitly imposed on such Creditor Trustee by this Trust Agreement.
2.6 Purposes of the Creditor Trust; Powers and Duties of the Creditor Trustees. The Creditor Trust has the purposes set forth in the Trust Provision, with its primary purpose being the liquidation of the Trust Assets and the distribution of the proceeds from such liquidation to the Trust Beneficiaries (after payment of Trust Administrative Expenses). In addition to any power and duty conferred upon the Creditor Trustees by any other provision of this Creditor Trust Agreement, the Creditor Trustees shall have the following express powers and duties with respect to this Creditor Trust:
a. Hold the Trust Assets, with the Creditor Trustees having full right, power and discretion to manage such property and execute, acknowledge and deliver any and all instruments as may be appropriate or necessary as determined by the Creditor Trustees.
b. Make interim and final payments and distributions in accordance with the provisions of this Creditor Trust Agreement.
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c. Administer the collection, prosecution, settlement or abandonment of the Preference Claims by such individuals or entities or such attorneys, accountants, expert witnesses or other professionals selected by the Creditor Trustees (the “Preference Claim Professionals”) to assist in or perform the collection, settlement, abandonment or transfer of Preference Claims.
d. Make payment of reasonable compensation to the Preference Claim Professionals for their services (including reasonable contingent fees for legal services as may be negotiated and agreed to by the Creditor Trust) and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services on terms agreed to by the Creditor Trustees.
e. Make payments of Trust Administrative Expenses from time to time.
f. File all tax and regulatory forms, returns, reports and other documents required with respect to the Creditor Trust; pay any and all taxes payable by the Creditor Trust; withhold any applicable taxes from distributions hereunder, if the Creditor Trustees reasonably believe that they are required to withhold such taxes, and distribute such withheld amount either to (i) the appropriate governmental agency responsible for the collection of such taxes or (ii) to the party from whom such taxes were withheld, but only upon presentation to the Creditor Trustees of a final non-appealable order from a court of competent jurisdiction or from the governmental agency responsible for the collection of such taxes.
g. File suit or any appropriate motion for relief in the Bankruptcy Court or in any other court of competent jurisdiction to resolve any claim, disagreement, conflict or ambiguity in connection with the exercise of its rights, powers or duties.
h. Provide reports in accordance with Article VII hereof.
i. Use their reasonable best efforts to qualify the Creditor Trust as a grantor trust for federal and state income tax purposes as set forth in Internal Revenue Service Revenue Procedure 94-45.
j. Perform any other obligations set forth in the Trust Provision.
k. Prosecute, defend, compromise, arbitrate or otherwise adjust or settle claims in favor of or against the Creditor Trustees or the Creditor Trust.
l. Take any other action consistent with this Creditor Trust Agreement and the Plan.
m. Execute and deliver any and all instruments or writings that the Creditor Trustees may deem advisable to carry out any of the foregoing powers or duties.
2.7 No Trade or Business. The Creditor Trust is prohibited from and shall not engage in the conduct of a trade or business.
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2.8 Irrevocability of Creditor Trust and Interest of Trust Beneficiaries. The Creditor Trust created hereby is irrevocable. Each Trust Beneficiary (or potential Trust Beneficiary) and their respective successors and assigns shall be a beneficiary of the Creditor Trust only to the extent of their interests or potential interests in distributions from the Creditor Trust.
2.9 Party in Interest. The Creditor Trust and the Creditor Trustees are parties in interest in the Bankruptcy Case.
ARTICLE III ADMINISTRATION
3.1 Name of the Creditor Trust. The name of this Creditor Trust shall be the Brotman Medical Center, Inc. Creditor Trust. The principal place of administration of the Creditor Trust shall be in Los Angeles, California.
3.2 Bookkeeping. The Creditor Trustees shall maintain books and records and shall file tax returns for the Creditor Trust on the basis of the calendar year.
3.3 Trust Beneficiaries. The Creditor Trustees shall maintain a registry of the Trust Beneficiaries.
3.4 Accounts.
3.4.1 The Creditor Trustees shall maintain, in one or more accounts with one or more banks or savings institutions, all cash received in respect of the Trust Assets (the “Operating Account(s)”). All payments and distributions permitted hereunder shall be made from the Operating Account(s).
3.4.2 The Creditor Trustees may maintain separate accounts for reserves as provided herein.
3.4.3 The Creditor Trustees may maintain other separate accounts as the Creditor Trustees determine advisable to maintain the Trust Assets.
3.5 Trust Assets. The Trust Assets consisting of cash shall be held only in time and demand deposit accounts, including short-term certificates of deposits, with banks and savings institutions, or Treasury bills.
ARTICLE IV DISTRIBUTIONS, PAYMENTS AND
TERMINATION OF THE CREDITOR TRUST
4.1 Creditor Trust Distributions. The Creditor Trustees shall, as the Creditor Trustees determine appropriate, distribute the Trust Assets to pay the Trust Administrative Expenses subject to Section 4.5 herein and make distributions on account of Allowed General Unsecured Claims of the Trust Beneficiaries as provided herein.
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4.2.1 Except as provided below, the Creditor Trustees shall first distribute the Trust Assets in payment of Trust Administrative Expenses. Once the Trust Administrative Expenses are paid in full, the Creditor Trustees may distribute the balance of the Trust Assets to the Trust Beneficiaries on account of their respective Allowed General Unsecured Claims. The Creditor Trustees shall use their reasonable efforts to distribute such balance of the Trust Assets pro rata to the Trust Beneficiaries in proportion to the amount of their respective Allowed General Unsecured Claims pursuant to the terms of the Trust Provision.
4.2.2 The Creditor Trustees may distribute Trust Assets to the Trust Beneficiaries prior to full payment of Trust Administrative Expenses only if after such distribution to the Trust Beneficiaries there shall remain, in the Creditor Trustees’ judgment, sufficient reserves for full payment of outstanding and future Trust Administrative Expenses.
4.2.3 No distribution shall be made to any parties other than those entitled to receive payment on account of Trust Administrative Expenses or the Trust Beneficiaries.
4.2.4 In their discretion, the Creditor Trustees may, but are not required to seek Bankruptcy Court approval of any payments of Trust Administrative Expenses or any distributions to Trust Beneficiaries.
4.2.5 The Creditor Trustees may round amounts of distributions to the nearest cent and they may not make distributions to any Trust Beneficiary in which the total amount to be distributed to the Trust Beneficiary as provided herein would be less than $75.00
4.2.6 The Creditor Trustees shall distribute to the Trust Beneficiaries, at least annually, an amount equal to net income of the Creditor Trust plus the net proceeds from the sale of Trust Assets, except that the Creditor Trustees may retain an amount of such net income and net proceeds reasonably necessary to maintain the value of the Trust Assets or to meet claims or contingent liabilities (including disputed claims).
4.3 Disputed or Contingent Claims Reserve. The Creditor Trustees shall maintain a reserve for disputed and contingent claims in the amount and to the extent the Creditor Trustees determine.
4.4 Other Reserves. The Creditor Trustees may create a reserve for payment of incurred and anticipated Trust Administrative Expenses. The Creditor Trustees may also create and maintain other reserves as they determine and which are not inconsistent with the terms of this Creditor Trust Agreement.
4.5 Trust Administration Expenses. Creditor Trust Professionals and other providers of trust administration services shall receive from the Trust Assets payment of their respective Trust Administration Expenses, absent objection of the Creditor Trustees within 10 days of service of a statement of fees and expenses by the Creditor Trust Professionals or the other service providers. In the event the Creditor Trustees send the Creditor Trust Professionals or other service providers a written objection within the 10 day period, the Creditor Trust Professionals or other service providers, as applicable, may, within 20 days after an objection has been served and delivered, move for an order of the Bankruptcy Court for approval of payment
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of their respective Trust Administration Expenses, and the Bankruptcy Court shall retain jurisdiction to determine such matter. To the extent a Fee Statement is only partially objected to under this section, the Creditor Trust Professional shall be entitled to immediate payment of those fees or expenses not specifically objected to following the expiration of the 10 day period. Notwithstanding any provision of this Creditor Trust Agreement to the contrary, no payment of Trust Administration Expenses shall be made until 30 days after the Effective Date.
4.6 Final Distribution Date and Termination of the Creditor Trust. The Final Distribution Date will occur as soon as reasonably practical after the date on which all disputed claims by potential Trust Beneficiaries have been adjudicated, settled or dismissed (and upon such adjudication, settlement or dismissal being final and nonappealable) and, if applicable, after the Creditor Trustees in their discretion seek Bankruptcy Court approval of the distributions of the Trust Assets and the Bankruptcy Court has entered an order on such request (and the order is final and nonappealable). On the Final Distribution Date, the Creditor Trustees will distribute all remaining Trust Assets except as the Creditor Trustees determine is necessary to pay in full all outstanding and anticipated Trust Administration Expenses necessary to wind up the affairs of the Creditor Trust. The Creditor Trustees shall, after the Final Distribution Date, file any required tax returns for the Creditor Trust and take any other actions necessary to wind up the affairs of the Creditor Trust. Once the Creditor Trustees have completed all actions as the Creditor Trustees reasonably determine is necessary to wind up the affairs of the Creditor Trust, the Creditor Trust will terminate and be of no further force and effect. The Creditor Trust shall terminate no later than four (4) years and one month after the Effective Date; provided, however, the Creditor Trustees may, with approval of the Bankruptcy Court, extend the term of the Creditor Trust for additional three (3) year periods if such extension(s) are determined by the Creditor Trustees and the Bankruptcy Court to be necessary to the liquidating purposes of the Creditor Trust. Such extensions must be approved by the Bankruptcy Court within six months of the beginning of the extended term.
4.7 Waiver of Claims. Upon full and final distribution of the Trust Assets to the Trust Beneficiaries the Trust Beneficiaries shall be deemed to have waived any and all claims against the Creditor Trust and the Creditor Trustees.
ARTICLE V CREDITOR TRUSTEES
5.1 Fees. The Creditor Trustees shall receive a fee at an hourly rate of $250.00 for actual services provided. This fee shall be paid from the Trust Assets and shall not require further approval of the Bankruptcy Court.
5.2 Expenses. In addition to the foregoing fee, the Creditor Trustees shall be entitled, without further Bankruptcy Court authority, to reimbursement from the Creditor Trust for all reasonable expenses the Creditor Trustees incur in administering the Creditor Trust.
5.3 Resignation and Successor. Any Creditor Trustee may resign at any time upon thirty (30) days’ prior written notice to the Creditor Trust and the Reorganized Debtor. If less than all of the Creditor Trustees resign, the remaining Creditor Trustee or Trustees shall appoint a successor or successors reasonably acceptable to the Reorganized Debtor. Should all Creditor
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Trustees resign without successor’s being appointed, Counsel to the Trust shall apply to the Bankruptcy Court for the appointment of successor Trustees upon notice to the Trust Beneficiaries. The foregoing provisions shall also apply (i) in the event of the death or total disability of a Creditor Trustee, (ii) in the event a Trustee is no longer employed by the entity represented as set forth in Section 1.9, above and (iii) the unsecured claim of the entity represented by the Trustee is withdrawn or denied by an order of the Bankruptcy Court. Any appointment of a Creditor Trustee hereunder shall be subject to the entry of an order by the Bankruptcy Court approving such appointment.
5.4 Agents. The Creditor Trustees may perform any of its duties under this Creditor Trust Agreement by or through its agents or employees.
5.5 Reorganized Debtor’s Financial Information. The Creditor Trustees shall have no duty or responsibility, either initially or on a continuing basis, to provide anyone with any information with respect to the Reorganized Debtor.
5.6 Limitation of Liability. The Creditor Trustees shall have no duties, responsibilities, powers or authority except as expressly set forth in this Creditor Trust Agreement. The Creditor Trustees shall not be liable for any action taken or omitted or for any loss or injury resulting from their actions or their performance or lack of performance of their duties hereunder in the absence of gross negligence or willful misconduct on their part. In no event shall the Creditor Trustees be liable (i) for special, consequential or punitive damages or (ii) for forces beyond the control of the Creditor Trustees, including without limitation strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God, the insolvency of any non-affiliated party, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services. In the event the Creditor Trustees make a payment of a Trust Administrative Expense or a distribution to a Trust Beneficiary to which the receiving party was not entitled, that party hereby indemnifies the Creditor Trustees for the amount of the payment or distribution to which they were not entitled and shall promptly pay such amount to the Creditor Trustees upon the Creditor Trustees’ demand.
5.7 Trust Beneficiaries. Other than as set forth herein, the Trust Beneficiaries (other than the Creditor Trustees) shall have no right to act for or bind the Creditor Trust and shall have no right to participate in, or have other control over, the actions of the Creditor Trust.
5.8 Expenses. The Creditor Trust shall pay expenses of the Creditor Trustees reimbursable hereunder directly to the Creditor Trustees.
5.9 Reliance. The Creditor Trustees shall be entitled to rely upon any written notices, statements, certificates, orders or other documents of the Bankruptcy Court. The Creditor Trustees shall also be entitled to rely upon the advice of legal counsel, independent accountants and other experts which the Creditor Trustees may select in the Creditor Trustee’s sole discretion. At any time, upon representation by a Trust Beneficiary of identification which satisfies the Creditor Trustees in their sole and absolute discretion that the Creditor Trust is holding funds for the Trust Beneficiary’s benefit, the Creditor Trustees may release such funds to the Trust Beneficiary in accordance with the distribution rules set forth in Article IV.
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5.10 Bond. The Creditor Trustees shall not be required in this or any other jurisdiction to furnish any bond or security for the faithful performance of their duties.
5.11 Discharge of Creditor Trustees. Upon termination of the Creditor Trust as provided herein, the Creditor Trustees shall be discharged of all duties and obligations under this Creditor Trust Agreement.
ARTICLE VI TAXES
6.1 Intent. The Creditor Trust is intended, for federal and applicable state income tax purposes, to be a Liquidating Trust that is a “grantor” trust, subject to taxation in accordance with Subpart E of Part I of Subchapter J of Chapter 1 of Subtitle A of the Code (starting with Code § 671). Furthermore, pursuant to Internal Revenue Service Revenue Procedure 94-45, the Trust Beneficiaries are treated as the grantors of the Creditor Trust and the owners of the Creditor Trust.
6.2 Limitation on Creditor Trustees’s Power and Authority. This Creditor Trust Agreement shall be construed and the Creditor Trust shall be administered in accordance with and to carry out the intent described in Section 6.1. Furthermore, notwithstanding any other provision of this Creditor Trust Agreement, the Creditor Trustees shall not make any distribution from the Creditor Trust to, or for the benefit of the Reorganized Debtor, the Reorganized Debtor shall not have any beneficiary interest or rights hereunder. None of the powers granted the Creditor Trustees shall enable any person to buy, exchange, or otherwise deal with trust principal or income for less than adequate and full consideration in money or money’s worth (other than by payment of Trust Administrative Expenses and Expenses or distributions to Trust Beneficiaries pursuant to the authority granted the Creditor Trustees hereunder.) None of the powers granted the Creditor Trustees shall enable anyone other than the Creditor Trustees to control the trust investments or reinvestments by direction or veto. None of the powers granted to the Creditor Trustees shall enable anyone to require the Creditor Trustees to exchange trust property by substituting other property of equal value.
6.3 No Liability for Tax Treatment. Neither the Creditor Trustees, the Trust Beneficiaries or Creditor Trust Professionals shall have any liability hereunder to any Trust Beneficiary or any other person claiming any interest by or through, or otherwise interested in, this Creditor Trust Agreement in the event it ultimately is determined that the Creditor Trust is not properly taxable in the manner described in Section 6.1 herein. Neither a legal opinion from a lawyer, an accountant or other professional, nor a tax ruling from a court, the IRS or other taxing authority will be sought or obtained as to the tax classification or tax treatment of the Creditor Trust or Trust Beneficiaries. Consequently, the IRS or other taxing authority may disagree with the intended tax treatment of the Creditor Trust as set forth herein and attempt to tax the Creditor Trust and the Trust Beneficiaries in a different manner. The Creditor Trustees may appeal or accept such treatment and/or may file amended tax returns.
6.4 Tax Returns. The Creditor Trustees shall file income tax returns for the Creditor Trust as a grantor trust pursuant to Treasury Regulations Section 1.671-4(a). The Creditor Trustees shall be responsible for filing all of the tax returns required for the Creditor Trust,
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causing the Trust to pay any taxes due and payable by it, obtaining a taxpayer identification number and otherwise complying with all tax laws applicable to the Creditor Trust. For all federal income tax reporting purposes, the Creditor Trustees shall value all Trust Assets consistent with the values set forth in the Plan. To the extent required by law, the Creditor Trustees shall notify each Trust Beneficiary of such Trust Beneficiary’s share of any allocation of tax items. The Creditor Trustees shall transmit such tax information, via regular mail or other reasonable alternative means, to the applicable Trust Beneficiary. After the termination of the Creditor Trust, the Creditor Trustees shall retain the authority to file any tax or informational returns (or amended returns) on behalf of the Creditor Trust that may be required and take any related actions.
ARTICLE VII NOTICE AND REPORTS
7.1 Quarterly Reports. Following the Effective Date, within thirty (30) days after the end of every calendar quarter the Creditor Trustees shall furnish the Trust Beneficiaries with a summary report showing all property received and disbursed by the Creditor Trust, if any, in such calendar quarter.
7.2 Final Report. Within sixty (60) days after the termination of the Creditor Trust as provided herein, the Creditor Trustees shall furnish the Trust Beneficiaries a summary report showing all monies received and disbursed by the Creditor Trust during its existence.
7.3 Other Reports. From time to time, in the Creditor Trustees’ discretion, the Creditor Trustees may deliver an accounting or other reports to the Trust Beneficiaries. Each such accounting or report shall be a written accounting of the Creditor Trust during the period to which the accounting or report relates and shall set forth all investments, receipts, distributions, expenses, determinations of the Creditor Trustees concerning the allowance of purported general unsecured claims in the Bankruptcy Case, and other transactions of the Creditor Trust and show all cash and other property held as a part of the Creditor Trust at the end of such period. Each such accountings or report shall be deemed to be an account stated, accepted and approved by all of the Trust Beneficiaries, and the Creditor Trustees shall be relieved and discharged, as if such accounting or report had been settled and allowed by final judgment or decree of a court of competent jurisdiction, unless protested by written notice to the Creditor Trustees within sixty (60) days of receipt thereof by any Trust Beneficiary.
7.4 Bankruptcy Court. The Creditor Trustees shall not be required to file or render periodic accounts or reports to the Bankruptcy Court other than for good cause shown. Notwithstanding anything to the contrary herein, the Creditor Trustees shall have the right, at the expense of the Creditor Trust, to apply at any time to the Bankruptcy Court for judicial settlement of any account or matter described in an account, including the allowability of claims, whether or not previously settled as herein provided or for the determination of any question of construction or for instructions regarding any matter including resolution of any dispute concerning general unsecured claims in the Bankruptcy Case.
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ARTICLE VIII RETENTION OF JURISDICTION
8.1 Exclusive Jurisdiction. The Bankruptcy Court shall have exclusive jurisdiction over the Creditor Trust as to all matters including, without limitation: (a) any contention or dispute that the Creditor Trustees have not complied with their obligations under the Creditor Trust Agreement; (b) determination of any motion or application to remove the Creditor Trustees or any of them, which motion or application may only be based upon good cause; (c) appointment of any successor or successors to the Creditor Trustees; (d) resolution of any claims asserted against the Creditor Trust, the Creditor Trustees or any of the Creditor Trust Professionals; (e) resolution of any claim or dispute regarding any distribution or payment made by the Creditor Trustees (including any indemnification of the Creditor Trustees thereof or other recovery of such distribution or payment to which the Creditor Trustees may be entitled); and (f) resolution of any objections to claims of the general unsecured creditors in the Bankruptcy Case which have not previously been adjudicated. Notwithstanding the foregoing, neither the Creditor Trust nor the Trust Assets constitute property of the estate in the Bankruptcy Case.
8.2 Approval of Distributions and Payments. The Creditor Trustees may, but are not required to, seek approval of the Bankruptcy Court for distributions on Allowed General Unsecured Claims and payments of Trust Administrative Expenses from the Creditor Trust. However, the Bankruptcy Court shall retain jurisdiction to approve such distributions and payments from the Creditor Trust.
8.3 Amendments. This Creditor Trust Agreement may be reformed, restated, amended or modified by the parties hereto only with the approval of the Bankruptcy Court and on notice to parties in interest, including Prospect and the Reorganized Debtor. In the event the Bankruptcy Case is closed, the Creditor Trustees may move to reopen the Bankruptcy Case.
8.4 Dismissal or Closing of Bankruptcy Case. In the event that the Bankruptcy Case is dismissed or closed prior to the termination of the Creditor Trust as provided herein, no Bankruptcy Court approval shall be required for any action taken by the Creditor Trustees (including any successor Creditor Trustee).
ARTICLE IX MISCELLANEOUS
9.1 Notices. All notices, requests or other communications required or permitted to be made in accordance with this Creditor Trust Agreement shall be in writing and shall be delivered personally or by overnight courier, facsimile or first class mail. All notices and communications sent by the Creditor Trustees to holders of general unsecured claims shall be deemed to have been duly given as follows: if personally delivered, at the time delivered; if by U.S. Mail, five business days after being deposited in the mail; if by facsimile, when receipt acknowledged; if overnight delivery, the next business day. Any notice mailed to a holder of a general unsecured claim shall be by first-class mail to such holder’s address of record. Failure to mail a notice or communication to a holder of a general unsecured claim or any defect in it shall not affect its sufficiency with respect to other holders of general unsecured claims.
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9.2 Effect of Sending Notice. If a notice or communication is sent in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. Notwithstanding any provisions of this Creditor Trust Agreement to the contrary, the Creditor Trustees shall have no liability to a holder of a general unsecured claim based upon or arising from the failure of the Creditor Trustees to receive any notice required by or relating to this Creditor Trust Agreement.
9.3 Addresses for Notices. Notices shall be sent to the following addresses or such other addresses as may be changed from time to time.
The Committee:
The Official Committee of Creditors Holding Unsecured Claims Attn: Luana Murphy, Co-Chair 9808 Venice Blvd., Ste. 700 Culver City, CA 90232 Tel: (310) 945-3350 Fax: (310) 840-7023 Email: [email protected]
With a copy to Committee Counsel:
Benjamin S. Seigel, Esq. Buchalter Nemer 1000 Wilshire Blvd.- Suite 1500 Los Angeles, CA 90017 Phone: 213-891-0700 Fax: 213-630-5676 E-Mail: [email protected]
Benjamin S. Seigel, Esq. Buchalter Nemer 1000 Wilshire Blvd.- Suite 1500 Los Angeles, CA 90017 Phone: 213-891-0700 Fax: 213-630-5676 E-Mail: [email protected]
Prospect Medical Holdings, Inc. ___________________________________________________________________________
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Creditor Trustees:
Luana Murphy Exodus Management Services, Inc. 9808 Venice Blvd., Ste. 700 Culver City, CA 90232 Tel: (310) 945-3350 Fax: (310) 840-7023 Email: [email protected]
Brad Kelly Adex Medical Staffing 5426 56th Commerce Park Blvd. Tampa, FL 33610 Tel: (813) 622-7699 Fax: (813) 622-7692 Email: [email protected]
Larry R. Whitley, CBF Owens & Minor 455 South Brea Canyon Road City of Industry, CA 91789-3058 Tel: (909) 444-6514 Fax: (909) 444-6595 Email: [email protected]
Creditor Trust Professionals:
Benjamin S. Seigel, Esq Buchalter Nemer 1000 Wilshire Blvd.-Suite 1500 Phone: 213-891-0700 Fax: 213-630-5676 E-Mail: [email protected]
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Debtor and Reorganized Debtor:
Stanley Otake Chief Executive Officer Brotman Medical Center, Inc. 3828 Delmas Terrace Culver City, CA 90232 Tel: (310) 836-7000
With a Copy to Debtor’s Counsel:
Thomas E. Patterson, Esq. Klee, Tuchin, Bogdanoff & Stern LLP 1999 Avenue of the Stars, 39th floorLos Angeles, CA 90067Tel: (310) 407-4000Fax : (310) 407-9090E-mail: [email protected]
9.4 Change of Address. Any entity or person may change the address for purposes of this Creditor Trust Agreement by furnishing written notice to the Creditor Trustees, the Reorganized Debtor and the Creditor Trust Professionals.
9.5 Counterparts. This Creditor Trust Agreement may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.
9.6 Governing Law. This Creditor Trust Agreement shall be governed by, construed under and interpreted in accordance with the laws of the State of California.
9.7 Headings. Sections, subheadings and other headings used in this Creditor Trust Agreement are for convenience only and shall not affect the construction of this Creditor Trust Agreement.
9.8 Severability. Any provision of this Creditor Trust Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions of this Creditor Trust Agreement, and any such prohibition, or unenforceability in any jurisdiction shall not invalidate or render unenforceable any such provision in any other jurisdiction.
9.9 Waiver. A waiver of any of the terms or conditions of this Creditor Trust Agreement shall not be construed as a general waiver.
9.10 Successors and Assigns. This Creditor Trust Agreement shall bind the parties hereto and their successors, designees and assigns.
9.11 No Other Third Party Beneficiary. This Creditor Trust Agreement is entered into for the sole and exclusive benefit of the Trust Beneficiaries pursuant to the terms of the Trust
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Provision and as set forth herein and their successors, designees and assigns, and no other person shall have any rights hereunder except as provided herein.
9.12 Fees and Costs. If an action at law or equity is necessary to enforce or interpret the terms of this Creditor Trust Agreement as among the parties to this agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs, and necessary disbursement in addition to any other relief to which such party may be entitled.
[Signatures are contained on the following page]
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IN WITNESS WHEREOF, this ____day of _________, the Committee, the Debtor, the Reorganized Debtor and the Creditor Trustees have executed this Creditor Trust Agreement and Declaration of Trust.
Committee:
OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF BROTMAN MEDICAL CENTER, INC.
By: __________________________________________ Luana Murphy, Co-Chair
Debtor and Reorganized Debtor
BROTMAN MEDICAL CENTER, INC..
By: __________________________________________ Stanley Otake, Chief Executive Officer
PROSPECT MEDICAL HOLDINGS, INC.
By: __________________________________________
Creditor Trustees:
__________________________________________Luana Murphy
__________________________________________Brad Kelly
__________________________________________Larry Whitley
EXHIBIT D - CRITICAL VENDORS
Prospect Hospital Advisory Services, Inc. Navigant Capital Advisors Navigant Consulting Medline Industries Inc. Sodexho Inc. Western Radiologic Medical Group Ian Armstrong, M.D., Inc. Southern California Edison Butler, Snow, O’Mara, Stevens and Cannada, PLLCSEIU United Health Care California Nurses Association Lockton Insurance Brokers Western Reimbursement Group Shariar Ghodsian, M.D. Kristina Winfield Jacqueline Gallagher dba Marcantaussie Inc Soheil Rabbani Howard Levine Geri Lynyak Pat Wolfram American Red Cross San Diego Blood Bank Office of Statewide Health and Planning Department Hospital Association of Southern California The Gas Company Solomon Forouzesh, M.D., Inc. Joseph Page, M.D., Inc. Abraham Ishaaya, M.D., Inc. Soheil Hekmat, M.D., Inc. Acute Dialysis Services, Inc. Jamshid Hekmat, M.D., Inc. Fardad Mobin, M.D., Inc. Hrayr Shahinian, M.D., Inc. Richard Horowitz, M.D., Inc. Belinda San Jose, M.D., Inc. Stepan Kasimian, M.D., Inc. Advanced Lung Center Medical Group, Inc. Perot Systems, Corp. Exodus Management Services, Inc. Owens and Minor Inc. Professional Hospital Supply Corporation Medtronic Inc.
EXHIBIT E
EXHIBIT F
RELEASE
THIS RELEASE (this “Release”) is made as of __________, 2009 by and among Brotman Medical Center, Inc., a California corporation (the “Company”), and Prospect Medical Holdings, Inc., a Delaware corporation (“Prospect”). The parties hereto are referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS, the Company intends to effect a restructuring as contemplated by the Second Amended Plan of Reorganization Proposed by Brotman Medical Center, Inc. (Dated November 6, 2008) (as amended, restated, modified or supplemented, the “Plan”) filed with the United States Bankruptcy Court for the Central District of California in Case No. LA 07-19705(BB); and
WHEREAS, in connection with the restructuring and the undertakings of the Parties contemplated by the Plan, the Parties wish to settle any and all disputes and potential disputes they may have with each other as set forth below, without resort to the courts, and intend that this document shall set forth all the terms of such settlement and agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, promises, and releases set forth herein, and for other good and valuable consideration, the Parties agree as follows:
1. Release of Prospect. Conditioned upon the occurrence of the Effective Date (as defined in the Plan), the Company irrevocably and unconditionally releases, acquits and forever discharges Prospect and its subsidiaries, affiliates, parent companies and related entities, past and present (including, without limitation, related funds), the independent contractors of any of one or more of the foregoing, the predecessors and successors in interest of any one or more of the foregoing, and the respective partners, members, shareholders, officers, directors, managers, trustees, agents, representatives, attorneys and employees of any one or more of the foregoing (collectively, “Affiliates”), of and from and against any and all past, present and future claims, demands, obligations, duties, causes of action at law or in equity, rights of indemnity or liability of any type, kind, nature or character, known or unknown, whether liquidated or unliquidated, that the Company or any of its Affiliates, and anyone asserting rights by or through the Company as a result of any rights the Company may claim to have had, now owns or holds, has at any time heretofore owned or held, or may at any time hereafter own or hold, by reason of any act, event or omission arising out of, relating to, or in connection with the Company and its affairs that occurred prior to the date hereof. Nothing contained in this paragraph 1 shall be deemed to (a) release, acquit or discharge Prospect from obligations created under or in connection with the Plan or (b) terminate that certain Consulting Services Agreement, dated as of August 1, 2005, amended as of October 25, 2007, and as may be amended from time to time thereafter, between Prospect and the Company (the “Consulting Agreement”) or release any of Prospect’s duties and obligations thereunder.
2. Release of the Company. Conditioned upon the occurrence of the Effective Date, Prospect hereby irrevocably and unconditionally releases, acquits and forever discharges the Company and its Affiliates of and from and against any and all past, present and future claims, demands, obligations, duties, causes of action at law or in equity, rights of indemnity or liability
109625.2
of any type, kind, nature or character, known or unknown, whether liquidated or unliquidated, that Prospect or any of its Affiliates, and anyone asserting rights by or through Prospect as a result of any rights Prospect may claim to have had, now owns or holds, has at any time heretofore owned or held, or may at any time hereafter own or hold, by reason of any act, event or omission arising out of, relating to, or in connection with the Company and its affairs. Nothing contained in this paragraph 2 shall be deemed to (a) release, acquit or discharge the Company from obligations created under or in connection with the Plan or (b) terminate the Consulting Agreement or release any of the Company’s duties and obligations thereunder.
3. Final Release. Each of the Parties expressly waives any and all rights and benefits conferred upon it by Section 1542 of the Civil Code of the State of California, which states as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”
Each Party expressly agrees and understands that the release given by it pursuant to this Release applies to all unknown, unsuspected and unanticipated claims, liabilities and causes of action which it may have against any Party that it has released. The Parties understand and acknowledge that the significance and consequence of this waiver of Section 1542 of the California Civil Code is that even if one of them should eventually suffer additional damages relating in any way to the dispute between the Parties, that Party will not be permitted to make any claim for those damages against a Party that it has released pursuant to this Agreement. Furthermore, the Parties acknowledge that they intend these consequences even as to claims for damages that may now exist as of the date of this Agreement but which are not known to exist, and which, if known would materially affect their decision, or the decision of one of them, to execute these releases, regardless of whether their lack of knowledge, or the lack of knowledge of any one of them, is the result of ignorance, oversight, error, negligence, or any other cause.
4. Covenant Not to Sue. Each Party hereby represents that it has not commenced or filed, and covenants that it will not commence or file, with any local, state or federal agency, court or arbitrator any complaints, charges, claims, lawsuits or grievances, or actions of any kind, whether civil, criminal or administrative, against the other Party or any of their Affiliates with respect to any claim released pursuant to paragraph 1 or paragraph 2 above or assigned or transferred any claim or any interest therein to any other person or entity.
5. Miscellaneous.
(a) This Release shall be governed by and construed in accordance with the internal laws of the State of California, without regard to its conflicts of laws principles, and may be executed in one or more counterparts (including counterparts transmitted by facsimile or electronic mail), each of which shall be an original, but all of which when taken together shall constitute one and the same Release.
109625.2
(b) This Release shall inure to the benefit of and be binding upon the Parties and their respective Affiliates.
(c) This Release, the Plan and the Consulting Agreement constitute and are intended to constitute the entire agreement of the Parties concerning the subject matter hereof.
(d) If any provision of this Release is determined by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part, the remaining provisions, and any partially invalid or unenforceable provisions, to the extent valid and enforceable, shall nevertheless be binding and valid and enforceable. Notwithstanding the foregoing severability provision, the Parties reserve the right to rescind this Release in the event that a court of competent jurisdiction holds that a provision of this Release is unenforceable, in whole or in part, provided that such unenforceability constitutes a material failure of consideration for the Parties entering into this Release.
(e) The Parties shall, from time to time, promptly execute and deliver such further instruments, documents and papers and perform such further acts as may be necessary or proper to carry out and effect the terms of this Release.
(f) This Agreement may not be modified or terminated orally and no modification, termination or waiver shall be valid unless in writing and signed by all of the Parties.
[signature page follows]
109625.2
IN WITNESS WHEREOF, the Parties have executed this Release as of the date first written above.
BROTMAN MEDICAL CENTER, INC.
By: Name: Title:
PROSPECT MEDICAL HOLDINGS, INC.
By: Name: Samuel S. Lee Title: Chief Executive Officer
109625.2
EXHIBIT G LIST OF INITIAL OFFICERS AND DIRECTORS
Officers
Chief Executive Officer: Stanley Otake Chief Financial Officer/SVP of Finance: Charles Natcher Chief Operating Officer: Judy Hopkins Chief Administrative Officer: Diane Rafferty Chief Nursing Officer: Audrey O’Donnell Controller: Andrew Grim
Board of Directors
Sam Lee (Chairman) Stanley Otake Andrew Brooks, M.D. Ed Hudson Robert Rose, M.D.
EXHIBIT H
ADR AND MEDIATION PROCEDURES
iManage_108365_3 (2) 1
Mediation Program
Upon entry of an order (the “Confirmation Order”) confirming a plan of reorganization
(the “Plan”) of Brotman Medical Center, Inc., the debtor and debtor in possession in the above-
captioned chapter 11 case (the “Debtor”), the following requirements for mediation (the
“Mediation Program”) will apply to the claims of all plaintiffs asserting professional liability
claims, claims for personal injuries, medical malpractice or wrongful death, or similar claims
against the Debtor (collectively, the “Claimants,” and such claims are the “Claims”) that arose
prior to the date that the Bankruptcy Court enters the Confirmation Order (the “Confirmation
Date”):
1. Pursuant to and in furtherance of the discharge provisions of section 1141(d) of
the Bankruptcy Code and the Plan, the commencement or continuation of Claims arising prior to
the Confirmation Date are enjoined from proceeding except in conformity with the discharge
provision of section 1141(d) of the Bankruptcy Code, the Plan, and the Mediation Program (or,
as applicable, the Code’s claim adjudication process).
2. The Mediation Program provides an administrative process for the Debtor and
each Claimant to participate in good faith in a mediation that complies with the alternative
dispute resolution procedures (the "ADR Procedures"), appended hereto as Exhibit 1, to attempt
to settle their dispute.
3. The Mediation Program is voluntary and non-binding and designed to facilitate
the settlement of Claims. The substantive rights of Claimants that opt not to participate in the
Mediation Program will not be affected. However, the Court will not, absent exceptional
circumstances, grant relief from the injunction that is established by the Confirmation Order that
requires compliance with the Mediation Program (including the ADR Procedures) (the
“Injunction”) to any Claimant that has not complied with the Mediation Program, as discussed in
more detail below.
iManage_108365_3 (2) 2
4. If a Claimant agrees to participate in the Mediation Program, the Debtor, the
Claimant, and the Debtor’s insurance carriers for the Claimant’s Claim are required to participate
in a mediation of the Claimant’s Claim in conformity with the ADR Procedures in good faith.
5. To implement the Mediation Program, the Debtor will employ a reputable
mediation service, such as Judicial Arbitration and Mediation Service ("JAMS"), to be the
“Facilitator” under the ADR Procedures, and the Debtor will pay the Facilitator’s reasonable fees
and expenses.
6. The Mediation Program authorizes the Debtor to identify, in its sole discretion
reasonably exercised, the sequence of the mediations of Claims. In this regard, the criteria,
which are employed by the Debtor in evaluating cases for the order in which Claims are
mediated in the Mediation Program, include but are not be limited to the following:1
(i) cases which have previously been tried and have resulted in a verdict or a mistrial, or cases which are currently on appeal;
(ii) cases which are currently set for trial or that may have been continued on the state court’s trial docket due to the automatic stay;
(iii) cases and causes of action which have been adjudicated by summaryjudgment, directed verdict, judgment notwithstanding the verdict, or some other
non-verdict type of order;
(iv) cases which are at issue and ripe to be set for trial;
(v) multiple cases involving the same skilled nursing facilities;
(vi) multiple cases against common defendants;
(vii) multiple cases involving the same plaintiffs’ counsel;
(viii) other cases identified by the Debtor where Debtor has sufficient facts or discovery to make expedited mediation meaningful;
(ix) the nature of the insurance coverage available for the claim; and
(x) Special hardship to the Claimant occasioned by delay in light of the Claimant's age or health.
7. Under the Mediation Program, the Debtor is authorized to settle any Claim on
1 These criteria are not listed in a particular order.
iManage_108365_3 (2) 3
any reasonable terms and to enter into, execute and consummate a written agreement of
settlement that will be binding on the Debtor and its estate without further notice or action by the
Court.
8. If mediation of a Claim results in a settlement, the parties shall execute a mutually
acceptable release within five (5) business days of the mediation, and, if necessary, the Debtor’s
counsel will use reasonable efforts thereafter to facilitate the prompt issuance of a bankruptcy
court order approving the settlement.
9. Relief from the Injunction will not be granted to a Claimant unless (i) both the
entity seeking relief from the Injunction and the Debtor certify in writing that they have
attempted to settle their dispute in good faith and, notwithstanding the completion of a mediation
that complies with the ADR Procedures, they have failed to reach a settlement; or (ii) the entity
seeking relief from the Injunction otherwise establishes good cause, after notice and a hearing
pursuant to a motion filed with the Court and served on the Debtor on not less than 24 days
notice, not to follow the ADR Procedures under the circumstances of the particular case.
10. Under the Confirmation Order, the Bankruptcy Court has reserved jurisdiction to
modify the Mediation Program (including the ADR Procedures) for cause after notice and a
hearing upon the motion of the Debtor, such motion to be served on the U.S. Trustee and the
holders of known and disputed Claims arising prior to the Confirmation Date.
Page 1
Claims Resolution Facility Mediation Procedures
1. PURPOSE OF MEDIATION
The purpose of mediation is to attempt to arrive at a mutually acceptable resolution of
the dispute in a cooperative and Informal, rather than a legal and formal, manner.
2. APPLICABILITY OF THESE MEDIATION PROCEDURES
These Claims Resolution Facility Mediation Procedures (the “ADR Procedures”) govern
all mediations of claims referred by the Debtor to mediation (“Referred Claims”) under
the Mediation Program approved by the United States Bankruptcy Court for the Central
District of California (the “Bankruptcy Court”) in In re Brotman Medical Center, Inc., Case
No. LA 07-19705-BB in its order (the “Confirmation Order”) confirming the Debtor’s plan
of reorganization (the “Plan”).
The term “Information” means all information, books, records, lists, data, images, disks,
files, tapes, documents, materials, reports, processes, specifications, budgets, studies,
projections, research, services and plans related to a Claim or the mediation processes
contemplated by this Agreement.
The term “Party” means parties to the mediation of a Referred Claim and their counsel.
3. MEDIATION PROCESS
(a) Administrative Scheduling Conference: Upon referral of a claim by the Debtor to
the company chosen by the Debtor to manage and facilitate mediations under these
procedures (“Facilitator”), the Facilitator will transmit to the Claimant a Notice of Referral
to Mediation. Within 14 days of transmitting the Notice, the Facilitator will contact the
parties to schedule a Mediation Conference, to solicit input from the parties concerning
the date, time and location of the mediation conference of the Referred Claim as well as
the appropriate neutral mediator to handle the mediation, and to provide the Facilitator’s
contact information to Claimant for purposes of complying with the ADR Procedures.
The Facilitator will appoint a mediator (the “Mediator”) and will notify the Parties of the
date, time and location of the mediation conference (the “Mediation Conference”).
Page 2
(b) Mediation Statements: Each of the Debtor and the Claimant is required to submit
to the Facilitator a confidential mediation statement (“Mediation Statement”) that meets
the following requirements:
1) Identifies the person(s), in addition to counsel, who will attend the mediation
conference as representative(s) of the party, who have authority to make
decisions;
2) describes briefly the substance of the dispute;
3) addresses any legal or factual issue(s) that might appreciably reduce the
scope of the dispute or contribute significantly to settlement;
4) identifies the discovery that could contribute most to preparing the parties for
meaningful discussions;
5) sets forth the history of past settlement discussions, including disclosure of
any prior and presently outstanding offers and demands; and
6) makes an estimate of the cost and time to be expended for further discovery,
pretrial conference, trial or otherwise.
Parties shall attach to the Mediation Statement (and such Mediation Statement shall be
deemed to include) copies of the documents from which the dispute has arisen (e.g.
contract) and the document(s) whose availability would materially advance the purposes
of attending the Mediation Conference. In the case of professional liability disputes,
Claimants must attach all medical evaluations that will be presented at the Mediation
Conference.
At Least 21 days before the hearing, Claimant is required to submit Claimant's Mediation
Statement to the Facilitator, and serve Claimant’s Mediation Statement on Debtor and its
counsel at
General Counsel Brotman Medical Center, Inc. 3828 Delmas Terrace Culver City, CA 90232 Facsimile: ______________
Thomas E. Patterson Klee. Tuchin. Bogdanoff & Stern 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Facsimile: 310-407-9090
Page 3
The Debtor shall serve each participating Claimant and the Mediator with its Mediation
Statement at least seven days prior to the Mediation Conference.
(c) Pre-Mediation Telephonic Conference: Upon receipt of the Claimant's Mediation
Statement, the Mediator shall conduct a pre-hearing telephonic conference for the
purpose of identifying issues that will facilitate the mediation and documents that should
be exchanged prior to the Mediation Conference. The mediator will set a schedule for
the exchange of documents, to occur no later than 5 days prior to the Mediation
Conference. Failure to comply with the mediator’s instructions without good cause may
be considered a lack of good faith bargaining, which may affect the right of the Claimant
to seek relief from the injunction imposed by the Plan (the “Injunction”).
(d) Conduct of the Mediation Conference:
In preparation for and during the Mediation Conference, the Mediator will:
1) Review the Mediation Statements submitted by the Parties.
2) Have private, confidential conversations with the participants to develop
Information about the Parties’ contentions and objectives.
3) Conduct a mediation session with representatives of the Parties and their
counsel.
To facilitate a resolution of the Referred Claim, the Mediator and the Parties and their
counsel will work to ensure that each Party appreciates the strength and weaknesses of
each side's factual and legal contentions. Both in the exchange of Information and
opinions, and in the evaluation of that Information and those opinions, each Party will
have the opportunity and responsibility candidly to disclose to the Mediator the facts,
theories, and opinions on which it intends to rely with regard to the matters in dispute.
In addition, the mediation will focus on the interests and objections of the Parties and
possible solutions that the Parties believe would be fair, equitable, and mutually
beneficial. Accordingly, each Party will be asked to work with the Mediator in
considering and evaluating solutions that would satisfy its own interests and those of the
other Party(ies).
The Parties will follow the recommendation of the Mediator regarding the agenda most
likely to resolve the dispute. During the session, the Mediator may have joint or
separate meetings with the Parties and their counsel. Private meetings will be
confidential. If a Party informs the Mediator that information is conveyed by the Party to
the Mediator in confidence, the Mediator will not disclose the information.
Page 4
(e) Procedural Disputes.
The Facilitator will resolve all procedural disputes regarding implementation of the ADR
Procedures.
4. CONFlDENTlALITY
The entire mediation process is a compromise negotiation. All offers, promises, conduct
and statements, whether oral or written, made in the course of the mediation by any of
the Parties, their agents, employees, experts and attorneys, and by Mediators and the
Facilitator’s employees, who are the Parties' joint agents for purposes of these
compromise negotiations, are confidential. Such offers, promises, conduct, and
statements will not be disclosed to third parties and are privileged and inadmissible for
any purpose, including impeachment, under Rule 408 of the Federal Rules of Evidence
and any applicable federal or state statute, rule or common law provisions. However,
evidence that is otherwise admissible or discoverable shall not be rendered inadmissible
or not discoverable as a result of its use in the mediation.
5. ROLE OF MEDIATOR AND FACILITATORS AS NEUTRALS
At the beginning of the Mediation Conference, the Parties shall sign a joint statement
that they have been informed and understand that:
a) The Mediator is serving as a neutral third party in the matter pursuant to the
Confirmation Order;
b) The Mediator is not acting as an attorney or providing legal advice on behalf of
any Party;
c) The Facilitator is serving as a neutral third-party facilitator in the matter pursuant
to the Confirmation Order;
d) Neither the Mediator, the Facilitator, nor any of the Facilitator’s employees or
agents shall be called as witnesses or as an expert in any pending or subsequent
litigation or arbitration involving the Parties and relating in any way to the
Referred Claim that is the subject of the mediation, and neither Party will
subpoena any notes or other materials generated by the Mediator related to the
mediation of the Referred Claim;
Page 5
e) Neither the Mediator, the Facilitator, nor any of the Facilitator’s employees or
agents is a necessary party in any arbitral, judicial or other proceedings relating
to the to the subject matter of the mediation;
f) Neither the Mediator, the Facilitator, nor any of the Facilitator’s employees or
agents shall be liable to any Party for any act or omission in connection with any
mediation conducted pursuant to the Confirmation Order.
g) The Mediator and the Facilitator, including its agents and employees, shall have
the same immunity from liability for any act or omission in connection with the
mediation as judges and court employees would have under federal law.
If a Party does not sign such a statement but was served with a copy of the ADR
Procedures prior to the Mediation Conference, then such Party shall be deemed to have
agreed to the foregoing in this Section 5.
6. WHO IS REQUIRED TO ATTEND
All Parties and their counsel are required to attend the Mediation Conference. Individual
Claimants must personally appear, unless personal attendance presents a hardship due
to physical limitations, in which case personal attendance of a Claimant's representative
(in addition to the Claimant's attorney) with settlement authority is mandatory, unless 1)
prior notice is given to the Debtor and the Mediator and 2) the Debtor consents to a
telephonic appearance by the Claimant or his representative. Corporations or other
entities must send a representative with full authority to settle the claim. In addition, any
insurance company necessary to resolve the matter shall attend through a designated
representative with full settlement authority. Parties without an attorney may represent
themselves, although legal representation is recommended.
7. SCHEDULE CONFLICTS
The Facilitator will work with the parties to schedule a Mediation Conference at a
mutually convenient time and place. If, after a Mediation Conference has been
scheduled, a party cannot attend the scheduled Mediation Conference, that party must
contact the Facilitator’s case manager immediately to see if an alternative date can be
arranged.
Page 6
8. MEDIATION COSTS AND FEES
The cost and fees for the mediation of a Referred Claim, including the Mediator's
compensation and the administrative costs of the Mediation Conference, are being paid
as an administrative expense of the Debtor’s estate.
9. CONSEQUENCES FOR FAILURE TO APPEAR
If any Party fails to appear at the Mediation Conference, the Mediator shall report to the
Court that that Party failed to participate in good faith in a mediation required by the ADR
Procedures. As a result, that Party may be precluded from later seeking relief from the
Injunction.
10. TERMINATION OF MEDIATION
At the conclusion of the Mediation Conference, the Parties and Mediator shall sign a
joint statement setting forth the outcome.
a) If the Referred Claim has been settled, the terms of the settlement shall be set
forth and the Mediator will attest that the settlement (i) is not unfair and (ii)
complies with the standards of Fed. R Bankr. P. Rule 9019, if applicable. The
settlement stipulation will be effective when executed.
b) If the Referred Claim has not been settled and the Parties participated in the
ADR Procedures in good faith, then each of the Parties and the Mediator shall
certify in writing that the Parties have attempted to settle the dispute in good faith
pursuant to the ADR Procedures, and notwithstanding the completion of the ADR
Procedures they have failed to reach a settlement.
c) If the Referred Claim has not been settled and a Party (the “Disputing Party”) or
the Mediator believes in good faith that the other Party (the “Other Party”) did not
participate in the ADR Procedures in good faith, then the Mediator shall report to
the Court that the Mediator or the Disputing Party, as the case may be, believes
the Other Party failed to participate in the ADR Procedures in good faith. Any
such dispute as to whether the Other Party participated in the ADR Procedures in
good faith will be determined by the Bankruptcy Court. If the Bankruptcy Court
determines that the Other Party did not participate in the ADR Procedures in
Page 7
good faith, the Other Party may be precluded from seeking relief from the
Injunction.