COLLATERAL ASSIGNMENT OF TRANSACTION DOCUMENTS
THIS COLLATERAL ASSIGNMENT OF TRANSACTION DOCUMENTS (this
"ASSIGNMENT") has been executed and delivered as of July 14, 1997, by and
between PROSPECT MEDICAL SYSTEMS, INC. a Delaware corporation ("ASSIGNOR"), and
IMPERIAL BANK, a California banking corporation ("BANK"), with reference to the
following facts:
R E C I T A L S
A. Assignor is a party to certain transaction documents pursuant to
which, among other things, Assignor acquired or will acquire the non-medical
assets of Santa Xxx/Tustin Physicians Group, Inc. a California professional
medical corporation ("PHYSICIAN GROUP"), and provides management services to
Physician Group.
B. Assignor has previously executed that certain Continuing
Guaranty, dated as of July 3, 1997, in favor of Bank (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"GUARANTY") pursuant to which Assignor guarantees the Guaranteed Obligations (as
defined in the Guaranty), including, without limitation, all obligations,
indebtedness and liabilities owed by Prospect Medical Holdings, Inc., a Delaware
corporation ("BORROWER") to Bank under that certain Revolving Credit Agreement,
dated as of July 3, 1997 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "LOAN AGREEMENT").
C. Assignor has executed and delivered that certain Security
Agreement, dated as of even date with the Guaranty ("SECURITY AGREEMENT"), in
order to secure the Guaranteed Obligations.
D. Assignor has agreed to execute and deliver this Assignment to
Bank in order to supplement the terms of the Security Agreement with respect to
the Transaction Documents (as hereinafter defined).
E. Assignor is a wholly-owned subsidiary of Borrower which will
directly and materially benefit from the Loans made by Bank to Borrower under
the Loan Agreement, and Assignor acknowledges that Bank would not enter into the
Loan Agreement absent Assignor's agreements under the Guaranty, the Security
Agreement and hereunder.
A G R E E M E N T
In consideration of the premises and the mutual agreements herein set
forth, Assignor and Bank hereby agree as follows:
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1. DEFINED TERMS. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Guaranty.
2. ASSIGNMENT. As additional security for the Guaranteed
Obligations, Assignor hereby collaterally assigns and transfers to Bank, and
acknowledges that pursuant to the Security Agreement Assignor has granted to
Bank a security interest in:
2.1 TRANSACTION DOCUMENTS. All of Assignor's right, title and
interest in and to the following documents (collectively, the "TRANSACTION
DOCUMENTS"):
(a) Management Services Agreement, dated as of July 14,
1997, executed by and between Assignor and Physician Group;
(b) Assignable Option Agreement, dated as of July 14, 1997,
executed by and among Assignor, Physician Group and Prospect Medical Group,
Inc., a California professional corporation ("GROUP");
(c) Security Agreement, dated as of July 14, 1997, executed
by and between Assignor and Physician Group, together with UCC-1 Financing
Statements with respect thereto ("PHYSICIAN GROUP SECURITY AGREEMENT"); and
(d) Secured Promissory Note, dated as of July 14, 1997, in
the principal amount of $3,000,000 ("NOTE"), executed by Group to the order of
Assignor.
2.2 RIGHTS AND REMEDIES. All of the rights, benefits, remedies,
privileges and claims of Assignor with respect to the Transaction Documents
(collectively, the "RIGHTS AND REMEDIES"), including, without limitation, (i)
all rights to monies or payments owing to Assignor under the Transaction
Documents, and any and all security therefor and for all other obligations owing
to Assignor thereunder, (ii) any right that Assignor may have to indemnification
under the Transaction Documents, (iii) all Rights and Remedies of Assignor with
respect to any breach of the representations, warranties and covenants set forth
in any of the Transaction Documents, and (iv) the proceeds thereof (the
Transaction Documents and the Rights and Remedies are collectively referred to
herein as, the "COLLATERAL").
3. RIGHT AND REMEDIES GENERALLY. Prior to the occurrence of a
breach or default of any of the agreements, covenants and obligations of
Assignor under the Guaranty (a "DEFAULT"), Assignor will enforce all of its
Rights and Remedies diligently and in good faith. Effective from and after the
occurrence of a Default, Assignor hereby irrevocably authorizes and empowers
Bank, in Bank's own discretion, to assert as Bank may deem proper, either
directly or on behalf of Assignor, any of the Rights and Remedies which Assignor
may from time to time have under the Transaction Documents, and to receive and
collect all damages, awards and other monies resulting therefrom and to apply
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the same on account of any of the Guaranteed Obligations.
4. FURTHER ASSURANCES. Assignor shall execute and deliver to Bank
concurrently with Assignor's execution of this Assignment, and from time to time
at the request of Bank, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages,
assignments, and all other documents that Bank may request, in form satisfactory
to Bank, to perfect and maintain perfected Bank's security interests in the
Collateral and in order to consummate fully all of the transactions contemplated
by this Assignment.
5. TRANSACTION DOCUMENTS. Concurrent herewith, Assignor is
delivering to Bank possession of the original Transaction Documents, together
with any and all amendments thereto, as in effect on the date hereof, including
the Note and Physician Group Security Agreement, duly endorsed to Bank pursuant
to an allonge in form and substance satisfactory to Bank, to hold in accordance
with the terms of the Security Agreement until the Security Agreement is
terminated in accordance with its terms.
6. ATTORNEY-IN-FACT. Assignor hereby irrevocably makes,
constitutes, and appoints Bank (and Bank's officers, employees, or agents) as
Assignor's true and lawful agent and attorney-in-fact for the purposes of
enabling Bank or its agent(s) after the occurrence of a Default to (a) assert
such Rights and Remedies and to collect such damages, awards and other monies
and to apply them in the manner set forth hereinabove, and (b) to sign the name
of Assignor on any documents which need to be executed, recorded, or filed, and
to do any and all things necessary in the name and on behalf of Assignor in
order to protect Bank's interests in the Transaction Documents. Assignor agrees
that neither Bank, nor any of its designers or attorneys-in-fact, will be liable
for any act of commission or omission, or for any error of judgment or mistake
of fact or law with respect to the exercise of the power of attorney granted
under this Section 6, other than as a result of its or their gross negligence or
wilful misconduct. The power of attorney granted under this Section 6 is
coupled with an interest and shall be irrevocable until all of the Guaranteed
Obligations have been paid in full, the Guaranty terminated, and Assignor's
duties under this Assignment have been discharged in full.
7. MODIFICATION OF RIGHTS AND REMEDIES. Assignor shall keep Bank
informed of all circumstances bearing upon the Rights and Remedies and shall
immediately provide Bank with copies of any notices delivered to Assignor in
connection with the Transaction Documents. Assignor shall also provide Bank
with a copy of any notice sent by Assignor in connection with the Transaction
Documents, concurrently with the sending of any such notice. Assignor shall not
waive, amend, alter or modify any of the Rights and Remedies in any material
respect without the prior written consent of Bank. Assignor shall not, without
Bank's prior written consent, amend, alter, modify or terminate any of the
Transaction Documents, or waive any of the provisions thereof, or do or permit
any act in contravention thereof.
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8. ASSIGNOR TO REMAIN LIABLE. Notwithstanding the foregoing,
Assignor expressly acknowledges and agrees that it shall remain liable under the
Transaction Documents to observe and perform all of the conditions and
obligations in the Transaction Documents which Assignor is bound to observe and
perform, and that neither this Assignment, nor any action taken pursuant hereto,
shall cause Bank to be under any obligation or liability in any respect
whatsoever to observe or perform any of the representations, warranties,
conditions, covenants, agreements or terms of the Transaction Documents.
9. COUNTERPARTS; EFFECTIVENESS. This Assignment may be executed in
any number of counterparts, each of which, when executed and delivered, shall be
deemed to be an original. All of such counterparts, taken together, shall
constitute but one and the same agreement. This Assignment shall become
effective upon the execution of a counterpart of this Assignment by each of the
parties hereto.
10. NOTICES. All notices, requests and other communications to any
party hereunder shall be sent in accordance with Section 15 of the Guaranty.
11. MODIFICATIONS AND AMENDMENTS. This Assignment shall not be
changed orally but shall be changed only by agreement in writing signed by
Assignor and Bank. No course of dealing between the parties, no usage of trade
and no parole or extrinsic evidence of any nature shall be used to supplement or
modify any of the terms or provisions of this Assignment.
12. SEVERABILITY. If any provision of this Assignment is held to be
illegal, invalid or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of this Assignment shall
not be affected thereby, and this Assignment shall be liberally construed so as
to carry out the intent of the parties to it.
13. GOVERNING LAW; SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This
Assignment (a) shall be governed and construed according to the laws of the
State of California, without regard to principles of conflicts of law; (b) shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; and (c) embodies the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes all prior agreements, consents and understandings relating to such
subject matter.
14. JUDICIAL REFERENCE.
14.1 REFERENCE PROCEEDING. Other than (i) nonjudicial
foreclosure and all matters in connection therewith regarding security interests
in real or personal property; or (ii) the appointment of a receiver, or the
exercise of other provisional remedies (any and all of which may be initiated
pursuant to applicable law), each controversy, dispute or claim between the
parties arising out of or relating to this Assignment, which
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controversy, dispute or claim is not settled in writing within thirty (30) days
after the "CLAIM DATE" (defined as the date on which either Assignor or Bank
gives written notice to the other that a controversy, dispute or claim exists),
will be settled by a reference proceeding in California in accordance with the
provisions of Section 638 ET SEQ. of the California Code of Civil Procedure, or
their successor section ("CCP"), which shall constitute the exclusive remedy for
the settlement of any controversy, dispute or claim concerning this Assignment,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in Los Angeles County (the "COURT"). The referee
shall be a retired Judge of the Court selected by mutual agreement of the
parties, and if they cannot so agree within forty-five (45) days after the Claim
Date, the referee shall be promptly selected by the Presiding Judge of the Court
(or his representative). The referee shall be appointed to sit as a temporary
judge, with all of the powers for a temporary judge, as authorized by law, and
upon selection should take and subscribe to the oath of office as provided for
in Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP Section 644 in any court in the State of California having jurisdiction.
Any party may apply for a reference proceeding at any time after thirty (30)
days following notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial. All
discovery permitted by this Assignment shall be completed no later than fifteen
(15) days before the first hearing date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of
the referee as provided herein, the Court is empowered to issue temporary and/or
provisional remedies, as appropriate.
14.2 MANNER OF REFERENCE PROCEEDING. Except as expressly set
forth in this Assignment, the referee shall determine the manner in which the
reference proceeding is conducted including the time and place of all hearings,
the order of presentation of evidence, and all other questions that arise with
respect to the course of the reference proceeding. All proceedings and hearings
conducted before the referee, except for trial, shall be conducted without a
court reporter except that when any party so requests, a court reporter will be
used at any hearing conducted before the referee. The party making such a
request shall have the obligation to arrange for and pay for the court reporter.
The costs
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of the court reporter at the trial shall be borne equally by the parties.
14.3 DUTIES OF REFEREE. The referee shall be required to
determine all issues in accordance with existing case law and the statutory laws
of the State of California. The rules of evidence applicable to proceedings at
law in the State of California will be applicable to the reference proceeding.
The referee shall be empowered to enter equitable as well as legal relief, to
provide all temporary and/or provisional remedies and to enter equitable orders
that will be binding upon the parties. The referee shall issue a single
judgment at the close of the reference proceeding which shall dispose of all of
the claims of the parties that are the subject of the reference. The parties
hereto expressly reserve the right to contest or appeal from the final judgment
or any appealable order or appealable judgment entered by the referee. The
parties hereto expressly reserve the right to findings of fact, conclusions of
laws, a written statement of decision, and the right to move for a new trial or
a different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
14.4 ARBITRATION ALTERNATIVE. In the event that the enabling
legislation which provides for appointment of a referee is repealed (and no
successor statute is enacted), any dispute between the parties that would
otherwise be determined by the reference procedure herein described will be
resolved and determined by arbitration. The arbitration will be conducted by a
retired judge of the Court, in accordance with the California Arbitration Act,
Section 1280 through Section 1294.2 of the CCP as amended from time to time.
The limitations with respect to discovery as set forth hereinabove shall apply
to any
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such arbitration proceeding.
EXECUTED as of the date first above written.
"Assignor"
PROSPECT MEDICAL SYSTEMS, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx, M.D.
-------------------------------------
Title: CEO
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"Bank"
IMPERIAL BANK,
a California banking corporation
By: Xxxx X. Xxxxxxxx
-------------------------------------
Title: SVP
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CONSENT TO ASSIGNMENT
Each of the undersigned acknowledges the terms of the above
Assignment, consents to the assignment by Assignor to Bank of the transaction
documents identified in Section 2 of the Assignment (the "TRANSACTION
DOCUMENTS") which it is a party, and agrees to recognize Bank as Assignor's
assignee under the Transaction Documents. Each of the undersigned hereby
represents and warrants to Bank that (i) it has no knowledge of any fact or
circumstance which would or could have a material adverse effect on the rights
granted to Bank in the Transaction Documents, (ii) each of the Transaction
Documents complies with all applicable laws and regulations, (iii) each of the
Transaction Documents is in full force and effect, and all signatures, names,
addresses, amounts and other statements and facts contained therein are true and
correct, and (iv) there are no defenses, offsets or counterclaims to enforcement
of the Transaction Documents.
ACKNOWLEDGED AND CONSENTED TO
THIS 14TH DAY OF JULY, 1997:
SANTA XXX/TUSTIN PHYSICIANS GROUP, INC.,
a California professional corporation
By: /s/ Xxxxx XxXxxxxx
-------------------------------------
Title: Secretary
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PROSPECT MEDICAL GROUP, INC.,
a California professional corporation
By: /s/ Xxxxx XxXxxxxx
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Title: President
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