Exhibit 10.77

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (“Agreement”) is made and entered into this 8th
day of August 2008 by and among Osmundo R.  Saguil, M.D.  (“Purchaser”), as
buyer, Jacob Y.  Terner, M.D.  (“Seller”), as seller, Prospect Medical
Group, Inc., a California professional corporation (“PMG”) and Prospect Medical
Systems, Inc., a Delaware corporation (“PMS”).

 

RECITALS

 

This Agreement is made with reference to the following facts and circumstances:

 

A.            Seller is a physician licensed in the State of California and the
record owner of eight hundred thirty-nine and 02/100 (839.02) shares (the
“Shares”) of common stock of Company, representing approximately fifty five
percent (55%) of the issued and outstanding shares of Nuestra Familia Medical
Group, Inc. (“Nuestra”) and one hundred percent (100%) of the issued and
outstanding shares of Nuestra held by Seller on behalf of PMG..

 

B.            Purchaser is a physician licensed in the State of California.

 

C.            PMG was the holder of an option to buy the Shares.

 

D.            PMS is the manager of PMG pursuant to a long term management
agreement and is a party to an agreement of accommodation reflecting that option
to buy the Shares then held by PMG, was held by PMG as an accommodation on
behalf of PMS.

 

D.            PMG assigned the option to Purchaser, with the consent of PMS, so
that Purchaser, as a duly licensed physician, could serve as the nominee holder
of record title to PMG’s shares in Nuestra.

 

E.             Purchaser exercised the option to purchase the Shares and desires
to effectuate the transfer of the Shares pursuant to this Agreement.

 

F.             As a result of Purchaser’s purchase of the Shares, Purchaser will
hold all of PMG’s shares in Nuestra which equals approximately 55% of Nuestra’s
issued and outstanding shares.

 

G.            Seller desires to sell the Shares to Purchaser and Purchaser
desires to purchase the Shares from Seller, on the terms and conditions set
forth in this Agreement.

 

1.             PURCHASE AND SALE OF STOCK

 

1.1           The Shares.  Pursuant to the terms and conditions set forth
herein, on the Closing Date, Seller shall sell, convey, transfer, and deliver to
Purchaser all right, title, and interest in and to the Shares.

 

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2.             PURCHASE PRICE

 

2.1           Consideration for the Shares.  Subject to the terms and conditions
of this Agreement and in full consideration of the sale and issuance of the
Shares, Purchaser shall receive One Dollar ($1.00) as payment (the “Purchase
Price”) on the Closing Date for the Shares.  PMG shall advance the Purchase
Price to Purchaser, for Purchaser’s payment to Seller of such Purchase Price.

 

3.             TRANSFER OF SHARES

 

3.1           Transfer.  In order to effectuate the transfer of record title to
the Shares to Purchaser, on the Closing Date, Seller shall issue to Purchaser
all stock certificates representing the Shares, with a stock power duly endorsed
for transfer (“Stock Power”), along with any other documents reasonably
requested by Purchaser to effectuate the purposes of this Agreement. 
Notwithstanding the foregoing, Purchaser acknowledges that that the stock
certificate representing the Shares is currently in the possession of PMG’s
lender (“Lender”) as evidence of the pledge of the Shares as collateral for
PMG’s loan pursuant to the terms of that First Lien Pledge Agreement and the
Second Lien Pledge Agreement, copies of which have been previously delivered to
Purchaser (the “Pledge Agreements”).  Purchaser acknowledges that the Shares
will continue to be collateral for PMG’s loan (which is also the loan for PMS,
Nuestra and their affiliates) after the purchase hereunder.  As a result, on the
Closing Date, Seller shall deliver the Stock Power duly endorsed in blank and
PMG and PMS, shall work with Lender to obtain a return of the original stock
certificate for the Shares so that such stock certificate can be cancelled and a
new stock certificate issued in the name of Purchaser.  The new stock
certificate representing the Shares will then be returned to Lender, along with
a Stock Power signed by Purchaser for the benefit of Lender.

 

4.             REPRESENTATIONS, WARRANTIES AND COVENANTS OF PMG

 

PMG represents and warrants to Purchaser that:

 

4.1           Organization and Authority.  PMG and Nuestra are California
professional corporations duly formed, legally existing and in good standing
under the laws of the State of California.  Seller is the holder of 839.02
shares of Nuestra.  PMG has full power and authority to enter into this
Agreement, to carry out and perform his obligations hereunder and to consummate
the transactions contemplated hereby.

 

4.2           Authorization and Enforceability.  PMG has duly authorized,
executed and delivered this Agreement.  Assuming the Purchaser, Seller and PMS
duly authorize, execute and deliver it, this Agreement is enforceable against
PMG.

 

4.3           Title.  Seller is the record owner of and has good and valid
record title to and has the full right to sell, convey and transfer the Shares
under the terms of this Agreement.  The Shares are encumbered by (a) the Pledge
Agreements, (b) an Amended and Restated Option Agreement (“Existing Option
Agreement”) between PMG and Seller which gives PMG the authority at any time
during the term of the Existing Option Agreement to designate the owner of the
Shares, and (c) an Agreement of Accommodation and Future Assignment of Rights
under the

 

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Option Agreement (“Agreement of Accommodation”).  A copy of the Existing Option
Agreement and the Agreement of Accommodation have been delivered to Purchaser.

 

4.4           No Violation of Other Agreements.  Neither this Agreement nor any
of the transactions contemplated hereby conflicts and will not conflict with or
result in the breach of any of the terms or provisions of, or constitute a
default under, any contractual obligation to which PMG is a party or by which
PMG, or the Shares, is bound, or any legal requirement applicable to PMG or the
Shares.  No approval is required to be obtained by PMG in connection with the
execution, delivery and performance of this Agreement or the transactions
contemplated hereby.

 

4.5           No Other Representations.  No oral or written representation
inconsistent with this Agreement has been made to Purchaser.

 

5.             REPRESENTATIONS, WARRANTIES AND COVENANTS OF PMS

 

PMS represents and warrants to Purchaser, PMS and PMG that:

 

5.1           Organization and Authority.  PMS is a Delaware corporation duly
formed, legally existing and in good standing under the laws of the State of
Delaware and qualified to do business in the State of California.  PMS has full
power and authority to enter into this Agreement, to carry out and perform his
obligations hereunder and to consummate the transactions contemplated hereby.

 

5.2           Authorization and Enforceability.  PMS has duly authorized,
executed and delivered this Agreement.  Assuming the Purchaser, Seller and PMG
duly authorize, execute and deliver it, this Agreement is enforceable against
PMS.

 

5.3           No Violation of Other Agreements.  Neither this Agreement nor any
of the transactions contemplated hereby conflicts and will not conflict with or
result in the breach of any of the terms or provisions of, or constitute a
default under, any contractual obligation to which PMS is a party or by which
PMS, or the Shares, is bound, or any legal requirement applicable to PMS or the
Shares.  No approval is required to be obtained by PMS in connection with the
execution, delivery and performance of this Agreement or the transactions
contemplated hereby.

 

5.4           No Other Representations.  No oral or written representation
inconsistent with this Agreement has been made to Purchaser.

 

6.             REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER

 

Seller represents and warrants to Purchaser, PMS and PMG that:

 

6.1           Title.  Seller is the record owner of the Shares.  Seller has not
(i) granted any option, warrant or other right to any person to acquire any of
the Shares or any other security of, or equity interest in, Nuestra, or (ii) any
contractual obligation that could have the same effect.  Seller hereby discloses
to Purchaser that the Shares are encumbered by (a) the Pledge Agreements,
(b) the Existing  Option Agreement, and the Agreement of Accommodation which

 

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gives PMG, with the consent of PMS, the authority at any time during the term of
the Existing Option Agreement to designate the owner of the Shares.  Other than
the encumbrances described above or any encumbrances that could be deemed to
exist as a result of the operation of PMG and/or Nuestra in their ordinary
course, Seller has not encumbered or placed any liens on the Shares.

 

6.2           No Violation of Other Agreements.  Neither this Agreement nor any
of the transactions contemplated hereby conflicts and will not conflict with or
result in the breach of any of the terms or provisions of, or constitute a
default under, any contractual obligation to which Seller is a party or by which
Seller, or the Shares, is bound, or any legal requirement applicable to Seller
or the Shares.  No approval is required to be obtained by Seller in connection
with the execution, delivery and performance of this Agreement or the
transactions contemplated hereby.

 

6.3           No Other Representations.  No oral or written representation
inconsistent with this Agreement has been made to Purchaser.

 

6.4           Access to Independent Counsel.  Seller has had ample opportunity
to consult independent legal counsel with respect to this Agreement and has not
relied upon PMG’s counsel for legal advice.

 

7.             REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER

 

Purchaser hereby represents and warrants to Seller, PMG and PMS that:

 

7.1           No Violation of Other Agreements.  Neither this Agreement nor any
of the transactions contemplated hereby conflicts and will not conflict with or
result in the breach of any of the terms or provisions of, or constitute a
default under, any contractual obligation to which Purchaser is a party or by
which Purchaser is bound, or any legal requirement applicable to Purchaser.  No
approval is required to be obtained by Purchaser in connection with the
execution, delivery and performance of this Agreement or the transactions
contemplated hereby.

 

7.2           Access to Properties, Books and Records.  Purchaser acknowledges
that he has been afforded reasonable access to all properties, books and records
of Nuestra to the extent held by PMG with respect to the Shares, the Existing
Option Agreement, the Agreement of Accommodation, and the Pledge Agreements.

 

7.3           Access to Independent Counsel.  Purchaser has had ample
opportunity to consult independent legal counsel with respect to this Agreement
and has not relied upon PMG’s counsel for legal advice.

 

8.             COVENANTS AND AGREEMENTS OF THE PARTIES

 

8.1           Publicity.  Neither Purchaser nor Seller shall, at any time on or
after the date hereof, issue any publicity or written or oral statement, or
otherwise disclose the existence of this Agreement or any of the terms or
conditions hereof, or disclose the contemplation, implementation or consummation
of any of the transactions intended hereby, without the prior written consent of
PMG and PMS.  Notwithstanding the foregoing, Purchaser and Seller

 

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acknowledge that PMG, PMS and Nuestra are part of the Prospect family of
companies and that Prospect Medical Holdings, Inc., a Delaware corporation, is a
public company required to file annual and periodic disclosure filings with the
Securities and Exchange Commission.  Purchaser and Seller acknowledge that this
Agreement, and any agreement referenced herein or contemplated hereby, may be
filed as an exhibit to such securities’ filings.

 

9.             CLOSING DATE; CLOSING CONDITIONS; EFFECTUATION OF CLOSING

 

9.1           Closing Date.  The transactions contemplated by this Agreement
shall be consummated at the “Closing”, at such location mutually agreed to by
the parties.  The Closing Date shall be August 8, 2008, or on such other date
mutually agreed to by the parties.

 

9.2           Conditions to Closing.

 

(a)           Purchaser shall have executed (i) the Option Agreement between PMG
and Purchaser, in the form attached hereto as Exhibit A., (ii) pledge agreements
prepared by Lender in the form attached hereto as Exhibit B and Exhibit C.

 

(b)           Seller shall have received evidence reasonably satisfactory to
Seller that the Pledge Agreements, and any uniform commercial code filings which
were filed to perfect Lender’s security interest in the Shares naming Seller,
have or will be terminated by Lender promptly upon the closing of the
transactions under this Agreement.

 

9.3           Effectuation of Closing.  At Closing, assuming the satisfaction of
the terms and conditions of sale set forth in this Agreement, Seller shall
deliver to Purchaser the Stock Power and Seller shall receive the Purchase
Price.

 

10.          MISCELLANEOUS

 

10.1         Entire Agreement.  This Agreement, together with all documents
referred to herein, constitutes the entire agreement between the parties with
respect to the subject matter hereof, supersedes all other and prior agreements
on the same subject, whether written or oral, and contains all of the covenants
and agreements between the parties with respect to the subject matter hereof. 
Each party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by the other party,
or by anyone acting on behalf of any party, that are not embodied herein, and
that no other agreement, statement, or promise not contained in this Agreement
shall be valid or binding.

 

10.2         Successors and Assigns.  This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, legal
representatives, and permitted successors and assigns.  No party may assign this
Agreement or the rights, interests or obligations hereunder.  Any assignment or
delegation in contravention of this Section shall be null and void.

 

10.3         Counterparts.  This Agreement, and any amendments thereto, may be
executed in counterparts, each of which shall constitute an original document,
but which together shall constitute one and the same instrument.

 

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10.4         Headings.  The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

10.5         Notices.  Any notices required or permitted to be given hereunder
by any party to the other shall be in writing and shall be deemed delivered upon
personal delivery; twenty-four (24) hours following deposit with a courier for
overnight delivery; or seventy-two (72) hours following deposit in the U.S. 
Mail, registered or certified mail, postage prepaid, return-receipt requested,
addressed to the parties at the following addresses or to such other addresses
as the parties may specify in writing:

 

If to Seller:                             Jacob Y.  Terner, M.D.
c/o Prospect Medical Group, Inc.
1920 E.  17th Street, Suite 200
Santa Ana, CA 92705

 

If to Purchaser:                     Osmundo R.  Saguil, M.D.
c/o Prospect Medical Group, Inc.
1920 E.  17th Street, Suite 200
Santa Ana, CA 92705

 

10.6         Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of California.

 

10.7         Amendment.  This Agreement may be amended at any time by agreement
of the parties, provided that any amendment shall be in writing and executed by
all parties.

 

10.8         Severability.  If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions will nevertheless continue in full force and effect, unless such
invalidity or unenforceability would defeat an essential business purpose of
this Agreement.

 

10.9         Survival of Representations and Warranties.  Except as expressly
stated to the contrary herein, the representations and warranties of Purchaser
and Seller contained in this Agreement or in any certificate or document
delivered pursuant to the provisions hereof shall survive the Closing Date for a
period of one (1) year.

 

10.10       Time of Essence.  Time is expressly made of the essence of this
Agreement and each and every provision hereof of which time of performance is a
factor.

 

10.11       Dispute Resolution.  If the parties to this Agreement cannot settle
grievances or disputes between them in an informal and expeditious fashion, the
dispute shall be submitted, upon the motion of either party, to arbitration in
Los Angeles County, California, in accordance with the commercial rules of the
American Arbitration Association and applying the laws of the State of
California.  Except as may be expressly provided to the contrary in this
Agreement, the arbitration procedure described in this Section shall be the sole
means of resolving any disputes hereunder.  The parties agree that the decision
of the arbitrator shall be final and binding as to each of them, and judgment
thereon may be entered in any court having jurisdiction thereof. 

 

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During the pendency of any such arbitration and until final judgment thereon has
been entered, this Agreement shall remain in full force and effect unless
otherwise terminated as provided hereunder.  The provisions of this
Section 10.11 shall survive the expiration or sooner termination of this
Agreement regardless of the cause of such termination.

 

10.12       Venue.  In the event of any litigation under this Agreement, the
parties agree that the venue for such litigation shall be Los Angeles County,
California.

 

10.13       Attorneys’ Fees.  Should either party hereto institute any action or
procedure to enforce this Agreement or any provision hereof, or for damages by
reason of any alleged breach of this Agreement or of any provision hereof, or
for a declaration of rights hereunder (including without limitation
arbitration), the prevailing party in any such action or proceeding shall be
entitled to receive from the other party all costs and expenses, including
without limitation reasonable attorneys’ fees, incurred by the prevailing party
in connection with such action or proceeding.

 

10.14       Further Assurances.  The parties shall take such actions and execute
and deliver such further documentation as may reasonably be required in order to
give effect to the transactions contemplated by this Agreement and the
intentions of the parties hereto.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

 

“Purchaser”:

 

“Seller”:

 

 

 

 

OSMUNDO R. SAGUIL, M.D.

 

JACOB Y. TERNER, M.D.

 

 

 

 

 

 

By:

/s/ Osmundo R. Saguil, M.D.

 

By:

/s/ Jacob Y. Terner, M.D.

 

Osmundo R. Saguil, M.D.

 

 

Jacob Y. Terner, M.D.

 

 

 

 

 

 

 

 

 

 

“PMG”:

 

“PMS”:

 

 

 

 

 

PROSPECT MEDICAL GROUP, INC.

 

PROSPECT MEDICAL SYSTEMS, INC.

 

 

 

 

 

 

By:

/s/ Samuel S. Lee

 

By:

/s/ Samuel S. Lee

 

Samuel S. Lee

 

 

Samuel S. Lee

 

Senior Vice President

 

 

Chairman of the Board

 

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Exhibit D

 

SPOUSAL JOINDER AND CONSENT

 

I am the spouse of Osmundo R.  Saguil, M.D.  (“Purchaser”).  To the extent that
I have any interest in any of the Shares (as that term is defined in the Stock
Purchase Agreement (“Agreement”) entered into as of this date, by and among
Jacob Y.  Terner, M.D., as seller, Prospect Medical Group, Inc.  (“PMG”) and
Prospect Medical Systems, Inc.  (“PMS”), I hereby join in the Agreement and
agree to be bound by its terms and conditions to the same extent as my spouse. 
I have read the Agreement, understand its terms and conditions, and to the
extent that I have felt it necessary, I have retained independent legal counsel
to advise me concerning the legal effect of this Agreement and this Spousal
Joinder and Consent.

 

I understand and acknowledge that Purchaser is relying on the validity and
accuracy of this Spousal Joinder and Consent in entering into this Agreement.

 

Executed this                day of                       , 2008.

 

 

Signature:

 

 

 

Printed or Typed Name:

 

 

 

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