Exhibit 10.81


 


AMENDED AND RESTATED SECOND LIEN PLEDGE AGREEMENT


 


THIS
AMENDED AND RESTATED SECOND LIEN PLEDGE AGREEMENT (this “Agreement”) is
effective as of the 8th day of August, 2008, by and between Osmundo
R. Saguil, M.D. (“Saguil” or the “Pledgor”) and Bank of America,
N.A., as administrative agent, and its successors and assigns (collectively,
the “Administrative Agent”) under the Credit Agreement (as defined
below).  Capitalized terms used herein,
but not defined herein, shall have the respective meanings set forth in the
Credit Agreement.


 


RECITALS


 


A.            Administrative Agent and Prior Owner
are party to that certain Second Lien Pledge Agreement dated as of August 8,
2007 (as amended, restated, or otherwise modified from time to time, the “Prior
Pledge Agreement”), wherein Prior Owner granted to Administrative Agent a
lien and security interest in the Stock, as more fully set forth therein.


 


B.            Simultaneous with the execution of
this Agreement, the Pledgor has acquired from Jacob Y. Terner, M.D. (“Prior
Owner”), (i) all of the issued and outstanding shares of PMG and (ii) all
of the shares of Nuestra Familia Medical Group, Inc. owned by PMG,
representing 55.02% of the issued and outstanding shares thereof (collectively
with (i), the “Stock”).


 


C.            Simultaneous with the execution of
this Agreement, the Pledgor has been appointed (i) Chief Executive Officer
of PMG, (ii) Vice President of PMG’s affiliate, Holdings, and (iii) Vice
President and Chief Medical Officer of Holdings’ subsidiary, PMS.


 


D.            Pursuant to the terms of the Loan
Documents, Pledgor is required to grant to the Administrative Agent, for the
benefit of the Secured Parties, a lien and security interest in the Stock and
Collateral (as defined below).


 


E.             Pledgor and the Administrative
Agent desire to amend and restate the Prior Pledge Agreement in its entirety as
set forth herein.


 


NOW
THEREFORE, in consideration of the foregoing promises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, the Administrative Agent and the Pledgor agree to
amend and restate the Prior Pledge Agreement to read in its entirety as
follows:


 


1.             GRANT OF SECURITY INTEREST.


 


(a)           The Pledgor hereby
irrevocably and unconditionally grants a second priority security interest in,
a lien upon and the right of set-off against, and assigns and transfers to the
Administrative Agent, for the benefit of the Administrative Agent and the
Secured Parties, all property referred to in Exhibit A attached hereto and
incorporated herein, as hereafter amended or supplemented from time to time
(the “Collateral”).  The parties
hereto expressly agree that all rights, assets and property at any time held in
or credited to any securities account constituting Collateral shall be treated
as financial assets as defined in the Uniform Commercial Code as in effect in
any applicable state (the “UCC”).


 

















 


(b)            Notwithstanding
anything contained herein to the contrary, the liens and security interests
granted to the Administrative Agent, for the benefit of the Lenders, pursuant
to this Agreement, and the exercise of any right or remedy by the
Administrative Agent, for the benefit of the Lenders, under this Agreement, are
subject to the provisions of the Intercreditor Agreement. In the event of any
conflict between the terms of the Intercreditor Agreement and this Agreement,
the terms of the Intercreditor Agreement shall govern and control.


 


2.             INDEBTEDNESS.


 


(a)            The Collateral
secures and will secure all Indebtedness of (i) Prospect Medical Group, Inc.,
a California professional corporation (“PMG”), (ii) Prospect
Medical Holdings, Inc., a Delaware corporation (“Holdings”) and (iii) PMS,
in each case, owed to the Administrative Agent and the Lenders.  Each person or entity obligated under any Indebtedness
is sometimes referred to in this Agreement as a “Debtor”.


 


(b)            “Indebtedness” means:


 


(i)            all “Obligations”
(as such term is defined in the Credit Agreement) under (A) that certain
Second Lien Credit Agreement (as amended, restated, modified or otherwise
supplemented, the “Credit Agreement”) dated as of August 8, 2007
among Holdings, PMG, the Administrative Agent and the other financial
institutions from time to time party thereto (the “Lenders”), (B) the
other Loan Documents, and (C) and all other instruments, documents and
agreements of every kind and nature now or hereafter executed in connection
with the Credit Agreement (including all renewals, increases, extensions,
restatements and replacements thereof and amendments and modifications of any
of the foregoing),


 


(ii)           all obligations
and liabilities of Pledgor to the Administrative Agent hereunder, and


 


(iii)          all costs,
attorneys’ fees and expenses incurred by the Administrative Agent in connection
with the collection or enforcement of any of the above.


 


(c)            Unless
otherwise agreed in writing, “Indebtedness” shall not include any debts,
obligations or liabilities which are or may hereafter be “consumer credit”
subject to the disclosure requirements of the Federal Truth in Lending law or
any regulation promulgated thereunder.


 


3.             COVENANTS,
REPRESENTATIONS AND WARRANTIES.   Pledgor
and each Debtor covenant, represent and warrant that unless compliance is
waived by the Administrative Agent in writing:


 


(a)            Pledgor is the
legal and beneficial owner of all the Collateral free and clear of any and all
liens, encumbrances, or interests of any third parties other than the Second
Priority Lien of the Administrative Agent and the first priority security
interest of the First Lien Administrative Agent, and will keep the Collateral
free of all liens, claims, security interests and encumbrances of any kind or
nature, whether voluntary or involuntary, except the Second Priority Lien of
the Administrative Agent and the first priority security interest of the First
Lien Administrative Agent.  Pledgor is
the (i) Chief Executive Officer of PMG, (ii) Vice President of PMG’s
affiliate, Holdings, and (iii) Vice President and Chief Medical Officer of
Holdings’ subsidiary, PMS.  Pledgor holds
title to the Collateral as an individual and such Collateral is subject to
assignable option agreements that allow PMS and PMG, as applicable, to acquire
the Collateral or designate 


 


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a
successor physician as the record holder of such Collateral at any time
(collectively, as each may be amended, the “Option Agreement”).


 


(b)            Pledgor and
each Debtor shall, at PMG’s expense, take all actions necessary or advisable
from time to time to maintain the Second Priority Lien and perfection thereof
of the Administrative Agent in the Collateral and shall not take any actions
that would alter, impair or eliminate said priority or perfection.


 


(c)            Pledgor and
each Debtor agree to cause PMG, and PMG agrees, to pay prior to delinquency all
taxes, charges, liens and assessments against the Collateral, and upon the
failure of Pledgor to do so, the Administrative Agent at its option may pay any
of them and shall be the sole judge of the legality or validity thereof and the
amount necessary to discharge the same.


 


(d)            If any of the
Collateral is margin stock as defined in Regulation U promulgated by the Board
of Governors of the Federal Reserve System of the United States (“FRB”),
Pledgor will provide the Administrative Agent a properly executed Form U-1
Purpose Statement. The Administrative Agent and Pledgor will comply with the
requirements and restrictions imposed by Regulation U.


 


(e)            Pledgor’s exact
legal name is correctly set forth on the signature page hereof. Pledgor
will notify the Administrative Agent in writing at least 30 days prior to any
change in Pledgor’s name or identity.


 


(f)             Pledgor resides
and has for the four month period preceding the date hereof resided in the
state specified on the signature page hereof.  Pledgor shall give the Administrative Agent
at least thirty (30) days notice before changing the location of his residence.


 


4.             REPRESENTATIONS, WARRANTIES
AND COVENANTS REGARDING EQUITY SECURITIES COLLATERAL.  Pledgor and each Debtor hereby represent,
warrant and covenant the following with respect to any equity securities
comprising any or all of the Collateral (collectively, the “Equity
Securities”) and covenant and agree to promptly notify the Administrative
Agent in writing in the event that any of the foregoing representations and
warranties is no longer true and correct:


 


(a)            The Equity
Securities have been duly authorized and validly issued and are fully paid and
non-assessable.


 


(b)            There are no
restrictions on the pledge of the Equity Securities by Pledgor to the Administrative
Agent nor on the sale of the Equity Securities by Pledgor or the Administrative
Agent (whether pursuant to securities laws or regulations or any shareholder,
lock-up or other similar agreement or insider trading rules of the
issuer).


 


5.             ADMINISTRATIVE
AGENT APPOINTED ATTORNEY IN FACT.  Upon
the occurrence and during the continuation of an Event of Default, Pledgor
authorizes and irrevocably appoints the Administrative Agent as Pledgor’s true
and lawful attorney-in-fact with full power of substitution to take any action
and execute or otherwise authenticate any record or other documentation that
the Administrative Agent considers necessary or advisable to accomplish the
purposes of this Agreement, including but not limited to, the following
actions: (a) to endorse, receive, accept and collect all checks, drafts,
other payment orders and instruments representing or included in the Collateral
or representing any payment, dividend or distribution relating to any
Collateral or to take any other action to enforce, collect or compromise any of
the Collateral; (b) to transfer any Collateral (including converting
physical certificates to book-entry holdings) into the name of the
Administrative Agent or its nominee or


 


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any broker-dealer (which may
be an affiliate of the Administrative Agent) and to execute any control
agreement covering any Collateral on Pledgor’s behalf and as attorney-in-fact
for Pledgor in order to perfect the Administrative Agent’s Second Priority Lien
in the Collateral and in order to provide the Administrative Agent with control
of the Collateral, and Pledgor’s signature on this Agreement or other
authentication of this Agreement shall constitute an irrevocable direction by
Pledgor to any bank, custodian, broker dealer, any other securities
intermediary or commodity intermediary holding any Collateral or any issuer of
any letters of credit to comply with any instructions or entitlement orders, of
the Administrative Agent without further consent of Pledgor; (c) to
participate in any recapitalization, reclassification, reorganization,
consolidation, redemption, stock split, merger or liquidation of any issuer of
securities which constitute Collateral, and in connection therewith the
Administrative Agent may deposit or surrender control of the Collateral, accept
money or other property in exchange for the Collateral, and take such action as
it deems proper in connection therewith, and any money or property received on
account of or in exchange for the Collateral shall be applied to the
Indebtedness or held by the Administrative Agent thereafter as Collateral
pursuant to the provisions hereof; (d) to exercise any right, privilege or
option pertaining to any Collateral, but the Administrative Agent has no
obligation to do so; (e) to file any claims, take any actions or institute
any proceedings which the Administrative Agent determines to be necessary or
appropriate to collect or preserve the Collateral or to enforce the
Administrative Agent’s rights with respect to the Collateral; (f) to
execute in the name or otherwise authenticate on behalf of Pledgor any record
reasonably believed necessary or appropriate by the Administrative Agent for
compliance with laws, rules or regulations applicable to any Collateral,
or in connection with exercising the Administrative Agent’s rights under this
Agreement; (g) to file any financing statement relating to this Agreement;
(h) to make any compromise or settlement it deems desirable or proper with
reference to the Collateral; (i) to do and take any and all actions with
respect to the Collateral and to perform any of Pledgor’s obligations under
this Agreement; and (j) to execute any documentation reasonably believed
necessary by the Administrative Agent for compliance with Rule 144 or any
other restrictions, laws, rules or regulations applicable to any
Collateral hereunder that constitutes restricted or control securities under
the securities laws.  The foregoing
appointments are irrevocable and coupled with an interest and shall survive the
death or disability of Pledgor and shall not be revoked without the
Administrative Agent’s written consent. 
To the extent permitted by law, Pledgor hereby ratifies all said
attorney-in-fact shall lawfully do by virtue hereof.


 


6.             VOTING RIGHTS.


 


(a)            So long as no
Event of Default shall have occurred and is continuing and the Administrative
Agent has not delivered the notice specified in subsection (b) below,
Pledgor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or any document or agreement
executed in connection herewith.


 


(b)            Upon the
occurrence and during the continuance of an Event of Default, at the option of
the Administrative Agent exercised in a writing sent to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to subsection (a) above shall
cease, and the Administrative Agent shall thereupon have the sole right to
exercise such voting and other consensual rights.


 


7.             EVENTS OF DEFAULT; REMEDIES.


 


(a)            Any one or more
of the following shall be a default hereunder (each an, “Event of Default”):


 


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(i)            An “Event of
Default” under the Credit Agreement (as such term is defined in the Credit
Agreement) occurs and is continuing.


 


(ii)           Pledgor or any
Debtor fails to pay any Indebtedness when due, after giving effect to any
applicable grace period.


 


(iii)          Pledgor or any
Debtor fails to cure a breach of any collateral maintenance provisions set
forth in this Agreement or in any agreement governing or executed or delivered
in connection with any Indebtedness within the applicable cure period specified
therein.


 


(iv)          Pledgor or any
Debtor breaches any term, provision, warranty or representation under this
Agreement not specifically referred to in subsection (a) of this Section or
breaches any term, provision, warranty or representation of the Credit
Agreement or any other agreement or instrument evidencing, securing or executed
or delivered in connection with the Indebtedness beyond any grace period
provided with respect thereto.


 


(v)           Any control
agreement covering any Collateral is breached, or any party to such control
agreement terminates or notifies the Administrative Agent or Pledgor of its
intention to terminate the control agreement or denies the enforceability of
the control agreement.


 


(vi)          Any involuntary
lien of any kind or character attaches to any of the Collateral.


 


(b)            If an Event of
Default occurs, the Administrative Agent may do any one or more of the
following:


 


(i)            Declare any
Indebtedness immediately due and payable, without notice or demand.


 


(ii)           Exercise as to
any or all of the Collateral all the rights, powers and remedies of an owner,
subject to the provisions of Section 6 of this Agreement.


 


(iii)          Enforce the
security interest given hereunder pursuant to the UCC and any other applicable
law.


 


(iv)          Subject to
applicable Laws (including, without limitation, securities laws and
regulations), sell all or any part of the Collateral at public or private sale
in accordance with the UCC, without advertisement, in such manner and order as
the Administrative Agent may elect.  The
Administrative Agent may purchase the Collateral for its own account at any
such sale.


 


(v)           Enforce the
security interest of the Administrative Agent in any deposit account which is
part of the Collateral by applying such account to the Indebtedness.


 


(vi)          Exercise any
other remedy provided under this Agreement or by any applicable law.


 


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(vii)         Comply with any
applicable state or federal law requirements in connection with a disposition
of the Collateral and such compliance will not be considered to affect
adversely the commercial reasonableness of any sale or other disposition of the
Collateral.


 


(viii)        Sell the
Collateral without giving any warranties as to the Collateral.  The Administrative Agent may specifically
disclaim any warranties of title or the like. 
This procedure will not be considered to affect adversely the commercial
reasonableness of any sale or other disposition of the Collateral.


 


(ix)           If requested by
the Administrative Agent, Holdings, PMS and/or PMG will direct Pledgor (whether
pursuant to the Option Agreement or otherwise), or his estate, as the case may
be, to sell and Pledgor, or his estate, as the case may be, shall promptly sell
all (or any portion as may be directed by the Administrative Agent) of the
Collateral to such person(s) as Holdings, PMS and PMG shall in their
reasonable discretion direct, subject to the reasonable approval of
Administrative Agent (the “New Shareholder(s)”).  If requested by the Administrative Agent,
such New Shareholder(s) shall execute and deliver to the Administrative
Agent a pledge agreement and such other agreements, documents and instruments
as the Administrative Agent and the Lenders may request evidencing or relating
to the Collateral, each in form and substance satisfactory to the
Administrative Agent.


 


8.             RIGHT TO CURE; LIMITATION ON
ADMINISTRATIVE AGENT’S DUTIES.  If
Pledgor fails to perform any agreement contained herein, the Administrative
Agent may perform or cause performance of such agreement and the expenses of
the Administrative Agent incurred in connection therewith shall be payable by
the Debtors, on a joint and several basis, under Section 13.  Any powers conferred on the Administrative
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers.  Except for reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Administrative Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.  The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property, it being understood that the Administrative Agent shall not have any
responsibility for (a) ascertaining, exercising or taking other action or
giving Pledgor notice with respect to subscription rights, calls, conversions,
exchanges, maturities, lenders or other matters relative to any Collateral,
whether or not the Administrative Agent has or is deemed to have knowledge of
such matters, or (b) taking any necessary steps to preserve rights against
any parties with respect to any Collateral. 
The Administrative Agent shall not be liable for any loss to the
Collateral resulting from acts of God, war, civil commotion, fire, earthquake,
or other disaster or for any other loss or damage to the Collateral except to
the extent such loss is determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the Administrative Agent’s
gross negligence or willful misconduct.


 


9.             WAIVERS.  The Administrative Agent shall be under no
duty or obligation whatsoever and Pledgor waives any right to require the
Administrative Agent to (i) make or give any presentment, demands for
performances, notices of nonperformance, protests, notices of protest or
notices of dishonor in connection with any obligations or evidences of
indebtedness held by the Administrative Agent as Collateral, or in connection
with any obligation or evidences of indebtedness which constitute in whole or
in part the Indebtedness, (ii) proceed against any person or entity, (iii) proceed
against or exhaust any collateral in any order and in any manner it so elects
or (iv) pursue any other remedy in the


 


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Administrative Agent’s
power.  Pledgor waives any defense
arising by reason of (i) any disability or other defense of any Debtor or
any other person, (ii) the cessation from any cause whatsoever of the
liability of any Debtor or any other person, (iii) any lack of validity or
enforceability of the Credit Agreement, any other document of consistence
executed in connection herewith or any other agreement or instrument governing
or evidencing any Secured Obligations, (iv) the insolvency of any Debtor
or any other person or (v) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor.


 


Until
the Indebtedness is paid in full, Pledgor waives any right of subrogation,
reimbursement, indemnification, and contribution (contractual, statutory or
otherwise), including without limitation any claim or right of subrogation
under the Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute,
arising from the existence or performance of this Agreement, and Pledgor waives
any right to enforce any remedy which the Administrative Agent now has or may
hereafter have against any Debtor or against any other person and waives any
benefit of and any right to participate in any Collateral or security
whatsoever now or hereafter held by the Administrative Agent.  If Pledgor is not also a Debtor with respect
to a specified Indebtedness, Pledgor authorizes the Administrative Agent
without notice or demand and without affecting Pledgor’s liability hereunder,
from time to time to:  (i) renew,
extend, accelerate or otherwise change the time for payment of or otherwise
change the terms of the Indebtedness or any part thereof, including increase or
decrease of the rate of interest thereon; (ii) take and hold security,
other than the Collateral, for the payment of the Indebtedness or any part
thereof, and exchange, enforce, waive and release the Collateral or any part
thereof or any such other security; (iii) apply the proceeds of any
Collateral to the Indebtedness in any order and in any manner it so elects and (iv) release
or substitute any Debtor or any one or more of them, or any of the endorsers or
guarantors of the Indebtedness or any part thereof, or any other parties
thereto and Pledgor consents to the taking of, or failure to take, any action
by the Administrative Agent which might in any manner or to any extent vary the
risks of Pledgor under this Agreement or which, but for this provision, might
operate as a discharge of Pledgor. 
Pledgor agrees that it is solely responsible for keeping itself informed
as to the financial condition of each Debtor and of all circumstances which
bear upon the risk of nonpayment or the risk of a margin call or liquidation of
the Collateral.


 


Pledgor
understands and acknowledges that if the Administrative Agent forecloses
judicially or nonjudicially against any real property security for the
Indebtedness, that foreclosure could impair or destroy any ability that Pledgor
may have to seek reimbursement, contribution, or indemnification from any
Debtor or others based on any right Pledgor may have of subrogation,
reimbursement, contribution, or indemnification for any amounts paid by Pledgor
under this Agreement.  Pledgor further
understands and acknowledges that in the absence of this paragraph, such
potential impairment or destruction of the Pledgor’s rights, if any, may
entitle Pledgor to assert a defense to this Agreement based on Section 580d
of the California Code of Civil Procedure as interpreted in Union Bank v.
Gradsky, 265 Cal.App.2d 40 (1968). By executing this Agreement, Pledgor
freely, irrevocably, and unconditionally: (i) waives and relinquishes that
defense and agrees that Pledgor will be fully liable under this Agreement even
though the Administrative Agent or any other person may foreclose, either by
judicial foreclosure or by exercise of power of sale, any deed of trust
securing the Indebtedness; (ii) agrees that Pledgor will not assert that
defense in any action or proceeding which the Administrative Agent or any other
person may commence to enforce this Agreement; (iii) acknowledges and
agrees that the rights and defenses waived by Pledgor in this Agreement include
any right or defense that the Pledgor may have had or be entitled to assert
based on or arising out of any one or more of Sections 580a, 580b, 580d, or 726
of the California Code of Civil Procedure or Section 2848 of the
California Civil Code; and (iv) acknowledges and agrees that the
Administrative Agent and each other Lender is relying on this waiver in
creating the Indebtedness, and that this waiver is a material part of the
consideration which the Administrative Agent and each Lender is receiving for
creating the Indebtedness.


 


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10.           TRANSFER, DELIVERY AND
RETURN OF COLLATERAL.


 


(a)            Pledgor shall
immediately deliver or cause to be delivered to the Administrative Agent (or
the Securities Intermediary, if any) (i) any certificates or instruments
now or hereafter representing or evidencing Collateral and such certificates and instruments shall be
in suitable form for transfer without restriction or stop order by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank in form and substance satisfactory to the Administrative Agent, and (ii) in
the same form as received (with any necessary endorsement), all dividends and
other distributions paid or payable in cash in respect of any Collateral and
any such amounts, if received by Pledgor, shall be received in trust for the
benefit of the Administrative Agent and be segregated from the other property
or funds of Pledgor.


 


(b)            The
Administrative Agent may at any time deliver the Collateral or any part thereof
to Pledgor and the receipt by Pledgor shall be a complete and full acquittance
for the Collateral so delivered, and the Administrative Agent shall thereafter
be discharged from any liability or responsibility therefor.


 


(c)            Upon the
transfer of all or any part of the Indebtedness, the Administrative Agent may
transfer all or any part of the Collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such
Collateral so transferred, and the transferee shall be vested with all the
rights and powers of the Administrative Agent hereunder with respect to such
Collateral so transferred; but with respect to any Collateral not so
transferred the Administrative Agent shall retain all rights and powers hereby
given.  Pledgor agrees that the
Administrative Agent may disclose to any prospective purchaser or transferee
and any purchaser or transferee of all or part of the Indebtedness any and all
information in the Administrative Agent’s possession concerning Pledgor, this
Agreement and the Collateral.


 


11.           CONTINUING AGREEMENT AND
POWERS.


 


(a)            This is a
continuing Agreement and all the rights, powers and remedies hereunder shall,
unless otherwise limited herein, apply to all past, present and future
Indebtedness of any Debtor or any one or more of them to the Administrative
Agent and the Lenders, including that arising under successive transactions
which shall either continue the Indebtedness, increase or decrease it, or from
time to time create new Indebtedness after all or any prior Indebtedness has
been satisfied, and notwithstanding the death, incapacity, cessation of
business, dissolution or bankruptcy of any Debtor or any one or more of them,
or any other event or proceeding affecting any Debtor or any one or more of
them.


 


(b)            Until all
Indebtedness shall have been paid in full and the Administrative Agent and the
Lenders shall have no obligation to extend credit to any Debtor, the power of
sale and all other rights, powers and remedies granted to the Administrative
Agent hereunder shall continue to exist and may be exercised by the
Administrative Agent at the time specified hereunder irrespective of the fact
that the Indebtedness or any part thereof may have become barred by any statute
of limitations, or that the personal liability of Debtor or any one or more of
them may have ceased.  Pledgor waives the
benefit of any statute of limitations as applied to this Agreement.


 


12.           SECURITIES
INTERMEDIARY.  Upon the occurrence and
during the continuation of an Event of Default, if permitted by the
Administrative Agent, some or all of the Collateral may be held at a broker or
other securities intermediary (the “Securities Intermediary”).  Pledgor shall pay to the Securities
Intermediary any charges or costs imposed by the Securities Intermediary.  Pledgor at no time


 


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shall request that the
Securities Intermediary release any Collateral to Pledgor, except as expressly
permitted by the Administrative Agent. 
The Administrative Agent may require that Pledgor obtain a control
agreement, signed by the Securities Intermediary, in form and substance
acceptable to the Administrative Agent. 
The Administrative Agent may, at any time but in accordance with the terms
of this Agreement and any control agreement, require the Securities
Intermediary to do any or all of the following: (a) disburse any or all of
the Collateral to the Administrative Agent; (b) allow the Administrative
Agent (and not Pledgor) to exercise any rights relating to the Collateral; (c) sell
some or all of the Collateral and remit the sales proceeds (less the Securities
Intermediary’s normal sales charge) to the Administrative Agent; and (d) buy
and sell Collateral only upon the instructions of the Administrative Agent (and
not Pledgor).  If the Administrative
Agent assigns or transfers its rights under this Agreement and the
Administrative Agent is the Securities Intermediary for any or all of the
Collateral, Pledgor agrees that the Administrative Agent, in such capacity, is
irrevocably directed by Pledgor to comply with instructions or entitlement
orders with respect to such Collateral originated by any assignee or transferee
of this Agreement without further consent of Pledgor.


 


13.           COSTS.  All advances, charges, costs and expenses,
including reasonable attorneys’ fees, incurred or paid by the Administrative
Agent in exercising any right, power or remedy conferred by this Agreement or
in the enforcement thereof, and including the charges and expenses of the
Administrative Agent’s custody unit or of any Securities Intermediary, shall
become a part of the Indebtedness secured hereunder and shall be paid to the
Administrative Agent by the Debtors, on a joint and several basis, immediately
and without demand, with interest thereon at an annual rate equal to the
highest rate of interest of any Indebtedness secured by this Agreement (or, if
there is no such interest rate, at the maximum interest rate permitted by law
for interest on judgments).  Such costs
and attorneys’ fees shall include the allocated cost of in-house counsel to the
extent permitted by law.


 


14.           NOTICES.  Unless otherwise provided or agreed to herein
or required by law, notice and communications provided for in this Agreement
shall be in writing and shall be mailed, telecopied or delivered to Pledgor and
each Debtor to the respective addresses or facsimile numbers for notices set
forth for Pledgor and each Debtor below or across from its signature below or
at such other address or facsimile number as shall be designated by Pledgor or
such Debtor in a written notice to the Administrative Agent at the address for
notices set forth for the Administrative Agent below or across from the
Administrative Agent’s signature below. 
If either Pledgor’s or Holdings’ address or facsimile number for notices
is not entered below the respective Person has not otherwise designated such
address or facsimile number to the Administrative Agent in writing, then the
address and/or facsimile number for such Person in the Administrative Agent’s
records shall be deemed the address or facsimile for notices to such
Person.  Notices and other communications
sent by (a) first class mail shall be deemed delivered on the earlier of
actual receipt or on the fourth business day after deposit in the U.S. mail, postage
prepaid, (b) overnight courier shall be deemed delivered on the next
business day after deposit with the overnight courier, (c) facsimile shall
be deemed delivered when transmitted and (d) any other method, shall be
deemed delivered when delivered.  To the
extent that oral notification is provided for or agreed to herein, such oral
notification may be made by telephone to any of the number(s) set forth on
the signature page for Pledgor; provided that any oral notification in
person or at any other telephone number shall constitute notification
hereunder.


 


15.           GOVERNING LAW;
JURISDICTION; JURY TRIAL, ETC.


 


(a)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


 


(b)           SUBMISSION TO JURISDICTION.  EACH DEBTOR AND PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMIT, FOR HIMSELF/ITSELF AND THE


 


9

















 


COLLATERAL,
TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING
IN BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, IN SUCH FEDERAL COURT.  EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER
LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER
OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST EITHER HOLDINGS,
PLEDGOR OR THE COLLATERAL IN THE COURTS OF ANY JURISDICTION.


 


(c)            WAIVER OF VENUE.  EACH DEBTOR AND PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS
SECTION.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.


 


(d)           SERVICE OF
PROCESS.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES
IN SECTION 14.  NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW.


 


(e)            WAIVER OF JURY
TRIAL.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLYOR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.


 


10














 


(f)            California
Judicial Reference.  If any action or
proceeding is filed in a court of the State of California by or against any
party hereto in connection with any of the transactions contemplated by this
Agreement or any other Loan Document, (a) the court shall, and is hereby
directed to, make a general reference pursuant to California Code of Civil
Procedure Section 638 to a referee (who shall be a single active or
retired judge) to hear and determine all of the issues in such action or
proceeding (whether of fact or of law) and to report a statement of decision,
provided that at the option of any party to such proceeding, any such issues
pertaining to a “provisional remedy” as defined in California Code of Civil
Procedure Section 1281.8 shall be heard and determined by the court and (b) PMG
shall be solely responsible to pay all fees and expenses of any referee
appointed in such action or proceeding.


 


16.           INDEMNITY.  Each Debtor shall
jointly and severally indemnify, hold harmless and defend the Administrative
Agent and its directors, officers, agents and employees, from and against any
and all claims, actions, obligations, liabilities and expenses, including
defense costs, investigative fees and costs, and legal fees and damages arising
from their execution of or performance under this Agreement or any control
agreement executed by the Administrative Agent in connection with the
Collateral, except to the extent that such claim, action, obligation, liability
or expense is determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such indemnified person. This indemnification shall survive the
termination of this Agreement.


 


17.           MISCELLANEOUS.


 


(a)           This Agreement (i) may be waived,
altered, modified or amended only by an instrument in writing, duly executed by
the party or parties sought to be charged or bound thereby, and (ii) may
be executed in any number of identical counterparts, each of which shall be
deemed an original for all purposes and all of which constitute, collectively,
one agreement; but, in making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.  Any waiver, express or implied, of any
provision hereof and any delay or failure by the Administrative Agent to
enforce any provision shall not preclude the Administrative Agent from
enforcing any such provision thereafter.


 


(b)           Pledgor hereby irrevocably authorizes the
Administrative Agent to file one or more financing statements describing all or
part of the Collateral, and continuation statements, or amendments thereto,
relative to all or part of the Collateral as authorized by applicable law.  Such financing statements, continuation
statements and amendments will contain any other information required by the
UCC for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment. 
Pledgor agrees to furnish any such information to the Administrative
Agent promptly upon request.  Pledgor
also ratifies Pledgor’s authorization for the Administrative Agent to have
filed any initial financing statement or amendments thereto filed prior to the
date hereof.


 


(c)           From time to time, Pledgor and each Debtor
shall, at the request of the Administrative Agent, execute such other
agreements, documents or instruments or take any other actions in connection
with this Agreement as the Administrative Agent may reasonably deem necessary
to evidence or perfect the security interests granted herein, to maintain the
Second Priority Lien, or to effectuate the rights granted to the Administrative
Agent herein, but their failure to do so shall not limit or affect any security
interest or any other rights of the Administrative Agent in and to the
Collateral.  Pledgor will execute and
deliver to the Administrative Agent any stock powers, instructions to any
securities intermediary, issuer or transfer agent, proxies, or any other
documents of transfer that the Administrative Agent requests


 


11

















 


in
order to perfect, obtain control or otherwise protect the Administrative Agent’s
security interest in the Collateral or to effect the Administrative Agent’s
rights under this Agreement.  Such powers
or documents may be executed in blank or completed prior to execution, as
requested by the Administrative Agent.


 


(d)           Any term used or defined in the UCC and not
defined herein has the meaning given to the term in the UCC, when used in this
Agreement.


 


(e)           This Agreement shall benefit the
Administrative Agent’s successors and assigns and shall bind each of Pledgor’s
and each Debtor’s successors and assigns, except that none of the Debtors or
Pledgor may assign their respective rights or obligations under this Agreement.


 


(f)            No failure by the Administrative Agent or any
Lender to exercise, and no delay by any such Person in exercising, any right,
remedy, power or privilege hereunder, under the Credit Agreement or under any
other Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided and provided under the Credit
Agreement and each other Loan Document are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.


 


(g)           The illegality, invalidity or
unenforceability of any provision of this Agreement shall not in any way affect
or impair the legality, validity or enforceability of the remaining provisions
of this Agreement.


 


(h)           This Agreement and any other documents
executed or delivered in connection herewith including, but not limited to the
Intercreditor Agreement,  constitute the
entire agreement of the parties hereto with respect to the subject matter
hereof and shall supersede any prior expressions of intent or understandings
with respect to this transaction.


 


18.           FINAL AGREEMENT.  BY
SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT:  (A) THIS DOCUMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, (B) THIS
DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN OUTLINE
OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH
COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS
EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.


 


[Signature Pages Follow]


 


12

















 


Executed
as of the 8th day of August, 2008.


 


	
   

  	
  BANK OF AMERICA, N.A., as
  administrative agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Tiffany Shin

  
	
   

  	
  Name:  Tiffany
  Shin

  
	
   

  	
  Title:   Assistant Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  Bank of America, N.A.

  
	
   

  	
  Agency Management

  
	
   

  	
  800 Fifth Avenue, Floor 32

  
	
   

  	
  WA1-501-32-37

  
	
   

  	
  Seattle, WA  98104

  
	
   

  	
  ATTN: Tiffany Shin

  
				



 

















 


	
  Pledgor’s Residence

  	
  PLEDGOR:

  
	
   

  	
   

  	
   

  
	
  California

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

  
	
   

  	
  Signature

  
	
  Address for Notices to Pledgor:

  	
   

  	
   

  
	
   

  	
  Printed Name: Osmundo R. Saguil, M.D.

  
	
  c/o Prospect Medical Group, Inc.

  	
   

  	
   

  
	
  1920 East 17th Street,
  Suite 200

  	
   

  	
   

  
	
  Santa Ana, California 92705

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices to Holdings, PMG and
  PMS:

  	
   

  	
   

  
	
   

  	
  Agreed to as of the date hereof:

  
	
  c/o Prospect Medical Group, Inc.

  	
  PROSPECT MEDICAL GROUP, INC.

  
	
  Santa Ana, California 92705

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/
  Samuel Lee

  
	
   

  	
  Name: 

  	
  Samuel Lee

  
	
   

  	
  Title: 

  	
  Senior Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Samuel Lee

  
	
   

  	
  Name: Samuel
  Lee

  
	
   

  	
  Title:  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Samuel Lee

  
	
   

  	
  Name:  Samuel Lee

  
	
   

  	
  Title:  Chairman

  
					



 

















 


SPOUSAL JOINDER AND CONSENT


 


I am the spouse of Osmundo
R. Saguil (“Saguil”).  To the
extent that I have any interest in any of the Collateral (as that term is
defined in the attached Second Lien Pledge Agreement dated as of August 8,
2007 between Saguil and Bank of America, N.A., as administrative agent (the “Pledge
Agreement”)), I hereby join in the Pledge Agreement and agree to be bound
by its terms and conditions to the same extent as my spouse.  I have read the Pledge Agreement, understand
its terms and conditions, and to the extent that I have felt it necessary, have
retained independent legal counsel to advise me concerning the legal effect of
the Pledge Agreement and this Spousal Joinder and Consent.


 


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


 


Date:       as of August     , 2008


 


	
  Signature:

  	
   

  	
   

  
	
   

  
	
  Printed
  Name:

  	
   

  	
   

  
				



 

















 


Exhibit A to Pledge
Agreement


 


Description of Collateral


 


Pledged equity:


 


	
  Pledged Entity

  	
   

  	
  Class of Stock

  	
   

  	
  Stock

  Certificate #

  	
   

  	
  Number of

  Shares

  	
   

  	
  Percentage of

  Outstanding

  Shares

  	
   

  
	
  Prospect Medical Group, Inc., a California
  professional corporation

  	
   

  	
  Common

  	
   

  	
  —

  	
   

  	
  4,000

  	
   

  	
  100

  	
  %

  
	
  Nuestra Familia Medical Group, Inc., a
  California professional corporation

  	
   

  	
  Common

  	
   

  	
  —

  	
   

  	
  839.02

  	
   

  	
  55.02

  	
  %

  



 


The pledged equity includes all present and future
income, proceeds, earnings, increases, and substitutions from or for the
Collateral of every kind and nature, including without limitation all payments,
interest, profits, distributions, benefits, rights, options, warrants,
dividends, stock dividends, stock splits, stock rights, regulatory dividends,
subscriptions, monies, claims for money due and to become due, proceeds of any
insurance on the Collateral, shares of stock of different par value or no par
value issued in substitution or exchange for shares included in the Collateral,
and all other property Pledgor is entitled to receive on account of such
Collateral, including accounts, documents, instruments, chattel paper, and
general intangibles.