Exhibit 10.79


 


AMENDED AND RESTATED FIRST LIEN PLEDGE AGREEMENT


 


THIS AMENDED AND RESTATED
FIRST 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 First 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 first 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 First 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 first priority security interest
of the Administrative Agent and the Second Priority Lien (as defined in the
Second Lien Credit Agreement) of the Second 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 first priority security interest of the Administrative Agent and the Second
Priority Lien of the Second 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 


 


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PMG,
as applicable, to acquire the Collateral or designate 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 first priority and perfection of the security interest 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


 


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physical certificates to
book-entry holdings) into the name of the Administrative Agent or its nominee
or 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 first priority and continuing security interest 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,
EXPRESSLY OR 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
first priority of the security interests, 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.

  
	
  1920 East 17th
  Street, Suite 200

  	
   

  	
   

  
	
  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 First 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 or
  Typed 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.