Exhibit
10.84


 


PLEDGE AGREEMENT


 


 


This Pledge Agreement (this “Agreement”), effective as
of May 30, 2003, is entered into by and between Prospect Medical Group, Inc., a
California professional corporation (“Secured Party”) and Jacob Y. Terner,
M.D.  (“Pledgor”), in light of the
following facts:


 


R E C I T A L S


 


A.                                   Prospect Medical Holdings, Inc., a
Delaware corporation (“PMH”) is indebteded to Secured Party for all amounts
reflected as an inter-company receivable on the records of Secured Party and an
inter-company payable on the records of PMH (“Inter-Company Debt”).


 


B.                                     Effective,
September 30, 2001, Secured Party demanded a continuing guaranty of that amount
of the Inter-Company Debt which is required to provide Secured Party with a
positive net tangible equity (the “TNE Guaranteed Amount”).  The TNE Guaranteed Amount is derived by
deducting the then net worth of SECURED PARTY from the Inter-Company Debt.  For the fiscal year ended September 30,
2001, the Inter-Company Debt was $10,086,609 and the TNE Guaranteed Amount was
$4,250,000.  For the fiscal year ended
September 30, 2002, the TNE Guaranteed Amount had been reduced to $3,616,400.


 


C.                                     A
continuing guaranty (“Original Continuing Guaranty”), and a pledge of
collateral satisfactory to Secured Party to secure performance of the Original
Continuing Guaranty, was provided by Foothill City Center, Ltd., a California
limited partnership (the “Partnership”), effective, September 30, 2001, an
entity in which Pledgor had, and continues to have, a substantial ownership
interest, consisting of a .10% general partnership interest and a 60.517%
limited partnership interest.


 


D.                                    Pledgor
is President, Chief Executive Officer and sole shareholder of Secured Party,
and the Chief Executive Officer of PMH, and has, effective May 30, 2003,
executed a continuing guaranty of the TNE Guaranteed Amount (the “Continuing
Guaranty”) pursuant to which Pledgor becomes the guarantor of the TNE
Guaranteed Amount in replacement of the Partnership effective May 30, 2003.


 


E.                                      In
addition to the substitution of Pledgor as guarantor in replacement of the
Partnership, the Continuing Guaranty reflects the substitution of collateral
from a security interest (deed of trust) in real property located in San
Bernardino County owned by the Partnership and pledged by the Partnership to
secure its obligations under the Original Continuing Guaranty (the “Real
Property”) to, due to the sale this date of the Real Property and the receipt
by the Partnership of a promissory note secured by a deed of trust on the Real
Property in the amount of $7,300,000 (the “CarryBack Note and Deed of Trust”),
a pledge of


 

















 


distributions received by
or owning to Pledgor based on its 60.517% limited partnership interest from the
Partnership of amounts received on the CarryBack Note and Deed of Trust.


 


D.                                    The
parties desire to provide for the pledge of the collateral described herein as
security for Pledgor’s obligations under the Continuing Guaranty.


 


NOW, THEREFORE, in consideration of the foregoing
facts the parties hereto agree as follows:


 


1.                                       Pledge,
Appointment of Agent.   Pledgor
hereby pledges to Secured Party, and hereby grants a continuing security
interest to Secured Party in, all right, title, and interest of Pledgor, to
distributions received or owing to Pledgor based on its 60.517% limited
partnership interest from the Partnership of amounts received under that
Promissory Note dated May 30, 2003, in the amount of $7,300,000 reflecting
Michael and Kathleen Cobb, as Maker, and the Partnership, as Holder (the “Promissory
Note”) including amounts received as a result of any foreclosure or other
recovery from the security for such Promissory Note consisting of that Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing which
recorded in the Official Records of the County of San Bernardino on May 30,
2003 as Instrument No. 2003-036539 covering the real property described as
Parcel 3 of Parcel Map No. 9612 in the City of Rancho Cucamonga, County of San
Bernardino, State of California, as per plat recorded in Book 105 of Parcel
Maps, Page 14, in the Office of the County Recorder of said County (the
“Collateral”).


 


2.                                       Obligations
Secured.  This Agreement secures,
and the Collateral is collateral security for, the performance of all
obligations of the Pledgor pursuant to the provisions of the Continuing
Guaranty, whether such obligations are absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or
in connection with the Continuing Guaranty (collectively, the “Obligations”).


 


3.                                       Representations
and Warranties Regarding the Collateral.  Pledgor hereby represents and warrants to Secured Party as
follows:


 


(a)                                  Pledgor
has, and will have, during the term of this Agreement, title to the Collateral,
free and clear of all liens, encumbrances and other security interests except
such liens, encumbrances and other security interests (“Permitted Liens”) as
(i) arise under this Agreement or (ii) are disclosed in writing and approved by
Secured Party.


 


(b)                                 Pledgor
is the sole legal and beneficial owner of the Collateral and has full power to
convey such Collateral.


 


(c)                                  Pledgor
has not:  (i) made any assignment for
the benefit of creditors, (ii) applied for or consented to the appointment of a
receiver or trustee for his affairs or (iii) been the subject of any voluntary
or involuntary bankruptcy, insolvency, reorganization or liquidation
proceeding.


 


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(d)                                 This
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against Pledgor in accordance with its terms.


 


(e)                                  The
execution, delivery and performance of this Agreement by Pledgor, the
compliance by Pledgor with the terms and provisions hereof, and the
consummation by Pledgor of the transactions described herein, do not and will
not conflict with, or result in a breach of, or constitute a default under, any
of the terms, conditions or provisions of any agreement, commitment, loan
agreement, note, contract, lease, indenture or understanding to which Pledgor
is a party or by which he is bound (including the partnership agreement with
the Partnership dated March 29, 1993 (the “Partnership Agreement”)) or to which
the Collateral is subject, and will not result in the creation of any lien or
encumbrance upon such Collateral other than as provided for herein.


 


(f)                                    The
Partnership Agreement has not been amended since the March 29, 1993 agreement
and is in full force and effect.


 


(g)                                 This
Agreement creates a valid security interest in the Collateral purported to be
pledged and assigned by Pledgor hereunder securing the payment of the
Obligations.


 


4.                                       Events
of Default.  An “Event of Default”
under this Agreement will be deemed to have occurred upon:


 


(a)                                  The
occurrence of a breach by the Pledgor of its obligations or covenants under the
Continuing Guaranty;


 


(b)                                 Pledgor
(i) becomes insolvent or admits in writing Pledgor’s inability to pay Pledgor’s
debts as they mature, (ii) makes any assignment for the benefit of creditors,
or (iii) applies for or consents to the appointment of a receiver or trustee
for Pledgor for a substantial part of Pledgor’s property or business, or a
receiver or trustee otherwise is appointed and is not discharged within thirty
(30) days after such appointment;


 


(c)                                  Any
attachment of the Collateral (by virtue of a judicial order, self-help or
otherwise) is placed against any of the Collateral) or a writ of execution or
other judicial order is served against any of the Collateral;


 


(d)                                 Any
of Pledgor’s representations or warranties made herein or in any other
agreement or statement or certificate at any time given by Pledgor pursuant
hereto or in connection herewith is false or misleading in any material
respect;


 


(e)                                  Any
bankruptcy, insolvency, reorganization or liquidation proceeding or other
proceeding for relief under any bankruptcy law or any law for the relief


 


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of debtors is instituted
by or against Pledgor, which proceeding is not dismissed within thirty (30)
days after initiation thereof; or


 


(f)                                    Any
money judgment, writ or warrant of attachment, or similar process (singly or,
if more than one, cumulatively in excess of $50,000) is entered or filed
against Pledgor or any of the assets of Pledgor and (i) remains unvacated,
unbonded, unstayed, undismissed or undischarged for a period of thirty (30)
days or in any event later than five (5) days before the date of any proposed
sale thereunder, or (ii) Pledgor has not appealed the same in good faith to
Secured Party’s satisfaction.


 


Upon the occurrence of an Event of Default hereunder,
in addition to all the other rights and remedies of Secured Party hereunder or
under applicable law or otherwise, Secured Party, may, at its option declare
any or all of the Obligations to be immediately due and payable.  In addition, without limiting the generality
of the foregoing, Secured Party may, upon or at any time after the occurrence
of an Event of Default, at its option, direct the Partnership to make payments
of the amounts constituting the Collateral directly to the Secured Party.


 


5.                                       Distributions.  So long as no default shall occur and be
continuing under the Continuing Guaranty and this Agreement, Pledgor shall be
entitled to receive free and clear of the interest of the Secured Party granted
under this Agreement all payments and other distributions receivable by Pledgor
from the Partnership pertaining to the Collateral, and shall be entitled to
exercise any and all management, voting and other partnership rights pertaining
to the Collateral for any purpose not inconsistent with the terms of this
Agreement or the Continuing Guaranty; provided, however, that Pledgor shall
exercise, or refrain from exercising, any such right if such action or inaction
would have a material adverse effect on the attachment, perfection, creation or
priority of the security interest in the Collateral or any part thereof as
herein granted.


 


6.                                       Pledgor
Remains Liable. Anything herein to the contrary notwithstanding, (a)
Pledgor shall remain liable under the Partnership Agreement and the other
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of his duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of the rights hereunder shall not release Pledgor from any
of his duties or obligations under the contracts and agreements included in the
Collateral and (c) the Secured Party shall not have any obligation or liability
under the contracts and agreements included in the Collateral or otherwise by
reason of this Agreement, nor shall the Secured Party be obligated to perform
any of the obligations or duties of Pledgor thereunder or to take any action to
collect or enforce any claim assigned hereunder.


 


7.                                       Records.  Pledgor shall keep his records concerning
the Collateral and original copies of the Partnership Agreement and of all
other chattel paper which evidence the Collateral, at his address specified in
Section 18 hereof. Pledgor will hold and preserve such records and will permit
representatives of the Secured Party at any time, upon reasonable prior notice,
during normal business hours to inspect and make abstracts from such records.


 


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8.                                       As
to the Partnership Agreement. (a) Pledgor shall at his expense perform and
observe all the terms and provisions to be performed or observed by him under
the Partnership Agreement, maintain the Partnership Agreement in full force and
effect, enforce the Partnership Agreement in accordance with its terms, and
take all such action to such end as may be from time to time reasonably
requested by the Secured Party to preserve the Collateral.


 


(b)                                 Pledgor
shall not, without the consent of the Secured Party:


 


(i)                                     cancel
or terminate the Partnership Agreement or consent to or accept any cancellation
or termination thereof;


 


(ii)                                  amend
or otherwise modify in a material respect the Partnership Agreement; or


 


(iii)                               waive any material
default under or material breach of the Partnership Agreement.


 


9.                                       Secured
Party. Pledgor hereby appoints the Secured Party as Pledgor’s attorney in
fact, with full authority in the place and stead of Pledgor and in the name of
Pledgor or otherwise, from time to time in the Secured Party’s discretion at
any time that a default under the Continuing Guaranty or this Agreement shall
have occurred and be continuing and not cured within the applicable cure
period, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to ask, demand, collect, sue for,
recover, compound, receive and give acceptance and receipts for moneys due and
to become due under or in connection with the Collateral, to receive, indorse,
and collect any drafts or other instruments, documents and chattel paper in
connection therewith, and to file any claims or financing statements under the
Uniform Commercial Code or otherwise or take any action or institute any
proceedings which the Secured Party may deem to be necessary or desirable for
the collection thereof. Such appointment is coupled with an interest and is
irrevocable.  Pledgor authorizes the Secured
Party to file one or more financing statements under the Uniform Commercial
Code to perfect the interests granted herein.


 


10.                                 Secured
Party May Perform. If Pledgor fails to perform any agreement contained
herein, the Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be payable by Pledgor under Section 16(b).


 


11.                                 Secured
Party’s Duties. The powers conferred on the Secured Party 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 the accounting for moneys
actually received by it hereunder, the Secured Party 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 and no
such duties shall be implied as arising hereunder.


 


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12.                                 Remedies.
Upon the occurrence of a default under the Continuing Guaranty or this
Agreement, which default has not been cured after 10 days notice thereof to
Pledgor, one or more of the following remedies may be applied, which
application is at the discretion of the Secured Party:


 


(a)                                  All
rights of Pledgor to receive the distributions which he would otherwise be
authorized to receive and retain pursuant to under Section 5 shall become
exercisable by the Secured Party who shall thereupon have the sole right to
receive and hold as Collateral such distributions unless and until such default
ceases to exist.


 


(b)                                 All
distributions which are received by Pledgor contrary to the provisions of
clause (a), above, shall be received in trust for the benefit of the Secured
Party, shall be segregated from other funds of Pledgor and shall be forthwith
paid over to the Secured Party as Collateral in the same form as so received
(with any necessary endorsement) for application to the Obligations.


 


(c)                                  All
payments made under or in connection with, or proceeds realized from, the
Partnership, or otherwise in respect of the Collateral and received by the
Secured Party shall be applied in whole or in part by the Secured Party against
the Obligations.


 


(d)                                 The
Secured Party may exercise any one or more of the rights and remedies available
under the California Uniform Commercial Code and other applicable law in any
order determined by Secured Party in its discretion consistent with the
requirements of this Agreement and such applicable law.


 


13.                                 Remedies
Cumulative.  The rights, powers and
remedies herein or in the Continuing Guaranty expressly provided are cumulative
and not exclusive of any rights, powers or remedies which the Secured Party
would otherwise have.


 


14.                                 Discontinuance
of Proceedings. In case the Secured Party shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason, then and in every such case Pledgor,
the Secured Party shall be restored to their former positions and rights
hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies and powers of the
Secured Party shall continue as if no such proceeding had been instituted.


 


15.                                 Indemnity
and Expenses.


 


(a)                                  Pledgor
agrees to indemnify and hold harmless the Secured Party from and against any
and all claims, losses and liabilities arising out of or resulting from the
Collateral or Pledgor’s pledge and assignment under this Agreement (including,
without limitation, enforcement against Pledgor of this Agreement), except
claims, losses or liabilities resulting from the Secured Party’s negligence or
willful misconduct.


 


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(b)                                 Pledgor
will upon demand pay to the Secured Party the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Secured Party may incur in connection with (i)
the sale of, collection from, or other realization upon, any of the Collateral
of Pledgor, (ii) the exercise or enforcement (whether through negotiations,
legal proceedings or otherwise) of any of the rights of the Secured Party
hereunder against Pledgor or (iii) the failure by Pledgor to perform or observe
any of the provisions hereof.


 


16.                                 Security
Interest Absolute. All rights of the Secured Party and the assignment,
hypothecation and security interest hereunder, and all obligations of Pledgor
hereunder, shall be absolute and unconditional, to the extent permitted by
applicable law.


 


17.                                 Amendment;
Waiver. No amendment or waiver of any provision of this Agreement shall be
effective unless the same shall be undertaken and accomplished in accordance
with the requirements of the Continuing Guaranty. No delay on the part of the
Secured Party in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial waiver by such Secured Party of
any right, power or remedy preclude any further exercise thereof, or the
exercise of any other right, power or remedy.


 


18.                                 Addresses
for Notices. All notices, requests and other communications to Pledgor or
the Secured Party shall be in writing (including telecopy or similar
teletransmission or writing) and shall be given, in the case of Pledgor to his
address at 205 Chautaugua Boulevard, Pacific Palisades, CA 90272, and in the
case of the Secured Party, at its principal place of business located at 1920
East 17th Street Suite 200, Santa Ana, California 92705 or such
other address or telecopy number as each party may hereafter specify by notice
to such other party. Each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the signature page hereof and receipt thereof is
confirmed in writing, or (ii) if given by any other means (including, without
limitation, by air courier), when delivered at the address specified herein.


 


19.                                 Continuing
Assignment, Pledge and Security Interest. 
This Agreement shall create a continuing pledge, assignment of,
hypothecation of and security interest in the Collateral and shall (i) remain
in full force and effect until the earlier of (A) the Obligations are paid in
full, or (B) Secured Party has a positive tangible net equity, (ii) be binding
upon Pledgor, his successors and assigns, provided, that Pledgor may not
transfer or assign any or all of his rights or obligations hereunder without
the prior written consent of the Secured Party, and (iii) inure to the benefit
of, and be enforceable by, the Secured Party, and its successors, transferees
and assigns.  Upon the payment in full
of the Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Pledgor, subject to the provisions
for prior release of the Collateral as provided in (i)(B) above.  Upon any such termination, the Secured Party
will, at Pledgor’s expense, execute and deliver to Pledgor such documents
including UCC termination statements as Pledgor shall reasonably request to
evidence such termination.


 


20.                                 Severability.
Any provision hereof that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or


 


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unenforceability without
invalidating the remaining provisions hereof and without affecting the validity
or enforceability of any provision in any other jurisdiction.


 


SECTION 21. GOVERNING LAW; TERMS. THIS
AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER
JURISDICTION ARE MANDATORILY APPLICABLE AND EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF CALIFORNIA. UNLESS OTHERWISE DEFINED HEREIN OR IN THE
LOAN DOCUMENTS, TERMS USED IN ARTICLE 9 OF THE CALIFORNIA UCC ARE USED HEREIN
AS THEREIN DEFINED. ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR AND THE SECURED
PARTY IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF CALIFORNIA.


 


22.                                 Execution
in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.


 


23.                                 Representation
by Counsel.  Pledgor acknowledges
that he has been advised, and has had ample opportunity, to obtain his own
independent counsel in order to review with him the legal consequences and
implications of entering into this Agreement.


 


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IN WITNESS
WHEREOF, this Pledge Agreement is effective the day and year first above
written.


 


	
   

  	
  SECURED
  PARTY

  
	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. Stewart Kahn

  	
   

  
	
   

  	
   

  	
  R. Stewart Kahn

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
  PLEDGOR

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

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

  	
   

  
	
   

  	
   

  	
  Jacob Y. Terner, M.D.

  	
   

  



 


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