# **Exhibit10.4**

 

# **CONTINUING GUARANTY**

 

FORVALUE RECEIVED, the sufficiency of which is hereby acknowledged, and inconsideration of credit and/or financial accommodations heretofore or hereafterfrom time to time made or granted to PROSPECT MEDICAL HOLDINGS, INC., aDelaware corporation (the “Borrower”), pursuant to the Credit Agreementdated as of the date hereof by and among the Borrower, ROYAL BANK OF CANADA asadministrative agent (the “Administrative Agent”) and the lenders partythereto (as amended, restated, supplemented or otherwise modified from time totime, the “Credit Agreement”; capitalized terms not otherwise defined inthis Guaranty shall have the respective meanings set forth in the CreditAgreement), the undersigned Guarantor (whether one or more, the “Guarantor”,and if more than one, jointly and severally) hereby furnishes its guaranty ofthe Guaranteed Obligations (as hereinafter defined) pursuant to this ContinuingGuaranty dated as of July 29, 2009 as follows:

 

1.             GUARANTY.  The Guarantor hereby absolutely andunconditionally guarantees, as a guaranty of payment and performance and notmerely as a guaranty of collection, prompt payment when due, whether at statedmaturity, by required prepayment, upon acceleration, demand or otherwise, and atall times thereafter, of all “Obligations” as defined in the Credit Agreement,and any and all existing and future indebtedness and liabilities of every kind,nature and character, direct or indirect, absolute or contingent, liquidated orunliquidated, voluntary or involuntary and whether for principal, interest,premiums, fees, indemnities, damages, costs, expenses or otherwise, of theBorrower to the Administrative Agent and any other Secured Party arising underthe Credit Agreement, any other Loan Documents and any instruments, agreementsor other documents of any kind or nature now or hereafter executed inconnection therewith (including all renewals, extensions, amendments,refinancings and other modifications thereof and all costs, attorneys’ fees andexpenses incurred by the Administrative Agent and any other Secured Party inconnection with the collection or enforcement thereof), and whether recoveryupon such indebtedness and liabilities may be or hereafter become unenforceableor shall be an allowed or disallowed claim under any proceeding or casecommenced by or against any Guarantor or the Borrower under the Bankruptcy Code(Title 11, United States Code), any successor statute or any otherliquidation, conservatorship, bankruptcy, assignment for the benefit ofcreditors, moratorium, rearrangement, receivership, insolvency, reorganization,or similar debtor relief laws of the United States or other applicablejurisdictions from time to time in effect and affecting the rights of creditorsgenerally (collectively, “Debtor Relief Laws”), and including interestthat accrues after the commencement by or against the Borrower of anyproceeding under any Debtor Relief Laws (collectively, the “GuaranteedObligations”).  The books and recordsof the Administrative Agent and the books and records of each Secured Partyshowing the amount of the Guaranteed Obligations shall be admissible inevidence in any action or proceeding, and shall be binding upon the Guarantorand conclusive for the purpose of establishing the amount of the GuaranteedObligations.  This Guaranty shall not beaffected by the genuineness, validity, regularity or enforceability of theGuaranteed Obligations or any instrument or agreement evidencing any GuaranteedObligations, or by the existence, validity, enforceability, perfection,non-perfection or extent of any collateral therefor, or by any fact orcircumstance relating to the Guaranteed Obligations which might otherwiseconstitute a defense to the obligations of the Guarantor under this Guaranty,and the Guarantor hereby irrevocably waives any defenses it may now have orhereafter acquire in any way relating to any or all of the foregoing.  Anything contained herein to the contrarynotwithstanding, the 

 

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obligations of the Guarantor hereunder at any timeshall be limited to an aggregate amount equal to the largest amount that wouldnot render its obligations hereunder subject to avoidance as a fraudulenttransfer or conveyance under Section 548 of the Bankruptcy Code(Title 11, United States Code) or any comparable provisions of any similarfederal or state law.

 

2.             NO SETOFF ORDEDUCTIONS; TAXES; PAYMENTS.  TheGuarantor represents and warrants that it is organized and resident in theUnited States of America.  The Guarantorshall make all payments hereunder without setoff or counterclaim and free andclear of and without deduction for any taxes, levies, imposts, duties, charges,fees, deductions, withholdings, compulsory loans, restrictions or conditions ofany nature now or hereafter imposed or levied by any jurisdiction or anypolitical subdivision thereof or taxing or other authority therein unless theGuarantor is compelled by law to make such deduction or withholding.  If any such obligation (other than onearising with respect to taxes based on or measured by the income or profits ofthe Administrative Agent or any other Secured Party) is imposed upon theGuarantor with respect to any amount payable by it hereunder, the Guarantorwill pay to the Administrative Agent or such other Secured Party, on the dateon which such amount is due and payable hereunder, such additional amount inDollars as shall be necessary to enable the Administrative Agent or such otherSecured Party to receive the same net amount which the Administrative Agent orsuch other Secured Party would have received on such due date had no suchobligation been imposed upon the Guarantor. The Guarantor will deliver promptly to the Administrative Agent or suchother Secured Party certificates or other valid vouchers for all taxes or othercharges deducted from or paid with respect to payments made by the Guarantorhereunder. Payments by the Guarantor shall be made to the Administrative Agentin accordance with Section 2.11 of the Credit Agreement and shall becredited and applied in accordance with Section 8.03 of the CreditAgreement.  The obligations of theGuarantor under this paragraph shall survive the payment in full of theGuaranteed Obligations and termination of this Guaranty.

 

3.             RIGHTS OFADMINISTRATIVE AGENT AND THE OTHER SECURED PARTIES.  The Guarantor consents and agrees that theAdministrative Agent and the other Secured Parties may, at any time and fromtime to time, without notice or demand, and without affecting theenforceability or continuing effectiveness hereof: (a) amend, extend,renew, compromise, discharge, accelerate or otherwise change the time forpayment or the terms of the Guaranteed Obligations or any part thereof; (b) take,hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwisedispose of any security for the payment of this Guaranty or any GuaranteedObligations; (c) apply such security and direct the order or manner ofsale thereof as the Administrative Agent and the other Secured Parties in theirsole discretion (subject to the terms of the Loan Documents) may determine; and(d) release or substitute one or more of any endorsers or other guarantorsof any of the Guaranteed Obligations. Without limiting the generality of the foregoing, the Guarantor consentsto the taking of, or failure to take, any action which might in any manner orto any extent vary the risks of the Guarantor under this Guaranty or which, butfor this provision, might operate as a discharge of the Guarantor.

 

4.             CERTAIN WAIVERS.  The Guarantor waives (a) any defensearising by reason of any disability or other defense of the Borrower or anyother guarantor, or the cessation from any cause whatsoever (including any actor omission of the Administrative Agent or any other Secured Party) of theliability of the Borrower other than payment in full of the Guaranteed 

 

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Obligations; (b) any defense based on any claimthat the Guarantor’s obligations exceed or are more burdensome than those ofthe Borrower; (c) the benefit of any statute of limitations affecting theGuarantor’s liability hereunder; (d) any right to require theAdministrative Agent or any other Secured Party to proceed against theBorrower, proceed against or exhaust any security for the Indebtedness, orpursue any other remedy in the Administrative Agent’s or any other SecuredParty’s power whatsoever; (e) any benefit of and any right to participatein any security now or hereafter held by the Administrative Agent or any otherSecured Party; and (f) to the fullest extent permitted by law, any and allother defenses or benefits that may be derived from or afforded by applicablelaw limiting the liability of or exonerating guarantors or sureties.  The Guarantor expressly waives all setoffsand counterclaims and all presentments, demands for payment or performance,notices of nonpayment or nonperformance, protests, notices of protest, noticesof dishonor and all other notices or demands of any kind or nature whatsoeverwith respect to the Guaranteed Obligations, and all notices of acceptance ofthis Guaranty or of the existence, creation or incurrence of new or additionalGuaranteed Obligations.  In accordancewith Section 2856 of the California Civil Code the Guarantor waives anyand all rights and defenses available to it by reason of Sections 2787 to 2855,inclusive, 2899 and 3433 of the California Civil Code, including any and allrights or defenses the Guarantor may have because the Obligations are securedby real property or by reason of protection afforded to the Guarantor withrespect to any of the Obligations pursuant to the antideficiency or other lawsof the State of California limiting or discharging a principal’s indebtednessor a guarantor’s obligations, including Section 580a, 580b, 580d or 726 ofthe California Code of Civil Procedure. Consequently, among other things: (1) the Secured Parties maycollect from the Guarantor without first foreclosing on any real or personalproperty collateral pledged by the Guarantor; and (2) if the SecuredParties foreclose on any real property collateral pledged by the Guarantor: (x) theamount of the Obligations may be reduced only by the price for which thecollateral is sold at the foreclosure sale, even if the collateral is worthmore than the sale price and (y) the Secured Parties may collect from theGuarantor even if the Secured Parties, by foreclosing on the real propertycollateral, have destroyed any right the Guarantor may have to collect from theBorrower. This is an unconditional and irrevocable waiver of any rights anddefenses the Guarantor may have because the Obligations are secured by realproperty. The Guarantor also waives all rights and defenses arising out of anelection of remedies by the Secured Parties, even though that election ofremedies, such as a nonjudicial foreclosure with respect to security for anObligation, has destroyed the Guarantor’s rights of subrogation andreimbursement against the Borrower by the operation of Section 580d of theCalifornia Code of Civil Procedure or otherwise; and even though that electionof remedies by the Secured Parties, such as nonjudicial foreclosure withrespect to security for an obligation of the Guarantor, has destroyed theBorrower’s rights of contribution against the Guarantor.  As provided below, this Guaranty shall begoverned by, and construed in accordance with, the laws of the State of NewYork.  The foregoing waivers and theprovisions hereinafter set forth in this Guaranty which pertain to Californialaw are included solely out of an abundance of caution, and shall not beconstrued to mean that any of the above referenced provisions of California laware in any way applicable to this Guaranty or the Guaranteed Obligations.

 

5.             OBLIGATIONSINDEPENDENT.  The obligations of theGuarantor hereunder are those of primary obligor, and not merely as surety, andare independent of the Guaranteed Obligations and the obligations of any otherguarantor, and a separate action may be 

 

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brought against the Guarantor to enforce this Guarantywhether or not the Borrower or any other person or entity is joined as a party.

 

6.             SUBROGATION.  The Guarantor shall not exercise any right ofsubrogation, contribution, indemnity, reimbursement or similar rights withrespect to any payments it makes under this Guaranty until all of theGuaranteed Obligations and any amounts payable under this Guaranty have beenindefeasibly paid and performed in full and any commitments of theAdministrative Agent and each other Secured Party or facilities provided by theAdministrative Agent and each other Secured Party with respect to theGuaranteed Obligations are terminated. If any amounts are paid to the Guarantor in violation of the foregoinglimitation, then such amounts shall be held in trust for the benefit of theAdministrative Agent and the other Secured Parties and shall forthwith be paidto the Administrative Agent (for the benefit of itself and the other SecuredParties) to reduce the amount of the Guaranteed Obligations, whether matured orunmatured.

 

7.             CONTRIBUTION.  Subject to Paragraph 6 above, theGuarantor hereby agrees with each other Guarantor that if any Guarantor shallmake an Excess Payment (as defined below), such Guarantor shall have a right ofcontribution from each other Guarantor in an amount equal to such otherGuarantor’s Contribution Share (as defined below) of such Excess Payment.  The payment obligations of any Guarantorunder this Paragraph 7 shall be subordinate and subject in right ofpayment to the Guaranteed Obligations until such time as the GuaranteedObligations have been paid in full, and no Guarantor shall exercise any rightor remedy under this Paragraph 7 against any other Guarantor until suchGuaranteed Obligations have been paid in full.

 

Forpurposes of this Paragraph 7:

 

#### (a)           “Excess Payment” shall meanthe amount paid by any Guarantor in excess of its Ratable Share of anyGuaranteed Obligations;

####  

#### (b)           “Ratable Share” shall mean,for any Guarantor in respect of any payment of Guaranteed Obligations, theratio (expressed as a percentage) as of the date of such payment of GuaranteedObligations of (i) the amount by which the aggregate present fair salablevalue of all of its assets and properties exceeds the amount of all debts andliabilities of such Guarantor (including probable contingent, subordinated,unmatured, and unliquidated liabilities, but excluding the obligations of suchGuarantor hereunder) to (ii) the amount by which the aggregate presentfair salable value of all assets and other properties of all of the Guarantorsexceeds the amount of all of the debts and liabilities (including probablecontingent, subordinated, unmatured, and unliquidated liabilities, butexcluding the obligations of the Guarantors hereunder) of the Guarantors; provided,however, that, for purposes of calculating the Ratable Shares of theGuarantors in respect of any payment of Guaranteed Obligations, any Guarantorthat became a Guarantor subsequent to the date of any such payment shall bedeemed to have been a Guarantor on the date of such payment and the financialinformation for such Guarantor as of the date such Guarantor became a Guarantorshall be utilized for such Guarantor in connection with such payment; and

 

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#### (c)           “Contribution Share” shallmean, for any Guarantor in respect of any Excess Payment made by any otherGuarantor, the ratio (expressed as a percentage) as of the date of such ExcessPayment of (i) the amount by which the aggregate present fair salablevalue of all of its assets and properties exceeds the amount of all debts andliabilities of such Guarantor (including probable contingent, subordinated,unmatured, and unliquidated liabilities, but excluding the obligations of suchGuarantor hereunder) to (ii) the amount by which the aggregate presentfair salable value of all assets and other properties of the Guarantors otherthan the maker of such Excess Payment exceeds the amount of all of the debtsand liabilities (including probable contingent, subordinated, unmatured, andunliquidated liabilities, but excluding the obligations of the Guarantors) ofthe Guarantors other than the maker of such Excess Payment; provided, however,that, for purposes of calculating the Contribution Shares of the Guarantors inrespect of any Excess Payment, any Guarantor that became a Guarantor subsequentto the date of any such Excess Payment shall be deemed to have been a Guarantoron the date of such Excess Payment and the financial information for such Guarantoras of the date such Guarantor became a Guarantor shall be utilized for suchGuarantor in connection with such Excess Payment.

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EachGuarantor recognizes and acknowledges that the rights to contribution arisinghereunder shall constitute an asset in favor of the party entitled to suchcontribution.  This Paragraph 7shall not be deemed to affect any right of subrogation, indemnity,reimbursement or contribution that any Guarantor may have under applicable Law againstthe Borrower in respect of any payment of Guaranteed Obligations.

 

8.             TERMINATION;REINSTATEMENT.  This Guaranty is acontinuing and irrevocable guaranty of all Guaranteed Obligations now orhereafter existing and shall remain in full force and effect until allGuaranteed Obligations and any other amounts payable under this Guaranty areindefeasibly paid in full in cash and any commitments of the AdministrativeAgent and each other Secured Party or facilities provided by the AdministrativeAgent and any other Secured Party with respect to the Guaranteed Obligationsare terminated.  Notwithstanding theforegoing, this Guaranty shall continue in full force and effect or be revived,as the case may be, if any payment by or on behalf of the Borrower or the Guarantoris made, or the Administrative Agent or any other Secured Party exercises itsright of setoff, in respect of the Guaranteed Obligations and such payment orthe proceeds of such setoff or any part thereof is subsequently invalidated,declared to be fraudulent or preferential, set aside or required (includingpursuant to any settlement entered into by the Administrative Agent or anyother Secured Party in its discretion) to be repaid to a trustee, receiver orany other party, in connection with any proceeding under any Debtor Relief Lawsor otherwise, all as if such payment had not been made or such setoff had notoccurred and whether or not the Administrative Agent or any other Secured Partyis in possession of or has released this Guaranty and regardless of any priorrevocation, rescission, termination or reduction.  The obligations of the Guarantor under thisparagraph shall survive termination of this Guaranty.

 

9.             SUBORDINATION.  The Guarantor hereby subordinates the paymentof all obligations and indebtedness of the Borrower owing to the Guarantor,whether now existing or hereafter arising, including but not limited to anyobligation of the Borrower to the Guarantor as subrogee of the AdministrativeAgent and any other Secured Party or resulting from the 

 

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Guarantor’s performance under this Guaranty, to theindefeasible payment in full in cash of all Guaranteed Obligations.  If the Administrative Agent so requests, anysuch obligation or indebtedness of the Borrower to the Guarantor shall beenforced and performance received by the Guarantor as trustee for theAdministrative Agent and the proceeds thereof shall be paid over to theAdministrative Agent on account of the Guaranteed Obligations, but withoutreducing or affecting in any manner the liability of the Guarantor under thisGuaranty.

 

10.           STAY OFACCELERATION.  In the event thatacceleration of the time for payment of any of the Guaranteed Obligations isstayed, in connection with any case commenced by or against the Borrower or anyother Guarantor under any Debtor Relief Laws, or otherwise, all such amountsshall nonetheless be payable by the Guarantor immediately upon demand by theAdministrative Agent.

 

11.           EXPENSES.  The Guarantor shall pay on demand allout-of-pocket expenses (including attorneys’ fees and expenses) in any wayrelating to the enforcement or protection of the Administrative Agent’s andeach other Secured Party’s rights under this Guaranty or in respect of theGuaranteed Obligations, including any incurred during any “workout” orrestructuring in respect of the Guaranteed Obligations and any incurred in thepreservation, protection or enforcement of any rights of the AdministrativeAgent and each other Secured Party in any proceeding under any Debtor ReliefLaws.  The obligations of the Guarantorunder this paragraph shall survive the payment in full of the GuaranteedObligations and termination of this Guaranty.

 

12.           MISCELLANEOUS.  No provision of this Guaranty may be waived,amended, supplemented or modified, except by a written instrument executed bythe Administrative Agent and the Guarantor. No failure by the Administrative Agent or any other Secured Party toexercise, and no delay in exercising, any right, remedy or power hereundershall operate as a waiver thereof; nor shall any single or partial exercise ofany right, remedy or power hereunder preclude any other or further exercisethereof or the exercise of any other right, power or remedy.  The remedies herein provided are cumulativeand not exclusive of any remedies provided by law or in equity.  The unenforceability or invalidity of anyprovision of this Guaranty shall not affect the enforceability or validity ofany other provision herein.  Unlessotherwise agreed by the Administrative Agent and the Guarantor in writing, thisGuaranty is not intended to supersede or otherwise affect any other guarantynow or hereafter given by the Guarantor for the benefit of the AdministrativeAgent and the other Secured Parties or any term or provision thereof.

 

13.           CONDITION OFBORROWER.  The Guarantor acknowledgesand agrees that it has the sole responsibility for, and has adequate means of,obtaining from the Borrower and any other guarantor such information concerningthe financial condition, business and operations of the Borrower and any suchother guarantor as the Guarantor requires, and that the Administrative Agentand the other Secured Parties have no duty, and the Guarantor is not relying onthe Administrative Agent or any other Secured Party at any time, to disclose tothe Guarantor any information relating to the business, operations or financialcondition of the Borrower or any other guarantor (the guarantor waiving anyduty on the part of the Administrative Agent and the other Secured Parties todisclose such information and any defense relating to the failure to providethe same).

 

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14.           SETOFF.  If and to the extent any payment is not madewhen due hereunder, the Guarantor hereby irrevocably authorizes each SecuredParty and each of their respective Affiliates at any time and from time totime, after obtaining the prior written consent of the Administrative Agent, tothe fullest extent permitted by applicable Laws, to set off and apply any andall deposits (general or special, time or demand, provisional or final, inwhatever currency) at any time held and other obligations (in whatevercurrency) at any time owing by such Secured Party or any such Affiliate to orfor the credit or the account of the Guarantor against any and all of theobligations of the Guarantor now or hereafter existing under this Agreement orany other Loan Document to such Secured Party, irrespective of whether or notsuch Secured Party shall have made any demand under this Agreement or any otherLoan Document and although such obligations of the Guarantor may be contingentor unmatured or are owed to a branch or office of such Secured Party differentfrom the branch or office holding such deposit or obligated on suchindebtedness.  The rights of each SecuredParty and its respective Affiliates under this Section are in addition toother rights and remedies (including other rights of setoff) that such SecuredParty or its respective Affiliates may have. Each Secured Party agrees to notify the Guarantor promptly after anysuch setoff and application, provided that the failure to give such noticeshall not affect the validity of such setoff and application.

 

15.           REPRESENTATIONSAND WARRANTIES.  The Guarantorrepresents and warrants that (a) it is duly organized and in good standingunder the laws of the jurisdiction of its organization and has full capacityand right to make and perform this Guaranty, and all necessary authority hasbeen obtained; (b) this Guaranty constitutes its legal, valid and bindingobligation enforceable in accordance with its terms; (c) the making andperformance of this Guaranty does not and will not violate the provisions ofany applicable law, regulation or order, and does not and will not result inthe breach of, or constitute a default or require any consent under, anymaterial agreement, instrument, or document to which it is a party or by whichit or any of its property may be bound or affected; and (d) all consents,approvals, licenses and authorizations of, and filings and registrations with,any governmental authority required under applicable law and regulations forthe making and performance of this Guaranty have been obtained or made and arein full force and effect.

 

16.           INDEMNIFICATIONAND SURVIVAL.  Without limitation onany other obligations of the Guarantor or remedies of the Administrative Agentor any other Secured Party under this Guaranty, the Guarantor shall, to thefullest extent permitted by law, indemnify, defend and save and hold harmlessthe Administrative Agent and each other Secured Party from and against, andshall pay on demand, any and all damages, losses, liabilities and expenses(including attorneys’ fees and expenses) that may be suffered or incurred bythe Administrative Agent or any other Secured Party in connection with or as aresult of any failure of any Guaranteed Obligations to be the legal, valid andbinding obligations of the Borrower enforceable against the Borrower inaccordance with their terms.  Theobligations of the Guarantor under this paragraph shall survive the payment infull of the Guaranteed Obligations and termination of this Guaranty.

 

17.           GOVERNING LAW; ASSIGNMENT;JURISDICTION; NOTICES.  THIS GUARANTYSHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OFTHE STATE OF NEW YORK.  This Guarantyshall 

 

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(a) bind the Guarantor and its successors andassigns, provided that the Guarantor may not assign its rights or obligationsunder this Guaranty without the prior written consent of the AdministrativeAgent (and any attempted assignment without such consent shall be void), and (b) inureto the benefit of the Administrative Agent and each other Secured Party andtheir respective successors and assigns and each Secured Party may, withoutnotice to the Guarantor and without affecting the Guarantor’s obligationshereunder, assign, sell or grant participations in the Guaranteed Obligationsand this Guaranty, in whole or in part. The Guarantor hereby irrevocably (i) submits to the non-exclusivejurisdiction of any United States Federal or State court sitting in New York,New York in any action or proceeding arising out of or relating to thisGuaranty, and (ii) waives to the fullest extent permitted by law any defenseasserting an inconvenient forum in connection therewith.  Service of process by the AdministrativeAgent in connection with such action or proceeding shall be binding on theGuarantor if sent to the Guarantor in the manner set forth below.  The Guarantor agrees that the AdministrativeAgent and each other Secured Party may disclose to any assignee of orparticipant in, or any prospective assignee of or participant in, any of itsrights or obligations of all or part of the Guaranteed Obligations any and allinformation in the Administrative Agent’s or such Secured Party’s possessionconcerning the Guarantor, this Guaranty and any security for thisGuaranty.  All notices and othercommunications to the Guarantor under this Guaranty shall be in writing andshall be delivered by hand or overnight courier service, mailed by certified orregistered mail or sent by telecopier to the Guarantor at its address set forthbelow or at such other address in the United States as may be specified by theGuarantor in a written notice delivered to the Administrative Agent at suchoffice as the Administrative Agent may designate for such purpose from time totime in a written notice to the Guarantor.

 

18.           WAIVER OF JURYTRIAL; FINAL AGREEMENT.  TO THEEXTENT ALLOWED BY APPLICABLE LAW, EACH GUARANTOR AND EACH SECURED PARTY HERETOIRREVOCABLY WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT ORPROCEEDING ON, ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE GUARANTEEDOBLIGATIONS.  EACH PARTY HERETO (A) CERTIFIESTHAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OFLITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THATIT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENTAND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS ANDCERTIFICATIONS IN THIS SECTION.  THISGUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BECONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORALAGREEMENTS BETWEEN THE PARTIES.  THEREARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

19.           ADDITIONALGUARANTOR WAIVERS AND AGREEMENTS.

 

### (a)           TheGuarantor understands and acknowledges that if the Administrative Agent or anyother Secured Party forecloses judicially or nonjudicially against any realproperty security for the Guaranteed Obligations, that foreclosure could impairor destroy any ability that the Guarantor may have to seek reimbursement,contribution, or indemnification from the 

 

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### Borrower or others based on any right the Guarantor may have ofsubrogation, reimbursement, contribution, or indemnification for any amountspaid by the Guarantor under this Guaranty. The Guarantor further understands and acknowledges that in the absenceof this paragraph, such potential impairment or destruction of the Guarantor’srights, if any, may entitle the Guarantor to assert a defense to this Guarantybased on Section 580d of the California Code of Civil Procedure asinterpreted in Union Bank v. Gradsky, 265 Cal.App.2d 40 (1968).  By executing this Guaranty, the Guarantorfreely, irrevocably, and unconditionally: (i) waives and relinquishes thatdefense and agrees that the Guarantor will be fully liable under this Guarantyeven though the Administrative Agent or any other Secured Party may foreclose,either by judicial foreclosure or by exercise of power of sale, any deed oftrust securing the Guaranteed Obligations; (ii) agrees that the Guarantorwill not assert that defense in any action or proceeding which theAdministrative Agent or any other Secured Party may commence to enforce thisGuaranty; (iii) acknowledges and agrees that the rights and defenseswaived by the Guarantor in this Guaranty include any right or defense that theGuarantor may have had or be entitled to assert based on or arising out of anyone or more of Sections 580a, 580b, 580d, or 726 of the California Code ofCivil Procedure or Section 2848 of the California Civil Code; and (iv) acknowledgesand agrees that the Administrative Agent and each other Secured Party isrelying on this waiver in creating the Guaranteed Obligations, and that thiswaiver is a material part of the consideration which the Administrative Agentand each other Secured Party is receiving for creating the GuaranteedObligations.

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### (b)           TheGuarantor waives all rights and defenses that the Guarantor may have becauseany of the Guaranteed Obligations is secured by real property.  This means, among other things: (i) TheAdministrative Agent and each other Secured Party may collect from theGuarantor without first foreclosing on any real or personal property collateralpledged by the Borrower; and (ii) if the Administrative Agent or any otherSecured Party forecloses on any real property collateral pledged by theBorrower or any other Person: (A) the amount of the Guaranteed Obligationsmay be reduced only by the price for which the collateral is sold at theforeclosure sale, even if the collateral is worth more than the sale price, and(B) the Administrative Agent or any other Secured Party may collect fromthe Guarantor even if the Administrative Agent or any other Secured Party, byforeclosing on the real property collateral, has destroyed any right theGuarantor may have to collect from the Borrower or any other Person.  This is an unconditional and irrevocablewaiver of any rights and defenses the Guarantor may have because any of theGuaranteed Obligations is secured by real property.  These rights and defenses include, but arenot limited to, any right or defenses based upon Section 580a, 580b, 580d,or 726 of the California Code of Civil Procedure.

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### (c)           TheGuarantor waives any right or defense it may have at law or equity, includingCalifornia Code of Civil Procedure Section 580a, to a fair market valuehearing or action to determine a deficiency judgment after a foreclosure.

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[SignaturePages Follow]

 

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INWITNESS WHEREOF, the parties hereto have caused this Continuing Guaranty to beexecuted as of the day and year first written above.

 
|   | **GUARANTORS:**                                                       |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |   |
|   |                                                                  |   |
|   | **ALTA HOSPITALS SYSTEM, LLC**                                        |
|   |                                                                  |   |
|   |                                                                  |   |
|   | By:                                                              | /s/ Samuel S. Lee |
|   |                                                                  | Name: Samuel S. Lee |
|   |                                                                  | Title: Chief Executive  Officer |
|   |                                                                  |   |
|   |                                                                  |   |
|   | **ALTA HOLLYWOOD HOSPITALS, INC.**                                    |
|   |                                                                  |   |
|   |                                                                  |   |
|   | By:                                                                   | /s/ Samuel S. Lee |
|   |                                                                  | Name: Samuel S. Lee |
|   |                                                                  | Title: President |
|   |                                                                  |   |
|   |                                                                  |   |
|   | **ALTA LOS ANGELES HOSPITALS,  INC.**                                 |
|   |                                                                  |   |
|   |                                                                  |   |
|   | By:                                                                   | /s/ Samuel S. Lee |
|   |                                                                  | Name: Samuel S. Lee |
|   |                                                                  | Title: President |
|   |                                                                  |   |
|   |                                                                  |   |
|   | **GENESIS HEALTHCARE OF SOUTHERN CALIFORNIA, INC.,  A MEDICAL GROUP** |
|   |                                                                  |   |
|   |                                                                  |   |
|   | By:                                                                   | /s/ Samuel S. Lee |
|   |                                                                  | Name: Samuel S. Lee |
|   |                                                                  | Title: Senior Vice  President |
|   |                                                                  |   |
|   |                                                                  |   |
|   | **POMONA VALLEY MEDICAL GROUP, INC.**                                 |
|   |                                                                  | ** ** |
|   |                                                                  |   |
|   | By:                                                                   | /s/ Samuel S. Lee |
|   |                                                                  | Name: Samuel S. Lee |
|   |                                                                  | Title: Vice President |

 

[*Prospect:Continuing Guaranty*]

 

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|   | **PROMED HEALTH CARE  ADMINISTRATORS**          |
|--------|-------------------------------------------------|
|   |                                            | ** ** |
|   |                                            |   |
|   | By:                                        | /s/  Samuel S. Lee |
|   |                                            | Name:  Samuel S. Lee |
|   |                                            | Title:  Vice President |
|   |                                            |   |
|   |                                            |   |
|   | **PROMED HEALTH SERVICES COMPANY**              |
|   |                                            |   |
|   |                                            |   |
|   | By:                                             | /s/  Samuel S. Lee |
|   |                                            | Name:  Samuel S. Lee |
|   |                                            | Title:  Vice President |
|   |                                            |   |
|   |                                            |   |
|   | **PROSPECT HOSPITAL ADVISORY  SERVICES, INC.**  |
|   |                                            |   |
|   |                                            |   |
|   | By:                                             | /s/  Samuel S. Lee |
|   |                                            | Name:  Samuel S. Lee |
|   |                                            | Title:  Chief Executive Officer |
|   |                                            |   |
|   |                                            |   |
|   | **PROSPECT HEALTH SOURCE MEDICAL  GROUP, INC.** |
|   |                                            |   |
|   |                                            |   |
|   | By:                                             | /s/  Samuel S. Lee |
|   |                                            | Name:  Samuel S. Lee |
|   |                                            | Title:  Senior Vice President |
|   |                                            |   |
|   |                                            |   |
|   | **PROSPECT MEDICAL GROUP, INC.**                |
|   |                                            |   |
|   |                                            |   |
|   | By:                                             | /s/  Samuel S. Lee |
|   |                                            | Name:  Samuel S. Lee |
|   |                                            | Title:  Senior Vice President |

 

[*Prospect:Continuing Guaranty*]

 

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|   | **PROSPECT MEDICAL SYSTEMS, INC.**                            |
|--------|---------------------------------------------------------------|
|   |                                                          |   |
|   |                                                          |   |
|   | By:                                                           | /s/  Samuel S. Lee |
|   |                                                          | Name:  Samuel S. Lee |
|   |                                                          | Title:  Chairman |
|   |                                                          |   |
|   |                                                          |   |
|   | **PROSPECT NWOC MEDICAL GROUP,  INC.**                        |
|   |                                                          |   |
|   |                                                          |   |
|   | By:                                                           | /s/  Samuel S. Lee |
|   |                                                          | Name:  Samuel S. Lee |
|   |                                                          | Title:  Senior Vice President |
|   |                                                          |   |
|   |                                                          |   |
|   | **PROSPECT PROFESSIONAL CARE MEDICAL  GROUP, INC.**           |
|   |                                                          |   |
|   |                                                          |   |
|   | By:                                                           | /s/  Samuel S. Lee |
|   |                                                          | Name:  Samuel S. Lee |
|   |                                                          | Title:  Senior Vice President |
|   |                                                          |   |
|   |                                                          |   |
|   | **STARCARE MEDICAL GROUP, INC.**                              |
|   |                                                          |   |
|   |                                                          |   |
|   | By:                                                           | /s/  Samuel S. Lee |
|   |                                                          | Name:  Samuel S. Lee |
|   |                                                          | Title:  Senior Vice President |
|   |                                                          |   |
|   |                                                          |   |
|   | **UPLAND MEDICAL GROUP, A PROFESSIONAL MEDICAL  CORPORATION** |
|   |                                                          |   |
|   |                                                          |   |
|   | By:                                                      | /s/ Samuel S. Lee |
|   |                                                          | Name: Samuel S. Lee |
|   |                                                          | Title: Vice President |

 

[*Prospect:Continuing Guaranty*]

 

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