EXHIBIT 10.230


LIMITED
CONSENT, OMNIBUS AMENDMENT NO. 3 AND JOINDER AGREEMENT

TO THE LOAN DOCUMENTS


This Limited Consent, Omnibus
Amendment No. 3 and Joinder Agreement to the Loan Documents (this “Amendment”), dated as of November 1,
2005, is among Residential Funding Corporation, a Delaware corporation (“Lender”),
Prospect Medical Holdings, Inc., a Delaware corporation (“Holdings”), Prospect Medical Group,
Inc., a California professional corporation (“PMG”; and together with Holdings, each a “Borrower” and collectively, the “Borrowers”), PMG, as Borrower Agent (as
defined in the LSA referenced below), each of the Persons signatory hereto as
Guarantors (each an “Initial Guarantor” and collectively,
the “Initial Guarantors”; and together
with the Borrowers, the “Initial Credit
Parties” and each an “Initial Credit Party”)
and Genesis Healthcare of Southern
California, Inc., a Medical Group, a California medical corporation (“Genesis”).


W I T N E S S E T H:


WHEREAS, Lender and the
Initial Credit Parties are parties to that certain Loan and Security Agreement
dated as of September 27, 2004
(as amended, restated, supplemented or otherwise modified prior to the date
hereof, the “LSA”; capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the LSA as
amended hereby unless otherwise defined herein);


WHEREAS, the Borrowers and the
other Initial Credit Parties have requested that the Lender agree to, and
Lender is willing to agree to, provide certain consents as hereinafter set forth,
subject to the terms and conditions contained herein; and


WHEREAS, the parties hereto
desire to amend the LSA and the other Loan Documents as hereinafter set forth.


NOW THEREFORE, in consideration
of the parties’ mutual promises in this Amendment, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


Section 1               Limited Consent.  Notwithstanding any of the provisions of the
LSA to the contrary, and subject to the satisfaction of each of the conditions
set forth in Section 6 hereof, Lender
hereby consents to the acquisition by PMG of all of the outstanding Stock of
Genesis pursuant to that certain Stock Purchase Agreement, dated as of the date
hereof, by and among PMG and Michael W. Lew, M.D., the sole shareholder of
Genesis (the “Genesis Purchase Agreement”)
for an aggregate consideration set forth in Section 1 of
the Genesis Purchase Agreement.


Section 2               LSA Amendments.  Subject to the satisfaction of each of the
conditions set forth in Section 6
hereof, the LSA is hereby amended as follows:


(a)           Section 1.1 of
the LSA is hereby amended by adding in proper alphabetical order the following
new defined terms:


Amendment
No. 3 Date — means November 1, 2005.










 



Genesis
— Genesis Healthcare of Southern
California, Inc., a Medical Group, a California medical corporation.


Genesis
Acquisition — means the acquisition by PMG
of all of the outstanding Stock of Genesis pursuant to the Genesis Acquisition Documents.


Genesis
Acquisition Agreement  — means that certain Stock
Purchase Agreement, dated as of November 1, 2005, by and between PMG and
Michael W. Lew, M.D. pursuant to which PMG has agreed to acquire all of the
outstanding Stock of Genesis,
as the same is in existence and in effect on the Amendment No. 3 Date.


Genesis
Acquisition Documents — collectively means (i) the Genesis Acquisition Agreement,
(ii) the employment agreement between Genesis and Michael W. Lew, M.D., (iii)
the non-competition agreement between Genesis and Michael W. Lew, M.D., and
(iv) all other agreements, documents, certificates, opinions and other
instruments delivered or executed in connection therewith, as each is in
existence and in effect on the Amendment No. 3 Date.


Term Loan A — means the Term Loan A to be made by the
Lender to Borrowers pursuant to Section
2.1(b) hereof.


Term Loan B — means the Term Loan B to be made by the
Lender to Borrowers pursuant to Section
2.1(b) hereof.


Term Loan A
Commitment —
means the Term Loan A Commitment set forth on Exhibit
A.


Term Loan B
Commitment —
means the Term Loan B Commitment set forth on Exhibit
A.


Term Note A — means the Term Note A issued to the Lender
to evidence Term Loan A in the form attached as Exhibit I-2/A.


Term Note B — means the Term Note B issued to the Lender
to evidence Term Loan B in the form attached as Exhibit I-2/B.


(b)           The following definitions set forth in Section 1.1 of the LSA are hereby amended and restated to
read in their entirety as follows:


Loan — means each Advance made by Lender to any
Borrower under the Revolving Credit, the Term Loan A and the Term Loan B made
by Lender to any Borrower pursuant to this Agreement.



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Term Loan — means, collectively, the Term Loan A and
Term Loan B to be made by the Lender to Borrowers pursuant to Section 2.1(b) hereof.


Term Loan
Commitment —
means, collectively, the Term Loan A Commitment and the Term Loan B Commitment
set forth on Exhibit A.


Term Loan
Maturity Date —
means the date on which the Term Loan A and Term Loan B shall terminate and the
entire outstanding balance of the Term Loan A and Term Loan B shall be due and
payable, as set forth on Exhibit A.


Term
Note(s) — means,
collectively, the Term Note A and Term Note B.


(c)           Section 2.1(b)
of the LSA is hereby amended and restated to read in its entirety as follows:


(b)           Term Loans.


(1)           Subject to the terms
and conditions of this Agreement, Lender agrees to make a loan on the Closing
Date in respect of Term Loan A to each Borrower (jointly and severally) in the
amount of the Term Loan A Commitment. 
Lender shall not be obligated to make any further loan to Borrowers
under the Term Loan A after the Closing Date and no portion of the Term Loan A
which has been repaid may be reborrowed. 
Each Borrower shall jointly and severally pay to Lender the principal
balance of the Term Loan A in monthly installments payable commencing on
November 1, 2004 and continuing on the first day of each succeeding month
thereafter in the amount of each such installment of $166,666.67 until the
earlier of:  (i) the date that the Term Loan
A is paid in full or (ii) the Term Loan Maturity Date.  The entire unpaid principal balance of the
Term Loan A, together with all accrued but unpaid interest thereon shall be due
in payable on the Term Loan Maturity Date. 
In addition, Credit Parties shall make certain mandatory prepayments in
respect of the Term Loan A as provided in Section
3.2.2 hereof.  The Term Loan A
shall be evidenced by the Term Note A, and the Borrowers to which Term Loan A
is made shall jointly execute and deliver the Term Note A to Lender on the
Closing Date.


(2)           Subject to the terms
and conditions of this Agreement, Lender agrees to make a loan on the Amendment
No. 3 Date in respect of Term Loan B to each Borrower (jointly and severally)
in the amount of the Term Loan B Commitment. 
Lender shall not be obligated to make any further loan to Borrowers
under the Term Loan B after the Amendment No. 3 Date and no portion of the Term
Loan B which has been repaid may be reborrowed. 
Each Borrower shall jointly and severally pay to Lender



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the principal balance of the Term Loan B in
monthly installments payable commencing on December  1, 2005 and
continuing on the first day of each succeeding month thereafter in the amount
of each such installment of $66,666.67 until the earlier of:  (i) the date that the Term Loan B is paid in
full or (ii) the Term Loan Maturity Date. 
The entire unpaid principal balance of the Term Loan B, together with
all accrued but unpaid interest thereon shall be due in payable on the Term
Loan Maturity Date.  In addition, Credit
Parties shall make certain mandatory prepayments in respect of the Term Loan B
as provided in Section 3.2.2
hereof.  The Term Loan B shall be
evidenced by the Term Note B, and the Borrowers to which Term Loan B is made
shall jointly execute and deliver the Term Note B to Lender on the Amendment
No. 3 Date.  Borrowers hereby direct Lender to disburse
all proceeds of Term Loan B (net of all fees owing to Lender) to the following
account of Borrowers: Wells Fargo Bank, N.A., Los Angeles, California, ABA No.
121000248, Account No. 4121043368, Reference: Prospect Medical Holdings, Inc.


(d)           Section 2.9 of
the LSA is hereby amended by adding the following new sentence at the end
thereof:


Notwithstanding the foregoing, the proceeds
of the Term Loan B shall be used solely to fund the Genesis Acquisition and pay
costs and expenses associated with the Genesis Acquisition that are approved by
Lender.


(e)           The last sentence of Section
3.2.1 of the LSA is hereby amended and restated to read in its
entirety as follows:


Any partial prepayments of the Term Loan A or
Term Loan B shall be ratably applied to prepay the scheduled installments of
such Term Loan A or Term Loan B, as applicable, in inverse order of maturity
except in connection with the payment in full of all Obligations and the
termination of this Agreement.


(f)            Section 3.2.2(a) of
the LSA is hereby amended and restated to read in its entirety as follows:


(a)           If at any time the sum of the Revolving
Credit Balance and the principal balance of the Term Loan exceeds the amount
equal to the lesser of (A) the Revolving Credit Borrowing Base or
(B) the sum of the Revolving Credit Commitment plus the principal balance of the Term Loan then
outstanding, Credit Parties shall immediately pay such excess to Lender for
application as follows: first, to payment
of principal in respect of the Revolving Credit until all Obligations in
respect of the Revolving Credit have been repaid in full; second to the
ratable payment of principal in respect of the Term Loan A in inverse order of
maturity until all Obligations in respect of Term Loan A have been repaid in
full; and third



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to the ratable payment of principal in
respect of the Term Loan B in inverse order of maturity until all Obligations
in respect of Term Loan B have been repaid in full provided that if any Default or Event of Default shall have occurred
and be continuing at the time any payment shall be due or payable pursuant to
this section, all proceeds of any such payment shall be applied in accordance
with Section 3.3 hereof.


(g)           The second sentence of Section
3.2.2(b) of the LSA is hereby amended and restated to read in its
entirety as follows:


Any prepayments required to be paid pursuant
to this section shall be applied first, to
the ratable payment of principal in respect of the Term Loan A in inverse order
of maturity until all Obligations in respect of Term Loan A have been repaid in
full; second, to the ratable payment of principal in respect of the Term
Loan B in inverse order of maturity until all Obligations in respect of Term
Loan B have been repaid in full; and third to payment of principal in
respect of the Revolving Credit until all Obligations in respect of the
Revolving Credit have been repaid in full; provided
that if any Default or Event of Default shall have occurred and be continuing
at the time any payment shall be due or payable pursuant to this section, all
proceeds of any such payment shall be applied in accordance with Section 3.3 hereof.


(h)           The second sentence of Section
3.2.2(c) of the LSA is hereby amended and restated to read in its
entirety as follows:


Any prepayments required to
be paid pursuant to this section shall be applied first, to payment of principal in respect of the Term Loan A in
inverse order of maturity until all Obligations in respect of Term Loan A have
been repaid in full; second, to payment of principal in respect of the
Term Loan B in inverse order of maturity until all Obligations in respect of
Term Loan B have been repaid in full; and third, to payment in respect of
the Revolving Credit until all Obligations in respect of the Revolving Credit
have been repaid in full; provided that if
any Default or Event of Default shall have occurred and be continuing at the
time any payment shall be due or payable hereunder, all proceeds of any such
payment shall be applied in accordance with Section
3.3 hereof.


(i)            The second sentence of Section
3.2.2(d) of the LSA is hereby amended and restated to read in its
entirety as follows:


Any
prepayments required to be paid pursuant to this section shall be applied first, to payment of principal in respect of
the Term Loan A in inverse order of maturity until all Obligations in respect
of Term Loan A have been repaid in full; second, to payment of principal
in respect of the Term Loan B in inverse order of maturity until all
Obligations in respect of Term Loan B have been repaid in full; and third,
to payment in respect



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of the Revolving Credit until all Obligations
in respect of the Revolving Credit have been repaid in full; provided that if any Default or Event of
Default shall have occurred and be continuing at the time any payment shall be
due or payable hereunder, all proceeds of any such payment shall be applied in
accordance with Section 3.3
hereof.


(j)            Section 3.3 of
the LSA is hereby amended and restated to read in its entirety as follows:


Subject to Section
2.5, so long as no
Default or Event of Default has occurred and is continuing and the Termination
Date shall not have occurred and except for voluntary prepayments permitted pursuant
to Section 3.2.1 which shall be
applied in accordance with such section and mandatory prepayments pursuant to Section 3.2.2 which shall be applied in
accordance with such section, all Collections and other payments (including all
monetary proceeds of Collateral) received shall be applied to amounts then due
and payable in the following order:


(a)           to the payment of, or the reimbursement of the Lender for or in respect
of all Fees and Expenses, costs, disbursements and losses which shall have been
incurred or sustained by the Lender and are then due and owing in connection
with the collection of such monies, or for the administration, exercise,
protection or enforcement by the Lender of any of the rights, remedies, duties
or powers of the Lender hereunder or under any of the other Loan Documents;


(b)           to the payment of any and all other accrued Fees and Expenses then due
and owing hereunder or under any of the other Loan Documents;


(c)           to interest on the Revolving Loans and Term Loan then due and owing, ratably
in proportion to the interest accrued as to each such Loan;


(d)           to principal payments on the Term Loan A then due and owing;


(e)           to principal payments on the Term Loan B then due and owing;


(f)            to payment of the Revolving Loans then
outstanding; and


(g)           to all other Obligations which may be then due and owing.


While any Default or Event of Default shall
have occurred and remain continuing or at all times from and after the
Termination Date, all Collections and other payments (including monetary proceeds
of



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Collateral or of realizations upon any Collateral) received shall be
applied to the Obligations in such order as Lender may elect in its sole
discretion.


(k)           Section 5.2(a)
of the LSA is hereby amended and restated to read in its entirety as follows:


(a)           On the Closing Date, Credit Parties (other
than Genesis), and within 5 Business Days of the Amendment No. 3 Date Genesis,
shall deliver Obligor Notices to all of their Obligors obligated under the
Receivables consisting of Capitated Contract Rights, which Obligor Notice shall
direct each such Obligor to make payments of Collections directly to an
applicable Lockbox (or in the case of payments by wire transfer, the applicable
Lockbox Account), and on the Closing Date Credit Parties (other than Genesis),
and within 5 Business Days of the Amendment No. 3 Date Genesis, shall deliver
or cause to be delivered to Lender the duplicate original of each such Obligor
Notices and evidence satisfactory to Lender that the delivery of such Obligor
Notices to the Obligors has been accomplished. 
In addition, on the Closing Date, Credit Parties (other than Genesis),
and within 5 Business Days of the Amendment No. 3 Date Genesis, shall deliver
to Lender a master Obligor Notice, in form and substance satisfactory to Lender,
in respect of all of their Obligors obligated under Fee-For-Service Receivables
which are Governmental Receivables and a master Obligor Notice, in form and
substance satisfactory to Lender, in respect of all of their Obligors obligated
under Fee-For-Service Receivables which are not Governmental Receivables, a
copy of which Obligor Notice specifying the applicable Obligor’s information,
Lender may deliver to the applicable Obligors on or after an Event of Default
has occurred, and each of which master Obligor Notice, among other things,
shall direct such Obligor to make payments of Collections directly to an
applicable Lockbox (or in the case of payments by wire transfer, the applicable
Lockbox Account), and mail all RA/EOBs directly to the applicable Lockbox, and
each of which master Obligor Notice shall attach a schedule listing all of the
applicable Obligors as of the date reasonably proximate to the Closing Date
with respect to Credit Parties (other than Genesis) and as of the date
reasonably proximate to the Amendment No. 3 Date with respect to Genesis, which
schedules shall be updated pursuant to and in accordance with Section 9.5(b)(xvi).  No such direction given by Credit Parties to
any Obligor shall be changed, modified or superceded without the express prior
written consent of Lender.  Credit
Parties shall cause all billing and claim forms sent to Obligors (and return
envelopes, if any, furnished by Credit Parties) to set forth only the
applicable Lockbox as the address for payment of Receivables and, in the case
of Fee-For-Services Receivables, delivery of the related RA/EOBs, and only the
applicable Lockbox Account as the bank account for receipt of wire transfers
for payment of Receivables; provided that unless an Event of Default
shall have occurred and Lender shall have requested Credit Parties to do so,
the Credit Parties not be



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required to direct Obligors of Fee-For-Service Receivables to remit
payments and RA/EOBs only to a Lockbox or Lockbox Account.  If a payment on a Receivable is made by an
Obligor other than to the appropriate Lockbox and Lockbox Account, Credit
Parties shall (x) remit such payment to the Lockbox Account on the same
day of the receipt thereof, if possible, but in any event no later than the
Business Day immediately following the day of the receipt thereof, and (y)
promptly take all necessary actions to effect collection of such proceeds from
the Person having possession thereof, if other than a Credit Party.


(l)            Section 9 of
the LSA is hereby amended by adding the following new Sections
9.25 and 9.26 at the end
thereof:


9.25         Genesis Bank Account.  Genesis shall be permitted to maintain the
account no. 222-07A89 (“Merrill Account”)
at Merrill Lynch Pierce Fenner and Smith, Inc. so long as (a) all funds
maintained in such Merrill Account are at all times held in cash or in Cash
Equivalents, (b) Genesis furnishes evidence to Lender satisfactory to Lender on
or prior to the Amendment No. 3 Date that all credit card related services
associated with such Merrill Account have been terminated and (c) Genesis
causes on each Business Day all available funds maintained in the Merrill
Account in excess of $700,000 (the “Maximum Balance”)
to be transferred to the Concentration Account. 
Not later than January 1, 2006, Genesis shall cease writing any checks
on the Merrill Account and except for the daily wire transfer of funds from the
Merrill Account to the Concentration Account required by this Section, Genesis
shall cease transferring funds from the Merrill Account or making deposits into
the Merrill Account.  In addition, not
later than January 1, 2006, Genesis shall have opened and caused to be fully
operational disbursing accounts at Wells Fargo Bank which are subject to
Control Agreements in favor of Lender on terms satisfactory to Lender.  From and after January 1, 2006, the Maximum
Balance shall be reduced to the sum of all checks outstanding on the Merrill
Account plus $10,000 as a cushion for fees and expenses and as such checks are
presented and honored for payment, the amount described in this clause shall
automatically be reduced.  Commencing on
the Amendment No. 3 Date and continuing until the Lender has received
satisfactory evidence that the Merrill Account Reserve Release Conditions (as
defined below) have been met, Lender shall be entitled to establish and
maintain a special Availability Reserve in the amount of $700,000; provided
that after January 1, 2006, Borrower shall be entitled to present the monthly
account statement for the Merrill Account or other written evidence satisfactory
to Lender demonstrating that the actual balance in the Merrill Account is less
than $700,000, and Lender shall reduce such special Availability Reserve to an
amount equal to the actual balance in the Merrill Account promptly after
receipt of such satisfactory written evidence; provided  further
that such special Availability Reserve shall be eliminated by Lender promptly
upon



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Lender’s
receipt of written evidence satisfactory to Lender demonstrating (a) that the
actual balance in the Merrill Account is less than $100,000 and (b) all checks
and electronic funds transfers from payors under the Capitated
Contracts have been successfully redirected to a lockbox or bank
account in the name of or under the control of the Lender (the
events in clauses (a) and (b) above, the “Merrill Account Reserve Release
Conditions”).


9.26         Genesis Management Agreement.  Promptly upon entering into by Genesis of a
management services agreement with any Management Credit Party, which shall be
in form and substance satisfactory to Lender and shall be deemed to be included
in the definition of “Management
Agreements” set forth in Section
1.1 of the LSA, Genesis shall enter into a collateral assignment
agreement, subordination agreement with Lender and any other agreements that
Lender may request, in respect of such management services agreement, each in
form and substance satisfactory to Lender


(m)          Section 11.1 of
the LSA is hereby amended by (i) deleting the “.” at the end of subsection (s)
thereof and inserting “; or” in place thereof and (ii) adding the following new
Subsection (t) at the end thereof:


(t)            any Credit Party makes
any post-closing payment under the Genesis Acquisition Agreement when any
Default or Event of Default shall have occurred and be continuing or would
result from the funding of such payment.


(n)           Effective as of the date hereof, 2005, the
notice address for Credit Parties set forth in Section 14.1
of the LSA is hereby amended and restated to read in its entirety as follows:


	
  If to Credit Parties:

  	
   

  	
  c/o Prospect Medical Holdings, Inc.

  400 Corporate Point, Suite 525

  Culver City, California 92801

  Attn: Jacob Y. Terner, CEO

  Telephone: (310) 337-4162

  Facsimile: (310) 338-1151

  E-Mail: jack.terner@prospectmedical.com

  




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  With a copy to:

  	
   

  	
  Miller & Holguin

  1801 Century Park East, Suite 700

  Los Angeles, California 90067

  Attn: Dale S. Miller

  Telephone: (310) 556-1990

  Facsimile: (310) 557-2205

  E-Mail: dmiller@millerholguin.com

  



 


 


(o)           Sections I and III.C of Exhibit A to
the LSA are hereby amended and restated to read in their entirety as follows:


	
  

  	
   

  	
  I. Commitments

  
	
   

  	
   

  
	
   

  	
  Revolving Credit Commitment:

  	
  $5,000,000.00

  
	
   

  	
   

  	
   

  
	
   

  	
  Term Loan A Commitment:

  	
  $10,000,000.00

  
	
   

  	
   

  	
   

  
	
   

  	
  Term Loan B Commitment:

  	
  $4,000,000.00

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C. Facility Origination Fee:

  	
  1.00% of the aggregate of the Revolving Credit

  Commitment and the Term Loan A

  Commitment, due on the Closing Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.00% of the Term Loan B Commitment, due on

  the Amendment No. 3 Date.

  



 


(p)           The following definitions set forth on Exhibit A to the LSA are hereby amended and restated to read
in their entirety as follows:


“Interest
Rate” — means: (i) the sum of the Prime Rate plus the Revolving Credit Applicable
Margin with respect to the Revolving Credit Balance, (ii) the sum of Prime Rate
plus the Term Loan A Applicable
Margin with respect to the Term Loan A, and (iii) the sum of Prime Rate plus the Term Loan B Applicable Margin
with respect to the Term Loan B.


“Applicable Margin” — means (a) for the Revolving Credit
Balance, the Revolving Credit Applicable Margin, (b) for the Term Loan A, the
Term Loan A Applicable Margin, and (c) for the Term Loan B, the Term Loan B
Applicable Margin.



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(q)           Exhibit A to the LSA are hereby amended by adding in proper
alphabetical order the following new defined terms:


“Term
Loan A Applicable Margin” — means 200 basis points.


“Term
Loan B Applicable Margin” — means 200 basis points.


(r)            Schedules 8.7, 8.13,
8.15, 8.17, 8.20, 9.8(b) and 10.1 to the LSA are hereby amended
by adding thereto the information contained on the Supplements to Schedules 8.7, 8.13, 8.15, 8.17, 8.20, 9.8(b) and 10.1
attached hereto with respect to Genesis. 
All references in the LSA to Schedules
8.7, 8.13, 8.15, 8.17, 8.20,
9.8(b) and 10.1 shall now be deemed to include a reference to Schedules 8.7, 8.13,
8.15, 8.17, 8.20, 9.8(b) and 10.1 as amended by the Supplements to Schedules 8.7, 8.13, 8.15, 8.17, 8.20, 9.8(b) and 10.1.


Section 3                Omnibus Amendments.  Subject to the satisfaction of each of the
conditions set forth in Section 6
hereof, the LSA and the other Loan Documents are hereby amended so that each
reference in the LSA and in the other Loan Documents to the term “Credit
Parties” or “Guarantors” shall be deemed to include a reference to Genesis.


Section 4                Joinders.


(a)           LSA.  Genesis (sometimes referred to herein as the “New Credit Party”) hereby agrees to
perform, for the benefit of Lender, all of the Obligations of a Guarantor and a
Credit Party (other than a Borrower) under the LSA, as direct and primary
obligations of the New Credit Party, and further agrees that it shall comply
with and be fully bound by the terms of the LSA as if it had been a signatory
thereto as a Guarantor and a Credit Party as of the date thereof.  In furtherance thereof, (i) in order to
secure payment and performance of all of the Obligations, the New Credit Party
hereby grants to Lender a security interest in all Collateral in which it has an
interest, whether now or hereafter arising, in accordance with the terms of the
Section 6 of the LSA and
(ii) the New Credit Party hereby agrees that it is jointly and severally
liable for, and hereby absolutely and unconditionally guarantees to Lender and
its successors and assigns, the full and prompt payment (whether at stated
maturity, by acceleration or otherwise) and performance of, all Obligations
owed or hereafter owing to Lender by each other Credit Party, in accordance
with the terms of the Section 15
of the LSA.


(b)           Offset Agreement.  The New Credit Party hereby agrees to
perform, for the benefit of Lender, all of the obligations of a Restricted
Credit Party (as defined therein) under the Offset Agreement, as direct and
primary obligations of the New Credit Party, and further agrees that it shall
comply with and be fully bound by the terms of the Offset Agreement as if it
had been a signatory thereto as a Credit Party as of the date thereof.


(c)           Other Loan Documents.  The New Credit Party hereby agrees to
perform, for the benefit of Lender, all of the obligations of a of a Guarantor
or a Credit Party, as the case may be, under each other Loan Document, as
direct and primary obligations of the New Credit Party, and further agrees that
it shall comply with and be



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fully bound by the terms of each such other Loan Document as if it had
been a signatory thereto as a Guarantor or a Credit Party, as applicable, as of
the date thereof.


Section 5                Amendments to
Collateral Assignments to Transaction Documents.


(a)           Item (xiv) of Exhibit A to that certain Collateral Assignment of
Transaction Documents dated as of September 27, 2004 between PMS and Lender (as
amended, restated, supplemented or otherwise modified from time to time, the “PMS Collateral Assignment”) is hereby
amended by deleting the “.” at the end thereof and inserting “(as amended,
restated, supplemented or otherwise modified from time to time) and item (xvii) of Exhibit A to
the PMS Collateral Assignment is hereby amended by deleting the “.” at the end
thereof and inserting “together with that certain Joinder Agreement by Genesis Healthcare of Southern California,
Inc., a Medical Group, a California medical corporation, dated as of November
1, 2005.”.


(b)           Item (x) of Exhibit A to that certain Collateral Assignment of
Transaction Documents dated as of September 27, 2004 between Sierra Primary and
Lender (as amended, restated, supplemented or otherwise modified from time to
time, the “Sierra Primary Collateral
Assignment”) is hereby amended by deleting the “.” at the end
thereof and inserting “(as amended, restated, supplemented or otherwise
modified from time to time) and item (xi) of Exhibit A to the Sierra Primary Collateral Assignment is
hereby amended by deleting the “.” at the end thereof and inserting “together
with that certain Joinder Agreement by Genesis
Healthcare of Southern California, Inc., a Medical Group, a California medical
corporation, dated as of November 1, 2005.”.


(c)           Item (vii) of Exhibit A to that certain Collateral Assignment of
Transaction Documents dated as of September 27, 2004 between PHR and Lender (as
amended, restated, supplemented or otherwise modified from time to time, the “PHR Collateral Assignment”) is hereby
amended by deleting the “.” at the end thereof and inserting “(as amended,
restated, supplemented or otherwise modified from time to time) and item (vii) of Exhibit A to
the PHR Collateral Assignment is hereby amended by deleting the “.” at the end
thereof and inserting “together with that certain Joinder Agreement by Genesis Healthcare of Southern California,
Inc., a Medical Group, a California medical corporation, dated as of November
1, 2005.”.


Section 6                Effectiveness and
Conditions Subsequent.


6.1           This Amendment shall
become effective on the date each of the following condition have been met:


(a)           this Amendment shall have been executed and
delivered by Lender and the Credit Parties;


(b)           Lender shall have received, each in form and
substance satisfactory to Lender, (i) all documents, agreements and other items
listed on the Closing Checklist attached hereto as Annex I duly executed
and delivered by each applicable party thereto and (ii) all other information
and copies of all documents which Lender may have



 12
 






 



requested in connection therewith. 
Upon the request of Lender or its counsel, such documents will be certified
by appropriate corporate officers or Governmental Authority;


(c)           Lender shall have completed its business,
legal, and collateral due diligence, the results of each of which shall be
satisfactory to Lender;


(d)           Lender shall have received evidence, in form
and substance satisfactory to Lender, that Lender has a valid perfected
security interest in that portion of the Collateral associated with Genesis,
subject only to Permitted Liens; and


(e)           Borrowers shall have paid to the Lender a
facility origination fee equal to $40,000 in connection with this Amendment.


6.2           Not later than the end
of business on November 1, 2005, Lender shall have received a photocopy of the
original stock certificate(s) of Genesis (which may be in the name of Edward
Medical Group II, a Medical Corporation) accompanied by a stock power endorsed
by Michael W. Lew, M.D. to PMG evidencing the consummation of the Genesis
Acquisition. Failure to satisfy this condition in accordance with this Section 6.2 shall constitute an immediate Event of Default
under the LSA and the other Loan Documents.


6.3           Each of the following
conditions must be satisfied on or before November 4, 2005:


(a)           Lender shall have received certified copies
of (i) the Genesis Acquisition Documents and (i) the Management Services
Agreement, dated as of April 1, 2001, between Advanced Medical Management, Inc.
and Genesis together with all amendments, supplements or other modifications
thereto; and


(b)           Lender shall have received the original
stock certificate representing 100% of the outstanding Stock of Genesis,
together with the original undated stock power executed in blank in respect of
such Stock.


Failure to satisfy
any of the above conditions in accordance with this Section 6.3
shall constitute an immediate Event of Default under the LSA and the other Loan
Documents.


6.4           Each of the following
conditions must be satisfied on or before November 11, 2005:


(a)           Lender shall have received a Landlord
Waiver, satisfactory to Lender, for the premises leased by Genesis located at
12665 Garden Grove Blvd., City of Garden Grove, California;


(b)           Lender shall have received, each in form and
substance satisfactory to Lender, certificates of insurance evidencing that
Genesis has been added to Credit Parties’ consolidated liability, casualty and
property insurance policies evidencing its coverage under such policies and
naming Lender as loss payee and/or additional insured, as applicable,
thereunder; and



 13
 






 



(c)           Lenders shall have received, in form and
substance satisfactory to Lender, certificates
from the applicable California tax authority evidencing the payment of all
franchise taxes by each California Credit Party.


Failure to satisfy
any of the above conditions in accordance with this Section 6.4
shall constitute an immediate Event of Default under the LSA and the other Loan
Documents.


6.5           On or prior
to November 8, 2005, Lender shall have received, in form and substance
satisfactory to Lender, evidence that Genesis has sent a letter to Blue Shield
of California (“BSC”)
acknowledging that (i) prior notice with respect to the Genesis Acquisition has
been sent to BSC, (ii) the Genesis Acquisition has been consummated and (iii)
no objections or concerns have been received from BSC concerning the Genesis
Acquisition and as a result Genesis has assumed the consent of BSC to the
Genesis Acquisition, and no later than ninety (90) calendar days following the
Amendment No. 3 Date, Lender shall have received, in form and substance
satisfactory to Lender, a copy of the assignment and assumption agreement
executed between Genesis and BSC. Failure required to satisfy this condition in
accordance with this Section 6.5
shall constitute an immediate Event of Default under the LSA and the other Loan
Documents.


Section 7                Representations and Warranties of the Credit
Parties. To induce the Lender to execute and deliver this
Amendment, the Credit Parties represent and warrant that:


(a)           the execution, delivery and performance by
the Initial Credit Parties and the New Credit Party of this Amendment has been
duly authorized and this Amendment constitutes the legal, valid and binding
obligation of the Initial Credit Parties and the New Credit Party, enforceable
against Initial Credit Parties and the New Credit Party in accordance with its
terms, except as the enforcement thereof may be subject to (i) the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors’ rights generally and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law);


(b)           no Default or Event of Default has occurred
and is continuing and each of the representations and warranties contained in
the LSA and the other Loan Documents is true and correct in all material
respects on and as of the date hereof as if made on the date hereof, except to
the extent that such representations and warranties expressly relate to an
earlier date, in which case such representations and warranties shall be true
and correct as of such earlier date, and each of the agreements and covenants
in the Loan Documents are hereby reaffirmed with the same force and effect as
if each were separately stated herein and made as of the date hereof;


(c)           the execution, delivery and performance of
this Amendment and the Genesis Acquisition Agreement and the consummation of
the transactions contemplated this Amendment and the Genesis Acquisition
Agreement do not and shall not contravene, result in a breach of, or violate
(i) any provision of any Initial Credit Party’s or the New Credit Party’s
corporate charter or bylaws or other governing documents, (ii) any material law
or regulation, or any order or decree of any court or



 14
 






 



government instrumentality or (iii) any material indenture, mortgage,
deed of trust, lease, agreement or other instrument to which any Initial Credit
Party or the New Credit Party is a party or by which any Initial Credit Party
or the New Credit Party or any of their respective property is bound; and


(d)           all reports, documents, notices or approvals
required to be filed or furnished to or obtained from any Governmental
Authority in connection with this Amendment have been filed or furnished to or
obtained from such Governmental Authority.


Section 8                Miscellaneous


(a)           Effect.  The consents and amendments set forth herein
are effective solely for the purposes set forth herein and shall be limited
precisely as written, and shall not be deemed to (i) except as expressly
provided in this Amendment, be a consent to any amendment, waiver or
modification of any term or condition of the LSA or of any other Loan Document,
(ii) prejudice any right or rights that Lender may now have or may have in the
future under or in connection with the LSA or any other Loan Document, or (iii)
constitute a course of dealing or other basis for altering any Obligation of
the Borrowers or any other Credit Parties under the LSA or any other Loan
Document or any other contract or instrument.


(b)           Reaffirmation.  Except as expressly amended herein, all of
the terms and provisions of the LSA and the Loan Documents are ratified and
confirmed in all respects by each Initial Credit Party and the New Credit Party
and shall remain in full force and effect. 
Each Initial Credit Party and the New Credit Party hereby acknowledges
and agrees that there is no defense, setoff or counterclaim of any kind, nature
or description to the Obligations or the payment thereof when due.  The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as an
amendment to or waiver of any right, power or remedy of the Lender under the
LSA or any of the other Loan Documents, or constitute an amendment or waiver of
any provision of the LSA or any of the other Loan Documents.


(c)           Binding on Successors and Assigns.  This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.


(d)           Severability.  Whenever possible, each provision of this
Amendment shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Amendment shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Amendment.


(e)           GOVERNING LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE INTERNAL LAWS OF THE



 15
 






 



STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.


(f)            No Waiver.  No waiver or consent, and no modification or
amendment of any provision of this Amendment shall be effective unless
specifically made in writing and duly signed by the party purportedly making
such waiver or consent.


(g)           Counterparts.  This Amendment may be executed by the parties
hereto individually or in combination, in one or more counterparts, each of
which shall be an original and all of which shall constitute one and the same
agreement.  This Amendment may be
executed and delivered by telecopier with the same force and effect as if the
same were a fully executed and delivered original manual counterpart.


(h)           Titles.  Paragraph and subparagraph titles, captions
and headings herein are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Amendment or the intent of any provisions hereof.


(i)            Acknowledgment.  The Initial Credit Parties and the New Credit
Party affirm and acknowledge that this Amendment constitutes a Loan Document
under the LSA and any reference to the Loan Documents under the LSA contained
in any notice, request, certificate or other document executed concurrently
with or after the execution and delivery of this Amendment shall be deemed to
include this Amendment unless the context shall otherwise specify.  Each of the Initial Credit Parties and the
New Credit Party hereby adopt and reaffirm each of the terms set forth in Section 15.2 of the LSA as though the same were restated in
this Amendment.


<Remainder of page left intentionally blank>

<Signature pages follow>



 16














 


IN WITNESS WHEREOF, the parties have caused
this Amendment to be duly executed and delivered all as of the day and year
first above written.


	
  

  	
  BORROWER AGENT:

  
	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL GROUP, INC., a California

  professional corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL HOLDINGS, INC., a
  Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL GROUP, INC., a California

  professional corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 









 



 


	
  

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL SYSTEMS, INC., a
  Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
  PINNACLE HEALTH RESOURCES, a
  California

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIERRA MEDICAL MANAGEMENT, INC., a
  Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIERRA PRIMARY CARE MEDICAL GROUP, A

  MEDICAL CORPORATION, a California professional

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NUESTRA FAMILIA MEDICAL GROUP, INC., a

  California professional corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				



 









 



 


	
   

  	
  GUARANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  SANTA ANA/TUSTIN PHYSICIANS GROUP,
  INC., a

  California professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  PEGASUS MEDICAL GROUP, INC.,
  a California

  professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  ANTELOPE VALLEY MEDICAL ASSOCIATES,
  INC., a

  California professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT HEALTH SOURCE MEDICAL
  GROUP,

  INC., a California professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT PROFESSIONAL CARE MEDICAL

  GROUP, INC., a California professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT NWOC MEDICAL GROUP, INC.,
  a

  California professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  APAC MEDICAL GROUP, INC.,
  a California professional

  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  STARCARE MEDICAL GROUP, INC.,
  a California

  professional corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				



 









 



 


	
   

  	
  PROSPECT HOSPITAL ADVISORY
  SERVICES, INC.

  (f/k/a Prospect Medical Management, Inc.), a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  



  	
  GENESIS HEALTHCARE OF SOUTHERN

  CALIFORNIA, INC., A MEDICAL GROUP, a California

  medical corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENESIS HEALTHCARE OF SOUTHERN

  CALIFORNIA, INC., A MEDICAL GROUP, a California

  medical corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 









 



 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  RESIDENTIAL FUNDING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: