**EXHIBIT 10.230**

 

**LIMITED CONSENT, OMNIBUS AMENDMENT NO. 3 ANDJOINDER AGREEMENTTO THE LOAN DOCUMENTS**

 

                This Limited Consent, Omnibus Amendment No. 3and 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 (asdefined in the LSA referenced below), each of the Persons signatory hereto asGuarantors (each an “**Initial Guarantor**” and collectively,the “**Initial Guarantors**”; and togetherwith the Borrowers, the “**Initial CreditParties**” and each an “**Initial Credit Party**”)and Genesis Healthcare of SouthernCalifornia, 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 areparties to that certain Loan and Security Agreement dated as of September27, 2004 (as amended, restated,supplemented or otherwise modified prior to the date hereof, the “**LSA**”; capitalizedterms used but not defined herein shall have the meanings assigned to suchterms in the LSA as amended hereby unless otherwise defined herein);

 

                WHEREAS, the Borrowers and the other InitialCredit Parties have requested that the Lender agree to, and Lender is willingto agree to, provide certain consents ashereinafter set forth, subject to theterms and conditions contained herein; and

 

                WHEREAS, the parties hereto desire to amendthe 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 valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties agree as follows:

 

# **Section 1               **LimitedConsent.  Notwithstanding any of the provisions of theLSA to the contrary, and subject to the satisfaction of each of the conditionsset forth in *Section 6* hereof, Lenderhereby 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., thesole shareholder of Genesis (the “Genesis Purchase Agreement”) for an aggregateconsideration set forth in *Section 1* ofthe Genesis Purchase Agreement.

# **Section 2               **LSAAmendments.  Subject to the satisfaction of each of theconditions 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 properalphabetical order the following new defined terms:

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

 

 

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### **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 AcquisitionDocuments.

 

### **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 hasagreed to acquire all of the outstanding Stock of Genesis, as the same is in existence and in effect on theAmendment No. 3 Date.

 

### **Genesis Acquisition Documents** — collectively means (i) the GenesisAcquisition Agreement, (ii) the employment agreement between Genesis andMichael W. Lew, M.D., (iii) the non-competition agreement between Genesis andMichael 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 theLender to Borrowers pursuant to*Section2.1(b)* hereof.

**Term Loan****B** — means the Term Loan B to be made by theLender to Borrowers pursuant to*Section2.1(b)* hereof.

**Term Loan ACommitment** —means the Term Loan A Commitment set forth on *ExhibitA*.

**Term Loan BCommitment** —means the Term Loan B Commitment set forth on *ExhibitA*.

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

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

### (b)           Thefollowing definitions set forth in *Section 1.1* ofthe LSA are hereby amended and restated to read in their entirety as follows:

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

 

 

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

**Term LoanCommitment** —means, collectively, the Term Loan A Commitment and the Term Loan B Commitmentset forth on *Exhibit A*.

**Term LoanMaturity Date** —means the date on which the Term Loan A and Term Loan B shall terminate and theentire outstanding balance of the Term Loan A and Term Loan B shall be due andpayable, as set forth on *Exhibit A*.

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

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

### (b)           **Term Loans**.

 

### (1)           Subjectto the terms and conditions of this Agreement, Lender agrees to make a loan onthe Closing Date in respect of Term Loan A to each Borrower (jointly andseverally) in the amount of the Term Loan A Commitment.  Lender shall not be obligated to make anyfurther loan to Borrowers under the Term Loan A after the Closing Date and noportion of the Term Loan A which has been repaid may be reborrowed.  Each Borrower shall jointly and severally payto Lender the principal balance of the Term Loan A in monthly installmentspayable commencing on November 1, 2004 and continuing on the first day ofeach 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 MaturityDate.  The entire unpaid principalbalance of the Term Loan A, together with all accrued but unpaid interestthereon shall be due in payable on the Term Loan Maturity Date.  In addition, Credit Parties shall makecertain 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 theTerm Note A, and the Borrowers to which Term Loan A is made shall jointlyexecute and deliver the Term Note A to Lender on the Closing Date.

 

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

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### the principal balance of the Term Loan B in monthly installmentspayable commencing on December  1, 2005 and continuing on the first day ofeach succeeding month thereafter in the amount of each such installment of$66,666.67 until the earlier of:  (i) thedate that the Term Loan B is paid in full or (ii) the Term Loan Maturity Date.  The entire unpaid principal balance of theTerm Loan B, together with all accrued but unpaid interest thereon shall be duein payable on the Term Loan Maturity Date. In addition, Credit Parties shall make certain mandatory prepayments inrespect of the Term Loan B as provided in *Section3.2.2* hereof.  The Term Loan Bshall be evidenced by the Term Note B, and the Borrowers to which Term Loan Bis made shall jointly execute and deliver the Term Note B to Lender on theAmendment No. 3 Date.  Borrowers hereby direct Lender to disburseall proceeds of Term Loan B (net of all fees owing to Lender) to the followingaccount 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 thefollowing new sentence at the end thereof:

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

 

### (e)           Thelast sentence of *Section 3.2.1*of the LSA ishereby amended and restated to read in its entirety as follows:

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

 

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

### (a)           If at any time thesum of the Revolving Credit Balance and the principal balance of the Term Loanexceeds the amount equal to the lesser of (A) the Revolving CreditBorrowing Base or (B) the sum of the Revolving Credit Commitment *plus* the principal balance of the TermLoan then outstanding, Credit Parties shall immediately pay such excess toLender for application as follows: first,to payment of principal in respect of the Revolving Credit until allObligations in respect of the Revolving Credit have been repaid in full; secondto the ratable payment of principal in respect of the Term Loan A in inverseorder of maturity until all Obligations in respect of Term Loan A have beenrepaid in full; and third

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

 

### (g)           Thesecond sentence of *Section 3.2.2(b)*ofthe LSA is hereby amended and restated to read in its entirety as follows:

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

 

### (h)           Thesecond sentence of *Section 3.2.2(c)*ofthe LSA is hereby amended and restated to read in its entirety as follows:

Any prepayments required tobe paid pursuant to this section shall be applied first, to payment of principal in respect of the Term Loan A ininverse order of maturity until all Obligations in respect of Term Loan A havebeen repaid in full; second, to payment of principal in respect of theTerm Loan B in inverse order of maturity until all Obligations in respect ofTerm Loan B have been repaid in full; and third, to payment in respectof the Revolving Credit until all Obligations in respect of the RevolvingCredit have been repaid in full; providedthat if any Default or Event of Default shall have occurred and be continuingat the time any payment shall be due or payable hereunder, all proceeds of anysuch payment shall be applied in accordance with *Section 3.3* hereof.

### (i)            Thesecond sentence of *Section 3.2.2(d)*ofthe LSA is hereby amended and restated to read in its entirety as follows:

### Any prepayments required to be paid pursuantto this section shall be applied first, topayment of principal in respect of the Term Loan A in inverse order of maturityuntil 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 ofmaturity until all Obligations in respect of Term Loan B have been repaid infull; and third, to payment in respect

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### of the Revolving Credit until all Obligations in respect of theRevolving Credit have been repaid in full; providedthat if any Default or Event of Default shall have occurred and be continuingat the time any payment shall be due or payable hereunder, all proceeds of anysuch payment shall be applied in accordance with *Section 3.3* hereof.

 

### (j)            *Section 3.3*of the LSA is hereby amended and restated toread in its entirety as follows:

Subject to *Section 2.5*,**so long as no Default or Event of Default has occurred andis continuing and the Termination Date shall not have occurred and except forvoluntary prepayments permitted pursuant to *Section3.2.1* which shall be applied in accordance with such section andmandatory prepayments pursuant to *Section3.2.2* which shall be applied in accordance with such section, allCollections and other payments (including all monetary proceeds of Collateral)received shall be applied to amounts then due and payable in the followingorder:

 

(a)           to the payment of, or the reimbursement of the Lender foror in respect of all Fees and Expenses, costs, disbursements and losses whichshall have been incurred or sustained by the Lender and are then due and owingin 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 otherLoan Documents;

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

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

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

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

(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 ofDefault shall have occurred and remain continuing or at all times from andafter the Termination Date, all Collections and other payments (includingmonetary proceeds of

 

 

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

 

### (k)           *Section 5.2(a)* of the LSA is hereby amended and restated toread 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 deliverObligor Notices to all of their Obligors obligated under the Receivables consistingof Capitated Contract Rights, which Obligor Notice shall direct each suchObligor to make payments of Collections directly to an applicable Lockbox (orin the case of payments by wire transfer, the applicable Lockbox Account), andon the Closing Date Credit Parties (other than Genesis), and within 5 BusinessDays of the Amendment No. 3 Date Genesis, shall deliver or cause to bedelivered to Lender the duplicate original of each such Obligor Notices andevidence satisfactory to Lender that the delivery of such Obligor Notices tothe Obligors has been accomplished.  Inaddition, on the Closing Date, Credit Parties (other than Genesis), and within5 Business Days of the Amendment No. 3 Date Genesis, shall deliver to Lender amaster Obligor Notice, in form and substance satisfactory to Lender, in respectof all of their Obligors obligated under Fee-For-Service Receivables which areGovernmental Receivables and a master Obligor Notice, in form and substancesatisfactory to Lender, in respect of all of their Obligors obligated underFee-For-Service Receivables which are not Governmental Receivables, a copy ofwhich Obligor Notice specifying the applicable Obligor’s information, Lendermay deliver to the applicable Obligors on or after an Event of Default hasoccurred, and each of which master Obligor Notice, among other things, shalldirect such Obligor to make payments of Collections directly to an applicableLockbox (or in the case of payments by wire transfer, the applicable LockboxAccount), and mail all RA/EOBs directly to the applicable Lockbox, and each ofwhich master Obligor Notice shall attach a schedule listing all of theapplicable Obligors as of the date reasonably proximate to the Closing Datewith respect to Credit Parties (other than Genesis) and as of the datereasonably proximate to the Amendment No. 3 Date with respect to Genesis, whichschedules shall be updated pursuant to and in accordance with *Section 9.5(b)(xvi)*.  No such direction given by Credit Parties toany Obligor shall be changed, modified or superceded without the express priorwritten consent of Lender.  CreditParties shall cause all billing and claim forms sent to Obligors (and returnenvelopes, if any, furnished by Credit Parties) to set forth only theapplicable Lockbox as the address for payment of Receivables and, in the caseof Fee-For-Services Receivables, delivery of the related RA/EOBs, and only theapplicable Lockbox Account as the bank account for receipt of wire transfersfor payment of Receivables; provided that unless an Event of Defaultshall 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 ofFee-For-Service Receivables to remit payments and RA/EOBs only to a Lockbox orLockbox Account.  If a payment on aReceivable is made by an Obligor other than to the appropriate Lockbox andLockbox Account, Credit Parties shall (x) remit such payment to theLockbox Account on the same day of the receipt thereof, if possible, but in anyevent  no later than the Business Dayimmediately following the day of the receipt thereof, and (y) promptly take allnecessary actions to effect collection of such proceeds from the Person havingpossession thereof, if other than a Credit Party.

 

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

9.25         **GenesisBank Account**.  Genesisshall be permitted to maintain the account no. 222-07A89 (“**Merrill Account**”) at Merrill LynchPierce Fenner and Smith, Inc. so long as (a) all funds maintained in suchMerrill 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 theAmendment No. 3 Date that all credit card related services associated with suchMerrill Account have been terminated and (c) Genesis causes on each BusinessDay all available funds maintained in the Merrill Account in excess of $700,000(the “**Maximum Balance**”) to be transferredto the Concentration Account.  Not laterthan January 1, 2006, Genesis shall cease writing any checks on the MerrillAccount and except for the daily wire transfer of funds from the MerrillAccount to the Concentration Account required by this Section, Genesis shallcease transferring funds from the Merrill Account or making deposits into theMerrill Account.  In addition, not laterthan January 1, 2006, Genesis shall have opened and caused to be fully operationaldisbursing accounts at Wells Fargo Bank which are subject to Control Agreementsin favor of Lender on terms satisfactory to Lender.  From and after January 1, 2006, the MaximumBalance shall be reduced to the sum of all checks outstanding on the MerrillAccount plus $10,000 as a cushion for fees and expenses and as such checks arepresented and honored for payment, the amount described in this clause shallautomatically be reduced.  Commencing onthe Amendment No. 3 Date and continuing until the Lender has receivedsatisfactory evidence that the Merrill Account Reserve Release Conditions (asdefined below) have been met, Lender shall be entitled to establish andmaintain a special Availability Reserve in the amount of $700,000; providedthat after January 1, 2006, Borrower shall be entitled to present the monthlyaccount statement for the Merrill Account or other written evidencesatisfactory to Lender demonstrating that the actual balance in the MerrillAccount is less than $700,000, and Lender shall reduce such specialAvailability Reserve to an amount equal to the actual balance in the MerrillAccount promptly after receipt of such satisfactory written evidence; providedfurther that such special Availability Reserve shall be eliminated byLender promptly upon

 

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

9.26         **GenesisManagement Agreement**. Promptly upon entering into by Genesis of a management servicesagreement with any Management Credit Party, which shall be in form andsubstance satisfactory to Lender and shall be deemed to be included in thedefinition of “**Management Agreements**”set forth in *Section 1.1* of theLSA, Genesis shall enter into a collateral assignment agreement, subordinationagreement with Lender and any other agreements that Lender may request, inrespect of such management services agreement, each in form and substancesatisfactory to Lender

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

### (t)            anyCredit Party makes any post-closing payment under the Genesis AcquisitionAgreement when any Default or Event of Default shall have occurred and becontinuing or would result from the funding of such payment.

 

### (n)           Effectiveas of the date hereof, 2005, the notice address for Credit Parties set forth in*Section 14.1* of the LSA is herebyamended 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 readin 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)           Thefollowing definitions set forth on *Exhibit A* tothe LSA are hereby amended and restated to read in their entirety as follows:

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

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

 

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

“**TermLoan A Applicable Margin**” — means 200 basis points.

“**TermLoan 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 onthe *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 *Schedules8.7**, 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               **OmnibusAmendments.  Subject to the satisfaction of each of theconditions set forth in *Section 6*hereof, the LSA and the other Loan Documents are hereby amended so that eachreference in the LSA and in the other Loan Documents to the term “CreditParties” or “Guarantors” shall be deemed to include a reference to Genesis.

# **Section 4               **Joinders.

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

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

### (c)           OtherLoan Documents.  The New Credit Partyhereby agrees to perform, for the benefit of Lender, all of the obligations ofa of a Guarantor or a Credit Party, as the case may be, under each other LoanDocument, as direct and primary obligations of the New Credit Party, andfurther agrees that it shall comply with and be

 

 

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### fully bound by the terms of each such otherLoan Document as if it had been a signatory thereto as a Guarantor or a CreditParty, as applicable, as of the date thereof.

# **Section 5               **Amendmentsto Collateral Assignments to Transaction Documents.

### (a)           *Item (xiv)* of *Exhibit A* tothat certain Collateral Assignment of Transaction Documents dated as of September27, 2004 between PMS and Lender (as amended, restated, supplemented orotherwise modified from time to time, the “**PMS Collateral Assignment**”)is hereby amended by deleting the “.” at the end thereof and inserting “(asamended, restated, supplemented or otherwise modified from time to time) and i*tem (xvii)* of *Exhibit A* tothe PMS Collateral Assignment is hereby amended by deleting the “.” at the endthereof 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 November1, 2005.”.

### (b)           *Item (x)* of *Exhibit A* tothat certain Collateral Assignment of Transaction Documents dated as ofSeptember 27, 2004 between Sierra Primary and Lender (as amended, restated,supplemented or otherwise modified from time to time, the “**SierraPrimary Collateral Assignment**”) is hereby amended by deletingthe “.” at the end thereof and inserting “(as amended, restated, supplementedor otherwise modified from time to time) and i*tem (xi)*of *Exhibit A* to the Sierra PrimaryCollateral Assignment is hereby amended by deleting the “.” at the end thereofand inserting “together with that certain Joinder Agreement by Genesis Healthcare of Southern California,Inc., a Medical Group, a California medical corporation, dated as of November1, 2005.”.

### (c)           *Item (vii)* of *Exhibit A* tothat certain Collateral Assignment of Transaction Documents dated as ofSeptember 27, 2004 between PHR and Lender (as amended, restated, supplementedor otherwise modified from time to time, the “**PHRCollateral Assignment**”) is hereby amended by deleting the “.” atthe end thereof and inserting “(as amended, restated, supplemented or otherwisemodified from time to time) and i*tem (vii)* of *Exhibit A* to the PHR Collateral Assignment is hereby amendedby deleting the “.” at the end thereof and inserting “together with thatcertain Joinder Agreement by GenesisHealthcare of Southern California, Inc., a Medical Group, a California medicalcorporation, dated as of November 1, 2005.”.

# **Section 6               Effectivenessand Conditions Subsequent**.

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

 

### (a)           thisAmendment shall have been executed and delivered by Lender and the CreditParties;

### (b)           Lendershall have received, each in form and substance satisfactory to Lender, (i) alldocuments, agreements and other items listed on the Closing Checklist attachedhereto as Annex I duly executed and delivered by each applicable partythereto and (ii) all other information and copies of all documents which Lendermay have

 

 

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

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

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

### (e)           Borrowersshall have paid to the Lender a facility origination fee equal to $40,000 inconnection 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) ofGenesis (which may be in the name of Edward Medical Group II, a MedicalCorporation) accompanied by a stock power endorsed by Michael W. Lew, M.D. toPMG evidencing the consummation of the Genesis Acquisition. Failure to satisfythis condition in accordance with this *Section 6.2*shall constitute an immediate Event of Default under the LSA and the other LoanDocuments.

 

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

 

### (a)           Lendershall have received certified copies of (i) the Genesis Acquisition Documentsand (i) the Management Services Agreement, dated as of April 1, 2001, betweenAdvanced Medical Management, Inc. and Genesis together with all amendments,supplements or other modifications thereto; and

### (b)           Lendershall have received the original stock certificate representing 100% of theoutstanding Stock of Genesis, together with the original undated stock powerexecuted in blank in respect of such Stock.

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

 

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

 

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

### (b)           Lender shall have received, each in form and substancesatisfactory to Lender, certificates of insurance evidencing that Genesis hasbeen added to Credit Parties’ consolidated liability, casualty and propertyinsurance policies evidencing its coverage under such policies and namingLender as loss payee and/or additional insured, as applicable, thereunder; and

 

 

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### (c)           Lendersshall have received, in form and substance satisfactory to Lender, certificates from the applicableCalifornia tax authority evidencing the payment of all franchise taxes by eachCalifornia Credit Party.

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

 

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

 

Section 7                **Representationsand Warranties of the Credit Parties**. To induce the Lender toexecute and deliver this Amendment, the Credit Parties represent and warrantthat:

 

### (a)           theexecution, delivery and performance by the Initial Credit Parties and the NewCredit Party of this Amendment has been duly authorized and this Amendmentconstitutes the legal, valid and binding obligation of the Initial CreditParties and the New Credit Party, enforceable against Initial Credit Partiesand the New Credit Party in accordance with its terms, except as theenforcement thereof may be subject to (i) the effect of any applicablebankruptcy, insolvency, reorganization, moratorium or similar law affectingcreditors’ rights generally and (ii) general principles of equity (regardlessof whether such enforcement is sought in a proceeding in equity or at law);

### (b)           noDefault or Event of Default has occurred and is continuing and each of therepresentations and warranties contained in the LSA and the other LoanDocuments is true and correct in all material respects on and as of the datehereof as if made on the date hereof, except to the extent that suchrepresentations and warranties expressly relate to an earlier date, in whichcase such representations and warranties shall be true and correct as of suchearlier date, and each of the agreements and covenants in the Loan Documentsare hereby reaffirmed with the same force and effect as if each were separatelystated herein and made as of the date hereof;

### (c)           theexecution, delivery and performance of this Amendment and the GenesisAcquisition Agreement and the consummation of the transactions contemplatedthis Amendment and the Genesis Acquisition Agreement do not and shall notcontravene, result in a breach of, or violate (i) any provision of any InitialCredit Party’s or the New Credit Party’s corporate charter or bylaws or othergoverning documents, (ii) any material law or regulation, or any order ordecree of any court or 

 

 

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### government instrumentality or (iii) anymaterial indenture, mortgage, deed of trust, lease, agreement or otherinstrument to which any Initial Credit Party or the New Credit Party is a partyor by which any Initial Credit Party or the New Credit Party or any of theirrespective property is bound; and

### (d)           allreports, documents, notices or approvals required to be filed or furnished toor obtained from any Governmental Authority in connection with this Amendmenthave been filed or furnished to or obtained from such Governmental Authority.

# **Section 8               **Miscellaneous

### (a)           Effect.  The consents and amendments set forth hereinare effective solely for the purposes set forth herein and shall be limitedprecisely as written, and shall not be deemed to (i) except as expresslyprovided in this Amendment, be a consent to any amendment, waiver ormodification 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 thefuture 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 ofthe Borrowers or any other Credit Parties under the LSA or any other LoanDocument or any other contract or instrument.

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

### (c)           Bindingon Successors and Assigns.  ThisAmendment shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns.

### (d)           Severability.  Whenever possible, each provision of thisAmendment shall be interpreted in such manner as to be effective and validunder applicable law, but if any provision of this Amendment shall be held tobe prohibited by or invalid under applicable law, such provision shall beineffective only to the extent of such prohibition or invalidity, withoutinvalidating the remaining provisions of this Amendment.

### (e)           GOVERNINGLAW.  THIS AMENDMENT AND THE RIGHTSAND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITHAND GOVERNED BY THE INTERNAL LAWS OF THE

 

 

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### STATE OF CALIFORNIA WITHOUT REGARD TOPRINCIPLES OF CONFLICTS OF LAWS.

### (f)            NoWaiver.  No waiver or consent, and nomodification or amendment of any provision of this Amendment shall be effectiveunless specifically made in writing and duly signed by the party purportedlymaking such waiver or consent.

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

### (h)           Titles.  Paragraph and subparagraph titles, captionsand headings herein are inserted only as a matter of convenience and forreference, and in no way define, limit, extend or describe the scope of thisAmendment or the intent of any provisions hereof.

### (i)            Acknowledgment.  The Initial Credit Parties  and the New Credit Party affirm andacknowledge that this Amendment constitutes a Loan Document under the LSA andany reference to the Loan Documents under the LSA contained in any notice,request, certificate or other document executed concurrently with or after theexecution and delivery of this Amendment shall be deemed to include thisAmendment unless the context shall otherwise specify.  Each of the Initial Credit Parties and theNew 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 inthis Amendment.

**<***Remainder of page leftintentionally blank***>**

**<***Signature pages follow***>**

 

 

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                IN WITNESS WHEREOF, the parties have caused thisAmendment to be duly executed and delivered all as of the day and year firstabove 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:                                                                   |       |
|       |                                                                     |       |

 

 

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|       |                                                                                                  |       |
|------------|-------------------------------------------------------------------------------------------------------|------------|
| ** ** | **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:                                                                                                |       |

 

 

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| ** ** | **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:                                                                                      |   |

 

 

 

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| ** ** | ** **                                                                                                        | ** ** |
|------------|-------------------------------------------------------------------------------------------------------------------|------------|
|       | **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:                                                                                                            |       |

 

 

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| ** ** | **LENDER:**                          |
|------------|--------------------------------------|
| ** ** | ** **                           | ** ** |
| ** ** | **RESIDENTIAL  FUNDING CORPORATION** |
| ** ** | ** **                           | ** ** |
| ** ** | ** **                           | ** ** |
| ** ** | By:                                  | ** ** |
| ** ** | Name:                                |   |
| ** ** | Title:                               |   |

 

 

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