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


 


 


5





















 


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


 


 


6





















 


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


 


 


7





















 


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: