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Exhibit 10.218    
    

 
 

COLLATERAL ASSIGNMENT OF TRANSACTION DOCUMENTS    
    

        THIS COLLATERAL ASSIGNMENT OF TRANSACTION DOCUMENTS (this "Assignment") has been executed and delivered as of
September 27, 2004, by and between PROSPECT MEDICAL SYSTEMS, INC., a Delaware corporation ("Assignor"), and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation ("Lender"), with reference to the following facts: 

RECITALS

        A.    Assignor
is a party to certain documents pursuant to which, among other things, Assignor acquired or will acquire the non-medical assets of Prospect Medical Group, 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, Nuestra Familia Medical Group, Inc., a California professional corporation, Prospect NWOC Medical Group, Inc., a California professional corporation and Santa Ana/Tustin Physicians Group,
Inc., a California professional corporation (each a "Professional Corporation" and collectively, the "Professional
Corporations"), and provides management services to the Professional Corporation. 

        B.    Pursuant
to that certain Loan and Security Agreement, dated on or about the date hereof (as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Loan Agreement"), Lender has agreed to extend credit and other financial accommodations to Assignor and and/or certain of Assignor's
affiliates, and Assignor and the other Credit Parties (as defined therein and including, without limitation, the Professional Corporations) have agreed to guarantee the payment and performance of all
of the Obligations (as defined therein) and to grant to Lender security interests in the Collateral (as defined therein) to secure payment and performance of all of the Obligations. 

        C.    Assignor
has agreed to execute and deliver this Assignment to Lender in order to supplement the terms of the Loan Agreement with respect to the Transaction Documents (as
hereinafter defined). 

        D.    Assignor
acknowledges that Lender would not enter into the Loan Agreement absent Assignor's agreements hereunder. 

AGREEMENT 

        In
consideration of the premises and the mutual agreements herein set forth, Assignor and Lender hereby agree as follows: 

        1.    Defined Terms.    All initially capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Loan Agreement. 

        2.    Assignment.    As additional security for the Obligations, Assignor hereby collaterally assigns and transfers to
Lender, and acknowledges that, pursuant to the Loan Agreement, Assignor has granted to Lender a security interest in: 

        2.1    Transaction Documents.    All of Assignor's right, title and interest in and to the documents set forth on  Exhibit A
attached hereto (collectively, the "Transaction Documents"). 

        2.2    Rights and Remedies.    All of the rights, benefits, remedies, privileges and claims of Assignor with respect
to the Transaction Documents (collectively, the "Rights And Remedies"), including, without limitation, (i) all rights to monies or payments owing to
Assignor under the Transaction Documents, and any and all security therefor and for all other obligations owing to Assignor thereunder, (ii) any right that Assignor may have to indemnification under
the Transaction Documents, (iii) all Rights and Remedies of Assignor with respect to any breach of the representations, warranties and covenants set forth in any of the Transaction Documents, and (iv)
the proceeds thereof (the Transaction Documents and the Rights and Remedies are collectively referred to herein as, the "Collateral"). 

 

        3.    Right and Remedies Generally.    Prior to the occurrence of a breach or default of any of the agreements,
covenants and obligations of Assignor under the Loan Agreement or any other Loan Document (a "Default"), Assignor will enforce all of its Rights and
Remedies diligently and in good faith and will give Lender written notice of any intention to assert any of its Rights and Remedies and keep Lender informed of the status of any proceeding concerning
such Rights and Remedies. Effective from and after the occurrence of a Default, Assignor hereby irrevocably authorizes and empowers Lender, in Lender's sole discretion, to assert as Lender may deem
proper, either directly or on behalf of Assignor, any of the Rights and Remedies which Assignor may from time to time have under the Transaction Documents, and to receive and collect all damages,
awards and other monies resulting therefrom and to apply the same on account of any of the Obligations. 

        4.    Termination.    This Assignment shall continue in effect until all of the Obligations have been paid in full and
the Loan Agreement has been terminated in accordance with the terms thereof, at which time Lender shall release to the Assignor Lender's interests in the Transaction Documents and the Rights and
Remedies and the other rights assigned to Lender hereby. 

        5.    Further Assurances.    At any time or from time to time, upon Lender's written request, Assignor will execute
and deliver to Lender such further documents and do such other acts and things as Lender may request in order to further effect the purposes of this Assignment or any schedule, amendment or supplement
hereto, or a financing or continuation statement with respect hereto, in accordance with the laws of any applicable jurisdictions. Assignor hereby authorizes Lender to effect any such filing or
recording statements (or amendments thereto) without the signature of Assignor, and Lender's costs and expenses with respect thereto shall be part of the Obligations and shall be payable by Assignor
on demand. 

        6.    Transaction Documents.    Concurrent herewith, Assignor is delivering to Lender possession of the original
Transaction Documents, together with any and all amendments thereto, as in effect on the date hereof, including Intercompany Note and Professional Corporation Security Agreement (as each such term is
defined on Exhibit A hereto), duly endorsed to Lender pursuant to an allonge in form and substance satisfactory to Lender, to hold in accordance with
the terms of the Loan Agreement until the Loan Agreement is terminated in accordance with its terms. 

        7.    Attorney-in-Fact.    Assignor hereby irrevocably makes, constitutes, and appoints Lender (and Lender's officers,
employees, or agents) as Assignor's true and lawful agent and attorney-in-fact for the purposes of enabling Lender or its agent(s) after the occurrence of a Default to (a) assert such Rights and
Remedies and to collect such damages, awards and other monies and to apply them in the manner set forth hereinabove, and (b) to sign the name of Assignor on any documents which need to be executed,
recorded, or filed, and to do any and all things necessary in the name and on behalf of Assignor in order to protect Lender's interests in the Transaction Documents. Assignor agrees that neither
Lender, nor any of its designees or attorneys-in-fact, will be liable for any act of commission or omission, or for any error of judgment or mistake of fact or law with respect to the exercise of the
power of attorney granted under this Section 7, other than as a result of its or their gross negligence or wilful misconduct. The power of attorney
granted under this Section 7 is coupled with an interest and shall be irrevocable until all of the Obligations have been paid in full, the Loan
Agreement and the other Loan Documents terminated, and Assignor's duties under this Assignment have been discharged in full. Assignor will not assign, pledge or otherwise encumber any of its rights,
title or interest under, in or to the Transaction
Document or Transaction Documents except for the assignment to Lender and its successors or assigns as set forth herein. 

        8.    Modification of Rights and Remedies.    Assignor shall keep Lender informed of all circumstances bearing upon
the Rights and Remedies and shall immediately provide Lender with copies of any notices delivered to Assignor in connection with the Transaction Documents. Assignor shall also provide Lender with a
copy of any notice sent by Assignor in connection with the Transaction 

2

 

Documents,
concurrently with the sending of any such notice. Assignor shall not waive, amend, alter or modify any of the Rights and Remedies in any material respect without the prior written consent
of Lender. Assignor shall not, without Lender's prior written consent, amend, alter, modify or terminate any of the Transaction Documents, or waive any of the provisions thereof, or do or permit any
act in contravention thereof. 

        9.    Assignor to Remain Liable.    Notwithstanding the foregoing, Assignor expressly acknowledges and agrees that it
shall remain liable under the Transaction Documents to observe and perform all of the conditions and obligations in the Transaction Documents which Assignor is bound to observe and perform, and that
neither this Assignment, nor any action taken pursuant hereto, shall cause Lender to be under any obligation or liability in any respect whatsoever to observe or perform any of the representations,
warranties, conditions, covenants, agreements or terms of the Transaction Documents. 

        10.    Counterparts; Effectiveness.    This Assignment may be executed in any number of counterparts, each of which,
when executed and delivered, shall be deemed to be an original. All of such counterparts, taken together, shall constitute but one and the same agreement. This Assignment shall become effective upon
the execution of a counterpart of this Assignment by each of the parties hereto. 

        11.    Notices.    All notices, requests and other communications to any party hereunder shall be sent in accordance
with Section 14.1 of the Loan Agreement. 

        12.    Modifications and Amendments.    This Assignment shall not be changed orally but shall be changed only by
agreement in writing signed by Assignor and Lender. No course of dealing between the parties, no usage of trade and no parole or extrinsic evidence of any nature shall be used to supplement or modify
any of the terms or provisions of this Assignment. 

        13.    Severability.    If any provision of this Assignment is held to be illegal, invalid or unenforceable under
present or future laws, the legality, validity and enforceability of the remaining provisions of this Assignment shall not be affected thereby, and this Assignment shall be liberally construed so as
to carry out the intent of the parties to it. 

        14.    Governing Law; Successors and Assigns; Entire Agreement.    This Assignment (a) shall be construed in
accordance with and governed by the internal laws of the State of CALIFORNIA, without regard to principles of conflicts of laws; (b) shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; and (c) embodies the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior
agreements, consents and understandings relating to such subject matter. 

        15.    Waiver of Jury Trial; Consent to Jurisdiction.    EACH PARTY HERETO WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE
EVENT OF ANY LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT, AND EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE
OF CALIFORNIA AND OF THE FEDERAL COURTS LOCATED IN LOS ANGELES COUNTY, CITY OF LOS ANGELES, CALIFORNIA IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY
SUCH LITIGATION, EACH PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE ON SUCH PARTY BY CERTIFIED U.S. FIRST CLASS MAIL, AND
OTHERWISE IN ACCORDANCE WITH APPLICABLE LAWS, POSTAGE PREPAID, ADDRESSED TO THE PARTY AT THE ADDRESS SPECIFIED IN SECTION 14.1 OF THE LOAN AGREEMENT. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS HAD THE
OPPORTUNITY TO OBTAIN THE ADVICE OF EXPERIENCED COUNSEL OF ITS OWN CHOOSING IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS AGREEMENT AND TO OBTAIN ADVICE OF SUCH COUNSEL WITH RESPECT TO ALL
MATTERS CONTAINED HEREIN, INCLUDING ANY PROVISIONS REGARDING WAIVER OF TRIAL BY JURY. 

[Signature Pages Follow] 

3

 

        EXECUTED
as of the date first above written. 

	 	 	ASSIGNOR:
	

 	
 	
PROSPECT MEDICAL SYSTEMS, INC.
	

 	
 	

By:	
 	

/s/  JACOB Y. TERNER, M.D.      

	 	 	Name:	 	Jacob Y. Terner, M.D.
	 	 	 	 	

	 	 	Title:	 	Chief Executive Officer
	 	 	 	 	

	

 	
 	
LENDER:
	

 	
 	
RESIDENTIAL FUNDING CORPORATION
	 	 	By:	 	/s/  ANGELA D. BROWN      

	 	 	Name:	 	Angela D. Brown
	 	 	 	 	

	 	 	Title:	 	Sr. Vice President
	 	 	 	 	

4

 
 
 

CONSENT TO ASSIGNMENT    
    

        Each of the undersigned acknowledges the terms of the above Assignment, consents to the assignment by Assignor to Lender of the transaction documents identified
in Exhibit A to the Assignment (the "Transaction Documents") which it is a party, and agrees to
recognize Lender as Assignor's assignee under the Transaction Documents. Each of the undersigned hereby represents and warrants to Lender that (i) it has no knowledge of any fact or circumstance which
would or could have a material adverse effect on the rights granted to Lender in the Transaction Documents, (ii) each of the Transaction Documents complies with all applicable laws and regulations,
(iii) each of the Transaction Documents is in full force and effect, and all signatures, names, addresses, amounts and other statements and facts contained therein are true and correct, and (iv) there
are no defenses, offsets or counterclaims to enforcement of the Transaction Documents. 

ACKNOWLEDGED
AND CONSENTED TO

THIS 27 DAY OF SEPTEMBER, 2004: 

	 	 	NUESTRA FAMILIA MEDICAL GROUP, INC., a California professional corporation
	

 	
 	

By:	
 	

/s/  R. STEWART KAHN      

	 	 	Name:	 	R. Stewart Kahn
	 	 	 	 	

	 	 	Title:	 	Vice President
	 	 	 	 	

5

 

ACKNOWLEDGED
AND CONSENTED TO

THIS 27 DAY OF SEPTEMBER, 2004: 

	 	 	PROSPECT MEDICAL GROUP, INC., a California professional corporation
	

 	
 	
SANTA ANA/TUSTIN PHYSICIANS GROUP, 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
	

 	
 	

By:	
 	

/s/  JACOB Y. TERNER, M.D.      

	 	 	Name:	 	Jacob Y. Terner, M.D.
	 	 	 	 	

	 	 	Title:	 	Chief Executive Officer
	 	 	 	 	

6

 
 

EXHIBIT A    
    
    TRANSANCTION DOCUMENTS    
    

	(i)
	Amended
and Restated Assignable Option Agreement, made as of September 27, 2000, among Prospect Medical Systems, Inc., Prospect Medical Group, Inc. and Jacob Y. Terner,
M.D.;

	(ii)
	Amended
and Restated Management Services Agreement, made as of September 15, 1998 and deemed to have been effective as of June 4, 1996, between Prospect Medical
Systems, Inc. and Prospect Medical Group, Inc. (Amendment to Management Services Agreement, made as of October 1, 1998, between Prospect Medical Systems, Inc. and Prospect Medical Group, Inc.);

	(iii)
	Security
Agreement (Physician Group), dated as of July 3, 1997, between Prospect Medical Systems, Inc. and Prospect Medical Group, Inc. (Amendment Number One to
Security Agreement dated as of July 6, 1999 between Prospect Medical Systems, Inc. and Prospect Medical Group, Inc.);

	(iv)
	Management
Services Agreement dated as of January 1, 2001 between Prospect Medical Systems, Inc. and Prospect Health Source Medical Group, Inc. (Amendment to Management
Services Agreement dated as of November 1, 2002 between Prospect Medical Systems, Inc. and Prospect Health Source Medical Group, Inc.);

	(v)
	Security
Agreement dated as of effective as of January 1, 2001 between Prospect Medical Systems, Inc. and Prospect Health Source Medical Group, Inc.

	(vi)
	Management
Services Agreement dated as of October 1, 2003, by and between Prospect Medical Systems, Inc. and Prospect Professional Care Medical Group, Inc.

	(vii)
	Security
Agreement dated as of October 1, 2003, between Prospect Professional Care Medical Group, Inc. and Prospect Medical Systems, Inc.

	(viii)
	Management
Services Agreement dated as of March 1, 2004 by and between Prospect Medical Systems, Inc. and Prospect NWOC Medical Group, Inc.;

	(ix)
	Security
Agreement effective as of March 1, 2004 between Prospect Medical Systems, Inc. and Prospect NWOC Medical Group, Inc.:

	(x)
	Management
Services Agreement, made as of August 1, 1999, between Prospect Medical Systems, Inc. and Nuestra Familia Medical Group.:

	(xi)
	Security
Agreement effective as of August 1, 1999 between Prospect Medial Systems, Inc. and Nuestra Familia Medical Group, Inc.

	(xii)
	Management
Services Agreement dated as of July 14, 1997, between Prospect Medical Systems, Inc. and Santa Ana/Tustin Physicians Group, Inc., a California professional
corporation;

	(xiii)
	Security
Agreement (Physician Group), dated as of July 14, 1997, between Prospect Medical Systems, Inc. and Santa Ana/Tustin Physicians Group, Inc. (Amendment Number
One to Security Agreement dated as of July 1, 1999 between Santa Ana/Tustin Physicians Group, Inc. and Prospect Medical Systems, Inc.);

	(xiv)
	Omnibus
Amendment to Security Agreements dated as of September 27, 2004, among Prospect Medical Systems, Inc., Sierra Medical Management, Inc., Pinnacle Health
Resources, Prospect Medical Group, Inc., Santa/Ana Tustin Physicians Group, Inc., Sierra Primary Care Medical Group, A Medical Corporation, Pegasus Medical Group, Inc., Antelope Valley Medical
Associates, Inc., Prospect Health Source Medical Group, Inc., Prospect Professional Care Medical Group, Inc., Prospect NWOC Medical Group, Inc., APAC Medical Group, Inc., StarCare Medical Group Inc.,
and Nuestra Familia Medical Group.;

	(xv)
	Agreement
of Purchase and Sale of Assets of Health Source Medical Group, Inc. dated as of May 1, 2001 among David M. Frisch, M.D., Prospect Medical Group, Inc.,
Prospect Health Source Medical Group, Inc. and Prospect Medical Systems, Inc. 

	(xvi)
	Agreement
of Purchase and Sale of Assets of Health Source Medical Group, Inc. dated as of July 1, 2001 among James Daniel, M.D. & Dana Eisenman, M.D. Medical
Corporation, Prospect Medical Group, Inc., Prospect Health Source Medical Group, Inc. and Prospect Medical Systems, Inc.

	(xvii)
	Subordinated
Intercompany Note, dated as of September 27, 2004, by each of Prospect Medical Holdings, Inc., a Delaware corporation, Prospect Medical Systems, Inc., a
Delaware corporation, Sierra Medical Management, Inc., a Delaware corporation, Pinnacle Health Resources, a California corporation, Prospect Medical Group, Inc., a California professional corporation,
Sierra Primary Care Medical Group, a Medical Corporation, a California professional corporation, 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, Nuestra Familia Medical Group, 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, and StarCare Medical Group, Inc., a California professional corporation, in
favor of Prospect Medical Systems, Inc. and other parties named as payees thereunder. 

QuickLinks

Exhibit 10.218

COLLATERAL ASSIGNMENT OF TRANSACTION DOCUMENTS

CONSENT TO ASSIGNMENT

EXHIBIT A TRANSANCTION DOCUMENTSQuickLinks
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Exhibit 10.219    
    

 
 

GUARANTY INDUCEMENT AND OFFSET AGREEMENT    
    

        THIS GUARANTY INDUCEMENT AND OFFSET AGREEMENT, dated as of September 27, 2004 (this "Agreement") is entered into
by and among Prospect Medical Group, Inc., a California professional corporation ("PMG"), Prospect Medical Holdings, Inc., a Delaware corporation
("Holdings"; and together with PMG, each a "Borrower" and collectively,
"Borrowers"), Prospect Medical Systems, Inc., a Delaware corporation ("PMS"), Sierra Medical Management,
Inc., a Delaware corporation ("SMM"), and Pinnacle Health Resources, a California corporation
("PHR"), Sierra Primary Care Medical Group, A Medical Corporation, a California professional corporation
("Sierra Primary"), Santa Ana/Tustin Physicians Group, Inc., a California professional corporation ("Santa
Ana/Tustin"), Pegasus Medical Group, Inc., a California professional corporation ("Pegasus"), Antelope Valley Medical
Associates, Inc., a California professional corporation ("Antelope"), Nuestra Familia Medical Group, Inc., a California professional corporation
("Nuestra"), Prospect Health Source Medical Group, Inc., a California professional corporation ("Prospect
Health"), Prospect Professional Care Medical Group, Inc., a California professional corporation ("Prospect Professional"),
Prospect NWOC Medical Group, Inc., a California professional corporation ("Prospect NWOC"), APAC Medical Group, Inc., a California professional
corporation ("APAC"), and StarCare Medical Group, Inc., a California professional corporation
("StarCare"; and together with PMS, SMM, PHR, Sierra Primary, Santa Ana/Tustin, Pegasus, Antelope, Nuestra, Prospect Health, Prospect Professional,
Prospect NWOC and APAC, each a "Guarantor" and collectively, "Guarantors"), each of the other parties
identified from time to time as a party hereto on the signature pages hereof or that become parties hereto pursuant to the joinder provision of Section
9 below (each, together with the Borrowers and the Guarantors, a "Restricted Credit Party" and collectively, the
"Restricted Credit Parties"), and Residential Funding Corporation, a Delaware corporation (the
"Lender"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement (as defined below). 

 
 

RECITALS    
    

        WHEREAS, the Lender has entered into or are about to enter into a Loan and Security Agreement (as the same may be amended, restated, modified, replaced,
refinanced or supplemented from time to time, the "Loan Agreement") with Borrowers and other Credit Parties, pursuant to which Lender may make loans and
provide other financial accommodations to Borrowers; 

        WHEREAS,
the Lender has required, among other things, that the Obligations under the Loan Agreement (the "Senior Obligations") be secured
by a security interest in all amounts owing from time to time among the Restricted Credit Parties (the "Intercompany Loans"), including, without
limitation, Intercompany Loans pursuant to or evidenced by that certain Subordinated Intercompany Note dated on or about the date hereof (as the same may be amended, restated, modified, replaced,
refinanced or supplemented from time to time, the "Intercompany Note"); 

        WHEREAS,
the Lender has required, as a condition to providing financing to Borrowers, that each of the Restricted Credit Parties guarantees the other Restricted Credit Parties'
Obligations as set forth in the Loan Agreement (the "Loan Agreement Guaranty") and secures such Loan Agreement Guaranty by granting a security interest
to the Lender, in any and all of such Restricted Credit Party's personal property, including the Intercompany Note and any future loans and other financial accommodations provided by such Restricted
Credit Party; 

        WHEREAS,
the Lender has required, as a condition to providing financing to Borrowers, that each Person party to the Intercompany Note as a Payee thereunder (as such term is defined
therein) (a "Lending Company") agree to provide compensation to each Person party to the Intercompany Note as a Debtor thereunder (as such term is
defined therein) (a "Borrowing Company"), as provided herein, if 

1

 

any
Restricted Credit Party does not repay the Senior Obligations and Lender calls upon any other Restricted Credit Party for payment on any such Loan Agreement Guaranty or from the Collateral in
which such Restricted Credit Party has granted a security interest; and 

        WHEREAS,
each party hereto intends that each Borrowing Company receive the "fair equivalent value" (as used in Section 548 of the Bankruptcy Code) for the amount of any such Loan
Agreement Guaranty that is called upon by Lender. 

 
 

AGREEMENT    
    

        NOW, THEREFORE, in consideration of the premises and covenants hereinafter contained, and to induce Lender to provide the loans and other financial accommodations
to Borrowers under the Loan Agreement, the parties agree as follows: 

        1.    Offset.    With respect to any Intercompany Loan, regardless of whether evidenced by the Intercompany Note, as
between a Lending Company and a Borrowing Company, such Lending Company hereby agrees that any payment made by such Borrowing Company pursuant to the Loan Agreement Guaranty of such Borrowing Company
shall be deemed to be a payment made at the request of such Lending Company to Lender, and shall be credited as a payment under the Intercompany Note by such Borrowing Company or any other
indebtedness owing by such Borrowing Company to such Lending Company, thereby automatically reducing the amount owing to such Lending Company by the amount of such payment. 

        2.    Amounts in Excess of Offset.    If the Lender should at any time obtain payment from any Borrowing Company in
excess of the amount of the offset which occurs pursuant to Section 1 above, the amount of such Borrowing Company's claim against the applicable
Lending Company by virtue of such payment may be offset against any and all amounts that such Lending Company may thereafter be entitled to receive, for any reason, from such Borrowing Company. 

        3.    Governing Law.    THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF CALIFORNIA. 

        4.    Amendments.    None of the terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Lender and the Restricted Credit Parties; provided that any provision of this
Agreement may be waived by the Lender, acting alone, in a letter or agreement executed by the Lender. 

        5.    Successors and Assigns.    

        (a)   This
Agreement shall be binding upon and shall inure to the benefit of the Lender, the Restricted Credit Parties and each of their respective heirs, administrators,
executors, successors and assigns. 

        (b)   Upon
a successor Lender becoming the Lender under the Loan Agreement Documents or upon any other lender (each, a "Refinancing
Lender") refinancing all, or with the prior written consent of the then existing Lender, any portion, of the Senior Obligations, such successor Lender or Refinancing Lender
shall automatically be entitled to all the rights and powers of the Lender hereunder without the need for any further action on the part of any party hereto. 

        6.    Headings.    Section headings in this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purposes. 

        7.    Counterparts.    This Agreement may be executed in any number of counterparts, each of which when so executed
shall be deemed an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. Any party hereto may 

2

 

execute
and deliver a counterpart of this Agreement by delivering by facsimile transmission a signature page of this Agreement signed by such party, and any such facsimile signature shall be treated
in all respects as having the same effect as an original signature. Any party delivering by facsimile transmission a counterpart executed by it shall promptly thereafter also deliver a manually signed
counterpart of this Agreement. 

        8.    Severability.    The invalidity, illegality, or unenforceability of any provision in or obligation under this
Agreement in any jurisdiction shall not affect or impair the validity, legality, or enforceability of the remaining provisions or obligations under this Agreement or of such provision or obligation in
any other jurisdiction. 

        9.    Joinder.    The parties hereto acknowledge and agree that any Person that becomes a Credit Party after the date
hereof is required to become a party hereto (the "New Party") at the time such New Party becomes a Credit Party. Restricted Credit Parties shall cause
each New Party to execute a joinder agreement in form and substance satisfactory to Lender and upon the execution thereof, the New Party shall be bound by all the terms and conditions hereof to the
same extent as though such New Party had originally executed this Agreement as a Restricted Credit Party. The addition of the New Party shall not in any manner affect the obligations of the other
parties hereto. 

[Signature Pages Follow]

3

 

        IN
WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day and year first above written. 

	 	 	LENDER:
	

 	
 	
RESIDENTIAL FUNDING CORPORATION
	

 	
 	

By:	

/s/  ANGELA D. BROWN      

	 	 	Name:	Angela D. Brown
	 	 	Title:	Sr. Vice President
	

 	
 	
RESTRICTED CREDIT PARTIES:
	

 	
 	

PROSPECT MEDICAL HOLDINGS, INC.
	

 	
 	

PROSPECT MEDICAL SYSTEMS, INC.
	

 	
 	

PINNACLE HEALTH RESOURCES
	

 	
 	

By:	

/s/  JACOB Y. TERNER, M.D.      

	 	 	Name:	Jacob Y. Terner, M.D.

	 	 	Title:	Chief Executive Officer

	

 	
 	

PROSPECT MEDICAL GROUP, INC.
	

 	
 	

SANTA ANA/TUSTIN PHYSICIANS GROUP, INC.
	

 	
 	

PEGASUS MEDICAL GROUP, INC.
	

 	
 	

ANTELOPE VALLEY MEDICAL ASSOCIATES, INC.
	

 	
 	

PROSPECT HEALTH SOURCE MEDICAL GROUP, INC.
	

 	
 	

PROSPECT PROFESSIONAL CARE MEDICAL GROUP, INC.
	

 	
 	

PROSPECT NWOC MEDICAL GROUP, INC.
	

 	
 	

APAC MEDICAL GROUP, INC.
	

 	
 	

STARCARE MEDICAL GROUP, INC.
	

 	
 	

By:	

/s/  JACOB Y. TERNER, M.D.      

	 	 	Name:	Jacob Y. Terner, M.D.

	 	 	Title:	Chief Executive Officer

4

 

	

 	
 	

SIERRA MEDICAL MANAGEMENT, INC.
	

 	
 	

By:	

/s/  JACOB Y. TERNER, M.D.      

	 	 	Name:	Jacob Y. Terner, M.D.

	 	 	Title:	Chief Executive Officer

	

 	
 	

SIERRA PRIMARY CARE MEDICAL GROUP, A MEDICAL CORPORATION
	

 	
 	

By:	

/s/  JACOB Y. TERNER, M.D.      

	 	 	Name:	Jacob Y. Terner, M.D.

	 	 	Title:	Chief Executive Officer

	

 	
 	

NUESTRA FAMILIA MEDICAL GROUP, INC.
	

 	
 	

By:	

/s/  R. STEWART KAHN      

	 	 	Name:	R. Stewart Kahn

	 	 	Title:	Vice President

5

QuickLinks

Exhibit 10.219

GUARANTY INDUCEMENT AND OFFSET AGREEMENT

RECITALS

AGREEMENT

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