AMENDED AND RESTATED FORBEARANCE AGREEMENT

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Exhibit 10.1

AMENDED AND RESTATED FORBEARANCE AGREEMENT

        THIS AMENDED AND RESTATED FORBEARANCE AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this " Agreement ") is made as of April 10, 2008 and entered into by and among Prospect Medical Holdings, Inc. (" Holdings ") and Prospect Medical Group, Inc. (" Prospect " and, collectively with Holdings, the " Borrowers " and each, individually, a " Borrower "), Bank of America, N.A., as Administrative Agent (in such capacity, the " First Lien Administrative Agent "), and the lenders party hereto (collectively, the " First Lien Lenders ").

RECITALS

        WHEREAS, the Borrowers, the First Lien Lenders and the First Lien Administrative Agent have entered into that certain First Lien Credit Agreement dated as of August 8, 2007 (as amended, restated, supplemented or otherwise modified, the " First Lien Credit Agreement "), pursuant to which the First Lien Lenders have agreed to make the Loans (such term, together with each other capitalized term used in this Agreement but not defined in this Agreement, shall be defined in accordance with the First Lien Credit Agreement) and other extensions of credit, all upon the terms and conditions set forth in the First Lien Credit Agreement;

        WHEREAS, as of the date hereof, certain Defaults and Events of Default exist under the First Lien Credit Agreement and, which as a result of such Defaults and Events of Default, gave rise to the First Lien Lenders and the First Lien Administrative Agent having the right, among other things, to declare the commitment of each First Lien Lender to make Loans to be terminated and to exercise any and all other remedies available to the First Lien Lenders under the First Lien Credit Agreement;

        WHEREAS, the Borrowers, the First Lien Lenders and the First Lien Administrative Agent entered into a Forbearance Agreement on February 13, 2008 (as amended, the " February 13 Forbearance Agreement ") pursuant to which the First Lien Lenders and the First Lien Administrative Agent agreed, subject to the terms and conditions set forth therein, to forbear from exercising such rights for a limited period of time provided that the Borrowers satisfied certain conditions set forth in the February 13 Forbearance Agreement;

        WHEREAS, the Borrowers have requested that the First Lien Lenders and the First Lien Administrative Agent amend and restate the February 13 Forbearance Agreement and thereby to continue to forbear from exercising such rights for a limited period of time; and

        WHEREAS, the First Lien Lenders and the First Lien Administrative Agent are willing to amend and restate the February 13 Forbearance Agreement and thereby to forbear from exercising such rights for a limited period of time;

        NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:

ARTICLE I. FORBEARANCE

        Section 1.1     Outstanding Indebtedness .    Each Borrower acknowledges and confirms (a) that Exhibit A hereto sets forth, as of the date hereof, the aggregate principal amount of all outstanding Loans and the issued and outstanding Letters of Credit, and (b) that such amounts are not subject to any defense, counterclaim, recoupment or offset of any kind.

        Section 1.2     Existing Defaults .    Each Borrower acknowledges that the Borrowers have failed to comply with the provisions of the First Lien Credit Agreement as set forth under the heading "Current Events of Defaults" on Exhibit B hereto (collectively, the " Current Events of Default "). Each Borrower further acknowledges (and has so advised the First Lien Administrative Agent) that it anticipates that it may fail during the Forbearance Period (as defined herein) to comply with the provisions of the First Lien Credit Agreement as set forth under the heading "Anticipated Events of Default" on Exhibit B

hereto (collectively, the " Anticipated Events of Default " and together with the Current Events of Default, the " Existing Events of Default ").

        Section 1.3     Continuing Defaults.     With respect to each of the Existing Events of Default, each Borrower acknowledges that (a) such Existing Event of Default is continuing and has not been waived by virtue of any previous actions (or failure to act) by the First Lien Administrative Agent or the First Lien Lenders through any course of conduct or course of dealing or otherwise, (b) as a result of the existence of such Existing Event of Default, the First Lien Lenders and the First Lien Administrative Agent, pursuant to Section 8.02 of the First Lien Credit Agreement and the other Loan Documents, have the right to, among other things, (i) terminate the obligations and any commitment of each First Lien Lender to make any further Loans and/or L/C Credit Extensions, (ii) accelerate the maturity of all of the Loans and all of the other Obligations, and (iii) decline to make any further Loans and/or L/C Credit Extensions.

        Section 1.4     Forbearance and Forbearance Period.     

        (a)   The First Lien Lenders and the First Lien Administrative Agent, by executing this Agreement and upon the satisfaction of the conditions set forth in Article II hereof, hereby agree to forbear from exercising their rights and remedies that exist by virtue of the Existing Events of Default for the period from January 28, 2008 through and including April 30, 2008 (the " Forbearance Period ") subject to the continuing satisfaction during the Forbearance Period of each of the following conditions:

          (i)  after giving effect to the terms of this Agreement, other than the Existing Events of Default, no other Default or Event of Default shall exist under the First Lien Credit Agreement or any Loan Document;

         (ii)  during the Forbearance Period, other than the Existing Events of Default, no other Default or Event of Default shall occur or arise under the First Lien Credit Agreement or any Loan Document and no default or event of default shall occur or arise under this Agreement;

        (iii)  neither the Second Lien Administrative Agent nor the Second Lien Lenders shall exercise or seek to exercise any of their respective rights or remedies under the Second Lien Loan Documents or take or seek to take any action that violates or is inconsistent with the terms of the Intercreditor Agreement or that otherwise impairs or adversely affects any rights or remedies of the First Lien Administrative Agent or the First Lien Lenders under the Loan Documents;

        (iv)  the second lien forbearance agreement as described in Section 3.1(c) hereof shall not have expired by its terms and the "Forbearance Period" set forth therein shall not have terminated; and

         (v)  the Borrowers shall be in compliance with their obligations under the Fee Letter (as defined in Section 3.1(d) hereof);

        (vi)  the Borrowers shall be in compliance with their obligations set forth in that certain side letter agreement dated as of the date hereof;

       (vii)  the Borrowers shall deliver to the First Lien Administrative Agent, as soon as available and in any event no later than April 18, 2008, a copy of any letter of engagement or other similar agreement entered into by the Borrowers with Cain Brothers (which engagement or similar agreement, including the terms and conditions thereof and the scope of Cain Brothers' duties and responsibilities set forth therein, shall be acceptable to the First Lien Administrative Agent), together with a copy of any and all documents further describing the scope of the engagement or consultation and any and all action plans, reports, evaluations or other memoranda delivered to the Borrowers by Cain Brothers;

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      (viii)  the Borrowers shall deliver during the Forbearance Period any updates, amendments, exhibits, or supplements to the Required Reporting Package (as defined in the February 13 Forbearance Agreement) in compliance with the February 13 Forbearance Agreement, each in form and substance satisfactory to the First Lien Lenders and the First Lien Administrative Agent;

        (ix)  the Borrowers shall deliver to the First Lien Administrative Agent as soon as available, and in any event no later than April 17, 2008 revised, assumption based financial projections (both in excel and in hardcopy format) for fiscal year 2008 and fiscal year 2009, which projections otherwise shall meet the requirements of Section 1.4(b)(vi) of the February 13 Forbearance Agreement; and

         (x)  the Borrowers shall deliver to the First Lien Administrative Agent, as soon as available and in any event prior to the expiration of the Forbearance Period the employment agreement for Sam Lee.

(b)

Each Borrower acknowledges and agrees that, upon the failure of any Borrower to satisfy any of the foregoing conditions at any time during the Forbearance Period, the Forbearance Period shall automatically terminate, and each such failure shall immediately constitute an additional Event of Default under the First Lien Credit Agreement. The First Lien Administrative Agent agrees to promptly provide the Borrowers with notice of the termination of the Forbearance Period; provided , however , that the failure to give such notice shall not affect the automatic termination of the Forbearance Period or its immediate constitution as an additional Event of Default, and the Borrowers hereby waive any such notice. Upon termination of the Forbearance Period, the First Lien Administrative Agent and the First Lien Lenders shall be permitted to exercise any and all rights and remedies that exist with respect to the Existing Events of Default.

ARTICLE II. OTHER AGREEMENTS

        Section 2.1     Revolving Loans.     During the Forbearance Period, the Borrowers agree that they will not request any Credit Extension.

        Section 2.2     Consultant Matters.     Further to their obligations under Sections 6.10 and 10.04 of the First Lien Credit Agreement, the Borrowers and their Subsidiaries (a) acknowledge and agree to the First Lien Administrative Agent's continued retention of Alvarez & Marsal as third-party consultants hired on behalf of the First Lien Lenders (the " Consultant "), (b) acknowledge and agree that they will be responsible for the payment of all fees and expenses of such Consultant, (c) agree to fully cooperate with such Consultant and allow such Consultant to: visit and inspect any of the properties of the Borrowers and their Subsidiaries; examine corporate, financial and operating records of the Borrowers and their Subsidiaries; make copies thereof or abstracts therefrom; and discuss the affairs, finances and accounts of the Borrowers and their Subsidiaries with their respective directors, officers, and independent public accountants, (d) consistent with the February 13 Forbearance Agreement, shall continue to provide on a bi-weekly basis to the Consultant (to be forwarded to the First Lien Administrative Agent and the First Lien Lenders) on a rolling basis a thirteen-week financial (cash-flow) budget ( i.e. , schedule of anticipated revenue and expenditures) and shall, when the Borrowers update such budget, also provide to the Consultant (to be forwarded to the First Lien Administrative Agent and the First Lien Lenders) a schedule that shows a projected versus actual comparison of the items set forth in the budget over the course of (i) the preceding two weeks; and (ii) the period beginning on February 18, 2008, and (e) within 2 Business Days' of each budget delivered in accordance with the foregoing Section 2.2(d) , participate in a conference call with the First Lien Lenders to discuss such budget and any variances contained therein.

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        Section 2.3     Modification of Maturity Date.     In the event that the Borrowers, the First Lien Lenders and the Second Lien Lenders do not reach a mutually acceptable waiver and amendment with respect to the Existing Events of Default by the expiration or termination of the Forbearance Period (as such Forbearance Period may be extended by the Required Lenders under each of the First Lien Credit Agreement and the Second Lien Credit Agreement), the Maturity Date under the First Lien Credit Agreement shall be June 30, 2008.

        Section 2.4     Amendments to First Lien Credit Agreement.     The First Lien Administrative Agent, the First Lien Lenders and the Borrowers agree to amend, effective as of the date of this Agreement, the First Lien Credit Agreement by:

          (i)  by deleting the definition of "Applicable Rate" in its entirety and substituting in lieu thereof the following:

         "'Applicable Rate' " means (a) with respect to the Term Loan Facility, 6.50% per annum for Base Rate Loans and 7.50% per annum for Eurodollar Rate Loans and (b) with respect to the Revolving Credit Facility, the applicable percentage per annum set forth below determined by reference to the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b):

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(b); provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then Pricing Level 5 shall apply, in each case as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered.

Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b)."

         (ii)  by deleting the first sentence in the definition of "Base Rate" and substituting in lieu thereof the following:

         "Base Rate" means, for any day, the greater of (a) a fluctuating rate per annum equal to the higher of (i) the Federa