Exhibit 10.5


 


Bank of
America, N.A.


WA1-501-17-32


800 Fifth
Avenue, Floor 17


Seattle,
WA  98104


 


December 31, 2008


 


Prospect Medical Group, Inc.


1920 East 17th Street, Suite 200


Santa Ana, CA 92705


 


Re:                               Second Amendment to Letter Agreement
Regarding Divestiture Plan (“Second Amendment”)


 


Ladies and Gentlemen:


 


Reference is hereby made
to that certain side letter agreement dated as of May 15, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the “Divestiture
Letter Agreement”) among Prospect Medical Holdings, Inc. (“Holdings”),
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
thereto (collectively, the “First Lien Lenders”).  Terms not otherwise defined in this Second
Amendment shall have the meaning assigned thereto in the Divestiture Letter
Agreement.


 


Under
the terms of the Divestiture Letter Agreement, the Borrowers agreed to complete
the sale of the ProMed Entities (as defined in the Divestiture Plan) no later
than December 31, 2008 (the “Sale Deadline”).  The Borrowers have requested that the First
Lien Administrative Agent and the First Lien Lenders amend the Divestiture
Letter Agreement to extend the Sale Deadline to January 31, 2009.  The First Lien Administrative Agent and the
First Lien Lenders are willing to grant the Borrowers’ request subject to the
terms and conditions of this Second Amendment.


 


In
furtherance thereof, the First Lien Administrative Agent, the First Lien
Lenders and the Borrowers agree that paragraph (c) of the Divestiture
Letter Agreement is hereby amended and restated in its entirety to read as follows:


 


“(c)         The
Borrowers shall complete the sale of (i) the Antelope Valley Entities (as
defined in the Divesture Plan) no later than October 1, 2008 and in
accordance with the terms set forth in the Amendment and (ii) the ProMed
Entities (as defined in the Divesture Plan) no later than January 31, 2009 on terms and conditions reasonably
satisfactory to the First Lien Administrative Agent and the Required Lenders.”


 


This
Second Amendment shall become effective as of December 31, 2008, upon (a) execution
by the Borrowers, the Guarantors, the First Lien Administrative Agent and the
Required Lenders, (b) payment of all professional fees and expenses of the
First Lien 


 

















 


Administrative
Agent and the First Lien Lenders in connection with this Second Amendment, the
Loan Documents and the transactions contemplated hereby and thereby (including
all fees and expenses of Winston & Strawn LLP, in its capacity as
counsel to the First Lien Administrative Agent), pursuant to wire transfer instructions to be
provided by the First Lien Administrative Agent.


 


Except
for the amendment contained herein, all of the terms and provisions of the
Divestiture Letter Agreement and the other Loan Documents shall remain in full
force and effect.  The Borrowers, by
their acceptance hereof,
hereby acknowledge and agree that the failure to provide the required items
within the time period set forth in the Divestiture Letter Agreement, or the
failure to complete the sale of the ProMed Entities prior to the date specified
in the Divestiture Letter Agreement, as amended hereby, shall result in an
Event of Default in accordance with Section 8.01(b) of the
First Lien Credit Agreement.


 


Each of the Guarantors,
by their acknowledgment hereto, agree and consent to this Second Amendment, to
all prior Loan Documents, and to the documents and agreements referred to
herein and therein, and to all future modifications and amendments thereto, and
any termination thereof, and to any and all other present and future documents
and agreements between or among the Borrowers and the First Lien Administrative
Agent.  The Guarantors agree to be bound
by all terms of the Loan Documents applicable to “Loan Parties”.  Nothing contained herein shall in any way
expand, limit or diminish any of the obligations of the Guarantors under their
respective guaranty, each such guaranty being hereby ratified and
affirmed.  The signatures of each of the
Guarantors shall be fully effective even if any other Guarantor fails to sign
this Second Amendment.


 


Each of the Borrowers and
Guarantors hereby waives and releases the First Lien Administrative Agent, each
First Lien Lender and their respective directors, officers, employees, agents,
attorneys, affiliates and subsidiaries (each a “Releasee”) from any and
all claims, offsets, defenses and counterclaims, known and unknown, that such
Person may have as of the date of this Second Amendment based upon, relating
to, or arising out of the Obligations and related transactions in any way.  Each of the Borrowers and Guarantors intends
the foregoing release to cover, encompass, release and extinguish, among other
things, all claims and matters that might otherwise be reserved by California
Civil Code Section 1542, which provides as follows:


 


“A
general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release,
which if known by him or her must have materially affected his or her
settlement with the debtor.”


 


Notwithstanding
the foregoing, this Second Amendment shall not constitute a release of the
obligations of the First Lien Administrative Agent or any First Lien Lender
under the Loan Documents, such waiver and release being with full knowledge and
understanding of the circumstances and effect thereof and after having
consulted legal counsel with respect thereto.


 

















 


This Second Amendment
shall constitute a Loan Document and may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Delivery of executed counterparts of this
Second Amendment by telecopy or pdf shall be effective as an original.


 


Very truly yours,


 


	
   

  	
  BANK
  OF AMERICA, N.A., in its capacity as First Lien Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tiffany Shin

  
	
   

  	
  Name:

  	
  Tiffany Shin

  
	
   

  	
  Title:

  	
  Assistant Vice
  President

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


	
   

  	
  BANK
  OF AMERICA, N.A., as a First Lien Lender, L/C Issuer and Swing Line Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas E. Brown

  
	
   

  	
  Name:

  	
  Thomas E. Brown

  
	
   

  	
  Title:

  	
  Senior Vice President

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


	
   

  	
  CAMULOUS
  MASTER FUND L.P., as a First Lien Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael P. Iuliano

  
	
   

  	
  Name:

  	
  Michael P. Iuliano

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


	
   

  	
  FIELD
  POINT I, LTD., as a First Lien Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael A. Gatto

  
	
   

  	
  Name:

  	
  Michael A. Gatto

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


	
   

  	
  FIELD
  POINT II, LTD., as a First Lien Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael A. Gatto

  
	
   

  	
  Name:

  	
  Michael A. Gatto

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


	
   

  	
  FIELD
  POINT III, LTD., as a First Lien Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael A. Gatto

  
	
   

  	
  Name:

  	
  Michael A. Gatto

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


	
   

  	
  GULF
  STREAM ASSET MANAGEMENT, as a First Lien Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [illegible]

  
	
   

  	
  Name:

  	
  [illegible]

  
	
   

  	
  Title:

  	
  Chief Credit Officer

  



 


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  GULF
  STREAM-COMPASS CLO 2005-I LTD

  By: Gulf Stream Asset
  Management, LLC

  As Collateral Manager

  	
   

  	
  GULF
  STREAM-COMPASS CLO 2005-II LTD

  By: Gulf Stream Asset
  Management, LLC

  As Collateral Manager

  
	
   

  	
   

  	
   

  
	
  GULF
  STREAM-SEXTANT CLO 2006-I LTD

  By: Gulf Stream Asset
  Management, LLC

  As Collateral Manager

  	
   

  	
  GULF
  STREAM-RASHINBAN CLO 2006-I LTD

  By: Gulf Stream Asset
  Management, LLC

  As Collateral Manager

  
	
   

  	
   

  	
   

  
	
  GULF
  STREAM-SEXTANT CLO 2007-I LTD

  By: Gulf Stream Asset Management, LLC

  As Collateral Manager

  






 


Second Amendment to First Lien Divestiture Letter Agreement


 
















 


	
   

  	
  PPM
  MONARCH BAY FUNDING LLC, as a First Lien Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tara E. Kenny

  
	
   

  	
  Name:

  	
  Tara E. Kenny

  
	
   

  	
  Title:

  	
  Assistant Vice
  President

  



 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 


Accepted and Agreed:


 


	
  PROSPECT MEDICAL
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Samuel S. Lee

  	
   

  
	
  Name:

  	
  Samuel S. Lee

  	
   

  
	
  Title:

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PROSPECT MEDICAL GROUP,
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Samuel S. Lee

  	
   

  
	
  Name:

  	
  Samuel S. Lee

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  



 


[Guarantor
Signature Pages Follow]


 


Second Amendment to First Lien Divestiture Letter Agreement


 

















 




	
  ALTA HOSPITALS SYSTEM,
  LLC, formerly known as PROSPECT HOSPITALS SYSTEM, LLC

  	
   

  	
  NUESTRA FAMILIA MEDICAL
  GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Samuel S. Lee

  	
   

  	
  By:

  	
  /s/ Samuel S. Lee

  
	
  Name:

  	
  Samuel S. Lee

  	
   

  	
  Name:

  	
  Samuel S. Lee

  
	
  Title:

  	
  Chief Executive Officer

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PROMED HEALTH CARE
  ADMINISTRATORS

  	
   

  	
  PROSPECT ADVANTAGE
  NETWORK, INC.

  
	
  PROMED HEALTH SERVICES
  COMPANY

  	
   

  	
  PINNACLE HEALTH RESOURCES

  
	
   

  	
   

  	
   

  	
  PROSPECT HOSPITAL ADVISORY
  SERVICES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Samuel S. Lee

  
	
  By:

  	
  /s/ Samuel S. Lee

  	
   

  	
  Name: 

  	
  Samuel S. Lee

  
	
  Name: 

  	
  Samuel S. Lee

  	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
  Title: 

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  POMONA VALLEY MEDICAL
  GROUP, INC.

  	
   

  	
  ARTHUR E. LIPPER, solely
  in his capacity as

  
	
  UPLAND MEDICAL GROUP, A
  PROFESSIONAL MEDICAL CORPORATION

  	
   

  	
  Pledgor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Samuel S. Lee

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Samuel S. Lee

  	
   

  	
  /s/ Arthur E.
  Lipper

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  






 


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Second Amendment to First Lien Divestiture Letter Agreement


 

















 




	
  ALTA LOS ANGELES
  HOSPITALS, INC.

  	
   

  	
  PROSPECT MEDICAL SYSTEMS,
  INC.

  
	
  ALTA HOLLYWOOD HOSPITALS,
  INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Samuel S. Lee

  
	
  By:

  	
  /s/ Ellen J. Shin

  	
   

  	
  Name:

  	
  Samuel S. Lee

  
	
  Name:

  	
  Ellen J. Shin

  	
   

  	
  Title:

  	
  Chairman of the Board

  
	
  Title:

  	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SANTA ANA/TUSTIN
  PHYSICIANS GROUP, INC.

  	
   

  	
   

  
	
  PROSPECT HEALTH SOURCE
  MEDICAL GROUP, INC.

  	
   

  	
   

  
	
  PROSPECT PROFESSIONAL CARE
  MEDICAL GROUP, INC.

  	
   

  	
   

  
	
  PROSPECT NWOC MEDICAL
  GROUP, INC.

  	
   

  	
   

  
	
  APAC MEDICAL GROUPS, INC.

  	
   

  	
   

  
	
  STARCARE MEDICAL GROUP,
  INC.

  	
   

  	
   

  
	
  GENESIS HEALTHCARE OF
  SOUTHERN CALIFORNIA, INC., A MEDICAL GROUP

  	
   

  	
   

  
	
  PROSPECT PHYSICIANS
  ASSOCIATES, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Samuel S. Lee

  	
   

  	
   

  
	
  Name:

  	
  Samuel S. Lee

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  	
   

  






 


Second Amendment to First Lien Divestiture Letter Agreement