Exhibit 10.8


 


Bank of
America, N.A.


WA1-501-17-32


800 Fifth
Avenue, Floor 17


Seattle,
WA  98104


 


January 30, 2009


 


Prospect Medical Group, Inc.


1920 East 17th Street, Suite 200


Santa Ana, CA 92705


 


Re:                               Third Amendment to Letter Agreement
Regarding Divestiture Plan and Consent (this “Agreement”)


 


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 “Second
Lien Administrative Agent”), and the lenders party
thereto (collectively, the “Second Lien Lenders”).  Reference is also hereby made to that certain Second Lien Credit
Agreement dated as of August 8, 2007 (as amended, restated, supplemented
or otherwise modified, the “Second Lien Credit Agreement”), pursuant to
which the Second Lien Lenders have agreed to make the Loans and other
extensions of credit, all upon the terms and conditions set forth in the Second
Lien Credit Agreement.  Terms not otherwise
defined in this Agreement shall have the meaning assigned thereto in the
Divestiture Letter Agreement and the Second Lien Credit Agreement, as
applicable.


 


1.             Third Amendment to 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 January 31, 2009 (the “Sale Deadline”).  The Borrowers have requested that the Second
Lien Administrative Agent and the Second Lien Lenders amend the Divestiture
Letter Agreement to extend the Sale Deadline to February 27, 2009 (the “Extension
Deadline”).  The Second Lien
Administrative Agent and the Second Lien Lenders are willing to grant the
Borrowers’ request subject to the terms and conditions of this Agreement.


 


In
furtherance thereof, the Second Lien Administrative Agent, the Second 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 February 27,
2009 on terms and conditions reasonably
satisfactory to the Second Lien Administrative Agent and the Required Lenders.”


 


2.             Consent by the Second Lien
Lenders


 


Prospect Hospital Advisory Services, Inc., a
Prospect subsidiary, presently owns a minority interest in Brotman Medical
Center, Inc. (“Brotman”).  In
connection with Brotman’s exit from current bankruptcy proceedings and as part
of a plan of reorganization for Brotman, the Borrowers placed certain amounts
with the U.S. Bankruptcy Court for the Central District of California, Los
Angeles Division, in an attempt to purchase additional equity in Brotman.  Should the Borrowers prevail, the Borrowers’
resulting ownership interest could approach 70% or more.


 


Under the terms of the Credit Agreement, acquiring a
majority interest in Brotman would immediately qualify Brotman as a “Subsidiary”
of the Borrowers and would require joinder of Brotman to the Collateral
Agreement and the Subsidiary Guaranty Agreement within a short period of time
following such acquisition.


 


Accordingly, the Borrowers have requested that, in
the event that any Borrower (or any Subsidiary or Subsidiaries thereof)
acquires a majority interest in Brotman prior to the Extension Deadline, the
Second Lien Administrative Agent and the Second Lien Lenders exclude Brotman as
a “Subsidiary” under the Second Lien Credit Agreement until the expiration of
the Extension Deadline.


 


Subject to the terms and conditions of this
Agreement, the Second Lien Administrative Agent and the Second Lien Lenders
hereby consent and agree that, should any Borrower (or any Subsidiary or
Subsidiaries thereof), acquire a majority ownership interest in Brotman prior
to the expiration of the Extension Deadline, Brotman shall not be deemed or
considered a “Subsidiary” under the terms of the Second Lien Credit Agreement for any purpose until
the expiration of the Extension Deadline.


 


This
Agreement shall become effective as of January 30, 2009, upon (a) execution
and delivery of this Agreement by the Borrowers, the Guarantors, the Second
Lien Administrative Agent and the Required Lenders under the Second Lien Credit
Agreement, (b) execution and delivery by the Borrowers, the Guarantors,
the First Lien Administrative Agent and the “Required” Lenders under the First
Lien Credit Agreement of an agreement substantially similar to this Agreement,
and (c) payment of all professional fees and expenses of the Second Lien
Administrative Agent and the Second Lien Lenders in connection with this
Agreement and the transactions contemplated hereby and thereby (including all
fees and expenses of Winston & Strawn LLP, in its capacity as counsel
to the Second Lien Administrative Agent), pursuant to wire transfer instructions to be provided
by the Second Lien Administrative Agent.


 


Except
for the amendment and consent contained herein, all of the terms and provisions
of the Divestiture Letter Agreement, the Second Lien Credit 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 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 Second
Lien Credit Agreement.  In addition, the
Borrowers acknowledge and agree that, should the Borrowers (or any Subsidiary
or Subsidiaries thereof) obtain majority ownership of Brotman and unless otherwise addressed
prior to such date in accordance with the terms of the Second Lien Credit
Agreement, upon the expiration of the Extension Deadline, the Borrowers shall
be required to comply with, and Brotman shall be subject to, the terms of the
Second Lien Credit Agreement and the other Loan Documents in all respects.


 


Each of the Guarantors,
by their acknowledgment hereto, agree and consent to this Agreement, 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, the Second 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 Agreement.


 


Each of the Borrowers and
Guarantors hereby waives and releases the Second Lien
Administrative Agent and the Second Lien Lenders 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 Agreement 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 Agreement shall not
constitute a release of the obligations of the Second Lien Administrative Agent
or any Second 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.


 


[Signature Pages Follow]


 

















 


This Agreement 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 Agreement by telecopy or pdf shall be
effective as an original.


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  	
   

  
	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tiffany Shin

  
	
   

  	
  Name:

  	
  Tiffany Shin

  
	
   

  	
  Title:

  	
  Assistant Vice
  President

  
					



 


[Signature Pages Continue]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
   

  	
  CMF Cayman Ltd., as a Second
  Lien Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael P. Iuliano

  
	
   

  	
  Name:

  	
  Michael P. Iuliano

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


[Signature Pages Continue]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
   

  	
  Field
  Point I, LTD., as a Second Lien Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Petrilli

  
	
   

  	
  Name:

  	
  Richard Petrilli

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


[Signature Pages Continue]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
   

  	
  Field
  Point II, LTD., as a Second Lien Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Petrilli

  
	
   

  	
  Name:

  	
  Richard Petrilli

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 


[Signature Pages Continue]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
   

  	
  Grand
  Central Asset Trust, CMF Series, as a Second Lien Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Molly Walter

  
	
   

  	
  Name:

  	
  Molly Walter

  
	
   

  	
  Title:

  	
  Attorney-In-Fact

  



 


[Signature Pages Continue]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
  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]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
  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

  PROMED HEALTH SERVICES COMPANY  

  	
   

  	
  PROSPECT
  ADVANTAGE NETWORK, INC.

  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:    Vice
  President

  	
   

  	
  Title:    President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  POMONA
  VALLEY MEDICAL GROUP, INC.

  UPLAND MEDICAL GROUP, A PROFESSIONAL MEDICAL CORPORATION  

  	
   

  	
  ARTHUR
  E. LIPPER, solely in his capacity as

  Pledgor  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Samuel S. Lee 

  	
   

  	
   

  
	
  Name:  Samuel S. Lee 

  	
   

  	
  /s/
  Arthur E. Lipper

  
	
  Title:    Vice
  President

  	
   

  	
   

  



 


[Signature Pages Continue]


 


Third Amendment to Second Lien Divestiture Letter Agreement and Consent


 

















 


	
  ALTA
  LOS ANGELES HOSPITALS, INC.

  ALTA HOLLYWOOD HOSPITALS, INC.  

  	
   

  	
  PROSPECT
  MEDICAL SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  David Topper

  	
   

  	
  By:

  	
  /s/
  Samuel S. Lee 

  
	
  Name:  David Topper 

  	
   

  	
  Name:  Samuel S. Lee 

  
	
  Title:    Chief
  Executive Officer

  	
   

  	
  Title:    Chairman
  of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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

  	
   

  	
   

  



 


Third
Amendment to Second Lien Divestiture Letter Agreement and Consent