Document:

Exhibit 10.5

 

*     Confidential
Information identified below was omitted and filed separately with the
Securities and Exchange Commission.

 

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

  

 

[Signature Pages Continue]

 

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

  

 

[Signature Pages Continue]

 

Second Amendment to First
Lien Divestiture Letter Agreement

 

 

[CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH

THE SECURITIES AND EXCHANGE COMMISSION]  

 

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

  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:

  	
  President and Chief Executive Officer

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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]

 

Second Amendment to First Lien Divestiture Letter Agreement

 

 

	
  ALTA
  LOS ANGELES HOSPITALS, INC.

  ALTA HOLLYWOOD HOSPITALS, INC.

  	
   

  	
  PROSPECT
  MEDICAL SYSTEMS, 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 AgreementExhibit 10.6

 

*                 Confidential
Information identified below was omitted and filed separately with the
Securities and Exchange Commission.

 

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 “Second
Lien Administrative
Agent”), and the lenders
party thereto (collectively, the “Second 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 Second
Lien Administrative Agent and the Second Lien Lenders amend the Divestiture
Letter Agreement to extend the Sale Deadline to January 31, 2009.   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 Second Amendment.

 

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 January 31, 2009 on terms and conditions reasonably
satisfactory to the Second 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 Second Lien Administrative Agent and the
Required Lenders, (b) payment of all professional fees and expenses of the
Second Lien Administrative Agent and the Second 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 Second Lien Administrative Agent),
pursuant to wire transfer
instructions to be provided by the Second 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 Second 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 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 Second Amendment.

 

Each of the Borrowers and
Guarantors hereby waives and releases the Second Lien Administrative Agent,
each Second 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 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.

 

 

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 Second Lien Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tiffany Shin

  
	
   

  	
  Name:

  	
  Tiffany Shin

  
	
   

  	
  Title:

  	
  Assistant Vice
  President

  

 

[Signature Pages Continue]

 

Second Amendment to Second Lien Divestiture Letter Agreement

 

 

[CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION]

 

Second Amendment to
Second 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 Second 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

  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:

  	
  President and Chief Executive Officer

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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]

 

Second
Amendment to Second Lien Divestiture Letter Agreement

 

 

	
  ALTA
  LOS ANGELES HOSPITALS, INC.

  ALTA HOLLYWOOD HOSPITALS, INC.

  	
   

  	
  PROSPECT
  MEDICAL SYSTEMS, 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 Second Lien Divestiture Letter Agreement

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