0001104659-08-053371.txt : 20080815 0001104659-08-053371.hdr.sgml : 20080814 20080815140904 ACCESSION NUMBER: 0001104659-08-053371 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20080815 DATE AS OF CHANGE: 20080815 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PROSPECT MEDICAL HOLDINGS INC CENTRAL INDEX KEY: 0001063561 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 330604264 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-81215 FILM NUMBER: 081022434 BUSINESS ADDRESS: STREET 1: 10780 SANTA MONICA BLVD STREET 2: SUITE 400 CITY: LOS ANGELES STATE: CA ZIP: 90025 BUSINESS PHONE: 310.943.4500 MAIL ADDRESS: STREET 1: 10780 SANTA MONICA BLVD STREET 2: SUITE 400 CITY: LOS ANGELES STATE: CA ZIP: 90025 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEE SAMUEL SANG-BUM CENTRAL INDEX KEY: 0001410209 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: BUSINESS PHONE: 310-943-34500 MAIL ADDRESS: STREET 1: 11500 W OLYMPIC BLVD STREET 2: SUITE 502 CITY: LOS ANGELES STATE: CA ZIP: 90064 SC 13D/A 1 a08-21705_1sc13da.htm SC 13D/A

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 4)*

Prospect Medical Holdings, Inc.

(Name of Issuer)

Common Stock, par value $.01 per share

(Title of Class of Securities)

743494106

(CUSIP Number)

Samuel S. Lee
c/o Prospect Medical Holdings, Inc.
10780 Santa Monica Blvd., Suite 400
Los Angeles, CA 90025

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

August 13, 2008

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 743494106

	1.	Names of Reporting Persons Samuel S. Lee

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) OO (SEE RESPONSE TO ITEM 3)

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization USA

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 5,125,768 (SEE RESPONSES TO ITEMS 4 AND 5)

			8.	Shared Voting Power

			9.	Sole Dispositive Power 5,125,768

			10.	Shared Dispositive Power SHARED DISPOSITIVE POWER

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 5,125,768

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 25.4%*

	14.	Type of Reporting Person (See Instructions) IN

* Based on 20,146,967 shares of Common Stock outstanding (comprised of the aggregate of 11,782,567 shares of Common Stock outstanding as of July 8, 2008 (as reported by the Issuer in its 2008 Proxy Statement filed July 10, 2008) and 8,364,400 shares of Common Stock issued to the Shareholders on August 13, 2008 pursuant to the conversion of the Issuer’s outstanding 1,672,880 shares of Series B Preferred Stock (as such capitalized terms are hereinafter defined)).

This filing is being made to further amend the Schedule 13D previously filed by Samuel S. Lee on August 20, 2007, as amended (the “Original Schedule 13D Filing”), solely to amend and restate Items 1, 3, 4, and 5(a)-(b) and to file Exhibit 8 to this Statement. There have been no other changes to the information previously reported in the Original Schedule 13D Filing.

Item 1.	Security and Issuer
The name of the issuer is Prospect Medical Holdings, Inc., a Delaware corporation (the “Issuer”), which has its principal executive offices at 10780 Santa Monica Blvd., Suite 400, Los Angeles, CA 90025. The class of equity securities to which this statement relates is the common stock, par value $0.01 per share (the “Common Stock”), of the Issuer.

Item 3.	Source and Amount of Funds or Other Consideration
On August 8, 2007, the Issuer acquired Alta Healthcare System, Inc., a Delaware corporation (“Alta”), pursuant to an Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Mr. Lee and the David & Alexa Topper Family Trust, U/D/T September 29, 1997 (the “Trust”), the sole shareholders of Alta (collectively, the “Shareholders”), the Issuer, Prospect Hospitals System, LLC, a California limited liability company and a direct wholly-owned subsidiary of the Issuer (“Sub”), and Alta, providing for the merger of Alta with and into Sub, with Sub as the surviving entity (the “Survivor”) and continuing as a wholly-owned subsidiary of the Issuer (such acquisition is referred to herein as the “Merger”). As a result of the Merger, Mr. Lee received 943,568 shares of Common Stock, 836,440 shares of Series B Preferred Stock, par value .01 per share (the “Series B Preferred Stock”), and $25.6 million in cash. A copy of the Merger Agreement has previously been filed as Exhibit 1 to this Statement and is incorporated herein by reference. The terms of the Series B Preferred Stock provided that it was not convertible into Common Stock upon issuance, but would become convertible by its terms upon receipt of stockholder approval. Such approval was obtained at the Issuer’s annual meeting of stockholders held on August 13, 2008. As a result, upon receipt of such approval each share of Series B Preferred Stock automatically became convertible into five shares of Common Stock at a conversion price of $5.00 per share of Common Stock. Thus, Mr. Lee’s 836,440 shares of Series B Preferred Stock became convertible into a total of 4,182,200 shares of Common Stock. Mr. Lee converted all of his Series B Preferred Stock into Common Stock following the annual meeting and after approval by the American Stock Exchange of the listing of the underlying shares of Common Stock. As a result, Mr. Lee now holds a total of 5,125,768 shares of Common Stock and no Series B Preferred Stock. In addition, Mr. Lee no longer has certain rights associated with being a holder of the Series B Preferred Stock, including the right to elect, with all holders of Series B Preferred Stock as a class, two directors to the Issuer’s Board of Directors and the right to receive any accrued and unpaid dividends.

Item 4.	Purpose of Transaction
As described under Item 3 above, as a result of the Merger, Mr. Lee received 943,568 shares of Common Stock, 836,440 shares of the Series B Preferred Stock and $25.6 million in cash, and such Series B Preferred Stock has since been converted into 4,182,200 shares of Common Stock. The Merger Agreement includes certain indemnification provisions pursuant to which the Shareholders have agreed, severally (not jointly), to indemnify the Issuer and certain of its affiliates against certain losses and expenses (i) resulting from breaches of representations and warranties and covenants of the Shareholders and Alta and its subsidiaries under the Merger Agreement and

(ii) relating to certain pending litigation against Alta, Mr. Lee and David Topper (the “Special Litigation”). Pursuant to the Merger Agreement, (i) the Issuer has limited periods of time in which to make claims, depending on the event that gives rise to the indemnification obligation; and (ii) subject to certain exceptions (including those provisions relating to the Special Litigation), the Shareholders are obligated to pay only those losses which exceed $800,000 in the aggregate, and the Shareholders have a maximum aggregate liability of (A) 10% of the total consideration received by the Shareholders (the “Merger Consideration”) with respect to claims asserted on or before January 2, 2008 and (B) 5% of the Merger Consideration with respect to claims asserted after January 2, 2008.

Under the Merger Agreement, the Shareholders may satisfy their indemnification obligation by payment half in cash and half by returning shares of the Common Stock. With respect to any shares of the Common Stock returned for cancellation, such shares will be assigned a value of $5.00 per share.

The Merger Agreement also includes certain non-competition provisions that are binding on Mr. Lee.

At the closing of the Merger (the “Closing”), Mr. Lee and the Trust entered into a Registration Rights Agreement with the Issuer, dated as of August 8, 2007 (the “Registration Rights Agreement”), which contains provisions that, among other things, (i) restrict transfers of a certain percentage of shares of the Common Stock for a period of three years; and (ii) obligate the Issuer to prepare and file a registration statement to register such shares under the U.S. securities laws upon the request of any holder of such shares (as well as grants such holder so-called “piggyback” registration rights). A copy of the Registration Rights Agreement has previously been filed as Exhibit 3 to this Statement and is incorporated herein by reference. In addition, at the Closing of the Merger the Survivor entered into an Executive Employment Agreement, dated as of August 8, 2007 (the “Employment Agreement”), with Mr. Lee. The Employment Agreement provides, among other things, that Mr. Lee will serve as the Chief Executive Officer of the Survivor for a term of five years, on the terms and subject to the conditions set forth therein. A copy of the Employment Agreement has previously been filed as Exhibit 4 to this Statement and is incorporated herein by reference. The Employment Agreement was later amended on April 16,2008, and made effective as of March 19, 2008 (the “First Amended Employment Agreement”), to reflect Mr. Lee’s promotion to the position of Chief Executive Officer of the Issuer. A copy of the First Amended Employment Agreement has previously been filed as Exhibit 7 to this Statement and is incorporated herein by reference. The Employment Agreement was further amended on July 8, 2008, and made effective as of March 19, 2008 (the “Second Amended Employment Agreement”), to effectuate a salary increase and bonus approved by the Issuer’s Compensation Committee on April 23, 2008. The amendment provides for an increase in Mr. Lee's base annual salary, retroactive to March 19, 2008 (the date on which Mr. Lee became Chief Executive Officer of the Issuer), from $610,000 to $650,000, and payment to Mr. Lee of a one-time bonus of $425,000 in recognition of his extraordinary services in implementing the Issuer’s turnaround plan. A copy of the Second Amended Employment Agreement is attached hereto as Exhibit 8 to this Statement and is incorporated herein by reference.

With respect to current plans or proposals of Mr. Lee which relate to or would result in the acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer, (i) Mr. Lee may in the future seek to acquire additional shares of the Common Stock; (ii) Mr. Lee’s Employment Agreement, as amended, provides that he shall be eligible to participate in any executive equity incentive plan adopted by the Board of Directors of the Issuer; and (iii) subject to the terms of the Registration Rights Agreement, Mr. Lee may in the future seek to dispose of some or all

of his shares of the Common Stock. Any such acquisition or disposition may be effected in privately negotiated transactions, in the open market, in block transactions, pursuant to underwritten transactions (in the case of dispositions) or otherwise. There can be no assurance that any such acquisition or disposition of shares of the Common Stock would occur or as to the timing or method of any such acquisition or disposition on the open market, through private transactions or otherwise in accordance with applicable law.

With respect to current plans or proposals of Mr. Lee which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in any material change in the present capitalization or dividend policy of the Issuer, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in any other material change in the Issuer’s business or corporate structure, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in changes in the Issuer’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person, Mr. Lee currently has no such plans or proposals, except as discussed herein or as contemplated by the Merger Agreement.

With respect to current plans or proposals of Mr. Lee which relate to or would result in causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to section 12(g)(4) of the Securities Exchange Act of 1934, as amended, Mr. Lee currently has no such plans or proposals.

With respect to current plans or proposals of Mr. Lee which relate to or would result in any action similar to any of those enumerated above, Mr. Lee currently has no such plans or proposals, except as set forth herein or as may be contemplated by the Registration Rights Agreement or the Merger Agreement.

In addition to the foregoing, Mr. Lee, as the Issuer’s Chief Executive Officer, exercises the management powers of such office with respect to the business and affairs of the Issuer and, as a

director and Chairman of the Board of Directors of the Issuer, may seek to influence the Board of Directors and management with respect to its business and affairs. Mr. Lee is continually reviewing and evaluating his positions with respect to the Issuer and may at any time reconsider and change his positions and formulate plans or proposals with respect to such matters, but he has no current plans to do so. The foregoing is qualified in its entirety by reference to the exhibits filed with and incorporated by reference in this Statement, including the Merger Agreement and the Registration Rights Agreement.

Item 5.	Interest in Securities of the Issuer
(a)-(b) The aggregate number of shares of Common Stock deemed to be beneficially owned by Mr. Lee for the purposes of this Statement is 5,125,768, representing 25.4% of the outstanding shares of Common Stock of the Issuer (based on 20,146,967 shares of Common Stock outstanding (comprised of the aggregate of 11,782,567 shares of Common Stock outstanding as of July 8, 2008 (as reported by the Issuer in its 2008 Proxy Statement filed July 10, 2008) and 8,364,400 shares of Common Stock issued to the Shareholders on August 13, 2008 pursuant to the conversion of the Issuer’s outstanding 1,672,880 shares of Series B Preferred Stock). Mr. Lee has sole voting and dispositive power as to all such shares.

Item 7.	Material to be Filed as Exhibits
8) Second Amendment to Executive Employment Agreement, dated as of July 8, 2008, by and among Issuer, Alta, and Mr. Lee

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

	August 15, 2008
	Date
	/s/ Samuel S. Lee
	Signature
	Samuel S. Lee
	Name/Title

	ATTENTION
Intentional misstatements or omissions of fact constitute Federal Criminal Violations (See 18 U.S.C. 1001).

EXHIBIT INDEX

8) Second Amendment to Executive Employment Agreement, dated as of July 8, 2008, by and among Issuer, Alta, and Mr. Lee

EX-8 2 a08-21705_1ex8.htm EX-8

Exhibit 8

SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

This Second Amendment to Executive Employment Agreement (“Second Amendment”) is effective as of the 8th day of July, 2008 (the “Effective Date”) by and among Prospect Medical Holdings, Inc., a Delaware corporation (“PMH”), Alta Hospitals System, LLC, a California limited liability company (“Alta”) and Samuel S. Lee, an individual (“Executive”) with reference to the following:

a. Alta, as Employer, and Executive previously entered into an Executive Employment Agreement effective as of August 8, 2007 providing for the employment of Executive as Chief Executive Officer of Alta (the “Employment Agreement”).

b. Alta is a wholly owned subsidiary of PMH.

c. The Employment Agreement was amended by a First Amendment to Executive Employment Agreement effective March 19, 2008 (the “First Amendment”) whereby Executive agreed to serve as Chief Executive Officer of PMH in addition to continuing his service as Chief Executive Officer of Alta.

d. By this Second Amendment, PMH and Executive desire to further amend the Employment Agreement to provide for an increase in Executive’s base compensation to reflect the additional duties assumed by Executive in connection with his appointment as Chief Executive Officer of PMH.

e. During its current fiscal year, Executive has led PMH in the implementation of a turnaround plan, including the negotiation of waivers and amendments to PMH’s outstanding credit facilities, and in so doing has provided extraordinary services to PMH.

f. By this Second Amendment, PMH and Executive desire to further amend the Employment Agreement to provide for the payment to Executive of a one time turnaround services bonus in consideration of the extraordinary services provided by Executive in connection with the implementation of PMH’s turnaround plan.

Capitalized terms used herein but not defined shall have the meaning given to them in the Employment Agreement.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged, PMH, Alta and Executive agree to and hereby further amend the Employment Agreement (as previously amended by the First Amendment) in the following respects.

1. Base Salary Increase. Section 4a of the Employment Agreement is hereby amended in its entirety as follows:

“(a) Base Salary. PMH shall pay Executive a base salary of Six Hundred Fifty Thousand Dollars ($650,000) per annum (the “Base Salary”), effective retroactively as of March 19, 2008. Payments shall be made in periodic installments in accordance with the normal payroll practices of Employer, as such may be changed from time to time to consolidate or coordinate with the normal payroll practices of PMH and/or PMH’s subsidiaries or affiliates; provided, however, that in order to give retroactive effect to Executive’s Base Salary as of March 19, 2008, Executive’s next regularly

scheduled Base Salary payment installment shall be adjusted to include such additional amounts as may be necessary to account for the difference between the aggregate payments actually received by Executive in all periodic payments made subsequent to March 19, 2008 and the aggregate payments which would have been received by Executive in such periodic payments had such payments reflected the foregoing Base Salary as of March 19, 2008. The Base Salary may be increased but not decreased.”

2. Turnaround Services Bonus. Section 4h is hereby added to the Employment Agreement to read in its entirety as follows:

“(h) Turnaround Services Bonus. In consideration of the extraordinary services provided by Executive in connection with the turnaround efforts implemented by PMH during its current fiscal year, PMH shall pay to Executive, on or before July 11, 2008, a one-time turnaround services bonus in the amount of Four Hundred Twenty Five Thousand Dollars ($425,000).”

3. Definition of Employer. Section 10(l) is hereby added to the Employment Agreement to read in its entirety as follows:

“(l) The term Employer, whenever used in this Agreement, shall mean PMH and/or Alta, as the context shall require.”

4. Employment Agreement Continued. Except as modified by this Second Amendment, the Employment Agreement, as previously modified by the First Amendment, is ratified and shall continue in all respects.

IN WITNESS WHEREOF, PMH, Executive and Alta have executed this Second Amendment as of the date set forth above.

“PMH”		“EXECUTIVE”

PROSPECT MEDICAL HOLDINGS, INC.


By:
	Ellen Shin, Esq.	Samuel S. Lee
	Secretary

“ALTA”

ALTA HOSPITALS SYSTEM, LLC


By:
	Samuel S. Lee
	Manager