-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UApgppDrOHBDbgzjQ05zazjj/C8baqJ3kZPF0KkP8Hjg/sZwjkkI85SA2NR619iv dQp2U9sBoQLGzodWkn0Zmw== 0001104659-08-055220.txt : 20080827 0001104659-08-055220.hdr.sgml : 20080827 20080827060059 ACCESSION NUMBER: 0001104659-08-055220 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20080827 DATE AS OF CHANGE: 20080827 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 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: 081040442 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 SC 13D/A 1 a08-22361_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. 5)*

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 20, 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(b) 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.

CUSIP No. 743494106

	1	NAME 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) Not Applicable

	5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 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 6,125,768

			8	SHARED VOTING POWER

			9	SOLE DISPOSITIVE POWER 6,125,768

			10	SHARED DISPOSITIVE POWER

	11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,125,768

	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) 28.8%*

	14	TYPE OF REPORTING PERSON (See Instructions) IN

* Based on a total of 20,280,300 shares of Common Stock outstanding, according to records of the Issuer.

This filing is being made to amend the Schedule 13D previously filed by Samuel S. Lee on August 20, 2007, as amended to date (the “Original Schedule 13D Filing”), solely to amend Items 4, 5(a)-(c), 6 and 7. Other than as disclosed herein, there have been no changes to the information previously reported in the Original Schedule 13D Filing.

Item 4.	Purpose of Transaction.

On August 20, 2008, the Issuer awarded a total of 1,956,250 options to purchase Common Stock of the Issuer (the “Options”) to Samuel S. Lee in connection with his employment as Chief Executive Officer of the Issuer, Chief Executive Officer and sole Manager of the Issuer’s Alta Hospital Systems, LLC subsidiary, and an officer of certain other subsidiaries of the Issuer. The Options were awarded as incentive compensation. A total of 500,000 Options were awarded to Mr. Lee under the Issuer’s 2008 Omnibus Equity Incentive Plan (the “Plan”), of which 113,634 Options were issued as incentive stock options and 386,366 Options were issued as non-qualified stock options. A total of 1,456,250 Options were awarded to Mr. Lee outside of the Plan as non-qualified stock options and were granted subject to stockholder approval. All Options have a five-year term. The Options issued under the Plan have vested or will vest one-third on the date of grant, one-third on March 19, 2009, and one-third on March 19, 2010. The Options issued outside of the Plan vested or will vest 833,333 on the date of grant, 311,459 on March 19, 2009, and 311,458 on March 19, 2010.

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 purposes of this Statement is 6,125,768. This number includes 1,000,000 shares that Mr. Lee has a right to acquire upon the exercise of Options which vested immediately on the date of grant. The 956,250 shares underlying unvested Options are not included in that total. The shares beneficially owned represent approximately 28.8% of the class, based on a total of 20,280,300 shares of Common Stock outstanding, according to records of the Issuer. Mr. Lee has sole voting and dispositive power as to all of such shares. (c) The information set forth in Item 4 above is hereby incorporated by reference.

Item 6.	Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

The terms of the Options are summarized in Item 4 and incorporated herein by reference. The terms of the 113,634 incentive stock options and 386,366 non-qualified stock options issued under the Plan have been memorialized in option agreements in substantially the form attached as Exhibits 9 and 10 to this statement. The 1,456,250 Options issued outside of the Plan are set forth in a non-qualified stock option agreement in the form attached as Exhibit 11 to this statement.

Item 7.

Material to be Filed as Exhibits.

9) Form of Incentive Stock Option Agreement for grants of incentive stock options to participants under the Issuer’s 2008 Omnibus Equity Incentive Plan

10) Form of Non-Qualified Stock Option Agreement for grants of non-qualified stock options to participants under the Issuer’s 2008 Omnibus Equity Incentive Plan

11) Non-Qualified Stock Option Agreement between the Issuer and Samuel S. Lee, effective as of August 20, 2008

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 26, 2008
	Date
	/s/ Samuel S. Lee
	Signature
	Samuel S. Lee
	Name/Title

EXHIBIT INDEX

9) Form of Incentive Stock Option Agreement for grants of incentive stock options to participants under the Issuer’s 2008 Omnibus Equity Incentive Plan

10) Form of Non-Qualified Stock Option Agreement for grants of non-qualified stock options to participants under the Issuer’s 2008 Omnibus Equity Incentive Plan

11) Non-Qualified Stock Option Agreement between the Issuer and Samuel S. Lee, effective as of August 20, 2008

EX-99.9 2 a08-22361_1ex99d9.htm EX-99.9

Exhibit 9

Prospect Medical Holdings, Inc.

2008 Omnibus Equity Incentive Plan

Incentive Stock Option Agreement

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Incentive Stock Option Agreement (the “Agreement”); and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the Option provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions. Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

(a) “Cause” includes (and is not limited to) dishonesty with respect to the Company or any Subsidiary, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Subsidiary. The determination of the Committee as to the existence of “Cause” will be conclusive on the Participant and the Company.

(b) “Disability” means, “Disability” as defined in an employment agreement between the Company or any of its Subsidiaries and the Participant or, if not defined therein or if there shall be no such agreement, “disability” of the Participant shall have the meaning ascribed to such term in the Plan.

(d) “Good Reason” means (i) a breach by the Company or any Subsidiary of any employment or consulting agreement to which the Participant is a party and (ii) following a Change in Control, (x) the failure of the Company to pay or cause to be paid the Participant’s base salary or annual bonus when due or (y) any substantial and sustained diminution in the Participant’s authority or responsibilities materially inconsistent with the Participant’s position; provided that either of the events described in clauses (x) and (y) will constitute Good Reason only if the Company fails to cure such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; provided, further, that “Good Reason” will cease to exist for an event on the sixtieth (60th) day following the later of its occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice of his or her termination of employment for Good Reason prior to such date.

(e) ”Plan” means the Prospect Medical Holdings, Inc. 2008 Omnibus Equity Incentive Plan, as the same may be amended, supplemented or modified from time to time.

(f) “Retirement” means a termination of employment by the Participant at Participant’s election (i) following the attainment of age sixty-five (65) with ten (10) or more years of combined service with the Company or any Subsidiary or (ii) pursuant to a retirement plan or early retirement program of the Company or any Subsidiary in which the Participant elects to participate.

(g) “Vested Portion” means, at any time, the portion of an Option which has become vested, as described in Section 3 of this Agreement.

2. Grant of Option. The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, the number of Shares set forth on the Notice of Grant of Stock Option (the “Notice”), subject to adjustment as set forth in the Plan. The purchase price of the Shares subject to the Option (the “Option Price”) shall be as set forth on the Notice. The Option is intended to be an Incentive Stock Option, and as such is intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended.

3. Vesting of the Option.

(a) In General. Subject to Sections 3(b) and 3(c), the Option shall vest and become exercisable at such times as are set forth in the Notice.

(b) Change in Control. Notwithstanding the foregoing, in the event of a Change in Control, the Committee, in its discretion, may elect to accelerate the vesting of any or all unvested Options as of the date of such Change in Control, to the extent not previously cancelled or forfeited, so that such unvested Options will become vested and exercisable either (i) upon the earlier of (x) the first anniversary of the Change in Control or (y) the termination of the Participant’s Employment (A) by the Company other than for Cause (unless such termination is due to death or Disability) or (B) by the Participant for Good Reason, or (ii) on such other terms established by the Committee.

(c) Termination of Employment. If the Participant’s Employment with the Company and its Subsidiaries terminates for any reason (including, unless otherwise determined by the Committee, a Participant’s change in status from an employee to a non-employee (other than director of the Company or any Subsidiary)), the Option, to the extent not then vested, shall be immediately canceled by the Company without consideration; provided, however, that if the Participant’s Employment terminates due to death, Disability or Retirement, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately become vested and exercisable. The Vested Portion of the Option shall remain exercisable for the period set forth in Section 4(a) of this Agreement. If the Participant is absent from work with the Company or with an Subsidiary because of a temporary disability (any disability other than a Disability), or on an approved leave of absence for any purpose, the Participant shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated Employment, except to the extent that the Committee so determines.

4. Exercise of Option.

(a) Period of Exercise. Subject to the provisions of the Plan and this Agreement, and the terms of any employment agreement entered into by the Participant and the Company or a Subsidiary that provides for treatment of Options that is more favorable to the Participant than clauses (i) - (vii) of this Section 4(a), the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the Expiration Date. Notwithstanding the foregoing, if the Participant’s Employment terminates prior to the Expiration Date, the Vested Portion of the Option shall remain exercisable for the period set forth below. If the last day on which the Option may be exercised, whether the Expiration Date or due to a termination of the Optionee’s Employment prior to the Expiration Date, is a Saturday, Sunday or other day that is not a trading day on the American Stock Exchange (the “AMEX”) or, if the Company’s Shares are not then listed on AMEX, such other stock exchange or trading system that is the primary exchange on which the Company’s Shares are then traded, then the last day on which the Option may be exercised shall be the preceding trading day on AMEX or such other stock exchange or trading system. If the Shares are not publicly traded, the next business day (when U.S. government offices and federal courts are open for business) following a Saturday, Sunday or national holiday shall be the last day on which the Option may be exercised.

(i) Death or Disability. If the Participant’s Employment with the Company or any Subsidiary terminates due to the Participant’s death or Disability, the Participant (or his or her representative) may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one hundred eighty (180) days following the date of such termination and (B) the Expiration Date;

(ii) Retirement. If the Participant’s Employment with the Company or any Subsidiary terminates due to the Participant’s Retirement, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) ninety (90) days following the date of such termination and (B) the Expiration Date; provided, that if the Company or any Subsidiary has given the Participant notice that the Participant’s Employment is being terminated for Cause prior to the Participant’s election to terminate due to the Participant’s Retirement, then the provisions of Section 4(a)(v) shall control;

(iii) Unsatisfactory Performance; Voluntary Termination without Good Reason. If the Participant’s Employment with the Company or any Subsidiary is terminated by the Company or the Subsidiary (other than after a Change in Control as set forth in Section 4(a)(vi)) for unsatisfactory performance, but not for Cause (as determined in its sole discretion by the Company or the Subsidiary), or the Participant voluntarily terminates Employment at any time without Good Reason, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) ninety (90) days following the date of such termination and (B) the Expiration Date; provided, that if the Company or any Subsidiary has given the Participant notice that the Participant’s Employment is being terminated for Cause prior to the Participant’s election to voluntarily terminate Employment without Good Reason, then the provisions of Section 4(a)(v) shall control;

(iv) Termination other than for Cause. Subject to the provision of Section 4(a)(vi), if the Participant’s Employment with the Company or any Subsidiary is terminated by

the Company or the Subsidiary for any reason other than by the Company or the Subsidiary for Cause, unsatisfactory performance or due to the Participant’s death or Disability, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) ninety (90) days following the date of such termination and (B) the Expiration Date;

(v) Termination by the Company for Cause. If the Participant’s Employment with the Company or any Subsidiary is terminated by the Company or the Subsidiary for Cause, the Vested Portion of the Option shall immediately terminate in full and cease to be exercisable; and

(vi) After a Change in Control. If the Participant’s Employment with the Company or any Subsidiary terminates after a Change in Control due to a termination by the Company other than for Cause or due to the Participant’s resignation for Good Reason, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) ninety (90) days following the date of such termination and (B) the Expiration Date.

(b) Method of Exercise.

(i) Subject to Section 4(a) of this Agreement, the Vested Portion of an Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole Shares only. Such notice shall specify the number of Shares for which the Option is being exercised, shall be signed (whether or not in electronic form) by the person exercising the Option and shall make provision for the payment of the Option Price. Payment of the aggregate Option Price shall be paid to the Company, at the election of the Committee, pursuant to one or more of the following methods: (A) in cash, or its equivalent; (B) by transferring Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased to the Company and satisfying such other requirements as may be imposed by the Committee; provided that such Shares have been held by the Participant for no less than six (6) months (or such other period as established from time to time by the Committee or generally accepted accounting principles); (C) partly in cash and partly in Shares; or (D) if there is a public market for the Shares at such time, subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate Option Price. No Participant shall have any rights to dividends or other rights of a stockholder with respect to the Shares subject to the Option until the issuance of the Shares.

(ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable.

(iii) Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participant’s name for such Shares. However, the Company shall not be liable to the Participant for damages

relating to any delays in issuing the certificates to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

(iv) In the event of the Participant’s death, the Vested Portion of an Option shall remain vested and exercisable by the Participant’s executor or administrator, or the person or persons to whom the Participant’s rights under this Agreement shall pass by will or by the laws of descent and distribution as the case may be, to the extent set forth in Section 4(a) of this Agreement. Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof.

(i) If Participant sells or otherwise disposes of any of the Shares acquired pursuant to the Option on or before the later of: (1) the date two years after the Date of Grant, and (2) the date one year after transfer of such Shares to Participant upon exercise of the Option, Participant immediately shall notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant from the early disposition by payment in the manner set forth in paragraph 8.

(ii) The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which the Option is exercisable for the first time by Participant during any calendar year (under the Plan or under any other stock option plan of the Company or any Subsidiary) shall not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which the Option is exercisable for the first time by Participant during any calendar year exceeds $100,000, only the Options for the first $100,000 worth of Shares to become exercisable in such calendar year shall comply with Section 422 of the Code and Options for the amount in excess of $100,000 that become exercisable in that calendar year shall be non-qualified stock options. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to incentive stock options, such different limit shall be automatically incorporated herein and shall apply to the unexercised portion of this Option after the effective date of such amendment, provided such regulations are intended to apply to pre-existing options.

(iii) Participant understands and acknowledges that for purposes of this Agreement, Participant must be an employee of the Company or a Subsidiary. Termination of Participant’s employment with the Company or a Subsidiary in order to provide service to the Company or a Subsidiary in any other capacity, such as a consultant or as an employee of a consultant providing services to the Company or a Subsidiary will not comply with the requirements of Section 422 of the Code and will result in the unexercised portion of the Option to be treated as a non-qualified stock option.

discontinue any other relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

6. Legend on Certificates. The certificates representing the Shares purchased by exercise of an Option shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, AMEX or any stock exchange upon which such Shares are listed, any applicable federal or state laws and the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

7. Transferability. Unless otherwise determined by the Committee, an Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Subsidiary.

8. Withholding. The Participant may be required to pay to the Company or a Subsidiary and the Company or the Subsidiary shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such action as may be necessary in the option of the Company to satisfy all obligations for the payment of such taxes.

9. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of an Option, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

10. Notices. Any notice under this Agreement shall be addressed to the Company in care of its Corporate Secretary at the principal executive office of the Company, with a copy to the Director, Human Resources, at the principal executive office of the Company, and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws, and any and all disputes between the Participant and the Company or any Subsidiary relating to the Option shall be brought only in a state or federal court of competent jurisdiction sitting in Wilmington, Delaware and the Participant and the Company and any Subsidiary hereby irrevocably submit to the jurisdiction of any such court and irrevocably agree that venue for any such action shall be only in any such court.

12. Entire Agreement. This Agreement, together with the Notice and the Plan, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement or the Notice shall affect or be used to interpret, change or restrict, the express terms and provisions of this Agreement or the Notice; provided, that this Agreement and the Notice shall be subject to and governed by the Plan, and in the event of any inconsistency between the provisions of this Agreement or the Notice and the provisions of the Plan, the provisions of the Plan shall govern.

13. Modifications And Amendments. The terms and provisions of this Agreement and the Notice may be modified or amended as provided in the Plan.

14. Waivers And Consents. Except as provided in the Plan, the terms and provisions of this Agreement and the Notice may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement or the Notice, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

15. Reformation; Severability. If any provision of this Agreement or the Notice (including any provision of the Plan that is incorporated herein by reference) shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the parties as expressed in, and the benefits of the parties provided by, this Agreement, the Notice and the Plan or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement or the Notice and an equitable adjustment shall be made to this Agreement or the Notice (including, without limitation, addition of necessary further provisions) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect the legality, validity or enforceability of any other provision of this Agreement, the Notice or the Plan.

16. Receipt of Documents. By entering into this Agreement, the Participant agrees and acknowledges that (i) the Participant has received and read a copy of the Plan and (ii) the Option is granted pursuant to the Plan and is therefore subject to all of the terms of the Plan.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day of , 20 at .

COMPANY

PROSPECT MEDICAL HOLDINGS, INC.

By:
	Name:
	Title:


	PARTICIPANT


	Name:

Signature Page to Incentive Stock Option Agreement

Prospect Medical Holdings, Inc.

2008 Omnibus Equity Incentive Plan

Notice of Grant of Incentive Stock Option

PROSPECT MEDICAL HOLDINGS, INC. (the “Company”), pursuant to action of the Compensation Committee of the Board of Directors of the Company taken on August 20, 2008, granted (the “Award”) to the undersigned Participant the following Stock Option (the “Option”) to purchase Shares, subject to the terms and conditions of this Notice of Grant of Incentive Stock Option (the “Notice”), the Incentive Stock Option Agreement (the “ISO Agreement”) and the Company’s 2008 Omnibus Equity Incentive Plan (the “Plan”). The Plan and the ISO Agreement are both incorporated into and made a part of this Notice.

1. Participant’s Name:

2. Grant Information for this Award:

Option Grant Number:

Date of Grant: , 20

Exercise Price per Share:

Total Number of Shares Subject to Option:

Option Expiration Date: , 20

3. The vesting dates shall be:

Shares	Vesting Date	Performance Vesting (Yes/No)

subject to earlier forfeiture in certain circumstances, including termination of Employment, and accelerated vesting, as provided in the ISO Agreement and the Plan.

4. I acknowledge that I have read and will comply with the Company’s Securities Trading Policy (accessible on the Company’s Website), which I understand may be updated from time to time.

5. I acknowledge and agree that I may owe withholding taxes at the time of each exercise of a vested portion of the Option and that I must determine if I will owe withholding taxes and, if so, elect the method of payment of such withholding taxes in advance of each exercise in accordance with the procedures established by the Company, and that such procedures may change and be updated over time.

IN WITNESS WHEREOF, the Company has caused this Notice to be signed by its duly authorized officer or agent as of the day of , .

		Prospect Medical Holdings, Inc.


		By:


Accepted and Agreed to:

Participant:
	(Signature)

Home Address:		Business Address:

EX-99.10 3 a08-22361_1ex99d10.htm EX-99.10

Exhibit 10

Prospect Medical Holdings, Inc.

2008 Omnibus Equity Incentive Plan

Non-Qualified Stock Option Agreement

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Non-Qualified Stock Option Agreement (the “Agreement”); and

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

(a) “Cause” includes (and is not limited to) dishonesty with respect to the Company or any Affiliate, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Committee as to the existence of “Cause” will be conclusive on the Participant and the Company.

(b) “Disability” means, “Disability” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there shall be no such agreement, “disability” of the Participant shall have the meaning ascribed to such term in the Plan.

(d) “Good Reason” means (i) a breach by the Company or any Affiliate of any employment or consulting agreement to which the Participant is a party and (ii) following a Change in Control, (x) the failure of the Company to pay or cause to be paid the Participant’s base salary or annual bonus when due or (y) any substantial and sustained diminution in the Participant’s authority or responsibilities materially inconsistent with the Participant’s position; provided that either of the events described in clauses (x) and (y) will constitute Good Reason only if the Company fails to cure such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; provided, further, that “Good Reason” will cease to exist for an event on the sixtieth (60th) day following the later of its occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice of his or her termination of employment for Good Reason prior to such date.

(e) “Plan” means the Prospect Medical Holdings, Inc. 2008 Omnibus Equity Incentive Plan, as the same may be amended, supplemented or modified from time to time.

A. “Retirement” means a termination of employment by the Participant at Participant’s election (i) following the attainment of age sixty-five (65) with ten (10) or more years of combined service with the Company or any Affiliate or (ii) pursuant to a retirement plan or early retirement program of the Company or any Affiliate in which the Participant elects to participate.

(f) “Vested Portion” means, at any time, the portion of an Option which has become vested, as described in Section 3 of this Agreement.

2. Grant of Option. The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, the number of Shares set forth on the Notice of Grant of Stock Option (the “Notice”), subject to adjustment as set forth in the Plan. The purchase price of the Shares subject to the Option (the “Option Price”) shall be as set forth on the Notice. The Option is intended to be a non-qualified stock option, and as such is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended.

3. Vesting of the Option.

(a) In General. Subject to Sections 3(b) and 3(c), the Option shall vest and become exercisable at such times as are set forth in the Notice.

B. Change in Control. Notwithstanding the foregoing, in the event of a Change in Control, the Committee, in its discretion, may elect to accelerate the vesting of any or all unvested Options as of the date of such Change in Control, to the extent not previously cancelled or forfeited, so that such unvested Options will become vested and exercisable either upon the earlier of (i) the first anniversary of the Change in Control or (ii) the termination of the Participant’s Employment (A) by the Company other than for Cause (unless such termination is due to death or Disability) or (B) by the Participant for Good Reason, or on such other terms established by the Committee.

(b) Termination of Employment. If the Participant’s Employment with the Company and its Affiliates terminates for any reason (including, unless otherwise determined by the Committee, a Participant’s change in status from an employee to a non-employee (other than director of the Company or any Affiliate)), the Option, to the extent not then vested, shall be immediately canceled by the Company without consideration; provided, however, that if the Participant’s Employment terminates due to death, Disability or Retirement, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately become vested and exercisable. The Vested Portion of the Option shall remain exercisable for the period set forth in Section 4(a) of this Agreement. If the Participant is absent from work with the Company or with an Affiliate because of a temporary disability (any disability other than a Disability), or on an approved leave of absence for any purpose, the Participant shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated Employment, except to the extent that the Committee so determines.

4. Exercise of Option.

(a) Period of Exercise. Subject to the provisions of the Plan and this Agreement, and the terms of any employment agreement entered into by the Participant and the Company or a Affiliate that provides for treatment of Options that is more favorable to the Participant than clauses (i) - (vii) of this Section 4(a), the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the Expiration Date. Notwithstanding the foregoing, if the Participant’s Employment terminates prior to the Expiration Date, the Vested Portion of the Option shall remain exercisable for the period set forth below. If the last day on which the Option may be exercised, whether the Expiration Date or due to a termination of the Optionee’s Employment prior to the Expiration Date, is a Saturday, Sunday or other day that is not a trading day on the American Stock Exchange (the “AMEX”) or, if the Company’s Shares are not then listed on AMEX, such other stock exchange or trading system that is the primary exchange on which the Company’s Shares are then traded, then the last day on which the Option may be exercised shall be the preceding trading day on AMEX or such other stock exchange or trading system. If the Shares are not publicly traded, the next business day (when U.S. government offices and federal courts are open for business) following a Saturday, Sunday or national holiday shall be the last day on which the Option may be exercised.

(i) Death or Disability. If the Participant’s Employment with the Company or any Affiliate terminates due to the Participant’s death or Disability, the Participant (or his or her representative) may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one hundred eighty (180) days following the date of such termination and (B) the Expiration Date;

(ii) Retirement. If the Participant’s Employment with the Company or any Affiliate terminates due to the Participant’s Retirement, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) ninety (90) days following the date of such termination and (B) the Expiration Date; provided, that if the Company or any Affiliate has given the Participant notice that the Participant’s Employment is being terminated for Cause prior to the Participant’s election to terminate due to the Participant’s Retirement, then the provisions of Section 4(a)(v) shall control;

(iii) Unsatisfactory Performance; Voluntary Termination without Good Reason. If the Participant’s Employment with the Company or any Affiliate is terminated by the Company or the Affiliate (other than after a Change in Control as set forth in Section 4(a)(vi)) for unsatisfactory performance, but not for Cause (as determined in its sole discretion by the Company or the Affiliate), or the Participant voluntarily terminates Employment at any time without Good Reason, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) ninety (90) days following the date of such termination and (B) the Expiration Date; provided, that if the Company or any Affiliate has given the Participant notice that the Participant’s Employment is being terminated for Cause prior to the Participant’s election to voluntarily terminate Employment without Good Reason, then the provisions of Section 4(a)(v) shall control;

(iv) Termination other than for Cause. Subject to the provision of Section 4(a)(vi), if the Participant’s Employment with the Company or any Affiliate is

terminated by the Company or the Affiliate for any reason other than by the Company or the Affiliate for Cause, unsatisfactory performance or due to the Participant’s death or Disability, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one year following the date of such termination and (B) the Expiration Date;

(v) Termination by the Company for Cause. If the Participant’s Employment with the Company or any Affiliate is terminated by the Company or the Affiliate for Cause, the Vested Portion of the Option shall immediately terminate in full and cease to be exercisable; and

(vi) After a Change in Control. If the Participant’s Employment with the Company or any Affiliate terminates after a Change in Control due to a termination by the Company other than for Cause or due to the Participant’s resignation for Good Reason, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one year following the date of such termination and (B) the Expiration Date.

(b) Method of Exercise.

the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

5. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the Employment of the Company or any Affiliate. Further, the Company or a Affiliate may at any time dismiss the Participant or discontinue any other relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

8. Withholding. The Participant may be required to pay to the Company or an Affiliate and the Company or the Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such action as may be necessary in the option of the Company to satisfy all obligations for the payment of such taxes.

or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws, and any and all disputes between the Participant and the Company or any Affiliate relating to the Option shall be brought only in a state or federal court of competent jurisdiction sitting in Wilmington, Delaware and the Participant and the Company and any Affiliate hereby irrevocably submit to the jurisdiction of any such court and irrevocably agree that venue for any such action shall be only in any such court.

13. Modifications And Amendments. The terms and provisions of this Agreement and the Notice may be modified or amended as provided in the Plan.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day of , 20 at .

COMPANY

PROSPECT MEDICAL HOLDINGS, INC.

By:
	Name:
	Title:

PARTICIPANT


Name:

Signature Page to Non-Qualified Stock Option Agreement

Prospect Medical Holdings, Inc.

2008 Omnibus Equity Incentive Plan

Notice of Grant of Non-Qualified Stock Option

PROSPECT MEDICAL HOLDINGS, INC. (the “Company”), pursuant to action of the Compensation Committee of the Board of Directors of the Company taken on August 20, 2008, granted (the “Award”) to the undersigned Participant the following Stock Option (the “Option”) to purchase Shares, subject to the terms and conditions of this Notice of Grant of Non-Qualified Stock Option (the “Notice”), the Non-Qualified Stock Option Agreement (the “NQSO Agreement”) and the Company’s 2008 Omnibus Equity Incentive Plan (the “Plan”). The Plan and the NQSO Agreement are both incorporated into and made a part of this Notice.

1. Participant’s Name:

2. Grant Information for this Award:

Option Grant Number:

Date of Grant: , 20

Exercise Price per Share:

Total Number of Shares Subject to Option:

Option Expiration Date: , 20

3. The vesting dates shall be:

Shares	Vesting Date	Performance Vesting (Yes/No)

subject to earlier forfeiture in certain circumstances, including termination of Employment, and accelerated vesting, as provided in the NQSO Agreement and the Plan.

4. I acknowledge that I have read and will comply with the Company’s Securities Trading Policy (accessible on the Company’s Website), which I understand may be updated from time to time.

5. I acknowledge and agree that I will owe withholding taxes at the time of each exercise of a vested portion of the Option and that I must elect the method of payment of such withholding taxes in advance of each exercise in accordance with the procedures established by the Company, and that such procedures may change and be updated over time.

IN WITNESS WHEREOF, the Company has caused this Notice to be signed by its duly authorized officer or agent as of the day of , .

	Prospect Medical Holdings, Inc.


	By:

Accepted and Agreed to:

Participant:
	(Signature)

Home Address:

Business Address:

EX-99.11 4 a08-22361_1ex99d11.htm EX-99.11

Exhibit 11

Prospect Medical Holdings, Inc.

Stock Option Agreement

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors of Prospect Medical Holdings, Inc. (the “Company”) has determined that it would be in the best interests of the Company and its stockholders to grant the Option provided for herein to the Optionee as set forth in the Notice of Grant of Stock Option attached as Exhibit “A” (the “Notice”).

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions. Whenever the following terms are used in this Stock Option Agreement (the “Agreement”), they shall have the meanings set forth below and as defined in the Notice.

(a) “Affiliate” means any entity that is consolidated with the Company for financial reporting purposes.

(b) “Cause” includes (and is not limited to) dishonesty with respect to the Company or any Affiliate, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Committee as to the existence of “Cause” will be conclusive on the Optionee and the Company.

(c) “Change in Control” occurs when, after the grant of the Option, any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, or any successor thereto (the “Act”) (other than any person who on the date of grant of the Option is a director or officer, or holder of more than 10% of the Shares, of the Company or an Affiliate of the Company) is or becomes the beneficial owner (as defined in Rule 1 3d-3 of the Act) directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then-outstanding securities entitled to vote in the election of directors

(d) “Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto.

(e) “Disability” has the meaning ascribed to it in an employment agreement between the Company and the Optionee or, if not defined therein, then it shall have the meaning ascribed to it under Section 22(e)(3) of the Code, as determined by the Committee.

(f) “Expiration Date” means the date set forth on the Notice.

(g) “Fair Market Value” means, as of any date, the value of the Shares determined as follows:

(i) if the Shares are publicly traded and are listed on a national securities exchange, the last reported sale price or, if no such reported sale takes place on such date, the

average of the closing bid and asked prices on the principal national securities exchange on which the Shares are listed or admitted to trading;

(ii) if the Shares are quoted on the American Stock Exchange (“AMEX”), the last reported sale price on the AMEX or, if no such reported sale takes place on such date, the average of the closing bid and asked prices;

(iii) if the Shares are publicly traded but are not quoted on the AMEX nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on such date, as reported by the Wall Street Journal, for the over-the-counter market; or

(iv) if none of the foregoing is applicable, by the Committee in good faith.

(h) “Good Reason” means (i) a breach by the Company or any Affiliate of any employment or consulting agreement to which the Optionee is a party and (ii) following a Change in Control, (x) the failure of the Company to pay or cause to be paid the Optionee’s base salary or annual bonus when due or (y) any substantial and sustained diminution in the Optionee’s authority or responsibilities materially inconsistent with the Optionee’s position; provided that either of the events described in clauses (x) and (y) will constitute Good Reason only if the Company fails to cure such event within 30 days after receipt from the Optionee of written notice of the event which constitutes Good Reason; provided, further, that “Good Reason” will cease to exist for an event on the sixtieth (60th) day following the later of its occurrence or the Optionee’s knowledge thereof, unless the Optionee has given the Company written notice of his or her termination of employment for Good Reason prior to such date.

(i) “Shares” means shares of common stock of the Company, $0.01 par value per share.

(j) “Vested Portion” means, at any time, the portion of an Option which has become vested, as described in Section 3 of this Agreement.

2. Grant of Option. The Company hereby grants to the Optionee the right and option (the “Option”) to purchase, on the terms and conditions set forth in the Notice and hereinafter set forth, the number of Shares set forth in the Notice. The purchase price of the Shares subject to the Option (the “Option Price”) shall be as set forth on the Notice. The Option is intended to be a non-qualified stock option, and as such is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended.

3. Vesting of the Option.

(a) In General. Subject to Sections 3(b) and 3(c), the Option shall vest and become exercisable at such times as are set forth in the Notice.

(b) Change in Control. Notwithstanding the foregoing, in the event of a Change in Control, the Option shall become vested as to all the Shares subject thereto.

(c) Termination of Employment. If the Optionee’s employment with the Company and its Affiliates terminates for any reason (including, unless otherwise determined by the Committee, Optionee’s change in status from an employee to a non-employee (other than director of the Company or any Affiliate)), the Option, to the extent not then vested, shall be immediately canceled by the Company without consideration; provided, however, that if the Optionee’s Employment terminates due to death or Disability, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately become vested and exercisable. The Vested Portion of the Option shall remain exercisable for the period set forth in Section 4(a) of this Agreement. If the Optionee is absent from work with the Company or with a Affiliate because of a temporary disability (any disability other than a Disability), or on an approved leave of absence for any purpose, the Optionee shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated employment, except to the extent that the Committee so determines.

4. Exercise of Option. Except as provided below, the Vested Portion of the Option shall remain exercisable until the Expiration Date.

(a) The Vested Portion of an Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole Shares only. Such notice shall specify the number of Shares for which the Option is being exercised, shall be signed (whether or not in electronic form) by the person exercising the Option and shall make provision for the payment of the Option Price. Payment of the aggregate Option Price shall be paid to the Company, at the election of the Committee, pursuant to one or more of the following methods: (A) in cash, or its equivalent; (B) by transferring Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased to the Company and satisfying such other requirements as may be imposed by the Committee; provided that such Shares have been held by the Optionee for no less than six (6) months (or such other period as established from time to time by the Committee or generally accepted accounting principles); (C) partly in cash and partly in Shares; or (D) if there is a public market for the Shares at such time, subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate Option Price. No Optionee shall have any rights to dividends or other rights of a stockholder with respect to the Shares subject to the Option until the issuance of the Shares.

(b) Notwithstanding any other provision of this Agreement to the contrary, absent an available exemption to registration or qualification, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable.

(i) Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Optionee’s name for such Shares. However, the Company shall not be liable to the Optionee for damages relating to

any delays in issuing the certificates to the Optionee, any loss by the Optionee of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

(ii) In the event of the Optionee’s death, the Vested Portion of an Option shall remain vested and exercisable by the Optionee’s executor or administrator, or the person or persons to whom the Optionee’s rights under this Agreement shall pass by will or by the laws of descent and distribution as the case may be, to the extent set forth in Section 4(a) of this Agreement. Any heir or legatee of the Optionee shall take rights herein granted subject to the terms and conditions hereof.

(c) Notwithstanding any other provision of this Agreement to the contrary, Optionee’s right to exercise the Option shall not occur unless and until the receipt of approval of the Option by the stockholders of the Company.

5. Legend on Certificates; Listing of Shares. The certificates representing the Shares purchased by exercise of an Option shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, AMEX or any stock exchange upon which such Shares are listed, any applicable federal or state laws and the Company’s Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Company shall seek the listing of the Shares with the AMEX, in accordance with the rules and regulations of the AMEX.

6. Transferability. Unless otherwise determined by the Committee, an Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Optionee otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.

7. Withholding. The Optionee may be required to pay to the Company or an Affiliate and the Company or the Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or from any compensation or other amount owing to Optionee the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option and to take such action as may be necessary in the option of the Company to satisfy all obligations for the payment of such taxes.

8. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of an Option, the Optionee will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

9. Giving Notice. Any notice given under this Agreement shall be addressed to the Company in care of its Corporate Secretary at the principal executive office of the Company, with a copy to the Director, Human Resources, at the principal executive office of the Company, and to the Optionee at the address appearing in the personnel records of the Company for the

Optionee or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws, and any and all disputes between the Optionee and the Company or any Affiliate relating to the Option shall be brought only in a state or federal court of competent jurisdiction sitting in Wilmington, Delaware and the Optionee and the Company hereby irrevocably submit to the jurisdiction of any such court and irrevocably agree that venue for any such action shall be only in any such court.

11. Entire Agreement. This Agreement, together with the Notice, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement or the Notice shall affect or be used to interpret, change or restrict, the express terms and provisions of this Agreement or the Notice.

12. Modifications And Amendments. The terms and provisions of this Agreement and the Notice may be modified or amended only by written instrument signed by the parties following approval by the Committee.

13. Waivers And Consents. Except as provided herein, the terms and provisions of this Agreement and the Notice may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement or the Notice, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day of , 20 at .

COMPANY

PROSPECT MEDICAL HOLDINGS, INC.

By:
		Name:
		Title:


OPTIONEE


Name: Samuel S. Lee

Signature Page to Non-Qualified Stock Option Agreement

Exhibit A

Prospect Medical Holdings, Inc.

Notice of Grant of Stock Option

PROSPECT MEDICAL HOLDINGS, INC. (the “Company”), pursuant to action of the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) taken on August 20, 2008, granted to the undersigned the following stock option (the “Option”) to purchase common stock of the Company (“Shares”), subject to the terms and conditions of this Notice of Grant of Stock Option (the “Notice”) and the Stock Option Agreement (the “Agreement”). The Agreement is incorporated into and made a part of this Notice.

1. Participant’s Name: Samuel S. Lee (“Optionee”) ID:

2. Grant Information for this Award:

Date of Grant: August 20, 2008

Exercise Price per Share: $2.40

Total Number of Shares Subject to Option: 1,456,250

Option Expiration Date: August 20, 2013

3. Vesting: If the Optionee is in the employ of the Company at each of the following dates, the Option shall be exercisable for the number of Shares indicated:

Shares	Vesting Date	Performance Vesting (Yes/No)
833,333	Aug. 20, 2008	No
311,459	Mar. 19, 2009	No
311,458	Mar. 19, 2010	No

subject to the terms of the Agreement.

4. I acknowledge that I have read and will comply with the Company’s Securities Trading Policy (accessible on the Company’s Website), which I understand may be updated from time to time.

IN WITNESS WHEREOF, the Company has caused this Notice to be signed by its duly authorized officer or agent as of the day of , .

		Prospect Medical Holdings, Inc.


		By:

Accepted and Agreed to:

Optionee:
	Samuel S. Lee

Home Address:		Business Address:

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