RESIGNATION AGREEMENT

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Exhibit 10.5

RESIGNATION AGREEMENT

        This Resignation Agreement ("Agreement") is entered into as of May 12, 2008 by and between Prospect Medical Holdings, Inc., a Delaware corporation ("Prospect"), and Jacob Y. Terner, M.D. ("Dr. Terner").

RECITALS

        WHEREAS, Dr. Terner has been employed with Prospect pursuant to an Employment Agreement dated as of August 1, 1999, as amended (the "Employment Agreement"), most recently serving as Chairman of the Board of Prospect; and

        WHEREAS, Dr. Terner has also served as director and chief executive officer of Prospect's management company subsidiaries (the "Prospect Subsidiaries"); and

        WHEREAS, in addition to Dr. Terner's positions with Prospect and its management company subsidiaries, Dr. Terner has served as director, chief executive officer and sole shareholder of Prospect Medical Group, Inc. ("Group"), a California professional corporation affiliated with Prospect, and as director and chief executive officer of each of Prospect's other affiliated physician organizations, except for AMVI/Prospect Health Network and Nuestra Familia Medical Group (together with Group, the "Affiliated Physician Organizations"); and

        WHEREAS, Prospect wishes Dr. Terner to immediately resign his positions as an officer and director of Prospect and the Prospect Subsidiaries and, ultimately, as an officer and director of the Affiliated Physician Organizations; and

        WHEREAS, Dr. Terner wishes to accommodate Prospect and so resign from his positions with Prospect and the Prospect Subsidiaries and as an officer of the Affiliated Physician Organizations, but to continue at Prospect's request on a temporary basis to act as director and officer of the Affiliated Physician Organizations, as sole shareholder of Group and as holder of record title to Group's shares in Nuestra Familia Medical Group until a suitable replacement can be identified for such positions; and

        WHEREAS, Dr. Terner and Prospect (collectively, "the Parties") desire to set forth the terms and conditions of Dr. Terner's resignation in this Agreement.

AGREEMENT

        NOW, THEREFORE, the Parties hereby agree as follows:

1.

RESIGNATION.

        (a)   Dr. Terner's employment by, and, except as provided for in this Agreement, entitlement to compensation from, Prospect and the Prospect Subsidiaries (collectively, the "Company") will end effective May 12, 2008 (the "Effective Date"). Prospect will continue to pay Dr. Terner's current base salary, on its normal payroll schedule, and (subject to all applicable withholding), through the Effective Date. On the Effective Date, Prospect shall issue Dr. Terner his final paycheck, representing all wages, compensation, accrued, unused vacation and reimbursable expenses (to the extent reimbursement requests have been submitted by Dr. Terner prior to the Effective Date) to which he is entitled. To the extent that any reimbursable expenses to which Dr. Terner is entitled have not been submitted by Dr. Terner for reimbursement or have not been billed or cannot otherwise be calculated by Prospect prior to the Effective Date, Prospect shall pay such expenses or reimburse Dr. Terner, as appropriate, promptly following presentation of evidence to Prospect of such reimbursable amounts. As of the signing of this document, Dr. Terner acknowledges and agrees that except for amounts due to him in his final paycheck, and for reimbursable expenses payable following the Effective Date as noted in the immediately preceding sentence, he has received all monies, bonuses, commissions, other compensation or perquisites and reimbursements he earned or was due through the Effective Date.

        (b)   Dr. Terner resigns his positions as an officer, director and/or manager of the Company and of Alta Hospitals System, LLC, all effective as of the Effective Date. Dr. Terner agrees to execute any documentation necessary to effectuate such resignations and his ultimate resignations as an officer of the Affiliated Physician Organizations per Section 3 below.

        (c)   Except as expressly provided for in this Agreement, Dr. Terner's entitlement to benefits from the Company, and eligibility to participate in the Company's benefit plans, shall cease on the Effective Date, except to the extent Dr. Terner elects to and is eligible to continue his medical and dental benefits at his sole expense pursuant to COBRA.

2.

PAYMENTS.

        (a)   In consideration for Dr. Terner's resignation and the other promises contained in this Agreement, commencing as of May 12, 2008 and concluding on April 30, 2011 (the "Payment Period"), Prospect shall make payments to the Terner Family Trust dated December, 1997 ("TFT") as follows:

        (i)    For the twelve (12) month period commencing on May 1, 2008 and ending on April 30, 2009, Prospect shall pay to TFT