-----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, EMFiYGWFILx2VyTBacdcFKBNSZjHNrBLrEeDIWQsOiktiR693xBm3HgR8o6ZuqWF KLGeebpjK7pKhDzUYOkDsA== 0001019687-07-003463.txt : 20071015 0001019687-07-003463.hdr.sgml : 20071015 20071015155751 ACCESSION NUMBER: 0001019687-07-003463 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20071009 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071015 DATE AS OF CHANGE: 20071015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Integrated Healthcare Holdings Inc CENTRAL INDEX KEY: 0001051488 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 870412182 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23511 FILM NUMBER: 071172045 BUSINESS ADDRESS: STREET 1: 1301 N. TUSTIN AVENUE CITY: SANTA ANA STATE: CA ZIP: 92705 BUSINESS PHONE: 714-434-9191 MAIL ADDRESS: STREET 1: 1301 N. TUSTIN AVENUE CITY: SANTA ANA STATE: CA ZIP: 92705 FORMER COMPANY: FORMER CONFORMED NAME: Integrated Healthcare Holdings DATE OF NAME CHANGE: 20040816 FORMER COMPANY: FORMER CONFORMED NAME: FIRST DELTAVISION INC DATE OF NAME CHANGE: 19971216 8-K 1 ihhi_8k-101207.txt - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): OCTOBER 9, 2007 INTEGRATED HEALTHCARE HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) NEVADA 0-23511 87-0412182 (STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER OF INCORPORATION) IDENTIFICATION NO.) 1301 NORTH TUSTIN AVENUE, SANTA ANA, CALIFORNIA 92705 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (714) 953-3503 ----------------------------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. Refinancing of Loans with Medical Capital Corporation - ----------------------------------------------------- Effective October 9, 2007, Integrated Healthcare Holdings, Inc. and its subsidiaries (collectively, the "Company") and Medical Capital Corporation and its affiliates (collectively, "MedCap") executed agreements to refinance MedCap's credit facilities with the Company aggregating up to $140,700,000 in principal amount (the "New Credit Facilities"). The New Credit Facilities replaced the Company's previous credit facilities with MedCap, which matured on March 2, 2007. The Company had been operating under an Agreement to Forbear with MedCap with respect to the previous credit facilities. The New Credit Facilities consist of the following instruments: o An $80,000,000 Credit Agreement, under which the Company issued a $45,000,000 Term Note bearing a fixed interest rate of 9% in the first year and 14% after the first year, which was used to repay amounts owing under the Company's existing $50,000,000 real estate term loan. o A $35,000,000 Non-Revolving Line of Credit Note issued under the $80,000,000 Credit Agreement, bearing a fixed interest rate of 9.25% per year, which was used to repay amounts owing under the Company's existing $30,000,000 line of credit, pay the origination fees on the other credit facilities and for working capital. o A $10,700,000 Credit Agreement, under which the Company issued a $10,700,000 Convertible Term Note bearing a fixed interest rate of 9.25% per year, which was used to repay amounts owing under the Company's existing $10,700,000 loan. The $10,700,000 Convertible Term Note is convertible into common stock of the Company at $0.21 per share during the term of the Note. o A $50,000,000 Revolving Credit Agreement, under which the Company issued a $50,000,000 Revolving Line of Credit Note bearing a fixed interest rate of 24% per year (subject to reduction to 18% if the $45,000,000 Real Estate Term Loan is repaid prior to its maturity) and an unused commitment fee of 0.50% per year, which was used to finance the Company's accounts receivable. Each of the above Credit Agreements and Notes (i) required a 1.5% origination fee due at funding, (ii) matures in three years, (iii) requires monthly payments of interest and repayment of principal upon maturity, (iv) are collateralized by all of the assets of the Company and its subsidiaries and the real estate underlying the Company's hospital facilities (which are owned by Pacific Coast Holdings Investments, LLC ("PCHI") and leased to the Company), and (v) are guaranteed by Orange County Physicians Investment Network, LLC and West Coast Holdings, LLC ("West Coast") pursuant to separate Guaranty Agreements in favor of the lender. West Coast is a member of PCHI. Concurrently with the execution of the New Credit Facilities, the Company issued to an affiliate of MedCap a five-year warrant to purchase the greater of 16,880,484 shares of the Company's common stock or up to 4.95% of the Company's common stock equivalents, as defined, at $0.21 per share (the "4.95% Warrant"). In addition, the Company and MedCap entered into Amendment No. 2 to Common Stock Warrant, originally dated December 12, 2005, which entitles an affiliate of MedCap to purchase the greater of 26,097,561 shares of the Company's common stock or up to 31.09% of the Company's common stock equivalents (the "31.09% Warrant"). Amendment No. 2 to the 31.09% Warrant extended the expiration date of the Warrant to October 9, 2012, removed the condition that it only be exercised if the Company is in default of its previous credit agreements, and increased the exercise price to $0.21 per share unless the Company's stock ceases to be registered under the Securities Exchange Act of 1934, as amended. The 4.95% Warrant and the 31.09% Warrant are collectively referred to herein as the "New Warrants." 2 Amended and Restated Triple Net Hospital Building Lease - ------------------------------------------------------- As a condition of the New Credit Facilities, the Company entered into an Amended and Restated Triple Net Hospital Building Lease with PCHI (the "Amended Lease"). The Amended Lease terminates on the 25-year anniversary of the original lease (March 8, 2005) (and grants the Company the right to renew for one additional 25-year period) and requires annual base rental payments of $8,300,000 (but until the Company refinances its $50,000,000 Revolving Line of Credit Loan with a stated interest rate less than 14% per annum or PCHI refinances the Real Estate Loan, the annual base rental payments are reduced to $7,100,000). In addition, the Company may offset against its rental payments owed to PCHI interest payments that it makes to MedCap under certain of its indebtedness discussed above. The Amended Lease also gives PCHI sole possession of the medical office buildings located at 1901/1905 North College Avenue, Santa Ana, California (the "Kindred Property") that are unencumbered by any claims by or tenancy of the Company. Settlement Agreement - -------------------- Concurrently with the execution of the Amended Lease, the Company, PCHI, Ganesha, and West Coast entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") whereby the Company agreed to pay to PCHI $2,500,000 as settlement for unpaid rents specified in the Settlement Agreement, relating to the Kindred Property, and for compensation relating to the medical office buildings located at 999 North Tustin Avenue in Santa Ana, California, under a previously executed Agreement to Compensation. The definitive forms of each of the New Credit Facilities, New Warrants, Amended Lease and Settlement Agreement are furnished as exhibits to this Report. The preceding descriptions of these documents are summary in nature and do not purport to be complete. This summary should be read in connection with the exhibits hereto. ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT. The disclosure under Item 1.01 of this Report is hereby incorporated herein by reference. ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES. The disclosure under Item 1.01 of this Report is hereby incorporated herein by reference. The sale of securities referenced in Item 1.01 of this Report have not been registered under the Securities Act, or any state securities laws, and were sold in a private transaction exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder. 3 ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits. EXHIBIT NUMBER DESCRIPTION - ----------------------------------- 99.1 $80,000,000 Credit Agreement * 99.2 $45,000,000 Term Note 99.3 $35,000,000 Non Revolving Line of Credit Note 99.4 $50,000,000 Revolving Credit Agreement * 99.5 $50,000,000 Revolving Line of Credit Note 99.6 $10,700,000 Credit Agreement * 99.7 $10,700,000 Convertible Term Note 99.8 4.95% Common Stock Warrant 99.9 Amendment No. 2 to 31.09% Common Stock Warrant 99.10 Amended and Restated Triple Net Hospital Building Lease 99.11 Settlement Agreement and Mutual Release * Certain exhibits, schedules and/or annexes have been omitted. A copy of any omitted exhibit, schedule or annex will be furnished supplementally to the Securities and Exchange Commission upon request. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: October 15, 2007 INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ Steven R. Blake -------------------------------- Steven R. Blake Chief Financial Officer 5 EX-99.1 2 ihh_8kex99-1.txt $80,000,000 CREDIT AGREEMENT Exhibit 99.1 CREDIT AGREEMENT ($80,000,000 FACILITY) Effective Date: October 9, 2007 among INTEGRATED HEALTHCARE HOLDINGS, INC., WMC-A, INC., WMC-SA, INC., CHAPMAN MEDICAL CENTER, INC., and COASTAL COMMUNITIES HOSPITAL, INC., as Borrowers, THE CREDIT PARTIES SIGNATORY HERETO, as Credit Parties, THE GUARANTORS SIGNATORY HERETO, as Guarantors, and MEDICAL PROVIDER FINANCIAL CORPORATION II, as Lender. INDEX OF ANNEXES, EXHIBITS AND DISCLOSURE SCHEDULES ANNEXES - ------- Annex A Definitions Annex B Cash Management System Annex C Collateral Reports Annex D Notice Addresses EXHIBITS - -------- Exhibit "A" Form of $45,000,000 Real Estate Term Note Exhibit "B" Form of $35,000,000 Non-Revolving Line of Credit Note Exhibit "C" [Intentionally Omitted] Exhibit "D" Form of Notice of Request for Advance Exhibit "E" Form of $80,000,000 Deed of Trust Exhibit "F" Form of Absolute Assignment Exhibit "G" Form of Security Agreement Exhibit "H" Form of Collateral Assignment of Contracts Exhibit "I" Form of Deposit Account Security Agreement Exhibit "J" Form of Control Agreement Exhibit "K" Form of Post-Closing Agreement Exhibit "L" Form of Intellectual Property Security Agreement Exhibit "M" Form of Environmental Indemnity Agreement Exhibit "N" Form of Guaranty Agreement Exhibit "O" Form of Intercreditor Agreement Exhibit "P" Form of Pledge Agreement Exhibit `Q" Form of Stock Power Exhibit "R" Form of Membership Power Exhibit "S" Form of Landlord's Consent and Estoppel Certificate (Chapman Leases) Exhibit "T" Form of Landlord's Consent and Estoppel Certificate (Triple Net Lease) Exhibit "U" Form of Warrant DISCLOSURE SCHEDULES - -------------------- Disclosure Schedule 1.3 Sources and Uses of Funds Disclosure Schedule 2.1(b) Required Consents and Approvals Disclosure Schedule 2.1(c) Capital Structure of Each Borrower Disclosure Schedule 3.1 Executive Office, Collateral Locations, FEIN Disclosure Schedule 3.5 Schedule of Real Estate Owned and Leased Disclosure Schedule 3.6 Labor Matters Disclosure Schedule 3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock Disclosure Schedule 3.10 Taxes Disclosure Schedule 3.11 ERISA Plans Disclosure Schedule 3.12 Litigation Disclosure Schedule 3.13 Brokers Disclosure Schedule 3.14 Intellectual Property Disclosure Schedule 3.16 Environmental Matters Disclosure Schedule 3.17 Insurance (With Copies of All Certificates of Insurance) Disclosure Schedule 3.18 Deposit and Disbursement Accounts Disclosure Schedule 3.20 Bonding; Licenses; Permits Disclosure Schedule 6.3 Indebtedness Disclosure Schedule 6.4 Transactions with Affiliates and Employees Disclosure Schedule 6.7 Existing Liens. CREDIT AGREEMENT ---------------- ($80,000,000 FACILITY) This CREDIT AGREEMENT ($80,000,000 Facility) ("AGREEMENT"), dated to be effective as of October 9, 2007 ("EFFECTIVE DATE"), is made by and among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-A, INC., a California corporation ("WMC-A"), WMC-SA, INC., a California corporation ("WMC-SA"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL") (IHHI, WMC-A, WMC-SA, Chapman and Coastal are hereinafter together referred to as "BORROWERS" and individually as a "BORROWER"); PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("PCHI"); WEST COAST HOLDINGS, LLC, a California limited liability company ("WEST COAST"); GANESHA REALTY, LLC, a California limited liability company ("GANESHA"); ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN") (PCHI, West Coast, Ganesha and OC-PIN are hereinafter together referred to as the "CREDIT PARTIES" and individually as a "CREDIT PARTY," and West Coast and OC-PIN are hereinafter together referred to as the "GUARANTORS" and individually as a "GUARANTOR"); and MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation ("LENDER"). Initially capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to them in Annex A. RECITALS -------- A. PCHI owns the fee simple title in the Western Medical Center - Anaheim, in the Western Medical Center - Santa Ana, and in the Coastal Communities Hospital (including the medical office buildings located thereon). PCHI leases the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Communities Hospital (including the medical office buildings located thereon) to IHHI pursuant to the Triple Net Lease. IHHI subleased the Western Medical Center - Anaheim to SMC-A; IHHI subleased the Western Medical Center - Santa Ana to WMC-SA; and IHHI subleased the Coastal Communities Hospital (including the medical office buildings located thereon) to Coastal. IHHI owns all (100%) of the Stock of WMC-A, WMC-SA and Coastal. B. IHHI leases the Hospital Facility and the related medical office buildings located at the Chapman Medical Center from the Hospital Landlord and from the MOB Landlord pursuant to the Chapman Leases. IHHI subleased the Hospital Facility and the related medical office buildings to Chapman. IHHI owns all (100%) of the Stock of Chapman. C. PCHI, OC-PIN and West Coast are Shareholders of IHHI. West Coast and Ganesha own all (100%) of the Membership Interests in PCHI. D. IHHI, WMC-A, WMC-SA, Coastal and Chapman are in the business of delivering acute care services to the public through the acute care Hospital Facilities; incident thereto, IHHI, WMC-A, WMC-SA, Coastal and Chapman are in the business of owning, operating and/or leasing medical office buildings and other healthcare businesses related thereto. 1 E. Lender, the Credit Parties and Borrowers are parties to the First Credit Agreement, pursuant to which Lender made available to Borrowers the Previous $50,000,000 Acquisition Loan and the Previous $30,000,000 Line of Credit Loan. In addition, Lender, the Credit Parties and Borrowers are parties to the certain Second Credit Agreement, pursuant to which Medical Provider Financial Corporation III, a Nevada corporation, ("MPFC III") made available to Borrowers the Previous $10,700,000 Term Loan. F. The loans referenced in the First and Second Credit Agreements have each matured and are now due and owing in full. G. Borrowers have requested that Lender make available to them a credit facility in the aggregate amount of $80,000,000, and that MPFC III make available to Borrowers a separate credit facility in the aggregate amount of $10,700,000 for the purposes of (i) paying in full all amounts due and owing under the First Credit Agreement, (ii) paying in full all amounts due and owing under the Second Credit Agreement, (iii) providing working capital financing for Borrowers, and (iv) providing funds for other purposes permitted hereunder. H. Lender is willing to make an $80,000,000 credit facility available to Borrowers on the terms and conditions set forth herein below. MPFC III is willing to make a $10,700,000 credit facility available to Borrowers on the terms and conditions set forth in a separate credit agreement between MPFC III, Borrowers and Credit Parties of even date herewith (the "NEW $10,700,000 CREDIT AGREEMENT"). I. All Annexes, Disclosure Schedules, Exhibits and other attachments, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the covenants and conditions hereinafter contained, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Borrowers, Lender, Credit Parties and Guarantors agree as follows: 1. AMOUNT AND TERMS OF CREDIT FACILITIES ------------------------------------- 1.1 $45,000,000 Real Estate Term Loan. (a) Subject to the terms and conditions hereof, on the Closing Date, Lender agrees to and shall make the $45,000,000 Real Estate Term Loan available to Borrowers for the sole purpose of repaying all amounts due Lender under the Previous $50,000,000 Acquisition Note referenced in the First Credit Agreement. The $45,000,000 Real Estate Term Loan shall be charged as a single Advance to Borrowers on the Closing Date but shall not be disbursed to Borrowers on the Closing Date; instead said Advance shall be withheld by Lender and paid directly to Lender to repay all amounts due and owing on the Previous $50,000,000 Acquisition Note. As of August 31, 2007, (i) the amount of unpaid principal due 2 under the Previous $50,000,000 Acquisition Note is $45,000,000; (ii) the amount of accrued but unpaid interest due under the Previous $50,000,000 Acquisition Note was $542,500; and (iii) after August 31, 2007, interest has and will accrue at the daily rate of $17,500 under the Previous $50,000,000 Acquisition Note. If the single Advance from the $45,000,000 Real Estate Term Loan is not sufficient to pay in full and retire the entire amount due under the Previous $50,000,000 Acquisition Note, the shortfall shall be paid from the first Advance from the $35,000,000 Non-Revolving Line of Credit. (b) On the Closing Date, Borrowers agree to and shall execute and deliver to Lender the $45,000,000 Real Estate Term Note in the form of Exhibit "A" attached hereto. The $45,000,000 Real Estate Term Note represents the obligation of Borrowers, jointly and severally, individually and collectively, to repay the $45,000,000 Real Estate Term Loan to Lender. During the term of the $45,000,000 Real Estate Term Note, Borrowers shall not be required to make any payments of principal, however, Borrowers shall pay interest to Lender on the entire principal balance outstanding from time to time, in arrears, on each applicable Interest Payment Date, at the Interest Rate applicable to the $45,000,000 Real Estate Term Loan, and the entire balance of unpaid principal, plus all accrued but unpaid interest thereon and all other non-contingent Obligations due and owing thereunder, shall be due and payable in full in a single payment in immediately available funds, on the Maturity Date. 1.2 $35,000,000 Non-Revolving Line of Credit Loan. (a) Subject to the terms and conditions hereof, Lender agrees to make available to Borrowers from time to time until the Commitment Termination Date, Advances under the $35,000,000 Non-Revolving Line of Credit Loan. Advances under the $35,000,000 Non-Revolving Line of Credit Loan may only be used for the following purposes: (i) to repay in full all amounts due and owing under the Previous $30,000,000 Line of Credit Note; (ii) to pay any shortfall necessary to pay in full all amounts due and owing under the Previous $50,000,000 Acquisition Note; (iii) to pay any shortfall necessary to pay in full all amounts due and owing under the Previous $10,700,000 Term Note; (iv) to pay all Origination Fees (as defined herein or in the New $10,700,000 Credit Agreement, as applicable) due and owing pursuant to this Agreement and the New $10,700,000 Credit Agreement; (v) to pay all Unused Commitment Fees due and owing under this Agreement; (vi) to pay all Lender's Costs (as defined herein or in the New $10,700,000 Credit Agreement, as applicable) due and owing under this Agreement and the New $10,700,000 Credit Agreement; and (vii) for working capital as approved by Lender in its sole and absolute discretion. As of August 31, 2007, (i) the amount of unpaid principal due under the Previous $30,000,000 Line of Credit Note was $27,341,458.61; (ii) the amount of accrued but unpaid interest due under the Previous $30,000,000 Line of Credit Note was $329,616.47; and 3 (iii) after August 31, 2007, interest has and will accrue at the daily rate of $10,632.79 under the Previous $30,000,000 Line of Credit Note. Except for Advances approved by Lender for working capital (which shall be funded as directed by Borrowers), all Advances from the $35,000,000 Non-Revolving Line of Credit Loan shall be charged to Borrowers on the date said Advances are made but shall not be disbursed to Borrowers; instead said Advances shall be withheld by Lender and paid directly to Lender and/or MPFC III, as applicable, to repay all amounts due and owing under the Previous $30,000,000 Line of Credit Note; or to pay any shortfall amounts required to pay in full the Previous $50,000,000 Acquisition Note; or to pay any shortfall amounts required to pay in full to MPFC III the Previous $10,700,000 Term Note; or disbursed directly to Lender to pay the Origination Fee (as defined herein or in the New $10,700,000 Credit Agreement, as applicable) or to pay Unused Commitment Fees due and owing from time to time under this Agreement; or disbursed directly to Lender and/or MPFC III to pay Lender's Costs (as defined herein or in the New $10,700,000 Credit Agreement, as applicable) due and owing from time to time under this Agreement and/or the New $10,700,000 Credit Agreement. (b) Advances from the $35,000,000 Non-Revolving Line of Credit Loan may not be used to make or pay principal payments due under any other Loan made available by Lender to Borrowers under this Agreement or any Loan (as defined in the New $10,700,000 Credit Agreement) made available by MPFC III to Borrowers under the New $10,700,000 Credit Agreement. Borrowers may borrow, but may not repay and reborrow, from the $35,000,000 Non-Revolving Line of Credit Loan. Each Advance under the $35,000,000 Non-Revolving Line of Credit Loan must be made on written notice, in the form of a Notice of Request for Advance in the form of Exhibit "D" attached hereto, signed and delivered by Borrower's Representative to Lender's Representative. Each such Notice of Request for Advance must be delivered to Lender no later than (1) 2:00 p.m. (Nevada local time) on the date which is at least three (3) Business Days prior to the date the proposed Advance is to be made. Only one request for an Advance from the $35,000,000 Non-Revolving Line of Credit Loan may be made during any calendar week. Each Notice of Request for Advance must separately identify the amount of the requested Advance, the specific Loan from which said Advance is to be made, and shall include the information required in the Notice for Request for Advance and such other information as may be required by Lender. In no event shall Borrowers be permitted to request further Advances from the $35,000,000 Non-Revolving Line of Credit Loan at any time during the thirty (30) day period prior to the Maturity Date. (c) On the Closing Date hereof, Borrowers agree to and shall execute and deliver to Lender the $35,000,000 Non-Revolving Line of Credit Note in the form of Exhibit "B" attached hereto. The $35,000,000 Non-Revolving Line of Credit Note represents the obligation of Borrowers, jointly and severally, individually and collectively, to repay the $35,000,000 Non-Revolving Line of Credit Loan to Lender. During the term of the $35,000,000 Non-Revolving Line of Credit Note, Borrowers shall not be required to make any payments of principal, however, Borrowers shall pay interest to Lender on the entire principal balance outstanding from time to time, in arrears, on each applicable Interest Payment Date, at the Interest Rate applicable to the $35,000,000 Non-Revolving Line of Credit Loan, and the entire balance of unpaid principal, plus all accrued but unpaid interest thereon and all other non-contingent Obligations due and owing thereunder, shall be due and payable in full in a single payment in immediately available funds, on the Maturity Date. 1.3 [Intentionally Omitted] 1.4 Prepayments. (a) Voluntary Prepayments. (i) $45,000,000 Real Estate Term Loan; Subordination. 4 (A) Borrowers may prepay all, but not less than all, of the $45,000,000 Real Estate Term Loan at any time without fee, charge or penalty. (B) If the $45,000,000 Real Estate Term Loan is paid in full prior to the Maturity Date, then Lender agrees to and shall subordinate the Liens of the Deeds of Trust securing repayment of the remaining Loan (i.e., the $35,000,000 Non-Revolving Line of Credit Loan) to the Lien of a deed of trust or mortgage securing repayment of a new loan, but only if (1) the proceeds of the new loan to which subordination is requested were used to repay the $45,000,000 Real Estate Term Loan in full, and (2) the new lender and Lender execute and deliver to one another a subordination agreement on commercially reasonable terms and conditions approved by Lender in its discretion. (ii) $35,000,000 Non-Revolving Line of Credit Loan. Borrowers may prepay all or any part of the $35,000,000 Non-Revolving Line of Credit Loan at any time without fee, charge or penalty. Notwithstanding the foregoing, the unused portion of the $35,000,000 Non-Revolving Line of Credit Loan as the same may be determined from time to time (inclusive of amounts prepaid) shall remain subject to the Unused Commitment Fee. (b) Mandatory Prepayments. Notwithstanding the foregoing, immediately upon receipt by Borrowers or Credit Parties of any cash proceeds of any sale or other disposition of any Collateral, Borrowers shall prepay the Loans in an amount equal to all such proceeds, net of (i) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (ii) transfer taxes, and (iii) an appropriate reserve for income taxes. Any such prepayment shall be applied in accordance with Section 1.4(c) (Application of Prepayments). The following shall not be subject to mandatory prepayment under this subsection: (1) proceeds of sales of Inventory in the ordinary course of business; (2) proceeds of collection of Accounts in the ordinary course of business; and (3) proceeds of sales of Equipment and other personal property in the ordinary course of business so long as such Equipment and other personal property is replaced (if necessary in the exercise of prudent business judgment) by Equipment and other personal property of equal or greater value or utility. (c) Application of Prepayments. Any prepayments made pursuant to Section 1.4 (a) or (b) (Prepayments) above shall be applied as follows: first, to reimbursable expenses of Lender then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on any of the Loans; third, and last, in such order as Lender shall determine in its sole and absolute discretion, to the principal balance of the Loans until the same has been paid in full. If an Event of Default has occurred and is continuing, Lender shall have the absolute right, in its sole discretion, to determine which of the Obligations shall be paid and in what order and amounts. (d) Application of Prepayments from Insurance and Condemnation Proceeds. Prepayments from insurance or condemnation proceeds in accordance with Section 5.4 (Insurance) shall be applied to the Loans in the manner described in Section 1.4(c) (Application of Prepayments) above. 5 (e) No Implied Consent. Nothing in this Section 1.4 (Prepayments) shall be construed to constitute Lender's consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents. (f) Use of Proceeds. Borrowers shall utilize the proceeds of the Loans solely for the express purposes authorized in Sections 1.1 through 1.3 in this Agreement. Disclosure Schedule 1.3 (Sources and Uses of Funds) contains a description of Borrower's sources and uses of funds as of the Closing Date, including the Loans to be made or incurred on that date. (g) Reliance on Notices; Appointment of Borrower's Representative. Lender shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Request for Advance or other notice believed by Lender to be genuine. Lender may assume that each Person executing and delivering any notice in accordance herewith, including without limitation the Notice of Request for Advance, was duly authorized, unless the responsible individual acting thereon for Lender has actual knowledge to the contrary. Borrowers hereby designate Bruce Mogel as Borrower's Representative for the purposes of issuing Notices of Request for Advances, giving instructions with respect to the disbursement of the proceeds of the applicable Loan, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of Borrowers under the Loan Documents. Borrower's Representative hereby accepts such appointment. Lender may regard any notice or other communication pursuant to any Loan Document from Borrower's Representative as a notice or communication from Borrowers, and may give any notice or communication required or permitted to be given to Borrowers hereunder to Borrower's Representative on behalf of Borrowers. Borrowers agree that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower's Representative shall be deemed for all purposes to have been made by Borrowers and shall be binding upon and enforceable against Borrowers to the same extent as if the same had been made directly by Borrowers. Borrowers may, by written notice to Lender, seek to terminate the appointment of Bruce Mogel as Borrower's Representative and propose appointment of replacement Borrower's Representative; provided, however, said proposed replacement Borrower's Representative (i) must be an officer or director of IHHI, and (ii) must be acceptable to Lender in its sole discretion. Lender shall within ten (10) Business Days from receipt of said notice deliver a written notice to Borrowers either approving, or disapproving, of said proposed replacement. If Lender timely delivers a notice to Borrowers disapproving the proposed replacement(s), or fails to timely deliver any notice to Borrowers, then Bruce Mogel shall remain as Borrower's Representative until an acceptable replacement(s) is proposed by Borrowers and approved by Lender. If Lender timely approves said proposed replacement, then from and after the date Lender delivers written notice of approval of said proposed replacement to Borrowers, Bruce Mogel shall cease to be Borrower's Representative and the proposed replacement shall become Borrower's Representative. 1.5 Interest; Payments. (a) Interest on Loans. During the term of the Loans, Borrowers shall pay interest to Lender on all outstanding Advances, in arrears, on each applicable Interest Payment Date, at the Interest Rate applicable to the Loan in question. 6 (b) Principal on the Loans. During the term of the Loans, no payments of principal shall be due or owing until the Maturity Date. (c) Payment Date. If any payment on any Loan becomes due and payable on a day other than a Business Day, the due date thereof will be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable Interest Rate during such extension. (d) Computation of Interest. All computations of interest shall be made by Lender at the applicable Interest Rate and calculated on the basis of a three hundred sixty (360) day year comprised of twelve (12) months of thirty (30) days each. (e) Default Rate. Notwithstanding the foregoing, so long as an Event of Default has occurred and is continuing under any Loan Document, the Interest Rate applicable to all of the Loans shall be increased to the Default Rate, and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand. All interest payments owing hereunder or under any of the other Loan Documents, including interest accruing at the Default Rate, shall constitute additional Obligations hereunder and shall be secured by the Collateral. (f) Payment to Lender's Account. All payments by Borrowers to Lender hereunder shall be made to the following deposit account: Bank of America (Las Vegas, Nevada) Medical Capital Corporation (Collection account for Medical Provider Financial Corporation II) Acct# 4966876714 ABA# 026009593 Address: 6900 West Cliff Drive, 4th Floor, Las Vegas, Nevada 89145 Contact Person: Gin Richardson 1.6 Maximum Lawful Rate of Interest. Notwithstanding anything to the contrary set forth in Section 1.5 (Interest; Payments), if a court of competent jurisdiction determines in a final unappealable order that the rate of interest payable hereunder exceeds the Maximum Lawful Rate, then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate. In no event shall the total interest received by Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. Any payments made by Borrowers in excess of the Maximum Lawful Rate shall be considered voluntary prepayments of the Loans under Section 1.4(a) (Voluntary Prepayments). 1.7 Cash Management System. On or prior to the Closing Date, Borrowers will establish and will maintain until the Termination Date, the Cash Management System described in Annex B (Cash Management System) attached hereto, including but not limited to the provisions of the Deposit Account Security Agreement and related Control Agreements. 7 1.8 Unused Commitment Fees. Borrowers agree to and shall pay Lender an Unused Commitment Fee on the $35,000,000 Non-Revolving Line of Credit Loan, which shall be non-refundable. The Unused Commitment Fee shall be due and payable in arrears, in installments, at the expiration of each one hundred eighty (180) calendar day period between the Closing Date and the Termination Date, without notice. If any installment of the Unused Commitment Fee is not paid to Lender within ten (10) Business Days following the due date of said installment, then Lender shall have the right, without further notice, to charge such payment of the Unused Commitment Fee against the $35,000,000 Non-Revolving Line of Credit Loan as an approved Advance. If, however, at the time said installment becomes delinquent either (i) Borrowers have drawn the maximum amount available under both the $35,000,000 Non-Revolving Line of Credit Loan and no further funds are available to borrow, or (ii) Borrowers have committed one or more other Events of Default under this Agreement which remain uncured, then said failure to timely pay the Unused Commitment Fee installment shall itself constitute an Event of Default hereunder, entitling Lender to all rights and remedies available to it under this Agreement, at law or in equity. 1.9 Origination Fees. For each Loan, Borrowers agree to and shall pay Lender an Origination Fee applicable to said Loan, which shall be nonrefundable. Each Origination Fee shall be deemed fully earned by Lender as of the Effective Date of this Agreement, however, the Origination Fee shall be due and payable on the Closing Date. 1.10 Closing Date; Notice of Request for Advance. At least three (3) Business Days prior to the Closing Date, Borrowers shall execute and deliver to Lender a Notice of Request for Advance requesting that Lender make initial Advances under the Loans which at a minimum are sufficient to pay each of the following: (a) Previous $50,000,000 Acquisition Loan. From the $45,000,000 Real Estate Term Loan, the amount necessary to pay in full all principal and interest due and owing on the Previous $50,000,000 Acquisition Loan. The Advance from the $45,000,000 Real Estate Term Loan shall not be disbursed to Borrowers at Closing but shall be withheld by Lender and paid directly to Lender to pay in full and satisfy the Previous $50,000,000 Acquisition Loan. (b) Previous $30,000,000 Non-Revolving Line of Credit Loan. >From the $35,000,000 Non-Revolving Line of Credit Loan, the amount necessary to pay in full all principal and interest due and owing on the Previous $30,000,000 Line of Credit Loan. The Advance from the $35,000,000 Non-Revolving Line of Credit Loan shall not be disbursed to Borrowers at Closing but shall be withheld by Lender and paid directly to Lender to pay in full and satisfy the Previous $30,000,000 Line of Credit Loan. (c) [Intentionally Omitted] (d) Shortfall Amounts. From the $35,000,000 Non-Revolving Line of Credit Loan: (i) the amount necessary (if any) to pay in full any shortfall amounts that remain due and owing on the Previous $50,000,000 Acquisition Loan after the Advance is made under Section 1.10(a) above; (ii) the amount necessary (if any) to pay in full any shortfall amounts that remain due and owing on the Previous $30,000,000 Line of Credit Loan after the Advance is made under Section 1.10(b) above; and (iii) the amount necessary (if any) to pay in full any shortfall amounts that remain due and owing on the Previous $10,700,000 Term 8 Loan to MPFC III after the initial Advance (as such term is defined in the New $10,700,000 Credit Agreement) is made pursuant to the New $10,700,000 Credit Agreement. The foregoing Advances (if any) from the $35,000,000 Non-Revolving Line of Credit Loan shall not be disbursed to Borrowers at Closing but shall be withheld by Lender and paid directly to Lender and/or MPFC III to satisfy the referenced shortfall amounts (if any). (e) Origination Fees. From the $35,000,000 Non-Revolving Line of Credit Loan, the amounts necessary to pay (i) to Lender each Origination Fee on each Loan, and (ii) to MPFC III each Origination Fee on each Loan (as such terms are defined in the New $10,700,000 Credit Agreement). The Origination Fees shall not be disbursed to Borrowers at Closing but shall be withheld by Lender and paid directly to Lender and/or MPFC III from the Advance from the $35,000,000 Non-Revolving Line of Credit Loan. (f) Lender's Costs. From the $35,000,000 Non-Revolving Line of Credit Loan, the amount necessary to pay (i) Lender's Costs, which shall be deemed fully earned as of the Effective Date of this Agreement, and (ii) Lender's Costs (as defined in the New $10,700,000 Credit Agreement), which shall be deemed fully earned as of the Effective Date of the New $10,700,000 Credit Agreement. Lender's Costs include, but are not limited to, outside legal counsel of Lender and/or MPFC III and other closing costs. Lender's Costs shall not be disbursed to Borrowers at Closing but shall be withheld by Lender and paid directly to Lender, MPFC III and/or to any other parties entitled thereto from the initial Advance from the $35,000,000 Non-Revolving Line of Credit Loan. 1.11 Receipt of Payments. Borrowers shall make each payment under this Agreement and the Notes not later than 2:00 p.m. (Las Vegas time) on the day when due in immediately available funds in Dollars to Lender's account described in Section 1.5(f) (Payment to Lender's Account) above. For purposes of computing interest as of any date, all payments shall be deemed received on the Business Day on which immediately available funds therefore are received in Lender's deposit account prior to 2:00 p.m. (Las Vegas time). Payments received in good and immediate funds after 2:00 p.m. (Las Vegas time) on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day. (a) Application and Allocation of Payments. (i) Application of Payments. So long as no Event of Default has occurred and is continuing, for each Loan, (1) scheduled monthly payments shall be applied first, to reimbursable expenses of Lender then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on Loan in question; third, and last, to the principal balance of the Loan in question until the same has been paid in full; and (2) voluntary prepayments and mandatory prepayments shall be applied as set forth in Section 1.4(c) (Application of Prepayments). As to any other payment, and as to all payments made when an Event of Default has occurred and is continuing or following the Commitment Termination Date, Borrowers and the Credit Parties hereby irrevocably waive the right to direct the application of any and all payments received from or on behalf of Borrowers, and Borrowers hereby irrevocably agree that Lender shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrowers as Lender may deem advisable notwithstanding any previous entry by Lender in the Loan Account or any other books and records. 9 (ii) Charges to the Loans. Lender is authorized to, and in its sole and absolute discretion may, charge to its respective Loans (which charges shall be deemed to be Advances requested by Borrowers) on behalf of Borrowers and cause to be paid all expenses, Charges, costs (including insurance premiums in accordance with Section 5.4 (Insurance)) and interest and principal, other than principal of the Loan in question, if and to the extent Borrowers fail to pay promptly any such amounts as and when due. Such charges to the Loan in question shall not waive any Event of Default due to Borrower's non-payment, unless Lender in its sole and absolute discretion, agrees in writing. At Lender's option and to the extent permitted by law, any charges so made shall constitute part of the Loan in question and shall reduce the aggregate amount of the Commitment remaining available to Borrowers, and shall be secured by the Collateral. 1.12 Loan Account. Lender shall maintain a Loan Account on its books to record all Advances, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loan in question or any other Obligations. All entries in the Loan Account shall be made in accordance with Lender's customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Lender's most recent printout or other written statement, shall, absent demonstrable error, be presumptive evidence of the amounts due and owing to Lender by Borrowers; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrower's duty to pay the Obligations. Lender shall render to Borrower's Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to Borrowers for the immediately preceding month. Unless Borrower's Representative notifies Lender in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) calendar days after the date of Borrower's Representative's receipt thereof, each and every such accounting shall be presumptive evidence of all matters reflected therein. Only those items expressly objected to in such notice and explaining the basis for such objection(s) shall be deemed to be disputed by Borrowers. 1.13 Access. Borrowers and Credit Parties (other than Ganesha) shall, during normal business hours, from time to time upon 24 hours prior notice as frequently as Lender reasonably determines to be appropriate: (a) provide Lender and any of its officers, employees and agents access to its properties, facilities, advisors, officers and employees of Borrowers and Credit Parties (other than Ganesha) and to the Collateral for purposes of exercising and enforcing Lender's rights and remedies under the Loan Documents, (b) permit Lender and any of its officers, employees and agents, to inspect, audit and make extracts from Borrower's and Credit Party's (other than Ganesha's) respective books and records pertaining to the Loans and the Collateral, and (c) permit Lender and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Collateral of Borrowers and Credit Parties. If an Event of Default has occurred and is continuing, Borrowers and Credit Parties (other than Ganesha) shall provide such access to Lender at all times and without advance notice. Furthermore, so long as any Event of Default has occurred and is continuing, Borrowers shall use commercially reasonable efforts to provide Lender with access to their suppliers and customers. Borrowers and Credit Parties (other than Ganesha) shall make available to Lender 10 and its counsel reasonably promptly originals or copies of all books and records that Lender may reasonably request. Borrowers and Credit Parties (other than Ganesha) shall deliver any document or instrument necessary for Lender as it may from time to time request, to obtain records from any service bureau or other Person that maintains records for Borrowers and Credit Parties pertaining to the Loans or the Collateral. 1.14 Taxes. (a) No Deduction for Taxes. Any and all payments by Borrowers hereunder (including any payments made pursuant to Section 13 (Suretyship Waivers) or under the Notes shall be made, in accordance with this Section 1.14 (Taxes), free and clear of and without deduction for any and all present or future Taxes. If Borrowers shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder (including any sum payable pursuant to Section 13 (Suretyship Waivers)) or under such Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.14 (Taxes)) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrowers shall make such deductions, and (iii) Borrowers shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower's Representative shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. (b) Indemnity for Taxes. Borrowers hereby agree to indemnify, defend, protect and hold Lender free and harmless from any claim or demand for payment of, and within ten (10) calendar days of receipt of demand therefor agrees to pay to Lender, (i) any and all Taxes that Borrowers are obligated to pay pursuant to this Section 1.14 (Taxes) (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1.14 (Taxes)), plus (ii) the full amount of any additional liability (including penalties, interest and expenses) payable or paid by Lender arising therefrom or with respect thereto, whether or not the same were correctly or legally asserted. Notwithstanding the foregoing, Lender remains ultimately responsible for paying any and all income taxes measured by Lender's own gross income. 1.15 Capital Adequacy; Increased Costs; Illegality. (a) Capital Adequacy. If any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by Lender with any request or directive compliance regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, from any Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by Lender and thereby reducing the rate of return on Lender's capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by Lender pay to Lender additional amounts sufficient to compensate Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by Lender to Borrower's Representative shall be presumptive evidence of the matters set forth therein. 11 (b) Increased Costs. If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to Lender of agreeing to make or making, funding or maintaining the Loans, then Borrowers shall from time to time, upon demand by Lender pay to Lender additional amounts sufficient to compensate Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower's Representative by Lender, shall be presumptive evidence of the matters set forth therein. Lender agrees that, as promptly as practicable after they become aware of any circumstances referred to above which would result in any such increased cost, Lender shall, to the extent not inconsistent with Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 1.15(b) (Increased Costs). Provided, however, the amounts due from Borrowers under Sections 1.15(a) and (b) (Capital Adequacy; Increased Costs) shall not include amounts attributable to Lender's non-compliance with any requirement of any Governmental Authority or to Lender's non-payment of its own income taxes or to any increase in Lender's income taxes. 1.16 Single Loan. The Loans to Borrowers and all of the other Obligations of Borrowers arising under this Agreement and the other Loan Documents shall constitute one general obligation of Borrowers secured by the Liens on all of the Collateral. 2. CONDITIONS PRECEDENT -------------------- 2.1 Conditions Precedent to the Closing Date. Lender shall not be obligated to take, fulfill, or perform any action hereunder, nor shall Lender be obligated to fund any portion of the Loans, until the following conditions precedent have been satisfied or provided for in a manner satisfactory to Lender, in its sole discretion, or waived in writing by Lender: (a) Credit Agreement; Disclosure Schedules. Two (2) duplicate original counterparts of this Agreement shall have been duly executed by and delivered by each Borrower and each Credit Party and each Guarantor to Lender; and Lender shall have received original updated two (2) sets of Disclosure Schedules in form and substance satisfactory to Lender, each dated and executed by each Borrower. (b) Approvals. Lender shall have received satisfactory evidence that each Borrower and each Credit Party have obtained, or in the case of necessary Governmental Authority approvals, have applied for, all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents. Disclosure Schedule 2.1(b) attached hereto lists all required consents and approvals of all Governmental Authorities and all other Persons. (c) Capital Structure: Other Indebtedness. The capital structure of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, the ownership of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, and the terms and conditions of all Indebtedness of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, shall certified by each applicable Person to Lender and must be acceptable to Lender in its sole and absolute discretion. The capital structure of each Borrower as of the Effective Date is set forth in Disclosure Schedule 2.1(c) attached hereto. 12 (d) Charter Documents. Each Borrower and each Credit Party (including each Guarantor) shall have delivered the following documents to Lender: (i) A copy of the articles of incorporation for each Borrower and a copy of the or articles of organization for each Credit Party, certified by the Secretary of State for the state of incorporation or organization within the most recent 30 day period prior to the Closing Date of this Agreement. (ii) A certificate of good standing issued by the applicable state of incorporation or organization for each Borrower and each Credit Party, certified by the Secretary of State for the state or incorporation or organization within the most recent 30 day period prior to the Closing Date of this Agreement. (iii) The bylaws or operating agreement for each Borrower and each Credit Party, certified to be true and accurate by the corporate secretary of each Borrower and by the manager of each Credit Party within the most recent 30 day period prior to the Closing Date of this Agreement. (iv) An incumbency certificate (officers and directors, or managers and members) for each Borrower and each Credit Party (including each Guarantor), certified to be true and accurate by the corporate secretary of each Borrower and by the manager of each Credit Party within the most recent 30 day period prior to the Closing Date of this Agreement. (v) The unanimous written consent of the board of directors of each Borrower and the unanimous written consent of all managers of each Credit Party (including each Guarantor), authorizing the transactions set forth in this Agreement and the other Loan Documents, executed by each such director or manager within most recent 30 day period prior to the Closing Date of this Agreement. (e) Voluntary Resignation of Dr. Shah. Based on Lender's prior experience in connection with the Previous Loans, Lender has determined in the exercise of its discretion that it is unable to work with Dr. Shah and that it will not make the Loans available to Borrowers unless Dr. Shah shall have voluntarily resigned as a director of and from all other management positions with or in IHHI prior to the Closing Date. (f) Plan Regarding Engagement of Independent Directors. Lender shall have received from IHHI and approved, in its sole discretion, a Plan Regarding Engagement of Independent Directors. (g) Appraisal. Lender shall have received from IHHI and approved, in its sole discretion, the Appraisal. (h) Loan to Value Ratio. The sum of the $45 Million Real Estate Term Loan and the $35 Million Non-Revolving Line of Credit Loan shall not exceed seventy percent (70%) of the Appraised Value of the Properties as set forth in the Appraisal. 13 (i) Due Diligence. Lender shall have completed its business and legal due diligence and shall have waived all objections thereto. (j) Title Commitment. For each of the Properties, the Title Company shall have delivered a Title Commitment to Lender in form and content acceptable to Lender in its sole and absolute discretion. (k) Notes. The Borrowers shall have each executed and delivered to Lender one (1) original of each of the following Notes: (i) To Lender, the $45,000,000 Real Estate Term Note in the form of Exhibit "A" attached hereto; and (ii) To Lender, the $35,000,000 Non-Revolving Line of Credit Note in the form of Exhibit "B" attached hereto. (l) Notices of Request for Advance. Borrower's Representative shall have executed and delivered to Lender two (2) duplicate original counterparts of the Notice of Request for Advance in the form of Exhibit "D" attached hereto, requesting initial Advances from each of the Loans in the minimum amounts required by this Agreement. (m) $80,000,000 Deeds of Trust. (i) With respect to the Western Medical Center - Anaheim, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original $80,000,000 Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original $80,000,000 Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital (and medical office buildings), PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original $80,000,000 Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and 14 (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (n) Absolute Assignment of Leases and Rents. (i) With respect to the Western Medical Center - Anaheim, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (o) Security Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Security Agreement in the form of Exhibit "G" attached hereto. (p) Collateral Assignment of Contracts. 15 (i) With respect to the Western Medical Center - Anaheim, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital (and medical office buildings), IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (q) Deposit Account Security Agreement. (i) With respect to the Western Medical Center - Anaheim, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital (and medical office buildings), IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; 16 (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease (r) Control Agreement. Borrowers and Bank shall have executed and delivered to Lender two (2) duplicate original counterparts of the Control Agreement in the form of Exhibit "J" attached hereto. (s) Post-Closing Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Post-Closing Agreement in the form of Exhibit "K" attached hereto. (t) Intellectual Property Security Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Intellectual Property Security Agreement in the form of Exhibit "L" attached hereto. (u) Environmental Indemnity Agreement. Borrowers and the Credit Parties (other than Ganesha) shall have executed and delivered to Lender two (2) duplicate original counterparts of the Environmental Indemnity Agreement in the form of Exhibit "M" attached hereto. (v) Guaranty Agreement. Guarantors shall have executed and delivered to Lender two (2) duplicate original counterparts of the Guaranty Agreement in the form of Exhibit "N" attached hereto. (w) Intercreditor Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Intercreditor Agreement in the form of Exhibit "O" attached hereto. (x) Pledge Agreement. IHHI, Ganesha and West Coast shall have executed and delivered to Lender two (2) duplicate original counterparts of the Pledge Agreement (IHHI) in the form of Exhibit "P" attached hereto. (y) Stock Power. IHHI shall have executed and delivered to Lender two (2) duplicate original counterparts of the Stock Power in the form of Exhibit "Q" attached hereto. 17 (z) Membership Power. Ganesha and West Coast shall have executed and delivered to Lender two (2) duplicate original counterparts of the Membership Power in the form of Exhibit "R" attached hereto (aa) Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease). The Landlord under the Chapman Hospital Lease shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "S" attached hereto. (bb) Landlord's Consent and Estoppel Certificate (Chapman MOB Lease). The Landlord under the Chapman MOB Lease shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "S" attached hereto (cc) Landlord's Consent and Estoppel Certificate (Triple Net Lease). PCHI, landlord under the Triple Net Lease, shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "T" attached hereto. (dd) Warrant. IHHI shall have executed and delivered to Lender one (1) original Warrant in the form of Exhibit "U" attached hereto. (ee) Legal Opinions. (i) Legal Opinion of California Counsel. An original legal opinion (from counsel licensed to practice law and in good standing in the State of California) for PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) the valid existence of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman in the State of California; (B) the good standing of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman in the State of California; (C) the requisite power of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman to execute this Agreement and the other Loan Documents; (D) that the execution of this Agreement and the other Loan Documents by PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman will not constitute a breach or default under any contracts or agreements executed by or to which PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman is a party; (E) ) that the choice of law provisions set forth in this Agreement and the other Loan Documents are enforceable; and (F) such other opinions that Lender may require. (ii) First Legal Opinion of Nevada Counsel. A first original legal opinion (from counsel licensed to practice law and in good standing in the State of Nevada) for IHHI and OC-PIN regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) the valid existence of IHHI and OC-PIN in the State of Nevada; (B) the good standing of IHHI and OC-PIN in the State of Nevada; (C) the requisite power of IHHI and OC-PIN to execute this Agreement and the other Loan Documents; (D) that 18 the execution of this Agreement and the other Loan Documents by IHHI and OC-PIN will not constitute a breach or default under any contracts or agreements executed by or to which IHHI and OC-PIN is a party; (E) ) that the choice of law provisions set forth in this Agreement and the other Loan Documents are enforceable; and (F) such other opinions that Lender may require. (iii) Second Legal Opinion of Nevada Counsel. A second original legal opinion from counsel (licensed to practice law and in good standing in the State of Nevada) for all Borrowers and all Credit Parties and all Guarantors regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) that this Agreement and the other Loan Documents comply with Nevada law; (B) that this Agreement and the other Loan Documents are enforceable under Nevada law; (C) that the choice of Nevada law under this Agreement and the other Loan Documents is valid and enforceable under Nevada law; (D) that the Interest Rate applicable to each of the Loans is not usurious under Nevada law; and (E) such other matters as Lender may require. (ff) Fairness Opinion. A fairness opinion executed by a qualified, independent, third-party professional financial advisor or investment bank opining as to (i) the fairness of the transactions contemplated by this Agreement as between the Borrowers and Credit Parties and Guarantors, and (ii) an allocation of fair value to each Hospital Facility, in form and substance satisfactory to Lender. (gg) Closing and Funding Checklist - Other Documents and Instruments. Each Borrower and each Credit Party and each Guarantor shall have executed (where required) and delivered to Lender each of the other documents, exhibits, disclosure schedules, instruments and other items listed in the Closing and Funding Checklist, in form and content satisfactory to Lender. (hh) $50,000,000 Revolving Credit Agreement. All conditions precedent to the obligation of Medical Provider Financial Corporation I (as lender) under Article 4 of the $50,000,000 Revolving Credit Agreement shall have been satisfied or provided for in a manner satisfactory to said lender, in its sole discretion, or waived in writing by said lender. (ii) Documents Required by Title Commitment. Each Borrower shall have executed (where required) and deposited into Escrow all documents and instruments required by the Title Commitment and/or the Escrow Company. (jj) New $10,700,000 Credit Agreement. All conditions precedent to the obligation of MPFC III under Article 2 of the New $10,700,000 Credit Agreement shall have been satisfied or provided for in a manner satisfactory to said MPFC III, in its sole discretion, or waived in writing by MPFC III. 2.2 Further Conditions Precedent to Making Loans; Further Conditions Precedent to Funding Advances. The obligations of Lender to making the Loans to Borrowers and to funding any Advances under the Loans to Borrowers, shall be subject to the following further conditions precedent: 19 (a) Further Conditions Precedent to Making Loans. Lender shall not be obligated to make any of the Loans to Borrowers unless and until the following additional conditions precedent have been satisfied or provided for in a manner reasonably satisfactory to Lender, or waived in writing by Lender, on or before the Closing Date: (i) Loan Documents. All Loan Documents having been executed and delivered on or before the Closing Date shall remain in full force and effect, and Lender shall have received such further documents, instruments, agreements and legal opinions as Lender shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, each in form and substance satisfactory to Lender. (ii) $50,000,000 Revolving Credit Agreement. All loan documents having been executed and delivered on or before the closing date of the transaction contemplated by the $50,000,000 Revolving Credit Agreement shall remain in full force and effect, and the lender under the $50,000,000 Revolving Credit Agreement shall have received such further documents, instruments, agreements and legal opinions as such lender shall reasonably request in connection with the transactions contemplated by the $50,000,000 Revolving Credit Agreement and the loan documents referenced therein, each in form and substance satisfactory to said lender. (iii) Approvals. Lender shall have received (A) satisfactory evidence (or, shall, in its reasonable discretion, continue to be satisfied with such evidence received under Section 2.1(b) (Required Consents and Approvals)), that each Borrower and each Credit Party have obtained, or in the case of necessary Governmental Authority approvals, have applied for, all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents to which they are parties or a signatory, or (B) an officer's certificate signed by an executive officer of each Borrower in form and substance satisfactory to Lender affirming that no such consents or approvals are required. (iv) Timing. The Closing must occur by the Closing Date. (v) Collateral. Lender shall have approved of the Collateral in its sole and absolute discretion. (vi) Changes to Disclosure Schedules. Borrower shall have delivered to Lender updates to all Disclosure Schedules as required by Section 5.6 (Supplemental Disclosures), and Lender shall have approved in their discretion all updates to the Disclosure Schedules as have been delivered to Lender on or before the Closing Date. (vii) No Material Adverse Effect. No event or circumstance shall have occurred that has or reasonably could be expected by Lender to have a Material Adverse Effect. (viii) Title Policies. Title Company shall irrevocably be committed to issue the Title Policy to Lender on the Closing Date for each Property, at Borrower's sole cost and expense, in form and content acceptable to Lender in its sole discretion. 20 (ix) Escrow. Borrowers shall have opened Escrow at the offices of the Title Company and the escrow officer shall be prepared to close Escrow on the terms and conditions set forth in the Escrow Instructions on deposit therein. (b) Conditions to Funding Advances. Lender shall not be obligated to fund any Advance under any of the Loans to Borrowers on the Closing Date or on any other date if: (i) Any representation or warranty by any Borrower or by any Credit Party or by any Guarantor contained herein or in any other Loan Document is untrue or incorrect in any material respect as of such date; (ii) Any Default or Event of Default has occurred and is continuing or would result after giving effect to any Advance; or (iii) Any event or circumstance shall have occurred that has or reasonably could be expected by Lender to have a Material Adverse Effect. The request by any Borrower or Borrower's Representative that Lender fund an Advance under any Loan on the Closing Date or on any other date shall in each event be deemed to constitute, as of the date thereof, (A) a representation and warranty by all Borrowers and all Credit Parties and all Guarantors that the conditions precedent in this Section 2.2 (Further Conditions Precedent to Making Loans; Further Conditions Precedent to Funding Advances) to which it is a party or a signatory have been satisfied, and (B) a reaffirmation by each Borrower and by each Credit Party and by each Guarantor of their respective obligations under the Loan Documents. 2.3 Place of Closing; Delivery of Loan Documents to Lender; Deposits Into Escrow; Close of Escrow; Distribution of Funds and Documents. The transactions contemplated by this Agreement and the other Loan Documents will close on the Closing Date, as follows: (a) Place Of Closing. Unless otherwise agreed in writing by Borrowers and Lender, the Closing will take place on the Closing Date at the offices of the Lender at c/o Medical Capital Corporation, 2100 South State College Blvd., Anaheim, California 92806, Attn: Joseph J. Lampariello, President and COO, telephone: 714-935-3100. (b) Delivery of Loan Documents to Lender's Counsel. Each Borrower shall, not less than three (3) Business Days prior to the Closing Date, deliver or cause to be delivered to legal counsel for Lender the following Loan Documents, each duly executed by each Borrower, each Credit Party (where applicable), each Guarantor (where applicable), any other Person required by this Agreement, and, where required, witnessed, acknowledged and in recordable form, with all exhibits, schedules and annexes (each pre-approved by Lender) attached and executed as required: (i) Two (2) duplicate original counterparts of this Agreement, executed by each Borrower and each Credit Party and each Guarantor and with all completed Annexes and Disclosure Schedules attached. 21 (ii) One (1) original of the $45,000,000 Real Estate Term Note, executed by Borrowers. (iii) One (1) original of the $35,000,000 Non-Revolving Line of Credit Note, executed by Borrowers. (iv) [Intentionally Omitted] (v) Two (2) duplicate original counterparts of the Notice of Request for Advance, executed by Borrower's Representative. (vi) Two (2) duplicate original counterparts of the Security Agreement, executed by Borrowers. (vii) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Western Medical Center - Anaheim, executed by IHHI and WMC-A. (viii) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Western Medical Center - Santa Ana, executed by IHHI and WMC-SA. (ix) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Coastal Community Hospital, executed by IHHI and Coastal. (x) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Chapman MOB Lease, , executed by IHHI. (xi) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Chapman Hospital Lease, executed by IHHI. (xii) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Western Medical Center - Anaheim, executed by IHHI and WMC-A. (xiii) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Western Medical Center - Santa Ana, executed by IHHI and WMC-SA. (xiv) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Coastal Community Hospital, executed by IHHI and Coastal. (xv) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Chapman MOB Lease, executed by IHHI. (xvi) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Chapman Hospital Lease, executed by IHHI. (xvii) Two (2) duplicate original counterparts of the Control Agreement, executed by Borrowers and Bank. 22 (xviii) Two (2) duplicate original counterparts of the Post-Closing Agreement, executed by Borrowers. (xix) Two (2) duplicate original counterparts of the Intellectual Property Security Agreement, executed by Borrowers. (xx) Two (2) duplicate original counterparts of the Environmental Indemnity Agreement, executed by Borrowers and by each Credit Party (other than Ganesha). (xxi) Two (2) duplicate original counterparts of the Guaranty Agreement, executed by each Guarantor. (xxii) Two (2) duplicate original counterparts of the Intercreditor Agreement, executed by Borrowers. (xxiii) Two (2) duplicate original counterparts of the Pledge Agreement, executed by IHHI, Ganesha and West Coast. (xxiv) Two (2) duplicate original counterparts of the Stock Power executed by IHHI. (xxv) All original Stock certificates in WMC-A, WMC-SA, Coastal and Chapman owned, held or controlled by IHHI. (xxvi) Two (2) duplicate original counterparts of the Membership Power executed by Ganesha and West Coast. (xxvii) All original Membership Certificates in PCHI owned, held or controlled by Ganesha; and all Membership Certificates in PCHI owned, held or controlled by West Coast. (xxviii) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease), executed by the Landlord under the Chapman MOB Lease. (xxix) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease), executed by the Landlord under the Chapman Hospital Lease. (xxx) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Triple Net Lease), executed by PCHI. (xxxi) One (1) original Warrant, executed by IHHI. (xxxii) Two (2) original executed opinions of California legal counsel for PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman, executed by said counsel. 23 (xxxiii) Two (2) original executed first opinions of Nevada legal counsel for IHHI and OC-PIN, executed by said Nevada counsel. (xxxiv) Two (2) original executed second opinions of Nevada legal counsel for all Borrowers and Credit Parties and Guarantors, executed by said Nevada counsel. (xxxv) One (1) original executed fairness opinion, in form and content acceptable to Lender. (xxxvi) All other documents, instruments, agreements, Annexes, Schedules, Exhibits not set forth above but required by the Closing and Funding Checklist. (c) Deposits Into Escrow. Unless otherwise set forth below, Borrowers and Lender shall, not less than two (2) Business Days prior to the Closing Date, deposit the following documents, instruments and other items into Escrow, each duly executed and, where appropriate, witnessed, acknowledged and in recordable form, with all exhibits, schedules and annexes (each pre-approved by Lender) attached and executed as required: (i) One (1) copy of this Agreement, executed by Lender, by each Borrower and by each Credit Party and by each Guarantor and with all completed Annexes and Disclosure Schedules and Exhibits attached. (ii) With respect to the Western Medical Center - Anaheim, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Western Medical Center - Anaheim. (iii) With respect to the Western Medical Center - Santa Ana, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana. (iv) With respect to the Coastal Communities Hospital, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Coastal Communities Hospital. (v) With respect to the Chapman Medical Center: (A) one (1) original Deed of Trust executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) one (1) original Deed of Trust executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease (vi) With respect to the Western Medical Center - Anaheim, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and WMC-A with the legal description describing the fee simple interest in the Western Medical Center - Anaheim. 24 (vii) With respect to the Western Medical Center - Santa Ana, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and WMC-SA with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana. (viii) With respect to the Coastal Communities Hospital, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and Coastal with the legal description describing the fee simple interest in the Coastal Communities Hospital. (ix) With respect to the Chapman Western Medical Center: (A) one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; and. (B) one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease. (x) Escrow Instructions executed by each Borrower and each Credit Party and each Guarantor. (xi) For each Property, all UCC-1 Financing Statements (Fixture Filing) as are required by Lender under the Loan Documents, naming the applicable Person's as Debtor. (xii) All other documents, resolutions, charter documents, affidavits and items required by any Title Company pursuant to and as set forth in any Title Commitment. (xiii) By 11:00 a.m. Los Angeles time on the Closing Date, Lender and Borrowers shall deposit into Escrow any funds required by this Agreement. (d) Close of Escrow; Recordation of Loan Documents. At such time as (i) Escrow Holder holds for the account of Lender each of the documents, instruments and funds set forth above; (ii) each Borrower, each Credit Party, each Guarantor and Lender have complied with their respective obligations under this Agreement and their respective Escrow Instructions; (iii) Escrow Holder is prepared to close and consummate the transactions contemplated by the $50,000,000 Revolving Credit Agreement and has complied with the escrow instructions by the parties to the $50,000,000 Revolving Credit Agreement; (iv) Escrow Holder is prepared to close and consummate the transactions contemplated by the New $10,700,000 Credit Agreement and has complied with the escrow instructions by the parties to the New $10,700,000 Credit Agreement; and (v) the Title Company is irrevocably prepared to issue and deliver each Title Policy to Lender at Closing, then Escrow Holder shall close Escrow as follows: 25 (i) With respect to fee simple interest at Western Medical Center - - Anaheim, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $10,700,000 Term Loan; (2) cause the Western Medical Center - Anaheim $80,000,000 Deed of Trust to be recorded as a first Lien and encumbrance against the fee simple title of the Western Medical Center - - Santa Ana; (3) cause the Western Medical Center - Anaheim Absolute Assignment of Leases and Rents to be recorded as a Lien and encumbrance against the fee simple title of the Western Medical Center - Anaheim; and (4) cause the Western Medical Center - Anaheim UCC-1 Financing Statement (Fixture Filing) to be recorded, in each case subject only to the applicable Permitted Exceptions. (ii) With respect to the fee simple interest at Western Medical Center - Santa Ana, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $10,700,000 Term Loan; (2) cause the Western Medical Center - Santa Ana $80,000,000 Deed of Trust to be recorded as a first Lien and encumbrance against the fee simple title of the Western Medical Center - Santa Ana; (3) cause the Western Medical Center - Santa Ana Absolute Assignment of Leases and Rents to be recorded as a Lien and encumbrance against the fee simple title of the Western Medical Center - Santa Ana; and (4) cause the Western Medical Center - Santa Ana UCC-1 Financing Statement (Fixture Filing) to be recorded, in each case subject only to the applicable Permitted Exceptions. (iii) With respect to the fee simple interest at Coastal Communities Hospital, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $10,700,000 Term Loan; (2) cause the Coastal Communities Hospital $80,000,000 Deed of Trust to be recorded as a first Lien and encumbrance against the fee simple title of the Coastal Communities Hospital; (3) cause the Coastal Communities Hospital Absolute Assignment of Leases and Rents to be recorded as a Lien and encumbrance against the fee simple title of the Coastal Communities Hospital; and (4) cause the Coastal Communities Hospital UCC-1 Financing Statement (Fixture Filing) to be recorded, in each case subject only to the applicable Permitted Exceptions. (iv) With respect to IHHI's interest, as MOB Tenant, in the Chapman MOB Lease at the Chapman Medical Center, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the 26 Previous $10,700,000 Term Loan; (2) cause the Chapman Medical Center $80,000,000 Deed of Trust (Chapman MOB Lease) to be recorded as a first Lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; (3) cause the Chapman Medical Center Absolute Assignment of Leases and Rents (Chapman MOB Lease) to be recorded as a Lien and encumbrance against IHHI's interest, as MOB tenant, in the Chapman MOB Lease; and (4) cause the Chapman Medical Center UCC-1 Financing Statement (Fixture Filing) (Chapman MOB Lease) to be recorded against Chapman's interest, as MOB Tenant, in the Chapman MOB Lease, in each case subject only to the applicable Permitted Exceptions. (v) With respect to IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease at the Chapman Medical Center, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $10,700,000 Term Loan; (2) cause the Chapman Medical Center $80,000,000 Deed of Trust (Chapman Hospital Lease) to be recorded as a first Lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; (3) cause the Chapman Medical Center Absolute Assignment of Leases and Rents (Chapman Hospital Lease) to be recorded as a Lien and encumbrance against IHHI's interest, as Hospital tenant, in the Chapman Hospital Lease; and (4) cause the Chapman Medical Center UCC-1 Financing Statement (Fixture Filing) (Chapman Hospital Lease) to be recorded against Chapman's interest, as Hospital Tenant, in the Chapman Hospital Lease, in each case subject only to the applicable Permitted Exceptions (e) Distribution of Funds and Documents by Escrow Holder at Closing. When Escrow Holder is in the position to close Escrow as required by Section 2.3(d) (Close of Escrow; Recordation of Loan Documents) immediately above, but in no event later than the Closing Date, Escrow Holder shall distribute funds and documents then on deposit in Escrow to Borrowers as set forth in Lender's separate escrow instructions. (f) Distribution of Documents by Escrow Holder. (i) The original and one (1) copy of each Lender's Title Policy to Lender. (ii) A true and correct copy of each of the $80,000,000 Deeds of Trust to Lender (with a copy to Borrowers) as recorded. (iii) A true and correct copy of each of the Absolute Assignment of Leases and Rents to Lender (with a copy to Borrowers) as recorded. (iv) A true and correct copy of each UCC-1 Financing Statement (Fixture Filing) (with a copy to Borrowers) as recorded. (v) Final settlement statement to Lender and to Borrowers with respect to distribution of amounts deposited into this Escrow. Even though the following amounts were not deposited into Escrow, said final settlement statement shall list the total amount of the Advances made by Lender to Borrowers pursuant to this Agreement but which were withheld by Lender to pay in full the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Origination Fees and Lender's Costs. 27 (g) Distribution of Documents by Lender at Closing. When Escrow Holder has closed Escrow and distributed the documents and funds as and when required by this Agreement, Lender shall cause the documents then in its possession to be distributed as follows: (i) To Borrower's Representative: one (1) duplicate original counterpart of the Absolute Assignments of Leases and Rents; the Security Agreement; the Collateral Assignments of Contracts; the Deposit Account Security Agreements; the Control Agreement; the Post-Closing Agreement; the Intellectual Property Security Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Intercreditor Agreement; the Pledge Agreement; the Stock Power; the Membership Power; the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease); the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease)and the Landlord's Consent and Estoppel Certificate (Triple Net Lease). (ii) To Borrower's Representative: one (1) copy of the $45,000,000 Real Estate Term Note; one (1) copy of the $35,000,000 Non-Revolving Line of Credit Note; and one (1) copy of the fairness opinion. (iii) To Lender: one (1) duplicate original counterpart of the Absolute Assignments of Leases and Rents; the Security Agreement; the Collateral Assignments of Contracts; the Deposit Account Security Agreements; the Control Agreement; the Post-Closing Agreement; the Intellectual Property Security Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Intercreditor Agreement; the Pledge Agreement; the Stock Power; the Membership Power; the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease); the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease); and the Landlord's Consent and Estoppel Certificate (Triple Net Lease). (iv) To Lender: the original executed $45,000,000 Real Estate Term Note; the original executed $35,000,000 Non-Revolving Line of Credit Note; the original, executed Warrant; the original of each of the executed legal opinions; and the original executed fairness opinion. 3. REPRESENTATIONS AND WARRANTIES ------------------------------ To induce Lender to make the Loans, Borrowers make the following representations and warranties to Lender with respect to Borrowers; each Credit Party makes the following representations and warranties to Lender with respect to itself; and each Guarantor makes the following representations and warranties to Lender with respect to itself. Each and all of said representations and warranties (i) shall be true, correct, complete and accurate on the Closing Date and on each subsequent funding date (unless expressly limited to a particular date), and (ii) shall survive the execution and delivery of this Agreement (it being understood, that, for purposes of any representation and warranty expressly made as of the Closing Date and each subsequent funding date with reference to, or qualified by, a Disclosure Schedule, such reference shall include such updated version, if any, of such Disclosure Schedule as may be made effective (including by consent of Lender) pursuant to Section 5.6 (Supplemental Disclosure) on or before the Closing Date). 28 3.1 Borrowers and Credit Parties. (a) Corporate Existence; Compliance with Applicable Laws. (i) IHHI (1) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada; (2) is registered as a foreign corporation in the State of California and is qualified to do business in and is doing business in the State of California; (3) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its bylaws; and (7) is in compliance in all material respects with all other Applicable Laws. (ii) WMC-A, WMC-SA, Coastal and Chapman are each (1) corporations duly organized, validly existing and in good standing under the laws of the State of California; (2) doing business in the State of California; (3) duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its bylaws; and (7) is in compliance in all material respects with all other Applicable Laws. (iii) PCHI, Ganesha and West Coast are each (1) limited liability companies duly organized, validly existing and in good standing under the laws of the State of California; (2) doing business in the State of California; (3) duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) have the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) have applied for all licenses, permits, consents or approvals from or by, 29 and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its operating agreement; and (7) is in compliance in all material respects with all other Applicable Laws. (iv) OC-PIN is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Nevada; (2) is registered as a foreign limited liability company in the State of California and is qualified to do business in and is doing business in the State of California; (3) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its operating agreement; and (7) is in compliance in all material respects with all other Applicable Laws. (b) Executive Office, Collateral Locations, FEIN. As of the Closing Date, the name of each Borrower and each Credit Party and each Guarantor, as its name appears in official filings in the States of Nevada and California (as applicable), and the current location of each Borrower's and each Credit Party's and each Guarantor's chief executive office and the premises at which any Collateral is located are set forth in Disclosure Schedule 3.1. None of such locations has changed within the four (4) months preceding the Closing Date (except that Collateral may have been transferred from one Hospital Facility to another during said period) and each Borrower and Credit Party and each Guarantor has only one state of incorporation or organization and has not changed the state of incorporation or organization at any time within the five (5) year period prior to the Closing Date. During the preceding five (5) years, no Borrower and no Credit Party and no Guarantor has conducted business under or used any name (whether corporate, partnership or assumed) other than as shown on Schedule 3.1. Each Borrower and each Credit Party and each Guarantor is the sole owner of all of its names listed on Schedule 3.1, and any and all business done and invoices issued in such names are such Borrower's and/or such Credit Party's and such Guarantor's sales, business and invoices. Each trade name of each Borrower and each Credit Party and each Guarantor represents a division or trading style of such Borrower and/or such Credit Party and/or such Guarantor. All Accounts of each Borrower and each Credit Party (other than Ganesha) and each Guarantor (other than Ganesha) arise, originate and are located, and all of the Collateral and all books and records in connection therewith or in any way relating thereto or evidencing the Collateral are located and shall only be located, in and at such locations other than goods in transit and immaterial amounts of property. All of the Collateral is located only in the continental United States. Each Borrower's and each Credit Party's (other than Ganesha) and each Guarantor's (other than Ganesha) Medicare and Medicaid Provider Numbers are set forth on Schedule 3.1. In addition, Disclosure Schedule 3.1 lists the federal employer identification number of each Borrower and each Credit Party and each Guarantor. 30 3.2 Power, Authorization, Enforceable Obligations. The execution, delivery and performance by Borrowers of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person's power; (b) have been duly authorized by all necessary corporate or limited liability company action; (c) do not contravene any provision of such Person's bylaws or operating agreement; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Lender pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 2.1(b) (Required Consents and Approvals), all of which will have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan Documents shall be duly executed and delivered by Borrowers and Credit Parties and each such Loan Document shall constitute a legal, valid and binding obligation of Borrowers and Credit Parties enforceable against it in accordance with its terms. Credit Parties hereby make the foregoing representations and warranties in clauses (d), (e), (f) and (g) of this Section 3.2 (Power, Authorization, Enforceable Obligations) with respect to the execution, delivery and performance by Credit Parties of the Loan Documents to which Credit Parties are a party and the creation of all Liens provided for therein. 3.3 Financial Statements and Projections. Except for the Projections, all Financial Statements delivered to Lender by Borrowers that are referred to below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of Borrowers as of the dates thereof and the results of their operations and cash flows for the periods then ended. Credit Parties (other than Ganesha) hereby represent and warrant to Lender that all financial statements delivered to Lender by Credit Parties present fairly in all material respects the financial position of the Credit Parties as of the dates thereof, and since the date of the most recent financial statements submitted to Lender, there has not occurred any Material Adverse Effect or, to Credit Parties' knowledge, any other event or condition that would reasonably be likely to have a Material Adverse Effect. (a) Financial Statements. The Financial Statements which have been delivered by Borrowers to Lender on or before the date hereof are comprised of: (i) The consolidated, unaudited balance sheets of Borrowers as of December 31, 2006, and the related statements of income and cash flows of Borrowers for the nine (9) month period then ended. (ii) The unaudited balance sheet(s) at June 30, 2007 of Borrowers and the related consolidated statement(s) of income and cash flows of Borrowers for the Fiscal Quarter then ended. 31 (b) Pro Forma. The pro forma financial statements which have been delivered by Borrowers to Lender on or before the date hereof were prepared by Borrowers giving pro forma effect to the Related Transactions, was based on the unaudited consolidated and consolidating balance sheets of Borrowers and its Subsidiaries, and were prepared in accordance with GAAP (to the extent applicable), with only such adjustments thereto as would be required in accordance with GAAP. (c) Projections. All Projections which have been delivered by Borrowers to Lender on the date hereof were prepared by Borrowers in light of Borrower's past experience, but including reasonably estimated future payments of known contingent liabilities, and reflect projections on a quarterly basis for the 2007/2008 Fiscal Year and on an annual basis for all periods thereafter through 2009/2010. The Projections are based upon the same accounting principles as those used in the preparation of the financial statements described above with certain normalizing assumptions made by Borrowers, and the estimates and assumptions stated therein, all of which Borrowers believe to be reasonable and fair in light of current conditions and current facts known to Borrowers and, as of the Closing Date, reflect Borrower's good faith and reasonable estimates of the future financial performance of Borrowers for the period set forth therein. 3.4 Material Adverse Effect. (a) Borrowers. The Borrowers hereby represent to Lender that, between the Effective Date of this Agreement and the Closing Date: (i) to the best of Borrower's knowledge, after due inquiry, there has not been any material increase in contingent or noncontingent liabilities, liabilities for Charges, or obligations with respect to long-term leases or unusual forward or long-term commitments of Borrowers, (ii) to the best of Borrower's knowledge, after due inquiry, there has not been any material decrease in the assets of Borrowers, (iii) no contract, lease or other agreement or instrument has been entered into by Borrowers or has become binding upon Borrower's assets and, to the knowledge of Borrowers, no law or regulation applicable to Borrowers has been adopted that has had or could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Collateral, (iv) to the best of Borrower's knowledge, after due inquiry, neither Borrowers nor any of the Credit Parties is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Collateral, and (v) to the best of Borrower's knowledge, after due inquiry, no event has occurred, that alone or together with other events, has had, or could reasonably be expected to have, a Material Adverse Effect with respect to Borrowers or the Collateral. (b) Credit Parties. The Credit Parties (other than Ganesha) hereby represent to Lender that, between the Effective Date of this Agreement and the Closing Date: (i) to the best of each Credit Party's knowledge, there has not been any material increase in contingent or noncontingent liabilities, liabilities for Charges, or obligations with respect to long-term leases or unusual forward or long-term commitments of Borrowers, (ii) to the best of each Credit Party's knowledge, there has not been any material decrease in the assets of any Credit Party, (iii) no contract, lease or other agreement or instrument has been entered into by any Credit Party or has become binding upon Credit Parties assets and, to the knowledge of Credit Parties, no law or regulation applicable to Credit Parties or to Borrowers has been adopted that has had or 32 could reasonably be expected to have a Material Adverse Effect with respect to Credit Party's or Borrowers or the Collateral, (iv) to the best of each Credit Party's knowledge, neither Borrowers nor any of the Credit Parties is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Credit Parties or the Collateral, and (v) to the best of each Credit Party's knowledge, no event has occurred, that alone or together with other events, has had, or could reasonably be expected to have, a Material Adverse Effect with respect to Borrowers or the Credit Parties or the Collateral. 3.5 Ownership of Collateral; Liens. Borrowers and Credit Parties (other than Ganesha) (a) each separately own good, valid and marketable title to or a valid leasehold interest in, all of its properties and assets, including all of its Collateral whether personal or real, subject to no transfer restrictions or Liens of any kind except for Permitted Encumbrances, and (b) is in compliance in all material respects with each lease to which it is a party or otherwise bound. None of the Collateral is subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to Borrowers or to Credit Parties that may result in any Liens (including Liens arising under Environmental Laws or other Applicable Laws) other than Permitted Encumbrances. Disclosure Schedule 3.5 attached hereto sets forth a list of all real estate and leases to be owned or held by Borrowers immediately after the Closing Date. Each Borrower enjoys peaceful and undisturbed possession under all such leases and such leases are all the leases necessary for the operation of such properties and assets are valid and subsisting and are in full force and effect. 3.6 Labor Matters. Except as set forth on Disclosure Schedule 3.6, as of the Closing Date, (a) no strikes or other material labor disputes against Borrowers are pending or, to any Borrower's or to any Credit Party's knowledge, threatened; (b) hours worked by and payment made to employees of Borrowers comply in all material respects with the Fair Labor Standards Act and other Applicable Laws; (c) all payments due from Borrowers for employee health and welfare insurance have been paid or accrued as a liability on the books of Borrowers; (d) Borrowers are not a party to or bound by any collective bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement unless true and complete copies of any agreements described on Disclosure Schedule 3.6 have been delivered to Lender; (e) there is no organizing activity involving Borrowers pending or, to Borrower's or Credit Party's knowledge, threatened by any labor union or group of employees of Borrowers; (f) except as otherwise disclosed on Disclosure Schedule 3.6, there are no representation proceedings pending or, to Borrower's or Credit Party's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Borrower has made a pending demand for recognition; and (g) there are no material complaints or charges against any Borrower pending or, to the knowledge of Borrowers or Credit Parties, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Borrower of any individual. 3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock. Except as listed on Disclosure Schedule 3.7, the Borrowers and the Credit Parties have no Subsidiaries. Disclosure Schedule 3.7 states the authorized and issued capitalization of each Borrower and of each Credit Party (other than Ganesha), 33 the number and class of equity securities and/or ownership, voting or partnership interests issued and outstanding of each Borrower and each Credit Party (other than Ganesha) and the record and beneficial owners thereof (including options, warrants and other rights to acquire any of the foregoing). The ownership or partnership interests of each Credit Party are not certificated, the documents relating to such interests do not expressly state that the interests are governed by Article 8 of the Uniform Commercial Code, and the interests are not held in a securities account. The outstanding equity securities and/or ownership, voting or partnership interests of each Borrower and each Credit Party (other than Ganesha) have been duly authorized and validly issued and are fully paid and non-assessable, and each Person listed on Disclosure Schedule 3.7 owns beneficially and of record all the equity securities and/or ownership, voting or partnership interests it is listed as owning free and clear of any Liens other than Liens created by the Collateral Documents. Disclosure Schedule 3.7 also lists the directors, members, managers and/or partners of each Borrower and each Credit Party (other than Ganesha). Except as listed on Disclosure Schedule 3.7, no Credit Party (other than Ganesha) owns an interest in, participates in or engages in any joint venture, partnership or similar arrangements with any Person. Except as set forth in Disclosure Schedule 3.7, as of the Closing Date, there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Borrower or any Credit Party (other than Ganesha) has issued or may be required to issue, sell, repurchase or redeem any of its Stock. All outstanding Indebtedness and Guaranteed Indebtedness of Borrowers and Credit Parties (other than Ganesha) as of the Closing Date identified in Section 6.3 (Indebtedness) is described in Disclosure Schedule 6.3. 3.8 Government Regulation. No Borrower is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940. No Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loans by Lender to Borrowers, the application of the proceeds thereof and repayment thereof and the consummation of the Related Transactions will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission or other Applicable Laws binding on Borrowers. 3.9 Margin Regulations. Borrowers are not engaged, nor will they engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect. Borrowers do not own any margin stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any stock or for any other purpose that might cause any of the Loans or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. Borrowers will not take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board. Each Credit Party (other than Ganesha) hereby makes the foregoing representations, warranties and covenants to Lender set forth in this Section 3.9 (Margin Regulations) with respect to such Credit Party. 34 3.10 Taxes. Except as described in Disclosure Schedule 3.10, all Federal and other material tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by Borrowers have been filed with the appropriate Governmental Authority, and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof excluding Charges or other amounts being contested in accordance with Section 5.2(b) (Right to Contest Charges) and unless the failure to so file or pay would not reasonably be expected to result in fines, penalties or interest in excess of $100,000 in the aggregate. Proper and accurate amounts have been withheld by Borrowers for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. Disclosure Schedule 3.10 sets forth as of the Closing Date and the Closing Date those taxable years for which each Borrower's tax returns are currently being audited by the IRS or any other applicable Governmental Authority, and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described in Disclosure Schedule 3.10, as of the Closing Date, no Borrower has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. Borrowers are not liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to Borrower's and Credit Party's knowledge, as a transferee. As of the Closing Date, Borrowers have not agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise. Each Credit Party (other than Ganesha) hereby make the foregoing representations, warranties and covenants to Lender set forth in this Section 3.10 (Taxes) with respect to all Charges and tax returns of such Credit Party. 3.11 ERISA. (a) Disclosure Schedule 3.11 lists, as of the Closing Date, for each Borrower (i) all ERISA Affiliates and (ii) all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such listed Plans have been delivered to Lender. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the IRC and its terms, including the timely filing of all reports required under the IRC or ERISA. Neither any Borrower nor any ERISA Affiliate has failed to make any material contribution or pay any material amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No "prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of the IRC, has occurred with respect to any Plan, that would subject any Borrower to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC. (b) Except as set forth in Disclosure Schedule 3.11: (i) no Title IV Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of Borrowers, threatened material claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or 35 instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) neither any Borrower nor any ERISA Affiliate has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; and (v) within the last five years no Title IV Plan of any Borrower or any ERISA Affiliate has been terminated, whether or not in a "standard termination" as that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any Borrower or any ERISA Affiliate (determined at any time within the last five years) with material Unfunded Pension Liabilities been transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14( of ERISA) of any Borrower or any ERISA Affiliate (determined at such time). 3.12 No Litigation. Except as set forth in Disclosure Schedule 3.12, no Litigation, action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of Borrowers or Credit Parties, threatened against Borrowers, before any Governmental Authority or before any arbitrator or panel of arbitrators, (a) that challenges the execution, delivery and performance of Borrower's or Credit Party's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to Borrowers or Credit Parties and that, if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule 3.12, as of the Closing Date there is no Litigation pending or, to Borrower's or Credit Party's knowledge, threatened, that seeks damages in excess of One Hundred Thousand Dollars ($100,000) or injunctive relief against, or alleges criminal misconduct of, Borrowers. 3.13 Brokers. Except as set forth on Disclosure Schedule 3.13, no broker or finder brought about the obtaining, making or closing of the Loans or the Related Transactions, and neither Borrowers nor any Affiliates thereof has any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 3.14 Intellectual Property. As of the Closing Date, Borrowers own or will own, and have or will have, rights to use all Intellectual Property necessary to continue to conduct its business as now conducted by it or presently proposed to be conducted by it, and each Patent, Trademark, registered Copyright and License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule 3.14. Borrowers conduct their businesses and affairs without knowingly infringing or interfering with any Intellectual Property of any other Person which could reasonably be expected to have a Material Adverse Effect. Except as set forth in Disclosure Schedule 3.14, neither Borrowers nor Credit Parties is aware of any material infringement claim by any other Person with respect to any Intellectual Property. 3.15 Full Disclosure. All representations and warranties made in any of the Loan Documents by Borrowers or Credit Parties or Guarantors shall be made after giving full effect to the transactions contemplated in this Agreement. No information contained in this Agreement, any of the other Loan Documents, Financial Statements or Collateral Reports or other written reports from time to time prepared by Borrowers or Credit Parties or Guarantors and delivered hereunder or any written statement prepared by Borrowers or Credit Parties or Guarantors and furnished by or on behalf of Borrowers or Credit Parties or Guarantors to Lender pursuant to the terms of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not 36 materially misleading in light of the circumstances under which they were made. Projections from time to time delivered hereunder are or will be based upon the estimates and assumptions stated therein, all of which Borrowers and Credit Parties (other than Ganesha) and Guarantors (other than Ganesha), as applicable, believed at the time of delivery to be reasonable and fair in light of current conditions and current facts known to Borrowers and Credit Parties (other than Ganesha) and Guarantors (other than Ganesha), as applicable, as of such delivery date, and reflect Borrower's and Credit Party's (other than Ganesha's) and Guarantor's (other than Ganesha's) good faith and reasonable estimates of the future financial performance of Borrowers and of the other information projected therein for the period set forth therein. The Liens granted to Lender pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances. 3.16 Environmental Matters. Each Borrower and each Credit Party (other than Ganesha) and each Guarantor represent and warrant to Lender as follows: (a) Except as set forth in Disclosure Schedule 3.16, as of the date hereof, no Borrower and no Credit Party and no Guarantor knows of any Hazardous Material which is present, used, manufactured, handled, generated, transported, stored, treated, discharged, released, buried or disposed of on, in, under or about any Property in violation of applicable Environmental Laws; (b) To the best of each Borrower's and each Credit Party's and each Guarantor's knowledge, following diligent inquiry, there has not been any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Material by any prior owners of prior occupants of any Property or by any third parties on, in, under or about any Property; (c) As of the date hereof there is no pending or, to each Borrower's and each Credit Party's and each Guarantor's knowledge, threatened litigation or proceedings before any administrative agency in which any person or entity alleges the release, threat of release, placement on, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or any Credit Party or any Guarantor, of any Hazardous Material, in violation of Environmental Laws; (d) As of the date hereof, no Borrower and no Credit Party and no Guarantor has received any notice and no Borrower and no Credit Party and no Guarantor has any actual knowledge that any Governmental Authority or any employee or agent thereof been determined, or threatens to determine, that there is a presence, release, threat of release, placement on, in, under or about any Property caused by any Borrower or by any Credit Party or by any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property caused by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or any Credit Party or any Guarantor, of any Hazardous Material, in violation of Environmental Laws; and 37 (e) To each Borrower's and each Credit Party's and each Guarantor's knowledge, there have been no communications or agreements with any Governmental Authority or any private entity indicating that there has occurred, a release, threat of release, placement on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or by any Credit Party or by any Guarantor, of any Hazardous Material in violation of any Environmental Laws. 3.17 Insurance. Disclosure Schedule 3.17 lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by Borrowers, as well as a brief description thereof; and a copy of each current certificate of insurance naming Lender as an additional co-insured. 3.18 Deposit and Disbursement Accounts. Disclosure Schedule 3.18 lists all banks and other financial institutions at which Borrowers maintain or will maintain deposit, commodities, investment or other accounts as of each of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor. Disclosure Schedule 3.18 shall identify which deposit accounts of each entity are used to receive Governmental Authority payments. 3.19 Vendor Relations. As of the Closing Date, there exists no actual or, to the knowledge of Borrowers or Credit Parties or Guarantors, threatened termination or cancellation of, or any material adverse modification or change in the business relationship of Borrowers with any supplier essential to its operations. 3.20 Bonding; Licenses; Permits. Except as set forth on Disclosure Schedule 3.20, as of the Closing Date, no Borrower is a party to or bound by any surety bond agreement or bonding requirement with respect to products or services sold by it or any trademark or patent license agreement with respect to products sold by it. Disclosure Schedule 3.20 list each permit each Borrower is required to obtain and maintain in order to conduct its respective Business in its respective Hospital Facility. 3.21 Solvency. Both before and after giving effect to (a) the Loans to be made or incurred on the Closing Date or such other date as Advances are made or incurred, (b) the disbursement of the proceeds of such Advances pursuant to the instructions of Borrower's Representative; (c) the consummation of the other Related Transactions; and (d) the payment and accrual of all transaction costs in connection with the foregoing, Borrowers are each and will be Solvent. 4. FINANCIAL STATEMENTS AND INFORMATION ------------------------------------ 4.1 Reports and Notices. (a) Lender have received from Borrowers and Credit Parties (other than Ganesha), and have approved, certain Financial Statements and Projections of Borrowers and the Credit Parties (other than Ganesha). Borrowers hereby agree 38 that they shall, between the Closing Date and the Termination Date, deliver to Lender updated Financial Statements and Projections (and, if requested by Lender, components thereof or statistical information related thereto not later than the 30th calendar day following expiration of each Fiscal Quarter to the address of Lender set forth in Annex D (Notice Addresses). Further, Lender shall have the right but not the obligation to require Borrowers to deliver updated Financial Statements and Projections (with all requested additional information) to Lender on a monthly basis, in Lender's sole discretion. (b) Borrowers hereby agree that, from and after the Closing Date and until the Termination Date, they shall deliver to Lender, the various Collateral Reports and other reports at the times, to the Persons and in the manner set forth in Annex D (Notice Addresses) including all certifications required with respect to Certified Cash balances. 4.2 Communication with Accountants. Borrowers and Credit Parties authorize Lender to communicate and/or meet directly with all independent certified public accountants of Borrowers, and Borrowers shall authorize and shall instruct those accountants to communicate and/or meet with Lender with regard to any and all financial statements and supporting financial documentation relating to Borrowers with respect to the business, results of operations and financial condition of Borrowers. Prior to communicating with the independent public accounts of Borrowers, Lender shall deliver a reasonable advance written notice to Borrowers stating the purpose and scope of the communication and/or meeting. 5. AFFIRMATIVE COVENANTS --------------------- To induce Lender to make the Loans, Borrowers and Credit Parties and Guarantors, as applicable, make the following affirmative covenants in favor of Lender, each of which shall survive the execution and delivery of this Agreement. 5.1 Maintenance of Existence and Conduct of Business. Borrowers and Credit Parties and Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate and/or limited liability company existence and its material rights; continue to conduct its business substantially as conducted prior to the Closing Date, anticipated to be conducted, or as otherwise permitted hereunder; at all times maintain, preserve and protect all of their assets and properties necessary to the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices. 5.2 Payment of Charges. (a) Obligation to Pay Charges. Subject to Section 5.2(b) (Right to Contest Charges), Borrowers shall pay and discharge or cause to be paid and discharged promptly all Charges payable by them, including (i) Charges imposed upon them, their income and profits, or any of their property (real, personal or mixed) and all Charges with respect to Taxes, social security and unemployment withholding with respect to their employees, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen or bailees in possession of any Collateral, in each case, before any thereof shall become past due, except in the case of clauses (ii) and (iii) where the failure to pay or discharge such Charges would not result in aggregate liabilities in excess of $100,000. 39 (b) Right to Contest Charges. Borrowers may in good faith contest, by appropriate proceedings, the validity or amount of any Charges, Taxes or claims described in Section 5.2(a) (Obligation to Pay Charges); provided, that (i) adequate reserves with respect to such contest are maintained on the books of Borrowers, in accordance with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) Borrowers shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Lender evidence reasonably acceptable to Lender of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to Borrowers or the conditions set forth in this Section 5.2(b) (Right to Contest Charges) are no longer met. 5.3 Books and Records. Borrowers shall keep adequate books and records with respect to their business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP (except as otherwise disclosed on the Financial Statements). 5.4 Insurance; Damage to or Destruction of Collateral. (a) Insurance. Borrowers shall, in Disclosure Schedule 3.17, list all existing policies of insurance that they carry and maintain, along with the names and contact information for each existing insurance carrier, which policies and carriers shall be subject to the prior written consent of Lender, which consent shall not be unreasonably withheld. If Lender fails or refuses to approve Borrower's existing policies of insurance or existing insurance carriers, then Borrowers agrees to increase or change its insurance coverage or change its insurance carrier as required by Lender, and the same shall be listed in Disclosure Schedule 3.17. Thereafter, Borrowers shall, at its sole cost and expense, maintain the policies of insurance described on Disclosure Schedule 3.17 as approved by Lender or may obtain and maintain other policies of insurance in form and amounts and with insurers reasonably acceptable to Lender. All policies of insurance (or the loss payable and additional insured endorsements delivered to Lender) that relate to coverage involving the Collateral shall contain provisions pursuant to which the insurer agrees to provide thirty (30) days prior written notice to Lender in the event of any non-renewal, cancellation or amendment of any such insurance policy. If Borrowers at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Lender may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Lender deems advisable. Lender shall have no obligation to obtain insurance for Borrowers or pay any premiums therefor. By doing so, Lender shall not be deemed to have waived any Default or Event of Default arising from Borrower's failure to maintain such insurance or pay any premiums therefore. All sums so disbursed, including reasonable attorneys' fees, court costs and other charges related thereto, shall be charged as an Advance against the $35,000,000 Non-Revolving Line of Credit Loan, or shall be payable on demand by Borrowers to Lender and shall be additional Obligations hereunder secured by the Collateral, and shall bear interest at the Default Rate until paid in full to Lender. 40 (b) Lender's Insurance Rights. Upon any change in Borrower's insurance risk profile (as determined by Borrower's insurance broker or as reasonably determined by Lender pursuant to and based upon generally recognized insurance underwriting standards (including changes caused by changes in laws affecting the potential liability of a Borrowers), Lender reserves the right to require additional forms and limits of insurance to, in Lender's reasonable opinion, adequately protect Lender's interests and Lien in all or any portion of the Collateral and to ensure that Borrowers are protected by insurance in amounts and with coverage customary for its industry. If reasonably requested by Lender, Borrowers shall to deliver to Lender from time to time a report of a reputable insurance broker, reasonably satisfactory to Lender, with respect to its insurance policies. (c) Endorsements. Borrowers shall deliver to Lender, in form and substance reasonably satisfactory to Lender, endorsements to all general liability and other liability policies naming Lender as an additional insured. Borrowers shall irrevocably make, constitute and appoint Lender (and all officers, employees of Lender designated by Lender), so long as any Default or Event of Default has occurred and is continuing, as each Borrower's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under all policies of insurance relating to coverage of the Collateral, endorsing the name of Borrowers on any check or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. Lender shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower's Representative shall promptly notify Lender of any loss, damage, or destruction to the Collateral in the amount of $100,000 or more, whether or not covered by insurance. After deducting from such proceeds (i) the expenses incurred by Lender in the collection or handling thereof, and (ii) amounts required to be paid to creditors (other than Lender) having Permitted Encumbrances, Lender may, at its option, apply such proceeds to the reduction of the Obligations in accordance with Section 1.3(c) (Application of Prepayments). Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds could not reasonably be expected to have a Material Adverse Effect, Lender shall permit Borrowers to replace, restore, repair or rebuild the property. 5.5 Compliance with Applicable Laws. Borrowers shall comply in all material respects with all federal, state, local and foreign laws and regulations applicable to it, including those relating to ERISA, labor laws, Environmental Laws and Environmental Permits. 5.6 Supplemental Disclosure. At Closing, and thereafter from time to time as may be reasonably requested by Lender, Borrowers shall supplement and update each Disclosure Schedule attached to this Agreement, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements or updates to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement or update to any 41 such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Lender in writing, and (b) no supplement or update shall be required or permitted as to representations and warranties that expressly relate only to the Closing Date (except as set forth in the introduction to Section 3 (Representations and Warranties) for purposes of representations and warranties made as of the Closing Date). If any Borrower has a material "commercial tort claim" (as defined in the Code), it shall promptly notify Lender in writing of the existence thereof. 5.7 Intellectual Property. Borrowers and Credit Parties will conduct their business and affairs without material infringement of or material interference with any Intellectual Property of any other Person. 5.8 Environmental Matters. Each Borrower and each Credit Party (other than Ganesha) shall (a) comply with and use commercially reasonable efforts to cause each Borrower and its employees, agents and representatives at any Property to comply with all Environmental Laws; (b) without limiting the generality of clause (a) above, not engage in, permit or acquiesce in to any Hazardous Material Activity on, under or about any Property, except in strict accordance with all Environmental Laws, and with then prudent business practices as determined by said Borrower or Credit Party; (c) immediately advise Lender in writing of (i) the receipt by any Borrower or any Credit Party of written notice of any and all Hazardous Material Claims, (ii) any knowledge by any Borrower or any Credit Party that any Property does not comply with any Environmental Laws, (iii) any remedial action taken by any Borrower or any Credit Party or any other Person in response to any Hazardous Materials or Hazardous Materials Activity on, under or about any Property, or to any Hazardous Material Claims, and (iv) any Borrower's or any Credit Party's discovery of the presence of any Hazardous Materials or Hazardous Material Activity on, in, under or about any Property or any real property immediately adjacent to any Property whether or not the same requires notice to be given to any governmental entity or agency under Environmental Laws; and (d) submit to Lender, promptly upon receipt or preparation, copies of any and all reports, studies, analyses, correspondence, governmental comments or approvals, proposed removal or other remedial work contracts and similar information prepared or received by any Borrower or any Credit Party in connection with any remedial work or Hazardous Materials relating to any Property. If Lender at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Borrower or any Credit Party (other than Ganesha) or any Environmental Liability of any Borrower or any Credit Party (other than Ganesha) arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any Property or any of their other real estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then such Borrower and/or Credit Party (other than Ganesha) shall, upon Lender's written request (i) cause the performance of such environmental investigations including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at such Borrower's or such Credit Party's expense, as Lender may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Lender and shall be in form and substance reasonably acceptable to Lender, and (ii) if such Borrower or Credit Party shall not have timely performed such environmental investigations, permit Lender or its representatives to have access to all real 42 estate for the purpose of conducting such environmental investigations and testing as Lender reasonably deems appropriate, including subsurface sampling of soil and groundwater. Each Borrower and Credit Party (other than Ganesha) shall reimburse Lender for the costs of such investigations and the same will constitute a part of the Obligations secured hereunder. 5.9 Landlord Agreements. With respect to any location where any material amount of Collateral is stored or located, Lender may require Borrowers to provide a reasonable landlord or mortgagee agreement or bailee letter as a condition to the continued storage of the Collateral at such location(s). Borrowers shall timely and fully pay and perform all obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. 5.10 Further Assurances. Borrowers and Credit Parties each agree that it shall, at Borrower's or Credit Party's expense and upon the reasonable request of Lender, duly execute and deliver, or cause to be duly executed and delivered, to Lender such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Lender to carry out more effectively the provisions and purposes of this Agreement and each Loan Document. 5.11 Qualified Cash. Borrowers shall deposit all net cash proceeds of Collateral as Qualified Cash in a Qualified Cash Account subject to the right of Borrowers to withdraw such cash proceeds. From and during the continuance of an Event of Default, Lender may exercise all rights under the applicable Control Agreements relating to any Qualified Cash, including the right to deliver applicable control exercise notices to each applicable Bank and securities intermediary and cause all such Qualified Cash to be forwarded immediately to a collection account designated by Lender through daily sweeps (or as otherwise directed by Lender). 5.12 Operation of Business. Borrowers shall have and maintain at all times from the Closing Date until the Obligations have been paid in full, sufficient approvals, consents, and permits from all necessary Governmental Authorities to fully operate the Business in accordance with Applicable Laws. Borrowers shall use their best efforts and use appropriate diligence to secure all approvals, consents and permits as and when required by Applicable Laws to fully operate the Business. 5.13 After-Acquired Property; Acquisition of other Real Property Interests. In the event from time to time Borrower acquires any fee interest in any real property or improvements or any master leasehold interest or ground leasehold interest in any real property or improvements, then Borrowers agrees to promptly notify Lender in writing at least ten (10) Business Days prior to such acquisition and to execute, acknowledge and deliver to Lender at least five (5) Business Days prior to such acquisition a deed of trust or mortgage for recordation on said other real property or improvements, as a first lien or encumbrance on Borrower's fee interest or, if applicable, on Borrower's interest in a master lease or ground lease. Each such deed of trust or mortgage shall secure repayment of the Obligations, including but not limited to repayment of the Loans. All reasonable expenditures incurred by Lender in performing this paragraph shall be additional Obligations payable upon demand and delivery of reasonable backup documentation, and shall bear interest at the Default Interest Rate from the date of demand for payment until paid in full. 43 5.14 Observer Status on Borrower's Board of Directors. Until the Loan is paid in full and satisfied, Borrowers each hereby grant Lender non-voting observer status with respect to all meetings of their respective boards of directors (and committees thereof) and all meetings of their shareholders (and committees thereof), excluding meetings (or portions thereof) held in executive session called in good faith and that relate matters not in Borrower's ordinary course of business. Concurrently with delivery of all notices of meetings and agendas to its directors and shareholders, Borrowers agree to and shall deliver a copy of each such notice and agenda to Lender. 5.15 Independent Directors. Until the Loan is paid in full and satisfied, Independent Directors shall at all times constitute a majority of the directors serving as members of IHHI's board of directors. Notwithstanding the foregoing, if as of the Closing Date, Independent Directors do not constitute a majority of the directors serving as members of IHHI's board of directors, then (a) within thirty (30) calendar days following the Closing Date, IHHI shall deliver to Lender a written statement identifying at least two (2) new Independent Directors (with contact and biographical information included) who have been approached by IHHI and who have agreed to serve as members of IHHI's board of directors, if nominated and elected or if appointed; and (b) not later than ninety (90) calendar days following the Closing Date, Independent Directors shall at all times thereafter constitute a majority of the directors serving as members of IHHI's board of directors. 6. NEGATIVE COVENANTS ------------------ To induce Lender to make the Loans, Borrowers and Credit Parties, as applicable, make the following negative covenants in favor of Lender, each of which shall survive the execution and delivery of this Agreement. 6.1 Mergers, Subsidiaries, Etc. Borrowers shall not, directly or indirectly, by operation of law or otherwise, (i) form or acquire any Subsidiary in addition to the existing Subsidiaries of Borrowers; or (ii) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person, without first receiving the prior written consent of Lender. 6.2 Investments; Line of Credit Loan and Advances. Borrowers shall not make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that: (a) Borrowers may hold investments constituting notes payable, or stock or other securities issued to Borrowers pursuant to negotiated agreements with respect to settlement of such issuer's accounts in the ordinary course of business consistent with past practices; (b) Borrowers may invest Qualified Cash in Qualified Cash Accounts (i) as of the Closing Date in the kinds and types of investments that they are then so invested, and (ii) thereafter, as to any new investments made after the Closing Date in other kinds and types of investments as are in conformity with Borrower's investment policies previously adopted by its board of directors or managers so long as Lender's Liens remain perfected therein, and (c) Borrowers may invest cash and cash equivalents (other than Qualified Cash in the Qualified Cash Accounts) (i) as of the Closing Date in the kinds and types of investments that they are then so invested, and (ii) thereafter, as to any new investments made after the Closing Date in other kinds and types of investments as are in conformity with Borrower's investment policies previously adopted by its board of directors. 44 6.3 Indebtedness. (a) Borrowers shall not create, incur or assume any Indebtedness, except (without duplication) (i) Indebtedness created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures or other capital assets acquired by Borrowers in the ordinary course of business; (ii) the Loans and the other Obligations; (iii) unsecured Indebtedness (other than Funded Debt) incurred in the ordinary course of Borrower's business; (iv) Indebtedness created after the date hereof for financing of insurance premiums; and (v) existing Indebtedness, if any, described in Disclosure Schedule 6.3. (b) Borrowers shall not, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Funded Debt prior to its scheduled due date, other than the Obligations. 6.4 Employee Loans and Affiliate Transactions. Except as set forth in Disclosure Schedule 6.4, no Borrower has entered into any transaction with any of its Affiliates or with any of its employees. Borrowers shall not enter into or be a party to any transaction with any Affiliate thereof except in the ordinary course of and pursuant to the reasonable requirements of Borrower's business and upon fair and reasonable terms that are no less favorable to Borrowers than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of Borrowers. Borrowers shall not enter into any lending or borrowing transaction with any employees of Borrowers, except loans to its respective employees in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs, pension plan advances, and similar purposes. 6.5 Capital Structure and Business. No Borrower or Credit Party (other than Ganesha) shall amend its charter, articles, bylaws or operating agreement without first receiving the prior written consent of Lender. No Borrower or Credit Party (other than Ganesha) shall engage in any business other than the businesses currently engaged in by it, without first receiving the prior written consent of Lender. 6.6 Guaranteed Indebtedness. Borrowers shall not create, incur, or assume any Guaranteed Indebtedness unless such Guaranteed Indebtedness would be permitted to be incurred directly by Borrowers pursuant to Section 6.3 (Indebtedness). 6.7 Liens. Except as set forth in Disclosure Schedule 6.7, no Borrower is subject to any existing Liens (excluding Lender's Liens). Borrowers shall not create, incur, assume or permit to exist any Lien on or with respect to any of the Collateral (whether now owned or hereafter acquired) except for Permitted Encumbrances. 6.8 Sale of Collateral and Intellectual Property. Borrowers shall not sell, transfer, convey, assign, license or otherwise dispose of any interest in Collateral, other than in the ordinary course of business, with an aggregate value in excess of $100,000. Borrowers shall not sell, transfer, convey, assign, license or otherwise dispose of any interest in Intellectual Property. 45 6.9 ERISA. Borrowers shall not cause or permit any ERISA Affiliate to, cause or permit to occur (a) an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (b) an ERISA Event to the extent such ERISA Event would reasonably be expected to result in taxes, penalties and other liabilities in an aggregate amount in excess of $100,000 in the aggregate. 6.10 Hazardous Materials. Borrowers shall not cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any real property owned or leased by Borrowers where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact the value or marketability of any real property owned or leased by Borrowers or any of the Collateral, other than such violations or Environmental Liabilities that could not reasonably be expected to have a Material Adverse Effect. 6.11 Restricted Payments. During the term of this Agreement, Borrowers shall not make any Restricted Payment, except (a) employee loans permitted under Section 6.4 (Employee Loans and Affiliate Transactions), (b) so long as no Event of Default shall have occurred and is continuing, dividends and distributions by Borrowers to its Shareholders or partners or members, and (c) ordinary course payments to Borrowers and/or to Credit Parties for services rendered to the Business. 6.12 Change of Corporate Name, State of Organization or Location; Change of Fiscal Year. No Borrower and no Credit Party and no Guarantor shall (a) change its name as it appears in official filings in the state of its incorporation or organization, (b) change its chief executive office, principal place of business, corporate offices or locations at which Collateral is held or stored, or the location of their records concerning the Collateral, (c) change the type of entity that it is, (d) change its organization identification numbers issued by its state of its incorporation or organization, or (e) change its state of incorporation or organization or incorporate or organize in any additional jurisdictions, in each case without at least ten (10) Business Days prior written notice to Lender and provided that Borrowers and Credit Parties and Guarantors shall have taken such actions and executed such documents as Lender reasonably requests in connection therewith to continue the perfection of any Liens in favor of Lender in any Collateral, and provided further that, any change to such Borrowers or such Credit Party's or such Guarantor's jurisdiction or state of incorporation or organization, such new jurisdiction or state of incorporation or organization shall be located in the United States. Borrowers shall not change their Fiscal Year without giving Lender at least thirty (30) calendar days prior written notice thereof. 6.13 No Impairment of Intercompany Transfers. Borrowers shall not directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) that could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions. 6.14 Dividends; Redemptions. No Borrower shall (a) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests, (b) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing, (c) 46 otherwise make any payments or distributions to any shareholder, member, partner or other equity owner in such Person's capacity as such, or (d) make any payment of any management or service fee; provided, however, that absent the occurrence and continuation of a Default of Event of Default, and if a Default or Event of Default would not arise therefrom, (i) each Borrower may declare, pay or make dividends or distributions payable in its stock, or split-ups or reclassifications of its stock; and (ii) each Borrower may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements. 6.15 Dr. Shah. Until the Loan is paid in full and satisfied, Borrowers will not, directly or indirectly, permit Dr. Shah to be nominated, or elected, or appointed, or directly or indirectly compensated, paid, engaged, retained or become, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, IHHI, WMC-A, WMC-SA, Coastal or Chapman. 6.16 Shareholder Blocking Rights. No Borrower shall issue any Stock that grants or provides any direct or indirect owner thereof any Shareholder Blocking Rights. 7. TERM ---- 7.1 Termination. The financing arrangements contemplated hereby shall be in effect until the earlier of the date when the Loans and other Obligations have been paid in full and satisfied or the Maturity Date, and the Loans and all other Obligations shall be automatically due and payable in full on such date without demand by Lender. 7.2 Survival of Obligations Upon Termination of Financing Arrangements. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of Borrowers or Credit Parties or the rights of Lender relating to any unpaid portion of the Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated, or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Maturity Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon Borrowers and Credit Parties, and all rights of Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that the provisions of Section 11 (Miscellaneous), the payment obligations under Section 1 (Amount and Terms of Credit Facilities), and the indemnities contained in the Loan Documents shall survive the Maturity Date. 8. EVENTS OF DEFAULT; REMEDIES --------------------------- 8.1 Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an Event of Default hereunder: 47 (a) Any Borrower fails to make any payment of interest or of principal on any Loan within five (5) calendar days after the same is due and payable, or any Borrower fails to make payment of any Unused Commitment Fee within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any payment within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and all Loans. (b) Borrowers fail to pay or reimburse Lender for any costs or expenses reimbursable under this Agreement or under any other Loan Document, or Borrowers fail to make payment of any Obligations (not specifically referenced in any other subsection of this Section 8.1) within ten (10) calendar days following Lender's demand for such reimbursement or payment thereof; provided, that if any Borrower fails to pay such amount within said ten (10) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and on all Loans. (c) Borrowers or Credit Parties fail or neglect to perform, keep or observe any provision of this Agreement (not specifically referenced in any other subsection of this Section 8.1) applicable to them and the same shall remain unremedied for ten (10) Business Days or more after the earlier of (i) Borrower's or Credit Party's actual knowledge thereof, or (ii) Borrower's or Credit Party's receipt of notice thereof from Lender. (d) Borrowers fail or neglect to perform, keep or observe any of the provisions of Section 4.1 (Reports and Notices) or any provisions set forth in Annex B (Cash Management System) or Annex C (Collateral Reports), respectively, and the same shall remain unremedied in whole or in part for thirty (30) calendar days or more after the earlier of (i) said Borrower's actual knowledge thereof, or (ii) said Borrower's receipt of notice thereof from Lender. (e) Borrowers deliver a supplement or update to any Disclosure Schedule as required by Section 5.6 (Supplemental Disclosures) and Lender fails to approve of the same because such supplement or update (i) discloses the existence of an Event of Default, or (ii) discloses a Material Adverse Effect, or (iii) discloses any fact or circumstance which, with the passage of time or otherwise, would constitute an Event of Default or Material Adverse Effect. (f) Borrowers or Credit Parties or Guarantors fail or neglect to timely perform, keep or observe any other provision of any of the Loan Documents required to be performed by it and the same shall remain unremedied in whole or in part for ten (10) Business Days after receipt of notice thereof from Lender. (g) Any Guarantor fails or neglects to timely perform, keep or observe any provision of the Guaranty Agreement and the same shall remain unremedied in whole or in part for ten (10) Business Days after receipt of notice thereof from Lender. (h) Any Borrower fails to make any payment of interest or of principal due under the $50,000,000 Revolving Facility and/or $50,000,000 Note within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any such payment under the $50,000,000 Revolving Facility within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and all Loans under this Agreement. 48 (i) Any Borrower fails or neglects to perform, keep or observe any provision of the $50,000,000 Revolving Facility, the $50,000,000 Revolving Credit Agreement and/or any other documents or instruments executed or delivered in connection with the foregoing (not specifically referenced in any other subsection of this Section 8.1) and the same shall remain unremedied for five (5) Business Days or more after the earlier of (i) Borrower's actual knowledge thereof, or (ii) Borrower's receipt of notice thereof from Lender under said $50,000,000 Revolving Facility and/or $50,000,000 Revolving Credit Agreement. (j) (i) A default or breach occurs under any other agreement, document or instrument to which any Borrower or any Credit Party is or are a party that is not cured within any applicable grace period therefore, such default or breach is not waived in writing by Lender, and such default or breach involves the failure to make any payment when due in respect of any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of Borrowers or Credit Parties in an amount in excess of $100,000; or (ii) an event, condition or circumstance occurs that causes, or permits any holder of Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a portion thereof to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or the holder of such Indebtedness or Guaranteed Indebtedness or such trustee has the right to demand cash collateral in respect of such Indebtedness or Guaranteed Indebtedness, in each case, regardless of whether such right is exercised, by such holder or trustee. (k) Any representation or warranty herein or in any Loan Document or in any written statement, report, Financial Statement or certificate made or delivered to Lender by Borrowers or Credit Parties is untrue or incorrect in any material respect as of the date when made or deemed made. (l) Assets of Borrowers or Credit Parties with a fair market value of $100,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or general assignee for the benefit of creditors of Borrowers or Credit Parties and such condition continues for thirty (30) calendar days or more. (m) A case or proceeding is commenced against any Borrower or any Credit Party seeking a decree or order in respect of said Borrower or Credit Party (i) under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for said Borrower or Credit Party or for any substantial part of said Borrower's or Credit Party's assets, or (iii) ordering the winding-up or liquidation of the affairs of any Borrower or Credit Party, and such case or proceeding shall remain undismissed or unstayed for sixty (60) calendar days or more or a decree or order granting the relief sought in such case or proceeding is granted by a court of competent jurisdiction. (n) Any Borrower or any Credit Party (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in 49 a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or Credit Party or for any substantial part of such Borrower's or Credit Party's assets, (iii) makes a general assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing; or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due. (o) A final judgment or judgments for the payment of money in excess of $100,000 in the aggregate at any time are outstanding against Borrowers or Credit Parties (which judgments are not covered by insurance policies as to which liability has been accepted in writing by the insurance carrier), and the same is/are not, within thirty (30) calendar days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay. (p) Any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Borrower or any Credit Party or any Guarantor shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any Loan Document ceases to be a valid and perfected first priority Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby. (q) Any Change of Control occurs. (r) A Material Adverse Effect shall exist as determined in the reasonable judgment of Lender. (s) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason, to grant Lender non-voting observer status with respect to all meetings of its board of directors and all meetings of its shareholders. (t) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason to deliver to Lender, concurrently with delivery to all shareholders, a notice and agenda of each annual meeting, special meeting or emergency meeting of shareholders. (u) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason to deliver to Lender, concurrently with delivery to all directors, a notice and agenda of each annual meeting, regular meeting, special meeting or emergency meeting of directors. (v) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower waive notice of a directors meeting and fail to deliver advance notice to Lender of said waiver of directors meeting. 50 (w) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower take any action without a meeting, which action was required or permitted to be taken at a meeting, and fail to deliver advance notice of the taking of said action to Lender. (x) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower hold a meeting by written consensus and fail to deliver advance notice of said meeting by consensus to Lender. (y) Dr. Shah at any time is nominated, or elected, or appointed, or directly or indirectly is compensated, paid, engaged, retained or becomes, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, IHHI, WMC-A, WMC-SA, Coastal or Chapman. (z) Within thirty (30) calendar days following the Closing Date, IHHI for any reason fails to deliver to Lender a written statement identifying at least two (2) new Independent Directors (with contact and biographical information included) who have been approached by IHHI and who have agreed to serve as members of IHHI's board of directors, if nominated and elected or if appointed. (aa) Within ninety (90) calendar days following the Closing Date, IHHI for any reason has failed to nominate and elect, or appoint, Independent Directors who constitute a majority of the directors serving as members of IHHI's board of directors. (bb) At any time after the date which is ninety (90) calendar days following the Closing Date, Independent Directors cease to constitute a majority of directors on IHHI's board of directors, and replacement Independent Director(s) acceptable to Lender in its sole discretion are not appointed, or nominated and elected, to IHHI's board of directors within thirty (30) calendar days after the date such Independent Directors cease to constitute a majority of directors on IHHI's board of directors. (cc) IHHI, as tenant, commits a breach or default under the Triple Net Lease and the same remains uncured following receipt of all required notices and expiration of all applicable cure periods. (dd) IHHI, as tenant, commits a breach or default under any of the Chapman Leases and the same remains uncured following receipt of all required notices and expiration of all applicable cure periods. (ee) Without first receiving the prior written consent of Lender (which consent may be granted or withheld by Lender in its sole discretion): (i) IHHI for any reason terminates the sublease with WMC-A for the Western Medical Center - Anaheim; (ii) IHHI for any reason terminates the sublease with WMC-SA for the Western Medical Center - Santa Ana; 51 (iii) IHHI for any reason terminates the sublease with Coastal for the Coastal Communities Hospital; or (iv) IHHI for any reason terminates any of the sub-subleases with Chapman for any portion of the Chapman Medical Center. (ff) PCHI ceases to own all (100%) of the fee simple title (i) in the Western Medical Center - Anaheim, or (ii) in the Western Medical Center - Santa Ana; or (iii) in the Coastal Communities Hospital. (gg) Any Borrower fails to make any payment of interest or of principal due under the $10,700,000 Convertible Term Loan and/or the $10,700,000 Convertible Term Note within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any such payment under the $10,700,000 Convertible Term Loan within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and all Loans under this Agreement. (hh) Any Borrower fails or neglects to perform, keep or observe any provision of the $10,700,000 Convertible Term Loan, the New $10,700,000 Credit Agreement and/or any other documents or instruments executed or delivered in connection with the foregoing (not specifically referenced in any other subsection of this Section 8.1) and the same shall remain unremedied for five (5) Business Days or more after the earlier of (i) Borrower's actual knowledge thereof, or (ii) Borrower's receipt of notice thereof from Lender under said $10,700,000 Convertible Term Loan and/or the New $10,700,000 Credit Agreement. 8.2 Remedies. Lender shall be entitled to enforce payment and performance of the Indebtedness and Obligations and to exercise all rights and powers under this Agreement and the other Loan Documents or other agreement or any laws now or hereafter in force. No remedy herein conferred upon or reserved to Lender is intended to be exclusive of any other remedy set forth herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by this Agreement or any of the other Loan Documents to Lender in any capacity or to which Lender may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Lender and Lender may pursue inconsistent remedies. Lender's remedies upon the occurrence and continuance of an Event of Default include, but are not limited to, the following: (a) Accelerate Maturity Date of Line of Credit Loan. If any Event of Default has occurred and is continuing, Lender may, at its option, without notice, accelerate the Maturity Date of all of the Loans and declare all of the Obligations, including all amounts due under all of the Loans, to be forthwith due and payable, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and Credit Parties (in their respective capacities as Credit Parties and Guarantors). (b) Suspend Lines of Credit. If any Event of Default has occurred and is continuing, Lender may, without notice, suspend the $35,000,000 Non-Revolving Line of Credit Loan with respect to additional Advances, whereupon additional Advances shall not be made except with the prior written consent of Lender, which consent may be granted or withheld in Lender's sole and absolute discretion, so long as such Event of Default is continuing. 52 (c) Increase Rate of Interest to Default Rate. If any Event of Default has occurred and is continuing, Lender may, without notice except as otherwise expressly provided herein, increase the rate of interest applicable to all Loans to the Default Rate. (d) Other Remedies. If any Event of Default has occurred and is continuing, Lender may, without notice: (i) terminate the $35,000,000 Non-Revolving Line of Credit Loan with respect to further Advances; (ii) reduce or terminate the Commitment; (iii) make application to a court of competent jurisdiction for, and obtain from such court as a matter of strict right, the appointment of a receiver of the Business, which receiver shall have all the usual powers and duties of receivers in similar cases, including the full power to maintain and otherwise operate the Business upon such terms as may be approved by the court; (iv) exercise any other rights and remedies provided to Lender under the Loan Documents, or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of an Event of Default specified in Sections 8.1(m) or (n) (Events of Default), the Commitment shall be automatically and immediately terminated and all of the Obligations and all of the Loans, shall become immediately due and payable without declaration, notice or demand by any Person. 8.3 Waivers. Except as otherwise provided for in this Agreement or by applicable law, each Borrower and each Credit Party and each Guarantor waive (including for purposes of Section 13 (Suretyship Waivers)): (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default (unless specifically required in this Agreement), nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Borrowers or Credit Parties or Guarantors may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard, (b) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Lender to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws. 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF LENDER ---------------------------------------------------- 9.1 Assignment and Participations. (a) Assignment to Qualified Assignee. Subject to the terms of this Section 9.1 (Assignment and Participations), Lender may make an assignment to a Qualified Assignee of, or sell participations in, at any time or times, the Loan Documents, any of the Loans, and Commitment or any portion thereof or interest therein, including any Lender's rights, title, interests, remedies, powers or duties thereunder. Any assignment by a Lender shall: (i) require the execution of an assignment agreement in form and content reasonably satisfactory to, and acknowledged by, Lender; and (ii) be conditioned on such assignee representing to Lender that it is purchasing the applicable Loan to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof. In the case of an assignment by Lender under this Section 9.1(a) 53 (Assignment to Qualified Assignee), the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as Lender hereunder. The original Lender shall be relieved of its obligations hereunder with respect to the Commitment or assigned portion thereof from and after the date of such assignment. Borrowers and Credit Parties and Guarantors hereby acknowledge and agree that any assignment shall give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a "Lender." In the event Lender assigns or otherwise transfers all or any part of the Obligations, Lender shall so notify Borrowers and Credit Parties and Guarantors shall, upon the request of Lender, execute one or more new notes in exchange for any of the Notes (upon the same terms), if any, being assigned. Notwithstanding the foregoing provisions of this Section 9.1(a) (Assignment to Qualified Assignee), Lender may at any time pledge the Obligations held by it and Lender's rights under this Agreement and the other Loan Documents to a financial institution. (b) Participations. Any participations by Lender of all or any part of the Commitment shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if Lender had not sold such participations, and that the holder of any such participation shall not be entitled to require Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). Solely for purposes of Section 1.14 (Taxes), and Section 1.15 (Capital Adequacy; Increased Costs; Illegality), Borrowers and Credit Parties and Guarantors acknowledge and agree that a participation shall give rise to a direct obligation of Borrowers to the participant (in each case subject to the terms and conditions in such Sections applicable to Lender) and the participant shall be considered to be a "Lender." (c) Cooperation to Effect Assignments and Participations. Borrowers and Credit Parties shall assist Lender under this Section 9.1 (Assignment and Participations) as reasonably required to enable Lender to effectuate any such assignment or participations, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, if requested by Lender, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or participants. Borrowers and Credit Parties shall certify the correctness, completeness and accuracy, in all material respects of all descriptions of Borrowers and Credit Parties and their respective affairs contained in any selling materials provided by them and all other information provided by them and included in such materials. (d) Disclosures by Lender. Lender may furnish any information concerning Borrowers and the Credit Parties in the possession of Lender from time to time to assignees and participants (including prospective assignees and participants); provided that Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in Section 11.10 (Confidentiality). 54 9.2 Reliance, Etc. Neither Lender nor any of its Affiliates nor any of their respective directors, officers, employees or attorneys shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Lender: (a) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to Borrowers or Credit Parties and shall not be responsible to Borrowers or Credit Parties for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of Borrowers and Credit Parties or to inspect the Collateral (including the books and records) of Borrowers or Credit Parties; (d) shall not be responsible to Borrowers or Credit Parties for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (e) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 10. SUCCESSORS AND ASSIGNS ---------------------- This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of Borrowers, Credit Parties and Lender, and their respective successors and assigns (including, in the case of Borrowers and Credit Parties, a debtor-in-possession on behalf of a Borrower or a Credit Party), except as otherwise provided herein or therein. Neither Borrowers nor Credit Parties may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Lender, which consent may be granted or withheld by Lender in its sole and absolute discretion. Any such purported assignment, transfer, hypothecation or other conveyance by Borrowers or Credit Parties without the prior express written consent of Lender shall be void. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of Borrowers, Credit Parties and Lender with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents. 11. MISCELLANEOUS ------------- 11.1 Complete Agreement; Modification of Agreement. This Agreement and the other Loan Documents (including all annexes, exhibits, and disclosure schedules attached hereto or thereto) constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 11.2 (Amendments and Waivers). The Term Sheet and any other letter of interest, commitment letter, fee letter or confidentiality agreement, if any, between Borrowers or Credit Parties and Lender or any of their respective Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. 55 11.2 Amendments and Waivers. (a) Signed by Representatives. No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement that waives compliance with the conditions precedent set forth in Article 2 (Conditions Precedent) to the making of any of the Loans shall be effective unless the same shall be in writing and signed by Lender's and Borrower's Representative. No waiver or consent with respect to any Default or any Event of Default shall be effective for purposes of the conditions precedent to the making of the Loans unless the same shall be in writing and signed by Lender and Borrower's Representative. (b) Must Be In Writing. No amendment, modification, termination or waiver shall, unless in writing and signed by Lender and Borrower's Representative: (i) increase the principal amount of the Commitment; (ii) reduce the principal amount of or the Interest Rate applicable to any of the Loans; (iii) extend any scheduled payment date or the Stated Maturity Date; (iv) waive, forgive, defer, extend or postpone any payment of interest; or (v) release any Guarantor or, except as otherwise permitted herein or in the other Loan Documents, release, or permit Borrowers or Credit Parties to sell or otherwise dispose of, any Collateral. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. Notwithstanding the foregoing, no amendment, modification, termination or waiver shall be required for Lender to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any of the Notes shall be effective without the written concurrence of the holder of that Note. No notice to or demand on Borrowers or Credit Parties in any case shall entitle Borrowers or Credit Parties to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.2 (Amendments and Waivers) shall be binding upon each holder of the Note in question at the time outstanding and each future holder of said Note. (c) Termination of Liens. Upon payment of all Loans in full in cash and performance of all Obligations (other than indemnification Obligations), termination of the Commitment, and a release of all existing and future claims (whether known or unknown) against Lender, and so long as no suits, actions, proceedings or claims are pending against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Lender shall promptly upon receipt of written request from Borrowers deliver to Borrowers such termination statements, Lien releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations. 11.3 Fees and Expenses. Borrowers shall reimburse Lender for (i) all fees, costs and expenses (including the reasonable fees and expenses of all of Lender's outside attorneys, advisors, consultants and auditors), and (ii) all fees, costs and expenses, including the reasonable fees, costs and expenses of other advisors (including environmental and management consultants and appraisers), incurred in connection with the negotiation, preparation and filing and/or recordation of the Loan Documents, or incurred in connection with any amendment, modification or waiver of, consent with respect to, or termination of, any of the Loan Documents or Related Transactions Documents, or advice provided in connection with a breach or Default under the Loans or Lender's rights hereunder or thereunder, or in connection with any of the following: 56 (a) Any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lender, Borrowers, Credit Parties or any other Person and whether as a party, witness or otherwise) in any way relating to the Collateral, this Agreement, any of the Loan Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against of Borrowers and/or Credit Parties or any other Person that may be obligated to Lender by virtue of the Loan Documents; including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring or forbearance of the Loans during the pendency of one or more Events of Default; provided that no Person shall be entitled to reimbursement under this clause (a) in respect of any litigation, contest, dispute, suit, proceeding or action to the extent any of the foregoing results from such Person's gross negligence or wilful misconduct. (b) Any attempt to enforce any remedies of Lender against Borrowers and/or Credit Parties or any other Person that may be obligated to Lender by virtue of any of the Loan Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring or forbearance of the Loans during the pendency of one or more Events of Default. (c) Any workout or restructuring or forbearance of the Loans during the pendency of one or more Events of Default. (d) Efforts by Lender to (i) monitor the operations, financial condition and/or regulatory status of the Business after an Event of Default occurs under this Agreement or under any of the other Loan Documents; (ii) evaluate, observe or assess Borrowers or Credit Parties or their respective business affairs after a breach or Default under this Agreement or under any of the other Loan Documents; and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral; including, as to each of clauses (a) through (c) above, all reasonable attorneys' and other professional and service providers' fees arising from such services and other advice, assistance or other representation, including those in connection with any appellate proceedings, and all reasonable expenses, costs, charges and other statutory and non-statutory fees and costs incurred by such counsel and others in connection with or relating to any of the events or actions described in this Section 11.3 (Fees and Expenses), all of which shall be payable, on demand, by Borrowers to Lender. Without limiting the generality of the foregoing, such expenses, costs, charges and fees shall include: Lender's Costs, fees, costs and reasonable expenses of attorneys, accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, statutory and non-statutory costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. 11.4 No Waiver. Lender's failure, at any time or from time to time, to require strict performance by Borrowers or Credit Parties of any provision of this Agreement or any other Loan Document shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or 57 subsequent thereto and whether the same or of a different type. Subject to the provisions of Section 11.2 (Amendments and Waivers), none of the undertakings, agreements, warranties, covenants and representations of Borrowers or Credit Parties contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by Borrowers or Credit Parties shall be deemed to have been suspended or waived by Lender, unless such waiver or suspension is by an instrument in writing signed by Lender and directed to Borrower's Representative specifying such suspension or waiver. 11.5 Remedies. Lender's rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 11.6 Severability. Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement or any other Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement or such other Loan Document. 11.7 Conflict of Terms. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. 11.8 Attorneys' Fees; Indemnification. (a) Attorneys' Fees. If any action or proceeding is brought by any party against any other party, the prevailing party shall be entitled to recover from the other party reasonable attorneys' fees and statutory and non-statutory costs incurred in connection with the prosecution or defense of such action. The foregoing includes, without limitation, attorneys' fees and costs of investigation incurred in appellate proceedings, costs incurred in establishing the right to indemnification, expert or other witness fees, copy and facsimile and telephone charges, courier and messenger charges, court costs, fees of charges of any arbitrator or mediator or arbitration or mediator service, or in connection with, any case or proceeding under Chapter 7, 11 or 13 of the Bankruptcy Code, 11 U.S.C. 101 et seq., or any successor statutes. For purposes of this Agreement, the term "attorneys' fees" or "attorneys' fees and costs" shall also include the fees and expenses of counsel to the parties hereto, which may include the allocable costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and fee billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney. (b) Indemnification. Should Lender, as a result of its relationship with Borrowers or Credit Parties or Guarantors contemplated hereby, be made a party to any litigation instituted by Borrowers or Credit Parties or Guarantors against a Person other than Lender, or any litigation instituted against Borrowers or Credit Parties or Guarantors by any Person other than Lender, Borrowers shall jointly and severally indemnify, defend, protect and hold harmless Lender from any and all loss, cost, liability, damage or expense incurred by Lender, including attorneys' fees and costs, in connection with the litigation. 58 11.9 Time of the Essence. Time is of the essence in the performance of each and every term, condition and covenant of this Agreement. 11.10 Confidentiality. Lender agree to use commercially reasonable efforts to maintain as confidential all information provided to them by Borrowers and/or Credit Parties which is designated in a writing delivered to Lender as confidential (provided, that, all non-public financial information and financial projections provided by Borrowers or Credit Parties to Lender shall be deemed confidential whether or not so designated in writing as confidential) for a period of one (1) year following receipt thereof, except that Lender may disclose such information (a) to Persons employed or engaged by Lender; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 11.10 (Confidentiality) and any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed (based on advice of counsel) by Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Lender's counsel, is required by law; (e) in connection with the exercise of any right or remedy under this Agreement or the other Loan Documents or in connection with any Litigation relative to this Agreement or the other Loan Documents or the transactions related hereto or thereto to which Lender is a party; or (f) that ceases to be confidential through no fault of Lender. If Lender is required in any proceeding, by any court decree, subpoena or legal or administrative order or process, to disclose any such confidential information, Lender will use commercially reasonable efforts to give Borrowers and Credit Parties, as applicable, prompt written notice of such request so that Borrowers or Credit Parties may seek an appropriate protective order. If in the absence of a protective order, Lender is compelled in a proceeding to disclose any such confidential information, Lender may disclose such portion of such confidential information that it is compelled to disclose; provided, however, that Lender shall use commercially reasonable efforts to provide Borrowers and Credit Parties, as applicable, written notice of the information to be disclosed as far in advance of its disclosure as is practicable. 11.11 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT AND IN ANY OF THE OTHER LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWERS AND CREDIT PARTIES AND LENDER EACH HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NEVADA, CLARK COUNTY, CITY OF LAS VEGAS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG BORROWERS AND CREDIT PARTIES ON THE ONE HAND, AND LENDER ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE 59 OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, EACH BORROWER AND EACH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CLARK COUNTY, NEVADA; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH BORROWER AND EACH CREDIT PARTY AND LENDER EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY WAIVE ANY OBJECTION THAT ANY BORROWER OR ANY CREDIT PARTY OR LENDER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE AT THE ADDRESSES SET FORTH IN ANNEX D OF THIS AGREEMENT. 11.12 Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered: (a) upon the earlier of actual receipt or three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by telecopy or facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 11.12 (Notices)); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Annex D (Notice Addresses) or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower's Representative or Lender) designated in Annex D (Notice Addresses) to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 11.13 Section Titles. The Section titles and headings contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 60 11.14 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. 11.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER, ANY BORROWER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 11.16 Press Releases and Related Matters. Borrowers and Credit Parties agree that neither they nor their respective Affiliates will in the future issue any press releases or other public disclosure using the name of Lender or its Affiliates or referring to this Agreement, the other Loan Documents or the Related Transactions Documents without at least two (2) Business Days' prior written notice to Lender and without the prior written consent of Lender (which consent will not be unreasonably withheld) unless (and only to the extent that) Borrowers or Credit Parties or their respective Affiliate are required to do so under law, regulation or any applicable exchange rules or OTC bulletin board rules, then, in any event, Borrowers, Credit Parties or their respective Affiliates will use commercially reasonable efforts to consult with Lender before issuing such press release or other public disclosure. Borrowers and Credit Parties consent to the publication by Lender of advertising material relating to the financing transactions contemplated by this Agreement using Borrower's and Credit Party's name, product photographs, logo or trademark, without the consent of Borrowers or Credit Parties. Lender may provide to industry trade organizations information necessary and customary for inclusion in league table measurements unless such disclosure would violate or any applicable exchange rules or OTC bulletin board rules applicable to Borrowers. 11.17 Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Borrowers or Credit Parties for liquidation or reorganization, or should Borrowers or Credit Parties become insolvent or make a general assignment for the benefit of any creditor or creditors, or should a receiver or trustee be appointed for all or any significant part of any Borrower's or any Credit Party's assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 61 11.18 Advice of Counsel. Each of the Borrowers and each of the Credit Parties represent to Lender and Lender represent to said Borrowers and to said Credit Parties, that they have each discussed this Agreement and, specifically, the provisions of Section 11.11 (Governing Law) and Section 11.15 (Waiver of Jury Trial), with their legal counsel. 11.19 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. 11.20 Limitation on Each Borrower's and Each Credit Party's Liability. Anything to the contrary notwithstanding, if any Fraudulent Transfer Law is determined by a court of competent jurisdiction to be applicable to the obligation of any Borrower or any Credit Party under this Agreement or under any other Loan Documents, said obligations shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under said Fraudulent Transfer Laws, in each case after giving effect to all other liabilities of such Borrower and such Credit Party, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Borrower or such Credit Party in respect of intercompany indebtedness to any other Borrowers or Credit Parties or Affiliates of Borrowers or Credit Parties). 12. RELEASES AND WAIVERS; COVENANTS NOT TO SUE; INDEMNITY. ------------------------------------------------------ Each Borrower, each Credit Party and each Guarantor acknowledge and agree that in March and December of 2005 Lender and/or MPFC III made the Previous Loans to Borrowers; that Borrowers subsequently committed various events of default under the Previous Loans; that twice during the term of the Previous Loans, Lender and MPFC III agreed to and did forbear from foreclosing on the Previous Loans; and that Lender has agreed to made the Loans contemplated by this Agreement on condition that each Borrower, each Credit Party and each Guarantor enter into and make the following releases and waivers, covenants not to sue and indemnities for the benefit of the Lender Released Parties: 12.1 Releases and Waivers. As an inducement to Lender to make the Loans to Borrowers: (a) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive, relinquish and discharge any and all Lender Liability Claims that the Releasing Parties now have or in the future may have against any of the Lender Released Parties, which Lender Liability Claims are based on any act or omission which allegedly occurred prior to the Effective Date of this Agreement. 62 (b) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive, relinquish and discharge each of the Lender Released Parties from any and all claims, rights, demands, debts, causes of action, charges, expenses, damages, attorneys' fees and costs, obligations or liabilities of any and every kind, nature and character whatsoever, whether or not now known, suspected or unsuspected, which any of the Releasing Parties may have had, may now have or may in the future claim to have against any of the Lender Released Parties arising out of, or directly or indirectly related in any manner to any act or omission to act which allegedly occurred prior to the Effective Date of this Agreement. The Releasing Parties hereto have been fully advised by their respective attorneys of the contents and effect of the applicable provisions under the laws of the State of Nevada and the State of California upon the rights of each of them, which provisions state substantially as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. EACH OF THE RELEASING PARTIES ACKNOWLEDGE THAT THEY MAY HAVE SUSTAINED DAMAGES, LOSSES, FEES, COSTS OR EXPENSES WHICH ARE PRESENTLY UNKNOWN AND UNSUSPECTED, AND, NOTWITHSTANDING THE FOREGOING PROVISIONS OF STATE LAW, ARE EXPRESSLY WAIVING THE SAME. EACH OF THE RELEASING PARTIES AGREES THAT IT INTENDS TO RELEASE EVEN UNKNOWN OR UNSUSPECTED CLAIMS. EACH OF THE RELEASING PARTIES REPRESENTS THAT IT HAS CONSULTED WITH ITS LEGAL COUNSEL REGARDING ITS CLAIMS AND POTENTIAL CLAIMS AGAINST THE RELEASED PARTIES, HAS CAREFULLY READ AND UNDERSTANDS ALL THE PROVISIONS OF THIS AGREEMENT, AND HAS VOLUNTARILY ENTERED INTO THIS AGREEMENT. THE FOREGOING RELEASES AND WAIVERS SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. 12.2 Covenants Not To Sue. Each of the Releasing Parties hereby promises, covenants and agrees not to sue any of the Lender Released Parties, and not to bring any legal action or proceeding of any kind, at any time, against any of the Lender Released Parties, in any court or administrative proceeding, in any venue, which legal action or proceeding (a) violates any covenant, condition, representation or warranty made by the Releasing Parties in this Agreement, in any other Loan Documents or in any of the Previous Loan Documents, or (b) directly or indirectly seeks to (i) obtain or procure issuance of any temporary restraining order, or preliminary injunction, or permanent injunction, or any other equitable or provisional relief against any of the Lender Released Parties based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement, or (ii) impose or bring any Lender Liability Claims on or against any of the Lender Released Parties based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement, or (iii) obtain or impose on any of the Lender Released Parties any injunctive relief based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement. The foregoing covenants not to sue are permanent and shall survive the expiration or termination of this Agreement. 63 12.3 Indemnity. Each of the Releasing Parties hereby jointly and severally agree to and shall indemnify, defend, protect and hold each of the Lender Released Parties free and harmless from and against any and all legal actions, suits, proceedings or claims brought or asserted against any of the Lender Released Parties for damages, losses, liabilities and expenses (including reasonable attorneys' fees, witness and expert witness fees, court fees and charges, statutory and non-statutory costs and expenses, and disbursements and other costs of investigation or defense, including those incurred upon any appeal or in any Bankruptcy proceeding) directly or indirectly arising out of or relating to: (a) the negotiation, execution and delivery of the Term Sheet by any Lender Released Party; (b) the negotiation, execution and delivery of this Agreement by any Lender Released Party; (c) the negotiation, execution and delivery of any of the Previous Loan Documents by any Lender Released Party; (d) the taking, implementation or enforcement by any of the Lender Released Parties of any of their rights and remedies under the Previous Loan Documents; (e) the making of the Loans by any of the Lender Released Parties pursuant to this Agreement; and (f) any Lender Liability Claim brought or asserted against any of the Lender Released Parties. NO LENDER RELEASED PARTY SHALL BE RESPONSIBLE OR LIABLE TO ANY OF THE RELEASING PARTIES, NOR RESPONSIBLE OR LIABLE TO ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH RELEASING PARTIES, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF HAVING EXECUTED THE TERM SHEET, OR THIS AGREEMENT, OR AS A RESULT OF EXECUTING THE PREVIOUS LOAN DOCUMENTS, OR AS A RESULT OF ANY CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY OF THE PREVIOUS LOAN DOCUMENTS, OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED UNDER THE TERM SHEET, THIS AGREEMENT OR THE PREVIOUS LOAN DOCUMENTS. THE FOREGOING INDEMNITIES SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. 13. SURETYSHIP WAIVERS ------------------ 13.1 Suretyship Waivers. Because Credit Parties are not direct borrowers from Lender under this Agreement, although the Loans directly and indirectly benefit each Person comprising Borrowers and Credit Parties, it is possible that the Credit Parties could be construed as guarantors or sureties of Borrowers and of each other and thereby have certain rights and remedies accorded to them that were not intended to be available to any of them. Accordingly, in order to induce the Lender to provide the credit facilities and accommodations provided for herein, each Person which is a Borrower or a Credit Party for itself agrees as follows: (a) Irrevocable Waivers. The waivers provided in this section are intended to be irrevocable and to apply to all present and future Obligations of Borrowers and Credit Parties to Lender, including those arising under successive transactions which shall either continue the Obligations, increase or decrease them, or from time to time, create new Obligations, after all or any prior Obligations have been satisfied, and notwithstanding the dissolution, liquidation or bankruptcy of Borrowers, Credit Parties, or Guarantors, of all or any portion of the Obligations, or other event or proceeding affecting Borrowers or Credit Parties or Guarantors of any portion of the Obligations. (b) Separate and Independent Obligations of Credit Parties. The Obligations of Credit Parties hereunder are separate and independent of (i) Borrower's obligation to pay Lender principal and interest under the Notes and the other Obligations hereunder, and (ii) the liabilities and obligations of Credit Parties which are Guarantors. A separate action or actions may be brought 64 and prosecuted against Credit Parties whether or not any action is brought and prosecuted against Borrowers, and whether or not Credit Parties are joined in any such action or actions. Borrowers and Credit Parties waive the benefit of any statute of limitations affecting the Obligations hereunder or the enforcement thereof. (c) Authority of Lender. Credit Parties and Guarantors hereby authorize Lender, without notice or demand and without affecting its liability hereunder, from time to time to: (i) amend, alter, restate, replace, modify, renew, extend, accelerate or otherwise change the time for payment or the terms of the Obligations with Borrowers, including increasing or decreasing the Interest Rate thereon or the principal amount thereof; (ii) accept partial payments on the Obligations from Borrowers or Guarantors; (iii) accept new or additional documents, instruments or agreements relative to the Obligations; (iv) take and hold security or additional guaranties for the payment of the Obligations, and amend, alter, exchange, substitute, transfer, enforce, waive, subordinate, terminate, modify and release in any manner any such security or guaranties; (v) apply such security and direct the order or manner of sale thereof as Lender in its sole discretion may determine; (vi) release or substitute any Guarantor; (vii) settle, release on terms satisfactory to Lender (or by operation of law or otherwise), compound, compromise, collect or otherwise liquidate any indebtedness or security in any manner, consent to the transfer of security and bid and purchase at any sale, without affecting or impairing the Obligations of Borrowers or Credit Parties or Guarantors hereunder; or (viii) enforce any other right or remedy granted to Lender under this Agreement or under any of the other Loan Documents or under any Guaranty Agreement. No action which Lender shall take or fail to take in connection with this Agreement or any of the Loan Documents, or any of them, or any security for the Obligations or other undertakings of Borrowers, nor any course of dealing with Borrowers or Credit Parties or Guarantors, or any course of dealing with any other person or legal entity, shall release Borrower's Obligations or Credit Party's or Guarantor's responsibilities hereunder, shall affect this Agreement or the other Loan Documents in any way, or afford Borrowers or Credit Parties or Guarantors any recourse against Lender. Without limiting the generality of the foregoing, Borrowers agree that this Agreement shall extend and be applicable to each new or replacement Note delivered by Borrowers pursuant thereto without notice to or further consent from Credit Parties or Guarantors. (d) Waiver of Rights Against Lender. Borrowers and Credit Parties and Guarantors waive any right to require Lender to: (i) proceed against Borrowers, against Guarantors, against Credit Parties, or against anyone else; (ii) proceed against or exhaust any security for the Obligations, or to marshal assets or to marshal assets of any Person in any particular order; (iii) except as required by applicable law, give notice of the terms, time and place of any public or private sale of any real or personalty securing the Obligations; or (iv) pursue any other remedy in Lender's power whatsoever. Each Person which is a Borrower, Guarantor, or a Credit Party waives any defense arising by reason of any disability or other defense of Borrowers, Guarantors, or Credit Parties, or by reason of the cessation from any cause whatsoever of the liability of Borrowers, Guarantors, or Credit Parties, or by reason of any act or omission of Lender or other Persons which directly or indirectly results in or aids the discharge or release of Borrowers, Guarantors, or Credit Parties, or any of the Obligations or any security therefor by operation of law or otherwise, or by reason of the amendment, modification, renewal, extension or other change in any of the Obligations. Borrowers, Credit Parties and Guarantors waive all setoffs and 65 counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Agreement and of the existence, creation, or incurring of new or additional Obligations, and all other notices and demands of any kind and description now or hereafter provided for by any statute or rule of law, except for such notices and demands as specifically required by this Agreement. Borrowers, Guarantors, and Credit Parties expressly waive any right whatsoever to, or right whatsoever to participate in, any security now or hereafter held by Lender, reimbursement, indemnity, exoneration, contribution or any other claim under local, state or federal law, including, without limitation, 11 U.S.C. ?547, which it may now or hereafter have against Borrowers, Guarantors, or Credit Parties, or any other Person directly or contingently liable for the Obligations, or against or with respect to Borrower's or Credit Party's or Guarantor's property (including, without limitation, any Collateral under any of the Loan Documents) arising from the existence or performance of this Agreement until all of the Obligations have been indefeasibly paid or satisfied in full. (e) Representations and Warranties. Borrowers, Guarantors, and Credit Parties represent and warrant to Lender that: (i) this Agreement is executed at each Borrower's, each Guarantor's, and each Credit Party's request; (ii) Guarantors, and Credit Parties have each established adequate means of obtaining from Borrowers on a continuing basis financial and other information pertaining to Borrower's Business and Borrower's financial condition; and (iii) Guarantors and Credit Parties are now and will be completely familiar with the Business, operation and financial condition of Borrowers and its assets and of its Business. Borrowers, Guarantors and Credit Parties hereby waive and relinquish any duty on the part of Lender to disclose to any of said parties any matter, fact or thing relating to the Business, operation or financial condition of Borrowers and their respective assets now known or hereafter known by Lender during the Term of this Agreement. With respect to any present or future Obligations of Borrowers to Lender, Lender need not inquire into the authority of Borrowers, and any Obligations made or created in reliance upon the professed exercise of such powers. (f) No Set-Off, Counterclaim, Etc. So long as any of the Obligations under this Agreement remain unpaid or undischarged, neither Guarantors nor Credit Parties will, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, (i) claim any set-off or counterclaim against Borrowers, Guarantors, or Credit Parties in respect of any Obligations or other indebtedness by virtue of the right of subrogation, by operation of law or otherwise; (ii) in any proceedings under federal bankruptcy law or insolvency proceedings of any nature, assert its rights in competition with Lender in respect of any payment hereunder because of any claims which Guarantors or Credit Parties may have against Borrowers or any other Person; or (iii) be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Borrowers, Guarantors, or Credit Parties or other Person, or the benefit of any of any other security for any Obligation which, now or hereafter, Lender may hold or in which it may have any share or interest. 13.2 Election of Remedies. If Lender may, under Applicable Laws, proceed to realize its benefits under any of the Loan Documents granting a Lien upon any Collateral, whether owned by Borrowers or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 13 (Suretyship 66 Waivers). If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against Borrowers or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, Borrowers hereby consent to such action by Lender and waive any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation that Borrowers might otherwise have had but for such action by Lender. Any election of remedies that results in the denial or impairment of the right of Lender to seek a deficiency judgment against Borrowers shall not impair Guarantor's or Credit Party's obligations to pay the full amount of the Obligations applicable to it. In the event Lender shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or the Loan Documents, Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Lender but shall be credited against the Obligations. [SIGNATURE PAGE FOLLOWS] 67 EXECUTION IN WITNESS WHEREOF, this Credit Agreement ($80,000,000 Facility) has been duly executed as of the date set forth next to the signature each party. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President [SIGNATURE PAGE CONTINUES] CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Anil V. Shah, MD Date of Execution: --------------------------------- Name: Anil V. Shah, MD Title: Co-Manager By: /s/ Kali P. Chaudhuri Date of Execution: -by William R. Thomas, Attny. in fact Title: Co-Manager GANESHA REALTY, LLC, a California limited liability company, By: /s/ William R. Thomas Date of Execution: --------------------------------- Name: William R. Thomas Title: Secretary WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager [SIGNATURE PAGE CONTINUES] GUARANTORS: WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation, By: /s/ Joseph J. Lampariello Date of Execution: 10/4/07 Name: Joseph J. Lampariello Title: COO ANNEX A TO CREDIT AGREEMENT ($80 MILLION FACILITY) --------------------------------------- DEFINITIONS Initially capitalized terms used in this Agreement shall (unless otherwise provided elsewhere in the Loan Documents) have the following respective meanings. All references to Sections, Exhibits, Schedules or Annexes in the following definitions shall refer to sections, Exhibits, Schedules or Annexes of or to this Credit Agreement: "ABSOLUTE ASSIGNMENT" means each of the following: (a) the Absolute Assignment of Leases and Rents With License Back re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, PCHI and WMC-A in the form of Exhibit "F" attached hereto; (b) the Absolute Assignment of Leases and Rents With License Back re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, PCHI and WMC-SA in the form of Exhibit "F" attached hereto; (c) the Absolute Assignment of Leases and Rents With License Back re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, PCHI and Coastal in the form of Exhibit "F" attached hereto; (d) the Absolute Assignment of Leases and Rents With License Back re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "F" attached hereto; and (e) the Absolute Assignment of Leases and Rents With License Back re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "F" attached hereto. "ACCOUNTS" means (i) the right to receive payment of rent, occupancy payments and other similar payments due and owing by any Person using or occupying space in any real property owned or leased by Borrowers, plus (ii) the future right to receive payment of any monetary obligations, whether or not earned by performance, now or hereafter existing, arising under or in relation to each Borrower's Business. "ADVANCE" means any advance of funds under any of the Loans. "AFFILIATE" means, with respect to any Person (excluding Lender), (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and partners, and (d) in the case of Borrowers, the immediate family members, 1 spouses and lineal descendants of individuals who are Affiliates of Borrowers. For the purposes of this definition, "CONTROL" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" means this Credit Agreement by and among Borrowers, Credit Parties, Guarantors and Lender, as the same may be amended, supplemented, restated or otherwise modified from time to time. "ANNEXES" means, together, Annex A (Definitions), Annex B (Cash Management System), Annex C (Collateral Reports) and Annex D (Notice Addresses) attached to this Agreement. "APPLICABLE LAWS" means all federal, state and local laws, statutes, codes, regulations, rules, acts, ordinances of all Governmental Authorities, departments, commissions, boards, courts, authorities, agencies, officials and officers, including without limitation, Environmental Laws, all building, safety, health, use laws, the Fair Labor Standards Act, 29 U.S.C. ss.ss.201 et seq., the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101, et seq., as amended, and the California version of the WARN Act, and any deed restrictions or other requirements of record applicable to the Collateral or to Borrowers or Credit Parties, or to their respective businesses. "APPRAISAL" means an appraisal of the Properties prepared by Marshall & Stevens, M.A.I.. "APPRAISED VALUE" means the fair market value of the Properties as set forth in the Appraisal. "BANK" means Wells Fargo Bank, N.A., located at 2030 Main Street, Suite 900, Irvine, California 92614. "BANKRUPTCY CODE" means the provisions of Title 11 of the United States Code, 11 U.S.C. ss.101 et seq. "BORROWERS" means IHHI, WMC-A, WMC-SA, Chapman and Coastal. "BORROWER'S REPRESENTATIVE" means Bruce Mogel at the address of IHHI, or any replacement therefor approved by Lender as required by this Agreement. "BUSINESS" means the business of Borrowers as defined in the Recitals set forth above. "BUSINESS DAY" means each day of the year that is not a Saturday or Sunday and which day (a) is not a day on which federally-chartered banking institutions in Las Vegas, Nevada are required to close, and (b) is a not a regularly scheduled holiday in the state of Nevada or in the United States. 2 "CAPITAL EXPENDITURE(S)" means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one year and that are required to be capitalized under GAAP. "CAPITAL LEASE" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. "CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. "CASH COLLATERAL ACCOUNT" has the meaning ascribed to it Annex B (Cash Management System). "CASH MANAGEMENT SYSTEM" means the cash management system described in Annex B (Cash Management System). "CERTIFIED CASH" means the net amount of Dollars in unrestricted cash and cash equivalents of Borrowers that is/are in Deposit Accounts or securities accounts maintained by a branch of a bank or securities intermediary within the United States and which are identified on Disclosure Schedule 3.18 (Deposit and Disbursement Accounts), as updated by Borrowers from time to time, as Certified Cash Accounts, which Certified Cash Accounts are not subject to any Liens, statutory liens or rights of offset, any overdraft, or any other charge or priority in favor of any Person other than Lender or, for any Deposit Account or securities account, the rights of the applicable bank or securities intermediary maintaining such Deposit Account or securities account with respect to customary account charges relating thereto (provided, that any amounts subject to any such rights in favor of any such bank or securities intermediary shall be excluded from Certified Cash for purposes of calculation of the amount thereof). For the avoidance of any doubt, the amount of Borrowers' marketable securities and Qualified Cash at the time of any determination shall be deemed to constitute Certified Cash but only to the extent they are not subject to any Liens, statutory liens or rights of offset, any overdraft, or any other charge or priority in favor of any Person other than Lender. "CHANGE OF CONTROL" means that any of the following have occurred: (a) any Person or group of Persons (within the meaning of the Securities Exchange Act of 1934) shall have acquired actual ownership, beneficial ownership or the right to own upon the occurrence of specified events, 25% or more of the Stock of any Borrower or any Credit Party (other than Ganesha); or (b) during any period of twelve (12) consecutive calendar months, Persons who at the beginning of such period constituted the majority of the board of directors of any Borrower or the majority of the managers of any Credit Party (other than Ganesha) (together with any new Person whose nomination or election or appointment was approved by the required vote of the shareholders or members) cease for any reason (other than death or personal disability) to constitute a majority of the board of directors of any Borrower or the majority of the managers of any Credit Party (other than Ganesha); or (c) IHHI ceases to own, directly or indirectly, and control, all 3 (100%) of the Stock of WMC-A, WMC-SA, Chapman and Coastal; or (d) Bruce Mogel ceases to be Chief Executive Officer or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal, and a replacement acceptable to Lender in its sole discretion is not employed by the applicable Borrower within thirty (30) calendar days after the date that Bruce Mogel is no longer employed as Chief Executive Office or Director of IHHI; or WMC-A, or WMC-SA, or Chapman, or Coastal; or (e) West Coast and Ganesha cease to own, directly or indirectly, and control, all (100%) of the membership interests of PCHI. "CHAPMAN" means Chapman Medical Center, Inc., a California corporation. "CHAPMAN LEASES" means each of the following: (a) That certain lease agreement dated December 31, 1984, by and between Chapman Medical, L.P., a California limited partnership, successor-in-interest to Chapman Investments Associates, a California limited liability company, successor-in-interest to James L, Kirby, Successor Trustee of the Taggart Land Trust dated December 29, 1977, Fred D. Pierce, Trustee of the Stanford Land Trust dated December 29, 1977, Lawrence A. Johnson, Trustee of the Oxford Land Trust dated December 29, 1977, James L. Kirby, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, Melia Harper Long, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, and Mattison James Harper, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, as tenants in common doing business under the fictitious name Chapman Investment Associates (collectively, "HOSPITAL LANDLORD"), and Chapman General Hospital, Inc., a California corporation, as the initial Tenant thereunder (the "HOSPITAL TENANT"). Said lease agreement was amended by a First Amendment dated April 8, 1985, by a Second Amendment dated April 1, 1989, by a Third Amendment dated November 5, 1990 and by a Fourth Amendment dated August 25, 1994. Said lease, as amended by the First, Second, Third and Fourth Amendments, shall collectively hereinafter be referred to as the "CHAPMAN HOSPITAL LEASE." The 2601 East Chapman Hospital Lease encumbers the real property and hospital improvements commonly described as and located at 2601 East Chapman Avenue, Orange, California. A memorandum of the Chapman Hospital Lease was recorded on August 30, 1994 as Instrument No. 94-0533295 of the Official Records of the Office of the County Recorder of the County of Orange, State of California. Hospital Tenant's interest in the Chapman Hospital Lease was assigned and transferred to IHHI on March 5, 2005. (b) That certain lease agreement dated December 31, 1984 by and between Chapman Medical, L.P., a California limited partnership, successor-in-interest to Chapman Investments Associates, a California limited liability company, successor-in-interest to James L, Kirby, Successor Trustee of the Taggart Land Trust dated December 29, 1977, Fred D. Pierce, Trustee of the Stanford Land Trust dated December 29, 1977, Lawrence A. Johnson, Trustee of the Oxford Land Trust dated December 29, 1977, James L. Kirby, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, Melia Harper Long, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, and Mattison James Harper, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, as tenants in common doing business under the fictitious name Chapman Investment Associates (collectively, "MOB LANDLORD") and Greatwest Medical Management, Inc., a California corporation, as the initial Tenant (the "MOB TENANT"). Said lease agreement was amended by a First Amendment dated April 8, 1985, and by a Second Amendment dated August 25, 1994. Said lease agreement, as amended by the First Amendment and Second Amendment, shall collectively hereinafter be referred 4 to as the "CHAPMAN MOB LEASE." The 2617 East Chapman MOB Lease encumbers the medical office building premises commonly described as and located at 2617 East Chapman Avenue, Orange, California. A memorandum of the Chapman MOB Lease was recorded on August 30, 1994 as Instrument No. 94-0533296 of the Official Records of the Office of the County Recorder of the County of Orange, State of California. MOB Tenant's interest in the Chapman MOB Lease was assigned and transferred to IHHI on March 5, 2005. "CHAPMAN MEDICAL CENTER" means the real property and hospital improvements located at 2601 East Chapman Avenue, Orange, California, and the real property and medical office building improvements located at 2617 East Chapman Avenue, Orange, California. "CHARGES" means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any of Borrowers or any of the Credit Parties, (d) the use of any real property owned or leased by Borrowers or Credit Parties (other than Ganesha), or (e) any other aspect of the Business of Borrowers or the business of Credit Parties (other than Ganesha). "CHATTEL PAPER" means any chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by Borrowers or Credit Parties. "CLOSING DATE" means October 9, 2007, unless Borrower's Representative and Lender otherwise agree in writing. "CLOSING AND FUNDING CHECKLIST" means the closing and funding checklist prepared by Lender listing certain documents and information to be delivered in connection with this Agreement and the other Loan Documents and the transactions contemplated thereunder, as described in Annex C (Collateral Reports). "COASTAL" means Coastal Communities Hospital, Inc., a California corporation. "COASTAL COMMUNITIES HOSPITAL" means the real property and hospital improvements located at 2701 South Bristol Street and 1901 and 1905 North College Avenue, Santa Ana, California. "CODE" means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of Nevada; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in such Article or Division shall govern; and provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender or any Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Nevada, the term "CODE" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. 5 "COLLATERAL" means the following: (a) all of each Borrower's tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired; (b) all of each Borrower's intangible personal property and interests in personal property, including without limitation all present and future Accounts, contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing; (c) all of each Borrower's Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Borrower; provided, however, that Lender shall not have a Lien in any rights under any Government Contract of any Borrower or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, ss. 203 or Title 41, ss. 15 of the United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable law, unless in any case consent is otherwise validly obtained; (d) PCHI's fee simple interest in the Western Medical Center - Anaheim, in the Western Medical Center - Santa Ana, and in the Coastal Communities Hospital; (e) IHHI's interest, as tenant, in the Triple Net Lease of the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Communities Hospital; (f) IHHI's interest, as sublandlord, in the sublease of the Western Medical Center - Anaheim to WMC-A, in the sublease of the Western Medical Center - - Santa Ana to WMC-SA, and in the sublease of the Coastal Communities Hospital to Coastal; (g) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; (h) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; and (i) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.. "COLLATERAL ASSIGNMENT" means each of the following: 6 (a) the Collateral Assignment of Contracts re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, IHHI and WMC-A in the form of Exhibit "H" attached hereto; (b) the Collateral Assignment of Contracts re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, IHHI and WMC-SA in the form of Exhibit "H" attached hereto; (c) the Collateral Assignment of Contracts re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, IHHI and Coastal in the form of Exhibit "H" attached hereto; (d) the Collateral Assignment of Contracts re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "H" attached hereto; and (e) the Collateral Assignment of Contracts re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "H" attached hereto. "COLLATERAL DOCUMENTS" means the $80,000,000 Deeds of Trust, the Absolute Assignments, the Collateral Assignment, the Security Agreement, the Pledge Agreement, the Stock Power, the IP Security Agreement, the UCC-1 Financing Statements, and all similar agreements, documents and instruments entered into guaranteeing payment of, or granting a Lien upon, real and personal property (and interests in real and personal property), and perfecting the Liens, as security for payment of, the Obligations. "COLLATERAL REPORTS" means the reports with respect to the Collateral referred to in Annex C (Collateral Reports). "COMMITMENT" means the aggregate commitment of Lender to make Advances under the Loans, which aggregate amount shall not exceed EIGHTY MILLION AND NO/100 DOLLARS ($80,000,000.00), from time to time in accordance with this Agreement. "COMMITMENT TERMINATION DATE" means the earliest of (a) thirty (30) calendar days prior to the Stated Maturity Date; (b) the date Lender's obligations to make Advances under any of the Notes terminate, (c) the date of prepayment in full of all of the Loans and the permanent reduction of the Loans to zero dollars ($0); or (d) the Maturity Date. "CONTRACTS" means all contracts as such term is defined in the Code, now owned or hereafter acquired by any of Borrowers, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any of the Borrowers may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Accounts. "CONTROL AGREEMENT" means the Control Agreement dated as of the date hereof, by and among Lender, Borrowers and Bank in the form of Exhibit "J" attached hereto. 7 "COPYRIGHT LICENSE" means any and all rights now owned or hereafter acquired by any of the Borrowers under any written agreement granting any right to use any Copyright or Copyright registration. "COPYRIGHTS" means all of the following now owned or hereafter adopted or acquired by any of the Borrowers or any of the Credit Parties: (a) all copyrights and General Intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof. "CREDIT PARTIES" means OC-PIN, PCHI, West Coast and Ganesha, and their respective successors and assigns. "DEFAULT" means any event that, with the passage of time or notice or both, would, unless cured or waived in writing by Lender, become an Event of Default. "DEFAULT RATE" means a rate of interest which is five percent (5%) per annum above the Interest Rate per annum otherwise applicable to the Loan in question. "DEPOSIT ACCOUNTS" means all deposit accounts as such term is defined in the Code, now or hereafter held in the name of any of the Borrowers. "DEPOSIT ACCOUNT SECURITY AGREEMENT" means that certain Deposit Account Security Agreement dated as of the date hereof, by and among Lender and Borrowers in the form of Exhibit "I" attached hereto. "DISBURSEMENT ACCOUNTS" has the meaning ascribed to it in Annex B (Cash Management System). "DISCLOSURE SCHEDULES" means the Schedules prepared by Borrowers and denominated as Disclosure Schedules 1.3 through 6.7 to this Agreement. "DOCUMENTS" means all documents, as such term is defined in the Code, now owned or hereafter acquired by any of Borrowers, wherever located. "DOLLARS" or "$" means lawful currency of the United States of America. "DR. SHAH" means Anil V. Shah, M.D., an individual. "$45,000,000 REAL ESTATE TERM LOAN" means the $45,000,000 real estate term loan made by Lender to Borrowers pursuant to this Agreement. "$45,000,000 REAL ESTATE TERM NOTE" means the $45,000,000 real estate promissory note of even date herewith, executed by Borrowers in favor of Lender, in the form of Exhibit "A" attached hereto. 8 "$35,000,000 NON-REVOLVING LINE OF CREDIT LOAN" means the $35,000,000 non-revolving line of credit loan made by Lender to Borrowers pursuant to this Agreement. "$35,000,000 NON-REVOLVING LINE OF CREDIT NOTE" means the $35,000,000 non-revolving line of credit promissory note of even date herewith, executed by Borrowers in favor of Lender, in the form of Exhibit "B" attached hereto. "$10,700,000 CONVERTIBLE TERM LOAN" means the $10,700,000 convertible term loan made by MPFC III to Borrowers pursuant to the New $10,700,000 Credit Agreement. "$10,700,000 CONVERTIBLE TERM NOTE" means the $10,700,000 convertible promissory note of even date herewith, executed by Borrowers in favor of MPFC III pursuant to the New $10,700,000 Credit Agreement. "$80,000,000 DEED OF TRUST " means each of the following: (a) the Deed of Trust With Assignment of Rents and Fixture Filing re Western Medical Center - Anaheim, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "E" attached hereto; (b) the Deed of Trust With Assignment of Rents and Fixture Filing re Western Medical Center - Santa Ana, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "E" attached hereto; (c) the Deed of Trust With Assignment of Rents and Fixture Filing re Coastal Communities Hospital, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "E" attached hereto; (d) the Deed of Trust With Assignment of Rents and Fixture Filing re Chapman MOB Lease, dated as of the date hereof, executed by IHHI in favor of Lender in the form of Exhibit "E" attached hereto; and (e) the Deed of Trust With Assignment of Rents and Fixture Filing re Chapman Hospital Lease, dated as of the date hereof, executed by IHHI in favor of Lender in the form of Exhibit "E" attached hereto. "$50,000,000 DEEDS OF TRUST" means each of the fee and leasehold $50,000,000 Deeds of Trust of even date herewith, executed by PCHI and/or IHHI, as Trustors, and Medical Provider Financial Corporation I, as Beneficiary, securing repayment of the $50,000,000 Revolving Facility. "$50,000,000 REVOLVING CREDIT AGREEMENT" means that certain $50,000,000 Revolving Credit Agreement of even date herewith, executed by Borrowers, as borrowers, and Medical Provider Financial Corporation I, as Lender. "$50,000,000 REVOLVING FACILITY" means the $50,000,000 revolving line of credit loan facility by Medical Provider Financial Corporation I, as lender, to Borrowers, as borrowers, pursuant to the $50,000,0000 Revolving Credit Agreement. 9 "EFFECTIVE DATE" means the date set forth in the introductory paragraph of this Agreement. "ENVIRONMENTAL INDEMNITY AGREEMENT" means an Environmental Indemnity Agreement of even date herewith, by and between Borrowers, Credit Parties (other than Ganesha) and Lender, in the form of Exhibit "M" attached hereto "ENVIRONMENTAL LAWS" means all federal, state and local health, safety, environmental or natural resource laws, statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, authorizations, concessions, franchises and similar items of all federal, state, county, municipal, or other governmental, quasi-governmental, regulatory or administrative authority, agency, board, court, arbitrator, body, instrumentality, commission or other judicial body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to Governmental Authority having jurisdiction, including, without limitation all statutes referred to by name in the definition of Hazardous Materials; and all other state, federal, and local laws, regulations, rules, ordinances and orders which govern: (i) the existence, cleanup and/or remedy of contamination on real property and improvements; (ii) the emission or discharge of Hazardous Materials into the environment; (iii) the control of Hazardous Materials; (iv) the use, generation, transport, treatment, storage, disposal, removal, or recovery of Hazardous Materials; as well as all applicable judicial and administrative and regulatory decrees, judgments or orders (including without limitation the common law) and all applicable covenants running with the land that relate to the protection of health, safety, environment or natural resources. "ENVIRONMENTAL LIABILITIES" means, with respect to any Person, all environmental liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property. "ENVIRONMENTAL LOSSES" means any and all losses (including diminution in value of a Property), liabilities, damages, demands, claims, actions, judgments, causes of action, assessments, penalties, costs and expenses (including sums paid in settlement of claims), liens, interest, fines or penalties, including without limitation, the fees and disbursements of outside counsel, paralegals and accountants, consultant fees, expert fees, all foreseeable and unforeseeable consequential damages, and all other costs and expenses of any kind or nature, which are suffered or incurred by Lender with respect to a Property or adjacent real property or improvements arising out of or as a result of (i) the occurrence of any Hazardous Material Activity; (ii) any violation of any Environmental Laws or Applicable Laws; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any Governmental Authority in connection with any Hazardous Material Activity; (iv) any Hazardous Material 10 Claims brought, asserted, or alleged against Lender or against any of Lender's directors, officers, shareholders, employees, attorneys, or agents; (v) any actions taken by Lender to enter and inspect a Property pursuant to the rights granted Lender under this Agreement and the other Loan Documents; and (vi) any misrepresentation or inaccuracy in any representation or warranty by any Borrower or any Credit Party or any material breach or failure to perform any covenants or obligations by any Borrower or any Credit Party pursuant to this Agreement relating to environmental matters. "ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws. "EQUIPMENT" means all equipment, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that, together with any other Person, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC. "ERISA EVENT" means (a) with respect to a Title IV Plan, any event described in Section 4043(c) of ERISA for which notice to the PBGC has not been waived; (b) the withdrawal of Borrowers or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2( of ERISA; (c) the complete or partial withdrawal of Borrowers or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in a distress termination described in Section 4041(c) of ERISA or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) with respect to a Title IV Plan, the existence of an "accumulated funding deficiency" (as defined in Section 412 of the IRC or Section 302 of ERISA) whether or not waived, or the failure to make by its due date a required installment under Section 412(m) of the Code or the failure to make any required contribution to a Multiemployer Plan; (g) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to a Title IV Plan; (h) the making of any amendment to any Title IV Plan which could result in the imposition of a lien or the posting of a bond or other security; (i) with respect to a Title IV Plan an event described in Section 4062(e) of ERISA; (j) any other event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (k) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; (1) the loss of a Qualified Plan's qualification or tax exempt status; or (m) the termination of a Plan described in Section 4064 of ERISA. 11 "ESCROW" means an escrow account established by the Escrow Company. "ESCROW COMPANY" means Chicago Title Insurance Company, Commercial/Industrial, 700 South Flower Street, Suite 800, Los Angeles, California 90017, Attn: Patricia M. Schlageck ("SR. COMMERCIAL ESCROW OFFICER"), telephone: 213-488-4358; facsimile: 213-612-4138; email: patricia.schlageck@ctt.com. "ESCROW HOLDER" means Escrow Company. "EVENT OF DEFAULT" means that Borrowers and/or Credit Parties have committed one or more of the events described in Section 8.1 (Events of Default) of this Agreement. "EXHIBITS" means any of Exhibits "A" through "T" attached to this Agreement. "FEES" means any and all fees payable to Lender pursuant to this Agreement or any of the other Loan Documents, including but not limited to the Origination Fees, the Unused Commitment Fees and Lender's Costs. "FINANCIAL STATEMENTS" means the consolidated income statements, statements of cash flows and balance sheets of each of the Borrowers delivered in accordance with Section 3.4 (Financial Statements and Projections) of this Agreement. "FIRST CREDIT AGREEMENT" means that certain Credit Agreement dated to be effective as of March 3, 2005, by and between Borrowers, Credit Parties and Lender. Pursuant to the First Credit Agreement, Lender made available to Borrowers the Previous $50,000,000 Acquisition Loan and the Previous $30,000,000 Line of Credit Loan. "FISCAL MONTH" means any of the monthly accounting periods of Borrowers. "FISCAL QUARTER" means any of the quarterly accounting periods of Borrowers, ending on March 31, June 30, September 30 and December 31 of each year. "FISCAL YEAR" means any of the annual accounting periods of Borrowers ending on March 31 of each year. "FIXTURES" means all fixtures as such term is defined in the Code, now owned or hereafter acquired by Borrowers or Credit Parties. "FRAUDULENT TRANSFER LAW" means Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law. "FUNDED DEBT" means, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a line of credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long term debt, lines of credit and short term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons. 12 "GAAP" means, as to a particular Person, such accounting practice as, in the opinion of the independent accountants regularly retained by such Person, conforms at the time to Generally Accepted Accounting Principles, consistently applied. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those principles and practices in the United States of America (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the most recent Financial Statements furnished Lender of the relevant Person, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board in order for such principle or practice to continue as a Generally Accepted Account Principle or practice, all reports and Financial Statements required hereunder shall be prepared in accordance with such changes. "GANESHA" means Ganesha Realty, LLC, a California limited liability company. "GENERAL INTANGIBLES" means all general intangibles, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, including all right, title and interest that Borrowers may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefore and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choices in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of Borrowers or any computer bureau or service company from time to time acting for Borrowers. "GOODS" means all goods as defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, including embedded software to the extent included in goods as defined in the Code. "GOVERNMENTAL AUTHORITY" means any nation or government, any state, county, city, or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 13 "GUARANTEED INDEBTEDNESS" means as to any Person, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation of any other Person in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss (other than product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof. "GUARANTORS" means OC-PIN and West Coast, and their respective successors and assigns. "GUARANTY AGREEMENT" means a Guaranty Agreement of even date herewith, executed by the Guarantors and Lender, in the form of Exhibit "N" attached hereto. "HAZARDOUS MATERIAL" means any (a) substance, product, waste or other material of any nature whatsoever which is or becomes listed, regulated, or addressed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET SEQ.) ("CLEAN WATER ACT" OR "CWA"); the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.) ("AEA"); the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.); the Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001, ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136, ET SEQ.) ("FIFRA"); the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486); the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.) ("SDWA"); the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C. Sections 1201, ET SEQ.); the Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.) ("TSCA"); the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901, ET SEQ.) ("UMTRCA"); all respective regulations promulgated thereunder; and or any other federal, state or local statute, law, ordinance, resolution, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect, (b) any substance, product, waste or other material of any nature whatsoever which may 14 give rise to liability under any of the above statutes or under any statutory or common law theory based on negligence, trespass, intentional tort, nuisance or strict liability or under any reported decisions of a state or federal court, (c) petroleum or crude oil other than petroleum and petroleum products contained within regularly operated motor vehicles, and (d) asbestos. "HAZARDOUS MATERIAL ACTIVITY" means any storage, holding, existence, release, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Material from, under, into, or across any Property or surrounding real property and improvements or any other use of or operation of any Property or surrounding real property or improvements that creates a risk of Hazardous Material contamination of said Property; provided, however, that Hazardous Material Activity shall not include reasonable incidental use, storage and disposal of Hazardous Materials on the Property provided that such use, disposal and storage complies with the following: (a) such use, disposal and storage shall be limited to customary supplies, including supplies and materials customarily used, stored and disposed of in the normal operations of medical facilities; (b) no such products or supplies create any risk of harm to persons or property including any Collateral under this Agreement and the other Loan Documents; and (c) all such products and supplies are used, stored and disposed of in material compliance with all applicable Environmental Laws. "HAZARDOUS MATERIAL CLAIM" means any and all enforcement, clean-up, removal, remedial or other governmental or regulatory actions, agreements, or orders threatened, instituted or completed pursuant to any Environmental Laws and any all other actions, proceedings, claims, demands or causes of action, whether meritorious or not (including, without limitation, third party claims for contribution, indemnity, personal injury or real or personal property damage), which directly or indirectly relate to, arise from or are based in whole or in part on: (i) the occurrence or alleged occurrence of any Hazardous Material Activity, (ii) any violation or alleged violation of any applicable Environmental Laws relating to a Property or to the ownership, use, occupation or operation thereof; and (iii) any investigation, inquiry, order, hearing, action or other proceeding by or before any Governmental Authority in connection with any Hazardous Material Activity. "HOSPITAL FACILITIES" and/or "HOSPITAL FACILITY" means Western Medical Center-Anaheim, the Western Medical Center-Santa Ana, the Coastal Communities Hospital and the Chapman Medical Center. "IHHI" means Integrated Healthcare Holdings, Inc., a Nevada corporation. "INDEBTEDNESS" means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are unsecured and not overdue by more than six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by note, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations and the present value of future 15 rental payments under all synthetic leases, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations. "INDEMNIFIED LIABILITIES" means all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other statutory and non-statutory costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any Lender Released Party directly or indirectly based on or relating to: (a) the negotiation, execution and delivery of this Agreement by any Lender Released Party; or (b) the negotiation, execution and delivery of any Previous Loan Document by any Lender Released Party; or (c) any Lender Liability Claim brought or asserted against any Lender Released Party in connection with any Previous Loan Document or in connection with the negotiation, execution and delivery of this Agreement; or (d) as the result of credit having been extended, suspended or terminated under any Previous Loan Document; or (e) as a result of the administration of any credit under any Previous Loan Document and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Previous Loan Documents. "INDEPENDENT DIRECTOR(S)" means a Person or Persons who are or who become members of IHHI's board of directors and who (a) are independent of all Borrowers and all Credit Parties, (b) are not now and never have been affiliated with any Borrower or any Credit Party, (c) are not now and never have been employed by or have performed consulting or other services for any Borrower or any Credit Party, (d) are not now and never have been paid or compensated, or received consideration of any kind from, any Borrower or any Credit Party, (e) are not now and never have been directly or indirectly engaged in the full-time practice of clinical medicine (i.e., said Persons are not doctors), and (f) are experienced in the administration and management of acute care hospital facilities such as the Hospital Facilities. "INSTRUMENTS" means all instruments, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "INTELLECTUAL PROPERTY" means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with such Trademarks. 16 "INTERCREDITOR AGREEMENT" means an Intercreditor Agreement of even date herewith, executed by the Lender and Borrowers in the form of Exhibit "O" attached hereto. "INTEREST PAYMENT DATE" means the first Business Day of each calendar month to occur while any Loan is outstanding, and provided further that, in addition to the foregoing, the Maturity Date shall be deemed to be an Interest Payment Date with respect to any interest that has then accrued under this Agreement. "INTEREST RATE" means the following: (a) With respect to the $45,000,000 Real Estate Term Loan, simple interest shall be charged at the per annum fixed rate of 9.0%. Provided, however, from and after the first anniversary of the Closing Date, simple interest shall thereafter be increased to and charged at the per annum fixed rate of 14.0%. (b) With respect to the $35,000,000 Non-Revolving Line of Credit Loan, simple interest shall be charged at the per annum fixed rate of 9.25%. "INVENTORY" means all inventory, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of Borrowers for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished' goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in Borrower's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. "INVESTMENT PROPERTY" means all investment property as such term is defined in the Code now owned or hereafter acquired by Borrowers, wherever located, including (a) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (b) all securities entitlements of Borrowers, including the rights of Borrowers to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (c) all securities accounts of Borrowers; (d) all commodity contracts of Borrowers; and (e) all commodity accounts held by Borrowers. "IRC" means the Internal Revenue Code of 1986 and all regulations promulgated thereunder. "IRS" means the Internal Revenue Service. "LANDLORD'S CONSENT AND ESTOPPEL CERTIFICATE (CHAPMAN LEASES)" means each of the following: (a) a Landlord's Consent and Estoppel Certificate (Chapman MOB Lease) executed by the Chapman MOB Landlord in favor of Lender, in the form of Exhibit "S" attached hereto; and 17 (b) a Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease) executed by the Chapman Hospital Landlord in favor of Lender, in the form of Exhibit "S" attached hereto. . "LANDLORD'S CONSENT AND ESTOPPEL CERTIFICATE (TRIPLE NET LEASE)" means that certain Landlord's Consent and Estoppel Certificate (Triple Net Lease) executed by PCHI, in the form of Exhibit "T" attached hereto. "LENDER" means Medical Provider Financial Corporation II, a Nevada corporation, and, if Lender shall decide to assign all or any portion of the Obligations, such term shall include any assignee(s) of Lender. "LENDER LIABILITY CLAIM(S)" means any claim or cause of action that any of the Releasing Parties now has or in the future may have against any Lender Released Party to the effect that, prior to the Effective Date of this Agreement: (a) any of the Lender Released Parties committed a breach or default under any of the Loan Documents or under any of the Previous Loan Documents or under the Term Sheet; or (b) any of the Lender Released Parties conspired with the executive officers, representatives or agents of IHHI to deprive OC-PIN of its stock ownership in IHHI or otherwise inflicted any actionable damage on OC-PIN; or (c) any of the Lender Released Parties committed an act not permitted by any of the Previous Loan Documents or by the Term Sheet or by applicable law; or (d) any of the Lender Released Parties omitted to take an action required by the Previous Loan Documents or by the Term Sheet or under applicable law; or (e) any of the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents is/are invalid or unenforceable in whole or in part for any reason; or (f) any of the Lender Released Parties suggested, implied, induced, cajoled or required that IHHI include any terms or conditions in any agreements between IHHI and OC-PIN in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (g) any of the Lender Released Parties suggested, implied, induced, cajoled or required that IHHI not include any terms or conditions in any agreements between IHHI and OC-PIN in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (h) any of the Lender Released Parties improperly interfered with, or improperly exercised control, or exercised excessive control, over any of the Borrowers, or Credit Parties, or Guarantors, in connection with the Previous Loan Documents or Term Sheet or this Agreement or the other Loan Documents; or (i) any of the Lender Released Parties breached in any way any alleged duty of good faith or fair dealing, any alleged fiduciary duty, or any alleged duty of commercial reasonableness, or any quasi-duty, or any implied duty, in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers or Credit Parties or Guarantors; or (j) any of the Lender Released Parties committed any unlawful, unfair or fraudulent business act or practice in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (k) any of the Lender Released Parties engaged in any unfair, deceptive, untrue or misleading advertising in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (l) any of the Lender Released Parties committed any act prohibited by California Business and Professions Code Section 17500 or its 18 State of Nevada counterpart in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (m) any of the Lender Released Parties engaged in predatory lending practices in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (n) any of the Lender Released Parties engaged in or committed any act or omission which constitutes fraud, duress, negligence, conversion, defamation or infliction of emotional distress in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (o) any of the Lender Released Parties interfered with IHHI's prospective business advantage in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (p) any of the Lender Released Parties interfered with IHHI's contractual relations in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (q) any of the Lender Released Parties acted or failed to act in a manner which directly or indirectly caused or contributed to the business decline, lost profits or other detrimental effects with respect to any of the Borrowers, or Credit Parties or Guarantors; or (r) any of the Lender Released Parties acted or failed to act in a manner which directly or indirectly caused or contributed to any of the Borrowers continuing in business while insolvent or otherwise delaying any filing of bankruptcy or similar proceedings; or (s) any of the Lender Released Parties utilized or made threats, coercion, undue influence or other methods of causing the Releasing Parties to voluntarily or involuntarily agree to the releases, waivers, covenants not to sue and indemnities set forth in this Agreement or in any of the Previous Loan Documents; or (t) any of the Lender Released Parties was party to or acted or failed to act in a manner which directly or indirectly gave rise to a principal-agent relationship with any of the Releasing Parties; or (u) that Lender's requirement, based on its past experience in connection with the Previous Loans, that Dr. Shah resign from IHHI's board of directors as a condition of making the Loans, improperly interfered with, or improperly exercised control, or exercised excessive control, over IHHI; or (v) that Lender's requirement, based on its past experience in connection with the Previous Loans, that until the Loans are paid in full and satisfied, Borrowers not, directly or indirectly, permit Dr. Shah to be nominated, or elected, or appointed, or directly or indirectly compensated, paid, engaged, retained or become, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, any of the Borrowers, improperly interfered with, or improperly exercised control, or exercised excessive control, over said Borrowers. The foregoing releases and waivers are permanent and shall survive the expiration or termination of this Agreement and the other Loan Documents. "LENDER RELEASED PARTIES" and individually a "LENDER RELEASED PARTY" means and includes Lender, Medical Provider Financial Corporation I, a Nevada corporation, Medical Provider Financial Corporation III, a Nevada corporation, Medical Capital Corporation, a Nevada corporation, and all of their related and affiliated companies and entities, and their respective predecessors, successors and assigns, and their respective officers, directors, shareholders, partners, trustees, employees, agents, attorneys, representatives and assigns. 19 "LENDER'S COSTS" means all fees and expenses of Lender in connection with the Loans and all Loan Documents including, but not limited to, all attorneys' fees, costs and expenses paid or incurred by Lender in connection with any application or engagement letter, or Term Sheet, or any Loan Documents, the fees and disbursements of Lender's counsel, the travel expenses of Lender's personnel and legal counsel related to the Loans, note intangible taxes, if any, and all Closing, escrow, recording and filing fees, expenses and taxes. "LENDER'S REPRESENTATIVE" means Medical Provider Financial Corporation II, c/o Medical Capital Corporation, 2100 South State College Blvd., Anaheim, California 92806, Attn: Sidney Field, CEO, or Joseph J. Lampariello, President and COO, or Adam Field, Sr. Vice President Development, telephone: 714-935-3100, facsimile: 714-935-3114. "LICENSE" means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by Borrowers. "LIEN(S)" means any agreement or deed of trust, mortgage, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "LITIGATION" means any action, claim, lawsuit, demand, investigation or proceeding now pending or, to the knowledge of Borrowers or Credit Parties or Guarantors, threatened against Borrowers or Credit Parties or Guarantors, whether before any Governmental Authority or before any arbitrator or panel of arbitrators, or otherwise. "LOAN ACCOUNT" means an account maintained by Lender in its books to record all Advances made by Lender to Borrowers, all payments made by Borrowers to Lender, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Lender's customary accounting practices as in effect from time to time. "LOAN DOCUMENTS" means, together, this Agreement, the Notes, the Guaranty Agreement, the Collateral Documents, the Environmental Indemnity Agreement, the Control Agreement, the Post-Closing Agreement, the Collateral Assignment of Contracts, and all other agreements, instruments, documents and certificates identified in the Closing and Funding Checklist executed and delivered to, or in favor of, Lender and including all other pledges, powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all other written matter whether heretofore, now or hereafter executed by or on behalf of Borrowers or Credit Parties or Guarantors, or any employee of Borrowers or Credit Parties or Guarantors, and delivered to Lender in connection with this Agreement or the transactions contemplated thereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all exhibits and schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative. 20 "LOANS" means, together, the following, and "LOAN" means any one of the following: (a) The $45,000,000 Real Estate Term Loan. (b) The $35,000,000 Non-Revolving Line of Credit Loan. "LOCK BOXES" has the meaning ascribed to it in Annex B (Cash Management System). "MATERIAL ADVERSE EFFECT" means any circumstance or event, as determined by Lender in the exercise of its reasonable discretion, which (a) has or may reasonably be expected to have any material adverse effect whatsoever upon the validity, performance, perfection or enforceability of the Loan Documents, (b) is, or is reasonably expected to be, material and adverse to the financial condition of the business operations of any Borrower, any Credit Party and/or any Guarantor, (c) is, or is reasonably expected to, materially impair the ability of any Borrower or any Credit Party or any Guarantor to fulfill their respective obligations under the Loan Documents, or (d) would with the passage of time or giving of notice, or both, result in or cause a Default or an Event of Default, or (e) materially impairs or is reasonably expected to materially impair any of the Collateral, or any of Lender's Liens on any of the Collateral, or the priority of such Liens, or (f) materially impairs or is reasonably expected to materially impair Lender's rights and remedies under this Agreement and the other Loan Documents. "MATURITY DATE" means the date which is the first to occur of (i) the Stated Maturity Date, and (ii) the occurrence or existence of a Default or an Event of Default under any of the Loan Documents with respect to which Lender has exercised its option to accelerate the Maturity Date pursuant to Section 8.2(a) hereof. "MAXIMUM AMOUNT" means, as of any date of determination, an amount equal to the Commitment as of that date. "MAXIMUM LAWFUL RATE" means the interest rate that a court of competent jurisdiction determines in a final unappealable order to be the highest rate of interest permissible under applicable law. "MEMBERSHIP CERTIFICATES" means all certificates evidencing the ownership of membership interests in a limited liability company. "MEMBERSHIP POWER" means the Irrevocable Membership Power of even date herewith, executed by West Coast and Ganesha in favor of Lender, in the form if Exhibit "R" attached hereto "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA, and to which any Borrower is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "NOTES" means, together, the following: (a) The $45,000,000 Real Estate Term Note; and (b) The $35,000,000 Non-Revolving Line of Credit Note. 21 "NOTICE OF REQUEST FOR ADVANCE" means a notice delivered to Lender by Borrower's Representative requesting an Advance, in the form of Exhibit "D" attached hereto. "OBLIGATIONS" means, collectively, the Loans, all Advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by Borrowers or Credit Parties or Guarantors to Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement, letter of credit agreement or other instrument, arising under this Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against Borrowers or Credit Parties or Guarantors in bankruptcy, whether or not allowed in such case or proceeding), fees, expenses, attorneys' fees and any other sum chargeable to Borrowers or Credit Parties or Guarantors under the Agreement or any of the other Loan Documents. "OC-PIN" means Orange County Physicians Investment Network, LLC, a Nevada limited liability company. "ORIGINATION FEES" means the sum of each of the following: (a) With respect to the $45,000,000 Real Estate Term Loan, an origination fee in the amount of SIX HUNDRED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS ($675,000.00) (1.5% of $45,000,000); plus (b) With respect to the $35,000,000 Non-Revolving Line of Credit Loan, an origination fee in the amount of FIVE HUNDRED TWENTY FIVE THOUSAND AND NO/100 DOLLARS ($525,000.00) (1.5% of $35,000,000). "PATENT LICENSE" means rights under any written agreement now owned or hereafter acquired by Borrowers granting any right with respect to any invention on which a Patent is in existence. "PATENTS" means all of the following in which Borrowers now hold or hereafter acquire any interest: (a) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof. "PBGC" means the Pension Benefit Guaranty Corporation. "PCHI" means Pacific Coast Holdings Investment, LLC, a California limited liability company. "PENSION PLAN" means a Plan described in Section 3(2) of ERISA. 22 "PERMITTED ENCUMBRANCES" means, for each Property, the following encumbrances relating thereto: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are being contested in accordance with Section 5.2(b) (Right to Contest Charges); (b) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) zoning restrictions, easements, licenses, or other restrictions on the use of any real estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not create a Material Adverse Effect, as determined by Lender in its sole discretion; (d) currently existing or hereafter created Liens in favor of Lender or its Affiliates; (e) any Lien held by an equipment lessor in the equipment so leased; (f) all encumbrances shown in any Title Policy issued on the Closing Date to Lender; (g) inchoate and unperfected workers' compensation, mechanics' or similar liens arising in the ordinary course of business, provided, that the same are satisfied in the ordinary course of business; (h) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business; (i) such other liens arising in the ordinary course of business so long as such liens do not create a Material Adverse Effect; and (j)) such endorsements to said Title Policies as Lender deems necessary or appropriate, in its sole discretion. "PERSON" means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, unincorporated organization, trust, business trust, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). "PLAN" means, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, that Borrowers or any ERISA Affiliate maintain, contribute to or have an obligation to contribute to or have maintained, contributed to or had an obligation to contribute to at any time within the past seven (7) years on behalf of participants who are or were employed by Borrowers or ERISA Affiliate. "PLAN REGARDING ENGAGEMENT OF INDEPENDENT DIRECTORS" means a written statement outlining IHHI's plan as to how it intends to identify, engage, nominate and elect Independent Directors to IHHI's board of directors within the time periods required by this Agreement. "PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith, by and between IHHI, West Coast, Ganesha and Lender, in the form of Exhibit "P" attached hereto. "PLEDGED ENTITY" means a Person whose Stock or Membership Interests are pledged pursuant to the Pledge Agreement. "PREVIOUS ACCOUNTS RECEIVABLE PURCHASE AGREEMENT" means that certain Accounts Purchase Agreement dated as of March 3, 2005, by and between Medical Provider Financial Corporation I (as Buyer) and Borrowers (as Sellers). "PREVIOUS $50,000,000 ACQUISITION LOAN" means the $50,000,000 acquisition loan made by Lender to Borrowers pursuant to the First Credit Agreement. 23 "PREVIOUS $50,000,000 ACQUISITION NOTE" means the $50,000,000 acquisition note executed by Borrowers in favor of Lender pursuant to the First Credit Agreement. "PREVIOUS $30,000,000 LINE OF CREDIT LOAN" means the $30,000,000 line of credit loan made by Lender to Borrowers pursuant to the First Credit Agreement. "PREVIOUS $30,000,000 LINE OF CREDIT NOTE" means the $30,000,000 line of credit note executed by Borrowers in favor of Lender pursuant to the First Credit Agreement. "PREVIOUS $10,700,000 TERM LOAN" means the $10,700,000 term loan made by MPFC III to Borrowers pursuant to the Second Credit Agreement. "PREVIOUS $10,700,000 TERM NOTE" means the $10,700,000 term note executed by Borrowers in favor of MPFC III pursuant to the Second Credit Agreement. "PREVIOUS LOANS" means, collectively, the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan and the Previous $10,700,000 Term Loan. "PREVIOUS LOAN DOCUMENTS" means and includes, collectively, (a) the Previous $50,000,000 Acquisition Loan, the Previous $50,000,000 Acquisition Note, and all other loan and security documents executed in connection therewith, (b) the Previous $30,000,000 Line of Credit Loan, the Previous $30,000,000 Line of Credit Note, and all loan and security documents executed in connection therewith, (c) the Previous $10,700,000 Term Loan, the Previous $10,700,000 Term Note, and all other loan and security documents executed in connection therewith, (d) the Forbearance Agreement dated June 1, 2005, and (e) the Forbearance Agreement (as amended) dated June 18, 2007. "PREVIOUS UCC-1 FINANCING STATEMENTS (FIXTURE FILINGS)" means the UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous $10,700,000 Term Loan and the Previous Accounts Receivable Purchase Agreement. "PROCEEDS" means proceeds, as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrowers from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to Borrowers from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of Borrowers against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by Borrowers against third parties with respect to any litigation or dispute concerning any of the Collateral including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral. 24 "PROJECTIONS" means, for Borrowers, its forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a cash basis, if applicable, and otherwise consistent with the historical Financial Statements of Borrowers with certain normalizing assumptions made by Borrowers, together with appropriate supporting details and a statement of underlying assumptions. "PROPERTY" means any of the Hospital Facilities, and "PROPERTIES" means each of the Hospital Facilities taken together. "QUALIFIED ASSIGNEE" means (a) any Lender, any Affiliate of Lender and, with respect to a Lender that is an investment fund that invests in commercial loans, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor or by an Affiliate of such investment advisor of such Lender and which is not a competitor or an Affiliate of a competitor of Borrowers, and (b) any commercial bank, savings and loan association or savings bank or any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody's at the date that it becomes a Lender and which, through its applicable lending office, is capable of lending to Borrowers without the imposition of any withholding or similar taxes; provided that no Person proposed to become a Lender after the Closing Date and determined by Lender to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Assignee, and no Person or Affiliate of such Person proposed to become a Lender after the Closing Date that holds Subordinated Debt or Stock issued by Borrowers shall be a Qualified Assignee. "QUALIFIED CASH" means, as of any date of determination, the amount of Certified Cash that is subject to perfection in favor of Lender pursuant to any Control Agreement in form and substance satisfactory to Lender, which Control Agreement shall provide, among other things, that the bank or securities intermediary executing such agreement (a) has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and, as applicable, for returned checks or other items of payment, and (b) agrees to follow the instructions or entitlement orders of Lender without further consent by Borrowers, including, with respect to funds in any such account, upon the instructions of Lender, to immediately forward by daily sweep all such funds to the Collection Account or as otherwise directed by Lender. "QUALIFIED CASH ACCOUNT" means any deposit account or securities account that is subject to a Control Agreement in form and substance satisfactory to Lender and holds Qualified Cash. "QUALIFIED PLAN" means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC. 25 "RECITALS" means the Recitals set forth on the first page of this Agreement. "RELATED TRANSACTIONS" means the borrowing of the Loans on the Closing Date, the payment of all fees, costs and expenses associated with all of the foregoing and the execution and delivery of all of the Related Transactions Documents. "RELATED TRANSACTIONS DOCUMENTS" means the Loan Documents and all other agreements or instruments executed in connection with the Related Transactions. "RELEASE" means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property. "RELEASING PARTIES" and individually, a "RELEASING PARTY" means each Borrower, each Credit Party, each Guarantor, and each of their respective predecessors, successors and assigns, and each of their respective officers, directors, shareholders, members, managers, partners (general and limited), employees, agents, representatives, attorneys and assigns. "RESTRICTED PAYMENT" means (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock; (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of Stock or any other payment or distribution made in respect thereof, either directly or indirectly; (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; and (f) any payment of management fees (or other fees of a similar nature). "RETIREE WELFARE PLAN" means, at any time, a welfare plan (within the meaning of Section 3(1) of ERISA) that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC or other similar state law and at the sole expense of the participant or the beneficiary of the participant. "SECOND CREDIT AGREEMENT" means that certain Credit Agreement by and between the MPFC III, the Credit Parties and the Borrowers dated to be effective as of December 12, 2005. Pursuant to the Second Credit Agreement, MPFC III made the Previous $10,700,000 Term Loan to Borrowers. "SECURITY AGREEMENT" means the Security Agreement of even date herewith, by and between Borrowers and Lender, in the form if Exhibit "G" attached hereto. 26 "SHAREHOLDER" means, with respect to any Person, each holder of Stock of such Person. "SHAREHOLDER BLOCKING RIGHTS" shall mean any rights of any owner (direct or indirect) of any Pledged Entity which, pursuant to the terms of any agreement or organizational document, has the right to consent, or the effect of requiring such consent, to any foreclosure by Lender under any Security Agreement or Pledge Agreement or otherwise to the exercise of any of Lender's rights and remedies thereunder or otherwise has the right to restrain, delay, impair or otherwise interfere with Lender in the event of Lender's exercise of its rights under any Security Agreement or Pledge Agreement. "SOFTWARE" means all software as such term is defined in the Code, now owned or hereafter acquired by Borrowers, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program. "SOLVENT" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; and (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature. The amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability. "STATED MATURITY DATE" means October 8, 2010. "STOCK" means all shares, options, warrants, general or limited partnership interests, Membership Interests or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including stock, preferred stock or any other equity security (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). "STOCK CERTIFICATES" means all certificates evidencing the ownership of Stock in a Person. "STOCK POWER" means the Irrevocable Stock Power of even date herewith, executed by IHHI in favor of Lender, in the form if Exhibit "Q" attached hereto. "SUBORDINATED DEBT" means any unsecured Indebtedness of Borrowers incurred after the Closing Date that is subordinated to the Obligations in a manner and form reasonably satisfactory to Lender, as to right and time of payment and as to any other rights and remedies thereunder. "SUBSIDIARY" means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of 27 such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have a Membership Interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or manager or may exercise the powers of a general partner. "SUPPORTING OBLIGATIONS" means all supporting obligations as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property. "TAXES" means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender. "TERM SHEET" means that certain letter agreement entitled Expression of Interest in Providing Credit Facilities dated August 29, 2007, executed by Lender and IHHI. "TERMINATION DATE" means the date on which (a) all of the Loans have been repaid in full, (b) all other Obligations due and payable under this Agreement and the other Loan Documents have been discharged, and (c) Borrowers shall have no further right to borrow any monies under this Agreement. "TITLE COMMITMENT(S)" means, with respect to each Property, an irrevocable commitment issued by the Title Company to Lender in form and content acceptable to Lender, committing to issue the Title Policy with respect to each such Property to Lender on the Closing Date. "TITLE COMPANY" means Chicago Title Insurance Company, 700 South Flower Street, Suite 800, Los Angeles, California 90017, Attn: Jeffrey L. Hurd ("SR. TITLE OFFICER"), telephone: 213-488-4365; facsimile: 213-243-9168; email: jeff.hurd@ctt.com; and Chicago Title Insurance Company, Division Counsel, 700 South Flower Street, Suite 3305, Los Angeles, California 90017, Attn: Scott M. Green, Associate Counsel ("TITLE ATTORNEY"), telephone: 213-488-4342; facsimile: 213-891-0834; email: greens@ctt.com. "TITLE POLICY" means an ALTA Loan Policy of Title Insurance issued by Title Company to Lender on the Closing Date, with a stated liability in the amount of $80,000,000, insuring that (a) the fee simple interest in the Western Medical Center - Anaheim is vested in PCHI and that the Deed of Trust constitutes a first Lien and encumbrance against the fee simple interest in such Property, subject only to the applicable Permitted Exceptions and with such endorsements as Lender may require in its sole and absolute discretion; (b) the fee simple interest in the Western Medical Center - Santa Ana is vested in PCHI and that the Deed of Trust constitutes a first Lien and encumbrance against the fee simple interest in such Property subject only to the applicable Permitted Exceptions and with such endorsements as Lender may require in its sole and absolute discretion; (c) the fee simple interest in the Coastal Community 28 Hospital is vested in PCHI and that the Deed of Trust constitutes a first Lien and encumbrance against the fee simple interest in such Property subject only to the applicable Permitted Exceptions and with such endorsements as Lender may require in its sole and absolute discretion; (d) the tenant's interest in the Chapman MOB Lease is vested in IHHI and that the Deed of Trust constitutes a first Lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease, subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion; and (e) the tenant's interest in the Chapman Hospital Lease is vested in IHHI and that the Deed of Trust constitutes a first Lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease, subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion. "TITLE IV PLAN" means a Pension Plan (other than a Multiemployer Plan), that is subject to Title IV of ERISA or Section 412 of the IRC, and that Borrowers or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "TRADEMARK LICENSE" means rights under any written agreement now owned or hereafter acquired by Borrowers granting any right to use any Trademark. "TRADEMARKS" means all of the following now owned or hereafter existing or adopted or acquired by Borrowers: (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. "TRIPLE NET LEASE" means that certain Triple Net Lease dated as of March 3, 2005 (as amended by that certain Amendment #1 to Triple Net Lease dated as of March 3, 2005) by and between PCHI, as lessor, and IHHI, as lessee, pursuant to which PCHI leased the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Community Hospital, to IHHI. "UCC FINANCING STATEMENTS" means all UCC-1 Financing Statements (fixture filings and personal property) required by Lender to be filed or recorded pursuant to this Agreement to secure repayment of the Loans and performance of the Obligations. "UNFUNDED PENSION LIABILITY" means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by Borrowers or any ERISA Affiliate as a result of such transaction. 29 "UNUSED COMMITMENT FEE" means, with respect to the $35,000,000 Non-Revolving Line of Credit Loan, that amount which is equal to 0.50% per annum of the average daily difference between $35,000,000 minus the sum of the outstanding principal amount of all Advances under the $35,000,000 Non-Revolving Line of Credit Loan for the period for which the Unused Commitment Fee is being paid. "WARRANT" means the Common Stock Warrant issued by IHHI to Healthcare Financial Management & Acquisitions, Inc., a Nevada corporation (an Affiliate of Lender) in the form of Exhibit "U" attached hereto. "WEST COAST" means West Coast Holdings, LLC, a California limited liability company. "WESTERN MEDICAL CENTER - ANAHEIM" means the real property and hospital improvements located at 1025 South Anaheim Boulevard, Anaheim, California. "WESTERN MEDICAL CENTER-SANTA ANA" means the real property and hospital improvements located at 1001 North Tustin Avenue and at 1301 North Tustin in Santa Ana, California. "WMC-A" means WMC-A, INC., a California corporation. "WMC-SA" means WMC-SA, INC., a California corporation. Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein; in the event that any term is defined differently in different Articles or Divisions of the Code, the definition contained in Article or Division 9 shall control. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular Section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; the word "or" is not exclusive; references to Persons include their respective 30 successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of Borrowers or Credit Parties, such words are intended to signify that such Borrowers or such Credit Parties has actual knowledge or awareness of a particular fact or circumstance. 31 EXECUTION ANNEX B TO CREDIT AGREEMENT ($80 MILLION FACILITY) --------------------------------------- CASH MANAGEMENT SYSTEM Borrowers agree to establish, and to maintain, until the Termination Date, the Cash Management System described below: 1. Borrowers: (i) shall not (nor shall it permit any of its Subsidiaries to) open or maintain any deposit, checking, operating or other bank account, or similar money handling account, with any bank or other financial institution except for those accounts identified in Attachment I hereto (to include a petty cash account not to exceed $10,000.00 during any fiscal month, and a payroll account not to exceed an amount equal to one regular payroll at any time, plus all other payroll obligations outstanding); and (ii) shall close or permit to be closed any of the accounts listed in Attachment I hereto, in each case without Lender's prior written consent, and then only after Borrowers have implemented agreements with such bank or financial institution acceptable to Lender. 2. Commencing on the Closing Date and until the Termination Date, Borrowers shall fully comply with the terms, conditions and procedures set forth in the Deposit Account Security Agreement and the Control Agreement. 3. Borrowers may maintain, in their name, Disbursement Accounts at a bank or banks acceptable to Lender into which Lender shall, from time to time, deposit proceeds of Advances made pursuant to this Agreement for use solely in accordance with the provisions of this Agreement. All of the Disbursement Accounts as of the Closing Date are listed in paragraph 2 of Attachment I hereto. 1 ATTACHMENT I TO CASH MANAGEMENT SYSTEM SCHEDULE LIST OF BANK ACCOUNTS 2 ANNEX C TO CREDIT AGREEMENT ($80 MILLION FACILITY) --------------------------------------- COLLATERAL REPORTS Collateral Reports means and includes any and all reports from time to time delivered by Borrowers to Lender at the request of Lender during the term hereof (as the same may be extended). Collateral Reports may include, but are not limited to, the following: 1. Cash Reports. A report delivered by Borrowers at the request of Lender stating, among other things: (a) the net amount of Dollars in unrestricted cash and cash equivalents that Borrowers have in their Deposit Accounts; and (b) the net amount of Dollars in unrestricted cash and cash equivalents that Borrowers have in their securities accounts. 2. Report on Cash Subject to Security Agreements. A report delivered by Borrowers at the request of Lender stating, among other things the amount of their cash that is subject to perfection in favor of Lender pursuant to any security agreements or other security instruments. 3. Updated Financial Statements and Projections. Updated financial statements and projections delivered by Borrowers at the request of Lender. 4. Updated Disclosure Schedules. Updated Disclosure Schedules delivered by Borrowers at the request of Lender. 5. Further Assurances. As required by Section 5.10 (Further Assurances) of this Agreement, such further instruments and assurances as may be necessary or proper in the reasonable opinion of Lender to carry out the purposes of the Loan Documents. 1 ANNEX D TO CREDIT AGREEMENT ($80 MILLION FACILITY) --------------------------------------- NOTICE ADDRESSES BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 WMC-A, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 WMC-SA, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 1 COASTAL COMMUNITIES HOSPITAL, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 CHAPMAN MEDICAL CENTER, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENTS, LLC 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Attn: Dr. Shah, Co-Manager Ph: 714-290-5322 Fax: 714-297-9588 and PACIFIC COAST HOLDINGS INVESTMENTS, LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 2 GANESHA REALTY LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 WEST COAST HOLDINGS, LLC 2621 South Bristol, Suite 304 Santa Ana, California 92704 Attn: Dr. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC 2621 South Bristol, Suite 304 Santa Ana, California 92704 Attn: Dr. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION II 2100 South State College Blvd. Anaheim, California 92806 Attn: Sidney Field, CEO, or Joseph J. Lampariello, President and COO, or Adam Field, Sr. Vice President Development Telephone: 714-935-3100 Facsimile: 714-935-3114 3 EX-99.2 3 ihh_8kex99-2.txt $45,000,000 TERM NOTE EXECUTION EXHIBIT 99.2 ------------ $45,000,000 TERM NOTE --------------------- ($80 MILLION CREDIT AGREEMENT) $45,000,000.00 October 9, 2007 Las Vegas, Nevada FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby acknowledged, INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL") (IHHI, WMC-SA, WMC-A, Chapman and Coastal are hereinafter together referred to as the "BORROWERS"), hereby jointly and severally promise to pay to the order of MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation ("LENDER"), the principal amount of FORTY FIVE MILLION AND NO/100 DOLLARS ($45,000,000.00) ("$45,000,000 TERM LOAN") or such lesser amount as may be loaned by Lender from time to time and be outstanding, together with interest on the unpaid balance of such amount from the date of the initial advance until paid. This "$45,000,000 TERM NOTE" is the $45,000,000 Term Note issued under the Credit Agreement ($80,000,000 Facility) by and among Borrowers, the Credit Parties named therein, and Lender of even date herewith (said agreement, as the same may be amended, restated or supplemented from time to time, being herein called the "CREDIT AGREEMENT") to which a reference is made for a statement of all of the terms and conditions of the $45,000,000 Term Loan evidenced hereby, which such terms and conditions are hereby incorporated by reference. Initially capitalized terms not defined in this $45,000,000 Term Note shall have the respective meanings assigned to them in the Credit Agreement. This $45,000,000 Term Note is secured by, among other things, the Collateral Documents referenced in the Credit Agreement, the other Loan Documents referenced therein, and is entitled to the benefit of the rights, remedies and security provided thereby. Interest on the outstanding principal balance under this $45,000,000 Term Note is payable at the Interest Rate provided in the Credit Agreement, or, under the circumstances provided for in the Credit Agreement, at the Default Rate, in immediately available United States Dollars at the times and in the manner specified in the Credit Agreement. Each Borrower acknowledges that (a) Lender is authorized under the Credit Agreement to charge the $45,000,000 Term Loan with the amount of any unpaid Obligations of Borrowers to Lender, (b) the principal amount of the $45,000,000 Term Note will be increased by such amounts, and (c) the principal, as so increased, will bear interest as provided for herein and in the Credit Agreement. Payments received by Lender shall be applied against principal and interest as provided for in the Credit Agreement. To the fullest extent permitted by applicable law, Borrowers waive, except to the extent specifically required by the Credit Agreement or other Loan Documents: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all of 1 the Obligations, the Loan Documents or this $45,000,000 Term Note; (ii) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevin, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption laws. Borrowers each acknowledge that this $45,000,000 Term Note is executed as part of a commercial transaction and that the proceeds of this $45,000,000 Term Note will not be used for any personal or consumer purpose. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this $45,000,000 Term Note shall become, or may be declared to be, immediately due and payable, to the extent provided for in the Credit Agreement. This $45,000,000 Term Note shall not be deemed to have been delivered until it is received by Lender in Las Vegas, Nevada. EACH BORROWER ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ON THIS $45,000,000 TERM NOTE. THIS $45,000,000 TERM NOTE IS GOVERNED BY THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President [SIGNATURES CONTINUED ON NEXT PAGE] 2 BORROWERS (continued): CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President 3 EX-99.3 4 ihh_8kex99-3.txt $35,000,000 NON REVOLVING LINE OF CREDIT NOTE EXECUTION EXHIBIT 99.3 ------------ $35,000,000 NON-REVOLVING LINE OF CREDIT NOTE --------------------------------------------- ($80 MILLION CREDIT AGREEMENT) $35,000,000.00 October 9, 2007 Las Vegas, Nevada FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby acknowledged, INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL") (IHHI, WMC-SA, WMC-A, Chapman and Coastal are hereinafter together referred to as the "BORROWERS"), hereby jointly and severally promise to pay to the order of MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation ("LENDER"), the principal amount of THIRTY FIVE MILLION AND NO/100 DOLLARS ($35,000,000.00) ("$35,000,000 NON-REVOLVING LINE OF CREDIT LOAN") or such lesser amount as may be loaned by Lender from time to time and be outstanding, together with interest on the unpaid balance of such amount from the date of the initial advance until paid. This "$35,000,000 NON-REVOLVING LINE OF CREDIT NOTE" is the $35,000,000 Non-Revolving Line of Credit Note issued under the Credit Agreement ($80,000,000 Facility) by and among Borrowers, the Credit Parties named therein, and Lender of even date herewith (said agreement, as the same may be amended, restated or supplemented from time to time, being herein called the "CREDIT AGREEMENT") to which a reference is made for a statement of all of the terms and conditions of the $35,000,000 Non-Revolving Line of Credit Loan evidenced hereby, which such terms and conditions are hereby incorporated by reference. Initially capitalized terms not defined in this $35,000,000 Non-Revolving Line of Credit Note shall have the respective meanings assigned to them in the Credit Agreement. This $35,000,000 Non-Revolving Line of Credit Note is secured by, among other things, the Collateral Documents referenced in the Credit Agreement, the other Loan Documents referenced therein, and is entitled to the benefit of the rights, remedies and security provided thereby. Interest on the outstanding principal balance under this $35,000,000 Non-Revolving Line of Credit Note is payable at the Interest Rate provided in the Credit Agreement, or, under the circumstances provided for in the Credit Agreement, at the Default Rate, in immediately available United States Dollars at the times and in the manner specified in the Credit Agreement. Each Borrower acknowledges that (a) Lender is authorized under the Credit Agreement to charge the $35,000,000 Non-Revolving Line of Credit Loan with the amount of any unpaid Obligations of Borrowers to Lender, (b) the principal amount of the $35,000,000 Non-Revolving Line of Credit Note will be increased by such amounts, and (c) the principal, as so increased, will bear interest as provided for herein and in the Credit Agreement. Payments received by Lender shall be applied against principal and interest as provided for in the Credit Agreement. To the fullest extent permitted by applicable law, Borrowers waive, except to the extent specifically required by the Credit Agreement or other Loan Documents: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, 1 maturity, release, compromise, settlement, extension or renewal of any or all of the Obligations, the Loan Documents or this $35,000,000 Non-Revolving Line of Credit Note; (ii) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevin, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption laws. Borrowers each acknowledge that this $35,000,000 Non-Revolving Line of Credit Note is executed as part of a commercial transaction and that the proceeds of this $35,000,000 Non-Revolving Line of Credit Note will not be used for any personal or consumer purpose. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this $35,000,000 Non-Revolving Line of Credit Note shall become, or may be declared to be, immediately due and payable, to the extent provided for in the Credit Agreement. This $35,000,000 Non-Revolving Line of Credit Note shall not be deemed to have been delivered until it is received by Lender in Las Vegas, Nevada. EACH BORROWER ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ON THIS $35,000,000 NON-REVOLVING LINE OF CREDIT NOTE. THIS $35,000,000 NON-REVOLVING LINE OF CREDIT NOTE IS GOVERNED BY THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson ----------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson ----------------------------------- Larry B. Anderson, President [SIGNATURES CONTINUED ON NEXT PAGE] 2 BORROWERS (continued): WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson ----------------------------------- Larry B. Anderson, President CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson ----------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson ----------------------------------- Larry B. Anderson, President 3 EX-99.4 5 ihhi_8kex99-4.txt $50,000,000 REVOLVING CREDIT AGREEMENT Exhibit 99.4 - ------------ REVOLVING CREDIT AGREEMENT ($50 MILLION FACILITY) Effective Date: October 9, 2007 by and among INTEGRATED HEALTHCARE HOLDINGS, INC., WMC-A, INC., WMC-SA, INC., CHAPMAN MEDICAL CENTER, INC., and COASTAL COMMUNITIES HOSPITAL, INC., as Borrowers, THE OTHER CREDIT PARTIES SIGNATORY HERETO, as Credit Parties, and MEDICAL PROVIDER FINANCIAL CORPORATION I, as Lender INDEX OF ANNEXES, EXHIBITS AND DISCLOSURE SCHEDULES ANNEXES - ------- Annex A Financial Covenants Annex B Definitions Annex C Cash Management System Annex D Collateral Reports Annex E Notice Addresses EXHIBITS - -------- Exhibit "A" Form of $50,000,000 Revolving Line of Credit Note Exhibit "B" Form of Notice of Request for Advance Exhibit "C" Form of Deed of Trust Exhibit "D" Form of Absolute Assignment Exhibit "E" Form of Collateral Assignment of Contracts Exhibit "F" Form of Deposit Account Security Agreement Exhibit "G" Form of Control Agreement Exhibit "H" Form of Post-Closing Agreement Exhibit "I" Form of Intellectual Property Security Agreement Exhibit "J" Form of Environmental Indemnity Agreement Exhibit "K" Form of Guaranty Agreement Exhibit "L" Form of Intercreditor Agreement Exhibit "M" Form of Pledge Agreement Exhibit `N" Form of Stock Power Exhibit "O" Form of Membership Power Exhibit "P" Form of Landlord's Consent and Estoppel Certificate (Chapman Leases) Exhibit "Q" Form of Landlord's Consent and Estoppel Certificate (Triple Net Lease) Exhibit "R" Form of Security Agreement 1 DISCLOSURE SCHEDULES - -------------------- Disclosure Schedule 2.4: Disbursement Instructions Disclosure Schedule 4.1(b): Approvals Disclosure Schedule 4.1(c): Capital Structure Disclosure Schedule 5.1(b): Executive Offices; Collateral Locations; FEIN Disclosure Schedule 5.4: Ownership of Collateral; Liens Disclosure Schedule 5.5: Labor Matters Disclosure Schedule 5.6: Ventures, Subsidiaries and Affiliates; Outstanding Stock Disclosure Schedule 5.9: Taxes Disclosure Schedule 5.10: ERISA Disclosure Schedule 5.11: Litigation Disclosure Schedule 5.12: Brokers Disclosure Schedule 5.13: Intellectual Property Disclosure Schedule 5.15: Environmental Matters Disclosure Schedule 5.16: Insurance Disclosure Schedule 5.17: Deposit and Disbursement Accounts Disclosure Schedule 5.19: Bonding, Licenses and Permits Disclosure Schedule 5.21: Other Agreements Disclosure Schedule 7.3: Indebtedness 2 REVOLVING CREDIT AGREEMENT -------------------------- ($50 MILLION FACILITY) THIS REVOLVING CREDIT AGREEMENT (this "AGREEMENT"), dated to be effective as of October 9, 2007 ("EFFECTIVE DATE"), is entered into by among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-A, INC., a California corporation ("WMC-A"), WMC-SA, INC., a California corporation ("WMC-SA"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL") (IHHI, WMC-A, WMC-SA, Chapman and Coastal are hereinafter together referred to as "BORROWERS" and individually as a "BORROWER"); PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("PCHI"); WEST COAST HOLDINGS, LLC, a California limited liability company ("WEST COAST"); GANESHA REALTY, LLC, a California limited liability company ("GANESHA"); ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN") (PCHI, West Coast, Ganesha and OC-PIN are hereinafter referred to as the "CREDIT PARTIES" and individually as a "CREDIT PARTY"; and West Coast, Ganesha and OC-PIN are hereinafter together referred to as the "GUARANTORS" and individually as a "GUARANTOR"); and MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation ("LENDER"). RECITALS -------- A. PCHI owns the fee simple title in the Western Medical Center - Anaheim, in the Western Medical Center - Santa Ana, and in the Coastal Communities Hospital (including the medical office buildings located thereon). PCHI leases the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Communities Hospital (including the medical office buildings located thereon) to IHHI pursuant to the Triple Net Lease. IHHI subleased the Western Medical Center - Anaheim to SMC-A; IHHI subleased the Western Medical Center - Santa Ana to WMC-SA; and IHHI subleased the Coastal Communities Hospital (including the medical office buildings located thereon) to Coastal. IHHI owns all (100%) of the Stock of WMC-A, WMC-SA and Coastal. B. IHHI leases the Hospital Facility and the related medical office buildings located at the Chapman Medical Center from the Hospital Landlord and from the MOB Landlord pursuant to the Chapman Leases. IHHI subleased the Hospital Facility and the related medical office buildings to Chapman. IHHI owns all (100%) of the Stock of Chapman. C. PCHI, OC-PIN and West Coast are Shareholders of IHHI. West Coast and Ganesha own all (100%) of the Membership Interests in PCHI. D. IHHI, WMC-A, WMC-SA, Coastal and Chapman are in the business of delivering acute care services to the public through the Hospital Facilities; incident thereto, IHHI, WMC-A, WMC-SA, Coastal and Chapman are in the business of owning, operating and/or leasing medical office buildings and other healthcare businesses related thereto. 3 E. Borrowers and Lender are parties to the Previous Accounts Receivable Purchase Agreement, pursuant to which Lender (as Buyer) purchased the Accounts of the Borrowers (as Sellers). Pursuant to this Agreement, Borrowers and the Credit Parties have requested that Lender terminate the Previous Accounts Receivable Purchase Agreement and replace the same with the Revolving Facility. >From the proceeds of the Initial Advance hereunder, Borrower shall pay to Lender the Previous Amount Owed. Pursuant to the Revolving Facility, in consideration for acquiring Borrower's Accounts, Lender would make loan proceeds available to Borrowers in an amount not to exceed the Facility Cap; and Borrowers would also use the loan proceeds to provide healthcare Services and other activities and business reasonably related, ancillary or complimentary thereto, for general corporate purposes, payment of fees and expenses, for working capital and for payments to Lender hereunder. F. It is intended by Borrowers that the administration and financial affairs relating to the Loan shall be administered for the benefit of all Borrowers by Borrower's Representative. G. Lender is willing to terminate the Previous Accounts Purchase Agreement and make the Revolving Facility available to Borrowers upon the terms and subject to the conditions set forth herein. H. All Annexes, Disclosure Schedules, Exhibits and other attachments, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing Recitals which are hereby incorporated into this Agreement, in consideration of the covenants and conditions hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender, Borrowers, Credit Parties and Guarantors agree as follows: I. DEFINITIONS ----------- 1.1. GENERAL TERMS For purposes of this Agreement, in addition to the definitions above and elsewhere in this Agreement, the terms listed in Annex A (Financial Covenants) and Annex B (Definitions) attached hereto shall have the meanings given such terms in Annex A and Annex B, which are incorporated herein and made apart hereof. All initially capitalized terms used herein which are not specifically defined shall have meanings provided in Article 9 of the Code in effect on the date hereof to the extent the same are used or defined therein. Unless otherwise specified herein or in Annex A (Financial Covenants), any agreement or contract referred to herein or in Annex A Financial Covenants) shall mean such agreement as modified, amended or supplemented from time to time. Unless otherwise specified, as used in the Loan Documents or any certificate, report, instrument or other document made or delivered pursuant to any of the Loan Documents, all accounting terms not defined in Annex A (Financial Covenants) or elsewhere in this Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP. References herein to "Pacific time" shall mean Pacific Standard Time or Pacific Daylight Saving Time as in effect on any date of determination in the far western United States. 4 II. ADVANCES, PAYMENT AND INTEREST ------------------------------ 2.1. REVOLVING FACILITY (a) Subject to the provisions of this Agreement, on the Closing Date, Lender and Borrowers agree to and shall terminate and cancel the Previous Accounts Purchase Agreement; and Borrower shall from the proceeds of the Initial Advance pay to Lender the Previous Amount Owed. (b) Subject to the provisions of this Agreement, Lender shall thereafter make Advances to Borrowers under the Revolving Facility from time to time during the Term, provided that, notwithstanding any other provision of this Agreement, the aggregate amount of all Advances at any one time outstanding under the Revolving Facility shall not exceed either of (a) the Facility Cap, or (b) the Availability. The Revolving Facility is a revolving credit facility, which may be drawn, repaid and redrawn, from time to time as permitted under this Agreement. Any determination as to whether there is Availability for Advances shall be made by Lender in its sole discretion and is final and binding upon Borrowers. Unless otherwise permitted by Lender, each Advance shall be in an amount of at least $1,000. Subject to the provisions of this Agreement, Borrowers may request Advances under the Revolving Facility to the extent of any then existing Availability. Moreover, during any Separate Borrowing Base Period, the sum of Advances outstanding to any Borrower shall not exceed that Borrower's separate Availability, which shall be determined without regard to the Eligible Receivables of any other Borrower included in the Borrowing Base. Advances under the Revolving Facility automatically shall be made for the payment of interest on the Revolving Facility and other Obligations on the date when due to the extent available and as provided for herein. (c) Lender has established the ninety percent (90%) advance rate for Availability and, in its sole credit judgment, may further adjust the Availability and such advance rate by applying percentages (known as liquidity factors) and other Dilution Items to Eligible Billed Receivables. Such liquidity factors and the advance rate for Availability may be adjusted by Lender throughout the Term as warranted by Lender's underwriting practices and procedures in its Permitted Discretion. Lender shall have the right to establish from time to time, in its sole judgment, reserves (without duplication of other reserves) against the Borrowing Base, which reserves shall have the effect of reducing the amounts otherwise eligible to be disbursed to a Borrower under the Revolving Facility. (d) Upon and at any time after the occurrence of a Default or Event of Default, each Borrower agrees that Lender shall have the right to require that any or all of the following changes be made to the Revolving Facility during any Separate Borrowing Base Period: (i) establish a separate Borrowing Base and separate availability for each Borrower; (ii) require Advances to be made available on a Borrower-by-Borrower basis to each individual Borrower based on such Borrower's separate Availability under its own separate Borrowing Base, (iii) restrict loans and advances between Borrowers, (iv) establish separate lockbox and dominion accounts for each Borrower, (v) establish such other procedures as shall be deemed by Lender in its reasonable discretion to be useful in tracking where Advances (and the benefit thereof) are made under this Agreement and the source of payments received by Lender on such Advances and (vi) modify such other terms and provisions hereof (including definitions set 5 for herein) as Lender may deem necessary or appropriate to implement the foregoing consistently. Each Borrower agrees that Lender shall have the right, exercisable at any time, in its Permitted Discretion, to require that any Borrower's cash management system be modified to have all Advances be made solely to accounts of such Borrower (acceptable to Lender) and in such other manner as may be reasonably requested by Lender. 2.2. MATURITY DATE All amounts outstanding under the Revolving Facility and other Obligations shall be due and payable in full, if not earlier in accordance with this Agreement, on the Maturity Date. 2.3. INTEREST Interest on outstanding Advances under the Revolving Facility shall accrue at the Interest Rate. Interest shall be payable monthly in arrears on the first day of each calendar month during the Term. Interest shall be calculated on the basis of a 360-day year and for the actual number of calendar days elapsed in each interest calculation period. 2.4. DISBURSEMENTS; NOTICE OF REQUEST FOR ADVANCE (a) Disbursements; Notice of Request for Advance. So long as no Default or Event of Default shall have occurred and be continuing, Borrower's Representative may give Lender irrevocable written notice requesting an Advance under the Revolving Facility by delivering to Lender, not later than 11:00 a.m. (Las Vegas time) at least three (3) Business Days before the proposed Borrowing Date, a completed and executed Notice of Request for Advance and relevant supporting documentation satisfactory to Lender, which shall (i) specify the proposed Borrowing Date of such Advance, which shall be a Business Day, (ii) containing a copy of each Eligible Billed Receivable billed by Borrowers to an Account Debtor but not previously submitted to Lender, (iii) specify the amount of such requested Advance, (iv) certify the matters required in Section 4.2 (Further Conditions Precedent to Making Advances, etc.), and (v) specify the amount of any Medicare or Medicaid recoupments and/or recoupments of any third-party payor being sought, requested or claimed, or, to such Borrower's knowledge, threatened against Borrower or Borrower's Affiliates. Each time a request for an Advance is made, and, in any event and regardless of whether an Advance is being requested, on Tuesday of each week during the Term (and more frequently if Lender shall so request) until the Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending) are indefeasibly paid in cash in full and this Agreement is terminated, Borrower's Representative shall deliver to Lender a Notice of Request for Advance accompanied by a separate detailed aging and categorizing of each Borrower's Accounts and such other supporting documentation with respect to the figures and information in the Notice of Request for Advance as Lender shall reasonably request in its Permitted Discretion. On each Borrowing Date, each Borrower irrevocably authorizes Lender to disburse the proceeds of the requested Advance to the appropriate Borrower's account(s) as set forth on Disclosure Schedule 2.4, in all cases for credit to the appropriate Borrower (or to such other account as to which the appropriate Borrower shall instruct Lender) via federal funds wire transfer no later than 1:00 p.m. (Las Vegas time). 6 (b) Initial Advance. In its Notice of Request for the Initial Advance, Borrower's Representative shall include such amounts as are necessary or required to pay on the Closing Date (i) the Origination Fee, (ii) all Lender's Costs and any other amounts then due and payable by Borrowers to Lender, (iii) the Previous Amount Owed, and (iv) all additional amounts required by Borrowers, subject to the extent of any then existing Availability. The amounts included in the Initial Advance for the Origination Fee, Lender's Costs and other amounts owed to Lender, and the Previous Amount Owed, shall be charged against Borrower's accounts as an Advance but shall not be disbursed to Borrowers at Closing, instead said amounts shall be withheld by Lender and paid directly to Lender or to the Person to whom said amounts are owed. 2.5. COLLECTION; REPAYMENT; BORROWING AVAILABILITY; LOCKBOXES Each Borrower shall maintain one or more Lockbox Accounts with one or more Lockbox Banks reasonably acceptable to Lender, and shall execute with each Lockbox Bank one or more Lockbox Agreements reasonably acceptable to Lender, and such other agreements related thereto as Lender may require in its Permitted Discretion. Each Borrower shall ensure that all collections of their respective Accounts and all other cash payments received by any Borrower are paid and delivered directly from each Account Debtor and other Person into the appropriate Lockbox Account. The Lockbox Agreements shall provide that the Lockbox Banks will immediately transfer all funds paid into the Lockbox Accounts into the Concentration Account, except that each Lockbox Agreement shall also provide that all Accounts payable by Medicaid/Medicare Account Debtors shall be deposited into the Lockbox Account required by the applicable Lockbox Agreement. Notwithstanding and without limiting any other provision of any of the Loan Documents, Lender shall apply, on a daily basis, all funds transferred into the Concentration Account pursuant to the Lockbox Agreements and this Section 2.5 (Collection; Repayment, etc.) in such order and manner as determined by Lender. To the extent that any Accounts are collected by any Borrower or any other cash payments are received by any Borrower and are not sent directly to the appropriate Lockbox Account but are received by any Borrower or any of their Affiliates, such collections and proceeds shall be held in trust in a segregated manner for the sole benefit of Lender and immediately remitted (and in any event within two (2) Business Days of receipt), in the form received, to the appropriate Lockbox Account for immediate transfer to the Concentration Account. Each Borrower acknowledges and agrees that compliance with the terms of this Section 2.5 (Collection; Repayment, etc.) is an essential term of this Agreement, and that, in addition to and notwithstanding any other rights Lender may have hereunder, under any of the other Loan Documents, under Applicable Laws or at equity, upon each and every failure by any Borrower or any of its Affiliates to comply with any such terms, Lender shall be entitled to assess a non-compliance fee which shall operate to increase the Interest Rate by two percent (2.0%) per annum during any period of non-compliance, whether or not a Default or an Event of Default occurs or is declared, provided that nothing shall prevent Lender from considering any failure to comply with the terms of this Section 2.5 (Collection; Repayment, etc.)to be a Default or an Event of Default. All funds transferred to the Concentration Account for application to the Obligations under the Revolving Facility shall be applied to reduce the Obligations under the Revolving Facility. If applicable, at any time prior to the execution of all or any of the Lockbox Agreements and operation of all or any of the Lockbox Accounts, each Borrower and their Affiliates shall direct all collections or proceeds it receives on Accounts or from other Collateral to the accounts(s) and in the manner specified by Lender in its Permitted Discretion. 7 2.6. PROMISE TO PAY; MANNER OF PAYMENT Each Borrower absolutely and unconditionally promises to pay principal, interest and all other amounts payable hereunder, or under any of the other Loan Documents, without any right of rescission and without any deduction whatsoever, including any deduction for any set-off, counterclaim or recoupment, and notwithstanding any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any property or improvements. All payments made by Borrowers (other than payments automatically paid through Advances under the Revolving Facility as provided herein), shall be made only by wire transfer on the date when due, without offset, deduction or counterclaim, in U.S. Dollars, in immediately available funds to such account as may be indicated in writing by Lender to Borrowers from time to time. Any such payment received after 2:00 p.m. (Las Vegas time) on the date when due shall be deemed received on the following Business Day. Whenever any payment hereunder shall be stated to be due or shall become due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made by 2:00 p.m. (Las Vegas time) on the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during such extension) and/or fees, as the case may be. 2.7. REPAYMENT OF EXCESS ADVANCES Any balance of Advances under the Revolving Facility outstanding at any time in excess of the lesser of (a) the Facility Cap or (b) the Availability shall be immediately due and payable by Borrower without the necessity of any demand at the Payment Office, whether or not a Default or Event of Default has occurred or is continuing and shall be paid in the manner specified in Section 2.6 (Promise to Pay, etc.). 2.8. PREPAYMENT Borrowers may not voluntarily prepay the Loan below a principal balance of $10,000 prior to March 31, 2009; thereafter, Borrowers may prepay the Loan in whole or in part, without prepayment fee. 2.9. MANDATORY PREPAYMENTS In addition to and without limiting any provision of any of the Loan Documents: (a) if a Change of Control occurs, then on the first (1st) Business Day following the date of such Change of Control, each Borrower shall prepay the Loan, including, without limitation, all outstanding Advances and all other Obligations, in full in cash together with accrued interest thereon to the date of prepayment and all other amounts owing to Lender under the Loan Documents; and 8 (b) if any Borrower sells any of its assets or properties, sells or issues any securities (debt or equity) (other than sales of equity securities to employees of Borrower up to $100,000 in the aggregate during any twelve (12) consecutive months or other than stock options to employees), capital Stock or ownership interests, receives any capital contributions, receives any property damage insurance award which is not used to repair or replace the property covered thereby or incurs any Indebtedness, except for Permitted Indebtedness, then it shall apply 100% of the proceeds thereof to the prepayment of the Loan together with accrued interest thereon and all other Obligations owing to Lender under the Loan Documents, such payment to be applied at such time and in such manner and order as Lender shall decide in its sole discretion. 2.10. PREPAYMENT OF $45,000,000 REAL ESTATE TERM LOAN. If the $45,000,000 real estate term loan made by Medical Provider Financial Corporation I (as lender) to Borrowers pursuant to the $80 Million Credit Agreement is paid in full prior to its maturity date, then Lender agrees to and shall subordinate the Lien of the Deeds of Trust securing repayment of the Loan to the Lien of a deed of trust or mortgage securing repayment of a new loan, but only if (a) the proceeds of the new loan to which subordination is requested were used to repay the $45,000,000 real estate term loan in full, and (b) the new lender and Lender execute and deliver to one another a subordination agreement on commercially reasonable terms and conditions approved by Lender in its discretion. 2.11. PAYMENTS BY LENDER Should any amount required to be paid under any Loan Document be unpaid, such amount may in its Permitted Discretion be paid by Lender, which payment shall be deemed an Advance under the Revolving Facility as of the date such payment is due, and each Borrower irrevocably authorizes disbursement of any such funds to Lender by way of direct payment of the relevant amount, interest or Obligations. No payment or prepayment of any amount by Lender or any other Person shall entitle any Person to be subrogated to the rights of Lender under any of the Loan Documents unless and until the Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending) have been fully performed and paid irrevocably in cash and this Agreement has been terminated. Any sums expended by Lender as a result of any Borrower's or any Guarantor's failure to pay, perform or comply with any Loan Document or any of the Obligations shall be charged to such Borrower's account as an Advance under the Revolving Facility and added to the Obligations. 2.12. GRANT OF SECURITY INTEREST; COLLATERAL (a) To secure the payment and performance of the Obligations, each Borrower hereby grants to Lender a continuing security interest in and Lien upon, and pledges to Lender, all of its right, title and interest in and to, the Collateral. (b) Notwithstanding the foregoing provisions of this Section 2.12 (Grant of Security Interest, etc.), such grant of a Lien shall not extend to, and the term Collateral shall not include, (i) any Intellectual Property for which the granting of a security interest would terminate, invalidate, void or abandon such Intellectual Property (all of which are set forth in Disclosure 9 Schedule 5.13) or (ii) any General Intangibles of any Borrower to the extent that (1) such General Intangibles are not assignable or capable of being encumbered as a matter of law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law) without the consent of the licensor thereof or other applicable party thereto, and (2) such consent has not been obtained; provided, however, that the foregoing grant of a Lien shall extend to, and the term "Collateral" shall include, each of the following: (A) any General Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of money, or goods which are the subject of any Account or right to the payment of money, (B) any and all proceeds of any General Intangible or Intellectual Property that is otherwise excluded to the extent that the assignment, pledge or encumbrance of such proceeds is not so restricted, and (C) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise excluded General Intangible or Intellectual Property, such General Intangible or Intellectual Property as well as any and all proceeds thereof that might theretofore have been excluded from such grant of a Lien and from the term Collateral. (c) In addition to the foregoing, to secure the payment and performance of the Obligations, (i) each Person who is signatory to a Pledge Agreement has pledged to Lender all of the securities pledged by it pursuant to the Pledge Agreement, and (ii) each Borrower shall deliver to Lender physical possession of each of the original, executed Lockbox Agreements. (d) Upon the execution and delivery of this Agreement, and upon the proper filing of the necessary financing statements, recordation of the Intellectual Property Security Agreement in the United States Patent and Trademark Office and/or the United States Copyright Office, recordation of the Deeds of Trust and proper delivery of the necessary stock certificates and limited liability company certificates with endorsements thereof duly executed in blank, without any further action, Lender will have a good, valid and perfected first priority Lien and security interest in the Collateral, subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Encumbrances. No financing statement relating to any of the Collateral is on file in any public office except those (i) on behalf of Lender, and/or (ii) in connection with Permitted Encumbrances. 2.13. COLLATERAL ADMINISTRATION (a) All Collateral (except Deposit Accounts, Collateral in possession of Lender, Equipment and Inventory in transit and Collateral out for repair, refurbishment or finishing) will at all times be kept by the Borrowers at the locations set forth on Disclosure Schedule 5.1(b) hereto and shall not, without concurrent written notice to Lender, be moved therefrom (other than to another such location set forth on Disclosure Schedule 5.1(b)), and in any case shall not be moved outside the State of California. (b) Each Borrower shall keep true, correct, complete and accurate records of its Accounts and all payments and collections thereon, and shall submit such records to Lender on such periodic basis as Lender may request. In addition, if Accounts of Borrowers in an aggregate face amount in excess of $50,000 become ineligible because they fall within one of the specified categories of ineligibility set forth in the definition of Eligible Receivables (except for subsection (c) in the definition of Eligible Receivables), such 10 Borrower shall notify Lender in writing of such occurrence on the first (1st) Business Day following such occurrence and the Borrowing Base shall thereupon be adjusted to reflect such occurrence. If requested by Lender, each Borrower shall execute and deliver to Lender formal written assignments of all of their Accounts weekly or daily as Lender may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from such assigned accounts exceed the amount of the Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending), such excess amount shall not accrue interest in favor of Borrower, but shall be available to Borrowers upon Borrowers' written request. (c) Whether or not an Event of Default has occurred, any of Lender's officers, employees, representatives or agents shall have the right upon one (1) Business Day advance notice, at any time during normal business hours, in the name of Lender or any designee of Lender, to verify the validity, amount or any other matter relating to any Accounts of Borrowers; provided, however, no advance notice shall be required during the continuance of a Default or Event of Default. Each Borrower shall cooperate fully with Lender in an effort to facilitate and promptly conclude such verification process. (d) To expedite collection, each Borrower shall endeavor in the first instance to make collection of its Accounts for Lender. Lender shall have the right at all times after the occurrence and during the continuance of an Event of Default to notify (i) Account Debtors owing Accounts to any Borrower (other than Medicaid/Medicare Account Debtors) that their Accounts have been assigned to Lender and to collect such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorneys' fees, to Borrowers, and (ii) Medicaid/Medicare Account Debtors that a Borrower has waived any and all defenses and counterclaims it may have or could interpose in any such action or procedure brought by Lender to obtain a court order recognizing the collateral assignment or Lien of Lender in and to any Account or other Collateral and that Lender is seeking or may seek to obtain a court order recognizing the collateral assignment or Lien of Lender in and to all Accounts and other Collateral payable by Medicaid/Medicare Account Debtors. (e) As and when determined by Lender in its sole discretion, Lender will perform the searches described in clauses (i) and (ii) below against Borrowers and Guarantors, all at Borrower's expense: (i) uniform commercial code searches with the Secretary of State of the jurisdiction of organization of each Borrower and Credit Party and Guarantor and the Secretary of State and local filing offices of each jurisdiction where any Borrower or Credit Party and/or any Guarantors maintain their respective executive offices, a place of business or assets; (ii) lien searches with the United States Patent and Trademark Office and the United States Copyright Office; and (iii) judgment, state and federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (i) above. (f) Each Borrower acknowledges that Lender has been granted a Lien upon and to all Accounts applicable to all Account Debtors and all Account Debtors shall make payments to the appropriate Lockbox Account, and to the extent any such Account Debtor is not making payments to the appropriate Lockbox Account or any Borrower's Lockbox Bank or other financial institution is not 11 transferring all items, collections and remittances to the Concentration Account, each Borrower (i) covenants that it shall provide prompt written notice to its current bank and/or Lockbox Bank to transfer all items, collections and remittances to the Concentration Account, (ii) shall provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that Lender has been granted a Lien upon and to all Accounts applicable to such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and each Borrower hereby authorizes Lender, upon any failure to send such notices and directions within ten (10) calendar days after the date of this Agreement (or ten (10) calendar days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and (iii) shall do anything further that may be lawfully required by Lender to create and perfect Lender's Lien on any collateral and effectuate the intentions of the Loan Documents. At Lender's request, each Borrower shall promptly deliver to Lender all items for which Lender must receive possession to obtain a perfected Lien and all notes, certificates and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral. 2.14. POWER OF ATTORNEY Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney-in-fact for each Borrower (without requiring Lender to act as such) with full power of substitution to do the following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders and other instruments for the payment of money that are payable to such Person and constitute collections on its or their Accounts; (ii) execute in the name of such Person any financing statements, schedules, assignments, instruments, documents and statements that it is or they or are obligated to give Lender under any of the Loan Documents; and (iii) do such other and further acts and deeds in the name of such Person that Lender may reasonably deem necessary to enforce any Account or other Collateral or to perfect Lender's Lien upon or in any Collateral. In addition, if any such Person breaches its obligation hereunder to direct payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, Lender, as the irrevocably made, constituted and appointed true and lawful attorney-in-fact for such Person pursuant to this paragraph, may, by the signature or other act of any of Lender's officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account. 2.15. EVIDENCE OF LOAN (a) Lender shall maintain a Register, in accordance with its usual practice, in the form of electronic or written records evidencing the indebtedness and obligations to such Lender resulting from each Loan made by such Lender from time to time, including without limitation, the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (b) The entries made by Lender in the Register shall be prima facie evidence of the existence and amounts of the obligations and indebtedness therein recorded; provided, however, that the failure of the Lender to maintain a Register or such records or any error therein shall not in any manner affect the obligations of any Borrower to repay the Loan or Obligations in accordance with their terms. 12 (c) Lender will account to Borrowers monthly with a statement of Advances under the Revolving Facility delivered to Borrower's Representative, and any charges and payments made pursuant to this Agreement, and in the absence of manifest error, such accounting rendered by Lender shall be deemed final, binding and conclusive unless Lender is notified by Borrower's Representative in writing to the contrary within ten (10) calendar days of receipt of each accounting, which notice shall be deemed an objection only to items specifically objected to therein. (d) Each Borrower agrees that: (i) upon receipt of written notice by Lender to the Borrower that a promissory note or other evidence of indebtedness is requested by Lender to evidence the Loan and other Obligations owing or payable to, or to be made by, such Lender, such Borrower shall promptly (and in any event within three (3) Business Days of any such request) execute and deliver to Lender an appropriate, promissory note or notes in form and substance reasonably acceptable to the Lender and Borrower, payable to the order of Lender or in a principal amount equal to the amount of the Loan owing or payable to Lender; (ii) all references to a Note in the Loan Documents shall mean only the Note, if any, to the extent issued (and not returned to the Borrower for cancellation) hereunder, as the same may be amended, modified, divided, supplemented and/or restated from time to time; and (iii) upon Lender's written request, and in any event within three (3) Business Days of any such request, Borrower shall execute and deliver to Lender a new Note and/or divide the Note in exchange for then existing Note in such smaller amounts or denominations as Lender shall specify in its sole, absolute and unfettered discretion; provided, that the aggregate principal amount of such new notes shall not exceed the aggregate principal amount of the Note outstanding at the time such request is made; and provided, further, that such notes that are to be replaced shall then be deemed no longer outstanding hereunder and replaced by such new notes and returned to the Borrower within a reasonable period of time after Lender's receipt of the replacement notes. III. FEES AND OTHER CHARGES ---------------------- 3.1. ORIGINATION FEE On the Closing Date, Borrowers shall pay the Origination Fee to Lender. The Origination Fee shall be deemed fully earned by Lender in full upon the signing and delivery of this Agreement, however, the Origination Fee shall be due and payable on the Closing Date. 3.2. UNUSED COMMITMENT FEE On the first day of each successive calendar month during the Term, Borrower shall pay to Lender monthly an Unused Commitment Fee. 13 3.3. LENDER'S COSTS. On the Closing Date, Borrowers shall pay Lender's Costs to Lender. Lender's Costs include, but are not limited to, fees and costs of it's outside legal counsel of Lender and other closing costs. Lender's Costs shall be deemed fully earned by Lender in full upon the signing and delivery of this Agreement, however, Lender's Costs shall be due and payable on the Closing Date. 3.4. COMPUTATION OF INTEREST; LAWFUL LIMITS All interest hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed in each calculation period, as applicable. In no event whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges paid or agreed to be paid to Lender for the use, forbearance or detention of money hereunder exceed the Maximum Lawful Rate permissible under Applicable Laws which a court of competent jurisdiction shall, in a final determination, deems applicable hereto. If, due to any circumstance whatsoever, fulfillment of any provision hereof, at the time performance of such provision shall be due, shall exceed any such Maximum Lawful Rate, then, the obligation to be so fulfilled shall be reduced to such Maximum Lawful Rate, and, if Lender shall have received interest or any other charges of any kind which might be deemed to be interest under applicable law in excess of the Maximum Lawful Rate, then such excess shall be applied first to any unpaid fees and charges hereunder, then to unpaid principal balance owed by Borrower hereunder, and if the then remaining excess interest is greater than the previously unpaid principal balance, Lender shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. The terms and provisions of this Section 3.4 (Computation of Interest, etc.) shall control to the extent any other provision of any Loan Document is inconsistent herewith. 3.5. DEFAULT RATE OF INTEREST Upon the occurrence and during the continuation of an Event of Default, the Interest Rate in effect at such time with respect to the Obligations shall be increased to the Default Rate. 3.6. ACKNOWLEDGEMENT OF JOINT AND SEVERAL LIABILITY Each Borrower acknowledges that it is jointly and severally liable for all of the Obligations under the Loan Documents. Each Borrower expressly understands, agrees and acknowledges that (i) Borrowers are all Affiliated entities by common ownership, (ii) each Borrower desires to have the availability of one common credit facility instead of separate credit facilities, (iii) each Borrower has requested that Lender extend such a common credit facility on the terms herein provided, (iv) Lender will be lending against, and relying on a Lien upon, all of Borrowers' assets even though the proceeds of the Loan made hereunder may not be advanced directly to a particular Borrower, (v) each Borrower will nonetheless benefit by the making of the Loan by Lender and the availability of a single credit facility of a size greater than each could independently warrant, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Loan Documents shall be applicable to and shall be binding upon each Borrower. 14 IV. CONDITIONS PRECEDENT -------------------- 4.1. CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCE. Lender shall not be obligated to take, fulfill, or perform any action hereunder, nor shall Lender be obligated to fund any portion of the Initial Advance, until the following conditions precedent have been satisfied or provided for in a manner satisfactory to Lender, in its sole and absolute discretion, or waived in writing by Lender: (a) Agreement With Attached Disclosure Schedules. Two (2) duplicate original counterparts of this Agreement shall have been duly executed by and delivered by each Borrower, each Credit Party and each Guarantor to Lender, including attached and completed Disclosure Schedules in form and substance satisfactory to Lender. (b) Approvals. Lender shall have received satisfactory evidence that each Borrower has obtained, or in the case of necessary Governmental Authority approvals, have applied for, all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents. Disclosure Schedule 4.1(b) attached hereto lists all required consents and approvals of all Governmental Authorities and all other Persons. (c) Capital Structure: Other Indebtedness. The capital structure of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, the ownership of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, and the terms and conditions of all Indebtedness of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, shall be acceptable to Lender in its sole, absolute and unfettered discretion. The capital structure of each Borrower and each Credit Party as of the Closing Date is set forth in Disclosure Schedule 4.1(c) attached hereto. (d) Charter Documents. Each Borrower and each Credit Party shall have delivered the following documents to Lender: (i) A copy of the Charter and Good Standing Documents for each Borrower and each Credit Party, as applicable, certified by the Secretary of State for the state of incorporation or organization within the most recent thirty (30) calendar days prior to the Closing Date. (ii) The bylaws or operating agreement for each Borrower and each Credit Party, certified to be true and accurate by the corporate secretary or manager of each such Borrower and Credit Party, as applicable, within thirty (30) calendar days prior to the Closing Date. (iii) An incumbency certificate (officers and directors, or managers and members) for each Borrower and each Credit Party, certified to be true and accurate by the corporate secretary or manager of each Borrower and each Credit Party, as applicable, within thirty (30) calendar days prior to the Closing Date . 15 (iv) The unanimous written consent of the board of directors or the managers of each Borrower and of each Credit Party, authorizing the transactions set forth in this Agreement and the other Loan Documents, executed by each such director or manager within most recent thirty (30) calendar days prior to the Closing Date. (e) Voluntary Resignation of Dr. Shah. Based on Lender's prior experience in connection with the Previous Loans, Lender has determined in the exercise of its discretion that it is unable to work with Dr. Shah and that it will not make the Loan available to Borrowers unless Dr. Shah shall have voluntarily resigned as a director of and from all other management positions with or in IHHI prior to the Closing Date. (f) Plan Regarding Engagement of Independent Directors. Lender shall have received from IHHI and approved, in its sole discretion, a Plan Regarding Engagement of Independent Directors. (g) Appraisal. Lender shall have received from IHHI and approved, in its sole discretion, the Appraisal. (h) Loan to Value Ratio. The sum of the $45,000,000 real estate term loan and the $35,000,000 non-revolving line of credit loan (made pursuant to the $80 Million Credit Agreement) shall not exceed seventy percent (70%) of the Appraised Value of the Properties as set forth in the Appraisal. (i) Due Diligence. Lender shall have completed its business and legal due diligence and shall have waived all objections thereto. (j) Title Commitment. For each of the Properties, the Title Company shall have delivered a Title Commitment to Lender in form and content acceptable to Lender in its sole, absolute and unfettered discretion. (k) Note. The Borrowers shall have each executed and delivered to Lender one (1) original of the Note. (l) Notices of Request for Advance. Borrower's Representative shall have executed and delivered to Lender two (2) duplicate original counterparts of the Notice of Request for Advance in the form of Exhibit "B" attached hereto, requesting the Initial Advance from the Loan. (m) Deeds of Trust. (i) With respect to the Western Medical Center - Anaheim, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "C" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; 16 (ii) With respect to the Western Medical Center - Santa Ana, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "C" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "C" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (1) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "C" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (2) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "C" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (n) Absolute Assignment of Leases and Rents. (i) With respect to the Western Medical Center - Anaheim, PCHI, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "D" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, PCHI, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "D" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital, PCHI, IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "D" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: 17 (1) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "D" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (2) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "D" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (o) Collateral Assignment of Contracts. (i) With respect to the Western Medical Center - Anaheim, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital, IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (1) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "E" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (2) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "E" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (p) Deposit Account Security Agreement. (i) With respect to the Western Medical Center - Anaheim, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; 18 (ii) With respect to the Western Medical Center - Santa Ana, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital, IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (1) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "F" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (2) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "F" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (q) Control Agreement. Borrowers and the Bank shall have executed and delivered to Lender two (2) duplicate original counterparts of the Control Agreement in the form of Exhibit "G" attached hereto. (r) Post-Closing Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Post-Closing Agreement in the form of Exhibit "H" attached hereto. (s) Intellectual Property Security Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Intellectual Property Security Agreement in the form of Exhibit "I" attached hereto. (t) Environmental Indemnity Agreement. Borrowers and the Credit Parties (other than Ganesha) shall have executed and delivered to Lender two (2) duplicate original counterparts of the Environmental Indemnity Agreement in the form of Exhibit "J" attached hereto. 19 (u) Guaranty Agreements. Each Guarantor shall have executed and delivered to Lender two (2) duplicate original counterparts of the Guaranty Agreement in the form of Exhibit "K" attached hereto. (v) Intercreditor Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Intercreditor Agreement in the form of Exhibit "L" attached hereto. (w) Pledge Agreement. IHHI, Ganesha and West Coast shall have executed and delivered to Lender two (2) duplicate original counterparts of the Pledge Agreement in the form of Exhibit "M" attached hereto. (x) Stock Power. IHHI shall have executed and delivered to Lender two (2) duplicate original counterparts of the Stock Power in the form of Exhibit "N" attached hereto. (y) Membership Power. Ganesha and West Coast shall have executed and delivered to Lender two (2) duplicate original counterparts of the Membership Power in the form of Exhibit "O" attached hereto (z) Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease). The Landlord under the Chapman Hospital Lease shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "P" attached hereto. (aa) Landlord's Consent and Estoppel Certificate (Chapman MOB Lease). The Landlord under the Chapman MOB Lease shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "P" attached hereto. (bb) Landlord's Consent and Estoppel Certificate (Triple Net Lease). PCHI shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Triple Net Lease) in the form of Exhibit "Q" attached hereto. (cc) Legal Opinions. (i) Legal Opinion of California Counsel. An original legal opinion (from counsel licensed to practice law and in good standing in the State of California) for PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) the valid existence of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman in the State of California; (B) the good standing of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman in the State of California; (C) the requisite power of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman to execute this Agreement and the other Loan Documents; (D) that the execution of this Agreement and the other Loan Documents by PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman will not constitute a breach or default under any contracts or agreements executed by or to which PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman is a party; (E) that the choice of law provisions set forth in this Agreement and the other Loan Documents are enforceable; and (F) such other opinions that Lender may require. 20 (ii) First Legal Opinion of Nevada Counsel. A first original legal opinion (from counsel licensed to practice law and in good standing in the State of Nevada) for IHHI and OC-PIN regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) the valid existence of IHHI and OC-PIN in the State of Nevada; (B) the good standing of IHHI and OC-PIN in the State of Nevada; (C) the requisite power of IHHI and OC-PIN to execute this Agreement and the other Loan Documents; (D) that the execution of this Agreement and the other Loan Documents by IHHI and OC-PIN will not constitute a breach or default under any contracts or agreements executed by or to which IHHI and OC-PIN is a party; (E) that the choice of law provisions set forth in this Agreement and the other Loan Documents are enforceable; and (F) such other opinions that Lender may require. (iii) Second Legal Opinion of Nevada Counsel. A second original legal opinion from counsel (licensed to practice law and in good standing in the State of Nevada) for all Borrowers and all Credit Parties regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) that this Agreement and the other Loan Documents comply with Nevada law; (B) that this Agreement and the other Loan Documents are enforceable under Nevada law; (C) that the choice of Nevada law under this Agreement and the other Loan Documents is valid and enforceable under Nevada law; (D) that the Interest Rate applicable to the Loan is not usurious under Nevada law; and (E) such other matters as Lender may require. (dd) Fairness Opinion. A fairness opinion executed by a qualified, independent, third-party professional financial advisor or investment bank opining as to (i) the fairness of the transactions contemplated by this Agreement as between the Borrowers and Credit Parties and Guarantors, and (ii) an allocation of fair value to each Hospital Facility, in form and substance satisfactory to Lender. (ee) Closing and Funding Checklist - Other Documents and Instruments. Each Borrower, each Credit Party and each Guarantor shall have executed (where required) and delivered to Lender each of the other documents, exhibits, disclosure schedules, certificates, instruments and other items listed in the Closing and Funding Checklist, in form and content satisfactory to Lender. (ff) $80 Million Credit Agreement. All conditions precedent to the obligation of Medical Provider Financial Corporation II (as lender) under Article 2 of the $80 Million Credit Agreement shall have been satisfied or provided for in a manner satisfactory to said lender, in its sole discretion, or waived in writing by said lender. (gg) $10.7 Million Credit Agreement. All conditions precedent to the obligation of Medical Provider Financial Corporation III (as lender) under Article 2 of the $10.7 Million Credit Agreement shall have been satisfied or provided for in a manner satisfactory to said lender, in its sole discretion, or waived in writing by said lender. 21 (hh) Documents Required by Title Commitment. Each Borrower shall have executed (where required) and deposited into Escrow all documents and instruments required by the Title Company and/or the Escrow Company. 4.2. FURTHER CONDITIONS PRECEDENT TO MAKING ADVANCES; FURTHER CONDITIONS PRECEDENT TO FUNDING ADVANCES The obligations of Lender to making the Loan to Borrowers and to funding any Advances (including the Initial Advance) to Borrowers, shall be subject to the following further conditions precedent: (a) Further Conditions Precedent to Making Advances. Lender shall not be obligated to make any of the Advances (including the Initial Advance) to Borrowers unless and until the following additional conditions precedent have been satisfied or provided for in a manner satisfactory to Lender in its sole and absolute discretion, or waived in writing by Lender, on or before the Closing Date: (i) Loan Documents. All Loan Documents having been executed and delivered on or before the Closing Date shall remain in full force and effect, and Lender shall have received such further documents, instruments, agreements and legal opinions as Lender shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, each in form and substance satisfactory to Lender. (ii) Other Credit Agreements. (1) All loan documents having been executed and delivered on or before the closing date of the transaction contemplated by the $80 Million Credit Agreement shall remain in full force and effect, and the lender under the $80 Million Credit Agreement shall have received such further documents, instruments, agreements and legal opinions as such lender shall reasonably request in connection with the transactions contemplated by the $80 Million Credit Agreement and the loan documents referenced therein, each in form and substance satisfactory to said lender. (2) All loan documents having been executed and delivered on or before the closing date of the transaction contemplated by the $10.7 Million Credit Agreement shall remain in full force and effect, and the lender under the $10.7 Million Credit Agreement shall have received such further documents, instruments, agreements and legal opinions as such lender shall reasonably request in connection with the transactions contemplated by the $10.7 Million Credit Agreement and the loan documents referenced therein, each in form and substance satisfactory to said lender. (iii) Approvals. Lender shall have received (A) satisfactory evidence that each Borrower has obtained, or in the case of necessary Governmental Authority approvals, has applied for, all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents to which they are parties or a signatory, or (B) an officer's certificate signed by an executive officer of each Borrower in form and substance satisfactory to Lender affirming that no such consents or approvals are required. 22 (iv) Timing. The Closing shall occur by the Closing Date. (v) Collateral. Lender shall have approved the Collateral in its sole, absolute and unfettered discretion. (vi) Update to Disclosure Schedules. Borrower shall have delivered to Lender updates to all Disclosure Schedules as required hereunder, and Lender shall have approved in its discretion all updates to the Disclosure Schedules. (vii) No Material Adverse Effect. No event or circumstance shall have occurred that has or reasonably could be expected by Lender to have a Material Adverse Effect. (viii) Title Policies. Title Company shall irrevocably be committed to issue a Title Policy to Lender on the Closing Date for each Property, at Borrower's sole cost and expense, in form and content acceptable to Lender in its sole discretion. (ix) Escrow. Borrowers shall have opened Escrow at the offices of the Title Company and the Escrow Officer shall be prepared to close Escrow on the terms and conditions set forth in the Escrow Instructions on deposit therein. (b) Additional Conditions Precedent to Funding Advances. Lender shall not be obligated to fund any Advance (including the Initial Advance) to Borrowers on the Closing Date or on any other date if: (i) Any representation or warranty by any Borrower or by any Credit Party or by any Guarantor contained (1) herein, or (2) in any other Loan Document, or (3) in the $80 Million Credit Agreement, or (4) in the $10.7 Million Credit Agreement, or (5) in any document or instrument executed or presented in connection with the $80 Million Credit Agreement or $10.7 Million Agreement, is untrue, incorrect, incomplete or inaccurate in any material respect as of such date; (ii) Any Default or Event of Default has occurred and is continuing or would result after giving effect to any Advance; or (iii) Any event or circumstance shall have occurred that has or reasonably could be expected by Lender to have a Material Adverse Effect. The request by Borrower's Representative that Lender fund an Advance under the Loan on the Closing Date or on any other date shall in each event be deemed to constitute, as of the date thereof, (A) a representation and warranty by all Borrowers and all Credit Parties that the conditions precedent in this Section 4.2 (Further Conditions Precedent to Making Advances, etc.) to which it is a party or to which it is a signatory have been satisfied, and (B) a reaffirmation by each Borrower and by each Credit Party of their respective obligations under the Loan Documents. 23 4.3. PLACE OF CLOSING; DELIVERY OF LOAN DOCUMENTS TO LENDER; DEPOSITS INTO ESCROW; CLOSE OF ESCROW; DISTRIBUTION OF FUNDS AND DOCUMENTS The transactions contemplated by this Agreement and the other Loan Documents will close on the Closing Date, as follows: (a) Place Of Closing. Unless otherwise agreed in writing by Borrower's Representative and Lender in writing, the Closing will take place on the Closing Date at the offices of the Lender at c/o Medical Capital Corporation, 2100 South State College Blvd., Anaheim, California 92806, Attn: Joseph J. Lampariello, President and COO, telephone: 714-935-3100. (b) Delivery of Loan Documents to Lender's Counsel. Each Borrower, each Credit Party and each Guarantor shall, not less than four (4) Business Days prior to the Closing Date, deliver or cause to be delivered to legal counsel for Lender the following Loan Documents, each duly executed by each Borrower, each Credit Party (where applicable), each Guarantor (where applicable), any other Person required by this Agreement, and, where required, witnessed, acknowledged and in recordable form, with all Exhibits, Disclosure Schedules and Annexes (each pre-approved by Lender) attached and executed as required: (i) Two (2) duplicate original counterparts of this Agreement, executed by each Borrower, each Credit Party and each Guarantor and with all completed Annexes and Disclosure Schedules attached. (ii) One (1) original of the Note, executed by Borrowers. (iii) Two (2) duplicate original counterparts of the Notice of Request for Advance, executed by Borrower's Representative. (iv) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts (Western Medical Center - Anaheim), executed by IHHI and WMC-A. (v) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts (Western Medical Center - Santa Ana), executed by IHHI and WMC-SA. (vi) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts (Coastal Community Hospital), executed by IHHI and Coastal. (vii) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts (Chapman MOB Lease), executed by IHHI. (viii) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts (Chapman Hospital Lease), executed by IHHI. (ix) Two (2) duplicate original counterparts of the Deposit Account Security Agreement (Western Medical Center - Anaheim), executed by IHHI and WMC-A. 24 (x) Two (2) duplicate original counterparts of the Deposit Account Security Agreement (Western Medical Center - Santa Ana), executed by IHHI and WMC-SA. (xi) Two (2) duplicate original counterparts of the Deposit Account Security Agreement (Coastal Community Hospital), executed by IHHI and Coastal. (xii) Two (2) duplicate original counterparts of the Deposit Account Security Agreement (Chapman MOB Lease), executed by IHHI. (xiii) Two (2) duplicate original counterparts of the Deposit Account Security Agreement (Chapman Hospital Lease), executed by IHHI. (xiv) Two (2) duplicate original counterparts of the Control Agreement, executed by Borrowers and Bank. (xv) Two (2) duplicate original counterparts of the Post-Closing Agreement, executed by Borrowers. (xvi) Two (2) duplicate original counterparts of the Intellectual Property Security Agreement, executed by Borrowers. (xvii) Two (2) duplicate original counterparts of the Environmental Indemnity Agreement, executed by Borrowers and by each Credit Party (other than Ganesha). (xviii) Two (2) duplicate original counterparts of the Guaranty Agreement, executed by each Guarantor. (xix) Two (2) duplicate original counterparts of the Intercreditor Agreement, executed by Borrowers. (xx) Two (2) duplicate original counterparts of the Pledge Agreement, executed by IHHI, Ganesha and West Coast. (xxi) Two (2) duplicate original counterparts of the Stock Power executed by IHHI. (xxii) All original Stock certificates in WMC-A, WMC-SA, Coastal and Chapman owned, held or controlled by IHHI. (xxiii) Two (2) duplicate original counterparts of the Membership Power executed by Ganesha and West Coast. (xxiv) All original Membership Certificates in PCHI owned, held or controlled by Ganesha (if any); and all original Membership Certificates in PCHI owned, held or controlled by West Coast (if any). 25 (xxv) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease), executed by the Landlord under the Chapman MOB Lease. (xxvi) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease), executed by the Landlord under the Chapman Hospital Lease. (xxvii) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Triple Net Lease), executed by PCHI. (xxviii) Two (2) original executed opinions of California legal counsel for PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman, executed by said counsel. (xxix) Two (2) original executed first opinions of Nevada legal counsel for IHHI and OC-PIN, executed by said Nevada counsel. (xxx) Two (2) original executed second opinions of Nevada legal counsel for all Borrowers, Credit Parties and Guarantors, executed by said Nevada counsel. (xxxi) One (1) original executed fairness opinion. (xxxii) All other documents, instruments, agreements, certificates, schedules, exhibits not set forth above but required by the Closing and Funding Checklist. (c) Deposits Into Escrow. Unless otherwise set forth below, Borrowers and Lender shall, not less than two (2) Business Days prior to the Closing Date, deposit the following documents, instruments and other items into Escrow, each duly executed and, where appropriate, witnessed, acknowledged and in recordable form, with all Exhibits, Disclosure Schedules and Annexes (each pre-approved by Lender) attached and executed as required: (i) One (1) copy of this Agreement, executed by Lender, by each Borrower, by each Credit Party and by each Guarantor and with all completed Annexes and Disclosure Schedules attached. (ii) With respect to the Western Medical Center - Anaheim, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Western Medical Center - Anaheim. (iii) With respect to the Western Medical Center - Santa Ana, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana. (iv) With respect to the Coastal Communities Hospital, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Coastal Communities Hospital. 26 (v) With respect to the Chapman Medical Center: (1) one (1) original Deed of Trust executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (2) one (1) original Deed of Trust executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (vi) With respect to the Western Medical Center - Anaheim, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and WMC-A with the legal description describing the fee simple interest in the Western Medical Center - Anaheim. (vii) With respect to the Western Medical Center - Santa Ana, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and WMC-SA with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana. (viii) With respect to the Coastal Communities Hospital, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and Coastal with the legal description describing the fee simple interest in the Coastal Communities Hospital. (ix) With respect to the Chapman Western Medical Center: (1) one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; and (2) one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease. (x) With respect to all Properties, requests to reconvey or deeds of reconveyance of all existing Liens and encumbrances, in each case executed by the applicable beneficiary or payee or mortgagee. (xi) Escrow Instructions executed by each Borrower. (xii) For each Property, all UCC-1 Financing Statements (Fixture Filing) as are required by Lender under the Loan Documents, naming the applicable as Debtor. (xiii) All other documents, instruments, certificates, resolutions, charter documents, affidavits and items required by Title Company. 27 (xiv) By 11:00 a.m. Los Angeles time on the Closing Date, Lender shall deposit into Escrow the amount required by the Notice of Request for Advance, less any amounts withheld for payment of the Origination Fee, Lender's Costs and the Previous Amount Owed. (d) Close of Escrow; Recordation of Loan Documents. At such time as (i) Escrow Holder holds for the account of Lender each of the documents, instruments and funds set forth above; (ii) each Borrower, each Credit Party, each Guarantor and Lender have complied with their respective obligations under this Agreement and their respective Escrow Instructions; (iii) Escrow Holder is prepared to close and consummate the transactions contemplated by the $80 Million Credit Agreement and has complied with the escrow instructions by the parties to the $80 Million Credit Agreement; (iv) Escrow Holder is prepared to close and consummate the transactions contemplated by the $10.7 Million Credit Agreement and has complied with the escrow instructions by the parties to the $10.7 Million Credit Agreement and; and (v) the Title Company is irrevocably prepared to issue and deliver each Title Policy to Lender at Closing, then Escrow Holder shall close Escrow as follows: (i) With respect to fee simple interest at Western Medical Center - - Anaheim, Escrow Holder will (1) cause the Western Medical Center - Anaheim Deed of Trust to be recorded as a third lien and encumbrance against the fee simple title of the Western Medical Center - Anaheim, junior and subordinate only to the Permitted Encumbrances; (2) cause the Western Medical Center - Anaheim Absolute Assignment of Leases and Rents to be recorded as a lien and encumbrance against the fee simple title of the Western Medical Center - Anaheim, junior and subordinate only to the Permitted Encumbrances; and (3) cause the Western Medical Center - Anaheim UCC-1 Financing Statement (Fixture Filing) to be recorded, junior and subordinate only to the Permitted Encumbrances. (ii) With respect to the fee simple interest at Western Medical Center - Santa Ana, Escrow Holder will (1) cause the Western Medical Center - Santa Ana, Deed of Trust to be recorded as a third lien and encumbrance against the fee simple title of the Western Medical Center - Santa Ana, junior and subordinate only to the Permitted Encumbrances; (2) cause the Western Medical Center - Santa Ana Absolute Assignment of Leases and Rents to be recorded as a lien and encumbrance against the fee simple title of the Western Medical Center - - Santa Ana, junior and subordinate only to the Permitted Encumbrances; and (3) cause the Western Medical Center - Santa Ana, UCC-1 Financing Statement (Fixture Filing) to be recorded, junior and subordinate only to the Permitted Encumbrances. (iii) With respect to the fee simple interest at Coastal Communities Hospital, Escrow Holder will (1) cause the Coastal Communities Hospital Deed of Trust to be recorded as a third lien and encumbrance against the fee simple title of the Coastal Communities Hospital, junior and subordinate only to the Permitted Encumbrances; (2) cause the Coastal Communities Hospital Absolute Assignment of Leases and Rents to be recorded as a lien and encumbrance against the fee simple title of the Coastal Communities Hospital, junior and subordinate only to the Permitted Encumbrances; and (3) cause the Coastal Communities Hospital UCC-1 Financing Statement (Fixture Filing) to be recorded, junior and subordinate only to the Permitted Encumbrances. 28 (iv) With respect to IHHI's interest, as MOB Tenant, in the Chapman MOB Lease at the Chapman Medical Center, Escrow Holder will (1) cause the Chapman Medical Center Deed of Trust (MOB Lease) to be recorded as a third lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease, junior and subordinate only to the Permitted Encumbrances; (2) cause the Chapman Medical Center Deed of Trust (Hospital Lease) to be recorded as a third lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease, junior and subordinate only to the Permitted Encumbrances; (3) cause the Chapman Medical Center Absolute Assignment of Leases and Rents to be recorded as a lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease, junior and subordinate only to the Permitted Encumbrances; (4) cause the Chapman Medical Center Absolute Assignment of Leases and Rents to be recorded as a lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease, junior and subordinate only to the Permitted Encumbrances; (5) cause the Chapman Medical Center UCC-1 Financing Statement (Fixture Filing) (Chapman MOB Lease) to be recorded against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease, junior and subordinate only to the Permitted Encumbrances, and (6) cause the Chapman Medical Center UCC-1 Financing Statement (Fixture Filing) (Chapman Hospital Lease) to be recorded against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease, junior and subordinate only to the Permitted Encumbrances. (e) Distribution of Funds and Documents at Closing. When Escrow Holder is the position to close Escrow as required by Section 4.3(d) (Close of Escrow; Recordation of Loan Documents) immediately above, but in no event later than the Closing Date, Escrow Holder shall record the Loan Documents pursuant to the requirements of Section 4.3(d) (Close of Escrow, Recordation of Loan Documents) above, then shall distribute funds and documents then on deposit in Escrow to Borrowers as set forth below: (i) The original and one (1) copy of each Lender's Title Policy to Lender. (ii) A true and correct copy of each Deed of Trust to Lender (with a copy to Borrowers) as recorded. (iii) A true and correct copy of each Absolute Assignment of Leases and Rents to Lender (with a copy to Borrowers) as recorded. (iv) A true and correct copy of each UCC-1 Financing Statement (Fixture Filing) (with a copy to Borrowers) as recorded. (v) Final settlement statement to Lender and to Borrowers with respect to distribution of amounts deposited into this Escrow and listing all credits and debits applicable to Lender and Borrowers. (vi) To Borrowers, the net amount (if any) required by the final settlement statement. 29 (f) Distribution of Documents by Lender at Closing. When Escrow Holder has closed each Escrow and distributed the documents and funds as and when required by this Agreement, Lender shall cause the documents then in its possession to be distributed as follows: (i) To Borrower's Representative: one (1) duplicate original counterpart of the Absolute Assignments of Leases and Rents; the Collateral Assignments of Contracts; the Deposit Account Security Agreements; the Control Agreement; the Post-Closing Agreement; the Intellectual Property Security Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Intercreditor Agreement; the Pledge Agreement; the Stock Power; the Membership Power; the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease); the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease); and the Landlord's Consent and Estoppel Certificate (Triple Net Lease). (ii) To Borrower's Representative: one (1) copy of the Note; and one (1) copy of the fairness opinion. (iii) To Lender: one (1) duplicate original counterpart of the Absolute Assignments of Leases and Rents; the Collateral Assignments of Contracts; the Deposit Account Security Agreements; the Control Agreement; the Post-Closing Agreement; the Intellectual Property Security Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Intercreditor Agreement; the Pledge Agreement; the Stock Power; the Membership Power; the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease); the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease); and the Landlord's Consent and Estoppel Certificate (Triple Net Lease). (iv) To Lender: the original, executed Note; the original executed legal opinions; the original executed fairness opinion; the original Stock certificates; and the original Membership Certificates. V. REPRESENTATIONS AND WARRANTIES ------------------------------ To induce Lender to make the Loan, Borrowers make the following representations and warranties to Lender with respect to Borrowers; each Credit Party makes the following representations and warranties to Lender with respect to itself; and each Guarantor makes the following representations and warranties to Lender with respect to itself. Each and all of said representations and warranties (i) shall be true, correct, complete and accurate on the Closing Date and on each subsequent funding date (unless expressly limited to a particular date), and (ii) shall survive the execution and delivery of this Agreement (it being understood, that, for purposes of any representation and warranty expressly made as of the Closing Date and each subsequent funding date with reference to, or qualified by, a Disclosure Schedule, such reference shall include such updated version, if any, of such Disclosure Schedule as may be made effective (including by consent of Lender) pursuant to Section 6.6 (Supplemental Disclosure) on or before the Closing Date). 30 5.1. BORROWERS AND CREDIT PARTIES (a) Corporate Existence; Compliance with Applicable Laws. (i) IHHI (1) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada; (2) is registered as a foreign corporation in the State of California and is qualified to do business in and is doing business in the State of California; (3) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its bylaws; and (7) is in compliance in all material respects with all other Applicable Laws. (ii) WMC-A, WMC-SA, Coastal and Chapman are each (1) corporations duly organized, validly existing and in good standing under the laws of the State of California; (2) doing business in the State of California; (3) duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its bylaws; and (7) is in compliance in all material respects with all other Applicable Laws. (iii) PCHI, Ganesha and West Coast are each (1) limited liability companies duly organized, validly existing and in good standing under the laws of the State of California; (2) doing business in the State of California; (3) duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) have the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) have applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its operating agreement; and (7) is in compliance in all material respects with all other Applicable Laws. 31 (iv) OC-PIN is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Nevada; (2) is registered as a foreign limited liability company in the State of California and is qualified to do business in and is doing business in the State of California; (3) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its operating agreement; and (7) is in compliance in all material respects with all other Applicable Laws. (b) Executive Office, Collateral Locations, FEIN. As of the Closing Date, the name of each Borrower and each Credit Party and each Guarantor, as its name appears in official filings in the States of Nevada and California (as applicable), and the current location of each Borrower's and each Credit Party's and each Guarantor's chief executive office and the premises at which any Collateral is located are set forth in Disclosure Schedule 5.1(b). None of such locations has changed within the four (4) months preceding the Closing Date (except that Collateral may have been transferred from one Hospital Facility to another during said period) and each Borrower and Credit Party and each Guarantor has only one state of incorporation or organization and has not changed the state of incorporation or organization at any time within the five (5) year period prior to the Closing Date. During the preceding five (5) years, no Borrower and no Credit Party and not Guarantor has conducted business under or used any name (whether corporate, partnership or assumed) other than as shown on Disclosure Schedule 5.1(b). Each Borrower and each Credit Party and each Guarantor is the sole owner of all of its names listed on Disclosures Schedule 5.1(b), and any and all business done and invoices issued in such names are such Borrower's and/or such Credit Party's and such Guarantor's sales, business and invoices. Each trade name of each Borrower and each Credit Party and each Guarantor represents a division or trading style of such Borrower and/or such Credit Party and/or such Guarantor. All Accounts of each Borrower and each Credit Party (other than Ganesha) and each Guarantor (other than Ganesha) arise, originate and are located, and all of the Collateral and all books and records in connection therewith or in any way relating thereto or evidencing the Collateral are located and shall only be located, in and at such locations other than goods in transit and immaterial amounts of property. All of the Collateral is located only in the continental United States. Each Borrower's and each Credit Party's (other than Ganesha) and each Guarantor's (other than Ganesha) Medicare and Medicaid Provider Numbers are set forth on Disclosure Schedule 5.1(b). In addition, Disclosure Schedule 5.1(b) lists the federal employer identification number of each Borrower and each Credit Party and each Guarantor. 32 5.2. POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by Borrowers of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person's power; (b) have been duly authorized by all necessary corporate or limited liability company action; (c) do not contravene any provision of such Person's bylaws or operating agreement; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Lender pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 4.1(b) (Conditions Precedent, etc.), all of which will have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan Documents shall be duly executed and delivered by Borrowers and Credit Parties and each such Loan Document shall constitute a legal, valid and binding obligation of Borrowers and Credit Parties enforceable against it in accordance with its terms. Credit Parties hereby make the foregoing representations and warranties in clauses (d), (e), (f) and (g) of this Section 5.2 (Power, Authorization, Enforceable Obligations) with respect to the execution, delivery and performance by Credit Parties of the Loan Documents to which Credit Parties are a party and the creation of all Liens provided for therein. 5.3. FINANCIAL STATEMENTS AND PROJECTIONS. Except for the Projections, all Financial Statements delivered to Lender by Borrowers that are referred to below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of Borrowers as of the dates thereof and the results of their operations and cash flows for the periods then ended. Credit Parties (other than Ganesha) hereby represent and warrant to Lender that all financial statements delivered to Lender by Credit Parties present fairly in all material respects the financial position of the Credit Parties as of the dates thereof, and since the date of the most recent financial statements submitted to Lender, there has not occurred any Material Adverse Effect or, to Credit Parties' knowledge, any other event or condition that would reasonably be likely to have a Material Adverse Effect (a) Financial Statements. The Financial Statements which have been delivered by Borrowers to Lender on or before the date hereof are comprised of: (i) The consolidated, unaudited balance sheets of Borrowers as of December 31, 2006, and the related statements of income and cash flows of Borrowers for the nine (9) month period then ended. 33 (ii) The unaudited balance sheet(s) at June 30, 2007 of Borrowers and the related consolidated statement(s) of income and cash flows of Borrowers for the Fiscal Quarter then ended. (b) Pro Forma. The pro forma financial statements which have been delivered by Borrowers to Lender on or before the date hereof were prepared by Borrowers giving pro forma effect to the Related Transactions, was based on the unaudited consolidated and consolidating balance sheets of Borrowers and its Subsidiaries, and were prepared in accordance with GAAP (to the extent applicable), with only such adjustments thereto as would be required in accordance with GAAP. (c) Projections. All Projections which have been delivered by Borrowers to Lender on the date hereof were prepared by Borrowers in light of Borrower's past experience, but including reasonably estimated future payments of known contingent liabilities, and reflect projections on a quarterly basis for the 2007/2008 Fiscal Year and on an annual basis for all periods thereafter through 2009/2010. The Projections are based upon the same accounting principles as those used in the preparation of the financial statements described above with certain normalizing assumptions made by Borrowers, and the estimates and assumptions stated therein, all of which Borrowers believe to be reasonable and fair in light of current conditions and current facts known to Borrowers and, as of the Closing Date, reflect Borrower's good faith and reasonable estimates of the future financial performance of Borrowers for the period set forth therein. 5.3A MATERIAL ADVERSE EFFECT. (a) Borrowers. The Borrowers hereby represent to Lender that, between the Effective Date of this Agreement and the Closing Date: (i) to the best of Borrower's knowledge, after due inquiry, there has not been any material increase in contingent or noncontingent liabilities, liabilities for Charges, or obligations with respect to long-term leases or unusual forward or long-term commitments of Borrowers, (ii) to the best of Borrower's knowledge, after due inquiry, there has not been any material decrease in the assets of Borrowers, (iii) no contract, lease or other agreement or instrument has been entered into by Borrowers or has become binding upon Borrower's assets and, to the knowledge of Borrowers, no law or regulation applicable to Borrowers has been adopted that has had or could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Collateral, (iv) to the best of Borrower's knowledge, after due inquiry, neither Borrowers nor any of the Credit Parties is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Collateral, and (v) to the best of Borrower's knowledge, after due inquiry, no event has occurred, that alone or together with other events, has had, or could reasonably be expected to have, a Material Adverse Effect with respect to Borrowers or the Collateral. (b) Credit Parties. The Credit Parties (other than Ganesha) hereby represent to Lender that, between the Effective Date of this Agreement and the Closing Date: (i) to the best of each Credit Party's knowledge, there has not been any material increase in contingent or noncontingent liabilities, liabilities for Charges, or obligations with respect to long-term leases or unusual forward or long-term commitments of Borrowers, (ii) to the best of each Credit Party's knowledge, there has not been any material decrease in the assets of any Credit Party, (iii) no contract, lease or other agreement or instrument 34 has been entered into by any Credit Party or has become binding upon Credit Party's assets and, to the knowledge of Credit Party's, no law or regulation applicable to Credit Party's or to Borrowers has been adopted that has had or could reasonably be expected to have a Material Adverse Effect with respect to Credit Party's or Borrowers or the Collateral, (iv) to the best of each Credit Party's knowledge, neither Borrowers nor any of the Credit Parties is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Credit Parties or the Collateral, and (v) to the best of each Credit Party's knowledge, no event has occurred, that alone or together with other events, has had, or could reasonably be expected to have, a Material Adverse Effect with respect to Borrowers or the Credit Parties or the Collateral. 5.4 OWNERSHIP OF COLLATERAL; LIENS. Borrowers and Credit Parties (other than Ganesha) (a) each separately own good, valid and marketable title to or a valid leasehold interest in, all of its properties and assets, including all of its Collateral whether personal or real, subject to no transfer restrictions or Liens of any kind except for permitted Encumbrances, and (b) is in compliance in all material respects with each lease to which it is a party or otherwise bound. None of the Collateral is subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to Borrowers or to Credit Parties that may result in any Liens (including Liens arising under Environmental Laws or other Applicable Laws) other than Permitted Encumbrances. Disclosure Schedule 5.4 attached hereto sets forth a list of all real estate and leases to be owned or held by Borrowers immediately after the Closing Date. Each Borrower enjoys peaceful and undisturbed possession under all such leases and such leases are all the leases necessary for the operation of such properties and assets are valid and subsisting and are in full force and effect. 5.5 LABOR MATTERS. Except as set forth on Disclosure Schedule 5.5, as of the Closing Date, (a) no strikes or other material labor disputes against Borrowers are pending or, to any Borrower's or to any Credit Party's knowledge, threatened; (b) hours worked by and payment made to employees of Borrowers comply in all material respects with the Fair Labor Standards Act and other Applicable Laws; (c) all payments due from Borrowers for employee health and welfare insurance have been paid or accrued as a liability on the books of Borrowers; (d) Borrowers are not a party to or bound by any collective bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement unless true and complete copies of any agreements described on Disclosure Schedule 5.5 have been delivered to Lender; (e) there is no organizing activity involving Borrowers pending or, to Borrower's or Credit Party's knowledge, threatened by any labor union or group of employees of Borrowers; (f) except as otherwise disclosed on Disclosure Schedule 5.5, there are no representation proceedings pending or, to Borrower's or Credit Party's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Borrower has made a pending demand for recognition; and (g) there are no material complaints or charges against any Borrower pending or, to the knowledge of Borrowers or Credit Parties, threatened 35 to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Borrower of any individual. 5.6 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK. Except as listed on Disclosure Schedule 5.6, the Borrowers and the Credit Parties have no Subsidiaries. Disclosure Schedule 5.6 states the authorized and issued capitalization of each Borrower and of each Credit Party (other than Ganesha), the number and class of equity securities and/or ownership, voting or partnership interests issued and outstanding of each Borrower and each Credit Party and the record and beneficial owners thereof (including options, warrants and other rights to acquire any of the foregoing). The ownership or partnership interests of each Credit Party are not certificated, the documents relating to such interests do not expressly state that the interests are governed by Article 8 of the Uniform Commercial Code, and the interests are not held in a securities account. The outstanding equity securities and/or ownership, voting or partnership interests of each Borrower and each Credit Party (other than Ganesha) have been duly authorized and validly issued and are fully paid and non-assessable, and each Person listed on Disclosure Schedule 5.6 owns beneficially and of record all the equity securities and/or ownership, voting or partnership interests it is listed as owning free and clear of any Liens other than Liens created by the Collateral Documents. Disclosure Schedule 5.6 also lists the directors, members, managers and/or partners of each Borrower and each Credit Party. Except as listed on Disclosure Schedule 5.6, no Credit Party (other than Ganesha) owns an interest in, participates in or engages in any joint venture, partnership or similar arrangements with any Person. Except as set forth in Disclosure Schedule 5.6, as of the Closing Date, there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Borrower or any Credit Party (other than Ganesha) has issued or may be required to issue, sell, repurchase or redeem any of its Stock. All outstanding Indebtedness and Guaranteed Indebtedness of Borrowers and Credit Parties (other than Ganesha) as of the Closing Date identified in Section 7.3 (Indebtedness) is described in Disclosure Schedule 7.2. 5.7 GOVERNMENT REGULATION. No Borrower is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940. No Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loan by Lender to Borrowers, the application of the proceeds thereof and repayment thereof will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission or other Applicable Laws binding on Borrowers. 5.8 MARGIN REGULATIONS. Borrowers are not engaged, nor will they engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter 36 in effect. Borrowers do not own any margin stock, and none of the proceeds of the Loan or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any stock or for any other purpose that might cause the Loan or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. Borrowers will not take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board. Each Credit Party (other than Ganesha) hereby makes the foregoing representations, warranties and covenants to Lender set forth in this Section 5.8 (Margin Regulations) with respect to such Credit Party 5.9 TAXES. Except as described in Disclosure Schedule 5.9, all Federal and other material tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by Borrowers have been filed with the appropriate Governmental Authority, and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof excluding Charges or other amounts being contested in accordance with Section 7.3 (Indebtedness) and unless the failure to so file or pay would not reasonably be expected to result in fines, penalties or interest in excess of $100,000 in the aggregate. Proper and accurate amounts have been withheld by Borrowers for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. Disclosure Schedule 5.9 sets forth as of the Closing Date and the Closing Date those taxable years for which each Borrower's tax returns are currently being audited by the IRS or any other applicable Governmental Authority, and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described in Disclosure Schedule 5.9, as of the Closing Date, no Borrower has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. Borrowers are not liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to Borrower's and Credit Party's knowledge, as a transferee. As of the Closing Date, Borrowers have not agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise. Each Credit Party (other than Ganesha) hereby make the foregoing representations, warranties and covenants to Lender set forth in this Section 5.9 (Taxes) with respect to all Charges and tax returns of such Credit Party. 5.10 ERISA. (a) Disclosure Schedule 5.10 lists, as of the Closing Date, for each Borrower (i) all ERISA Affiliates and (ii) all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such listed Plans have been delivered to Lender. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the IRC and its terms, including the timely filing of all reports required under the IRC or 37 ERISA. Neither any Borrower nor any ERISA Affiliate has failed to make any material contribution or pay any material amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No "prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of the IRC, has occurred with respect to any Plan, that would subject any Borrower to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC. (b) Except as set forth in Disclosure Schedule 5.10: (i) no Title IV Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of Borrowers, threatened material claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) neither any Borrower nor any ERISA Affiliate has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; and (v) within the last five years no Title IV Plan of any Borrower or any ERISA Affiliate has been terminated, whether or not in a "standard termination" as that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any Borrower or any ERISA Affiliate (determined at any time within the last five years) with material Unfunded Pension Liabilities been transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14( of ERISA) of any Borrower or any ERISA Affiliate (determined at such time). 5.11 NO LITIGATION. Except as set forth in Disclosure Schedule 5.11, no Litigation, action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of Borrowers or Credit Parties, threatened against Borrowers, before any Governmental Authority or before any arbitrator or panel of arbitrators, (a) that challenges the execution, delivery and performance of Borrower's or Credit Party's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to Borrowers or Credit Parties and that, if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule 5.11, as of the Closing Date there is no Litigation pending or, to Borrower's or Credit Party's knowledge, threatened, that seeks damages in excess of One Hundred Thousand Dollars ($100,000) or injunctive relief against, or alleges criminal misconduct of, Borrowers. 5.12 BROKERS. Except as set forth on Disclosure Schedule 5.12, no broker or finder brought about the obtaining, making or closing of the Loan, and neither Borrowers nor any Affiliates thereof has any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 38 5.13 INTELLECTUAL PROPERTY. As of the Closing Date, Borrowers own or will own, and have or will have, rights to use all Intellectual Property necessary to continue to conduct its business as now conducted by it or presently proposed to be conducted by it, and each Patent, Trademark, registered Copyright and License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule 5.13. Borrowers conduct their businesses and affairs without knowingly infringing or interfering with any Intellectual Property of any other Person which could reasonably be expected to have a Material Adverse Effect. Except as set forth in Disclosure Schedule 5.13, neither Borrowers nor Credit Parties are aware of any material infringement claim by any other Person with respect to any Intellectual Property. 5.14 FULL DISCLOSURE. All representations and warranties made in any of the Loan Documents by Borrowers or Credit Parties or Guarantors shall be made after giving full effect to the transactions contemplated in this Agreement. No information contained in this Agreement, any of the other Loan Documents, Financial Statements or Collateral Reports or other written reports from time to time prepared by Borrowers or Credit Parties or Guarantors and delivered hereunder or any written statement prepared by Borrowers or Credit Parties or Guarantors and furnished by or on behalf of Borrowers or Credit Parties or Guarantors to Lender pursuant to the terms of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not materially misleading in light of the circumstances under which they were made. Projections from time to time delivered hereunder are or will be based upon the estimates and assumptions stated therein, all of which Borrowers and Credit Parties (other than Ganesha) and Guarantors (other than Ganesha), as applicable, believed at the time of delivery to be reasonable and fair in light of current conditions and current facts known to Borrowers and Credit Parties (other than Ganesha) and Guarantors (other than Ganesha), as applicable, as of such delivery date, and reflect Borrower's and Credit Party's (other than Ganesha's) and Guarantor's (other than Ganesha's) good faith and reasonable estimates of the future financial performance of Borrowers and of the other information projected therein for the period set forth therein. The Liens granted to Lender pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances 5.15 ENVIRONMENTAL MATTERS. Each Borrower and each Credit Party (other than Ganesha) and each Guarantor represent and warrant to Lender as follows: (a) Except as set forth in Disclosure Schedule 5.15, as of the date hereof, no Borrower and no Credit Party and no Guarantor knows of any Hazardous Material which is present, used, manufactured, handled, generated, transported, stored, treated, discharged, released, buried or disposed of on, in, under or about any Property in violation of applicable Environmental Laws; 39 (b) To the best of each Borrower's and each Credit Party's and each Guarantor's knowledge, following diligent inquiry, there has not been any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Material by any prior owners of prior occupants of any Property or by any third parties on, in, under or about any Property; (c) As of the date hereof there is no pending or, to each Borrower's and each Credit Party's and each Guarantor's knowledge, threatened litigation or proceedings before any administrative agency in which any person or entity alleges the release, threat of release, placement on, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or any Credit Party or any Guarantor, of any Hazardous Material, in violation of Environmental Laws; (d) As of the date hereof, no Borrower and no Credit Party and no Guarantor has received any notice and no Borrower and no Credit Party and no Guarantor has any actual knowledge that any Governmental Authority or any employee or agent thereof been determined, or threatens to determine, that there is a presence, release, threat of release, placement on, in, under or about any Property caused by any Borrower or by any Credit Party or by any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property caused by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or any Credit Party or any Guarantor, of any Hazardous Material, in violation of Environmental Laws; and (e) To each Borrower's and each Credit Party's and each Guarantor's knowledge, there have been no communications or agreements with any Governmental Authority or any private entity indicating that there has occurred, a release, threat of release, placement on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or by any Credit Party or by any Guarantor, of any Hazardous Material in violation of any Environmental Laws. 5.16 INSURANCE. Disclosure Schedule 5.16 lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by Borrowers, as well as a brief description thereof; and a copy of each current certificate of insurance naming Lender as an additional co-insured. 5.17 DEPOSIT AND DISBURSEMENT ACCOUNTS. Disclosure Schedule 5.17 lists all banks and other financial institutions at which Borrowers maintain or will maintain deposit, commodities, investment or other accounts as of each of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor. Disclosure Schedule 5.17 shall identify which deposit accounts of each entity are used to receive Governmental Authority payments. 40 5.18 VENDOR RELATIONS. As of the Closing Date, there exists no actual or, to the knowledge of Borrowers or Credit Parties or Guarantors, threatened termination or cancellation of, or any material adverse modification or change in the business relationship of Borrowers with any supplier essential to its operations. 5.19 BONDING; LICENSES; PERMITS. Except as set forth on Disclosure Schedule 5.19, as of the Closing Date, no Borrower is a party to or bound by any surety bond agreement or bonding requirement with respect to products or services sold by it or any trademark or patent license agreement with respect to products sold by it. Disclosure Schedule 5.19 list each permit each Borrower is required to obtain and maintain in order to conduct its respective Business in its respective Hospital Facility. 5.20 SOLVENCY. Both before and after giving effect to (a) the Loan to be made or incurred on the Closing Date or such other date as Advances are made or incurred, (b) the disbursement of the proceeds of such Advances pursuant to the instructions of Borrower's Representative; and (c) the payment and accrual of all transaction costs in connection with the foregoing, Borrowers are each and will be Solvent. 5.21 OTHER AGREEMENTS. Except as set forth on Disclosure Schedule 5.21, (a) there are no existing or proposed agreements, arrangements, understandings or transactions between any Borrower, any Credit Party and any of such Credit Party's officers, members, managers, directors, shareholders, partners, other interest holders, employees or Affiliates or any members of their respective immediate families, and (b) none of the foregoing Persons is directly or indirectly, indebted to or have any direct or indirect ownership, partnership or voting interest in, to Borrowers' or Credit Parties' knowledge, any Affiliate of any Borrower or any Credit Party or any Person that competes with Credit Parties (except that any such Persons may own stock in (but not exceeding two (2%) percent of the outstanding capital stock of) any publicly traded company that may compete with Credit Parties. 5.22 ACCOUNTS. In determining which Accounts are Eligible Receivables, Lender may rely on all statements and representations made by Borrowers with respect to any Account: Unless otherwise indicated in writing to Lender, (a) each Account of each Borrower is genuine and in all respects what it purports to be and is not evidenced by a judgment, (b) each Account of each Borrower arises out of a completed, bona fide sale and delivery of goods of rendering of Services by such Borrower in the ordinary course of business and in accordance with the terns and conditions of all purchase orders, contracts, certifications, participations, certificates of need and other documents relating thereto or forming a part of 41 the contract between such Borrower and the Account Debtor, (c) each Account of each Borrower is for a liquidated amount maturing as stated in a claim or invoice covering such sale of goods or rendering of Services, a copy of which has been furnished or is available to Lender, (d) each Account of each Borrower together with Lender's security interest therein, is not and will not be in the future (by voluntary act or omission by any Borrower), subject to any offset, lien, deduction, defense, dispute, counterclaim or other adverse condition, is absolutely owing to each such Borrower and is not contingent in any respect or for any reason (except Accounts owed or owing by Medicaid/Medicare Account Debtors that may be subject to offset or deduction under applicable law) (other than pursuant to Permitted Encumbrances or offsets, deductions, defenses, disputes or counterclaims arising in the ordinary course of business), (e) there are no facts, events or occurrences which in any way impair the validity or enforceability of any Account of any Borrower or tend to reduce the amount payable thereunder from the face amount of the claim or invoice and statements delivered to Lender with respect thereto (other than those arising in the ordinary course of business), (f) to the knowledge of each Borrower (i) the Account Debtor under each Account of each Borrower had the capacity to contract at the time any contract or other document giving rise thereto was executed and (ii) each such Account Debtor is solvent, (g) unless otherwise disclosed by Borrowers to Lender in writing prior to submitting such Accounts to Lender, there are no proceedings or actions which are threatened or pending against any Account Debtor under any Account of any Borrower which might result in any Material Adverse Effect on such Account Debtor's financial condition or the collectability thereof, (h) each Account of each Borrower has been billed and forwarded to the Account Debtor for payment in accordance with applicable laws and is in compliance and conformance with any requisite procedures, requirements and regulations governing payment by such Account Debtor with respect to such Account, and, if due from a Medicaid/Medicare Account Debtor, is properly payable directly to such Borrower, (i) each Borrower has obtained and currently has all Permits necessary in the generation of each Account of such Borrower, and (j) each Borrower has disclosed to Lender on each Notice of Request for Advance the amount of all Accounts of such Borrower for which Medicare is the Account Debtor and for which payment has been denied and subsequently appealed pursuant to the procedure described in the definition of Eligible Receivables hereof, and such Borrower is pursuing all available appeals in respect of such Accounts. 5.23 HEALTHCARE. Without limiting or being limited by any other provision of any Loan Document, each Borrower has timely filed or caused to be filed all material cost and other reports of every kind required by law, agreement or otherwise. Subject to subsection (j) of Section 5.22 (Accounts), there are no claims, actions or appeals pending (and no Borrower has filed any claims or reports which could reasonably result in any such claims, actions or appeals) before any commission, board or agency or other Governmental Authority, including, without limitation; any intermediary or carrier, the Joint Commission on Accreditation of Healthcare Organizations or other accrediting body, the Provider Reimbursement Review Board or the Administrator of the Centers for Medicare and Medicaid Services, with respect to any state or federal Medicare or Medicaid cost reports or claims filed by any Borrower, or any disallowance by any commission, board or agency or other Governmental Authority in connection with any audit of such cost reports. 42 No validation review or program integrity review related to any Borrower or the consummation of the transactions contemplated herein or to the Collateral have been conducted by any commission, board or agency or other Governmental Authority in connection with the Medicare or Medicaid programs, and to the knowledge of Borrowers, no such reviews are scheduled, pending or threatened against or affecting any of the providers, any of the Collateral or the consummation of the transactions contemplated hereby. 5.24 SURVIVAL. Each Borrower and, to the extent applicable, each Credit Party and each Guarantor, makes the representations and warranties contained herein with the knowledge and intention that Lender is relying and will rely thereon. All such representations and warranties will survive the execution and delivery of this Agreement and the making of the Advances hereunder. VI. AFFIRMATIVE COVENANTS --------------------- To induce Lender to make the Loan, Borrowers and Credit Parties and Guarantors, as applicable, make the following affirmative covenants in favor of Lender, each of which shall survive the execution and delivery of this Agreement. 6.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS Borrowers and Credit Parties and Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate and/or limited liability company existence and its material rights; continue to conduct its business substantially as conducted prior to the Closing Date, anticipated to be conducted, or as otherwise permitted hereunder; at all times maintain, preserve and protect all of their assets and properties necessary to the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices. 6.2. PAYMENT OF CHARGES (a) Obligation to Pay Charges. Subject to Section 6.2(b) (Right to Contest Charges), Borrowers shall pay and discharge or cause to be paid and discharged promptly all Charges payable by them, including (i) Charges imposed upon them, their income and profits, or any of their property (real, personal or mixed) and all Charges with respect to Taxes, social security and unemployment withholding with respect to their employees, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen or bailees in possession of any Collateral, in each case, before any thereof shall become past due, except in the case of clauses (ii) and (iii) where the failure to pay or discharge such Charges would not result in aggregate liabilities in excess of $100,000. (b) Right to Contest Charges. Borrowers may in good faith contest, by appropriate proceedings, the validity or amount of any Charges, Taxes or claims described in Section 6.2(a) (Obligation to Pay Charges); provided, that (i) adequate reserves with respect to such contest are maintained on the books of Borrowers, in accordance with GAAP; (ii) no Lien shall be imposed to secure 43 payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) Borrowers shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Lender evidence reasonably acceptable to Lender of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to Borrowers or the conditions set forth in this Section 6.2(b) (Right to Contest Charges) are no longer met. 6.3. BOOKS AND RECORDS. Borrowers shall keep adequate books and records with respect to their business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP (except as otherwise disclosed on the Financial Statements). 6.4. INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL. (a) Insurance. Disclosure Schedule 5.16 lists all existing policies of insurance that they carry and maintain, along with the names and contact information for each existing insurance carrier, which policies and carriers shall be subject to the prior written consent of Lender, which consent shall not be unreasonably withheld. If Lender fails or refuses to approve Borrower's existing policies of insurance or existing insurance carriers, then Borrowers agrees to increase or change its insurance coverage or change its insurance carrier as required by Lender, and the same shall be listed in Disclosure Schedule 5.16. Thereafter, Borrowers shall, at its sole cost and expense, maintain the policies of insurance described on Disclosure Schedule 5.16 as approved by Lender or may obtain and maintain other policies of insurance in form and amounts and with insurers reasonably acceptable to Lender. All policies of insurance (or the loss payable and additional insured endorsements delivered to Lender) that relate to coverage involving the Collateral shall contain provisions pursuant to which the insurer agrees to provide thirty (30) days prior written notice to Lender in the event of any non-renewal, cancellation or amendment of any such insurance policy. If Borrowers at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Lender may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Lender deems advisable. Lender shall have no obligation to obtain insurance for Borrowers or pay any premiums therefor. By doing so, Lender shall not be deemed to have waived any Default or Event of Default arising from Borrower's failure to maintain such insurance or pay any premiums therefore. All sums so disbursed, including reasonable attorneys' fees, court costs and other charges related thereto, shall be charged as an Advance against the Loan, shall be payable on demand by Borrowers to Lender and shall be additional Obligations hereunder secured by the Collateral, and shall bear interest at the Default Rate until paid in full to Lender. (b) Lender's Insurance Rights. Upon any change in Borrower's insurance risk profile (as determined by Borrower's insurance broker or as reasonably determined by Lender pursuant to and based upon generally recognized insurance underwriting standards (including changes caused by changes in laws affecting the potential liability of a Borrowers), Lender reserves the right to require 44 additional forms and limits of insurance to, in Lender's reasonable opinion, adequately protect Lender's interests and Lien in all or any portion of the Collateral and to ensure that Borrowers are protected by insurance in amounts and with coverage customary for its industry. If reasonably requested by Lender, Borrowers shall to deliver to Lender from time to time a report of a reputable insurance broker, reasonably satisfactory to Lender, with respect to its insurance policies. (c) Endorsements. Borrowers shall deliver to Lender, in form and substance reasonably satisfactory to Lender, endorsements to all general liability and other liability policies naming Lender as an additional insured. Borrowers shall irrevocably make, constitute and appoint Lender (and all officers, employees of Lender designated by Lender), so long as any Default or Event of Default has occurred and is continuing, as each Borrower's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under all policies of insurance relating to coverage of the Collateral, endorsing the name of Borrowers on any check or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. Lender shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower's Representative shall promptly notify Lender of any loss, damage, or destruction to the Collateral in the amount of $100,000 or more, whether or not covered by insurance. After deducting from such proceeds (i) the expenses incurred by Lender in the collection or handling thereof, and (ii) amounts required to be paid to creditors (other than Lender) having Permitted Encumbrances, Lender may, at its option, apply such proceeds to the reduction of the Obligations in accordance with Section 2.9(b) (Mandatory Prepayments). Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds could not reasonably be expected to have a Material Adverse Effect, Lender shall permit Borrowers to replace, restore, repair or rebuild the property. 6.5. COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS Each Borrower shall (a) substantially comply with all laws, statutes, rules, regulations, ordinances and tariffs of all Governmental Authorities applicable to it or its business, assets or operations, including applicable requirements of the Standards for Privacy of Individually Identifiable Health Information which were promulgated pursuant to HIPAA; (b) pay all taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other obligations or liabilities of any kind, except liabilities being contested in good faith and against which adequate reserves have been established in accordance with GAAP, (c) perform in accordance with its terms this Agreement and each contract, agreement or other arrangement to which it is a party or by which it or any of the Collateral is bound, except where the failure to comply, pay or perform could not reasonably be expected to have a Material Adverse Effect, (d) maintain and comply with all Permits necessary to conduct its business and comply with any new or additional requirements that may be imposed on it or its business, and (e) properly file all Medicaid/Medicare cost reports. 45 6.6. SUPPLEMENTAL DISCLOSURES From time to time Borrowers may, or shall if reasonably requested by Lender, supplement and update each Disclosure Schedule attached to this Agreement, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements or updates to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement or update to any such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Lender in writing, and (b) no supplement or update shall be required or permitted as to representations and warranties that expressly relate only to the Closing Date for purposes of representations and warranties made as of the Closing Date. If any Borrower has a material "commercial tort claim" (as defined in the Code), it shall promptly notify Lender of the existence thereof. 6.7. INTELLECTUAL PROPERTY Borrowers and Credit Parties (other than Ganesha) will conduct their business and affairs without material infringement of or material interference with any Intellectual Property of any other Person. 6.8. ENVIRONMENTAL MATTERS Each Borrower and each Credit Party (other than Ganesha) shall (a) comply with and use commercially reasonable efforts to cause each Borrower and its employees, agents and representatives at any Property to comply with all Environmental Laws; (b) without limiting the generality of clause (a) above, not engage in, permit or acquiesce in to any Hazardous Material Activity on, under or about any Property, except in strict accordance with all Environmental Laws, and with then prudent business practices as determined by said Borrower or Credit Party; (c) immediately advise Lender in writing of (i) the receipt by any Borrower or any Credit Party of written notice of any and all Hazardous Material Claims, (ii) any knowledge by any Borrower or any Credit Party that any Property does not comply with any Environmental Laws, (iii) any remedial action taken by any Borrower or any Credit Party or any other Person in response to any Hazardous Materials or Hazardous Materials Activity on, under or about any Property, or to any Hazardous Material Claims, and (iv) any Borrower's or any Credit Party's discovery of the presence of any Hazardous Materials or Hazardous Material Activity on, in, under or about any Property or any real property immediately adjacent to any Property whether or not the same requires notice to be given to any governmental entity or agency under Environmental Laws; and (d) submit to Lender, promptly upon receipt or preparation, copies of any and all reports, studies, analyses, correspondence, governmental comments or approvals, proposed removal or other remedial work contracts and similar information prepared or received by any Borrower or any Credit Party in connection with any remedial work or Hazardous Materials relating to any Property. If Lender at any time has a reasonable basis to believe that there may be a violation of any 46 Environmental Laws or Environmental Permits by any Borrower or any Credit Party (other than Ganesha) or any Environmental Liability of any Borrower or any Credit Party (other than Ganesha) arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any Property or any of their other real estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then such Borrower and/or Credit Party (other than Ganesha) shall, upon Lender's written request (i) cause the performance of such environmental investigations including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at such Borrower's or such Credit Party's expense, as Lender may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Lender and shall be in form and substance reasonably acceptable to Lender, and (ii) if such Borrower or Credit Party shall not have timely performed such environmental investigations, permit Lender or its representatives to have access to all real estate for the purpose of conducting such environmental investigations and testing as Lender reasonably deems appropriate, including subsurface sampling of soil and groundwater. Each Borrower and Credit Party (other than Ganesha) shall reimburse Lender for the costs of such investigations and the same will constitute a part of the Obligations secured hereunder 6.9. LANDLORD AGREEMENTS With respect to any location where any material amount of Collateral is stored or located, Lender may require Borrowers to provide a reasonable landlord or mortgagee agreement or bailee letter as a condition to the continued storage of the Collateral at such location(s). Borrowers shall timely and fully pay and perform all obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. 6.10. FURTHER ASSURANCES Borrowers and Credit Parties each agree that it shall, at Borrower's or Credit Party's expense and upon the reasonable request of Lender, duly execute and deliver, or cause to be duly executed and delivered, to Lender such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Lender to carry out more effectively the provisions and purposes of this Agreement and each Loan Document. 6.11. QUALIFIED CASH Borrowers shall deposit all net cash proceeds of Collateral as Qualified Cash in a Qualified Cash Account subject to the right of Borrowers to withdraw such cash proceeds. From and during the continuance of an Event of Default, Lender may exercise all rights under the applicable Control Agreements relating to any Qualified Cash, including the right to deliver applicable control exercise notices to each applicable Bank and securities intermediary and cause all such Qualified Cash to be forwarded immediately to a collection account designated by Lender through daily sweeps (or as otherwise directed by Lender). 47 6.12. OPERATION OF BUSINESS Borrowers shall have and maintain at all times after the Closing Date until the Obligations have been paid in full, sufficient approvals, consents, and permits from all necessary Governmental Authorities to fully operate the Business in accordance with Applicable Laws. Borrowers shall use their best efforts and use appropriate diligence to secure all approvals, consents and permits as and when required by Applicable Laws to fully operate the Business. 6.13. AFTER-ACQUIRED PROPERTY; ACQUISITION OF OTHER REAL PROPERTY INTERESTS. In the event from time to time Borrower acquires any fee interest in any real property or improvements or any master leasehold interest or ground leasehold interest in any real property or improvements, then Borrowers agrees to promptly notify Lender in writing at least ten (10) Business Days prior to such acquisition and to execute, acknowledge and deliver to Lender at least five (5) Business Days prior to such acquisition a deed of trust or mortgage for recordation on said other real property or improvements, as a first lien or encumbrance on Borrower's fee interest or, if applicable, on Borrower's interest in a master lease or ground lease. Each such deed of trust or mortgage shall secure repayment of the Obligations, including but not limited to repayment of the Loans. All reasonable expenditures incurred by Lender in performing this paragraph shall be additional Obligations payable upon demand and delivery of reasonable backup documentation, and shall bear interest at the Default Interest Rate from the date of demand for payment until paid in full. 6.14. OBSERVER STATUS ON BORROWER'S BOARD OF DIRECTORS. Until the Loan is paid in full and satisfied, Borrowers hereby grant Lender non-voting observer status with respect to all meetings of their respective boards of directors (and committees thereof) and all meetings of their shareholders (and committees thereof) of Borrowers, excluding meetings (or portions thereof) held in executive session called in good faith and that relate matters not in Borrower's ordinary course of business. Concurrently with delivery of all notices of meetings and agendas to its directors and shareholders, Borrowers agrees to and shall deliver a copy of each such notice and agenda to Lender. 6.15. INDEPENDENT DIRECTORS ON IHHI'S BOARD OF DIRECTORS Until the Loan is paid in full and satisfied, Independent Directors shall at all times constitute a majority of the directors serving as members of IHHI's board of directors. Notwithstanding the foregoing, if as of the Closing Date, Independent Directors do not constitute a majority of the directors serving as members of IHHI's board of directors, then (a) within thirty (30) calendar days following the Closing Date, IHHI shall deliver to Lender a written statement identifying at least two (2) new Independent Directors (with contact and biographical information included) who have been approached by IHHI and who have agreed to serve as members of IHHI's board of directors, if nominated and elected or if appointed; and (b) not later than ninety (90) calendar days following the Closing Date, Independent Directors shall at all times thereafter constitute a majority of the directors serving as members of IHHI's board of directors 48 6.16. FINANCIAL STATEMENTS, NOTICE OF REQUEST FOR ADVANCE, FINANCIAL REPORTS AND OTHER INFORMATION (a) Financial Reports. In addition to providing the Notice of Request for Advance in accordance with Section 2.4, Borrowers shall furnish to Lender the same financial statements and reports as are required to be delivered to the lender under the $80 Million Credit Agreement and the $10.7 Million Credit Agreement. (b) Other Materials. Borrowers shall furnish to Lender as soon as available, and in any event within ten (10) calendar days after the preparation or issuance thereof or at such other time as set forth below: (i) copies of such financial statements (other than those required to be delivered pursuant to Section 6.16(a) (Financial Reports) prepared by, for or on behalf of Borrowers and any other notes, reports and other materials related thereto, including, without limitation, any pro forma financial statements, (ii) within ten (10) calendar days after the end of each calendar month a report of its payroll taxes for the immediately preceding calendar month and evidence of payment thereof, (iii) any reports, returns, information, notices and other materials that Borrowers shall send to their shareholders, members, partners or other equity owners at any time, (iv) all Medicare and Medicaid cost reports and other documents and materials filed by Borrowers and any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for or on behalf of Borrowers, including, without limitation, (A) copies of licenses and permits required by any applicable federal, state, foreign or local law, statute ordinance or regulation or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys pertaining to any health care facility operated, owned or leased by any Borrower or any of its Affiliates or Subsidiaries, and (D) participating agreements relating to medical plans, (v) within fifteen (15) calendar days after the end of each calendar month for such month, (A) a report of the status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts, (B) a sales and collection report and accounts receivable and accounts payable aging schedule, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts reported in the monthly financial statements, and (C) a report of census and occupancy percentage by payor type, (vi) promptly upon receipt thereof, copies of any reports submitted to a Borrower by its independent accountants in connection with any interim audit of the books of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants, (vii) within fifteen (15) calendar days after the execution thereof, a copy of any contracts with the federal government or with a Governmental Authority in the State of California, (viii) within 15 calendar days after the end of each month, a monthly reconciliation of Borrower's clearing accounts for periodic interim payment reimbursements from Medicare and uniform payment plan reimbursements from Blue Cross, (ix) within 15 calendar days after the end of each month, a report analyzing cash clearing accounts and patient credit balances on a monthly basis, (x) within 15 calendar days after the end of each month (or at such more frequent intervals as may be required by Lender, in its sole discretion, a report specifically detailing for such month (a) monies paid out of any Borrower's operating account to other Borrowers, together with a specific description of the use by each such Borrower of such monies, and (b) monies in such master operating account used by any Borrower, together with a specific description of the specific use of such monies by any Borrower, and (xi) such additional information, documents, statements, reports and other materials as Lender may reasonably request in its Permitted Discretion. 49 (c) Notices. Borrowers shall promptly, and in any event within 5 Business Days after any Borrower or any officer of any Borrower obtains knowledge thereof, notify Lender in writing of (i) any pending or threatened litigation, suit, investigation, arbitration, dispute resolution proceeding or administrative proceeding brought or initiated by a Borrower or otherwise affecting or involving or relating to a Borrower or any of its property or assets to the extent (A) the mount in controversy exceeds $100,000 individually or in the aggregate, or (B) to the extent any of the foregoing seeks injunctive or declarative relief, (ii) any Default or Event of Default, which notice shall specify the nature and status thereof, the period of existence thereof and what action is proposed to be taken with respect thereto, (iii) any other development, event, fact, circumstance or condition that would reasonably be likely to have a Material Adverse Effect, in each case describing the nature and status thereof and the action proposed to be taken with respect thereto, (iv) any notice received by a Borrower from any payor of a claim, suit or other action such payor has, claims or has filed against any Borrower for an amount in excess of $10,000 individually or $50,000 in the aggregate, (v) any matter(s) affecting the value, enforceability or collectability of any of the Accounts or the Collateral, including, without limitation, claims or disputes in the amount of $10,000 or more, singly or $50,000 in the aggregate, in existence at any one time, (vi) any notice given by a Borrower to any other lender of a Borrower, which notice to Lender shall be accompanied by a copy of the applicable notice given to the other lender, (vii) receipt of any notice or request from any Governmental Authority or governmental payor regarding any liability or claim of liability or any material modification to any special program or the amounts payable to a Borrower thereunder, (viii) receipt of any notice by a Borrower regarding termination of any manager of any facility owned, operated or leased by a Credit Party, (ix) any planned change to any Borrower's "chargemaster" or similar database, as soon as practical and in any event prior to effecting such change, (x) any Account becoming evidenced or secured by an Instrument or Chattel Paper, and/or (xi) after a Borrower or any authorized officer of a Borrower, obtains knowledge thereof, notify Lender in writing of any oral or written communication from the Internal Revenue Service or otherwise with respect to any tax investigations, relating to a Borrower directly, or relating to any consolidated tax return which was filed on behalf of a Borrower, notices of tax assessment or possible tax assessment, years that are designated open pending tax examination or audit, and information that could give rise to an IRS tax liability or assessment. (d) Consents. Borrower's shall obtain and deliver to Lender from time to all required consents, approvals and agreements from such third parties as Lender shall determine are necessary or desirable in its sole discretion, each of which must be satisfactory to Lender in its sole discretion, with respect to (i) the Loan Documents and the transactions contemplated thereby, (ii) claims against a Borrower or the Collateral, and/or (iii) any agreements, consents, documents or instruments to which any Borrower is a party or by which any properties or assets of any Borrower or any of the Collateral is or are bound or subject, including, without limitation, landlord waivers and consents with respect to leases. (e) Operating Budget. Borrower's shall furnish to Lender on or prior to the Closing Date and, for each Fiscal Year of Borrower's thereafter, not less than thirty (30) calendar days prior to the commencement of such Fiscal Year, consolidated month by month projected operating budgets, annual projections, profit and loss statements, and cash flow reports of and for Borrowers for such upcoming fiscal year (including an income statement for each month and a balance sheet as of the end of the last month in each fiscal quarter). 50 (f) Non-Compliance Fee. To the extent any of the foregoing items in this Section 6.16 (Financial Statements, etc.) are not delivered to Lender on a timely basis, Borrowers shall be obligated to pay Lender a daily fee equal to $500 for each day until such item is delivered to Lender, whether or not a Default or Event of Default occurs or is declared, provided that nothing shall prevent Lender from considering any failure to comply with the terms of this Section 6.16 (Financial Statements, etc.) to be a Default or an Event of Default. Such fee shall be payable if the delivery obligation is not cured within 5 Business Days from the date said delivery obligation was originally due. 6.17. TRUE BOOKS Each Borrower shall (a) keep true, correct, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and transactions in all material respects; and (b) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements. 6.18. INSPECTION; PERIODIC AUDITS Each Borrower shall permit the representatives of Lender, at the expense of Borrowers, from time to time during normal business hours upon one (1) Business Day notice, to (a) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers, (b) make copies and extracts therefrom, and (c) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts with its officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing); provided, however, in each case, no advance notice shall be required during the continuance of a Default or Event of Default. 6.19. FURTHER ASSURANCES; POST CLOSING At Borrower's cost and expense, each Borrower shall (a) take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, assignments, instructions or documents as Lender may request in its Permitted Discretion with respect to the purposes, terms and conditions of the Loan Documents and the consummation of the transactions contemplated thereby, and (b) without limiting and notwithstanding any other provision of any Loan Document, execute and deliver, or cause to be executed and delivered, such agreements and documents, and take or cause to be taken such actions, and otherwise perform, observe and comply with such obligations. 6.20. PAYMENT OF INDEBTEDNESS Except as otherwise permitted by the Loan Documents, Borrowers shall pay, discharge or otherwise satisfy at or before maturity (subject to applicable grace periods and in the case of trade payables, to ordinary course payment practices) all of their material obligations and liabilities, except when the amount or validity thereof is being contested in good faith by appropriate proceedings and such reserves as Lender may deem proper and necessary in its sole discretion shall have been made. 51 6.21. TERMINATION OF LIENS If Liens other than Permitted Encumbrances exist, Borrowers immediately shall take all actions, execute and deliver all documents and instruments necessary to release and terminate such Liens. 6.22. USE OF PROCEEDS Borrowers shall use the proceeds from the Revolving Facility only for the purposes set forth in this Agreement. 6.23. SECURITY DOCUMENTS; LIEN ON COLLATERAL Each Borrower shall (a) execute, obtain, deliver, file, register and/or record any and all financing statements, continuation statements, stock powers, instruments and other documents, or cause the execution, filing, registration, recording or delivery of any and all of the foregoing, that are necessary or required under law or otherwise or reasonably requested by Lender to be executed, filed, registered, obtained, delivered or recorded to create, maintain, perfect, preserve, validate or otherwise protect the pledge of the Collateral to Lender and Lender's perfected first priority Lien on the Collateral (and Borrowers irrevocably grant Lender the right, at Lender's option, to file any or all of the foregoing), (b) immediately upon learning thereof, report to Lender any reclamation, return or repossession of goods in excess of $10,000 (individually or $50,000 in the aggregate), and (c) defend the Collateral and Lender's perfected first priority Lien (or such other priority Lien as shall be provided for by this Agreement) thereon against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to Lender, and pay all reasonable costs and expenses (including, without limitation, in-house documentation and diligence fees and legal expenses and reasonable attorneys' fees and expenses) in connection with such defense, which may at Lender's discretion be added to the Obligations. Each Borrower hereby authorizes Lender to file such UCC-1 financing statements and amendments thereto as Lender may deem necessary to perfect Lender's Lien on the Collateral in such governmental offices as Lender shall deem necessary. 6.24. TAXES AND OTHER CHARGES All payments and reimbursements to Lender made under any Loan Document shall be free and clear of and without deduction for all taxes, levies, imposts, deductions, assessments, charges or withholdings, and all liabilities with respect thereto of any nature whatsoever, excluding taxes to the extent imposed on Lender's net income. If any Borrower shall be required by law to deduct any such amounts from or in respect of any sum payable under any Loan Document to Lender, then the sum payable to Lender shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. Notwithstanding any other provision of any Loan Document, if at any time after the Closing (i) any change in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (ii) any new law, regulation, treaty or directive enacted or any interpretation or application thereof, or (iii) compliance by Lender with any request or directive (whether or riot having the 52 force of law) from any Governmental Authority: (A) subjects Lender to any tax, levy, impost, deduction, assessment, charge or withholding of any kind whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to Lender of any amount payable thereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or commitment fees or other fees payable hereunder or changes in the rate of tax on the overall net income of Lender), or (B) imposes on Lender any other condition or increased cost in connection with the transactions contemplated thereby or participations therein; and the result of any of the foregoing is to increase the cost to Lender of making or continuing any Loan hereunder or to reduce any amount receivable hereunder, then, in any such case, Borrowers shall promptly pay to Lender any additional amounts necessary to compensate Lender, on an after-tax basis, for such additional cost or reduced amount as determined by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 6.24 (Taxes and Other Charges) it shall promptly notify Borrowers of the event by reason of which Lender has become so entitled, and each such notice of additional amounts payable pursuant to this Section 6.24 (Taxes and Other Charges) submitted by Lender to Borrowers shall, absent manifest error, be final, conclusive and binding for all purposes. 6.25. PAYROLL TAXES Without limiting or being limited by any other provision of any Loan Document, each Borrower at all times shall retain and use a Person reasonably acceptable to Lender to process, manage and pay its payroll taxes. VII. NEGATIVE COVENANTS ------------------ To induce Lender to make the Loan, Borrowers and Credit Parties, as applicable, make the following negative covenants in favor of Lender, each of which shall survive the execution and delivery of this Agreement. 7.1. MERGERS, SUBSIDIARIES, ETC. Borrowers shall not, directly or indirectly, by operation of law or otherwise, (a) form or acquire any Subsidiary in addition to the existing Subsidiaries of Borrowers; or (b) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person, without first receiving the prior written consent of Lender. 7.2. INVESTMENTS; LOANS AND ADVANCES. Borrowers shall not make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that: (a) Borrowers may hold investments constituting notes payable, or stock or other securities issued to Borrowers pursuant to negotiated agreements with respect to settlement of such issuer's accounts in the ordinary course of business consistent with past practices; (b) Borrowers may invest Qualified Cash in Qualified Cash Accounts (i) as of the Closing Date in the kinds and types of 53 investments that they are then so invested, and (ii) thereafter, as to any new investments made after the Closing Date in other kinds and types of investments as are in conformity with Borrower's investment policies previously adopted by its board of directors or managers so long as Lender's Liens remain perfected therein, and (c) Borrowers may invest cash and cash equivalents (other than Qualified Cash in the Qualified Cash Accounts) (i) as of the Closing Date in the kinds and types of investments that they are then so invested, and (ii) thereafter, as to any new investments made after the Closing Date in other kinds and types of investments as are in conformity with Borrower's investment policies previously adopted by its board of directors. 7.3. INDEBTEDNESS. (a) Borrowers shall not create, incur or assume any Indebtedness, except (without duplication) (i) Indebtedness created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures or other capital assets acquired by Borrowers in the ordinary course of business; (ii) the Loan and the other Obligations; (iii) unsecured Indebtedness (other than Funded Debt) incurred in the ordinary course of Borrower's business; (iv) Indebtedness created after the date hereof for financing of insurance premiums; and (v) existing Indebtedness, if any, described in Disclosure Schedule 7.3. (b) Borrowers shall not, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Funded Debt prior to its scheduled due date, other than the Obligations. 7.4. EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS. Except as set forth in Disclosure Schedule 5.21, no Borrower has entered into any transaction with any of its Affiliates or with any of its employees. Borrowers shall not enter into or be a party to any transaction with any Affiliate thereof except in the ordinary course of and pursuant to the reasonable requirements of Borrower's business and upon fair and reasonable terms that are no less favorable to Borrowers than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of Borrowers. Borrowers shall not enter into any lending or borrowing transaction with any employees of Borrowers, except loans to its respective employees in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs, pension plan advances, and similar purposes. 7.5. CAPITAL STRUCTURE AND BUSINESS. No Borrower or Credit Party shall amend its charter, articles, bylaws or operating agreement without first receiving the prior written consent of Lender. No Borrower or Credit Party shall engage in any business other than the businesses currently engaged in by it, without first receiving the prior written consent of Lender. 7.6. GUARANTEED INDEBTEDNESS. Borrowers shall not create, incur, or assume any Guaranteed Indebtedness unless such Guaranteed Indebtedness would be permitted to be incurred directly by Borrowers pursuant to Section 7.3) (Indebtedness). 54 7.7. LIENS. Except as set forth in Disclosure Schedule 5.4, no Borrower is subject to any existing Liens (excluding Lender's Liens). Borrowers shall not create, incur, assume or permit to exist any Lien on or with respect to any of the Collateral (whether now owned or hereafter acquired) except for Permitted Encumbrances. 7.8. SALE OF COLLATERAL AND INTELLECTUAL PROPERTY. Borrowers shall not sell, transfer, convey, assign, license or otherwise dispose of any interest in Collateral, other than in the ordinary course of business, with an aggregate value in excess of $100,000. Borrowers shall not sell, transfer, convey, assign, license or otherwise dispose of any interest in Borrowers. 7.9. ERISA. Borrowers shall not cause or permit any ERISA Affiliate to, cause or permit to occur (a) an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (b) an ERISA Event to the extent such ERISA Event would reasonably be expected to result in taxes, penalties and other liabilities in an aggregate amount in excess of $100,000 in the aggregate. 7.10. HAZARDOUS MATERIALS. Borrowers shall not cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any real property owned or leased by Borrowers where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact the value or marketability of any real property owned or leased by Borrowers or any of the Collateral, other than such violations or Environmental Liabilities that could not reasonably be expected to have a Material Adverse Effect. 7.11. RESTRICTED PAYMENTS. During the term of this Agreement, Borrowers shall not make any Restricted Payment, except (a) employee loans permitted under Section 7.4 (Employee Loans, etc.), (b) so long as no Event of Default shall have occurred and is continuing, dividends and distributions by Borrowers to its Shareholders or partners or members, and (c) ordinary course payments to Borrowers and/or to Credit Parties for services rendered to the Business. 7.12. CHANGE OF CORPORATE NAME, STATE OF ORGANIZATION OR LOCATION; CHANGE OF FISCAL YEAR No Borrower and no Credit Party and no Guarantor shall (a) change its name as it appears in official filings in the state of its incorporation or organization, (b) change its chief executive office, principal place of business, corporate offices or locations at which Collateral is held or stored, or the location of their records concerning the Collateral, (c) change the type 55 of entity that it is, (d) change its organization identification numbers issued by its state of its incorporation or organization, or (e) change its state of incorporation or organization or incorporate or organize in any additional jurisdictions, in each case without at least ten (10) Business Days prior written notice to Lender and provided that Borrowers and Credit Parties and Guarantors shall have taken such actions and executed such documents as Lender reasonably requests in connection therewith to continue the perfection of any Liens in favor of Lender in any Collateral, and provided further that, any change to such Borrowers or such Credit Party's or such Guarantor's jurisdiction or state of incorporation or organization, such new jurisdiction or state of incorporation or organization shall be located in the United States. Borrowers shall not change their Fiscal Year without giving Lender at least thirty (30) calendar days prior written notice thereof. 7.13. NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. Borrowers shall not directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) that could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions. 7.14. DIVIDENDS; REDEMPTIONS No Borrower shall (a) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests, (b) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing, (c) otherwise make any payments or distributions to any shareholder, member, partner or other equity owner in such Person's capacity as such, or (d) make any payment of any management or service fee; provided, however, that absent the occurrence and continuation of a Default of Event of Default, and if a Default or Event of Default would not arise therefrom, (i) each Borrower may declare, pay or make dividends or distributions payable in its stock, or split-ups or reclassifications of its stock; and (ii) each Borrower may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements. 7.15. DR. SHAH. Until the Loan is paid in full and satisfied, Borrowers will not, directly or indirectly, permit Dr. Shah to be nominated, or elected, or appointed, or directly or indirectly compensated, paid, engaged, retained or become, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, IHHI, WMC-A, WMC-SA, Coastal or Chapman. 7.16. SHAREHOLDER BLOCKING RIGHTS No Borrower shall issue any capital stock that grants or provides any direct or indirect owner thereof any Shareholder Blocking Rights. 56 7.17. FINANCIAL COVENANTS Borrower's shall not violate the financial covenants set forth on Annex A to this Agreement. VIII. EVENTS OF DEFAULT ----------------- 8.1. Events of Default. The occurrence of any one or more of the following shall constitute an Event of Default: (a) Any Borrower fails to make any payment of interest or of principal on the Loan within five (5) calendar days after the same is due and payable, or any Borrower fails to make payment of the Unused Commitment Fee within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any payment within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and on the Loan. (b) Borrowers fail to pay or reimburse Lender for any costs or expenses reimbursable under this Agreement or under any other Loan Document, or Borrowers fail to make payment any Obligations (not specifically referenced in any other subsection of this Section 8.1 (Events of Default)) within ten (10) calendar days following Lender's demand for such reimbursement or payment thereof; provided, that if any Borrower fails to pay such amount within said ten (10) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and on the Loan. (c) Borrowers or Credit Parties fail or neglect to perform, keep or observe any provision of this Agreement applicable to them (not specifically referenced in any other subsection of this Section 8.1 (Events of Default)) and the same shall remain unremedied for ten (10) Business Days or more after the earlier of (i) Borrower's or Credit Party's actual knowledge thereof, or (ii) Borrower's or Credit Party's receipt of notice thereof from Lender. (d) Borrowers fail or neglect to perform, keep or observe any of the provisions of Annex A (Financial Covenants) or any provisions set forth in Annex C (Cash Management System) or Annex D (Collateral Reports), respectively, and the same shall remain unremedied in whole or in part for thirty (30) calendar days or more after the earlier of (i) said Borrower's actual knowledge thereof, or (ii) said Borrower's receipt of notice thereof from Lender. (e) Borrowers deliver a supplement or update to any Disclosure Schedule as required by Section 6.6 (Supplemental Disclosures) and Lender fails to approve of the same because such supplement or update (i) discloses the existence of an Event of Default, or (ii) discloses a Material Adverse Effect, or (iii) discloses any fact or circumstance which, with the passage of time or otherwise, would constitute an Event of Default or Material Adverse Effect. (f) Borrowers or Credit Parties or Guarantors fail or neglect to timely perform, keep or observe any other provision of any of the other Loan Documents required to be performed by it and the same shall remain unremedied in whole or in part for ten (10) Business Days after receipt of notice thereof from Lender. 57 (g) Any Guarantor fails or neglects to timely perform, keep or observe any provision of the Guaranty Agreement and the same shall remain unremedied in whole or in part for ten (10) Business Days after receipt of notice thereof from Lender. (h) Any Borrower fails to make any payment of interest or of principal on the $45,000,000 Real Estate Term Loan or on the $35,000,000 Non-Revolving Line of Credit Loan made pursuant to the $80 Million Credit Agreement, or on the $10,700,000 Convertible Loan made pursuant to the $10.7 Million Credit Agreement, within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any such payment within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and the Loan under this Agreement. (i) Any Borrower fails or neglects to perform, keep or observe any provision of the $80 Million Credit Agreement or $10.7 Million Credit Agreement or other documents and instruments executed or delivered in connection therewith (not specifically referenced in any other subsection of this Section 8.1 (Events of Default)) and such Borrower shall fail to cure the same by expiration of the cure period set forth in the $80 Million Credit Agreement or $10.7 Million Credit Agreement or other document or instrument executed or delivered in connection therewith. (j) A default or breach occurs under any other agreement, document or instrument to which any Borrower or any Credit Party is or are a party that is not cured within any applicable grace period therefore, such default or breach is not waived in writing by Lender, and such default or breach involves the failure to make any payment when due in respect of any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of Borrowers or Credit Parties in an amount in excess of $100,000; or (ii) an event, condition or circumstance occurs that causes, or permits any holder of Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a portion thereof to become due prior to its maturity date or prior to its regularly scheduled dates of payment, or the holder of such Indebtedness or Guaranteed Indebtedness or such trustee has the right to demand cash collateral in respect of such Indebtedness or Guaranteed Indebtedness, in each case, regardless of whether such right is exercised, by such holder or trustee. (k) Any representation or warranty in this Agreement or in any other Loan Document or in any written statement, report, Financial Statement or certificate made or delivered to Lender by Borrowers or Credit Parties or Guarantors is untrue or incorrect in any material respect as of the date when made or deemed made. (l) Assets of Borrowers or Credit Parties with a fair market value of $100,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or general assignee for the benefit of creditors of Borrowers or Credit Parties and such condition continues for thirty (30) calendar days or more. 58 (m) A case or proceeding is commenced against any Borrower or any Credit Party seeking a decree or order in respect of any Borrower or any Credit Party (i) under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for said Borrower or Credit Party or for any substantial part of said Borrower's or Credit Party's assets, or (iii) ordering the winding-up or liquidation of the affairs of any Borrower or Credit Party, and such case or proceeding shall remain undismissed or unstayed for sixty (60) calendar days or more or a decree or order granting the relief sought in such case or proceeding is granted by a court of competent jurisdiction. (n) Any Borrower or any Credit Party (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or Credit Party or for any substantial part of such Borrower's or Credit Party's assets, (iii) makes a general assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing; or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due. (o) A final judgment or judgments for the payment of money in excess of $100,000 in the aggregate at any time are outstanding against any Borrower or Credit Party (which judgments are not covered by insurance policies as to which liability has been accepted in writing by the insurance carrier), and the same is/are not, within thirty (30) calendar days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay. (p) Any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Borrower or any Credit Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any Loan Document ceases to be a valid, perfected and attached first priority Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby. (q) Any Change of Control occurs. (r) A Material Adverse Effect shall exist as determined in the reasonable judgment of Lender. (s) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason, to grant Lender non-voting observer status with respect to all meetings of its board of directors and all meetings of its shareholders. (t) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason to deliver to Lender, concurrently with delivery to all shareholders, a notice and agenda of each annual meeting, special meeting or emergency meeting of shareholders. 59 (u) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason to deliver to Lender, concurrently with delivery to all directors, a notice and agenda of each annual meeting, regular meeting, special meeting or emergency meeting of directors. (v) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower waive notice of a directors meeting and fail to deliver advance notice to Lender of said waiver of directors meeting. (w) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower take any action without a meeting, which action was required or permitted to be taken at a meeting, and fail to deliver advance notice of the taking of said action to Lender. (x) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower hold a meeting by written consensus and fail to deliver advance notice of said meeting to Lender. (y) Dr. Shah at any time is nominated, or elected, or appointed, or directly or indirectly is compensated, paid, engaged, retained or becomes, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, IHHI, WMC-A, WMC-SA, Coastal or Chapman. (z) Within thirty (30) calendar days following the Closing Date, IHHI for any reason fails to deliver to Lender a written statement identifying at least two (2) new Independent Directors (with contact and biographical information included) who have been approached by IHHI and who have agreed to serve as members of IHHI's board of directors, if nominated and elected or if appointed. (aa) Within ninety (90) calendar days following the Closing Date, IHHI for any reason has failed to nominate and elect, or appoint, Independent Directors who constitute a majority of the directors serving as members of IHHI's board of directors. (bb) At any time after the date which is ninety (90) calendar days following the Closing Date, Independent Directors cease to constitute a majority of directors on IHHI's board of directors, and replacement Independent Director(s) acceptable to Lender in its sole discretion are not appointed, or nominated and elected, to IHHI's board of directors within thirty (30) calendar days after the date such Independent Directors cease to constitute a majority of directors on IHHI's board of directors. (cc) IHHI, as tenant, commits a breach or default under the Triple Net Lease and the same remains uncured following receipt of all required notices and expiration of all applicable cure periods. 60 (dd) IHHI, as tenant, commits a breach or default under any of the Chapman Leases and the same remains uncured following receipt of all required notices and expiration of all applicable cure periods. (ee) Without first receiving the prior written consent of Lender (which consent may be granted or withheld by Lender in its sole discretion): (i) IHHI for any reason terminates the sublease with WMC-A for the Western Medical Center - Anaheim; or (ii) IHHI for any reason terminates the sublease with WMC-SA for the Western Medical Center - Santa Ana; (iii) IHHI for any reason terminates the sublease with Coastal for the Coastal Communities Hospital; or (iv) IHHI for any reason terminates any of the sub-subleases with Chapman for any portion of the Chapman Medical Center. (ff) PCHI ceases to own all (100%) of the fee simple title (i) in the Western Medical Center - Anaheim, or (ii) in the Western Medical Center - Santa Ana; or (iii) in the Coastal Communities Hospital. Upon the occurrence of any Event of Default, notwithstanding any other provision of any Loan Document, Lender may, in its sole, absolute and unfettered discretion, without notice or demand, do any of the following: (A) terminate its obligations to make further Advances under the Loan, whereupon the same shall immediately terminate, and/or (B) declare the Loan and the Note, all interest thereon and all other Obligations to be due and payable immediately (except in the case of an Event of Default under Section 8.1(m) or (n), in which event the Loan, the Note and all Obligations shall automatically and without further act by Lender be due and payable). IX. RIGHTS AND REMEDIES AFTER DEFAULT --------------------------------- 9.1. RIGHTS AND REMEDIES (a) In addition to the acceleration provisions set forth in Article VIII (Events of Default) above, if an Event of Default has occurred and is continuing, Lender may, at its option, without notice, accelerate the Maturity Date of the Loan and declare all of the Obligations, including all amounts due under the Loan, to be forthwith due and payable, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and Credit Parties and Guarantors. (b) In addition to the acceleration provisions set forth in Article VIII (Events of Default) above, upon the occurrence and continuation of an Event of Default, Lender shall have the right to exercise any and all rights, options and remedies provided for in the Loan Documents, under the Code or at law or in equity, including, without limitation, the right to (i) apply any property of any Borrower and any Credit Party held by Lender to reduce the Obligations, (ii) foreclose the Liens created under the Security Documents, (iii) realize upon, take possession of and/or sell any Collateral or securities pledged (other than 61 Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law) with or without judicial process, (iv) exercise all rights and powers with respect to the Collateral as any Borrower or any Credit Party, as applicable, might exercise (other than with respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law), (v) collect and send notices regarding the Collateral (other than with respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law), with or without judicial process, (vi) by its own means or with judicial assistance, enter any premises at which Collateral and/or pledged securities are located, or render any of the foregoing unusable or dispose of the Collateral and/or pledged securities on such premises without any liability for rent, storage, utilities or other sums, and no Borrower or Credit Party shall resist or interfere with such action, (vii) at Borrower's expense, require that all or any part of the Collateral be assembled and made available to Lender at any place designated by Lender, (viii) reduce or otherwise change the Facility Cap and/or (ix) relinquish or abandon any Collateral or securities pledged or any Lien thereon. Notwithstanding any provision of any Loan Document, Lender, in its sole discretion, shall have the right, at any time that Borrower's fail to do so, and from time to time, without prior notice, to: (i) obtain insurance covering any of the Collateral to the extent required hereunder; (ii) pay for the performance of any of Obligations; (iii) discharge taxes or Liens on any of the Collateral that are in violation of any Loan Document unless Borrower's are in good faith with due diligence by appropriate proceedings contesting those items; and (iv) pay for the maintenance and preservation of the Collateral. Such expenses and advances shall be added to the Obligations until reimbursed to Lender and shall be secured by the Collateral, and such payments by Lender shall not be construed as a waiver by Lender of any Event of Default or any other rights or remedies of Lender. All such rights and remedies shall be cumulative and none exclusive. (c) If any Event of Default has occurred and is continuing, Lender may, without notice, suspend the Revolving Facility with respect to additional Advances, whereupon any additional Advances may be made or incurred in Lender's sole discretion, so long as such Event of Default is continuing. (d) If any Event of Default has occurred and is continuing, Lender may, without notice except as otherwise expressly provided herein, increase the Interest Rate to the Default Rate. (e) Borrowers agree that notice received by it at least five (5) calendar days before the time of any intended public sale, or the time after which any private sale or other disposition of Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrowers. At any sale or disposition of Collateral or securities pledged, Lender may (to the extent permitted by applicable law) purchase all or any part thereof free from any right of redemption by any Borrower which right is hereby waived and released. Borrowers covenant and agree not to, and not to permit or cause any of their Subsidiaries to, interfere with or impose any obstacle to Lender's exercise of its rights and remedies with respect to the Collateral. Lender, in dealing with or disposing of the Collateral or any part thereof, shall not be required to give priority or preference to any item of Collateral or otherwise to marshal assets or to take possession or sell any Collateral with judicial process. 62 (f) In addition to all other rights and remedies granted to it under this Agreement and the Security Documents and under any other instrument or agreement securing, evidencing or relating to any of the Indebtedness, if any Event of Default shall have occurred and be continuing, the Lender may exercise all rights and remedies of a secured party under the Code (whether or not the Code applies to the affected Collateral). Without limiting the generality of the foregoing, the Borrowers expressly agree that upon the occurrence and during the continuance of an Event of Default, Lenders, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon the Borrowers or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code and other applicable law), may forthwith enter upon the premises of the Borrowers where any Collateral is located through self-help in compliance with Applicable Laws, without judicial process, without first obtaining a final judgment or giving the Borrowers or any other Person notice and opportunity for a hearing on the Lender's claim or action and may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, license, assign, give an option or options to purchase, or sell or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at a public or private sale or sales, at any exchange at such prices as it may deem acceptable, for cash or on credit or for future delivery without assumption of any credit risk. The Lender shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of Lender, the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption the Borrowers hereby release. Such sales may be adjourned and continued from time to time with or without notice. At any such sale or other disposition, Lender reserves the right to sell for cash, on credit (whether secured or unsecured), or a combination of both, and not to credit the Obligations unless and until any deferred portion of the purchase has actually been paid to Lender in good funds. The Lender shall have the right to conduct such sales on each Borrower's premises or elsewhere and shall have the right to use each Borrower's premises without charge for such time or times as the Lender deem necessary or advisable. (g) If any Event of Default shall have occurred and be continuing, Borrowers further agree, at Lender's request, to assemble the Collateral and make it available to Lender at a place or places designated by Lender which are reasonably convenient to Lender and Borrowers, whether at a Borrower's premises or elsewhere. Until Lender is able to effect a sale, lease, or other disposition of Collateral, Lender shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by the Lender. (h) To the extent that applicable law imposes duties on Lender to exercise remedies in a commercially reasonable manner, the Borrowers acknowledge and agree that it is not commercially unreasonable for Lender (i) to fail to incur expenses reasonably deemed significant by Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account 63 debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as Borrowers, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure Lender against risks of loss, collection or disposition of Collateral or to provide to Lender a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Lender, to obtain the services of brokers, investment bankers, consultants and other professionals to assist Lender in the collection or disposition of any of the Collateral. The Borrowers acknowledge that the purpose of this Section 9.1(g) (Rights and Remedies) is to provide non-exhaustive indications of what actions or omissions by Lender would not be commercially unreasonable in Lender's exercise of remedies against the Collateral and that other actions or omissions by Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 9.1(g) (Rights and Remedies). Without limitation upon the foregoing, nothing contained in this Section 9.1(g) (Rights and Remedies) shall be construed to grant any rights to Borrowers or to impose any duties on Lender that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section 9.1(g) (Rights and Remedies). (i) Lender shall not be required to make any demand upon, or pursue or exhaust any of their rights or remedies against, Borrowers, Credit Parties, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof. Lender shall not be required to marshal the Collateral or any guarantee of the Obligations or to resort to the Collateral or any such guarantee in any particular order, and all of its and their rights hereunder or under any other Loan Document shall be cumulative. To the extent it may lawfully do so, the Borrowers absolutely and irrevocably waive and relinquish the benefit and advantage of, and covenants not to assert against Lender, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise. (j) Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral, and Lender's compliance therewith will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. 64 (k) Upon the exercise by Lender of any power, right, privilege, or remedy pursuant to this Agreement which requires any consent, approval, registration, qualification, or authorization of any Governmental Authority or any third party, Borrowers agree to execute and deliver, or will cause the execution and delivery of, all applications, certificates, instruments, assignments, and other documents and papers that Lender or any purchaser of the Collateral may be required to obtain for such consent, approval, registration, qualification, or authorization. To the maximum extent permitted by applicable law, Borrowers and Credit Parties waive all claims, damages, and demands against Lender, its Affiliates, agents, and the officers and employees of any of them arising out of the repossession, retention or sale of any Collateral except such as are determined in a final judgment by a court of competent jurisdiction to have arisen solely out of the gross negligence or willful misconduct of such Person. (l) In connection with the exercise of its remedies pursuant to Article IX (Rights and Remedies After Default), Lender may, but shall have no obligation to: (i) exchange, enforce, waive or release any portion of the Collateral and any other security for the Obligations; (ii) subject to the Agreement, apply such Collateral or security and direct the order or manner of sale thereof as Lender may, from time to time, determine; and (iii) settle, compromise, collect or otherwise liquidate any such Collateral or security in any manner following the occurrence and during the continuance of an Event of Default, without affecting or impairing Lender's right to take any other further action with respect to any Collateral or security or any part thereof. Borrowers and the Credit Parties waive any right they may have to require Lender to pursue any third Person for any of the Obligations. (m) Borrowers recognize that upon the occurrence of an Event of Default, any remedy of law may prove to be inadequate relief to Lender; therefore, Borrowers agree that Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. (n) The rights and remedies provided under this Agreement are cumulative and may be exercised singly or concurrently and are not exclusive of any rights and remedies provided by applicable law or equity. 9.2. APPLICATION OF PROCEEDS In addition to any other rights, options and remedies Lender has under the Loan Documents, the Code, at law or in equity, all dividends, interest, rents, issues, profits, fees, revenues, income and other proceeds collected or received from collecting, holding, managing, renting, selling or otherwise disposing of all or any part of the Collateral or any proceeds thereof upon exercise of its remedies hereunder shall be applied in the following order of priority: (a) first, to the payment of all costs and expenses of such collection, storage, lease, holding, operation, management, sale, disposition or delivery and of conducting Borrower's business and of maintenance, repairs, replacements, alterations, additions and improvements of or to the Collateral, and to the payment of all sums which Lender may be required or may elect to pay, if any, for taxes, assessments, insurance and other charges upon the Collateral or any 65 part thereof, and all other payments that Lender may be required or authorized to make under any provision of this Agreement (including, without limitation, in each such case, in-house documentation and diligence fees and legal expenses, search, audit, recording, professional and filing fees and expenses and reasonable attorneys' fees and all expenses, liabilities and advances made or incurred in connection therewith); (b) second, to the payment of all Obligations as provided herein; (c) third, to the satisfaction of Indebtedness secured by any subordinate security interest of record in the Collateral if written notification of demand therefor is received before distribution of the proceeds is completed, provided that if requested by Lender, the holder of a subordinate security interest shall furnish reasonable proof of its interest and unless it does so, Lender need not address its claims; and (d) fourth, to the payment of any surplus then remaining to Borrowers, unless otherwise required by law or directed by a court of competent jurisdiction, provided that Borrowers shall be liable for any deficiency if such proceeds are insufficient to satisfy the Obligations or any of the other items referred to in this section. 9.3. RIGHTS OF LENDER TO APPOINT RECEIVER Without limiting and in addition to any other rights, options and remedies Lender has under the Loan Documents, the Code, at law or in equity, upon the occurrence and continuation of an Event of Default, Lender shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction in any action taken by Lender to enforce its rights and remedies in order to manage, protect, preserve, sell or dispose of the Collateral and continue the operation of the business of Borrowers and to collect all revenues and profits thereof and apply the same to the payment of all expenses and other charges of such receivership including the compensation of the receiver and to the payments as aforesaid until a sale or other disposition of such Collateral shall be finally made and consummated. 9.4. RIGHTS AND REMEDIES NOT EXCLUSIVE Lender shall have the right in its sole discretion to determine which rights, Liens and/or remedies Lender may at any time pursue, relinquish, subordinate or modify, and such determination will not in any way modify or affect any of Lender's rights, Liens or remedies under any Loan Document, applicable law or equity. The enumeration of any rights and remedies in any Loan Document is not intended to be exhaustive, and all rights and remedies of Lender described in any Loan Document are cumulative and are not alternative to or exclusive of any other rights or remedies which Lender otherwise may have. The partial or complete exercise of any right or remedy shall not preclude any other further exercise of such or any other right or remedy. X. WAIVERS AND JUDICIAL PROCEEDINGS -------------------------------- 10.1. WAIVERS Except as expressly provided for herein, Borrowers hereby waive set-off, counterclaim, demand, presentment, protest, all defenses with respect to any and all instruments and all notices and demands of any description, and the pleading of any statute of limitations as a defense to any demand under any Loan Document. Borrowers hereby waive any and all defenses and counterclaims they may have or could interpose in any action or procedure brought by Lender to obtain an order of court recognizing the assignment of, or Lien of Lender in and to, any Collateral, whether or not payable by a Medicaid/Medicare Account Debtor. With respect to any action hereunder, Lender conclusively may rely upon, and shall incur no liability to Borrowers in acting upon, any request or other communication that Lender reasonably believes to have been given or made by a person authorized on Borrowers' behalf, whether or not such person is listed on the incumbency certificate delivered pursuant to Section 4.1(aa) (Closing and Funding Checklist) hereof. In each such case, Borrowers hereby waive the right to dispute Lender's action based upon such request or other communication, absent manifest error. 66 10.2. DELAY; NO WAIVER OF DEFAULTS No course of, action or dealing, renewal, release or extension of any provision of any Loan Document, or single or partial exercise of any such provision, or delay, failure or omission on Lender's part in enforcing any such provision shall affect the liability of any Borrower or Credit Party or operate as a waiver of such provision or affect the liability of any Borrower or any Credit Party or preclude any other or further exercise of such provision. No waiver by any party to any Loan Document of any one or more defaults by any other party in the performance of any of the provisions of any Loan Document shall operate or be construed as a waiver of any future default whether of a like or different nature, and each such waiver shall be limited solely to the express terms and provisions of such waiver. Notwithstanding any other provision of any Loan Document, by completing the Closing under this Agreement and/or by making Advances, Lender does not waive any breach of any representation or warranty under any Loan Document, and all of Lender's claims and rights resulting from any such breach or misrepresentation are specifically reserved. 10.3. JURY WAIVER EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY. 10.4. COOPERATION IN DISCOVERY AND LITIGATION In any litigation, arbitration or other dispute resolution proceeding relating to any Loan Document, each Borrower and each Credit Party waives any and all defenses, objections and counterclaims it may have or could interpose with respect to (a) any of its directors, officers, employees or agents being deemed to be employees or managing agents of such Borrower or Credit Party for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise), (b) Lender's counsel examining any such individuals as if under cross-examination and using any discovery deposition of any of them as if it were an evidence deposition, and/or (c) using all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner reasonably requested by Lender, all Persons, documents (whether in tangible, electronic or other form) and/or other things under its control and relating to the dispute. 67 XI. CLOSING DATE AND TERMINATION ---------------------------- 11.1. TERMINATION AND CLOSING DATE (a) Subject to Lender's right to terminate and cease making Advances upon or after any Event of Default, this Agreement shall continue in full force and effect until the full performance and indefeasible payment in cash of all Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending), unless terminated sooner as provided in this Section 11.1 (Termination and Closing Date). Borrowers may terminate this Agreement at any time upon not less than sixty (60) calendar days' prior written notice to Lender and upon full performance and indefeasible payment in full in cash of all Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending) on or prior to such 60th calendar day after receipt by Lender of such written notice. All of the Obligations shall be immediately due and payable upon the Termination Date; provided that, notwithstanding any other provision of any Loan Document, the Termination Date shall be effective no earlier than the first Business Day of the month following the expiration of the sixty (60) calendar days' prior written notice period. Notwithstanding any other provision of any Loan Document, no termination of this Agreement shall affect Lender's rights or any of the Obligations existing as of the Closing Date of such termination, and the provisions of the Loan Documents shall continue to be fully operative until the Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending) have been fully performed and indefeasibly paid in cash in full. The Liens granted to Lender under the Security Documents and the financing statements filed pursuant thereto and the rights and powers of Lender shall continue in full force and effect notwithstanding the fact that Borrower's borrowings hereunder may from time to time be in a zero or credit position until all of the Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending) have been fully performed and indefeasibly paid in full in cash. (b) If a Revolver Termination occurs, then upon the occurrence of such Revolver Termination, Borrowers shall pay Lender (in addition to the then outstanding principal, accrued interest and other Obligations relating to the Revolving Facility pursuant to the terms of this Agreement and any other Loan Document), to compensate Lender for the loss of bargain and not as a penalty, an amount equal to Yield Maintenance. 11.2. SURVIVAL All obligations, covenants, agreements, representations, warranties, waivers and indemnities made by Borrowers and Credit Parties and Guarantors in any Loan Document shall survive the execution and delivery of the Loan Documents, the Closing, the making of the Advances and any termination of this Agreement until all Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims 68 that would give rise thereto are not then pending) are fully performed and indefeasibly paid in full in cash. The obligations and provisions of Sections 3.4, 3.5, 6.5, 6.8, 10.1, 10.3, 10.4, 11.1, 11.2, 12.1, 12.4, 12.8, 12.10, and Article XIII shall survive termination of the Loan Documents and any payment, in full or in part, of the Obligations. XII. MISCELLANEOUS ------------- 12.1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT This Agreement and the other Loan Documents (including all annexes, exhibits, and disclosure schedules attached hereto or thereto) constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 12.2 (Amendments and Waivers). Any letter of interest, commitment letter, fee letter or confidentiality agreement, if any, between Borrowers or Credit Parties and Lender or any of their respective Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. 12.2. AMENDMENTS AND WAIVERS (a) Signed by Representatives. No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement that waives compliance with the conditions precedent set forth in Article IV (Conditions Precedent) to the making of the Loan shall be effective unless the same shall be in writing and signed by Lender's and Borrower's Representative. No waiver or consent with respect to any Default or any Event of Default shall be effective for purposes of the conditions precedent to the making of the Loan unless the same shall be in writing and signed by Lender and Borrower's Representative. (b) Must Be In Writing. No amendment, modification, termination or waiver shall, unless in writing and signed by Lender and Borrowers: (i) increase the principal amount of the Facility Cap; (ii) reduce the principal amount of or the Interest Rate applicable to the Loan; (iii) extend any scheduled payment date or the Stated Maturity Date; (iv) waive, forgive, defer, extend or postpone any payment of interest; or (v) release any Guarantor or, except as otherwise permitted herein or in the other Loan Documents, release, or permit Borrowers or Credit Parties to sell or otherwise dispose of, any Collateral. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination or waiver shall be required for Lender to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any of the Notes shall be effective without the written concurrence of the holder of that Note. No notice to or demand on Borrowers or Credit Parties in any case shall entitle Borrowers or Credit Parties to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 12.2 (Amendments and Waivers) shall be binding upon each holder of the Note in question at the time outstanding and each future holder of said Note. 69 (c) Termination of Liens. Upon the indefeasible payment in full in cash and performance of all of the Obligations (other than indemnification Obligations), termination of the Commitment, and a release of all existing and future claims (whether known or unknown) against Lender, and so long as no suits, actions, proceedings or claims are pending against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Lender shall promptly upon receipt of written request from Borrowers deliver to Borrowers termination statements, Lien releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations. 12.3. FEES AND EXPENSES Borrowers shall reimburse Lender for (i) Lender's Costs, (ii) all fees, costs and expenses (including the reasonable fees and expenses of all of their outside attorneys, advisors, consultants and auditors), and (iii) all fees, costs and expenses, including the reasonable fees, costs and expenses of other advisors (including environmental and management consultants and appraisers), incurred in connection with the negotiation, preparation and filing and/or recordation of the Loan Documents, incurred in connection with any amendment, modification or waiver of, consent with respect to, or termination of, any of the Loan Documents, or advice in connection with a breach or default under the Loan or Lender's rights hereunder or thereunder, or in connection with any of the following: (a) Any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lender, Borrowers, Credit Parties or any other Person and whether as a party, witness or otherwise) in any way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against of Borrowers and/or Credit Parties or any other Person that may be obligated to Lender by virtue of the Loan Documents; including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring or forbearance of the Loan during the pendency of one or more Events of Default; provided that no Person shall be entitled to reimbursement under this clause (a) in respect of any litigation, contest, dispute, suit, proceeding or action to the extent any of the foregoing results from such Person's gross negligence or willful misconduct. (b) Any attempt to enforce any remedies of Lender against Borrowers and/or Credit Parties or any other Person that may be obligated to Lender by virtue of any of the Loan Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring or forbearance of the Loan during the pendency of one or more Events of Default. (c) Any workout or restructuring or forbearance of the Loan during the pendency of one or more Events of Default. (d) Efforts by Lender to (i) monitor the operations, financial condition and/or regulatory status of the Business after an Event of Default occurs under this Agreement or under any of the other Loan Documents; (ii) evaluate, observe or assess Borrowers or Credit Parties or their respective business affairs after a breach or default under this Agreement or under any of the other Loan Documents; and (iii) verify, protect, evaluate, assess, appraise, 70 collect, sell, liquidate or otherwise dispose of any of the Collateral; including, as to each of clauses (a) through (c) above, all reasonable attorneys' and other professional and service providers' fees arising from such services and other advice, assistance or other representation, including those in connection with any appellate proceedings, and all reasonable expenses, costs, charges and other fees incurred by such counsel and others in connection with or relating to any of the events or actions described in this Section 12.3 (Fees and Expenses), all of which shall be payable, on demand, by Borrowers to Lender. Without limiting the generality of the foregoing, such expenses, costs, charges and fees shall include: Lender's Costs, fees, costs and reasonable expenses of attorneys, accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. 12.4. NO WAIVER Lender's failure, at any time or from time to time, to require strict performance by Borrowers or Credit Parties of any provision of this Agreement or any other Loan Document shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. Subject to the provisions of Section 12.2 (Amendments and Waivers), none of the undertakings, agreements, warranties, covenants and representations of Borrowers or Credit Parties contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by Borrowers or Credit Parties shall be deemed to have been suspended or waived by Lender, unless such waiver or suspension is by an instrument in writing signed by Lender and directed to Borrower's Representative specifying such suspension or waiver. 12.5. REMEDIES Lender's rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 12.6. SEVERABILITY Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement or any other Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement or such other Loan Document. 71 12.7. CONFLICT OF TERMS Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. 12.8. ATTORNEYS' FEES; INDEMNIFICATION (a) Attorneys' Fees. If any action or proceeding is brought by any party against any other party, the prevailing party shall be entitled to recover from the other party reasonable attorneys' fees, statutory costs and non-statutory costs incurred in connection with the prosecution or defense of such action. The foregoing includes, without limitation, attorneys' fees, statutory costs and non-statutory costs of investigation incurred in appellate proceedings, costs incurred in establishing the right to indemnification, expert or other witness fees, copy and facsimile and telephone charges, courier and messenger charges, court costs, fees of charges of any arbitrator or mediator or arbitration or mediator service, or in connection with, any case or proceeding under Chapter 7, 11 or 13 of the Bankruptcy Code, 11 U.S.C. 101 et seq., or any successor statutes. For purposes of this Agreement, the term "attorneys' fees" or "attorneys' fees and costs" shall also include the fees, statutory and non-statutory expenses of counsel to the parties hereto, which may include the allocable costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and fee billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney. (b) Indemnification. Should Lender, as a result of its relationship with Borrowers contemplated hereby, be made a party to any litigation instituted by Borrowers or Credit Parties against a Person other than Lender, or any litigation instituted against Borrowers or Credit Parties by any Person other than Lender, Borrowers shall indemnify, defend, protect and hold harmless Lender from any and all loss, cost, liability, damage or expense incurred by Lender, including attorneys' fees and costs, in connection with the litigation. 12.9. TIME OF THE ESSENCE Time is of the essence in the performance of each and every term, condition and covenant of this Agreement. 12.10. CONFIDENTIALITY Lender agree to use commercially reasonable efforts to maintain as confidential all confidential information provided to them by Borrowers and/or Credit Parties which is designated in a writing delivered to Lender as confidential (provided, that, all non-public financial information and financial projections provided by Borrowers or Credit Parties shall be deemed confidential whether or not so designated in writing as confidential) for a period of one (1) year following receipt thereof, except that Lender may disclose such information (a) to Persons employed or engaged by Lender so long as Lender has policies relative to the maintenance of confidential information; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 12.10 (Confidentiality) and 72 any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed (based on advice of counsel) by Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Lender's counsel, is required by law; (e) in connection with the exercise of any right or remedy under this Agreement or the other Loan Documents or in connection with any Litigation relative to this Agreement or the other Loan Documents or the transactions related hereto or thereto to which Lender is a party; or (f) that ceases to be confidential through no fault of Lender. If Lender is required in any proceeding, by any court decree, subpoena or legal or administrative order or process, to disclose any such confidential information, Lender will use commercially reasonable efforts to give Borrowers and Credit Parties, as applicable, prompt written notice of such request so that Borrowers or Credit Parties may seek an appropriate protective order. If in the absence of a protective order, Lender is compelled in a proceeding to disclose any such confidential information, Lender may disclose such portion of such confidential information that it is compelled to disclose; provided, however, that Lender shall use commercially reasonable efforts to provide Borrowers and Credit Parties, as applicable, written notice of the information to be disclosed as far in advance of its disclosure as is practicable. 12.11. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT AND IN ANY OF THE OTHER LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWERS AND CREDIT PARTIES AND LENDER EACH HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NEVADA, CLARK COUNTY, CITY OF LAS VEGAS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG BORROWERS AND CREDIT PARTY'S ON THE ONE HAND, AND LENDER ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, EACH BORROWER AND EACH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CLARK COUNTY, NEVADA; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH BORROWER AND EACH CREDIT PARTY AND LENDER EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, 73 AND EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY WAIVE ANY OBJECTION THAT ANY BORROWER OR ANY CREDIT PARTY OR LENDER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE AT THE ADDRESSES SET FORTH IN ANNEX E OF THIS AGREEMENT. 12.12. NOTICES Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 12.12 (Notices)); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Annex E (Notice Addresses) or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower's Representative or Lender) designated in Annex E (Notice Addresses) to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 12.13. SECTION TITLES The Section titles and headings contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 12.14. COUNTERPARTS This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. 12.15. PRESS RELEASES AND RELATED MATTER. Borrowers and Credit Parties agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of Lender or its Affiliates or referring to this Agreement, the other Loan Documents without at least two (2) Business Days' prior notice to Lender and without the prior written consent of Lender (which consent will not be 74 unreasonably withheld) unless (and only to the extent that) Borrowers or Credit Parties or Affiliate is required to do so under law, regulation or any applicable exchange rules or OTC bulletin board rules, then, in any event, Borrowers, Credit Parties or Affiliate will use commercially reasonable efforts to consult with Lender before issuing such press release or other public disclosure. Borrowers and Credit Parties consents to the publication by Lender of advertising material relating to the financing transactions contemplated by this Agreement using Borrower's and Credit Party's name, product photographs, logo or trademark, without the consent of Borrowers or Credit Parties. Lender may provide to industry trade organizations information necessary and customary for inclusion in league table measurements unless such disclosure would violate or any applicable exchange rules or OTC bulletin board rules applicable to Borrowers. 12.16. REINSTATEMENT This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Borrowers or Credit Parties for liquidation or reorganization, or should Borrowers or Credit Parties become insolvent or make a general assignment for the benefit of any creditor or creditors, or should a receiver or trustee be appointed for all or any significant part of Borrower's or Credit Party's assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 12.17. ADVICE OF COUNSEL Each of Borrowers and Credit Parties represent to Lender and Lender represent to Borrowers and to Credit Parties, that it has discussed this Agreement and, specifically, the provisions of Section 10.3 (Jury Waiver) and Section 12.11 (Governing Law), with its counsel. 12.18. NO STRICT CONSTRUCTION The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. 12.19. LIMITATION ON BORROWER'S AND CREDIT PARTY'S LIABILITY Anything to the contrary notwithstanding, if any Fraudulent Transfer Law is determined by a court of competent jurisdiction to be applicable to the obligation of Borrowers or Credit Party's under this Agreement or under any other Loan Documents, said obligations shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under said Fraudulent Transfer Laws, in each case after giving effect to all other 75 liabilities of Borrowers and Credit Parties, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of Borrowers or Credit Parties in respect of intercompany indebtedness to any other Borrowers or Credit Parties or Affiliates of Borrowers or Credit Parties). 12.20. LENDER APPROVALS Unless expressly provided herein to the contrary, any approval, consent, waiver, satisfaction of Lender with respect to any matter that is subject of any Loan Document may be granted, withheld or conditioned by Lender in its sole, unfettered and absolute discretion. XIII. RELEASES AND WAIVERS; COVENANTS NOT TO SUE; INDEMNITY. ----------------------------------------------------- Each Borrower, each Credit Party and each Guarantor acknowledge and agree that the Previous Lenders made the Previous Loans to Borrowers; that Borrowers subsequently committed various events of default under the Previous Loans; that twice during the term of the Previous Loans, Previous Lenders agreed to and did forbear from foreclosing on the Previous Loans; and that Lender has agreed to made the Loans contemplated by this Agreement on condition that each Borrower, each Credit Party and each Guarantor enter into and make the following releases and waivers, covenants not to sue and indemnities for the benefit of the Lender Released Parties: 13.1. RELEASES AND WAIVERS. As an inducement to Lender to make the Loan to Borrowers: (a) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive, relinquish and discharge any and all Lender Liability Claims that the Releasing Parties now have or in the future may have against any of the Lender Released Parties, which Lender Liability Claims are based on any act or omission which allegedly occurred prior to the Effective Date of this Agreement. (b) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive, relinquish and discharge each of the Lender Released Parties from any and all claims, rights, demands, debts, causes of action, charges, expenses, damages, attorneys' fees and costs, obligations or liabilities of any and every kind, nature and character whatsoever, whether or not now known, suspected or unsuspected, which any of the Releasing Parties may have had, may now have or may in the future claim to have against any of the Lender Released Parties arising out of, or directly or indirectly related in any manner to any act or omission to act which allegedly occurred prior to the Effective Date of this Agreement. (c) The Releasing Parties hereto have been fully advised by their respective attorneys of the contents and effect of the applicable provisions under the laws of the State of Nevada and the State of California upon the rights of each of them, which provisions state substantially as follows: 76 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. EACH OF THE RELEASING PARTIES ACKNOWLEDGE THAT THEY MAY HAVE SUSTAINED DAMAGES, LOSSES, FEES, COSTS OR EXPENSES WHICH ARE PRESENTLY UNKNOWN AND UNSUSPECTED, AND, NOTWITHSTANDING THE FOREGOING PROVISIONS OF STATE LAW, ARE EXPRESSLY WAIVING THE SAME. EACH OF THE RELEASING PARTIES AGREES THAT IT INTENDS TO RELEASE EVEN UNKNOWN OR UNSUSPECTED CLAIMS. EACH OF THE RELEASING PARTIES REPRESENTS THAT IT HAS CONSULTED WITH ITS LEGAL COUNSEL REGARDING ITS CLAIMS AND POTENTIAL CLAIMS AGAINST THE RELEASED PARTIES, HAS CAREFULLY READ AND UNDERSTANDS ALL THE PROVISIONS OF THIS AGREEMENT, AND HAS VOLUNTARILY ENTERED INTO THIS AGREEMENT. THE FOREGOING RELEASES AND WAIVERS SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. 13.2. COVENANTS NOT TO SUE. (a) Each of the Releasing Parties hereby promises, covenants and agrees not to sue any of the Lender Released Parties, and not to bring any legal action or proceeding of any kind, at any time, against any of the Lender Released Parties, in any court or administrative proceeding, in any venue, which legal action or proceeding (a) violates any covenant, condition, representation or warranty made by the Releasing Parties in this Agreement, in any other Loan Documents or in any of the Previous Loan Documents, or (b) directly or indirectly seeks to (i) obtain or procure issuance of any temporary restraining order, or preliminary injunction, or permanent injunction, or any other equitable or provisional relief against any of the Lender Released Parties based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement, or (ii) impose or bring any Lender Liability Claims on or against any of the Lender Released Parties based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement, or (iii) obtain or impose on any of the Lender Released Parties any injunctive relief based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement. The foregoing covenants not to sue are permanent and shall survive the expiration or termination of this Agreement. 13.3. INDEMNITY. (a) Each of the Releasing Parties hereby jointly and severally agree to and shall indemnify, defend, protect and hold each of the Lender Released Parties free and harmless from and against any and all legal actions, suits, proceedings or claims brought or asserted against any of the Lender Released Parties for damages, losses, liabilities and expenses (including reasonable attorneys' fees, witness and expert witness fees, court fees and charges, statutory and non-statutory costs and expenses, and disbursements and other costs of investigation or defense, including those incurred upon any appeal or in any Bankruptcy proceeding) directly or indirectly arising out of or relating to: (i) the negotiation, execution and delivery of the Term Sheet by any Lender Released Party; (ii) the negotiation, execution and delivery of this Agreement by any Lender Released Party; (iii) the negotiation, execution and delivery of any of the Previous Loan Documents by any Lender Released Party; (iv) the taking, 77 implementation or enforcement by any of the Lender Released Parties of any of their rights and remedies under the Previous Loan Documents; (v) the making of the Loans by any of the Lender Released Parties pursuant to this Agreement; and (vi) any Lender Liability Claim brought or asserted against any of the Lender Released Parties. NO LENDER RELEASED PARTY SHALL BE RESPONSIBLE OR LIABLE TO ANY OF THE RELEASING PARTIES, NOR RESPONSIBLE OR LIABLE TO ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH RELEASING PARTIES, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF HAVING EXECUTED THE TERM SHEET, OR THIS AGREEMENT, OR AS A RESULT OF EXECUTING THE PREVIOUS LOAN DOCUMENTS, OR AS A RESULT OF ANY CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY OF THE PREVIOUS LOAN DOCUMENTS, OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED UNDER THE TERM SHEET, THIS AGREEMENT OR THE PREVIOUS LOAN DOCUMENTS. THE FOREGOING INDEMNITIES SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. XIV. SURETYSHIP WAIVERS ------------------ 14.1. SURETYSHIP WAIVERS Because Credit Parties are not direct borrowers from Lender under this Agreement, although the Loan directly and indirectly benefits each Person comprising Borrowers and Credit Parties, it is possible that Borrowers and the Credit Parties could be construed as guarantors or sureties of Borrowers and of each other and thereby have certain rights and remedies accorded to them that were not intended to be available to any of them. Accordingly, in order to induce the Lender to provide the credit facilities and accommodations provided for herein, each Person which is a Borrower or a Credit Party for itself agrees as follows: (a) Irrevocable Waivers. The waivers provided in this Section are intended to be irrevocable and to apply to all present and future Obligations of Borrowers and Credit Parties to Lender, including those arising under successive transactions which shall either continue the Obligations, increase or decrease them, or from time to time, create new Obligations, after all or any prior Obligations have been satisfied, and notwithstanding the dissolution, liquidation or bankruptcy of Borrowers, Credit Parties, and Guarantor, of all or any portion of the Obligations, or other event or proceeding affecting Borrowers or Credit Parties or Guarantor of any portion of the Obligations. (b) Separate and Independent Obligations of Credit Parties. The Obligations of Credit Parties hereunder are separate and independent of (i) Borrower's obligation to pay Lender principal and interest under the Notes and the other Obligations hereunder, and (ii) the liabilities and obligations of Credit Parties which are Guarantors. A separate action or actions may be brought and prosecuted against Credit Parties whether or not any action is brought and prosecuted against Borrowers, and whether or not Credit Parties are joined in any such action or actions. Borrowers and Credit Parties waive the benefit of any statute of limitations affecting the Obligations hereunder or the enforcement thereof. 78 (c) Authority of Lender. Credit Parties hereby authorizes Lender, without notice or demand and without affecting its liability hereunder, from time to time to: (i) amend, alter, restate, replace, modify, renew, extend, accelerate or otherwise change the time for payment or the terms of the Obligations with Borrowers, including increasing or decreasing the Interest Rate thereon or the principal amount thereof; (ii) accept partial payments on the Obligations from Borrowers or Guarantors; (iii) accept new or additional documents, instruments or agreements relative to the Obligations; (iv) take and hold security or additional guaranties for the payment of the Obligations, and amend, alter, exchange, substitute, transfer, enforce, waive, subordinate, terminate, modify and release in any manner any such security or guaranties; (v) apply such security and direct the order or manner of sale thereof as Lender in its sole discretion may determine; (vi) release or substitute Guarantors; (vii) settle, release on terms satisfactory to Lender (or by operation of law or otherwise), compound, compromise, collect or otherwise liquidate any indebtedness or security in any manner, consent to the transfer of security and bid and purchase at any sale, without affecting or impairing the Obligations of Borrowers or Credit Parties hereunder; or (viii) enforce any other right or remedy granted to Lender under this Agreement or under any of the other Loan Documents or under any Guaranty. No action which Lender shall take or fail to take in connection with this Agreement or any of the Loan Documents, or any of them, or any security for the Obligations or other undertakings of Borrowers, nor any course of dealing with Borrowers or Credit Parties, or any course of dealing with any other person or legal entity, shall release Borrower's Obligations or Credit Party's responsibility hereunder, shall affect this Agreement or the other Loan Documents in any way, or afford Borrowers or Credit Parties any recourse against Lender. Without limiting the generality of the foregoing, Borrowers agrees that this Agreement shall extend and be applicable to each new or replacement note delivered by Borrowers pursuant thereto without notice to or further consent from Credit Parties. (d) Waiver of Rights Against Lender. Borrowers and Credit Parties waive any right to require Lender to: (i) proceed against Borrowers under any of the Notes, against Guarantors, against Credit Parties, or against anyone else; (ii) proceed against or exhaust any security for the Obligations, or to marshal assets or to marshal assets of any Person in any particular order; (iii) except as required by applicable law, give notice of the terms, time and place of any public or private sale of any real or personalty securing the Obligations; or (iv) pursue any other remedy in Lender's power whatsoever. Each Person which is a Borrower, Guarantor, or a Credit Party waives any defense arising by reason of any disability or other defense of Borrowers, Guarantors, or Credit Parties, or by reason of the cessation from any cause whatsoever of the liability of Borrowers, Guarantors, or Credit Parties, or by reason of any act or omission of Lender or other persons which directly or indirectly results in or aids the discharge or release of Borrowers, Guarantors, or Credit Parties, or any of the Obligations or any security therefor by operation of law or otherwise, or by reason of the amendment, modification, renewal, extension or other change in any of the Obligations. Credit Parties waive all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Agreement and of the existence, creation, or incurring of new or additional Obligations, and all other notices and demands of any kind and description now or hereafter provided for by any statute or rule of law, except for such notices and demands as specifically required by this Agreement. Borrowers, Guarantors, and Credit Parties expressly waive any right whatsoever to, or right whatsoever to participate in, any security now or hereafter held by Lender, reimbursement, 79 indemnity, exoneration, contribution or any other claim under local, state or federal law, including, without limitation, 11 U.S.C. ?547, which it may now or hereafter have against Borrowers, Guarantors, or Credit Parties, or any other Person directly or contingently liable for the Obligations, or against or with respect to Borrower's or Credit Party's property (including, without limitation, any Collateral under any of the Loan Documents) arising from the existence or performance of this Agreement until all of the Obligations have been indefeasibly paid or satisfied in full. (e) Representations and Warranties. Borrowers and Credit Parties represent and warrant to Lender that: (i) this Agreement is executed at Borrower's and Credit Party's request; (ii) Credit Parties have each established adequate means of obtaining from Borrowers on a continuing basis financial and other information pertaining to Borrower's business and Borrower's financial condition; and (iii) Credit Parties are now and will be completely familiar with the business, operation and financial condition of Borrowers and its assets and of its Business. Borrowers and Credit Parties hereby waive and relinquish any duty on the part of Lender to disclose to any of said parties any matter, fact or thing relating to the business, operation or financial condition of Borrowers and their respective assets now known or hereafter known by Lender during the Term of this Agreement. With respect to any present or future Obligations of Borrowers to Lender, Lender need not inquire into the authority of Borrowers, and any Obligations made or created in reliance upon the professed exercise of such powers. (f) No Set-Off, Counterclaim, Etc. So long as any of the Obligations under this Agreement remain unpaid or undischarged, no Credit Party will, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, (i) claim any set-off or counterclaim against Borrowers in respect of any Obligations or other indebtedness by virtue of the right of subrogation, by operation of law or otherwise; (ii) in any proceedings under federal bankruptcy law or insolvency proceedings of any nature, assert its rights in competition with Lender in respect of any payment hereunder because of any claims which Credit Parties may have against Borrowers or any other Person; or (iii) be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Credit Parties or any other Person, or the benefit of any other security for any Obligation which, now or hereafter, Lender may hold or in which it may have any share or interest. 14.2. ELECTION OF REMEDIES If Lender may, under applicable law, proceed to realize its benefits under any of the Loan Documents granting a Lien upon any Collateral, whether owned by Borrowers or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Article XIV (Suretyship Waivers). If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against Borrowers or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, Borrowers hereby consent to such action by Lender and waive any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation that Borrowers might otherwise have had but for such action by Lender. Any election of remedies that results in the denial or impairment of the right of Lender to seek a deficiency judgment against Borrowers shall not impair any Guarantor's obligation to pay the full amount of the Obligations applicable to it. In the 80 event Lender shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or the Loan Documents, Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Lender but shall be credited against the Obligations. [NO FURTHER TEXT ON THIS PAGE] 81 IN WITNESS WHEREOF, this Revolving Credit Agreement ($50,000,000 Facility) has been duly executed as of the date set forth next to the signature each party; provided, however, this Revolving Credit Agreement shall for all purposes be deemed effective as of the Effective Date first written above. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President [SIGNATURE PAGE CONTINUES] 1 CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Anil V. Shah, MD Date of Execution: --------------------------------- Name: Anil V. Shah MD Title:Co-Manager By: /s/ Kali P. Chaudhuri Date of Execution: 10/4/07 -by William R. Thomas, Attny. in fact Title: Co-Manager GANESHA REALTY, LLC, a California limited liability company, By: /s/ William R. Thomas Date of Execution: --------------------------------- Name: William R. Thomas Title: Secretary WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager [SIGNATURE PAGE CONTINUES] 2 GUARANTORS: WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation, By: /s/ Joseph J. Lampariello Date of Execution: 10/4/07 Name: Joseph J. Lampariello Title: COO 3 ANNEX A TO REVOLVING CREDIT AGREEMENT ($50 MILLION FACILITY) ------------------------------------------------------------ FINANCIAL COVENANTS 1) MINIMUM CENSUS For each Test Period, the aggregate combined occupancy percentage (defined as average daily census divided by available beds at the four Hospital Facilities) shall not be less than 55%. 2) MINIMUM EBITDA For each Test Period, EBITDA shall not be less than $100. 3) MINIMUM FIXED CHARGE COVERAGE RATIO For each Test Period, the Fixed Charge Coverage Ratio shall not be less than 1.0. 4) MINIMUM CASH VELOCITY Collections of Borrower's Accounts shall not be less than $69,000,000 during each Test Period of this Agreement; provided, however, that upon any violation of or failure to comply with this covenant Lender shall have the right, in its sole discretion, to consider for all purposes under the Agreement as though Borrower actually collected Accounts equal to such minimum required amount. For purposes of the covenants set forth in this Annex A, the terms listed below shall have the following meanings: "EBITDA" shall mean, for any period, the sum, without duplication, of the following for each Borrower collectively on a consolidated basis: Net Income, plus, (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, and (f) loss from any sale of assets, other than sales in the ordinary course of business, minus (a) gains from any sale of assets, other than sales in the ordinary course of business and (b) other extraordinary or non-recurring gains, in each case determined in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" shall mean, for all Borrowers collectively on a consolidated basis, the ratio of (a) EBITDA, divided by (b) Fixed Charges. "FIXED CHARGES" shall mean, for any Test Period, the sum of the following for Borrowers collectively on a consolidated basis: (a) Total Debt Service during such Test Period, (b) Capital Expenditures and management and service fees during such Test Period, (c) income taxes paid in cash or accrued during such Test Period, and (d) dividends and Distributions paid or accrued or declared during such Test Period. 1 "INTEREST EXPENSE" shall mean, for any period, for Borrowers collectively on a consolidated basis, total interest expense (including without limitation attributable to Capital Leases in accordance with GAAP), fees with respect to all outstanding Indebtedness including without limitation capitalized interest but excluding commissions, discounts and other fees owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements. "NET INCOME" shall mean; for any period, the net income (or loss) of Borrowers collectively on a consolidated basis determined in accordance with GAAP; provided, however, that such amount shall exclude (a) the income (or loss) of any Person in which any other Person (other than any Credit Party) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to a Borrower by such Person (b) the income (or loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or consolidated with a Borrower or that Person's assets are acquired by a Borrower, (c) the income of any Subsidiary of any Borrower to the extent that the declaration or payment of dividends or similar distributions of that income by that Subsidiary is not at the time permitted by operation of the terms of the charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) compensation expense resulting from the issuance of capital stock, stock options or stock appreciation rights issued to former or current employees, including officers, of a Borrower, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by a Borrower or any affiliate thereof, and (e) compensation expense resulting from the repurchase of capital stock, options and rights described in clause (d) of this definition of Net Income. "TEST PERIOD" shall mean, as of any date of determination, the three most recent calendar months then ended (taken as one accounting period), or such other period as specified in the Agreement or any Annex thereto. "TOTAL DEBT SERVICE" shall mean, for any period, the sum of the following for Borrowers collectively on a consolidated basis: (a) payments of principal on Indebtedness, plus (ii) Interest Expense. 2 ANNEX B TO REVOLVING CREDIT AGREEMENT ($50 MILLION FACILITY) ------------------------------------------------------------ DEFINITIONS "ABSOLUTE ASSIGNMENT" means each of the following: (a) the Absolute Assignment of Leases and Rents With License Back re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, PCHI and WMC-A in the form of Exhibit "D" attached hereto; (b) the Absolute Assignment of Leases and Rents With License Back re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, PCHI and WMC-SA in the form of Exhibit "D" attached hereto; (c) the Absolute Assignment of Leases and Rents With License Back re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, PCHI and Coastal in the form of Exhibit "D" attached hereto; (d) the Absolute Assignment of Leases and Rents With License Back re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "D" attached hereto; and (e) the Absolute Assignment of Leases and Rents With License Back re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "D" attached hereto. "ACCOUNT DEBTOR" shall mean any Person who is obligated under an Account. "ACCOUNT(S)" shall mean each account(s) (as defined in the Code) of the Borrowers (or, if referring to another Person, of such other Person), including without limitation, accounts, accounts receivables, monies due or to become due and obligations in any form (whether arising in connection with contracts, contract rights, Instruments, General Intangibles or Chattel Paper), in each case whether arising out of goods sold or services rendered or from any other transaction and whether or not earned by performance, now or hereafter in existence, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing. "ADVANCE" shall mean a borrowing under the Revolving Facility. Any amounts paid by Lender on behalf of Borrowers or any Credit Parties or any Guarantors under any Loan Document shall be an Advance for purposes of the Agreement. "AFFILIATE" means, with respect to any Person (excluding Lender), (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and partners and (d) in the case of Borrowers, the immediate family members, spouses 3 and lineal descendants of individuals who are Affiliates of Borrowers. For the purposes of this definition, "CONTROL" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" means this Revolving Credit Agreement by and among Borrowers, Credit Parties, Guarantors and Lender, as the same may be amended, supplemented, restated or otherwise modified from time to time. "ANNEXES" means Annexes A through E attached to this Agreement. "APPLICABLE LAWS" means all federal, state and local laws, statutes, codes, regulations, rules, acts, ordinances of all Governmental Authorities, departments, commissions, boards, courts, authorities, agencies, officials and officers, including without limitation, Environmental Laws, all building, safety, health, use laws, the Fair Labor Standards Act, 29 U.S.C. ss.ss.201 et seq., the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101, et seq., as amended, and the California version of the WARN Act, and any deed restrictions or other requirements of record applicable to the Collateral or to Borrowers or Credit Parties or Guarantors, or to their respective businesses. "APPRAISAL" means an appraisal of the Properties prepared by Marshall & Stevens, M.A.I.. "APPRAISED VALUE" means the fair market value of the Properties as set forth in the Appraisal. "AVAILABILITY" means that amount which is equal to (a) ninety percent (90%) (or more at the sole discretion of Lender) of Eligible Billed Receivables, and (b) fifty percent (50%) (or more at the sole discretion of Lender) of Eligible Unbilled Receivables. "BANK" means Wells Fargo Bank, N.A., located at 2030 Main Street, Suite 900, Irvine, California 92614 "BANKRUPTCY CODE" shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time. "BORROWING BASE" shall mean, as of any date of determination, the net collectible U.S. Dollar value of Eligible Receivables, as determined by Lender in its discretion with reference to the most recent Notice of Request for Advance and otherwise in accordance with this Agreement; provided, however, that if as of such date the most recent Notice of Request for Advance is of a date more than four (4) Business Days before or after such date, the Borrowing Base shall be determined by Lender in its sole discretion. "BORROWERS" means IHHI, WMC-A, WMC-SA, Chapman and Coastal. 4 "BORROWER'S REPRESENTATIVE" means Bruce Mogel at the address of IHHI, or any replacement therefor approved by Lender as required by this Agreement. "BORROWING DATE" means the date that Borrower's Representative requests that Lender make an Advance available to Borrowers. "BUSINESS DAY" means each day of the year that is not a Saturday or Sunday and which day (a) is not a day on which federally-chartered banking institutions in Las Vegas, Nevada are required to close, and (b) is a not a regularly scheduled holiday in the state of Nevada or in the United States. "CAPITAL EXPENDITURES" shall mean, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one year and that are required to be capitalized under GAAP. "CAPITAL LEASE" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. "CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. "CERTIFIED CASH" means the net amount of Dollars in unrestricted cash and cash equivalents of Borrowers that is/are in Deposit Accounts or securities accounts maintained (by a branch of a bank or securities intermediary) within the United States and which are identified on Disclosure Schedule 5.17 (Deposit and Disbursement Accounts), as updated by Borrowers from time to time, as Certified Cash Accounts, which Certified Cash Accounts are not subject to any Liens, statutory liens or rights of offset, any overdraft, or any other charge or priority in favor of any Person other than Lender or, for any Deposit Account or securities account, the rights of the applicable bank or securities intermediary maintaining such Deposit Account or securities account with respect to customary account charges relating thereto (provided, that any amounts subject to any such rights in favor of any such bank or securities intermediary shall be excluded from Certified Cash for purposes of calculation of the amount thereof). For the avoidance of any doubt, the amount of Borrowers' marketable securities and Qualified Cash at the time of any determination shall be deemed to constitute Certified Cash but only to the extent they are not subject to any Liens, statutory liens or rights of offset, any overdraft, or any other charge or priority in favor of any Person other than Lender. "CHANGE OF CONTROL" means that any of the following have occurred: (a) any Person or group of Persons (within the meaning of the Securities Exchange Act of 1934) shall have acquired actual ownership, beneficial ownership or the right to own upon the occurrence of specified events, 25% or more of the Stock of any Borrower or any Credit Party (other than Ganesha); or (b) during any period of twelve (12) consecutive calendar months, Persons who at the beginning of such period constituted the majority of the board of directors of any Borrower or the majority of the managers of any Credit Party (other than Ganesha) (together with 5 any new Person whose nomination or election or appointment was approved by the required vote of the shareholders or members) cease for any reason (other than death or personal disability) to constitute a majority of the board of directors of any Borrower or the majority of the managers of any Credit Party (other than Ganesha); or (c) IHHI ceases to own, directly or indirectly, and control, all (100%) of the Stock of WMC-A, WMC-SA, Chapman and Coastal; or (d) Bruce Mogel ceases to be Chief Executive Officer or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal, and a replacement acceptable to Lender in its sole discretion is not employed by the applicable Borrower within thirty (30) calendar days after the date that Bruce Mogel is no longer employed as Chief Executive Office or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal; or (e) West Coast and Ganesha cease to own, directly or indirectly, and control, all (100%) of the membership interests of PCHI. "CHAPMAN" means Chapman Medical Center, Inc., a California corporation. "CHAPMAN LEASES" means each of the following: (a) That certain lease agreement dated December 31, 1984, by and between Chapman Medical, L.P., a California limited partnership, successor-in-interest to Chapman Investments Associates, a California limited liability company, successor-in-interest to James L, Kirby, Successor Trustee of the Taggart Land Trust dated December 29, 1977, Fred D. Pierce, Trustee of the Stanford Land Trust dated December 29, 1977, Lawrence A. Johnson, Trustee of the Oxford Land Trust dated December 29, 1977, James L. Kirby, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, Melia Harper Long, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, and Mattison James Harper, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, as tenants in common doing business under the fictitious name Chapman Investment Associates (collectively, "HOSPITAL LANDLORD"), and Chapman General Hospital, Inc., a California corporation, as the initial Tenant thereunder (the "HOSPITAL TENANT"). Said lease agreement was amended by a First Amendment dated April 8, 1985, by a Second Amendment dated April 1, 1989, by a Third Amendment dated November 5, 1990 and by a Fourth Amendment dated August 25, 1994. Said lease, as amended by the First, Second, Third and Fourth Amendments, shall collectively hereinafter be referred to as the "CHAPMAN HOSPITAL LEASE." The 2601 East Chapman Hospital Lease encumbers the real property and hospital improvements commonly described as and located at 2601 East Chapman Avenue, Orange, California. A memorandum of the Chapman Hospital Lease was recorded on August 30, 1994 as Instrument No. 94-0533295 of the Official Records of the Office of the County Recorder of the County of Orange, State of California. Hospital Tenant's interest in the Chapman Hospital Lease was assigned and transferred to IHHI on March 5, 2005. (b) That certain lease agreement dated December 31, 1984 by and between Chapman Medical, L.P., a California limited partnership, successor-in-interest to Chapman Investments Associates, a California limited liability company, successor-in-interest to James L, Kirby, Successor Trustee of the Taggart Land Trust dated December 29, 1977, Fred D. Pierce, Trustee of the Stanford Land Trust dated December 29, 1977, Lawrence A. Johnson, Trustee of the Oxford Land Trust dated December 29, 1977, James L. Kirby, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, Melia Harper Long, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, and Mattison James Harper, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, as tenants in common doing business under the fictitious name Chapman Investment Associates (collectively, "MOB LANDLORD") and Greatwest Medical Management, 6 Inc., a California corporation, as the initial Tenant (the "MOB TENANT"). Said lease agreement was amended by a First Amendment dated April 8, 1985, and by a Second Amendment dated August 25, 1994. Said lease agreement, as amended by the First Amendment and Second Amendment, shall collectively hereinafter be referred to as the "CHAPMAN MOB LEASE." The 2617 East Chapman MOB Lease encumbers the medical office building premises commonly described as and located at 2617 East Chapman Avenue, Orange, California. A memorandum of the Chapman MOB Lease was recorded on August 30, 1994 as Instrument No. 94-0533296 of the Official Records of the Office of the County Recorder of the County of Orange, State of California. MOB Tenant's interest in the Chapman MOB Lease was assigned and transferred to IHHI on March 5, 2005. "CHAPMAN MEDICAL CENTER" means the real property and hospital improvements located at 2601 East Chapman Avenue, Orange, California, and the real property and medical office building improvements located at 2617 East Chapman Avenue, Orange, California. "CHARGES" means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any of Borrowers or any of the Credit Parties, (d) the use of any real property owned or leased by Borrowers or Credit Parties (other than Ganesha), or (e) any other aspect of the business of Borrowers or the business of Credit Parties (other than Ganesha). "CHARTER AND GOOD STANDING DOCUMENTS" shall mean, for each Borrower and each Credit Party (a) a copy of the certificate of incorporation or formation (or other charter document) certified and dated within thirty (30) calendar days prior to the Closing Date by the applicable Governmental Authority of the jurisdiction of incorporation or organization of such Borrower and Credit Party, (b) a copy of the bylaws or similar organizational documents certified and dated within thirty (30) calendar days prior to the Closing Date by the corporate secretary or assistant secretary of such Borrower and Credit Party, (c) an original certificate of good standing certified and dated thirty (30) calendar days prior to the Closing Date issued by the applicable Governmental Authority of the jurisdiction of incorporation or organization of such Borrower and Credit Party and of every other jurisdiction in which such Borrower and Credit Party has an office or conducts business or is otherwise required to be in good standing, and (d) copies of the resolutions of the Board of Directors or managers (or other applicable governing body) and, if required, shareholders, members or other equity owners authorizing the execution, delivery and performance of the Loan Documents to which such Borrower and Credit Party is a party, certified by an authorized officer of such Person as of the Closing Date. "CHATTEL PAPER" means any "chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by Borrowers. "CLOSING" shall mean the satisfaction, or written waiver by Lender, of all of the conditions precedent set forth in the Agreement required to be satisfied prior to the consummation of the transactions contemplated hereby. 7 "CLOSING DATE" shall mean October 1, 2007, unless Borrower's Representative and Lender otherwise agree in writing. "COASTAL" means Coastal Communities Hospital, Inc., a California corporation. "COASTAL COMMUNITIES HOSPITAL" means the real property and improvements located at 2701 South Bristol Street and 1901 and 1905 North College Avenue, Santa Ana, California. "CODE" means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of Nevada; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in such Article or Division shall govern; and provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender or any Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Nevada, the term "CODE" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. "COLLATERAL" means the following: (a) all of each Borrower's tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired; (b) all of each Borrower's intangible personal property and interests in personal property, including without limitation all present and future Accounts, contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing; (c) all of each Borrower's Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Borrower; provided, however, that Lender shall not have a Lien in any rights under any Government Contract of any Borrower or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, ss. 203 or Title 41, ss. 15 of thE United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable law, unless in any case consent is otherwise validly obtained; (d) PCHI's fee simple interest in the Western Medical Center - Anaheim, in the Western Medical Center - Santa Ana, and in the Coastal Communities Hospital; 8 (e) IHHI's interest, as tenant, in the Triple Net Lease of the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Communities Hospital; (f) IHHI's interest, as sublandlord, in the sublease of the Western Medical Center - Anaheim to WMC-A, in the sublease of the Western Medical Center - - Santa Ana to WMC-SA, and in the sublease of the Coastal Communities Hospital to Coastal; (g) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; (h) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; and (i) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing. "COLLATERAL ASSIGNMENT" means each of the following: (a) the Collateral Assignment of Contracts re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, IHHI and WMC-A in the form of Exhibit "E" attached hereto; (b) the Collateral Assignment of Contracts re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, IHHI and WMC-SA in the form of Exhibit "E" attached hereto; (c) the Collateral Assignment of Contracts re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, IHHI and Coastal in the form of Exhibit "E" attached hereto; (d) the Collateral Assignment of Contracts re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "E" attached hereto; and (e) the Collateral Assignment of Contracts re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "E" attached hereto. "COLLATERAL PATENT, TRADEMARK AND COPYRIGHT ASSIGNMENT" shall mean any patent, trademark, or copyright assignment or acknowledgement executed by and between Borrowers and Lender, as such may be modified, amended or supplemented from time to time. "CONCENTRATION ACCOUNT" means an account established by Lender with a bank or other financial institution of its choice, into which each Lockbox Bank shall deliver all amounts deposited into the Lockbox Accounts by Account Debtors and other Persons. "CONTRACTS" means all contracts as such term is defined in the Code, now owned or hereafter acquired by any of Borrowers, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any of the Borrowers may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account. 9 "CONTROL AGREEMENT" means the Control Agreement dated as of the date hereof, by and among Lender, Borrowers and Bank in the form of Exhibit "G" attached hereto. "COPYRIGHT LICENSE" means any and all rights now owned or hereafter acquired by any of the Borrowers under any written agreement granting any right to use any Copyright or Copyright registration. "COPYRIGHTS" means all of the following now owned or hereafter adopted or acquired by any of the Borrowers: (a) all copyrights and General Intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof. "CREDIT PARTIES" means, collectively, OC-PIN, PCHI, West Coast and Ganesha, and their respective successors and assigns; and "CREDIT PARTY" means any one of the Credit Parties. "DEBTOR RELIEF LAW" shall mean, collectively, the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally, as amended from time to time. "DEED OF TRUST " means each of the following: (a) the Deed of Trust With Assignment of Rents and Fixture Filing re Western Medical Center - Anaheim, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "C" attached hereto; (b) the Deed of Trust With Assignment of Rents and Fixture Filing re Western Medical Center - Santa Ana, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "C" attached hereto; (c) the Deed of Trust With Assignment of Rents and Fixture Filing re Coastal Communities Hospital, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "C" attached hereto; (d) the Deed of Trust With Assignment of Rents and Fixture Filing re Chapman MOB Lease, dated as of the date hereof, executed by IHHI in favor of Lender in the form of Exhibit "C" attached hereto; and (e) the Deed of Trust With Assignment of Rents and Fixture Filing re Chapman Hospital Lease, dated as of the date hereof, executed by IHHI in favor of Lender in the form of Exhibit "C" attached hereto. 10 "DEFAULT" shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would, unless cured or waived in writing, constitute or be or result in an Event of Default. "DEFAULT RATE" means a rate of interest which is five percent (5%) per annum above the Interest Rate per annum otherwise applicable to the Loan. "DEPOSIT ACCOUNTS" means all deposit accounts as such term is defined in the Code, now or hereafter held in the name of any of the Borrowers. "DEPOSIT ACCOUNT SECURITY AGREEMENT" means each of the following: (a) the Deposit Account Security Agreement re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, IHHI and WMC-A in the form of Exhibit "F" attached hereto; (b) the Deposit Account Security Agreement re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, IHHI and WMC-SA in the form of Exhibit "F" attached hereto; (c) the Deposit Account Security Agreement re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, IHHI and Coastal in the form of Exhibit "F" attached hereto; (d) the Deposit Account Security Agreement re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "F" attached hereto; and (e) the Deposit Account Security Agreement re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "F" attached hereto. "DILUTION ITEMS" means the various items used by Lender in determining whether or not to change the factors constituting a Borrower's Availability, such items to include but not be limited to a Borrower's actual recent collection history for each class of payors (i.e., Medicare, Medicaid, commercial insurance, etc.); whether said history is consistent with Lender's underwriting practices and procedures; and such Borrower's historical returns, rebates, discounts, credits and allowances. "DISCLOSURE SCHEDULES" means the Schedules prepared by Borrowers and denominated as Disclosure Schedules 2.4 through 7.3 to this Agreement. "DISTRIBUTION" shall mean any fee, payment, bonus or other remuneration of any kind, or any distribution of cash, property or assets of any Person to the holders of shares of such Person's capital stock or of such Person's other equity interests. "DOCUMENTS" means all documents, as such term is defined in the Code, now owned or hereafter acquired by any of Borrowers, wherever located. 11 "DOLLARS" or "$" means lawful currency of the United States of America. "$10.7 MILLION CREDIT AGREEMENT" means that certain Credit Agreement ($10,700,000 Facility) dated as of the date hereof by and among Borrowers, Credit Parties, Guarantors and Medical Provider Financial Corporation III, a Nevada corporation (an affiliate of Lender), pursuant to which Medical Provider Financial Corporation III is providing to Borrowers for the benefit of Borrowers and the Credit Parties and the Guarantors named therein a $10,700,000 term loan. "$80 MILLION CREDIT AGREEMENT" means that certain Credit Agreement ($80,000,000 Facility) dated as of the date hereof by and among Borrowers, Credit Parties, Guarantors and Medical Provider Financial Corporation II, a Nevada corporation (an affiliate of Lender), pursuant to which Medical Provider Financial Corporation II is providing to Borrowers for the benefit of Borrowers and the Credit Parties and the Guarantors named therein, (a) a $45,000,000 real estate term loan, and (b) a $35,000,000 non-revolving line of credit loan. "DR. SHAH" means Anil V. Shah, M.D. "EFFECTIVE DATE" means the date set forth in the introductory paragraph of this Agreement. "ELIGIBLE BILLED RECEIVABLES" shall mean the amount of each Eligible Receivable arising in the ordinary course of business of Borrowers that is evidenced by an invoice, statement or other documentary evidence reasonably satisfactory to Lender that is dated and sent to the applicable Account Debtor no later than 180 calendar days after the services covered by such Eligible Receivable were rendered; provided however, that an Eligible Receivable that was an Eligible Unbilled Receivable shall become an Eligible Billed Receivable upon satisfaction of the terms of this definition of Eligible Billed Receivables; and further provided that Lender shall have the right in its discretion to reduce the amount of Eligible Billed Receivables based on its collection experience for Accounts similar to those included in a particular batch of Eligible Billed Receivables, with due consideration for the business practices of Borrower in the documentation and processing of Accounts and Lender's experience with similar Accounts and turn-around time. "ELIGIBLE RECEIVABLES" shall mean each Account arising in the ordinary course of a Borrower's business from the sale of goods or rendering of Services which Lender, in its sole discretion, deems an Eligible Receivable. Provided, however, an Account cannot be an Eligible Receivable if: (a) the Account is not subject to a valid perfected first priority security interest in favor of Lender, subject to no other Lien; or (b) the Account or any portion thereof is payable by a beneficiary, recipient or subscriber individually and not directly by a Medicaid/Medicare Account Debtor or commercial medical insurance carrier acceptable to Lender; or 12 (c) the Account arises out of services rendered or a sale, made to, or out of any transaction between any Borrower or any of its Subsidiaries and, one or more Affiliates of any Borrower or any of its Subsidiaries; or (d) the Account remains unpaid for longer than 150 calendar days after the first to occur of (i) the claim date, (ii) the invoice date, or (iii) the date Services were rendered; or (e) with respect to all Accounts owed by any particular Account Debtor (other than Accounts from Medicaid/Medicare Account Debtors) and/or its Affiliates, if more than 10% of the aggregate balance of all such Accounts owing from such Account Debtor and/or its Affiliates remain unpaid for longer than 150 calendar days after the first to occur of (i) the claim date, (ii) the invoice date, or (iii) the date Services were rendered; or (f) with respect to all Accounts owed by any particular Account Debtor and/or its Affiliates, 25% or more of all such Accounts are not deemed Eligible Receivables for any reason hereunder (which percentage may, in Lender's sole discretion, be increased or decreased); or (g) with respect to all Accounts owed by any particular Account Debtor and/or its Affiliates (except Medicaid/Medicare Account Debtors), if such Accounts exceed 20% of the net collectible dollar value of all Eligible Receivables at any one time (including Accounts from Medicaid/Medicare Account Debtors) (which percentage may, in Lender's sole discretion, be increased or decreased); or (h) any, covenant, agreement, representation or warranty contained in any Loan Document with respect to such Account has been breached and remains uncured; or (i) the Account Debtor for such Account has commenced a voluntary case under any Debtor Relief Law or has made an assignment for the benefit of creditors, or a decree or order for relief has been entered by a court having jurisdiction in respect of such Account Debtor in an involuntary case under any Debtor Relief Law, or any other petition or application for relief under any Debtor Relief Law has been filed against such Account Debtor or such Account Debtor has failed, suspended business, ceased to be solvent, called a meeting of its creditors, or has consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs, or any Borrower, in the ordinary course of business, should have known of any of the foregoing; or (j) the Account arises from the sale of property or Services rendered to one or more Account Debtors outside the continental United States or that have their principal place of business or chief executive offices outside the continental United States; or (k) the Account represents the sale of goods or rendering of Services to an Account Debtor on a bill-and-hold basis, or on a guaranteed sale basis, or on a sale-and-return basis, or on a sale-on-approval basis, or on a consignment or any other repurchase or return basis, or is evidenced by Chattel Paper or an Instrument of any kind or has been reduced to judgment; or 13 (l) the applicable Account Debtor for such Account is any Governmental Authority, unless rights to payment of such Account have been assigned to Lender pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727, ET SEQ. and 41 U.S.C. Section 15, ET SEQ.), or otherwise only if all applicable statutes or regulations respecting the assignment of Government Accounts have been complied with (for example, with respect to all Accounts payable directly by a Medicaid/Medicare Account Debtor); or (m) the Account is subject to any offset, credit (including any resource or other income credit or offset) deduction, defense, discount, chargeback, freight claim, allowance, adjustment, dispute or counterclaim, or is contingent in any respect or for any reason; or (n) there is any agreement with an Account Debtor for any deduction from such Account, except for discounts or allowances made in the ordinary course of business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each invoice related thereto, such that only the discounted amount of such Account after giving effect to such discounts and allowances shall be considered an Eligible Receivable; or (o) any return, rejection or repossession of goods or Services related to an Account has occurred; or (p) the Account is not payable to a Borrower; or (q) a Borrower has agreed to accept or have accepted any non-cash payment for such Account; or (r) with respect to any Account arising from the sale of goods, the goods have not been shipped to the Account Debtor or its designee; or (s) with respect to any Account arising from the performance of Services, the Services have not been actually performed or the Services were undertaken in violation of any Applicable Laws; or (t) the Account fails to meet such other specifications and requirements which may from time to time be established by Lender or is not otherwise satisfactory to Lender, as determined in Lender's sole discretion. "ELIGIBLE UNBILLED RECEIVABLE" shall mean each Eligible Receivable arising in the ordinary course of business of Borrower that is not an Eligible Billed Receivable and for which an invoice, statement or other billing document has not yet been created or sent; provided that any such Eligible Receivable will cease to be an Eligible Unbilled Receivable after 15 days following the date Services giving rise to such Eligible Receivable were rendered and, provided further, that any such Eligible Receivable will cease to be an Eligible Unbilled Receivable on the date on which it becomes evidenced by an invoice, statement or other documentary evidence of any kind acceptable to Lender. "EMPLOYMENT AGREEMENTS" shall mean employment agreements between any Borrower and any of its senior officers, in form and substance approved in writing by Lender. 14 "ENVIRONMENTAL LAWS" means all federal, state and local health, safety, environmental or natural resource laws, statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, authorizations, concessions, franchises and similar items of all federal, state, county, municipal, or other governmental, quasi-governmental, regulatory or administrative authority, agency, board, court, arbitrator, body, instrumentality, commission or other judicial body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to Governmental Authority having jurisdiction, including, without limitation all statutes referred to by name in the definition of Hazardous Materials; and all other state, federal, and local laws, regulations, rules, ordinances and orders which govern: (i) the existence, cleanup and/or remedy of contamination on real property and improvements; (ii) the emission or discharge of Hazardous Materials into the environment; (iii) the control of Hazardous Materials; (iv) the use, generation, transport, treatment, storage, disposal, removal, or recovery of Hazardous Materials; as well as all applicable judicial and administrative and regulatory decrees, judgments or orders (including without limitation the common law) and all applicable covenants running with the land that relate to the protection of health, safety, environment or natural resources. "ENVIRONMENTAL LIABILITIES" means, with respect to any Person, all environmental liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property. "ENVIRONMENTAL LOSSES" means any and all losses (including diminution in value of a Property), liabilities, damages, demands, claims, actions, judgments, causes of action, assessments, penalties, costs and expenses (including sums paid in settlement of claims), liens, interest, fines or penalties, including without limitation, the fees and disbursements of outside counsel, paralegals and accountants, consultant fees, expert fees, all foreseeable and unforeseeable consequential damages, and all other costs and expenses of any kind or nature, which are suffered or incurred by Indemnitee with respect to a Property or adjacent real property or improvements arising out of or as a result of (i) the occurrence of any Hazardous Material Activity; (ii) any violation of any applicable Environmental Laws or to the ownership, use, occupancy or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any Governmental Authority in connection with any Hazardous Material Activity; (iv) any Hazardous Material Claims brought, asserted, or alleged against Lender or any of its directors, officers, shareholders, employees, attorneys, or agents; (v) any actions taken by Lender to enter and inspect a Property pursuant to the rights granted Lender under this Agreement and the other Loan Documents; and (vi) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or obligations pursuant to this Agreement relating to environmental matters. 15 "ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws. "EQUIPMENT" means all equipment, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that, together with any other Person, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC. "ERISA EVENT" means (a) with respect to a Title IV Plan, any event described in Section 4043(c) of ERISA for which notice to the PBGC has not been waived; (b) the withdrawal of Borrowers or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2( of ERISA; (c) the complete or partial withdrawal of Borrowers or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in a distress termination described in Section 4041(c) of ERISA or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) with respect to a Title IV Plan, the existence of an "accumulated funding deficiency" (as defined in Section 412 of the IRC or Section 302 of ERISA) whether or not waived, or the failure to make by its due date a required installment under Section 412(m) of the Code or the failure to make any required contribution to a Multiemployer Plan; (g) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to a Title IV Plan; (h) the making of any amendment to any Title IV Plan which could result in the imposition of a lien or the posting of a bond or other security; (i) with respect to a Title IV Plan an event described in Section 4062(e) of ERISA; (j) any other event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (k) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; (1) the loss of a Qualified Plan's qualification or tax exempt status; or (m) the termination of a Plan described in Section 4064 of ERISA. "ESCROW" means an escrow account established by the Escrow Company. "ESCROW COMPANY" means Chicago Title Insurance Company, 700 South Flower Street, Suite 800, Los Angeles, California 90017, Attn: Patricia M. Schlageck ("ESCROW OFFICER"), telephone: 213-488-4358; facsimile: 213-612-4138; email: patricia.schlageck@ctt.com. "ESCROW HOLDER" means Escrow Company. 16 "EVENT OF DEFAULT" shall mean the existence or occurrence of any event set forth in Article VIII (Events of Default). "EXHIBITS" means Exhibits "A" through "R" attached to this Agreement. "FACILITY CAP" means the maximum aggregate amount of $50,000,000.00. "FAIR VALUATION" shall mean the reasonable determination of the value of the consolidated assets of a Person on the basis of the amount which may be realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under ordinary selling conditions in an arm's length transaction. "FINANCIAL STATEMENTS" means the consolidated income statements, statements of cash flows and balance sheets of the Borrowers delivered in accordance with Section 6.16 (Financial Statements) of this Agreement. "FIRST CREDIT AGREEMENT" means that certain Credit Agreement dated to be effective as of March 3, 2005, by and between Borrowers, Credit Parties and Medical Provider Financial Corporation II, a Nevada corporation (an affiliate of Lender). Pursuant to the First Credit Agreement, Medical Provider Financial Corporation II made available to Borrowers the Previous $50,000,000 Acquisition Loan and the Previous $30,000,000 Line of Credit Loan. "FISCAL MONTH" means any of the monthly accounting periods of Borrowers. "FISCAL QUARTER" means any of the quarterly accounting periods of Borrowers, ending on March 31, June 30, September 30 and December 31 of each year. "FISCAL YEAR" means any of the annual accounting periods of Borrowers ending on March 31 of each year. "FIXTURES" means all fixtures as such term is defined in the Code, now owned or hereafter acquired by Borrowers. "FRAUDULENT TRANSFER LAW" means Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law. "FUNDED DEBT" means, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a line of credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long term debt, lines of credit and short term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons. 17 "GAAP" means, as to a particular Person, such accounting practice as, in the opinion of the independent accountants regularly retained by such Person, conforms at the time to Generally Accepted Accounting Principles, consistently applied. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those principles and practices in the United States of America (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the most recent Financial Statements furnished Lender of the relevant Person, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board in order for such principle or practice to continue as a Generally Accepted Account Principle or practice, all reports and Financial Statements required hereunder shall be prepared in accordance with such changes. "GANESHA" means Ganesha Realty, LLC, a California limited liability company. "GENERAL INTANGIBLES" means all general intangibles, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, including all right, title and interest that Borrowers may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefore and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of Borrowers or any computer bureau or service company from time to time acting for Borrowers. "GOODS" means all goods as defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, including embedded software to the extent included in goods as defined in the Code. "GOVERNMENTAL AUTHORITY" means any nation or government, any state, county, city, or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 18 "GOVERNMENT ACCOUNT" shall be defined to mean all Accounts arising out of or with respect to any Government Contract. "GOVERNMENT CONTRACT" shall be defined to mean all contracts with the United States Government or with any agency thereof, and all amendments thereto. "GUARANTEED INDEBTEDNESS" means as to any Person, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation of any other Person in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss (other than product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof. "GUARANTORS" shall mean, collectively and each individually, PCHI, OC-PIN and West Coast, and each such Guarantor's successors and assigns or heirs and personal representatives, as applicable. "GUARANTY AGREEMENT" means a Guaranty Agreement of even date herewith, executed by the Guarantors and Lender, in the form of Exhibit "K" attached hereto. "HAZARDOUS MATERIAL" means any (a) substance, product, waste or other material of any nature whatsoever which is or becomes listed, regulated, or addressed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET SEQ.) ("CLEAN WATER ACT" OR "CWA"); the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.) ("AEA"); the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.); the Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001, ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136, ET SEQ.) ("FIFRA"); the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486); the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.) ("SDWA"); the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C. Sections 1201, ET SEQ.); the Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.) ("TSCA"); the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901, ET SEQ.) ("UMTRCA"); all respective regulations promulgated thereunder; and or any other 19 federal, state or local statute, law, ordinance, resolution, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect, (b) any substance, product, waste or other material of any nature whatsoever which may give rise to liability under any of the above statutes or under any statutory or common law theory based on negligence, trespass, intentional tort, nuisance or strict liability or under any reported decisions of a state or federal court, (c) petroleum or crude oil other than petroleum and petroleum products contained within regularly operated motor vehicles, and (d) asbestos. "HAZARDOUS MATERIAL ACTIVITY" means any storage, holding, existence, release, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Material from, under, into, or across any Property or surrounding real property and improvements or any other use of or operation of any Property or surrounding real property or improvements that creates a risk of Hazardous Material contamination of said Property; provided, however, that Hazardous Material Activity shall not include reasonable incidental use, storage and disposal of Hazardous Materials on the Property provided that such use, disposal and storage complies with the following: (a) such use, disposal and storage shall be limited to customary supplies, including supplies and materials customarily used, stored and disposed of in the normal operations of medical facilities; (b) no such products or supplies create any risk of harm to persons or property including any Collateral under this Agreement and the other Loan Documents; and (c) all such products and supplies are used, stored and disposed of in material compliance with all applicable Environmental Laws. "HAZARDOUS MATERIAL CLAIM" means any and all enforcement, clean-up, removal, remedial or other governmental or regulatory actions, agreements, or orders threatened, instituted or completed pursuant to any Environmental Laws and any all other actions, proceedings, claims, demands or causes of action, whether meritorious or not (including, without limitation, third party claims for contribution, indemnity, personal injury or real or personal property damage), which directly or indirectly relate to, arise from or are based in whole or in part on: (i) the occurrence or alleged occurrence of any Hazardous Material Activity, (ii) any violation or alleged violation of any applicable Environmental Laws relating to a Property or to the ownership, use, occupation or operation thereof; and (iii) any investigation, inquiry, order, hearing, action or other proceeding by or before any Governmental Authority in connection with any Hazardous Material Activity. "HEALTHCARE LAWS" shall mean all applicable statutes, laws, ordinances, rules and regulations of any Governmental Authority with respect to regulatory matters primarily relating to patient healthcare, healthcare providers and healthcare services (including without limitation Section 1128B(b) of the Social Security Act, as amended, 42 U.S.C. Section 1.320a-7(b) (Criminal Penalties Involving Medicare or State Health Care Programs), commonly referred to as the "Federal Anti-Kickback Statute," and the Social Security Act, as amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as "Stark Statute"). "HIPAA" means the Health Insurance Portability and Accountability Act of 1996, as amended, Public Law 104-191, August 21, 1996. 20 "HOSPITAL FACILITIES" means the Western Medical Center-Anaheim, the Western Medical Center-Santa Ana, the Coastal Communities Hospital and the Chapman Medical Center. "IHHI" means Integrated Healthcare Holdings, Inc., a Nevada corporation. "INDEBTEDNESS" means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are unsecured and not overdue by more than six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by note, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations and the present value of future rental payments under all synthetic leases, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations. "INDEMNIFIED LIABILITIES" means all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other statutory and non-statutory costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any Lender Released Party directly or indirectly based on or relating to: (a) the negotiation, execution and delivery of this Agreement by any Lender Released Party; or (b) the negotiation, execution and delivery of any Previous Loan Document by any Lender Released Party; or (c) any Lender Liability Claim brought or asserted against any Lender Released Party in connection with any Previous Loan Document or in connection with the negotiation, execution and delivery of this Agreement; or (d) as the result of credit having been extended, suspended or terminated under any Previous Loan Document; or (e) as a result of the administration of any credit under any Previous Loan Document and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Previous Loan Documents. "INDEMNIFIED PERSON" means Lender and its Affiliates, the Previous Lenders and their Affiliates, and each such Person's respective officers, directors, members, employees, attorneys, agents, and representatives. 21 "INDEPENDENT DIRECTOR(S)" means a Person or Persons who are or who become members of IHHI's board of directors and who (a) are independent of all Borrowers and all Credit Parties, (b) are not now and never have been affiliated with any Borrower or any Credit Party, (c) are not now and never have been employed by or have performed consulting or other services for any Borrower or any Credit Party, (d) are not now and never have been paid or compensated, or received consideration of any kind from, any Borrower or any Credit Party, (e) are not now and never have been directly or indirectly engaged in the full-time practice of clinical medicine (i.e., said Persons are not doctors), and (f) are experienced in the administration and management of acute care hospital facilities such as the Hospital Facilities. "INITIAL ADVANCE" means the first, or initial, Advance funded by Lender to Borrowers on the Closing Date, the proceeds of which shall be applied, in whole or in part, to pay to Lender the Previous Amount Owed. "INSTRUMENTS" means all instruments, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "INSURER" shall mean a Person that insures another Person against any costs incurred in the receipt by such other Person of Services, or that has an agreement with any Borrower to compensate it for providing Services to such Person. "INTELLECTUAL PROPERTY" means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with such Trademarks. "INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the Intellectual Property Security Agreement in the form of Exhibit "I" attached hereto. "INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor Agreement entered into by the Borrowers, the Credit Parties, Lender and Medical Provider Financial Corporation III, a Nevada corporation, in the form of Exhibit "L" attached hereto. "INTEREST RATE" means simple interest at the annual rate of 24% fixed; provided, however, if the $45,000,000 real estate term loan made by Medical Provider Financial Corporation II to Borrowers pursuant to the $80 Million Credit Agreement is paid in full prior to the maturity date of said loan, then from and after the date of such payment in full the interest rate on the Revolving Facility shall decrease to simple interest at the annual rate of 18% fixed. "INVENTORY" means all inventory, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of Borrowers for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished' goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in Borrower's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. 22 "INVESTMENT PROPERTY" means all investment property as such term is defined in the Code now owned or hereafter acquired by Borrowers, wherever located, including (a) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (b) all securities entitlements of Borrowers, including the rights of Borrowers to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (c) all securities accounts of Borrowers; (d) all commodity contracts of Borrowers; and (e) all commodity accounts held by Borrowers. "IRC" means the Internal Revenue Code of 1986 and all regulations promulgated thereunder. "IRS" means the Internal Revenue Service. "LANDLORD'S CONSENT AND ESTOPPEL CERTIFICATE (CHAPMAN LEASES)" means each of the following: (a) a Landlord's Consent and Estoppel Certificate (Chapman MOB Lease) executed by the Chapman MOB Landlord in favor of Lender, in the form of Exhibit "P" attached hereto; and (b) a Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease) executed by the Chapman Hospital Landlord in favor of Lender, in the form of Exhibit "P" attached hereto. "LANDLORD'S CONSENT AND ESTOPPEL CERTIFICATE (TRIPLE NET LEASE)" means a Landlord's Consent and Estoppel Certificate (Triple Net Lease) executed by PCHI in favor of Lender, in the form of Exhibit "Q" attached hereto. "LENDER" means Medical Provider Financial Corporation I, a Nevada corporation, and, if Lender shall decide to assign all or any portion of the Obligations, such term shall include any assignee(s) of Lender. "LENDER LIABILITY CLAIM(S)" means any claim or cause of action that any of the Releasing Parties now has or in the future may have against any Lender Released Party to the effect that, prior to the Effective Date of this Agreement: (a) any of the Lender Released Parties committed a breach or default under any of the Loan Documents or under any of the Previous Loan Documents or under the Term Sheet; or (b) any of the Lender Released Parties conspired with the executive officers, representatives or agents of IHHI to deprive OC-PIN of its stock ownership in IHHI or otherwise inflicted any actionable damage on OC-PIN; or (c) any of the Lender Released Parties committed an act not permitted by any of the Previous Loan Documents or by the Term Sheet or by applicable law; or (d) any of the Lender Released Parties omitted to take an action required by the Previous Loan Documents or by the Term Sheet or under applicable law; or (e) any of the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents is/are invalid or unenforceable in whole or in part for any reason; or (f) any of the Lender Released Parties suggested, implied, induced, cajoled or required that IHHI include any terms or conditions in any agreements between IHHI and OC-PIN in connection with the Previous Loan Documents or the 23 Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (g) any of the Lender Released Parties suggested, implied, induced, cajoled or required that IHHI not include any terms or conditions in any agreements between IHHI and OC-PIN in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (h) any of the Lender Released Parties improperly interfered with, or improperly exercised control, or exercised excessive control, over any of the Borrowers, or Credit Parties, or Guarantors, in connection with the Previous Loan Documents or Term Sheet or this Agreement or the other Loan Documents; or (i) any of the Lender Released Parties breached in any way any alleged duty of good faith or fair dealing, any alleged fiduciary duty, or any alleged duty of commercial reasonableness, or any quasi-duty, or any implied duty, in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers or Credit Parties or Guarantors; or (j) any of the Lender Released Parties committed any unlawful, unfair or fraudulent business act or practice in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (k) any of the Lender Released Parties engaged in any unfair, deceptive, untrue or misleading advertising in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (l) any of the Lender Released Parties committed any act prohibited by California Business and Professions Code Section 17500 or its State of Nevada counterpart in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (m) any of the Lender Released Parties engaged in predatory lending practices in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (n) any of the Lender Released Parties engaged in or committed any act or omission which constitutes fraud, duress, negligence, conversion, defamation or infliction of emotional distress in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (o) any of the Lender Released Parties interfered with IHHI's prospective business advantage in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (p) any of the Lender Released Parties interfered with IHHI's contractual relations in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (q) any of the Lender Released Parties acted or failed to act in a manner which directly or indirectly caused or contributed to the business decline, lost profits or other detrimental effects with respect to any of the Borrowers, or Credit Parties or Guarantors; or (r) any of the Lender Released Parties acted or failed to act in a manner which directly or indirectly caused or contributed to any of the Borrowers continuing in business while insolvent or otherwise delaying any filing of bankruptcy or similar proceedings; or (s) any of the Lender Released Parties utilized or made threats, coercion, undue influence or other methods of causing the Releasing Parties to voluntarily or involuntarily agree to the releases, waivers, covenants not to sue and indemnities set forth in this Agreement or in any of the Previous Loan Documents; or (t) any of the Lender Released Parties was party to or acted or 24 failed to act in a manner which directly or indirectly gave rise to a principal-agent relationship with any of the Releasing Parties; or (u) that Lender's requirement, based on its past experience in connection with the Previous Loans, that Dr. Shah resign from IHHI's board of directors as a condition of making the Loans, improperly interfered with, or improperly exercised control, or exercised excessive control, over IHHI; or (v) that Lender's requirement, based on its past experience in connection with the Previous Loans, that until the Loans are paid in full and satisfied, Borrowers not, directly or indirectly, permit Dr. Shah to be nominated, or elected, or appointed, or directly or indirectly compensated, paid, engaged, retained or become, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, any of the Borrowers, improperly interfered with, or improperly exercised control, or exercised excessive control, over said Borrowers. The foregoing releases and waivers are permanent and shall survive the expiration or termination of this Agreement and the other Loan Documents. "LENDER RELEASED PARTIES" and individually a "LENDER RELEASED PARTY" means and includes Lender, the Previous Lenders, Medical Provider Financial Corporation III, a Nevada corporation, Medical Capital Corporation, a Nevada corporation, and all of their related and affiliated companies and entities, and their respective predecessors, successors and assigns, and their respective officers, directors, shareholders, partners, trustees, employees, agents, attorneys, representatives and assigns. "LENDER'S COSTS" means all fees and expenses of Lender in connection with the Loan and all Loan Documents including, but not limited to, all attorneys' fees, lockbox fees and costs of Lender, audit fees and costs of Lender, other costs and expenses paid or incurred by Lender in connection with any application or engagement letter, the fees and disbursements of Lender's outside counsel, the travel expenses of Lender's personnel related to the Loan, intangible taxes, if any, and all Closing, escrow, title insurance, recording and filing fees, expenses and taxes. "LENDER'S REPRESENTATIVE" means Medical Capital Corporation, 2100 South State College Blvd., Anaheim, California 92806, Attn: Sidney Field, CEO, or Joseph J. Lampariello, President and COO, or Adam Field, Sr. Vice President Development, telephone: 714-935-3100, facsimile: 714-935-3114. "LIABILITY EVENT" shall mean any event, fact, condition or circumstance or series thereof (i) in or for which any Borrower becomes liable or otherwise responsible for any amount owed or owing to any Medicaid or Medicare program by a provider under common ownership with such Borrower or any provider owned by such Borrower pursuant to any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority after the failure; of any such provider to pay any such amount when owed or owing, (ii) in which Medicaid or Medicare payments to any Borrower are lawfully set-off against payments to such Borrower to satisfy any liability of or for any amounts owed or owing to any Medicaid or Medicare program by a provider under common ownership with such Borrower or any provider owned by such Borrower pursuant to any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority, or (iii) any of the foregoing under clauses (i) or (ii) in each case pursuant to statutory or regulatory provisions that are similar to any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority referenced in clauses (i) and (ii) above or successor provisions thereto. 25 "LICENSE" means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by Borrowers. "LIEN" means any agreement or deed of trust, mortgage, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "LITIGATION" means any action, claim, lawsuit, demand, investigation or proceeding now pending or, to the knowledge of Borrowers or Credit Parties or Guarantors, threatened against Borrowers or Credit Parties or Guarantors, whether before any Governmental Authority or before any arbitrator or panel of arbitrators, or otherwise. "LOAN" means all amounts borrowed pursuant to the Revolving Facility and all Advances under the Revolving Facility. "LOAN DOCUMENTS" means, together, this Agreement, the Note, the Guaranty Agreement, the Security Documents, the Environmental Indemnity Agreement, the Control Agreement, the Post-Closing Agreement, the Intercreditor Agreement, and all other agreements, instruments, documents and certificates identified in the Closing and Funding Checklist executed and delivered to, or in favor of, Lender and including all other pledges, powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all other written matter whether heretofore, now or hereafter executed by or on behalf of Borrowers or Credit Parties, or any employee of Borrowers or Credit Parties, and delivered to Lender in connection with this Agreement or the transactions contemplated thereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all exhibits and schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative. "LOCKBOX(S)" means and refers to each Lockbox Account where each Account Debtor or other Person is instructed by a Borrower to make payment of all amounts due and owing on their Accounts, and to make all other cash payments due and owing to a Borrower. "LOCKBOX ACCOUNT(S)" means one or more accounts established by a Borrower with a Lockbox Bank reasonably acceptable to Lender. "LOCKBOX AGREEMENT" means the agreement between each Borrower and each Lockbox Bank pursuant to which the Lockbox Accounts and Lockboxes are established and governed. "LOCKBOX BANK" means a bank or banks reasonably acceptable to Lender which have established one or more Lockbox Accounts and Lockboxes for a Borrower. 26 "MATERIAL ADVERSE EFFECT" means any circumstance or event, as determined by Lender in the exercise of its reasonable discretion, which (a) has or may reasonably be expected to have any material adverse effect whatsoever upon the validity, performance, perfection or enforceability of the Loan Documents, or (b) is, or is reasonably expected to be, material and adverse to the financial condition of the business operations of any Borrower, any Credit Party and/or any Guarantor, or (c) is, or is reasonably expected to, materially impair the ability of any Borrower or any Credit Party or any Guarantor to fulfill their respective obligations under the Loan Documents, or (d) would with the passage of time or giving of notice, or both, result in or cause a Default or an Event of Default, or (e) materially impairs or is reasonably expected to materially impair any of the Collateral, or any of Lender's Liens on any of the Collateral, or the priority of such Liens, or (f) materially impairs or is reasonably expected to materially impair Lender's rights and remedies under this Agreement and the other Loan Documents. "MATURITY DATE" means the date which is the first to occur of (i) the Stated Maturity Date, or (ii) the occurrence or existence of an Event of Default under any of the Loan Documents with respect to which the Maturity Date of the Loan and other Obligations has been accelerated. "MAXIMUM LAWFUL RATE" means the interest rate that a court of competent jurisdiction determines in a final unappealable order to be the highest rate of interest permissible under applicable law. "MEDICAID/MEDICARE ACCOUNT DEBTOR" shall mean any Account Debtor which is (i) the United States of America acting under the Medicaid or Medicare program established pursuant to the Social Security Act or any other federal healthcare program, (ii) any state acting pursuant to a health plan adopted pursuant to Title XIX of the Social Security Act or any other state health care program, or (iii) any agent, carrier, administrator or intermediary for any of the foregoing. "MEMBERSHIP CERTIFICATES" means all certificates evidencing the ownership of membership interests in a limited liability company. "MEMBERSHIP POWER" means the Irrevocable Membership Power of even date herewith, executed by West Coast, Ganesha and the Members of West Coast in favor of Lender, in the form if Exhibit "O" attached hereto. "MORTGAGED PROPERTIES" means each of the Hospital Facilities. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA, and to which any Borrower is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "NOTE" means the $50,000,000 revolving line of credit promissory note of even date herewith, executed by Borrowers in favor of Lender, in the form of Exhibit "A" attached hereto. "NOTICE OF REQUEST FOR ADVANCE" means a notice delivered to Lender by Borrower's Representative requesting an Advance, in the form of Exhibit "B" attached hereto. 27 "OBLIGATIONS" collectively means the Loan, Advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by Borrowers or Credit Parties or Guarantors to Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement, letter of credit agreement or other instrument, arising under this Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against Borrowers or Credit Parties under any Debtor Relief Law in bankruptcy, whether or not allowed in such case or proceeding), fees, expenses, attorneys' fees and any other sum chargeable to Borrowers or Credit Parties under this Agreement or any of the other Loan Documents. "OC-PIN" means Orange County Physicians Investment Network, LLC, a Nevada limited liability company. "ORIGINATION FEE" means an origination fee in the amount of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00) (1.5% of $50,000,000). "PAYMENT OFFICE" shall mean initially the address set forth beneath Lender's name on the signature page of the Agreement, and thereafter, such other office of Lender, if any, which it may designate by notice to Credit Parties to be the Payment Office. "PATENT LICENSE" means rights under any written agreement now owned or hereafter acquired by Borrowers granting any right with respect to any invention on which a Patent is in existence. "PATENTS" means all of the following in which Borrowers now holds or hereafter acquires any interest: (a) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof. "PBGC" means the Pension Benefit Guaranty Corporation. "PCHI" means Pacific Coast Holdings Investment, LLC, a California limited liability company. "PENSION PLAN" means a Plan described in Section 3(2) of ERISA. "PERMIT" shall mean collectively all licenses, leases, powers, permits, franchises, certificates, authorizations, approvals, certificates of need, provider numbers, accreditations, and other tights. "PERMITTED DISCRETION" shall mean a determination or judgment made by Lender in the exercise of its reasonable (from the perspective of a secured lender) business judgment. 28 "PERMITTED ENCUMBRANCES" means, with respect to each Property, the following encumbrances relating thereto: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are being contested in accordance with Section 6.2(b) (Right to Contest Charges); (b) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) zoning restrictions, easements, licenses, or other restrictions on the use of any real estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not create a Material Adverse Effect, as determined by Lender in its sole discretion; (d) any Lien held by an equipment lessor in the equipment so leased; (e) inchoate and unperfected workers' compensation, mechanics' or similar liens arising in the ordinary course of business, provided, that the same are satisfied in the ordinary course of business; (f) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business, provided, that the same are satisfied in the ordinary course of business; (g) such other liens arising in the ordinary course of business so long as such liens do not create a Material Adverse Effect; (h) the deeds of trusts securing repayment of the $45,000,000 real estate term loan and the $35,000,000 non-revolving line of credit loan due under the $80 Million Credit Agreement; (i) the deeds of trusts securing repayment of the $10,700,000 convertible term loan due and owing under the $10.7 Million Credit Agreement; (j) the absolute assignments of leases and rents securing repayment of the $45,000,000 real estate term loan and the $35,000,000 non-revolving line of credit loan under the $80 Million Credit Agreement; (k) the absolute assignment of leases and rents securing repayment of the $10,700,000 convertible term loan due and owing under the $10.7 Million Credit Agreement; (l) the UCC-1 Financing Statements (Fixture Filings) securing repayment of the $45,000,000 real estate term loan and the $35,000,000 non-revolving line of credit loan due and owing under the $80 Million Credit Agreement; (m) the UCC-1 Financing Statements (Fixture Filings) securing repayment of the $10,700,000 convertible term loan due and owing under the $10.7 Million Credit Agreement; (n) currently existing or hereafter created Liens in favor of Lender or its Affiliates; (o) all encumbrances shown in any Title Policy issued on the Closing Date to Lender; and (p) such endorsements to said Title Policies as Lender deems necessary or appropriate, in its sole discretion. "PERSON" means any individual, sole proprietorship, partnership, joint venture, unincorporated organization, trust, business trust, association, corporation (including Borrowers), limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). "PERMITTED INDEBTEDNESS" means the following: (a) Indebtedness under the Loan Documents and under the $80 Million Credit Agreement and/or $10.7 Million Credit Agreement, (b) any Indebtedness set forth on Disclosure Schedule 7.3, (c) Capital Lease Obligations incurred after the Closing Date and Indebtedness incurred pursuant to purchase money Liens permitted by Section 7.3(a) (Indebtedness), provided that the aggregate amount of such Capital Lease Obligations and purchase money Indebtedness outstanding at any time shall not exceed the amounts set forth in the yearly budget of the Borrowers delivered to Lender concurrently with the operating budget delivered pursuant to Section 6.16(e) (Operating Budget) hereof and approved by Lender in writing, (d) Indebtedness in connection with advances made by a shareholder, provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in 29 right of repayment and remedies to all of the Obligations and to all of Lender's rights pursuant to a subordination agreement in form and substance satisfactory to Lender, (e) accounts payable to trade creditors and current operating expenses (other than for borrowed money) which are not aged more than 120 calendar days from the billing date or more than 30 days from the due date, in each case incurred in the ordinary course of business and paid within such time period, unless (i) the same are being contested in good faith and by appropriate and lawful proceedings and such reserves, if any, with respect thereto as are required by GAAP and deemed adequate by Borrower's independent accountants shall have been reserved or (ii) the trade creditor with respect to a particular account payable customarily permits such Borrower to pay invoices in the ordinary course of business more than 30 calendar days from the due date without any penalty, provided, that (x) such trade creditor has not taken any collection action with respect thereto, including, without limitation the employment of, or assignment to, a third party for purposes of the collection thereof, and (y) such trade creditor continues to do business with such Borrower with no changes to the terms of trade; (f) borrowings incurred in the ordinary course of business and not exceeding $50,000 individually or in the aggregate outstanding at any one time, provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Lender's rights pursuant to a subordination agreement in form and substance satisfactory to Lender; and (g) Permitted Subordinated Debt. No Borrower shall make prepayments on any existing or future Indebtedness to any Person other than to Lender or to the extent specifically permitted by this Agreement or any subsequent agreement between such Borrower and Lender. "PERMITTED SUBORDINATED DEBT" shall mean Indebtedness incurred by Borrowers which is subordinated to Borrowers' Indebtedness owed to Lender pursuant to a written agreement approved by Lender in writing. "PLAN" means, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, that Borrowers or ERISA Affiliate maintains, contributes to or has an obligation to contribute to or has maintained, contributed to or had an obligation to contribute to at any time within the past seven (7) years on behalf of participants who are or were employed by Borrowers or ERISA Affiliate. "PLAN REGARDING ENGAGEMENT OF INDEPENDENT DIRECTORS" means a written statement outlining IHHI's plan as to how it intends to identify, engage, nominate and elect Independent Directors to IHHI's board of directors within the time periods required by this Agreement. "PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith, by and between IHHI, West Coast and Ganesha, as pledgors, and Lender, as pledgee, in the form of Exhibit "M" attached hereto. "PLEDGED ENTITY" shall mean a Person whose Stock or Membership Interests are pledged to Lender pursuant to the Pledge Agreement. "PREVIOUS ACCOUNTS RECEIVABLE PURCHASE AGREEMENT" means that certain Accounts Purchase Agreement dated as of March 3, 2005, by and between Medical Provider Financial Corporation I (as Buyer) and Borrowers (as Sellers). 30 "PREVIOUS AMOUNT OWED" means that amount which is owed by Borrowers to Lender for repurchase of accounts receivable purchased by Lender pursuant to the Previous Accounts Receivable Purchase Agreement. "PREVIOUS $50,000,000 ACQUISITION LOAN" means the $50,000,000 acquisition loan made by Medical Provider Financial Corporation II, a Nevada corporation, to Borrowers pursuant to the First Credit Agreement. "PREVIOUS $30,000,000 LINE OF CREDIT LOAN" means the $30,000,000 line of credit loan made by Medical Provider Financial Corporation II, a Nevada corporation, to Borrowers pursuant to the First Credit Agreement. "PREVIOUS $10,700,000 TERM LOAN" means the $10,700,000 term loan made by Medical Provider Financial Corporation II to Borrowers pursuant to the Second Credit Agreement. "PREVIOUS LENDERS" means, together (a) Medical Provider Financial Corporation II, a Nevada corporation and an affiliate of Lender with respect to the Previous $50,000,000 Acquisition Loan and the Previous $30,000,000 Line of Credit Loan, and (b) Medical Provider Financial Corporation III, a Nevada corporation and an affiliate of Lender with respect to the Previous $10,700,000 Term Loan. "PREVIOUS LOAN DOCUMENTS" means and includes, collectively, (a) the Previous $50,000,000 Acquisition Loan and any loan documents executed in connection therewith, (b) the Previous $30,000,000 Line of Credit Loan and any loan documents executed in connection therewith, and (c) the Previous $10,7,000,000 Term Loan and any loan documents executed in connection therewith. "PREVIOUS LOANS" means and includes, collectively, (a) the Previous $50,000,000 Acquisition Loan, (b) the Previous $30,000,000 Line of Credit Loan, and (c) the Previous $10,7,000,000 Term Loan. "PROCEEDS" means proceeds, as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrowers or to Credit Parties from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to Borrowers or to Credit Parties from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of Borrowers or Credit Parties against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by Borrowers or by Credit Parties against third parties with respect to any litigation or dispute concerning any of the Collateral including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral. 31 "PROJECTIONS" means, for Borrowers, its forecasted consolidated and consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a cash basis, if applicable, and otherwise consistent with the historical Financial Statements of Borrowers with certain normalizing assumptions made by Borrowers, together with appropriate supporting details and a statement of underlying assumptions. "PROPERTY" means any one of the Hospital Facilities, and "PROPERTIES" means each of the Hospital Facilities taken together. "QUALIFIED ASSIGNEE" means (a) any Lender, any Affiliate of Lender and, with respect to a lender that is an investment fund that invests in commercial loan, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor and which is not a competitor or an Affiliate of a competitor of Borrowers, and (b) any commercial bank, savings and loan association or savings bank or any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody's at the date that it becomes a Lender and which, through its applicable lending office, is capable of lending to Borrowers without the imposition of any withholding or similar taxes; provided that no Person proposed to become a Lender after the Closing Date and determined by Lender to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Assignee, and no Person or Affiliate of such Person proposed to become a Lender after the Closing Date that holds Subordinated Debt or Stock issued by Credit Parties shall be a Qualified Assignee. "QUALIFIED CASH" means, as of any date of determination, the amount of Certified Cash that is subject to perfection in favor of Lender pursuant to any Control Agreement in form and substance satisfactory to Lender, which Control Agreement shall provide, among other things, that the bank or securities intermediary executing such agreement (a) has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and, as applicable, for returned checks or other items of payment, and (b) agrees to follow the instructions or entitlement orders of Lender without further consent by Borrowers or by Credit Parties, including, with respect to funds in any such account, upon the instructions of Lender, to immediately forward by daily sweep all such funds to the Collection Account or as otherwise directed by Lender. "QUALIFIED CASH ACCOUNT" means any deposit account or securities account that is subject to a Control Agreement in form and substance satisfactory to Lender and holds Qualified Cash. 32 "QUALIFIED PLAN" means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC. "REGISTER" means the entries made in the register maintained pursuant to Section 2.13(a) of this Agreement. "RELEASE" means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property. "RELEASING PARTIES" and individually, a "RELEASING PARTY" means each Borrower, each Credit Party, each Guarantor, their respective predecessors, successors and assigns, and their respective officers, directors, shareholders, members, managers, employees, agents, representatives, attorneys and assigns. "RESTRICTED PAYMENT" means (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock; (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of Stock or any other payment or distribution made in respect thereof, either directly or indirectly; (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; and (f) any payment of management fees (or other fees of a similar nature). "RETIREE WELFARE PLAN" means, at any time, a welfare plan (within the meaning of Section 3(1) of ERISA) that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC or other similar state law and at the sole expense of the participant or the beneficiary of the participant. "REVOLVER TERMINATION" means the occurrence of any one or more of the following: (a) Borrowers terminate this Revolving Facility under Section 11.1 (Termination and Closing Date); or (b) Borrowers are required to make payment in full of the Revolving Facility and/or Obligations relating to the Revolving Facility upon the occurrence of an Event of Default; or (c) any other voluntary or involuntary prepayment in full of the Revolving Facility and/or Obligations relating to the Revolving Facility by Borrowers or any other Person occurs or Borrowers voluntarily or involuntarily repay in full the Obligations, whether by virtue of Lender's exercising its right of set off or otherwise; or (d) Lender accelerates the Revolving Facility or makes any demand on the Revolving Facility; or (e) any payment or reduction of the outstanding balance of the Revolving Facility and/or the Revolving Facility is made during a bankruptcy, reorganization or other proceeding or is made pursuant to any plan of reorganization or liquidation or any Debtor Relief Law. 33 "REVOLVING FACILITY" means a revolving line of credit facility to be made available by Lender to Borrowers pursuant to this Agreement in an amount not to exceed the Facility Cap at any time. "SECOND CREDIT AGREEMENT" means that certain Credit Agreement by and between Medical Provider Financial Corporation III, a Nevada corporation, as lender, and the Credit Parties and the Borrowers named therein, dated to be effective as of December 12, 2005. Pursuant to the Second Credit Agreement, Medical Provider Financial Corporation III made the Previous $10,700,000 Term Loan to Borrowers. "SECURITY AGREEMENT" means a Security Agreement executed by Borrowers and Lender, in the form of Exhibit "R" attached hereto. "SECURITY DOCUMENTS" means the Deeds of Trust, the Absolute Assignment, the Collateral Assignment, the Security Agreement, the Deposit Account Security Agreement, the Collateral Assignment of Contracts, the Intellectual Property Security Agreement, the Pledge Agreement, the Stock Powers, the Membership Powers, the UCC-1 Financing Statements, and all similar agreements, documents and instruments entered into guaranteeing payment of, or granting a Lien upon, real and personal property (and interests in real and personal property), and perfecting the Liens, as security for payment of, the Obligations. "SEPARATE BORROWING BASE PERIOD" means any period for which Lender has notified a Borrower that Lender will require Availability to be determined for said Borrower by reference to such Borrower's separate Borrowing Base, which notice may be given by Lender at any time upon its sole credit judgment pursuant to Section 2.1 (Revolving Facility). "SERVICES" shall mean medical and health care services provided to a Person, including, but not limited to, medical and health care services which are covered by a policy of insurance issued by an Insurer, physician services, nurse and therapist services, dental services, hospital services, skilled nursing facility services, comprehensive outpatient rehabilitation services, home health care services, residential and out-patient behavioral healthcare services. "SHAREHOLDER BLOCKING RIGHTS" shall mean any rights of any owner (direct or indirect) of any Pledged Entity which, pursuant to the terms of any agreement or organizational document, has the right to consent, or the effect of requiring such consent, to any foreclosure by Lender under any Security Document or otherwise to the exercise of any of Lender's rights and remedies thereunder or otherwise has the right to restrain, delay, impair or otherwise interfere with Lender in the event of Lender's exercise of its rights under any Security Document. "SOFTWARE" means all software as such term is defined in the Code, now owned or hereafter acquired by Borrowers, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program. "SOLVENT" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; and (c) such Person does not 34 intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature. The amount of contingent liabilities (such as Litigation, Guaranties and Pension Plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability. "SPECIAL PROGRAM" shall mean any of the Medicare or Medicaid programs relating to reimbursements, direct and/or indirect medical education programs, and any other special funding programs from which any Borrower benefits. "STATED MATURITY DATE" means October 8, 2010. "STOCK" means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including Stock, preferred stock or any other equity security (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). "STOCK CERTIFICATES" means all certificates evidencing the ownership of Stock in a Person. "STOCK POWER" means the Irrevocable Stock Power of even date herewith, executed by IHHI in favor of Lender, in the form if Exhibit "N" attached hereto. "SUBORDINATION AGREEMENT" shall mean, collectively and each individually, any subordination agreements to which Lender and other service providers or creditors of any Borrower or Credit Party are a party. "SUBORDINATED DEBT" means any unsecured Indebtedness of Borrowers incurred after the Closing Date that is subordinated to the Obligations in a manner and form reasonably satisfactory to Lender, as to right and time of payment and as to any other rights and remedies thereunder. "SUBSIDIARY" means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrowers. 35 "SUPPORTING OBLIGATIONS" means all supporting obligations as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property. "TAXES" means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender. "TERM" shall mean the period commencing on the Closing Date and ending on the Maturity Date. "TERM SHEET" means that certain letter agreement entitled Expression of Interest in Providing Credit Facilities dated August 29, 2007, executed by Lender and IHHI. "TERMINATION DATE" means the date on which (a) the Loan has been repaid in full, (b) all other Obligations due and payable under this Agreement and the other Loan Documents have been discharged, and (c) Borrowers shall have no further right to borrow any monies under this Agreement. "TITLE COMMITMENT(S)" means, with respect to each Property, an irrevocable commitment issued by the Title Company to Lender in form and content acceptable to Lender, committing to issue the Title Policy with respect to each such Property to Lender on the Closing Date. "TITLE COMPANY" means Chicago Title Insurance Company, 700 South Flower Street, Suite 800, Los Angeles, California 90017, Attn: Karl Daly ("TITLE OFFICER"), telephone: 213-612-4157; facsimile: 213-243-9168; email: Karl.Daly@ctt.com; and Chicago Title Insurance Company, Division Counsel, 700 South Flower Street, Suite 3305, Los Angeles, California 90017, Attn: Scott M. Green, Associate Counsel ("TITLE ATTORNEY"), telephone: 213-488-4342; facsimile: 213-891-0834; email: greens@ctt.com. "TITLE POLICY" means an ALTA Loan Policy of Title Insurance issued by Title Company to Lender on the Closing Date, with a stated liability in the amount of $50,000,000, insuring that (a) the fee simple interest in the Western Medical Center - Anaheim is vested in PCHI and that the Deed of Trust constitutes a third Lien and encumbrance against the fee simple interest in such Property, subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion; (b) the fee simple interest in the Western Medical Center - Santa Ana is vested in PCHI and that the Deed of Trust constitutes a third Lien and encumbrance against the fee simple interest in such Property subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion; (c) the fee simple interest in the Coastal Community Hospital in PCHI and that the Deed of Trust constitutes a third Lien and encumbrance against the fee simple interest in such Property subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion; (d) the tenant's interest in the Chapman MOB Lease is vested in IHHI and that the Deed of Trust constitutes a third Lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease, subject only to the applicable Permitted Encumbrances 36 and with such endorsements as Lender may require in its sole, absolute and unfettered discretion; and (e) the tenant's interest in the Chapman Hospital Lease is vested in IHHI and that the Deed of Trust constitutes a third Lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease, subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion. "TITLE IV PLAN" means a Pension Plan (other than a Multiemployer Plan), that is subject to Title IV of ERISA or Section 412 of the IRC, and that Borrowers or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "TRADEMARK LICENSE" means rights under any written agreement now owned or hereafter acquired by Borrowers granting any right to use any Trademark. "TRADEMARKS" means all of the following now owned or hereafter existing or adopted or acquired by Borrowers: (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. "TRIPLE NET LEASE" means that certain Triple Net Lease dated as of March 3, 2005 (as amended by that certain Amendment #1 to Triple Net Lease dated as of March 3, 2005) by and between PCHI, as lessor, and IHHI, as lessee, pursuant to which PCHI leased the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Community Hospital, to IHHI. "UCC" means the Code. "UCC-1 FINANCING STATEMENTS" means all UCC-1 Financing Statements (fixture filings and personal property) required by Lender to be filed or recorded to secure repayment of the Loan or performance of the Obligations. "UNFUNDED PENSION LIABILITY" means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by Borrowers or any ERISA Affiliate as a result of such transaction. "UNUSED COMMITMENT FEE" means that amount which is equal to 0.50% per annum of the average daily difference between the Facility Cap minus the sum of the outstanding principal amount of all Advances under the Revolving Facility for the period for which the Unused Commitment Fee is being paid, taking into account prepayments and reborrowings where applicable. 37 "WEST COAST" means West Coast Holdings, LLC, a California limited liability company. "WESTERN MEDICAL CENTER - ANAHEIM" means the real property and improvements located at 1025 South Anaheim Boulevard, Anaheim, California. "WESTERN MEDICAL CENTER - SANTA ANA" means the real property and improvements located at 1001 North Tustin Avenue and at 1301 North Tustin in Santa Ana, California. "WMC-A" means WMC-A, INC., a California corporation. "WMC-SA" means WMC-SA, INC., a California corporation. "YIELD MAINTENANCE" shall mean an amount equal to the future value at the last day of the Term, discounted to the present value as of the later of the Termination Date or the date of prepayment using the most recently published asked yield to maturity as quoted in the Wall Street Journal for the United States Treasury Notes or Bills with a maturity date closest to the last day of the Term of the product of: (A) the all in effective yield (measured as a percentage per annum) on the Revolving Facility for the six months prior to the Termination Date; (B) the Facility Cap; and (C) the quotient of (i) the number of months remaining in the Term, and (ii) twelve. Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein; in the event that any term is defined differently in different Articles or Divisions of the Code, the definition contained in Article or Division 9 shall control. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular Section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; the word "or" is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to 38 the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of Borrowers or Credit Parties, such words are intended to signify that such Borrowers or such Credit Parties has actual knowledge or awareness of a particular fact or circumstance. 39 ANNEX C TO REVOLVING CREDIT AGREEMENT ($50 MILLION FACILITY) ------------------------------------------------------------ CASH MANAGEMENT SYSTEM Borrowers agree to establish, and to maintain, until the Termination Date, the Cash Management System described below: 1. Borrowers: (i) shall not (nor shall it permit any of its subsidiaries to) open or maintain any deposit, checking, operating or other bank account, or similar money handling account, with any bank or other financial institution except for those accounts identified in Attachment I hereto (to include a petty cash account not to exceed $10,000.00 during any fiscal month, and a payroll account not to exceed an amount equal to one regular payroll at any time, plus all other payroll obligations outstanding); and (ii) shall close or permit to be closed any of the accounts listed in Attachment I hereto, in each case without lender's prior written consent, and then only after Borrowers have implemented agreements with such bank or financial institution acceptable to lender. 2. Commencing on the Closing Date and until the Termination Date, Borrowers shall fully comply with the terms, conditions and procedures set forth in the Deposit Account Security Agreement and the Control Agreement. 3. Borrowers may maintain, in their name, Disbursement Accounts at a Bank or Banks acceptable to Lender into which Lender shall, from time to time, deposit proceeds of Advances made pursuant to this Agreement for use solely in accordance with the provisions of this Agreement. All of the Disbursement Accounts as of the Closing Date are listed in Paragraph 2 of Attachment I hereto. 1 ANNEX D TO REVOLVING CREDIT AGREEMENT ($50 MILLION FACILITY) COLLATERAL REPORTS Collateral Reports means and includes any and all reports from time to time delivered by Borrowers to Lender at the request of Lender during the term hereof (as the same may be extended). Collateral Reports may include, but are not limited to, the following: 1. Cash Reports. A report delivered by Borrowers at the request of Lender stating, among other things: (a) the net amount of Dollars in unrestricted cash and cash equivalents that Borrowers have in their Deposit Accounts; and (b) the net amount of Dollars in unrestricted cash and cash equivalents that Borrowers have in their securities accounts. 2. Report on Cash Subject to Security Agreements. A report delivered by Borrowers at the request of Lender stating, among other things the amount of their cash that is subject to perfection in favor of Lender pursuant to any security agreements or other security instruments. 3. Updated Financial Statements and Projections. Updated financial statements and projections delivered by Borrowers at the request of Lender. 4. Updated Disclosure Schedules. Updated Disclosure Schedules delivered by Borrowers at the request of Lender. 5. Further Assurances. As required by Section 6.8 (Further Assurances) of this Agreement, such further instruments and assurances as may be necessary or proper in the reasonable opinion of Lender to carry out the purposes of the Loan Documents. 2 ANNEX E TO REVOLVING CREDIT AGREEMENT ($50 MILLION FACILITY) ------------------------------------------------------------ NOTICE ADDRESSES BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 WMC-SA, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 WMC-A, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 1 COASTAL COMMUNITIES HOSPITAL, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 CHAPMAN MEDICAL CENTER, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENTS, LLC 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Attn: Dr. Anil V. Shah, Co-Manager Ph: 714-290-5322 Fax: 714-297-9588 and PACIFIC COAST HOLDINGS INVESTMENTS, LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 2 GANESHA REALTY LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Kali Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 WEST COAST HOLDINGS, LLC 2621 South Bristol, Suite 304 Santa Ana, California 92704 Attn: Dr. Jacob Sweidan, Co-Manager Ph: 714-537-6595 Fax: 949-203-6380 Email: JSweidan@aol.com ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC 2621 South Bristol, Suite 304 Santa Ana, California 92704 Attn: Dr. Michael Sein, Manager Ph: ___-___-____ Fax: ___-___-____ LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION I 2100 South State College Blvd. Anaheim, California 92806 Attn: Sidney Field, CEO, or Joseph J. Lampariello, President and COO, or Adam Field, Sr. Vice President Development Telephone: 714-935-3100 Facsimile: 714-935-3114 3 EX-99.5 6 ihhi_8kex99-5.txt $50,000,000 REVOLVING LINE OF CREDIT NOTE Exhibit 99.5 $50,000,000 REVOLVING LINE OF CREDIT NOTE $50,000,000.00 October 9, 2007 Las Vegas, Nevada FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby acknowledged, INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("Chapman"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("Coastal") (IHHI, WMC-SA, WMC-A, Chapman and Coastal are hereinafter together referred to as the "Borrowers"), hereby jointly and severally promise to pay to the order of MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation ("Lender"), the principal amount of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00) ("Revolving Facility") or such lesser amount as may be loaned by Lender from time to time and be outstanding, together with interest on the unpaid balance of such amount from the date of the initial advance until paid. This "Revolving Line of Credit Note" is the Note issued under the Revolving Credit Agreement ($50 Million Facility) by and among Borrowers, the Credit Parties named therein, and Lender of even date herewith (said agreement, as the same may be amended, restated or supplemented from time to time, being herein called the "Revolving Credit Agreement") to which a reference is made for a statement of all of the terms and conditions of the Revolving Facility evidenced hereby, which such terms and conditions are hereby incorporated by reference. Initially capitalized terms not defined in this Revolving Line of Credit Note shall have the respective meanings assigned to them in the Revolving Credit Agreement. This Revolving Line of Credit Note is secured by, among other things, the Collateral Documents referenced in the Revolving Credit Agreement, the other Loan Documents referenced therein, and is entitled to the benefit of the rights, remedies and security provided thereby. Interest on the outstanding principal balance under this Revolving Line of Credit Note is payable at the Interest Rate provided in the Revolving Credit Agreement, or, under the circumstances provided for in the Revolving Credit Agreement, at the Default Rate, in immediately available United States Dollars at the times and in the manner specified in the Revolving Credit Agreement. Each Borrower acknowledges that (a) Lender is authorized under the Revolving Credit Agreement to charge the Revolving Facility with the amount of any unpaid Obligations of Borrowers to Lender, (b) the principal amount of the Revolving Line of Credit Note will be increased by such amounts, and (c) the principal, as so increased, will bear interest as provided for herein and in the Revolving Credit Agreement. Payments received by Lender shall be applied against principal and interest as provided for in the Revolving Credit Agreement. To the fullest extent permitted by applicable law, Borrowers waive, except to the extent specifically required by the Revolving Credit Agreement or other Loan Documents: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all of the Obligations, the Loan Documents or this Revolving Line of Credit Note; (ii) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevin, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption laws. Borrowers each acknowledge that this Revolving Line of Credit Note is executed as part of a commercial transaction and that the proceeds of this Revolving Line of Credit Note will not be used for any personal or consumer purpose. Upon the occurrence of any one or more of the Events of Default specified in the Revolving Credit Agreement, all amounts then remaining unpaid on this Revolving Line of Credit Note shall become, or may be declared to be, immediately due and payable, to the extent provided for in the Revolving Credit Agreement. This Revolving Line of Credit Note shall not be deemed to have been delivered until it is received by Lender in Las Vegas, Nevada. EACH BORROWER ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ON THIS REVOLVING LINE OF CREDIT NOTE. THIS REVOLVING LINE OF CREDIT NOTE IS GOVERNED BY THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson -------------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson -------------------------------------- Larry B. Anderson, President [Signatures Continued on Next Page] BORROWERS (continued): WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson -------------------------------------- Larry B. Anderson, President CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson -------------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson -------------------------------------- Larry B. Anderson, President EX-99.6 7 ihhi_8kex99-6.txt $10,700,000 CREDIT AGREEMENT Exhibit 99.6 CREDIT AGREEMENT ($10,700,000 FACILITY) Effective Date: October 9, 2007 among INTEGRATED HEALTHCARE HOLDINGS, INC., WMC-A, INC., WMC-SA, INC., CHAPMAN MEDICAL CENTER, INC., and COASTAL COMMUNITIES HOSPITAL, INC., as Borrowers, THE CREDIT PARTIES SIGNATORY HERETO, as Credit Parties, THE GUARANTORS SIGNATORY HERETO, as Guarantors, and MEDICAL PROVIDER FINANCIAL CORPORATION III, as Lender. INDEX OF ANNEXES, EXHIBITS AND DISCLOSURE SCHEDULES ANNEXES - ------- Annex A Definitions Annex B Cash Management System Annex C Collateral Reports Annex D Notice Addresses EXHIBITS - -------- Exhibit "A" [Intentionally Omitted] Exhibit "B" [Intentionally Omitted] Exhibit "C" Form of $10,700,000 Convertible Term Note Exhibit "D" [Intentionally Omitted] Exhibit "E" Form of $10,700,000 Deed of Trust Exhibit "F" Form of Absolute Assignment Exhibit "G" Form of Security Agreement Exhibit "H" Form of Collateral Assignment of Contracts Exhibit "I" Form of Deposit Account Security Agreement Exhibit "J" Form of Control Agreement Exhibit "K" Form of Post-Closing Agreement Exhibit "L" Form of Intellectual Property Security Agreement Exhibit "M" Form of Environmental Indemnity Agreement Exhibit "N" Form of Guaranty Agreement Exhibit "O" Form of Intercreditor Agreement Exhibit "P" Form of Pledge Agreement Exhibit `Q" Form of Stock Power Exhibit "R" Form of Membership Power Exhibit "S" Form of Landlord's Consent and Estoppel Certificate (Chapman Leases) Exhibit "T" Form of Landlord's Consent and Estoppel Certificate (Triple Net Lease) DISCLOSURE SCHEDULES - -------------------- Disclosure Schedule 1.3 Sources and Uses of Funds Disclosure Schedule 2.1(b) Required Consents and Approvals Disclosure Schedule 2.1(c) Capital Structure of Each Borrower Disclosure Schedule 3.1 Executive Office, Collateral Locations, FEIN Disclosure Schedule 3.5 Schedule of Real Estate Owned and Leased Disclosure Schedule 3.6 Labor Matters Disclosure Schedule 3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock Disclosure Schedule 3.10 Taxes Disclosure Schedule 3.11 ERISA Plans Disclosure Schedule 3.12 Litigation Disclosure Schedule 3.13 Brokers Disclosure Schedule 3.14 Intellectual Property Disclosure Schedule 3.16 Environmental Matters Disclosure Schedule 3.17 Insurance (With Copies of All Certificates of Insurance) Disclosure Schedule 3.18 Deposit and Disbursement Accounts Disclosure Schedule 3.20 Bonding; Licenses; Permits Disclosure Schedule 6.3 Indebtedness Disclosure Schedule 6.4 Transactions with Affiliates and Employees Disclosure Schedule 6.7 Existing Liens. CREDIT AGREEMENT ---------------- ($10,700,000 FACILITY) This CREDIT AGREEMENT ($10,700,000 Facility) ("AGREEMENT"), dated to be effective as of October 9, 2007 ("EFFECTIVE DATE"), is made by and among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-A, INC., a California corporation ("WMC-A"), WMC-SA, INC., a California corporation ("WMC-SA"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL") (IHHI, WMC-A, WMC-SA, Chapman and Coastal are hereinafter together referred to as "BORROWERS" and individually as a "BORROWER"); PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("PCHI"); WEST COAST HOLDINGS, LLC, a California limited liability company ("WEST COAST"); GANESHA REALTY, LLC, a California limited liability company ("GANESHA"); ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN") (PCHI, West Coast, Ganesha and OC-PIN are hereinafter together referred to as the "CREDIT PARTIES" and individually as a "CREDIT PARTY," and West Coast and OC-PIN are hereinafter together referred to as the "GUARANTORS" and individually as a "GUARANTOR"); and MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation ("LENDER"). Initially capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to them in Annex A. RECITALS -------- A. PCHI owns the fee simple title in the Western Medical Center - Anaheim, in the Western Medical Center - Santa Ana, and in the Coastal Communities Hospital (including the medical office buildings located thereon). PCHI leases the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Communities Hospital (including the medical office buildings located thereon) to IHHI pursuant to the Triple Net Lease. IHHI subleased the Western Medical Center - Anaheim to SMC-A; IHHI subleased the Western Medical Center - Santa Ana to WMC-SA; and IHHI subleased the Coastal Communities Hospital (including the medical office buildings located thereon) to Coastal. IHHI owns all (100%) of the Stock of WMC-A, WMC-SA and Coastal. B. IHHI leases the Hospital Facility and the related medical office buildings located at the Chapman Medical Center from the Hospital Landlord and from the MOB Landlord pursuant to the Chapman Leases. IHHI subleased the Hospital Facility and the related medical office buildings to Chapman. IHHI owns all (100%) of the Stock of Chapman. C. PCHI, OC-PIN and West Coast are Shareholders of IHHI. West Coast and Ganesha own all (100%) of the Membership Interests in PCHI. 1 D. IHHI, WMC-A, WMC-SA, Coastal and Chapman are in the business of delivering acute care services to the public through the acute care Hospital Facilities; incident thereto, IHHI, WMC-A, WMC-SA, Coastal and Chapman are in the business of owning, operating and/or leasing medical office buildings and other healthcare businesses related thereto. E. Medical Provider Financial Corporation II, a Nevada corporation, ("MPFC II") the Credit Parties and Borrowers are parties to the First Credit Agreement, pursuant to which MPFC II made available to Borrowers the Previous $50,000,000 Acquisition Loan and the Previous $30,000,000 Line of Credit Loan. In addition, Lender, the Credit Parties and Borrowers are parties to the certain Second Credit Agreement, pursuant to which Lender made available to Borrowers the Previous $10,700,000 Term Loan. F. The loans referenced in the First and Second Credit Agreements have each matured and are now due and owing in full. G. Borrowers have requested that Lender make available to them a credit facility in the aggregate amount of $10,700,000 and that MPFC II make available to Borrowers a separate credit facility in the aggregate amount of $80,000,000 for the purposes of (i) paying in full all amounts due and owing under the First Credit Agreement, (ii) paying in full all amounts due and owing under the Second Credit Agreement, (iii) providing working capital financing for Borrowers, and (iv) providing funds for other purposes permitted hereunder. H. Lender is willing to make a $10,700,000 credit facility available to Borrowers on the terms and conditions set forth herein below. MPFC II is willing to make an $80,000,000 credit facility available to Borrowers on the terms and conditions set forth in a separate credit agreement between MPFC II, Borrowers and Credit Parties of even date herewith (the "NEW $80,000,000 CREDIT AGREEMENT"). I. All Annexes, Disclosure Schedules, Exhibits and other attachments, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the covenants and conditions hereinafter contained, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Borrowers, Lender, Credit Parties and Guarantors agree as follows: 1. AMOUNT AND TERMS OF CREDIT FACILITIES ------------------------------------- 1.1 [Intentionally Omitted] 1.2 [Intentionally Omitted] 1.3 $10,700,000 Convertible Term Loan. (a) Subject to the terms and conditions hereof, on the Closing Date, Lender agrees to and shall make the $10,700,000 Convertible Term Loan available to Borrowers for the sole purpose of repaying all amounts due Lender under the Previous $10,700,000 Term Note referenced in the Second Credit Agreement. The 2 $10,700,000 Convertible Term Loan shall be charged as a single Advance to Borrowers on the Closing Date but shall not be disbursed to Borrowers on the Closing Date; instead said Advance shall be withheld by Lender and paid directly to Lender to repay all amounts due and owing on the Previous $10,700,000 Term Note. As of August 31, 2007, (i) the amount of unpaid principal due under the Previous $10,700,000 Term Note was $10,700,000; (ii) the amount of accrued but unpaid interest due under the Previous $10,700,000 Term Note was $109,052.06; and (iii) after August 31, 2007, interest has and will accrue at the daily rate of $3,517.81 under the Previous $10,700,000 Term Note. If the single Advance from the $10,700 000 Convertible Term Loan is not sufficient to pay in full and retire the entire amount due under the Previous $10,700,000 Term Note, the shortfall shall be paid from the first Advance (as defined in the New $80,000,000 Credit Agreement) from the $35,000,000 Non-Revolving Line of Credit. (b) On the Closing Date hereof, Borrowers agree to and shall execute and deliver to Lender the $10,700,000 Convertible Term Note in the form of Exhibit "C" attached hereto. The $10,700,000 Convertible Term Note represents the obligation of Borrowers, jointly and severally, individually and collectively, to repay the $10,700,000 Convertible Term Loan to Lender. During the term of the $10,700,000 Convertible Term Note, Borrowers shall not be required to make any payments of principal, however, Borrowers shall pay interest to Lender on the entire principal balance outstanding from time to time, in arrears, on each applicable Interest Payment Date, at the Interest Rate applicable to the $10,700,000 Convertible Term Loan, and the entire balance of unpaid principal, plus all accrued but unpaid interest thereon and all other non-contingent Obligations due and owing thereunder, shall be due and payable in full in a single payment in immediately available funds, on the Maturity Date. (c) At any time and from time to time, (i) Lender shall have the right to sell, assign, transfer and convey its interest in the $10,700,000 Convertible Term Note and Lender's interest in the other Loan Documents (insofar as the same pertain to the $10,700,000 Convertible Term Loan) to any Person, and/or (ii) if any part or all of the $10,700,000 Convertible Term Loan has been converted to IHHI common stock, Lender shall have the right to sell, assign, transfer and convey its interest in said common Stock of IHHI to any Person. Any such sale must be in compliance with Applicable Laws. 1.4 Prepayments. (a) Voluntary Prepayments. (i) [Intentionally Omitted] (ii) [Intentionally Omitted] (iii) $10,700,000 Convertible Term Loan. Borrowers may prepay all, but not less than all, of the $10,700,000 Convertible Term Loan at any time without fee, charge or penalty. (b) Mandatory Prepayments. Notwithstanding the foregoing, immediately upon receipt by Borrowers or Credit Parties of any cash proceeds of any sale or other disposition of any Collateral, Borrowers shall prepay the Loan in an amount equal to all such proceeds, net of (i) commissions and other reasonable 3 and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (ii) transfer taxes, and (iii) an appropriate reserve for income taxes. Any such prepayment shall be applied in accordance with Section 1.4(c) (Application of Prepayments). The following shall not be subject to mandatory prepayment under this subsection: (1) proceeds of sales of Inventory in the ordinary course of business; (2) proceeds of collection of Accounts in the ordinary course of business; and (3) proceeds of sales of Equipment and other personal property in the ordinary course of business so long as such Equipment and other personal property is replaced (if necessary in the exercise of prudent business judgment) by Equipment and other personal property of equal or greater value or utility. (c) Application of Prepayments. Any prepayments made pursuant to Section 1.4 (a) or (b) (Prepayments) above shall be applied as follows: first, to reimbursable expenses of Lender then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on the Loan; third, and last, in such order as Lender shall determine in its sole and absolute discretion, to the principal balance of the Loan until the same has been paid in full. If an Event of Default has occurred and is continuing, Lender shall have the absolute right, in its sole discretion, to determine which of the Obligations shall be paid and in what order and amounts. (d) Application of Prepayments from Insurance and Condemnation Proceeds. Prepayments from insurance or condemnation proceeds in accordance with Section 5.4 (Insurance) shall be applied to the Loan in the manner described in Section 1.4(c) (Application of Prepayments) above. (e) No Implied Consent. Nothing in this Section 1.4 (Prepayments) shall be construed to constitute Lender's consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents. (f) Use of Proceeds. Borrowers shall utilize the proceeds of the Loan solely for the express purposes authorized in Sections 1.1 through 1.3 in this Agreement. Disclosure Schedule 1.3 (Sources and Uses of Funds) contains a description of Borrower's sources and uses of funds as of the Closing Date, including the Loan to be made or incurred on that date. (g) Reliance on Notices; Appointment of Borrower's Representative. Lender shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Request for Advance or other notice believed by Lender to be genuine. Lender may assume that each Person executing and delivering any notice in accordance herewith, including without limitation the Notice of Request for Advance, was duly authorized, unless the responsible individual acting thereon for Lender has actual knowledge to the contrary. Borrowers hereby designate Bruce Mogel as Borrower's Representative for the purposes of issuing Notices of Request for Advances, giving instructions with respect to the disbursement of the proceeds of the applicable Loan, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of Borrowers under the Loan Documents. Borrower's Representative hereby accepts such appointment. Lender may regard any notice or other communication pursuant to any Loan Document from Borrower's Representative as a notice or communication from Borrowers, and may give any notice or communication required or permitted to be given to Borrowers hereunder to Borrower's Representative on behalf of 4 Borrowers. Borrowers agree that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower's Representative shall be deemed for all purposes to have been made by Borrowers and shall be binding upon and enforceable against Borrowers to the same extent as if the same had been made directly by Borrowers. Borrowers may, by written notice to Lender, seek to terminate the appointment of Bruce Mogel as Borrower's Representative and propose appointment of replacement Borrower's Representative; provided, however, said proposed replacement Borrower's Representative (i) must be an officer or director of IHHI, and (ii) must be acceptable to Lender in its sole discretion. Lender shall within ten (10) Business Days from receipt of said notice deliver a written notice to Borrowers either approving, or disapproving, of said proposed replacement. If Lender timely delivers a notice to Borrowers disapproving the proposed replacement(s), or fails to timely deliver any notice to Borrowers, then Bruce Mogel shall remain as Borrower's Representative until an acceptable replacement(s) is proposed by Borrowers and approved by Lender. If Lender timely approves said proposed replacement, then from and after the date Lender delivers written notice of approval of said proposed replacement to Borrowers, Bruce Mogel shall cease to be Borrower's Representative and the proposed replacement shall become Borrower's Representative. 1.5 Interest; Payments. (a) Interest on Loan. During the term of the Loan, Borrowers shall pay interest to Lender on all outstanding Advances, in arrears, on each applicable Interest Payment Date, at the Interest Rate applicable to the Loan in question. (b) Principal on the Loan. During the term of the Loan, no payments of principal shall be due or owing until the Maturity Date. (c) Payment Date. If any payment on any Loan becomes due and payable on a day other than a Business Day, the due date thereof will be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable Interest Rate during such extension. (d) Computation of Interest. All computations of interest shall be made by Lender at the applicable Interest Rate and calculated on the basis of a three hundred sixty (360) day year comprised of twelve (12) months of thirty (30) days each. (e) Default Rate. Notwithstanding the foregoing, so long as an Event of Default has occurred and is continuing under any Loan Document, the Interest Rate applicable to Loan shall be increased to the Default Rate, and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand. All interest payments owing hereunder or under any of the other Loan Documents, including interest accruing at the Default Rate, shall constitute additional Obligations hereunder and shall be secured by the Collateral. 5 (f) Payment to Lender's Account. All payments by Borrowers to Lender hereunder shall be made to the following deposit account: Bank of America (Las Vegas, Nevada) Medical Capital Corporation (Collection account for Medical Provider Financial Corporation III) Acct# 5011129988 ABA# 026009593 Address: 6900 West Cliff Drive, 4th Floor, Las Vegas, Nevada 89145 Contact Person: Gin Richardson 1.6 Maximum Lawful Rate of Interest. Notwithstanding anything to the contrary set forth in Section 1.5 (Interest; Payments), if a court of competent jurisdiction determines in a final unappealable order that the rate of interest payable hereunder exceeds the Maximum Lawful Rate, then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate. In no event shall the total interest received by Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. Any payments made by Borrowers in excess of the Maximum Lawful Rate shall be considered voluntary prepayments of the Loan under Section 1.4(a) (Voluntary Prepayments). 1.7 Cash Management System. On or prior to the Closing Date, Borrowers will establish and will maintain until the Termination Date, the Cash Management System described in Annex B (Cash Management System) attached hereto, including but not limited to the provisions of the Deposit Account Security Agreement and related Control Agreements. 1.8 [Intentionally Omitted] 1.9 Origination Fees. For each Loan, Borrowers agree to and shall pay Lender an Origination Fee applicable to said Loan, which shall be nonrefundable. Each Origination Fee shall be deemed fully earned by Lender as of the Effective Date of this Agreement, however, the Origination Fee shall be due and payable on the Closing Date. 1.10 [Intentionally Omitted] 1.11 Receipt of Payments. Borrowers shall make each payment under this Agreement and the Note not later than 2:00 p.m. (Las Vegas time) on the day when due in immediately available funds in Dollars to Lender's account described in Section 1.5(f) (Payment to Lender's Account) above. For purposes of computing interest as of any date, all payments shall be deemed received on the Business Day on which immediately available funds therefore are received in Lender's deposit account prior to 2:00 p.m. (Las Vegas time). Payments received in good and immediate funds after 2:00 p.m. (Las Vegas time) on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day. (a) Application and Allocation of Payments. 6 (i) Application of Payments. So long as no Event of Default has occurred and is continuing, for each Loan, (1) scheduled monthly payments shall be applied first, to reimbursable expenses of Lender then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on Loan in question; third, and last, to the principal balance of the Loan in question until the same has been paid in full; and (2) voluntary prepayments and mandatory prepayments shall be applied as set forth in Section 1.4(c) (Application of Prepayments). As to any other payment, and as to all payments made when an Event of Default has occurred and is continuing or following the Commitment Termination Date, Borrowers and the Credit Parties hereby irrevocably waive the right to direct the application of any and all payments received from or on behalf of Borrowers, and Borrowers hereby irrevocably agree that Lender shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrowers as Lender may deem advisable notwithstanding any previous entry by Lender in the Loan Account or any other books and records. (ii) Charges to the Loan. Lender is authorized to, and in its sole and absolute discretion may, charge to the Loan (which charges shall be deemed to be Advances requested by Borrowers) on behalf of Borrowers and cause to be paid all expenses, Charges, costs (including insurance premiums in accordance with Section 5.4 (Insurance)) and interest and principal, other than principal of the Loan in question, if and to the extent Borrowers fail to pay promptly any such amounts as and when due. Such charges to the Loan in question shall not waive any Event of Default due to Borrower's non-payment, unless Lender in its sole and absolute discretion, agrees in writing. At Lender's option and to the extent permitted by law, any charges so made shall constitute part of the Loan in question and shall reduce the aggregate amount of the Commitment remaining available to Borrowers, and shall be secured by the Collateral. 1.12 Loan Account. Lender shall maintain a Loan Account on its books to record all Advances, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loan in question or any other Obligations. All entries in the Loan Account shall be made in accordance with Lender's customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Lender's most recent printout or other written statement, shall, absent demonstrable error, be presumptive evidence of the amounts due and owing to Lender by Borrowers; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrower's duty to pay the Obligations. Lender shall render to Borrower's Representative a monthly accounting of transactions with respect to the Loan setting forth the balance of the Loan Account as to Borrowers for the immediately preceding month. Unless Borrower's Representative notifies Lender in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) calendar days after the date of Borrower's Representative's receipt thereof, each and every such accounting shall be presumptive evidence of all matters reflected therein. Only those items expressly objected to in such notice and explaining the basis for such objection(s) shall be deemed to be disputed by Borrowers. 1.13 Access. Borrowers and Credit Parties (other than Ganesha) shall, during normal business hours, from time to time upon 24 hours prior notice as frequently as Lender reasonably determines to be appropriate: (a) provide Lender and any of its officers, employees and agents access to its properties, facilities, advisors, officers and employees of Borrowers and Credit Parties 7 (other than Ganesha) and to the Collateral for purposes of exercising and enforcing Lender's rights and remedies under the Loan Documents, (b) permit Lender and any of its officers, employees and agents, to inspect, audit and make extracts from Borrower's and Credit Party's (other than Ganesha's) respective books and records pertaining to the Loan and the Collateral, and (c) permit Lender and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Collateral of Borrowers and Credit Parties. If an Event of Default has occurred and is continuing, Borrowers and Credit Parties (other than Ganesha) shall provide such access to Lender at all times and without advance notice. Furthermore, so long as any Event of Default has occurred and is continuing, Borrowers shall use commercially reasonable efforts to provide Lender with access to their suppliers and customers. Borrowers and Credit Parties (other than Ganesha) shall make available to Lender and its counsel reasonably promptly originals or copies of all books and records that Lender may reasonably request. Borrowers and Credit Parties (other than Ganesha) shall deliver any document or instrument necessary for Lender as it may from time to time request, to obtain records from any service bureau or other Person that maintains records for Borrowers and Credit Parties pertaining to the Loan or the Collateral. 1.14 Taxes. (a) No Deduction for Taxes. Any and all payments by Borrowers hereunder (including any payments made pursuant to Section 13 (Suretyship Waivers) or under the Note shall be made, in accordance with this Section 1.14 (Taxes), free and clear of and without deduction for any and all present or future Taxes. If Borrowers shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder (including any sum payable pursuant to Section 13 (Suretyship Waivers)) or under such Note, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.14 (Taxes)) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrowers shall make such deductions, and (iii) Borrowers shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower's Representative shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. (b) Indemnity for Taxes. Borrowers hereby agree to indemnify, defend, protect and hold Lender free and harmless from any claim or demand for payment of, and within ten (10) calendar days of receipt of demand therefor agrees to pay to Lender, (i) any and all Taxes that Borrowers are obligated to pay pursuant to this Section 1.14 (Taxes) (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1.14 (Taxes)), plus (ii) the full amount of any additional liability (including penalties, interest and expenses) payable or paid by Lender arising therefrom or with respect thereto, whether or not the same were correctly or legally asserted. Notwithstanding the foregoing, Lender remains ultimately responsible for paying any and all income taxes measured by Lender's own gross income. 1.15 Capital Adequacy; Increased Costs; Illegality. (a) Capital Adequacy. If any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by Lender 8 with any request or directive compliance regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, from any Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by Lender and thereby reducing the rate of return on Lender's capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by Lender pay to Lender additional amounts sufficient to compensate Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by Lender to Borrower's Representative shall be presumptive evidence of the matters set forth therein. (b) Increased Costs. If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to Lender of agreeing to make or making, funding or maintaining the Loan, then Borrowers shall from time to time, upon demand by Lender pay to Lender additional amounts sufficient to compensate Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower's Representative by Lender, shall be presumptive evidence of the matters set forth therein. Lender agrees that, as promptly as practicable after they become aware of any circumstances referred to above which would result in any such increased cost, Lender shall, to the extent not inconsistent with Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 1.15(b) (Increased Costs). Provided, however, the amounts due from Borrowers under Sections 1.15(a) and (b) (Capital Adequacy; Increased Costs) shall not include amounts attributable to Lender's non-compliance with any requirement of any Governmental Authority or to Lender's non-payment of its own income taxes or to any increase in Lender's income taxes. 1.16 Single Loan. The Loan to Borrowers and all of the other Obligations of Borrowers arising under this Agreement and the other Loan Documents shall constitute one general obligation of Borrowers secured by the Liens on all of the Collateral. 2. CONDITIONS PRECEDENT -------------------- 2.1 Conditions Precedent to the Closing Date. Lender shall not be obligated to take, fulfill, or perform any action hereunder, nor shall Lender be obligated to fund any portion of the Loan, until the following conditions precedent have been satisfied or provided for in a manner satisfactory to Lender, in its sole discretion, or waived in writing by Lender: (a) Credit Agreement; Disclosure Schedules. Two (2) duplicate original counterparts of this Agreement shall have been duly executed by and delivered by each Borrower and each Credit Party and each Guarantor to Lender; and Lender shall have received original updated two (2) sets of Disclosure Schedules in form and substance satisfactory to Lender, each dated and executed by each Borrower. 9 (b) Approvals. Lender shall have received satisfactory evidence that each Borrower and each Credit Party have obtained, or in the case of necessary Governmental Authority approvals, have applied for, all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents. Disclosure Schedule 2.1(b) attached hereto lists all required consents and approvals of all Governmental Authorities and all other Persons. (c) Capital Structure: Other Indebtedness. The capital structure of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, the ownership of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, and the terms and conditions of all Indebtedness of each Borrower and each Credit Party (other than Ganesha) as of the Closing Date, shall certified by each applicable Person to Lender and must be acceptable to Lender in its sole and absolute discretion. The capital structure of each Borrower as of the Effective Date is set forth in Disclosure Schedule 2.1(c) attached hereto. (d) Charter Documents. Each Borrower and each Credit Party (including each Guarantor) shall have delivered the following documents to Lender: (i) A copy of the articles of incorporation for each Borrower and a copy of the or articles of organization for each Credit Party, certified by the Secretary of State for the state of incorporation or organization within the most recent 30 day period prior to the Closing Date of this Agreement. (ii) A certificate of good standing issued by the applicable state of incorporation or organization for each Borrower and each Credit Party, certified by the Secretary of State for the state or incorporation or organization within the most recent 30 day period prior to the Closing Date of this Agreement. (iii) The bylaws or operating agreement for each Borrower and each Credit Party, certified to be true and accurate by the corporate secretary of each Borrower and by the manager of each Credit Party within the most recent 30 day period prior to the Closing Date of this Agreement. (iv) An incumbency certificate (officers and directors, or managers and members) for each Borrower and each Credit Party (including each Guarantor), certified to be true and accurate by the corporate secretary of each Borrower and by the manager of each Credit Party within the most recent 30 day period prior to the Closing Date of this Agreement. (v) The unanimous written consent of the board of directors of each Borrower and the unanimous written consent of all managers of each Credit Party (including each Guarantor), authorizing the transactions set forth in this Agreement and the other Loan Documents, executed by each such director or manager within most recent 30 day period prior to the Closing Date of this Agreement. (e) Voluntary Resignation of Dr. Shah. Based on Lender's prior experience in connection with the Previous Loans, Lender has determined in the exercise of its discretion that it is unable to work with Dr. Shah and that it will not make the Loan available to Borrowers unless Dr. Shah shall have voluntarily resigned as a director of and from all other management positions with or in IHHI prior to the Closing Date. 10 (f) Plan Regarding Engagement of Independent Directors. Lender shall have received from IHHI and approved, in its sole discretion, a Plan Regarding Engagement of Independent Directors. (g) Appraisal. Lender shall have received from IHHI and approved, in its sole discretion, the Appraisal. (h) Loan to Value Ratio. The sum of the $45 Million Real Estate Term Loan and the $35 Million Non-Revolving Line of Credit Loan shall not exceed seventy percent (70%) of the Appraised Value of the Properties as set forth in the Appraisal. (i) Due Diligence. Lender shall have completed its business and legal due diligence and shall have waived all objections thereto. (j) Title Commitment. For each of the Properties, the Title Company shall have delivered a Title Commitment to Lender in form and content acceptable to Lender in its sole and absolute discretion. (k) Note. The Borrowers shall have each executed and delivered to Lender one (1) original of the $10,700,000 Convertible Term Note in the form of Exhibit "C" attached hereto. (l) [Intentionally Omitted] (m) $10,700,000 Deeds of Trust. (i) With respect to the Western Medical Center - Anaheim, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original $10,700,000 Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original $10,700,000 Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital (and medical office buildings), PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original $10,700,000 Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: 11 (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deed of Trust in the form of Exhibit "E" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (n) Absolute Assignment of Leases and Rents. (i) With respect to the Western Medical Center - Anaheim, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital, PCHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Absolute Assignment of Leases and Rents in the form of Exhibit "F" attached hereto, with the legal description describing (1) the fee simple interest Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. 12 (o) Security Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Security Agreement in the form of Exhibit "G" attached hereto. (p) Collateral Assignment of Contracts. (i) With respect to the Western Medical Center - Anaheim, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital (and medical office buildings), IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Collateral Assignment of Contracts in the form of Exhibit "H" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease. (q) Deposit Account Security Agreement. (i) With respect to the Western Medical Center - Anaheim, IHHI and WMC-A shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Anaheim; (ii) With respect to the Western Medical Center - Santa Ana, IHHI and WMC-SA shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) 13 original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana; (iii) With respect to the Coastal Communities Hospital (and medical office buildings), IHHI and Coastal shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing the fee simple interest in the Coastal Communities Hospital; (iv) With respect to the Chapman Medical Center: (A) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) IHHI shall have executed, acknowledged and delivered to Lender (or shall have deposited the same into Escrow as, when and if required by Lender) one (1) original Deposit Account Security Agreement in the form of Exhibit "I" attached hereto, with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease (r) Control Agreement. Borrowers and Bank shall have executed and delivered to Lender two (2) duplicate original counterparts of the Control Agreement in the form of Exhibit "J" attached hereto. (s) Post-Closing Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Post-Closing Agreement in the form of Exhibit "K" attached hereto. (t) Intellectual Property Security Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Intellectual Property Security Agreement in the form of Exhibit "L" attached hereto. (u) Environmental Indemnity Agreement. Borrowers and the Credit Parties (other than Ganesha) shall have executed and delivered to Lender two (2) duplicate original counterparts of the Environmental Indemnity Agreement in the form of Exhibit "M" attached hereto. (v) Guaranty Agreement. Guarantors shall have executed and delivered to Lender two (2) duplicate original counterparts of the Guaranty Agreement in the form of Exhibit "N" attached hereto. (w) Intercreditor Agreement. Borrowers shall have executed and delivered to Lender two (2) duplicate original counterparts of the Intercreditor Agreement in the form of Exhibit "O" attached hereto. 14 (x) Pledge Agreement. IHHI, Ganesha and West Coast shall have executed and delivered to Lender two (2) duplicate original counterparts of the Pledge Agreement (IHHI) in the form of Exhibit "P" attached hereto. (y) Stock Power. IHHI shall have executed and delivered to Lender two (2) duplicate original counterparts of the Stock Power in the form of Exhibit "Q" attached hereto. (z) Membership Power. Ganesha and West Coast shall have executed and delivered to Lender two (2) duplicate original counterparts of the Membership Power in the form of Exhibit "R" attached hereto (aa) Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease). The Landlord under the Chapman Hospital Lease shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "S" attached hereto. (bb) Landlord's Consent and Estoppel Certificate (Chapman MOB Lease). The Landlord under the Chapman MOB Lease shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "S" attached hereto (cc) Landlord's Consent and Estoppel Certificate (Triple Net Lease). PCHI, landlord under the Triple Net Lease, shall have executed and delivered to Lender, for the benefit of Lender, two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate in the form of Exhibit "T" attached hereto. (dd) [Intentionally Omitted] (ee) Legal Opinions. (i) Legal Opinion of California Counsel. An original legal opinion (from counsel licensed to practice law and in good standing in the State of California) for PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) the valid existence of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman in the State of California; (B) the good standing of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman in the State of California; (C) the requisite power of PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman to execute this Agreement and the other Loan Documents; (D) that the execution of this Agreement and the other Loan Documents by PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman will not constitute a breach or default under any contracts or agreements executed by or to which PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman is a party; (E) ) that the choice of law provisions set forth in this Agreement and the other Loan Documents are enforceable; and (F) such other opinions that Lender may require. (ii) First Legal Opinion of Nevada Counsel. A first original legal opinion (from counsel licensed to practice law and in good standing in the State of Nevada) for IHHI and OC-PIN regarding the transactions contemplated by 15 this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) the valid existence of IHHI and OC-PIN in the State of Nevada; (B) the good standing of IHHI and OC-PIN in the State of Nevada; (C) the requisite power of IHHI and OC-PIN to execute this Agreement and the other Loan Documents; (D) that the execution of this Agreement and the other Loan Documents by IHHI and OC-PIN will not constitute a breach or default under any contracts or agreements executed by or to which IHHI and OC-PIN is a party; (E) ) that the choice of law provisions set forth in this Agreement and the other Loan Documents are enforceable; and (F) such other opinions that Lender may require. (iii) Second Legal Opinion of Nevada Counsel. A second original legal opinion from counsel (licensed to practice law and in good standing in the State of Nevada) for all Borrowers and all Credit Parties and all Guarantors regarding the transactions contemplated by this Agreement and the other Loan Documents shall be delivered to Lender, containing among other things legal opinions with respect to the following: (A) that this Agreement and the other Loan Documents comply with Nevada law; (B) that this Agreement and the other Loan Documents are enforceable under Nevada law; (C) that the choice of Nevada law under this Agreement and the other Loan Documents is valid and enforceable under Nevada law; (D) that the Interest Rate applicable to the Loan is not usurious under Nevada law; and (E) such other matters as Lender may require. (ff) Fairness Opinion. A fairness opinion executed by a qualified, independent, third-party professional financial advisor or investment bank opining as to (i) the fairness of the transactions contemplated by this Agreement as between the Borrowers and Credit Parties and Guarantors, and (ii) an allocation of fair value to each Hospital Facility, in form and substance satisfactory to Lender. (gg) Closing and Funding Checklist - Other Documents and Instruments. Each Borrower and each Credit Party and each Guarantor shall have executed (where required) and delivered to Lender each of the other documents, exhibits, disclosure schedules, instruments and other items listed in the Closing and Funding Checklist, in form and content satisfactory to Lender. (hh) $50,000,000 Revolving Credit Agreement. All conditions precedent to the obligation of Medical Provider Financial Corporation I (as lender) under Article 4 of the $50,000,000 Revolving Credit Agreement shall have been satisfied or provided for in a manner satisfactory to said lender, in its sole discretion, or waived in writing by said lender (ii) Documents Required by Title Commitment. Each Borrower shall have executed (where required) and deposited into Escrow all documents and instruments required by the Title Commitment and/or the Escrow Company. (jj) New $80,000,000 Credit Agreement. All conditions precedent to the obligation of MPFC II under Article 2 of the New $80,000,000 Credit Agreement shall have been satisfied or provided for in a manner satisfactory to MPFC II, in its sole discretion, or waived in writing by MPFC II. 16 2.2 Further Conditions Precedent to Making Loan; Further Conditions Precedent to Funding Advances. The obligations of Lender to making the Loan to Borrowers and to funding any Advances under the Loan to Borrowers, shall be subject to the following further conditions precedent: (a) Further Conditions Precedent to Making Loan. Lender shall not be obligated to make the Loan to Borrowers unless and until the following additional conditions precedent have been satisfied or provided for in a manner reasonably satisfactory to Lender, or waived in writing by Lender, on or before the Closing Date: (i) Loan Documents. All Loan Documents having been executed and delivered on or before the Closing Date shall remain in full force and effect, and Lender shall have received such further documents, instruments, agreements and legal opinions as Lender shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, each in form and substance satisfactory to Lender. (ii) $50,000,000 Revolving Credit Agreement. All loan documents having been executed and delivered on or before the closing date of the transaction contemplated by the $50,000,000 Revolving Credit Agreement shall remain in full force and effect, and the lender under the $50,000,000 Revolving Credit Agreement shall have received such further documents, instruments, agreements and legal opinions as such lender shall reasonably request in connection with the transactions contemplated by the $50,000,000 Revolving Credit Agreement and the loan documents referenced therein, each in form and substance satisfactory to said lender. (iii) Approvals. Lender shall have received (A) satisfactory evidence (or, shall, in its reasonable discretion, continue to be satisfied with such evidence received under Section 2.1(b) (Required Consents and Approvals)), that each Borrower and each Credit Party have obtained, or in the case of necessary Governmental Authority approvals, have applied for, all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents to which they are parties or a signatory, or (B) an officer's certificate signed by an executive officer of each Borrower in form and substance satisfactory to Lender affirming that no such consents or approvals are required. (iv) Timing. The Closing must occur by the Closing Date. (v) Collateral. Lender shall have approved of the Collateral in its sole and absolute discretion. (vi) Changes to Disclosure Schedules. Borrower shall have delivered to Lender updates to all Disclosure Schedules as required by Section 5.6 (Supplemental Disclosures), and Lender shall have approved in their discretion all updates to the Disclosure Schedules as have been delivered to Lender on or before the Closing Date. (vii) No Material Adverse Effect. No event or circumstance shall have occurred that has or reasonably could be expected by Lender to have a Material Adverse Effect. 17 (viii) Title Policies. Title Company shall irrevocably be committed to issue the Title Policy to Lender on the Closing Date for each Property, at Borrower's sole cost and expense, in form and content acceptable to Lender in its sole discretion. (ix) Escrow. Borrowers shall have opened Escrow at the offices of the Title Company and the escrow officer shall be prepared to close Escrow on the terms and conditions set forth in the Escrow Instructions on deposit therein. (b) Conditions to Funding Advances. Lender shall not be obligated to fund any Advance under the Loan to Borrowers on the Closing Date or on any other date if: (i) Any representation or warranty by any Borrower or by any Credit Party or by any Guarantor contained herein or in any other Loan Document is untrue or incorrect in any material respect as of such date; (ii) Any Default or Event of Default has occurred and is continuing or would result after giving effect to any Advance; or (iii) Any event or circumstance shall have occurred that has or reasonably could be expected by Lender to have a Material Adverse Effect. The request by any Borrower or Borrower's Representative that Lender fund an Advance under any Loan on the Closing Date or on any other date shall in each event be deemed to constitute, as of the date thereof, (A) a representation and warranty by all Borrowers and all Credit Parties and all Guarantors that the conditions precedent in this Section 2.2 (Further Conditions Precedent to Making Loan; Further Conditions Precedent to Funding Advances) to which it is a party or a signatory have been satisfied, and (B) a reaffirmation by each Borrower and by each Credit Party and by each Guarantor of their respective obligations under the Loan Documents. 2.3 Place of Closing; Delivery of Loan Documents to Lender; Deposits Into Escrow; Close of Escrow; Distribution of Funds and Documents. The transactions contemplated by this Agreement and the other Loan Documents will close on the Closing Date, as follows: (a) Place Of Closing. Unless otherwise agreed in writing by Borrowers and Lender, the Closing will take place on the Closing Date at the offices of the Lender at c/o Medical Capital Corporation, 2100 South State College Blvd., Anaheim, California 92806, Attn: Joseph J. Lampariello, President and COO, telephone: 714-935-3100. (b) Delivery of Loan Documents to Lender's Counsel. Each Borrower shall, not less than three (3) Business Days prior to the Closing Date, deliver or cause to be delivered to legal counsel for Lender the following Loan Documents, each duly executed by each Borrower, each Credit Party (where applicable), each Guarantor (where applicable), any other Person required by this Agreement, and, where required, witnessed, acknowledged and in recordable form, with all exhibits, schedules and annexes (each pre-approved by Lender) attached and executed as required: 18 (i) Two (2) duplicate original counterparts of this Agreement, executed by each Borrower and each Credit Party and each Guarantor and with all completed Annexes and Disclosure Schedules attached. (ii) [Intentionally Omitted] (iii) [Intentionally Omitted] (iv) One (1) original of the $10,700,000 Convertible Term Note, executed by Borrowers. (v) [Intentionally Omitted] (vi) Two (2) duplicate original counterparts of the Security Agreement, executed by Borrowers. (vii) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Western Medical Center - Anaheim, executed by IHHI and WMC-A. (viii) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Western Medical Center - Santa Ana, executed by IHHI and WMC-SA. (ix) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Coastal Community Hospital, executed by IHHI and Coastal. (x) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Chapman MOB Lease, , executed by IHHI. (xi) Two (2) duplicate original counterparts of the Collateral Assignment of Contracts re Chapman Hospital Lease, executed by IHHI. (xii) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Western Medical Center - Anaheim, executed by IHHI and WMC-A. (xiii) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Western Medical Center - Santa Ana, executed by IHHI and WMC-SA. (xiv) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Coastal Community Hospital, executed by IHHI and Coastal. (xv) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Chapman MOB Lease, executed by IHHI. (xvi) Two (2) duplicate original counterparts of the Deposit Account Security Agreement re Chapman Hospital Lease, executed by IHHI. (xvii) Two (2) duplicate original counterparts of the Control Agreement, executed by Borrowers and Bank. 19 (xviii) Two (2) duplicate original counterparts of the Post-Closing Agreement, executed by Borrowers. (xix) Two (2) duplicate original counterparts of the Intellectual Property Security Agreement, executed by Borrowers. (xx) Two (2) duplicate original counterparts of the Environmental Indemnity Agreement, executed by Borrowers and by each Credit Party (other than Ganesha). (xxi) Two (2) duplicate original counterparts of the Guaranty Agreement, executed by each Guarantor. (xxii) Two (2) duplicate original counterparts of the Intercreditor Agreement, executed by Borrowers. (xxiii) Two (2) duplicate original counterparts of the Pledge Agreement, executed by IHHI, Ganesha and West Coast. (xxiv) Two (2) duplicate original counterparts of the Stock Power executed by IHHI. (xxv) All original Stock certificates in WMC-A, WMC-SA, Coastal and Chapman owned, held or controlled by IHHI. (xxvi) Two (2) duplicate original counterparts of the Membership Power executed by Ganesha and West Coast. (xxvii) All original Membership Certificates in PCHI owned, held or controlled by Ganesha; and all Membership Certificates in PCHI owned, held or controlled by West Coast. (xxviii) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease), executed by the Landlord under the Chapman MOB Lease. (xxix) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease), executed by the Landlord under the Chapman Hospital Lease. (xxx) Two (2) duplicate original counterparts of the Landlord's Consent and Estoppel Certificate (Triple Net Lease), executed by PCHI. (xxxi) [Intentionally Omitted] (xxxii) Two (2) original executed opinions of California legal counsel for PCHI, West Coast, Ganesha, WMC-A, WMC-SA, Coastal and Chapman, executed by said counsel. 20 (xxxiii) Two (2) original executed first opinions of Nevada legal counsel for IHHI and OC-PIN, executed by said Nevada counsel. (xxxiv) Two (2) original executed second opinions of Nevada legal counsel for all Borrowers and Credit Parties and Guarantors, executed by said Nevada counsel. (xxxv) One (1) original executed fairness opinion, in form and content acceptable to Lender. (xxxvi) All other documents, instruments, agreements, Annexes, Schedules, Exhibits not set forth above but required by the Closing and Funding Checklist. (c) Deposits Into Escrow. Unless otherwise set forth below, Borrowers and Lender shall, not less than two (2) Business Days prior to the Closing Date, deposit the following documents, instruments and other items into Escrow, each duly executed and, where appropriate, witnessed, acknowledged and in recordable form, with all exhibits, schedules and annexes (each pre-approved by Lender) attached and executed as required: (i) One (1) copy of this Agreement, executed by Lender, by each Borrower and by each Credit Party and by each Guarantor and with all completed Annexes and Disclosure Schedules and Exhibits attached. (ii) With respect to the Western Medical Center - Anaheim, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Western Medical Center - Anaheim. (iii) With respect to the Western Medical Center - Santa Ana, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana. (iv) With respect to the Coastal Communities Hospital, one (1) original Deed of Trust executed and acknowledged by PCHI with the legal description describing the fee simple interest in the Coastal Communities Hospital. (v) With respect to the Chapman Medical Center: (A) one (1) original Deed of Trust executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; and (B) one (1) original Deed of Trust executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease (vi) With respect to the Western Medical Center - Anaheim, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and WMC-A with the legal description describing the fee simple interest in the Western Medical Center - Anaheim. 21 (vii) With respect to the Western Medical Center - Santa Ana, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and WMC-SA with the legal description describing the fee simple interest in the Western Medical Center - Santa Ana. (viii) With respect to the Coastal Communities Hospital, one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by PCHI, IHHI and Coastal with the legal description describing the fee simple interest in the Coastal Communities Hospital. (ix) With respect to the Chapman Western Medical Center: (A) one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; and. (B) one (1) original Absolute Assignment of Leases and Rents executed and acknowledged by IHHI with the legal description describing (1) the fee simple interest in the Chapman Medical Center, and (2) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease. (x) Escrow Instructions executed by each Borrower and each Credit Party and each Guarantor. (xi) For each Property, all UCC-1 Financing Statements (Fixture Filing) as are required by Lender under the Loan Documents, naming the applicable Person's as Debtor. (xii) All other documents, resolutions, charter documents, affidavits and items required by any Title Company pursuant to and as set forth in any Title Commitment. (xiii) By 11:00 a.m. Los Angeles time on the Closing Date, Lender and Borrowers shall deposit into Escrow any funds required by this Agreement. (d) Close of Escrow; Recordation of Loan Documents. At such time as (i) Escrow Holder holds for the account of Lender each of the documents, instruments and funds set forth above; (ii) each Borrower, each Credit Party, each Guarantor and Lender have complied with their respective obligations under this Agreement and their respective Escrow Instructions; (iii) Escrow Holder is prepared to close and consummate the transactions contemplated by the $50,000,000 Revolving Credit Agreement and has complied with the escrow instructions by the parties to the $50,000,000 Revolving Credit Agreement; (iv) Escrow Holder is prepared to close and consummate the transactions contemplated by the New $80,000,000 Credit Agreement and has complied with the escrow instructions by the parties to the New $80,000,000 Credit Agreement; and (v) the Title Company is irrevocably prepared to issue and deliver each Title Policy to Lender at Closing, then Escrow Holder shall close Escrow as follows: 22 (i) With respect to fee simple interest at Western Medical Center - - Anaheim, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $10,700,000 Term Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan and/or the Previous $30,000,000 Line of Credit Loan; (2) cause the Western Medical Center - Anaheim $10,700,000 Deed of Trust to be recorded as a first Lien and encumbrance against the fee simple title of the Western Medical Center - - Santa Ana; (3) cause the Western Medical Center - Anaheim Absolute Assignment of Leases and Rents to be recorded as a Lien and encumbrance against the fee simple title of the Western Medical Center - Anaheim; and (4) cause the Western Medical Center - Anaheim UCC-1 Financing Statement (Fixture Filing) to be recorded, in each case subject only to the applicable Permitted Exceptions. (ii) With respect to the fee simple interest at Western Medical Center - Santa Ana, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $10,700,000 Term Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan and/or the Previous $30,000,000 Line of Credit Loan; (2) cause the Western Medical Center - Santa Ana $10,700,000 Deed of Trust to be recorded as a first Lien and encumbrance against the fee simple title of the Western Medical Center - Santa Ana; (3) cause the Western Medical Center - Santa Ana Absolute Assignment of Leases and Rents to be recorded as a Lien and encumbrance against the fee simple title of the Western Medical Center - - Santa Ana; and (4) cause the Western Medical Center - Santa Ana UCC-1 Financing Statement (Fixture Filing) to be recorded, in each case subject only to the applicable Permitted Exceptions. (iii) With respect to the fee simple interest at Coastal Communities Hospital, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $10,700,000 Term Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan and/or the Previous $30,000,000 Line of Credit Loan; (2) cause the Coastal Communities Hospital $10,700,000 Deed of Trust to be recorded as a first Lien and encumbrance against the fee simple title of the Coastal Communities Hospital; (3) cause the Coastal Communities Hospital Absolute Assignment of Leases and Rents to be recorded as a Lien and encumbrance against the fee simple title of the Coastal Communities Hospital; and (4) cause the Coastal Communities Hospital UCC-1 Financing Statement (Fixture Filing) to be recorded, in each case subject only to the applicable Permitted Exceptions. (iv) With respect to IHHI's interest, as MOB Tenant, in the Chapman MOB Lease at the Chapman Medical Center, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $10,700,000 Term Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan and/or the Previous 23 $30,000,000 Line of Credit Loan; (2) cause the Chapman Medical Center $10,700,000 Deed of Trust (Chapman MOB Lease) to be recorded as a first Lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; (3) cause the Chapman Medical Center Absolute Assignment of Leases and Rents (Chapman MOB Lease) to be recorded as a Lien and encumbrance against IHHI's interest, as MOB tenant, in the Chapman MOB Lease; and (4) cause the Chapman Medical Center UCC-1 Financing Statement (Fixture Filing) (Chapman MOB Lease) to be recorded against Chapman's interest, as MOB Tenant, in the Chapman MOB Lease, in each case subject only to the applicable Permitted Exceptions. (v) With respect to IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease at the Chapman Medical Center, Escrow Holder will (1) release from record all existing Lender Liens re the Previous $10,700,000 Term Loan, the Previous Accounts Receivable Purchase Agreement, and all Previous UCC-1 Financing Statements (Fixture Filings) except any Previous UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan and/or the Previous $30,000,000 Line of Credit Loan; (2) cause the Chapman Medical Center $10,700,000 Deed of Trust (Chapman Hospital Lease) to be recorded as a first Lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; (3) cause the Chapman Medical Center Absolute Assignment of Leases and Rents (Chapman Hospital Lease) to be recorded as a Lien and encumbrance against IHHI's interest, as Hospital tenant, in the Chapman Hospital Lease; and (4) cause the Chapman Medical Center UCC-1 Financing Statement (Fixture Filing) (Chapman Hospital Lease) to be recorded against Chapman's interest, as Hospital Tenant, in the Chapman Hospital Lease, in each case subject only to the applicable Permitted Exceptions (e) Distribution of Funds and Documents by Escrow Holder at Closing. When Escrow Holder is the position to close Escrow as required by Section 2.3(d) (Close of Escrow; Recordation of Loan Documents) immediately above, but in no event later than the Closing Date, Escrow Holder shall distribute funds and documents then on deposit in Escrow to Borrowers as set forth in Lender's separate escrow instructions. (f) Distribution of Documents by Escrow Holder. (i) The original and one (1) copy of each Lender's Title Policy to Lender. (ii) A true and correct copy of each of the $10,700,000 Deeds of Trust to Lender (with a copy to Borrowers) as recorded. (iii) A true and correct copy of each of the Absolute Assignment of Leases and Rents to Lender (with a copy to Borrowers) as recorded. (iv) A true and correct copy of each UCC-1 Financing Statement (Fixture Filing) (with a copy to Borrowers) as recorded. (v) Final settlement statement to Lender and to Borrowers with respect to distribution of amounts deposited into this Escrow. Even though the following amounts were not deposited into Escrow, said final settlement statement shall list the total amount of the Advances made by Lender to Borrowers pursuant to this Agreement but which were withheld by Lender to pay in full the Previous $10,700,000 Term Loan. 24 (g) Distribution of Documents by Lender at Closing. When Escrow Holder has closed Escrow and distributed the documents and funds as and when required by this Agreement, Lender shall cause the documents then in its possession to be distributed as follows: (i) To Borrower's Representative: one (1) duplicate original counterpart of the Absolute Assignments of Leases and Rents; the Security Agreement; the Collateral Assignments of Contracts; the Deposit Account Security Agreements; the Control Agreement; the Post-Closing Agreement; the Intellectual Property Security Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Intercreditor Agreement; the Pledge Agreement; the Stock Power; the Membership Power; the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease); the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease)and the Landlord's Consent and Estoppel Certificate (Triple Net Lease). (ii) To Borrower's Representative: one (1) copy of the $10,700,000 Convertible Term Note; and one (1) copy of the fairness opinion. (iii) To Lender: one (1) duplicate original counterpart of the Absolute Assignments of Leases and Rents; the Security Agreement; the Collateral Assignments of Contracts; the Deposit Account Security Agreements; the Control Agreement; the Post-Closing Agreement; the Intellectual Property Security Agreement; the Environmental Indemnity Agreement; the Guaranty Agreement; the Intercreditor Agreement; the Pledge Agreement; the Stock Power; the Membership Power; the Landlord's Consent and Estoppel Certificate (Chapman MOB Lease); the Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease); and the Landlord's Consent and Estoppel Certificate (Triple Net Lease). (iv) To Lender: the original executed $10,700,000 Convertible Term Note; the original of each of the executed legal opinions; and the original executed fairness opinion. 3. REPRESENTATIONS AND WARRANTIES ------------------------------ To induce Lender to make the Loan, Borrowers make the following representations and warranties to Lender with respect to Borrowers; each Credit Party makes the following representations and warranties to Lender with respect to itself; and each Guarantor makes the following representations and warranties to Lender with respect to itself. Each and all of said representations and warranties (i) shall be true, correct, complete and accurate on the Closing Date and on each subsequent funding date (unless expressly limited to a particular date), and (ii) shall survive the execution and delivery of this Agreement (it being understood, that, for purposes of any representation and warranty expressly made as of the Closing Date and each subsequent funding date with reference to, or qualified by, a Disclosure Schedule, such reference shall include such updated version, if any, of such Disclosure Schedule as may be made effective (including by consent of Lender) pursuant to Section 5.6 (Supplemental Disclosure) on or before the Closing Date). 25 3.1 Borrowers and Credit Parties. (a) Corporate Existence; Compliance with Applicable Laws. (i) IHHI (1) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada; (2) is registered as a foreign corporation in the State of California and is qualified to do business in and is doing business in the State of California; (3) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its bylaws; and (7) is in compliance in all material respects with all other Applicable Laws. (ii) WMC-A, WMC-SA, Coastal and Chapman are each (1) corporations duly organized, validly existing and in good standing under the laws of the State of California; (2) doing business in the State of California; (3) duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its bylaws; and (7) is in compliance in all material respects with all other Applicable Laws. (iii) PCHI, Ganesha and West Coast are each (1) limited liability companies duly organized, validly existing and in good standing under the laws of the State of California; (2) doing business in the State of California; (3) duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) have the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) have applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its operating agreement; and (7) is in compliance in all material respects with all other Applicable Laws. 26 (iv) OC-PIN is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Nevada; (2) is registered as a foreign limited liability company in the State of California and is qualified to do business in and is doing business in the State of California; (3) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (4) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (5) has applied for all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (6) is in compliance with its operating agreement; and (7) is in compliance in all material respects with all other Applicable Laws. (b) Executive Office, Collateral Locations, FEIN. As of the Closing Date, the name of each Borrower and each Credit Party and each Guarantor, as its name appears in official filings in the States of Nevada and California (as applicable), and the current location of each Borrower's and each Credit Party's and each Guarantor's chief executive office and the premises at which any Collateral is located are set forth in Disclosure Schedule 3.1. None of such locations has changed within the four (4) months preceding the Closing Date (except that Collateral may have been transferred from one Hospital Facility to another during said period) and each Borrower and Credit Party and each Guarantor has only one state of incorporation or organization and has not changed the state of incorporation or organization at any time within the five (5) year period prior to the Closing Date. During the preceding five (5) years, no Borrower and no Credit Party and no Guarantor has conducted business under or used any name (whether corporate, partnership or assumed) other than as shown on Schedule 3.1. Each Borrower and each Credit Party and each Guarantor is the sole owner of all of its names listed on Schedule 3.1, and any and all business done and invoices issued in such names are such Borrower's and/or such Credit Party's and such Guarantor's sales, business and invoices. Each trade name of each Borrower and each Credit Party and each Guarantor represents a division or trading style of such Borrower and/or such Credit Party and/or such Guarantor. All Accounts of each Borrower and each Credit Party (other than Ganesha) and each Guarantor (other than Ganesha) arise, originate and are located, and all of the Collateral and all books and records in connection therewith or in any way relating thereto or evidencing the Collateral are located and shall only be located, in and at such locations other than goods in transit and immaterial amounts of property. All of the Collateral is located only in the continental United States. Each Borrower's and each Credit Party's (other than Ganesha) and each Guarantor's (other than Ganesha) Medicare and Medicaid Provider Numbers are set forth on Schedule 3.1. In addition, Disclosure Schedule 3.1 lists the federal employer identification number of each Borrower and each Credit Party and each Guarantor. 27 3.2 Power, Authorization, Enforceable Obligations. The execution, delivery and performance by Borrowers of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person's power; (b) have been duly authorized by all necessary corporate or limited liability company action; (c) do not contravene any provision of such Person's bylaws or operating agreement; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Lender pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 2.1(b) (Required Consents and Approvals), all of which will have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan Documents shall be duly executed and delivered by Borrowers and Credit Parties and each such Loan Document shall constitute a legal, valid and binding obligation of Borrowers and Credit Parties enforceable against it in accordance with its terms. Credit Parties hereby make the foregoing representations and warranties in clauses (d), (e), (f) and (g) of this Section 3.2 (Power, Authorization, Enforceable Obligations) with respect to the execution, delivery and performance by Credit Parties of the Loan Documents to which Credit Parties are a party and the creation of all Liens provided for therein. 3.3 Financial Statements and Projections. Except for the Projections, all Financial Statements delivered to Lender by Borrowers that are referred to below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of Borrowers as of the dates thereof and the results of their operations and cash flows for the periods then ended. Credit Parties (other than Ganesha) hereby represent and warrant to Lender that all financial statements delivered to Lender by Credit Parties present fairly in all material respects the financial position of the Credit Parties as of the dates thereof, and since the date of the most recent financial statements submitted to Lender, there has not occurred any Material Adverse Effect or, to Credit Parties' knowledge, any other event or condition that would reasonably be likely to have a Material Adverse Effect. (a) Financial Statements. The Financial Statements which have been delivered by Borrowers to Lender on or before the date hereof are comprised of: (i) The consolidated, unaudited balance sheets of Borrowers as of December 31, 2006, and the related statements of income and cash flows of Borrowers for the nine (9) month period then ended. (ii) The unaudited balance sheet(s) at June 30, 2007 of Borrowers and the related consolidated statement(s) of income and cash flows of Borrowers for the Fiscal Quarter then ended. 28 (b) Pro Forma. The pro forma financial statements which have been delivered by Borrowers to Lender on or before the date hereof were prepared by Borrowers giving pro forma effect to the Related Transactions, was based on the unaudited consolidated and consolidating balance sheets of Borrowers and its Subsidiaries, and were prepared in accordance with GAAP (to the extent applicable), with only such adjustments thereto as would be required in accordance with GAAP. (c) Projections. All Projections which have been delivered by Borrowers to Lender on the date hereof were prepared by Borrowers in light of Borrower's past experience, but including reasonably estimated future payments of known contingent liabilities, and reflect projections on a quarterly basis for the 2007/2008 Fiscal Year and on an annual basis for all periods thereafter through 2009/2010. The Projections are based upon the same accounting principles as those used in the preparation of the financial statements described above with certain normalizing assumptions made by Borrowers, and the estimates and assumptions stated therein, all of which Borrowers believe to be reasonable and fair in light of current conditions and current facts known to Borrowers and, as of the Closing Date, reflect Borrower's good faith and reasonable estimates of the future financial performance of Borrowers for the period set forth therein. 3.4 Material Adverse Effect. (a) Borrowers. The Borrowers hereby represent to Lender that, between the Effective Date of this Agreement and the Closing Date: (i) to the best of Borrower's knowledge, after due inquiry, there has not been any material increase in contingent or noncontingent liabilities, liabilities for Charges, or obligations with respect to long-term leases or unusual forward or long-term commitments of Borrowers, (ii) to the best of Borrower's knowledge, after due inquiry, there has not been any material decrease in the assets of Borrowers, (iii) no contract, lease or other agreement or instrument has been entered into by Borrowers or has become binding upon Borrower's assets and, to the knowledge of Borrowers, no law or regulation applicable to Borrowers has been adopted that has had or could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Collateral, (iv) to the best of Borrower's knowledge, after due inquiry, neither Borrowers nor any of the Credit Parties is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Collateral, and (v) to the best of Borrower's knowledge, after due inquiry, no event has occurred, that alone or together with other events, has had, or could reasonably be expected to have, a Material Adverse Effect with respect to Borrowers or the Collateral. (b) Credit Parties. The Credit Parties (other than Ganesha) hereby represent to Lender that, between the Effective Date of this Agreement and the Closing Date: (i) to the best of each Credit Party's knowledge, there has not been any material increase in contingent or noncontingent liabilities, liabilities for Charges, or obligations with respect to long-term leases or unusual forward or long-term commitments of Borrowers, (ii) to the best of each Credit Party's knowledge, there has not been any material decrease in the assets of any Credit Party, (iii) no contract, lease or other agreement or instrument has been entered into by any Credit Party or has become binding upon Credit Parties assets and, to the knowledge of Credit Parties, no law or regulation applicable to Credit Parties or to Borrowers has been adopted that has had or 29 could reasonably be expected to have a Material Adverse Effect with respect to Credit Party's or Borrowers or the Collateral, (iv) to the best of each Credit Party's knowledge, neither Borrowers nor any of the Credit Parties is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to Borrowers or the Credit Parties or the Collateral, and (v) to the best of each Credit Party's knowledge, no event has occurred, that alone or together with other events, has had, or could reasonably be expected to have, a Material Adverse Effect with respect to Borrowers or the Credit Parties or the Collateral. 3.5 Ownership of Collateral; Liens. Borrowers and Credit Parties (other than Ganesha) (a) each separately own good, valid and marketable title to or a valid leasehold interest in, all of its properties and assets, including all of its Collateral whether personal or real, subject to no transfer restrictions or Liens of any kind except for Permitted Encumbrances, and (b) is in compliance in all material respects with each lease to which it is a party or otherwise bound. None of the Collateral is subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to Borrowers or to Credit Parties that may result in any Liens (including Liens arising under Environmental Laws or other Applicable Laws) other than Permitted Encumbrances. Disclosure Schedule 3.5 attached hereto sets forth a list of all real estate and leases to be owned or held by Borrowers immediately after the Closing Date. Each Borrower enjoys peaceful and undisturbed possession under all such leases and such leases are all the leases necessary for the operation of such properties and assets are valid and subsisting and are in full force and effect. 3.6 Labor Matters. Except as set forth on Disclosure Schedule 3.6, as of the Closing Date, (a) no strikes or other material labor disputes against Borrowers are pending or, to any Borrower's or to any Credit Party's knowledge, threatened; (b) hours worked by and payment made to employees of Borrowers comply in all material respects with the Fair Labor Standards Act and other Applicable Laws; (c) all payments due from Borrowers for employee health and welfare insurance have been paid or accrued as a liability on the books of Borrowers; (d) Borrowers are not a party to or bound by any collective bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement unless true and complete copies of any agreements described on Disclosure Schedule 3.6 have been delivered to Lender; (e) there is no organizing activity involving Borrowers pending or, to Borrower's or Credit Party's knowledge, threatened by any labor union or group of employees of Borrowers; (f) except as otherwise disclosed on Disclosure Schedule 3.6, there are no representation proceedings pending or, to Borrower's or Credit Party's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Borrower has made a pending demand for recognition; and (g) there are no material complaints or charges against any Borrower pending or, to the knowledge of Borrowers or Credit Parties, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Borrower of any individual. 3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock. Except as listed on Disclosure Schedule 3.7, the Borrowers and the Credit Parties have no Subsidiaries. Disclosure Schedule 3.7 states the authorized and issued capitalization of each Borrower and of each Credit Party (other than Ganesha), 30 the number and class of equity securities and/or ownership, voting or partnership interests issued and outstanding of each Borrower and each Credit Party (other than Ganesha) and the record and beneficial owners thereof (including options, warrants and other rights to acquire any of the foregoing). The ownership or partnership interests of each Credit Party are not certificated, the documents relating to such interests do not expressly state that the interests are governed by Article 8 of the Uniform Commercial Code, and the interests are not held in a securities account. The outstanding equity securities and/or ownership, voting or partnership interests of each Borrower and each Credit Party (other than Ganesha) have been duly authorized and validly issued and are fully paid and non-assessable, and each Person listed on Disclosure Schedule 3.7 owns beneficially and of record all the equity securities and/or ownership, voting or partnership interests it is listed as owning free and clear of any Liens other than Liens created by the Collateral Documents. Disclosure Schedule 3.7 also lists the directors, members, managers and/or partners of each Borrower and each Credit Party (other than Ganesha). Except as listed on Disclosure Schedule 3.7, no Credit Party (other than Ganesha) owns an interest in, participates in or engages in any joint venture, partnership or similar arrangements with any Person. Except as set forth in Disclosure Schedule 3.7, as of the Closing Date, there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Borrower or any Credit Party (other than Ganesha) has issued or may be required to issue, sell, repurchase or redeem any of its Stock. All outstanding Indebtedness and Guaranteed Indebtedness of Borrowers and Credit Parties (other than Ganesha) as of the Closing Date identified in Section 6.3 (Indebtedness) is described in Disclosure Schedule 6.3. 3.8 Government Regulation. No Borrower is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940. No Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loan by Lender to Borrowers, the application of the proceeds thereof and repayment thereof and the consummation of the Related Transactions will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission or other Applicable Laws binding on Borrowers. 3.9 Margin Regulations. Borrowers are not engaged, nor will they engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect. Borrowers do not own any margin stock, and none of the proceeds of the Loan or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any stock or for any other purpose that might cause the Loan or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. Borrowers will not take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board. Each Credit Party (other than Ganesha) hereby makes the foregoing representations, warranties and covenants to Lender set forth in this Section 3.9 (Margin Regulations) with respect to such Credit Party. 31 3.10 Taxes. Except as described in Disclosure Schedule 3.10, all Federal and other material tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by Borrowers have been filed with the appropriate Governmental Authority, and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof excluding Charges or other amounts being contested in accordance with Section 5.2(b) (Right to Contest Charges) and unless the failure to so file or pay would not reasonably be expected to result in fines, penalties or interest in excess of $100,000 in the aggregate. Proper and accurate amounts have been withheld by Borrowers for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. Disclosure Schedule 3.10 sets forth as of the Closing Date and the Closing Date those taxable years for which each Borrower's tax returns are currently being audited by the IRS or any other applicable Governmental Authority, and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described in Disclosure Schedule 3.10, as of the Closing Date, no Borrower has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. Borrowers are not liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to Borrower's and Credit Party's knowledge, as a transferee. As of the Closing Date, Borrowers have not agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise. Each Credit Party (other than Ganesha) hereby make the foregoing representations, warranties and covenants to Lender set forth in this Section 3.10 (Taxes) with respect to all Charges and tax returns of such Credit Party. 3.11 ERISA. (a) Disclosure Schedule 3.11 lists, as of the Closing Date, for each Borrower (i) all ERISA Affiliates and (ii) all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such listed Plans have been delivered to Lender. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the IRC and its terms, including the timely filing of all reports required under the IRC or ERISA. Neither any Borrower nor any ERISA Affiliate has failed to make any material contribution or pay any material amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No "prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of the IRC, has occurred with respect to any Plan, that would subject any Borrower to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC. (b) Except as set forth in Disclosure Schedule 3.11: (i) no Title IV Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of Borrowers, threatened material claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; 32 (iv) neither any Borrower nor any ERISA Affiliate has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; and (v) within the last five years no Title IV Plan of any Borrower or any ERISA Affiliate has been terminated, whether or not in a "standard termination" as that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any Borrower or any ERISA Affiliate (determined at any time within the last five years) with material Unfunded Pension Liabilities been transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14( of ERISA) of any Borrower or any ERISA Affiliate (determined at such time). 3.12 No Litigation. Except as set forth in Disclosure Schedule 3.12, no Litigation, action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of Borrowers or Credit Parties, threatened against Borrowers, before any Governmental Authority or before any arbitrator or panel of arbitrators, (a) that challenges the execution, delivery and performance of Borrower's or Credit Party's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to Borrowers or Credit Parties and that, if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule 3.12, as of the Closing Date there is no Litigation pending or, to Borrower's or Credit Party's knowledge, threatened, that seeks damages in excess of One Hundred Thousand Dollars ($100,000) or injunctive relief against, or alleges criminal misconduct of, Borrowers. 3.13 Brokers. Except as set forth on Disclosure Schedule 3.13, no broker or finder brought about the obtaining, making or closing of the Loan or the Related Transactions, and neither Borrowers nor any Affiliates thereof has any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 3.14 Intellectual Property. As of the Closing Date, Borrowers own or will own, and have or will have, rights to use all Intellectual Property necessary to continue to conduct its business as now conducted by it or presently proposed to be conducted by it, and each Patent, Trademark, registered Copyright and License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule 3.14. Borrowers conduct their businesses and affairs without knowingly infringing or interfering with any Intellectual Property of any other Person which could reasonably be expected to have a Material Adverse Effect. Except as set forth in Disclosure Schedule 3.14, neither Borrowers nor Credit Parties is aware of any material infringement claim by any other Person with respect to any Intellectual Property. 3.15 Full Disclosure. All representations and warranties made in any of the Loan Documents by Borrowers or Credit Parties or Guarantors shall be made after giving full effect to the transactions contemplated in this Agreement. No information contained in this Agreement, any of the other Loan Documents, Financial Statements or Collateral Reports or other written reports from time to time prepared by Borrowers or Credit Parties or Guarantors and delivered hereunder or any written statement prepared by Borrowers or Credit Parties or Guarantors and furnished by or on behalf of Borrowers or Credit Parties or Guarantors to Lender pursuant to the terms of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not 33 materially misleading in light of the circumstances under which they were made. Projections from time to time delivered hereunder are or will be based upon the estimates and assumptions stated therein, all of which Borrowers and Credit Parties (other than Ganesha) and Guarantors (other than Ganesha), as applicable, believed at the time of delivery to be reasonable and fair in light of current conditions and current facts known to Borrowers and Credit Parties (other than Ganesha) and Guarantors (other than Ganesha), as applicable, as of such delivery date, and reflect Borrower's and Credit Party's (other than Ganesha's) and Guarantor's (other than Ganesha's) good faith and reasonable estimates of the future financial performance of Borrowers and of the other information projected therein for the period set forth therein. The Liens granted to Lender pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances. 3.16 Environmental Matters. Each Borrower and each Credit Party (other than Ganesha) and each Guarantor represent and warrant to Lender as follows: (a) Except as set forth in Disclosure Schedule 3.16, as of the date hereof, no Borrower and no Credit Party and no Guarantor knows of any Hazardous Material which is present, used, manufactured, handled, generated, transported, stored, treated, discharged, released, buried or disposed of on, in, under or about any Property in violation of applicable Environmental Laws; (b) To the best of each Borrower's and each Credit Party's and each Guarantor's knowledge, following diligent inquiry, there has not been any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Material by any prior owners of prior occupants of any Property or by any third parties on, in, under or about any Property; (c) As of the date hereof there is no pending or, to each Borrower's and each Credit Party's and each Guarantor's knowledge, threatened litigation or proceedings before any administrative agency in which any person or entity alleges the release, threat of release, placement on, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or any Credit Party or any Guarantor, of any Hazardous Material, in violation of Environmental Laws; (d) As of the date hereof, no Borrower and no Credit Party and no Guarantor has received any notice and no Borrower and no Credit Party and no Guarantor has any actual knowledge that any Governmental Authority or any employee or agent thereof been determined, or threatens to determine, that there is a presence, release, threat of release, placement on, in, under or about any Property caused by any Borrower or by any Credit Party or by any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property caused by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or any Credit Party or any Guarantor, of any Hazardous Material, in violation of Environmental Laws; and 34 (e) To each Borrower's and each Credit Party's and each Guarantor's knowledge, there have been no communications or agreements with any Governmental Authority or any private entity indicating that there has occurred, a release, threat of release, placement on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the manufacture, handling, generation, transportation, storage, treatment, discharge, burial or disposal on, in, under or about any Property by any Borrower or any Credit Party or any Guarantor, or the transportation to or from any Property by any Borrower or by any Credit Party or by any Guarantor, of any Hazardous Material in violation of any Environmental Laws. 3.17 Insurance. Disclosure Schedule 3.17 lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by Borrowers, as well as a brief description thereof; and a copy of each current certificate of insurance naming Lender as an additional co-insured. 3.18 Deposit and Disbursement Accounts. Disclosure Schedule 3.18 lists all banks and other financial institutions at which Borrowers maintain or will maintain deposit, commodities, investment or other accounts as of each of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor. Disclosure Schedule 3.18 shall identify which deposit accounts of each entity are used to receive Governmental Authority payments. 3.19 Vendor Relations. As of the Closing Date, there exists no actual or, to the knowledge of Borrowers or Credit Parties or Guarantors, threatened termination or cancellation of, or any material adverse modification or change in the business relationship of Borrowers with any supplier essential to its operations. 3.20 Bonding; Licenses; Permits. Except as set forth on Disclosure Schedule 3.20, as of the Closing Date, no Borrower is a party to or bound by any surety bond agreement or bonding requirement with respect to products or services sold by it or any trademark or patent license agreement with respect to products sold by it. Disclosure Schedule 3.20 list each permit each Borrower is required to obtain and maintain in order to conduct its respective Business in its respective Hospital Facility. 3.21 Solvency. Both before and after giving effect to (a) the Loan to be made or incurred on the Closing Date or such other date as Advances are made or incurred, (b) the disbursement of the proceeds of such Advances pursuant to the instructions of Borrower's Representative; (c) the consummation of the other Related Transactions; and (d) the payment and accrual of all transaction costs in connection with the foregoing, Borrowers are each and will be Solvent. 4. FINANCIAL STATEMENTS AND INFORMATION ------------------------------------ 4.1 Reports and Notices. (a) Lender have received from Borrowers and Credit Parties (other than Ganesha), and have approved, certain Financial Statements and Projections of Borrowers and the Credit Parties (other than Ganesha). Borrowers hereby agree 35 that they shall, between the Closing Date and the Termination Date, deliver to Lender updated Financial Statements and Projections (and, if requested by Lender, components thereof or statistical information related thereto not later than the 30th calendar day following expiration of each Fiscal Quarter to the address of Lender set forth in Annex D (Notice Addresses). Further, Lender shall have the right but not the obligation to require Borrowers to deliver updated Financial Statements and Projections (with all requested additional information) to Lender on a monthly basis, in Lender's sole discretion. (b) Borrowers hereby agree that, from and after the Closing Date and until the Termination Date, they shall deliver to Lender, the various Collateral Reports and other reports at the times, to the Persons and in the manner set forth in Annex D (Notice Addresses) including all certifications required with respect to Certified Cash balances. 4.2 Communication with Accountants. Borrowers and Credit Parties authorize Lender to communicate and/or meet directly with all independent certified public accountants of Borrowers, and Borrowers shall authorize and shall instruct those accountants to communicate and/or meet with Lender with regard to any and all financial statements and supporting financial documentation relating to Borrowers with respect to the business, results of operations and financial condition of Borrowers. Prior to communicating with the independent public accounts of Borrowers, Lender shall deliver a reasonable advance written notice to Borrowers stating the purpose and scope of the communication and/or meeting. 5. AFFIRMATIVE COVENANTS --------------------- To induce Lender to make the Loan, Borrowers and Credit Parties and Guarantors, as applicable, make the following affirmative covenants in favor of Lender, each of which shall survive the execution and delivery of this Agreement. 5.1 Maintenance of Existence and Conduct of Business. Borrowers and Credit Parties and Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate and/or limited liability company existence and its material rights; continue to conduct its business substantially as conducted prior to the Closing Date, anticipated to be conducted, or as otherwise permitted hereunder; at all times maintain, preserve and protect all of their assets and properties necessary to the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices. 5.2 Payment of Charges. (a) Obligation to Pay Charges. Subject to Section 5.2(b) (Right to Contest Charges), Borrowers shall pay and discharge or cause to be paid and discharged promptly all Charges payable by them, including (i) Charges imposed upon them, their income and profits, or any of their property (real, personal or mixed) and all Charges with respect to Taxes, social security and unemployment withholding with respect to their employees, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen or bailees in possession of any Collateral, in each case, before any thereof shall become past due, except in the case of clauses (ii) and (iii) where the failure to pay or discharge such Charges would not result in aggregate liabilities in excess of $100,000. 36 (b) Right to Contest Charges. Borrowers may in good faith contest, by appropriate proceedings, the validity or amount of any Charges, Taxes or claims described in Section 5.2(a) (Obligation to Pay Charges); provided, that (i) adequate reserves with respect to such contest are maintained on the books of Borrowers, in accordance with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) Borrowers shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Lender evidence reasonably acceptable to Lender of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to Borrowers or the conditions set forth in this Section 5.2(b) (Right to Contest Charges) are no longer met. 5.3 Books and Records. Borrowers shall keep adequate books and records with respect to their business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP (except as otherwise disclosed on the Financial Statements). 5.4 Insurance; Damage to or Destruction of Collateral. (a) Insurance. Borrowers shall, in Disclosure Schedule 3.17, list all existing policies of insurance that they carry and maintain, along with the names and contact information for each existing insurance carrier, which policies and carriers shall be subject to the prior written consent of Lender, which consent shall not be unreasonably withheld. If Lender fails or refuses to approve Borrower's existing policies of insurance or existing insurance carriers, then Borrowers agrees to increase or change its insurance coverage or change its insurance carrier as required by Lender, and the same shall be listed in Disclosure Schedule 3.17. Thereafter, Borrowers shall, at its sole cost and expense, maintain the policies of insurance described on Disclosure Schedule 3.17 as approved by Lender or may obtain and maintain other policies of insurance in form and amounts and with insurers reasonably acceptable to Lender. All policies of insurance (or the loss payable and additional insured endorsements delivered to Lender) that relate to coverage involving the Collateral shall contain provisions pursuant to which the insurer agrees to provide thirty (30) days prior written notice to Lender in the event of any non-renewal, cancellation or amendment of any such insurance policy. If Borrowers at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Lender may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Lender deems advisable. Lender shall have no obligation to obtain insurance for Borrowers or pay any premiums therefor. By doing so, Lender shall not be deemed to have waived any Default or Event of Default arising from Borrower's failure to maintain such insurance or pay any premiums therefore. All sums so disbursed, including reasonable attorneys' fees, court costs and other charges related thereto, shall be charged as an Advance against the $35,000,000 Non-Revolving Line of Credit Loan, or shall be payable on demand by Borrowers to Lender and shall be additional Obligations hereunder secured by the Collateral, and shall bear interest at the Default Rate until paid in full to Lender. 37 (b) Lender's Insurance Rights. Upon any change in Borrower's insurance risk profile (as determined by Borrower's insurance broker or as reasonably determined by Lender pursuant to and based upon generally recognized insurance underwriting standards (including changes caused by changes in laws affecting the potential liability of a Borrowers), Lender reserves the right to require additional forms and limits of insurance to, in Lender's reasonable opinion, adequately protect Lender's interests and Lien in all or any portion of the Collateral and to ensure that Borrowers are protected by insurance in amounts and with coverage customary for its industry. If reasonably requested by Lender, Borrowers shall to deliver to Lender from time to time a report of a reputable insurance broker, reasonably satisfactory to Lender, with respect to its insurance policies. (c) Endorsements. Borrowers shall deliver to Lender, in form and substance reasonably satisfactory to Lender, endorsements to all general liability and other liability policies naming Lender as an additional insured. Borrowers shall irrevocably make, constitute and appoint Lender (and all officers, employees of Lender designated by Lender), so long as any Default or Event of Default has occurred and is continuing, as each Borrower's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under all policies of insurance relating to coverage of the Collateral, endorsing the name of Borrowers on any check or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. Lender shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower's Representative shall promptly notify Lender of any loss, damage, or destruction to the Collateral in the amount of $100,000 or more, whether or not covered by insurance. After deducting from such proceeds (i) the expenses incurred by Lender in the collection or handling thereof, and (ii) amounts required to be paid to creditors (other than Lender) having Permitted Encumbrances, Lender may, at its option, apply such proceeds to the reduction of the Obligations in accordance with Section 1.3(c) (Application of Prepayments). Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds could not reasonably be expected to have a Material Adverse Effect, Lender shall permit Borrowers to replace, restore, repair or rebuild the property. 5.5 Compliance with Applicable Laws. Borrowers shall comply in all material respects with all federal, state, local and foreign laws and regulations applicable to it, including those relating to ERISA, labor laws, Environmental Laws and Environmental Permits. 5.6 Supplemental Disclosure. At Closing, and thereafter from time to time as may be reasonably requested by Lender, Borrowers shall supplement and update each Disclosure Schedule attached to this Agreement, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements or updates to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement or update to any 38 such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Lender in writing, and (b) no supplement or update shall be required or permitted as to representations and warranties that expressly relate only to the Closing Date (except as set forth in the introduction to Section 3 (Representations and Warranties) for purposes of representations and warranties made as of the Closing Date). If any Borrower has a material "commercial tort claim" (as defined in the Code), it shall promptly notify Lender in writing of the existence thereof. 5.7 Intellectual Property. Borrowers and Credit Parties will conduct their business and affairs without material infringement of or material interference with any Intellectual Property of any other Person. 5.8 Environmental Matters. Each Borrower and each Credit Party (other than Ganesha) shall (a) comply with and use commercially reasonable efforts to cause each Borrower and its employees, agents and representatives at any Property to comply with all Environmental Laws; (b) without limiting the generality of clause (a) above, not engage in, permit or acquiesce in to any Hazardous Material Activity on, under or about any Property, except in strict accordance with all Environmental Laws, and with then prudent business practices as determined by said Borrower or Credit Party; (c) immediately advise Lender in writing of (i) the receipt by any Borrower or any Credit Party of written notice of any and all Hazardous Material Claims, (ii) any knowledge by any Borrower or any Credit Party that any Property does not comply with any Environmental Laws, (iii) any remedial action taken by any Borrower or any Credit Party or any other Person in response to any Hazardous Materials or Hazardous Materials Activity on, under or about any Property, or to any Hazardous Material Claims, and (iv) any Borrower's or any Credit Party's discovery of the presence of any Hazardous Materials or Hazardous Material Activity on, in, under or about any Property or any real property immediately adjacent to any Property whether or not the same requires notice to be given to any governmental entity or agency under Environmental Laws; and (d) submit to Lender, promptly upon receipt or preparation, copies of any and all reports, studies, analyses, correspondence, governmental comments or approvals, proposed removal or other remedial work contracts and similar information prepared or received by any Borrower or any Credit Party in connection with any remedial work or Hazardous Materials relating to any Property. If Lender at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Borrower or any Credit Party (other than Ganesha) or any Environmental Liability of any Borrower or any Credit Party (other than Ganesha) arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any Property or any of their other real estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then such Borrower and/or Credit Party (other than Ganesha) shall, upon Lender's written request (i) cause the performance of such environmental investigations including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at such Borrower's or such Credit Party's expense, as Lender may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Lender and shall be in form and substance reasonably acceptable to Lender, and (ii) if such Borrower or Credit Party shall not have timely performed such environmental investigations, permit Lender or its representatives to have access to all real 39 estate for the purpose of conducting such environmental investigations and testing as Lender reasonably deems appropriate, including subsurface sampling of soil and groundwater. Each Borrower and Credit Party (other than Ganesha) shall reimburse Lender for the costs of such investigations and the same will constitute a part of the Obligations secured hereunder. 5.9 Landlord Agreements. With respect to any location where any material amount of Collateral is stored or located, Lender may require Borrowers to provide a reasonable landlord or mortgagee agreement or bailee letter as a condition to the continued storage of the Collateral at such location(s). Borrowers shall timely and fully pay and perform all obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. 5.10 Further Assurances. Borrowers and Credit Parties each agree that it shall, at Borrower's or Credit Party's expense and upon the reasonable request of Lender, duly execute and deliver, or cause to be duly executed and delivered, to Lender such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Lender to carry out more effectively the provisions and purposes of this Agreement and each Loan Document. 5.11 Qualified Cash. Borrowers shall deposit all net cash proceeds of Collateral as Qualified Cash in a Qualified Cash Account subject to the right of Borrowers to withdraw such cash proceeds. From and during the continuance of an Event of Default, Lender may exercise all rights under the applicable Control Agreements relating to any Qualified Cash, including the right to deliver applicable control exercise notices to each applicable Bank and securities intermediary and cause all such Qualified Cash to be forwarded immediately to a collection account designated by Lender through daily sweeps (or as otherwise directed by Lender). 5.12 Operation of Business. Borrowers shall have and maintain at all times from the Closing Date until the Obligations have been paid in full, sufficient approvals, consents, and permits from all necessary Governmental Authorities to fully operate the Business in accordance with Applicable Laws. Borrowers shall use their best efforts and use appropriate diligence to secure all approvals, consents and permits as and when required by Applicable Laws to fully operate the Business. 5.13 After-Acquired Property; Acquisition of other Real Property Interests. In the event from time to time Borrower acquires any fee interest in any real property or improvements or any master leasehold interest or ground leasehold interest in any real property or improvements, then Borrowers agrees to promptly notify Lender in writing at least ten (10) Business Days prior to such acquisition and to execute, acknowledge and deliver to Lender at least five (5) Business Days prior to such acquisition a deed of trust or mortgage for recordation on said other real property or improvements, as a first lien or encumbrance on Borrower's fee interest or, if applicable, on Borrower's interest in a master lease or ground lease. Each such deed of trust or mortgage shall secure repayment of the Obligations, including but not limited to repayment of the Loan. All reasonable expenditures incurred by Lender in performing this paragraph shall be additional Obligations payable upon demand and delivery of reasonable backup documentation, and shall bear interest at the Default Interest Rate from the date of demand for payment until paid in full. 40 5.14 Observer Status on Borrower's Board of Directors. Until the Loan is paid in full and satisfied, Borrowers each hereby grant Lender non-voting observer status with respect to all meetings of their respective boards of directors (and committees thereof) and all meetings of their shareholders (and committees thereof), excluding meetings (or portions thereof) held in executive session called in good faith and that relate matters not in Borrower's ordinary course of business. Concurrently with delivery of all notices of meetings and agendas to its directors and shareholders, Borrowers agree to and shall deliver a copy of each such notice and agenda to Lender. 5.15 Independent Directors. Until the Loan is paid in full and satisfied, Independent Directors shall at all times constitute a majority of the directors serving as members of IHHI's board of directors. Notwithstanding the foregoing, if as of the Closing Date, Independent Directors do not constitute a majority of the directors serving as members of IHHI's board of directors, then (a) within thirty (30) calendar days following the Closing Date, IHHI shall deliver to Lender a written statement identifying at least two (2) new Independent Directors (with contact and biographical information included) who have been approached by IHHI and who have agreed to serve as members of IHHI's board of directors, if nominated and elected or if appointed; and (b) not later than ninety (90) calendar days following the Closing Date, Independent Directors shall at all times thereafter constitute a majority of the directors serving as members of IHHI's board of directors. 6. NEGATIVE COVENANTS ------------------ To induce Lender to make the Loan, Borrowers and Credit Parties, as applicable, make the following negative covenants in favor of Lender, each of which shall survive the execution and delivery of this Agreement. 6.1 Mergers, Subsidiaries, Etc. Borrowers shall not, directly or indirectly, by operation of law or otherwise, (i) form or acquire any Subsidiary in addition to the existing Subsidiaries of Borrowers; or (ii) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person, without first receiving the prior written consent of Lender. 6.2 Investments; Line of Credit Loan and Advances. Borrowers shall not make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that: (a) Borrowers may hold investments constituting notes payable, or stock or other securities issued to Borrowers pursuant to negotiated agreements with respect to settlement of such issuer's accounts in the ordinary course of business consistent with past practices; (b) Borrowers may invest Qualified Cash in Qualified Cash Accounts (i) as of the Closing Date in the kinds and types of investments that they are then so invested, and (ii) thereafter, as to any new investments made after the Closing Date in other kinds and types of investments as are in conformity with Borrower's investment policies previously adopted by its board of directors or managers so long as Lender's Liens remain perfected therein, and (c) Borrowers may invest cash and cash equivalents (other than Qualified Cash in the Qualified Cash Accounts) (i) as of the Closing Date in the kinds and types of investments that they are then so invested, and (ii) thereafter, as to any new investments made after the Closing Date in other kinds and types of investments as are in conformity with Borrower's investment policies previously adopted by its board of directors. 41 6.3 Indebtedness. (a) Borrowers shall not create, incur or assume any Indebtedness, except (without duplication) (i) Indebtedness created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures or other capital assets acquired by Borrowers in the ordinary course of business; (ii) the Loan and the other Obligations; (iii) unsecured Indebtedness (other than Funded Debt) incurred in the ordinary course of Borrower's business; (iv) Indebtedness created after the date hereof for financing of insurance premiums; and (v) existing Indebtedness, if any, described in Disclosure Schedule 6.3. (b) Borrowers shall not, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Funded Debt prior to its scheduled due date, other than the Obligations. 6.4 Employee Loans and Affiliate Transactions. Except as set forth in Disclosure Schedule 6.4, no Borrower has entered into any transaction with any of its Affiliates or with any of its employees. Borrowers shall not enter into or be a party to any transaction with any Affiliate thereof except in the ordinary course of and pursuant to the reasonable requirements of Borrower's business and upon fair and reasonable terms that are no less favorable to Borrowers than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of Borrowers. Borrowers shall not enter into any lending or borrowing transaction with any employees of Borrowers, except loans to its respective employees in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs, pension plan advances, and similar purposes. 6.5 Capital Structure and Business. No Borrower or Credit Party (other than Ganesha) shall amend its charter, articles, bylaws or operating agreement without first receiving the prior written consent of Lender. No Borrower or Credit Party (other than Ganesha) shall engage in any business other than the businesses currently engaged in by it, without first receiving the prior written consent of Lender. 6.6 Guaranteed Indebtedness. Borrowers shall not create, incur, or assume any Guaranteed Indebtedness unless such Guaranteed Indebtedness would be permitted to be incurred directly by Borrowers pursuant to Section 6.3 (Indebtedness). 6.7 Liens. Except as set forth in Disclosure Schedule 6.7, no Borrower is subject to any existing Liens (excluding Lender's Liens). Borrowers shall not create, incur, assume or permit to exist any Lien on or with respect to any of the Collateral (whether now owned or hereafter acquired) except for Permitted Encumbrances. 6.8 Sale of Collateral and Intellectual Property. Borrowers shall not sell, transfer, convey, assign, license or otherwise dispose of any interest in Collateral, other than in the ordinary course of business, with an aggregate value in excess of $100,000. Borrowers shall not sell, transfer, convey, assign, license or otherwise dispose of any interest in Intellectual Property. 42 6.9 ERISA. Borrowers shall not cause or permit any ERISA Affiliate to, cause or permit to occur (a) an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (b) an ERISA Event to the extent such ERISA Event would reasonably be expected to result in taxes, penalties and other liabilities in an aggregate amount in excess of $100,000 in the aggregate. 6.10 Hazardous Materials. Borrowers shall not cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any real property owned or leased by Borrowers where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact the value or marketability of any real property owned or leased by Borrowers or any of the Collateral, other than such violations or Environmental Liabilities that could not reasonably be expected to have a Material Adverse Effect. 6.11 Restricted Payments. During the term of this Agreement, Borrowers shall not make any Restricted Payment, except (a) employee loans permitted under Section 6.4 (Employee Loans and Affiliate Transactions), (b) so long as no Event of Default shall have occurred and is continuing, dividends and distributions by Borrowers to its Shareholders or partners or members, and (c) ordinary course payments to Borrowers and/or to Credit Parties for services rendered to the Business. 6.12 Change of Corporate Name, State of Organization or Location; Change of Fiscal Year. No Borrower and no Credit Party and no Guarantor shall (a) change its name as it appears in official filings in the state of its incorporation or organization, (b) change its chief executive office, principal place of business, corporate offices or locations at which Collateral is held or stored, or the location of their records concerning the Collateral, (c) change the type of entity that it is, (d) change its organization identification numbers issued by its state of its incorporation or organization, or (e) change its state of incorporation or organization or incorporate or organize in any additional jurisdictions, in each case without at least ten (10) Business Days prior written notice to Lender and provided that Borrowers and Credit Parties and Guarantors shall have taken such actions and executed such documents as Lender reasonably requests in connection therewith to continue the perfection of any Liens in favor of Lender in any Collateral, and provided further that, any change to such Borrowers or such Credit Party's or such Guarantor's jurisdiction or state of incorporation or organization, such new jurisdiction or state of incorporation or organization shall be located in the United States. Borrowers shall not change their Fiscal Year without giving Lender at least thirty (30) calendar days prior written notice thereof. 6.13 No Impairment of Intercompany Transfers. Borrowers shall not directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) that could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions. 6.14 Dividends; Redemptions. No Borrower shall (a) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests, (b) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing, (c) 43 otherwise make any payments or distributions to any shareholder, member, partner or other equity owner in such Person's capacity as such, or (d) make any payment of any management or service fee; provided, however, that absent the occurrence and continuation of a Default of Event of Default, and if a Default or Event of Default would not arise therefrom, (i) each Borrower may declare, pay or make dividends or distributions payable in its stock, or split-ups or reclassifications of its stock; and (ii) each Borrower may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements. 6.15 Dr. Shah. Until the Loan is paid in full and satisfied, Borrowers will not, directly or indirectly, permit Dr. Shah to be nominated, or elected, or appointed, or directly or indirectly compensated, paid, engaged, retained or become, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, IHHI, WMC-A, WMC-SA, Coastal or Chapman. 6.16 Shareholder Blocking Rights. No Borrower shall issue any Stock that grants or provides any direct or indirect owner thereof any Shareholder Blocking Rights. 7. TERM ---- 7.1 Termination. The financing arrangements contemplated hereby shall be in effect until the earlier of the date when the Loan and other Obligations have been paid in full and satisfied or the Maturity Date, and the Loan and all other Obligations shall be automatically due and payable in full on such date without demand by Lender. 7.2 Survival of Obligations Upon Termination of Financing Arrangements. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of Borrowers or Credit Parties or the rights of Lender relating to any unpaid portion of the Loan or any other Obligations, due or not due, liquidated, contingent or unliquidated, or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Maturity Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon Borrowers and Credit Parties, and all rights of Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that the provisions of Section 11 (Miscellaneous), the payment obligations under Section 1 (Amount and Terms of Credit Facilities), and the indemnities contained in the Loan Documents shall survive the Maturity Date. 8. EVENTS OF DEFAULT; REMEDIES --------------------------- 8.1 Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an Event of Default hereunder: 44 (a) Any Borrower fails to make any payment of interest or of principal on any Loan within five (5) calendar days after the same is due and payable, or any Borrower fails to make payment of any Unused Commitment Fee within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any payment within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and the Loan. (b) Borrowers fail to pay or reimburse Lender for any costs or expenses reimbursable under this Agreement or under any other Loan Document, or Borrowers fail to make payment of any Obligations (not specifically referenced in any other subsection of this Section 8.1) within ten (10) calendar days following Lender's demand for such reimbursement or payment thereof; provided, that if any Borrower fails to pay such amount within said ten (10) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and on the Loan. (c) Borrowers or Credit Parties fail or neglect to perform, keep or observe any provision of this Agreement (not specifically referenced in any other subsection of this Section 8.1) applicable to them and the same shall remain unremedied for ten (10) Business Days or more after the earlier of (i) Borrower's or Credit Party's actual knowledge thereof, or (ii) Borrower's or Credit Party's receipt of notice thereof from Lender. (d) Borrowers fail or neglect to perform, keep or observe any of the provisions of Section 4.1 (Reports and Notices) or any provisions set forth in Annex B (Cash Management System) or Annex C (Collateral Reports), respectively, and the same shall remain unremedied in whole or in part for thirty (30) calendar days or more after the earlier of (i) said Borrower's actual knowledge thereof, or (ii) said Borrower's receipt of notice thereof from Lender. (e) Borrowers deliver a supplement or update to any Disclosure Schedule as required by Section 5.6 (Supplemental Disclosures) and Lender fails to approve of the same because such supplement or update (i) discloses the existence of an Event of Default, or (ii) discloses a Material Adverse Effect, or (iii) discloses any fact or circumstance which, with the passage of time or otherwise, would constitute an Event of Default or Material Adverse Effect. (f) Borrowers or Credit Parties or Guarantors fail or neglect to timely perform, keep or observe any other provision of any of the Loan Documents required to be performed by it and the same shall remain unremedied in whole or in part for ten (10) Business Days after receipt of notice thereof from Lender. (g) Any Guarantor fails or neglects to timely perform, keep or observe any provision of the Guaranty Agreement and the same shall remain unremedied in whole or in part for ten (10) Business Days after receipt of notice thereof from Lender. (h) Any Borrower fails to make any payment of interest or of principal due under the $50,000,000 Revolving Facility and/or $50,000,000 Note within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any such payment under the $50,000,000 Revolving Facility within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and the Loan under this Agreement. 45 (i) Any Borrower fails or neglects to perform, keep or observe any provision of the $50,000,000 Revolving Facility, the $50,000,000 Revolving Credit Agreement and/or any other documents or instruments executed or delivered in connection with the foregoing (not specifically referenced in any other subsection of this Section 8.1) and the same shall remain unremedied for five (5) Business Days or more after the earlier of (i) Borrower's actual knowledge thereof, or (ii) Borrower's receipt of notice thereof from Lender under said $50,000,000 Revolving Facility and/or $50,000,000 Revolving Credit Agreement. (j) (i) A default or breach occurs under any other agreement, document or instrument to which any Borrower or any Credit Party is or are a party that is not cured within any applicable grace period therefore, such default or breach is not waived in writing by Lender, and such default or breach involves the failure to make any payment when due in respect of any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of Borrowers or Credit Parties in an amount in excess of $100,000; or (ii) an event, condition or circumstance occurs that causes, or permits any holder of Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a portion thereof to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or the holder of such Indebtedness or Guaranteed Indebtedness or such trustee has the right to demand cash collateral in respect of such Indebtedness or Guaranteed Indebtedness, in each case, regardless of whether such right is exercised, by such holder or trustee. (k) Any representation or warranty herein or in any Loan Document or in any written statement, report, Financial Statement or certificate made or delivered to Lender by Borrowers or Credit Parties is untrue or incorrect in any material respect as of the date when made or deemed made. (l) Assets of Borrowers or Credit Parties with a fair market value of $100,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or general assignee for the benefit of creditors of Borrowers or Credit Parties and such condition continues for thirty (30) calendar days or more. (m) A case or proceeding is commenced against any Borrower or any Credit Party seeking a decree or order in respect of said Borrower or Credit Party (i) under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for said Borrower or Credit Party or for any substantial part of said Borrower's or Credit Party's assets, or (iii) ordering the winding-up or liquidation of the affairs of any Borrower or Credit Party, and such case or proceeding shall remain undismissed or unstayed for sixty (60) calendar days or more or a decree or order granting the relief sought in such case or proceeding is granted by a court of competent jurisdiction. (n) Any Borrower or any Credit Party (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in 46 a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or Credit Party or for any substantial part of such Borrower's or Credit Party's assets, (iii) makes a general assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing; or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due. (o) A final judgment or judgments for the payment of money in excess of $100,000 in the aggregate at any time are outstanding against Borrowers or Credit Parties (which judgments are not covered by insurance policies as to which liability has been accepted in writing by the insurance carrier), and the same is/are not, within thirty (30) calendar days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay. (p) Any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Borrower or any Credit Party or any Guarantor shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any Loan Document ceases to be a valid and perfected first priority Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby. (q) Any Change of Control occurs. (r) A Material Adverse Effect shall exist as determined in the reasonable judgment of Lender. (s) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason, to grant Lender non-voting observer status with respect to all meetings of its board of directors and all meetings of its shareholders. (t) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason to deliver to Lender, concurrently with delivery to all shareholders, a notice and agenda of each annual meeting, special meeting or emergency meeting of shareholders. (u) Any Borrower fails or refuses, more than once during any consecutive twelve (12) month period, for any reason to deliver to Lender, concurrently with delivery to all directors, a notice and agenda of each annual meeting, regular meeting, special meeting or emergency meeting of directors. (v) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower waive notice of a directors meeting and fail to deliver advance notice to Lender of said waiver of directors meeting. 47 (w) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower take any action without a meeting, which action was required or permitted to be taken at a meeting, and fail to deliver advance notice of the taking of said action to Lender. (x) More than once during any consecutive twelve (12) month period, the directors or shareholders of any Borrower hold a meeting by written consensus and fail to deliver advance notice of said meeting by consensus to Lender. (y) Dr. Shah at any time is nominated, or elected, or appointed, or directly or indirectly is compensated, paid, engaged, retained or becomes, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, IHHI, WMC-A, WMC-SA, Coastal or Chapman. (z) Within thirty (30) calendar days following the Closing Date, IHHI for any reason fails to deliver to Lender a written statement identifying at least two (2) new Independent Directors (with contact and biographical information included) who have been approached by IHHI and who have agreed to serve as members of IHHI's board of directors, if nominated and elected or if appointed. (aa) Within ninety (90) calendar days following the Closing Date, IHHI for any reason has failed to nominate and elect, or appoint, Independent Directors who constitute a majority of the directors serving as members of IHHI's board of directors. (bb) At any time after the date which is ninety (90) calendar days following the Closing Date, Independent Directors cease to constitute a majority of directors on IHHI's board of directors, and replacement Independent Director(s) acceptable to Lender in its sole discretion are not appointed, or nominated and elected, to IHHI's board of directors within thirty (30) calendar days after the date such Independent Directors cease to constitute a majority of directors on IHHI's board of directors. (cc) IHHI, as tenant, commits a breach or default under the Triple Net Lease and the same remains uncured following receipt of all required notices and expiration of all applicable cure periods. (dd) IHHI, as tenant, commits a breach or default under any of the Chapman Leases and the same remains uncured following receipt of all required notices and expiration of all applicable cure periods. (ee) Without first receiving the prior written consent of Lender (which consent may be granted or withheld by Lender in its sole discretion): (i) IHHI for any reason terminates the sublease with WMC-A for the Western Medical Center - Anaheim; (ii) IHHI for any reason terminates the sublease with WMC-SA for the Western Medical Center - Santa Ana; 48 (iii) IHHI for any reason terminates the sublease with Coastal for the Coastal Communities Hospital; or (iv) IHHI for any reason terminates any of the sub-subleases with Chapman for any portion of the Chapman Medical Center. (ff) PCHI ceases to own all (100%) of the fee simple title (i) in the Western Medical Center - Anaheim, or (ii) in the Western Medical Center - Santa Ana; or (iii) in the Coastal Communities Hospital. (gg) Any Borrower fails to make any payment of interest or of principal due under the $45,000,000 Real Estate Term Loan and/or the $45,000,000 Real Estate Term Note within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any such payment under the $45,000,000 Real Estate Term Loan within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and all Loans under this Agreement. (hh) Any Borrower fails or neglects to perform, keep or observe any provision of the $45,000,000 Real Estate Term Loan, the New $80,000,000 Credit Agreement and/or any other documents or instruments executed or delivered in connection with the foregoing (not specifically referenced in any other subsection of this Section 8.1) and the same shall remain unremedied for five (5) Business Days or more after the earlier of (i) Borrower's actual knowledge thereof, or (ii) Borrower's receipt of notice thereof from Lender under said $45,000,000 Real Estate Term Loan and/or the New $80,000,000 Credit Agreement. (ii) Any Borrower fails to make any payment of interest or of principal due under the $35,000,000 Non-Revolving Line of Credit Loan and/or the $35,000,000 Non-Revolving Line of Credit Note within five (5) calendar days after the same is due and payable, provided, that if any Borrower fails to make any such payment under the $35,000,000 Non-Revolving Line of Credit Loan within such five (5) calendar day period, interest at the Default Rate shall accrue from the due date for such payment on all Obligations and all Loans under this Agreement. (jj) Any Borrower fails or neglects to perform, keep or observe any provision of the $35,000,000 Non-Revolving Line of Credit Loan, the New $80,000,000 Credit Agreement and/or any other documents or instruments executed or delivered in connection with the foregoing (not specifically referenced in any other subsection of this Section 8.1) and the same shall remain unremedied for five (5) Business Days or more after the earlier of (i) Borrower's actual knowledge thereof, or (ii) Borrower's receipt of notice thereof from Lender under said $35,000,000 Non-Revolving Line of Credit Loan and/or the New $80,000,000 Credit Agreement. 8.2 Remedies. Lender shall be entitled to enforce payment and performance of the Indebtedness and Obligations and to exercise all rights and powers under this Agreement and the other Loan Documents or other agreement or any laws now or hereafter in force. No remedy herein conferred upon or reserved to Lender is intended to be exclusive of any other remedy set forth herein or by law provided 49 or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by this Agreement or any of the other Loan Documents to Lender in any capacity or to which Lender may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Lender and Lender may pursue inconsistent remedies. Lender's remedies upon the occurrence and continuance of an Event of Default include, but are not limited to, the following: (a) Accelerate Maturity Date of Line of Credit Loan. If any Event of Default has occurred and is continuing, Lender may, at its option, without notice, accelerate the Maturity Date of the Loan and declare all of the Obligations, including all amounts due under all the Loan, to be forthwith due and payable, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and Credit Parties (in their respective capacities as Credit Parties and Guarantors). (b) [Intentionally Omitted] (c) Increase Rate of Interest to Default Rate. If any Event of Default has occurred and is continuing, Lender may, without notice except as otherwise expressly provided herein, increase the rate of interest applicable to the Loan to the Default Rate. (d) Other Remedies. If any Event of Default has occurred and is continuing, Lender may, without notice: (i) terminate the $35,000,000 Non-Revolving Line of Credit Loan with respect to further Advances; (ii) reduce or terminate the Commitment; (iii) make application to a court of competent jurisdiction for, and obtain from such court as a matter of strict right, the appointment of a receiver of the Business, which receiver shall have all the usual powers and duties of receivers in similar cases, including the full power to maintain and otherwise operate the Business upon such terms as may be approved by the court; (iv) exercise any other rights and remedies provided to Lender under the Loan Documents, or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of an Event of Default specified in Sections 8.1(m) or (n) (Events of Default), the Commitment shall be automatically and immediately terminated and all of the Obligations and the Loan, shall become immediately due and payable without declaration, notice or demand by any Person. 8.3 Waivers. Except as otherwise provided for in this Agreement or by applicable law, each Borrower and each Credit Party and each Guarantor waive (including for purposes of Section 13 (Suretyship Waivers)): (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default (unless specifically required in this Agreement), nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Borrowers or Credit Parties or Guarantors may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard, (b) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Lender to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws. 50 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF LENDER ---------------------------------------------------- 9.1 Assignment and Participations. (a) Assignment to Qualified Assignee. Subject to the terms of this Section 9.1 (Assignment and Participations), Lender may make an assignment to a Qualified Assignee of, or sell participations in, at any time or times, the Loan Documents, the Loan, and Commitment or any portion thereof or interest therein, including any Lender's rights, title, interests, remedies, powers or duties thereunder. Any assignment by a Lender shall: (i) require the execution of an assignment agreement in form and content reasonably satisfactory to, and acknowledged by, Lender; and (ii) be conditioned on such assignee representing to Lender that it is purchasing the applicable Loan to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof. In the case of an assignment by Lender under this Section 9.1(a) (Assignment to Qualified Assignee), the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as Lender hereunder. The original Lender shall be relieved of its obligations hereunder with respect to the Commitment or assigned portion thereof from and after the date of such assignment. Borrowers and Credit Parties and Guarantors hereby acknowledge and agree that any assignment shall give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a "Lender." In the event Lender assigns or otherwise transfers all or any part of the Obligations, Lender shall so notify Borrowers and Credit Parties and Guarantors shall, upon the request of Lender, execute one or more new notes in exchange for the Note (upon the same terms), if any, being assigned. Notwithstanding the foregoing provisions of this Section 9.1(a) (Assignment to Qualified Assignee), Lender may at any time pledge the Obligations held by it and Lender's rights under this Agreement and the other Loan Documents to a financial institution. (b) Participations. Any participations by Lender of all or any part of the Commitment shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if Lender had not sold such participations, and that the holder of any such participation shall not be entitled to require Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). Solely for purposes of Section 1.14 (Taxes), and Section 1.15 (Capital Adequacy; Increased Costs; Illegality), Borrowers and Credit Parties and Guarantors acknowledge and agree that a participation shall give rise to a direct obligation of Borrowers to the participant (in each case subject to the terms and conditions in such Sections applicable to Lender) and the participant shall be considered to be a "Lender." (c) Cooperation to Effect Assignments and Participations. Borrowers and Credit Parties shall assist Lender under this Section 9.1 (Assignment and Participations) as reasonably required to enable Lender to effectuate any such assignment or participations, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, if requested by Lender, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or 51 participants. Borrowers and Credit Parties shall certify the correctness, completeness and accuracy, in all material respects of all descriptions of Borrowers and Credit Parties and their respective affairs contained in any selling materials provided by them and all other information provided by them and included in such materials. (d) Disclosures by Lender. Lender may furnish any information concerning Borrowers and the Credit Parties in the possession of Lender from time to time to assignees and participants (including prospective assignees and participants); provided that Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in Section 11.10 (Confidentiality). 9.2 Reliance, Etc. Neither Lender nor any of its Affiliates nor any of their respective directors, officers, employees or attorneys shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Lender: (a) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to Borrowers or Credit Parties and shall not be responsible to Borrowers or Credit Parties for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of Borrowers and Credit Parties or to inspect the Collateral (including the books and records) of Borrowers or Credit Parties; (d) shall not be responsible to Borrowers or Credit Parties for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (e) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 10. SUCCESSORS AND ASSIGNS ---------------------- This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of Borrowers, Credit Parties and Lender, and their respective successors and assigns (including, in the case of Borrowers and Credit Parties, a debtor-in-possession on behalf of a Borrower or a Credit Party), except as otherwise provided herein or therein. Neither Borrowers nor Credit Parties may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Lender, which consent may be granted or withheld by Lender in its sole and absolute discretion. Any such purported assignment, transfer, hypothecation or other conveyance by Borrowers or Credit Parties without the prior express written consent of Lender shall be void. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of Borrowers, Credit Parties and Lender with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents. 52 11. MISCELLANEOUS ------------- 11.1 Complete Agreement; Modification of Agreement. This Agreement and the other Loan Documents (including all annexes, exhibits, and disclosure schedules attached hereto or thereto) constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 11.2 (Amendments and Waivers). The Term Sheet and any other letter of interest, commitment letter, fee letter or confidentiality agreement, if any, between Borrowers or Credit Parties and Lender or any of their respective Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. 11.2 Amendments and Waivers. (a) Signed by Representatives. No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement that waives compliance with the conditions precedent set forth in Article 2 (Conditions Precedent) to the making of the Loan shall be effective unless the same shall be in writing and signed by Lender's and Borrower's Representative. No waiver or consent with respect to any Default or any Event of Default shall be effective for purposes of the conditions precedent to the making of the Loan unless the same shall be in writing and signed by Lender and Borrower's Representative. (b) Must Be In Writing. No amendment, modification, termination or waiver shall, unless in writing and signed by Lender and Borrower's Representative: (i) increase the principal amount of the Commitment; (ii) reduce the principal amount of or the Interest Rate applicable to the Loan; (iii) extend any scheduled payment date or the Stated Maturity Date; (iv) waive, forgive, defer, extend or postpone any payment of interest; or (v) release any Guarantor or, except as otherwise permitted herein or in the other Loan Documents, release, or permit Borrowers or Credit Parties to sell or otherwise dispose of, any Collateral. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. Notwithstanding the foregoing, no amendment, modification, termination or waiver shall be required for Lender to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of the Note shall be effective without the written concurrence of the holder of the Note. No notice to or demand on Borrowers or Credit Parties in any case shall entitle Borrowers or Credit Parties to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.2 (Amendments and Waivers) shall be binding upon each holder of the Note in question at the time outstanding and each future holder of said Note. (c) Termination of Liens. Upon payment of the Loan in full in cash and performance of all Obligations (other than indemnification Obligations), termination of the Commitment, and a release of all existing and future claims (whether known or unknown) against Lender, and so long as no suits, actions, proceedings or claims are pending against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Lender shall promptly upon receipt of written request from Borrowers deliver to Borrowers such termination statements, Lien releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations. 53 11.3 Fees and Expenses. Borrowers shall reimburse Lender for (i) all fees, costs and expenses (including the reasonable fees and expenses of all of Lender's outside attorneys, advisors, consultants and auditors), and (ii) all fees, costs and expenses, including the reasonable fees, costs and expenses of other advisors (including environmental and management consultants and appraisers), incurred in connection with the negotiation, preparation and filing and/or recordation of the Loan Documents, or incurred in connection with any amendment, modification or waiver of, consent with respect to, or termination of, any of the Loan Documents or Related Transactions Documents, or advice provided in connection with a breach or Default under the Loan or Lender's rights hereunder or thereunder, or in connection with any of the following: (a) Any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lender, Borrowers, Credit Parties or any other Person and whether as a party, witness or otherwise) in any way relating to the Collateral, this Agreement, any of the Loan Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against of Borrowers and/or Credit Parties or any other Person that may be obligated to Lender by virtue of the Loan Documents; including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring or forbearance of the Loan during the pendency of one or more Events of Default; provided that no Person shall be entitled to reimbursement under this clause (a) in respect of any litigation, contest, dispute, suit, proceeding or action to the extent any of the foregoing results from such Person's gross negligence or wilful misconduct. (b) Any attempt to enforce any remedies of Lender against Borrowers and/or Credit Parties or any other Person that may be obligated to Lender by virtue of any of the Loan Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring or forbearance of the Loan during the pendency of one or more Events of Default. (c) Any workout or restructuring or forbearance of the Loan during the pendency of one or more Events of Default. (d) Efforts by Lender to (i) monitor the operations, financial condition and/or regulatory status of the Business after an Event of Default occurs under this Agreement or under any of the other Loan Documents; (ii) evaluate, observe or assess Borrowers or Credit Parties or their respective business affairs after a breach or Default under this Agreement or under any of the other Loan Documents; and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral; including, as to each of clauses (a) through (c) above, all reasonable attorneys' and other professional and service providers' fees arising from such services and other advice, assistance or other representation, including those in connection with any appellate proceedings, and all reasonable expenses, costs, charges and other statutory and non-statutory fees and costs incurred by such counsel and others in connection with or relating to any of the events or actions described in this Section 11.3 (Fees and Expenses), all of which shall be payable, on demand, by Borrowers to Lender. Without limiting the generality of the foregoing, such expenses, costs, charges and fees shall include: Lender's Costs, fees, costs and reasonable expenses of attorneys, accountants, 54 environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, statutory and non-statutory costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. 11.4 No Waiver. Lender's failure, at any time or from time to time, to require strict performance by Borrowers or Credit Parties of any provision of this Agreement or any other Loan Document shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. Subject to the provisions of Section 11.2 (Amendments and Waivers), none of the undertakings, agreements, warranties, covenants and representations of Borrowers or Credit Parties contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by Borrowers or Credit Parties shall be deemed to have been suspended or waived by Lender, unless such waiver or suspension is by an instrument in writing signed by Lender and directed to Borrower's Representative specifying such suspension or waiver. 11.5 Remedies. Lender's rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 11.6 Severability. Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement or any other Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement or such other Loan Document. 11.7 Conflict of Terms. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. 11.8 Attorneys' Fees; Indemnification. (a) Attorneys' Fees. If any action or proceeding is brought by any party against any other party, the prevailing party shall be entitled to recover from the other party reasonable attorneys' fees and statutory and non-statutory costs incurred in connection with the prosecution or defense of such action. The foregoing includes, without limitation, attorneys' fees and costs of investigation incurred in appellate proceedings, costs incurred in establishing the right to indemnification, expert or other witness fees, copy and facsimile and telephone charges, courier and messenger charges, court costs, fees of charges of any arbitrator or mediator or arbitration or mediator service, or in connection with, any case or proceeding under Chapter 7, 11 or 13 of the 55 Bankruptcy Code, 11 U.S.C. 101 et seq., or any successor statutes. For purposes of this Agreement, the term "attorneys' fees" or "attorneys' fees and costs" shall also include the fees and expenses of counsel to the parties hereto, which may include the allocable costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and fee billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney. (b) Indemnification. Should Lender, as a result of its relationship with Borrowers or Credit Parties or Guarantors contemplated hereby, be made a party to any litigation instituted by Borrowers or Credit Parties or Guarantors against a Person other than Lender, or any litigation instituted against Borrowers or Credit Parties or Guarantors by any Person other than Lender, Borrowers shall jointly and severally indemnify, defend, protect and hold harmless Lender from any and all loss, cost, liability, damage or expense incurred by Lender, including attorneys' fees and costs, in connection with the litigation. 11.9 Time of the Essence. Time is of the essence in the performance of each and every term, condition and covenant of this Agreement. 11.10 Confidentiality. Lender agree to use commercially reasonable efforts to maintain as confidential all information provided to them by Borrowers and/or Credit Parties which is designated in a writing delivered to Lender as confidential (provided, that, all non-public financial information and financial projections provided by Borrowers or Credit Parties to Lender shall be deemed confidential whether or not so designated in writing as confidential) for a period of one (1) year following receipt thereof, except that Lender may disclose such information (a) to Persons employed or engaged by Lender; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 11.10 (Confidentiality) and any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed (based on advice of counsel) by Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Lender's counsel, is required by law; (e) in connection with the exercise of any right or remedy under this Agreement or the other Loan Documents or in connection with any Litigation relative to this Agreement or the other Loan Documents or the transactions related hereto or thereto to which Lender is a party; or (f) that ceases to be confidential through no fault of Lender. If Lender is required in any proceeding, by any court decree, subpoena or legal or administrative order or process, to disclose any such confidential information, Lender will use commercially reasonable efforts to give Borrowers and Credit Parties, as applicable, prompt written notice of such request so that Borrowers or Credit Parties may seek an appropriate protective order. If in the absence of a protective order, Lender is compelled in a proceeding to disclose any such confidential information, Lender may disclose such portion of such confidential information that it is compelled to disclose; provided, however, that Lender shall use commercially reasonable efforts to provide Borrowers and Credit Parties, as applicable, written notice of the information to be disclosed as far in advance of its disclosure as is practicable. 11.11 GOVERNING LAW. 56 EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT AND IN ANY OF THE OTHER LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWERS AND CREDIT PARTIES AND LENDER EACH HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NEVADA, CLARK COUNTY, CITY OF LAS VEGAS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG BORROWERS AND CREDIT PARTIES ON THE ONE HAND, AND LENDER ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, EACH BORROWER AND EACH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CLARK COUNTY, NEVADA; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH BORROWER AND EACH CREDIT PARTY AND LENDER EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY WAIVE ANY OBJECTION THAT ANY BORROWER OR ANY CREDIT PARTY OR LENDER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER, EACH CREDIT PARTY AND LENDER HEREBY AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE AT THE ADDRESSES SET FORTH IN ANNEX D OF THIS AGREEMENT. 11.12 Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered: (a) upon the earlier of actual receipt or three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by telecopy or facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 11.12 (Notices)); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be 57 addressed to the party to be notified and sent to the address or facsimile number indicated in Annex D (Notice Addresses) or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower's Representative or Lender) designated in Annex D (Notice Addresses) to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 11.13 Section Titles. The Section titles and headings contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 11.14 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. 11.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER, ANY BORROWER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 11.16 Press Releases and Related Matters. Borrowers and Credit Parties agree that neither they nor their respective Affiliates will in the future issue any press releases or other public disclosure using the name of Lender or its Affiliates or referring to this Agreement, the other Loan Documents or the Related Transactions Documents without at least two (2) Business Days' prior written notice to Lender and without the prior written consent of Lender (which consent will not be unreasonably withheld) unless (and only to the extent that) Borrowers or Credit Parties or their respective Affiliate are required to do so under law, regulation or any applicable exchange rules or OTC bulletin board rules, then, in any event, Borrowers, Credit Parties or their respective Affiliates will use commercially reasonable efforts to consult with Lender before issuing such press release or other public disclosure. Borrowers and Credit Parties consent to the publication by Lender of advertising material relating to the financing transactions contemplated by this Agreement using Borrower's and Credit Party's name, product photographs, logo or trademark, without the consent of Borrowers or Credit Parties. Lender may provide to industry trade organizations information necessary and customary for inclusion in league table measurements unless such disclosure would violate or any applicable exchange rules or OTC bulletin board rules applicable to Borrowers. 58 11.17 Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Borrowers or Credit Parties for liquidation or reorganization, or should Borrowers or Credit Parties become insolvent or make a general assignment for the benefit of any creditor or creditors, or should a receiver or trustee be appointed for all or any significant part of any Borrower's or any Credit Party's assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 11.18 Advice of Counsel. Each of the Borrowers and each of the Credit Parties represent to Lender and Lender represent to said Borrowers and to said Credit Parties, that they have each discussed this Agreement and, specifically, the provisions of Section 11.11 (Governing Law) and Section 11.15 (Waiver of Jury Trial), with their legal counsel. 11.19 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. 11.20 Limitation on Each Borrower's and Each Credit Party's Liability. Anything to the contrary notwithstanding, if any Fraudulent Transfer Law is determined by a court of competent jurisdiction to be applicable to the obligation of any Borrower or any Credit Party under this Agreement or under any other Loan Documents, said obligations shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under said Fraudulent Transfer Laws, in each case after giving effect to all other liabilities of such Borrower and such Credit Party, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Borrower or such Credit Party in respect of intercompany indebtedness to any other Borrowers or Credit Parties or Affiliates of Borrowers or Credit Parties). 12. RELEASES AND WAIVERS; COVENANTS NOT TO SUE; INDEMNITY. ------------------------------------------------------ Each Borrower, each Credit Party and each Guarantor acknowledge and agree that in March and December of 2005, Lender and/or MPFC II made the Previous Loans to Borrowers; that Borrowers subsequently committed various events of default under the Previous Loans; that twice during the term of the Previous Loans, MPFC II and Lender agreed to and did forbear from foreclosing on the Previous Loans; and that Lender has agreed to make the Loan contemplated by this Agreement on condition that each Borrower, each Credit Party and each Guarantor enter into and make the following releases and waivers, covenants not to sue and indemnities for the benefit of the Lender Released Parties: 59 12.1 Releases and Waivers. As an inducement to Lender to make the Loan to Borrowers: (a) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive, relinquish and discharge any and all Lender Liability Claims that the Releasing Parties now have or in the future may have against any of the Lender Released Parties, which Lender Liability Claims are based on any act or omission which allegedly occurred prior to the Effective Date of this Agreement. (b) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive, relinquish and discharge each of the Lender Released Parties from any and all claims, rights, demands, debts, causes of action, charges, expenses, damages, attorneys' fees and costs, obligations or liabilities of any and every kind, nature and character whatsoever, whether or not now known, suspected or unsuspected, which any of the Releasing Parties may have had, may now have or may in the future claim to have against any of the Lender Released Parties arising out of, or directly or indirectly related in any manner to any act or omission to act which allegedly occurred prior to the Effective Date of this Agreement. The Releasing Parties hereto have been fully advised by their respective attorneys of the contents and effect of the applicable provisions under the laws of the State of Nevada and the State of California upon the rights of each of them, which provisions state substantially as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. EACH OF THE RELEASING PARTIES ACKNOWLEDGE THAT THEY MAY HAVE SUSTAINED DAMAGES, LOSSES, FEES, COSTS OR EXPENSES WHICH ARE PRESENTLY UNKNOWN AND UNSUSPECTED, AND, NOTWITHSTANDING THE FOREGOING PROVISIONS OF STATE LAW, ARE EXPRESSLY WAIVING THE SAME. EACH OF THE RELEASING PARTIES AGREES THAT IT INTENDS TO RELEASE EVEN UNKNOWN OR UNSUSPECTED CLAIMS. EACH OF THE RELEASING PARTIES REPRESENTS THAT IT HAS CONSULTED WITH ITS LEGAL COUNSEL REGARDING ITS CLAIMS AND POTENTIAL CLAIMS AGAINST THE RELEASED PARTIES, HAS CAREFULLY READ AND UNDERSTANDS ALL THE PROVISIONS OF THIS AGREEMENT, AND HAS VOLUNTARILY ENTERED INTO THIS AGREEMENT. THE FOREGOING RELEASES AND WAIVERS SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. 12.2 Covenants Not To Sue. Each of the Releasing Parties hereby promises, covenants and agrees not to sue any of the Lender Released Parties, and not to bring any legal action or proceeding of any kind, at any time, against any of the Lender Released Parties, in any court or administrative proceeding, in any venue, which legal action or proceeding (a) violates any covenant, condition, representation or warranty made by the Releasing Parties in this Agreement, in any other Loan Documents or in any of the Previous Loan Documents, or (b) 60 directly or indirectly seeks to (i) obtain or procure issuance of any temporary restraining order, or preliminary injunction, or permanent injunction, or any other equitable or provisional relief against any of the Lender Released Parties based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement, or (ii) impose or bring any Lender Liability Claims on or against any of the Lender Released Parties based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement, or (iii) obtain or impose on any of the Lender Released Parties any injunctive relief based on acts or omissions which allegedly occurred prior to the Effective Date of this Agreement. The foregoing covenants not to sue are permanent and shall survive the expiration or termination of this Agreement. 12.3 Indemnity. Each of the Releasing Parties hereby jointly and severally agree to and shall indemnify, defend, protect and hold each of the Lender Released Parties free and harmless from and against any and all legal actions, suits, proceedings or claims brought or asserted against any of the Lender Released Parties for damages, losses, liabilities and expenses (including reasonable attorneys' fees, witness and expert witness fees, court fees and charges, statutory and non-statutory costs and expenses, and disbursements and other costs of investigation or defense, including those incurred upon any appeal or in any Bankruptcy proceeding) directly or indirectly arising out of or relating to: (a) the negotiation, execution and delivery of the Term Sheet by any Lender Released Party; (b) the negotiation, execution and delivery of this Agreement by any Lender Released Party; (c) the negotiation, execution and delivery of any of the Previous Loan Documents by any Lender Released Party; (d) the taking, implementation or enforcement by any of the Lender Released Parties of any of their rights and remedies under the Previous Loan Documents; (e) the making of the Loan by any of the Lender Released Parties pursuant to this Agreement; and (f) any Lender Liability Claim brought or asserted against any of the Lender Released Parties. NO LENDER RELEASED PARTY SHALL BE RESPONSIBLE OR LIABLE TO ANY OF THE RELEASING PARTIES, NOR RESPONSIBLE OR LIABLE TO ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH RELEASING PARTIES, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF HAVING EXECUTED THE TERM SHEET, OR THIS AGREEMENT, OR AS A RESULT OF EXECUTING THE PREVIOUS LOAN DOCUMENTS, OR AS A RESULT OF ANY CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY OF THE PREVIOUS LOAN DOCUMENTS, OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED UNDER THE TERM SHEET, THIS AGREEMENT OR THE PREVIOUS LOAN DOCUMENTS. THE FOREGOING INDEMNITIES SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. 13. SURETYSHIP WAIVERS ------------------ 13.1 Suretyship Waivers. Because Credit Parties are not direct borrowers from Lender under this Agreement, although the Loan directly and indirectly benefits each Person comprising Borrowers and Credit Parties, it is possible that the Credit Parties could be construed as guarantors or sureties of Borrowers and of each other and thereby have certain rights and remedies accorded to them that were not intended to be available to any of them. Accordingly, in order to induce the Lender to provide the credit facilities and accommodations provided for herein, each Person which is a Borrower or a Credit Party for itself agrees as follows: 61 (a) Irrevocable Waivers. The waivers provided in this section are intended to be irrevocable and to apply to all present and future Obligations of Borrowers and Credit Parties to Lender, including those arising under successive transactions which shall either continue the Obligations, increase or decrease them, or from time to time, create new Obligations, after all or any prior Obligations have been satisfied, and notwithstanding the dissolution, liquidation or bankruptcy of Borrowers, Credit Parties, or Guarantors, of all or any portion of the Obligations, or other event or proceeding affecting Borrowers or Credit Parties or Guarantors of any portion of the Obligations. (b) Separate and Independent Obligations of Credit Parties. The Obligations of Credit Parties hereunder are separate and independent of (i) Borrower's obligation to pay Lender principal and interest under the Note and the other Obligations hereunder, and (ii) the liabilities and obligations of Credit Parties which are Guarantors. A separate action or actions may be brought and prosecuted against Credit Parties whether or not any action is brought and prosecuted against Borrowers, and whether or not Credit Parties are joined in any such action or actions. Borrowers and Credit Parties waive the benefit of any statute of limitations affecting the Obligations hereunder or the enforcement thereof. (c) Authority of Lender. Credit Parties and Guarantors hereby authorize Lender, without notice or demand and without affecting its liability hereunder, from time to time to: (i) amend, alter, restate, replace, modify, renew, extend, accelerate or otherwise change the time for payment or the terms of the Obligations with Borrowers, including increasing or decreasing the Interest Rate thereon or the principal amount thereof; (ii) accept partial payments on the Obligations from Borrowers or Guarantors; (iii) accept new or additional documents, instruments or agreements relative to the Obligations; (iv) take and hold security or additional guaranties for the payment of the Obligations, and amend, alter, exchange, substitute, transfer, enforce, waive, subordinate, terminate, modify and release in any manner any such security or guaranties; (v) apply such security and direct the order or manner of sale thereof as Lender in its sole discretion may determine; (vi) release or substitute any Guarantor; (vii) settle, release on terms satisfactory to Lender (or by operation of law or otherwise), compound, compromise, collect or otherwise liquidate any indebtedness or security in any manner, consent to the transfer of security and bid and purchase at any sale, without affecting or impairing the Obligations of Borrowers or Credit Parties or Guarantors hereunder; or (viii) enforce any other right or remedy granted to Lender under this Agreement or under any of the other Loan Documents or under any Guaranty Agreement. No action which Lender shall take or fail to take in connection with this Agreement or any of the Loan Documents, or any of them, or any security for the Obligations or other undertakings of Borrowers, nor any course of dealing with Borrowers or Credit Parties or Guarantors, or any course of dealing with any other person or legal entity, shall release Borrower's Obligations or Credit Party's or Guarantor's responsibilities hereunder, shall affect this Agreement or the other Loan Documents in any way, or afford Borrowers or Credit Parties or Guarantors any recourse against Lender. Without limiting the generality of the foregoing, Borrowers agree that this Agreement shall extend and be applicable to each new or replacement Note delivered by Borrowers pursuant thereto without notice to or further consent from Credit Parties or Guarantors. 62 (d) Waiver of Rights Against Lender. Borrowers and Credit Parties and Guarantors waive any right to require Lender to: (i) proceed against Borrowers, against Guarantors, against Credit Parties, or against anyone else; (ii) proceed against or exhaust any security for the Obligations, or to marshal assets or to marshal assets of any Person in any particular order; (iii) except as required by applicable law, give notice of the terms, time and place of any public or private sale of any real or personalty securing the Obligations; or (iv) pursue any other remedy in Lender's power whatsoever. Each Person which is a Borrower, Guarantor, or a Credit Party waives any defense arising by reason of any disability or other defense of Borrowers, Guarantors, or Credit Parties, or by reason of the cessation from any cause whatsoever of the liability of Borrowers, Guarantors, or Credit Parties, or by reason of any act or omission of Lender or other Persons which directly or indirectly results in or aids the discharge or release of Borrowers, Guarantors, or Credit Parties, or any of the Obligations or any security therefor by operation of law or otherwise, or by reason of the amendment, modification, renewal, extension or other change in any of the Obligations. Borrowers, Credit Parties and Guarantors waive all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Agreement and of the existence, creation, or incurring of new or additional Obligations, and all other notices and demands of any kind and description now or hereafter provided for by any statute or rule of law, except for such notices and demands as specifically required by this Agreement. Borrowers, Guarantors, and Credit Parties expressly waive any right whatsoever to, or right whatsoever to participate in, any security now or hereafter held by Lender, reimbursement, indemnity, exoneration, contribution or any other claim under local, state or federal law, including, without limitation, 11 U.S.C. ?547, which it may now or hereafter have against Borrowers, Guarantors, or Credit Parties, or any other Person directly or contingently liable for the Obligations, or against or with respect to Borrower's or Credit Party's or Guarantor's property (including, without limitation, any Collateral under any of the Loan Documents) arising from the existence or performance of this Agreement until all of the Obligations have been indefeasibly paid or satisfied in full. (e) Representations and Warranties. Borrowers, Guarantors, and Credit Parties represent and warrant to Lender that: (i) this Agreement is executed at each Borrower's, each Guarantor's, and each Credit Party's request; (ii) Guarantors, and Credit Parties have each established adequate means of obtaining from Borrowers on a continuing basis financial and other information pertaining to Borrower's Business and Borrower's financial condition; and (iii) Guarantors and Credit Parties are now and will be completely familiar with the Business, operation and financial condition of Borrowers and its assets and of its Business. Borrowers, Guarantors and Credit Parties hereby waive and relinquish any duty on the part of Lender to disclose to any of said parties any matter, fact or thing relating to the Business, operation or financial condition of Borrowers and their respective assets now known or hereafter known by Lender during the Term of this Agreement. With respect to any present or future Obligations of Borrowers to Lender, Lender need not inquire into the authority of Borrowers, and any Obligations made or created in reliance upon the professed exercise of such powers. (f) No Set-Off, Counterclaim, Etc. So long as any of the Obligations under this Agreement remain unpaid or undischarged, neither Guarantors nor Credit Parties will, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, (i) claim any set-off or counterclaim against Borrowers, Guarantors, or Credit Parties in 63 respect of any Obligations or other indebtedness by virtue of the right of subrogation, by operation of law or otherwise; (ii) in any proceedings under federal bankruptcy law or insolvency proceedings of any nature, assert its rights in competition with Lender in respect of any payment hereunder because of any claims which Guarantors or Credit Parties may have against Borrowers or any other Person; or (iii) be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Borrowers, Guarantors, or Credit Parties or other Person, or the benefit of any of any other security for any Obligation which, now or hereafter, Lender may hold or in which it may have any share or interest. 13.2 Election of Remedies. If Lender may, under Applicable Laws, proceed to realize its benefits under any of the Loan Documents granting a Lien upon any Collateral, whether owned by Borrowers or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 13 (Suretyship Waivers). If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against Borrowers or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, Borrowers hereby consent to such action by Lender and waive any claim based upon such action, even if such action by Lender shall result in a full or partial loss of any rights of subrogation that Borrowers might otherwise have had but for such action by Lender. Any election of remedies that results in the denial or impairment of the right of Lender to seek a deficiency judgment against Borrowers shall not impair Guarantor's or Credit Party's obligations to pay the full amount of the Obligations applicable to it. In the event Lender shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or the Loan Documents, Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Lender but shall be credited against the Obligations. 64 IN WITNESS WHEREOF, this Credit Agreement ($10,700,000 Facility) has been duly executed as of the date set forth next to the signature each party. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson Date of Execution: October 2, 2007 --------------------------------- Larry B. Anderson, President [SIGNATURE PAGE CONTINUES] CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Anil V. Shah MD Date of Execution: October 4, 2007 --------------------------------- Name: Anil V. Shah MD Title: Co-Manager By: /s/ Kali P. Chaudhuri Date of Execution: -by William R. Thomas, Attny. in fact Title: Co-Manager GANESHA REALTY, LLC, a California limited liability company, By: /s/ William R. Thomas Date of Execution: --------------------------------- Name: William R. Thomas Title: Secretary WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager [SIGNATURE PAGE CONTINUES] GUARANTORS: GANESHA REALTY, LLC, a California limited liability company, By: Date of Execution: --------------------------------- Name: Title: WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company By: /s/ Jacob Sweidan Date of Execution: October 9, 2007 --------------------------------- Name: Jacob Sweidan, MD Title: Manager LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation, By: /s/ Joseph J. Lampariello Date of Execution: 10/4/07 Name: Joseph J. Lampariello Title: COO ANNEX A TO CREDIT AGREEMENT ($10.7 MILLION FACILITY) ----------------------------------------- DEFINITIONS Initially capitalized terms used in this Agreement shall (unless otherwise provided elsewhere in the Loan Documents) have the following respective meanings. All references to Sections, Exhibits, Schedules or Annexes in the following definitions shall refer to sections, Exhibits, Schedules or Annexes of or to this Credit Agreement: "ABSOLUTE ASSIGNMENT" means each of the following: (a) the Absolute Assignment of Leases and Rents With License Back re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, PCHI and WMC-A in the form of Exhibit "F" attached hereto; (b) the Absolute Assignment of Leases and Rents With License Back re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, PCHI and WMC-SA in the form of Exhibit "F" attached hereto; (c) the Absolute Assignment of Leases and Rents With License Back re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, PCHI and Coastal in the form of Exhibit "F" attached hereto; (d) the Absolute Assignment of Leases and Rents With License Back re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "F" attached hereto; and (e) the Absolute Assignment of Leases and Rents With License Back re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "F" attached hereto. "ACCOUNTS" means (i) the right to receive payment of rent, occupancy payments and other similar payments due and owing by any Person using or occupying space in any real property owned or leased by Borrowers, plus (ii) the future right to receive payment of any monetary obligations, whether or not earned by performance, now or hereafter existing, arising under or in relation to each Borrower's Business. "ADVANCE" means any advance of funds under the Loan. "AFFILIATE" means, with respect to any Person (excluding Lender), (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and 1 partners, and (d) in the case of Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of Borrowers. For the purposes of this definition, "CONTROL" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" means this Credit Agreement by and among Borrowers, Credit Parties, Guarantors and Lender, as the same may be amended, supplemented, restated or otherwise modified from time to time. "ANNEXES" means, together, Annex A (Definitions), Annex B (Cash Management System), Annex C (Collateral Reports) and Annex D (Notice Addresses) attached to this Agreement. "APPLICABLE LAWS" means all federal, state and local laws, statutes, codes, regulations, rules, acts, ordinances of all Governmental Authorities, departments, commissions, boards, courts, authorities, agencies, officials and officers, including without limitation, Environmental Laws, all building, safety, health, use laws, the Fair Labor Standards Act, 29 U.S.C. ss.ss.201 et seq., the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101, et seq., as amended, and the California version of the WARN Act, and any deed restrictions or other requirements of record applicable to the Collateral or to Borrowers or Credit Parties, or to their respective businesses. "APPRAISAL" means an appraisal of the Properties prepared by Marshall & Stevens, M.A.I.. "APPRAISED VALUE" means the fair market value of the Properties as set forth in the Appraisal. "BANK" means Wells Fargo Bank, N.A., located at 2030 Main Street, Suite 900, Irvine, California 92614. "BANKRUPTCY CODE" means the provisions of Title 11 of the United States Code, 11 U.S.C. ss.101 et seq. "BORROWERS" means IHHI, WMC-A, WMC-SA, Chapman and Coastal. "BORROWER'S REPRESENTATIVE" means Bruce Mogel at the address of IHHI, or any replacement therefor approved by Lender as required by this Agreement. "BUSINESS" means the business of Borrowers as defined in the Recitals set forth above. "BUSINESS DAY" means each day of the year that is not a Saturday or Sunday and which day (a) is not a day on which federally-chartered banking institutions in Las Vegas, Nevada are required to close, and (b) is a not a regularly scheduled holiday in the state of Nevada or in the United States. 2 "CAPITAL EXPENDITURE(S)" means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one year and that are required to be capitalized under GAAP. "CAPITAL LEASE" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. "CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. "CASH COLLATERAL ACCOUNT" has the meaning ascribed to it Annex B (Cash Management System). "CASH MANAGEMENT SYSTEM" means the cash management system described in Annex B (Cash Management System). "CERTIFIED CASH" means the net amount of Dollars in unrestricted cash and cash equivalents of Borrowers that is/are in Deposit Accounts or securities accounts maintained by a branch of a bank or securities intermediary within the United States and which are identified on Disclosure Schedule 3.18 (Deposit and Disbursement Accounts), as updated by Borrowers from time to time, as Certified Cash Accounts, which Certified Cash Accounts are not subject to any Liens, statutory liens or rights of offset, any overdraft, or any other charge or priority in favor of any Person other than Lender or, for any Deposit Account or securities account, the rights of the applicable bank or securities intermediary maintaining such Deposit Account or securities account with respect to customary account charges relating thereto (provided, that any amounts subject to any such rights in favor of any such bank or securities intermediary shall be excluded from Certified Cash for purposes of calculation of the amount thereof). For the avoidance of any doubt, the amount of Borrowers' marketable securities and Qualified Cash at the time of any determination shall be deemed to constitute Certified Cash but only to the extent they are not subject to any Liens, statutory liens or rights of offset, any overdraft, or any other charge or priority in favor of any Person other than Lender. "CHANGE OF CONTROL" means that any of the following have occurred: (a) any Person or group of Persons (within the meaning of the Securities Exchange Act of 1934) shall have acquired actual ownership, beneficial ownership or the right to own upon the occurrence of specified events, 25% or more of the Stock of any Borrower or any Credit Party (other than Ganesha); or (b) during any period of twelve (12) consecutive calendar months, Persons who at the beginning of such period constituted the majority of the board of directors of any Borrower or the majority of the managers of any Credit Party (other than Ganesha) (together with any new Person whose nomination or election or appointment was approved by the required vote of the shareholders or members) cease for any reason (other than death or personal disability) to constitute a majority of the board of directors of any Borrower or the majority of the managers of any Credit Party (other than Ganesha); or (c) IHHI ceases to own, directly or indirectly, and control, all 3 (100%) of the Stock of WMC-A, WMC-SA, Chapman and Coastal; or (d) Bruce Mogel ceases to be Chief Executive Officer or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal, and a replacement acceptable to Lender in its sole discretion is not employed by the applicable Borrower within thirty (30) calendar days after the date that Bruce Mogel is no longer employed as Chief Executive Office or Director of IHHI; or WMC-A, or WMC-SA, or Chapman, or Coastal; or (e) West Coast and Ganesha cease to own, directly or indirectly, and control, all (100%) of the membership interests of PCHI. "CHAPMAN" means Chapman Medical Center, Inc., a California corporation. "CHAPMAN LEASES" means each of the following: (a) That certain lease agreement dated December 31, 1984, by and between Chapman Medical, L.P., a California limited partnership, successor-in-interest to Chapman Investments Associates, a California limited liability company, successor-in-interest to James L, Kirby, Successor Trustee of the Taggart Land Trust dated December 29, 1977, Fred D. Pierce, Trustee of the Stanford Land Trust dated December 29, 1977, Lawrence A. Johnson, Trustee of the Oxford Land Trust dated December 29, 1977, James L. Kirby, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, Melia Harper Long, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, and Mattison James Harper, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, as tenants in common doing business under the fictitious name Chapman Investment Associates (collectively, "HOSPITAL LANDLORD"), and Chapman General Hospital, Inc., a California corporation, as the initial Tenant thereunder (the "HOSPITAL TENANT"). Said lease agreement was amended by a First Amendment dated April 8, 1985, by a Second Amendment dated April 1, 1989, by a Third Amendment dated November 5, 1990 and by a Fourth Amendment dated August 25, 1994. Said lease, as amended by the First, Second, Third and Fourth Amendments, shall collectively hereinafter be referred to as the "CHAPMAN HOSPITAL LEASE." The 2601 East Chapman Hospital Lease encumbers the real property and hospital improvements commonly described as and located at 2601 East Chapman Avenue, Orange, California. A memorandum of the Chapman Hospital Lease was recorded on August 30, 1994 as Instrument No. 94-0533295 of the Official Records of the Office of the County Recorder of the County of Orange, State of California. Hospital Tenant's interest in the Chapman Hospital Lease was assigned and transferred to IHHI on March 5, 2005. (b) That certain lease agreement dated December 31, 1984 by and between Chapman Medical, L.P., a California limited partnership, successor-in-interest to Chapman Investments Associates, a California limited liability company, successor-in-interest to James L, Kirby, Successor Trustee of the Taggart Land Trust dated December 29, 1977, Fred D. Pierce, Trustee of the Stanford Land Trust dated December 29, 1977, Lawrence A. Johnson, Trustee of the Oxford Land Trust dated December 29, 1977, James L. Kirby, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, Melia Harper Long, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, and Mattison James Harper, Successor Co-Trustee of the Cayuga Land Trust dated December 29, 1977, as tenants in common doing business under the fictitious name Chapman Investment Associates (collectively, "MOB LANDLORD") and Greatwest Medical Management, Inc., a California corporation, as the initial Tenant (the "MOB TENANT"). Said lease agreement was amended by a First Amendment dated April 8, 1985, and by a 4 Second Amendment dated August 25, 1994. Said lease agreement, as amended by the First Amendment and Second Amendment, shall collectively hereinafter be referred to as the "CHAPMAN MOB LEASE." The 2617 East Chapman MOB Lease encumbers the medical office building premises commonly described as and located at 2617 East Chapman Avenue, Orange, California. A memorandum of the Chapman MOB Lease was recorded on August 30, 1994 as Instrument No. 94-0533296 of the Official Records of the Office of the County Recorder of the County of Orange, State of California. MOB Tenant's interest in the Chapman MOB Lease was assigned and transferred to IHHI on March 5, 2005. "CHAPMAN MEDICAL CENTER" means the real property and hospital improvements located at 2601 East Chapman Avenue, Orange, California, and the real property and medical office building improvements located at 2617 East Chapman Avenue, Orange, California. "CHARGES" means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any of Borrowers or any of the Credit Parties, (d) the use of any real property owned or leased by Borrowers or Credit Parties (other than Ganesha), or (e) any other aspect of the Business of Borrowers or the business of Credit Parties (other than Ganesha). "CHATTEL PAPER" means any chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by Borrowers or Credit Parties. "CLOSING DATE" means October 9, 2007, unless Borrower's Representative and Lender otherwise agree in writing. "CLOSING AND FUNDING CHECKLIST" means the closing and funding checklist prepared by Lender listing certain documents and information to be delivered in connection with this Agreement and the other Loan Documents and the transactions contemplated thereunder, as described in Annex C (Collateral Reports). "COASTAL" means Coastal Communities Hospital, Inc., a California corporation. "COASTAL COMMUNITIES HOSPITAL" means the real property and hospital improvements located at 2701 South Bristol Street and 1901 and 1905 North College Avenue, Santa Ana, California. "CODE" means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of Nevada; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in such Article or Division shall govern; and provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender or any Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Nevada, the term "CODE" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. 5 "COLLATERAL" means the following: (a) all of each Borrower's tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired; (b) all of each Borrower's intangible personal property and interests in personal property, including without limitation all present and future Accounts, contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing; (c) all of each Borrower's Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Borrower; provided, however, that Lender shall not have a Lien in any rights under any Government Contract of any Borrower or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, ss. 203 or Title 41, ss. 15 of the United States Code shall not be deemed an exprEss prohibition against assignment thereof) or is prohibited by applicable law, unless in any case consent is otherwise validly obtained; (d) PCHI's fee simple interest in the Western Medical Center - Anaheim, in the Western Medical Center - Santa Ana, and in the Coastal Communities Hospital; (e) IHHI's interest, as tenant, in the Triple Net Lease of the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Communities Hospital; (f) IHHI's interest, as sublandlord, in the sublease of the Western Medical Center - Anaheim to WMC-A, in the sublease of the Western Medical Center - - Santa Ana to WMC-SA, and in the sublease of the Coastal Communities Hospital to Coastal; (g) IHHI's interest, as MOB Tenant, in the Chapman MOB Lease; (h) IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease; and (i) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.. "COLLATERAL ASSIGNMENT" means each of the following: 6 (a) the Collateral Assignment of Contracts re Western Medical Center - Anaheim, dated as of the date hereof, by and among Lender, IHHI and WMC-A in the form of Exhibit "H" attached hereto; (b) the Collateral Assignment of Contracts re Western Medical Center - Santa Ana, dated as of the date hereof, by and among Lender, IHHI and WMC-SA in the form of Exhibit "H" attached hereto; (c) the Collateral Assignment of Contracts re Coastal Communities Hospital, dated as of the date hereof, by and among Lender, IHHI and Coastal in the form of Exhibit "H" attached hereto; (d) the Collateral Assignment of Contracts re Chapman MOB Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "H" attached hereto; and (e) the Collateral Assignment of Contracts re Chapman Hospital Lease, dated as of the date hereof, by and among Lender and IHHI in the form of Exhibit "H" attached hereto. "COLLATERAL DOCUMENTS" means the $10,700,000 Deeds of Trust, the Absolute Assignments, the Collateral Assignment, the Security Agreement, the Pledge Agreement, the Stock Power, the IP Security Agreement, the UCC-1 Financing Statements, and all similar agreements, documents and instruments entered into guaranteeing payment of, or granting a Lien upon, real and personal property (and interests in real and personal property), and perfecting the Liens, as security for payment of, the Obligations. "COLLATERAL REPORTS" means the reports with respect to the Collateral referred to in Annex C (Collateral Reports). "COMMITMENT" means the aggregate commitment of Lender to make Advances under the Loan, which aggregate amount shall not exceed TEN MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($10,700,000.00), from time to time in accordance with this Agreement. "COMMITMENT TERMINATION DATE" means the earliest of (a) thirty (30) calendar days prior to the Stated Maturity Date; (b) the date Lender's obligations to make Advances under the Note terminates, (c) the date of prepayment in full of the Loan and the permanent reduction of the Loan to zero dollars ($0); or (d) the Maturity Date. "CONTRACTS" means all contracts as such term is defined in the Code, now owned or hereafter acquired by any of Borrowers, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any of the Borrowers may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Accounts. "CONTROL AGREEMENT" means the Control Agreement dated as of the date hereof, by and among Lender, Borrowers and Bank in the form of Exhibit "J" attached hereto. 7 "COPYRIGHT LICENSE" means any and all rights now owned or hereafter acquired by any of the Borrowers under any written agreement granting any right to use any Copyright or Copyright registration. "COPYRIGHTS" means all of the following now owned or hereafter adopted or acquired by any of the Borrowers or any of the Credit Parties: (a) all copyrights and General Intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof. "CREDIT PARTIES" means OC-PIN, PCHI, West Coast and Ganesha, and their respective successors and assigns. "DEFAULT" means any event that, with the passage of time or notice or both, would, unless cured or waived in writing by Lender, become an Event of Default. "DEFAULT RATE" means a rate of interest which is five percent (5%) per annum above the Interest Rate per annum otherwise applicable to the Loan in question. "DEPOSIT ACCOUNTS" means all deposit accounts as such term is defined in the Code, now or hereafter held in the name of any of the Borrowers. "DEPOSIT ACCOUNT SECURITY AGREEMENT" means that certain Deposit Account Security Agreement dated as of the date hereof, by and among Lender and Borrowers in the form of Exhibit "I" attached hereto. "DISBURSEMENT ACCOUNTS" has the meaning ascribed to it in Annex B (Cash Management System). "DISCLOSURE SCHEDULES" means the Schedules prepared by Borrowers and denominated as Disclosure Schedules 1.3 through 6.7 to this Agreement. "DOCUMENTS" means all documents, as such term is defined in the Code, now owned or hereafter acquired by any of Borrowers, wherever located. "DOLLARS" or "$" means lawful currency of the United States of America. "DR. SHAH" means Anil V. Shah, M.D., an individual. "$45,000,000 REAL ESTATE TERM LOAN" means the $45,000,000 real estate term loan made by MPFC II to Borrowers pursuant to the New $80,000,000 Credit Agreement. "$45,000,000 REAL ESTATE TERM NOTE" means the $45,000,000 real estate promissory note of even date herewith, executed by Borrowers in favor of MPFC II pursuant to the New $80,000,000 Credit Agreement. 8 "$35,000,000 NON-REVOLVING LINE OF CREDIT LOAN" means the $35,000,000 non-revolving line of credit loan made by MPFC II to Borrowers pursuant to the New $80,000,000 Credit Agreement.. "$35,000,000 NON-REVOLVING LINE OF CREDIT NOTE" means the $35,000,000 non-revolving line of credit promissory note of even date herewith, executed by Borrowers in favor of MPFC II pursuant to the New $80,000,000 Credit Agreement.. "$10,700,000 CONVERTIBLE TERM LOAN" means the $10,700,000 convertible term loan made by Lender to Borrowers pursuant to this Agreement. "$10,700,000 CONVERTIBLE TERM NOTE" means the $10,700,000 convertible promissory note of even date herewith, executed by Borrowers in favor of Lender, in the form of Exhibit "C" attached hereto. "$10,700,000 DEED OF TRUST " means each of the following: (a) the Deed of Trust With Assignment of Rents and Fixture Filing re Western Medical Center - Anaheim, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "E" attached hereto; (b) the Deed of Trust With Assignment of Rents and Fixture Filing re Western Medical Center - Santa Ana, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "E" attached hereto; (c) the Deed of Trust With Assignment of Rents and Fixture Filing re Coastal Communities Hospital, dated as of the date hereof, executed by PCHI in favor of Lender in the form of Exhibit "E" attached hereto; (d) the Deed of Trust With Assignment of Rents and Fixture Filing re Chapman MOB Lease, dated as of the date hereof, executed by IHHI in favor of Lender in the form of Exhibit "E" attached hereto; and (e) the Deed of Trust With Assignment of Rents and Fixture Filing re Chapman Hospital Lease, dated as of the date hereof, executed by IHHI in favor of Lender in the form of Exhibit "E" attached hereto. "$50,000,000 DEEDS OF TRUST" means each of the fee and leasehold $50,000,000 Deeds of Trust of even date herewith, executed by PCHI and/or IHHI, as Trustors, and Medical Provider Financial Corporation I, as Beneficiary, securing repayment of the $50,000,000 Revolving Facility. "$50,000,000 REVOLVING CREDIT AGREEMENT" means that certain $50,000,000 Revolving Credit Agreement of even date herewith, executed by Borrowers, as borrowers, and Medical Provider Financial Corporation I, as Lender. "$50,000,000 REVOLVING FACILITY" means the $50,000,000 revolving line of credit loan facility by Medical Provider Financial Corporation I, as lender, to Borrowers, as borrowers, pursuant to the $50,000,0000 Revolving Credit Agreement. 9 "EFFECTIVE DATE" means the date set forth in the introductory paragraph of this Agreement. "ENVIRONMENTAL INDEMNITY AGREEMENT" means an Environmental Indemnity Agreement of even date herewith, by and between Borrowers, Credit Parties (other than Ganesha) and Lender, in the form of Exhibit "M" attached hereto "ENVIRONMENTAL LAWS" means all federal, state and local health, safety, environmental or natural resource laws, statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, authorizations, concessions, franchises and similar items of all federal, state, county, municipal, or other governmental, quasi-governmental, regulatory or administrative authority, agency, board, court, arbitrator, body, instrumentality, commission or other judicial body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to Governmental Authority having jurisdiction, including, without limitation all statutes referred to by name in the definition of Hazardous Materials; and all other state, federal, and local laws, regulations, rules, ordinances and orders which govern: (i) the existence, cleanup and/or remedy of contamination on real property and improvements; (ii) the emission or discharge of Hazardous Materials into the environment; (iii) the control of Hazardous Materials; (iv) the use, generation, transport, treatment, storage, disposal, removal, or recovery of Hazardous Materials; as well as all applicable judicial and administrative and regulatory decrees, judgments or orders (including without limitation the common law) and all applicable covenants running with the land that relate to the protection of health, safety, environment or natural resources. "ENVIRONMENTAL LIABILITIES" means, with respect to any Person, all environmental liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property. "ENVIRONMENTAL LOSSES" means any and all losses (including diminution in value of a Property), liabilities, damages, demands, claims, actions, judgments, causes of action, assessments, penalties, costs and expenses (including sums paid in settlement of claims), liens, interest, fines or penalties, including without limitation, the fees and disbursements of outside counsel, paralegals and accountants, consultant fees, expert fees, all foreseeable and unforeseeable consequential damages, and all other costs and expenses of any kind or nature, which are suffered or incurred by Lender with respect to a Property or adjacent real property or improvements arising out of or as a result of (i) the occurrence of any Hazardous Material Activity; (ii) any violation of any Environmental Laws or Applicable Laws; (iii) any investigation, inquiry, order, 10 hearing, action, or other proceeding by or before any Governmental Authority in connection with any Hazardous Material Activity; (iv) any Hazardous Material Claims brought, asserted, or alleged against Lender or against any of Lender's directors, officers, shareholders, employees, attorneys, or agents; (v) any actions taken by Lender to enter and inspect a Property pursuant to the rights granted Lender under this Agreement and the other Loan Documents; and (vi) any misrepresentation or inaccuracy in any representation or warranty by any Borrower or any Credit Party or any material breach or failure to perform any covenants or obligations by any Borrower or any Credit Party pursuant to this Agreement relating to environmental matters. "ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws. "EQUIPMENT" means all equipment, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that, together with any other Person, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC. "ERISA EVENT" means (a) with respect to a Title IV Plan, any event described in Section 4043(c) of ERISA for which notice to the PBGC has not been waived; (b) the withdrawal of Borrowers or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2( of ERISA; (c) the complete or partial withdrawal of Borrowers or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in a distress termination described in Section 4041(c) of ERISA or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) with respect to a Title IV Plan, the existence of an "accumulated funding deficiency" (as defined in Section 412 of the IRC or Section 302 of ERISA) whether or not waived, or the failure to make by its due date a required installment under Section 412(m) of the Code or the failure to make any required contribution to a Multiemployer Plan; (g) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to a Title IV Plan; (h) the making of any amendment to any Title IV Plan which could result in the imposition of a lien or the posting of a bond or other security; (i) with respect to a Title IV Plan an event described in Section 4062(e) of ERISA; (j) any other event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (k) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; (1) the loss of a Qualified Plan's qualification or tax exempt status; or (m) the termination of a Plan described in Section 4064 of ERISA. 11 "ESCROW" means an escrow account established by the Escrow Company. "ESCROW COMPANY" means Chicago Title Insurance Company, Commercial/Industrial, 700 South Flower Street, Suite 800, Los Angeles, California 90017, Attn: Patricia M. Schlageck ("SR. COMMERCIAL ESCROW OFFICER"), telephone: 213-488-4358; facsimile: 213-612-4138; email: patricia.schlageck@ctt.com. "ESCROW HOLDER" means Escrow Company. "EVENT OF DEFAULT" means that Borrowers and/or Credit Parties have committed one or more of the events described in Section 8.1 (Events of Default) of this Agreement. "EXHIBITS" means any of Exhibits "A" through "T" attached to this Agreement. "FEES" means any and all fees payable to Lender pursuant to this Agreement or any of the other Loan Documents, including but not limited to the Origination Fees, the Unused Commitment Fees and Lender's Costs. "FINANCIAL STATEMENTS" means the consolidated income statements, statements of cash flows and balance sheets of each of the Borrowers delivered in accordance with Section 3.4 (Financial Statements and Projections) of this Agreement. "FIRST CREDIT AGREEMENT" means that certain Credit Agreement dated to be effective as of March 3, 2005, by and between Borrowers, Credit Parties and Medical Provider Financial Corporation II (as lender). Pursuant to the First Credit Agreement, Medical Provider Financial Corporation II (as lender) made available to Borrowers the Previous $50,000,000 Acquisition Loan and the Previous $30,000,000 Line of Credit Loan. "FISCAL MONTH" means any of the monthly accounting periods of Borrowers. "FISCAL QUARTER" means any of the quarterly accounting periods of Borrowers, ending on March 31, June 30, September 30 and December 31 of each year. "FISCAL YEAR" means any of the annual accounting periods of Borrowers ending on March 31 of each year. "FIXTURES" means all fixtures as such term is defined in the Code, now owned or hereafter acquired by Borrowers or Credit Parties. "FRAUDULENT TRANSFER LAW" means Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law. "FUNDED DEBT" means, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a line of credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long term debt, lines of credit and short term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons. 12 "GAAP" means, as to a particular Person, such accounting practice as, in the opinion of the independent accountants regularly retained by such Person, conforms at the time to Generally Accepted Accounting Principles, consistently applied. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those principles and practices in the United States of America (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the most recent Financial Statements furnished Lender of the relevant Person, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board in order for such principle or practice to continue as a Generally Accepted Account Principle or practice, all reports and Financial Statements required hereunder shall be prepared in accordance with such changes. "GANESHA" means Ganesha Realty, LLC, a California limited liability company. "GENERAL INTANGIBLES" means all general intangibles, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, including all right, title and interest that Borrowers may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefore and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choices in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of Borrowers or any computer bureau or service company from time to time acting for Borrowers. "GOODS" means all goods as defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, including embedded software to the extent included in goods as defined in the Code. "GOVERNMENTAL AUTHORITY" means any nation or government, any state, county, city, or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 13 "GUARANTEED INDEBTEDNESS" means as to any Person, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation of any other Person in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss (other than product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof. "GUARANTORS" means OC-PIN and West Coast, and their respective successors and assigns. "GUARANTY AGREEMENT" means a Guaranty Agreement of even date herewith, executed by the Guarantors and Lender, in the form of Exhibit "N" attached hereto. "HAZARDOUS MATERIAL" means any (a) substance, product, waste or other material of any nature whatsoever which is or becomes listed, regulated, or addressed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET SEQ.) ("CLEAN WATER ACT" OR "CWA"); the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.) ("AEA"); the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.); the Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001, ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136, ET SEQ.) ("FIFRA"); the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486); the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.) ("SDWA"); the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C. Sections 1201, ET SEQ.); the Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.) ("TSCA"); the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901, ET SEQ.) ("UMTRCA"); all respective regulations promulgated thereunder; and or any other federal, state or local statute, law, ordinance, resolution, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect, (b) any substance, product, waste or other material of any nature whatsoever which may give rise to liability under any of the above statutes or under any statutory or common law theory based on negligence, trespass, intentional tort, nuisance or strict liability or under any reported decisions of a state or federal court, (c) petroleum or crude oil other than petroleum and petroleum products contained within regularly operated motor vehicles, and (d) asbestos. 14 "HAZARDOUS MATERIAL ACTIVITY" means any storage, holding, existence, release, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Material from, under, into, or across any Property or surrounding real property and improvements or any other use of or operation of any Property or surrounding real property or improvements that creates a risk of Hazardous Material contamination of said Property; provided, however, that Hazardous Material Activity shall not include reasonable incidental use, storage and disposal of Hazardous Materials on the Property provided that such use, disposal and storage complies with the following: (a) such use, disposal and storage shall be limited to customary supplies, including supplies and materials customarily used, stored and disposed of in the normal operations of medical facilities; (b) no such products or supplies create any risk of harm to persons or property including any Collateral under this Agreement and the other Loan Documents; and (c) all such products and supplies are used, stored and disposed of in material compliance with all applicable Environmental Laws. "HAZARDOUS MATERIAL CLAIM" means any and all enforcement, clean-up, removal, remedial or other governmental or regulatory actions, agreements, or orders threatened, instituted or completed pursuant to any Environmental Laws and any all other actions, proceedings, claims, demands or causes of action, whether meritorious or not (including, without limitation, third party claims for contribution, indemnity, personal injury or real or personal property damage), which directly or indirectly relate to, arise from or are based in whole or in part on: (i) the occurrence or alleged occurrence of any Hazardous Material Activity, (ii) any violation or alleged violation of any applicable Environmental Laws relating to a Property or to the ownership, use, occupation or operation thereof; and (iii) any investigation, inquiry, order, hearing, action or other proceeding by or before any Governmental Authority in connection with any Hazardous Material Activity. "HOSPITAL FACILITIES" and/or "HOSPITAL FACILITY" means Western Medical Center-Anaheim, the Western Medical Center-Santa Ana, the Coastal Communities Hospital and the Chapman Medical Center. "IHHI" means Integrated Healthcare Holdings, Inc., a Nevada corporation. "INDEBTEDNESS" means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are unsecured and not overdue by more than six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by note, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such 15 property), (e) all Capital Lease Obligations and the present value of future rental payments under all synthetic leases, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations. "INDEMNIFIED LIABILITIES" means all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other statutory and non-statutory costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any Lender Released Party directly or indirectly based on or relating to: (a) the negotiation, execution and delivery of this Agreement by any Lender Released Party; or (b) the negotiation, execution and delivery of any Previous Loan Document by any Lender Released Party; or (c) any Lender Liability Claim brought or asserted against any Lender Released Party in connection with any Previous Loan Document or in connection with the negotiation, execution and delivery of this Agreement; or (d) as the result of credit having been extended, suspended or terminated under any Previous Loan Document; or (e) as a result of the administration of any credit under any Previous Loan Document and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Previous Loan Documents. "INDEPENDENT DIRECTOR(S)" means a Person or Persons who are or who become members of IHHI's board of directors and who (a) are independent of all Borrowers and all Credit Parties, (b) are not now and never have been affiliated with any Borrower or any Credit Party, (c) are not now and never have been employed by or have performed consulting or other services for any Borrower or any Credit Party, (d) are not now and never have been paid or compensated, or received consideration of any kind from, any Borrower or any Credit Party, (e) are not now and never have been directly or indirectly engaged in the full-time practice of clinical medicine (i.e., said Persons are not doctors), and (f) are experienced in the administration and management of acute care hospital facilities such as the Hospital Facilities. "INSTRUMENTS" means all instruments, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "INTELLECTUAL PROPERTY" means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with such Trademarks. 16 "INTERCREDITOR AGREEMENT" means an Intercreditor Agreement of even date herewith, executed by the Lender and Borrowers in the form of Exhibit "O" attached hereto. "INTEREST PAYMENT DATE" means the first Business Day of each calendar month to occur while any Loan is outstanding, and provided further that, in addition to the foregoing, the Maturity Date shall be deemed to be an Interest Payment Date with respect to any interest that has then accrued under this Agreement. "INTEREST RATE" means with respect to the $10,700,000 Convertible Term Loan, simple interest shall be charged at the per annum fixed rate of 9.25%. "INVENTORY" means all inventory, as such term is defined in the Code, now owned or hereafter acquired by Borrowers, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of Borrowers for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished' goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in Borrower's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. "INVESTMENT PROPERTY" means all investment property as such term is defined in the Code now owned or hereafter acquired by Borrowers, wherever located, including (a) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (b) all securities entitlements of Borrowers, including the rights of Borrowers to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (c) all securities accounts of Borrowers; (d) all commodity contracts of Borrowers; and (e) all commodity accounts held by Borrowers. "IRC" means the Internal Revenue Code of 1986 and all regulations promulgated thereunder. "IRS" means the Internal Revenue Service. "LANDLORD'S CONSENT AND ESTOPPEL CERTIFICATE (CHAPMAN LEASES)" means each of the following: (a) a Landlord's Consent and Estoppel Certificate (Chapman MOB Lease) executed by the Chapman MOB Landlord in favor of Lender, in the form of Exhibit "S" attached hereto; and (b) a Landlord's Consent and Estoppel Certificate (Chapman Hospital Lease) executed by the Chapman Hospital Landlord in favor of Lender, in the form of Exhibit "S" attached hereto. . 17 "LANDLORD'S CONSENT AND ESTOPPEL CERTIFICATE (TRIPLE NET LEASE)" means that certain Landlord's Consent and Estoppel Certificate (Triple Net Lease) executed by PCHI, in the form of Exhibit "T" attached hereto. "LENDER" means Medical Provider Financial Corporation III, a Nevada corporation, and, if Lender shall decide to assign all or any portion of the Obligations, such term shall include any assignee(s) of Lender. "LENDER LIABILITY CLAIM(S)" means any claim or cause of action that any of the Releasing Parties now has or in the future may have against any Lender Released Party to the effect that, prior to the Effective Date of this Agreement: (a) any of the Lender Released Parties committed a breach or default under any of the Loan Documents or under any of the Previous Loan Documents or under the Term Sheet; or (b) any of the Lender Released Parties conspired with the executive officers, representatives or agents of IHHI to deprive OC-PIN of its stock ownership in IHHI or otherwise inflicted any actionable damage on OC-PIN; or (c) any of the Lender Released Parties committed an act not permitted by any of the Previous Loan Documents or by the Term Sheet or by applicable law; or (d) any of the Lender Released Parties omitted to take an action required by the Previous Loan Documents or by the Term Sheet or under applicable law; or (e) any of the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents is/are invalid or unenforceable in whole or in part for any reason; or (f) any of the Lender Released Parties suggested, implied, induced, cajoled or required that IHHI include any terms or conditions in any agreements between IHHI and OC-PIN in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (g) any of the Lender Released Parties suggested, implied, induced, cajoled or required that IHHI not include any terms or conditions in any agreements between IHHI and OC-PIN in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (h) any of the Lender Released Parties improperly interfered with, or improperly exercised control, or exercised excessive control, over any of the Borrowers, or Credit Parties, or Guarantors, in connection with the Previous Loan Documents or Term Sheet or this Agreement or the other Loan Documents; or (i) any of the Lender Released Parties breached in any way any alleged duty of good faith or fair dealing, any alleged fiduciary duty, or any alleged duty of commercial reasonableness, or any quasi-duty, or any implied duty, in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers or Credit Parties or Guarantors; or (j) any of the Lender Released Parties committed any unlawful, unfair or fraudulent business act or practice in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (k) any of the Lender Released Parties engaged in any unfair, deceptive, untrue or misleading advertising in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (l) any of the Lender Released Parties committed any act prohibited by California Business and Professions Code Section 17500 or its State of Nevada counterpart in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (m) any of the Lender Released Parties engaged in predatory lending practices in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan 18 Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (n) any of the Lender Released Parties engaged in or committed any act or omission which constitutes fraud, duress, negligence, conversion, defamation or infliction of emotional distress in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (o) any of the Lender Released Parties interfered with IHHI's prospective business advantage in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (p) any of the Lender Released Parties interfered with IHHI's contractual relations in connection with the Previous Loan Documents or the Term Sheet or this Agreement or the other Loan Documents or with respect to any of the Borrowers, or Credit Parties or Guarantors; or (q) any of the Lender Released Parties acted or failed to act in a manner which directly or indirectly caused or contributed to the business decline, lost profits or other detrimental effects with respect to any of the Borrowers, or Credit Parties or Guarantors; or (r) any of the Lender Released Parties acted or failed to act in a manner which directly or indirectly caused or contributed to any of the Borrowers continuing in business while insolvent or otherwise delaying any filing of bankruptcy or similar proceedings; or (s) any of the Lender Released Parties utilized or made threats, coercion, undue influence or other methods of causing the Releasing Parties to voluntarily or involuntarily agree to the releases, waivers, covenants not to sue and indemnities set forth in this Agreement or in any of the Previous Loan Documents; or (t) any of the Lender Released Parties was party to or acted or failed to act in a manner which directly or indirectly gave rise to a principal-agent relationship with any of the Releasing Parties; or (u) that Lender's requirement, based on its past experience in connection with the Previous Loans, that Dr. Shah resign from IHHI's board of directors as a condition of making the Loan, improperly interfered with, or improperly exercised control, or exercised excessive control, over IHHI; or (v) that Lender's requirement, based on its past experience in connection with the Previous Loans, that until the Loan is paid in full and satisfied, Borrowers not, directly or indirectly, permit Dr. Shah to be nominated, or elected, or appointed, or directly or indirectly compensated, paid, engaged, retained or become, an officer, or director, or employee, or manager, or supervisor, or consultant, or agent, or representative of, any of the Borrowers, improperly interfered with, or improperly exercised control, or exercised excessive control, over said Borrowers. The foregoing releases and waivers are permanent and shall survive the expiration or termination of this Agreement and the other Loan Documents. "LENDER RELEASED PARTIES" and individually a "LENDER RELEASED PARTY" means and includes Lender, MPFC II, Medical Provider Financial Corporation I, a Nevada corporation, Medical Capital Corporation, a Nevada corporation, and all of their related and affiliated companies and entities, and their respective predecessors, successors and assigns, and their respective officers, directors, shareholders, partners, trustees, employees, agents, attorneys, representatives and assigns. "LENDER'S COSTS" means all fees and expenses of Lender in connection with the Loan and all Loan Documents including, but not limited to, all attorneys' fees, costs and expenses paid or incurred by Lender in connection with any application or engagement letter, or Term Sheet, or any Loan Documents, the fees and disbursements of Lender's counsel, the travel expenses of Lender's personnel and legal counsel related to the Loan, note intangible taxes, if any, and all Closing, escrow, recording and filing fees, expenses and taxes. 19 "LENDER'S REPRESENTATIVE" means Medical Provider Financial Corporation III, c/o Medical Capital Corporation, 2100 South State College Blvd., Anaheim, California 92806, Attn: Sidney Field, CEO, or Joseph J. Lampariello, President and COO, or Adam Field, Sr. Vice President Development, telephone: 714-935-3100, facsimile: 714-935-3114. "LICENSE" means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by Borrowers. "LIEN(S)" means any agreement or deed of trust, mortgage, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "LITIGATION" means any action, claim, lawsuit, demand, investigation or proceeding now pending or, to the knowledge of Borrowers or Credit Parties or Guarantors, threatened against Borrowers or Credit Parties or Guarantors, whether before any Governmental Authority or before any arbitrator or panel of arbitrators, or otherwise. "LOAN ACCOUNT" means an account maintained by Lender in its books to record all Advances made by Lender to Borrowers, all payments made by Borrowers to Lender, and all other debits and credits as provided in this Agreement with respect to the Loan or any other Obligations. All entries in the Loan Account shall be made in accordance with Lender's customary accounting practices as in effect from time to time. "LOAN DOCUMENTS" means, together, this Agreement, the Note, the Guaranty Agreement, the Collateral Documents, the Environmental Indemnity Agreement, the Control Agreement, the Post-Closing Agreement, the Collateral Assignment of Contracts, and all other agreements, instruments, documents and certificates identified in the Closing and Funding Checklist executed and delivered to, or in favor of, Lender and including all other pledges, powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all other written matter whether heretofore, now or hereafter executed by or on behalf of Borrowers or Credit Parties or Guarantors, or any employee of Borrowers or Credit Parties or Guarantors, and delivered to Lender in connection with this Agreement or the transactions contemplated thereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all exhibits and schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative. "LOAN" means the $10,700,000 Convertible Term Loan. "LOCK BOXES" has the meaning ascribed to it in Annex B (Cash Management System). "MATERIAL ADVERSE EFFECT" means any circumstance or event, as determined by Lender in the exercise of its reasonable discretion, which (a) has or may reasonably be expected to have any material adverse effect whatsoever upon the validity, performance, perfection or enforceability of the Loan Documents, (b) is, or is reasonably expected to be, material and adverse to the financial 20 condition of the business operations of any Borrower, any Credit Party and/or any Guarantor, (c) is, or is reasonably expected to, materially impair the ability of any Borrower or any Credit Party or any Guarantor to fulfill their respective obligations under the Loan Documents, or (d) would with the passage of time or giving of notice, or both, result in or cause a Default or an Event of Default, or (e) materially impairs or is reasonably expected to materially impair any of the Collateral, or any of Lender's Liens on any of the Collateral, or the priority of such Liens, or (f) materially impairs or is reasonably expected to materially impair Lender's rights and remedies under this Agreement and the other Loan Documents. "MATURITY DATE" means the date which is the first to occur of (i) the Stated Maturity Date, and (ii) the occurrence or existence of a Default or an Event of Default under any of the Loan Documents with respect to which Lender has exercised its option to accelerate the Maturity Date pursuant to Section 8.2(a) hereof. "MAXIMUM AMOUNT" means, as of any date of determination, an amount equal to the Commitment as of that date. "MAXIMUM LAWFUL RATE" means the interest rate that a court of competent jurisdiction determines in a final unappealable order to be the highest rate of interest permissible under applicable law. "MEMBERSHIP CERTIFICATES" means all certificates evidencing the ownership of membership interests in a limited liability company. "MEMBERSHIP POWER" means the Irrevocable Membership Power of even date herewith, executed by West Coast and Ganesha in favor of Lender, in the form if Exhibit "R" attached hereto. "MPFC II" means Medical Provider Financial Corporation II, a Nevada corporation and an affiliate of Lender. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA, and to which any Borrower is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "NOTE" means the $10,700,000 Convertible Term Note. "OBLIGATIONS" means, collectively, the Loan, all Advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by Borrowers or Credit Parties or Guarantors to Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement, letter of credit agreement or other instrument, arising under this Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against Borrowers or Credit Parties or Guarantors in bankruptcy, whether or not allowed in such case or proceeding), fees, expenses, attorneys' fees and any other sum chargeable to Borrowers or Credit Parties or Guarantors under the Agreement or any of the other Loan Documents. 21 "OC-PIN" means Orange County Physicians Investment Network, LLC, a Nevada limited liability company. "ORIGINATION FEES" means with respect to the $10,700,000 Convertible Term Loan, an origination fee in the amount of ONE HUNDRED SIXTY THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($160,500.00) (1.5% of $10,700,000). "PATENT LICENSE" means rights under any written agreement now owned or hereafter acquired by Borrowers granting any right with respect to any invention on which a Patent is in existence. "PATENTS" means all of the following in which Borrowers now hold or hereafter acquire any interest: (a) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof. "PBGC" means the Pension Benefit Guaranty Corporation. "PCHI" means Pacific Coast Holdings Investment, LLC, a California limited liability company. "PENSION PLAN" means a Plan described in Section 3(2) of ERISA. "PERMITTED ENCUMBRANCES" means, for each Property, the following encumbrances relating thereto: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are being contested in accordance with Section 5.2(b) (Right to Contest Charges); (b) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) zoning restrictions, easements, licenses, or other restrictions on the use of any real estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not create a Material Adverse Effect, as determined by Lender in its sole discretion; (d) currently existing or hereafter created Liens in favor of Lender or its Affiliates; (e) any Lien held by an equipment lessor in the equipment so leased; (f) all encumbrances shown in any Title Policy issued on the Closing Date to Lender; (g) inchoate and unperfected workers' compensation, mechanics' or similar liens arising in the ordinary course of business, provided, that the same are satisfied in the ordinary course of business; (h) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business; (i) such other liens arising in the ordinary course of business so long as such liens do not create a Material Adverse Effect; and (j)) such endorsements to said Title Policies as Lender deems necessary or appropriate, in its sole discretion. 22 "PERSON" means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, unincorporated organization, trust, business trust, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). "PLAN" means, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, that Borrowers or any ERISA Affiliate maintain, contribute to or have an obligation to contribute to or have maintained, contributed to or had an obligation to contribute to at any time within the past seven (7) years on behalf of participants who are or were employed by Borrowers or ERISA Affiliate. "PLAN REGARDING ENGAGEMENT OF INDEPENDENT DIRECTORS" means a written statement outlining IHHI's plan as to how it intends to identify, engage, nominate and elect Independent Directors to IHHI's board of directors within the time periods required by this Agreement. "PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith, by and between IHHI, West Coast, Ganesha and Lender, in the form of Exhibit "P" attached hereto. "PLEDGED ENTITY" means a Person whose Stock or Membership Interests are pledged pursuant to the Pledge Agreement. "PREVIOUS ACCOUNTS RECEIVABLE PURCHASE AGREEMENT" means that certain Accounts Purchase Agreement dated as of March 3, 2005, by and between Medical Provider Financial Corporation I (as Buyer) and Borrowers (as Sellers). "PREVIOUS $50,000,000 ACQUISITION LOAN" means the $50,000,000 acquisition loan made by MPFC II to Borrowers pursuant to the First Credit Agreement. "PREVIOUS $50,000,000 ACQUISITION NOTE" means the $50,000,000 acquisition note executed by Borrowers in favor of MPFC II pursuant to the First Credit Agreement. "PREVIOUS $30,000,000 LINE OF CREDIT LOAN" means the $30,000,000 line of credit loan made by MPFC II to Borrowers pursuant to the First Credit Agreement. "PREVIOUS $30,000,000 LINE OF CREDIT NOTE" means the $30,000,000 line of credit note executed by Borrowers in favor of MPFC II pursuant to the First Credit Agreement. "PREVIOUS $10,700,000 TERM LOAN" means the $10,700,000 term loan made by Lender to Borrowers pursuant to the Second Credit Agreement. "PREVIOUS $10,700,000 TERM NOTE" means the $10,700,000 term note executed by Borrowers in favor of Lender pursuant to the Second Credit Agreement. "PREVIOUS LOANS" means, collectively, the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan and the Previous $10,700,000 Term Loan. 23 "PREVIOUS LOAN DOCUMENTS" means and includes, collectively, (a) the Previous $50,000,000 Acquisition Loan, the Previous $50,000,000 Acquisition Note, and all other loan and security documents executed in connection therewith, (b) the Previous $30,000,000 Line of Credit Loan, the Previous $30,000,000 Line of Credit Note, and all loan and security documents executed in connection therewith, (c) the Previous $10,700,000 Term Loan, the Previous $10,700,000 Term Note, and all other loan and security documents executed in connection therewith, (d) the Forbearance Agreement dated June 1, 2005, and (e) the Forbearance Agreement (as amended) dated June 18, 2007. "PREVIOUS UCC-1 FINANCING STATEMENTS (FIXTURE FILINGS)" means the UCC-1 Financing Statements (Fixture Filings) recorded against each of the Properties in conjunction with the Previous $50,000,000 Acquisition Loan, the Previous $30,000,000 Line of Credit Loan, the Previous $10,700,000 Term Loan and the Previous Accounts Receivable Purchase Agreement. "PROCEEDS" means proceeds, as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrowers from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to Borrowers from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of Borrowers against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by Borrowers against third parties with respect to any litigation or dispute concerning any of the Collateral including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral. "PROJECTIONS" means, for Borrowers, its forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a cash basis, if applicable, and otherwise consistent with the historical Financial Statements of Borrowers with certain normalizing assumptions made by Borrowers, together with appropriate supporting details and a statement of underlying assumptions. "PROPERTY" means any of the Hospital Facilities, and "PROPERTIES" means each of the Hospital Facilities taken together. "QUALIFIED ASSIGNEE" means (a) any Lender, any Affiliate of Lender and, with respect to a Lender that is an investment fund that invests in commercial loans, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor or by an Affiliate of such investment advisor of such Lender and which is not a competitor or an Affiliate of a competitor of Borrowers, and (b) any commercial bank, savings and loan 24 association or savings bank or any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody's at the date that it becomes a Lender and which, through its applicable lending office, is capable of lending to Borrowers without the imposition of any withholding or similar taxes; provided that no Person proposed to become a Lender after the Closing Date and determined by Lender to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Assignee, and no Person or Affiliate of such Person proposed to become a Lender after the Closing Date that holds Subordinated Debt or Stock issued by Borrowers shall be a Qualified Assignee. "QUALIFIED CASH" means, as of any date of determination, the amount of Certified Cash that is subject to perfection in favor of Lender pursuant to any Control Agreement in form and substance satisfactory to Lender, which Control Agreement shall provide, among other things, that the bank or securities intermediary executing such agreement (a) has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and, as applicable, for returned checks or other items of payment, and (b) agrees to follow the instructions or entitlement orders of Lender without further consent by Borrowers, including, with respect to funds in any such account, upon the instructions of Lender, to immediately forward by daily sweep all such funds to the Collection Account or as otherwise directed by Lender. "QUALIFIED CASH ACCOUNT" means any deposit account or securities account that is subject to a Control Agreement in form and substance satisfactory to Lender and holds Qualified Cash. "QUALIFIED PLAN" means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC. "RECITALS" means the Recitals set forth on the first page of this Agreement. "RELATED TRANSACTIONS" means the borrowing of the Loan on the Closing Date, the payment of all fees, costs and expenses associated with all of the foregoing and the execution and delivery of all of the Related Transactions Documents. "RELATED TRANSACTIONS DOCUMENTS" means the Loan Documents and all other agreements or instruments executed in connection with the Related Transactions. "RELEASE" means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property. "RELEASING PARTIES" and individually, a "RELEASING PARTY" means each Borrower, each Credit Party, each Guarantor, and each of their respective predecessors, successors and assigns, and each of their respective officers, directors, shareholders, members, managers, partners (general and limited), employees, agents, representatives, attorneys and assigns. 25 "RESTRICTED PAYMENT" means (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock; (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of Stock or any other payment or distribution made in respect thereof, either directly or indirectly; (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; and (f) any payment of management fees (or other fees of a similar nature). "RETIREE WELFARE PLAN" means, at any time, a welfare plan (within the meaning of Section 3(1) of ERISA) that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC or other similar state law and at the sole expense of the participant or the beneficiary of the participant. "SECOND CREDIT AGREEMENT" means that certain Credit Agreement by and between the Lender, the Credit Parties and the Borrowers dated to be effective as of December 12, 2005. Pursuant to the Second Credit Agreement, Lender made the Previous $10,700,000 Term Loan to Borrowers. "SECURITY AGREEMENT" means the Security Agreement of even date herewith, by and between Borrowers and Lender, in the form if Exhibit "G" attached hereto. "SHAREHOLDER" means, with respect to any Person, each holder of Stock of such Person. "SHAREHOLDER BLOCKING RIGHTS" shall mean any rights of any owner (direct or indirect) of any Pledged Entity which, pursuant to the terms of any agreement or organizational document, has the right to consent, or the effect of requiring such consent, to any foreclosure by Lender under any Security Agreement or Pledge Agreement or otherwise to the exercise of any of Lender's rights and remedies thereunder or otherwise has the right to restrain, delay, impair or otherwise interfere with Lender in the event of Lender's exercise of its rights under any Security Agreement or Pledge Agreement. "SOFTWARE" means all software as such term is defined in the Code, now owned or hereafter acquired by Borrowers, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program. 26 "SOLVENT" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; and (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature. The amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability. "STATED MATURITY DATE" means October 8, 2010. "STOCK" means all shares, options, warrants, general or limited partnership interests, Membership Interests or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including stock, preferred stock or any other equity security (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). "STOCK CERTIFICATES" means all certificates evidencing the ownership of Stock in a Person. "STOCK POWER" means the Irrevocable Stock Power of even date herewith, executed by IHHI in favor of Lender, in the form if Exhibit "Q" attached hereto. "SUBORDINATED DEBT" means any unsecured Indebtedness of Borrowers incurred after the Closing Date that is subordinated to the Obligations in a manner and form reasonably satisfactory to Lender, as to right and time of payment and as to any other rights and remedies thereunder. "SUBSIDIARY" means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have a Membership Interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or manager or may exercise the powers of a general partner. "SUPPORTING OBLIGATIONS" means all supporting obligations as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property. 27 "TAXES" means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender. "TERM SHEET" means that certain letter agreement entitled Expression of Interest in Providing Credit Facilities dated August 29, 2007, executed by Lender and IHHI. "TERMINATION DATE" means the date on which (a) the Loan has been repaid in full, (b) all other Obligations due and payable under this Agreement and the other Loan Documents have been discharged, and (c) Borrowers shall have no further right to borrow any monies under this Agreement. "TITLE COMMITMENT(S)" means, with respect to each Property, an irrevocable commitment issued by the Title Company to Lender in form and content acceptable to Lender, committing to issue the Title Policy with respect to each such Property to Lender on the Closing Date. "TITLE COMPANY" means Chicago Title Insurance Company, 700 South Flower Street, Suite 800, Los Angeles, California 90017, Attn: Jeffrey L. Hurd ("SR. TITLE OFFICER"), telephone: 213-488-4365; facsimile: 213-243-9168; email: jeff.hurd@ctt.com; and Chicago Title Insurance Company, Division Counsel, 700 South Flower Street, Suite 3305, Los Angeles, California 90017, Attn: Scott M. Green, Associate Counsel ("TITLE ATTORNEY"), telephone: 213-488-4342; facsimile: 213-891-0834; email: greens@ctt.com. "TITLE POLICY" means an ALTA Loan Policy of Title Insurance issued by Title Company to Lender on the Closing Date, with a stated liability in the amount of $10,700,000, insuring that (a) the fee simple interest in the Western Medical Center - Anaheim is vested in PCHI and that the Deed of Trust constitutes a first Lien and encumbrance against the fee simple interest in such Property, subject only to the applicable Permitted Exceptions and with such endorsements as Lender may require in its sole and absolute discretion; (b) the fee simple interest in the Western Medical Center - Santa Ana is vested in PCHI and that the Deed of Trust constitutes a first Lien and encumbrance against the fee simple interest in such Property subject only to the applicable Permitted Exceptions and with such endorsements as Lender may require in its sole and absolute discretion; (c) the fee simple interest in the Coastal Community Hospital is vested in PCHI and that the Deed of Trust constitutes a first Lien and encumbrance against the fee simple interest in such Property subject only to the applicable Permitted Exceptions and with such endorsements as Lender may require in its sole and absolute discretion; (d) the tenant's interest in the Chapman MOB Lease is vested in IHHI and that the Deed of Trust constitutes a first Lien and encumbrance against IHHI's interest, as MOB Tenant, in the Chapman MOB Lease, subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion; and (e) the tenant's interest in the Chapman Hospital Lease is vested in IHHI and that the Deed of Trust constitutes a first Lien and encumbrance against IHHI's interest, as Hospital Tenant, in the Chapman Hospital Lease, subject only to the applicable Permitted Encumbrances and with such endorsements as Lender may require in its sole, absolute and unfettered discretion. 28 "TITLE IV PLAN" means a Pension Plan (other than a Multiemployer Plan), that is subject to Title IV of ERISA or Section 412 of the IRC, and that Borrowers or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "TRADEMARK LICENSE" means rights under any written agreement now owned or hereafter acquired by Borrowers granting any right to use any Trademark. "TRADEMARKS" means all of the following now owned or hereafter existing or adopted or acquired by Borrowers: (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. "TRIPLE NET LEASE" means that certain Triple Net Lease dated as of March 3, 2005 (as amended by that certain Amendment #1 to Triple Net Lease dated as of March 3, 2005) by and between PCHI, as lessor, and IHHI, as lessee, pursuant to which PCHI leased the Western Medical Center - Anaheim, the Western Medical Center - Santa Ana, and the Coastal Community Hospital, to IHHI. "UCC FINANCING STATEMENTS" means all UCC-1 Financing Statements (fixture filings and personal property) required by Lender to be filed or recorded pursuant to this Agreement to secure repayment of the Loan and performance of the Obligations. "UNFUNDED PENSION LIABILITY" means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by Borrowers or any ERISA Affiliate as a result of such transaction. "UNUSED COMMITMENT FEE" means, with respect to the $35,000,000 Non-Revolving Line of Credit Loan, that amount which is equal to 0.50% per annum of the average daily difference between $35,000,000 minus the sum of the outstanding principal amount of all Advances under the $35,000,000 Non-Revolving Line of Credit Loan for the period for which the Unused Commitment Fee is being paid. "WEST COAST" means West Coast Holdings, LLC, a California limited liability company. "WESTERN MEDICAL CENTER - ANAHEIM" means the real property and hospital improvements located at 1025 South Anaheim Boulevard, Anaheim, California. 29 "WESTERN MEDICAL CENTER-SANTA ANA" means the real property and hospital improvements located at 1001 North Tustin Avenue and at 1301 North Tustin in Santa Ana, California. "WMC-A" means WMC-A, INC., a California corporation. "WMC-SA" means WMC-SA, INC., a California corporation. Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein; in the event that any term is defined differently in different Articles or Divisions of the Code, the definition contained in Article or Division 9 shall control. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular Section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; the word "or" is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of Borrowers or Credit Parties, such words are intended to signify that such Borrowers or such Credit Parties has actual knowledge or awareness of a particular fact or circumstance. 30 ANNEX B TO CREDIT AGREEMENT ($10.7 MILLION FACILITY) ----------------------------------------- CASH MANAGEMENT SYSTEM Borrowers agree to establish, and to maintain, until the Termination Date, the Cash Management System described below: 1. Borrowers: (i) shall not (nor shall it permit any of its Subsidiaries to) open or maintain any deposit, checking, operating or other bank account, or similar money handling account, with any bank or other financial institution except for those accounts identified in Attachment I hereto (to include a petty cash account not to exceed $10,000.00 during any fiscal month, and a payroll account not to exceed an amount equal to one regular payroll at any time, plus all other payroll obligations outstanding); and (ii) shall close or permit to be closed any of the accounts listed in Attachment I hereto, in each case without Lender's prior written consent, and then only after Borrowers have implemented agreements with such bank or financial institution acceptable to Lender. 2. Commencing on the Closing Date and until the Termination Date, Borrowers shall fully comply with the terms, conditions and procedures set forth in the Deposit Account Security Agreement and the Control Agreement. 3. Borrowers may maintain, in their name, Disbursement Accounts at a bank or banks acceptable to Lender into which Lender shall, from time to time, deposit proceeds of Advances made pursuant to this Agreement for use solely in accordance with the provisions of this Agreement. All of the Disbursement Accounts as of the Closing Date are listed in paragraph 2 of Attachment I hereto. 1 ATTACHMENT I TO CASH MANAGEMENT SYSTEM SCHEDULE LIST OF BANK ACCOUNTS 2 ANNEX C TO CREDIT AGREEMENT ($10.7 MILLION FACILITY) ----------------------------------------- COLLATERAL REPORTS Collateral Reports means and includes any and all reports from time to time delivered by Borrowers to Lender at the request of Lender during the term hereof (as the same may be extended). Collateral Reports may include, but are not limited to, the following: 1. Cash Reports. A report delivered by Borrowers at the request of Lender stating, among other things: (a) the net amount of Dollars in unrestricted cash and cash equivalents that Borrowers have in their Deposit Accounts; and (b) the net amount of Dollars in unrestricted cash and cash equivalents that Borrowers have in their securities accounts. 2. Report on Cash Subject to Security Agreements. A report delivered by Borrowers at the request of Lender stating, among other things the amount of their cash that is subject to perfection in favor of Lender pursuant to any security agreements or other security instruments. 3. Updated Financial Statements and Projections. Updated financial statements and projections delivered by Borrowers at the request of Lender. 4. Updated Disclosure Schedules. Updated Disclosure Schedules delivered by Borrowers at the request of Lender. 5. Further Assurances. As required by Section 5.10 (Further Assurances) of this Agreement, such further instruments and assurances as may be necessary or proper in the reasonable opinion of Lender to carry out the purposes of the Loan Documents. 1 ANNEX D TO CREDIT AGREEMENT ($10.7 MILLION FACILITY) ----------------------------------------- NOTICE ADDRESSES BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 WMC-A, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 WMC-SA, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 1 COASTAL COMMUNITIES HOSPITAL, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 CHAPMAN MEDICAL CENTER, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. 1301 North Tustin Avenue Santa Ana, California 92705 Attn: Larry Anderson, President Bruce Mogel, CEO (mobile: 602-770-3581) Ph: 714-953-3575 Fax: 714-953-2595 CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENTS, LLC 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Attn: Dr. Shah, Co-Manager Ph: 714-290-5322 Fax: 714-297-9588 and PACIFIC COAST HOLDINGS INVESTMENTS, LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 2 GANESHA REALTY LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 WEST COAST HOLDINGS, LLC 2621 South Bristol, Suite 304 Santa Ana, California 92704 Attn: Dr. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC 2621 South Bristol, Suite 304 Santa Ana, California 92704 Attn: Dr. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION III 2100 South State College Blvd. Anaheim, California 92806 Attn: Sidney Field, CEO, or Joseph J. Lampariello, President and COO, or Adam Field, Sr. Vice President Development Telephone: 714-935-3100 Facsimile: 714-935-3114 3 EX-99.7 8 ihhi_8kex99-7.txt $10,700,000 CONVERTIBLE TERM NOTE EXHIBIT 99.7 THIS CONVERTIBLE TERM NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO INTEGRATED HEALTHCARE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SAID ACT, OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. $10,700,000 CONVERTIBLE TERM NOTE ($10.7 MILLION CREDIT AGREEMENT) $10,700,000.00 October 9, 2007 Las Vegas, Nevada 1. Terms. FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby acknowledged, INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("CHAPMAN"), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL") (IHHI, WMC-SA, WMC-A, Chapman and Coastal are hereinafter together referred to as the "BORROWERS"), hereby jointly and severally promise to pay to the order of MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation, or its successors, nominees or assigns (collectively, "LENDER"), the principal amount of TEN MILLION AND SEVEN HUNDRED THOUSAND DOLLARS ($10,700,000.00) ("$10,700,000 CONVERTIBLE TERM LOAN") or such lesser amount as may be loaned by Lender from time to time and be outstanding, together with interest on the unpaid balance of such amount from the date of the initial advance until paid. This "$10,700,000 CONVERTIBLE TERM NOTE" is the $10,700,000 Convertible Term Note issued under the Credit Agreement ($10,700,000 Facility) of even date herewith by and between Borrowers, the Credit Parties named therein, and Lender of even date herewith (said agreement, as the same may be amended, restated or supplemented from time to time, being herein called the "CREDIT AGREEMENT") to which a reference is made for a statement of additional terms and conditions of the $10,700,000 Convertible Term Loan evidenced hereby, which such terms and conditions are hereby incorporated by reference. Initially capitalized terms not defined in this $10,700,000 Convertible Term Note shall have the respective meanings assigned to them in the Credit Agreement. This $10,700,000 Convertible Term Note is secured by, among other things, the Collateral Documents referenced in the Credit Agreement, the other Loan Documents referenced therein, and is entitled to the benefit of the rights, remedies and security provided thereby. 1 Interest on the outstanding principal balance under this $10,700,000 Convertible Term Note is payable at the Interest Rate provided in the Credit Agreement, or, under the circumstances provided for in the Credit Agreement, at the Default Rate, in immediately available United States Dollars at the times and in the manner specified in the Credit Agreement. Borrower acknowledges that (a) Lender is authorized under the Credit Agreement to charge the $10,700,000 Convertible Term Loan with the amount of any unpaid Obligations of Borrowers to Lender, (b) the principal amount of the $10,700,000 Convertible Term Note will be increased by such amounts, and (c) the principal, as so increased, will bear interest as provided for herein and in the Credit Agreement. Payments received by Lender shall be applied against principal and interest as provided for in the Credit Agreement. To the fullest extent permitted by applicable law, Borrowers waive, except to the extent specifically required by the Credit Agreement or other Loan Documents: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all of the Obligations, the Loan Documents or this $10,700,000 Convertible Term Note; (ii) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevin, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption laws. 2. Conversion. At any time prior to the Maturity Date, the Lender may elect to convert all or any part of the principal amount of this $10,700,000 Convertible Term Note, and the accrued and unpaid interest thereon, into fully issued and nonassessable shares of voting common stock of IHHI ("COMMON STOCK") as set forth herein. The maximum number of shares of Common Stock into which this $10,700,000 Convertible Term Note may be converted shall be determined by dividing the entire unpaid principal amount of the $10,700,000 Convertible Term Loan, and the accrued and unpaid interest thereon, by the conversion price of $0.21, which shall be subject to adjustment from time to time as set forth herein (as adjusted, the "COMMON STOCK CONVERSION PRICE"). 3. Mechanics and Effect of Conversion. No fractional shares of Common Stock shall be issued upon conversion of this $10,700,000 Convertible Term Note. In lieu of IHHI issuing any fractional shares to the Lender, Borrowers shall pay to the Lender the amount of outstanding principal and/or interest that is not so converted into Common Stock in cash. Upon conversion of this $10,700,000 Convertible Term Note, IHHI shall, as soon as practicable thereafter, issue and deliver to Lender a certificate or certificates for the number of shares of Common Stock to which the Lender shall be entitled upon such conversion (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to IHHI), together with any other securities and property to which the Lender is entitled upon such conversion under the terms of this $10,700,000 Convertible Term Note. Upon full conversion of this $10,700,000 Convertible Term Note, Borrower shall be forever released from all its obligations and liabilities under this $10,700,000 Convertible Term Note with the exception of such obligations and liabilities as are set forth in Sections 10, 12, 13, 14, 18, 19 and 20, which sections shall survive any conversion of this $10,700,000 Convertible Term Note. 2 4. Maturity. To the extent that this $10,700,000 Convertible Term Note has not been converted as set forth in Sections 2 and 3 above, the entire outstanding principal balance and all unpaid accrued interest shall become fully due and payable as set forth in the Credit Agreement. 5. Adjustments to the Common Stock Conversion Price. The Common Stock Conversion Price shall be subject to adjustment from time to time as follows: (a) For purposes of this Section 5, the following definitions shall apply: (i) "OPTIONS" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities (as defined below). (ii) "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Stock of IHHI. (iii) "ADDITIONAL STOCK" shall mean all shares of Common Stock issued (or, pursuant to Section 5(b) below, deemed to be issued) by IHHI from and after the date of this $10,700,000 Convertible Term Note, other than shares of Common Stock issued or issuable pursuant to the conversion or exercise of convertible or exercisable securities of IHHI outstanding as of the date hereof or pursuant to any event for which adjustment has already been made or is otherwise provided for pursuant to this Section 5. (b) Adjustment of Exercise Price Upon Issuance of Shares of Additional Stock. In the event that IHHI shall issue shares of Additional Stock without consideration or for a consideration per share less than the Common Stock Conversion Price then in effect, then and in each such event, the Common Stock Conversion Price then in effect shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-tenth of a cent) determined by multiplying the Common Stock Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including any Common Stock issuable pursuant to any then outstanding options or warrants for Common Stock or any class or series of preferred stock convertible into Common Stock outstanding immediately prior to such issue) plus the number of shares of Common Stock (on an as-converted to Common Stock basis) which the aggregate consideration received by IHHI for the total number of shares of Additional Stock so issued would purchase at the Common Stock Conversion Price in effect immediately prior to such issuance, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including any Common Stock issuable pursuant to any then outstanding options or warrants for Common Stock or any class or series of preferred stock convertible into Common Stock outstanding immediately prior to such issue) plus the number of shares of such Additional Stock (on an as-converted to Common Stock basis) so issued. In the event that IHHI at any time or from time to time after the date of this $10,700,000 Convertible Term Note shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) 3 of Additional Stock issuable upon the exercise of such Options or, in the case of Convertible Securities, the conversion or exchange of the Convertible Securities shall be deemed to be Additional Stock issued as of the time of the issuance of such Option or Convertible Securities or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that: (i) except as provided in Section 5(b)(ii) and 5(b)(iii) below, no further adjustment in the Common Stock Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (ii) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to IHHI, or change in the number of shares of Common Stock or Convertible Securities issuable upon the exercise, conversion or exchange thereof (other than under or by reason of provisions designed to protect against dilution), the Common Stock Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (iii) upon the expiration of any such Options or Convertible Securities, the Common Stock Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock or Convertible Securities actually issued upon the exercise of such Options or Convertible Securities; and (iv) no readjustment pursuant to Sections 5(b)(ii) and 5(b)(iii) above shall have the effect of increasing the Common Stock Conversion Price to an amount which exceeds the lower of (A) the Common Stock Conversion Price on the original adjustment date or (B) the Common Stock Conversion Price that would have resulted from any issuance of Additional Stock between the original adjustment date and such readjustment date. (c) Adjustment of Common Stock Conversion Price for Stock Dividends, Subdivisions, or Split-ups of Common Stock. If the number of shares of Common Stock outstanding at any time after the date of this $10,700,000 Convertible Term Note is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, effective at the close of business upon the record date fixed for the determination of holders of Common Stock entitled to receive or be subject to such stock dividend, subdivision or split-up, the Common Stock Conversion Price then in effect shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this $10,700,000 Convertible Term Note shall be increased in proportion to such increase of outstanding shares of Common Stock. (d) Adjustment of Exercise Price for Combinations of Common Stock. If the number of shares of Common Stock outstanding at any time after the date of this $10,700,000 Convertible Term Note is decreased by a combination of the outstanding shares of Common Stock then, effective at the close of business upon the record date of such combination, the Common Stock Conversion Price then in 4 effect shall be appropriately increased so that the number of shares of Common Stock issuable upon conversion of this $10,700,000 Convertible Term Note shall be decreased in proportion to such decrease in outstanding shares of Common Stock. (e) Adjustment for Reorganizations, Reclassifications, etc. In the case, at any time after the date of this $10,700,000 Convertible Term Note, that the Common Stock issuable upon conversion of this $10,700,000 Convertible Term Note shall be changed into the same or a different number of shares of any other class or classes of stock or other securities or property, whether by reorganization, reclassification, merger or consolidation of IHHI with or into any other entity or entities, or a sale of all or substantially all of the assets of IHHI, or otherwise (other than a subdivision or combination of shares provided for elsewhere in this Section 5), then the Common Stock Conversion Price and other applicable terms of this $10,700,000 Convertible Term Note shall, concurrently with the effectiveness of such reorganization, reclassification, merger or consolidation, be proportionately adjusted or modified such that this $10,700,000 Convertible Term Note shall be convertible for, in lieu of the number of shares of Common Stock which the Lender would otherwise have been entitled to receive, a number of shares of such other class or classes of stock or securities or other property equivalent to the number of shares of Common Stock that the Lender would have been entitled to receive upon conversion of this $10,700,000 Convertible Term Note immediately before such event; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the Lender, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Common Stock Conversion Price) shall thereafter be applicable, as nearly as may be reasonable, in relation to any shares of stock or other property thereafter receivable upon conversion of this $10,700,000 Convertible Term Note. (f) Adjustment of Exercise Price for Other Distributions. In the event that IHHI, after the date hereof, shall declare a cash dividend upon its Common Stock payable otherwise than out of retained earnings or shall distribute to holders of its Common Stock shares of IHHI capital stock (except as otherwise adjusted in this Section 5), stock or other securities of other persons, evidences of indebtedness issued by IHHI or other persons, assets, options or other rights, or shall fix a record date for the determination of holders of Common Stock entitled to receive any such dividend or distribution, then, and in each such event, provision shall be made so that the Lender shall receive upon conversion of this $10,700,000 Convertible Term Note, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities, assets or other rights which Lender would have received had this $10,700,000 Convertible Term Note been converted into Common Stock, as of the date of such event or, in case such a record date shall have been fixed, as of the close of business on such record date for such event and had Lender thereafter, during the period from the date of such event or record date, as applicable, to and including the date of conversion of this $10,700,000 Convertible Term Note, retained such securities, assets and other rights receivable by Lender as aforesaid during such period, subject to all other adjustments called for during such period under this Section 5 with respect to the rights of the Lender. 6. Notice of Adjustments to Common Stock Conversion Price. Whenever any adjustment of any terms of this $10,700,000 Convertible Term Note shall be required pursuant to Section 5 hereof, IHHI shall promptly provide notice to the 5 Lender setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number of shares of Common Stock or other property which this $10,700,000 Convertible Term Note may be convertible into and the Common Stock Conversion Price therefor after giving effect to such adjustment. 7. Representations, Warranties and Covenants of IHHI. (a) IHHI represents and warrants to the Lender that all corporate actions on the part of IHHI, its officers, directors and stockholders necessary for the issuance of this $10,700,000 Convertible Term Note and the sale and issuance of the Common Stock pursuant hereto and the performance of IHHI's obligations hereunder were taken prior to and are effective as of the effective date of this $10,700,000 Convertible Term Note. IHHI will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock, for the purpose of enabling it to satisfy any obligation to issue Common Stock upon conversion of this $10,700,000 Convertible Term Note, a number of shares of Common Stock equal to the maximum number of shares of Common Stock (as adjusted from time to time pursuant to Section 5 hereof) which may then be deliverable upon the conversion of this $10,700,000 Convertible Term Note. IHHI covenants that all Common Stock that shall be so issuable and deliverable upon conversion of this $10,700,000 Convertible Term Note shall, upon issuance thereof, be duly and validly authorized and issued and fully paid, and nonassessable. (b) IHHI has made available to the Lender true, correct and complete copies of its Articles of Incorporation and Bylaws, as amended. This $10,700,000 Convertible Term Note is not inconsistent with IHHI's Articles of Incorporation or Bylaws, and does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, agreement or other instrument to which it is a party or by which it is bound, and constitutes the legal, valid and binding agreements of IHHI, enforceable in accordance with its terms. (c) No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by IHHI of its obligations under this $10,700,000 Convertible Term Note, except for the filing of notices pursuant to Regulation D under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "SECURITIES ACT") and any filing required by applicable state securities law, which filings will be effective by the time required thereby. (d) All issued and outstanding shares of Common Stock and any other securities of IHHI have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws. No stockholder of IHHI has preemptive rights to purchase new issuances of IHHI's capital stock. (e) The issuance of the Common Stock upon conversion of this $10,700,000 Convertible Term Note will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act, in reliance upon 6 Section 4(2) thereof, and (ii) the qualification requirements of applicable state securities laws. 8. Restrictive Legend. The shares representing the Common Stock issuable upon conversion of this $10,700,000 Convertible Term Note (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form: THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. 9. Restrictions Upon Transfer. (a) This $10,700,000 Convertible Term Note shall not be sold, transferred, assigned or hypothecated by the Lender except (i) to a partnership, limited liability company or other entity (or one or more of the foregoing), the owners of which are the Lender and/or affiliates of the Lender on the date of transfer; (iii) to a successor in interest to the Lender; (iii) to a purchaser of all or substantially all of the Lender's business, equity securities or assets; (iv) any affiliate of the Lender, which shall be any person which directly or indirectly controls, is controlled by, or is under common control with the Lender; or (v) to any trustee of a fund pursuant to any lending agreements or arrangements between such trustee and Lender; provided in each case that any transferee agrees to be bound by the terms of this $10,700,000 Convertible Term Note. For purposes of this $10,700,000 Convertible Term Note, "CONTROL" of a person shall mean the power, direct or indirect, (x) to vote or direct the voting of 10% or more of the voting equity of such person or (y) to direct or cause the direction of the management and policies of such person whether by ownership or equity, by contract or otherwise, and "person" means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof. The terms and conditions of this $10,700,000 Convertible Term Note shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. (b) No opinion of counsel or "no-action" letter shall be necessary for any transfer by Lender to any of the persons specified in Section 9(a) above. 10. Registration Rights. (a) No later than ninety (90) days prior to Maturity Date, IHHI shall file a registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "SECURITIES ACT") covering the 7 resale of all shares of Common Stock issued or issuable by IHHI upon conversion of this $10,700,000 Convertible Term Note, and IHHI shall use its reasonable best efforts to have such registration statement declared effective by the Securities Exchange Commission ("SEC") as soon as practicable but no later than the Maturity Date for distribution thereof by means of an underwriting. The underwriter will be selected by IHHI and shall be reasonably acceptable to the Lender. The Lender shall (together with IHHI as provided hereinbelow) enter into an underwriting agreement in a customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 10(a), if the underwriter advises the Lender in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of shares of Common Stock held by the Lender to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. IHHI shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the shares of Common Stock with respect to the registrations pursuant to this Section 10(a), including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the Lender selected by Lender. (b) (i) IHHI covenants and agrees with the Lender that, in the event IHHI proposes to file a registration statement under the Securities Act (including, without limitation, relating to a request for registration on Form S-3 from any stockholder) with respect to any class of security which becomes or which IHHI believes will become effective on or after the date of this $10,700,000 Convertible Term Note and on or before the Maturity Date, then IHHI shall in each case give prompt written notice of such proposed filing to the Lender at least sixty (60) days before the proposed filing date and, by such notice, shall offer to Lender the opportunity to include in such registration statement such number of shares of Common Stock issued or issuable by IHHI upon conversion of this $10,700,000 Convertible Term Note as Lender may request in writing. (ii) IHHI shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Lender from whom such written requests have been received to include such number of shares of Common Stock issued or issuable upon conversion of this $10,700,000 Convertible Term Note as Lender may request in writing (the "PIGGY-BACK SHARES") in the proposed offering on the same terms and conditions as applicable to securities of IHHI included therein or as applicable to securities of any person other than IHHI and the Lender if the securities of any such person are included therein; provided, however, that IHHI shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of IHHI's notice or after the Maturity Date. Notwithstanding any other provision of this Section 10(b), if the underwriter advises the Lender in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of shares of Common Stock held by the Lender to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. IHHI shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the shares of Common Stock with respect to the registrations pursuant to this Section 10(b), including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the Lender selected by Lender. 8 (iii) IHHI shall be obligated pursuant to this Section 10(b) to include in the piggy-back offering shares of Common Stock that have not yet been issued by IHHI upon conversion of this $10,700,000 Convertible Term Note so long as Lender submits an undertaking to IHHI that such Lender intends to convert this $10,700,000 Convertible Term Note for at least the number of shares of Common Stock to be included by Lender in such piggy-back offering prior to the consummation of such piggy-back offering. IHHI shall use its reasonable best efforts to register or qualify the Piggy-back Shares for offer or sale under the state securities or Blue Sky laws of such states which the Lender shall designate. (iv) If IHHI decides not to proceed with the piggy-back offering, IHHI will have no obligation to proceed with the offering of the Piggy-back Shares. (c) (i) To the fullest extent permitted by law, IHHI will indemnify and hold harmless Lender, the partners, members, officers, directors and shareholders of Lender, legal counsel and accountants for Lender, any underwriter (as defined in the Securities Act) for Lender and each person, if any, who controls Lender or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "EXCHANGE ACT"), against any Violation (as defined hereinbelow) and IHHI will pay to each such Lender, underwriter, controlling person or other aforementioned person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 10(c) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of IHHI (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall IHHI be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Lender, underwriter, controlling person or other aforementioned person. The term "VIOLATION" means losses, claims, damages, or liabilities (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law. (ii) Lender shall indemnify and hold harmless IHHI, each of its directors, each of its officers who have signed any such registration statement, and each person, if any, who controls IHHI within the meaning of the Securities Act, against any losses, claims, damages or liabilities to which IHHI, or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue or alleged untrue statement of any material fact contained in any such registration statement, or final prospectus, or any 9 amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such registration statement, or final prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished by Lender expressly for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by IHHI, or any such director, officer or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 10(c)(ii) shall not apply to amounts paid to any claimant in settlement of any suit or claim unless such payment is first approved by Lender; and, provided further, that the aggregate amount payable by Lender pursuant to this Section 10(c)(ii) shall not exceed the net proceeds received by Lender in the registered offering out of which its obligations pursuant to this Section 10(c)(ii) arise. 11. Rights of Stockholders. The Lender shall not be entitled, solely as a holder of this $10,700,000 Convertible Term Note, to vote or receive dividends or be deemed the holder of the shares of Common Stock issuable by IHHI upon conversion of this $10,700,000 Convertible Term Note or any other securities of IHHI which may at any time be issuable upon the conversion hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this $10,700,000 Convertible Term Note, as such, any of the rights of a stockholder of IHHI or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this $10,700,000 Convertible Term Note shall have been converted and the shares of Common Stock, other securities or property issuable by IHHI upon conversion of this $10,700,000 Convertible Term Note shall have become deliverable, as provided herein. 12. Information Rights. IHHI shall deliver to the Lender the following (which may be satisfied by IHHI's delivery of IHHI's public filings, if applicable, to Lender): (a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of IHHI, a balance sheet and income statement as of the last day of such year; a statement of cash flows for such year, such year end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants of nationally recognized standing selected by IHHI; (b) as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of IHHI, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of shareholder's equity as of the end of such fiscal quarter; and (c) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of IHHI, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of shares of 10 Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for shares of Common Stock and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Lender to calculate its percentage equity ownership in IHHI and certified by the Chief Financial Officer or Chief Executive Officer of IHHI as being true, complete and correct. 13. Inspection and Observer Rights. IHHI shall permit the Lender to visit and inspect IHHI's properties, to examine its books of account and records and to discuss IHHI's affairs, finances and accounts with its officers, all at such reasonable times as may be reasonably requested by Lender. IHHI shall invite a representative of the Lender to attend all regular meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give Lender copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, (a) that Lender shall agree to hold in confidence and trust all information so provided, and (b) if in the good faith opinion of IHHI's legal counsel, the delivery of such information to Lender, or the attendance of the Lender's representative at such meeting, would breach IHHI's attorney - client privilege with its legal counsel with respect to such information, IHHI may withhold such information from the Lender, or exclude the Lender's representative from such meeting of IHHI's Board of Directors, as the case may be. 14. Reports Under Exchange Act. With a view to making available to the Lender the benefits of Rule 144 promulgated by the SEC under the Securities Act ("SEC Rule 144") and any other rule or regulation of the SEC that may at any time permit Lender to sell securities of the IHHI to the public without registration, IHHI agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, so long as IHHI is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) file with the SEC in a timely manner all reports and other documents required of IHHI under the Securities Act and the Exchange Act; and (c) furnish to the Lender, so long as the Lender holds this $10,700,000 Convertible Term Note or owns any shares of Common Stock issued by IHHI upon conversion of this $10,700,000 Convertible Term Note, forthwith upon request (i) a written statement by IHHI that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of IHHI and such other reports and documents so filed by IHHI, and (iii) such other information as may be reasonably requested in availing of any rule or regulation of the SEC which permits the selling of any such securities without registration. 15. Proceeds Not Used for Personal or Consumer Purposes. Borrowers each acknowledge that this $10,700,000 Convertible Term Note is executed as part of a commercial transaction and that the proceeds of this $10,700,000 Convertible Term Note will not be used for any personal or consumer purpose. 11 16. Event of Default. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this $10,700,000 Convertible Term Note shall become, or may be declared to be, immediately due and payable, to the extent provided for in the Credit Agreement. 17. Delivery of Note. This $10,700,000 Convertible Term Note shall not be deemed to have been delivered until it is received by Lender in Las Vegas, Nevada. 18. WAIVER OF RIGHT TO JURY TRIAL. EACH BORROWER ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ON THIS $10,700,000 CONVERTIBLE TERM NOTE. THIS $10,700,000 CONVERTIBLE TERM NOTE IS GOVERNED BY THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES. 19. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS $10,700,000 CONVERTIBLE TERM NOTE AND IN ANY OF THE OTHER LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS $10,700,000 CONVERTIBLE TERM NOTE AND EACH OF THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWERS AND LENDER EACH HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NEVADA, CLARK COUNTY, CITY OF LAS VEGAS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG BORROWERS ON THE ONE HAND, AND LENDER ON THE OTHER HAND, PERTAINING TO THIS $10,700,000 CONVERTIBLE TERM NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS $10,700,000 CONVERTIBLE TERM NOTE OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER AND EACH BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CLARK COUNTY, NEVADA; PROVIDED FURTHER, THAT NOTHING IN THIS $10,700,000 CONVERTIBLE TERM NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH BORROWER AND LENDER EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER AND LENDER HEREBY WAIVE ANY OBJECTION THAT ANY BORROWER OR LENDER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER AND LENDER HEREBY AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE AT THE ADDRESSES SET FORTH IN ANNEX D OF THE CREDIT AGREEMENT. 12 20. Assignment and Transfer. At any time and from time to time, (a) Lender shall have the right to sell, assign, transfer and convey its interest in the $10,700,000 Convertible Term Note and Lender's interest in the other Loan Documents (insofar as the same pertain to the $10,700,000 Convertible Term Loan) to any Person, and/or (b) if any part or all of the $10,700,000 Convertible Term Loan has been converted to Common Stock, other securities or property, Lender shall have the right to sell, assign, transfer and convey its interest in said Common Stock, other securities or property to any Person. Any such sale must be in compliance with Applicable Laws. NO FURTHER TEXT ON THIS PAGE 13 Borrowers have caused this $10,700,000 Convertible Term Note ($10.7 Million Credit Agreement) to be executed by their respective duly authorized officers as of the date first written above. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Larry B. Anderson --------------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation, By: /s/ Larry B. Anderson --------------------------------------- Larry B. Anderson, President WMC-A, INC., a California corporation, By: /s/ Larry B. Anderson --------------------------------------- Larry B. Anderson, President CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Larry B. Anderson --------------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Larry B. Anderson --------------------------------------- Larry B. Anderson, President 14 EX-99.8 9 ihhi_8kex99-8.txt 4.95% COMMON STOCK WARRANT EXHIBIT 99.8 NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. INTEGRATED HEALTHCARE HOLDINGS, INC. COMMON STOCK WARRANT -------------------- WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS COMMON STOCK WARRANT (this "WARRANT") certifies that, for consideration received, Healthcare Financial Management & Acquisitions, Inc., a Nevada corporation, or its permitted successors or assigns (the "HOLDER" or "HOLDERS," as applicable), is entitled to subscribe for and purchase a minimum of 16,880,484 fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the "SHARES") of the Common Stock (the "COMMON STOCK") of Integrated Healthcare Holdings, Inc., a Nevada corporation, (the "COMPANY") at a price per Share equal to $0.21, which is equal to the per share fair market value of the Common Stock on the Initial Exercise Date (as defined below) determined in accordance with Section 1(d) hereof (as adjusted pursuant to Section 3 hereof, the "EXERCISE PRICE"), subject to the provisions and upon the terms and conditions hereinafter set forth. 1. Method of Exercise; Payment. (a) Exercise. This Warrant shall be exercisable from and after October 9, 2007 (the "INITIAL EXERCISE DATE") until October 9, 2017 (the "EXPIRATION DATE"). This Warrant shall be exercisable by Holder from time to time for the Shares (as adjusted pursuant to Section 3 hereof). (b) Cash Exercise. The purchase rights represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company, and by the payment to the Company, by certified, cashier's or other check acceptable to the Company (or as otherwise provided pursuant to Section 1(c) or 1(e) hereinbelow), of an amount equal to the aggregate Exercise Price of the Shares being purchased. 1 (c) Net Issue Exercise. In lieu of exercising this Warrant, the Holder may elect to receive Shares of Common Stock equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Shares computed using the following formula: X = Y (A-B) ------- A Where X = the number of the Shares to be issued to the Holder. Y = the number of the Shares purchasable under this Warrant. A = the fair market value of one Share on the date of election under this Section 1(c). B = the Exercise Price (as adjusted to the date of such calculation). (d) Fair Market Value. For purposes of this Warrant, the per share fair market value of the Shares shall mean: (i) If the Company's Common Stock is publicly traded, the per share fair market value of the Shares shall be the closing price of such Common Stock as quoted on the Nasdaq National Market or the principal exchange on which the Common Stock is listed, or if not so listed then the fair market value shall be the average of the closing bid and asked prices of such Common Stock as published in The Wall Street Journal, in each case for the trading day immediately prior to the date of determination of fair market value; or (ii) If the Company's Common Stock is not so publicly traded, the per share fair market value of the Shares shall be determined by either of the foregoing, as elected by Holder in its sole and absolute discretion: (A) the mutual agreement of the Company and Holder, or (B) alternatively, a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing selected by the Holder in its sole and absolute discretion (the "APPRAISER"). (e) Stock Certificates. Promptly upon receipt of a notice to exercise, the Company will take all necessary actions to authorize the issuance of such Common Stock under this Warrant. In the event of any exercise of the rights represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder within three (3) business days, or four (4) Trading Days (as defined hereinbelow) if the Company's Common Stock is publicly traded and the notice of exercise is received after 4:30 p.m. Eastern Standard Time on a day in which the Company's Common Stock is publicly traded (each a "TRADING DAY") and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time. 2 2. Stock Fully Paid. All of the Shares issuable upon the exercise of the rights represented by this Warrant will, upon issuance and receipt of the Exercise Price therefor, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof (except the Holder's income taxes, if any, that are due and payable with respect to the Shares). 3. Adjustment to the Number of Shares Issuable and/or the Exercise Price. The number of Shares issuable upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as set forth in this Section 3. Upon each adjustment pursuant to this Section 3, the Holder shall thereafter prior to the Expiration Date be entitled to purchase the adjusted number of Shares of Common Stock at the Exercise Price as adjusted hereby. Subject to the other provisions of this Section 3, the number of Shares of Common Stock issuable upon the exercise of this Warrant shall be automatically adjusted to be the greater of the following: (1) 16,880,484 Shares of Common Stock (as set forth on page 1 of this Warrant), or (2) Shares of Common Stock representing four and ninety five one-hundredths percent (4.95%) of all Common Stock Equivalents (as defined hereinbelow) of the Company on the date of exercise of this Warrant. "COMMON STOCK EQUIVALENTS" shall mean, collectively, (i) all shares of Common Stock issued and outstanding, (ii) shares of Common Stock issued or deemed issued as a dividend or distribution, including on any preferred stock, (iii) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock, (iv) shares of Common Stock or Convertible Securities issued or issuable upon the exercise of rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities (as defined hereinbelow) (collectively, "OPTIONS") or shares of Common Stock issued or issuable upon the conversion or exchange of any evidences of indebtedness, shares, preferred stock or other securities directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES"), pursuant to the terms of such Option or Convertible Security, (v) shares of Common Stock or Convertible Securities issued or issuable to third parties upon the exercise of rights, options, warrants or otherwise, including, without limitation, to suppliers, banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction, and (vi) shares of Common Stock issued or issuable to employees or directors of, or consultants to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Company. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), (ii) shall subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then (x) the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased to reflect such event, and (y) the Exercise Price shall be adjusted to an amount obtained by multiplying the Exercise Price in effect immediately prior to such event by a fraction equal to the number of Shares for which this Warrant is exercisable immediately prior to such event 3 divided by the number of Shares for which this Warrant is exercisable immediately after such event. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification. (b) If the Company, at any time while any Warrants are outstanding, shall distribute to all holders of Common Stock, or holders of any securities convertible into, or exchangeable or exercisable for Common Stock (and not to the Holder), evidences of its indebtedness, assets or any rights or warrants to subscribe for or purchase any security (excluding those referred to in this Section 3), the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect such event as determined by the Appraiser. The Company shall promptly provide a statement to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (c) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then, subject to the terms hereof, the Holder shall have the right thereafter to exercise this Warrant into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which this Warrant could have been exercised immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such reclassification, consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 3(c) upon any exercise following such reclassification, consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassification, consolidations, mergers, sales, transfers or share exchanges. (d) For purposes of any computation respecting consideration received, the following shall apply: (i) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and (ii) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Appraiser, whose determination shall be conclusive. 4 (e) For the purposes of this Section 3, the following clauses shall also be applicable: (i) Record Date. In case the Company shall promptly take a record of the holders of its Common Stock for the purposes of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in convertible securities, or (B) to subscribe for or purchase Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock for the purposes of this Section 3. 4. Notice of Adjustments. Whenever the number of Shares purchasable hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3 hereof, the Company shall promptly provide notice to the Holder setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number and class of Shares which may be purchased and the Exercise Price therefor after giving effect to such adjustment. 5. Fractional Shares. This Warrant may not be exercised for fractional shares. In lieu of fractional shares the Company shall promptly make a cash payment therefor based upon the per share fair market value of a Share then in effect. 6. Representations, Warranties and Covenants of the Company. (a) The Company represents and warrants to the Holder that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of the Shares pursuant hereto and the performance of the Company's obligations hereunder were taken prior to and are effective as of the effective date of this Warrant. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Shares upon exercise of the Warrants, a number of shares of Common Stock equal to the maximum number of Shares (as adjusted from time to time pursuant to Section 3 hereof) which may then be deliverable upon the exercise of this Warrant. The Company covenants that all Shares that shall be so issuable and deliverable shall, upon issuance thereof, be duly and validly authorized and issued and fully paid, and nonassessable. 5 (b) The Company has made available to the Holder true, correct and complete copies of its articles of incorporation and bylaws, as amended. This Warrant is not inconsistent with the Company's articles of incorporation or bylaws, and does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, agreement or other instrument to which it is a party or by which it is bound, and constitutes the legal, valid and binding agreements of the Company, enforceable in accordance with its terms. (c) No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant, except for the filing of notices pursuant to Regulation D under the Securities Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby. (d) All issued and outstanding shares of Common Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws. No stockholder of the Company has preemptive rights to purchase new issuances of the Company's capital stock. (e) The Company is not, pursuant to the terms of any agreement currently in existence, under any obligation to register under the Securities Act any of its presently outstanding securities or any of its securities which may hereafter be issued. (f) Assuming that the Holder is an accredited investor (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act (as defined in Section 9 hereof), the issuance of the Shares upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws. (g) At the written request of the Holder, in the event the Holder proposes to sell Shares issuable upon the exercise of this Warrant in compliance with Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission, the Company shall furnish to the Holder, within ten (10) days after receipt of such request, a written statement confirming the Company's compliance with the filing requirements of the Securities and Exchange Commission as set forth in such rule, as such rule may be amended from time to time. 7. Restrictive Legend. The Shares (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form: 6 THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. 8. Transfer of Warrant. (a) This Warrant may be sold, transferred, assigned or hypothecated, in whole or in part, by the Holder without the consent of the Company; provided, in each case that any transferee or assignee agrees to be bound by the terms of this Warrant, and such transfer or assignment is in compliance with the Securities Act and the securities law of any applicable jurisdiction. The Warrant may be divided or combined, upon request to the Company by the Holder, into one or more new warrants representing the same aggregate number of Shares. For purposes of this Warrant, "CONTROL" of a person shall mean the power, direct or indirect, (x) to vote or direct the voting of 10% or more of the voting equity of such person or (y) to direct or cause the direction of the management and policies of such person whether by ownership or equity, by contract or otherwise, and "PERSON" means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof. The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. (b) No opinion of counsel or "no-action" letter shall be necessary for any transfer or assignment by any Holder. 9. Registration Rights. (a) The Company shall file a registration statement under the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the "SECURITIES ACT"), covering the resale of all Shares of the Holder as soon as practicable following the Holder's written request to do so, and use its reasonable best efforts to have the registration statement declared effective by the Securities Exchange Commission ("SEC") for distribution thereof by means of an underwriting. The underwriter will be selected by the Company and shall be reasonably acceptable to the Holder. The Holder shall (together with the Company as provided hereinbelow) enter into an underwriting agreement in a customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 9(a), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of shares of Shares held by the Holder to be included in such underwriting shall not 7 be reduced unless all other securities are first entirely excluded from the underwriting. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them. (b) (i) The Company covenants and agrees with the Holder (and any subsequent Holders of this Warrant and/or Shares) that, in the event the Company proposes to file a registration statement under the Securities Act (including, without limitation, relating to an initial public offering of Company Common Stock or shall receive a request for registration on Form S-3 from any stockholder) with respect to any class of security which becomes or which the Company believes will become effective on or after the Initial Exercise Date and on or before the Expiration Date, then the Company shall in each case give prompt written notice of such proposed filing to the Holder (and any subsequent Holders of this Warrant and/or Shares) at least sixty (60) days before the proposed filing date and, by such notice, shall offer to such Holders the opportunity to include in such registration statement such number of Shares as they may request in writing. (ii) The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the "PIGGY-BACK SHARES") in the proposed offering on terms and conditions no less favorable to the Holders as the terms and conditions applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company's notice or after the Expiration Date. Notwithstanding any other provision of this Section 9(b), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of shares of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them. (iii) The Company shall be obligated pursuant to this Section 9(b) to include in the piggy-back offering Shares that have not yet been purchased by a Holder so long as such Holder submits an undertaking to the Company that such Holder intends to exercise the Warrant for at least the number of Shares to be included in such piggy-back offering prior to the consummation of such piggy-back offering. The Company shall use its reasonable best efforts to register or qualify the Shares for offer or sale under the state securities or Blue Sky laws of such states which the Holders of such Shares shall designate. 8 (iv) If the Company decides not to proceed with the piggy-back offering, the Company will have no obligation to proceed with the offering of the Piggy-back Shares. (c) (i) To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "EXCHANGE ACT"), against any Violation (as defined hereinbelow) and the Company will pay to each such Holder, underwriter, controlling person or other aforementioned person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 9(c) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter, controlling person or other aforementioned person. The term "VIOLATION" means losses, claims, damages, or liabilities (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law. (ii) Each Holder of Shares who participates in a registration pursuant to Section 9 shall indemnify and hold harmless the Company, each of its directors, each of its officers who have signed any such registration statement, and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities to which the Company, or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are 9 based upon, any untrue or alleged untrue statement of any material fact contained in any such registration statement, or final prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such registration statement, or final prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished by such Holder expressly for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subparagraph (ii) shall not apply to amounts paid to any claimant in settlement of any suit or claim unless such payment is first approved by such Holder; and, provided further, that the aggregate amount payable by a Holder pursuant to this Section 9(c)(ii) shall not exceed the net proceeds received by such Holder in the registered offering out of which its obligations pursuant to this Section 9(c)(ii) arise. 10. Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. 11. Information Rights. The Company shall deliver to the Holder the following (which may be satisfied by the Company's delivery of the Company's public filings, if applicable, to Holder): (a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, a balance sheet and income statement as of the last day of such year; a statement of cash flows for such year, such year end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants of nationally recognized standing selected by the Company; (b) as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of stockholder's equity as of the end of such fiscal quarter; and 10 (c) as soon as practicable, but in any event with forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of common shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for common shares and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Holder to calculate its percentage equity ownership in the Company and certified by the Chief Financial Officer or Chief Executive Officer of the Company as being true, complete and correct. 12. Inspection and Observer Rights. The Company shall permit the Holder to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be reasonably requested by the Holder. The Company shall invite a representative of the Holder to attend all regular meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, (a) that such representative shall agree to hold in confidence and trust all information so provided, and (b) if in the good faith opinion of the Company's legal counsel, the delivery of such information to the Holder's representative, or the attendance of the Holder's representative at such meeting, would breach the Company's attorney - client privilege with its legal counsel with respect to such information, the Company may withhold such information from the Holder's representative, or exclude the Holder's representative from such meeting of the Company's Board of Directors, as the case may be. 13. Reports Under Exchange Act. With a view to making available to the Holders the benefits of Rule 144 promulgated by the SEC under the Securities Act ("SEC RULE 144") and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to any Holder, so long as the Holder holds this Warrants or owns any Shares, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time 11 after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 14. Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable after 5:00 p.m., Pacific Standard Time, on the Expiration Date. 15. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder's address as set forth on the register maintained by the Company, and (ii) if to the Company, at the address of its principal corporate offices (Attention: President), which on the date hereof is 1301 N. Tustin Avenue, Santa Ana, California 92705, or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above. 16. Warrant Agent. (a) The Company shall serve as the initial warrant agent under this Warrant. The Company and the Holder may appoint a new warrant agent as mutually agreed upon by the Company and the Holder. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the register maintained by the warrant agent pursuant to this Warrant. 17. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of Shares upon the exercise of the Warrants represented by this Warrant. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrants represented by this Warrant or receiving the Shares under this Warrant. 18. Replacement of Warrant. If the certificate evidencing the Warrants is mutilated, lost, stolen or destroyed, the Company shall issue in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant certificate, a new warrant certificate of like tenor, but only 12 upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and bond or other indemnity, if requested, reasonably satisfactory to it. A Holder of a replacement warrant certificate also shall comply with such other reasonable regulations and pay such other reasonable charges attributable to the replacement of a warrant certificate. 19. Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Nevada. Issued this 9th day of October, 2007. INTEGRATED HEALTHCARE HOLDINGS, INC., A NEVADA CORPORATION By: /s/ Bruce Mogel --------------------------------------- Bruce Mogel, Chief Executive Officer Attachments - ----------- Exhibit A - Notice of Exercise Exhibit B - Form of Transfer 13 EXHIBIT A --------- NOTICE OF EXERCISE ------------------ TO: INTEGRATED HEALTHCARE HOLDINGS, INC. Attention: President 1. The undersigned hereby elects to purchase __________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the "COMPANY") pursuant to the terms of the attached Warrant. 2. Method of Exercise (Please initial the applicable blank): ___ The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any. ___ The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 1(c) of this Warrant, and accordingly requests delivery of a net of ______ of such securities. 3. Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below: ____________________________ (Name) ____________________________ ____________________________ (Address) 4. The undersigned hereby represents and warrants that the aforesaid shares of Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof. ____________________________ (Signature) Title:______________________ ____________________________ (Date) EXHIBIT B --------- FORM OF TRANSFER ---------------- (To be signed only upon transfer of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of the Common Stock of INTEGRATED HEALTHCARE HOLDINGS, INC. (the "COMPANY"), to which the attached Warrant relates, and appoints ______________ as their true and lawful attorney in fact to transfer such right on the books of the Company, with full power of substitution in the premises. Dated: ____________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ________________________________ ________________________________ (Address) Signed in the presence of: ________________________________ EX-99.9 10 ihhi_8kex99-9.txt AMENDMENT NO. 2 TO 31.09% COMMON STOCK WARRANT EXHIBIT 99.9 INTEGRATED HEALTHCARE HOLDINGS INC. AMENDMENT NO.2 TO COMMON STOCK WARRANT OCTOBER 9, 2007 This Amendment No. 2 to Common Stock Warrant (this "Amendment No.2") is made and entered into as of the date set forth above (the "Effective Date") by and between Integrated Healthcare Holdings, Inc., a Nevada corporation (the "Company"), and Healthcare Financial Management & Acquisitions, Inc., a Nevada corporation (the "Holder"). RECITALS -------- A. On December 12, 2005, the Company issued a warrant to subscribe for and purchase a minimum of 26,097,561 shares of Common Stock of the Company subject to the provisions and upon the terms and conditions set forth therein (the "Warrant"). B. The Warrant was issued pursuant to that certain Credit Agreement dated as of December 12, 2005 (the "Credit Agreement") by and between the Company (as Borrower), the "Credit Parties" (as defined therein), and Medical Provider Financial Corporation III, Inc., a Nevada corporation (the "Lender"). C. The Warrant was amended on April ___, 2006 pursuant to that certain Amendment to Common Stock Warrant entered into by and between the Company and the Holder. D. The Company (as Borrower) has defaulted under the Credit Agreement and as a condition to refinancing the loan to Borrowers under the Credit Agreement, the Lender is requiring that the Company and the Holder enter into this Amendment No.2. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to amend the Warrant as set forth herein and agree as follows: AGREEMENT --------- 1. Recitals. The foregoing Recitals are incorporated by reference as though fully set forth herein. 2. Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Warrant. 3. The first paragraph of the Warrant is hereby amended to read in its entirety as follows: 1 "THIS COMMON STOCK WARRANT (this "WARRANT") certifies that, for consideration received, Healthcare Financial Management & Acquisitions, Inc., a Nevada corporation, or its permitted successors or assigns (the "HOLDER" or "HOLDERS," as applicable), is entitled to subscribe for and purchase a minimum of 26,097,561 fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the "SHARES") of the Common Stock (the "COMMON STOCK") of Integrated Healthcare Holdings, Inc., a Nevada corporation, (the "COMPANY") at a price per Share equal to $0.21, which is equal to the per share fair market value of the Common Stock on the Initial Exercise Date (as defined below) which shall be determined in accordance with Section 1(d) hereof (as adjusted pursuant to Section 3 hereof, the "EXERCISE PRICE"), subject to the provisions and upon the terms and conditions hereinafter set forth; provided, however, that the Exercise Price shall be $1.00 in the aggregate for the Shares if, on the date of exercise of this Warrant, the Company's Common Stock is not registered under the Securities Exchange Act of 1934, as amended." 4. Section 1(a) of the Warrant is hereby amended to read in its entirety as follows: "(a) Exercise. This Warrant shall be exercisable from and after October 9, 2007 (the "INITIAL EXERCISE DATE") until October 9, 2017 (the "EXPIRATION DATE"). This Warrant shall be exercisable by Holder from time to time for the Shares (as adjusted pursuant to Section 3 hereof). For avoidance of doubt, this Warrant shall be exercisable whether or not such exercise is in accordance with Section 10.2(c) or any other provision of the Credit Agreement." 5. The first paragraph of Section 3 of the Warrant is hereby amended to read in its entirety as follows: "Adjustment to the Number of Shares Issuable and/or the Exercise Price. The number of Shares issuable upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as set forth in this Section 3. Upon each adjustment pursuant to this Section 3, the Holder shall thereafter prior to the Expiration Date be entitled to purchase the adjusted number of Shares of Common Stock at the Exercise Price as adjusted hereby. Subject to the other provisions of this Section 3, the number of Shares of Common Stock issuable upon the exercise of this Warrant shall be automatically adjusted to be the greater of the following: (1) 26,097,561 Shares of Common Stock (as set forth on page 1 of this Warrant), or (2) Shares of Common Stock representing thirty-one and nine one-hundredths percent (31.09%) of all Common Stock Equivalents (as defined hereinbelow) of the Company on the date of exercise of this Warrant. "COMMON STOCK EQUIVALENTS" shall mean, collectively, (i) all shares of Common Stock issued and outstanding, (ii) shares of Common Stock issued or deemed issued as a dividend or distribution, including on any preferred stock, (iii) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock, (iv) shares of Common Stock or Convertible Securities issued or issuable upon the exercise of rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities (as 2 defined hereinbelow) (collectively, "OPTIONS") or shares of Common Stock issued or issuable upon the conversion or exchange of any evidences of indebtedness, shares, preferred stock or other securities directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES"), pursuant to the terms of such Option or Convertible Security, (v) shares of Common Stock or Convertible Securities issued or issuable to third parties upon the exercise of rights, options, warrants or otherwise, including, without limitation, to suppliers, banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction, and (vi) shares of Common Stock issued or issuable to employees or directors of, or consultants to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Company." 6. Section 3(a) of the Warrant which reads: "(a) If the Company, at any time while any Warrants are outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), or (ii) subdivide outstanding shares of Common Stock into a larger number of shares, the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect such event. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification." is hereby amended to read in its entirety as follows: "(a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), (ii) shall subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then (x) the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased to reflect such event, and (y) the Exercise Price shall be adjusted to an amount obtained by multiplying the Exercise Price in effect immediately prior to such event by a fraction equal to the number of Shares for which this Warrant is exercisable immediately prior to such event divided by the number of Shares for which this Warrant is exercisable immediately after such event. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification." 3 7. Section 8 of the Warrant is hereby amended to read in its entirety as follows: "8. Transfer of Warrant. (a) This Warrant may be sold, transferred, assigned or hypothecated, in whole or in part, by the Holder without the consent of the Company; provided, in each case that any transferee or assignee agrees to be bound by the terms of this Warrant, and such transfer or assignment is in compliance with the Securities Act and the securities law of any applicable jurisdiction. The Warrant may be divided or combined, upon request to the Company by the Holder, into one or more new warrants representing the same aggregate number of Shares. For purposes of this Warrant, "CONTROL" of a person shall mean the power, direct or indirect, (x) to vote or direct the voting of 10% or more of the voting equity of such person or (y) to direct or cause the direction of the management and policies of such person whether by ownership or equity, by contract or otherwise, and "PERSON" means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof. The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. (b) No opinion of counsel or "no-action" letter shall be necessary for any transfer or assignment by any Holder." 8. The first sentence of Section 9(a) of the Warrant which reads: "The Company shall file a registration statement under the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the "Securities Act"), covering the resale of all Shares of the Holder no later than ninety (90) days prior to the Loan's "Maturity Date" (as defined in the Credit Agreement governing the Loan), and use its reasonable best efforts to have the registration statement declared effective by the Securities Exchange Commission ("SEC") as soon as practicable but no later than the Maturity Date for distribution thereof by means of an underwriting." is hereby amended to read in its entirety as follows: "The Company shall file a registration statement under the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the "Securities Act"), covering the resale of all Shares of the Holder as soon as practicable following the Holder's written request to do so, and use its reasonable best efforts to have the registration statement declared effective by the Securities Exchange Commission ("SEC") for distribution thereof by means of an underwriting." 4 9. The first sentence of Section 9(b)(ii) of the Warrant which reads: "The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the "Piggy-back Shares") in the proposed offering on the same terms and conditions as applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company's notice or after the Expiration Date." is hereby amended to read in its entirety as follows: "The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the "Piggy-back Shares") in the proposed offering on terms and conditions no less favorable to the Holders as the terms and conditions applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company's notice or after the Expiration Date." 10. Except as set forth herein, the Warrant shall remain unmodified and in full force and effect. 11. This Amendment No.2 may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS.] 5 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.2 to Common Stock Warrant as of the date and year first above written. INTEGRATED HEALTHCARE HOLDINGS, INC., A NEVADA CORPORATION By:__________________________________ Name:________________________________ Title:_______________________________ HEALTHCARE FINANCIAL MANAGEMENT & ACQUISITIONS, INC., A NEVADA CORPORATION By:__________________________________ Name:________________________________ Title:_______________________________ EX-99.10 11 ihhi_8kex99-10.txt AMENDED AND RESTATED TRIPLE LEASE EXHIBIT 99.10 AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE between PACIFIC COAST HOLDINGS INVESTMENT, LLC (Landlord) and INTEGRATED HEALTHCARE HOLDINGS, INC. (Tenant) ---------------------------------------- -1- AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE THIS AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE (the "Amended Lease") is made as of the 1st day of October, 2007, by and between Pacific Coast Holdings Investment, LLC, a California limited liability company ("Landlord") and Integrated Healthcare Holdings, Inc. a Nevada corporation ("Tenant") and does amend and restate that certain TRIPLE NET HOSPITAL AND MEDICAL OFFICE BUILDING LEASE dated March 3, 2005 ("Original Lease") and Amendment No.1 to Triple Net Hospital and Medical Office Building Amended Lease dated as of March 8, 2005 ("Amendment No. 1") with reference to the following facts: RECITALS -------- A. Tenant acquired from Tenet Healthcare System ("Tenet") the real property more particularly described in Exhibit "A" attached hereto together with all of the buildings, improvements and fixtures located thereon (hereinafter collectively referred to as the "Property"). Concurrent with the closing of the transaction with Tenet, Tenant transferred title to the Property to Landlord whereupon Landlord leased the Property back to Tenant on the terms and conditions set forth in the Original Lease. B. Landlord and Tenant and Tenant's subsidiaries entered into a loan agreement with Medical Provider Financial Corporation II, a Nevada corporation ("Med Cap"), dated as of February 28, 2005, whereby obligations of Tenant and Landlord to Med Cap were cross-collateralized (hereinafter the "Current Financing"). The original principal amount of the Current Financing was an aggregate amount of Eighty Million Dollars ($80,000,000) of which Thirty Million Dollars ($30,000,000) is a working capital non-revolving credit line provided to Tenant ("Operating Loan") and Fifty Million Dollars ($50,000,000), subsequently paid down to Forty-Five Million Dollars ($45,000,000), is a real estate loan provided to Landlord ("Real Estate Loan"). The Real Estate Loan is secured by a first trust deed lien recorded against Landlord's interest in the Property ("Current Trust Deed"). All financing by Med Cap other than the Real Estate Loan is collectively referred to as the "Operating Company Loan". Additionally Tenant entered into an Accounts Purchase Agreement (APA) with Medical Provider Corporation I, a Nevada corporation, whereby billed accounts receivable are factored. Net advances on the sale of accounts receivable are variable and range approximately from $13 million to $22 million for various reporting periods. C. Tenant defaulted under the Original Lease and Amendment No. 1 by non-payment of the rent required thereby. Landlord and Tenant have by separate agreement resolved the issues related to that default. D. The annual Base Rent set forth in Section 2.2 of Seven Million One Hundred Thousand Dollars ($7,100,000) (until such time as the conditions set forth therein are meet) is at a rate below the fair market value of the Property and was established based upon the ability of the Tenant to pay, rather than upon market forces. -2- E. The annual Base Rent set forth in Section 2.2 of Eight Million Three Hundred Thousand Dollars ($8,300,000) (following the meeting of the conditions set forth therein) is acknowledged by the parties to be less than or equal to fair market rent and in no event greater than fair market rent. F. Landlord and Tenant and Tenant's subsidiaries propose to renew the Current Financing with Med Cap ("Med Cap Loan Renewal"). The Med Cap Loan Renewal would consist of the following instruments: o A $45 million Real Estate Term Loan bearing a fixed interest rate of 9% in the first year and 14% after the first year, used to repay amounts owing under the existing Real Estate Loan. o A $35 million Non-Revolving Line of Credit bearing a fixed interest rate of 9.25% per year, used to repay amounts owing under the existing Operating Loan, pay the origination fees on the other credit facilities and for working capital. o A $10.7 million Convertible Term Loan bearing a fixed interest rate of 9.25% per year, used to repay amounts owing under an existing $10.7 million loan to Tenant. o A $50 million Revolving Line of Credit Loan bearing a fixed interest rate of 24% per year (subject to reduction to 18% if the $45 million Real Estate Term Loan is repaid prior to its maturity) and an unused commitment fee of 0.50% per year, used to finance Tenant's accounts receivable. Each of the above instruments would (i) require a 1.5% origination fee due at funding, (ii) require monthly payments of interest and repayment of principal upon maturity in three years, (iii) be collateralized by all of the assets of Tenant and its subsidiaries and Landlord's interest in the real estate underlying Tenant's hospital facilities, and (iv) be guaranteed by Orange County Physicians Investment Network, LLC, and West Coast Holdings, LLC. Tenant would also issue to Med Cap a warrant to purchase 4.95% of Tenant's outstanding shares of common stock. G. The parties now wish to amend and restate the Original Lease and Amendment No. 1. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto do hereby amend and restate the Original Lease and Amendment No. 1 in its entirety to read in full as set forth in this Amended Lease as follows: -3- ARTICLE I TERMS ----- 1.1 Initial Lease Term. The initial term of this Amended Lease ("Initial Term") shall commence on March 8, 2005 ("Commencement Date") and shall terminate on the date (referred to herein as the "Termination Date") which is the earlier of (a) the date on which this Amended Lease is terminated pursuant to the terms and conditions hereof, and (b) the last day of the month following the twenty-fifth (25th) anniversary of the Commencement Date ("Initial Term Expiration Date"). 1.2 Option To Renew Property Lease Term. Landlord hereby grants to Tenant the option to extend the term of this Amended Lease (the "Option") for one (1) additional period of twenty-five (25) years, commencing upon the Initial Term Expiration Date (the "Option Period") upon each and all of the following terms and conditions: (a) The Option shall be deemed exercised and this Amended Lease shall automatically renew for the Option Period unless Tenant gives to Landlord, and Landlord actually receives, on a date (the "Option Decline Expiration Date") which is at least one hundred and eighty (180) days prior to the Initial Term Expiration Date, a written notice stating that Tenant has declined to exercise the Option. If for any reason Landlord does not receive a written notice from Tenant stating that it has declined to exercise the Option at least one hundred and eighty (180) days prior to the Initial Term Expiration Date, then the Option shall automatically be deemed to have been exercised as herein provided. (b) Notwithstanding the foregoing, if as of the Option Decline Expiration Date, a material default and breach of this Amended Lease on the part of Tenant has occurred and is continuing beyond the applicable cure periods referred to in Sections 15.1 below, as applicable, then the Option shall not become effective or exercised and the term of this Amended Lease shall not be extended beyond the Initial Term Expiration Date. (c) In the event the Option is deemed to have been exercised, as provided herein, then all of the terms and conditions of this Amended Lease shall apply during the Option Period, except as otherwise provided in this Amended Lease. ARTICLE II RENT AND FINANCING ------------------ 2.1 Property Base Rent. (a) The annual "Base Rent" shall be Eight Million Three Hundred Thousand Dollars ($8,300,000), which shall be payable in equal monthly installments of Six Hundred Ninety-One Thousand Six Hundred Sixty-Six and 67/100 Dollars ($691,666.67). Provided however, that until such time as either (i) Tenant refinances its A/R Financing with stated interest rate which is less than -4- Fourteen percent (14%) per annum (if the stated rate is a spread over an index rate such as two percent over 30 day LIBOR, then the stated interest rate shall be the sum of the spread and the index rate at the time the loan is made) or (ii) the Landlord refinances its Real Estate Loan, the annual Base Rent shall be reduced to Seven Million One Hundred Thousand Dollars ($7,100,000) which shall be payable in equal monthly installments of Five Hundred Ninety One Thousand Six Hundred Sixty-Six and 67/100 Dollars ($591,666.67). (b) Landlord and Tenant hereby acknowledge and agree that the rental payments required pursuant to this Amended Lease are the product of bona fide, arms-length negotiations, without taking into account the volume or value of any actual or expected federal health care program or other referrals to, or business otherwise generated for, either Landlord or Tenant. The rental payments do not reflect any additional value Landlord or Tenant may attribute to the proximity or convenience of the Property to sources of referrals or business otherwise generated for which payment may be made in whole or in part under any federal health care program. Neither the entry into this Amended Lease by the parties nor the terms and conditions of this Amended Lease shall be conditioned on Landlord or Tenant (i) making referrals to the other, (ii) being in a position to make or influence referrals to the other, or (iii) otherwise generating business for the other. 2.2 CPI Adjustment. "Consumer Price Index" or "CPI" shall refer to the All Urban Consumers, Los Angeles-Riverside-Orange County, All Items Index (Base Period 1982-84=100) as published by the United States Department of Labor, Bureau of Labor Statistics in mid-January of each year relating to the prior calendar year (annual column) as published by the United States Department of Labor, Bureau of Labor Statistics ("Bureau"). In the event that the Bureau shall cease to publish said Consumer Price Index, then the successor or such nearly comparable index as reasonably determined by Landlord shall be used. If the Bureau substantially revises the manner in which the CPI is determined, an adjustment shall be made in the revised index which would produce results equivalent, as nearly as possible, to those which would be obtained if the CPI had not been so revised. If the 1982-84 average shall no longer be used as an index of 100, such change shall constitute a substantial revision. If the CPI becomes unavailable to the public because publication is discontinued, or otherwise becomes unavailable, or if equivalent data is not readily available to enable Landlord to make the adjustment to the revised index referred to above, Landlord shall substitute a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index is available, then a comparable index published by a major bank, other financial institution, university or recognized financial publication. On January 1st 2009 and on each January 1st thereafter (or as soon thereafter as available) the Consumer Price Index figure for the preceding year shall be determined, and the Base Rent for the calendar year shall be increased or decreased by the same percentage as the percentage, if any, by which the Consumer Price Index for the January of the preceding year shall have increased as compared with the Consumer Price Index for the January of the current year; provided, however, that in no event shall any annual increase in Base Rent under the provisions of this Section 2.2 be less than two percent (2%) or exceed six percent (6%) per year. Landlord shall provide written -5- notice of the CPI adjustment to Tenant. In the event that the adjustment has not been determined in time for any invoicing sent, then upon determination of the adjustment, Landlord shall send out adjustment invoice(s). 2.3 Base Rent Market Adjustment. Notwithstanding the CPI adjustment provided for in Section 2.2 above, on the September 1, 2012 and each five (5) years thereafter the Base Rent shall be increased or decreased to an amount equal to the then current fair market rental rate ("Base Rent Market Adjustment"); provided, however, the fair value of Tenant's capital improvements and maintenance including but not limited to those improvements required under Section 7.2(a) shall be separately valued and excluded in the valuation of the Property in calculating the Base Rent Market Adjustment. Commencing not less than ninety (90) days prior to each anniversary in which the Hospital Base Rent may be adjusted, Landlord and Tenant shall attempt to agree on the fair market rental rate for the Property. If Landlord and Tenant are not able to agree to the fair market rental rate within thirty (30) days, Landlord and Tenant shall each choose an independent, MAI certified appraiser, with not less than five (5) years experience in leasing healthcare related facilities including hospitals. The two appraisers so appointed shall appoint a third appraiser, similarly qualified. Each appraiser shall independently determine the fair market rental rate. The three rates so determined will be averaged. The rate determined by the appraiser which varies the most from the average shall be discarded and the two remaining values and the average value shall be averaged and said second average shall constitute the fair market rental rate. Each party shall bear the costs of the appraiser appointed by that party and the parties shall equally divide the costs of the third appraiser. 2.4 Cross Payment Duties. Med Cap has agreed that Landlord may refinance the Real Estate Loan, and Med Cap upon the repayment of the Real Estate Loan will subordinate the Operating Company Loan and the lien upon the Property securing said Operating Company Loan to the Landlord's new loan or any subsequent loans. Tenant agrees to exercise its commercially reasonable efforts to cause Med Cap to enter into acceptable subordination agreements and customary inter-creditor agreements with Landlord's subsequent lenders; provided, however, that so long as the Operating Company Loan is collateralized by the Property, Tenant shall have an obligation and duty to Landlord to pay when due all sums coming due under the Operating Company Loan and to otherwise fully comply with all terms and conditions of the Operating Company Loan and so long as the Property is collateral for the Operating Company Loan Landlord shall have an obligation and duty to Tenant to pay when due all sums coming due under the Real Estate Loan and to otherwise fully comply with all terms and conditions of the Real Estate Loan. In the event that either party fails to make required payments or payment to Med Cap or in the case of Landlord to the party who refinanced the Real Estate Loan, then the other party may make such payment or payments and in addition to all other rights and remedies shall have the right to offset such payment against sums owed by the party to the other party. 2.5 Information and Notices. Tenant shall provide copies to Landlord of all notices, reports, information and communications received from any lender and responses thereto. During cross collateralization, the Landlord shall provide copies to Tenant of all notices, reports, information and communications -6- received from or responses to Med Cap and will provide accounting records, reports and management representations as reasonably required to consolidate the Landlord's financials in its reports filed with the Securities and Exchange Commission. 2.6 Cross Collateralization. The parties acknowledge that the Med Cap Loan Renewal will require cross collateralization of the Property for among other things the obligations of Tenant to Med Cap in connection with the Operating Company Loan. The Med Cap Loan Renewal will provide, however, that the Real Estate Loan may be paid off or refinanced at any time without penalty whereupon Med Cap shall subordinate the Operating Company Loan lien on the Property to Landlord's replacement financing and that Tenant will cooperate in such payoff or refinancing of the Real Estate Loan and shall exercise its best efforts to cause Med Cap to enter into subordination and inter-creditor agreements reasonably acceptable to Landlord's new lender. The parties acknowledge that Landlord may refinance from time to time and these duties shall apply to each such refinancing. Landlord shall have no obligation to provide Property as security or cross collateralization to any lender or financer of Tenant other than Med Cap. As soon as the cross collateralization has been terminated, Landlord shall have no further obligation to Tenant to provide the Property as collateral for any obligations of Tenant. 2.7 Invoicing for Base Rent. Landlord shall invoice Tenant for the monthly Base Rent due. Base Rent shall be due on or before fifth (5th) day of the month. Any partial month shall be prorated on a daily basis at the rate of 1/30th of the monthly rent per day. So long as the Real Estate Loan is cross collateralized, Tenant may elect to make timely interest payments directly to Med Cap and deduct the amount paid from the rent due to Landlord upon written notice to Landlord. Such notice shall remain effective, and Tenant may continue to make timely interest payments directly to Med Cap, until Tenant revokes its election by subsequent notice to Landlord. Tenant shall indemnify Landlord pursuant to the indemnification provisions set forth in Article X hereof from and against any and all claims, actions, damages, liabilities and expenses, including reasonable attorneys fees and costs (collectively, "Claims"), arising out of Tenant's failure to comply with the provision of this Section 2.7, including any failure to timely pay Base Rent or interest payments to Med Cap. In the event following such election Tenant fails on two (2) occasions in any twelve (12) month period to make timely payment of the Real Estate Loan, then Landlord may by written notice to Tenant cancel Tenant's right to make the afore described payments of the Real Estate Loan. 2.8 Refinancing by Landlord. Landlord shall have the right to from time to time refinance the Real Estate Loan in Landlord's sole and absolute discretion. In connection with such refinancing, to the extent reasonably available, Tenant shall furnish any prospective lender for such refinancing with Tenant's existing current and historical financial statements and provide such prospective lender with such other information regarding the business or financial condition of Tenant as such prospective lender may reasonably request; provided, however, that Tenant shall not be required to prepare any financial statements or other documents that do not already exist and the prospective lender shall be required to provide Tenant with a written confidentiality agreement, in form and substance mutually acceptable to Landlord and Tenant, as a condition of receiving such statements, documents and other information from Tenant. -7- 2.9 Other Charges. Except as otherwise expressly provided herein, this Amended Lease is what is commonly called a net-net-net lease, it being understood that Landlord shall receive the Base Rent free and clear of any and all impositions of real and personal Property taxes, or other taxes (excepting Landlord's income tax), insurance costs, costs of repair and maintenance, liens and all other charges, costs, expenses and liabilities in connection with the ownership and operation of the Property and the businesses conducted thereon. 2.10 Delinquent Rent. Tenant acknowledges that late payment of Base Rent or any additional rent by Tenant to Landlord will cause Landlord to incur costs not contemplated by this Amended Lease, and the exact amount of such costs being extremely difficult and impracticable to fix. Therefore, if any installment of Base Rent or any additional rent is not received within five (5) days of when due, Tenant shall pay Landlord the additional sum equal to the actual costs incurred by Landlord as the result of such late payment but in no event less than Five Thousand Dollars ($5,000) per late payment charge to compensate Landlord for costs incurred by reason of the delay in payment. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payments. Additionally, any payments of Base Rent and any other sums payable by Tenant pursuant to the terms of this Amended Lease shall bear interest at the maximum legal rate. 2.11 Costs of Med Cap Loan Renewal. All costs and expenses, including, but not limited to, the parties' legal expenses, in connection with Med Cap Loan Renewal shall be borne by Landlord or Tenant, as applicable, who incurred the same. For example, Landlord shall be responsible for all fees, costs and charges in connection with the Real Estate Loan and Tenant shall be responsible for all fees, costs and charges attributable to the Operating Company Loan. ARTICLE III LANDLORD'S REDEVELOPMENT RIGHTS ------------------------------- 3.1 Landlord's Redevelopment Rights. The parking facilities/lot located at 1001 North Tustin Avenue, Santa Ana, California and parking facilities/lot located at 979 S. Anaheim Boulevard, Anaheim, California (collectively, the "Parking Facilities"), and the Administrative Building located at 1301 North Tustin Avenue, Santa Ana, California (the "Administrative Building" together with the Parking Facilities, collectively, the "Redevelopment Area") have the potential to be developed for commercial or residential use, if current parking facilities are replaced with structured or other alternative parking arrangements or if a replacement building suitable for the Permitted Uses as reasonably determined by Tenant is made available to Tenant in the event that the Administrative Building and the land thereunder is being redeveloped. The Landlord shall have the right to replace said Parking Facilities and Administrative Building, and to designate all or a portion of the Redevelopment Area which is thereby made available for commercial or residential development (such right referred to herein as "Redevelopment Right"); provided that Landlord satisfies each of the following conditions and complies with its obligations under this Article III: -8- (a) Landlord shall provide Tenant with written notice at least one hundred eighty (180) days in advance of entering into any redevelopment activities relating to the Redevelopment Area. Such notice shall describe the proposed project in reasonable detail (including, but not limited to, describing the proposed buildings to be constructed, the areas of the Redevelopment Area being affected, any anticipated interference with Tenant's possession, use and enjoyment of the Property, and the anticipated construction commencement and completion dates). (b) Landlord shall be entitled to exercise its Redevelopment Rights solely with respect to all or a designated portion of the Redevelopment Area. (c) Landlord shall not exercise its Redevelopment Rights in a manner that competes with the healthcare services offered by Tenant at the Property at the time of the proposed redevelopment, so long as such healthcare services are customarily provided by hospitals at the time of the proposed redevelopment, including but not limited to, redeveloping any part of the Redevelopment Area for or on behalf of any individual or entity that engages in any activities that competes in the foregoing manner with any healthcare services then provided by Tenant at the Property; provided, however, that outpatient services usually and customarily provided as part of a physician's primary medical practice for the physician's patients and not offered to the general public (including solicitation of referrals from other physicians or providers of such services) shall be permitted even if such services are co-extensive with the services provided by Tenant at the hospital adjacent to the Redevelopment Area subject to Tenant's approval, which shall not be unreasonably withheld. Subject to the foregoing, Landlord may redevelop the Redevelopment Area as a medical office building or complex so long as Landlord complies with the provisions of this Section 3.1(c). (d) Landlord shall provide Tenant with an opportunity to review and approve all redevelopment plans relating to the Redevelopment Area, which approval shall not be unreasonably withheld or delayed. The parties acknowledge that Tenant shall be deemed to have acted reasonably in disapproving any redevelopment plan if such plan (i) is incompatible with Tenant's business or operations from the Property, (ii) would result in unreasonable interference with Tenant's possession, use and enjoyment of the Property or (iii) could otherwise adversely affect or impair Tenant's business, operations, and activities at the Property, or its finances, reputation or business licenses and qualifications. (e) At the time Landlord exercises its Redevelopment Rights, Landlord shall not be in default under the terms of this Amended Lease. (f) Landlord shall exercise its Redevelopment Rights in compliance with all applicable law, rules, regulations, ordinances, orders and permits and, prior to commencing any redevelopment activities, shall secure all necessary consents, orders, permits or other authorization in connection with its redevelopment activities. -9- (g) In exercising its Redevelopment Rights, Landlord shall not at any time unreasonably interfere with Tenant's possession, use and enjoyment of any Property listed in Exhibit A. Without limiting the generality of the foregoing, Landlord's exercise of the Redevelopment Rights shall not unreasonably interfere with Tenant's business operations at the Property, the use and enjoyment of the Property by Tenant and its employees, guests, patients and other invitees for the Permitted Uses, and street and pedestrian access to and from the Property nor impair the licensing or qualification of the Property for the Permitted Uses. The parties acknowledge that unreasonable interference shall be interpreted and applied in the context of a hospital environment and, depending upon the circumstances, interference which may not constitute unreasonable interference for a commercial office building may nonetheless constitute unreasonable interference for a hospital. (h) If any Parking Facility is being affected by Landlord's exercise of its Redevelopment Rights, Landlord shall provide Tenant with the use of reasonable temporary off site parking to be located within a two (2) mile radius of the Property being affected by the proposed redevelopment while the structured or other alternative parking arrangements are being completed (the "Replacement Parking Facilities"). The Replacement Parking Facilities shall contain at least the same number of parking spaces made available to Tenant for the Property being affected by the proposed redevelopment immediately prior to Landlord's exercise of its Redevelopment Rights. (i) If all or any portion of the Administrative Building is rendered untenantable for its Permitted Use in connection with Landlord's exercise of its Redevelopment Rights, then Landlord shall provide Tenant with a replacement building located within a five (5) mile radius of the Administrative Building suitable for Tenant's use as reasonably determined by Tenant (the "Replacement Building"). The Replacement Building shall be substantially the same quality and size (by rentable square footage) as the Administrative Building. (j) If Landlord's exercise of its Redevelopment Rights results in a material reduction in the use or functionality of the Parking Facilities, Administrative Building, or any other facilities leased by Tenant hereunder for its Permitted Use, then the parties shall agree upon an equitable reduction in the Base Rent and any other charges under this Amended Lease to reflect the reduction in use or functionality. Replacement of surface parking with properly designed and built structured parking shall NOT be deemed a reduction in use of functionality. (k) Upon exercising its Redevelopment Rights with respect to any particular Redevelopment Area, such Redevelopment Area shall be excluded from any and all terms of this Amended Lease and Tenant shall have no obligation with respect to such Redevelopment Area nor bear any costs, expenses or liabilities associated therewith, including but not limited to, obligations with respect to Base Rent, taxes, operating expenses and all other costs, expenses and liabilities associated with or related to such Redevelopment Area. -10- 3.2 Cooperation by Tenant. Subject to Landlord's satisfaction of the conditions and obligations set forth in this Article III with respect to its Redevelopment Rights, Tenant agrees to reasonably cooperate with Landlord regarding the exercise of its Redevelopment Rights, which cooperation shall include, but is not limited to, the use of the Replacement Parking Facilities and Replacement Building, as applicable. 3.3 Indemnification by Landlord. Landlord, for itself and its successors and assigns, hereby agrees to indemnify, defend, and hold Tenant, and Tenant's stockholders, agents, representatives, employees, guests, invitees and attorneys, free and harmless from and against any and all Claims in connection with or arising out of the exercise by Landlord of its Redevelopment Rights under this Article III. 3.4 Tenant's Share of Sales and Rental Proceeds. (a) In the event of any sale of all or any portion of the Redevelopment Area, Tenant shall receive twenty percent (20%) of the difference between the (1)sale price minus (2) the fair market value of such Redevelopment Area prior to its redevelopment plus the Landlord's expenses of redevelopment (assuming it is still leased and subject to the Amended Lease). (b) In the event of any lease of all or any portion of the Redevelopment Area, Tenant shall receive twenty percent (20%) of the amount of rent received by Landlord net of all direct expenses attributable to the Redevelopment Area. (c) The fair market value or fair market rental value of all or any portion of the Redevelopment Area shall be calculated under this Section 3.4 in accordance with the valuation procedures set forth in Section 2.3. 3.5 Dispute Resolution. Any dispute relating to provisions of this Article III (including, without limitations, any dispute as to whether Landlord has unreasonably interfere with Tenant's possession, use and enjoyment of the Property, or as to whether Tenant has exercised reasonable discretion in withholding its approval of any redevelopment plans) shall be resolved through Expedited Arbitration in accordance with the procedures set forth under Section 20.22(d) of this Amended Lease. ARTICLE IV TAXES ----- 4.1 Real Property Taxes. Tenant shall pay, as additional rent, when and as the same become due, and prior to delinquency, all taxes, both general and special, and other charges, including transient occupancy taxes and rental taxes, if any, lawfully imposed or assessed against the Property, including but not limited to any and all licenses, fees or charges, improvement bonds, ordinary and extraordinary, general and special, foreseen and unforeseen, which may be lawfully levied, assessed or imposed during the term of this Amended Lease upon or against Tenant or the Property, and/or the businesses conducted thereon, and including any future tax adopted in lieu of a Property tax, any and all general and special taxes, including any increase in such taxes resulting from a "change in ownership" of Landlord or Tenant (as defined in California Revenue and Taxation Code Section 60, et seq.). -11- Where any assessment may, at the option of the taxpayer, be payable in installments, Tenant shall have the right to exercise the option, and Tenant's liability for the payment of the assessment shall be limited to the payment of the installments which become due during the term of this Amended Lease. If separate bills are not sent directly to Tenant, Landlord shall furnish Tenant, upon receipt by Landlord, with true copies of each bill to be paid by Tenant in whole or in part. 4.2 Tax Contest. Upon written application, Tenant shall furnish to Landlord for inspection, and for such use as may be proper for the protection of Landlord's interest in the Property, written evidence duly certified that any and all taxes, assessments or charges required to be paid by Tenant hereunder have been paid, satisfied or otherwise discharged. Tenant, at its sole cost and expense, shall have the right to employ and exhaust all available remedies to protest and contest the amount of any liability for any taxes, assessments, licenses, fees or charges imposed or assessed against the Property, or otherwise to seek reduction or refund. Tenant shall post a bond (or, in lieu thereof, equivalent cash collateral) to prevent enforcement of any lien resulting from the foregoing. If Landlord has records or other documentation that will assist Tenant in protesting and / or contesting the tax imposed Landlord shall, upon request, provide same to Tenant. 4.3 Personal Property Taxes. Tenant shall pay, before delinquency, all taxes and assessments levied against any personal Property that is located on the Property. ARTICLE V UTILITIES --------- 5.1 Utilities. In addition to the rents, taxes, and other charges herein provided, Tenant shall pay, or cause to be paid, as additional rent, all charges for public or private utility services, including, but not limited to, those for water, sewage, electricity, gas, telephone and other utility services, including trash collection supplied to and used on the Property. ARTICLE VI USE OF THE PROPERTY ------------------- 6.1 Use of the Property. Tenant shall use the Property for the "Permitted Uses" which shall mean all of the following: (i) the ownership and/or operation of an acute care hospital; (ii) the ownership and/or operation of a facility for or a business engaged in delivering health care services; (iii) any other uses or operations which are supportive to the delivery of health care services; and (iv) any other uses reasonably related to the foregoing. Landlord and Tenant understand and acknowledge that the term of this Amended Lease is at least 25 years and the health care industry may change over time and, therefore, Landlord and Tenant agree that in applying and interpreting the foregoing definition of -12- Permitted Uses and uses not permitted under in the Redevelopment Area, flexibility will be required to meet the changes which occur over time in the health care industry. Tenant shall not use or permit the Property to be used for any other purpose without the prior written consent of Landlord, which consent may be granted or withheld in the sole and absolute discretion of the Landlord. ARTICLE VII MAINTENANCE, ALTERATIONS IMPROVEMENTS ------------------------------------- 7.1 Maintenance and Repair. Tenant shall, at Tenant's sole cost, keep and maintain the Property in good and sanitary order, condition and repair, including, without limitation, interior and exterior walls, roof, foundation, and equipment. Tenant hereby accepts the Property in its as-is condition existing as of the Commencement Date, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Property. 7.2 Alterations and Improvements. (a) Tenant shall be responsible financially and in all other respects for making and paying for any alterations or improvements to the Property required in order to enable Tenant to use the Property for the Permitted Uses, including without limitation any and all seismic retrofitting required by applicable law including, but not limited to, repairs, alterations, improvements of any nature or anything else which may be required for compliance with SB 1953, and further including without limitation any structural or non-structural alterations. All alterations, improvements, additions and installations (whether or not such installations constitute trade fixtures of Tenant), which may be made to the Property by Tenant, including but not limited to, floor coverings, paneling, doors, drapes, built-ins, moldings, sound attenuation, lighting and telephone or communication systems, conduit, wiring and outlets shall be made and done in a good and workmanlike manner and of good and sufficient quality and materials and shall be the Property of Landlord and remain upon and be surrendered with the Property at the expiration of the Amended Lease. The fair value of capital maintenance and improvements made and paid for by Tenant shall be separately valued and excluded in establishing the Base Rent Market Adjustment under Section 2.3. (b) Tenant shall promptly pay and discharge all claims for work or labor done, supplies furnished or services rendered and shall keep the Property free and clear of all mechanic and materialman liens in connection therewith. Landlord shall have the right to post or keep posted on the Property, or in the immediate vicinity thereof, any notices of non-responsibility for any construction, alteration, or repair of the Property by Tenant. If any such lien is filed, Landlord may, but shall not be required to take such action or pay such amount as may be necessary to remove such lien; and Tenant shall pay to Landlord as additional rent any such amounts expended by Landlord within five (5) days after notice is received by Tenant of the amount expended by Landlord. -13- ARTICLE VIII COMPLIANCE WITH LAWS -------------------- 8.1 Generally. Tenant, as additional rent, at its sole cost and expense, shall make any and all additions to, repairs and alterations in, the Improvements, the Property which may be required by law or governmental authority applicable to Tenant's operations, and shall otherwise observe and comply with any and all public laws, ordinances, regulations, agreements, and covenants, conditions and/or restrictions of public record applicable to the Property. Tenant shall be obligated to obtain, at its sole effort, cost and expense, all permits, approval and licenses required for its operation at the Property, or for alteration, addition to or repair of the Improvements due to its operations. Each party represents and warrants to the other party that it shall not knowingly violate any federal, state or local laws or regulations by entering into this Amended Lease or performing its obligations hereunder. 8.2 Hazardous Substances - Reportable Uses; Required Consent. The terms "Hazardous Substance" and "Hazardous Substances" shall mean any hazardous or toxic materials as those terms are defined by law, including, without limitation, (i) petroleum and petroleum by-products to the extent they are hazardous, (ii) polychlorinate biphenyls, (iii) all substances now or hereafter designated as "hazardous substances, "hazardous materials" or "toxic substances" pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C. Section 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., or the Resource, Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., or (vi) all substances now or hereafter designated as hazardous substances, hazardous materials, or toxic substances under any other federal, state or local laws or in any regulations adopted and publications promulgated pursuant to said laws. 8.3 Reportable Use. Tenant shall not engage in any activity in, on or about the Property that constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Landlord and compliance in a timely manner, at Tenant's sole cost and expense, with all Applicable Law (as defined hereinafter). Reportable Use shall mean (i) the installation or use of any above or below ground storage tank (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report and notice, registration or business plan is required to be filed with any governmental authority, or to which any Applicable Law requires that a written notice be given to persons entering or occupying the Property or neighboring properties. Notwithstanding the foregoing, Tenant may, without Landlord's prior consent, but in full compliance with all Applicable Law, use, generate and store any ordinary and customary materials reasonably required to be used by Tenant in the normal course of Tenant's business permitted on the Property by the terms of this Amended Lease, so long as such use does not result in, or materially increase the risk of, environmental contamination or damage, taking into account the use of the Property as a hospital and the other Permitted Uses of the Property under this Amended Lease. -14- 8.4 Duty to Inform Landlord. If Tenant's officers, directors or general manager know, or have reasonable cause to believe, that it has released a Hazardous Substance or created a condition involving or resulting from same, that has come to be located on, in or under the Property, the Improvements or adjoining properties, other than as previously consented to by Landlord or as provided by this Lease, Tenant shall promptly give written notice of such fact to Landlord. Tenant shall also within three (3) business days after receipt of Landlord's written request, and to the extent reasonably available provide Landlord with a reasonable opportunity to inspect any statement, report, notice, registration, application, permit, business plan, license, claim, action or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to any Hazardous Substance or contamination in, on or about the Property, including, but not limited to, such documents as may be involved in any Reportable Uses involving the Property. 8.5 Indemnification. Tenant shall indemnify, protect, defend and hold Landlord, its agents, employees, members and lenders, if any, and the Property harmless from and against any and all loss of rents and/or damages, liabilities, judgments, costs, claims, liens, expenses, penalties, attorneys fees and consultants fees arising out of or involving the presence, storage, use or transport of any Hazardous Substance or storage tank resulting from its actions or operations, provided, however, that nothing in this section shall make the Tenant responsible for any action, inaction, operation, conduct or condition caused by the Landlord, for which the Landlord will be responsible. Tenant's obligations under this Section shall include, but not be limited to, the effects of any contamination or injury to person, Property or the environment suffered by Landlord caused by Tenant's actions, including the cost of investigation (including consultant's and attorney's fees and testing), removal, remediation, restoration, and/or abatement thereof, or of any contamination therein involved. The parties agree that provision shall supersede and replace any contrary indemnity provision of any other agreement, which shall be of no further force or effect. 8.6 Tenant's Compliance With Applicable Laws. Tenant shall, at Tenant's sole cost and expense, fully, diligently and in a timely manner comply with all "Applicable Law", which term shall mean all laws, rules, regulations, ordinances, directives, covenants, easements, and restrictions of record, permits, the requirements of any applicable federal, state or municipal governmental authority, applicable fire insurance, underwriter or rating bureau, relating, in any manner, to the operation of the businesses being conducted at the Property by Tenant and its permitted licensees, invitees, and independent contractors, including, but not limited to, matters pertaining to (i) industrial hygiene (ii) environmental conditions on, in, under, or about the Property, including soil and ground water contamination, (iii) the use, generation, manufacture, production, installation, maintenance, removal, transportation, signage, spill or release of any Hazardous Substances or storage tank), (iv) the American with Disabilities Act of 1990, as amended, (v) OSHA, (vi) the California Building Code, and (vii) Title 24 now in effect which may hereinafter come into effect, and whether or not reflecting a change in policy from any previous existing policy. Tenant shall, within ten (10) business days after -15- receipt of Landlord's written request, and to the extent reasonably available, provide Landlord with a reasonable opportunity to inspect all permits, registrations and certificates, evidencing Tenant's compliance with any material Applicable Law specified by Landlord and shall promptly upon receipt notify Landlord, in writing, of any written claim, notice, citation, warning, complaint or report by the responsible government agency asserting or alleging a failure by Tenant to comply with any such Applicable Law or any written claim, notice, citation, warning, complaint or report asserting or alleging the failure of the Property to comply with any such Applicable Law. ARTICLE IX INTENTIONALLY DELETED --------------------- ARTICLE X EXCULPATION AND INDEMNITY ------------------------- 10.1 Waiver of Landlord Liability. Landlord shall not be liable for any loss, damage or injury of any kind or character to any person or property (a) arising from any use and/or condition and extent of the Property, or any part thereof including, without limitation, environmental contamination, (b) caused by any defect in the equipment or other facility located therein, (c) caused by or arising from any act or omission of Tenant, or any of its agents, employees, licensees or invitees, (d) arising from or in connection with the conduct of any business, occupation, transaction, event or other activity occurring on the Property, (e) arising from any accident on the Property or any fire or casualty thereon, or (f) occasioned by the failure of Tenant to maintain the Property in a safe condition, except as occasioned by the act, negligence, or gross negligence of any duty by Landlord or its agents or employees occurring after the Commencement Date or as occasioned by a breach of this Amended Lease by Landlord. Subject to the foregoing limitation, Tenant, as a material part of the consideration of this Amended Lease, hereby waives, on its behalf, all claims and damages against Landlord for any such loss, damage or injury to Tenant. 10.2 Tenant Indemnification. Tenant, for itself and its successors and assigns, hereby agrees to indemnify, defend and hold Landlord, and Landlord's members, managers, agents, representatives, employees and attorneys, free and harmless from and against any and all Claims in connection with or arising out of (i) any loss of life, personal injury and/or damage to Property arising from or out of any occurrence in, upon or at the Property if caused by negligent, gross negligent or willful act of Tenant, (ii) the occupancy or use by Tenant of the Property, or any part thereof excluding any portion of the Property released pursuant to Article III hereof, or (iii) arising from or out of Tenant's failure to comply with any provision of this Amended Lease (including, without limitation, Tenant's failure to timely pay Base Rent or comply with the provisions of Section 2.7 hereof), excepting any Claims caused solely by the act, negligence, or gross of negligence of any duty by Landlord or its agents or employees or by a breach of this Amended Lease by Landlord. Any Claims caused in part by the act, negligence, or gross of negligence of any duty by Landlord or its agents or employees or by a breach of this Amended Lease by Landlord shall be subject to allocation as provided in Section 10.4 hereof. -16- 10.3 Landlord Indemnification. Landlord, for itself and its successors and assigns, hereby agrees to indemnify Tenant, and Tenant's stockholders, directors, agents, representatives, employees, invitees, guests and attorneys, free and harmless from and against any and all Claims in connection with or arising out of (i) any loss of life, personal injury and/or damage to Property arising from or out of any occurrence in, upon or at the Property if caused by negligent, gross negligent or willful act of Landlord, or (ii) arising from or out of Landlord's failure to comply with any provision of this Amended Lease, excepting any Claims caused solely by the act, negligence, or gross negligence of any duty by Tenant or its agents or employees or by a breach of this Amended Lease by Tenant. Any Claims caused in part by the act, negligence, or gross negligence of any duty by Tenant or its agents or employees or by a breach of this Amended Lease by Tenant shall be subject to allocation as provided in Section 10.4 hereof. 10.4 Joint Liability. In the event that Landlord and Tenant may be held jointly liable for any Claim asserted for which indemnification is sought under this Amended Lease, Landlord and Tenant hereby agree to contribute to the amount of expenses (including reasonable attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such Claim in such proportion as is appropriate to reflect (i) the relative fault of Landlord on the one hand and Tenant on the other in connection with the events which resulted in such Claim, and (ii) the relative benefits, if any, received by the Landlord on the one hand and the Tenant on the other in connection with the events which resulted in such Claim, as well as any other relevant equitable consideration. 10.5 Claims for Indemnification. Whenever any claim arises for indemnification under this Agreement, the Party seeking indemnification (in each such case, the "Indemnified Party") must notify the Party or Parties from whom indemnification is being sought (in each such case, the "Indemnifying Party") of such claim in writing promptly and in no case later than thirty (30) days after such Indemnified Party has actual knowledge of the facts constituting the basis for such claim. Each Indemnified Party will also so notify the Indemnifying Party promptly and in no case later than fifteen (15) days after the Indemnified Party has actual knowledge of the commencement of any legal proceedings with respect to any such claim. The failure of any Indemnified Party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the Indemnifying Party has been damaged by such failure. Such notice will specify all facts known to such Indemnified Party giving rise to the indemnification sought and the amount or an estimate of the amount of the obligation or liability arising from such indemnifying event. 10.6 Defense of Third-party Claims. (a) If any lawsuit or enforcement action is filed by a third party against any Indemnified Party, written notice thereof shall be given to the Indemnifying Party as promptly as practicable (and in any event within fifteen (15) days after the service of the citation or summons). The failure of any Indemnified Party to give timely notice hereunder shall not affect rights to -17- indemnification hereunder, except to the extent that the Indemnifying Party has been damaged by such failure. After such notice, if the Indemnifying Party shall acknowledge in writing to the Indemnified Party that the Indemnifying Party is obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the Indemnifying Party shall be entitled, if it elects to do so, at its own cost, risk and expense, (i) to take control of the defense and investigation of such lawsuit or action, and (ii) to employ and engage legal counsel of its own choice, but, in any event, reasonably acceptable to the Indemnified Party, to handle and defend the same. The Indemnifying Party shall not, without the written consent of the Indemnified Party, which shall not be unreasonably withheld, conditioned or delayed, settle or compromise any Claim or consent to the entry of any judgment which does not include an unconditional written release by the claimant or plaintiff of the Indemnified Party from all liability in respect of such Claim, or settle or compromise any Claim if the settlement imposes equitable remedies or material obligations on the Indemnified Party other than financial obligations for which such Indemnified Party will be indemnified hereunder. No Claim which is being defended in good faith by the Indemnifying Party in accordance with the terms of this Agreement shall be settled or compromised by the Indemnified Party without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. (b) If the Indemnifying Party fails to assume the defense of such lawsuit or action within thirty (30) days after receipt of the claim notice, the Indemnified Party against which such lawsuit or action has been asserted will (upon delivering notice to such effect to the Indemnifying Party) have the right to undertake, at the Indemnifying Party's cost and expense, the defense, compromise or settlement of such lawsuit or action on behalf of and for the account and risk of the Indemnifying Party; provided, however, that such lawsuit or action shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. If the Indemnified Party settles or compromises such lawsuit or action without the prior written consent of the Indemnifying Party, the Indemnifying Party will bear no liability hereunder for or with respect to such lawsuit or action. (c) In the event either party assumes the defense of a particular lawsuit or action in the manner contemplated above, the party assuming such defense will keep the other party reasonably informed of the progress of any such defense, compromise or settlement. 10.7 Survival of Indemnity Obligation. The indemnification obligations of Tenant and Landlord under this Article X shall survive the expiration of the term, or the termination, of this Amended Lease. ARTICLE XI INSURANCE --------- 11.1 Liability. Tenant agrees to maintain, at its sole cost and expense, as additional rent, during the term of this Amended Lease comprehensive public liability insurance insuring against liabilities related to the condition of or use of the Property and the Improvements, bodily injury, employment related -18- liability, liquor liability, blanket contractual liability, garage liability, garage keepers legal liability, non-owned auto liability and advertising injury, in such amount as may be required by any beneficiary of any deed of trust encumbering the Property, but in no event less than Nine Million Dollars ($9,000,000), combined single limit coverage, specifically insuring performance by Tenant of the indemnity set forth in Article X above, and containing the following provisions: (a) Providing that the coverage is primary and that any coverage Landlord may maintain shall be in excess thereto; (b) Naming Landlord and any beneficiary under any deed of trust encumbering the Property as additional insureds; (c) Providing that the policy cannot be canceled or modified without thirty (30) days prior written notice to Landlord and any beneficiary of a deed of trust encumbering the Property; (d) Providing for a cross liability or a severability of interest endorsement or equivalent thereof; (e) With respect to improvements, alterations, demolitions, and changes required or permitted to be made by Tenant pursuant to the terms of this Amended Lease, contingent liability and builders- risk insurance; (f) Workers' compensation coverage as required by law, together with employer's liability coverage; and (g) A waiver by Tenant's insurers of any right to subrogation against Landlord, its agents, members, managers, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or admission of Landlord, its agents, members, managers, employees or representatives. 11.2 Adjustments. The foregoing limits of coverage and the coverages may be adjusted reasonably by Landlord and Tenant, with the consent of any beneficiary of any deed of trust encumbering the Property, from time to time, but not more often than once during any three (3) year period, during the term of this Amended Lease based upon changes in the amounts of judgments for personal injury and Property damage, industry standards, inflation, and other relevant factors in order to maintain insurance protection at least equivalent to the protection afforded on the Commencement Date. In the event that the Landlord and Tenant are unable to agree upon an adjustment then Landlord and Tenant, the issue shall be resolved by arbitration in accordance with the binding arbitration provisions of Section 20.22. The cost of such arbitration shall be born by the party whose insurance proposal is closest to the insurance proposal decided upon by the arbitration process. 11.3 Property. Tenant agrees to maintain, at its expense, as additional rent, during the term of this Amended Lease (a) standard form fire, extended coverage, vandalism, malicious mischief, boiler and machinery coverage, and -19- building ordinance and law coverage endorsements, and special extended insurance, including all risk insurance, and other Property insurance coverage as may be required by any beneficiary of any deed of trust encumbering the Property, with respect to the Improvements and the personal property in amounts at least equal to the greater of full replacement costs thereof or the amount required by any beneficiary of a deed of trust encumbering the Property, (b) with respect to the construction, demolition, additions, alterations and the like required or permitted to be constructed by Tenant hereunder, builders all-risk insurance insuring the full replacement value of all construction in process on the Property, and (c) business interruption insurance as provided in Section 11.5 below, in an amount reasonably satisfactory to Landlord. Tenant and Landlord hereby acknowledge that, at the time of the execution of this Amended Lease, earthquake insurance for the Property is not available at commercially reasonable rates and conditions. If earthquake insurance becomes available at commercially reasonable rates and under reasonable terms and conditions, Tenant shall also maintain, at Tenant's expense, earthquake insurance, including sprinkler leakage coverage, building, contents and loss of income, with a limit no less than the probable maximum loss limit as valued either through Landlord or any beneficiary under a deed of trust encumbering the Property. Each policy shall specifically (i) name the beneficiary under any deed of trust encumbering the Property and then Landlord as additional insureds, (ii) provide that all payments shall be made as provided in Article XII above, and that the beneficiary of a deed of trust encumbering the Property shall have first priority and claim to any payments as provided in its deed of trust, and (iii) provide that it cannot be canceled or modified by the insurer without thirty (30) days prior written notice to Landlord and such beneficiary. 11.4 Personal Property Insurance. Tenant, at Tenant's cost, shall maintain a policy of standard fire and extended coverage insurance (with vandalism and malicious mischief endorsements) on all Tenant's personal Property and alterations to the extent of at least their full replacement value. Tenant shall use the proceeds from any such policy for the replacement of personal Property or the restoration of Tenant's improvements or alterations. 11.5 Rental Loss and Business Interruption. Tenant at its sole cost and expense, as additional rent, at all times during the term of this Amended Lease, maintain in force a policy of rental loss or business interruption insurance in an amount at least sufficient to pay, for a period of twelve (12) months following any applicable loss, the sum of the following: (a) the then applicable Base Rent as provided in Article II above; (b) all additional rent as provided in this Amended Lease; and (c) the insurance premiums provided in this Article XI. 11.6 Quality of Policies. The minimum limits of policies of insurance required of Tenant under this Amended Lease shall in no event limit the liability of Tenant under this Amended Lease. Such insurance policy shall be issued by an insurance company having a rating of not less than A (or equivalent) in Bests Insurance Guide or which is otherwise acceptable to Landlord, and licensed to do business in the State of California. Upon execution of this Amended Lease and thereafter on or prior to the expiration date of each insurance policy required to be furnished by Tenant hereunder, Tenant shall -20- renew and deliver to Landlord evidence of renewal of such insurance policy reasonably satisfactory to Landlord. Additionally, within thirty (30) days after the expiration date of such insurance policy, Tenant shall deliver to Landlord a certificate of the insurer reasonably satisfactory to Landlord bearing a notation evidencing the payment of the premium or accompanied by other evidence of payment reasonably satisfactory to Landlord. 11.7 Adjustments. Except for personal property insurance required under Section 11.4 hereof, all policies of insurance required or permitted under this Article XI shall provide for loss thereunder to be adjusted by and payable to the beneficiary under any deed of trust encumbering the Property and then to Landlord or its designee. 11.8 Payment of Loss. All policies of insurance shall provide for payment of loss to the holder of any security interest in the Property and Landlord, jointly, and if there is no such security interest, or as to any excess, the proceeds shall be paid to Landlord and Tenant, jointly, in trust or if Tenant so elects, to a mutually approved corporate trustee, to be held in trust and applied to the repair and restoration of the Property. When the Improvements have been fully repaired and restored, any excess shall be paid to Tenant. Landlord and Tenant shall use due diligence to cause the holder of any security interest in the Property to make the proceeds of such insurance available for repair and restoration following any casualty or loss covered thereby. 11.9 Cancellation. Each policy or certificate therefore issued by the insurer shall to the extent obtainable contain a provision that no act or omission of Tenant which would otherwise result in forfeiture or reduction of the insurance therein provided shall affect or limit the obligation of the insurance company to pay the amount of any loss sustained. 11.10 Compliance with Insurance Requirements. Tenant shall observe and comply with the requirements of all policies of public liability, fire and other policies of insurance in force with respect to the Property. 11.11 Failure to Obtain Insurance. In the event that Tenant fails to maintain and pay for any of the insurance required by this Article XI, Landlord may (but without obligation to do so) procure such insurance and pay the premiums therefore, in which event Tenant shall repay Landlord all sums so paid by Landlord within ten (10) days following Landlords written demand to Tenant for such payment. 11.12 Subrogation. The parties release each other, and their respective authorized representatives, from any claims for damage to any person or to the Property and to the fixtures, personal Property, Tenant's improvements, and alterations of either Landlord or Tenant in or on the Property that are caused by or result from risks insured against any insurance policies carried by the parties and in force at the time of any such damage. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection with any damage covered by any policy. Neither party shall be liable to the other for any damages caused by fire or any of the risks insured against under any insurance policy required by this Amended Lease. -21- ARTICLE XII DESTRUCTION ----------- 12.1 Rent Continues. Subject to the provisions of this Article XII, in case of damage to or destruction of the Property by fire or any other casualty whatsoever, Tenant's rental obligations shall continue except as provided in Article III above (and elsewhere in this Amended Lease), and Tenant shall, at no cost or expense to Landlord, restore, repair, replace or rebuild improvements of comparable value, use, design, size and utility as existed immediately prior to such damage or destruction. Such restoration, repairs, replacements or rebuilding shall be commenced within a reasonable period of time following such damage and destruction and thereafter diligently prosecuted to completion. All work required to be performed by Tenant under this Article shall be performed in accordance with the provisions of Article VII above and may be performed by Tenant's agents, employees or subtenants. 12.2 Insurance Available. All insurance proceeds paid as provided in Section 11.9, less Landlord's actual costs, fees, and expenses, if any, incurred in connection with adjustment of the loss, shall be applied to pay or reimburse Tenant for the payment of the cost of the repair or restoration of the Improvements (including the cost of temporary repairs for the protection of the Improvements pending the completion of the permanent repair or restoration of the Improvements) and shall be paid out from time to time as such restoration progresses upon the written request of Tenant, which request shall be accompanied by a certificate signed by Tenant and Tenant's architect or engineer in charge of the restoration, dated not more than thirty (30) days prior to such request, setting forth the following: (a) That the sum then requested either has been paid by Tenant or is justly due to contractors, subcontractors, materialmen, engineers, architects, or other persons who have rendered services or furnished materials for the restoration; that no part of such request covers expenditures for which a request for payment has previously been made; and that to the best of Tenant's knowledge, the sum requested does not exceed the value of the services and materials described in the certificate; and (b) That, except for the amounts, if any, stated (pursuant to Subsection (a) above) in such certificate to be due for services and materials and except for work in progress on the restoration and materials and supplies ordered and services rendered but not yet billed, there is no outstanding indebtedness known to Tenant, after due inquiry, that is then due and payable for labor, wages, materials, supplies, or services in connection with the restoration. 12.3 Proceeds Payment. Upon compliance with the foregoing provisions of this Article XII, the person or persons holding the proceeds shall pay from such proceeds to Tenant or the persons named in Tenant's certificate the respective amounts stated in the certificate to have been paid by Tenant or to be due to them as the case may be. -22- 12.4 Deficiencies. If the insurance proceeds received as a result of the damage or destruction, less the actual costs, fees, and expenses, if any, incurred in connection with the adjustment of the loss, are insufficient to pay the entire cost of restoration, Tenant shall promptly pay the deficiency unless otherwise provided in this Amended Lease. 12.5 Landlord Cure. Notwithstanding any of the foregoing provisions of this Article XII, if Tenant has not commenced construction or has not notified Landlord that it intends to promptly commence construction within thirty (30) days from the date of the damage or destruction which under the provisions of this Article XII Tenant is obligated to repair, Landlord may thereupon, upon written notice to Tenant, commence such work, or Landlord may exercise any of the rights or remedies provided in this Amended Lease for a default by Tenant. If Landlord elects to undertake the work, all insurance proceeds payable under Article XII as a result of the damage or destruction to the Improvements shall then be held by Landlord for use by Landlord in doing such work. If Landlord undertakes such work, Tenant shall be liable to Landlord for any and all reasonable costs and expenses incurred by Landlord in connection therewith in excess of the insurance proceeds. All work required to be performed by Landlord under this Article shall be performed in accordance with the provisions of Article VII above and may be performed by Landlord's agents, employees or subtenants. 12.6 No Rent Abatement. There shall be no abatement of Base Rent or additional rent, or any other sums or obligations of Tenant under this Amended Lease, by reason of any such damage or destruction. Notwithstanding the foregoing, if it takes longer than twelve (12) months from the date of damage or destruction to complete the repair or restoration of such damage or destruction, then the Base Rent will be abated proportionally on a square footage basis for the portion(s) of the Property that cannot be used commencing on the first anniversary of the date of damage or destruction and until the damage or destruction is substantially repaired or restored. 12.7 No Surrender. Except as otherwise provided in this Amended Lease, no destruction of or damage to the Property, or any part thereof, by fire or any other casualty shall terminate or permit Tenant to surrender this Amended Lease, or relieve Tenant of its obligations to pay the full Base Rent, additional rent and other sums and charges payable under this Amended Lease, or from any of its other obligations under this Amended Lease, and Tenant waives any rights now or hereafter conferred upon it by statute or otherwise, to quit or surrender this Amended Lease or the Property, or any part thereof, or to any suspension, diminution, abatement or reduction of rent, or other charges payable under this Amended Lease on account of such destruction or damage. Notwithstanding the foregoing, for each individual property identified on Exhibit "A" hereof (each hereinafter "Building"), if (a) the damage or destruction applies to all or substantially all of a Building, (b) the damage or destruction to the Building is sufficient so as to render twenty-five (25%) percent of the Building or more unusable and occurs during the last three (3) years of the current term of this Amended Lease, or -23- (c) the damage to a Building is caused by a casualty not insured by any insurance required to be maintained by Tenant under Article XI hereof and within 180 days of such damage the Landlord, at its sole cost and expense, has not provided for the financing of such repair and has not commenced the repair and restoration of the damaged Building and has not continually prosecuted the contemplated repair and restoration in a prompt and diligent manner;. then, Tenant may elect to terminate this Lease with respect to the damaged Building upon notice to Landlord. In the event the one or more Buildings is excluded and terminated from the provisions of the Amended Lease as provided in this Section, the insurance proceeds, if any, shall be paid to the party (Landlord or Tenant) who paid for the improvements damaged or destroyed, provided that if insufficient funds are received, the funds received shall be divided among Landlord and Tenant in proportion to the costs incurred by each, subject to the rights of any lender who has an existing lien encumbering the Property. Furthermore in the event of any such termination the Base Rent payable hereunder shall be reduced in proportion to the reduction in total net rentable square footage caused by such termination, and neither party shall have any further liability under this Lease with respect to the damaged Building. ARTICLE XIII CONDEMNATION ------------ 13.1 Amended Lease Governs. If, during the term, there is any taking by condemnation of all or any part of the Property, the rights of the parties shall be determined pursuant to the provisions of this Article XIII. 13.2 Total Taking. If the Property is totally taken by condemnation, this Amended Lease shall terminate on the date of taking. 13.3 Partial Taking. If only a portion of the Property is taken by condemnation, this Amended Lease shall continue in effect; provided, however, for each individual property identified on Exhibit "A" hereof (each hereinafter "Building"), if there is a taking of (i) all or substantially all of one or more Buildings, or (ii) so much of one or more Buildings as to render the remainder of the Building unusable for the purposes for which the Property was leased, then Tenant shall have the option to terminate this Amended Lease as to the Building or Buildings in question. In the event of a dispute as to whether or not any taking rendered the Building unusable for the purposes for which the Property was leased, such dispute shall be resolved by arbitration on an expedited basis in accordance with the arbitration provisions under Section 20.22(d). If Tenant elects to terminate this Amended Lease as to the Building in question, Tenant must exercise such right by giving written notice to Landlord within ninety (90) days after the nature and the extent of the taking have been fully determined. Such termination date shall not be earlier than ninety (90) days nor later than one hundred eighty (180) days after Tenant has given -24- termination notice. If Tenant does not terminate this Amended Lease as to the Building in question within the time period set forth above, the Amended Lease shall continue in force, except that the Base Rent shall be reduced by an amount that is in the same ratio to Base Rent as the net rentable square footage of the area of the portion of the Property taken bears the total value net rentable square footage immediately before the date of taking. 13.4 Condemnation of Parking Facilities. If all or any portion of the Parking Facilities is taken as a result of condemnation proceedings and Tenant's use of the applicable Property for its Permitted Uses is adversely affected by such taking, then Landlord, at its sole cost and expense, shall provide Tenant with suitable replacement parking facilities containing the minimum number of parking spaces required by applicable law, code, rule or statute with respect to such condemned Parking Facility or Facilities. Such parking facilities shall be located within a two (2) mile radius of the Building for which the parking facilities serve. Notwithstanding the provisions of Section 13.5 below and in light of Landlord's obligation to provide suitable replacement parking facilities, all proceeds of condemnation of all or any portion of the Parking Facilities shall be paid to Landlord. 13.5 Distribution of Award. The condemnation award shall belong to Landlord; provided, however, that Tenant shall be entitled, following any priority payment of any condemnation award allocable to Landlord's interest in the Property, to that portion of such award that is made for and/or allocable to (i) diminution in value of Tenant's interest in the leasehold, (ii) taking of Tenant's personal property and/or trade fixtures, (iii) interruption of or damage to Tenant's business, (iv) the unamortized cost of improvements made to and/or installed in the Premises to the extent paid by Tenant, and (v) moving and relocation expenses. Tenant shall be entitled to any compensation separately awarded to Tenant for the matters set out in (i) through (v) above. In the event that this Amended Lease is not terminated by reason of such condemnation and the parties mutually agree that condemnation proceeds shall be used to repair and restore the partially condemned Property, Landlord shall, to the extent of proceeds received by Landlord with respect to the condemnation matter, repair any damage to the Property caused by such condemnation, except to the extent that Tenant has been reimbursed therefor by the condemning authority. If such repairs are not made, then Base Rent shall be reduced by an amount that is in the same ratio to Base Rent as the net rentable square footage of the area of the portion of the Property taken bears the total net rentable square footage immediately before the date of taking. ARTICLE XIV ASSIGNMENT ---------- 14.1 Assignment. Except for an assignment or sublease to an affiliated company, including, but not limited to, a wholly owned subsidiary or parent entity, Tenant shall not assign, mortgage or encumber this Amended Lease, nor sublet, nor suffer or permit the Property or any part thereof to be used by others, without the prior written consent of Landlord in each instance, which consent, which may be granted or withheld in Landlord's reasonable discretion. Landlord shall be under no obligation to consider a request for Landlord's consent to an assignment until Tenant shall have submitted in writing to -25- Landlord a request for Landlord's consent to such assignment together with audited financial statements of Tenant and the proposed assignee, a history of the proposed assignee's business experience and such other information as may be reasonably required by Landlord to verify that the creditworthiness and business background of the proposed assignee. Tenant shall reimburse Landlord for its reasonable, out of pocket costs incurred in considering such request. Any premium rent payable under said assignment or sublease in excess of the then current rent payable under the Amended Lease shall belong solely to Tenant and Landlord shall have no right to condition its consent to any assignment or sublease upon payment by Tenant of any such premium rent. 14.2 Release of Tenant. (a) In the event that Landlord has consented to an assignment of all of the Properties, or all or substantially all of one or more of the Buildings on the Properties, and the proposed assignee's creditworthiness is superior to Tenant, as determined by Landlord in its reasonable judgment, and in the judgment of the Landlord reasonably appropriate to the obligations being assumed (the parties acknowledge that Tenant as of the date hereof is a start up company and the credit decisions of Landlord with respect to Tenant by Landlord are based on factors extrinsic to those involved in a lease assignment) then, upon the effectiveness of such assignment or sublease, Tenant shall be released of its obligations under this Amended Lease with respect to the portion of the Property or Building(s) being assigned (including any obligation to pay Base Rent or additional rent allocable to the assigned portion of the Property or Building(s)). The parties hereby agree to amend this Amended Lease, to be effective as of the effective date of such assignment, to exclude the Property or Building(s) being assigned from the provisions of this Amended Lease and to adjust the Base Rent due for each of the Properties, if any, that remains the subject of this Amended Lease following such assignment to reflect its then current fair market rental value. Such fair market rental value shall be determined in accordance with the valuation procedures set forth in Section 2.3 above. (b) Except as otherwise provided in this Section 14.2(a), no other assignment or subletting shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay the rent or to perform all other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. Landlord may consent to subsequent assignments or subletting of this Amended Lease or amendments or modifications to this Amended Lease with assignees of Tenant, without notifying Tenant or the successor of Tenant, and without obtaining its or their consent thereto so long as Tenant is released from its obligations under this Amended Lease with respect to the assigned or subleased portion of the Property. All other consents to the subsequent assignments or subletting of, or amendments or modifications to, this Amended Lease with assignees of Tenant by Landlord shall require Tenant's prior written consent, which consent shall not be unreasonably withheld. -26- 14.3 Involuntary Assignment. No interest of Tenant in this Amended Lease shall be assignable by operation of law. Each of the following acts shall be considered an involuntary assignment: (a) If Tenant becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or is the debtor in a proceeding under the Bankruptcy Act; or, if Tenant is a partnership or consists of more than one person or entity, if any partner or other person or entity becomes bankrupt or insolvent, or makes an assignment for the benefit of others. Provided that in the event of an involuntary bankruptcy proceeding, Tenant shall have sixty (60) days in which to have the proceeding dismissed, before such proceedings shall be considered an involuntary transfer. (b) If a writ of attachment or execution if levied on this Amended Lease and Tenant has not caused the same to be released or discharged within sixty (60) days. Any such involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Amended Lease upon fifteen (15) days prior written notice, if such event giving rise to the notice is not removed or cured within the notice period. 14.4 Excluded Subleases. The provisions of this Article XIV shall not apply, and Tenant shall have the right, without the necessity of obtaining Landlord's consent under this Amended Lease, to sublease space for any and all usual and customary uses and activities associated with the delivery of health care services, including, without limitation, (i) physician office space; (ii) lab space; (iii) pharmacies; and/or (iv) concessions, such as flower shops, public cafeteria, etc. ARTICLE XV DEFAULT ------- 15.1 Default by Tenant. The occurrence of any one or more of the following events shall constitute a material default and breach of this Amended Lease by Tenant: (a) The vacating or abandonment of the Property by Tenant; (b) The failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of fifteen (15) days after notice by Landlord to Tenant of the failure to receive payment; (c) The failure by Tenant to observe or perform any of the covenants, conditions, or provisions of any franchise agreement affecting the Property or the business operated thereon, or under this Amended Lease to be observed or performed by Tenant, where such failure shall continue for a period of thirty (30) days after written notice thereof, from Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, than Tenant shall not be deemed to be in default if Tenant commenced the cure within the thirty (30) day period and thereafter diligently prosecutes the cure to completion; -27- (d) The making by Tenant of any general assignment or general arrangement for the benefit of creditors without the consent of Landlord or the beneficiary under any deed of trust encumbering the Property; (e) The filing by or against Tenant, or any guarantor of this Amended Lease, of a petition to have Tenant, or any guarantor of this Amended Lease, adjudicated a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, or any guarantor of this Amended Lease, the same is dismissed within ninety (90) days; (f) The appointment of a trustee or receiver to take possession of substantially all of Tenant's, or any guarantor's of this Amended Lease, assets located at the Property or of Tenant's, or any guarantor's of this Amended Lease, interest in this Amended Lease, where possession is not restored to Tenant, or any guarantor of this Amended Lease, within ninety (90) days; or (g) The attachment, execution or judicial seizure of substantially all of Tenant's, or any guarantor's of this Amended Lease, assets located at the Property or of Tenant's, or any guarantor's of this Amended Lease, interest in this Amended Lease, if not discharged within ninety (90) days. 15.2 Termination Remedies. Subject to Section 15.7 below, should Tenant breach this Amended Lease or abandon the Property before the end of the term of this Amended Lease, Landlord may terminate this Amended Lease. Upon such termination, Tenant shall immediately surrender the Property and Improvements (including any trade fixtures attached to the Property which cannot be removed by Tenant without causing material damage to the Property) to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any of the remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Property, and Improvements, and expel or remove Tenant and any other person who may be occupying the Property, or any part thereof, without being liable for prosecution or any claim or damages therefore, and Landlord may recover from Tenant the following: (a) The worth at the time of award of the unpaid Base Rent and additional rent which had been earned at the time of termination; plus (b) The worth at the time of award of the amount by which the unpaid Base Rent and additional rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided, subject to the provisions of this Section 15.2; plus (c) The worth at the time of award of the amount by which the unpaid Base Rent and additional rent for the balance of the term after time of award exceeds the amount of such rental loss for such period Tenant proves could be reasonably avoided, subject to the provisions of this Section 15.6; plus -28- The worth at the time of award of the amount referred to in Subsections 15.2(a) and (b) above, is computed by allowing interest at ten percent (10%) per annum. The worth at the time of award of the amount referred to in Subsection 15.2(c) above is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus one percent (1%). For purposes of this Section 15.2, the Property shall be deemed to be abandoned by Tenant, and this Amended Lease shall terminate, if Landlord gives written notice of its belief of abandonment to Tenant, personally delivered or sent by first class mail, postage prepaid to Tenant at Tenant's last known address and Tenant thereafter fails to give Landlord written notice, prior to the date of termination specified in Landlord's notice, stating that Tenant does not intend to abandon the Property and stating an address at which Tenant may be served by certified mail in any action for unlawful detainer. Landlord may give notice of belief of abandonment to Tenant only where the rent on the Property has been due and unpaid for at least twenty (20) consecutive days and Landlord reasonably believes that Tenant has abandoned the Property. The date of termination of this Amended Lease shall be specified in Landlord's notice and shall not be less than fifteen (15) days after notice is personally served or not less than eighteen (18) days after notice is deposited in the mail. Nothing contained herein shall preclude Landlord from otherwise proving that the Property has been abandoned by Tenant within the meaning of this Section. 15.3 Breach Without Termination. Even though Tenant has breached this Amended Lease or abandoned the Property, this Amended Lease continues in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may, from time to time, enforce all or any of its rights and remedies under this Amended Lease, including the right to recover the rental amounts as they become due. For purposes of this Section 15.3, acts of maintenance or preservation, or efforts to relet the Property, or the appointment of a receiver on initiative of Landlord to protect its interest in this Amended Lease, shall not constitute acts of termination of Tenant's right of possession of the Property. 15.4 Right of Landlord to Perform. In the event of any default of Tenant, including the payment of money, other than rent, or the performance of obligations required of Tenant under this Amended Lease, then in addition to the other remedies herein granted to Landlord, Landlord may, but shall not be obligated to, and without waiving or releasing Tenant from any obligations of this Amended Lease, make any reasonable payment and perform any other reasonable acts on Tenant's part to be made or performed under this Amended Lease. All reasonable sums paid by Landlord and all other reasonably necessary costs incident thereto shall be deemed additional rent. 15.5 Remedies Not Exclusive. Except as otherwise provided herein, no right or remedy herein conferred on or reserved to Landlord is intended to be exclusive of any other remedy or right, and each and every right or remedy shall be cumulative and in addition to any right or remedy given hereunder or now or hereafter existing at law, in equity or by statute. -29- 15.6 Default by Landlord. Landlord shall not be deemed to be in default of the performance of any obligation required to be performed by it hereunder unless and until it has failed to perform within thirty (30) days after written notice by Tenant to Landlord specifying therein that Landlord has failed to perform its obligations; provided, however, that if the nature of Landlord's obligations are such that more than thirty (30) days are required for performance, then Landlord shall not be deemed to be in default if Landlord shall commence performance within the thirty (30) day period and thereafter diligently prosecute the same until completion. In the event Landlord defaults in the performance of any of its obligations under this Amended Lease and remains in default beyond any cure period provided hereunder, then in addition to the other remedies herein granted to Tenant, Tenant may, but shall not be obligated to, and without waiving or releasing Landlord from any obligations of this Amended Lease, make any reasonable payment and perform any other reasonable acts on Landlord's part to be made or performed. All reasonable sums paid by Tenant and all reasonably necessary costs incident thereto may be offset by Tenant against Tenant's obligations to pay Base Rent and other charges under this Amended Lease. 15.7 Expenses of Reletting. Tenant shall be immediately liable to pay Landlord, in addition to any other indebtedness hereunder, the costs and expenses of retaking possession and reletting of the Property and of alterations or repairs to the Property incurred by Landlord for the purposes of reletting the Property after any default of Tenant. 15.8 Application of Rentals and Receipts. The rentals and receipts received by Landlord shall be applied. (a) First to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; and (b) Second, to the payment of any costs and expenses of retaking and reletting, and of all alterations and repairs as are expended by Landlord; and (c) Third, to the payment of Base Rent and additional rent due and unpaid hereunder. ARTICLE XVI WAIVER ------ 16.1 Waiver. No delay or omission in the exercise of any remedies of a party upon the default of the other party shall be construed as a waiver. Landlord's approval of any of Tenant's acts which require Landlord's approval shall not be deemed to waive or render unnecessary Landlord's consent to any subsequent acts by Tenant. -30- ARTICLE XVII LANDLORD'S ENTRY ONTO PROPERTY ------------------------------ 17.1 Landlord's Entry onto Property. Landlord, and Landlord's agents, representatives and others acting on behalf of or with Landlord's authority, shall have the right to enter the Property during normal business hours, upon reasonable notice and from time to time for purposes of inspection of the Property, to assure Tenant's performance of Tenant's obligations under this Amended Lease, and for such other reasonable purposes relating to Landlord's ownership of the Property or the financing thereof as Landlord may reasonably determine. ARTICLE XVIII SURRENDER OF PROPERTY AND HOLDING OVER -------------------------------------- 18.1 Surrender of Property. On expiration of this Amended Lease, Tenant shall surrender the Property to Landlord (along with all Tenants improvements except those which Tenant has the right or obligation to remove) in good condition, reasonable wear and tear excepted. Tenant shall also perform all restorations made necessary by the removal of Tenant's improvements and/or personal Property within the time periods stated in this Paragraph. 18.2 Holding Over. If Tenant remains in possession of the Property after expiration of the term, or after the date in any notice given by Landlord to Tenant to terminate this Amended Lease, such possession by Tenant shall be deemed to be a month-to-month tenancy terminable on thirty (30) days' written notice given at any time by either party. During any such month-to-month tenancy, Tenant shall pay all rent required by this Amended Lease, except that Base Rent shall be equal to the last month of the then term Base Rent multiplied by One Hundred Ten percent (110%). All provisions of this Amended Lease, except those pertaining to the term and option to extend, shall apply to the month-to-month tenancy. ARTICLE XIX ESTOPPEL CERTIFICATES --------------------- 19.1 Estoppel Certificates. At any time and from time to time, Landlord, on fourteen (14) days' prior written request by Tenant, and Tenant, on fourteen (14) days' prior written request by Landlord, will deliver to the party making the request, and such designees specified by the requesting party, a statement in writing certifying that this Amended Lease is unmodified and in full force and effect (or if there shall have been modifications, stating the modifications), the current monthly Base Rent, the dates to which the rent and any other deposits or charges have been paid, and stating whether or not, to the best knowledge of the party executing the certificate, the party requesting the statement is in default in the performance of any covenant, agreement or condition contained in this Amended Lease and, if so, specifying each default of which the executing party may have knowledge. In addition, Tenant shall provide to Landlord such additional information, confirmations and/or statements as may reasonably be requested by Landlord or Landlord's lender. -31- ARTICLE XX GENERAL PROVISIONS ------------------ 20.1 Attorneys' Fees. If a dispute arises or an action is filed between any of the parties hereto (a) regarding the interpretation or enforcement of any of the terms of this Amended Lease, (b) as a result of the breach by a party of any of the terms hereof, or (c) regarding the exercise of any equitable remedies available to any party, the losing party shall pay to the prevailing party reasonable attorneys' fees, costs and expenses, including, but not limited to, reasonable expert witness fees, accounting and engineering fees, and any other reasonable professional fees incurred in connection with such dispute or the prosecution or defense of such action, whether an action is actually filed or is prosecuted to a final judgment. 20.2 Notice. Any notice, approval, disapproval, consent, waiver, or other communication (collectively, "Notices") required or permitted to be given under this Amended Lease shall be in writing and shall be delivered personally or sent by Federal Express or other reputable overnight carrier, or transmittal by telecopier. All Notices shall be deemed delivered (a) if personally delivered or sent by Federal Express or other reputable overnight carrier, when actually delivered to the address of the person to whom such Notice is addressed, or (b) if telecopied, when the transmitting telecopier machine has confirmed that the Notice has been completed or sent without error. All Notices shall be addressed to the party to whom such Notice is to be given at the party's address set forth below or as such party shall otherwise direct by Notice sent pursuant to this Section 20.2: If to Landlord: Pacific Coast Holdings Investment, LLC c/o Anil Shah Co-Manager 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Telephone: 714-290-5322 Telecopier: 714-279-9588 And Kali P. Chaudhuri, Co-Manager 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Telephone: 951-782-8812 Telecopier: 951-782-8850 With Copies to: Richard Carpe 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Telephone: 714-290-5322 Telecopier: 714-279-9588 -32- William E. Thomas 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Telephone: 951-782-8812 Telecopier: 951-782-8850 If to Tenant: Integrated Healthcare Holdings, Inc. Attn: Chief Executive Officer 1301 N. Tustin Ave. Santa Ana, California 92705 Telephone: 714-434-9191 Telecopier: 714-434-9505 20.3 Corporate Authority. If either party is a corporation, that party shall deliver to the other party on execution of this Amended Lease a certified copy of a resolution of its board of directors authorizing the execution of this Amended Lease and naming the officers that are authorized to execute this Amended Lease on behalf of the corporation. 20.4 Headings. The word titles underlying the Article and Section designations contained herein are inserted solely for convenience and under no circumstances are they to be treated or construed as any part of this instrument. 20.5 Covenants and Conditions. Each term and each provision of this Amended Lease performable by Tenant and/or Landlord shall be deemed both a covenant and a condition. 20.6 Successors and Assigns. Subject to the provisions hereof, this Amended Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 20.7 Partial Invalidity. If any term or provision of this Amended Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Amended Lease shall be valid and enforced to the fullest extent permitted by law. 20.8 Amendment. This Amended Lease may be amended only by a writing signed by all the parties hereto. 20.9 Entire Agreement. This Amended Lease contains the entire agreement of the parties hereto with respect to the matters set forth herein with respect to the leasing of the Property and the Improvements, and supersedes any prior written or oral agreement between them respecting the subject matter contained herein. -33- 20.10 Construction of Amended Lease. In determining the meaning of, or resolving any ambiguity with respect to, any word, phrase or provision of this Amended Lease, no uncertainty or ambiguity shall be construed or resolved against any party under any rule of construction, including the party primarily responsible for the drafting and preparation of this Amended Lease. 20.11 Currency. All sums payable hereunder shall be determined and paid in United States Dollars. 20.12 Quitclaim Deed. At the expiration or earlier termination of this Amended Lease, Tenant shall, upon request of Landlord, execute, acknowledge and deliver to Landlord within thirty (30) days, any quitclaim deeds or other documents to remove the cloud of this Amended Lease from the Property. 20.13 Recording of Memorandum of Amended Lease. At the request of Tenant, Landlord shall execute and Tenant may record a Memorandum of Amended Lease referencing the Amended Lease in the Official Records of the County Recorder for the County in which the Property is located. 20.14 Financial Information. During the term of this Amended Lease, Tenant shall provide to Landlord, if and to the extent prepared in the ordinary course of business of Tenant, unaudited quarterly and annual audited financial statements (which shall be delivered within a reasonable time after such financial statements have been completed) for the businesses conducted on the Property ("Tenant Financial Statements"); provided, however, that Tenant shall be deemed to have deliver to Landlord the Tenant Financial Statements hereunder upon the filing by Tenant of such Tenant Financial Statements with the Securities and Exchange Commission. Such financial statements shall be prepared using generally accepted accounting principles consistently applied. Such Tenant Financial Statements shall constitute "Confidential Information" within the meaning of Section 20.26 of this Amended Lease and shall be treated accordingly; provided, however, that Landlord may deliver copies thereof to its advisors, lenders, buyers, investors, attorney, and accountants if such persons are advised of the confidential nature of the Tenant Financial Statements and the obligation to hold such documents and information in strict confidence as provided in Section 20.26 of this Amended Lease. 20.15 Relationship of the Parties. Nothing herein shall create between the parties hereto, or be relied upon by others as creating, any relationship of partnership, association, joint venture, or otherwise. The sole relationship of the parties hereto shall be that of Landlord and Tenant. 20.16 Time of Essence. Time is of the essence of each provision of this Amended Lease. 20.17 Successors. Subject to the limitations on assignment, this Amended Lease shall be binding on and inure to the benefit of the parties and their successors. 20.18 Integrated Agreement, Modification. This Amended Lease contains all the agreements of the parties pertaining to the lease of the Property and cannot be amended or modified except by another written agreement. -34- 20.19 Severability. The unenforceability, invalidity or illegality of any provision of this Amended Lease shall not render the other provisions unenforceable, invalid or illegal. 20.20 Real Estate Brokers, Finders. Each party represents that it has not had dealings with any real estate broker, finder, or other person, with respect to this Amended Lease in any manner. Each party shall hold harmless the other party from all damages resulting from any claims that may be asserted against the other party by any broker, finder, or other person, with whom the other party has or purportedly has dealt. 20.21 State Law. This Amended Lease shall be construed and interpreted in accordance with the laws of the State of California. 20.22 Dispute Resolution. (a) General. It is understood and agreed between the parties hereto that from and after the date of this Amended Lease, any and all claims, grievances, demands, controversies, causes of action or disputes of any nature whatsoever (including, but not limited to, tort and contract claims, and claims upon any law, statute, order, or regulation) (and except for the relief referred to in Section 20.22(b) below), shall be resolved by Arbitration, in the manner set forth in Section 20.22(c) below, or by Expedited Arbitration in the manner set forth in Section 20.22(d) below. By signing this Amended Lease, the parties hereto are giving up their respective right to a jury trial, to the extent that such waiver is enforceable under Applicable Law. (b) Other Relief. Each of the parties hereto acknowledges and agrees that the other party would be damaged irreparably in the event any provision of this Amended Lease is not performed in accordance with its specific terms or otherwise is breached. Accordingly, each of the parties hereto agrees that the other party shall be entitled to (a) an order or orders enforcing the decision rendered by any Arbitrator pursuant to Section 20.22(c) or Section 20.22(d) hereof and/or (b) such other prohibitory and/or mandatory injunctive relief as such party may be entitled to, in each case in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter. If any party to this Amended Lease brings an action for injunctive relief in accordance with the provisions of this Section 20.22(b), the prevailing party shall be entitled to recover its costs and expenses, including without limitation reasonable legal fees, incurred in connection with such action, including any appeal of such action. (c) Arbitration Provisions. All disputes under this Amended Lease required to be resolved by arbitration as set forth above shall be resolved by a single arbitrator ("Arbitrator") in accordance with the Judicial Arbitration and Mediation Service Comprehensive Arbitration Rules and Procedures before the Judicial Arbitration and Mediation Service ("JAMS"), pursuant to the following procedures: (i) Within fourteen (14) days from delivery of a notice from one of the parties hereto ("Dispute Notice"), each party involved in the dispute shall meet at a mutually agreed location in Orange County, California, for the -35- purpose of determining whether they can resolve the dispute themselves and document such resolution by written agreement, and, if not, whether they can agree upon an Arbitrator to whom to submit the matter in dispute for final and binding arbitration. (ii) If such parties fail to resolve the dispute by written agreement or agree on the Arbitrator within the later of fourteen (14) days from any such initial meeting or within twenty (20) days from the delivery of the Dispute Notice, any such party may make written application to JAMS or its successor or, if no longer in existence, a mutually agreeable similar service, in Orange County, California for the appointment of a single Arbitrator to resolve the dispute by arbitration. At the request of JAMS the parties involved in the dispute shall meet with JAMS at its offices within ten (10) calendar days of such request to discuss the dispute and the qualifications and experience which each party respectively believes the Arbitrator should have; provided, however, that the selection of the Arbitrator shall be the exclusive decision of JAMS and shall be made within thirty (30) days of the written application to JAMS. (iii) All arbitration proceedings shall be conducted in the English language. In any such proceeding, the Arbitrator shall have the authority to modify or waive entirely the rules of evidence as he or she sees fit; and the Arbitrator shall be expressly instructed to determine the intent of the parties and to apply such intention in reaching his or her determination, even in situations where there is no clear statement of such intention. (iv) The decision of the Arbitrator shall be a final and binding determination of the dispute and shall be fully enforceable as an arbitration decision in any court having jurisdiction and venue over such parties. (v) Each party shall pay one-half of the fees (if any) of any Arbitrator that are required to be paid prior to the commencement of any proceeding. Notwithstanding the foregoing, the prevailing party or parties (as determined by the Arbitrator) shall in addition be awarded by the Arbitrator such party's or parties' own legal fees and expenses in connection with such proceeding, and the non-prevailing party or parties (as determined by the Arbitrator) shall pay the Arbitrator's fees and expenses. (vi) To the extent applicable in civil actions in California courts, the following shall apply and be observed: all rules of pleading (including the right of demurrer), all rules of evidence, all rights to resolution of the dispute by means of motions for summary judgment, judgment on the pleadings, and judgment under Code of Civil Procedure Section 631.8. Resolution of the dispute shall be based solely upon the law governing the claims and defenses pleaded, and the arbitrator may not invoke any basis (including but not limited to, notions of "just cause") other than such controlling law. The arbitrator shall have the immunity of a judicial officer from civil liability when acting in the capacity of an arbitrator, which immunity supplements any other existing immunity. Likewise, all communications during or in connection with the arbitration proceedings are privileged in accordance with Cal. Civil Code Section 47(b). As reasonably required to allow full use and benefit of this agreement's modifications to the Act's procedures, the arbitrator shall extend the times set by the Act for the giving of notices -36- and settings of hearings. Awards shall include the arbitrator's written reasoned opinion and, at either party's written request within 10 days after issuance of the award, shall be subject to affirmation, reversal or modification, following review of the record and arguments of the parties by a second arbitrator who shall, as far as practicable, proceed according to the law and procedures applicable to appellate review by the California Court of Appeal of a civil judgment following court trial. Should any term or provision, or portion thereof, be declared void or unenforceable it shall be severed and the remainder of this agreement shall be enforceable. (d) Expedited Arbitration. Any disputes involving the provisions of Article III, or, at the request of either Landlord or Tenant, any other disputes under this Amended Lease the urgency, facts and circumstances of which reasonably requires expedited arbitration to protect the rights and interests of the parties hereunder, shall be resolved by final, binding, expedited nonjudicial arbitration ("Expedited Arbitration") by a single Arbitrator in accordance with the Judicial Arbitration and Mediation Service Comprehensive Arbitration Rules and Procedures before the JAMS, in which case, the arbitration shall be conducted in accordance with the procedures set forth in subsection (c) of this Section 20.22, except as modified below: (i) The party requesting arbitration shall request that JAMS provide, within two (2) business days, five (5) potential arbitrators. Landlord and Tenant shall each have 24 hours to strike a name from the list and send notice to JAMS of the name stricken. If either Landlord or Tenant fails to respond within such 24 hour period, then the non-responding party shall lose the right to strike a name from the list. Within one (1) business day after being notified of the names stricken, JAMS shall then chose an arbitrator from the remaining names on the list. Notwithstanding the foregoing, if the parties agree to a single arbitrator without invoking or in the course of invoking the above selection process, then the parties shall request that JAMS honor such selection. (ii) The arbitration hearing shall be held within three (3) business days after the arbitrator is selected pursuant to subparagraph (i) above and shall be limited to one (1) business day (unless the Arbitrator requires additional hearings, in which case the duration of such arbitration hearings may be extended by up to a maximum of one (1) additional business day), and the Arbitrator shall render a written decision within five (5) business days following the conclusion of such hearing. Any judgment confirming the award rendered by the Arbitrator may be entered in any court having jurisdiction. 20.23 Landlord Authority. The parties recognize that Landlord is a manager managed California limited liability company operated by co-managers. Any approval, disapproval or other action by Landlord shall require a writing executed by both co-managers. 20.24 Subordination. This Amended Lease shall be subject and subordinate at all times to the lien of any mortgage or deed of trust or other encumbrance(s) which may now or which may at any time hereafter be made upon the Property or any portion thereof, or upon Landlord's interest therein; provided, however, that, so long as Tenant is not in default (beyond any period given Tenant to -37- cure such default under this Amended Lease) in the payment of rent or in the performance of its obligations under this Amended Lease, Tenant's possession, use and quiet enjoyment of the Property shall not be diminished or interfered with by any mortgagee, lender or successor for any reason whatsoever during the term of the Amended Lease. This clause shall be self-operative, and no further instrument of subordination shall be required to effect the subordination of this Amended Lease. Nonetheless, in confirmation of such subordination, Tenant shall execute and deliver such further instrument(s) as may be reasonably requested in order to subordinate this Amended Lease to the lien of any such mortgage or deed of trust thereby. If the interests of Landlord under this Amended Lease shall be transferred by reason of foreclosure or other proceedings for enforcement of any mortgage or deed of trust on the Property, Tenant shall be bound to the transferee at the option of the transferee, under the terms, covenants and conditions of this Amended Lease for the remaining term, including any extensions or renewals, with the same force and effect as if the transferee were Landlord under this Amended Lease, and, if requested by such transferee, Tenant agrees to attorn to the transferee as its Landlord. The holder of any mortgage or deed of trust encumbering the Property shall have the right, unilaterally, at any time to subordinate fully or partially its mortgage or deed of trust or other security instrument to this Amended Lease on such terms and subject to such conditions as such holder may consider appropriate in its reasonable discretion. Upon request, Tenant shall execute and deliver an instrument reasonably required to confirm any such full or partial subordination. 20.25 Sale by Landlord. In the event the original Landlord hereunder, or any successor owner of the Property or any portion thereof, shall sell or convey same, all liabilities and obligations on the part of the original Landlord, or such successor owner, under this Amended Lease accruing thereafter shall terminate, and thereupon all such liabilities and obligations shall be binding upon the new owner. Tenant agrees to attorn to each such new owner. 20.26 Confidential Information. Landlord and Tenant acknowledge that the terms of this Amended Lease, and any financial or other information required to be delivered hereunder (including, but not limited to, Tenant's Financial Statements), constitute their respective confidential and proprietary information. Each party agrees that, to the extent that such party retains such information, it shall hold it in the strictest confidence, and shall not disclose such information, or use it for its own direct or indirect benefit, without the prior written consent of the other party. Each party will use its best efforts to assure that its officers, directors, employees, agents and consultants treat such information as confidential. 20.27 Quiet Enjoyment. Landlord covenants and agrees that so long as Tenant is not in default (beyond any period given Tenant to cure such default under this Amended Lease) in the payment of rent or in the performance of its obligations under this Amended Lease, Tenant may peaceably and quietly have, hold and enjoy the Property for the Term, without hindrance or molestation by anyone claiming paramount title or claims through Landlord subject, however, to the covenants, agreements, terms and conditions and other obligations of this Amended Lease. -38- ARTICLE XXI INTENTIONALLY DELETED --------------------- ARTICLE XXII LIMITATION OF LIABILITY ----------------------- 22.1. Limitation of Landlord's Liability Upon Sale. In the event of any conveyance or other divestiture of title to all or any portion of the Property the grantor or the person who is divested of title shall be entirely freed and relieved of all covenants and obligations thereafter accruing hereunder with respect to portion of the Property being conveyed, and the grantee or the person who otherwise succeeds to title shall be deemed to have assumed the covenants and obligations of Landlord thereafter accruing hereunder and shall then be Landlord under this Amended Lease. 22.2 Nonrecourse Liability. Notwithstanding anything to the contrary provided in this Amended Lease, if Landlord, Tenant or any successor in interest of Landlord or Tenant shall be an individual, partnership, limited liability company, corporation, trust, tenant in common or mortgagee, there shall be absolutely no personal, corporate or entity liability on the part of Landlord, Tenant or any individual or member of Landlord or Tenant or any manager, stockholder, director, officer, employee, partner or trustee of Landlord or Tenant with respect to the terms, covenants or conditions of this Amended Lease, and Landlord and Tenant shall look solely to the interest of the other party in the Property for the satisfaction of each and every remedy which Landlord or Tenant may have for the breach of this Amended Lease; such exculpation from personal, corporate or entity liability to be absolute and without any exception, whatsoever. ARTICLE XXIII TENANT OPTION TO PURCHASE ------------------------- 23.1 Purchase Option. Upon the condition that Tenant (or its permitted assignee) has exercised Tenant's option to renew as provided in Section 1.2 hereof, and provided that Tenant (or its permitted assignee) is not in default hereunder, Tenant (or its permitted assignee) shall have the option to purchase the Property (this "Purchase Option") upon each and all of the following terms: (a) Tenant gives to Landlord, and Landlord actually receives, on a date which is at least six (6) and not more than nine (9) months prior to expiration of the Amended Lease term as extended by the exercise of the renewal option. If said notification of the exercise of this Purchase Option is not so given and received, this Purchase Option shall automatically terminate and be of no further force and effect. (b) The purchase price for the Property shall be the fair market value thereof. The parties agree to meet within thirty (30) days of the exercise of notice of the exercise of this Purchase Option and attempt to agree upon the fair market price, which if agreed upon shall constitute the purchase price. If the parties are unable to agree, then each shall appoint an appraiser with not less than five (5) years experience in the valuation of Property, the two -39- appraisers shall appoint a third appraiser. Each appraiser shall separately appraise the Property. The three appraisals shall then be averaged, the appraisal which deviates the most from the average shall be disregarded and the remaining two appraisals and the average of the three appraisals shall then be averaged, the resulting average shall be deemed the fair market value and shall constitute the purchase price. (c) The Property shall be transferred in "As Is" "Where Is" condition free of any liens other than for real estate taxes and installments of special assessments not yet due and payable and any other lien which is the obligation of the Tenant under this Amended Lease. (d) The closing date for the sale of the Hospital Properties shall be the date of expiration of the Amended Lease term as extended by the exercise of the renewal option, or such other date as the parties may agree upon. (e) Any dispute with respect to this Purchase Option shall be resolved in accordance with Section 20.22 hereof. ARTICLE XXIV RIGHT OF FIRST OFFER OR REFUSAL ------------------------------- During the Term hereof in the event that Landlord contemplates the sale of the Property or any portion thereof, then the Landlord shall provide Tenant either (the choice of which shall be at Landlord's sole election) the First Offer Right or the First Refusal Right (as such terms are defined below) to purchase the Property or portion thereof in accordance with the terms set forth below: 24.1 First Right of Offer. (a) If at any time during the term of this Amended Lease, Landlord determines to sell any of the individual properties listed on Exhibit "A" hereof or any portion thereof (the "Offered Property"), then Landlord will first offer ("First Offer") to Tenant the right and option to purchase the Offered Property (the "First Offer Right"). Such First Offer to Tenant shall be made in writing (the "Notice of Offer"), and shall set forth the price and other key economic and other terms upon which Landlord is prepared to sell the Offered Property ("Offered Terms"). The Notice of Offer shall also include the adjusted Base Rent for each of the Properties, if any, that remains subject to this Amended Lease following such proposed purchase by Tenant, which Base Rent shall be adjusted to reflect its then current fair market rental value in accordance with the valuation procedures set forth in Section 2.3 above. Tenant shall have the right, for a period of thirty (30) days after Tenant's receipt of the Notice of Offer, to elect, by written notice to Landlord ("Offer Acceptance Notice"), to purchase and take title to the Offered Property, at the price and upon the other terms set forth in the Notice of Offer. Tenant recognizes that Landlord may elect to offer the property to others at terms less favorable than those offered to Tenant; accordingly, Tenant agrees to treat the terms of such offer as confidential information and not to disclose the terms except Tenant may deliver -40- copies thereof to its advisors, lenders, buyers, investors, attorney, and accountants if such persons are advised of the confidential nature of the offered terms and the obligation to hold such documents and information in strict confidence. (b) If Tenant elects to accept the First Offer, the parties will reasonably and diligently negotiate to develop, sign and deliver a definitive Purchase and Sale Agreement, and related documentation, based on the Offered Terms ("Definitive Documents") within thirty (30) days after Landlord's receipt of the Offer Acceptance Notice. If Landlord does not receive the Offer Acceptance Notice within the required thirty (30) day period, or Landlord and Tenant are unable to reach agreement on and sign and deliver the Definitive Documents within the required thirty (30) day period, then Landlord will be free for a period of one (1) year to sell and transfer the Offered Property to any other third party unaffiliated with Landlord, provided it does so for an aggregate purchase price of no less than the purchase price reflected in the Notice of Offer and on other terms which, in the aggregate, are not materially less favorable to Landlord than the other terms reflected in the Notice of Offer. If the parties timely agree upon and deliver the Definitive Documents, the closing on the purchase of the Offered Property shall be completed within sixty (60) days after such execution and delivery of the Definitive Documents and the purchase price shall be made in cash or other immediately available funds upon closing, unless otherwise agreed by the parties. In the event Landlord seeks to sell any of its Property for an aggregate purchase price of less than the purchase price reflected in the Notice of Offer or on other terms which, in the aggregate, are materially less favorable to Landlord than the other terms reflected in the Notice of Offer, Landlord shall again comply with the provisions of this Article XXIV prior to entering into any transaction for the sale of the Property. Any dispute as to whether the other purchase terms are materially less favorable to Landlord shall be resolved by arbitration in accordance with Section 20.22 (d) the expedited arbitration provision. 24.2 Right of First Refusal. (a) If at any time during the term of this Amended Lease, Landlord receives a definitive bona fide offer from a third party unaffiliated with Landlord (the "Purchase Offer") to acquire all or any of the individual properties listed on Exhibit "A" hereof or portions thereof (the "Targeted Property") which Landlord desires to accept, and the Landlord has not provided the Right of First Offer as set forth in Section 24.1 above, it shall give Tenant written notice of the Landlord's intention to sell the Targeted Property in accordance with the Purchaser Offer, which notice shall include the name and address of the offeror, and the price and other terms of the intended sale pursuant to the Purchase Offer (the "Purchase Offer Notice"). The Purchase Offer shall also include the adjusted Base Rent for each of the Properties, if any, that remains subject to this Amended Lease following such proposed purchase by Tenant, which Base Rent shall be adjusted to reflect its then current fair market rental value in accordance with the valuation procedures set forth in Section 2.3 above. Tenant shall have the right (the "First Refusal Right"), for a period of twenty (20) days after Tenant's receipt of the Purchase Offer Notice, to elect, by written notice to Landlord ("Election Notice"), to purchase the Targeted Property at the price, and upon the other terms, set forth in the Purchase Offer Notice. -41- (b) If Tenant does not elect, within the required twenty (20) day period, to purchase the Targeted Property, then Landlord shall be free to transfer the Targeted Property in accordance with, and to the maker of, the Purchase Offer, for the same purchase price as set forth in the Purchase Offer and on other terms, which in the aggregate, shall not be materially less favorable to Landlord than the terms stated in the Purchase Offer. Any dispute as to whether the other purchase terms are materially less favorable to Landlord shall be resolved by arbitration in accordance with Section 20.22. Any such transfer of the Targeted Property by Landlord to the offeror shall be completed within six (6) months following the delivery of the Election Notice to Tenant. In the event that such transfer is not completed within said six (6) month period, Landlord shall again offer Tenant a First Refusal Right or First Offer Right with respect to the Targeted Property in accordance with the provisions of this Article XXIV before it may complete such transfer. (c) If Tenant elects to exercise its First Refusal Right by timely providing the Election Notice, the parties will (i) reasonably and diligently develop, sign and deliver a definitive Purchase and Sale Agreement, and related documentation, consistent with the Purchase Offer Notice, which agreements shall be in substantially the same form as any documents agreed to by Landlord in connection with the Purchase Offer (to the extent copies of such documents were provided to Tenant as part of the Purchase Offer Notice), and (ii) the closing on such transaction shall be completed as promptly as reasonably practicable. 24.3 Other Terms. (a) Upon the completion of the acquisition of the Offered Property or Targeted Property by Tenant under the provisions of this Article XIV, Landlord and Tenant shall be released of their respective obligations under this Amended Lease with respect to such Offered Property or Targeted Property (including but not limited to any obligations to pay Base Rent or additional rent with respect to such Offered Property or Targeted Property). In addition, following Tenant's purchase of the Offered Property or Targeted Property, the Base Rent due for each of the Properties that remains the subject of this Lease following such purchase shall be adjusted to its then current fair market rental value as agreed upon by Landlord and Tenant in accordance with the valuation procedures set forth in Section 2.3 above. (b) If Tenant does not elect to exercise its First Offer Right or First Refusal Right, as a condition to the sale by Landlord of the Offered Property or Targeted Property, the buyer of such Property shall be required to enter into a separate lease with Tenant with respect to the Property being sold on the same terms and conditions (including but not limited to the same Base Rent then due for the Targeted Property) under the Amended Lease. SIGNATURES ON FOLLOWING PAGE -42- EXECUTION IN WITNESS THEREOF, Landlord and Tenant have executed this Amended Lease in one or more counterparts which, taken together, shall constitute one agreement. TENANT Integrated Healthcare Holdings, Inc. By: /s/ Bruce Mogel ------------------------------------ Its: CEO ------------------------------------ LANDLORD Pacific Coast Holdings Investment, LLC By: /s/ Anil V. Shah ------------------------------------ Its: G. Manager ------------------------------------ By: /s/ Kali P. Chaudhuri ------------------------------------ Its: by /s/ William R. Thomas atty in fact William R. Thomas ------------------------------------ -43- EXHIBIT A PROPERTY - -------- Western Medical Center-Santa Ana 1001 North Tustin Avenue Santa Ana, CA 92705 Together with the Administrative Building located at 1301 N. Tustin Ave. Santa Ana, CA Western Medical Center-Anaheim 1025 South Anaheim Boulevard Anaheim, CA 92805 Together with the parking lot located at 979 S, Anaheim Blvd. Anaheim, CA 92805 Coastal Communities Hospital 2701 South Bristol Street Santa Ana, CA 92704 -44- Memorandum of Understanding Payment of Lease Payments under Amended and Restated Triple Net Lease and related Settlement Agreement IHHI: Tenant PCHI: Landlord For all rent payment periods under the Amended Lease, beginning October 1, 2007: Settlement Payment: - ------------------ Within 24 hours following the close of the escrow relating to the Real Estate Loan (as defined herein), IHHI will submit to Medical Provider Capital I (together with Medical Provider Capital II and Medical Provider Capital III, "MCC") a request for an advance (the "Advance") on the Revolving Credit Agreement ($50,000,000 Facility) for sufficient funds to cover the First Installment of $1.5 million under the Settlement Agreement, as adjusted in accordance with this paragraph. The First Installment amount will be reduced by (a) the origination fee on the real estate term loan component of the Credit Agreement ($80,000,000 Facility) ("Real Estate Loan") and (b) PCHI's prorated share of MCC's legal costs and escrow fees attributable solely to the Real Estate Loan. Upon receipt of the Advance, IHHI will promptly wire the First Installment, less the origination fee ($675,000), to PCHI. Thereafter IHHI and PCHI will calculate and determine PCHI's portion of MCC's legal costs and escrow fees attributed solely to the Real Estate Loan, which will be paid by PCHI through direct payment or rent credit to IHHI within 60 days of the final calculation. Payment of Rent: - ---------------- Rent under the Amended Lease will continue to be paid in arrears as has been the practice in the past. On or before the le day of each month, commencing in November 2007, IHHI will deduct from the rent and pay to MCC the interest due on the Real Estate Loan. . The remainder of the rent payment for October 2007, and for each monthly rent period thereafter, will be paid to PCHI at the same time. The "remainder of the rent payment" is the difference between the monthly rent due under the Lease and the interest payment due MCC on the Real Estate Loan for that month. IHHI will provide a statement of accounting for the application of rent with each monthly rent payment it tenders to PCHI. Please note that the interest payment for October 2007 is expected to include nine days at the interest rates prevailing on loans from MCC prior to the Real Estate Loan and the remainder will be based on the terms prevailing under the Real Estate Loan . Detail of the interest calculation will be provided with the October 2007 rent payment statement. MOB [Kindred] Rent - ------------------ Rental payments for October 2007 will he forwarded to PCHI and IHHI will work with Kindred to transition the payments and responsibility under the Kindred Lease to PCHI. IHHI will be entitled to a recovery of direct costs incurred related to October 2007, and for all monthly rent periods thereafter, by either offset or reimbursement from PCHI, and will use its best efforts to transition these responsibilities as well. IHHI's costs associated with the Kindred Lease have historically amounted to less than $2,500 per month. PCHI and IHHI will cooperate to transfer these costs to PCHI as soon as practicable. Conflict; Further Cooperation: - ------------------------------ If there is any conflict between the terms of the Amended Lease and the Settlement Agreement, on the one hand, and the MOU, on the other hand, the terms of this MOU shall prevail. IHHI and PCHI agree to execute any amendments to the Amended Lease and/or the Settlement Agreement that may be necessary to incorporate the terms of this Memorandum of Understanding ("MOU") in those documents. PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California Limited Liability Company By: /s/ Kali P. Chaudhuri -by William R. Thomas, attny. in fact Title: Manager By: /s/ Anil V. Shah ------------------------------------- Anil V.Shah, Its: Manager GANESHA REALTY, LLC, a California Limited Liability Company By: /s/ Kali P. Chaudhuri -by William R. Thomas, attny. in fact Title: Manager WEST COAST HOLDINGS, LLC, a California Limited Liability Company By:/s/ Jacob Sweidan, M.D ------------------------------------- Jacob Sweidan, M.D. Its: Manager (continued signature page to Memorandum of Understanding between IHHI and PCHI) INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada Corporation By: /s/ Bruce Mogel ------------------------------------- Its: CEO ------------------------------------- EX-99.11 12 ihhi_8kex99-11.txt SETTLEMENT AGMT. EXHIBIT 99.11 SETTLEMENT AGREEMENT -------------------- AND MUTUAL RELEASE ------------------ This Settlement Agreement and Mutual Release (the "Agreement"), effective as of October 1, 2007, by and between Pacific Coast Holdings Investment, LLC, a California limited liability company ("PCHI"), Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), Ganesha Realty, LLC, a California limited liability company ("Ganesha"), and West Coast Holdings, LLC, a California limited liability company ("West Coast") is based upon the following recitals of facts: A. PCHI and IHHI are parties to a Triple Net Hospital and Medical Office Building Lease dated March 3, 2005, as amended by Amendment No. 1 of the same date (together "Lease"). The parties agree PCHI purchased the property encumbered by the Lease ("Property") from IHHI for a payment to IHHI of $5 million cash plus PCHI's assumption of $50 million of IHHI's debt (now reduced to $45 million) associated with the Property. B. PCHI and IHHI have engaged in discussions concerning the respective rights and duties under the Lease, which included the execution of an Interim Agreement Regarding Lease Performance dated August 30, 2006 (the "Interim Agreement"). The Interim Agreement was terminated by its terms on December 31, 2006. C. PCHI and IHHI have discussed the amount and payment of rent due under the Lease from February 1, 2006 through September 1, 2007, including rent paid by the tenants of a medical office building located at 1901/1905 N. College Ave., Santa Ana, California, and commonly referred to as the "Kindred Property." Solely for the purposes of this Agreement, all unpaid rent due under the Lease through September 30, 2007 shall be referred to as "Unpaid Rent." D. Pursuant to the Interim Agreement, the parties retained legal counsel who engaged a valuation consultant to evaluate the Lease. The parties met and conferred concerning the findings and reports resulting from the engagement, including recommendations to address any potential compliance issues. E. PCHI, IHHI, Ganesha and West Coast entered into an Agreement For Compensation Related to the Medical Office Building related to a building located at 999 N. Tustin Ave., Santa Ana, California (the "999 Agreement"). Pursuant to the 999 Agreement, compensation was payable to West Coast and Ganesha in the event certain conditions occurred ("999 Agreement Compensation"). F. West Coast and Ganesha assert that conditions have occurred that require the payment of the 999 Agreement Compensation by IHHI to Ganesha and West Coast. G. It is the mutual wish and desire of all of the parties hereto that a lull and final settlement of all their rights, duties. interests and claims, if any, regarding acquisition of the Property, formation of the Lease, the Unpaid Rent and the 999 Agreement Compensation, which may exist now or in the future, he had on the terms and conditions set forth herein. NOW, THEREFORE, IN CONSIDERATION OF THE PROMISES AND COVENANTS SET FORTH HEREIN BELOW, THE PARTIES HERETO MUTUALLY AGREE AS FOLLOWS: 1. Incorporation of Recitals: The foregoing recitals are incorporated by reference herein, and by this reference expressly made a part of this Agreement. 2. Amended and Restated Lease. Concurrently herewith, the parties agree to execute and deliver the Amended and Restated Triple Net Hospital Lease ("Amended Lease") attached hereto as Exhibit "A." Among other things, the parties have agreed that the Kindred Property shall not be included in the Amended Lease but rather shall be the sole property of PCHI uencumbered by any claims by or tenancy of IHHI. IHHI agrees to cooperate in all respects in providing proper notice to the tenants of Kindred Property. All rental receipts derived from the Kindred Property commencing October 1, 2007, shall be directed to and be the sole property of PCHI. IHHI further assigns and quitclaims to PCHI any and all rights it may have, if any, to claims against any and all subtenants of the Kindred Property. The Amended Lease further provides for an adjustment of rental rates and periodic review of the base rental rate to insure conformance with fair market value. The parties acknowledge that they have reviewed the Amended Lease and this Settlement Agreement with regulatory counsel and acknowledge that to the best of their knowledge, these arrangements are in compliance with law. All parties stipulate that the Amended Lease is fully enforceble in accordance with its terms. 3. Unpaid Rent: In full and final settlement of the Unpaid Rent and the 999 Agreement Compensation, IHHI will pay PCHI the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00) (the "Settlement Payment"). The Settlement Payment shall be made in two installments: (a) One Million Five Hundred Thousand Dollars ($1,500,000.00) ("First Installment") upon the execution of the Amended Restated Lease by all parties ("Lease Closing") and (b) One Million Dollars ($1,000,000.00) ("Second Installment") payable on the first anniversary of the Lease Closing. The Second Installment shall bear interest at the rate of five percent (5%) per annum from the date of the Lease Closing and be payable together with the Second Installment. 4. Release of IIIU: PCHI, Ganesha and West Coast, and their principals, members, managers, agents, officers, directors, parents, subsidiaries, and affiliates, hereby release and absolutely forever discharge IHHI, together with its principals, agents, officers, directors, subsidiaries, and affiliates, of and from any and all debts, claims, obligations, damages, liabilities, demands, costs, expenses, indebtedness and causes of action of every kind and nature whatsoever, whether now known or unknown, suspected or unsuspected, fixed, conditional or contingent, which they ever had, may now have, or may hereafter have, regarding the acquisition of the Property, formation of the Lease, the Unpaid Rent and the 999 Agreement Compensation. Notwithstanding the foregoing, nothing herein shall be construed to release any claim or any derivative claim of Anil V. Shah, Orange County Physicians Investment Network, LLC ("OCPIN") or any individual principal, manager, member, agent, officer or director of OCPIN as such, including, but not limited to any present or future claims, rights or causes of action related to Orange County Superior Court Case Nos. 070005895 and 070006017. The foregoing release shall be deemed withdrawn, null and void. and of no further force or effect should IHHI breach its duty to make either the First or Second Installments or interest thereon prescribed in paragraph 3. 2 5. Release of PCHI, Ganesha and West Coast: IHHI and its principals, agents, officers, directors, parents, subsidiaries, and affiliates, hereby release and absolutely forever discharge PCHI, Ganesha and West Coast, together with its principals, managers, members, agents, officers, directors, subsidiaries, and affiliates, of and from any and all debts, claims, obligations, damages, liabilities, demands, costs, expenses, indebtedness and causes of action of every kind and nature whatsoever, whether now known or unknown, suspected or unsuspected, fixed, conditional or contingent, which they ever had, may now have, or may hereafter have, regarding the acquisition of the Property, formation of the Lease, the Unpaid Rent, the 999 Agreement Compensation, the compliance with the federal self-referral law (the "Stark Law") or the federal fraud and abuse law (the "Anti- Kickback Law") as a basis for non-payment of any rent or consideration under the Lease and the purchase of the Property from IHHI by PCHI. Notwithstanding the foregoing, nothing herein shall be construed to release any claim or any derivative claim of IHHI or any individual officer, director or employee of IHHI as such, against Anil V. Shah, M.D., Ajay G. Meka, M.D., Salman Naqvi, M.D., OCPIN or any principal, manager, member, agent, officer or director of OCPIN as such, including but not limited to any present or future claims, rights or causes of action related to Orange County Superior Court Case Nos. 07CC05895 and 07CC06017. 6. Continuing Duty to Cooperate: Each of the parties hereto shall, at any time hereafter, make, execute and deliver any and all papers or documents as any party hereto may reasonably require for the purpose of giving full effect to this Agreement and each of its provisions. 7. No Admission: This Agreement is a compromise and should not be treated in any way as a admission of liability or responsibility by any party for any purpose. 8. Entire Agreement: This Agreement contains the sole and entire agreement and understanding of the parties with respect to the entire subject matter hereof, and no other agreement , oral or written, shall be deemed to exist or to bind any of the parties hereto. 9. Waiver Modification and Amendment: No provision hereof may be waived unless in writing signed by all parties hereto. Waiver of any one provision herein shall not be deemed to be a waiver of any other provision herein. This Agreement may be modified or amend d only by a written agreement executed by the parties affected thereby. 10. Successors and Assigns: This Agreement shall inure to the benefit of and shall be on the predecessors, successors and assigns of the parties hereto, and each of s Agreement is not intended to constitute a third-party beneficiary contract. 11. Attorneys' Fees: The parties hereto agree to bear their own costs and attorneys' fees, including but not limited to those incurred in the negotiation and drafting of this Agreement or otherwise incurred in connection with the discussions and negotiations associate with the Unpaid Rent and the 999 Compensation Agreement. In the event of any legal action or other proceeding to enforce or interpret this Agreement, the losing party will pad all of the prevailing party's reasonable legal expenses and costs incurred in such action or proceeding. 3 12. Severability: in the event that any of the terms or provisions of this Agreement are found to be legally unenforceable, then the remaining terms and conditions shall nevertheless be fully enforceable without regard to any such provision or terms that are found to be legally unenforceable. 13. Governing Law: The terms and provisions of this Agreement shall be construed, interpreted and governed by the laws of the State of California. 14. Headings: Titles and headings of this Agreement are for convenience and identification only, and shall not be deemed to limit, amplify or define the contents of the respective sections or paragraphs to which they pertain. 15. Drafting of Agreement: The parties hereto represent, warrant and agree that the terms set forth in this Agreement are the result of all parties' discussion and input, and thus all Parties shall be deemed to be equal drafters of the Agreement. 16. Execution: This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which, together, shall be deemed to constitute a single document. Each party acknowledges that it has carefully read this Agreement and knows the contents thereof and executes the same of its own free will, Each party acknowledges and represents that it is executing this Agreement after having received advice from independent legal counsel as to its rights under this Agreement and its legal effect. Each party represents and warrants that it is authorized to sign and to bind itself by signing this document. 17. Lease: Nothing in this Agreement is intended to amend, modify or revise any term or condition of the Lease, which remains in full force and effect. PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California Limited Liability Company By: /s/ Kali P. Chaudhuri -by William R. Thomas, attny. in fact Title: Manager By: /s/ Anil V. Shah ------------------------------------- Anil V.Shah, Its: Manager 4 INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada Corporation By: /s/ Bruce Mogel ------------------------------------- Its: CEO ------------------------------------- GANESHA REALTY, LLC, a California Limited Liability Company By: /s/ Kali P. Chaudhuri -by William R. Thomas, attny. in fact Title: Manager WEST COAST HOLDINGS, LLC, a California Limited Liability Company By: /s/ Jacob Sweidan ------------------------------------- Jacob Sweidan, M.D. Its: Manager 5 -----END PRIVACY-ENHANCED MESSAGE-----