-----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, T/WhekSMlgjc1+/wiycFdCM8cEVhzOo5dT+fyQ04AUfUo8VhcIIcm98Se9/1yOhf flEzPXsAo47QGopMWvyxdA== 0001019687-09-001249.txt : 20090407 0001019687-09-001249.hdr.sgml : 20090407 20090407143726 ACCESSION NUMBER: 0001019687-09-001249 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20090325 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20090407 DATE AS OF CHANGE: 20090407 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: 09737336 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-032509.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): March 25, 2009 -------------------------- INTEGRATED HEALTHCARE HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) -------------------------- NEVADA 87-0573331 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 0-23511 (Commission File Number) 1301 NORTH TUSTIN AVENUE SANTA ANA, CALIFORNIA 92705 (Address of Principal Executive Offices) (Zip Code) (714) 953-3503 (Registrant's telephone number, including area code) (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. Settlement agreement - -------------------- On March 25, 2009, Integrated Healthcare Holdings, Inc. ("IHHI"), Anil V. Shah, M.D. ("Dr. Shah"), Orange County Physicians Investment Network, LLC ("OC-PIN"), Bruce Mogel ("Mogel"), Pacific Coast Holdings Investment, LLC ("PCHI"), West Coast Holdings, LLC, ("WCH"), Dr. Kali P. Chaudhuri ("Dr. Chaudhuri"), Ganesha Realty, LLC ("Ganesha"), William E. Thomas ("Thomas"), Medical Capital Corporation ("MCC"), Medical Provider Financial Corporation I ("MPFCI"), Medical Provider Financial Corporation II ("MPFCII") and Medical Provider Financial Corporation III ("MPFCIII", together MCC, MPFCI, and MPFCIII, "MedCap", and MedCap together with all of the above entities and individuals sometimes hereinafter collectively referred to as the "Parties" or individually as the "Party") entered into a Settlement Agreement, General Release and Covenant Not to Sue (the "Settlement Agreement") in connection with the settlement of pending and threatened litigation, arbitration, appellate, and other legal proceedings (the "Actions") among certain of the parties. The following descriptions of the Settlement Agreement and the other material definitive agreements within this Item 1.01 is not complete and is qualified in its entirety by reference to the full texts of each of those agreements, certain of which are filed as Exhibits 10.1 through 10.8 hereto and are incorporated herein by reference. Pursuant to the Settlement Agreement and effective on or before March 27, 2009 (the "Closing"), IHHI agreed to pay the Callahan & Blaine Trust Account, as the jointly designated representative of OC-PIN and Dr. Shah (the "Trust Account"), a total sum of $1,500,000 in two installments of $750,000; the first payable at the Closing and the second, together with interest thereon at 8%, payable on September 25, 2009 (the "Second $750,000"). IHHI also agreed to pay to the Trust Account the sum of $15,000 as satisfaction of Dr. Shah's individual claims. Additionally, IHHI and Mogel agreed to stipulate to the release and return of a $50,000 bond which was posted in connection with a shareholder derivative suit filed by OC-PIN against both Mogel and IHHI. In addition, Dr. Shah covenanted and agreed, that for a period of 2 years after the Closing, Dr. Shah will not accept any nomination, appointment or will not serve in the capacity as a director, officer, or employee of IHHI, so long as IHHI keeps the PCHI and Chapman leases current by making payments within 45 days of when payment is due. Also pursuant to the Settlement Agreement, Dr. Shah and OC-PIN covenant not to sue or to assist anyone else in suing, directly or derivatively on behalf of IHHI, Dr. Chaudhuri or MedCap, and Dr. Chaudhuri and MedCap covenant not to sue or to assist anyone else in suing, directly or derivatively on behalf of IHHI, Dr. Shah and OC-PIN. Dr. Shah and OC-PIN also agreed to sign and deliver dismissals with prejudice of all Dr. Shah and OC-PIN's claims in the Actions, and IHHI, PCHI, and Dr. Chaudhuri agreed to sign and deliver dismissals with prejudice of all of IHHI, PCHI and Dr. Chaudhuri claims against Dr. Shah and/or OC-PIN in the Actions. Furthermore, all of the parties agreed to general releases discharging each and all of the other parties from, among other things, any and all rights, suits, claims or actions arising out of or otherwise related to the Actions. 2 Second Settlement Agreement - --------------------------- Dr. Shah, OC-PIN, the members of OC-PIN ("OC-PIN Members"), PCHI, WCH, the members of WCH, Dr. Chaudhuri and Ganesha, have entered into a Second Settlement Agreement dated as of March 25, 2009, which is not in conflict with any of the terms or provisions of the Settlement Agreement and is not incorporated by reference herein. Pursuant to the Second Settlement Agreement, certain of these parties also agreed to enter into a Shareholders Agreement. IHHI is not a party to the Second Settlement Agreement. Shareholders Agreement - ---------------------- Pursuant to the Shareholders Agreement, dated as of March 25, 2009, Dr. Chaudhuri and OC-PIN agreed to nominate and Dr. Chaudhuri, OC-PIN and Dr. Shah agreed to vote in favor of or in a manner to ensure election of up to 4 individuals designated by Dr. Chaudhuri, up to 2 individuals designated by OC-PIN, and one individual who shall at all times be the then-current Chief Executive Officer of the Company. Pursuant to the Tag Along Rights provision within the Shareholders Agreement, in the event that Dr. Chaudhuri, on the one hand, or OC-PIN or any OC-PIN Member (each a "Purchasing Shareholder"), proposes to buy or otherwise acquire from IHHI or any other person or entity beneficial ownership of any additional shares of capital stock of the Company, then the Purchasing Shareholder shall first offer for sale to the other party the right to buy such portion of the Tag Shares available after ensuring that Dr. Chaudhuri owns at least 51% of the issued and outstanding voting shares of the Company. IHHI is not a party to the Shareholders Agreement. Bylaws of IHHI as Amended and Restated effective April 2, 2009 - -------------------------------------------------------------- Pursuant to the Settlement Agreement and effective no later than Closing, IHHI agreed to amend the IHHI Bylaws to provide (i) that the number of members of IHHI's Board of Directors shall be fixed at 7 and (ii) that, effective immediately after IHHI's 2009 Annual Meeting of Shareholders, a shareholder who owns 15% or more of the voting stock of IHHI is entitled to call one special shareholders meeting per year. IHHI also agreed to appoint an OC-PIN representative to fill the seat to be vacated by Ken Westbrook at Closing until the September 2009 annual meeting of shareholders. Stock Purchase Agreements - ------------------------- Also pursuant to the Settlement Agreement and effective as of April 2, 2009, IHHI entered into Stock Purchase Agreements with Dr. Shah, Dr. Chaudhuri and OC-PIN respectively. Pursuant to these Stock Purchase Agreements, Dr. Shah and OC-PIN will receive an aggregate of 14,700,000 shares of IHHI common stock each and Dr. Chaudhuri will receive an aggregate of 30,600,000 shares of IHHI common stock, for a price of $0.03 per share (the "Stock Purchase Shares"). The purchase and sale of IHHI common stock under these agreements will take place 45 days after the Closing. Pursuant to the Settlement Agreement, if either OC-PIN or Dr. Shah chooses not to purchase all of their respective Stock Purchase Shares, those Stock Purchase Shares which either party elects not to purchase may be purchased by the other party. In the event that OC-PIN and Dr. Shah purchase, in the aggregate, fewer Stock Purchase Shares than the maximum they were entitled to purchase under the terms of their Stock Purchase Agreements, Dr. Chaudhuri agreed that the number of Stock Purchase Shares that he is entitled to purchase under his Stock Purchase Agreement shall be automatically reduced to an amount 3 which is 51% of the aggregate number of Stock Purchase Shares which Dr. Chaudhuri, OC-PIN and Dr. Shah actually purchase under their Stock Purchase Agreements. OC-PIN and Dr. Shah also agreed to provide notice to IHHI and Dr. Chaudhuri regarding their choice to use as a credit all or a portion of the Second $750,000, and any interest accrued thereon, toward OC-PIN and Dr. Shah's payment to IHHI for their respective Stock Purchase Shares. IHHI also agreed that IHHI will use the net proceeds of the sale of the Stock Purchase Shares to pay down the principal balance of IHHI's $10,700,000 Convertible Term Note, dated October 9, 2007, held by MPFCII ("Convertible Term Note"), and MedCap agreed to advance to IHHI additional funds equal to such amount by which the Convertible Term Note is paid down. If necessary, IHHI agreed to use these additional funds to bring current the PCHI and Chapman Leases. Amendment No. 1 to Credit Agreement - ----------------------------------- On April 2, 2009, MPFCII and IHHI entered into the Amendment No. 1 to Credit Agreement ("Credit Amendment"). MPFCII agreed to reduce the interest rate on the $45,000,000 Term Note, dated October 9, 2007 (the "Term Note") to simple interest of 10.25% (the "Debt Service Reduction") and to maintain such interest rate up to and including the maturity date of the Term Note, or any extension thereof, as defined in the $80 Million Credit Agreement, dated October 9, 2007 (the "Credit Agreement"), under which the Term Note was issued (the "Debt Service Reduction Period"). The Credit Amendment also provided for an optional one year extension of the maturity date of the Term Note and the $35,000,000 Non-Revolving Line of Credit Loan, provided that IHHI, WMC-SA, WMC-A, Chapman and Coastal Communities Hospital, Inc. ("Coastal", and collectively with IHHI, WMC-SA, WMC-A and Chapman, the "Borrowers") pay in full the unpaid principal balance due under the $10.7 Million Convertible Term Loan (the "$10.7 Million Loan") no later than January 30, 2010. Amendment No. 1 to Revolving Credit Agreement - --------------------------------------------- On April 2, 2009, MPFCI and IHHI entered into the Amendment No. 1 to Revolving Credit Agreement which provides an optional one year extension of the maturity date of the $50,000,000 revolving credit facility extended to Borrowers pursuant to the $50 Million Revolving Credit Agreement, dated October 9, 2007 (the "Revolving Credit Agreement"), provided that the Borrowers pay in full the unpaid principal balance due under the $10.7 Million Loan no later than January 30, 2010. Acknowledgement, Waiver and Consent and Amendment to Credit Agreements - ---------------------------------------------------------------------- On April 2, 2009, IHHI, WMC-SA, WMC-A, Coastal, Chapman, PCHI, OC-PIN, Ganesha, WCH, MPFCI, MPFCII, MPFCIII, Healthcare Financial Management & Acquisitions, Inc. ("HFMA"), and MCC (collectively, the "Acknowledgement Parties") entered into the Acknowledgement, Waiver and Consent and Amendment to Credit Agreements (the "Acknowledgement"). The Acknowledgement Parties agreed that if and to the extent that the agreements, transactions and events contemplated in the Settlement Agreement and the Second Settlement Agreement constitute, may constitute or will constitute a change of control, default, event of default or other breach or default under the Credit Agreement, Revolving Credit Agreement, $10.7 Million Loan (the "Credit Facilities"), or any documents related to the Credit Facilities, each Acknowledgement Party waives and consents to the waiver of such event, breach or default. 4 In addition, pursuant to the Acknowledgement, PCHI agreed to execute Guaranty Agreements for each of the Credit Facilities (the "PCHI Guaranty Agreements"), in substitute for the guaranty of WCH under each such Credit Facility. IHHI is not a party to the PCHI Guaranty Agreements. Amendment to Amended and Restated Triple Net Hospital Building - -------------------------------------------------------------- Pursuant to the Settlement Agreement, PCHI and IHHI entered into the Amendment to Amended and Restated Triple Net Hospital Building Lease, dated as of March 27, 2009 (the "Lease Amendment"), whereby PCHI agreed to reduce the rent paid by IHHI under the Amended and Restated Triple Net Hospital Building Lease, dated as of September 1, 2007 (the "Lease"), by an amount equal to the Debt Service Reduction (I.E., the difference between 14% and 10.25%) during the Debt Service Reduction Period. IHHI also agreed, pursuant to the Settlement Agreement, to bring the PCHI lease and the Chapman leases current and to pay all arrearages due under the PCHI lease and the Chapman leases within 45 days of the Closing. ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES. The sale of securities referenced in Item 1.01 under the heading "Stock Purchase Agreements" have not been registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws, and were sold in a transaction exempt from registration pursuant to Section 4(2) of the Act and Regulation D promulgated thereunder. The aforementioned disclosures under Item 1.01 are hereby incorporated into this Item 3.02 by reference. ITEM 5.03 AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR The disclosure regarding the amendment to the IHHI bylaws referenced in Item 1.01 under the heading "Bylaws of IHHI as Amended and Restated effective April 2, 2009" is incorporated herein by reference. 5 ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits EXHIBIT NUMBER DESCRIPTION - ------ ----------- 3.01 Bylaws of Integrated Healthcare Holdings, Inc., as amended and restated effective April 2, 2009. 10.1 Settlement Agreement, General Release and Covenant Not to Sue, dated March 25, 2009, by and among the Registrant, Anil V. Shah, M.D., Orange County Physicians Investment Network, LLC, Bruce Mogel, Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, Dr. Kali P. Chaudhuri, Ganesha Realty, LLC, William E. Thomas, Medical Capital Corporation, Medical Provider Financial Corporation I, Medical Provider Financial Corporation II and Medical Provider Financial Corporation III. 10.2 Stock Purchase Agreement, dated as of April 2, 2009, by and between Integrated Healthcare Holdings, Inc. and Dr. Kali P. Chaudhuri. 10.3 Stock Purchase Agreement, dated as of April 2, 2009, by and between Integrated Healthcare Holdings, Inc. and Dr. Anil V. Shah. 10.4 Stock Purchase Agreement, dated as of April 2, 2009, by and between Integrated Healthcare Holdings, Inc. and Orange County Physicians Investment Network, LLC. 10.5 Amendment No. 1 to Revolving Credit Agreement, dated as of April 2, 2009, by and among Integrated Healthcare Holdings, Inc., WMC-SA, Inc., WMC-A, Inc., Chapman Medical Center, Inc., Coastal Communities Hospital, Inc., Pacific Coast Holdings Investment, LLC, Orange County Physicians Investment Network, LLC, Ganesha Realty, LLC, West Coast Holdings, LLC, and Medical Provider Financial Corporation I. 10.6 Amendment No. 1 to Credit Agreement, dated as of April 2, 2009, by and among Integrated Healthcare Holdings, Inc., WMC-SA, Inc., WMC-A, Inc., Chapman Medical Center, Inc., Coastal Communities Hospital, Inc., Pacific Coast Holdings Investment, LLC, Orange County Physicians Investment Network, LLC, Ganesha Realty, LLC, West Coast Holdings, LLC, and Medical Provider Financial Corporation II. 10.7 Acknowledgement, Waiver and Consent and Amendment to Credit Agreements, dated as of April 2, 2009, by and among Integrated Healthcare Holdings, Inc., Anil V. Shah, M.D., Orange County Physicians Investment Network, LLC, Bruce Mogel, Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, Dr. Kali P. Chaudhuri, Ganesha Realty, LLC, William E. Thomas, Medical Capital Corporation, Medical Provider Financial Corporation I, Medical Provider Financial Corporation II and Medical Provider Financial Corporation III. 6 10.8 Amendment to Amended and Restated Triple New Hospital Building Lease, dated as of March 27, 2009, by and between Pacific Coast Holdings Investment, LLC, and Integrated Healthcare Holdings, Inc. 99.1 Press Release, dated April 2, 2009, announcing the Settlement Agreement, General Release and Covenant Not to Sue. 7 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: April 7, 2009 INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ Steven R. Blake ----------------------------------------- Name: Steven R. Blake Title: Chief Financial Officer 8 EX-3.1 2 ihhi_8k-ex0301.txt BYLAWS EXHIBIT 3.01 BYLAWS OF INTEGRATED HEALTHCARE HOLDINGS, INC. AS AMENDED AND RESTATED EFFECTIVE APRIL 2, 2009 ARTICLE I. OFFICES. - ------------------- SECTION 1. PRINCIPAL OFFICE. The principal office of Integrated Healthcare Holdings, Inc. shall be located in Orange County, California, or at such other place as shall from time to time be fixed by the Board of Directors. The corporation may have such other offices, within or without the State of California, as the Board of Directors may designate or as the business of the corporation may require from time to time. SECTION 2. REGISTERED OFFICE. The corporation shall maintain a registered office required by the laws of the State of Nevada to be maintained in the State of Nevada, and the registered office and the registered agent at such office may be changed from time to time by the Board of Directors. ARTICLE II. SHAREHOLDERS. - ------------------------- SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the corporation shall be held on such date and at such time each year as may be designated from time to time by the Board of Directors, such date to be within 180 days of the end of the last fiscal year then ended. Notwithstanding the forgoing, each annual meeting of the shareholders shall be held no more than 13 months after the annual meeting of the shareholders for the previous year. SECTION 2. PURPOSES OF ANNUAL MEETING. The annual meeting shall be held for the purpose of electing directors, and for the transaction of such other business as may lawfully come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated for any annual meeting of shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be conveniently held. SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders, for any purpose or purposes, may only be called (a) by the vote of a majority of the entire Board of Directors or action by written consent signed by all of the directors or (b) effective on the day immediately following the corporation's 2009 annual meeting of shareholders, by any holder of not less than fifteen percent (15%) of the shares entitled to vote at the special meeting, provided that such holder (including any other shareholder(s) forming a "group" with such holder within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) has not called a special meeting of shareholders of the corporation during the same calendar year. 1 SECTION 4. PLACE OF MEETING. The Board of Directors may designate any place, either within or without the State of Nevada, as the place of meeting for any annual or for any special meeting of shareholders, or if no designation is made the place of meeting shall be the principal office of the corporation in the State of California. SECTION 5. NOTICE OF MEETING. Written or printed notice stating the place, day, and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer of persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address at it appears on the stock transfer books of the corporation, with postage thereon prepaid. SECTION 6. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for stated period but not to exceed, in any case, fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of the shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholder entitled to notice of or to vote at a meeting of shareholders, or of shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. SECTION 7. VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the corporation, shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of, and the number of shares held by each, which list, for a period of ten days prior to the meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection of any shareholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. Failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. 2 SECTION 8. QUORUM OF SHAREHOLDERS. A majority of the outstanding shares of the corporation entitled to vote, represented in person or any proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders. SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 10. VOTING OF SHARES. Each outstanding share entitled to vote (common share) shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 11. VOTING OF CERTAIN SHARES. Neither treasury shares nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by the corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver and shares held by or under the control of a receiver may be voted by such receiver without transfer thereof into his name if authority so to do be contained in an appropriate order of the Court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledge, and thereafter the pledge shall be entitled to vote the shares so transferred. On or after the date on which written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares. Shares of its own stock held by the corporation in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. SECTION 12. NONCUMULATIVE VOTING. At each election of directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote. No shareholder may cast more than one vote for any one nominee for director. 3 SECTION 13. VOTING TRUST. Any number of shareholders of the corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period of not to exceed ten years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust, by depositing a counterpart of the agreement with the corporation at its registered office, and by transferring their shares to such trustee or trustees for the purpose of the agreement. The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at a reasonable time for any proper purpose. SECTION 14. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. SECTION 15. SHAREHOLDER PROPOSALS AT ANNUAL MEETINGS. (a) At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a shareholder of the corporation who is a shareholder of record on the date of the giving of the notice provided for in this Section 15 and on the record date for the determination of shareholders entitled to vote at such meeting and who complies with the notice procedures set forth in this in this Section 15. (b) In addition to any other applicable requirements for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than 45 days nor more than 75 days prior to the date on which the corporation first mailed its proxy materials for the previous year's annual meeting of shareholders (or the date on which the corporation mails its proxy materials for the current year if during the prior year the corporation did not hold an annual meeting or if the date of the annual meeting was changed more than 30 days from the prior year). A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the shareholder, (iv) a description of any material interest of such shareholder in such business, (v) a representation that such shareholder intends to appear in person or by proxy at the meeting to bring such business before the meeting and (vi) any other information required by law. 4 (c) Notwithstanding anything in the bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 15, provided, however, that nothing in this Section 15 shall be deemed to preclude discussion by any shareholder of any business properly brought before the annual meeting in accordance with said procedure. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 15 or other rules applicable to the conduct of business at the annual meeting, and if he should so determine he shall so declare to the meeting, and any such business not properly brought before the meeting shall not be transacted. (d) Nothing in this Section 15 shall affect the right of a shareholder to request inclusion of a proposal in the corporation's proxy statement to the extent that such right is provided by an applicable rule of the Securities and Exchange Commission. SECTION 16. NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS. (a) In addition to any other applicable requirements, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. (b) Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of shareholders (i) by or at the direction of the Board of Directors, (ii) by any nominating committee or person appointed by the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 16. (c) Such nominations, other than those made by or at the direction of the Board of Directors or a nominating committee, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than 45 days nor more than 75 days prior to the date on which the corporation first mailed its proxy materials for the previous year's annual meeting of shareholders (or the date on which the corporation mails its proxy materials for the current year if during the prior year the corporation did not hold an annual meeting or if the date of the annual meeting was changed more than 30 days from the prior year). Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934; and (b) as to the shareholder giving the notice, (i) the name and record address of the shareholder, and (ii) the class and number of shares of the corporation which are beneficially owned by the shareholder. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. 5 (d) To be eligible to be a nominee for election or reelection as a director of the corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 16(c) of these bylaws) to the Secretary at the principal executive offices of the corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the corporation, will act or vote on any issue or question (a "Voting Commitment") that has not been disclosed to the corporation or (2) any Voting Commitment that could limit or interfere with such person's ability to comply, if elected as a director of the corporation, with such person's fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein and (C) in such person's individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation. ARTICLE III. BOARD OF DIRECTORS. - -------------------------------- SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by its Board of Directors. Directors shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation. SECTION 2. NUMBER, TENURE, AND QUALIFICATIONS. The number of directors of this corporation shall be fixed at seven. Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified. SECTION 3. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board may determine and, if so determined, no notice thereof need be given, provided that the first meeting following such a determination by the Board may be held no less than 72 hours after the determination. A regular meeting of the Board of Directors may be held without notice immediately after the annual meeting of shareholders at the same place at which such meeting was held. SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of any two directors or the Chairman of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. SECTION 5. NOTICE. 6 (a) No notice is required for regular meetings of the Board of Directors. Notice of special meetings of the Board of Directors shall be given to each director at least five (5) days in advance of the meeting if given by written notice, or at least seventy-two (72) hours in advance of the meeting if given orally, by personal delivery in writing, or by delivery in writing and acknowledged in writing by the director. Written notice may be transmitted by mail, private carrier, personal delivery, telegraph, teletype, facsimile or electronic mail. Oral notice may be communicated in person or by telephone, and is effective when communicated in a comprehensible manner. (b) Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. SECTION 7. MANNER OF ACTING. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Any action required to be taken at a meeting of the Board of Directors may be taken without a meeting, provided a consent in writing, setting forth the action taken, shall be signed by all of the directors. Such consent shall have the same effect as a unanimous vote. SECTION 8. VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any directorship to be filled by reason of an increase in the number of directors, shall be filled by the Board of Directors, such appointment to be until the next annual meeting or a special meeting of the shareholders called for the purpose of electing a director to the office to created. SECTION 9. COMPENSATION. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and non-employee directors may be paid a fixed sum for attendance at each such meeting of the Board of Directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Any such compensation fixed by the Board of Directors shall be reported to the shareholders. SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 7 SECTION 11. REMOVAL OF DIRECTORS. At a meeting called expressly for that purpose, one or more directors or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Any directorship to be filled by reason of the removal of one or more directors by the shareholders may be filled by election by the shareholders at the meeting at which the director or directors are moved. SECTION 12. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall be elected by a majority of the directors at any meeting of the Board of Directors, may be an officer of the corporation and, if an officer, may serve as Executive Chairman. The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors. The Board of Directors may also elect a Vice-Chairman of the Board of Directors who shall, in the absence of the Chairman, preside at all meetings of the shareholders and of the Board of Directors. In the absence of the Chairman or Vice-Chairman, another director selected by the majority of the directors present shall preside at such meetings. SECTION 13. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, retain independent counsel or other advisers, and may authorize the seal of the corporation to be affixed to all pages which may require it. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to these bylaws. ARTICLE IV. OFFICERS. - --------------------- SECTION 1. POSITIONS. The officers of the corporation shall be appointed by resolution of the Board of Directors and shall consist of a President, a Secretary and a Treasurer. The Board of Directors may also appoint additional officers by resolution, including without limitation an Executive Chairman (who may be the Chairman of the Board), a Chief Executive Officer and one or more Vice Presidents (who may be designated Senior Vice President or Executive Vice President). The corporation may have such additional or assistant officers as the Board of Directors may appoint from time to time. The Board of Directors shall also have the authority, but shall not be required, to designate officers as the Chief Operating Officer, the Chief Financial Officer or similar such titles. 8 SECTION 2. APPOINTMENT AND TERM OF OFFICE. The officers of the corporation shall be appointed annually by resolution of the Board of Directors at the first meeting of the Board held after each annual meeting of the shareholders. If officers are not appointed at such meeting, such appointment shall occur as soon as possible thereafter, or may be left vacant. Each officer shall hold office until a successor shall have been appointed and qualified or until said officer's earlier death, resignation, or removal. SECTION 3. PRESIDENT. In the absence of a Chief Executive Officer or Executive Chairman, the president shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. He may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 4. SECRETARY. The secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and shall perform such other duties as may be prescribed by the Board of Directors. He shall keep in safe custody the seal of the corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. SECTION 5. TREASURER. The treasurer shall have charge and custody of all funds and securities of the corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors, and shall perform all other duties incident to the office of treasurer and such other duties as may from time to time be assigned to him by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at the regular meetings of the Board, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. SECTION 6. AUTHORITY AND DUTIES OF OTHER OFFICERS. Each officer shall have the authority and shall perform the duties set forth in these bylaws or, to the extent consistent with the bylaws, the duties prescribed by the Board of Directors or an officer authorized by the Board to prescribe the duties of such officer. 9 SECTION 7. COMPENSATION AND CONTRACT RIGHTS. The Board of Directors shall have authority (a) to fix the compensation, whether in the form of salary, bonus, stock options or otherwise, of all officers and employees of the corporation, either specifically or by formula applicable to particular classes of officers or employees, and (b) to authorize officers of the corporation to fix the compensation of subordinate employees. The Board of Directors shall have authority to appoint a Compensation Committee and may delegate to such committee any or all of its authority relating to compensation. The appointment of an officer shall not of itself create contract rights. SECTION 8. REMOVAL. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 9. VACANCIES. If any office becomes vacant by any reason, the directors may appoint a successor or successors who shall hold office for the unexpired term or leave such office vacant. ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS. - ------------------------------------------------- SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors or delegated to an officer by resolution of the Board. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the payment of money, notes or other evidence of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositories as the Board of Directors may select. ARTICLE VI. CERTIFICATES FOR SHARES, THEIR TRANSFER, LOST CERTIFICATES. - ----------------------------------------------------------------------- SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the president or a vice president and by the secretary or an assistant secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the 10 former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed, or mutilated certificate a new one may be issued therefor. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such manner as the Board of Directors may require and shall give the corporation a bond of indemnity in form and with one or more sureties and in such amount as determined by the Board of Directors, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, but always subject to the approval of the Board of Directors. SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to the transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. ARTICLE VII. DIVIDENDS. - ----------------------- SECTION 1. WHEN DECLARED. The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in cash, property, or its own shares, upon the terms and conditions provided by law. SECTION 2. RESERVE. The Board of Directors may set aside out of the net profits of the corporation available for dividends such sum or sums, before payment of any dividend, as the Board of Directors in their absolute discretion think proper as a reserve fund. to meet contingencies, or for equalizing dividends, or for repairing, or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and they may abolish or modify any such reserve in the manner in which it was created. ARTICLE VIII. SEAL. - ------------------- SECTION 1. The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon ARTICLE IX. WAIVER OF NOTICE. - ----------------------------- SECTION 1. Whenever any notice is required to be given to any shareholder or any director of the corporation under the provisions of these bylaws or under the provisions of the laws of the State of Nevada, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 11 ARTICLE X. AMENDMENTS. - ---------------------- SECTION 1. The power to alter, amend or repeal the bylaws of the corporation, or to adopt new bylaws shall be vested in the Board of Directors, subject to repeal or change by action of the shareholders; provided, no bylaws shall be adopted by the Board of Directors which shall require more than a majority of the voting shares for a quorum at a meeting of the shareholders, or more than a majority of the votes cast to constitute action by the shareholders, except where higher percentages are required by law. The directors may amend or repeal bylaws passed by them but may not amend or repeal the bylaws passed by the shareholders. ARTICLE XI. INDEMNITY - --------------------- SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to the maximum extent and in the manner permitted by the Nevada Revised Statutes, as amended, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this paragraph, a director or officer of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. SECTION 2. INDEMNIFICATION OF OTHERS. The corporation shall have the power, to the extent and in the manner permitted by the Nevada Revised Statutes, as amended, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this paragraph, an employee or agent of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. SECTION 3. INSURANCE. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the Nevada Revised Statutes, as amended. 12 EX-10.1 3 ihhi_8k-ex1001.txt SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE EXHIBIT 10.1 SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE This Settlement Agreement, General Release and Covenant Not to Sue ("Settlement Agreement") is made this 25th day of March, 2009 by and among Integrated Healthcare Holdings, Inc. ("IHHI"), Anil V. Shah, M.D. ("Dr. Shah"), Orange County Physicians Investment Network, LLC ("OC-PIN"), Bruce Mogel ("Mogel"), Pacific Coast Holdings Investment, LLC ("PCHI"), West Coast Holdings, LLC, ("WCH"), Dr. Kali P. Chaudhuri ("Dr. Chaudhuri"), Ganesha Realty, LLC ("Ganesha"), William E. Thomas ("Thomas"), Medical Capital Corporation ("MCC"), Medical Provider Financial Corporation I ("MPFCI"), Medical Provider Financial Corporation II ("MPFCII") and Medical Provider Financial Corporation III ("MPFCIII")(MCC, MPFCI, MPFCII and MPFCIII are sometimes hereinafter collectively referred to as "MedCap"). All the above entities and individuals are sometimes hereinafter collectively referred to as "Parties" or individually as a "Party." RECITALS A. Certain of the Parties are currently engaged in litigation, appellate, arbitration and/or court proceedings and/or have certain legal disputes and issues with each other as more particularly set forth herein below. B. Specifically: a. IHHI is now suing Dr. Shah in Orange County Superior Court ("OCSC") Case No. 07CC05895 (consolidated with OCSC Case No. 07CC06017) and OCSC Case No. 30-2008-106637; 1 b. Dr. Shah has filed a cross-complaint against IHHI in OCSC Case No. 07CC05895; c. OC-PIN (previously dismissed as a named defendant in OCSC Case No. 07CC05895) is now suing Mogel in OCSC Case No. 30-2008-00109286 (a derivative action purportedly filed on behalf of IHHI); d. OC-PIN is also suing IHHI in OCSC Case Nos. 30-2008-00106805, 30-2008-00108983; 30-2008-00109959 and 30-2008-00112102; e. Dr. Chaudhuri is now suing OC-PIN in OCSC Case No. 30-2008-0011293; f. Dr. Shah presently seeks to perfect an arbitration award in his favor against PCHI (JAMS Case No. 1200040611) in OCSC Case No. 30-2008-00114434; and g. PCHI is suing OC-PIN et al. in OCSC Case No. 30-2008-00112088. C. The foregoing litigation has spawned various related appellate proceedings including, but not limited to, California Fourth Appellate District Case Nos. G041208, G041181, G041491 and California Supreme Court Case No. S168604. D. Some of the foregoing litigation has been stayed, while other aspects of the litigation are now scheduled to be tried on July 27, 2009. E. All of the above described litigation, arbitration, appellate and other legal proceedings are hereinafter collectively referred to as the "Actions." 2 F. In addition to the foregoing, periodic threats have been made by Dr. Shah, OC-PIN and/or their legal counsel to hereinafter sue Dr. Chaudhuri, MedCap and/or IHHI's individual directors, executives and attorneys on a variety of theories, either directly or derivatively purportedly on behalf of IHHI. Periodic allegations have also been made against Dr. Chaudhuri and others alleging that Dr. Chaudhuri is not properly managing PCHI and that PCHI is not acting properly defending claims brought against it by Dr. Shah. Certain members of OC-PIN have also made threats and allegations against one another and some members of OC-PIN have assigned certain threatened claims to IHHI. Dr. Chaudhuri and PCHI have challenged the confirmation of the Arbitration Award in favor of Dr. Shah and have indicated that they will pursue all appellate avenues. G. For reasons of their own and without admission of wrongdoing or liability of any sort, the signatories to this Settlement Agreement wish to fully and finally resolve the foregoing pending Actions and threatened litigation, arbitration and discovery disputes, together with any and all possible claims, disputes or disagreements among certain of the Parties relating to any past fact, act or occurrence (except as expressly reserved herein) ("Settlement"). H. Certain of the Parties have entered into a separate settlement agreement ("Second Settlement Agreement") concurrently herewith. No term or provision of the Second Settlement Agreement contradicts or is inconsistent with any term or provision of this Settlement Agreement nor does any term or provision of the Second Settlement Agreement decrease, diminish or reduce any of the agreements, covenants, waivers, or releases made by or granted to any of the Parties to this Settlement Agreement. NOW, THEREFORE, in consideration of the mutual covenants, promises and undertakings set forth below, the adequacy and sufficiency of which are hereby expressly acknowledged by each of the Parties hereto, the Parties agree as follows: 3 COVENANTS 1. The foregoing Recitals are incorporated by reference as if fully set forth herein. 2. The Closing of the Settlement ("Closing") shall occur on or before March 27, 2009 at Callahan & Blaine, 3 Hutton Centre Drive, Ninth Floor, Santa Ana, California. 3. The Closing shall be contingent upon, subject to and concurrent with the Closing of the Second Settlement Agreement. MONETARY. --------- 4. IHHI shall pay the Callahan & Blaine Trust Account as the jointly designated representative of OC-PIN and Dr. Shah the total sum of One Million Five Hundred Thousand Dollars ($1,500,000) in two installments as follows: Seven Hundred Fifty Thousand Dollars ($750,000) payable at the Closing; and Seven Hundred Fifty Thousand Dollars ($750,000) and interest thereon payable at eight percent (8%) payable on September 25, 2009. Payment of the second installment is hereby guaranteed by PCHI, who shall make such payment by September 28, 2009, if not timely paid by IHHI. 5. At the Closing, PCHI will separately pay to the Callahan & Blaine Trust Account, as the designated representative of Dr. Shah, Eight Hundred Fifty Thousand Dollars ($850,000). 6. At the Closing, MedCap will separately pay to the Callahan & Blaine Trust Account, as the jointly designated representative of OC-PIN and Dr. Shah, Three Hundred Fifty Thousand Dollars ($350,000). 7. At the Closing, IHHI shall pay to the Callahan & Blaine Trust Account, as the designated representative of Dr. Shah, the sum of Fifteen Thousand Dollars ($15,000) in satisfaction of all Shah's individual claims including, but not limited to, his claims for past due director's fees and other compensation. 4 8. [Intentionally Omitted.] 9. At the Closing, IHHI and Mogel shall agree and stipulate to the release and return of the $50,000 bond which was posted in connection with the shareholder derivative action filed by OC-PIN against Mogel and IHHI in OCSC Case No. 30-2008-00109286. STOCK PURCHASE AGREEMENTS. -------------------------- 10. At the Closing, IHHI, Dr. Shah, Dr. Chaudhuri and OC-PIN agree to execute and deliver their respective Stock Purchase Agreements in the forms attached hereto as Exhibits A, B and C ("Stock Purchase Agreements"). The shares purchased under the Stock Purchase Agreements shall be referred to as the "Stock Purchase Shares." The Stock Purchase Agreements are an integral part of this First Settlement Agreement, the terms of which Stock Purchase Agreements are incorporated by reference as though fully set forth herein. If either OC-PIN or Dr. Shah choose not to purchase all of the respective Stock Purchase Shares, then those Stock Purchase Shares which either party elects not to purchase may be purchased by the other party. Either party who elects not to purchase all or part of their Stock Purchase Shares shall give appropriate notice to the other party no later than 20 days after Closing. Within 30 days after Closing, OC-PIN and Dr. Shah shall jointly notify IHHI and Dr. Chaudhuri in writing ("SPA Notice") of their final determination of the number of Stock Purchase Shares subject to their respective Stock Purchase 5 Agreements whereupon such Stock Purchase Agreements shall be deemed so amended to reflect the final number of Stock Purchase Shares being purchased. In the event IHHI and Dr. Chaudhuri do not receive a SPA Notice duly executed by OC-PIN and Dr. Shah within 30 days of Closing there shall be no adjustment in the number of shares subject to any of the Stock Purchase Agreements. In the event that OC-PIN and Dr. Shah purchase, in the aggregate, fewer Stock Purchase Shares than the maximum they were entitled to purchase under the terms of their Stock Purchase Agreements then Dr. Chaudhuri agrees that the number of Stock Purchase Shares he is entitled to purchase under his Stock Purchase Agreement shall be automatically reduced to an amount which is 51% of the aggregate number of Stock Purchase Shares which Dr. Chaudhuri, OC-PIN and Dr. Shah actually purchase under their Stock Purchase Agreements. By way of illustration, if OC-PIN and Dr. Shah actually purchase an aggregate of 15 million shares, then Dr. Chaudhuri is entitled to purchase 15,612,245 shares which is 51% of the aggregate number of shares being sold under all Stock Purchase Agreements. At the same time, as part of the SPA Notice, OC-PIN and Dr. Shah must elect whether they intend to use as a credit all or a portion of the second Seven Hundred Fifty Thousand Dollars ($750,000) payment (as specified in Paragraph 4 above and hereinafter referred to as the "Second Payment"), and any accrued interest thereon, toward OC-PIN and Dr. Shah's payment to IHHI for their respective Stock Purchase Shares. In the SPA Notice, OC-PIN and Shah will provide an agreed allocation of the Second Payment signed by each of them. Neither OC-PIN nor Dr. Shah are entitled to use as a credit all or a portion of the Second Payment unless such a fully signed allocation is so provided. If OC-PIN and Dr. Shah properly provide a SPA Notice with a fully signed 6 allocation, they can use so much of the amount allocated as a credit applicable to their respective obligations under their respective Stock Purchase Agreements. If the credit is more than what is owed to IHHI, then IHHI will continue to owe the balance under the terms of Section 4. If the credit is less than what is owed to IHHI, OC-PIN and Dr. Shah will need to furnish the additional funds at the Closing of their respective Stock Purchase Agreements. If OC-PIN and Dr. Shah fail to timely give the SPA Notice with fully signed allocation, then no credit shall be given but IHHI shall continue to owe the Second Payment under the terms of Section 4. 11. IHHI agrees (and MedCap concurs) that IHHI will use the net proceeds of the sale of the Stock Purchase Shares to pay down the principal balance of IHHI's $10,700,000 Convertible Term Note, dated October 9, 2007, held by MPFCIII, and MedCap agrees to promptly advance (or cause its subsidiaries to promptly advance) to IHHI additional funds equal to such amount by which the $10,700,000 Convertible Term Note is paid down ("Additional Loaned Funds"). IHHI agrees (and MedCap concurs) that the source of the Additional Loaned Funds will be further borrowing on and against IHHI's existing lines of credit with MedCap. If necessary, IHHI then agrees to use the Additional Loaned Funds to bring current the Chapman Lease and the PCHI Lease, including all late fees, penalties, etc., associated with IHHI's failure to timely pay such rent and other payments required under the leases. 7 12. IHHI shall use its reasonable best efforts to ensure that it has enough authorized capital stock to issue the Stock Purchase Shares, after consideration of all previously granted warrants, conversion rights and stock purchase agreements. The IHHI Board has authorized, and the majority-in-interest of IHHI's shareholders have consented to an increase in authorized capital stock to accommodate the Stock Purchase Agreements. IHHI has filed an information statement on Schedule 14C with the Securities and Exchange Commission ("SEC"). IHHI covenants to promptly (1) seek to have such information statement declared effective by the SEC, (2) respond to any comments by the SEC, (3) mail the information statement to the shareholders, and (4) file restated articles of incorporation with the Nevada Secretary of State. The increase in authorized capital stock shall be completed within 45 days subject to reasonable extension if IHHI must respond to SEC comments. Notwithstanding the foregoing, in no event shall IHHI be required to perform under the Stock Purchase Agreements if the effect would be to require IHHI to issue shares, including outstanding warrants, conversion rights and stock purchase options, in excess of its authorized and unreserved capital stock. 13. OC-PIN expressly acknowledges the validity and enforceability of the preemptive rights granted by IHHI to Dr. Chaudhuri. OC-PIN recognizes that in connection with this Settlement Agreement, OC-PIN is releasing its claim that IHHI granted or should have granted OC-PIN competing or superior preemptive rights and acknowledges that as of the Closing, it does not have any preemptive rights with respect to securities of IHHI; provided, however, nothing herein is intended to affect the Stock Purchase Agreements described in Section 10 of this Settlement Agreement or the OC-PIN members' Tag Along Right described in the Shareholder's Agreement referenced in the Second Settlement Agreement. 8 LOAN INTEREST AND RENT REDUCTION. --------------------------------- 14. MPFCII agrees, effective as of the Closing, to reduce the interest rate on the $45,000,000 Term Note dated October 9, 2007 ("Term Note") to simple interest of 10.25% and to maintain such interest rate up to and including the Maturity date of such Term Note, or any extension thereof, as defined in the $80,000,000 Credit Agreement dated October 9, 2007 ("Credit Agreement"), under which Credit Agreement the Term Note was issued ("MedCap Debt Service Reduction"). Provided, however, the MedCap Debt Service Reduction shall have no force or effect, and shall be suspended, at any time an Event of Default shall have occurred and continues under the Credit Agreement. PCHI agrees that during the period of the MedCap Debt Service Reduction it will reduce the rent payable by IHHI to PCHI in an amount equal to the MedCap Debt Service Reduction (I.E., the difference between 14% and 10.25%). At Closing, all parties to the Credit Agreement will execute and deliver to MPFCII a written amendment to the Credit Agreement memorializing the MedCap Debt Service Reduction set forth immediately above. PCHI RENT. - ---------- 15. IHHI agrees to bring the PCHI lease and the Chapman leases current and pay all arrearages due under the PCHI Lease and the Chapman leases within forty-five (45) days after the Closing. IHHI BY-LAWS AND BOARD CHANGES. - ------------------------------- 16. OC-PIN's obligation to fulfill its agreements at the Closing shall be subject to the following actions by IHHI's Board of Directors: 9 i. Approve an amendment to IHHI's Bylaws to provide that the number of members serving on IHHI's Board of Directors shall be fixed at seven. This amendment shall be made not later than Closing. ii. Approve an amendment to Section 4 of Article III of IHHI's Bylaws to provide that, effective immediately after IHHI's 2009 Annual Meeting of Shareholders, a Shareholder who owns fifteen percent (15%) or more of the voting stock of IHHI is entitled to call one special shareholders meeting per year. This amendment shall be made not later than Closing; and iii. Appoint an OC-PIN representative selected by a majority-in-interest of OC-PIN to fill the seat to be vacated by Ken Westbrook at Closing until the September 2009 annual meeting of shareholders. 17. In connection with the provisions set forth in Paragraph 16 immediately above, MedCap (and all related and affiliated persons and entities) makes no representation or takes any position other than as set forth in the $80 Million Loan Documents and the Other Loan Documents (as said terms are defined in Paragraph 23(x) below.) 18. Dr. Shah and OC-PIN agree to make, within five (5) business days after the Closing, and keep current on a timely basis, all such filings and reports that are required to be made by each of them under Section 13(d) of the Securities Exchange Act of 1934, as amended, including such filings or reports that are required to publicly disclose or report to the SEC the transactions contemplated by this Settlement Agreement. 10 19. Dr. Shah covenants and agrees that for a period of two (2) years after the Closing Dr. Shah will not accept any nomination, appointment or serve in the capacity as a director, officer or employee of IHHI, so long as IHHI keeps the PCHI and Chapman leases current ("current" means payment is made within forty-five (45) days of when payment is due). DISMISSALS AND RELEASES. ------------------------ 20. Dr. Shah and OC-PIN specifically covenant not to sue, and further covenant not to assist anyone else in suing, directly or derivatively on behalf of IHHI or any other entity, Dr. Chaudhuri or MedCap (and all related and affiliated persons and entities). Dr. Chaudhuri and MedCap specifically covenant not to sue, and further covenant not to assist anyone else in suing, directly or derivatively on behalf of IHHI or any other entity, Dr. Shah and OC-PIN based on any act, occurrence or omission which occurred or allegedly occurred prior to the Closing. 21. At the Closing, Dr. Shah and OC-PIN shall sign and deliver to IHHI, PCHI, Chaudhuri and Mogel dismissals with prejudice of all Dr. Shah and OC-PIN's claims in the Actions described in the Recitals. 22. At the Closing, IHHI, PCHI and Chaudhuri shall sign and deliver to Shah and OC-PIN dismissals with prejudice of all IHHI, PCHI and Chaudhuri's claims against Dr. Shah and/or OC-PIN in the Actions described in the Recitals. 23. Except as to such rights or claims as may be created by this Settlement Agreement, the Second Settlement Agreement or expressly reserved in either of them, the following releases are provided: 11 i. RELEASE OF CLAIMS BY IHHI. IHHI irrevocably, unconditionally and fully releases and forever discharges OC-PIN, Dr. Shah, PCHI, WCH, MedCap (and all related and affiliated persons and entities), Dr. Chaudhuri, Ganesha, Thomas and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which IHHI may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of any claims by IHHI against Mogel, either in his individual or representative capacity as an agent for any party. THIS IS A GENERAL RELEASE. ii. RELEASE OF CLAIMS BY OC-PIN OC-PIN irrevocably, unconditionally and fully releases and forever discharges IHHI, Mogel, PCHI, Dr. Chaudhuri, Ganesha, Thomas, MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, directors, partners, 12 agents, employees, members, managers, insurers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which OC-PIN may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of OC-PIN's rights to enforce its preexisting ownership of IHHI's stock (acknowledging that it does not have preemptive rights) or previous releases which IHHI has executed in favor of OC-PIN. THIS IS A GENERAL RELEASE. iii. RELEASE OF CLAIMS BY DR. SHAH. Dr. Shah irrevocably, unconditionally and fully releases and forever discharges IHHI, Mogel, PCHI, Dr. Chaudhuri, Ganesha, Thomas, MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, 13 directors, partners, agents, employees, members, managers, insurers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which Dr. Shah may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of Dr. Shah's right to enforce his preexisting ownership and contractual rights with OC-PIN or WCH. THIS IS A GENERAL RELEASE. iv. RELEASE OF CLAIMS BY MOGEL. Mogel irrevocably, unconditionally and fully releases and forever discharges IHHI, OC-PIN, Dr. Shah, PCHI, WCH, Dr. Chaudhuri, Ganesha, Thomas, MedCap (and all related and affiliated persons and entities), and their 14 respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which Mogel may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement is intended to or shall be construed to extinguish, release, waive, restrict, reduce, or modify any rights of Mogel under his pre-existing Resignation Agreement dated November 4, 2008 ("Resignation Agreement") with IHHI or rights recognized in such Resignation Agreement including, but not limited to, Mogel's rights to indemnification as set forth and recognized in Section 7(d) of the Resignation Agreement, and nothing in this Settlement Agreement shall constitute or include a release or compromise of Mogel's right to enforce his pre-existing Resignation Agreement with IHHI. THIS IS A GENERAL RELEASE. 15 v. RELEASE OF CLAIMS BY PCHI. PCHI irrevocably, unconditionally and fully releases and forever discharges its members and managers, IHHI, OC-PIN, Dr. Shah, Dr. Jacob Sweidan, WCH, Dr. Chaudhuri, Ganesha, Thomas, Mogel MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which PCHI may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of PCHI's right to enforce its pre-existing lease with IHHI. THIS IS A GENERAL RELEASE. 16 vi. Release of Claims by WCH. WCH irrevocably, unconditionally and fully releases and forever discharges IHHI, Mogel, PCHI, Dr. Chaudhuri, Dr. Shah, Dr. Jacob Sweidan, Ganesha, Thomas, MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which WCH may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of WCH's right to enforce its preexisting ownership and contractual rights in and with PCHI. THIS IS A GENERAL RELEASE. 17 vii. RELEASE OF CLAIMS BY DR. CHAUDHURI. Dr. Chaudhuri irrevocably, unconditionally and fully releases and forever discharges IHHI, Dr. Shah, Mogel, OC-PIN, PCHI, WCH, MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which Dr. Chaudhuri may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of Dr. Chaudhuri's right to enforce his pre-existing ownership and contractual rights in and with IHHI including, but not limited to, the above-described preemptive rights and Stock Purchase Agreement. THIS IS A GENERAL RELEASE. 18 viii. RELEASE OF CLAIMS BY GANESHA. Ganesha irrevocably, unconditionally and fully releases and forever discharges IHHI, Dr. Shah, Mogel, OC-PIN, PCHI, WCH, MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which Ganesha may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of Ganesha's right to enforce its pre-existing ownership and contractual rights in and with PCHI. THIS IS A GENERAL RELEASE. 19 ix. RELEASE OF CLAIMS BY THOMAS. Thomas irrevocably, unconditionally and fully releases and forever discharges IHHI, Dr. Shah, Mogel, OC-PIN, PCHI, WCH, MedCap (and all related and affiliated persons and entities), and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which Thomas may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement shall constitute or include a release or compromise of Thomas' right to enforce his pre-existing ownership and contractual rights in and with IHHI. THIS IS A GENERAL RELEASE. 20 x. RELEASE OF CLAIMS BY MEDCAP. MedCap (and all related and affiliated persons and entities) irrevocably, unconditionally and fully releases and forever discharges IHHI, Dr. Shah, Mogel, OC-PIN, PCHI, WCH, Dr. Chaudhuri, Ganesha, Thomas and their respective past and present subsidiaries, affiliates, officers, directors, partners, agents, employees, members, managers, insurers, representatives, lawyers and law firms, and all persons acting by, through, under or in concert with them, or any of them, from any and all rights, suits, claims, actions, accounts, demands, contracts, debts, controversies, agreements, promises, liabilities, duties, obligations, costs, expenses, damages and causes of action, whether presently known or unknown, vested or contingent, suspected or unsuspected, accrued or yet to accrue, in law or in equity, which MedCap may now or hereafter have, own or claim to have arising out of, connected with or otherwise related to or concerning the Actions, any facts, circumstances or claims which were alleged or which could have been alleged in the pleadings in the Actions, or which could have been asserted in any action or proceeding in any legal, administrative or other forum whatsoever in any jurisdiction, including, but not limited to, any legal fees, court costs or expenses relating to the Actions; provided, however, nothing in this Settlement Agreement or in the Second Settlement Agreement shall constitute or include a release, waiver, compromise, limitation or diminishment of the right of MedCap (and of its related and affiliated entities) to enforce the provisions of the Term Note, the Credit Agreement or of any other notes, documents or instrument executed or delivered in connection therewith (collectively and together, the "$80 21 Million Loan Documents") against any Party to this Settlement Agreement and/or against any Party to the Second Settlement Agreement which is or was a party to the $80 Million Loan Documents, and nothing in this Settlement Agreement or in the Second Settlement Agreement shall constitute or include a release, waiver, compromise, limitation or diminishment of the right of MedCap (and of its related and affiliated entities) to enforce the provisions of the $50,000,000 Credit Agreement dated October 9, 2007 and the $10,700,000 Credit Agreement dated October 9, 2007 and/or any notes, documents or instruments executed or delivered in connection therewith (collectively and together, the "Other Loan Documents") against any Party to this Settlement Agreement and/or against any party to the Second Settlement Agreement which is or was a party to the Other Loan Documents. THIS IS A GENERAL RELEASE. xi. Without limiting the generality of the foregoing, Dr. Shah, OC-PIN and WCH generally release Dr. Chaudhuri, Ganesha, Thomas and PCHI's counsel Gaines, Weil, West & Epstein from any claims relating or pertaining to the management of PCHI, the defense of Dr. Shah's claims against PCHI or PCHI's claims against OC-PIN. xii. Notwithstanding the foregoing, a WCH or OC-PIN Member who has not executed the Second Settlement Agreement shall not be entitled to a release herein or a release under the Second Settlement Agreement. 22 24. Each Party agrees not to commence, maintain, initiate, prosecute, cause, assist or cooperate with any other person to commence, maintain, initiate or prosecute any action, suit, proceeding or any claim before any court or administrative agency in any jurisdiction against a Party of the matters released in this Settlement Agreement. If a Party violates this covenant then (a) this Settlement Agreement shall be a complete defense to any such action, suit, proceeding or claim, and (b) the suing Party may not attack the legal validity or sufficiency of this Settlement Agreement. 25. Each Party acknowledges that he, she or it has been advised by counsel of his, her or its own choosing and is familiar with and understands the provisions of California Civil Code section 1542, which section provides as follows: 1. "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." 26. Each Party hereby voluntarily and expressly waives and relinquishes each and every right or benefit which he, she or it may have under California Civil Code section 1542 to the full extent that he, she or it may lawfully waive such rights. Each Party acknowledges that he, she or it may hereafter discover facts in addition to or different from those which he, she or it presently knows or believes to be true regarding the subject matter of the dispute, but that the intention here is to fully, finally and forever settle and release the matters, disputes, differences, now known or unknown, suspected or unsuspected, arising out of or in any way relating to the matters released pursuant to this Settlement Agreement. 23 27. The Parties hereto acknowledge that they expressly understand that this Settlement Agreement and the Settlement it represents is (a) entered into solely for the purpose of avoiding on-going and future expenses, burdens or distractions of litigating the Actions, and (b) in no way constitutes an admission by any Party hereto of any liability of any kind to any other Party or of any wrongdoing. In this connection, the Parties specifically deny liability in connection with any claims which have been made or could have been made, or which are the subject matter of, or arise from, or are connected directly or indirectly with or related in any way to any of the allegations raised in the Actions. 28. Notwithstanding the foregoing, PCHI reserves its claims against IHHI for unpaid rent and other violations of the IHHI\PCHI lease. 29. Dr. Shah represents that, to date, he and his wife have not incurred any attorneys' fees on account of their guaranty of the Chapman leases. However, should Dr. Shah or his wife incur any liability, including, but not limited to, damages, losses or attorneys' fees, caused by IHHI's past failure to pay rent on the Chapman leases, Dr. Shah hereby expressly reserves, and nothing herein shall be deemed to release, impair or diminish, any and all rights Dr. Shah and his wife may have against IHHI or any other party in connection with any damages, losses or attorney's fees reasonably incurred by Dr. Shah or his wife in satisfaction or defense of claims brought by the landlord(s) of the Chapman leases or Tenet relating to Dr. Shah or his wife's guaranty of the Chapman leases, or any affirmative claims related thereto, including without limitation the recent action filed by Tenet Healthcare Corporation against Dr. Shah and IHHI (OCSC Case No. 30-2009-00119836). 24 COMPLIANCE WITH THE LAW. ------------------------ 30. All performance under this Settlement Agreement shall at all times be subject to compliance by all Parties with applicable law and regulation then in effect including, without limitation, federal and California law and regulation relating to financial relationships between IHHI and its referring physicians, such as the federal "Stark Law" contained in provisions of the Social Security Act. MISCELLANEOUS. -------------- 31. The Parties each independently represent, warrant and agree that each is now and shall remain through the Closing the sole and lawful owner of all right, title and interest in and to every right, claim or other matter released herein, and that such Party has not assigned or transferred or purported to or attempted to assign or transfer or had involuntary assigned or transferred to any person or entity any right, claim, or other matter released herein, and that no third party is subrogated to any such rights or has any claim upon the payments being made herein. 32. The Parties named as parties to the Actions stipulate that this Settlement Agreement may be entered as a judgment pursuant to California Code of Civil Procedure section 664.6 and that the Orange County Superior Court shall retain jurisdiction over the Parties to enforce the terms of this Settlement Agreement until they have been performed in full. For the purposes of this Settlement Agreement only, and without affecting any other agreements which may exist between the Parties, California law shall govern this Settlement Agreement. 25 33. The Parties agree to execute all further and additional documents and to take such other action necessary under the circumstances to accomplish the purposes set forth in this Settlement Agreement. Each person or entity who executes this Settlement Agreement acknowledges and represents that to the extent that he, she or it is a signatory that he, she or it (a) has fully and carefully read and understands the Settlement Agreement; (b) has had the opportunity to be fully apprised by his, her or its attorneys of the legal effect and meaning of this Settlement Agreement; (c) has had the opportunity to make whatever investigation or inquiry he, she or it has deemed necessary or appropriate in connection with the subject matter of this Settlement Agreement; (d) has been afforded the opportunity to negotiate as to any and all terms of this Settlement Agreement; and (e) is executing this Settlement Agreement voluntarily, free from undue influence, coercion, duress, menace or fraud of any kind. 34. In executing this Settlement Agreement, the Parties hereto do not rely on any inducements, promises or representations made by any other Party other than as contemporaneously set forth in writing, including those set forth in the Second Settlement Agreement, the Shareholder Agreement and the Stock Purchase Agreements with respect to those Parties who are also parties to those agreements, respectively. This Settlement Agreement contains the entire agreement and understanding between the Parties with respect to the Actions and the subject matters which gave rise to the Actions and supersedes and replaces and all prior negotiations, proposed and actual agreements, whether written or 26 oral, except for the Second Settlement Agreement, the Shareholder Agreement and the Stock Purchase Agreements, with respect to the Actions and subject matters which gave rise to the Actions. Except as expressly set forth herein, nothing in this Settlement Agreement is intended to modify, change or affect the rights or obligations of any Party to any pre-existing written contracts or written agreements between them. 35. The failure of any of the Parties to insist upon strict adherence to any term, condition or provision of this Settlement Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence of that term, condition, or provision or any other term, condition or provision of this Settlement Agreement. 36. The failure of any Party to fully perform its duties and obligations under this Settlement Agreement and/or to pay any amounts when due under this Settlement Agreement ("Defaulting Party") shall not affect, impact, change, reduce, diminish or eliminate the settlements, covenants, releases and waivers granted to any other Party to this Settlement Agreement ("Non-Defaulting Party") so long as the Non-Defaulting Party has fully performed its obligations under this Settlement Agreement. 37. Each of the signatories for the Parties declares and represents that he or she is competent and authorized to execute this Settlement Agreement on behalf of the Party for whom he or she is signing. 27 38. Each Party to this Settlement Agreement shall bear all of his, her or its own attorneys' fees, costs and expenses as well as fees, costs and expenses of any of his, her or its advisors with respect to the matters and Actions released herein and in the negotiation and drafting of this Settlement Agreement; provided, however, that this provision is not intended to and shall not be construed to extinguish, release, waive, restrict, reduce, or modify Mogel's rights to indemnification as set forth and recognized in Section 7(d) of the Resignation Agreement. 39. This Settlement Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same agreement. 40. A photocopied and/or faxed signature page will suffice for the purposes of executing this Settlement Agreement. 41. Any notice required by this Settlement Agreement shall be made in writing and sent via certified mail, return receipt requested, DHL, Fed-Ex, Courier hand-delivered or similar means to give actual notice and proof thereof ("Dispatch") and by facsimile (if facsimile number is provided hereinafter) on the same day of Dispatch and shall be effective upon Dispatch and facsimile, if applicable. Notice shall be made as follows: Dr. Anil Shah 2621 South Bristol, Suite 108 Santa Ana, CA 92704 Fax: (714) 966-0417 With copy to: Daniel J. Callahan, Esq. CALLAHAN & BLAINE 3 Hutton Centre Drive, 9th Floor Santa Ana, CA 92707 Fax: (714) 241-4445 28 Orange County Physicians Investment Network, LLC 2621 South Bristol, Suite 304 Santa Ana, CA 92704 Fax: (714) 297-9588 With copies to: Daniel J. Callahan, Esq. CALLAHAN & BLAINE 3 Hutton Centre Drive, 9th Floor Santa Ana, CA 92707 Fax: (714) 241-4445 and William R. Mitchell, Esq. 1168-003 LOGAN RETOSKE, LLP 31351 Ranch Viejo Road, Suite 202 San Juan Capistrano, CA 92675 Fax: (949) 489-1257 Integrated Healthcare Holdings, Inc. 1301 N. Tustin Ave. Santa Ana, CA 92705 Fax: (714) 953-3384 With copies to: David A. Robinson, Esq. ENTERPRISE COUNSEL GROUP, ALC Five Park Plaza, Suite 450 Irvine, CA 92614 Fax: (949) 833-8540 and J. Scott Schoeffel, Esq. Integrated Healthcare Holdings, Inc. 1301 N. Tustin Ave. Santa Ana, CA 92705 Fax: (714) 953-3384 and 29 Allen Z. Sussman, Esq. Reed Smith, LLP 355 South Grand Avenue, Suite 2900 Los Angeles, CA 90071-1514 Fax: (213) 457-8080 Bruce Mogel c/o Michael G. Yoder, Esq. O'MELVENY & MYERS LLP 610 Newport Center Drive, 17th Floor Newport Beach, CA 92660-6429 Fax: (949) 823-6994 William E. Thomas, Esq. Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Fax: (951) 782-8850 Dr. Kali Chaudhuri Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Fax: (951) 782-8850 With copy to: Peter J. Mort, Esq. Law Office of Peter J. Mort 41250 Gallop Lane Murrieta, CA 92562 Fax: (951) 696-9343 Medical Capital Corporation Medical Provider Financial Corporation I Medical Provider Financial Corporation II Medical Provider Financial Corporation III c/o Medical Capital Corporation 15101 Red Hill Avenue Tustin, CA 92780 Attn: Joseph J. Lampariello, President Thomas R. Fazio, Vice President and General Counsel Tel: 800-824-3700 Fax: 714-258-7242 30 With copy to: Gary Sheppard, Esq. Sedgwick Detert Moran & Arnold One Market Plaza Steuart Tower 8th Floor San Francisco, California 94105 Fax: (415) 781-2635 Pacific Coast Holdings Investment, LLC 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Fax: (951) 782-8850 and 2621 South Bristol, Suite 304 Santa Ana, CA 92704 Fax: (714) 297-9588 With copy to: William E. Thomas ------------------ 2023 Arroyo Dr. ---------------- Riverside, CA 92506 ------------------- West Coast Holdings, LLC 2621 South Bristol, Suite 304 Santa Ana, CA 92704 Fax: (714) 297-9588 With copy to: ---------------------- ---------------------- ---------------------- Ganesha Realty, LLC 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Fax: (951) 782-8850 31 With copy to: William E. Thomas, Esq. Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Fax: (951) 782-8850 The foregoing is agreed upon this 25th day of March, 2009 at Santa Ana, California. INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ Kenneth K. Westbrook ---------------------------------------- Printed Name: Kenneth K. Westbrook ------------------------------ Its: President and CEO --------------------------------------- By: /s/ Steven R. Blake ---------------------------------------- Printed Name: Steven R. Blake ------------------------------ Its: CFO -------------------------------------- ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC By: /s/ John L. Glavinovich, M.D ---------------------------------------- Printed Name: John L. Glavinovich, M.D. ----------------------------- Its: Co-Manager --------------------------------------- By: /s/ Anil V. Shah, M.D. ---------------------------------------- Printed Name: Anil V. Shah, M.D. ------------------------------ Its: Co-Manager -------------------------------------- ANIL V. SHAH, M.D. /s/ Anil V. Shah, M.D. - -------------------------------------------- 32 PACIFIC COAST HOLDINGS INVESTMENT, LLC By: /s/ Kali P. Chaudhuri, M.D. ---------------------------------------- Printed Name: Kali P. Chaudhuri, M.D. ----------------------------- Its: Manager --------------------------------------- By: /s/ Jacob Sweidan ---------------------------------------- Printed Name: Jacob Sweidan ------------------------------ Its: Co-Manager -------------------------------------- MEDICAL PROVIDER FINANCIAL CORPORATION I MEDICAL PROVIDER FINANCIAL CORPORATION II MEDICAL PROVIDER FINANCIAL CORPORATION III MEDICAL CAPITAL CORPORATION By: /s/ Joseph J. Lampariell ---------------------------------------- Printed Name: Joseph J. Lampariello ----------------------------- Its: President --------------------------------------- By: /s/ Joseph J. Lampariello ---------------------------------------- Printed Name: Joseph J. Lampariello ------------------------------ Its: President -------------------------------------- BRUCE MOGEL /s/ Bruce Mogel - -------------------------------------------- KALI P. CHAUDHURI, M.D. /s/ Kali P. Chaudhuri, M.D - -------------------------------------------- WEST COAST HOLDINGS, LLC By: /s/ Jacob Sweidan ---------------------------------------- Printed Name: Jacob Sweidan ------------------------------ Its: Manager -------------------------------------- 33 GANESHA REALTY, LLC By: /s/ Kali P. Chaudhuri, M.D. ---------------------------------------- Printed Name: Kali P. Chaudhuri, M.D. ------------------------------ Its: Owner/Manager -------------------------------------- WILLIAM THOMAS /s/ William E. Thomas - -------------------------------------------- 34 EX-10.2 4 ihhi_8k-ex1002.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.2 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "AGREEMENT") is made and entered into effective as of April 2, 2009 (the "EFFECTIVE DATE") by and between Integrated Healthcare Holdings, Inc., a Nevada corporation (the "COMPANY"), and Dr. Kali P. Chaudhuri (the "INVESTOR"). WHEREAS, each of the parties hereto are also party to that certain Settlement Agreement, General Release and Covenant Not to Sue of even date herewith (the "SETTLEMENT AGREEMENT") by and among the Company, Dr. Anil V. Shah, Orange County Physicians Investment Network, LLC ("OC-PIN"), Bruce Mogel, Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, Dr. Kali P. Chaudhuri, Ganesha Realty, LLC, William E. Thomas, and Medical Capital Corporation, on behalf of itself and three of its wholly owned subsidiaries, Medical Provider Financial Corporation I, Medical Provider Financial Corporation II and Medical Provider Financial Corporation III. WHEREAS, in connection with the execution of the Settlement Agreement, the parties desire to enter into this Agreement as set forth herein. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Investor agree as follows: ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1: "AFFILIATE" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the common stock of the Company, par value $0.001 per share. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "LIEN" means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind. 1 "MATERIAL ADVERSE EFFECT" means any of (i) a material and adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company, taken as a whole, or (iii) an adverse impairment to the Company's ability to perform on a timely basis its obligations under this Agreement. "PERSON" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "REQUIRED APPROVALS" has the meaning set forth in Section 3.1(d). "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SEC REPORTS" means all reports required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Sections 13(a) or 15(d) thereof, and the rules and regulations adopted by the Commission thereunder. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHARES" means the shares of Common Stock purchased by the Investor pursuant to this Agreement. ARTICLE II. ISSUANCE OF COMMON STOCK 2.1 PURCHASE AND SALE; CLOSING. (a) Subject to and upon the terms and conditions set forth herein, at the Closing the Company shall issue and deliver to the Investor, and the Investor shall acquire and receive from the Company, an aggregate of 30,600,000 shares of Common Stock (the "SHARES") "), subject to possible adjustment pursuant to Section 10 of the Settlement Agreement, for a purchase price of Three Cents ($0.03) per share. At the Closing, the Investor shall pay to the Company the aggregate purchase price for the Shares by bank check or wire transfer of immediately available funds, the credit described in Section 10 of the Settlement Agreement, or such other payment mechanism as the parties may mutually agree prior to the Closing, or any combination thereof. The Closing shall be held at the offices of Reed Smith LLP, 355 South Grand Ave., Suite 2900, Los Angeles CA 90071. (b) The purchase and sale of the Shares hereunder (the "CLOSING") shall be held on the day that is forty-five (45) days after the Effective Date (or if such day is not a business day, then the next following business day) (the "CLOSING DATE"); PROVIDED, HOWEVER, that if on the Closing Date the Company does not have sufficient authorized and unreserved shares of Common Stock to issue all of the Shares being purchased by the Investor as well 2 as the other shares required to be issued pursuant to the Settlement Agreement (aggregating 60,000,000 shares in all), then the Closing Date shall be postponed to the first business day on which the Company has a sufficient number of authorized and unreserved shares to issue all of the Shares being purchased by the Investor hereunder and the other shares required to be issued pursuant to the Settlement Agreement. Failure of the Investor to deliver payment for the Shares shall relieve the Company from its obligation to issue and deliver the shares to the Investor, and the Company shall not be entitled to any other damages or relief resulting from the failure of the Investor to purchase the Shares. The failure of the Investor to purchase the Shares shall not constitute a default under the Settlement Agreement or the Second Settlement Agreement. (c) At the Closing, the Company shall deliver to the Investor a stock certificate registered in the name of the Investor and evidencing the Shares, or irrevocable instructions to the Company's transfer agent to promptly deliver such a certificate to the Investor. The Shares shall be issued free and clear of any Liens, except for (i) restrictions on transfer imposed under Federal and state securities laws, (ii) any designations, rights, preferences and powers set forth in the Company's Articles of Incorporation, and (iii) any legends required to be imprinted on the certificates evidencing the Shares under Section 4.2. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the following representations and warranties to Investor: (a) ORGANIZATION AND QUALIFICATION. The Company is duly organized, validly existing and in good standing under the laws of the State of Nevada, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation of any of the provisions of its Articles of Incorporation, bylaws or other organizational or charter documents. The Company is duly qualified to conduct its business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (b) AUTHORIZATION; ENFORCEMENT. Subject to the proposed increase in the Company's authorized shares of common stock as described in Section 12 of the Settlement Agreement (the "AUTHORIZED CAPITAL INCREASE"), the Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder. Except for the Required Approvals, the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith. This Agreement has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. 3 (c) NO CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Company's Articles of Incorporation and bylaws, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) subject to the filings contemplated by Section 3.1(d), result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including Federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (d) FILINGS, CONSENTS AND APPROVALS. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) filings required by state securities laws, (ii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, and (iii) those that have been made or obtained prior to the date of this Agreement (collectively, the "REQUIRED APPROVALS"). (e) ISSUANCE OF THE SHARES. Upon consummation of the Authorized Capital Increase, the Shares will be duly authorized and, when issued and paid for in accordance with this Agreement, duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for in this Agreement. The Company has reserved from its duly authorized capital stock, subject to consummation of the Authorized Capital Increase, the shares of Common Stock issuable pursuant to this Agreement. (f) CAPITALIZATION. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company's various option and incentive plans, is specified in the SEC Reports. 3.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor hereby represents to the Company as follows: 4 (a) INVESTMENT INTENT. Investor is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to Investor's right to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws. Investor is acquiring the Shares hereunder in the ordinary course of its business. Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares. (b) INVESTOR STATUS. At the time Investor was offered the Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Investor is not a registered broker-dealer under Section 15 of the Exchange Act. (c) GENERAL SOLICITATION. Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (d) ACCESS TO INFORMATION. Investor acknowledges that it has reviewed the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of Investor or its representatives or counsel shall modify, amend or affect Investor's right to rely on the truth, accuracy and completeness of the SEC Reports and the Company's representations and warranties contained in this Agreement. (e) INDEPENDENT INVESTMENT DECISION. Investor has independently evaluated the merits of its decision to purchase Shares pursuant to this Agreement, and has not relied on the advice of any other Person or the Company in making such decision. ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES 4.1 The Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Shares to the Company or to an Affiliate of Investor, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. 4.2 Certificates evidencing the Shares will contain the following legends, until such time as the Shares are eligible for sale without restriction under Rule 144 or state securities laws: 5 THE SHARES REPRESENTED BY THIS CERTIFICATE 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 THE 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 FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF APRIL 2, 2009 WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH SHAREHOLDERS AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS. ARTICLE V. MISCELLANEOUS 5.1 GOVERNING LAW; VENUE. This Agreement shall be construed in accordance with and governed by the laws of the State of Nevada without reference to conflicts of law principles. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of California and of the United States of America, in each case located in the County of Orange, for any lawsuit, action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any lawsuit, action or proceeding relating thereto except in such courts), Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any lawsuit, action or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of California or the United States of America, in each case located in the County of Orange, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such lawsuit, action or proceeding brought in any such court has been brought in an inconvenient forum. 6 5.2 WAIVER. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either party of any condition or term in any one or more instances shall be construed as a further or continuing waiver of such condition or term or of another condition or term. 5.3 ENTIRE AGREEMENT. This Agreement and the Settlement Agreement constitute the entire agreement between the parties relating to the subject matter hereof and supersede all previous writings and understandings. No modifications or waiver of any terms or conditions hereof shall be effective unless made in writing and signed by a party (if an individual) or a duly authorized officer of the party against which enforcement is sought. 5.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. 5.5 NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto, or their respective permitted successors and assigns, any benefits, rights or remedies. 5.6 HEADINGS. The headings contained in this Agreement have been added for convenience and shall not be construed as limiting. 5.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution of a facsimile copy shall have the same force and effect as execution of an original, and a facsimile signature shall be deemed an original and valid signature. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 7 IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. COMPANY: INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ KENNETH K. WESTBROOK ---------------------------------------- Print Name: Kenneth K. Westbrook Title: President & CEO INVESTOR: /s/ KALI P. CHAUDHURI, M.D. -------------------------------------------- DR. KALI P. CHAUDHURI 8 EX-10.3 5 ihhi_8k-ex1003.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.3 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "AGREEMENT") is made and entered into effective as of April 2, 2009 (the "EFFECTIVE DATE") by and between Integrated Healthcare Holdings, Inc., a Nevada corporation (the "COMPANY"), and Dr. Anil V. Shah (the "INVESTOR"). WHEREAS, each of the parties hereto are also party to that certain Settlement Agreement, General Release and Covenant Not to Sue of even date herewith (the "SETTLEMENT AGREEMENT") by and among the Company, Dr. Anil V. Shah, Orange County Physicians Investment Network, LLC ("OC-PIN"), Bruce Mogel, Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, Dr. Kali P. Chaudhuri, Ganesha Realty, LLC, William E. Thomas, and Medical Capital Corporation, on behalf of itself and three of its wholly owned subsidiaries, Medical Provider Financial Corporation I, Medical Provider Financial Corporation II and Medical Provider Financial Corporation III. WHEREAS, in connection with the execution of the Settlement Agreement, the parties desire to enter into this Agreement as set forth herein. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Investor agree as follows: ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1: "AFFILIATE" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the common stock of the Company, par value $0.001 per share. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "LIEN" means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind. 1 "MATERIAL ADVERSE EFFECT" means any of (i) a material and adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company, taken as a whole, or (iii) an adverse impairment to the Company's ability to perform on a timely basis its obligations under this Agreement. "PERSON" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "REQUIRED APPROVALS" has the meaning set forth in Section 3.1(d). "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SEC REPORTS" means all reports required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Sections 13(a) or 15(d) thereof, and the rules and regulations adopted by the Commission thereunder. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHARES" means the shares of Common Stock purchased by the Investor pursuant to this Agreement. ARTICLE II. ISSUANCE OF COMMON STOCK 2.1 PURCHASE AND SALE; CLOSING. (a) Subject to and upon the terms and conditions set forth herein, at the Closing the Company shall issue and deliver to the Investor, and the Investor shall acquire and receive from the Company, an aggregate of 14,700,000 shares of Common Stock (the "SHARES") "), subject to possible adjustment pursuant to Section 10 of the Settlement Agreement, for a purchase price of Three Cents ($0.03) per share. At the Closing, the Investor shall pay to the Company the aggregate purchase price for the Shares by bank check or wire transfer of immediately available funds, the credit described in Section 10 of the Settlement Agreement, or such other payment mechanism as the parties may mutually agree prior to the Closing, or any combination thereof. The Closing shall be held at the offices of Reed Smith LLP, 355 South Grand Ave., Suite 2900, Los Angeles CA 90071. (b) The purchase and sale of the Shares hereunder (the "CLOSING") shall be held on the day that is forty-five (45) days after the Effective Date (or if such day is not a business day, then the next following business day) (the "CLOSING DATE"); PROVIDED, HOWEVER, that if on the Closing Date the Company does not have sufficient authorized and unreserved shares of Common Stock to issue all of the Shares being purchased by the Investor as well 2 as the other shares required to be issued pursuant to the Settlement Agreement (aggregating 60,000,000 shares in all), then the Closing Date shall be postponed to the first business day on which the Company has a sufficient number of authorized and unreserved shares to issue all of the Shares being purchased by the Investor hereunder and the other shares required to be issued pursuant to the Settlement Agreement. Failure of the Investor to deliver payment for the Shares shall relieve the Company from its obligation to issue and deliver the shares to the Investor, and the Company shall not be entitled to any other damages or relief resulting from the failure of the Investor to purchase the Shares. The failure of the Investor to purchase the Shares shall not constitute a default under the Settlement Agreement or the Second Settlement Agreement. (c) At the Closing, the Company shall deliver to the Investor a stock certificate registered in the name of the Investor and evidencing the Shares, or irrevocable instructions to the Company's transfer agent to promptly deliver such a certificate to the Investor. The Shares shall be issued free and clear of any Liens, except for (i) restrictions on transfer imposed under Federal and state securities laws, (ii) any designations, rights, preferences and powers set forth in the Company's Articles of Incorporation, and (iii) any legends required to be imprinted on the certificates evidencing the Shares under Section 4.2. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the following representations and warranties to Investor: (a) ORGANIZATION AND QUALIFICATION. The Company is duly organized, validly existing and in good standing under the laws of the State of Nevada, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation of any of the provisions of its Articles of Incorporation, bylaws or other organizational or charter documents. The Company is duly qualified to conduct its business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (b) AUTHORIZATION; ENFORCEMENT. Subject to the proposed increase in the Company's authorized shares of common stock as described in Section 12 of the Settlement Agreement (the "AUTHORIZED CAPITAL INCREASE"), the Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder. Except for the Required Approvals, the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith. This Agreement has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance 3 with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (c) NO CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Company's Articles of Incorporation and bylaws, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) subject to the filings contemplated by Section 3.1(d), result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including Federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (d) FILINGS, CONSENTS AND APPROVALS. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) filings required by state securities laws, (ii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, and (iii) those that have been made or obtained prior to the date of this Agreement (collectively, the "REQUIRED APPROVALS"). (e) ISSUANCE OF THE SHARES. Upon consummation of the Authorized Capital Increase, the Shares will be duly authorized and, when issued and paid for in accordance with this Agreement, duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for in this Agreement. The Company has reserved from its duly authorized capital stock, subject to consummation of the Authorized Capital Increase, the shares of Common Stock issuable pursuant to this Agreement. (f) CAPITALIZATION. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company's various option and incentive plans, is specified in the SEC Reports. 3.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor hereby represents to the Company as follows: 4 (a) INVESTMENT INTENT. Investor is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to Investor's right to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws. Investor is acquiring the Shares hereunder in the ordinary course of its business. Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares. (b) INVESTOR STATUS. At the time Investor was offered the Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Investor is not a registered broker-dealer under Section 15 of the Exchange Act. (c) GENERAL SOLICITATION. Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (d) ACCESS TO INFORMATION. Investor acknowledges that it has reviewed the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of Investor or its representatives or counsel shall modify, amend or affect Investor's right to rely on the truth, accuracy and completeness of the SEC Reports and the Company's representations and warranties contained in this Agreement. (e) INDEPENDENT INVESTMENT DECISION. Investor has independently evaluated the merits of its decision to purchase Shares pursuant to this Agreement, and has not relied on the advice of any other Person or the Company in making such decision. ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES 4.1 The Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Shares to the Company or to an Affiliate of Investor, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. 4.2 Certificates evidencing the Shares will contain the following legends, until such time as the Shares are eligible for sale without restriction under Rule 144 or state securities laws: 5 THE SHARES REPRESENTED BY THIS CERTIFICATE 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 THE 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 FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF APRIL 2, 2009 WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH SHAREHOLDERS AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS. ARTICLE V. MISCELLANEOUS 5.1 GOVERNING LAW; VENUE. This Agreement shall be construed in accordance with and governed by the laws of the State of Nevada without reference to conflicts of law principles. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of California and of the United States of America, in each case located in the County of Orange, for any lawsuit, action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any lawsuit, action or proceeding relating thereto except in such courts), Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any lawsuit, action or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of California or the United States of America, in each case located in the County of Orange, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such lawsuit, action or proceeding brought in any such court has been brought in an inconvenient forum. 6 5.2 WAIVER. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either party of any condition or term in any one or more instances shall be construed as a further or continuing waiver of such condition or term or of another condition or term. 5.3 ENTIRE AGREEMENT. This Agreement and the Settlement Agreement constitute the entire agreement between the parties relating to the subject matter hereof and supersede all previous writings and understandings. No modifications or waiver of any terms or conditions hereof shall be effective unless made in writing and signed by a party (if an individual) or a duly authorized officer of the party against which enforcement is sought. 5.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. 5.5 NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto, or their respective permitted successors and assigns, any benefits, rights or remedies. 5.6 HEADINGS. The headings contained in this Agreement have been added for convenience and shall not be construed as limiting. 5.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution of a facsimile copy shall have the same force and effect as execution of an original, and a facsimile signature shall be deemed an original and valid signature. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 7 IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. COMPANY: INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ KENNETH K. WESTBROOK ---------------------------------------- Print Name: Kenneth K. Westbrook Title: President & CEO INVESTOR: /s/ ANIL V. SHAH, M.D. -------------------------------------------- DR. ANIL V. SHAH 8 EX-10.4 6 ihhi_8k-ex1004.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.4 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "AGREEMENT") is made and entered into effective as of April 2, 2009 (the "EFFECTIVE DATE") by and between Integrated Healthcare Holdings, Inc., a Nevada corporation (the "COMPANY"), and Orange County Physicians Investment Network, LLC (the "INVESTOR"). WHEREAS, each of the parties hereto are also party to that certain Settlement Agreement, General Release and Covenant Not to Sue of even date herewith (the "SETTLEMENT AGREEMENT") by and among the Company, Dr. Anil V. Shah, Orange County Physicians Investment Network, LLC ("OC-PIN"), Bruce Mogel, Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, Dr. Kali P. Chaudhuri, Ganesha Realty, LLC, William E. Thomas, and Medical Capital Corporation, on behalf of itself and three of its wholly owned subsidiaries, Medical Provider Financial Corporation I, Medical Provider Financial Corporation II and Medical Provider Financial Corporation III. WHEREAS, in connection with the execution of the Settlement Agreement, the parties desire to enter into this Agreement as set forth herein. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Investor agree as follows: ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1: "AFFILIATE" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the common stock of the Company, par value $0.001 per share. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "LIEN" means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind. 1 "MATERIAL ADVERSE EFFECT" means any of (i) a material and adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company, taken as a whole, or (iii) an adverse impairment to the Company's ability to perform on a timely basis its obligations under this Agreement. "PERSON" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "REQUIRED APPROVALS" has the meaning set forth in Section 3.1(d). "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SEC REPORTS" means all reports required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Sections 13(a) or 15(d) thereof, and the rules and regulations adopted by the Commission thereunder. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHARES" means the shares of Common Stock purchased by the Investor pursuant to this Agreement. ARTICLE II. ISSUANCE OF COMMON STOCK 2.1 PURCHASE AND SALE; CLOSING. (a) Subject to and upon the terms and conditions set forth herein, at the Closing the Company shall issue and deliver to the Investor, and the Investor shall acquire and receive from the Company, an aggregate of 14,700,000 shares of Common Stock (the "SHARES") "), subject to possible adjustment pursuant to Section 10 of the Settlement Agreement, for a purchase price of Three Cents ($0.03) per share. At the Closing, the Investor shall pay to the Company the aggregate purchase price for the Shares by bank check or wire transfer of immediately available funds, the credit described in Section 10 of the Settlement Agreement, or such other payment mechanism as the parties may mutually agree prior to the Closing, or any combination thereof. The Closing shall be held at the offices of Reed Smith LLP, 355 South Grand Ave., Suite 2900, Los Angeles CA 90071. (b) The purchase and sale of the Shares hereunder (the "CLOSING") shall be held on the day that is forty-five (45) days after the Effective Date (or if such day is not a business day, then the next following business day) (the "CLOSING DATE"); PROVIDED, HOWEVER, that if on the Closing Date the Company does not have sufficient authorized and unreserved shares of Common Stock to issue all of the Shares being purchased by the Investor as well as the other shares required to be issued pursuant to the Settlement Agreement (aggregating 60,000,000 shares in all), then the Closing Date shall be postponed to the first business day on which the Company has a sufficient number of 2 authorized and unreserved shares to issue all of the Shares being purchased by the Investor hereunder and the other shares required to be issued pursuant to the Settlement Agreement. Failure of the Investor to deliver payment for the Shares shall relieve the Company from its obligation to issue and deliver the shares to the Investor, and the Company shall not be entitled to any other damages or relief resulting from the failure of the Investor to purchase the Shares. The failure of the Investor to purchase the Shares shall not constitute a default under the Settlement Agreement or the Second Settlement Agreement. (c) At the Closing, the Company shall deliver to the Investor a stock certificate registered in the name of the Investor and evidencing the Shares, or irrevocable instructions to the Company's transfer agent to promptly deliver such a certificate to the Investor. The Shares shall be issued free and clear of any Liens, except for (i) restrictions on transfer imposed under Federal and state securities laws, (ii) any designations, rights, preferences and powers set forth in the Company's Articles of Incorporation, and (iii) any legends required to be imprinted on the certificates evidencing the Shares under Section 4.2. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the following representations and warranties to Investor: (a) ORGANIZATION AND QUALIFICATION. The Company is duly organized, validly existing and in good standing under the laws of the State of Nevada, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation of any of the provisions of its Articles of Incorporation, bylaws or other organizational or charter documents. The Company is duly qualified to conduct its business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (b) AUTHORIZATION; ENFORCEMENT. Subject to the proposed increase in the Company's authorized shares of common stock as described in Section 12 of the Settlement Agreement (the "AUTHORIZED CAPITAL INCREASE"), the Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder. Except for the Required Approvals, the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith. This Agreement has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance 3 with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (c) NO CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Company's Articles of Incorporation and bylaws, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) subject to the filings contemplated by Section 3.1(d), result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including Federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (d) FILINGS, CONSENTS AND APPROVALS. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) filings required by state securities laws, (ii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, and (iii) those that have been made or obtained prior to the date of this Agreement (collectively, the "REQUIRED APPROVALS"). (e) ISSUANCE OF THE SHARES. Upon consummation of the Authorized Capital Increase, the Shares will be duly authorized and, when issued and paid for in accordance with this Agreement, duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for in this Agreement. The Company has reserved from its duly authorized capital stock, subject to consummation of the Authorized Capital Increase, the shares of Common Stock issuable pursuant to this Agreement. (f) CAPITALIZATION. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company's various option and incentive plans, is specified in the SEC Reports. 3.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor hereby represents to the Company as follows: 4 (a) INVESTMENT INTENT. Investor is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to Investor's right to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws. Investor is acquiring the Shares hereunder in the ordinary course of its business. Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares. (b) INVESTOR STATUS. At the time Investor was offered the Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Investor is not a registered broker-dealer under Section 15 of the Exchange Act. (c) GENERAL SOLICITATION. Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (d) ACCESS TO INFORMATION. Investor acknowledges that it has reviewed the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of Investor or its representatives or counsel shall modify, amend or affect Investor's right to rely on the truth, accuracy and completeness of the SEC Reports and the Company's representations and warranties contained in this Agreement. (e) INDEPENDENT INVESTMENT DECISION. Investor has independently evaluated the merits of its decision to purchase Shares pursuant to this Agreement, and has not relied on the advice of any other Person or the Company in making such decision. ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES 4.1 The Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Shares to the Company or to an Affiliate of Investor, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. 4.2 Certificates evidencing the Shares will contain the following legends, until such time as the Shares are eligible for sale without restriction under Rule 144 or state securities laws: 5 THE SHARES REPRESENTED BY THIS CERTIFICATE 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 THE 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 FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF APRIL 2, 2009 WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH SHAREHOLDERS AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS. ARTICLE V. MISCELLANEOUS 5.1 GOVERNING LAW; VENUE. This Agreement shall be construed in accordance with and governed by the laws of the State of Nevada without reference to conflicts of law principles. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of California and of the United States of America, in each case located in the County of Orange, for any lawsuit, action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any lawsuit, action or proceeding relating thereto except in such courts), Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any lawsuit, action or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of California or the United States of America, in each case located in the County of Orange, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such lawsuit, action or proceeding brought in any such court has been brought in an inconvenient forum. 6 5.2 WAIVER. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either party of any condition or term in any one or more instances shall be construed as a further or continuing waiver of such condition or term or of another condition or term. 5.3 ENTIRE AGREEMENT. This Agreement and the Settlement Agreement constitute the entire agreement between the parties relating to the subject matter hereof and supersede all previous writings and understandings. No modifications or waiver of any terms or conditions hereof shall be effective unless made in writing and signed by a party (if an individual) or a duly authorized officer of the party against which enforcement is sought. 5.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. 5.5 NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto, or their respective permitted successors and assigns, any benefits, rights or remedies. 5.6 HEADINGS. The headings contained in this Agreement have been added for convenience and shall not be construed as limiting. 5.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution of a facsimile copy shall have the same force and effect as execution of an original, and a facsimile signature shall be deemed an original and valid signature. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 7 IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. COMPANY: INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ KENNETH K. WESTBROOK --------------------------------------- Print Name: Kenneth K. Westbrook Title: President & CEO INVESTOR: ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC By: /s/ JOHN L. GLAVINOVICH, M.D. --------------------------------------- Print Name: John L. Glavinovich, M.D. Title: Co-Manager By: /s/ ANIL V. SHAH, M.D. --------------------------------------- Print Name: Anil V. Shah, M.D. Title: Co-Manager 8 EX-10.5 7 ihhi_8k-ex1005.txt AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT EXHIBIT 10.5 AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT --------------------------------------------- ($50,000,000 FACILITY DATED OCTOBER 9, 2007) This AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT (this "AMENDMENT NO. 1"), dated as of April 2, 2009 ("EFFECTIVE DATE"), is made by and among 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"), COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL"), PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("PCHI"), ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN"), GANESHA REALTY, LLC, a California limited liability company ("GANESHA"), WEST COAST HOLDINGS, LLC, a California limited liability company ("WEST COAST"), and MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation ("LENDER"). IHHI, WMC-SA, WMC-A, Chapman and Coastal are sometimes collectively referred to herein as "BORROWERS"; PCHI, Ganesha, and West Coast are hereinafter together sometimes referred to as the "CREDIT PARTIES"; and PCHI and OC-PIN are hereinafter together sometimes referred to as the "GUARANTORS." This Amendment No. 1 amends that certain Revolving Credit Agreement ($50,000,000 Facility) dated as of October 9, 2007 ("$50 MILLION REVOLVING CREDIT AGREEMENT") by and between Lender, Borrowers, the Credit Parties and the Guarantors. RECITALS A. Lender, Borrowers, and the Credit Parties are parties to the $50 Million Revolving Credit Agreement; Lender, West Coast and OC-PIN are parties to that certain Guaranty Agreement dated October 9, 2007 ("GUARANTY"); and Lender, West Coast, Ganasha and IHHI are parties to that certain Pledge Agreement dated October 9, 2007 ("PLEDGE AGREEMENT"). The $50 Million Revolving Credit Agreement, the Guaranty and the Pledge Agreement, and each of the other documents and instruments executed in connection with the $50 Million Revolving Credit Agreement, are hereinafter collectively referred to as the "$50 MILLION REVOLVING LOAN DOCUMENTS." Capitalized terms not defined in this Amendment No. 1 shall have the same meaning as set forth in the $50 Million Revolving Credit Agreement. Pursuant to the $50 Million Revolving Credit Agreement, Lender extended to Borrowers a $50,000,000 revolving credit facility ("REVOLVING FACILITY"). B. Separately: 1. Medical Provider Financial Corporation III, a Nevada corporation and an affiliated of Lender ("MPFC III"), Borrowers, the Credit Parties and certain other persons and entities named therein are parties to that certain Credit Agreement ($10.7 Million Facility) dated as of October 9, 2007 ("$10.7 MILLION CREDIT AGREEMENT"), pursuant to which MPFC III agreed to and did make a $10,700,000 convertible term loan ("$10.7 MILLION LOAN") to the 1 Borrowers. Repayment of the $10.7 Million Loan is evidenced by that certain $10,700,000 promissory note dated as of October 9, 2007 (the "$10.7 MILLION NOTE"). The $10.7 Million Credit Agreement, the $10.7 Million Note and all other agreements, documents, and instruments evidencing and/or securing the payment or performance of the $10.7 Million Loan are hereinafter collectively sometimes referred to as the "$10.7 MILLION LOAN DOCUMENTS." 2. Lender, MPFC III, Borrowers and certain other persons and entities named therein are parties to that certain Early Loan Payoff Agreement dated as of July 18, 2008 as first amended on January 30, 2009 (together the "EARLY LOAN PAYOFF AGREEMENT"). Pursuant to the Early Loan Payoff Agreement, among other things, Borrowers requested, and Lender agreed, to grant Borrowers the right and option to extend the Maturity Date of the $50 Million Revolving Credit Agreement upon the occurrence of certain events. C. Pursuant to this Amendment No. 1, the undersigned intend to amend the $50 Million Revolving Credit Agreement as set forth below. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows: 1. RECITALS. The foregoing Recitals are incorporated by reference as if fully set forth herein. 2. AMENDMENT TO $50 MILLION REVOLVING CREDIT AGREEMENT. The $50 Million Revolving Credit Agreement is hereby amended to provide as follows: (i) OPTION TO EXTEND MATURITY DATE. New Article 15 is hereby added to the $50 Million Revolving Credit Agreement: XV. OPTION TO EXTEND MATURITY DATE. Notwithstanding anything in the $50 Million Revolving Credit Agreement to the contrary, on condition that Borrowers under the $10.7 Million Credit Agreement pay in full the unpaid principal balance due and owing under the $10.7 Million Loan ("$10.7 MILLION BALANCE Due") no later than January 30, 2010, Lender under the $50 Million Revolving Credit Agreement hereby grants Borrowers under the $50 Million Revolving Credit Agreement the option ("OPTION TO EXTEND") to extend the Maturity Date of the Revolving Facility from October 8, 2010 to October 8, 2011 ("EXTENDED MATURITY DATE"). Borrowers may exercise the Option to Extend, if at all, by delivery of unequivocal written notice thereof ("NOTICE OF EXERCISE") to Lender under the $50 Million Revolving Credit Agreement after payment of the $10.7 Million Balance Due in immediately available funds and not later than July 8, 2010 ("EXERCISE DATE"). The Notice of Exercise must be accompanied by the written agreement and consent of all Persons (other than Lender) named in the $50 Million Revolving Credit Agreement (e.g., Credit Parties, Guarantors, etc.), if any, whose consent and agreement is necessary or required in order for said Borrower to exercise the Option to Extend. If said Borrower fails to timely exercise the Option to Extend, then the Option to Extend shall terminate, expire and have no further force or effect. All references to Maturity Date shall mean and include the Extended Maturity Date. 2 3. REAFFIRMATION OF $50 MILLION REVOLVING LOAN DOCUMENTS; CONFIRMATION OF GUARANTIES; UNCONDITIONAL OBLIGATIONS; WAIVERS. Each of the Borrowers, each of the Credit Parties, and each of the Guarantors hereby reaffirms, remakes and confirms each of their respective representations and warranties made in each of the $50 Million Revolving Loan Documents. In addition, each of the Guarantors reaffirms and remakes each of their obligations under its Guaranty and reaffirms and restates each and every term, condition, and provision of its Guaranty. In addition, each Guarantor hereby agrees that its obligations under its Guaranty shall be unconditional, irrespective of (a) the absence of any attempt to collect the Revolving Facility from Borrowers or any other Guarantor or other action to enforce the same, (b) the waiver or consent by Lender with respect to any provision of any of the $50 Million Revolving Loan Documents or any other agreement now or hereafter executed by Borrower and delivered to Lender. Each Guarantor further reaffirms that its obligations under its Guaranty are primary and are separate and distinct from Borrower's obligations. Each Guarantor further represents and warrants that it has no defenses or claims against Lender that would or might affect the enforceability of its Guaranty and that its Guaranty remains in full force and effect. Each Guarantor irrevocably and permanently waives any and all rights of subrogation, reimbursement, indemnity, contribution or any other claim arising from the existence of performance of its Guaranty which each Guarantor may now or hereafter have against Borrowers or any other person or entity (or their respective properties) directly or contingently liable for said obligations. 4. ADVICE OF LEGAL COUNSEL. Each Borrower, each Credit Party and each Guarantor represents, warrants and covenants that it has consulted with and received advice from its own legal counsel, that it has read this Amendment No. 1 and/or that its legal counsel has explained the contents of this Amendment No. 1, that it understands the terms and conditions of this Amendment No. 1, that it understands the legal consequences of executing this Amendment No. 1, and agrees to execute the same. 5. $50 MILLION REVOLVING CREDIT AGREEMENT TO REMAIN IN FORCE AND EFFECT. Except as amended by this Amendment No. 1, the $50 Million Revolving Credit Agreement shall remain in full force and effect according to its terms. In the event of an inconsistency or conflict between this Amendment No. 1 and the $50 Million Revolving Credit Agreement, in each instance this Amendment No. 1 to prevail and govern. [SIGNATURE PAGE FOLLOWS] 3 IN WITNESS WHEREOF, this Amendment No. 1 to the $50 Million Revolving Credit Agreement has been duly executed as of the date first written above. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ----------------------------------- Title: CEO & PRESIDENT ---------------------------------- WMC-SA, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ----------------------------------- Title: CEO ---------------------------------- WMC-A, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ----------------------------------- Title: CEO ---------------------------------- COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ----------------------------------- Title: CEO ---------------------------------- CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ KENNETH K. WESTBROO ------------------------------------------ Name: KENNETH K. WESTBROOK ----------------------------------- Title: CEO ---------------------------------- [SIGNATURE PAGE CONTINUES] 4 GUARANTORS AND CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ JACOB SWEIDAN ------------------------------------------ Jacob Sweidan, M.D., Manager By: /s/ KALI P. CHAUDHURI, M.D. ------------------------------------------ Kali P. Chaudhuri, M.D., Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company, By: /s/ ANIL V. SHAH, M.D. ------------------------------------------ Anil V. Shah, M.D., Manager ADDITIONAL CREDIT PARTIES: GANESHA REALTY, LLC, a California limited liability company, By: /s/ KALI P. CHAUDHURI ------------------------------------------ Name: KALI P. CHAUDHURI, ----------------------------------- Title: MANAGER ---------------------------------- WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ JACOB SWEIDAN ------------------------------------------ Name: JACOB SWEIDAN ----------------------------------- Title: MANAGER ---------------------------------- [SIGNATURE PAGE CONTINUES] 5 LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation, By: /s/ JOSEPH J. LAMPARIELLO ------------------------------------------ Joseph J. Lampariello, President and COO 6 EX-10.6 8 ihhi_8k-ex1006.txt AMENDMENT NO. 1 TO CREDIT AGREEMENT EXHIBIT 10.6 AMENDMENT NO. 1 TO CREDIT AGREEMENT ----------------------------------- ($80,000,000 FACILITY DATED OCTOBER 9, 2007) This AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "AMENDMENT NO. 1"), dated as of April 2, 2009 ("EFFECTIVE DATE"), is made by and among 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"), COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("COASTAL"), PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("PCHI"), ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN"), GANESHA REALTY, LLC, a California limited liability company ("GANESHA"), WEST COAST HOLDINGS, LLC, a California limited liability company ("WEST COAST"), and MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation ("LENDER"). IHHI, WMC-SA, WMC-A, Chapman and Coastal are sometimes collectively referred to herein as "BORROWERS"; PCHI, Ganesha, and West Coast are hereinafter together sometimes referred to as the "CREDIT PARTIES"; and PCHI and OC-PIN are hereinafter together sometimes referred to as the "GUARANTORS." This Amendment No. 1 amends that certain Credit Agreement ($80,000,000 Loan Facility) dated as of October 9, 2007 ("$80 MILLION CREDIT AGREEMENT") by and between Lender, Borrowers, the Credit Parties and the Guarantors. RECITALS A. Lender, Borrowers, and the Credit Parties are parties to the $80 Million Credit Agreement; Lender, West Coast and OC-PIN are parties to that certain Guaranty Agreement dated October 9, 2007 ("GUARANTY"); and Lender, West Coast, Ganasha and IHHI are parties to that certain Pledge Agreement dated October 9, 2007 ("PLEDGE AGREEMENT"). The $80 Million Credit Agreement, the Guaranty and the Pledge Agreement, and each of the other documents and instruments executed in connection with the $80 Million Credit Agreement, are hereinafter collectively referred to as the "$80 MILLION LOAN DOCUMENTS." Capitalized terms not defined in this Amendment No. 1 shall have the same meaning as set forth in the $80 Million Credit Agreement. Pursuant to the $80 Million Credit Agreement, Lender extended to Borrowers a $45,000,000 real estate term loan ("$45,000,000 REAL ESTATE TERM LOAN") and a $35,000,000 non-revolving line of credit loan ("$35,000,000 NON-REVOLVING LINE OF CREDIT LOAN"). The $45,000,000 Real Estate Term Loan and the $35,000,000 Non-Revolving Line of Credit Loan are hereinafter together referred to as the "$80 MILLION LOANS." B. Separately: 1 1. Medical Provider Financial Corporation III, a Nevada corporation and an affiliate of Lender ("MPFC III"), Borrowers, the Credit Parties and certain other persons and entities named therein are parties to that certain Credit Agreement ($10.7 Million Facility) dated as of October 9, 2007 ("NEW $10.7 MILLION CREDIT AGREEMENT"), pursuant to which MPFC III agreed to and did make a $10,700,000 convertible term loan ("$10.7 MILLION CONVERTIBLE TERM LOAN") to the Borrowers. Repayment of the $10.7 Million Loan is evidenced by that certain $10,700,000 promissory note dated as of October 9, 2007 (the "$10.7 MILLION CONVERTIBLE NOTE"). The New $10.7 Million Credit Agreement, the $10.7 Million Convertible Term Note and all other agreements, documents, and instruments evidencing and/or securing the payment or performance of the $10.7 Million Convertible Term Loan are hereinafter collectively sometimes referred to as the "NEW $10.7 MILLION LOAN DOCUMENTS." 2. Lender, MPFC III, Borrowers and certain other persons and entities named therein are parties to that certain Early Loan Payoff Agreement dated as of July 18, 2008 as first amended on January 30, 2009 (together the "EARLY LOAN PAYOFF AGREEMENT"). Pursuant to the Early Loan Payoff Agreement, among other things, Borrowers requested, and Lender agreed, to grant Borrowers the right and option to extend the Maturity Date of the $80 Million Credit Agreement upon the occurrence of certain events. C. Pursuant to this Amendment No. 1, the undersigned intend to amend the $80 Million Credit Agreement as set forth below. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows: 1. RECITALS. The foregoing Recitals are incorporated by reference as if fully set forth herein. 2. AMENDMENTS TO $80 MILLION CREDIT AGREEMENT. The $80 Million Credit Agreement is hereby amended to provide as follows: (i) INTEREST RATE. Annex A to the $80 Million Credit Agreement is hereby amended by deleting the definition of Interest Rate set forth therein and replacing it with the following new definition of Interest Rate: "INTEREST RATE" means, effective as of the Effective Date of this Amendment No. 1, 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 10.25%. (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%. (ii) OPTION TO EXTEND MATURITY DATE. New Section 14 is hereby added to the $80 Million Credit Agreement: 2 14. OPTION TO EXTEND MATURITY DATE. Notwithstanding anything in the $80 Million Credit Agreement to the contrary, on condition that Borrowers under the New $10.7 Million Credit Agreement pay in full the unpaid principal balance due and owing under the $10.7 Million Convertible Term Loan ("$10.7 MILLION BALANCE DUE") no later than January 30, 2010, Lender under the $80 Million Credit Agreement hereby grants Borrowers under the $80 Million Credit Agreement the option ("OPTION TO EXTEND") to extend the Maturity Date of the $80 Million Loans from October 8, 2010 to October 8, 2011 ("EXTENDED MATURITY Date"). Borrowers may exercise the Option to Extend, if at all, by delivery of unequivocal written notice thereof ("NOTICE OF EXERCISE") to Lender under the $80 Million Credit Agreement after payment of the $10.7 Million Balance Due in immediately available funds and not later than July 8, 2010 ("EXERCISE DATE"). The Notice of Exercise must be accompanied by the written agreement and consent of all Persons (other than Lender) named in the $80 Million Credit Agreement (e.g., Credit Parties, Guarantors, etc.), if any, whose consent and agreement is necessary or required in order for said Borrower to exercise the Option to Extend. If said Borrower fails to timely exercise the Option to Extend, then the Option to Extend shall terminate, expire and have no further force or effect. All references to Maturity Date shall mean and include the Extended Maturity Date. 3. REAFFIRMATION OF $80 MILLION LOAN DOCUMENTS; CONFIRMATION OF GUARANTIES; UNCONDITIONAL OBLIGATIONS; WAIVERS. Each of the Borrowers, each of the Credit Parties, and each of the Guarantors hereby reaffirms, remakes and confirms each of their respective representations and warranties made in each of the $80 Million Loan Documents. In addition, each of the Guarantors reaffirms and remakes each of their obligations under its Guaranty and reaffirms and restates each and every term, condition, and provision of its Guaranty. In addition, each Guarantor hereby agrees that its obligations under its Guaranty shall be unconditional, irrespective of (a) the absence of any attempt to collect the $80 Million Loans from Borrower or any other Guarantor or other action to enforce the same, (b) the waiver or consent by Lender with respect to any provision of any of the $80 Million Loan Documents or any other agreement now or hereafter executed by Borrower and delivered to Lender. Each Guarantor further reaffirms that its obligations under its Guaranty are primary and are separate and distinct from Borrower's obligations. Each Guarantor further represents and warrants that it has no defenses or claims against Lender that would or might affect the enforceability of its Guaranty and that its Guaranty remains in full force and effect. Each Guarantor irrevocably and permanently waives any and all rights of subrogation, reimbursement, indemnity, contribution or any other claim arising from the existence of performance of its Guaranty which each Guarantor may now or hereafter have against Borrowers or any other person or entity (or their respective properties) directly or contingently liable for said obligations. 3 4. ADVICE OF LEGAL COUNSEL. Each Borrower, each Credit Party and each Guarantor represents, warrants and covenants that it has consulted with and received advice from its own legal counsel, that it has read this Amendment No. 1 and/or that its legal counsel has explained the contents of this Amendment No. 1, that it understands the terms and conditions of this Amendment No. 1, that it understands the legal consequences of executing this Amendment No. 1, and agrees to execute the same. 5. $80 MILLION CREDIT AGREEMENT TO REMAIN IN FORCE AND EFFECT . Except as amended by this Amendment No. 1, the $80 Million Credit Agreement shall remain in full force and effect according to its terms. In the event of an inconsistency or conflict between this Amendment No. 1 and the $80 Million Credit Agreement, in each instance this Amendment No. 1 to prevail and govern. 4 IN WITNESS WHEREOF, this Amendment No. 1 to the $80 Million Credit Agreement has been duly executed as of the date first written above. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ------------------------------------- Title: CHIEF EXECUTIVE OFFICER & PRESIDENT ------------------------------------ WMC-SA, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ------------------------------------- Title: CEO ------------------------------------ WMC-A, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ------------------------------------- Title: CEO ------------------------------------ COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ------------------------------------- Title: CEO ------------------------------------ CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ KENNETH K. WESTBROOK ------------------------------------------ Name: KENNETH K. WESTBROOK ------------------------------------- Title: CEO ------------------------------------ [SIGNATURE PAGE CONTINUES] 5 GUARANTORS AND CREDIT PARTIES: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ JACOB SWEIDAN ------------------------------------------ Jacob Sweidan, M.D., Manager By: /s/ KALI P. CHAUDHURI, M.D. ------------------------------------------ Kali P. Chaudhuri, M.D., Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company, By: /s/ ANIL V. SHAH, M.D. ------------------------------------------ Anil V. Shah, M.D., Manager ADDITIONAL CREDIT PARTIES: GANESHA REALTY, LLC, a California limited liability company, By: /s/ KALI P. CHAUDHURI ------------------------------------------ Name: KALI P. CHAUDHURI, ------------------------------------- Title: MANAGER ------------------------------------ WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ JACOB SWEIDAN ------------------------------------------ Name: JACOB SWEIDAN ------------------------------------- Title: MANAGER ------------------------------------ [SIGNATURE PAGE CONTINUES] 6 LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation, By: /s/ JOSEPH J. LAMPARIELLO ------------------------------------------ Joseph J. Lampariello, President and COO 7 EX-10.7 9 ihhi_8k-ex1007.txt ACKNOWLEDGEMENT, WAIVER AND CONSENT AND AMENDMENT TO CREDIT AGREEMENTS Exhibit 10.7 ACKNOWLEDGMENT, WAIVER AND CONSENT AND AMENDMENT TO CREDIT AGREEMENTS A. The undersigned hereby acknowledge that the following agreements are being entered into substantially concurrent with the execution of this Acknowledgment, Waiver and Consent and Amendment to Credit Agreements: (i) Settlement Agreement, General Release and Covenant Not to Sue ("First Settlement Agreement") by and among Integrated Healthcare Holdings, Inc. ("IHHI"), Anil V. Shah, M.D. ("Dr. Shah"), Orange County Physicians Investment Network, LLC ("OC-PIN"), Bruce Mogel ("Mogel"), Pacific Coast Holdings Investment, LLC ("PCHI"), West Coast Holdings, LLC, ("WCH"), Dr. Kali P. Chaudhuri ("Dr. Chaudhuri"), Ganesha Realty, LLC ("Ganesha"), William E. Thomas ("Thomas"), Medical Capital Corporation ("MCC"), Medical Provider Financial Corporation I ("MPFCI"), Medical Provider Financial Corporation II ("MPFCII") and Medical Provider Financial Corporation III ("MPFCIII") (MCC, MPFCI, MPFCII and MPFCIII are collectively, "MedCap"); and (ii) Settlement Agreement No. 2 ("Second Settlement Agreement", and together with the First Settlement Agreement, the "Settlement Agreements") by and among Dr. Shah, OC-PIN, the members of OC-PIN (collectively, "OC-PIN Members"), PCHI, WCH, the members of WCH (collectively, "WCH Members"), Dr. Chaudhuri, and Ganesha. B. The undersigned hereby acknowledge that the Settlement Agreements require parties thereto to enter into further agreements as described therein, including without limitation, a Voting Agreement between Dr. Chaudhuri and OC-PIN. C. The undersigned hereby acknowledge that the Settlement Agreements contemplate the occurrence of various transactions and events, including without limitation, the dissolution of WCH and restructuring of PCHI, the dissolution of OC-PIN, the grant and exercise of an Option and Tag Along Rights (as defined in the Settlement Agreements) that will or may result in, among other things, changes in actual or beneficial ownership of the parties thereto and/or affiliates of those parties, some of whom are Credit Parties under one or more of the following credit facilities with MedCap (collectively, "Credit Facilities"): (a) the $10,700,000 Credit Agreement dated October 9, 2007 and related documents (the "$10,700,000 Loan Documents") among MPFCIII, IHHI, WMC-A, Inc. ("WMC-A"), WMC-SA, Inc. ("WMC-SA"), Chapman Medical Center, Inc. ("Chapman"), Coastal Communities Hospital, Inc. ("Coastal") (IHHI, WMC-A, WMC-SA, Chapman and Coastal are collectively, "Borrowers"), PCHI, West Coast, Ganesha and OC-PIN (PCHI, West Coast, Ganesha and OC-PIN are collectively, "Credit Parties"); (b) the $50,000,000 Revolving Credit Agreement dated October 9, 2007 and related documents (the "$50,000,000 Loan Documents") among MPFCI and the Borrowers and Credit Parties; and (c) the $80,000,000 Credit Agreement dated October 9, 2007 and related documents (the "$80,000,000 Loan Documents") among MPFCII and the Borrowers and Credit Parties. D. The undersigned hereby acknowledge that: (a) included in the $10,700,000 Loan Documents are an Environmental Indemnity Agreement dated October 9, 2007 among MPFCIII, the Borrowers, PCHI, WCH and OC-PIN; a Guaranty 1 Agreement dated October 9, 2007 executed by WCH and OC-PIN; and a Pledge Agreement dated October 9, 2007 executed by MPFCIII, IHHI, WCH and Ganesha; (b) included in the $50,000,000 Loan Documents are an Environmental Indemnity Agreement dated October 9, 2007 among MPFCI, the Borrowers, PCHI, WCH and OC-PIN; a Guaranty Agreement dated October 9, 2007 executed by WCH and OC-PIN; and a Pledge Agreement dated October 9, 2007 executed by MPFCI, IHHI, WCH and Ganesha; and (c) included in the $80,000,000 Loan Documents are an Environmental Indemnity Agreement dated October 9, 2007 among MPFCII, the Borrowers, PCHI, WCH and OC-PIN; a Guaranty Agreement dated October 9, 2007 executed by WCH and OC-PIN; and a Pledge Agreement dated October 9, 2007 executed by MPFCII, IHHI, WCH and Ganesha. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the undersigned parties hereto agree as follows: 1. The undersigned hereby agree that if and to the extent that the agreements, transactions and events contemplated in the Settlement Agreements constitute, may constitute or will constitute a "Change of Control", "Default", "Event of Default" (as those terms are defined in the Credit Facilities or the Warrants (as defined below)) or other breach or default under any of the Credit Facilities or the Warrants, the undersigned each hereby waive and consent to the waiver of such event, breach or default. Without limitation of the foregoing, the undersigned hereby further agree that if and to the extent that the agreements, transactions and events contemplated in the Settlement Agreements result in the termination or release of the rights and obligations of WCH pursuant to the $10,700,000 Loan Documents, the $50,000,000 Loan Documents and the $80,000,000 Loan Documents, the undersigned each hereby consent to such termination and release and hereby irrevocably waive all objections thereto. This Acknowledgment, Waiver and Consent and Amendment to Credit Agreements shall be attached to each of the $10,700,000 Credit Agreement, $50,000,000 Revolving Credit Agreement and the $80,000,000 Credit Agreement and constitute amendments thereof. As used herein, "Warrants" are: (i) the warrant dated October 9, 2007 issued to Healthcare Financial Management & Acquisitions, Inc. ("HFMA") to purchase a minimum of 16,880,484 shares of common stock of IHHI (subject to certain adjustments described in the warrant), as amended; and (ii) the warrant dated December 12, 2005 issued to HFMA to purchase a minimum of 26,097,561 shares of common stock of IHHI (subject to certain adjustments described in the warrant), as amended. 2. Notwithstanding anything in the Settlement Agreements to the contrary (including, but not limited to, anything to the contrary set forth in the Shareholders Agreement attached as Exhibit "A" to the Second Settlement Agreement): a. OC-PIN and each of the OC-PIN Members covenant and agree not to cause or permit the dissolution of OC-PIN or cause or permit OC-PIN to make a liquidating distribution of it's stock (together a "OC-PIN Dissolution Event") at any time prior to the date that all amounts due and owing to MedCap under each of the Credit Facilities have been paid in full and satisfied. The occurrence of an OC-PIN Dissolution Event will constitute an Event of Default under each of the Credit Facilities. 2 b. In substitution for the Guaranty of WCH under each of the Credit Facilities, and on the Effective Date of this Acknowledgment, Waiver and Consent and Amendment to Credit Agreements, PCHI hereby agrees to and shall execute and deliver to MedCap the following Guaranty Agreements: (i) Guaranty Agreement ($80 Million Credit Agreement) attached hereto as EXHIBIT "A"; (ii) Guaranty Agreement ($10.7 Million Credit Agreement) attached hereto as EXHIBIT "B"; and (iii) Guaranty Agreement ($50 Million Revolving Credit Agreement) attached hereto as EXHIBIT "C". IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgment, Waiver and Consent and Amendment to Credit Agreements to be duly executed by their respective authorized signatories as of April 2, 2009 ("Effective Date"). INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, By: /s/ Kenneth K. Westbrook ------------------------------------------ Name: Kenneth K. Westbrook ------------------------------------- Title: CEO & President ------------------------------------ WMC-SA, INC., a California corporation, By: /s/ Kenneth K. Westbrook ------------------------------------------ Name: Kenneth K. Westbrook ------------------------------------- Title: CEO ------------------------------------ WMC-A, INC., a California corporation, By: /s/ Kenneth K. Westbrook ------------------------------------------ Name: Kenneth K. Westbrook ------------------------------------- Title: CEO ------------------------------------ [SIGNATURE PAGE CONTINUES] 3 COASTAL COMMUNITIES HOSPITAL, INC., a California corporation, By: /s/ Kenneth K. Westbrook ------------------------------------------ Name: Kenneth K. Westbrook ------------------------------------- Title: CEO ------------------------------------ CHAPMAN MEDICAL CENTER, INC., a California corporation, By: /s/ Kenneth K. Westbrook ------------------------------------------ Name: Kenneth K. Westbrook ------------------------------------- Title: CEO ------------------------------------ PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Jacob Sweidan, M.D. ------------------------------------------ Jacob Sweidan, M.D., Manager By: /s/ Kali P. Chaudhuri, M.D. ------------------------------------------ Kali P. Chaudhuri, M.D., Manager ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company, By: /s/ Anil V. Shah, M.D. ------------------------------------------ Anil V. Shah, M.D., Manager GANESHA REALTY, LLC, a California limited liability company, By: /s/ Kali P. Chaudhuri ------------------------------------------ Name: Kali P. Chaudhuri ------------------------------------- Title: Manager ------------------------------------ [SIGNATURE PAGE CONTINUES] 4 WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Jacob Sweidan, M.D. ------------------------------------------ Name: Jacob Sweidan, M.D. ------------------------------------- Title: Manager ------------------------------------ MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation, By: /s/ Joseph J. Lampariello ------------------------------------------ Joseph J. Lampariello, President and COO MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation, By: /s/ Joseph J. Lampariello ------------------------------------------ Joseph J. Lampariello, President and COO MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation, By: /s/ Joseph J. Lampariello ------------------------------------------ Joseph J. Lampariello, President and COO HEALTHCARE FINANCIAL MANAGEMENT & ACQUISITIONS, INC., a Nevada corporation, By: /s/ Joseph J. Lampariello ------------------------------------------ Name: Joseph J. Lampariello ------------------------------------- Title: President and COO ------------------------------------ [SIGNATURE PAGE CONTINUES] 5 MEDICAL CAPITAL CORPORATION, a Nevada corporation, By: /s/ Joseph J. Lampariello ------------------------------------------ Name: Joseph J. Lampariello ------------------------------------- Title: President and COO ------------------------------------ 6 EXHIBIT "A" TO ACKNOWLEDGEMENT, WAIVER AND CONSENT GUARANTY AGREEMENT OF PCHI ($80 MILLION CREDIT AGREEMENT) SEE ATTACHED 1 GUARANTY AGREEMENT ($80 MILLION CREDIT AGREEMENT) This GUARANTY AGREEMENT (as the same may be amended, modified, or supplemented from time to time, the "Guaranty") is to be effective as of April 2, 2009 ("Effective Date"), by PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("Guarantor"), in favor of MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation ("Lender"), with reference to the following facts: RECITALS A. Guarantor is a party to that certain Credit Agreement ($80 Million Facility) dated as of October 9, 2007 (including all annexes, exhibits and schedules thereto, and as the same may be and has been amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), by and among 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 sometimes collectively referred to herein as "Borrowers" and individually as "Borrower"); Guarantor, WEST COAST HOLDINGS, LLC, a California limited liability company ("West Coast"), GANESHA REALTY, LLC, a California limited liability company ("Ganesha") and ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN") (Guarantor, West Coast, Ganesha and OC-PIN are referred to collectively in the Credit Agreement as the "Credit Parties"), and Lender. B. Pursuant to the Credit Agreement, Lender agreed to and did make (i) a $45,000,000 term loan ("$45,000,000 TERM LOAN") and (ii) a $35,000,000 non-revolving line of credit loan ("$35,000,000 NON-REVOLVING LINE OF CREDIT LOAN") (each as amended, restated, supplemented or otherwise modified from time to time, the "LOANS") to the Borrowers. Repayment of the Loans is evidenced by (1) that certain $45,000,000 Term Note dated as of October 9, 2007 ("$45,000,00 TERM NOTE") and (2) that certain $35,000,000 Non-Revolving Line of Credit Note dated as of October 9, 2007 ("$35,000,000 NON-REVOLVING LINE OF CREDIT NOTE") (the $45,000,000 Term Note and $35,000,000 Non-Revolving Line of Credit Note, each as amended, restated, supplemented or otherwise modified from time to time, are sometimes referred to collectively herein as the "NOTES," and individually as a "NOTE"). The Credit Agreement, the Notes and all other agreements, documents, and instruments evidencing and/or securing the payment or performance of the Obligations (as defined in the Credit Agreement), including all Loan Documents as defined in the Credit Agreement are hereinafter collectively sometimes referred to as the "LOAN DOCUMENTS." C. The following agreements are being entered into substantially concurrent with the execution of this Guaranty: 1 (i) Settlement Agreement, General Release and Covenant Not to Sue ("FIRST SETTLEMENT AGREEMENT") by and among IHHI, Anil V. Shah, M.D. ("Dr. Shah"), OC-PIN, Bruce Mogel ("Mogel"), Guarantor, West Coast, Dr. Kali P. Chaudhuri ("Dr. Chaudhuri"), Ganesha, William E. Thomas ("Thomas"), Medical Capital Corporation ("MCC"), Medical Provider Financial Corporation I ("MPFCI"), Lender and Medical Provider Financial Corporation III ("MPFCIII") (MCC, MPFCI, Lender and MPFCIII are collectively, "MedCap"); and (ii) Settlement Agreement No. 2 ("SECOND SETTLEMENT AGREEMENT", and together with the First Settlement Agreement, the "SETTLEMENT AGREEMENTS") by and among Dr. Shah, OC-PIN, the members of OC-PIN, Guarantor, West Coast, the members of West Coast, Dr. Chaudhuri, and Ganesha. D. The Settlement Agreements require the parties thereto to enter into further agreements as described therein, including without limitation, a Voting Agreement between Dr. Chaudhuri and OC-PIN. E. The Settlement Agreements contemplate the occurrence of various transactions and events, including without limitation, the dissolution of West Coast and restructuring of Guarantor, the dissolution of OC-PIN, the grant and exercise of an Option and Tag Along Rights (as defined in the Settlement Agreements) that will or may result in, among other things, changes in actual or beneficial ownership of the parties thereto and/or affiliates of those parties, some of whom are Credit Parties under the Credit Agreement. F. Among other conditions for entering into the First Settlement Agreement, Lender has required that the Guarantor guaranty the payment and performance of the Guaranty Obligations (defined below), including repayment of the Loans. G. The parties intend that these Recitals are made a part of this Guaranty. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Guaranty, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor hereby covenants, promises and agrees for the benefit of Lender as follows: 1. DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION. Unless otherwise set forth herein, (a) initially capitalized terms or matters of construction defined or established in the Credit Agreement shall be applied herein as defined or established therein, (b) any reference to a "Section" shall refer to the relevant section of this Guaranty, and (c) the following terms shall have, unless otherwise provided elsewhere in this Guaranty, the meanings set forth below: "EQUITY INTEREST" means all shares of Stock, options and warrants to purchase equity securities or other forms of equity, membership interests, general or limited partnership 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 common 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). 2 "GUARANTY OBLIGATIONS" shall mean (a) the obligations to repay the Loans under the Notes, (b) the payment and performance obligations under the Credit Agreement, including repayment of the Loans and the Notes, (c) payment and performance obligations under the other Loan Documents, (d) all other indebtedness, liabilities, and obligations of all Borrowers and the Credit Parties to Lender whether now existing or hereafter arising under the Loan Documents, and (e) all indebtedness, liabilities, and Obligations of Guarantors to Lender whether now existing or hereafter arising under this Guaranty or in any of the Loan Documents. "MATERIAL ADVERSE EVENT" means that any one or more of the following has occurred: (a) any representation or warranty in the Credit Agreement or in any of the other Loan Documents or in any written statement, report, financial statement or certificate made or delivered to Lender by any Borrower or by any Credit Party (including Guarantors) is untrue or incorrect in any material respect as of the date when made or deemed made; or (b) between the Effective Date and the Termination Date, any Borrower or any Credit Party (including Guarantors) commit any act or omit to take any act the result of which constitutes a fraud or intentional misrepresentation as to Lender. "OBLIGATIONS" means all obligations of Borrower under the Credit Agreement. 2. GUARANTY. 2.1 GUARANTY OF THE OBLIGATIONS. (a) In consideration of making the Loans to Borrowers under the Credit Agreement, for all other financial accommodations to or for the benefit of Borrowers and Credit Parties, for entering into the First Settlement Agreement, and for other valuable consideration the receipt and sufficiency of which Guarantor hereby acknowledges, Guarantor hereby unconditionally, irrevocably and absolutely guaranties to Lender, and its respective successors, endorsees, transferees, and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of the Guaranty Obligations. (b) This Guaranty constitutes a guaranty of payment and performance when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that Lender, or any of its successors, endorsees, transferees, or assigns assert any claim or demand or enforce any remedy whatsoever against any Borrower, any other guarantor, or with respect to any collateral provided by any Borrower (collectively, "Collateral"), before or as a condition to the obligations of Guarantor under this Guaranty. 2.2 ABSOLUTE AND IRREVOCABLE GUARANTY. The Guaranty Obligations shall remain in full force and effect without regard to, and shall not be impaired or affected by, or be deemed to be satisfied by, and Guarantor shall not be exonerated, discharged, revoked or released by, any of the following events: 3 (a) Lender's exercise or enforcement of, or failure or delay in exercising or enforcing, legal proceedings to collect any of the Loans or the Guaranty Obligations or any power, right, or remedy with respect to any of the Loans, the Guaranty Obligations, or the Collateral, including without limitation: (i) any action or inaction of Lender to perfect, protect, or enforce any lien upon any Collateral; or (ii) any change in the time, manner, or place of payment of, or in any other term of, any or all of the Loans or the Guaranty Obligations, or any other amendment to, or waiver of, any of the Notes, any other Loan Document, or any other agreement or instrument governing or evidencing any of the Loans or any of the Guaranty Obligations; (b) Insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver or trustee for all or any part of any Borrower's or any Guarantor's assets or of the assets of any other Guarantor of the Obligations, liquidation, winding-up, or dissolution of any Borrower or any Guarantor, or any other guarantor of the Obligations; (c) Any limitation, discharge, cessation, or partial satisfaction of any of the Loans, the Guaranty Obligations, or the obligations of any other guarantor of the Obligations, or any invalidity, voidability, unenforceability, in whole or in part, of the Notes, this Guaranty, any other Loan Document, or any other document evidencing the Loans or Guaranty Obligations; (d) Any merger, acquisition, consolidation or change in structure of any Borrower or any Guarantor or any other guarantor of the Obligations; or any sale, lease, transfer, or other disposition of any or all of the assets or Equity Interests of any Borrower or any Guarantor or any other Guarantor of the Obligations, including, without limitation, any transfer by any Borrower of all or any part of any Collateral, or termination of any Borrower's existence for any reason; (e) Any assignment or other transfer, in whole or in part, of Lender's interest in or rights in or under any of the Notes, or any other Loan Document, including, without limitation, this Guaranty, or with respect to any of the Loans, the Guaranty Obligations, or the Collateral; (f) Any claim, defense, counterclaim, or setoff that any Borrower or any Guarantor or any other Guarantor of the Obligations may have or assert, including, without limitation, any defense of incapacity, disability, or lack of corporate, organizational or other authority to execute any document relating to any of the Loans, the Guaranty Obligations, the Collateral, or this Guaranty, other than (i) upon the occurrence of the Termination Date, the defense of prior performance, or (ii) any defense based on any applicable provision of the Uniform Commercial Code requiring that Collateral be disposed of in a commercially reasonable manner; (g) Any purported revocation by any Guarantor; (h) Any cancellation, renunciation or surrender of any pledge, guaranty, or any debt instrument evidencing any of the Loans or the Guaranty Obligations; 4 (i) The vote, claim, distribution, election, acceptance, action, or inaction of Lender in any bankruptcy or reorganization case related to any of the Loans, the Guaranty Obligations, or the Collateral; or (j) Any other action or circumstances that might otherwise constitute a defense available to, or a legal or equitable discharge of, any surety, any Guarantor or any other Guarantor, except as expressly provided herein; it being agreed that the Guaranty Obligations shall not be discharged or revoked or released until the Termination Date. 2.3 DEMAND BY LENDER. In addition to the terms set forth herein, and in no manner imposing any limitation on such terms, if any of the Obligations under any of the Notes or the Credit Agreement or the other Loan Documents are declared to be or otherwise becomes immediately due and payable due in whole or in part to the occurrence of a Material Adverse Event(s), then Guarantor, upon demand in writing therefor by Lender, shall promptly pay the Guaranty Obligations to Lender. Payment by Guarantor shall be made to Lender to be credited and applied to the Obligations, in immediately available funds in lawful money of the United States of America to an account designated by Lender or at the address set forth in the Credit Agreement or at any other address that may be specified in writing from time to time by Lender as provided herein. Any payment received by Lender with respect to any of the Loans or other Obligations shall reduce the Guaranty Obligations by the amount of such payment. 2.4 GUARANTOR WAIVERS. In addition to any other waivers contained herein, each Guarantor waives, agrees and acknowledges as follows and waives any defense based upon or arising from the following: (a) The Guaranty Obligations are the immediate, direct, primary and absolute liabilities of each Guarantor, and are independent of, and not co-extensive with, any of the Loans, the other Obligations or the obligations of any other Guarantor of the Obligations. Each Guarantor expressly waives any right it may have now or in the future to direct or affect the manner or timing of Lender's enforcement of its rights or remedies. Each Guarantor expressly waives any right he may have now or in the future to revoke this Guaranty. Each Guarantor expressly waives any right it may have now or in the future to require Lender to, and Lender shall not have any liability to, pursue or enforce first against any Borrower, any of the properties or assets of any Borrower, the Collateral or any other security, guaranty or pledge that may now or hereafter be held by Lender for any of the Loans or for the Guaranty Obligations, or to apply such security, guaranty, or pledge to any of the Loans or to the Guaranty Obligations. Each Guarantor shall remain liable for the Guaranty Obligations, notwithstanding any judgment Lender may obtain against any Borrower or any Guarantor, any other Guarantor of the Obligations, or any other Person or entity, or any modification, extension or renewal with respect thereto. Lender shall not be under any liability to marshal any assets in favor of each Guarantor or in payment of any or all of the Loans or the Guaranty Obligations. (b) Each Guarantor has entered into this Guaranty based solely upon his/her/its independent knowledge of each Borrower's financial condition, and each Guarantor assumes full responsibility for obtaining any further information with respect to each Borrower or the conduct of each 5 Borrower's business. Each Guarantor represents that it is now, and during the terms of this Guaranty will be, responsible for ascertaining the financial condition of each Borrower. Each Guarantor hereby waives any duty on the part of Lender to disclose to any Guarantor, and agrees that it is not relying upon or expecting Lender to disclose to it, any fact known or hereafter known by Lender relating to the operation or condition of any Borrower or its business or relating to the existence, liability, or financial condition of any other Guarantor of the Obligations. Each Guarantor knowingly accepts the full range of risk encompassed in a contract of continuing guaranty, which risk includes the possibility that a Borrower may incur further indebtedness after such Borrower's financial condition or its ability to pay debts as they mature has deteriorated. (c) Except as specifically provided in this Guaranty or applicable law, each Guarantor waives, to the fullest extent permitted by applicable law (i) notice of the acceptance by Lender of this Guaranty, (ii) notice of the existence, creation, payment, nonpayment, performance or nonperformance of all or any of the Guaranty Obligations, (iii) 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 Credit Agreement or the other Loan Documents, any of the Notes, commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Guarantors may be liable in any way, and hereby ratifies and confirms whatever Lender may do in this regard, (iv) 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 which might be required by any court prior to allowing Lender to exercise any of its remedies, (v) all rights to receive notices from Lender with respect to, or otherwise sent to, each Guarantor or any other Guarantor of the Obligations, (vi) the benefit of all valuation, appraisal, stay, extension, redemption and exemption laws, (vii) the benefit of any law purporting to reduce any Guarantor's obligation in proportion to the principal obligation hereby guarantied, (viii) the benefit of any law purporting to exonerate any Guarantor's obligation upon performance or an offer of performance of the principal obligation, (ix) notice of any extension, modification, renewal, or amendment of any of the terms of any of the Notes or the Credit Agreement or any other Loan Document relating to any of the Loans or the Guaranty Obligations, (x) notice of the occurrence of any Default or Event of Default with respect to any of the Loans, the Guaranty Obligations, the Collateral or otherwise, and (xi) notice of any exercise or non-exercise by Lender of any right, power, or remedy with respect to any of the Loans, the Guaranty Obligations or the Collateral. (d) If Lender, under applicable law, may proceed to realize its benefits under the Credit Agreement or any other Loan Document providing for a lien upon any Collateral, whether owned by Borrower or by any other person or entity, either by judicial foreclosure or by nonjudicial sale or enforcement, Lender, at its sole option, may determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Guaranty. (e) Each Guarantor represents that each of the Loans and Guaranty Obligations are and shall be incurred by the Borrowers for the permitted uses set forth in the Credit Agreement. Each Guarantor undertakes all the risks encompassed in any of the Notes, in the Credit Agreement and the other Loan Documents as they may be now or are hereafter agreed upon by Lender and any of the Borrowers. Prior to the date this Guaranty terminates, Lender, in such manner and upon such terms and at such time as it deems best, and with or without notice to each Guarantor, may release, add, subordinate or substitute security for the any of the Loans or other Guaranty Obligations in accordance with the Credit Agreement. 6 (f) A separate action or actions may be brought and prosecuted against any Guarantor whether or not an action is brought against any Borrower, or whether any Borrower or any other Guarantor is joined in any such action or actions. 2.5 WAIVERS UNDER STATUTES. Each Guarantor makes the following waivers: EACH GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY LENDER, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED ANY RIGHTS GRANTED TO EACH GUARANTOR PURSUANT TO NEVADA LAW. 2.6 ADDITIONAL WAIVERS. (a) Until the Termination Date, each Guarantor waives any and all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to any Guarantor by reason of applicable state law. This means, among other things, that: (i) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (ii) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that a creditor may be required to pursue the principal obligor or the security for the principal obligation before seeking enforcement against a guarantor or security pledged by such guarantor; (iii) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that a guarantor's obligations may be limited or exonerated by reason of the creditor's alteration of the principal obligation or of another guaranty, or by reason of the impairment or suspension of the creditor's rights or remedies against the principal, another guarantor, or any security given for the principal obligation or given for other guaranties; (iv) Each Guarantor waives and will be unable to claim any right to participate in, or the benefit of, any security given for the principal obligation now or hereafter held by Lender; and (v) Each Guarantor waives and will be unable to claim any right of subrogation and any right to enforce any remedy which Lender may have against any Borrower. 7 (b) Each Guarantor waives any defense based upon any lack of authority of the officers, directors, partners, members, managers, or agents acting or purporting to act on behalf of any Borrower or any principal of any Borrower or any legal disability or defect in the formation of any Borrower. (c) Each Guarantor waives any defense based upon the application by any Borrower of the proceeds of any of the Loans for purposes other than the purposes represented by Borrowers to Lender or intended or understood by Lender or any Guarantor. (d) Each Guarantor waives the benefit of any statute of limitations affecting the liability of any Guarantor hereunder or the enforcement hereof, and each Guarantor further agrees that any act or event which tolls any statute of limitations applicable to the obligations of any Borrower shall similarly operate to toll the statute of limitations applicable to any Guarantor's liability hereunder. (e) Each Guarantor further waives any and all defenses which are comparable to the waivers set forth in this Guaranty which would otherwise be available to a Guarantor under Nevada or California law (whether based on a statute or decisional law) and any other defenses available to guarantors under Nevada or California law, whether based on a statute or decisional law. 2.7 BENEFITS OF GUARANTY. The provisions of this Guaranty are for the benefit of Lender and its successors, transferees, endorsees, and assigns, and nothing herein shall impair any of the Loans or other Obligations, as between Borrower, Guarantors and Lender. No such transfer, endorsement, or assignment shall increase or diminish any of the Guaranty Obligations hereunder. This Guaranty binds each Guarantor, and no Guarantor may assign, transfer or endorse this Guaranty. In the event all or any part of any of the Loans or other Obligations are transferred, endorsed or assigned by Lender to any Person or Persons, any reference to "Lender" herein shall be deemed to refer equally to such Person or Persons. 2.8 CONTINUING GUARANTY. (a) This is a continuing guaranty, (b) this Guaranty shall remain in full force and effect until the Termination Date, and (c) the Guaranty Obligations hereunder shall extend to each and every extension or renewal, if any, of any of the Notes, the Credit Agreement or other Loan Documents regardless of whether any of the Loans or other Guaranty Obligations, in successive transactions, may be paid, repaid, advanced or renewed from time to time. 2.9 SUBORDINATION. Except for compensation and employee benefits due any Guarantor from time to time from any Borrower, and all dividends and distributions permitted pursuant to the Credit Agreement and the Pledge Agreement to be paid or issued to any Guarantor, any and all present and future debts and obligations of each Borrower to any Guarantor are hereby fully and absolutely subordinated to the right and time of payment in full of the Guaranty Obligations to Lender under each of the Note, the Credit Agreement and the other Loan Documents. Notwithstanding the foregoing, unless an Event of Default shall have occurred, any Borrower may declare and pay dividends to its shareholders, including Guarantors, in accordance with its organizational documents and applicable law. Any Lien, now existing or hereafter arising, on or in any of the assets of any Borrower in favor of Guarantors, whether created by contract, assignment, subrogation, reimbursement, indemnity, operation of law, principles of equity or otherwise is hereby subordinated in priority to the liens and security interests of Lender, now existing or hereafter arising. The subordination provisions of this Section 2.9 shall be effective regardless of whether demand has been made by Lender and shall remain in effect until the Termination Date. 8 3. REPRESENTATIONS AND WARRANTIES. To induce Lender to provide the consideration to each Borrower and each Guarantor described above, each Guarantor hereby makes the following representations and warranties, and each and all of which survive the execution and delivery of this Guaranty: 3.1 DUE AUTHORIZATION. The execution, delivery and performance by such Guarantor of this Guaranty have been duly authorized by all necessary action of such Guarantor. 3.2 BINDING OBLIGATION. This Guaranty constitutes the legal, valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with its terms. 3.3 NO CONFLICTS. To the best of such Guarantor's knowledge, the execution, delivery, and performance by such Guarantor of this Guaranty does not contravene any law or any contractual restriction binding on or affecting such Guarantor, and does not result in or require the creation of any Lien upon or with respect to any of its properties. 3.4 CONSENTS. No authorization or approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Guarantor of this Guaranty. 3.5 ADDRESS AND LOCATION OF RECORDS. The address of such Guarantor's principal place of business is accurately set forth on the signature page to this Guaranty. 3.6 NO SETOFF, DEFENSE, OR COUNTERCLAIM. As of the date of this Guaranty, the Guaranty Obligations are not subject to any setoff or defense of any kind against Lender or any Borrower, and such Guarantor specifically waives its right to assert any such defense or right of setoff. The Guaranty Obligations shall not be subject to any counterclaims, setoffs, or defenses against Lender or any Borrower that may arise in the future, except for (a) any defense of prior performance or payment, or (b) any defense based on any applicable provision of the Uniform Commercial Code requiring that Collateral be disposed of in a commercially reasonable manner, which any Borrower, Guarantors, or other guarantor of the Obligations may have or assert. 4. COVENANTS. Each Guarantor covenants and agrees that until the Termination Date, each Guarantor shall give prompt written notice to Lender (in any event not later than 10 days prior to any change described below) of (a) any change in the location of such Guarantor's principal place of business, (b) any change in the location of books and records pertaining to its business, (c) any change in its name, identity, or structure in any manner which might make any financing statement filed in connection with the Loan Documents incorrect or misleading. 5. FURTHER ASSURANCES. Each Guarantor agrees that, at its expense, upon the written request of Lender, it will promptly execute and deliver to Lender any additional instruments or documents reasonably considered necessary by Lender to cause this Guaranty to be, become, or remain valid and effective in accordance with its terms. Each Guarantor will provide Lender in writing such financial and other information with respect to its assets and liabilities as Lender shall request, in form reasonably satisfactory to Lender. 9 6. REINSTATEMENT. This Guaranty shall remain in full force and effect and continue to be effective, as the case may be, if at any time payment or performance of any of the Loans or the Guaranty Obligations, or any part thereof, pursuant to applicable law, is avoided, rescinded, or reduced in amount, or must otherwise be restored or returned by Lender, or any other obligee of any of the Loans or the Guaranty 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 avoided, rescinded, reduced, restored or returned, each of the Loans or the Guaranty Obligations, as the case may be, shall be reinstated and deemed reduced only by such amount paid and not so avoided, rescinded, reduced, restored or returned. 7. DEFAULTS AND REMEDIES. Upon the occurrence and during the continuance of an Event of Default under any of the Notes or the Credit Agreement or other Loan Documents, Lender may declare any or all of the Guaranty Obligations, immediately and without demand, notice or legal process of any kind, to be, and such Guaranty Obligations shall immediately become, due and payable, and then, or at any subsequent time, Lender may exercise any or all of its rights and remedies under this Guaranty, any of the Notes, the Credit Agreement, and any other Loan Documents, including the exercise of any rights and remedies of Lender as a secured party against the Collateral, and under applicable law, and in addition may make demand upon Guarantor for the payment of the Guaranty Obligations. All Guaranty Obligations shall bear interest at the Default Rate from and after the date an Event of Default occurs under any of the Notes. 8. APPLICATION OF PAYMENTS. Any payment made by any Guarantor under this Guaranty shall be applied by Lender as set forth in the Credit Agreement. 9. INDEMNIFICATION. Each Guarantor agrees to and shall indemnify and hold Lender, and its officers, directors, employees, agents, attorneys and representatives harmless from and against any liabilities, claims and damages, including, without limitation, reasonable costs, attorneys' fees, disbursements and other expenses incurred or arising by reason of the taking or the failure to take action by Lender, in good faith, in respect of any transaction effected under this Guaranty, including, without limitation, any action to enforce payment of the Guaranty Obligations. The liabilities of each Guarantor under this Section 9 shall survive the termination of this Guaranty. 10. NOTICES. All notices and other communications required or desired to be served, given or delivered hereunder shall be in writing and shall be served, given or delivered as provided in the Credit Agreement. 11. ENTIRE AGREEMENT. This Guaranty, together with the Credit Agreement, each of the Notes, and the other Loan Documents constitutes the entire agreement, and supersedes all prior and contemporaneous oral and written communications and agreements, between the parties with respect to the subject matter hereof. 10 12. LIMITATION OF LIABILITY. Neither Lender nor any of its officers, directors, employees, agents, or counsel, shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own respective gross negligence or willful misconduct. 13. ADVICE OF COUNSEL. Each Guarantor represents and warrants that it has either obtained the advice of counsel or has had the opportunity to obtain such advice in connection with the terms and provisions of this Guaranty. 14. AMENDMENTS. No amendment or waiver of any provisions of this Guaranty, or consent to any departure by any Guarantor therefrom, shall be effective in any event unless the same shall be in writing and signed by Lender and all Guarantors and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 15. CONSENT TO LOAN DOCUMENTS. Each Guarantor hereby acknowledges it has received copies of, and consents to, the Credit Agreement, each of the Notes, and all other Loan Documents. 16. NO WAIVER. No failure on the part of Lender to exercise, and no delay in exercising, any right under the Credit Agreement of any other Loan Document shall operate as a waiver thereof; and no single or partial exercise of any right under the Credit Agreement or any other Loan Document shall preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Credit Agreement and other Loan Documents are cumulative and not exclusive of any remedies provided by law. 17. BINDING EFFECT. This Guaranty shall be binding upon and inure to respective benefits of Lender and all Guarantors and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights hereunder or any interest herein without Lender's prior written consent. 18. SEVERABILITY. In the event that any one or more of the provisions contained in the Credit Agreement of any other Loan Documents shall be determined to be invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision or provisions in every other respect, and the remaining provisions of the Credit Agreement and other Loan Documents shall not be in any way impaired. 19. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, OF THIS GUARANTY AND OF THE CREDIT AGREEMENT, EACH OF THE NOTES AND THE OTHER LOAN DOCUMENTS AND THE GUARANTY 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. EACH GUARANTOR, BY ITS ACCEPTANCE OF THIS GUARANTY, 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 ANY GUARANTOR AND LENDER PERTAINING TO THIS GUARANTY OR ANY OF 11 THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT EACH GUARANTOR ACKNOWLEDGES 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 GUARANTY 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 GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH GUARANTOR HEREBY WAIVES ANY OBJECTION THAT ANY GUARANTOR 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. 20. WAIVER OF TRIAL BY JURY. Each Guarantor each hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Guaranty, any other Loan Document, or any of the transactions contemplated thereby. 21. COUNTERPARTS. This Guaranty may be executed in any number of identical counterparts, which shall constitute an original and collectively and separately constitute a single instrument or agreement. [NO FURTHER TEXT ON THIS PAGE] 12 IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty Agreement ($80 Million Credit Agreement) to and for the benefit of Lender as of the Effective Date first above written. GUARANTOR: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Kali P. Chaudhuri /s/ Jacob Sweidan ---------------------------------- Jacob Sweidan Name: Kali P. Chaudhuri Manager PCHI ----------------------------- Title: Manager ---------------------------- Address: 6800 Indiana Ave., Suite 130 ------------------------------- Riverside, CA 92506 ------------------------------- Attn: ------------------------- Ph: 951-782-8812 ------------------------- Fax: 951-782-8850 ------------------------- 13 EXHIBIT "B" TO ACKNOWLEDGEMENT, WAIVER AND CONSENT GUARANTY AGREEMENT OF PCHI ($10.7 MILLION CREDIT AGREEMENT) SEE ATTACHED 1 GUARANTY AGREEMENT ------------------ ($10.7 MILLION CREDIT AGREEMENT) This GUARANTY AGREEMENT (as the same may be amended, modified, or supplemented from time to time, the "Guaranty") is to be effective as of April 2, 2009 ("Effective Date"), by PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("Guarantor"), in favor of MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation ("Lender"), with reference to the following facts: RECITALS A. Guarantor is a party to that certain Credit Agreement ($10.7 Million Facility) dated as of October 9, 2007 (including all annexes, exhibits and schedules thereto, and as the same may be and has been amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), by and among 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 sometimes collectively referred to herein as "Borrowers" and individually as "Borrower"); Guarantor, WEST COAST HOLDINGS, LLC, a California limited liability company ("West Coast"), GANESHA REALTY, LLC, a California limited liability company ("Ganesha") and ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN") (Guarantor, West Coast, Ganesha and OC-PIN are referred to collectively in the Credit Agreement as the "Credit Parties"), and Lender. B. Pursuant to the Credit Agreement, Lender agreed to and did make a $10,700,000 convertible term loan ("$10,700,000 Convertible Term Loan") (as amended, restated, supplemented or otherwise modified from time to time, the "Loan") to the Borrowers. Repayment of the Loan is evidenced by that certain $10,700,000 Convertible Term Note dated as of October 9, 2007 ("$10,700,000 Convertible Term Note") (the $10,700,000 Convertible Term Note, as amended, restated, supplemented or otherwise modified from time to time, is sometimes referred to herein as the "Note"). The Credit Agreement, the Note and all other agreements, documents, and instruments evidencing and/or securing the payment or performance of the Obligations (as defined in the Credit Agreement), including all Loan Documents as defined in the Credit Agreement are hereinafter collectively sometimes referred to as the "Loan Documents." C. The following agreements are being entered into substantially concurrent with the execution of this Guaranty: (i) Settlement Agreement, General Release and Covenant Not to Sue ("First Settlement Agreement") by and among IHHI, Anil V. Shah, M.D. ("Dr. Shah"), OC-PIN, Bruce Mogel ("Mogel"), Guarantor, West Coast, Dr. Kali P. Chaudhuri ("Dr. Chaudhuri"), Provider Financial Corporation I ("MPFCI"), Lender and Medical Provider Financial Corporation II ("MPFCII") (MCC, MPFCI, Lender and MPFCII are collectively, "MedCap"); and 1 (ii) Settlement Agreement No. 2 ("Second Settlement Agreement", and together with the First Settlement Agreement, the "Settlement Agreements") by and among Dr. Shah, OC-PIN, the members of OC-PIN, Guarantor, West Coast, the members of West Coast, Dr. Chaudhuri, and Ganesha. D. The Settlement Agreements require the parties thereto to enter into further agreements as described therein, including without limitation, a Voting Agreement between Dr. Chaudhuri and OC-PIN. E. The Settlement Agreements contemplate the occurrence of various transactions and events, including without limitation, the dissolution of West Coast and restructuring of Guarantor, the dissolution of OC-PIN, the grant and exercise of an Option and Tag Along Rights (as defined in the Settlement Agreements) that will or may result in, among other things, changes in actual or beneficial ownership of the parties thereto and/or affiliates of those parties, some of whom are Credit Parties under the Credit Agreement. F. Among other conditions for entering into the First Settlement Agreement, Lender has required that the Guarantor guaranty the payment and performance of the Guaranty Obligations (defined below), including repayment of the Loan. G. The parties intend that these Recitals are made a part of this Guaranty. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Guaranty, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor hereby covenants, promises and agrees for the benefit of Lender as follows: 1. DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION. Unless otherwise set forth herein, (a) initially capitalized terms or matters of construction defined or established in the Credit Agreement shall be applied herein as defined or established therein, (b) any reference to a "Section" shall refer to the relevant section of this Guaranty, and (c) the following terms shall have, unless otherwise provided elsewhere in this Guaranty, the meanings set forth below: "Equity Interest" means all shares of Stock, options and warrants to purchase equity securities or other forms of equity, membership interests, general or limited partnership 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 common 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). 2 "Guaranty Obligations" shall mean (a) the obligations to repay the Loan under the Note, (b) the payment and performance obligations under the Credit Agreement, including repayment of the Loan and the Note, (c) payment and performance obligations under the other Loan Documents, (d) all other indebtedness, liabilities, and obligations of all Borrowers and the Credit Parties to Lender whether now existing or hereafter arising under the Loan Documents, and (e) all indebtedness, liabilities, and Obligations of Guarantors to Lender whether now existing or hereafter arising under this Guaranty or in any of the Loan Documents. "Material Adverse Event" means that any one or more of the following has occurred: (a) any representation or warranty in the Credit Agreement or in any of the other Loan Documents or in any written statement, report, financial statement or certificate made or delivered to Lender by any Borrower or by any Credit Party (including Guarantors) is untrue or incorrect in any material respect as of the date when made or deemed made; or (b) between the Effective Date and the Termination Date, any Borrower or any Credit Party (including Guarantors) commit any act or omit to take any act the result of which constitutes a fraud or intentional misrepresentation as to Lender. "Obligations" means all obligations of Borrower under the Credit Agreement. 2. GUARANTY. 2.1 GUARANTY OF THE OBLIGATIONS. (a) In consideration of making the Loan to Borrowers under the Credit Agreement, for all other financial accommodations to or for the benefit of Borrowers and Credit Parties, for entering into the First Settlement Agreement, and for other valuable consideration the receipt and sufficiency of which Guarantor hereby acknowledges, Guarantor hereby unconditionally, irrevocably and absolutely guaranties to Lender, and its respective successors, endorsees, transferees, and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of the Guaranty Obligations. (b) This Guaranty constitutes a guaranty of payment and performance when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that Lender, or any of its successors, endorsees, transferees, or assigns assert any claim or demand or enforce any remedy whatsoever against any Borrower, any other guarantor, or with respect to any collateral provided by any Borrower (collectively, "Collateral"), before or as a condition to the obligations of Guarantor under this Guaranty. 2.2 ABSOLUTE AND IRREVOCABLE GUARANTY. The Guaranty Obligations shall remain in full force and effect without regard to, and shall not be impaired or affected by, or be deemed to be satisfied by, and Guarantor shall not be exonerated, discharged, revoked or released by, any of the following events: (a) Lender's exercise or enforcement of, or failure or delay in exercising or enforcing, legal proceedings to collect the Loan or the Guaranty Obligations or any power, right, or remedy with respect to the Loan, the Guaranty Obligations, or the Collateral, including without limitation: (i) any action or inaction of Lender to perfect, protect, or enforce any lien upon 3 any Collateral; or (ii) any change in the time, manner, or place of payment of, or in any other term of, the Loan or the Guaranty Obligations, or any other amendment to, or waiver of, the Note, any other Loan Document, or any other agreement or instrument governing or evidencing any the Loan or any of the Guaranty Obligations; (b) Insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver or trustee for all or any part of any Borrower's or any Guarantor's assets or of the assets of any other Guarantor of the Obligations, liquidation, winding-up, or dissolution of any Borrower or any Guarantor, or any other guarantor of the Obligations; (c) Any limitation, discharge, cessation, or partial satisfaction of the Loan, the Guaranty Obligations, or the obligations of any other guarantor of the Obligations, or any invalidity, voidability, unenforceability, in whole or in part, of the Note, this Guaranty, any other Loan Document, or any other document evidencing the Loan or Guaranty Obligations; (d) Any merger, acquisition, consolidation or change in structure of any Borrower or any Guarantor or any other guarantor of the Obligations; or any sale, lease, transfer, or other disposition of any or all of the assets or Equity Interests of any Borrower or any Guarantor or any other Guarantor of the Obligations, including, without limitation, any transfer by any Borrower of all or any part of any Collateral, or termination of any Borrower's existence for any reason; (e) Any assignment or other transfer, in whole or in part, of Lender's interest in or rights in or under the Note, or any other Loan Document, including, without limitation, this Guaranty, or with respect to the Loan, the Guaranty Obligations, or the Collateral; (f) Any claim, defense, counterclaim, or setoff that any Borrower or any Guarantor or any other Guarantor of the Obligations may have or assert, including, without limitation, any defense of incapacity, disability, or lack of corporate, organizational or other authority to execute any document relating to the Loan, the Guaranty Obligations, the Collateral, or this Guaranty, other than (i) upon the occurrence of the Termination Date, the defense of prior performance, or (ii) any defense based on any applicable provision of the Uniform Commercial Code requiring that Collateral be disposed of in a commercially reasonable manner; (g) Any purported revocation by any Guarantor; (h) Any cancellation, renunciation or surrender of any pledge, guaranty, or any debt instrument evidencing the Loan or the Guaranty Obligations; (i) The vote, claim, distribution, election, acceptance, action, or inaction of Lender in any bankruptcy or reorganization case related to the Loan, the Guaranty Obligations, or the Collateral; or (j) Any other action or circumstances that might otherwise constitute a defense available to, or a legal or equitable discharge of, any surety, any Guarantor or any other Guarantor, except as expressly provided herein; 4 it being agreed that the Guaranty Obligations shall not be discharged or revoked or released until the Termination Date. 2.3 DEMAND BY LENDER. In addition to the terms set forth herein, and in no manner imposing any limitation on such terms, if any of the Obligations under the Note or the Credit Agreement or the other Loan Documents are declared to be or otherwise becomes immediately due and payable due in whole or in part to the occurrence of a Material Adverse Event(s), then Guarantor, upon demand in writing therefor by Lender, shall promptly pay the Guaranty Obligations to Lender. Payment by Guarantor shall be made to Lender to be credited and applied to the Obligations, in immediately available funds in lawful money of the United States of America to an account designated by Lender or at the address set forth in the Credit Agreement or at any other address that may be specified in writing from time to time by Lender as provided herein. Any payment received by Lender with respect to the Loan or other Obligations shall reduce the Guaranty Obligations by the amount of such payment. 2.4 GUARANTOR WAIVERS. In addition to any other waivers contained herein, each Guarantor waives, agrees and acknowledges as follows and waives any defense based upon or arising from the following: (a) The Guaranty Obligations are the immediate, direct, primary and absolute liabilities of each Guarantor, and are independent of, and not co-extensive with, the Loan, the other Obligations or the obligations of any other Guarantor of the Obligations. Each Guarantor expressly waives any right it may have now or in the future to direct or affect the manner or timing of Lender's enforcement of its rights or remedies. Each Guarantor expressly waives any right he may have now or in the future to revoke this Guaranty. Each Guarantor expressly waives any right it may have now or in the future to require Lender to, and Lender shall not have any liability to, pursue or enforce first against any Borrower, any of the properties or assets of any Borrower, the Collateral or any other security, guaranty or pledge that may now or hereafter be held by Lender for the Loan or for the Guaranty Obligations, or to apply such security, guaranty, or pledge to the Loan or to the Guaranty Obligations. Each Guarantor shall remain liable for the Guaranty Obligations, notwithstanding any judgment Lender may obtain against any Borrower or any Guarantor, any other Guarantor of the Obligations, or any other Person or entity, or any modification, extension or renewal with respect thereto. Lender shall not be under any liability to marshal any assets in favor of each Guarantor or in payment of the Loan or the Guaranty Obligations. (b) Each Guarantor has entered into this Guaranty based solely upon his/her/its independent knowledge of each Borrower's financial condition, and each Guarantor assumes full responsibility for obtaining any further information with respect to each Borrower or the conduct of each Borrower's business. Each Guarantor represents that it is now, and during the terms of this Guaranty will be, responsible for ascertaining the financial condition of each Borrower. Each Guarantor hereby waives any duty on the part of Lender to disclose to any Guarantor, and agrees that it is not relying upon or expecting Lender to disclose to it, any fact known or hereafter known by Lender relating to the operation or condition of any Borrower or its business or relating to the existence, liability, or financial condition of any other Guarantor of the Obligations. Each Guarantor knowingly accepts the full range of risk encompassed in a contract of continuing guaranty, which risk includes the possibility that a Borrower may incur further indebtedness after such Borrower's financial condition or its ability to pay debts as they mature has deteriorated. 5 (c) Except as specifically provided in this Guaranty or applicable law, each Guarantor waives, to the fullest extent permitted by applicable law (i) notice of the acceptance by Lender of this Guaranty, (ii) notice of the existence, creation, payment, nonpayment, performance or nonperformance of all or any of the Guaranty Obligations, (iii) 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 Credit Agreement or the other Loan Documents, the Note, commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Guarantors may be liable in any way, and hereby ratifies and confirms whatever Lender may do in this regard, (iv) 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 which might be required by any court prior to allowing Lender to exercise any of its remedies, (v) all rights to receive notices from Lender with respect to, or otherwise sent to, each Guarantor or any other Guarantor of the Obligations, (vi) the benefit of all valuation, appraisal, stay, extension, redemption and exemption laws, (vii) the benefit of any law purporting to reduce any Guarantor's obligation in proportion to the principal obligation hereby guarantied, (viii) the benefit of any law purporting to exonerate any Guarantor's obligation upon performance or an offer of performance of the principal obligation, (ix) notice of any extension, modification, renewal, or amendment of any of the terms of the Note or the Credit Agreement or any other Loan Document relating to the Loan or the Guaranty Obligations, (x) notice of the occurrence of any Default or Event of Default with respect to the Loan, the Guaranty Obligations, the Collateral or otherwise, and (xi) notice of any exercise or non-exercise by Lender of any right, power, or remedy with respect to the Loan, the Guaranty Obligations or the Collateral. (d) If Lender, under applicable law, may proceed to realize its benefits under the Credit Agreement or any other Loan Document providing for a lien upon any Collateral, whether owned by Borrower or by any other person or entity, either by judicial foreclosure or by nonjudicial sale or enforcement, Lender, at its sole option, may determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Guaranty. (e) Each Guarantor represents that the Loan and Guaranty Obligations are and shall be incurred by the Borrowers for the permitted uses set forth in the Credit Agreement. Each Guarantor undertakes all the risks encompassed the Note, in the Credit Agreement and the other Loan Documents as they may be now or are hereafter agreed upon by Lender and any of the Borrowers. Prior to the date this Guaranty terminates, Lender, in such manner and upon such terms and at such time as it deems best, and with or without notice to each Guarantor, may release, add, subordinate or substitute security for the Loan or other Guaranty Obligations in accordance with the Credit Agreement. (f) A separate action or actions may be brought and prosecuted against any Guarantor whether or not an action is brought against any Borrower, or whether any Borrower or any other Guarantor is joined in any such action or actions. 6 2.5 WAIVERS UNDER STATUTES. Each Guarantor makes the following waivers: EACH GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY LENDER, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED ANY RIGHTS GRANTED TO EACH GUARANTOR PURSUANT TO NEVADA LAW. 2.6 ADDITIONAL WAIVERS. (a) Until the Termination Date, each Guarantor waives any and all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to any Guarantor by reason of applicable state law. This means, among other things, that: (i) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (ii) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that a creditor may be required to pursue the principal obligor or the security for the principal obligation before seeking enforcement against a guarantor or security pledged by such guarantor; (iii) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that a guarantor's obligations may be limited or exonerated by reason of the creditor's alteration of the principal obligation or of another guaranty, or by reason of the impairment or suspension of the creditor's rights or remedies against the principal, another guarantor, or any security given for the principal obligation or given for other guaranties; (iv) Each Guarantor waives and will be unable to claim any right to participate in, or the benefit of, any security given for the principal obligation now or hereafter held by Lender; and (v) Each Guarantor waives and will be unable to claim any right of subrogation and any right to enforce any remedy which Lender may have against any Borrower. (b) Each Guarantor waives any defense based upon any lack of authority of the officers, directors, partners, members, managers, or agents acting or purporting to act on behalf of any Borrower or any principal of any Borrower or any legal disability or defect in the formation of any Borrower. (c) Each Guarantor waives any defense based upon the application by any Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrowers to Lender or intended or understood by Lender or any Guarantor. 7 (d) Each Guarantor waives the benefit of any statute of limitations affecting the liability of any Guarantor hereunder or the enforcement hereof, and each Guarantor further agrees that any act or event which tolls any statute of limitations applicable to the obligations of any Borrower shall similarly operate to toll the statute of limitations applicable to any Guarantor's liability hereunder. (e) Each Guarantor further waives any and all defenses which are comparable to the waivers set forth in this Guaranty which would otherwise be available to a Guarantor under Nevada or California law (whether based on a statute or decisional law) and any other defenses available to guarantors under Nevada or California law, whether based on a statute or decisional law. 2.7 BENEFITS OF GUARANTY. The provisions of this Guaranty are for the benefit of Lender and its successors, transferees, endorsees, and assigns, and nothing herein shall impair the Loan or other Obligations, as between Borrower, Guarantors and Lender. No such transfer, endorsement, or assignment shall increase or diminish any of the Guaranty Obligations hereunder. This Guaranty binds each Guarantor, and no Guarantor may assign, transfer or endorse this Guaranty. In the event all or any part of any of the Loan or other Obligations are transferred, endorsed or assigned by Lender to any Person or Persons, any reference to "Lender" herein shall be deemed to refer equally to such Person or Persons. 2.8 CONTINUING GUARANTY. (a) This is a continuing guaranty, (b) this Guaranty shall remain in full force and effect until the Termination Date, and (c) the Guaranty Obligations hereunder shall extend to each and every extension or renewal, if any, of the Note, the Credit Agreement or other Loan Documents regardless of whether the Loan or other Guaranty Obligations, in successive transactions, may be paid, repaid, advanced or renewed from time to time. 2.9 SUBORDINATION. Except for compensation and employee benefits due any Guarantor from time to time from any Borrower, and all dividends and distributions permitted pursuant to the Credit Agreement and the Pledge Agreement to be paid or issued to any Guarantor, any and all present and future debts and obligations of each Borrower to any Guarantor are hereby fully and absolutely subordinated to the right and time of payment in full of the Guaranty Obligations to Lender under each of the Note, the Credit Agreement and the other Loan Documents. Notwithstanding the foregoing, unless an Event of Default shall have occurred, any Borrower may declare and pay dividends to its shareholders, including Guarantors, in accordance with its organizational documents and applicable law. Any Lien, now existing or hereafter arising, on or in any of the assets of any Borrower in favor of Guarantors, whether created by contract, assignment, subrogation, reimbursement, indemnity, operation of law, principles of equity or otherwise is hereby subordinated in priority to the liens and security interests of Lender, now existing or hereafter arising. The subordination provisions of this Section 2.9 shall be effective regardless of whether demand has been made by Lender and shall remain in effect until the Termination Date. 3. REPRESENTATIONS AND WARRANTIES. To induce Lender to provide the consideration to each Borrower and each Guarantor described above, each Guarantor hereby makes the following representations and warranties, and each and all of which survive the execution and delivery of this Guaranty: 8 3.1 DUE AUTHORIZATION. The execution, delivery and performance by such Guarantor of this Guaranty have been duly authorized by all necessary action of such Guarantor. 3.2 BINDING OBLIGATION. This Guaranty constitutes the legal, valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with its terms. 3.3 NO CONFLICTS. To the best of such Guarantor's knowledge, the execution, delivery, and performance by such Guarantor of this Guaranty does not contravene any law or any contractual restriction binding on or affecting such Guarantor, and does not result in or require the creation of any Lien upon or with respect to any of its properties. 3.4 CONSENTS. No authorization or approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Guarantor of this Guaranty. 3.5 ADDRESS AND LOCATION OF RECORDS. The address of such Guarantor's principal place of business is accurately set forth on the signature page to this Guaranty. 3.6 NO SETOFF, DEFENSE, OR COUNTERCLAIM. As of the date of this Guaranty, the Guaranty Obligations are not subject to any setoff or defense of any kind against Lender or any Borrower, and such Guarantor specifically waives its right to assert any such defense or right of setoff. The Guaranty Obligations shall not be subject to any counterclaims, setoffs, or defenses against Lender or any Borrower that may arise in the future, except for (a) any defense of prior performance or payment, or (b) any defense based on any applicable provision of the Uniform Commercial Code requiring that Collateral be disposed of in a commercially reasonable manner, which any Borrower, Guarantors, or other guarantor of the Obligations may have or assert. 4. COVENANTS. Each Guarantor covenants and agrees that until the Termination Date, each Guarantor shall give prompt written notice to Lender (in any event not later than 10 days prior to any change described below) of (a) any change in the location of such Guarantor's principal place of business, (b) any change in the location of books and records pertaining to its business, (c) any change in its name, identity, or structure in any manner which might make any financing statement filed in connection with the Loan Documents incorrect or misleading. 5. FURTHER ASSURANCES. Each Guarantor agrees that, at its expense, upon the written request of Lender, it will promptly execute and deliver to Lender any additional instruments or documents reasonably considered necessary by Lender to cause this Guaranty to be, become, or remain valid and effective in accordance with its terms. Each Guarantor will provide Lender in writing such financial and other information with respect to its assets and liabilities as Lender shall request, in form reasonably satisfactory to Lender. 6. REINSTATEMENT. This Guaranty shall remain in full force and effect and continue to be effective, as the case may be, if at any time payment or performance of the Loan or the Guaranty Obligations, or any part thereof, pursuant to applicable law, is avoided, rescinded, or reduced in amount, or must otherwise be restored or returned by Lender, or any other obligee of the Loan or the Guaranty 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 avoided, rescinded, reduced, restored or returned, the Loan or the Guaranty Obligations, as the case may be, shall be reinstated and deemed reduced only by such amount paid and not so avoided, rescinded, reduced, restored or returned. 9 7. DEFAULTS AND REMEDIES. Upon the occurrence and during the continuance of an Event of Default under the Note or the Credit Agreement or other Loan Documents, Lender may declare any or all of the Guaranty Obligations, immediately and without demand, notice or legal process of any kind, to be, and such Guaranty Obligations shall immediately become, due and payable, and then, or at any subsequent time, Lender may exercise any or all of its rights and remedies under this Guaranty, the Note, the Credit Agreement, and any other Loan Documents, including the exercise of any rights and remedies of Lender as a secured party against the Collateral, and under applicable law, and in addition may make demand upon Guarantor for the payment of the Guaranty Obligations. All Guaranty Obligations shall bear interest at the Default Rate from and after the date an Event of Default occurs under the Note. 8. APPLICATION OF PAYMENTS. Any payment made by any Guarantor under this Guaranty shall be applied by Lender as set forth in the Credit Agreement. 9. INDEMNIFICATION. Each Guarantor agrees to and shall indemnify and hold Lender, and its officers, directors, employees, agents, attorneys and representatives harmless from and against any liabilities, claims and damages, including, without limitation, reasonable costs, attorneys' fees, disbursements and other expenses incurred or arising by reason of the taking or the failure to take action by Lender, in good faith, in respect of any transaction effected under this Guaranty, including, without limitation, any action to enforce payment of the Guaranty Obligations. The liabilities of each Guarantor under this Section 9 shall survive the termination of this Guaranty. 10. NOTICES. All notices and other communications required or desired to be served, given or delivered hereunder shall be in writing and shall be served, given or delivered as provided in the Credit Agreement. 11. ENTIRE AGREEMENT. This Guaranty, together with the Credit Agreement, the Note, and the other Loan Documents constitutes the entire agreement, and supersedes all prior and contemporaneous oral and written communications and agreements, between the parties with respect to the subject matter hereof. 12. LIMITATION OF LIABILITY. Neither Lender nor any of its officers, directors, employees, agents, or counsel, shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own respective gross negligence or willful misconduct. 13. ADVICE OF COUNSEL. Each Guarantor represents and warrants that it has either obtained the advice of counsel or has had the opportunity to obtain such advice in connection with the terms and provisions of this Guaranty. 10 14. AMENDMENTS. No amendment or waiver of any provisions of this Guaranty, or consent to any departure by any Guarantor therefrom, shall be effective in any event unless the same shall be in writing and signed by Lender and all Guarantors and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 15. CONSENT TO LOAN DOCUMENTS. Each Guarantor hereby acknowledges it has received copies of, and consents to, the Credit Agreement, the Note, and all other Loan Documents. 16. NO WAIVER. No failure on the part of Lender to exercise, and no delay in exercising, any right under the Credit Agreement of any other Loan Document shall operate as a waiver thereof; and no single or partial exercise of any right under the Credit Agreement or any other Loan Document shall preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Credit Agreement and other Loan Documents are cumulative and not exclusive of any remedies provided by law. 17. BINDING EFFECT. This Guaranty shall be binding upon and inure to respective benefits of Lender and all Guarantors and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights hereunder or any interest herein without Lender's prior written consent. 18. SEVERABILITY. In the event that any one or more of the provisions contained in the Credit Agreement of any other Loan Documents shall be determined to be invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision or provisions in every other respect, and the remaining provisions of the Credit Agreement and other Loan Documents shall not be in any way impaired. 19. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, OF THIS GUARANTY AND OF THE CREDIT AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE GUARANTY 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. EACH GUARANTOR, BY ITS ACCEPTANCE OF THIS GUARANTY, 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 ANY GUARANTOR AND LENDER PERTAINING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT EACH GUARANTOR ACKNOWLEDGES 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 GUARANTY 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 GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH GUARANTOR HEREBY WAIVES ANY OBJECTION THAT ANY GUARANTOR 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. 11 20. WAIVER OF TRIAL BY JURY. Each Guarantor each hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Guaranty, any other Loan Document, or any of the transactions contemplated thereby. 21. COUNTERPARTS. This Guaranty may be executed in any number of identical counterparts, which shall constitute an original and collectively and separately constitute a single instrument or agreement. [NO FURTHER TEXT ON THIS PAGE] 12 IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty Agreement ($10.7 Million Credit Agreement) to and for the benefit of Lender as of the Effective Date first above written. GUARANTOR: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Kali P. Chaudhuri /s/ Jacob Sweidan ---------------------------------- Jacob Sweidan Name: Kali P. Chaudhuri Manager PCHI ----------------------------- Title: Manager ---------------------------- Address: 6800 Indiana Ave., Suite 130 ------------------------------- Riverside, CA 92506 ------------------------------- Attn: ------------------------------- Ph: 951-782-8812 ------------------------------- Fax: 951-782-8850 ------------------------------- 13 EXHIBIT "C" TO ACKNOWLEDGEMENT, WAIVER AND CONSENT -------------------------------------------------- GUARANTY AGREEMENT OF PCHI ($50 MILLION REVOLVING CREDIT AGREEMENT) SEE ATTACHED 1 EXECUTION GUARANTY AGREEMENT ------------------ ($50 MILLION REVOLVING CREDIT AGREEMENT) This GUARANTY AGREEMENT (as the same may be amended, modified, or supplemented from time to time, the "Guaranty") is to be effective as of April 2, 2009 ("Effective Date"), by PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("Guarantor"), in favor of MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation ("Lender"), with reference to the following facts: RECITALS -------- A. Guarantor is a party to that certain Revolving Credit Agreement ($50 Million Facility) dated as of October 9, 2007 (including all annexes, exhibits and schedules thereto, and as the same may be and has been amended, restated, supplemented, or otherwise modified from time to time, the "Revolving Credit Agreement"), by and among 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 sometimes collectively referred to herein as "Borrowers" and individually as "Borrower"); Guarantor, WEST COAST HOLDINGS, LLC, a California limited liability company ("West Coast"), GANESHA REALTY, LLC, a California limited liability company ("Ganesha") and ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN") (Guarantor, West Coast, Ganesha and OC-PIN are referred to collectively in the Credit Agreement as the "Credit Parties"), and Lender. B. Pursuant to the Credit Agreement, Lender agreed to and did make a $50,000,000 revolving line of credit loan (as amended, restated, supplemented or otherwise modified from time to time, the "$50,000,000 Revolving Line of Credit Loan") to the Borrowers. Repayment of the $50,000,000 Revolving Line of Credit Loan is evidenced by that certain $50,000,000 Revolving Line of Credit Note dated as of October 9, 2007 (as amended, restated, supplemented or otherwise modified from time to time, the "$50,000,000 Revolving Line of Credit Note"). The Revolving Credit Agreement, the $50,000,000 Revolving Line of Credit Note and all other agreements, documents, and instruments evidencing and/or securing the payment or performance of the Obligations (as defined in the Revolving Credit Agreement) are hereinafter collectively sometimes referred to as the "$50,000,000 Revolving Line of Credit Loan Documents." C. The following agreements are being entered into substantially concurrent with the execution of this Guaranty: (i) Settlement Agreement, General Release and Covenant Not to Sue ("First Settlement Agreement") by and among IHHI, Anil V. Shah, M.D. ("Dr. Shah"), OC-PIN, Bruce Mogel ("Mogel"), Guarantor, West Coast, Dr. Kali P. Chaudhuri ("Dr. Chaudhuri"), Provider Financial Corporation II ("MPFCII"), Lender and Medical Provider Financial Corporation III ("MPFCIII") (MCC, MPFCII, Lender and MPFCIII are collectively, "MedCap"); and 1 (ii) Settlement Agreement No. 2 ("SECOND SETTLEMENT AGREEMENT", and together with the First Settlement Agreement, the "SETTLEMENT AGREEMENTS") by and among Dr. Shah, OC-PIN, the members of OC-PIN, Guarantor, West Coast, the members of West Coast, Dr. Chaudhuri, and Ganesha. D. The Settlement Agreements require the parties thereto to enter into further agreements as described therein, including without limitation, a Voting Agreement between Dr. Chaudhuri and OC-PIN. E. The Settlement Agreements contemplate the occurrence of various transactions and events, including without limitation, the dissolution of West Coast and restructuring of Guarantor, the dissolution of OC-PIN, the grant and exercise of an Option and Tag Along Rights (as defined in the Settlement Agreements) that will or may result in, among other things, changes in actual or beneficial ownership of the parties thereto and/or affiliates of those parties, some of whom are Credit Parties under the Revolving Credit Agreement. F. Among other conditions for entering into the First Settlement Agreement, Lender has required that the Guarantor guaranty the payment and performance of the Guaranty Obligations (defined below), including repayment of the $50,000,000 Revolving Line of Credit Loans. G. The parties intend that these Recitals are made a part of this Guaranty. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Guaranty, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor hereby covenants, promises and agrees for the benefit of Lender as follows: 1. DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION. Unless otherwise set forth herein, (a) initially capitalized terms or matters of construction defined or established in the Revolving Credit Agreement shall be applied herein as defined or established therein, (b) any reference to a "Section" shall refer to the relevant section of this Guaranty, and (c) the following terms shall have, unless otherwise provided elsewhere in this Guaranty, the meanings set forth below: "EQUITY INTEREST" means all shares of Stock, options and warrants to purchase equity securities or other forms of equity, membership interests, general or limited partnership 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 common 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). 2 "GUARANTY OBLIGATIONS" shall mean (a) the obligations to repay the $50,000,000 Revolving Line of Credit Loan under the $50,000,000 Revolving Line of Credit Note, (b) the payment and performance obligations under the Revolving Credit Agreement, including repayment of the $50,000,000 Revolving Line of Credit Loan and the $50,000,000 Revolving Line of Credit Note, (c) payment and performance obligations under the other $50,000,000 Revolving Line of Credit Loan Documents, (d) all other indebtedness, liabilities, and obligations of all Borrowers and the Credit Parties to Lender whether now existing or hereafter arising under the $50,000,000 Revolving Line of Credit Loan Documents, and (e) all indebtedness, liabilities, and Obligations of Guarantors to Lender whether now existing or hereafter arising under this Guaranty or in any of the $50,000,000 Revolving Line of Credit Loan Documents. "MATERIAL ADVERSE EVENT" means that any one or more of the following has occurred: (a) any representation or warranty in the Revolving Credit Agreement or in any of the other $50,000,000 Revolving Line of Credit Loan Documents or in any written statement, report, financial statement or certificate made or delivered to Lender by any Borrower or by any Credit Party (including Guarantors) is untrue or incorrect in any material respect as of the date when made or deemed made; or (b) between the Effective Date and the Termination Date, any Borrower or any Credit Party (including Guarantors) commit any act or omit to take any act the result of which constitutes a fraud or intentional misrepresentation as to Lender. "OBLIGATIONS" means all obligations of Borrower under the Revolving Credit Agreement. 2. GUARANTY. 2.1 GUARANTY OF THE OBLIGATIONS. (a) In consideration of making the $50,000,000 Revolving Line of Credit Loan to Borrowers under the Revolving Credit Agreement, for all other financial accommodations to or for the benefit of Borrowers and Credit Parties, for entering into the First Settlement Agreement, and for other valuable consideration the receipt and sufficiency of which Guarantor hereby acknowledges, Guarantor hereby unconditionally, irrevocably and absolutely guaranties to Lender, and its respective successors, endorsees, transferees, and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of the Guaranty Obligations. (b) This Guaranty constitutes a guaranty of payment and performance when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that Lender, or any of its successors, endorsees, transferees, or assigns assert any claim or demand or enforce any remedy whatsoever against any Borrower, any other guarantor, or with respect to any collateral provided by any Borrower (collectively, "COLLATERAL"), before or as a condition to the obligations of Guarantor under this Guaranty. 2.2 ABSOLUTE AND IRREVOCABLE GUARANTY. The Guaranty Obligations shall remain in full force and effect without regard to, and shall not be impaired or affected by, or be deemed to be satisfied by, and Guarantor shall not be exonerated, discharged, revoked or released by, any of the following events: 3 (a) Lender's exercise or enforcement of, or failure or delay in exercising or enforcing, legal proceedings to collect the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations or any power, right, or remedy with respect to the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations, or the Collateral, including without limitation: (i) any action or inaction of Lender to perfect, protect, or enforce any lien upon any Collateral; or (ii) any change in the time, manner, or place of payment of, or in any other term of, any or all of the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations, or any other amendment to, or waiver of, the $50,000,000 Revolving Line of Credit Note, any other $50,000,000 Revolving Line of Credit Loan Document, or any other agreement or instrument governing or evidencing the $50,000,000 Revolving Line of Credit Loan or any of the Guaranty Obligations; (b) Insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver or trustee for all or any part of any Borrower's or any Guarantor's assets or of the assets of any other guarantor of the Obligations, liquidation, winding-up, or dissolution of any Borrower or any Guarantor, or any other guarantor of the Obligations; (c) Any limitation, discharge, cessation, or partial satisfaction of the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations, or the obligations of any other guarantor of the Obligations, or any invalidity, voidability, unenforceability, in whole or in part, of the $50,000,000 Revolving Line of Credit Note, this Guaranty, any other $50,000,000 Revolving Line of Credit Loan Document, or any other document evidencing the $50,000,000 Revolving Line of Credit Loan or Guaranty Obligations; (d) Any merger, acquisition, consolidation or change in structure of any Borrower or any Guarantor or any other guarantor of the Obligations; or any sale, lease, transfer, or other disposition of any or all of the assets or Equity Interests of any Borrower or any Guarantor or any other Guarantor of the Obligations, including, without limitation, any transfer by any Borrower of all or any part of any Collateral, or termination of any Borrower's existence for any reason; (e) Any assignment or other transfer, in whole or in part, of Lender's interest in or rights in or under the $50,000,000 Revolving Line of Credit Note, or any other $50,000,000 Revolving Line of Credit Loan Document, including, without limitation, this Guaranty, or with respect to the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations, or the Collateral; (f) Any claim, defense, counterclaim, or setoff that any Borrower or any Guarantor or any other Guarantor of the Obligations may have or assert, including, without limitation, any defense of incapacity, disability, or lack of corporate, organizational or other authority to execute any document relating to the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations, the Collateral, or this Guaranty, other than (i) upon the occurrence of the Termination Date, the defense of prior performance, or (ii) any defense based on any applicable provision of the Uniform Commercial Code requiring that Collateral be disposed of in a commercially reasonable manner; 4 (g) Any purported revocation by any Guarantor; (h) Any cancellation, renunciation or surrender of any pledge, guaranty, or any debt instrument evidencing the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations; (i) The vote, claim, distribution, election, acceptance, action, or inaction of Lender in any bankruptcy or reorganization case related to the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations, or the Collateral; or (j) Any other action or circumstances that might otherwise constitute a defense available to, or a legal or equitable discharge of, any surety, any Guarantor or any other Guarantor, except as expressly provided herein; it being agreed that the Guaranty Obligations shall not be discharged or revoked or released until the Termination Date. 2.3 DEMAND BY LENDER. In addition to the terms set forth herein, and in no manner imposing any limitation on such terms, if any of the Obligations under the $50,000,000 Revolving Line of Credit Note or the Revolving Credit Agreement or the other $50,000,000 Revolving Line of Credit Loan Documents are declared to be or otherwise becomes immediately due and payable due in whole or in part to the occurrence of a Material Adverse Event(s), then Guarantor, upon demand in writing therefor by Lender, shall promptly pay the Guaranty Obligations to Lender. Payment by Guarantor shall be made to Lender to be credited and applied to the Obligations, in immediately available funds in lawful money of the United States of America to an account designated by Lender or at the address set forth in the Revolving Credit Agreement or at any other address that may be specified in writing from time to time by Lender as provided herein. Any payment received by Lender with respect to the $50,000,000 Revolving Line of Credit Loan or other Obligations shall reduce the Guaranty Obligations by the amount of such payment. 2.4 GUARANTOR WAIVERS. In addition to any other waivers contained herein, each Guarantor waives, agrees and acknowledges as follows and waives any defense based upon or arising from the following: (a) The Guaranty Obligations are the immediate, direct, primary and absolute liabilities of each Guarantor, and are independent of, and not co-extensive with, the $50,000,000 Revolving Line of Credit Loan, the other Obligations or the obligations of any other Guarantor of the Obligations. Each Guarantor expressly waives any right it may have now or in the future to direct or affect the manner or timing of Lender's enforcement of its rights or remedies. Each Guarantor expressly waives any right he may have now or in the future to revoke this Guaranty. Each Guarantor expressly waives any right it may have now or in the future to require Lender to, and Lender shall not have any liability to, pursue or enforce first against any Borrower, any of the properties or assets of any Borrower, the Collateral or any other security, guaranty or pledge that may now or hereafter be held by Lender for the $50,000,000 Revolving Line of Credit Loan or for the Guaranty Obligations, or to apply such security, guaranty, or pledge to the $50,000,000 Revolving Line of Credit Loan or to the Guaranty Obligations. Each Guarantor shall remain liable for the Guaranty Obligations, notwithstanding any judgment Lender may obtain against any Borrower or any Guarantor, any other Guarantor of the Obligations, or any other Person or entity, or any modification, extension or renewal with respect thereto. Lender shall not be under any liability to marshal any assets in favor of each Guarantor or in payment of any or all of the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations. 5 (b) Each Guarantor has entered into this Guaranty based solely upon his/her/its independent knowledge of each Borrower's financial condition, and each Guarantor assumes full responsibility for obtaining any further information with respect to each Borrower or the conduct of each Borrower's business. Each Guarantor represents that it is now, and during the terms of this Guaranty will be, responsible for ascertaining the financial condition of each Borrower. Each Guarantor hereby waives any duty on the part of Lender to disclose to any Guarantor, and agrees that it is not relying upon or expecting Lender to disclose to it, any fact known or hereafter known by Lender relating to the operation or condition of any Borrower or its business or relating to the existence, liability, or financial condition of any other Guarantor of the Obligations. Each Guarantor knowingly accepts the full range of risk encompassed in a contract of continuing guaranty, which risk includes the possibility that a Borrower may incur further indebtedness after such Borrower's financial condition or its ability to pay debts as they mature has deteriorated. (c) Except as specifically provided in this Guaranty or applicable law, each Guarantor waives, to the fullest extent permitted by applicable law (i) notice of the acceptance by Lender of this Guaranty, (ii) notice of the existence, creation, payment, nonpayment, performance or nonperformance of all or any of the Guaranty Obligations, (iii) 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 Revolving Credit Agreement or the other $50,000,000 Revolving Line of Credit Loan Documents, the $50,000,000 Revolving Line of Credit Note, commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Guarantors may be liable in any way, and hereby ratifies and confirms whatever Lender may do in this regard, (iv) 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 which might be required by any court prior to allowing Lender to exercise any of its remedies, (v) all rights to receive notices from Lender with respect to, or otherwise sent to, each Guarantor or any other Guarantor of the Obligations, (vi) the benefit of all valuation, appraisal, stay, extension, redemption and exemption laws, (vii) the benefit of any law purporting to reduce any Guarantor's obligation in proportion to the principal obligation hereby guarantied, (viii) the benefit of any law purporting to exonerate any Guarantor's obligation upon performance or an offer of performance of the principal obligation, (ix) notice of any extension, modification, renewal, or amendment of any of the terms of the $50,000,000 Revolving Line of Credit Note or the Revolving Credit Agreement or any other $50,000,000 Revolving Line of Credit Loan Document relating to the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations, (x) notice of the occurrence of any Default or Event of Default with respect to the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations, the Collateral or otherwise, and (xi) notice of any exercise or non-exercise by Lender of any right, power, or remedy with respect to the $50,000,000 Revolving Line of Credit Loan, the Guaranty Obligations or the Collateral. 6 (d) If Lender, under applicable law, may proceed to realize its benefits under the Revolving Credit Agreement or any other $50,000,000 Revolving Line of Credit Loan Document providing for a lien upon any Collateral, whether owned by Borrower or by any other person or entity, either by judicial foreclosure or by nonjudicial sale or enforcement, Lender, at its sole option, may determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Guaranty. (e) Each Guarantor represents that the $50,000,000 Revolving Line of Credit Loan and Guaranty Obligations are and shall be incurred by the Borrowers for the permitted uses set forth in the Revolving Credit Agreement. Each Guarantor undertakes all the risks encompassed in the $50,000,000 Revolving Line of Credit Note, in the Revolving Credit Agreement and the other $50,000,000 Revolving Line of Credit Loan Documents as they may be now or are hereafter agreed upon by Lender and any of the Borrowers. Prior to the date this Guaranty terminates, Lender, in such manner and upon such terms and at such time as it deems best, and with or without notice to each Guarantor, may release, add, subordinate or substitute security for the $50,000,000 Revolving Line of Credit Loan or other Guaranty Obligations in accordance with the Revolving Credit Agreement. (f) A separate action or actions may be brought and prosecuted against any Guarantor whether or not an action is brought against any Borrower, or whether any Borrower or any other Guarantor is joined in any such action or actions. 2.5 WAIVERS UNDER STATUTES. Each Guarantor makes the following waivers: EACH GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY LENDER, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED ANY RIGHTS GRANTED TO EACH GUARANTOR PURSUANT TO NEVADA LAW. 2.6 ADDITIONAL WAIVERS. (a) Until the Termination Date, each Guarantor waives any and all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to any Guarantor by reason of applicable state law. This means, among other things, that: (i) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (ii) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that a creditor may be required to pursue the principal obligor or the security for the principal obligation before seeking enforcement against a guarantor or security pledged by such guarantor; 7 (iii) Each Guarantor waives and will be unable to raise any defense based upon any statute or rule of law which provides that a guarantor's obligations may be limited or exonerated by reason of the creditor's alteration of the principal obligation or of another guaranty, or by reason of the impairment or suspension of the creditor's rights or remedies against the principal, another guarantor, or any security given for the principal obligation or given for other guaranties; (iv) Each Guarantor waives and will be unable to claim any right to participate in, or the benefit of, any security given for the principal obligation now or hereafter held by Lender; and (v) Each Guarantor waives and will be unable to claim any right of subrogation and any right to enforce any remedy which Lender may have against any Borrower. (b) Each Guarantor waives any defense based upon any lack of authority of the officers, directors, partners, members, managers, or agents acting or purporting to act on behalf of any Borrower or any principal of any Borrower or any legal disability or defect in the formation of any Borrower. (c) Each Guarantor waives any defense based upon the application by any Borrower of the proceeds of the $50,000,000 Revolving Line of Credit Loan for purposes other than the purposes represented by Borrowers to Lender or intended or understood by Lender or any Guarantor. (d) Each Guarantor waives the benefit of any statute of limitations affecting the liability of any Guarantor hereunder or the enforcement hereof, and each Guarantor further agrees that any act or event which tolls any statute of limitations applicable to the obligations of any Borrower shall similarly operate to toll the statute of limitations applicable to any Guarantor's liability hereunder. (e) Each Guarantor further waives any and all defenses which are comparable to the waivers set forth in this Guaranty which would otherwise be available to a Guarantor under Nevada or California law (whether based on a statute or decisional law) and any other defenses available to guarantors under Nevada or California law, whether based on a statute or decisional law. 2.7 BENEFITS OF GUARANTY. The provisions of this Guaranty are for the benefit of Lender and its successors, transferees, endorsees, and assigns, and nothing herein shall impair the $50,000,000 Revolving Line of Credit Loan or other Obligations, as between Borrower, Guarantors and Lender. No such transfer, endorsement, or assignment shall increase or diminish any of the Guaranty Obligations hereunder. This Guaranty binds each Guarantor, and no Guarantor may assign, transfer or endorse this Guaranty. In the event all or any part of the $50,000,000 Revolving Line of Credit Loan or other Obligations are transferred, endorsed or assigned by Lender to any Person or Persons, any reference to "Lender" herein shall be deemed to refer equally to such Person or Persons. 8 2.8 CONTINUING GUARANTY. (a) This is a continuing guaranty, (b) this Guaranty shall remain in full force and effect until the Termination Date, and (c) the Guaranty Obligations hereunder shall extend to each and every extension or renewal, if any, of the $50,000,000 Revolving Line of Credit Note, the Revolving Credit Agreement or other $50,000,000 Revolving Line of Credit Loan Documents regardless of whether the $50,000,000 Revolving Line of Credit Loan or other Guaranty Obligations, in successive transactions, may be paid, repaid, advanced or renewed from time to time. 2.9 SUBORDINATION. Except for compensation and employee benefits due any Guarantor from time to time from any Borrower, and all dividends and distributions permitted pursuant to the Revolving Credit Agreement and the Pledge Agreement to be paid or issued to any Guarantor, any and all present and future debts and obligations of each Borrower to any Guarantor are hereby fully and absolutely subordinated to the right and time of payment in full of the Guaranty Obligations to Lender under each of the $50,000,000 Revolving Line of Credit Note, the Revolving Credit Agreement and the other $50,000,000 Revolving Line of Credit Loan Documents. Notwithstanding the foregoing, unless an Event of Default shall have occurred, any Borrower may declare and pay dividends to its shareholders, including Guarantors, in accordance with its organizational documents and applicable law. Any Lien, now existing or hereafter arising, on or in any of the assets of any Borrower in favor of Guarantors, whether created by contract, assignment, subrogation, reimbursement, indemnity, operation of law, principles of equity or otherwise is hereby subordinated in priority to the liens and security interests of Lender, now existing or hereafter arising. The subordination provisions of this Section 2.9 shall be effective regardless of whether demand has been made by Lender and shall remain in effect until the Termination Date. 3. REPRESENTATIONS AND WARRANTIES. To induce Lender to provide the consideration to each Borrower and each Guarantor described above, each Guarantor hereby makes the following representations and warranties, and each and all of which survive the execution and delivery of this Guaranty: 3.1 DUE AUTHORIZATION. The execution, delivery and performance by such Guarantor of this Guaranty have been duly authorized by all necessary action of such Guarantor. 3.2 BINDING OBLIGATION. This Guaranty constitutes the legal, valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with its terms. 3.3 NO CONFLICTS. To the best of such Guarantor's knowledge, the execution, delivery, and performance by such Guarantor of this Guaranty does not contravene any law or any contractual restriction binding on or affecting such Guarantor, and does not result in or require the creation of any Lien upon or with respect to any of its properties. 3.4 CONSENTS. No authorization or approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Guarantor of this Guaranty. 9 3.5 ADDRESS AND LOCATION OF RECORDS. The address of such Guarantor's principal place of business is accurately set forth on the signature page to this Guaranty. 3.6 NO SETOFF, DEFENSE, OR COUNTERCLAIM. As of the date of this Guaranty, the Guaranty Obligations are not subject to any setoff or defense of any kind against Lender or any Borrower, and such Guarantor specifically waives his right to assert any such defense or right of setoff. The Guaranty Obligations shall not be subject to any counterclaims, setoffs, or defenses against Lender or any Borrower that may arise in the future, except for (a) any defense of prior performance or payment, or (b) any defense based on any applicable provision of the Uniform Commercial Code requiring that Collateral be disposed of in a commercially reasonable manner, which any Borrower, Guarantors, or other guarantor of the Obligations may have or assert. 4. COVENANTS. Each Guarantor covenants and agrees that until the Termination Date, each Guarantor shall give prompt written notice to Lender (in any event not later than 10 days prior to any change described below) of (a) any change in the location of such Guarantor's principal place of business, (b) any change in the location of books and records pertaining to its business, (c) any change in its name, identity, or structure in any manner which might make any financing statement filed in connection with the $50,000,000 Line of Credit Loan Documents. 5. FURTHER ASSURANCES. Each Guarantor agrees that, at its expense, upon the written request of Lender, it will promptly execute and deliver to Lender any additional instruments or documents reasonably considered necessary by Lender to cause this Guaranty to be, become, or remain valid and effective in accordance with its terms. Each Guarantor will provide Lender in writing such financial and other information with respect to its assets and liabilities as Lender shall request, in form reasonably satisfactory to Lender. 6. REINSTATEMENT. This Guaranty shall remain in full force and effect and continue to be effective, as the case may be, if at any time payment or performance of the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations, or any part thereof, pursuant to applicable law, is avoided, rescinded, or reduced in amount, or must otherwise be restored or returned by Lender, or any other obligee of the $50,000,000 Revolving Line of Credit Loan or the Guaranty 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 avoided, rescinded, reduced, restored or returned, the $50,000,000 Revolving Line of Credit Loan or the Guaranty Obligations, as the case may be, shall be reinstated and deemed reduced only by such amount paid and not so avoided, rescinded, reduced, restored or returned. 7. DEFAULTS AND REMEDIES. Upon the occurrence and during the continuance of an Event of Default under the $50,000,000 Revolving Line of Credit Note or the Revolving Credit Agreement or other $50,000,000 Revolving Line of Credit Loan Documents, Lender may declare any or all of the Guaranty Obligations, immediately and without demand, notice or legal process of any kind, to be, and such Guaranty Obligations shall immediately become, due and payable, and then, or at any subsequent time, Lender may exercise any or all of its rights and remedies under this Guaranty, the $50,000,000 Revolving Line of Credit Note, the Revolving Credit Agreement, and any other $50,000,000 Revolving Line of Credit Loan Documents, including the exercise of any rights and remedies of Lender as a secured party against the Collateral, and under applicable law, and in addition may make demand upon Guarantor for the payment of the Guaranty Obligations. All Guaranty Obligations shall bear interest at the Default Rate from and after the date an Event of Default occurs under the $50,000,000 Revolving Line of Credit Note. 10 8. APPLICATION OF PAYMENTS. Any payment made by any Guarantor under this Guaranty shall be applied by Lender as set forth in the Revolving Credit Agreement. 9. INDEMNIFICATION. Each Guarantor agrees to and shall indemnify and hold Lender, and its officers, directors, employees, agents, attorneys and representatives harmless from and against any liabilities, claims and damages, including, without limitation, reasonable costs, attorneys' fees, disbursements and other expenses incurred or arising by reason of the taking or the failure to take action by Lender, in good faith, in respect of any transaction effected under this Guaranty, including, without limitation, any action to enforce payment of the Guaranty Obligations. The liabilities of each Guarantor under this Section 9 shall survive the termination of this Guaranty. 10. NOTICES. All notices and other communications required or desired to be served, given or delivered hereunder shall be in writing and shall be served, given or delivered as provided in the Revolving Credit Agreement. 11. ENTIRE AGREEMENT. This Guaranty, together with the Revolving Credit Agreement, the $50,000,000 Revolving Line of Credit Note, and the other $50,000,000 Revolving Line of Credit Loan Documents constitutes the entire agreement, and supersedes all prior and contemporaneous oral and written communications and agreements, between the parties with respect to the subject matter hereof. 12. LIMITATION OF LIABILITY. Neither Lender nor any of its officers, directors, employees, agents, or counsel, shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own respective gross negligence or willful misconduct. 13. ADVICE OF COUNSEL. Each Guarantor represents and warrants that it has either obtained the advice of counsel or has had the opportunity to obtain such advice in connection with the terms and provisions of this Guaranty. 14. AMENDMENTS. No amendment or waiver of any provisions of this Guaranty, or consent to any departure by any Guarantor therefrom, shall be effective in any event unless the same shall be in writing and signed by Lender and all Guarantors and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 15. CONSENT TO $50,000,000 REVOLVING LINE OF CREDIT LOAN DOCUMENTS. Each Guarantor hereby acknowledges he has received copies of, and consents to, the Revolving Credit Agreement, the $50,000,000 Revolving Line of Credit Note, and all other $50,000,000 Revolving Line of Credit Loan Documents. 16. NO WAIVER. No failure on the part of Lender to exercise, and no delay in exercising, any right under the Revolving Credit Agreement of any other $50,000,000 Revolving Line of Credit Loan Document shall operate as a waiver thereof; and no single or partial exercise of any right under the Revolving Credit Agreement or any other $50,000,000 Revolving Line of Credit Loan Document shall preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Revolving Credit Agreement and other $50,000,000 Revolving Line of Credit Loan Documents are cumulative and not exclusive of any remedies provided by law. 11 17. BINDING EFFECT. This Guaranty shall be binding upon and inure to respective benefits of Lender and all Guarantors and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights hereunder or any interest herein without Lender's prior written consent. 18. SEVERABILITY. In the event that any one or more of the provisions contained in the Revolving Credit Agreement of any other $50,000,000 Revolving Line of Credit Loan Documents shall be determined to be invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision or provisions in every other respect, and the remaining provisions of the Revolving Credit Agreement and other $50,000,000 Revolving Line of Credit Loan Documents shall not be in any way impaired. 19. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, OF THIS GUARANTY AND OF THE REVOLVING CREDIT AGREEMENT, THE $50,000,000 REVOLVING LINE OF CREDIT NOTE AND THE OTHER $50,000,000 REVOLVING LINE OF CREDIT LOAN DOCUMENTS AND THE GUARANTY 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. EACH GUARANTOR HEREBY CONSENTS AND AGREES 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 ANY GUARANTOR AND LENDER PERTAINING TO THIS GUARANTY OR ANY OF THE OTHER $50,000,000 REVOLVING LINE OF CREDIT LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER $50,000,000 REVOLVING LINE OF CREDIT LOAN DOCUMENTS; PROVIDED, THAT EACH GUARANTOR ACKNOWLEDGES 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 GUARANTY 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 GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH GUARANTOR HEREBY WAIVES ANY OBJECTION THAT ANY GUARANTOR 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. 12 20. WAIVER OF TRIAL BY JURY. Each Guarantor each hereby irrevocably waives all rights to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Guaranty, any other $50,000,000 Revolving Line of Credit Loan Document, or any of the transactions contemplated thereby. 21. COUNTERPARTS. This Guaranty may be executed in any number of identical counterparts, which shall constitute an original and collectively and separately constitute a single instrument or agreement. [NO FURTHER TEXT ON THIS PAGE] 13 IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty Agreement ($50 Revolving Credit Agreement) to and for the benefit of Lender as of the Effective Date first above written. GUARANTOR: PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company, By: /s/ Kali P. Chaudhuri /s/ Jacob Sweidan ---------------------------------- Jacob Sweidan Name: Kali P. Chaudhuri Manager PCHI ----------------------------- Title: Manager ---------------------------- Address: 6800 Indiana Ave., Suite 130 ------------------------------- Riverside, CA 92506 ------------------------------- Attn: ------------------------------- Ph: 951-782-8812 ------------------------------- Fax: 951-782-8850 ------------------------------- 14 EX-10.8 10 ihhi_8k-ex1008.txt AMENDMENT TO AMENDED AND RESTATED TRIPLE NEW HOSPITAL BUILDING LEASE EXHIBIT 10.8 AMENDMENT TO AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE This AMENDMENT TO AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE (this "AMENDMENT") is made as of March 27, 2009 (the "EFFECTIVE DATE"), 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 hereby amend that certain AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE, dated as of September 1, 2007 (the "LEASE"), between Landlord and Tenant with reference to the following facts: RECITALS WHEREAS, Landlord and Tenant are parties to that certain Settlement Agreement, General Release and Covenant Not to Sue dated March 25, 2009 (the "SETTLEMENT AGREEMENT"); WHEREAS, pursuant to Section 14 of the Settlement Agreement, Medical Provider Financial Corporation II ("MPFCII") has agreed to reduce the interest rate on Tenant's $45,000,000 Term Note dated October 9, 2007 (the "TERM NOTE") from interest of 14 % to simple interest of 10.25% (the "DEBT SERVICE REDUCTION") and to maintain such reduction through the Maturity Date of the Term Note, including any extension thereof, as defined in the $80,000,000 Credit Agreement dated October 9, 2007 (the "CREDIT AGREEMENT"), except during such time as an Event of Default shall have occurred and continues under the Credit Agreement. The period during which the Debt Service Reduction is in effect is referred to herein as the "DEBT REDUCTION PERIOD"; WHEREAS, pursuant to Section 14 of the Settlement Agreement, Landlord has agreed to reduce the rent payable by Tenant under the Lease by an amount equal to the Debt Service Reduction during the Debt Reduction Period; and WHEREAS, Landlord and Tenant now wish to amend the Lease to provide for the foregoing changes. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows: 1. RENT REDUCTION. Beginning on the Effective Date, the Base Rent under the Lease shall be reduced by an amount equal to the Debt Service Reduction during the Debt Reduction Period, and Tenant shall be entitled to reduce its monthly or other periodic payments of the Base Rent by the amount of the Debt Service Reduction for the applicable period. 2. STATEMENTS; BOOKS AND RECORDS. Within twenty (20) days after the end of each of its fiscal quarters, Tenant shall deliver to Landlord a statement (the "RECONCILIATION") containing an accounting reconciliation of the amount of the Debt Service Reduction for the fiscal quarter then ended, including all reasonable supporting calculations. Within ninety (90) days following the end of 1 each fiscal year of Tenant, Landlord may make an examination, at its own expense during normal business hours, of the books and records of Tenant to the extent necessary to verify the amount of the Debt Service Reductions previously reported by Tenant in its Reconciliations during such fiscal year; PROVIDED, HOWEVER, that (a) such examination must be at the request of members of Landlord holding at least two-thirds of its membership interests, and (b) Landlord and any of its representatives receiving information from such examination must execute a confidentiality agreement in customary form. If Landlord has any objections to a Reconciliation prepared by Tenant, Landlord must deliver written notice of objection to Tenant within one hundred and eighty (180) days following the end of each fiscal year of Tenant, after which time each Reconciliation prepared by Tenant during such fiscal year will become conclusively binding on Landlord and Tenant, and Landlord will no longer have any right to object to it. 3. NO OTHER AMENDMENT. Except as modified herein, the Lease and all of the terms and provisions thereof shall remain unmodified and in full force and effect as originally written. In the event of an inconsistency or conflict between this Amendment and the Lease, in each instance this Amendment to prevail and govern. All capitalized terms used and not defined herein shall have the meaning assigned to them in the Lease. 4. COUNTERPARTS. This Amendment may be executed in counterparts, each of which, when taken together, shall be deemed to be one and the same instrument. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS. 2 IN WITNESS WHEREOF, Landlord and Tenant have read and agree to be bound by the above terms and conditions and have entered into this AMENDMENT TO AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE as of the Effective Date set forth above. LANDLORD: Pacific Coast Holdings Investment, LLC By: /s/ JACOB SWEIDAN. M.D. PCHI CO-MANAGER --------------------------------------------------------- Its: /s/ WILLIAM E. THOMAS FOR KALI P. CHAUDHURI, CO-MANAGER --------------------------------------------------------- TENANT: Integrated Healthcare Holdings, Inc. By: /s/ KENNETH K. WESTBROOK --------------------------------------------------------- Its: PRESIDENT & CEO --------------------------------------------------------- 3 EX-99.1 11 ihhi_8k-ex9901.txt PRESS RELEASE, DATED APRIL 2, 2009 EXHIBIT 99.1 IHHI SETTLES LITIGATION WITH OC-PIN FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT: EDWARD GYIMAH (714) 953-3503 Santa Ana, California --April 2, 2009-- Integrated Healthcare Holdings, Inc. announced today that it has agreed to settle a number of pending lawsuits with Orange County Physicians Investment Network, LLC, which is owned primarily by local physicians and is one of IHHI's largest shareholders, and certain related parties of OC-PIN. The litigation grew out of a lawsuit filed by IHHI in May, 2007 against two of its former directors and one current director alleging various breaches of fiduciary duties owed to the company. The dispute escalated over the past two years when the directors cross-complained against IHHI and OC-PIN filed a number of lawsuits seeking to oust the company's former Chief Executive Officer and to assert various shareholder rights. None of the parties admitted any wrongdoing in connection with the settlement. Maurice J. DeWald, IHHI's Chairman of the Board, said "I could not be more pleased that IHHI is turning the page on this unfortunate chapter in our company's short history. The Board of Directors, management, and our dedicated employees are now looking forward to concentrating all of our efforts on providing quality health care to our patients." IHHI's recently appointed President and Chief Executive Officer, Kenneth K. Westbrook, was also happy and relieved that the parties were able to settle their differences out of court. "When I started here just over three months ago, I quickly realized that settling this litigation was key to unlocking the vast potential of our four hospitals that are so critical to the delivery of health care in Orange County," Westbrook said. "It is a new day for IHHI. I am ecstatic that all parties have found a way to put this behind them and focus on working together to provide the best possible service to our patients and the community." About Integrated Healthcare Holdings, Inc. Integrated Healthcare Holdings, Inc. owns and operates the following four acute care hospitals in Orange County, California: Western Medical Center in Santa Ana; Western Medical Center in Anaheim; Coastal Communities Hospital in Santa Ana; and Chapman Medical Center in Orange. For more information about IHHI, please refer to our website at www.ihhioc.com. Safe Harbor for Forward-Looking Statements Some of the statements in this release may constitute forward-looking statements. Such statements are based on our current expectations and could be affected by numerous factors and are subject to various risks and uncertainties discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended March 31, 2008, our quarterly reports on Form 10-Q and our periodic reports on Form 8-K. Do not rely on any forward-looking statement, as we cannot predict or control many of the factors that ultimately may affect our ability to achieve the results estimated. We undertake no obligation to update any forward-looking statement, whether as a result of changes in underlying factors, new information, future events, or otherwise. -----END PRIVACY-ENHANCED MESSAGE-----