-----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, Dd1F+NldDDiyKkPSq3lGMW8DwMHz+NelPMhouXcjxGrqx/IrZG+cRpoKS4y2YCXz DkJtchVYpH4MdYAv187qgA== 0001019687-10-001492.txt : 20100419 0001019687-10-001492.hdr.sgml : 20100419 20100419171231 ACCESSION NUMBER: 0001019687-10-001492 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20100417 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100419 DATE AS OF CHANGE: 20100419 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: 10757730 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.htm INTEGRATED HEALTHCARE 8-K ihhi_8k.htm

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):  April 13, 2010
 
Integrated Healthcare Holdings, Inc.
 
(Exact Name of Registrant as Specified in Charter)
  
Nevada
  
0-23511
  
87-0573331
(State or Other Jurisdiction  of Incorporation)
  
(Commission File Number)
  
(IRS Employer Identification No.)
 
1301 N. Tustin Avenue, Santa Ana, California 92705
            (Address of Principal Executive Offices)                        (Zip Code)

Registrant’s telephone number, including area code: (714) 953-3503
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
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.
 
On April 13, 2010, Integrated Healthcare Holdings, Inc. (“IHHI”) and its subsidiaries WMC-A, Inc., WMC-SA, Inc., Chapman Medical Center, Inc. and Coastal Communities Hospital, Inc. (together with IHHI, the “Company”) entered into an Omnibus Credit Agreement Amendment (the “Omnibus Amendment”) with SPCP Group IV, LLC and SPCP Group, LLC (together, “Silver Point”), Silver Point Finance, LLC, as the Lender Agent, Pacific Coast Holdings Investment, LLC (“PCH I”), Ganesha Realty, LLC (“Ganesha”), Kali P. Chaudhuri, M.D. (“Dr. Chaudhuri”) and KPC Resolution Company, LLC (“KPC”).  KPC and Ganesha are companies owned and controlled by Dr. Chaudhuri, who is the majority shareholder of IHHI.  Ganesha is a member of PCHI with a 49% membership interest.
 
The Omnibus Amendment amends the Credit Agreement ($80,000,000 Facility) dated as of October 9, 2007, as amended (the “$80,000,000 Credit Agreement”), the Revolving Credit Agreement ($50,000,000 Facility) dated as of October 9, 2007, as amended  (the “50,000,000 Revolving Credit Agreement”), and the Credit Agreement ($10,700,000 Facility) dated as of October 9, 2007, as amended (the “$10,700,000 Credit Agreement” and together with the $80,000,000 Credit Agreement and the $50,000,000 Credit Agreement, the “Credit Agreeme nts”), by and among the Company and certain affiliates of Medical Capital Corporation.  In July 2009, Medical Capital Corporation and its affiliates were seized by the U.S. Securities and Exchange Commission (“SEC”) in connection with a complaint filed by the SEC against Medical Capital Corporation for alleged federal securities laws violations, and in August 2009 Thomas A. Seaman (the “Receiver”) was appointed by a federal judge to oversee the receivership of Medical Capital Corporation and its affiliates.
 
The Company entered into the Omnibus Amendment in connection with the Loan Purchase and Sale Agreement, dated as of January 13, 2010, as amended (the “Loan Purchase Agreement”), by and between KPC and the Receiver.  Under the Loan Purchase Agreement, KPC agreed to purchase all of the Credit Agreements from the Receiver for $70,000,000.  Concurrent with the closing of the Loan Purchase Agreement, KPC sold its interest in the Credit Agreements to Silver Point, and KPC purchased from Silver Point a participation interest in the Credit Agreements.  On April 13, 2010, concurrent with the effectiveness of the Omnibus Amendment and the closing of the Loan Purchase Agreement, Sil ver Point acquired all of the Credit Agreements, including the security agreements and other ancillary documents executed by the Company in connection with the Credit Agreements, and became the “Lender” under the Credit Agreements.
 
The following are material terms of the Omnibus Amendment:
 
·     
The Stated Maturity Date under each Credit Agreement was changed to April 13, 2013.  The Credit Agreements were otherwise due to mature on October 8, 2010.
 
·     
Silver Point agreed to waive certain Events of Default that had occurred under the Credit Agreements.
 
·     
Silver Point agreed to reduce the outstanding principal balances under the Credit Agreements by $1,000,000, and waived all accrued and unpaid interest and fees under the Credit Agreements as of April 13, 2010.
 
·     
The $80,000,000 Credit Agreement was amended so that the $45,000,000 Real Estate Term Loan (the “$45,000,000 Loan”) and $35,000,000 Non-Revolving Line of Credit Loan (the “$35,000,000 Loan”) will each bear a fixed interest rate of 14.5% per year.  These loans previously bore interest rates of 10.25% and 9.25%, respectively.  In addition, the Company agreed to make certain mandatory prepayments of the $35,000,000 Loan if it receives proceeds from certain new financing of its accounts receivable or provider fee funds from Medi-Cal under California AB 1383.
 
 
 
 
 
 
·    
The $50,000,000 Revolving Credit Agreement was amended so that Silver Point will, subject to the terms and conditions contained therein, make up to $10,000,000 in new revolving funds available to the Company for working capital and general corporate purposes.  Each advance under the $50,000,000 Revolving Credit Agreement will bear interest at an annual rate of Adjusted LIBOR (calculated as LIBOR subject to certain adjustments, with a floor of 2% and a cap of 5%) plus 12.5%, compared to an interest rate of 24% that was previously in effect under the $50,000,000 Revolving Credit Agreement.  In addition, the Company agreed to make mandatory prepayments of the $50,000,000 Revolving Credit Agreement under the conditions described above with respect to the $80,000,000 Credit Agreement.  The financial covenants under the $50,000 ,000 Revolving Credit Agreement were also amended to increase the required levels of minimum EBITDA (as defined in the Omnibus Amendment) from the levels previously in effect under the $50,000,000 Revolving Credit Agreement.
 
·    
The $10,700,000 Credit Agreement was amended so that the $10,700,000 Convertible Term Loan will bear a fixed interest rate of 14.5% per year, compared to the interest rate of 9.25% previously in effect and to eliminate the conversion feature of the loan.  In addition, the Company agreed to make mandatory prepayments of the $10,700,000 Credit Agreement under the conditions described above with respect to the $80,000,000 Credit Agreement.
 
·    
In connection with the sale of the Credit Agreements, all warrants and stock conversion rights previously issued to affiliates of Medical Capital Corporation were cancelled.  In connection with the Omnibus Amendment, IHHI issued new Warrants to purchase its common stock for a period of three years at an exercise price of $0.07 per share in the following denominations: 139,000,000 shares to KPC or its designees and 96,000,000 shares to Silver Point or its designees.  The new Warrants also provide the holders with certain pre-emptive, information and registration rights.  In addition, on April 13, 2010, IHHI issued to Dr. Chaudhuri a three-year Warrant to acquire 170,000,000 shares of common stock at $0.07 in satisfaction of its existing obligation under the Amended and Restated Memorandum of Understanding, dated January 13 , 2010.  The Amended and Restated Memorandum of Understanding was terminated upon effectiveness of the Omnibus Amendment.
 
On April 13, 2010, IHHI and PCHI entered into a Second Amendment to Amended and Restated Triple Net Hospital Building Lease (the “Amendment to Lease”), which amended the Amended And Restated Triple Net Hospital Building between the parties.  Under the Amendment to Lease, the annual base rent to be paid by IHHI to PCHI was increased from $5,389,063 to $7,328,125, but if PCHI refinances the $45,000,000 Loan, the annual base rent will increase to $8,300,000.  In addition, since IHHI has not paid rent due under the Lease since October 1, 2008, IHHI agreed that upon receipt of provider fee funds from Medi-Cal under California AB 1383 (subject to its obligation to prepay certain of the Credit Agreements from such funds under the Omnibus Amendment), IHHI will pay all unpaid rent due to PCHI for the period from November 1, 2008 through April 30, 2010, but in any event not later than December 1, 2010.
 
On April 13, 2010, in connection with the sale of the Credit Agreements by the Receiver, the Company and the Receiver entered into a Release (the “Release”) under which the Company agreed to provide a general release to the Receiver from any claims arising under the Credit Agreements.  The Company received a limited release from the Receiver for claims arising under the Credit Agreements and the sale of the Credit Agreements by the Receiver.
 
The foregoing descriptions of the Omnibus Amendment, Warrants, Amendment to Lease and Release are summary in nature and qualified in their entirety by copies of such agreements, copies of which are filed as exhibits hereto and incorporated by reference herein.
 
 
 
 
 
ITEM 1.02  TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
 
As indicated under Item 1.01of this Report, the Amended and Restated Memorandum of Understanding was terminated upon the effectiveness of the Omnibus Amendment.
 
ITEM 3.02  UNREGISTERED SALES OF EQUITY SECURITIES.

The disclosure under Item 1.01 of this Report is hereby incorporated herein by reference.
 
The sale of securities referenced in Item 1.01 of this Report have not been registered under the Securities Act of 1933, as amended (“Securities Act”), or any state securities laws, and were sold in a private transaction exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
 
ITEM 9.01  FINANCIAL STATEMENTS AND EXHIBITS.

(d)              Exhibits.

Exhibit Number
 
Description
99.1
Omnibus Credit Agreement Amendment, dated as of April 13, 2010*
99.2
Warrant to purchase 170,000,000 shares of common stock, dated April 13, 2010, issued to Kali P. Chaudhuri, M.D.
99.3
Warrant to purchase 139,000,000 shares of common stock, dated April 13, 2010, issued to KPC Resolution Company, LLC
99.4
Warrant to purchase 79,182,635 shares of common stock, dated April 13, 2010, issued to SPCP Group, LLC
99.5
Warrant to purchase 16,817,365 shares of common stock, dated April 13, 2010, issued to SPCP Group IV, LLC
99.6
Second Amendment to Amended and Restated Triple Net Hospital Building Lease, dated April 13, 2010, by and between IHHI and PCHI
99.7
Release, dated April 13, 2010, by and between the Company and Thomas A. Seaman, Receiver *

* Certain exhibits, schedules and/or annexes have been omitted. A copy of any omitted exhibit, schedule or annex will be furnished supplementally to the Securities and Exchange Commission upon request.

 
 
 

SIGNATURE

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.  
 
Integrated Healthcare Holdings, Inc.
 
By: /s/ Steven R. Blake         
Name:  Steven R. Blake
Title: Chief Financial Officer
 
Date: April 19, 2010
 
 

 
 EX-99.1 2 ihhi_8k-ex9901.htm OMNIBUS CREDIT AGREEMENT AMENDMENT ihhi_8k-ex9901.htm
Exhibit 99.1
 
OMNIBUS CREDIT AGREEMENT AMENDMENT
 
 
OMNIBUS CREDIT AGREEMENT AMENDMENT dated as of April 13, 2010 (this “Omnibus Amendment”) among (i) 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”),  and GANESHA REALTY, LLC, a California limited liability company (“Ganesha”), (ii) SPCP GROUP IV, LLC, a Delaware limited liability company (“SP 1”) and SPCP Group, LLC, a Delaware limited liability company (“SP 2” and together with SP 1, the “Lender”), as the Lender under each Credit Agreement (as defined below) and (ii) SILVER POINT FINANCE, LLC, a Delaware limited liability company (the “Lender Agent” and together with the Lender, “Silver Point”), as the Lender Agent under each Credit Agreement.

R E C I T A L S

WHEREAS, IHHI, WMC-SA, WMC-A, Chapman, Coastal (together with IHHI, WMC-SA, WMC-A and Chapman the “Borrowers”), PCHI, Ganesha and OC-PIN (together with PCHI and Ganesha, the “Credit Parties” and PCHI and OC-PIN, the “$80,000,000 Guarantors”) and the Lender are parties to that certain Credit Agreement ($80,000,000 Facility) dated as of October 9, 2007 (as amended by the certain Amendment No. 1 dated April 2, 2009 and that certain Acknowledgement, Waiver and Consent and Amendment to Credit Agreements dated April 2, 2009 and as may be further amended, supplemented or modified, the “$80,000,000 Credit Agreement”), providing, subject to the terms and conditions thereof, for loans made, and extensions of credit (by means of loans) to be made, by the Lender to the Borrowers in an aggregate principal amount equal to $80,000,000;

WHEREAS, the Borrowers and the Credit Parties (wherein PCHI and OC-PIN are guarantors and in such capacity shall hereinafter be referred to as the “$50,000,000 Guarantors”) and the Lender are parties to that certain Revolving Credit Agreement ($50,000,000 Facility) dated as of October 9, 2007 (as amended by that certain Amendment dated June 10, 2008, that certain Amendment dated June 20, 2008 and that certain Amendment No. 1 dated April 2, 2009 and that certain Acknowledgment, Waiver and Consent and Amendment to Credit Agreements dated April 2, 2009 and as may be further amended, supplemented or modified, the “50,000,000 Credit Agreement”), providing, subject to the terms and conditions thereof, for extensions of credit (by means of loans) to be made by the Lender to the Borrowers in an aggregate principal or face amount not exceeding $50,000,000;

WHEREAS,  the Borrowers and the Credit Parties (wherein PCHI and OC-PIN are guarantors and in such capacity shall hereinafter be referred to as the “$10,700,000 Guarantors” and together with the $80,000,000 Guarantors and the $50,000,000 Guarantors, the “Guarantors”) and the Lender are parties to that certain Credit Agreement ($10,700,000 Facility) dated as of October 9, 2007 (as amended by that certain Acknowledgment, Waiver and consent and Amendment to Credit Agreements dated as of April 2, 2009 and as may be further amended, supplemented or modified, the “$10,700,000 Credit Agreement” and together with the $80,000,000 Credit Agreement and the $50,000,000 Credit Agreement, the “Credit Agreements”), providing, subject to the terms and conditions thereof, for loans made by the Lender to the Borrowers in an aggregate principal of $10,700,000;

WHEREAS, one or more Events of Default (as defined in each Credit Agreement) (the “Current Events of Defaults”) under the Credit Agreements have occurred and are continuing and Borrowers have been operating under temporary forbearance with respect to such Current Events of Default;


 
 

WHEREAS, the Borrowers, Credit Parties and the Lender have agreed to amend certain provisions of the Credit Agreements as provided herein; and

WHEREAS, the Lender has agreed to waive the Existing Defaults (as defined herein) in connection with such amendments;

NOW, THEREFORE, the Borrowers, the Credit Parties and the Lender wish now to amend the Credit Agreements in certain respects, and accordingly, the parties hereto hereby agree as follows:

SECTION 1.  DEFINITIONS.  Except as otherwise defined in this Omnibus Amendment, terms defined in the Credit Agreements are used herein as defined therein.

SECTION 2.  AMENDMENTS TO THE $80,000,000 CREDIT AGREEMENT.  Subject to the satisfaction of the conditions precedent specified in Section 12 below, but effective as of the date hereof, the $80,000,000 Credit Agreement shall be amended as follows:

2.01.  References Generally.  References in the $80,000,000 Credit Agreement (including references to the $80,000,000 Credit Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the $80,000,000 Credit Agreement as amended hereby.

2.02.  Definitions.  Annex A of the $80,000,000 Credit Agreement shall be amended by amending the following definitions (to the extent already included in said Annex A) and adding the following definitions in the appropriate alphabetical location (to the extent not already included in said Annex A):

“Amendment No. 3 Effective Date” means April 13, 2010.

“A/R Financing” has the meaning assigned to such term in Section 1.17.

“A/R Lender” has the meaning assigned to such term in Section 1.17.

“Change of Control” means that any of the following have occurred:  (a) Kali P. Chaudhuri, M.D. and his Affiliates no longer beneficially own a majority of the outstanding shares (and/or securities readily convertible into or exercisable for shares) of Voting Stock on a fully diluted basis of IHHI; or (b) during any period of twelve (12) consecutive calendar months, Persons who at the beginning of such period constituted the majority of the board of directors of any Borrower or the majority of the managers of PCHI (together with any new Person whose nomination or election or appointment was approved by the required vote of the shareholders or members) cease for any reason (other than death or personal disability) to constitute a majority of the board of directors of any Borrower or the majority of the managers of PCHI; or (c) IHHI ceases to own, directly or indirectly, and control, all (100%) of the Stock of WMC-A, WMC-SA, Chapman and Coastal; or (d) Kenneth K. Westbrook ceases to be Chief Executive Officer or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal, and a replacement Chief Executive Officer acceptable to Lender in its sole discretion is not employed by the applicable Borrower within thirty (30) calendar days after the date that Kenneth K. Westbrook is no longer Chief Executive Office or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal; (e) Ganesha ceases to own, directly or indirectly, at least 49% of the membership interests of PCHI or any other Person (other than any entity the shareholders and shareholdings of which are substantially the same as the non-Ganesha shareholders and shareholdings of PCHI on the Amendment No. 3 Effective Date) and its Affiliates owns, directly or indirectly, a greater percentage of membership interests of PCHI than Ganesha; or (f) Kali P. Chaudhuri, M.D. ceases to own, directly or indirectly, a majority of the outstanding Voting Stock of Ganesha.  Notwithstanding the foregoing, a Change of Control shall not occur as a result of the exercise by Kali P. Chaudhuri, M.D., SPCP Group IV, LLC, SPCP Group, LLC or their respective Affiliates or designees or assigns of the warrants issued by IHHI to Kali P. Chaudhuri, M.D., KPC Resolution Company, LLC (so long as it is controlled by Kali P. Chaudhuri, M.D.), SPCP Group IV, LLC, and SPCP Group, LLC or their respective designees or assigns on the Amendment No. 3 Effective Date.


 
2
 

“$50,000,000 Revolving Credit Agreement” means that certain $50,000,000 Revolving Credit Agreement of even date herewith, executed by Borrowers, as borrowers, and Medical Provider Financial Corporation I, as Lender, as may be amended, supplemented or otherwise modified and in effect from time to time.

“Interest Rate” means the following:

(a)            With respect to the $45,000,000 Real Estate Term Loan, simple interest shall be charged at the per annum fixed rate of 14.5%.

(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 14.5%.

“Lender” means (i) prior to the Amendment No. 3 Effective Date, Medical Provider Financial Corporation II, a Nevada corporation and (ii) on and after the Amendment No. 3 Effective Date, SPCP Group IV, LLC, a Delaware limited liability company and SPCP Group LLC, a Delaware limited liability company, and, in each case, if either shall decide to assign all or any portion of the Obligations, such term shall include any assignee(s) of such Lender.

“Lender Agent” means Silver Point Finance, LLC, a Delaware limited liability company, and its successors and assigns.

“New $10,700,000 Credit Agreement” has the meaning set forth in the Recitals to this Agreement, as the New $10,700,000 Credit Agreement may be amended, supplemented or otherwise modified and in effect from time to time.

“Participation Agreement” means that certain Participation Agreement dated as of April 13, 2010 among Lender, KPC Resolution Company, LLC and Silver Point Finance, LLC, as participation agent.

“Second Lien Collateral” has the meaning assigned to such term in Section 1.17.

“Stated Maturity Date” means April 13, 2013.

“Voting Stock” means, with respect to any Person, any class or classes of capital stock or other ownership interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect directors, managers or trustees (as applicable) of such Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency).


 
3
 

2.03.           Mandatory Prepayments.  Section 1.4(b) of the $80,000,000 Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(b)           Mandatory Prepayments.  Notwithstanding the foregoing, (i) immediately upon receipt by Borrowers or Credit Parties of any cash proceeds of any sale or other disposition of any Collateral, Borrowers shall prepay the Loans in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, and (C) an appropriate reserve for income taxes; (ii) on the date of availability of any A/R Financing executed by the Borrowers as contemplated by Section 1.17, the Borrowers shall prepay the $35,00,000 Non-Revolving Line of Credit Loan and all accrued and unpaid interest and fees thereon in an aggregate amount equal to the outstanding balances thereof as of such date; and (iii) after giving effect to any prior application of funds to prepay the $10,700,000 Convertible Term Loan required on such date, immediately upon receipt by Borrowers or Credit Parties of any payment or reimbursement of enhanced federal matching funds, net of: provider fees, pledged funds due to the California Health Foundation & Trust and estimated federal and state taxes on such net funds (assuming a marginal blended tax rate of 40%) received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments), Borrowers shall prepay the $35,000,000 Non-Revolving Line of Credit Loan or any outstanding A/R Financing, as applicable, in an amount equal 65% of such payment or reimbursement up to an annual aggregate prepayment equal to $25,000,000, provided that in the case of a prepayment of any A/R Financing, commitments under such A/R Financing equal to the amount of such prepayment shall be permanently reduced and terminated (but in no event shall such commitments be required to be reduced below $10,000,000).  Any prepayment pursuant to clause (i) or (iii) of the immediately foregoing sentence shall be applied in accordance with Section 1.4(c) (Application of Prepayments); provided that no such prepayment under clause (iii) shall be applied to the $45,000,000 Real Estate Term Loan.  The following shall not be subject to mandatory prepayment under this subsection:  (1) proceeds of sales of Inventory in the ordinary course of business; (2) proceeds of collection of Accounts in the ordinary course of business (except as otherwise set forth herein); and (3) proceeds of sales of Equipment and other personal property in the ordinary course of business so long as such Equipment and other personal property is replaced (if necessary in the exercise of prudent business judgment) by Equipment and other personal property of equal or greater value or utility.”

2.04.           Interest; Payments; Principal on the Loans.  Section 1.5 of the $80,000,000 Credit Agreement is hereby amended follows:

(a)  Section 1.5(b) is hereby amended and restated to read in its entirety as follows:

“(b)           Principal on the Loans.  The Borrowers hereby unconditionally promise to pay the unpaid principal amount of the Loans on the Maturity Date.”

(b)  Section 1.5(f) is hereby amended and restated to read in its entirety as follows:

“(f)           Payment to Lender’s Account.  All payments by Borrowers to Lender hereunder shall be made to the following deposit account unless and until Lender directs otherwise:

Bankers Trust
ABA: 021-001-033
A/C Name: Global Loan Services
A/C #: 99907998
Ref: IHHI”


 
4
 

2.05.  A/R Facility.  Article 1 of the $80,000,000 Credit Agreement is hereby amended by adding the following new Section 1.17 immediately after the existing section 1.16:

“1.17  A/R Financing.  In the event that Borrowers obtain third party financing (“A/R Financing”) which is a borrowing base facility secured by Borrowers’ Accounts and which is in form and substance reasonably satisfactory to Lender, Lender shall promptly take such action and execute any such documents as may be reasonably requested by Borrower’s Representative and at Borrowers’ expense to grant a prior Lien to the lender under such A/R Financing (the “A/R Lender”) in respect of the Collateral described in clauses (a) (other than items of equipment which are or become Fixtures), (b) and (c) of the definition thereof and the proceeds of such Collateral (collectively, the “Second Lien Collateral”) so long as:

(i)           the Borrowers repay in full the outstanding principal balance of and any and all accrued and unpaid interest and fees on the Working Capital Facility Loan (as defined in the $50,000,000 Revolving Credit Agreement) and the $35,000,000 Non-Revolving Line of Credit Loan on the date such A/R Financing becomes effective;  and

(iii)        an intercreditor agreement reasonably acceptable to Lender is entered into between Lender and the A/R Lender, which intercreditor agreement shall become effective upon the execution of the A/R Financing.

If at any time such A/R Financing terminates, Lender shall immediately and automatically have a first lien on the Second Lien Collateral and the Borrowers shall execute any and all agreements or documents and make any and all filings as requested by Lender in order to give effect thereto.”

2.06.           Participations.  Section 9.1(b) of the $80,000,000 Credit Agreement is hereby amended by adding the following new sentence immediately after the last sentence thereof:

“The Borrowers and Credit Parties and Guarantors further consent to the voting provisions set forth in Section 3 of the Participation Agreement.”

2.07.           Voting.  Section 11.2 of the $80,000,000 Credit Agreement is hereby amended by adding the following new clause (d) immediately after existing clause (c) thereof:

“(d)            Lender Voting.  In addition to the terms set forth in the foregoing clauses (a) through (c) of this Section 11.2, if at any time there is more than one Lender hereunder, no amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by any Borrower or Credit Party therefrom, shall in any event be effective without the written concurrence of one or more Lenders having or holding Loans representing more than fifty percent (50%) of the aggregate outstanding principal amount of the Loans.”

2.08.           Lender Agent.  Article 11 of the $80,000,000 Credit Agreement is hereby amended by adding the provisions set forth in Exhibit A to this Omnibus Amendment as new Section 11.21 immediately following existing Section 11.20.


 
5
 

2.09.  Option to Extend Maturity Date.  Section 14 of the $80,000,000 Credit Agreement is hereby deleted in its entirety.

SECTION 3.  AMENDMENTS TO THE $50,000,000 CREDIT AGREEMENT.  Subject to the satisfaction of the conditions precedent specified in Section 12 below, but effective as of the date hereof, the $50,000,000 Credit Agreement shall be amended as follows:

3.01.  References Generally.  References in the $50,000,000 Credit Agreement (including references to the $50,000,000 Credit Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the $50,000,000 Credit Agreement as amended hereby.

3.02.  Recitals.  Recital (E) of the $50,000,000 Credit Agreement is hereby amended and restated to read in its entirety as follows:

“E.           [Intentionally omitted].”

3.03.  Definitions.  Annex B of the $50,000,000 Credit Agreement shall be amended by (i) deleting the definitions “Availability”, “Borrowing Base”, “Dilution Items”, “Eligible Billed Receivable”, “Eligible Receivable”, “Eligible Unbilled Receivable”, “Facility Cap”, “Separate Borrowing Base Period”, (ii) amending and restating the following definitions (to the extent already included in said Annex A) and (iii) adding the following definitions in the appropriate alphabetical location (to the extent not already included in said Annex B):

“ADJUSTED LIBOR RATE” means, for any Interest Rate Determination Date with respect to an Interest Period for a Loan, the greater of (A) two percent (2%) per annum and (B) the rate per annum obtained by dividing (and rounding upward to the next whole multiple of one-sixteenth of one percent (1/16 of 1%)) (i) (a) the rate per annum (rounded to the nearest one-hundredth of one percent (1/100 of 1%)) equal to the rate determined by the Lender to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m.  (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest one-hundredth of one percent (1/100 of 1%)) equal to the rate determined by the Lender to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m.  (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest one-hundredth of one percent (1/100 of 1%)) equal to the offered quotation rate to first class banks in the London interbank market for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan, for which the Adjusted LIBOR Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date as determined by the Lender in accordance with its customary practices, by (ii) an amount equal to (a) one, minus (b) the Applicable Reserve Requirement; provided that in no event shall the rate determined under clause (B) of this definition exceed five percent (5%) per annum.

“ADVANCE” means a loan pursuant to the terms of this Agreement prior to the Amendment No. 5 Effective Date.


 
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“AFFECTED LOANS” has the meaning set forth in Section 2.16(b).

“ALTERNATE INTEREST RATE” means the greater of (i) the Prime Rate in effect on such day, and (ii) the Federal Funds Effective Rate in effect on such day plus 2%.  Any change in the Alternate Interest Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“ALTERNATE RATE LOANS” means Loans bearing interest at a rate determined by reference to the Alternate Interest Rate.

“AMENDMENT NO. 5” means that certain Omnibus Credit Agreement Amendment dated as of the Amendment No. 5 Effective Date among the Borrowers, the Credit Parties and the Lender.

“AMENDMENT NO. 5 EFFECTIVE DATE” means April 13, 2010.

“APPLICABLE RESERVE REQUIREMENT” means, at any time, for any Loan, the maximum rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained by a Lender with respect thereto against “Eurocurrency Liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator.  Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted LIBOR Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Loans.  A Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender.  The rate of interest on Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement.

“A/R FINANCING” has the meaning assigned to such term in the $80,000,000 Credit Agreement.

“BORROWING DATE” means the date of the making or continuance or a Loan.

“CHANGE OF CONTROL” means that any of the following have occurred:  (a) Kali P. Chaudhuri, M.D. and his Affiliates no longer beneficially own a majority of the outstanding shares (and/or securities readily convertible into or exercisable for shares) of Voting Stock on a fully diluted basis of IHHI; or (b) during any period of twelve (12) consecutive calendar months, Persons who at the beginning of such period constituted the majority of the board of directors of any Borrower or the majority of the managers of PCHI (together with any new Person whose nomination or election or appointment was approved by the required vote of the shareholders or members) cease for any reason (other than death or personal disability) to constitute a majority of the board of directors of any Borrower or the majority of the managers of PCHI; or (c) IHHI ceases to own, directly or indirectly, and control, all (100%) of the Stock of WMC-A, WMC-SA, Chapman and Coastal; or (d) Kenneth K. Westbrook ceases to be Chief Executive Officer or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal, and a replacement Chief Executive Officer acceptable to Lender in its sole discretion is not employed by the applicable Borrower within thirty (30) calendar days after the date that Kenneth K. Westbrook is no longer Chief Executive Office or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal; (e) Ganesha ceases to own, directly or indirectly, at least 49% of the membership interests of PCHI or any other Person (other than any entity the shareholders and shareholdings of which are substantially the same as the non-Ganesha shareholders and shareholdings of PCHI on the Amendment No. 5 Effective Date) and its Affiliates owns, directly or indirectly, a greater percentage of membership interests of PCHI than Ganesha; or (f) Kali P. Chaudhuri, M.D. ceases to own, directly or indirectly, a majority of the outstanding Voting Stock of Ganesha.  Notwithstanding the foregoing, a Change of Control shall not occur as a result of the exercise by Kali P. Chaudhuri, M.D., SPCP Group IV, LLC, SPCP Group, LLC or their respective Affiliates or designees or assigns of the warrants issued by IHHI to Kali P. Chaudhuri, M.D., KPC Resolution Company, LLC (so long as it is controlled by Kali P. Chaudhuri, M.D.), SPCP Group IV, LLC, and SPCP Group, LLC or their respective designees or assigns on the Amendment No. 5 Effective Date.


 
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“CONTINUATION NOTICE” means a Continuation Notice substantially in the form of Exhibit B to Amendment No. 5.

“$80 MILLION CREDIT AGREEMENT” means that certain Credit Agreement ($80,000,000 Facility) dated as of the date hereof by and among Borrowers, Credit Parties, Guarantors and Medical Provider Financial Corporation II, a Nevada corporation (an affiliate of Lender), pursuant to which Medical Provider Financial Corporation II (or its successors and assigns, as applicable) is providing to Borrowers for the benefit of Borrowers and the Credit Parties and the Guarantors named therein, (a) a $45,000,000 real estate term loan, and (b) a $35,000,000 non-revolving line of credit loan, as may be amended, supplemented or otherwise modified and in effect from time to time.

“EQUIPMENT LOAN FACILITY” means that certain Master Lease Agreement No. 801146 dated as of November 29, 2007 among FPC Funding, LLC, as successor to IFC Credit Corp., and Borrower, as amended from time to time.

“FEDERAL FUNDS EFFECTIVE RATE” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher one-hundredth of one percent (1/100 of 1%)) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average of the quotations for the day of such transactions received by Administrative Agent from three federal funds brokers of recognized standing selected by it.

“INITIAL ADVANCE” means the first, or initial, Loan funded by Lender to Borrowers on the Closing Date, the proceeds of which were be applied, in whole or in part, to pay to Lender the Previous Amount Owed.

“INTEREST PAYMENT DATE” means (i) the last day of each month commencing on the first such date to occur after the Closing Date and (ii) the last day of each Interest Period applicable to such Loan.


 
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“INTEREST PERIOD” means an interest period of one, two or three months, as selected by the Borrower’s Representative in the applicable Notice for Request for Advance or Continuation Notice (i) initially, commencing on the Borrowing Date or Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clauses (c) of this definition, end on the last Business Day of a calendar month;  and (c) no Interest Period with respect to any portion of the Loans shall extend beyond the Maturity Date.

“INTEREST RATE” means the sum of Adjusted LIBOR Rate plus 12.50% per annum.

“INTEREST RATE DETERMINATION DATE” means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period.

“LENDER” means (i) prior to the Amendment No. 5 Effective Date, Medical Provider Financial Corporation I, a Nevada corporation and (ii) on and after the Amendment No. 5 Effective Date, SPCP Group IV, LLC, a Delaware limited liability company and SPCP Group LLC, a Delaware limited liability company, and, in each case, if either shall decide to assign all or any portion of the Obligations, such term shall include any assignee(s) of such Lender.

“LENDER AGENT” means Silver Point Finance, LLC, a Delaware limited liability company, and its successors and assigns.

“LIBOR LOANS” means Loans bearing interest at a rate determined by reference to the Adjusted LIBOR Rate.

“LOAN” means a Working Capital Facility Loan.

“NOTICE OF REQUEST FOR ADVANCE” means a notice delivered to Lender by Borrower’s Representative requesting a Loan, in substantially the same form of Exhibit “B” attached hereto.

“PARTICIPATION AGREEMENT” means that certain Participation Agreement dated as of April 13, 2010 among Lender, KPC Resolution Company, LLC and Silver Point Finance, LLC as participation agent.

“PRIME RATE” means the rate of interest quoted in The Wall Street Journal, Money Rates Section as the Prime Rate (currently defined as the base rate on corporate loans posted by at least seventy five percent (75%) of the nation’s thirty (30) largest banks), as in effect from time to time.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  The Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“RESERVE PERIOD” means the period beginning on the date hereof and ending on the date, if any, that the post-closing condition contained in Section 13(c) of the Omnibus Amendment is satisfied.


 
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“REVOLVING FACILITY” means the revolving line of credit facility to be made available by Lender to Borrowers pursuant to this Agreement in an aggregate amount not to exceed the Working Capital Facility Commitment.

“STATED MATURITY DATE” means April 13, 2013.

“$10.7 MILLION CREDIT AGREEMENT” means that certain Credit Agreement ($10,700,000 Facility) dated as of the date hereof by and among Borrowers, Credit Parties, Guarantors and Medical Provider Financial Corporation III, a Nevada corporation (an affiliate of Lender), pursuant to which Medical Provider Financial Corporation III (or its successors and assigns, as applicable) is providing to Borrowers for the benefit of Borrowers and the Credit Parties and the Guarantors named therein a $10,700,000 term loan, as may be amended, supplemented or otherwise modified and in effect from time to time.

“UNUSED COMMITMENT FEE” means, for any day, an amount equal to 0.50% per annum of the average daily difference between (a) the Working Capital Facility Commitment on such day and (b) the outstanding principal amount of the Working Capital Facility Loans on such day.

“VOTING STOCK” means, with respect to any Person, any class or classes of capital stock or other ownership interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect directors, managers or trustees (as applicable) of such Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency).

“WORKING CAPITAL FACILITY COMMITMENT” means the commitment of the Lender to make or otherwise fund any Working Capital Facility Loans.  The amount of the Lender’s Working Capital Facility Commitment as of the Closing Date was $50,000,000 and as of the Amendment No. 5 Effective Date is $10,000,000.

“WORKING CAPITAL FACILITY LOAN” means a Loan made by the Lender to the Borrowers pursuant to Section 2.1.

“YIELD MAINTENANCE” means an amount equal to the future value at the last day of the Term, discounted to the present value as of the later of the Termination Date or the date of prepayment using the most recently published asked yield to maturity as quoted in the Wall Street Journal for the United States Treasury Notes or Bills with a maturity date closest to the last day of the Term of the product of:  (A) the all in effective yield (measured as a percentage per annum) on the Revolving Facility for the six months prior to the Termination Date; (B) the aggregate of the Working Capital Facility Commitments; and (C) the quotient of (i) the number of months remaining in the Term, and (ii) twelve.

3.04.  Revolving Facility.  Section 2.1 of the $50,000,000 Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Section 2.1.  REVOLVING FACILITY.


 
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During the Term, subject to the terms and conditions hereof, the Lender agrees to make Loans to the Borrowers in an aggregate amount up to but not exceeding the Lender’s Working Capital Facility Commitment; provided that (i) after giving effect to the making of any Working Capital Facility Loans, in no event shall the aggregate principal amount of all outstanding Working Capital Facility Loans exceed $10,000,000 and (ii) during the Reserve Period after giving effect to the making of any Working Capital Facility Loans, in no event shall the aggregate principal amount of all outstanding Working Capital Facility Loans exceed $9,000,000.  Amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed during the Term. The Lender’s Working Capital Facility Commitment shall expire on the Maturity Date and all Working Capital Facility Loans and all other amounts owed hereunder with respect to the Working Capital Facility Loans and the Working Capital Facility Commitment shall be paid in full no later than such date.  So long as the Reserve Period is continuing there shall be a $1,000,000 reserve against the availability on the Working Capital Facility and the Lender shall be and hereby is authorized, upon the occurrence and continuance of an event of default under the Equipment Loan Facility or an Event of Default under the Loans, to apply (but shall not be obligated to apply) such portion of the $1,000,000 reserve to repay in full the Equipment Loan Facility and any such application of funds shall be a borrowing hereunder.”

3.05.  Interest.  Section 2.3 of the $50,000,000 Credit Agreement shall be amended and restated in its entirety to read as follows:

“Section 2.3.  INTEREST.

(a)           Each Loan shall bear interest at the applicable Interest Rate on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof; provided that the Loans will bear interest at the Alternate Interest Rate plus 12.5% if required by Section 2.16.

(b)           The Interest Period with respect to any Loan shall be selected by Borrower’s Representative and notified to the Lender pursuant to the applicable Notice of Request for Advance or Continuation Notice, as the case may be.  In the event Borrower’s Representative fails to specify the Interest Period for any Loan in the applicable Notice of Request for Advance or Continuation Notice, Borrower’s Representative shall be deemed to have selected an Interest Period of one month.  As soon as practicable after 10:00 a.m. (Las Vegas time) on each Interest Rate Determination Date, the Lender shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrower’s Representative.

(c)           Except as otherwise set forth herein, interest on each Loan shall be payable in arrears on and to (i) each Interest Payment Date; (ii) upon any prepayment of that Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (iii) on the Maturity Date.

(d)           Company shall deliver a Continuation Notice to the Lender no later than 10:00 a.m. (Las Vegas time) at least three Business Days in advance of the proposed continuation date.  Except as otherwise provided herein, a Continuation Notice for continuation of any Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrower’s Representative shall be bound to effect a continuation in accordance herewith.”



 
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3.06.  Disbursements; Notice of Request for Advance.  Section 2.4 of the $50,000,000 Credit Agreement is hereby amended as follows:
 
 
(a)           Section 2.4(a) is hereby amended by replacing “Advance” in each instance it is used with “Loan”.

(b)           The first sentence of Section 2.4(a) is hereby amended by:

(i)           replacing “three (3) Business Days” with “five (5) Business Days”;

(ii)          amending and restating clause (ii) in its entirety to read as follows:

 
“(ii)  specify the initial Interest Period to be applicable to such Loan, which shall be a period contemplated by the definition of the term “Interest Period,”

 
; and

(iii)           amending and restating clause (v) in its entirety to read as follows:

“(v)  specify the appropriate Borrower’s account(s) as set forth on Disclosure Schedule 2.4 to which such Loan shall be disbursed.”

(c)           The second sentence of Section 2.4(a) is hereby deleted in its entirety.

(d)           Section 2.4(b) is hereby amended and restated to read in its entirety as follows:

“(b)           [intentionally omitted]”

3.07.  Promise to Pay; Manner of Payment.  The second sentence of Section 2.6 of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.08.  Repayment of Excess Advances.  Section 2.7 of the $50,000,000 Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Section 2.7  REPAYMENT OF LOANS IN EXCESS OF COMMITMENTS.

If at any time the outstanding principal balance of the Working Capital Facility Loans exceed the Working Capital Facility Commitment, the Borrowers shall prepay the Working Capital Facility Loans in an amount equal to such excess.”

3.09.  Mandatory Prepayments.  Section 2.9 of the $50,000,000 Credit Agreement is hereby amended as follows:

(a)           Clause (a) is hereby amended and restated in its entirety to read as follows:

“(a)  no later than the first Business Day following the date of a Change of Control, the Borrowers shall prepay the Loans and all other Obligations in full in cash, together with all accrued and unpaid interest thereon to the date of prepayment and any and all other amounts owing to the Lender; ”


 
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(b)           Clause (b) is hereby amended by adding the following new sentence at the end thereof:

“Prepayments made pursuant to this Section 2.9(b) shall be applied to the outstanding Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof); and”

(c)           The following new clauses (c) and (d) shall be added immediately after the existing clause (b):

“(c)           on the date of availability of any A/R Financing executed by the Borrowers as contemplated by Section 1.17 of the $80,000,000 Credit Agreement, the Borrowers shall prepay the Working Capital Facility Loans and all accrued and unpaid interest and fees thereon in an aggregate amount equal to the outstanding balances thereof on such date and upon such prepayment the Working Capital Facility Commitment shall automatically terminate.

(d)            after giving effect to any prior application of funds to prepay the Loans under the $10.7 Million Credit Agreement and the $35,000,000 non-revolving line of credit loan (made pursuant to the $80 Million Credit Agreement) required on such date, immediately upon receipt by Borrowers or Credit Parties of any payment or reimbursement of enhanced federal matching funds, net of: provider fees, pledged funds due to the California Health Foundation & Trust and estimated federal and state taxes on such net funds (assuming a marginal blended tax rate of 40%) received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments), Borrowers shall prepay the Working Capital Facility Loans, and the Working Capital Facility Commitment shall be permanently reduced, in an amount equal to 65% of such payment or reimbursement up to an annual aggregate prepayment equal to $25,000,000.”

3.10.  Prepayment of $45,000,000 Real Estate Term Loan.  Section 2.10 of the $50,000,000 Credit Agreement is hereby amended by deleting “by Medical Provider Financial Corporation I (as lender)” therefrom.

3.11.  Payments by Lender.  Section 2.11 of the $50,000,000 Credit Agreement is hereby amended by replacing “an Advance” where it appears therein with “a Loan”.

3.12.  Collateral Administration.  Section 2.13(b) of the $50,000,000 Credit Agreement is hereby amended by deleting the second sentence thereof.

3.13.  Evidence of Loan.  Section 2.15(c) of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.14.  Making or Maintaining Loans.  The following new Section 2.16 shall be added immediately after Section 2.15:

“2.16.       MAKING OR MAINTAINING LOANS


 
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(a)           Inability to Determine Adjusted LIBOR Rate.  In the event that the Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any LIBOR Loans that, by reason of circumstances affecting the London interbank market, adequate and fair means do not exist for ascertaining the interest rate applicable to such LIBOR Loans on the basis provided for in the definition of Adjusted LIBOR Rate, the Lender shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Borrower’s Representative of such determination, whereupon (i) any Loan made on and after the date of such determination shall be Alternate Rate Loans  bearing interest at the Alternate Interest Rate plus 12.5% per annum until such time as the Lender notifies Borrower’s Representative that the circumstances giving rise to such notice no longer exist, and (ii) any Continuation Notice given by Borrower’s Representative with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Borrower’s Representative.

(b)           Illegality or Impracticability of LIBOR Loans.  In the event that on any date the Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Borrower’s Representative) that the making, maintaining or continuation of its Loans (i) has become unlawful as a result of compliance by the Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of the Lender in that market, then, and in any such event, the Lender shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Borrower’s Representative of such determination.  Thereafter (1) the obligation of the Lender to make Loans based on the Adjusted LIBOR Rate shall be suspended until such notice shall be withdrawn by the Lender, (2) to the extent such determination by the Lender relates to a Loan then being requested by Borrower’s Representative pursuant to a Notice for Request for Advance or a Continuation Notice, the Lender shall make such Loan as (or continue such Loan as or convert such Loan to, as the case may be) an Alternate Rate Loan, (3) the Lender’s obligation to maintain its outstanding LIBOR Loans (the “Affected Loans”) shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Alternate Rate Loans on the date of such termination.  Borrower’s Representative shall pay accrued interest on the amount so converted and all amounts due under Section 2.16(c) in accordance with the terms thereof due to such conversion.  Notwithstanding the foregoing, to the extent a determination by the Lender as described above relates to a LIBOR Loan then being requested by Borrower’s Representative pursuant to a Notice of Request for Advance or a Continuation Notice, Company shall have the option, subject to the provisions of Section 2.16(c), to rescind such Notice of Request for Advance or Continuation Notice by giving notice (by telefacsimile or by telephone confirmed in writing) to the Lender of such rescission on the date on which the Lender gives notice of its determination as described above.

(c)           Compensation for Breakage or Non Commencement of Interest Periods.  Borrower’s Representative shall compensate the Lender, upon written request by the Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid or calculated to be due and payable by the Lender to lenders of funds borrowed by it to make or carry its LIBOR Loans and any loss, expense or liability sustained by the Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which the Lender may sustain: (i) if for any reason (other than a default by the Lender) a borrowing of any LIBOR Loan does not occur on a date specified therefor in a Notice of Request for Advance or a telephonic request for borrowing, or a continuation of any LIBOR Loan does not occur on a date specified therefor in a Continuation Notice or a telephonic request for continuation; (ii) if any prepayment or other principal payment of any of its LIBOR Loans occurs on any day other than the last day of an Interest Period applicable to that Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or (iii) if any prepayment of any of its LIBOR Loans is not made on any date specified in a notice of prepayment given by Borrower’s Representative.


 
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(d)           Booking of LIBOR Loans.  The Lender may make, carry or transfer LIBOR Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of the Lender.
 
(e)           Assumptions Concerning Funding of LIBOR Loans.  Calculation of all amounts payable to the Lender under this Section 2.16 shall be made as though the Lender had actually funded each of the relevant LIBOR Loans through the purchase of a LIBOR deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted LIBOR Rate in an amount equal to the amount of such LIBOR Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such LIBOR deposit from an offshore office of the Lender to a domestic office of the Lender in the United States of America; provided, however, the Lender may fund the LIBOR Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.16.”

3.15.  Computation of Interest; Lawful Limits.  Section 3.4 of the $50,000,000 Credit Agreement is hereby amended by adding the following new sentence immediately after the end of the first sentence thereof and immediately before the beginning of the second sentence thereof:

“In computing the interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan shall be excluded, provided, if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.”

3.16.  Additional Conditions Precedent to Funding Advances.  Section 4.2 of the $50,000,000 Credit Agreement is hereby amended as follows:

(a)           The portion of the first sentence of Section 4.2 immediately prior to clause (a) thereof is hereby amended and restated to read in its entirety as follows:

“The obligations of Lender to fund any Advance or Loan (including the Initial Advance) to Borrowers shall be subject to the following further conditions precedent:”

(b)           Section 4.2(b) is hereby amended and restated to read in its entirety as follows:

“(b)           Additional Conditions Precedent to Funding Loans.  Lender shall not be obligated to fund any Loan to Borrowers on the Closing Date or on any other date if:
 
(i)           Any representation or warranty by any Borrower or by any Credit Party or by any Guarantor contained (1) herein, or (2) in any other Loan Document, or (3) in the $80 Million Credit Agreement, or (4) in the $10.7 Million Credit Agreement, or (5) in any document or instrument executed or presented in connection with the $80 Million Credit Agreement or $10.7 Million Agreement, is untrue, incorrect, incomplete (to the extent such representation or warranty purports to be complete) or inaccurate in any material respect as of such date;
 

 
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(ii)           Any Default or Event of Default has occurred and is continuing under this Agreement, the $80 Million Credit Agreement or the $10.7 Million Credit Agreement or would result after giving effect to such Loan;
 
 
(iii)
KPC Resolution Company, LLC, a California limited liability company, does not consent to the funding of such Loan or, as of the Borrowing Date for such Loan, has not funded its participated amount with respect to such Loan pursuant to the terms of the Participation Agreement; or

 
(iv)
Any event or circumstance shall have occurred that has or reasonably could be expected by the Lender to have a Material Adverse Effect.

The request by Borrower’s Representative that Lender fund a Loan on any date shall in each event be deemed to constitute, as of the date thereof, (A) a representation and warranty by all Borrowers and all Credit Parties that the conditions precedent in this Section 4.2 (Further Conditions Precedent to Making Loans, etc.) to which it is a party or to which it is a signatory have been satisfied, and (B) a reaffirmation by each Borrower and by each Credit Party of their respective obligations under the Loan Documents.”

3.17.  Representations and Warranties; Solvency.  Section 5.20 of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.18.  Representations and Warranties; Accounts.  Section 5.22 of the $50,000,000 Credit Agreement is hereby amended as follows:

(a)            Section 5.22 is hereby amended by deleting “In determining which Accounts are Eligible Receivables,”.

(b)           Clause (j) is hereby amended by deleting “pursuant to the procedure described in the definition of Eligible Receivables hereof”.

3.19.  Representations and Warranties; Survival.  Section 5.24 of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.20.  Affirmative Covenants; Insurance.  The last sentence of Section 6.4(a) of the $50,000,000 Credit Agreement is hereby amended and restated to read in its entirety as follows:

“All sums so disbursed, including reasonable attorneys’ fees, court costs and other charges related thereto, shall be deemed to be a Working Capital Facility Loan hereunder, shall be payable on demand by Borrowers to Lender, shall be additional Obligations hereunder secured by the Collateral, and shall bear interest at the Default Rate until paid in full to Lender.”

3.21.  Affirmative Covenants; Use of Proceeds.  Section 6.22 of the $50,000,000 Credit Agreement is hereby amended and restated in its entirety to read as follows:

“6.22           USE OF PROCEEDS.


 
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The proceeds of the Working Capital Facility Loans will be used only for working capital and general corporate purposes of the Borrowers.  No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof or a violation of the Securities Exchange Act of 1934.”

3.22.  Events of Default.  Clause (A) of the last paragraph of Section 8.1 of the $50,000,000 Credit Agreement is hereby amended and restated in its entirety to read as follows:

“(A) terminate its Working Capital Facility Commitment, whereupon the same shall automatically terminate, and/or”

3.23  Rights and Remedies.  Section 9.1 of the $50,000,000 Credit Agreement is hereby amended as follows:

(a)  Clause (viii) of the first sentence of Section 9.1(b) is hereby amended by replacing “Facility Cap” where it appears therein with “Working Capital Facility Commitment”.

(b)  Section 9.1(c) is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.24.  Delay; No Waiver of Defaults.  The last sentence of Section 10.2 of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.25.  Termination and Closing Date.  The first sentence of Section 11.1(a) of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.26.  Survival.  The first sentence of Section 11.2 of the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

3.27.  Amendments and Waivers.  Section 12.2 of the $50,000,000 Credit Agreement is hereby amended as follows:

(a) Section 12.2(b) is hereby amended by replacing “Facility Cap” where it appears therein with “Working Capital Facility Commitment”.

(b)  Section 12.2(c) is hereby amended by replacing “Commitment” where it appears therein with “Revolving Facility”.

“(d)           Lender Voting.  In addition to the terms set forth in the foregoing clauses (a) through (c) of this Section 12.2, if at any time there is more than one Lender hereunder, no amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by any Borrower or Credit Party therefrom, shall in any event be effective without the written concurrence of one or more Lenders having or holding the Loans representing more than fifty percent (50%) of the aggregate outstanding principal amount of the Loans.”

3.28.  Assignments.  Article XII of the $50,000,000 Credit Agreement is hereby amended by adding the following new Section 12.21 immediately after existing Section 12.20:


 
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“12.21.    ASSIGNMENT AND PARTICIPATIONS

(a)           Assignment to Qualified Assignee.  Subject to the terms of this Section 12.21 (Assignment and Participations), Lender may make an assignment to a Qualified Assignee of, or sell participations in, at any time or times, the Loan Documents, any of the Loans, the Commitments or any portion thereof or interest therein, including any Lender’s rights, title, interests, remedies, powers or duties thereunder.  Any assignment by a Lender shall:  (i) require the execution of an assignment agreement in form and content reasonably satisfactory to, and acknowledged by, Lender; and (ii) be conditioned on such assignee representing to Lender that it is purchasing the applicable Loan to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof.  In the case of an assignment by Lender under this Section 12.21(a) (Assignment to Qualified Assignee), the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as Lender hereunder.  The original Lender shall be relieved of its obligations hereunder with respect to the Commitment or assigned portion thereof from and after the date of such assignment.  Borrowers and Credit Parties and Guarantors hereby acknowledge and agree that any assignment shall give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a “Lender.” In the event Lender assigns or otherwise transfers all or any part of the Obligations, Lender shall so notify Borrowers and Credit Parties and Guarantors shall, upon the request of Lender, execute one or more new notes in exchange for any of the Notes (upon the same terms), if any, being assigned.  Notwithstanding the foregoing provisions of this Section 12.21(a) (Assignment to Qualified Assignee), Lender may at any time pledge the Obligations held by it and Lender’s rights under this Agreement and the other Loan Documents to a financial institution.
 
(b)           Participations.  Any participations by Lender of all or any part of the Commitment shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if Lender had not sold such participations, and that the holder of any such participation shall not be entitled to require Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents).  Solely for purposes of Section 2.16 (Making or Maintaining Loans) and Section 6.24 (Taxes and Other Charges), Borrowers and Credit Parties and Guarantors acknowledge and agree that a participation shall give rise to a direct obligation of Borrowers to the participant (in each case subject to the terms and conditions in such Sections applicable to Lender) and the participant shall be considered to be a “Lender.”  The Borrowers and Credit Parties and Guarantors further consent to the voting provisions set forth in Section 3 of the Participation Agreement.
 
(c)           Cooperation to Effect Assignments and Participations.  Borrowers and Credit Parties shall assist Lender under this Section 12.21 (Assignment and Participations) as reasonably required to enable Lender to effectuate any such assignment or participations, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, if requested by Lender, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or participants.  Borrowers and Credit Parties shall certify the correctness, completeness and accuracy, in all material respects of all descriptions of Borrowers and Credit Parties and their respective affairs contained in any selling materials provided by them and all other information provided by them and included in such materials.
 

 
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(e)           Disclosures by Lender.  Lender may furnish any information concerning Borrowers and the Credit Parties in the possession of Lender from time to time to assignees and participants (including prospective assignees and participants); provided that Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in Section 12.10 (Confidentiality).”

3.29.           Lender Agent.  Article 12 of the $50,000,000 Credit Agreement is hereby amended by adding the provisions set forth in Exhibit A to this Omnibus Amendment as new Section 12.21 immediately following existing Section 12.20.

3.30.  Option to Extend Maturity Date.  Article XV of the $50,000,000 Credit Agreement is hereby deleted in its entirety.

3.31.  Annex A; Financial Covenants.  Annex A to the $50,000,000 Credit Agreement is hereby amended as follows:

(a)           Section 2 is hereby amended and restated to read in its entirety as follows:

“2)  MINIMUM EBITDA

For (i) the Test Period ending June 30, 2010, EBITDA shall not be less than $17,500,000, (ii) the Test Period ending September 30, 2010, EBITDA shall not be less than $10,000,000, (iv) the Test Period ending December 31, 2010, EBITDA shall not be less than $17,500,000 and (v) for each Test Period after the Test Period ending December 31, 2010, EBITDA shall not be less than $20,000,000.”

(b)           Section 4 is hereby deleted in its entirety.

(c)           The definition of “EBITDA” is hereby amended and restated to read in its entirety as follows:

““EBITDA” shall mean, for any period, the sum, without duplication, of the following for each Borrower collectively on a consolidated basis: Net Income, plus (a) Interest Expenses, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, (f) loss from any sale of assets, other than sales in the ordinary course of business, and (g) the portion of lease payments paid by Borrower to PCHI in respect of lease payments which are attributable to interest minus (a) gains from any sale of assets, other than sales in the ordinary course of business, (b) other extraordinary or non-recurring gains and (c) to the extent included in Net Income, any payment or reimbursement of federal matching funds received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments), in each case determined in accordance with GAAP.”

(d)           The definition of “TEST PERIOD” is hereby amended and restated to read in its entirety as follows:

““Test Period” shall mean, with respect to each fiscal quarter beginning with fiscal quarter ending June 30, 2010, the four most recent fiscal quarters then ended (taken as one accounting period), or such other period as specified in the Agreement or any Annex thereto.”


 
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3.32.  Annex C; Cash Management System.  Section 3 of Annex C to the $50,000,000 Credit Agreement is hereby amended by replacing “Advances” where it appears therein with “Loans”.

SECTION 4.  AMENDMENTS TO THE $10,700,000 CREDIT AGREEMENT.  Subject to the satisfaction of the conditions precedent specified in Section 12 below, but effective as of the date hereof, the $10,700,000 Credit Agreement shall be amended as follows:

4.01.  References Generally.  References in the $10,700,000 Credit Agreement (including references to the $10,700,000 Credit Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the $10,700,000 Credit Agreement as amended hereby.

4.02.  Definitions.  Annex A of the $10,700,000 Credit Agreement shall be amended by amending the following definitions (to the extent already included in said Annex A) and adding the following definitions in the appropriate alphabetical location (to the extent not already included in said Annex A):

“AMENDMENT NO. 2 EFFECTIVE DATE” means April 13, 2010.

“A/R FINANCING” has the meaning assigned to such term in the $80,000,000 Credit Agreement.

“A/R LENDER” has the meaning assigned to such term in the $80,000,000 Credit Agreement.

“CHANGE OF CONTROL” means that any of the following have occurred:  (a) Kali P. Chaudhuri, M.D. and his Affiliates no longer beneficially own a majority of the outstanding shares (and/or securities readily convertible into or exercisable for shares) of Voting Stock on a fully diluted basis of IHHI; or (b) during any period of twelve (12) consecutive calendar months, Persons who at the beginning of such period constituted the majority of the board of directors of any Borrower or the majority of the managers of PCHI (together with any new Person whose nomination or election or appointment was approved by the required vote of the shareholders or members) cease for any reason (other than death or personal disability) to constitute a majority of the board of directors of any Borrower or the majority of the managers of PCHI; or (c) IHHI ceases to own, directly or indirectly, and control, all (100%) of the Stock of WMC-A, WMC-SA, Chapman and Coastal; or (d) Kenneth K. Westbrook ceases to be Chief Executive Officer or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal, and a replacement Chief Executive Officer acceptable to Lender in its sole discretion is not employed by the applicable Borrower within thirty (30) calendar days after the date that Kenneth K. Westbrook is no longer Chief Executive Office or Director of IHHI, or WMC-A, or WMC-SA, or Chapman, or Coastal; (e) Ganesha ceases to own, directly or indirectly, at least 49% of the membership interests of PCHI or any other Person (other than any entity the shareholders and shareholdings of which are substantially the same as the non-Ganesha shareholders and shareholdings of PCHI on the Amendment No. 2 Effective Date) and its Affiliates owns, directly or indirectly, a greater percentage of membership interests of PCHI than Ganesha; or (f) Kali P. Chaudhuri, M.D. ceases to own, directly or indirectly, a majority of the outstanding Voting Stock of Ganesha.  Notwithstanding the foregoing, a Change of Control shall not occur as a result of the exercise by Kali P. Chaudhuri, M.D., SPCP Group IV, LLC, SPCP Group, LLC or their respective Affiliates or designees or assigns of the warrants issued by IHHI to Kali P. Chaudhuri, M.D., KPC Resolution Company, LLC (so long as it is controlled by Kali P. Chaudhuri, M.D.), SPCP Group IV, LLC, and SPCP Group, LLC or their respective designees or assigns on the Amendment No. 2 Effective Date.


 
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“$50,000,000 REVOLVING CREDIT AGREEMENT” means that certain $50,000,000 Revolving Credit Agreement of event date herewith, executed by Borrowers, as borrowers, and Medical Provider Financial Corporation I, as Lender, as may be amended, supplemented or otherwise modified and in effect from time to time.

“INTEREST RATE” means with respect to the $10,700,000 Convertible Term Loan, simple interest shall be charged at the per annum fixed rate of 14.5%.

“LENDER” means (i) prior to the Amendment No. 2 Effective Date, Medical Provider Financial Corporation III, a Nevada corporation and (ii) on and after the Amendment No. 2 Effective Date, SPCP Group IV, LLC, a Delaware limited liability company and SPCP Group LLC, a Delaware limited liability company and, in each case, if either shall decide to assign all or any portion of the Obligations, such term shall include any assignee(s) of such Lender.

“LENDER AGENT” means Silver Point Finance, LLC, a Delaware limited liability company, and its successors and assigns.

“NEW $80,000,000 CREDIT AGREEMENT” has the meaning set forth in the Recitals to this Agreement, as the New $80,000,000 Credit Agreement may be amended, supplemented or otherwise modified and in effect from time to time.

“PARTICIPATION AGREEMENT” means that certain Participation Agreement dated as of April 13, 2010 among Lender, KPC Resolution Company, LLC and Silver Point Finance, LLC, as participation agent.

“SECOND LIEN COLLATERAL” has the meaning assigned to such term in the $80,000,000 Credit Agreement.

“STATED MATURITY DATE” means April 13, 2013.

“VOTING STOCK” means, with respect to any Person, any class or classes of capital stock or other ownership interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect directors, managers or trustees (as applicable) of such Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency).


4.03.  $10,700,000 Convertible Term Loan.  Section 1.3(c) of the $10,700,000 Credit Agreement is hereby amended and restated to read in its entirety as follows:

“(c)  At any time and from time to time, Lender shall have the right to sell, assign, transfer and convey its interest in the $10,700,000 Convertible Term Note and Lender’s interest in the other Loan Documents (insofar as the same pertain to the $10,700,000 Convertible Term Loan) to any Person.  Any such sale must be in compliance with Applicable Laws.”

4.04.  Prepayments; Mandatory Prepayments.  Section 1.4(b) of the $10,700,000 Credit Agreement is hereby amended by adding the following new sentence immediately after the last sentence thereof:


 
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“Mandatory Prepayments.  Notwithstanding the foregoing, (i) immediately upon receipt by Borrowers or Credit Parties of any cash proceeds of any sale or other disposition of any Collateral, Borrowers shall prepay the Loan in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, and (C) an appropriate reserve for income taxes; and (ii) immediately upon receipt by Borrowers or Credit Parties of any payment or reimbursement of enhanced federal matching funds, net of: provider fees, pledged funds due to the California Health Foundation & Trust and estimated federal and state taxes on such net funds (assuming a marginal blended tax rate of 40%) received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments), Borrowers shall prepay the Loans in an amount equal 65% of such payment or reimbursement up to an annual aggregate prepayment equal to $25,000,000.  Any prepayment pursuant to clause (i) of the immediately foregoing sentence shall be applied in accordance with Section 1.4(c) (Application of Prepayments).  The following shall not be subject to mandatory prepayment under this subsection:  (1) proceeds of sales of Inventory in the ordinary course of business; (2) proceeds of collection of Accounts in the ordinary course of business (except as otherwise set forth herein); and (3) proceeds of sales of Equipment and other personal property in the ordinary course of business so long as such Equipment and other personal property is replaced (if necessary in the exercise of prudent business judgment) by Equipment and other personal property of equal or greater value or utility.”

4.05.  Interest; Payments; Principal on the Loan.  Section 1.5 of the $10,700,000 Credit Agreement is hereby amended follows:

(a)  Section 1.5(b) is hereby amended and restated to read in its entirety as follows:

“(b)           Principal on the Loans.  The Borrowers hereby unconditionally promises to pay the unpaid principal amount of the Loans on the Maturity Date.”

(b)  Section 1.5(f) is hereby amended and restated to read in its entirety as follows:

“(f)           Payment to Lender’s Account.  All payments by Borrowers to Lender hereunder shall be made to the following deposit account unless and until Lender directs otherwise:

Bankers Trust
ABA: 021-001-033
A/C Name: Global Loan Services
A/C #: 99907998
Ref: IHHI”

4.06.  A/R Financing.  Article 1 of the $10,700,000 Credit Agreement is hereby amended by adding the following new Section 1.17 immediately after the existing section 1.16:

“1.17  A/R Financing.  In the event that Borrowers obtain A/R Financing, Lender shall promptly take such action and execute any such documents as may be reasonably requested by Borrowers and at Borrowers’ expense to grant a prior Lien to the A/R Lender in respect of the Second Lien Collateral so long as:


 
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(i)           the Borrowers repay in full the outstanding principal balance of and any and all accrued and unpaid interest and fees on the Working Capital Facility (as defined in the $50,000,000 Revolving Credit Agreement) and the $35,000,000 Non-Revolving Line of Credit Loan on the date such A/R Financing becomes effective; and

(iii)           an intercreditor agreement reasonably acceptable to Lender is entered into between Lender and the A/R Lender, which intercreditor agreement shall become effective upon the execution of the A/R Financing.

If at any time such A/R Financing terminates, Lender shall immediately and automatically have a first lien on the Second Lien Collateral and the Borrowers shall execute any and all agreements or documents and make any and all filings as requested by Lender in order to give effect thereto.”

4.07.   Participations.  Section 9.1(b) of the $10,700,000 Credit Agreement is hereby amended by adding the following new sentence immediately after the last sentence thereof:

“The Borrowers and Credit Parties and Guarantors further consent to the voting provisions set forth in Section 3 of the Participation Agreement.”

4.08.   Voting.  Section 11.2 of the $10,700,000 Credit Agreement is hereby amended by adding the following new clause (d) immediately after existing clause (c) thereof:

“(d)     Lender Voting.  In addition to the terms set forth in the foregoing clauses (a) through (c) of this Section 11.2, if at any time there is more than one Lender hereunder, no amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by any Borrower or Credit Party therefrom, shall in any event be effective without the written concurrence of one or more Lenders having or holding the Loan representing more than fifty percent (50%) of the aggregate outstanding principal amount the Loan.”

4.09.           Lender Agent.  Article 11 of the $10,700,000 Credit Agreement is hereby amended by adding the provisions set forth in Exhibit A to this Omnibus Amendment as new Section 11.21 immediately following existing Section 11.20.

SECTION 5.   SECURITY AGREEMENT AMENDMENTS.  Subject to the satisfaction of the conditions precedent specified in Section 12 below, but effective as of the date hereof, the Security Agreements executed in connection with the Credit Agreements are hereby amended as follows:
5.01.  References Generally.  References in each Security Agreement executed in connection with the Credit Agreements (including references to such Security Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to such Security Agreement as amended hereby.

5.02.   $80,000,000 Security Agreement.  The Security Agreement executed in connection with the $80,000,000 Credit Agreement (the “$80,000,000 Security Agreement”) is hereby amended as follows:

(a)      The first sentence of Section 2 of the $80,000,000 Security Agreement is hereby amended by deleting “(junior and subordinate only to the Liens of the $50,000,000 Deeds of Trust and other documents and instruments made in connection with the $50,000,000 Revolving Facility)” therefrom.


 
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(b)      The definition of “Payment Intangibles” set forth in Section 2 of the $80,000,000 Security Agreement is hereby amended by adding the following new sentence immediately after the last sentence thereof:

“For the avoidance of doubt, “Payment Intangibles” shall include without limitation any payment or reimbursement enhanced federal matching funds, net of: provider fees, pledged funds due to the California Health Foundation & Trust and estimated federal and state taxes on such net funds (assuming a marginal blended tax rate of 40%) received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments) received or to be received by any Debtor.”

5.03   $50,000,000 Security Agreement.  The definition of “Payment Intangibles” set forth in Section 2 of the Security Agreement executed in connection with the $50,000,000 Credit Agreement is hereby amended by adding the following new sentence immediately after the last thereof:

“For the avoidance of doubt, “Payment Intangibles” shall include without limitation any payment or reimbursement enhanced federal matching funds, net of: provider fees, pledged funds due to the California Health Foundation & Trust and estimated federal and state taxes on such net funds (assuming a marginal blended tax rate of 40%) received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments) received or to be received by any Debtor.”

5.04.   $10,700,000 Security Agreement.  The Security Agreement executed in connection with the $10,700,000 Credit Agreement (the “$10,700,000 Security Agreement”) is hereby amended as follows

(a)       The first sentence of Section 2 of the $10,700,000 Security Agreement is hereby amended by deleting “(junior and subordinate only to the Liens of the $50,000,000 Deeds of Trust and other documents and instruments made in connection with the $50,000,000 Revolving Facility)” therefrom.

(b)       The definition of “Payment Intangibles” set forth in Section 2 of the $10,700,000 Security Agreement is hereby amended by adding the following new sentence immediately after the last sentence thereof:

“For the avoidance of doubt, “Payment Intangibles” shall include without limitation any payment or reimbursement enhanced federal matching funds, net of: provider fees, pledged funds due to the California Health Foundation & Trust and estimated federal and state taxes on such net funds (assuming a marginal blended tax rate of 40%) received from Medi-Cal upon implementation of California AB1383 (or any substitute, replacement or successor legislation or payments) received or to be received by any Debtor.”
 
SECTION 6.  INTERCREDITOR AGREEMENT.  Subject to the satisfaction of the conditions precedent specified in Section 12 below, but effective as of the date hereof, the  Intercreditor Agreement is hereby amended as follows:
 
6.01.  Priority.  Section 2 of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 

 
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“2.      Priority.  Notwithstanding the terms or provisions of any agreement or arrangement which the $80 Million Lender or the $10.7 Million Lender or the $50 Million Lender may now or hereafter have with their respective Borrowers or any rule of law and irrespective of (a) the time, order or method of attachment or perfection of any security interest or the recordation or other filing in any public record of any financing statement, or (b) the giving or failure to give notice of the acquisition or expected acquisition of purchase money security interests, the $80 Million Lender Obligations, the $10.7 Million Lender Obligations and the $50 Million Dollar Lender Obligations, and all security interests in the $80 Million Lender Collateral, the $10.7 Million Lender Collateral and the security interests granted by the $50 Million Borrowers to the $50 Million Lenders pursuant to the $50 Million Credit Agreement, shall be treated by the $80 Million Lender, the $10.7 Lender and the $50 Million Lender on a pari passu basis.”
 
6.02.  Enforcement of Security Interest.  Section 3 of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“3.       [Intentionally omitted]”
 
6.03.   Covenants and Warranties of the $10.7 Million Lender.  Section 4(d) of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“(d)     [intentionally omitted]”
 
6.04.   Covenants and Warranties of the $50 Million Lender.  Sections 5(d) of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“(d)     [intentionally omitted]”
 
6.05.   Effect of Bankruptcy.  Section 8(b) of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“(b)    [Intentionally omitted.]”
 
6.06.  No Duty to Provide Financial Accommodations.  Section 9 of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“9.      [Intentionally omitted.]”
 
6.07.   Waiver of Marshalling.  Section 10 of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“10.     [Intentionally omitted.]”
 
6.08.   Waiver.  Section 18 of the Intercreditor Agreement is hereby amended and restated to read in its entirety as follows:
 
“18.
Waiver.  No failure to exercise and no delay in exercising any right, power, or remedy hereunder shall impair any right, power, or remedy which the $80 Million Lender, the $10.7 Million Lender or the $50 Million Lender may have, nor shall any such delay be construed to be a waiver of any of such rights, powers or remedies or any acquiescence in any breach or default thereunder; nor shall any waiver by $80 Million Lender, the $10.7 Million Lender or the $50 Million Lender of any breach or default by any other party hereto hereunder be deemed a waiver of any default or breach subsequently occurring.  All rights and remedies granted to the $80 Million Lender, the $10.7 Million Lender and the $50 Million Lender hereunder shall remain in full force and effect notwithstanding any single or partial exercise of, or any discontinuance of action begun to enforce, any such right or remedy.  The rights and remedies specified herein are cumulative and not exclusive of each other or of any rights or remedies with the $80 Million Lender, the $10.7 Million Lender or the $50 Million Lender may otherwise have.  Any waiver, permit, consent or approval by the parties hereto of any breach or default hereunder must be in writing and shall be effective only to the extent set forth in such writing and only as to that specific instance.”
 

 
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SECTION 7.  REPRESENTATIONS AND WARRANTIES.  Each Borrower and Credit Party makes the following representations and warranties to the Lender, insofar as they relate to such Borrower, Credit Party or any of its respective subsidiaries, that:

(a)       Except for the existence of the Existing Defaults (as defined below) and after giving effect to the updated schedules contemplated by clause (f) below, the representations and warranties set forth in Article 3 of the $80,000,000 Credit Agreement (as hereby amended), Article V of the $50,000,000 Credit Agreement (as hereby amended), Article 3 of the $10,700,000 Credit Agreement (as hereby amended) and in each of the other Loan Documents, are true and complete on the date hereof as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, such representation or warranty shall be true and correct as of such specific date), and as if each reference in said Articles to “this Agreement” included reference to this Omnibus Amendment;

(b)       Except for the Existing Defaults (as defined below), no Default or Event of Default has occurred and is continuing;

(c)       Borrowers and Credit Parties have the power and authority to enter into this Omnibus Amendment and all other agreements contemplated hereby, and to do all acts and things as are required or contemplated hereunder to be done, observed or performed by the Borrowers and Credit Parties;
 
(d)      Each of this Omnibus Amendment and all other agreements to be executed by Borrowers and Credit Parties contemplated hereby has been duly authorized (by all necessary corporate or limited liability company action and otherwise), validly executed and delivered by Borrowers and Credit Parties and constitutes the legal, valid and binding obligation of Borrowers and Credit parties enforceable against them in accordance with its terms; and

(e)      The execution and delivery of this Omnibus Amendment and all other agreements to be executed by Borrowers and Credit Parties and contemplated hereby and Borrowers’ and Credit Parties’ performance hereunder and thereunder do not and will not require the consent or approval of any governmental authority, nor be in contravention of or in conflict with Borrowers’ and Credit Parties’ respective Articles of Incorporation or similar document, or the provisions of any statute, or any judgment, order, or indenture, instrument, agreement or undertaking, to which each Borrower and Credit Party is a party or by which each Borrower or Credit Party or its assets or properties are or may become bound.
 
(f)       Attached hereto as Annex A are updated schedules to the $80,000,000 Credit Agreement which shall replace the corresponding existing schedules attached to the $80,000,000 Credit Agreement.  Attached hereto as Annex B are updated schedules to the $50,000,000 Credit Agreement which shall replace the corresponding existing schedules attached to the $50,000,000 Credit Agreement.  Attached hereto as Annex C are updated schedules to the $10,700,000 Credit Agreement which shall replace the corresponding existing schedules attached to the $10,700,000 Credit Agreement.


 
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(g)      The organization chart of the Borrowers attached hereto as Annex D is true, correct and accurate as of the date hereof and contains no material omission.

(h)      On the date hereof, the aggregate amount of the liabilities and other obligations outstanding under the Equipment Loan Facility does not exceed $800,000.

SECTION 8.  CONFIRMATION OF GUARANTEE AND SECURITY INTEREST.  Each Guarantor, by its execution of this Omnibus Amendment, hereby consents to this Omnibus Amendment and confirms and ratifies that all of its obligations as a Guarantor under the Loan Documents shall continue in full force and effect for the benefit of the Lenders with respect to the Credit Agreements as amended hereby.  Each of the Borrowers and PCHI, by its execution of this Omnibus Amendment, hereby consents to this Omnibus Amendment, and confirms the security interests granted by it under each of the Loan Documents to which it is a party shall continue in full force and effect in favor of the Lender with respect to the Credit Agreements as amended hereby.  All obligations of Borrowers and Credit Parties under each Credit Agreement, as amended hereby, shall be secured by a first priority security interest and Lien (subject only to Permitted Encumbrances) and be entitled to the benefits of the Collateral Documents and Security Documents.  All Collateral Documents and Security Documents heretofore executed by the Borrowers and/or Credit Parties shall remain in full force and effect to secure the Obligations, and such Collateral Documents and Security Documents are hereby ratified and affirmed.  Nothing in this Section 8 shall limit or modify the obligations of any other guarantor of the Loans.

SECTION 9.  WAIVER.  The Borrowers and Credit Parties hereby acknowledge and agree that the Events of Default listed on Schedule 1 to this Omnibus Amendment (the “Existing Defaults”) have occurred as of the date hereof and will be continuing.  The Borrowers and Credit Parties further represent and warrant that as of the date hereof no other Defaults or Events of Default under the Loan Documents exist.  Subject to the satisfaction of the conditions precedent specified in Section 12 hereof, but effective as of the date hereof, the Lender waives the Existing Defaults. The Lender has not waived, and is not waiving, by the execution of this Omnibus Agreement, the funding of any future Loans or the acceptance of any payments under the Credit Agreements, any Default or Event of Default which may hereafter occur (whether the same or similar to the Existing Defaults or otherwise) or any Event of Default other than the Existing Defaults.  Lender further agrees not to assert that any interest, penalties or fees are due and owing by Borrowers under any of the Credit Agreements for any period prior to the date hereof (the “Retroactive Period”) or (b) to collect any interest, penalties or fees alleged to have been due and owing by Borrowers under any of the Credit Agreements for the Retroactive Period.

SECTION 10.  AGREEMENTS OF BORROWERS AND CREDIT PARTIES.  Effective as of the date hereof, each Borrower and Credit Party hereby agrees to the following:

(a)       Release.
 

 
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(i)        In consideration of the agreements of Lender, KPC Resolution Company, LLC, a California limited liability company (“KPC”) and Kali P. Chaudhuri, M.D. contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Borrower and Credit Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Lender, Kali P. Chaudhuri, M.D., KPC, their respective successors and assigns, and each of their affiliates, subsidiaries, predecessors, directors, officers, members, managers, partners, attorneys, employees, agents and other representatives and the existing trustees under any deed of trust securing the Loans under the Credit Agreements (Lender, Kali P. Chaudhuri, M.D., KPC, the trustees and all such other Persons being hereinafter referred to collectively as the "Releasees," and individually as a "Releasee"), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims (including third-party claims), counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a "Claim," and collectively, "Claims") of every name and nature, known or unknown, suspected or unsuspected, direct or indirect, both at law and in equity, which any Borrower or Credit Party or any of their respective successors, assigns, or other legal representatives, may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises (i) at any time on or prior to the day and date of this Omnibus Amendment for or on account of, or in relation to, or in any way in connection with any of the Credit Agreements, as amended hereby, the other Loan Documents, this Omnibus Amendment or transactions thereunder or related thereto or the property which is the security for the Loan Documents or (ii) on account of or in any way connected with (A) Case No. SACV 09-818 DOC (RNBx) in the United States District Court for the Central District of California, Southern Division, (B) the alleged failure of any predecessor to Lender, as lender under the Credit Agreements, (“Predecessor Lender”) to fund advances of any Loans under the $50,000,000 Credit Agreement, or (C) the alleged “oversweeping” of Borrower’s accounts receivable by any Predecessor Lender.
 
(ii)       Each Borrower and Credit Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
 
(iii)      Each Borrower and Credit Party agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.
 
(iv)     Each Borrower and Credit Party, on behalf of itself and its respective successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by the Borrower pursuant to Section 10(a) of this Omnibus Amendment.  If any Borrower, Credit Party, or their respective successors, assigns, or other legal representatives violates the foregoing covenant, each Borrower and Credit Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys' fees and costs incurred by any Releasee as a result of such violation.
 
(v)       As to each and every Claim released hereunder, each Borrower and Credit Party hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows:
 
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A 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."


 
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As to each and every Claim released hereunder, each Borrower also waives the benefit of each other similar provision of applicable federal or state law, if any, pertaining to general releases after having been advised by its legal counsel with respect thereto.

(b)      Lockbox Arrangements.  The Borrowers and Credit Parties hereby covenant and agree to re-institute on the date hereof the lockbox arrangements as required by Section 2.5 of the $50,000,000 Credit Agreement and to comply with such requirements going forward, which lockbox arrangements shall not require the sweeping of cash except cash from government payors or upon and during the continuation of an Event of Default.
 
(c)       Memorandum of Understanding.  The Borrowers, Kali P. Chaudhuri, M.D. and KPC (collectively, the “MOU Parties”) are party to the Amended and Restated Memorandum of Understanding dated January 13, 2010 (the “MOU”) and each of the MOU Parties hereby acknowledges and agrees that upon the execution and delivery of this Omnibus Amendment and effective as of the date hereof (i) all terms, conditions and obligations of the MOU Parties have been satisfied in full;  no term, condition or obligation with respect to the MOU, or any failure of any party to perform such term, condition or obligation shall serve as a defense, counterclaim, or offset of the obligations of the Borrowers and Credit Parties under the Credit Agreement; (iii) the $50,000,000 Credit Agreement, the Loan Documents related thereto and all liens and security interests granted in connection therewith shall not terminate as contemplated by Section 9 of the MOU and shall remain in full force and effect as amended by this Omnibus Amendment and as may be further amended, supplemented or modified after the date hereof; (iiii) the MOU has terminated and has no further force or effect; and (iv) the Borrowers do not and will not have any claims or causes of action based on the MOU.

(e)       Early Loan Payoff Agreement.  Together with Medical Provider Financial Corporation I, Medical Provider Financial Corporation II, Medical Provider Financial Corporation III and Healthcare Financial Management & Acquisitions, Inc., the Borrowers executed that certain Early Loan Payoff Agreement dated as of July 18, 2008.  The Borrowers hereby confirm and represent and warrant that such Early Loan Payoff Agreement has expired and has no further force or effect.

(f)       Participation Agent.  The Borrowers and Credit Parties hereby acknowledge that the Lender and KPC have entered into the Participation Agreement on the date hereof and pursuant thereto the Lender and KPC have appointed Silver Point Finance, LLC as the participation agent.  Unless and until directed otherwise by the Lender, the Borrowers and Credit Parties hereby agree, and the Lender hereby directs the Borrowers and Credit Parties, to provide a copy of each Notice of Request for Advance and each other notice, statement or agreement delivered in connection with the Credit Agreements to Silver Point Finance, LLC at the following address (or such other address as directed by the Lender):

Silver Point Finance, LLC
Two Greenwich Plaza, First Floor
Greenwich, CT 06830
Attention: Thomas Banks
Email: tbanks@silverpointcapital.com
Facsimile: (203) 542-4376
 
; provided that the Borrowers and Credit Parties shall also send any such Notice of Request for Advance and each other notice, statement or agreement delivered in connection with the Credit Agreements to the Lender Agent at the following address (or such other address as directed by the Lender):

Silver Point Finance, LLC
Two Greenwich Plaza, First Floor
Greenwich, CT 06830
Attention: Thomas Banks
Email: tbanks@silverpointcapital.com
Facsimile: (203) 542-4376

 
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(g)       Equipment Loan Facility.  On and after the date hereof, Borrower will not incur any additional indebtedness under the Equipment Loan Facility.

SECTION 11.  ACKNOWLEDGMENT OF INDEBTEDNESS.  Borrowers and Credit Parties hereby acknowledge, confirm and agree that as of the date hereof and prior to taking into account the funding of any Loans under the $50,000,000 Credit Agreement as amended hereby, Borrowers are indebted to Lenders in respect of: (i) the $45,000,000 Real Estate Term Loan in the aggregate outstanding principal amount of $45,000,000 plus accrued and unpaid interest; (ii) the $35,000,000 Non-Revolving Line of Credit Loan in the aggregate outstanding principal amount of $28,999,633 plus accrued and unpaid interest; (iii) the Revolving Facility in the aggregate outstanding principal amount of $0; (iv) the $10,700,000 Convertible Term Loan in an aggregate outstanding principal amount of $5,968,268 plus accrued and unpaid interest; and (v) all fees in connection with the Credit Agreements and/or any other Loan Document accrued and outstanding on the date hereof.  The $45,000,000 Real Estate Term Loan, the $35,000,000 Non-Revolving Line of Credit Loan, the Revolving Facility Loans and the $10,700,000 Convertible Term Loan, together with interest accrued and accruing thereon, and fees, costs, expenses and other charges now or hereafter payable by Borrowers and Credit Parties to Lender, are unconditionally owing by Borrowers, without offset, defense or counterclaim of any kind, nature or description whatsoever.  The parties hereto agree that the outstanding principal balances set forth in this Section 11 reflect the agreed upon reductions on the date hereof of the outstanding principal balances of the Loans, as well as the waiver of the accrued but unpaid interest and fees as of the date hereof.  The parties hereto further agree that the current Interest Period shall start on and include that date hereof.

SECTION 12.  CONDITIONS PRECEDENT.  The amendments, waivers and agreements set forth in this Omnibus Amendment shall become effective, as of the date hereof, upon satisfaction of the following conditions:

(a)       Execution.  The Lender shall have received counterparts of this Omnibus Amendment executed by each Borrower, Guarantor and Credit Party and the Lender.

(b)       Opinion of Company’s Counsel.  The Lender shall have received a favorable written opinion of (i) Lionel, Sawyer & Collins, counsel for IHHI, (ii) Reed Smith LLP, counsel for WMC-A, WMC-SA, Coastal and Chapman, (ii) Shulman Hodges & Bastian LLP, counsel for PCHI, and (iii) Rutan & Tucker, LLP, counsel for Ganesha, in each case covering the matters relating to the IHHI, WMC-A, WMC-SA, Coastal, Chapman, PCHI and Ganesha, as applicable, or this Omnibus Amendment as the Lender shall reasonably request (and each of such Borrowers and Credit Parties hereby request their respective counsel to deliver such opinion).

(c)       Corporate Documents. The Lender shall have received such documents and certificates certified by the secretary of each Borrower, Credit Party or Guarantor, as applicable, as the Lender or its counsel may reasonably request relating to the organization, existence and good standing of each Borrower, Credit Party and Guarantor, the authorization of this Omnibus Amendment and any other legal matters relating to the Borrowers, Credit Parties and Guarantors or this Agreement, all in form and substance satisfactory to the Lender and its counsel.

(d)       Lease Agreement.  The Lender and Borrowers shall have received a copy of the Second Amendment to Amended and Restated Triple Net Hospital Building Lease between PCHI and IHHI memorializing the rent to be paid under such lease in light of this Omnibus Amendment, executed and delivered by the parties thereto.


 
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(e)       Participation Agreement.  The Lender shall have received the Participation Agreement fully executed and delivered by the parties thereto.

(f)        Account Control Agreement.  The Lender shall have received the Wells Fargo Deposit Account Control Agreement fully executed and delivered by the parties thereto.

(g)       Stock and Membership Powers.  The Lender shall have received from IHHI  for each Credit Agreement executed original counterparts of the stock power in the form of Exhibit C hereto and from Ganesha for each Credit Agreement executed original counterparts of the membership power in the form of Exhibit D hereto.

(h)       Warrants.

(i)           Cancellation of Existing Warrants and Conversion Rights.  All warrants and stock conversion rights to purchase equity securities issued by the Borrowers to MedCap or its Affiliates and existing immediately prior to the date hereof shall have been cancelled.

(ii)          Issuance of Warrants to Dr. Chaudhuri.  IHHI shall have issued warrants to Kali P. Chaudhuri, M.D. to acquire 170,000,000 shares of common stock of IHHI in substantially the form of Exhibit E.

(iii)         Issuance of Other Warrants.  IHHI shall have issued warrants to purchase up to 235,000,000 shares of common stock of IHHI, in substantially the form attached as Exhibit E, exercisable for 96,000,000 shares in favor of Silver Point or its designees, and exercisable for 139,000,000 shares in favor of KPC or its designees.

(i)        Landlord Consent and Estoppel Certificates.  The Lender shall have received a Landlord Consent and Estoppel Certificate executed by the parties thereto in form, substance and scope satisfactory to the Lender for each of the properties located at (i)  1001 N. Tustin Avenue and 1301 N. Tustin Avenue Santa Ana, California;  (ii) 1025 S. Anaheim Boulevard Anaheim, California; (iii) 2701 S. Bristol Street, 1901 N. College Avenue and 1905 N. College Avenue, Santa Ana, California; (iv)  2617 E. Chapman Avenue Orange, California; and (v) 2601 E. Chapman Avenue Orange, California.

(j)        Leasehold Deeds of Trust.  The Lender shall have received Leasehold Deeds of Trust in favor of Lender and covering each Credit Agreement, executed by the parties thereto, in form, substance and scope satisfactory to the Lender, encumbering each of the leases or subleases affecting the properties located at (i)  1001 N. Tustin Avenue and 1301 N. Tustin Avenue Santa Ana, California;  (ii) 1025 S. Anaheim Boulevard Anaheim, California; (iii) 2701 S. Bristol Street, 1901 N. College Avenue and 1905 N. College Avenue, Santa Ana, California; (iv) 2601 E. Chapman Ave., Orange, California; and (v) 2617 E. Chapman Ave., Orange, California.

(k)       Absolute Assignment of Leases and Rents with License Back.  The Lender shall have received Corrections to the Absolute Assignment of Leases and Rents with License Back ($80 Million Credit Agreement) executed by the parties thereto, in form, substance and scope satisfactory to the Lender for the properties located at (i) 1001 N. Tustin Avenue and 1301 N. Tustin Avenue Santa Ana, California and (ii)  2601 E. Chapman Avenue Orange, California.


 
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(l)        Title Insurance.  The Lender shall have received all endorsements to the existing Title Policies for each Property, at Borrowers’ sole cost and expense, as required by the Lender in its sole discretion and the Title Company shall be irrevocably committed, at Borrower’s sole cost and expense, to issue new title insurance policies to Lender, in form, substance and scope acceptable to Lender in its sole discretion, for each of the Leasehold Deeds of Trust encumbering the properties located at (i) 1001 N. Tustin Avenue and 1301 N. Tustin Avenue Santa Ana, California;  (ii) 1025 S. Anaheim Boulevard Anaheim, California; (iii) 2701 S. Bristol Street, 1901 N. College Avenue and 1905 N. College Avenue, Santa Ana, California; (iv) 2601 E. Chapman Ave., Orange, California; and (v) 2617 E. Chapman Ave., Orange, California.

(m)      Memorandum of Intercreditor.  The Lender shall have received the Borrowers’ executed counterparts to the Memorandum of Intercreditor dated the date hereof among the Lender and Borrowers.
 
(n)      Fees and Expenses.  The Borrowers shall have paid in full the costs, expenses and fees at set forth in Section 11.3 of the $80,000,000 Credit Agreement, Section 12.3 of the $50,000,000 Credit Agreement and Section 11.3 of the $10,700,000 Credit Agreement.

SECTION 13.  POST CLOSING CONDITIONS.  The Borrowers hereby covenant and agree to execute and deliver the following documents within the time frames set forth below and the Borrowers and the Credit Parties agree that the failure to satisfy the requirements of this Section 13 shall constitute an Event of Default under each of the Credit Agreements:
 
(a)       Insurance Certificates.  The Borrowers shall deliver to the Lender within 10 days of the date hereof a certificate from Borrowers’ insurance broker with endorsements naming Silver Point Finance, LLC , for the benefit of the Lender, as additional insured and loss payee thereunder.
 
(b)      Termination of Mechanic’s Liens.  The Borrowers shall provide the Title Company with all documentation required by the Title Company to issue endorsements to the Lender’s title insurance policies removing the mechanics’ lien exceptions on the title insurance policies for Western Medical Center – Santa Ana, Coastal Communities Hospital and Chapman Medical Office Building, and such endorsements shall have been issued within 30 days of the date hereof.  Such documentation shall include, but not be limited to:

(i)           with respect to Western Medical Center – Santa Ana, a copy of the construction contract and budget, lien waivers from the general contractor and major sub-contractors for work completed to date and an indemnity from a financially viable indemnitor (along with audited financials of the proposed indemnitor); and

(ii)          with respect to Coastal Communities Hospital and Chapman Medical Office Building, information regarding the nature of the work and the date on which such work was completed, and to the extent work was completed less than one hundred twenty days prior to the date hereof, final unconditional lien waivers from the general contractor and major sub-contractors.
 
(c)       Equipment Loan Facility.
 
(i)          Within 10 days of the date hereof, Lender shall have received from the Borrowers a copy of a letter sent by the Borrowers to the lenders under the Equipment Loan Facility notifying such lenders that the Borrowers are not entitled to incur any additional indebtedness under the Equipment Loan Facility
 

 
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(ii)         Within 90 days of the date hereof, the Borrowers shall either (i) obtain amendments in form and substance satisfactory to the Lender Agent to the transaction documents governing the Equipment Loan Facility and related UCC financing statements limiting the collateral covered thereby to solely the equipment financed under such facility, (ii) obtain from the lenders under the Equipment Loan Facility a subordination agreement in favor of the Lender which subordinates the indebtedness under the Equipment Loan Facility to the Loans on terms that are satisfactory to the Lender Agent in its sole discretion or (iii) pay in full any and all amounts outstanding under the Equipment Loan Facility and cause the Equipment Loan Facility and the UCC financing statements filed in connection therewith to be terminated.
 
SECTION 14.  OPTION AND STANDSTILL AGREEMENT.  Together with Medical Provider Financial Corporation I, Medical Provider Financial Corporation II, Medical Provider Financial Corporation III, Kali P. Chaudhuri, M.D. executed that certain Option and Standstill Agreement dated as of July 18, 2008.  Kali P. Chaudhuri, M.D. hereby confirms that such Option and Standstill Agreement has expired and has no further force or effect.
 
SECTION 15.  $10,700,000 CONVERTIBLE TERM NOTE.  Borrowers and Lender hereby agree that the provisions of Section 2 of the $10,700,000 Convertible Term Note permitting Lender to convert all or any part of the principal amount of the $10,700,000 Convertible Term Note, and the accrued and unpaid interest thereon, into fully paid and nonassessable shares of voting common stock of IHHI, and any provisions of the $10,700,000 Convertible Term Note related thereto, are hereby terminated and shall have no further force or effect.
 
SECTION 16.  ACCREDITED INVESTOR.  Each of the Silver Point and KPC hereby represent and warrant to the Borrowers as to itself that it is an “accredited investor” (as defined in Rule 501 under the Securities Act of 1933, as amended).
 
SECTION 17.  NO FURTHER AMENDMENTS.  Except for the amendments set forth herein or otherwise set forth in any agreement signed by Lender and dated the date hereof, the text of each Credit Agreement shall remain unchanged and in full force and effect.  No waiver by Lender under any Credit Agreement is granted or intended and Lender expressly reserves the right to require strict compliance with the terms of the Credit Agreements.  The waivers and amendments agreed to herein shall not constitute or evidence a course of dealing at variance with the Credit Agreements such as to require further notice by Lender to require strict compliance with the terms of the Credit Agreements in the future.  The Borrowers and Credit Parties confirm and agree that this Omnibus Amendment shall constitute a Loan Document under each Credit Agreement.
 
SECTION 18.  MISCELLANEOUS.  Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect.  This Omnibus Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Omnibus Amendment by signing any such counterpart.  This Omnibus Amendment shall be governed by, and construed in accordance with, the law of the State of Nevada.


[Remainder of page intentionally left blank.]

 
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IN WITNESS WHEREOF, the parties hereto have caused this Omnibus Amendment to Credit Agreement to be duly executed and delivered as of the day and year first above written.
 
 
 
BORROWERS:

INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation


By:     /s/ Kenneth K. Westbrook                                                      
Name: Kenneth K. Westbrook
Title:  Chief Executive Officer


WMC-A, INC., a California corporation


By:     /s/ Kenneth K. Westbrook
Name: Kenneth K. Westbrook
Title:  Chief Executive Officer


WMC-SA, INC., a California corporation


By:     /s/ Kenneth K. Westbrook
Name: Kenneth K. Westbrook
Title:  Chief Executive Officer


COASTAL COMMUNITIES HOSPITAL, INC., a California corporation


By:     /s/ Kenneth K. Westbrook
Name: Kenneth K. Westbrook
Title:  Chief Executive Officer


CHAPMAN MEDICAL CENTER, INC., a California corporation


By:     /s/ Kenneth K. Westbrook
Name: Kenneth K. Westbrook
Title:  Chief Executive Officer
 
 

 
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CREDIT PARTIES AND GUARANTORS:

PACIFIC COAST HOLDINGS INVESTMENT, LLC,
a California limited liability company


By:     /s/ Kali P. Chaudhuri, M.D.
Name:  Kali P. Chaudhuri, M.D.
Title:  Co-Manager


By:     /s/ Jacob Sweidan, M.D.
Name:  Jacob Sweidan, M.D.
Title:  Co-Manager


CREDIT PARTIES:

GANESHA REALTY, LLC, a California
limited liability company


By:     /s/ Kali P. Chaudhuri, M.D.
Name:  Kali P. Chaudhuri, M.D.
Title:  Manager


LENDERS:

SPCP GROUP IV, LLC,
a Delaware limited liability company

By: Silver Point C&I Opportunity GP, LLC

 
By:      /s Michael A. Gatto
Name:   Michael A. Gatto
Title:    Authorized Signatory


SPCP GROUP, LLC,
a Delaware limited liability company


By:      /s Michael A. Gatto
Name:   Michael A. Gatto
Title:    Authorized Signatory

 

 
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LENDER AGENT:

SILVER POINT FINANCE, LLC,
a Delaware limited liability company

By:      /s Michael A. Gatto
Name:   Michael A. Gatto
Title:    Authorized Signatory

For purposes of Sections 10(a), 10(c), 11, 12 and 14 of this Omnibus Amendment only:


  /s/ Kali P. Chaudhuri, M.D.
Kali P. Chaudhuri, M.D.
 


For purposes of Sections 10(a), 10(c), 11, 12 and 16 of this Omnibus Amendment only

KPC RESOLUTION COMPANY, LLC, a
California limited liability company


By:           /s/ Kali P. Chaudhuri, M.D.
Name:  Kali P. Chaudhuri, M.D.
Title:  Manager


 
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Exhibit A

Lender Agent Provision


Lender Agent.

(a)           Appointment of Lender Agent
 
.  Silver Point Finance, LLC, a Delaware limited liability company (“Silver Point”), is hereby appointed Lender Agent hereunder and under the other Loan Documents and Lender hereby authorizes Silver Point to act as its agent in each such capacity in accordance with the terms hereof.  Lender Agent hereby agrees to act upon the express conditions contained herein and the other Loan Documents, as applicable.  The provisions of this section are solely for the benefit of the Lender Agent and Lender and no Borrower or Credit Party shall have any rights as a third party beneficiary of any of the provisions thereof.  In performing its functions and duties hereunder, the Lender Agent shall act solely as an agent of Lender and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Borrowers, Credit Parties or any of their respective Subsidiaries.

(b)           Powers and Duties
 
.  Lender authorizes the Lender Agent to take such action on Lender’s behalf and to exercise such powers, rights and remedies and perform such duties hereunder and under the other Loan Documents as are specifically delegated or granted to the Lender Agent by the terms hereof or otherwise agreed in writing by Lender, together with such actions, powers, rights and remedies as are reasonably incidental thereto.  The Lender Agent shall have only those duties and responsibilities that are expressly specified herein and the other Loan Documents.  The Lender Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees.  The Lender Agent shall not have or be deemed to have, by reason hereof or any of the other Loan Documents, a fiduciary relationship in respect of Lender; and nothing herein or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Lender Agent any obligations in respect hereof or any of the other Loan Documents except as expressly set forth herein or therein.

(c)           Successor Agent.  The Lender Agent may assign its rights and duties as Lender Agent hereunder to an Affiliate of Silver Point without the prior written consent of, or prior written notice to, any Borrower, Credit Party or Lender; provided that the Borrowers, Credit Parties and Lender may deem and treat such assigning Lender Agent as the relevant Lender Agent for all purposes hereof, unless and until such the Lender Agent provides written notice to Borrowers, Credit Parties and Lender of such assignment.  Upon such assignment such Affiliate shall succeed to and become vested with all rights, powers, privileges and duties as the Lender Agent hereunder and under the other Loan Documents.  In addition, with the unanimous consent of all Lenders in the event there is more than one Lender hereunder, Lender may remove the Lender Agent and appoint a successor Lender Agent without the consent of Borrowers, Credit Parties or the Lender Agent.

(d)           Lender under Security and Guaranty
 
.  Lender hereby further authorizes the Lender Agent, on behalf of and for the benefit of Lender, to be the agent for and representative of Lender with respect to the Guaranty, the Collateral and the Loan Documents related thereto.  With the written consent or authorization from Lender, the Lender Agent may execute any documents or instruments necessary to (i) release or subordinate any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets or for the establishment of A/R Financing by Borrowers that, in either case, is permitted by the Loan Documents and (ii) release any Guarantor from its guaranty if such release is permitted under the Loan Documents.  After the payment in full of the Obligations, the Lender Agent shall, upon request of the Borrowers and the consent of Lender (such consent not to be unreasonably withheld), take such actions as shall be required to promptly release the security interest in the Collateral and to promptly release each Guarantor from its guaranty under the Guaranty Agreements to which it is a party.
 
 
37
 
(e)           Loan Document Provisions.  For all purposes hereunder and under the other Loan Documents, any provision requiring any action, consent or vote of a “Lender” may be taken or given by the Lender Agent acting at the direction of the Lenders.
 
 
 
 
 
 
 
 
 
 
 
 

 
 
38
 

Exhibit B
 
Form of Continuation Notice
 
Silver Point Finance, LLC,
   as Lender Agent
under the below referenced Credit Agreement
Two Greenwich Plaza, First Floor
Greenwich, CT  06830
 
Ladies and Gentlemen:
 
Reference hereby is made to that certain Credit Agreement, dated as of October 9, 2007 (as amended by that certain Amendment dated June 10, 2008, that certain Amendment dated June 20, 2008, that certain Amendment No. 1 dated April 2, 2009 and that certain Acknowledgment, Waiver and Consent and Amendment to Credit Agreements dated April 2, 2009 and as may be further amended, supplemented or modified, the "Credit Agreement") entered into 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” and together with IHHI, WMC-SA, WMC-A, Chapman, the “Borrowers”), PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company (“PCHI”), GANESHA REALTY, LLC, a California limited liability company (“Ganesha”), and ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company (“OC-PIN” and, together with PCHI, Ganesha and OC-PIN, the “Credit Parties” and, together with PCHI, the “Guarantors”) and SILVER POINT CAPITAL, L.P., as Lender (the “Lender”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
 
This Continuation Notice represents the Borrowers’ request, effective as of __________, to continue an outstanding Working Capital Facility Loan in the amount of $_________ that bears interest at a rate determined by the Adjusted LIBOR Rate as a LIBOR Loan, and is a written confirmation of the telephonic notice of such election given to the Lender.
 
Such Loan will have an Interest Period of [1, 2, or 3] month(s) commencing on.
 
This Continuation Notice further confirms the Borrowers’ acceptance, for purposes of determining the rate of interest based on the Adjusted LIBOR Rate under the Credit Agreement, of the Adjusted LIBOR Rate as determined pursuant to the Credit Agreement.
 
Each Borrower represents and warrants that (a) as of the date hereof, each representation or warranty contained in or pursuant to any Loan Document or any agreement, instrument, certificate, document or other writing furnished at any time under or in connection with any Loan Document, and as of the effective date of any continuation requested above, is true and correct in all material respects (except to the extent any representation or warranty expressly related to an earlier date), (b) each of the covenants and agreements contained in any Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), and (c) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above.
 

 
39
 
 
 

 
 
Dated:

INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation


By:                                                               
Name:
Title:


WMC-A, INC., a California corporation


By:                                                               
Name:
Title:


WMC-SA, INC., a California corporation


By:                                                               
Name:
Title:


COASTAL COMMUNITIES HOSPITAL, INC., a California corporation

By:                                                               
Name:
Title:


CHAPMAN MEDICAL CENTER, INC., a California corporation


By:                                                               
Name:
Title:
 
 



[Continuation Notice]

 
40
 


 

 
Acknowledged by:
 
LENDERS:

SPCP GROUP IV, LLC,
a Delaware limited liability company

By: Silver Point C&I Opportunity GP, LLC

 
By:___________________________
Name:
Title:


SPCP GROUP, LLC,
a Delaware limited liability company


By:___________________________
Name:
Title:

LENDER AGENT:

SILVER POINT FINANCE, LLC,
a Delaware limited liability company

By:___________________________
Name:
Title:















[Continuation Notice]

 
41
 




Exhibit C

Form of Stock Power

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
42
 

Exhibit D

Form of Membership Power


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
43
 

Exhibit E

Form of Warrants


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
44
 

Schedule 1

Existing Defaults


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
45
 

Annex A

Updated Schedules to $80,000,000 Credit Agreement


 
 
 
 
 
 
 
 
 
 

 

 
46
 

Annex B

Updated Schedules to $50,000,000 Credit Agreement

 
 
 
 
 
 
 
 
 
 

 

 
47
 

Annex C

Updated Schedules to $10,700,000 Credit Agreement



 
 
 
 
 
 
 
 
 
 

 
 
48
 

Annex D

Organizational Chart

 
 
 
 
 
 
 
 
 

 
 
49
 

 EX-99.2 3 ihhi_8k-ex9902.htm COMMON STOCK WARRANT ihhi_8k-ex9902.htm  
Exhibit 99.2
 

NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 

 
INTEGRATED HEALTHCARE HOLDINGS, INC.
COMMON STOCK WARRANT

 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
 
THIS COMMON STOCK WARRANT (this “Warrant”) certifies that, for consideration received, KALI P. CHAUDHURI, M.D., an individual, or its successors or assigns (the “Holder” or “Holders,” as applicable), is entitled to subscribe for and purchase ONE HUNDRED SEVENTY MILLION (170,000,000) fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the “Shares”) of the Common Stock (the “Common Stock”) of Integrated Healthcare Holdings, Inc., a Nevada corporation (the “Company”), at a price per Share equal to seven cents ($0.07) (as adjusted pursuant to Section 3 hereof, the “Exercise Price”), subject to the provisions and upon the terms and conditions hereinafter set forth.
 
1.           Method of Exercise; Payment.
 
(a)           Exercise. This Warrant shall be exercisable from and after April 13, 2010 (the “Initial Exercise Date”) through April 13, 2013 (the “Expiration Date”).  This Warrant shall be exercisable by Holder in whole or in part and from time to time for the Shares (as adjusted pursuant to Section 3 hereof).
 
(b)           Cash Exercise.  The purchase rights represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company, and by the payment to the Company, by wire transfer or certified, cashier’s or other check acceptable to the Company (or as otherwise provided pursuant to Section 1(c) hereinbelow), of an amount equal to the aggregate Exercise Price of the Shares being purchased.
 
(c)           Net Issue Exercise.  In combination with or in lieu of exercising this Warrant for cash pursuant to Section 1(b), the Holder may elect to receive Shares of Common Stock equal to the value of this Warrant (or any portion thereof) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Shares computed using the following formula:
 

 
1
 
 
 
 
X 
=
Y (A-B)
     A
 
  Where  
X
=
the number of the Shares to be issued to the Holder pursuant to this Section 1(c).
 
 
Y
=
the number of the Shares covered by this Warrant in respect of which the net issuance election is made pursuant to this Section 1(c).
 
 
A
=
the fair market value of one Share on the date of election under this Section 1(c), as determined in accordance with Section 3(d).
 
 
B
=
the Exercise Price in effect under this Warrant on the date of election under this Section 1(c).
 
(d)           Fair Market Value.  For purposes of this Warrant, the per share fair market value of the Shares shall mean:
 
(i)           If the class of Shares is traded on a national securities exchange or other over-the-counter quotation system, the fair market value shall be the last reported sale price of a Share on such exchange or other over-the-counter quotation system on the last business day before the effective date of exercise of the net issuance election or if no such sale is made on such day, the mean of the closing bid and asked prices for such day on such exchange.
 
(ii)           If the class of Shares is not so listed and bid and ask prices are not reported, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company, as such price shall be determined by either of the following (in each case, the “Appraiser”), which determination shall be conclusive and binding on the Company and the Holder for purposes of this Warrant: (A) the mutual agreement of the Company and Holder, or (B) alternatively, if in good faith the Company and the Holder are unable to reach such mutual agreement within five (5) business days, a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing selected by the Holder in its sole and absolute discretion and at the Company’s sole cost and expense.
 
(e)           Stock Certificates.  Promptly upon receipt of a notice to exercise, the Company will take all necessary actions to authorize the issuance of such Common Stock under this Warrant.  In the event of any exercise of the rights represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder within three (3) business days, or four (4) Trading Days if the Company’s Common Stock is publicly traded and the notice of exercise is received after 1:30 p.m. Pacific Time on a day in which the Company’s Common Stock is publicly traded (each a “Trading Day”) and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time.
 

 
2
 

2.           Stock Fully Paid.  All of the Shares issuable upon the exercise of the rights represented by this Warrant will, upon issuance and receipt of the Exercise Price therefor, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof (except the Holder’s income taxes, if any, that are due and payable with respect to the Shares).
 
3.           Adjustment to the Number of Shares Issuable and/or the Exercise Price.  The number of Shares issuable upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as set forth in this Section 3.  Upon each adjustment pursuant to this Section 3, the Holder shall thereafter prior to the Expiration Date be entitled to purchase the adjusted number of Shares of Common Stock at the Exercise Price as adjusted hereby.
 
(a)           If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), (ii) shall subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then (x) the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased to reflect such event, and (y) the Exercise Price shall be adjusted to an amount obtained by multiplying the Exercise Price in effect immediately prior to such event by a fraction equal to the number of Shares for which this Warrant is exercisable immediately prior to such event divided by the number of Shares for which this Warrant is exercisable immediately after such event.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification.
 
(b)           If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock, or holders of any securities convertible into, or exchangeable or exercisable for Common Stock (and not to the Holder), evidences of its indebtedness, assets or any rights or warrants to subscribe for or purchase any security (excluding those referred to in this Section 3), the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect such event as determined by the Appraiser.  The Company shall promptly provide a statement to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
 

 
3
 

(c)           In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then, subject to the terms hereof, the Holder shall have the right thereafter to exercise this Warrant into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which this Warrant could have been exercised immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled.  The terms of any such reclassification, consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 3(c) upon any exercise following such reclassification, consolidation, merger, sale, transfer or share exchange.  This provision shall similarly apply to successive reclassification, consolidations, mergers, sales, transfers or share exchanges.
 
(d)           If the Company, at any time while this Warrant is outstanding, shall issue additional shares of Common Stock for a consideration per share less than the Exercise Price (a “Dilutive Issuance”), then, the Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Company for such issue would purchase at such Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such additional shares of Common Stock so issued.  For the purposes of this Section 3(d), all shares of Common Stock issuable upon conversion of any outstanding shares of preferred stock and the exercise and/or conversion of any other outstanding securities or rights exercisable for or convertible into shares of Common Stock shall be deemed to be outstanding.  For the purposes of this Section 3(d), the following paragraphs shall also be applicable:
 
(i)           If the Company, at any time while this Warrant is outstanding, grants any rights to subscribe for, or any rights or options to purchase, or securities convertible into, shares of Common Stock, whether or not such rights or options or rights to convert or exchange are immediately exercisable, and the price per share associated with such rights or options or rights to convert or exchange is less than the Exercise Price, then the total maximum number of shares issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such convertible securities issuable upon the exercise of such rights or options shall (as of the date of grant of such rights or options) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d).
 

 
4
 

(ii)           If the Company, at any time while this Warrant is outstanding, issues or sells any convertible securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share associated with such convertible securities is less than the Exercise Price, then the total maximum number of shares issuable upon conversion or exchange of such convertible securities shall (as of the date of the issue or sale of such convertible securities) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d); provided that if any such issuance or sale of such convertible securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such convertible securities for which adjustments of the Exercise Price have been or are to be made pursuant to Section 3(d)(i), then no further adjustment shall be made pursuant to this Section 3(d)(ii) by reason of such issuance or sale.
 
(e)           For purposes of any computation respecting consideration received, the following shall apply:
 
(i)           in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and
 
(ii)           in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Appraiser, whose determination shall be conclusive.
 
(f)           For the purposes of this Section 3, the following clauses shall also be applicable:
 
(i)           Record Date.  In case the Company shall promptly take a record of the holders of its Common Stock for the purposes of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in convertible securities, or (B) to subscribe for or purchase Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
 
(ii)           Treasury Shares.  Except for the shares issuable pursuant to the stock purchase agreements entered into by the Company pursuant to the Settlement Agreement, General Release and Covenant Not to Sue on or about April 2, 2009 (“Purchase Rights”), the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock for purposes of this Section 3.
 

 
5
 

(iii)           Exempt Issuance.  Notwithstanding anything to the contrary contained in this Section 3, no adjustments to the number of Shares issuable upon exercise of this Warrant or the Exercise Price shall be made upon an Exempt Issuance.  The term “Exempt Issuance” means the issuance of (a) shares of Common Stock in an underwritten public offering with an aggregate gross offering price of at least $50,000,000 and a minimum per share offering price of at least double the then-current Exercise Price, (b) shares of Common Stock or options to employees, officers or directors of the Company primarily for compensatory purposes pursuant to any stock or option plan or arrangement duly adopted by the Board of Directors of the Company, provided that any shares issued to any Affiliate, existing shareholder, or other related party of the Company (the “Related Parties”) in connection with such plans or arrangements are not materially greater than the shares otherwise issued to non-Related Parties for similar service under such plans or arrangements, (c) shares of common stock or options to third-party consultants to the Company who are not Related Parties pursuant to arrangements duly approved by the Board of Directors of the Company, (d) securities upon the exercise or conversion of this Warrant, the other New Warrants (defined below), the Purchase Rights, or other securities or rights exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Initial Exercise Date, (e) securities issued as consideration for acquisitions or strategic transactions duly approved by the Board of Directors of the Company in a business synergistic with the business of the Company, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities or (f) Common Stock and/or securities convertible into or exercisable for shares of Common Stock that may be issued to Kali P. Chaudhuri, M.D. or his Affiliates in connection with one or more strategic transactions approved by the Board of Directors of the Company as being fair and reasonable and providing consideration to the Company at least commensurate with the shares or securities being issued, provided that the number of shares issued or shares into which such securities are convertible pursuant to all issuances under this clause (f) shall not exceed 55,000,000 shares in aggregate (as appropriately adjusted for stock splits, combinations and similar events).
 
(iv)           For purposes of this Warrant, the term “Affiliate” shall have the definition given that term in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Exchange Act.
 
(g)           The Company shall not, by amendment of its articles of incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Section 3 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Section 3 against impairment.
 
4.           Notice of Adjustments. Whenever the number of Shares purchasable hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3 hereof, the Company shall promptly provide notice to the Holder setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number and class of Shares which may be purchased and the Exercise Price therefor after giving effect to such adjustment.
 

 
6
 

5.           Fractional Shares. This Warrant may not be exercised for fractional shares.  In lieu of fractional shares the Company shall promptly make a cash payment therefor based upon the per share fair market value of a Share then in effect.
 
6.           Pre-emptive Rights.  The Company hereby grants to the Holder (so long as Kali P. Chaudhuri, M.D. or an Affiliate thereof is and remains the Holder hereof) pre-emptive rights with respect to issuances, other than Exempt Issuances, after the Initial Exercise Date, by the Company of its equity securities or securities or rights convertible into or exercisable for equity securities, where issuance of those securities or rights would result in dilution of the Holder’s beneficial ownership (as calculated by the Holder for purposes of Section 13(d) of the Exchange Act of 1934, as amended (the “Exchange Act”)) of the Common Stock on a fully-diluted and as converted basis, taking into account all securities of the Company held by the Holder which entitle the Holder to acquire Common Stock at any time, including, without limitation, this Warrant, immediately prior to the consummation of the proposed issuance (the “Pre-Transaction Percentage”).  Each time the Company proposes to issue or offer any shares of, or securities or rights convertible into or exercisable for any shares of, any class of the Company’s equity securities (the “New Shares”) that would reduce the Holder’s Pre-Transaction Percentage, other than in Exempt Issuances, the Company shall first make a written offer to the Holder of its pro rata share of the New Shares based on the Holder’s Pre-Transaction Percentage (the “Offer Notice”).  The Offer Notice shall state (a) the Company’s bona fide intention to issue or offer the New Shares, (b) the identity of the person(s) to whom the New shares are to be issued or offered, (c) the number of New Shares to be issued or offered, and (d) the price and terms upon which it proposes to issue or offer the New Shares.  The Holder may, by written notice to the Company delivered within ten (10) days of its receipt of the Offer Notice, elect to purchase, at the price and on the terms specified in the Offer Notice, up to its pro rata share of the New Shares.  The closing of the sale to the Holder shall occur simultaneously with the issuance or sale of the New Shares to the other person(s) identified in the Offer Notice, but no earlier than fifteen (15) days following the Holder’s receipt of the Offer Notice (unless a shorter period is mutually agreed between the Company and the Holders).  The Holder’s pro rata share of the New Shares shall be priced equal to the lowest price paid by any of the other person(s) identified in the Offer Notice, including any such person who may be receiving or purchasing New Shares by virtue of similar pre-emptive or other purchase rights.  If the Company does not consummate the issuance or sale of the New Shares within sixty (60) days following the Holder’s receipt of the Offer Notice, then the New Shares shall not be offered, issued or sold unless again offered to the Holder in accordance with this Section 6.
 
7.           Representations, Warranties and Covenants of the Company.
 

 
7
 

(a)           The Company represents and warrants to the Holder that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of the Shares pursuant hereto and the performance of the Company’s obligations hereunder were taken prior to and are effective as of the effective date of this Warrant, except that the Company may need to obtain stockholder approval to increase its authorized capital to ensure there are sufficient shares of Common Stock available for issuance of the Shares pursuant hereto.  The Company covenants and agrees to promptly increase the Company’s authorized capital as and to the extent necessary to ensure there are sufficient authorized shares of Common Stock reserved and available for issuance under this Warrant, subject to the Holder’s cooperation in approving by vote or written consent from time to time resolutions approving such increases in authorized capital. The Company will procure at its sole expense upon each such authorization and reservation of shares the listing thereof (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed or inter-dealer trading systems or markets on which the Common Stock is then traded. The Company will take all such actions as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock may be listed or inter-dealer trading system on which the Common Stock is then traded, free of any pre-emptive rights except as referenced in Section 7(e) hereof. In furtherance, and not in limitation, of the foregoing, the Company covenants and agrees to prepare and file with the Securities and Exchange Commission preliminary and definitive versions of a Schedule 14C Information Statement and make such other filings and mailings to the Company’s stockholders as necessary or appropriate to cause an increase in the Company’s authorized capital to a number that is sufficient to accommodate exercise of this Warrant, to become effective as soon as practicable after the Initial Exercise Date.
 
(b)           The Company has made available to the Holder true, correct and complete copies of its articles of incorporation and bylaws, as amended.  This Warrant is not inconsistent with the Company’s articles of incorporation or bylaws, and does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, agreement or other instrument to which it is a party or by which it is bound, and constitutes the legal, valid and binding agreements of the Company, enforceable in accordance with its terms.
 
(c)           No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant, except for the filing of notices pursuant to Regulation D under the Securities Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.
 
(d)           All issued and outstanding shares of Common Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws.  Except as provided in favor of Kali P. Chaudhuri, M.D. and William E. Thomas in that certain Securities Purchase Agreement dated effective as of July 18, 2008, as amended, among the Company, Kali P. Chaudhuri, M.D. and William E. Thomas (“2008 SPA”), no stockholder of the Company has preemptive rights to purchase new issuances of the Company’s capital stock.
 

 
8
 

(e)           Except as provided in the 2008 SPA and in warrants (including this Warrant) to purchase up to four hundred five million (405,000,000) shares of Common Stock, which warrants (the “New Warrants”) were issued by the Company on the Initial Exercise Date, the Company is not, pursuant to the terms of any agreement currently in existence, under any obligation to register under the Securities Act any of its presently outstanding securities or any of its securities which may hereafter be issued.
 
(f)           Assuming that the Holder is an accredited investor (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act (as defined in Section 8 hereof)), the issuance of the Shares upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.
 
(g)           At the written request of the Holder, in the event the Holder proposes to sell Shares issuable upon the exercise of this Warrant in compliance with Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission, the Company shall furnish to the Holder, within three (3) Trading Days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time.
 
8.           Restrictive Legend.  The Shares (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:
 
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 
9.           Transfer of Warrant.
 
(a)           This Warrant may be sold, transferred, assigned or hypothecated, in whole or in part, by the Holder without the consent of the Company; provided, in each case that any transferee or assignee agrees to be bound by the terms of this Warrant, and such transfer or assignment is in compliance with the Securities Act and the securities law of any applicable jurisdiction.  The Warrant may be divided or combined, upon request to the Company by the Holder, into one or more new warrants representing the same aggregate number of Shares.  For purposes of this Warrant, “person” means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof.  The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.
 

 
9
 

(b)           No opinion of counsel or “no-action” letter shall be necessary for any transfer or assignment by any Holder.
 
10.           Rights of Stockholders.  No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.
 
11.           Information Rights.  The Company shall deliver to the Holder the following (which may be satisfied by the Company’s delivery of the Company’s public filings, if applicable, to Holder):
 
(a)           as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, a balance sheet and income statement as of the last day of such year and a statement of cash flows for such year, such year end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants of nationally recognized standing selected by the Company;
 
(b)           as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of stockholder’s equity as of the end of such fiscal quarter; and
 
(c)           as soon as practicable, but in any event with forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of common shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for common shares and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Holder to calculate its percentage equity ownership in the Company and certified by the Chief Financial Officer or Chief Executive Officer of the Company as being true, complete and correct.
 

 
10
 

12.           Reports Under Exchange Act.  With a view to making available to the Holders the benefits of Rule 144 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act (“SEC Rule 144”) and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
 
(a)           make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;
 
(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
 
(c)           furnish to any Holder, so long as the Holder holds this Warrant or owns any Shares, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.
 
13.           Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable after 5:00 p.m., Pacific Time, on the Expiration Date.
 
14.           Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the register maintained by the Company, and (ii) if to the Company, at the address of its principal corporate offices (Attention: President), which on the date hereof is 1301 N. Tustin Avenue, Santa Ana, California 92705, or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.
 
15.           Warrant Agent.
 

 
11
 

(a)           The Company shall serve as the initial warrant agent under this Warrant.  The Company and the Holder may appoint a new warrant agent as mutually agreed upon by the Company and the Holder.
 
(b)           Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the register maintained by the warrant agent pursuant to this Warrant.
 
16.           Payment of Taxes.  The Company will pay all documentary stamp taxes attributable to the issuance of Shares upon the exercise of the Warrants represented by this Warrant.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrants represented by this Warrant or receiving the Shares under this Warrant.
 
17.           Replacement of Warrant.  If the certificate evidencing this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant certificate, a new warrant certificate of like tenor, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and bond or other indemnity, if requested, reasonably satisfactory to it.  A Holder of a replacement warrant certificate also shall comply with such other reasonable regulations and pay such other reasonable charges attributable to the replacement of a warrant certificate.
 
18.           Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Nevada.
 
19.           Amendments.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
 
20.           Registration Rights.
 
(a)           The Company shall file a registration statement under the Securities Act covering the resale of all Shares of the Holder as soon as practicable following the Holder’s written request to do so, and use its reasonable best efforts to have the registration statement declared effective by the SEC for distribution thereof by means of an underwriting.  The underwriter will be selected by the Company and shall be reasonably acceptable to the Holder.  The Holder shall (together with the Company as provided herein below) enter into an underwriting agreement in a customary form with the underwriter or underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 19(a), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of Shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders as selected by them.
 

 
12
 

(b)           (i)           The Company covenants and agrees with the Holder (and any subsequent Holders of this Warrant and/or Shares) that, in the event the Company proposes to file a registration statement under the Securities Act (including, without limitation, relating to an initial public offering of Company Common Stock or shall receive a request for registration on Form S-3 from any stockholder) with respect to any class of security which becomes or which the Company believes will become effective on or after the Initial Exercise Date and on or before the Expiration Date, then the Company shall in each case give prompt written notice of such proposed filing to the Holder (and any subsequent Holders of this Warrant and/or Shares) at least sixty (60) days before the proposed filing date and, by such notice, shall offer to such Holders the opportunity to include in such registration statement such number of Shares as they may request in writing.
 
(ii)           The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the “Piggy-back Shares”) in the proposed offering on terms and conditions no less favorable to the Holders as the terms and conditions applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company’s notice or after the Expiration Date. Notwithstanding any other provision of this Section 19(b)(ii), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities, other than securities to be registered pursuant to the registration rights granted in the 2008 SPA (the “Other Shares”) and securities to be offered for the account of the Holders of the New Warrants and the Company, are first entirely excluded from the underwriting, and unless the number of Other Shares, on the one hand, and Piggy-back Shares on the other hand, are cut back on a pro rata basis based on the number of Piggy-back Shares and Other Shares requested to be included in such offering.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them.
 

 
13
 

(iii)        The Company shall be obligated pursuant to this Section 19(b)(iii) to include in the piggy-back offering Shares that have not yet been purchased by a Holder so long as such Holder submits an undertaking to the Company that such Holder intends to exercise the Warrant for at least the number of Shares to be included in such piggy-back offering prior to the consummation of such piggy-back offering.  The Company shall use its reasonable best efforts to register or qualify the Shares for offer or sale under the state securities or Blue Sky laws of such states which the Holders of such Shares shall designate.
 
(iv)        If the Company decides not to proceed with the piggy-back offering, the Company will have no obligation to proceed with the offering of the Piggy-back Shares.
 
(c)           (i)           To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Violation (as defined herein below) and the Company will pay to each such Holder, underwriter, controlling person or other aforementioned person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 19(c)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter, controlling person or other aforementioned person.  The term “Violation” means losses, claims, damages, or liabilities (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations:  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.
 

 
14
 

(ii)         Each Holder of Shares who participates in a registration pursuant to Section 19 shall indemnify and hold harmless the Company, each of its directors, each of its officers who have signed any such registration statement, and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities to which the Company, or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue or alleged untrue statement of any material fact contained in any such registration statement, or final prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such registration statement, or final prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished by such Holder expressly for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subparagraph (ii) shall not apply to amounts paid to any claimant in settlement of any suit or claim unless such payment is first approved by such Holder; and, provided further, that the aggregate amount payable by a Holder pursuant to this Section 19(c)(ii) shall not exceed the net proceeds received by such Holder in the registered offering out of which its obligations pursuant to this Section 19(c)(ii) arise.
 
[signature page follows]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
15
 

Issued this 13th day of April, 2010.
 
 
 
Integrated Healthcare Holdings, Inc.,
a Nevada corporation

 

 
By:      /s/ Kenneth K. Westbrook                                               
Kenneth K. Westbrook, Chief Executive Officer
 
 

Attachments
 

Exhibit A - - Notice of Exercise
Exhibit B - - Form of Transfer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
16
 

 

EXHIBIT A
 
NOTICE OF EXERCISE
 
 
TO:           Integrated Healthcare Holdings, Inc.
 
Attention: President
 
1.           The undersigned hereby elects to purchase __________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”) pursuant to the terms of the attached Warrant.
 
2.           Method of Exercise (Please initial the applicable blank(s)):
 
 
___
The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full of $____________ for the purchase price of _____________ Shares being purchased for cash, together with all applicable transfer taxes, if any.
 
 
___
The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 1(c) of this Warrant, and accordingly requests delivery of a net of ______ of such Shares and a corresponding reduction in the total number of Shares available for further exercise from __________ Shares to _____________ Shares.
 
3.           Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:
 
 
 
(Name)
   
 
 
 
(Address)
   
 
 
4.           The undersigned hereby represents and warrants that the aforesaid shares of Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof.
 

 
 
     (Signature)
   
  Title: ___________________________________________________________
 
 
                                                              

 
(Date)
  
 
 

 
17
 


 
 
EXHIBIT B

FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”), to which the attached Warrant relates, and appoints ______________ as their true and lawful attorney in fact to transfer such right on the books of the Company, with full power of substitution in the premises.
 
Dated: ____________________
 
 
 
 
 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
 
 
 
(Address)
 
 
 
Signed in the presence of:
 

 

 

 

 

 

 
18
 

 EX-99.3 4 ihhi_8k-ex9903.htm COMMON STOCK WARRANT ihhi_8k-ex9903.htm  
Exhibit 99.3
 

NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 

 
INTEGRATED HEALTHCARE HOLDINGS, INC.
COMMON STOCK WARRANT

 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
 
THIS COMMON STOCK WARRANT (this “Warrant”) certifies that, for consideration received, KPC RESOLUTION COMPANY, LLC, a California limited liability company, or its successors or assigns (the “Holder” or “Holders,” as applicable), is entitled to subscribe for and purchase ONE HUNDRED THIRTY NINE MILLION (139,000,000) fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the “Shares”) of the Common Stock (the “Common Stock”) of Integrated Healthcare Holdings, Inc., a Nevada corporation (the “Company”), at a price per Share equal to seven cents ($0.07) (as adjusted pursuant to Section 3 hereof, the “Exercise Price”), subject to the provisions and upon the terms and conditions hereinafter set forth.
 
1.           Method of Exercise; Payment.
 
(a)           Exercise. This Warrant shall be exercisable from and after April 13, 2010 (the “Initial Exercise Date”) through April 13, 2013 (the “Expiration Date”).  This Warrant shall be exercisable by Holder in whole or in part and from time to time for the Shares (as adjusted pursuant to Section 3 hereof).
 
(b)           Cash Exercise.  The purchase rights represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company, and by the payment to the Company, by wire transfer or certified, cashier’s or other check acceptable to the Company (or as otherwise provided pursuant to Section 1(c) hereinbelow), of an amount equal to the aggregate Exercise Price of the Shares being purchased.
 
(c)           Net Issue Exercise.  In combination with or in lieu of exercising this Warrant for cash pursuant to Section 1(b), the Holder may elect to receive Shares of Common Stock equal to the value of this Warrant (or any portion thereof) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Shares computed using the following formula:
 

 
 
 
 
 
X
=
Y (A-B)
    A
 
  Where   
X
=
the number of the Shares to be issued to the Holder pursuant to this Section 1(c).
 
 
Y
=
the number of the Shares covered by this Warrant in respect of which the net issuance election is made pursuant to this Section 1(c).
 
 
A
=
the fair market value of one Share on the date of election under this Section 1(c), as determined in accordance with Section 3(d).
 
 
B
=
the Exercise Price in effect under this Warrant on the date of election under this Section 1(c).
 
(d)           Fair Market Value.  For purposes of this Warrant, the per share fair market value of the Shares shall mean:
 
(i)           If the class of Shares is traded on a national securities exchange or other over-the-counter quotation system, the fair market value shall be the last reported sale price of a Share on such exchange or other over-the-counter quotation system on the last business day before the effective date of exercise of the net issuance election or if no such sale is made on such day, the mean of the closing bid and asked prices for such day on such exchange.
 
(ii)           If the class of Shares is not so listed and bid and ask prices are not reported, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company, as such price shall be determined by either of the following (in each case, the “Appraiser”), which determination shall be conclusive and binding on the Company and the Holder for purposes of this Warrant: (A) the mutual agreement of the Company and Holder, or (B) alternatively, if in good faith the Company and the Holder are unable to reach such mutual agreement within five (5) business days, a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing selected by the Holder in its sole and absolute discretion and at the Company’s sole cost and expense.
 
(e)           Stock Certificates.  Promptly upon receipt of a notice to exercise, the Company will take all necessary actions to authorize the issuance of such Common Stock under this Warrant.  In the event of any exercise of the rights represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder within three (3) business days, or four (4) Trading Days if the Company’s Common Stock is publicly traded and the notice of exercise is received after 1:30 p.m. Pacific Time on a day in which the Company’s Common Stock is publicly traded (each a “Trading Day”) and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time.
 

 
2
 

2.           Stock Fully Paid.  All of the Shares issuable upon the exercise of the rights represented by this Warrant will, upon issuance and receipt of the Exercise Price therefor, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof (except the Holder’s income taxes, if any, that are due and payable with respect to the Shares).
 
3.           Adjustment to the Number of Shares Issuable and/or the Exercise Price.  The number of Shares issuable upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as set forth in this Section 3.  Upon each adjustment pursuant to this Section 3, the Holder shall thereafter prior to the Expiration Date be entitled to purchase the adjusted number of Shares of Common Stock at the Exercise Price as adjusted hereby.
 
(a)           If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), (ii) shall subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then (x) the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased to reflect such event, and (y) the Exercise Price shall be adjusted to an amount obtained by multiplying the Exercise Price in effect immediately prior to such event by a fraction equal to the number of Shares for which this Warrant is exercisable immediately prior to such event divided by the number of Shares for which this Warrant is exercisable immediately after such event.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification.
 
(b)           If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock, or holders of any securities convertible into, or exchangeable or exercisable for Common Stock (and not to the Holder), evidences of its indebtedness, assets or any rights or warrants to subscribe for or purchase any security (excluding those referred to in this Section 3), the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect such event as determined by the Appraiser.  The Company shall promptly provide a statement to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
 

 
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(c)           In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then, subject to the terms hereof, the Holder shall have the right thereafter to exercise this Warrant into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which this Warrant could have been exercised immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled.  The terms of any such reclassification, consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 3(c) upon any exercise following such reclassification, consolidation, merger, sale, transfer or share exchange.  This provision shall similarly apply to successive reclassification, consolidations, mergers, sales, transfers or share exchanges.
 
(d)           If the Company, at any time while this Warrant is outstanding, shall issue additional shares of Common Stock for a consideration per share less than the Exercise Price (a “Dilutive Issuance”), then, the Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Company for such issue would purchase at such Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such additional shares of Common Stock so issued.  For the purposes of this Section 3(d), all shares of Common Stock issuable upon conversion of any outstanding shares of preferred stock and the exercise and/or conversion of any other outstanding securities or rights exercisable for or convertible into shares of Common Stock shall be deemed to be outstanding.  For the purposes of this Section 3(d), the following paragraphs shall also be applicable:
 
(i)           If the Company, at any time while this Warrant is outstanding, grants any rights to subscribe for, or any rights or options to purchase, or securities convertible into, shares of Common Stock, whether or not such rights or options or rights to convert or exchange are immediately exercisable, and the price per share associated with such rights or options or rights to convert or exchange is less than the Exercise Price, then the total maximum number of shares issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such convertible securities issuable upon the exercise of such rights or options shall (as of the date of grant of such rights or options) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d).
 

 
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(ii)           If the Company, at any time while this Warrant is outstanding, issues or sells any convertible securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share associated with such convertible securities is less than the Exercise Price, then the total maximum number of shares issuable upon conversion or exchange of such convertible securities shall (as of the date of the issue or sale of such convertible securities) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d); provided that if any such issuance or sale of such convertible securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such convertible securities for which adjustments of the Exercise Price have been or are to be made pursuant to Section 3(d)(i), then no further adjustment shall be made pursuant to this Section 3(d)(ii) by reason of such issuance or sale.
 
(e)           For purposes of any computation respecting consideration received, the following shall apply:
 
(i)           in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and
 
(ii)           in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Appraiser, whose determination shall be conclusive.
 
(f)           For the purposes of this Section 3, the following clauses shall also be applicable:
 
(i)           Record Date.  In case the Company shall promptly take a record of the holders of its Common Stock for the purposes of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in convertible securities, or (B) to subscribe for or purchase Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
 
(ii)           Treasury Shares.  Except for the shares issuable pursuant to the stock purchase agreements entered into by the Company pursuant to the Settlement Agreement, General Release and Covenant Not to Sue on or about April 2, 2009 (“Purchase Rights”), the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock for purposes of this Section 3.
 

 
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(iii)           Exempt Issuance.  Notwithstanding anything to the contrary contained in this Section 3, no adjustments to the number of Shares issuable upon exercise of this Warrant or the Exercise Price shall be made upon an Exempt Issuance.  The term “Exempt Issuance” means the issuance of (a) shares of Common Stock in an underwritten public offering with an aggregate gross offering price of at least $50,000,000 and a minimum per share offering price of at least double the then-current Exercise Price, (b) shares of Common Stock or options to employees, officers or directors of the Company primarily for compensatory purposes pursuant to any stock or option plan or arrangement duly adopted by the Board of Directors of the Company, provided that any shares issued to any Affiliate, existing shareholder, or other related party of the Company (the “Related Parties”) in connection with such plans or arrangements are not materially greater than the shares otherwise issued to non-Related Parties for similar service under such plans or arrangements, (c) shares of common stock or options to third-party consultants to the Company who are not Related Parties pursuant to arrangements duly approved by the Board of Directors of the Company, (d) securities upon the exercise or conversion of this Warrant, the other New Warrants (defined below), the Purchase Rights, or other securities or rights exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Initial Exercise Date, (e) securities issued as consideration for acquisitions or strategic transactions duly approved by the Board of Directors of the Company in a business synergistic with the business of the Company, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities or (f) Common Stock and/or securities convertible into or exercisable for shares of Common Stock that may be issued to Kali P. Chaudhuri, M.D. or his Affiliates in connection with one or more strategic transactions approved by the Board of Directors of the Company as being fair and reasonable and providing consideration to the Company at least commensurate with the shares or securities being issued, provided that the number of shares issued or shares into which such securities are convertible pursuant to all issuances under this clause (f) shall not exceed 55,000,000 shares in aggregate (as appropriately adjusted for stock splits, combinations and similar events).
 
(iv)           For purposes of this Warrant, the term “Affiliate” shall have the definition given that term in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Exchange Act.
 
(g)           The Company shall not, by amendment of its articles of incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Section 3 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Section 3 against impairment.
 

 
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4.           Notice of Adjustments. Whenever the number of Shares purchasable hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3 hereof, the Company shall promptly provide notice to the Holder setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number and class of Shares which may be purchased and the Exercise Price therefor after giving effect to such adjustment.
 
5.           Fractional Shares. This Warrant may not be exercised for fractional shares.  In lieu of fractional shares the Company shall promptly make a cash payment therefor based upon the per share fair market value of a Share then in effect.
 
6.           Pre-emptive Rights.  The Company hereby grants to the Holder (so long as KPC Resolution Company, LLC or an Affiliate thereof is and remains the Holder hereof) pre-emptive rights with respect to issuances, other than Exempt Issuances, after the Initial Exercise Date, by the Company of its equity securities or securities or rights convertible into or exercisable for equity securities, where issuance of those securities or rights would result in dilution of the Holder’s beneficial ownership (as calculated by the Holder for purposes of Section 13(d) of the Exchange Act of 1934, as amended (the “Exchange Act”)) of the Common Stock on a fully-diluted and as converted basis, taking into account all securities of the Company held by the Holder which entitle the Holder to acquire Common Stock at any time, including, without limitation, this Warrant, immediately prior to the consummation of the proposed issuance (the “Pre-Transaction Percentage”).  Each time the Company proposes to issue or offer any shares of, or securities or rights convertible into or exercisable for any shares of, any class of the Company’s equity securities (the “New Shares”) that would reduce the Holder’s Pre-Transaction Percentage, other than in Exempt Issuances, the Company shall first make a written offer to the Holder of its pro rata share of the New Shares based on the Holder’s Pre-Transaction Percentage (the “Offer Notice”).  The Offer Notice shall state (a) the Company’s bona fide intention to issue or offer the New Shares, (b) the identity of the person(s) to whom the New shares are to be issued or offered, (c) the number of New Shares to be issued or offered, and (d) the price and terms upon which it proposes to issue or offer the New Shares.  The Holder may, by written notice to the Company delivered within ten (10) days of its receipt of the Offer Notice, elect to purchase, at the price and on the terms specified in the Offer Notice, up to its pro rata share of the New Shares.  The closing of the sale to the Holder shall occur simultaneously with the issuance or sale of the New Shares to the other person(s) identified in the Offer Notice, but no earlier than fifteen (15) days following the Holder’s receipt of the Offer Notice (unless a shorter period is mutually agreed between the Company and the Holders).  The Holder’s pro rata share of the New Shares shall be priced equal to the lowest price paid by any of the other person(s) identified in the Offer Notice, including any such person who may be receiving or purchasing New Shares by virtue of similar pre-emptive or other purchase rights.  If the Company does not consummate the issuance or sale of the New Shares within sixty (60) days following the Holder’s receipt of the Offer Notice, then the New Shares shall not be offered, issued or sold unless again offered to the Holder in accordance with this Section 6.
 
7.           Representations, Warranties and Covenants of the Company.
 

 
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(a)           The Company represents and warrants to the Holder that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of the Shares pursuant hereto and the performance of the Company’s obligations hereunder were taken prior to and are effective as of the effective date of this Warrant, except that the Company may need to obtain stockholder approval to increase its authorized capital to ensure there are sufficient shares of Common Stock available for issuance of the Shares pursuant hereto.  The Company covenants and agrees to promptly increase the Company’s authorized capital as and to the extent necessary to ensure there are sufficient authorized shares of Common Stock reserved and available for issuance under this Warrant, subject to the Holder’s cooperation in approving by vote or written consent from time to time resolutions approving such increases in authorized capital. The Company will procure at its sole expense upon each such authorization and reservation of shares the listing thereof (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed or inter-dealer trading systems or markets on which the Common Stock is then traded. The Company will take all such actions as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock may be listed or inter-dealer trading system on which the Common Stock is then traded, free of any pre-emptive rights except as referenced in Section 7(e) hereof. In furtherance, and not in limitation, of the foregoing, the Company covenants and agrees to prepare and file with the Securities and Exchange Commission preliminary and definitive versions of a Schedule 14C Information Statement and make such other filings and mailings to the Company’s stockholders as necessary or appropriate to cause an increase in the Company’s authorized capital to a number that is sufficient to accommodate exercise of this Warrant, to become effective as soon as practicable after the Initial Exercise Date.
 
(b)           The Company has made available to the Holder true, correct and complete copies of its articles of incorporation and bylaws, as amended.  This Warrant is not inconsistent with the Company’s articles of incorporation or bylaws, and does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, agreement or other instrument to which it is a party or by which it is bound, and constitutes the legal, valid and binding agreements of the Company, enforceable in accordance with its terms.
 
(c)           No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant, except for the filing of notices pursuant to Regulation D under the Securities Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.
 
(d)           All issued and outstanding shares of Common Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws.  Except as provided in favor of Kali P. Chaudhuri, M.D. and William E. Thomas in that certain Securities Purchase Agreement dated effective as of July 18, 2008, as amended, among the Company, Kali P. Chaudhuri, M.D. and William E. Thomas (“2008 SPA”), no stockholder of the Company has preemptive rights to purchase new issuances of the Company’s capital stock.
 

 
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(e)           Except as provided in the 2008 SPA and in warrants (including this Warrant) to purchase up to four hundred five million (405,000,000) shares of Common Stock, which warrants (the “New Warrants”) were issued by the Company on the Initial Exercise Date, the Company is not, pursuant to the terms of any agreement currently in existence, under any obligation to register under the Securities Act any of its presently outstanding securities or any of its securities which may hereafter be issued.
 
(f)           Assuming that the Holder is an accredited investor (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act (as defined in Section 8 hereof)), the issuance of the Shares upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.
 
(g)           At the written request of the Holder, in the event the Holder proposes to sell Shares issuable upon the exercise of this Warrant in compliance with Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission, the Company shall furnish to the Holder, within three (3) Trading Days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time.
 
8.           Restrictive Legend.  The Shares (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:
 
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 
9.           Transfer of Warrant.
 
(a)           This Warrant may be sold, transferred, assigned or hypothecated, in whole or in part, by the Holder without the consent of the Company; provided, in each case that any transferee or assignee agrees to be bound by the terms of this Warrant, and such transfer or assignment is in compliance with the Securities Act and the securities law of any applicable jurisdiction.  The Warrant may be divided or combined, upon request to the Company by the Holder, into one or more new warrants representing the same aggregate number of Shares.  For purposes of this Warrant, “person” means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof.  The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.
 

 
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(b)           No opinion of counsel or “no-action” letter shall be necessary for any transfer or assignment by any Holder.
 
10.           Rights of Stockholders.  No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.
 
11.           Information Rights.  The Company shall deliver to the Holder the following (which may be satisfied by the Company’s delivery of the Company’s public filings, if applicable, to Holder):
 
(a)           as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, a balance sheet and income statement as of the last day of such year and a statement of cash flows for such year, such year end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants of nationally recognized standing selected by the Company;
 
(b)           as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of stockholder’s equity as of the end of such fiscal quarter; and
 
(c)           as soon as practicable, but in any event with forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of common shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for common shares and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Holder to calculate its percentage equity ownership in the Company and certified by the Chief Financial Officer or Chief Executive Officer of the Company as being true, complete and correct.
 

 
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12.           Reports Under Exchange Act.  With a view to making available to the Holders the benefits of Rule 144 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act (“SEC Rule 144”) and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
 
(a)           make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;
 
(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
 
(c)           furnish to any Holder, so long as the Holder holds this Warrant or owns any Shares, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.
 
13.           Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable after 5:00 p.m., Pacific Time, on the Expiration Date.
 
14.           Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the register maintained by the Company, and (ii) if to the Company, at the address of its principal corporate offices (Attention: President), which on the date hereof is 1301 N. Tustin Avenue, Santa Ana, California 92705, or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.
 
15.           Warrant Agent.
 

 
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(a)           The Company shall serve as the initial warrant agent under this Warrant.  The Company and the Holder may appoint a new warrant agent as mutually agreed upon by the Company and the Holder.
 
(b)           Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the register maintained by the warrant agent pursuant to this Warrant.
 
16.           Payment of Taxes.  The Company will pay all documentary stamp taxes attributable to the issuance of Shares upon the exercise of the Warrants represented by this Warrant.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrants represented by this Warrant or receiving the Shares under this Warrant.
 
17.           Replacement of Warrant.  If the certificate evidencing this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant certificate, a new warrant certificate of like tenor, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and bond or other indemnity, if requested, reasonably satisfactory to it.  A Holder of a replacement warrant certificate also shall comply with such other reasonable regulations and pay such other reasonable charges attributable to the replacement of a warrant certificate.
 
18.           Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Nevada.
 
19.           Amendments.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
 
20.           Registration Rights.
 
(a)           The Company shall file a registration statement under the Securities Act covering the resale of all Shares of the Holder as soon as practicable following the Holder’s written request to do so, and use its reasonable best efforts to have the registration statement declared effective by the SEC for distribution thereof by means of an underwriting.  The underwriter will be selected by the Company and shall be reasonably acceptable to the Holder.  The Holder shall (together with the Company as provided herein below) enter into an underwriting agreement in a customary form with the underwriter or underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 19(a), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of Shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders as selected by them.
 

 
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(b)           (i)           The Company covenants and agrees with the Holder (and any subsequent Holders of this Warrant and/or Shares) that, in the event the Company proposes to file a registration statement under the Securities Act (including, without limitation, relating to an initial public offering of Company Common Stock or shall receive a request for registration on Form S-3 from any stockholder) with respect to any class of security which becomes or which the Company believes will become effective on or after the Initial Exercise Date and on or before the Expiration Date, then the Company shall in each case give prompt written notice of such proposed filing to the Holder (and any subsequent Holders of this Warrant and/or Shares) at least sixty (60) days before the proposed filing date and, by such notice, shall offer to such Holders the opportunity to include in such registration statement such number of Shares as they may request in writing.
 
(ii)           The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the “Piggy-back Shares”) in the proposed offering on terms and conditions no less favorable to the Holders as the terms and conditions applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company’s notice or after the Expiration Date. Notwithstanding any other provision of this Section 19(b)(ii), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities, other than securities to be registered pursuant to the registration rights granted in the 2008 SPA (the “Other Shares”) and securities to be offered for the account of the Holders of the New Warrants and the Company, are first entirely excluded from the underwriting, and unless the number of Other Shares, on the one hand, and Piggy-back Shares on the other hand, are cut back on a pro rata basis based on the number of Piggy-back Shares and Other Shares requested to be included in such offering.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them.
 

 
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(iii)        The Company shall be obligated pursuant to this Section 19(b)(iii) to include in the piggy-back offering Shares that have not yet been purchased by a Holder so long as such Holder submits an undertaking to the Company that such Holder intends to exercise the Warrant for at least the number of Shares to be included in such piggy-back offering prior to the consummation of such piggy-back offering.  The Company shall use its reasonable best efforts to register or qualify the Shares for offer or sale under the state securities or Blue Sky laws of such states which the Holders of such Shares shall designate.
 
(iv)        If the Company decides not to proceed with the piggy-back offering, the Company will have no obligation to proceed with the offering of the Piggy-back Shares.
 
(c)           (i)           To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Violation (as defined herein below) and the Company will pay to each such Holder, underwriter, controlling person or other aforementioned person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 19(c)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter, controlling person or other aforementioned person.  The term “Violation” means losses, claims, damages, or liabilities (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations:  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.
 

 
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(ii)           Each Holder of Shares who participates in a registration pursuant to Section 19 shall indemnify and hold harmless the Company, each of its directors, each of its officers who have signed any such registration statement, and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities to which the Company, or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue or alleged untrue statement of any material fact contained in any such registration statement, or final prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such registration statement, or final prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished by such Holder expressly for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subparagraph (ii) shall not apply to amounts paid to any claimant in settlement of any suit or claim unless such payment is first approved by such Holder; and, provided further, that the aggregate amount payable by a Holder pursuant to this Section 19(c)(ii) shall not exceed the net proceeds received by such Holder in the registered offering out of which its obligations pursuant to this Section 19(c)(ii) arise.
 
[signature page follows]
 

 
15
 

Issued this 13th day of April, 2010.
 
 
 
 
Integrated Healthcare Holdings, Inc.,
a Nevada corporation

 

 
By:     /s/ Kenneth K. Westbrook                                                      
Kenneth K. Westbrook, Chief Executive Officer
 

 
 

 
Attachments
 

Exhibit A - - Notice of Exercise
Exhibit B - - Form of Transfer


 
16
 

 

EXHIBIT A
 
NOTICE OF EXERCISE
 
 
TO:           Integrated Healthcare Holdings, Inc.
 
Attention: President
 
1.           The undersigned hereby elects to purchase __________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”) pursuant to the terms of the attached Warrant.
 
2.           Method of Exercise (Please initial the applicable blank(s)):
 
 
___
The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full of $____________ for the purchase price of _____________ Shares being purchased for cash, together with all applicable transfer taxes, if any.
 
 
___
The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 1(c) of this Warrant, and accordingly requests delivery of a net of ______ of such Shares and a corresponding reduction in the total number of Shares available for further exercise from __________ Shares to _____________ Shares.
 
 
3.           Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:
 
 
 
(Name)
   
 
 
 
(Address)
   
 
 
4.           The undersigned hereby represents and warrants that the aforesaid shares of Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof.
 


 
 
     (Signature)
   
  Title: ___________________________________________________________
 
 

 
(Date)
  
 
 

 
17
 


 
 
EXHIBIT B

FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”), to which the attached Warrant relates, and appoints ______________ as their true and lawful attorney in fact to transfer such right on the books of the Company, with full power of substitution in the premises.
 
Dated: ____________________
 
 
 
 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
 
 
 
(Address)
 
 
 
Signed in the presence of:
 

 

 

 

 

 

 
18
 

EX-99.4 5 ihhi_8k-ex9904.htm COMMON STOCK WARRANT ihhi_8k-ex9904.htm  
Exhibit 99.4
 

NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 

 
INTEGRATED HEALTHCARE HOLDINGS, INC.
COMMON STOCK WARRANT

 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
 
THIS COMMON STOCK WARRANT (this “Warrant”) certifies that, for consideration received, SPCP GROUP, LLC, a Delaware limited liability company, or its successors or assigns (the “Holder” or “Holders,” as applicable), is entitled to subscribe for and purchase SEVENTY NINE MILLION ONE HUNDRED EIGHTY TWO THOUSAND SIX HUNDRED THIRTY FIVE (79,182,635) fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the “Shares”) of the Common Stock (the “Common Stock”) of Integrated Healthcare Holdings, Inc., a Nevada corporation (the “Company”), at a price per Share equal to seven cents ($0.07) (as adjusted pursuant to Section 3 hereof, the “Exercise Price”), subject to the provisions and upon the terms and conditions hereinafter set forth.
 
1.           Method of Exercise; Payment.
 
(a)           Exercise. This Warrant shall be exercisable from and after April 13, 2010 (the “Initial Exercise Date”) through April 13, 2013 (the “Expiration Date”).  This Warrant shall be exercisable by Holder in whole or in part and from time to time for the Shares (as adjusted pursuant to Section 3 hereof).
 
(b)           Cash Exercise.  The purchase rights represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company, and by the payment to the Company, by wire transfer or certified, cashier’s or other check acceptable to the Company (or as otherwise provided pursuant to Section 1(c) hereinbelow), of an amount equal to the aggregate Exercise Price of the Shares being purchased.
 
(c)           Net Issue Exercise.  In combination with or in lieu of exercising this Warrant for cash pursuant to Section 1(b), the Holder may elect to receive Shares of Common Stock equal to the value of this Warrant (or any portion thereof) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Shares computed using the following formula:
 

 
 

 
 
X
=
Y (A-B)
    A
 
  Where   
X
=
the number of the Shares to be issued to the Holder pursuant to this Section 1(c).
 
 
Y
=
the number of the Shares covered by this Warrant in respect of which the net issuance election is made pursuant to this Section 1(c).
 
 
A
=
the fair market value of one Share on the date of election under this Section 1(c), as determined in accordance with Section 3(d).
 
 
B
=
the Exercise Price in effect under this Warrant on the date of election under this Section 1(c).
 
(d)           Fair Market Value.  For purposes of this Warrant, the per share fair market value of the Shares shall mean:
 
(i)           If the class of Shares is traded on a national securities exchange or other over-the-counter quotation system, the fair market value shall be the last reported sale price of a Share on such exchange or other over-the-counter quotation system on the last business day before the effective date of exercise of the net issuance election or if no such sale is made on such day, the mean of the closing bid and asked prices for such day on such exchange.
 
(ii)           If the class of Shares is not so listed and bid and ask prices are not reported, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company, as such price shall be determined by either of the following (in each case, the “Appraiser”), which determination shall be conclusive and binding on the Company and the Holder for purposes of this Warrant: (A) the mutual agreement of the Company and Holder, or (B) alternatively, if in good faith the Company and the Holder are unable to reach such mutual agreement within five (5) business days, a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing selected by the Holder in its sole and absolute discretion and at the Company’s sole cost and expense.
 
(e)           Stock Certificates.  Promptly upon receipt of a notice to exercise, the Company will take all necessary actions to authorize the issuance of such Common Stock under this Warrant.  In the event of any exercise of the rights represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder within three (3) business days, or four (4) Trading Days if the Company’s Common Stock is publicly traded and the notice of exercise is received after 1:30 p.m. Pacific Time on a day in which the Company’s Common Stock is publicly traded (each a “Trading Day”) and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time.
 

 
2
 

2.           Stock Fully Paid.  All of the Shares issuable upon the exercise of the rights represented by this Warrant will, upon issuance and receipt of the Exercise Price therefor, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof (except the Holder’s income taxes, if any, that are due and payable with respect to the Shares).
 
3.           Adjustment to the Number of Shares Issuable and/or the Exercise Price.  The number of Shares issuable upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as set forth in this Section 3.  Upon each adjustment pursuant to this Section 3, the Holder shall thereafter prior to the Expiration Date be entitled to purchase the adjusted number of Shares of Common Stock at the Exercise Price as adjusted hereby.
 
(a)           If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), (ii) shall subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then (x) the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased to reflect such event, and (y) the Exercise Price shall be adjusted to an amount obtained by multiplying the Exercise Price in effect immediately prior to such event by a fraction equal to the number of Shares for which this Warrant is exercisable immediately prior to such event divided by the number of Shares for which this Warrant is exercisable immediately after such event.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification.
 
(b)           If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock, or holders of any securities convertible into, or exchangeable or exercisable for Common Stock (and not to the Holder), evidences of its indebtedness, assets or any rights or warrants to subscribe for or purchase any security (excluding those referred to in this Section 3), the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect such event as determined by the Appraiser.  The Company shall promptly provide a statement to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
 

 
3
 

(c)           In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then, subject to the terms hereof, the Holder shall have the right thereafter to exercise this Warrant into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which this Warrant could have been exercised immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled.  The terms of any such reclassification, consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 3(c) upon any exercise following such reclassification, consolidation, merger, sale, transfer or share exchange.  This provision shall similarly apply to successive reclassification, consolidations, mergers, sales, transfers or share exchanges.
 
(d)           If the Company, at any time while this Warrant is outstanding, shall issue additional shares of Common Stock for a consideration per share less than the Exercise Price (a “Dilutive Issuance”), then, the Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Company for such issue would purchase at such Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such additional shares of Common Stock so issued.  For the purposes of this Section 3(d), all shares of Common Stock issuable upon conversion of any outstanding shares of preferred stock and the exercise and/or conversion of any other outstanding securities or rights exercisable for or convertible into shares of Common Stock shall be deemed to be outstanding.  For the purposes of this Section 3(d), the following paragraphs shall also be applicable:
 
(i)           If the Company, at any time while this Warrant is outstanding, grants any rights to subscribe for, or any rights or options to purchase, or securities convertible into, shares of Common Stock, whether or not such rights or options or rights to convert or exchange are immediately exercisable, and the price per share associated with such rights or options or rights to convert or exchange is less than the Exercise Price, then the total maximum number of shares issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such convertible securities issuable upon the exercise of such rights or options shall (as of the date of grant of such rights or options) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d).
 

 
4
 

(ii)           If the Company, at any time while this Warrant is outstanding, issues or sells any convertible securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share associated with such convertible securities is less than the Exercise Price, then the total maximum number of shares issuable upon conversion or exchange of such convertible securities shall (as of the date of the issue or sale of such convertible securities) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d); provided that if any such issuance or sale of such convertible securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such convertible securities for which adjustments of the Exercise Price have been or are to be made pursuant to Section 3(d)(i), then no further adjustment shall be made pursuant to this Section 3(d)(ii) by reason of such issuance or sale.
 
(e)           For purposes of any computation respecting consideration received, the following shall apply:
 
(i)           in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and
 
(ii)           in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Appraiser, whose determination shall be conclusive.
 
(f)           For the purposes of this Section 3, the following clauses shall also be applicable:
 
(i)           Record Date.  In case the Company shall promptly take a record of the holders of its Common Stock for the purposes of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in convertible securities, or (B) to subscribe for or purchase Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
 
(ii)           Treasury Shares.  Except for the shares issuable pursuant to the stock purchase agreements entered into by the Company pursuant to the Settlement Agreement, General Release and Covenant Not to Sue on or about April 2, 2009 (“Purchase Rights”), the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock for purposes of this Section 3.
 

 
5
 

(iii)           Exempt Issuance.  Notwithstanding anything to the contrary contained in this Section 3, no adjustments to the number of Shares issuable upon exercise of this Warrant or the Exercise Price shall be made upon an Exempt Issuance.  The term “Exempt Issuance” means the issuance of (a) shares of Common Stock in an underwritten public offering with an aggregate gross offering price of at least $50,000,000 and a minimum per share offering price of at least double the then-current Exercise Price, (b) shares of Common Stock or options to employees, officers or directors of the Company primarily for compensatory purposes pursuant to any stock or option plan or arrangement duly adopted by the Board of Directors of the Company, provided that any shares issued to any Affiliate, existing shareholder, or other related party of the Company (the “Related Parties”) in connection with such plans or arrangements are not materially greater than the shares otherwise issued to non-Related Parties for similar service under such plans or arrangements, (c) shares of common stock or options to third-party consultants to the Company who are not Related Parties pursuant to arrangements duly approved by the Board of Directors of the Company, (d) securities upon the exercise or conversion of this Warrant, the other New Warrants (defined below), the Purchase Rights, or other securities or rights exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Initial Exercise Date, (e) securities issued as consideration for acquisitions or strategic transactions duly approved by the Board of Directors of the Company in a business synergistic with the business of the Company, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities or (f) Common Stock and/or securities convertible into or exercisable for shares of Common Stock that may be issued to Kali P. Chaudhuri, M.D. or his Affiliates in connection with one or more strategic transactions approved by the Board of Directors of the Company as being fair and reasonable and providing consideration to the Company at least commensurate with the shares or securities being issued, provided that the number of shares issued or shares into which such securities are convertible pursuant to all issuances under this clause (f) shall not exceed 55,000,000 shares in aggregate (as appropriately adjusted for stock splits, combinations and similar events).
 
(iv)           For purposes of this Warrant, the term “Affiliate” shall have the definition given that term in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Exchange Act.
 
(g)           The Company shall not, by amendment of its articles of incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Section 3 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Section 3 against impairment.
 
4.           Notice of Adjustments. Whenever the number of Shares purchasable hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3 hereof, the Company shall promptly provide notice to the Holder setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number and class of Shares which may be purchased and the Exercise Price therefor after giving effect to such adjustment.
 

 
6
 

5.           Fractional Shares. This Warrant may not be exercised for fractional shares.  In lieu of fractional shares the Company shall promptly make a cash payment therefor based upon the per share fair market value of a Share then in effect.
 
6.           Pre-emptive Rights.  The Company hereby grants to the Holder (so long as SPCP Group, LLC or an Affiliate thereof (which term shall include any investment fund managed by SPCP Group, LLC or its Affiliates) is and remains the Holder hereof) pre-emptive rights with respect to issuances, other than Exempt Issuances, after the Initial Exercise Date, by the Company of its equity securities or securities or rights convertible into or exercisable for equity securities, where issuance of those securities or rights would result in dilution of the Holder’s beneficial ownership (as calculated by the Holder for purposes of Section 13(d) of the Exchange Act of 1934, as amended (the “Exchange Act”)) of the Common Stock on a fully-diluted and as converted basis, taking into account all securities of the Company held by the Holder which entitle the Holder to acquire Common Stock at any time, including, without limitation, this Warrant, immediately prior to the consummation of the proposed issuance (the “Pre-Transaction Percentage”).  Each time the Company proposes to issue or offer any shares of, or securities or rights convertible into or exercisable for any shares of, any class of the Company’s equity securities (the “New Shares”) that would reduce the Holder’s Pre-Transaction Percentage, other than in Exempt Issuances, the Company shall first make a written offer to the Holder of its pro rata share of the New Shares based on the Holder’s Pre-Transaction Percentage (the “Offer Notice”).  The Offer Notice shall state (a) the Company’s bona fide intention to issue or offer the New Shares, (b) the identity of the person(s) to whom the New shares are to be issued or offered, (c) the number of New Shares to be issued or offered, and (d) the price and terms upon which it proposes to issue or offer the New Shares.  The Holder may, by written notice to the Company delivered within ten (10) days of its receipt of the Offer Notice, elect to purchase, at the price and on the terms specified in the Offer Notice, up to its pro rata share of the New Shares.  The closing of the sale to the Holder shall occur simultaneously with the issuance or sale of the New Shares to the other person(s) identified in the Offer Notice, but no earlier than fifteen (15) days following the Holder’s receipt of the Offer Notice (unless a shorter period is mutually agreed between the Company and the Holders).  The Holder’s pro rata share of the New Shares shall be priced equal to the lowest price paid by any of the other person(s) identified in the Offer Notice, including any such person who may be receiving or purchasing New Shares by virtue of similar pre-emptive or other purchase rights.  If the Company does not consummate the issuance or sale of the New Shares within sixty (60) days following the Holder’s receipt of the Offer Notice, then the New Shares shall not be offered, issued or sold unless again offered to the Holder in accordance with this Section 6.
 
7.           Representations, Warranties and Covenants of the Company.
 

 
7
 

(a)           The Company represents and warrants to the Holder that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of the Shares pursuant hereto and the performance of the Company’s obligations hereunder were taken prior to and are effective as of the effective date of this Warrant, except that the Company may need to obtain stockholder approval to increase its authorized capital to ensure there are sufficient shares of Common Stock available for issuance of the Shares pursuant hereto.  The Company covenants and agrees to promptly increase the Company’s authorized capital as and to the extent necessary to ensure there are sufficient authorized shares of Common Stock reserved and available for issuance under this Warrant, subject to the Holder’s cooperation in approving by vote or written consent from time to time resolutions approving such increases in authorized capital. The Company will procure at its sole expense upon each such authorization and reservation of shares the listing thereof (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed or inter-dealer trading systems or markets on which the Common Stock is then traded. The Company will take all such actions as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock may be listed or inter-dealer trading system on which the Common Stock is then traded, free of any pre-emptive rights except as referenced in Section 7(e) hereof. In furtherance, and not in limitation, of the foregoing, the Company covenants and agrees to prepare and file with the Securities and Exchange Commission preliminary and definitive versions of a Schedule 14C Information Statement and make such other filings and mailings to the Company’s stockholders as necessary or appropriate to cause an increase in the Company’s authorized capital to a number that is sufficient to accommodate exercise of this Warrant, to become effective as soon as practicable after the Initial Exercise Date.
 
(b)           The Company has made available to the Holder true, correct and complete copies of its articles of incorporation and bylaws, as amended.  This Warrant is not inconsistent with the Company’s articles of incorporation or bylaws, and does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, agreement or other instrument to which it is a party or by which it is bound, and constitutes the legal, valid and binding agreements of the Company, enforceable in accordance with its terms.
 
(c)           No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant, except for the filing of notices pursuant to Regulation D under the Securities Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.
 
(d)           All issued and outstanding shares of Common Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws.  Except as provided in favor of Kali P. Chaudhuri, M.D. and William E. Thomas in that certain Securities Purchase Agreement dated effective as of July 18, 2008, as amended, among the Company, Kali P. Chaudhuri, M.D. and William E. Thomas (“2008 SPA”), no stockholder of the Company has preemptive rights to purchase new issuances of the Company’s capital stock.
 

 
8
 

(e)           Except as provided in the 2008 SPA and in warrants (including this Warrant) to purchase up to four hundred five million (405,000,000) shares of Common Stock, which warrants (the “New Warrants”) were issued by the Company on the Initial Exercise Date, the Company is not, pursuant to the terms of any agreement currently in existence, under any obligation to register under the Securities Act any of its presently outstanding securities or any of its securities which may hereafter be issued.
 
(f)           Assuming that the Holder is an accredited investor (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act (as defined in Section 8 hereof)), the issuance of the Shares upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.
 
(g)           At the written request of the Holder, in the event the Holder proposes to sell Shares issuable upon the exercise of this Warrant in compliance with Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission, the Company shall furnish to the Holder, within three (3) Trading Days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time.
 
8.           Restrictive Legend.  The Shares (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:
 
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 
9.           Transfer of Warrant.
 
(a)           This Warrant may be sold, transferred, assigned or hypothecated, in whole or in part, by the Holder without the consent of the Company; provided, in each case that any transferee or assignee agrees to be bound by the terms of this Warrant, and such transfer or assignment is in compliance with the Securities Act and the securities law of any applicable jurisdiction.  The Warrant may be divided or combined, upon request to the Company by the Holder, into one or more new warrants representing the same aggregate number of Shares.  For purposes of this Warrant, “person” means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof.  The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.
 

 
9
 

(b)           No opinion of counsel or “no-action” letter shall be necessary for any transfer or assignment by any Holder.
 
10.           Rights of Stockholders.  No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.
 
11.           Information Rights.  The Company shall deliver to the Holder the following (which may be satisfied by the Company’s delivery of the Company’s public filings, if applicable, to Holder):
 
(a)           as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, a balance sheet and income statement as of the last day of such year and a statement of cash flows for such year, such year end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants of nationally recognized standing selected by the Company;
 
(b)           as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of stockholder’s equity as of the end of such fiscal quarter; and
 
(c)           as soon as practicable, but in any event with forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of common shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for common shares and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Holder to calculate its percentage equity ownership in the Company and certified by the Chief Financial Officer or Chief Executive Officer of the Company as being true, complete and correct.
 

 
10
 

12.           Reports Under Exchange Act.  With a view to making available to the Holders the benefits of Rule 144 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act (“SEC Rule 144”) and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
 
(a)           make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;
 
(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
 
(c)           furnish to any Holder, so long as the Holder holds this Warrant or owns any Shares, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.
 
13.           Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable after 5:00 p.m., Pacific Time, on the Expiration Date.
 
14.           Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the register maintained by the Company, and (ii) if to the Company, at the address of its principal corporate offices (Attention: President), which on the date hereof is 1301 N. Tustin Avenue, Santa Ana, California 92705, or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.
 

 
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15.           Warrant Agent.
 
(a)           The Company shall serve as the initial warrant agent under this Warrant.  The Company and the Holder may appoint a new warrant agent as mutually agreed upon by the Company and the Holder.
 
(b)           Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the register maintained by the warrant agent pursuant to this Warrant.
 
16.           Payment of Taxes.  The Company will pay all documentary stamp taxes attributable to the issuance of Shares upon the exercise of the Warrants represented by this Warrant.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrants represented by this Warrant or receiving the Shares under this Warrant.
 
17.           Replacement of Warrant.  If the certificate evidencing this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant certificate, a new warrant certificate of like tenor, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and bond or other indemnity, if requested, reasonably satisfactory to it.  A Holder of a replacement warrant certificate also shall comply with such other reasonable regulations and pay such other reasonable charges attributable to the replacement of a warrant certificate.
 
18.           Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Nevada.
 
19.           Amendments.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
 
20.           Registration Rights.
 
(a)           The Company shall file a registration statement under the Securities Act covering the resale of all Shares of the Holder as soon as practicable following the Holder’s written request to do so, and use its reasonable best efforts to have the registration statement declared effective by the SEC for distribution thereof by means of an underwriting.  The underwriter will be selected by the Company and shall be reasonably acceptable to the Holder.  The Holder shall (together with the Company as provided herein below) enter into an underwriting agreement in a customary form with the underwriter or underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 19(a), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of Shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders as selected by them.
 

 
12
 

(b)           (i)           The Company covenants and agrees with the Holder (and any subsequent Holders of this Warrant and/or Shares) that, in the event the Company proposes to file a registration statement under the Securities Act (including, without limitation, relating to an initial public offering of Company Common Stock or shall receive a request for registration on Form S-3 from any stockholder) with respect to any class of security which becomes or which the Company believes will become effective on or after the Initial Exercise Date and on or before the Expiration Date, then the Company shall in each case give prompt written notice of such proposed filing to the Holder (and any subsequent Holders of this Warrant and/or Shares) at least sixty (60) days before the proposed filing date and, by such notice, shall offer to such Holders the opportunity to include in such registration statement such number of Shares as they may request in writing.
 
(ii)          The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the “Piggy-back Shares”) in the proposed offering on terms and conditions no less favorable to the Holders as the terms and conditions applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company’s notice or after the Expiration Date. Notwithstanding any other provision of this Section 19(b)(ii), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities, other than securities to be registered pursuant to the registration rights granted in the 2008 SPA (the “Other Shares”) and securities to be offered for the account of the Holders of the New Warrants and the Company, are first entirely excluded from the underwriting, and unless the number of Other Shares, on the one hand, and Piggy-back Shares on the other hand, are cut back on a pro rata basis based on the number of Piggy-back Shares and Other Shares requested to be included in such offering.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them.
 

 
13
 

(iii)        The Company shall be obligated pursuant to this Section 19(b)(iii) to include in the piggy-back offering Shares that have not yet been purchased by a Holder so long as such Holder submits an undertaking to the Company that such Holder intends to exercise the Warrant for at least the number of Shares to be included in such piggy-back offering prior to the consummation of such piggy-back offering.  The Company shall use its reasonable best efforts to register or qualify the Shares for offer or sale under the state securities or Blue Sky laws of such states which the Holders of such Shares shall designate.
 
(iv)        If the Company decides not to proceed with the piggy-back offering, the Company will have no obligation to proceed with the offering of the Piggy-back Shares.
 
(c)           (i)           To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Violation (as defined herein below) and the Company will pay to each such Holder, underwriter, controlling person or other aforementioned person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 19(c)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter, controlling person or other aforementioned person.  The term “Violation” means losses, claims, damages, or liabilities (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations:  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.
 

 
14
 

(ii)          Each Holder of Shares who participates in a registration pursuant to Section 19 shall indemnify and hold harmless the Company, each of its directors, each of its officers who have signed any such registration statement, and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities to which the Company, or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue or alleged untrue statement of any material fact contained in any such registration statement, or final prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such registration statement, or final prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished by such Holder expressly for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subparagraph (ii) shall not apply to amounts paid to any claimant in settlement of any suit or claim unless such payment is first approved by such Holder; and, provided further, that the aggregate amount payable by a Holder pursuant to this Section 19(c)(ii) shall not exceed the net proceeds received by such Holder in the registered offering out of which its obligations pursuant to this Section 19(c)(ii) arise.
 
[signature page follows]
 

 
15
 

Issued this 13th day of April, 2010.
 
 
 
Integrated Healthcare Holdings, Inc.,
a Nevada corporation

 

 
By:     /s/ Kenneth K. Westbrook                                                      
Kenneth K. Westbrook, Chief Executive Officer
 
 

 
 
Attachments
 

Exhibit A - - Notice of Exercise
Exhibit B - - Form of Transfer


 
16
 

 

EXHIBIT A
 
NOTICE OF EXERCISE
 
 
TO:           Integrated Healthcare Holdings, Inc.
 
Attention: President
 
1.           The undersigned hereby elects to purchase __________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”) pursuant to the terms of the attached Warrant.
 
2.           Method of Exercise (Please initial the applicable blank(s)):
 
 
___
The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full of $____________ for the purchase price of _____________ Shares being purchased for cash, together with all applicable transfer taxes, if any.
 
 
___
The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 1(c) of this Warrant, and accordingly requests delivery of a net of ______ of such Shares and a corresponding reduction in the total number of Shares available for further exercise from __________ Shares to _____________ Shares.
 
3.           Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:
 
 
 
(Name)
   
 
 
 
(Address)
   
 
 
4.           The undersigned hereby represents and warrants that the aforesaid shares of Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof.
 


 
 
     (Signature)
   
  Title: ___________________________________________________________
 
 

 
(Date)
  
 
 
 

 
17
 


 
 
EXHIBIT B

FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”), to which the attached Warrant relates, and appoints ______________ as their true and lawful attorney in fact to transfer such right on the books of the Company, with full power of substitution in the premises.
 
Dated: ____________________
 
 
 
 
 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
 
 
 
(Address)
 
 
 
Signed in the presence of:
 

 

 

 
 

 

 
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EX-99.5 6 ihhi_8k-ex9905.htm COMMON STOCK WARRANT ihhi_8k-ex9905.htm  
Exhibit 99.5
 


NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 

 
INTEGRATED HEALTHCARE HOLDINGS, INC.
COMMON STOCK WARRANT

 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
 
THIS COMMON STOCK WARRANT (this “Warrant”) certifies that, for consideration received, SPCP GROUP IV, LLC, a Delaware limited liability company, or its successors or assigns (the “Holder” or “Holders,” as applicable), is entitled to subscribe for and purchase SIXTEEN MILLION EIGHT HUNDRED SEVENTEEN THOUSAND THREE HUNDRED SIXTY FIVE (16,817,365) fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the “Shares”) of the Common Stock (the “Common Stock”) of Integrated Healthcare Holdings, Inc., a Nevada corporation (the “Company”), at a price per Share equal to seven cents ($0.07) (as adjusted pursuant to Section 3 hereof, the “Exercise Price”), subject to the provisions and upon the terms and conditions hereinafter set forth.
 
1.           Method of Exercise; Payment.
 
(a)           Exercise. This Warrant shall be exercisable from and after April 13, 2010 (the “Initial Exercise Date”) through April 13, 2013 (the “Expiration Date”).  This Warrant shall be exercisable by Holder in whole or in part and from time to time for the Shares (as adjusted pursuant to Section 3 hereof).
 
(b)           Cash Exercise.  The purchase rights represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company, and by the payment to the Company, by wire transfer or certified, cashier’s or other check acceptable to the Company (or as otherwise provided pursuant to Section 1(c) hereinbelow), of an amount equal to the aggregate Exercise Price of the Shares being purchased.
 
(c)           Net Issue Exercise.  In combination with or in lieu of exercising this Warrant for cash pursuant to Section 1(b), the Holder may elect to receive Shares of Common Stock equal to the value of this Warrant (or any portion thereof) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder a number of Shares computed using the following formula:
 

 
 

 
 
X
=
Y (A-B)
    A
 
  Where   
X
=
the number of the Shares to be issued to the Holder pursuant to this Section 1(c).
 
 
Y
=
the number of the Shares covered by this Warrant in respect of which the net issuance election is made pursuant to this Section 1(c).
 
 
A
=
the fair market value of one Share on the date of election under this Section 1(c), as determined in accordance with Section 3(d).
 
 
B
=
the Exercise Price in effect under this Warrant on the date of election under this Section 1(c).
 
(d)           Fair Market Value.  For purposes of this Warrant, the per share fair market value of the Shares shall mean:
 
(i)           If the class of Shares is traded on a national securities exchange or other over-the-counter quotation system, the fair market value shall be the last reported sale price of a Share on such exchange or other over-the-counter quotation system on the last business day before the effective date of exercise of the net issuance election or if no such sale is made on such day, the mean of the closing bid and asked prices for such day on such exchange.
 
(ii)           If the class of Shares is not so listed and bid and ask prices are not reported, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company, as such price shall be determined by either of the following (in each case, the “Appraiser”), which determination shall be conclusive and binding on the Company and the Holder for purposes of this Warrant: (A) the mutual agreement of the Company and Holder, or (B) alternatively, if in good faith the Company and the Holder are unable to reach such mutual agreement within five (5) business days, a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing selected by the Holder in its sole and absolute discretion and at the Company’s sole cost and expense.
 
(e)           Stock Certificates.  Promptly upon receipt of a notice to exercise, the Company will take all necessary actions to authorize the issuance of such Common Stock under this Warrant.  In the event of any exercise of the rights represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder within three (3) business days, or four (4) Trading Days if the Company’s Common Stock is publicly traded and the notice of exercise is received after 1:30 p.m. Pacific Time on a day in which the Company’s Common Stock is publicly traded (each a “Trading Day”) and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the shares with respect to which this Warrant shall not have been exercised shall also be issued to the Holder within such time.
 

 
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2.           Stock Fully Paid.  All of the Shares issuable upon the exercise of the rights represented by this Warrant will, upon issuance and receipt of the Exercise Price therefor, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof (except the Holder’s income taxes, if any, that are due and payable with respect to the Shares).
 
3.           Adjustment to the Number of Shares Issuable and/or the Exercise Price.  The number of Shares issuable upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as set forth in this Section 3.  Upon each adjustment pursuant to this Section 3, the Holder shall thereafter prior to the Expiration Date be entitled to purchase the adjusted number of Shares of Common Stock at the Exercise Price as adjusted hereby.
 
(a)           If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend payable in shares of its capital stock (whether payable in shares of its Common Stock, preferred stock, or securities convertible into, or exchangeable or exercisable for, Common Stock or of other capital stock of any class), (ii) shall subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then (x) the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased to reflect such event, and (y) the Exercise Price shall be adjusted to an amount obtained by multiplying the Exercise Price in effect immediately prior to such event by a fraction equal to the number of Shares for which this Warrant is exercisable immediately prior to such event divided by the number of Shares for which this Warrant is exercisable immediately after such event.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date of a subdivision, combination or reclassification.
 
(b)           If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock, or holders of any securities convertible into, or exchangeable or exercisable for Common Stock (and not to the Holder), evidences of its indebtedness, assets or any rights or warrants to subscribe for or purchase any security (excluding those referred to in this Section 3), the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect such event as determined by the Appraiser.  The Company shall promptly provide a statement to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
 

 
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(c)           In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then, subject to the terms hereof, the Holder shall have the right thereafter to exercise this Warrant into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which this Warrant could have been exercised immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled.  The terms of any such reclassification, consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 3(c) upon any exercise following such reclassification, consolidation, merger, sale, transfer or share exchange.  This provision shall similarly apply to successive reclassification, consolidations, mergers, sales, transfers or share exchanges.
 
(d)           If the Company, at any time while this Warrant is outstanding, shall issue additional shares of Common Stock for a consideration per share less than the Exercise Price (a “Dilutive Issuance”), then, the Exercise Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Company for such issue would purchase at such Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such additional shares of Common Stock so issued.  For the purposes of this Section 3(d), all shares of Common Stock issuable upon conversion of any outstanding shares of preferred stock and the exercise and/or conversion of any other outstanding securities or rights exercisable for or convertible into shares of Common Stock shall be deemed to be outstanding.  For the purposes of this Section 3(d), the following paragraphs shall also be applicable:
 
(i)           If the Company, at any time while this Warrant is outstanding, grants any rights to subscribe for, or any rights or options to purchase, or securities convertible into, shares of Common Stock, whether or not such rights or options or rights to convert or exchange are immediately exercisable, and the price per share associated with such rights or options or rights to convert or exchange is less than the Exercise Price, then the total maximum number of shares issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such convertible securities issuable upon the exercise of such rights or options shall (as of the date of grant of such rights or options) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d).
 

 
4
 

(ii)           If the Company, at any time while this Warrant is outstanding, issues or sells any convertible securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share associated with such convertible securities is less than the Exercise Price, then the total maximum number of shares issuable upon conversion or exchange of such convertible securities shall (as of the date of the issue or sale of such convertible securities) be deemed to have been issued at such time in a Dilutive Issuance, and the Exercise Price shall be adjusted accordingly pursuant to this Section 3(d); provided that if any such issuance or sale of such convertible securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such convertible securities for which adjustments of the Exercise Price have been or are to be made pursuant to Section 3(d)(i), then no further adjustment shall be made pursuant to this Section 3(d)(ii) by reason of such issuance or sale.
 
(e)           For purposes of any computation respecting consideration received, the following shall apply:
 
(i)           in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; and
 
(ii)           in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Appraiser, whose determination shall be conclusive.
 
(f)           For the purposes of this Section 3, the following clauses shall also be applicable:
 
(i)           Record Date.  In case the Company shall promptly take a record of the holders of its Common Stock for the purposes of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in convertible securities, or (B) to subscribe for or purchase Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
 
(ii)           Treasury Shares.  Except for the shares issuable pursuant to the stock purchase agreements entered into by the Company pursuant to the Settlement Agreement, General Release and Covenant Not to Sue on or about April 2, 2009 (“Purchase Rights”), the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock for purposes of this Section 3.
 

 
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(iii)           Exempt Issuance.  Notwithstanding anything to the contrary contained in this Section 3, no adjustments to the number of Shares issuable upon exercise of this Warrant or the Exercise Price shall be made upon an Exempt Issuance.  The term “Exempt Issuance” means the issuance of (a) shares of Common Stock in an underwritten public offering with an aggregate gross offering price of at least $50,000,000 and a minimum per share offering price of at least double the then-current Exercise Price, (b) shares of Common Stock or options to employees, officers or directors of the Company primarily for compensatory purposes pursuant to any stock or option plan or arrangement duly adopted by the Board of Directors of the Company, provided that any shares issued to any Affiliate, existing shareholder, or other related party of the Company (the “Related Parties”) in connection with such plans or arrangements are not materially greater than the shares otherwise issued to non-Related Parties for similar service under such plans or arrangements, (c) shares of common stock or options to third-party consultants to the Company who are not Related Parties pursuant to arrangements duly approved by the Board of Directors of the Company, (d) securities upon the exercise or conversion of this Warrant, the other New Warrants (defined below), the Purchase Rights, or other securities or rights exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Initial Exercise Date, (e) securities issued as consideration for acquisitions or strategic transactions duly approved by the Board of Directors of the Company in a business synergistic with the business of the Company, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities or (f) Common Stock and/or securities convertible into or exercisable for shares of Common Stock that may be issued to Kali P. Chaudhuri, M.D. or his Affiliates in connection with one or more strategic transactions approved by the Board of Directors of the Company as being fair and reasonable and providing consideration to the Company at least commensurate with the shares or securities being issued, provided that the number of shares issued or shares into which such securities are convertible pursuant to all issuances under this clause (f) shall not exceed 55,000,000 shares in aggregate (as appropriately adjusted for stock splits, combinations and similar events).
 
(iv)           For purposes of this Warrant, the term “Affiliate” shall have the definition given that term in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Exchange Act.
 
(g)           The Company shall not, by amendment of its articles of incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Section 3 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Section 3 against impairment.
 
4.           Notice of Adjustments. Whenever the number of Shares purchasable hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3 hereof, the Company shall promptly provide notice to the Holder setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number and class of Shares which may be purchased and the Exercise Price therefor after giving effect to such adjustment.
 

 
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5.           Fractional Shares. This Warrant may not be exercised for fractional shares.  In lieu of fractional shares the Company shall promptly make a cash payment therefor based upon the per share fair market value of a Share then in effect.
 
6.           Pre-emptive Rights.  The Company hereby grants to the Holder (so long as SPCP Group IV, LLC or an Affiliate thereof (which term shall include any investment fund managed by SPCP Group IV, LLC or its Affiliates) is and remains the Holder hereof) pre-emptive rights with respect to issuances, other than Exempt Issuances, after the Initial Exercise Date, by the Company of its equity securities or securities or rights convertible into or exercisable for equity securities, where issuance of those securities or rights would result in dilution of the Holder’s beneficial ownership (as calculated by the Holder for purposes of Section 13(d) of the Exchange Act of 1934, as amended (the “Exchange Act”)) of the Common Stock on a fully-diluted and as converted basis, taking into account all securities of the Company held by the Holder which entitle the Holder to acquire Common Stock at any time, including, without limitation, this Warrant, immediately prior to the consummation of the proposed issuance (the “Pre-Transaction Percentage”).  Each time the Company proposes to issue or offer any shares of, or securities or rights convertible into or exercisable for any shares of, any class of the Company’s equity securities (the “New Shares”) that would reduce the Holder’s Pre-Transaction Percentage, other than in Exempt Issuances, the Company shall first make a written offer to the Holder of its pro rata share of the New Shares based on the Holder’s Pre-Transaction Percentage (the “Offer Notice”).  The Offer Notice shall state (a) the Company’s bona fide intention to issue or offer the New Shares, (b) the identity of the person(s) to whom the New shares are to be issued or offered, (c) the number of New Shares to be issued or offered, and (d) the price and terms upon which it proposes to issue or offer the New Shares.  The Holder may, by written notice to the Company delivered within ten (10) days of its receipt of the Offer Notice, elect to purchase, at the price and on the terms specified in the Offer Notice, up to its pro rata share of the New Shares.  The closing of the sale to the Holder shall occur simultaneously with the issuance or sale of the New Shares to the other person(s) identified in the Offer Notice, but no earlier than fifteen (15) days following the Holder’s receipt of the Offer Notice (unless a shorter period is mutually agreed between the Company and the Holders).  The Holder’s pro rata share of the New Shares shall be priced equal to the lowest price paid by any of the other person(s) identified in the Offer Notice, including any such person who may be receiving or purchasing New Shares by virtue of similar pre-emptive or other purchase rights.  If the Company does not consummate the issuance or sale of the New Shares within sixty (60) days following the Holder’s receipt of the Offer Notice, then the New Shares shall not be offered, issued or sold unless again offered to the Holder in accordance with this Section 6.
 
7.           Representations, Warranties and Covenants of the Company.
 

 
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(a)           The Company represents and warrants to the Holder that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of the Shares pursuant hereto and the performance of the Company’s obligations hereunder were taken prior to and are effective as of the effective date of this Warrant, except that the Company may need to obtain stockholder approval to increase its authorized capital to ensure there are sufficient shares of Common Stock available for issuance of the Shares pursuant hereto.  The Company covenants and agrees to promptly increase the Company’s authorized capital as and to the extent necessary to ensure there are sufficient authorized shares of Common Stock reserved and available for issuance under this Warrant, subject to the Holder’s cooperation in approving by vote or written consent from time to time resolutions approving such increases in authorized capital. The Company will procure at its sole expense upon each such authorization and reservation of shares the listing thereof (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed or inter-dealer trading systems or markets on which the Common Stock is then traded. The Company will take all such actions as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock may be listed or inter-dealer trading system on which the Common Stock is then traded, free of any pre-emptive rights except as referenced in Section 7(e) hereof. In furtherance, and not in limitation, of the foregoing, the Company covenants and agrees to prepare and file with the Securities and Exchange Commission preliminary and definitive versions of a Schedule 14C Information Statement and make such other filings and mailings to the Company’s stockholders as necessary or appropriate to cause an increase in the Company’s authorized capital to a number that is sufficient to accommodate exercise of this Warrant, to become effective as soon as practicable after the Initial Exercise Date.
 
(b)           The Company has made available to the Holder true, correct and complete copies of its articles of incorporation and bylaws, as amended.  This Warrant is not inconsistent with the Company’s articles of incorporation or bylaws, and does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, agreement or other instrument to which it is a party or by which it is bound, and constitutes the legal, valid and binding agreements of the Company, enforceable in accordance with its terms.
 
(c)           No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant, except for the filing of notices pursuant to Regulation D under the Securities Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.
 
(d)           All issued and outstanding shares of Common Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws.  Except as provided in favor of Kali P. Chaudhuri, M.D. and William E. Thomas in that certain Securities Purchase Agreement dated effective as of July 18, 2008, as amended, among the Company, Kali P. Chaudhuri, M.D. and William E. Thomas (“2008 SPA”), no stockholder of the Company has preemptive rights to purchase new issuances of the Company’s capital stock.
 

 
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(e)           Except as provided in the 2008 SPA and in warrants (including this Warrant) to purchase up to four hundred five million (405,000,000) shares of Common Stock, which warrants (the “New Warrants”) were issued by the Company on the Initial Exercise Date, the Company is not, pursuant to the terms of any agreement currently in existence, under any obligation to register under the Securities Act any of its presently outstanding securities or any of its securities which may hereafter be issued.
 
(f)           Assuming that the Holder is an accredited investor (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act (as defined in Section 8 hereof)), the issuance of the Shares upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.
 
(g)           At the written request of the Holder, in the event the Holder proposes to sell Shares issuable upon the exercise of this Warrant in compliance with Rule 144 promulgated under the Securities Act by the Securities and Exchange Commission, the Company shall furnish to the Holder, within three (3) Trading Days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time.
 
8.           Restrictive Legend.  The Shares (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:
 
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
 
9.           Transfer of Warrant.
 
(a)           This Warrant may be sold, transferred, assigned or hypothecated, in whole or in part, by the Holder without the consent of the Company; provided, in each case that any transferee or assignee agrees to be bound by the terms of this Warrant, and such transfer or assignment is in compliance with the Securities Act and the securities law of any applicable jurisdiction.  The Warrant may be divided or combined, upon request to the Company by the Holder, into one or more new warrants representing the same aggregate number of Shares.  For purposes of this Warrant, “person” means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof.  The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.
 

 
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(b)           No opinion of counsel or “no-action” letter shall be necessary for any transfer or assignment by any Holder.
 
10.           Rights of Stockholders.  No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.
 
11.           Information Rights.  The Company shall deliver to the Holder the following (which may be satisfied by the Company’s delivery of the Company’s public filings, if applicable, to Holder):
 
(a)           as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, a balance sheet and income statement as of the last day of such year and a statement of cash flows for such year, such year end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certified by independent public accountants of nationally recognized standing selected by the Company;
 
(b)           as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of stockholder’s equity as of the end of such fiscal quarter; and
 
(c)           as soon as practicable, but in any event with forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of common shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for common shares and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Holder to calculate its percentage equity ownership in the Company and certified by the Chief Financial Officer or Chief Executive Officer of the Company as being true, complete and correct.
 

 
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12.           Reports Under Exchange Act.  With a view to making available to the Holders the benefits of Rule 144 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act (“SEC Rule 144”) and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
 
(a)           make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company is subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;
 
(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
 
(c)           furnish to any Holder, so long as the Holder holds this Warrant or owns any Shares, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.
 
13.           Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable after 5:00 p.m., Pacific Time, on the Expiration Date.
 
14.           Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the register maintained by the Company, and (ii) if to the Company, at the address of its principal corporate offices (Attention: President), which on the date hereof is 1301 N. Tustin Avenue, Santa Ana, California 92705, or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.
 

 
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15.           Warrant Agent.
 
(a)           The Company shall serve as the initial warrant agent under this Warrant.  The Company and the Holder may appoint a new warrant agent as mutually agreed upon by the Company and the Holder.
 
(b)           Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the register maintained by the warrant agent pursuant to this Warrant.
 
16.           Payment of Taxes.  The Company will pay all documentary stamp taxes attributable to the issuance of Shares upon the exercise of the Warrants represented by this Warrant.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrants represented by this Warrant or receiving the Shares under this Warrant.
 
17.           Replacement of Warrant.  If the certificate evidencing this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant certificate, a new warrant certificate of like tenor, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and bond or other indemnity, if requested, reasonably satisfactory to it.  A Holder of a replacement warrant certificate also shall comply with such other reasonable regulations and pay such other reasonable charges attributable to the replacement of a warrant certificate.
 
18.           Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Nevada.
 
19.           Amendments.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
 
20.           Registration Rights.
 

 
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(a)           The Company shall file a registration statement under the Securities Act covering the resale of all Shares of the Holder as soon as practicable following the Holder’s written request to do so, and use its reasonable best efforts to have the registration statement declared effective by the SEC for distribution thereof by means of an underwriting.  The underwriter will be selected by the Company and shall be reasonably acceptable to the Holder.  The Holder shall (together with the Company as provided herein below) enter into an underwriting agreement in a customary form with the underwriter or underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 19(a), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of Shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders as selected by them.
 
(b)           (i)           The Company covenants and agrees with the Holder (and any subsequent Holders of this Warrant and/or Shares) that, in the event the Company proposes to file a registration statement under the Securities Act (including, without limitation, relating to an initial public offering of Company Common Stock or shall receive a request for registration on Form S-3 from any stockholder) with respect to any class of security which becomes or which the Company believes will become effective on or after the Initial Exercise Date and on or before the Expiration Date, then the Company shall in each case give prompt written notice of such proposed filing to the Holder (and any subsequent Holders of this Warrant and/or Shares) at least sixty (60) days before the proposed filing date and, by such notice, shall offer to such Holders the opportunity to include in such registration statement such number of Shares as they may request in writing.
 
(ii)           The Company shall permit, or shall cause the managing underwriter of a proposed offering to permit, the Holders from whom such written requests have been received to include such number of Shares (the “Piggy-back Shares”) in the proposed offering on terms and conditions no less favorable to the Holders as the terms and conditions applicable to securities of the Company included therein or as applicable to securities of any person other than the Company and the Holders of Piggy-back Shares if the securities of any such person are included therein; provided, however, that the Company shall not be required to honor any such request that is received more than sixty (60) days after the proper giving of the Company’s notice or after the Expiration Date. Notwithstanding any other provision of this Section 19(b)(ii), if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of Shares held by the Holder to be included in such underwriting shall not be reduced unless all other securities, other than securities to be registered pursuant to the registration rights granted in the 2008 SPA (the “Other Shares”) and securities to be offered for the account of the Holders of the New Warrants and the Company, are first entirely excluded from the underwriting, and unless the number of Other Shares, on the one hand, and Piggy-back Shares on the other hand, are cut back on a pro rata basis based on the number of Piggy-back Shares and Other Shares requested to be included in such offering.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of the Shares with respect to the registrations pursuant to this Section for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them.
 

 
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(iii)        The Company shall be obligated pursuant to this Section 19(b)(iii) to include in the piggy-back offering Shares that have not yet been purchased by a Holder so long as such Holder submits an undertaking to the Company that such Holder intends to exercise the Warrant for at least the number of Shares to be included in such piggy-back offering prior to the consummation of such piggy-back offering.  The Company shall use its reasonable best efforts to register or qualify the Shares for offer or sale under the state securities or Blue Sky laws of such states which the Holders of such Shares shall designate.
 
(iv)        If the Company decides not to proceed with the piggy-back offering, the Company will have no obligation to proceed with the offering of the Piggy-back Shares.
 
(c)           (i)           To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Violation (as defined herein below) and the Company will pay to each such Holder, underwriter, controlling person or other aforementioned person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 19(c)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, delayed or conditioned), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter, controlling person or other aforementioned person.  The term “Violation” means losses, claims, damages, or liabilities (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations:  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.
 

 
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(ii)          Each Holder of Shares who participates in a registration pursuant to Section 19 shall indemnify and hold harmless the Company, each of its directors, each of its officers who have signed any such registration statement, and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities to which the Company, or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue or alleged untrue statement of any material fact contained in any such registration statement, or final prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such registration statement, or final prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished by such Holder expressly for use in the preparation thereof; and will reimburse any legal or other expenses reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subparagraph (ii) shall not apply to amounts paid to any claimant in settlement of any suit or claim unless such payment is first approved by such Holder; and, provided further, that the aggregate amount payable by a Holder pursuant to this Section 19(c)(ii) shall not exceed the net proceeds received by such Holder in the registered offering out of which its obligations pursuant to this Section 19(c)(ii) arise.
 
[signature page follows]
 

 
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Issued this 13th day of April, 2010.
 
 
 
Integrated Healthcare Holdings, Inc.,
a Nevada corporation

 

 
By:     /s/ Kenneth K. Westbrook                                                      
Kenneth K. Westbrook, Chief Executive Officer
 

 
 

 
Attachments
 

Exhibit A - - Notice of Exercise
Exhibit B - - Form of Transfer


 
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EXHIBIT A
 
NOTICE OF EXERCISE
 
 
TO:           Integrated Healthcare Holdings, Inc.
 
Attention: President
 
1.           The undersigned hereby elects to purchase __________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”) pursuant to the terms of the attached Warrant.
 
2.           Method of Exercise (Please initial the applicable blank(s)):
 
 
___
The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full of $____________ for the purchase price of _____________ Shares being purchased for cash, together with all applicable transfer taxes, if any.
 
 
___
The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 1(c) of this Warrant, and accordingly requests delivery of a net of ______ of such Shares and a corresponding reduction in the total number of Shares available for further exercise from __________ Shares to _____________ Shares.
 
 
3.           Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:
 
 
 
(Name)
   
 
 
 
(Address)
   
 
 
4.           The undersigned hereby represents and warrants that the aforesaid shares of Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof.
 


 
 
     (Signature)
   
  Title: ___________________________________________________________
 
 

 
(Date)
  
 
 

 
17
 


 
 
EXHIBIT B

FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________________________________ the right represented by the attached Warrant to purchase ____________ shares of the Common Stock of Integrated Healthcare Holdings, Inc. (the “Company”), to which the attached Warrant relates, and appoints ______________ as their true and lawful attorney in fact to transfer such right on the books of the Company, with full power of substitution in the premises.
 
Dated: ____________________
 
 
 
 
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
 
 
 
(Address)
 
 
 
Signed in the presence of:
 

 

 

 

 

 

 
18
 

EX-99.6 7 ihhi_8k-ex9906.htm SECOND AMENDMENT TO AMENDED AND RESTATED BUILDING LEASE ihhi_8k-ex9906.htm  
Exhibit 99.6
 
 
 
SECOND AMENDMENT TO AMENDED AND RESTATED
TRIPLE NET HOSPITAL BUILDING LEASE
 
THIS SECOND AMENDMENT TO AMENDED AND RESTATED TRIPLE NET HOSPITAL BUILDING LEASE (“Amendment”) is entered into as of this 13th day of April, 2010, between Pacific Coast Holdings Investment, LLC, a California limited liability company (“Landlord”), and Integrated Healthcare Holdings, Inc., a Nevada corporation (“Tenant”).
 
RECITALS
 
A.          Landlord and Tenant are parties to an Amended and Restated Triple Net Hospital Building Lease dated October 1, 2007 (the “Original Amended and Restated Lease”), which amended and restated that certain Triple Net Hospital and Medical Office Building Lease dated March 3, 2005, as amended by Amendment No. 1 to Triple Net Hospital and Medical Office Building Lease dated as of March 8, 2005.  The Original Amended and Restated Lease was amended on March 27, 2009 (the “March 2009 Amendment”) (the Original Amended and Restated Lease, together with the March 2009 Amendment, shall be referred to herein as the “Lease”).
 
B.           Concurrently herewith, KPC Resolution Company, LLC, a California limited liability company (“KPC”) is selling certain credit facilities to SPCP Group IV, LLC, a Delaware limited liability company, and SPCP Group, LLC, a Delaware limited liability company, (collectively, “SPCP”), wherein Tenant is the borrower.  Medical Provider Financial Corporation I, a Nevada corporation, Medical Provider Financial Corporation II, a Nevada corporation (“MedCap II”), and Medical Financial Corporation III, a Nevada corporation, were the initial lenders under such credit facilities.  The aforementioned credit facilities are referred to herein as the “Credit Facilities”.
 
C.          As part of the Credit Facilities, Tenant, WMC-SA, Inc., a California corporation, WMC-A, Inc., a California corporation, Chapman Medical Center, Inc., a California corporation, and Coastal Communities Hospital, Inc., a California corporation, executed that certain $45,000,000 Term Note (the “Real Estate Loan”) dated October 9, 2007, originally in favor of MedCap II.  The term Real Estate Loan used in this Amendment shall replace such term as used in the Original Amended and Restated Lease.
 
D.          In connection with the sale of the Credit Facilities to SPCP, Tenant, Landlord, and certain other credit parties are entering into an Omnibus Credit Agreement Amendment (the “Omnibus Amendment”) and related documents (collectively, the “Omnibus Amendment Documents”), which provides that the interest rate on the Credit Facilities, including the Real Estate Loan, shall be fourteen and one-half percent (14½ %) per annum until the maturity date of the Real Estate Loan, as modified by the Omnibus Amendment Documents.
 
E.           Landlord and Tenant desire to memorialize the rent to be paid under the Lease in light of the Omnibus Amendment Documents.
 
F.           All terms not otherwise defined in this Amendment shall have the same meaning as set forth in the Lease.

 
-1-
 

 
NOW THEREFORE, the parties hereto agree as follows:
 
1.           Effective May 1, 2010, Section 2.1(a) of the Original Amended and Restated Lease and Section 1 of the March 2009 Amendment shall be deleted in their entirety and the following inserted in place of Section 2.1(a) of the Lease:
 
“(a)           The annual “Base Rent” shall be Seven Million Three Hundred Twenty-Eight Thousand One Hundred Twenty-Five and No/100 Dollars ($7,328,125.00), payable in equal monthly installments of Six Hundred Ten Thousand Six Hundred Seventy-Seven and 08/100 Dollars ($610,677.08); provided, however, should Landlord refinance the Real Estate Loan, the annual Base Rent shall increase to Eight Million Three Hundred Thousand and No/100 Dollars ($8,300,000.00), payable in equal monthly installments of Six Hundred Ninety-One Thousand Six Hundred Sixty-Six and 67 /100 ($691,666.67).
 
2.           Tenant acknowledges that it has not paid rent due under the Lease since October 1, 2008.  Tenant agrees that upon receipt of its AB 1383 provider fee funds, subject to first making any payments due pursuant to Section 2.03(b) of the Omnibus Amendment, Tenant shall pay from its AB 1383 provider fee funds all unpaid rent due under the Lease for the period from November 1, 2008 through April 30, 2010; provided however, all such unpaid rent due under the Lease must be paid no later than December 1, 2010.
 
3.           Paragraph 2 of the March 2009 Amendment is hereby deleted in its entirety.
 
4.           Landlord and Tenant acknowledge that there are two leases covering the property described in the Lease:  (i) the Lease, and (ii) a second lease identical to the Original Amended and Restated Lease dated September 1, 2007 (the “2007 Lease”).  Landlord and Tenant acknowledge and agree that the 2007 Lease was executed in error and is void ab initio.  In addition, the parties agree that the reference to the 2007 Lease in the March 2009 Amendment should have been, and is hereby changed to be, the Original Amended and Restated Lease.
 
5.           Except as specifically set forth in this Amendment, the terms of the Lease shall remain unchanged and continue in full force and effect.
 
6.           This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
-2-
 

 
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.
 
LANDLORD
 
PACIFIC COAST HOLDINGS INVESTMENT, LLC,
a California limited liability company,


By:  /s/ Kali P. Chaudhuri, M.D.                                                                
Name:  Kali P. Chaudhuri, M.D.
Title:  Co-Manager

By:  /s/ Jacob Sweidan, M.D.                                                      
Name:  Jacob Sweidan, M.D.
Title:  Co-Manager

 
TENANT
 
INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation

By: /s/ Kenneth K. Westbrook                                                      
Name: Kenneth K. Westbrook
Title:  Chief Executive Officer


 
-3-
 

 EX-99.7 8 ihhi_8k-ex9907.htm RELEASE ihhi_8k-ex9907.htm  
Exhibit 99.7
 

RELEASE

This RELEASE (the “Agreement”) is made and entered into this April 13, 2010 by and between each of INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, WMC-A, INC., a California corporation, WMC-SA, INC., a California corporation, CHAPMAN MEDICAL CENTER, INC., a California corporation, and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation (individually, a “Borrower” and together, the “Borrowers”), on the one hand, and Thomas A. Seaman, Receiver ("Receiver"), appointed by the United States District Court for the Central District of California, Southern Division on behalf of each of MEDICAL CAPITAL CORPORATION, a Nevada corporation, MEDICAL CAPITAL HOLDINGS, INC., a Nevada corporation, MEDICAL PROVIDER FINANCIAL CORPORATION I, a Nevada corporation (“MPFC I”), MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation (“MPFC II”), MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation (“MPFC III”), MEDICAL PROVIDER FINANCIAL CORPORATION IV, a Nevada corporation (“MPFC IV”) and MEDICAL PROVIDER FUNDING CORPORATION V, a Nevada corporation (“MPFC V”, and together with MPFC I, MPFC II, MPFC III and MPFC IV, collectively, "MPFC") (individually, a “Lender” and together, the “Lenders”), on the other hand.
 
BACKGROUND

 
A.         The Borrowers and MPFC I are parties to that certain $50 Million Revolving Credit Agreement, dated October 9, 2007 (as amended or otherwise modified to date, the “$50 Million Agreement”).  The $50 Million Agreement and the related loan and loan documents may have been assigned to MPFC V and further collaterally assigned to Wells Fargo Bank, N.A.  The Borrowers and MPFC II are parties to that certain $80 Million Credit Agreement, dated October 9, 2007 (as amended or otherwise modified to date, the “$80 Million Agreement”).  The Borrowers and MPFC III are parties to that certain $10.7 Million Revolving Credit Agreement, dated October 9, 2007 (as amended or otherwise modified to date, the “$10.7 Million Agreement”).  The $10.7 Million Agreement and the related loan and loan documents may have been assigned to MPFC IV and further collaterally assigned to The Bank of New York Mellon (formerly known as The Bank of New York).
 
B.         The obligations of the Borrowers under the $50 Million Agreement, $80 Million Agreement and $10.7 Million Agreement are evidenced by those certain notes, dated October 9, 2007, with such outstanding balances as are set forth on Exhibit A to this Agreement (collectively, the “Notes”).
 
C.         As security for the obligations under the $50 Million Agreement, $80 Million Agreement and $10.7 Million Agreement, the Borrowers have entered into those certain loan documents, dated October 9, 2007, pursuant to which the Borrowers granted to the applicable Lenders liens and security interests in certain collateral, all as set forth on Exhibit B to this Agreement (collectively, the “Loan Documents”).

 
-1-
 

 
D.         The $50 Million Agreement, $80 Million Agreement and $10.7 Million Agreement, together with the Notes and Loan Documents described above, are collectively referred to herein as the “Credit Facilities”.
 
E.         The Borrowers allege a credit balance of approximately $4,903,037 under the $50 Million Agreement (the “Credit Balance”).  Lenders have alleged a default by the Borrowers under all of the Credit Facilities and the Borrowers have asserted certain claims against the Lenders in connection with the Credit Facilities and the alleged Credit Balance.
 
F.         KPC Resolution Company, LLC, a California limited liability company (“Purchaser”), an entity wholly owned by Dr. Kali Chaudhuri has entered into a Loan Purchase and Sale Agreement with the Lenders, dated January 13, 2010, under which it will purchase and the Lenders will sell to KPC Resolution Company the entire lender's interest in all of the Credit Facilities and outstanding warrants to purchase shares of Integrated Healthcare Holdings, Inc. held by Lenders and concurrently terminate any collateral or other interests assigned to third party lenders (the “Purchase Agreement”).
 
G.         Pursuant to that certain Preliminary Injunction and Order Appointing a Permanent Receiver (the "Order") entered on August 17, 2009 by the Court in Case No. SACV 09-818 DOC (RNBx) (the "Case"), Receiver was appointed receiver of MEDICAL CAPITAL CORPORATION, a Nevada corporation and certain of its affiliated entities.

NOW, THEREFORE, incorporating the Background section herein, and in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, each of the Lenders and the Borrowers agree as follows:

AGREEMENT

 
1.           Release by Borrowers.
 
(a)           Effective immediately following the completion of the purchase and sale of the Credit Facilities to Purchaser under the Purchase Agreement, each Borrower, on behalf of itself, and any person or entity claiming by or through such Borrower (collectively, the “Borrower Releasors”), hereby unconditionally remises, releases, and forever discharges each Lender and its respective past and present officers, directors, shareholders, agents, employees, parent corporations, subsidiaries, affiliates, trustees, administrators, attorneys, predecessors, successors and assigns, including without limitation the Receiver, and the heirs, executors, administrators, and successors and assigns of any such person or entity, as releasees (collectively, the “Lender Releasees”), of and from any and all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, promises, warranties, guaranties, representations, liens, judgments, claims, counterclaims, crossclaims, defenses, and/or demands whatsoever, including claims for contribution and/or indemnity, whether now known or unknown, past or present, asserted or unasserted, contingent or liquidated, at law or in equity, or resulting from any assignment, if any, which any of the Borrower Releasors ever had, now have, or may have against any of the Lender Releasees, for or by reason of any cause, matter, or thing whatsoever, whether direct or indirect, known or unknown, foreseen or unforeseen, arising from the beginning of time to the date hereof, relating to or arising under any of the Credit Facilities, the Case or the Property (collectively, the “Borrower Claims”), including, without limitation, any claims arising with respect to MPFC's alleged failure to fund advances of the $50,000,000 Loan and MPFC's alleged "oversweeping" of Borrowers' collections of Borrowers' accounts receivable.  Each of the Borrowers hereby expressly waives the provisions of Section 1542 of the California Civil Code in connection with the matters which are the subject of the foregoing waivers and releases, which provides:

 
-2-
 

 
"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."
 
and all similar provisions or rules of law.  Each of the Borrowers elects to and does assume all risk for the Borrower Claims heretofore and hereafter arising, whether now known or unknown by such party.
 
(b)           Each Borrower represents and warrants that it has not assigned, pledged, hypothecated, and/or otherwise divested itself or encumbered all or any part of the Borrower Claims being released hereby and that it hereby agrees to indemnify and hold harmless any and all of Lender Releasees against whom any Borrower Claim so assigned, pledged, hypothecated, divested, or encumbered is asserted.  Each Borrower covenants and agrees never to commence, voluntarily aid in any way, foment, prosecute, or cause to be commenced or prosecuted against the Lender Releasees any action or other proceeding based on any of the Borrower Claims, which may have arisen from the beginning of time to the date hereof, relating to or arising from the lending or any other relationship between Lender and Borrowers under the Credit Facilities.
 
2.           Limited Release by Lenders.
 
(a)           Effective immediately following the completion of the sale of the Credit Facilities to Purchaser under the Purchase Agreement, each Lender, on behalf of itself, and any person or entity claiming by or through such Lender, including the Receiver (collectively, the “Lender Releasors”), hereby releases, covenants not to sue, and forever discharges each Borrower and its respective past and present officers, directors, shareholders, agents, employees, parent corporations, subsidiaries, affiliates, trustees, administrators, attorneys, predecessors, successors and assigns, and the heirs, executors, administrators, and successors and assigns of any such person or entity, as releasees (the "Borrower Releasees"), from rights, claims, cross-claims, counter-claims, demands, liabilities, obligations, warranties, guaranties, representations, liens, judgments, actions and causes of action which any of the Lender Releasors ever had, now have, or may ever have, against any of the Borrower Releasees that arise solely in connection with (i) any obligation to pay principal, interest on such principal, fees, costs, penalties, charges, reimbursements or guaranties, whether as obligor or guarantor, under any of the Loan Documents and (ii) any difference between the amounts due and owing from Borrowers to Lenders under the Loan Documents and the purchase price payable to Lenders by Purchaser under the Purchase Agreement (collectively, the “Lender Claims”); provided, however, that, without limitation of any other claims that the Lender Releasors may have against Borrower Releasees, the Lender Releasors are not releasing the Borrower Releasees from any indemnity obligations under the Loan Documents or to the extent any Borrower Releasees committed fraud, misrepresentation, concealment of material fact, any torts or any criminal activity in connection with the Credit Facilities.

 
-3-
 

 
(b)           Other than pursuant to the Purchase Agreement, each Lender represents and warrants that it has not assigned, pledged, hypothecated, and/or otherwise divested itself or encumbered all or any part of the Lender Claims being released hereby.  Each Lender covenants and agrees never to commence, voluntarily aid, prosecute, or cause to be commenced or prosecuted against the Borrower Releasees any action or other proceeding based on any of the Lender Claims, which may have arisen from the beginning of time to the date hereof.
 
3.           Conditions Precedent to Enforceability of Amendment.
 
The effectiveness of this Agreement shall be conditioned upon and subject to each of the following:
 
(a)           Purchaser shall have consummated his purchase of all of the Credit Facilities under the Purchase Agreement;
 
(b)           The Borrowers shall have executed and delivered this Agreement to the Lenders; and
 
(c)           The Receiver shall have executed and delivered this Agreement to the Borrowers on behalf of the Lenders, and as of the date of such execution and delivery the Receiver shall have all requisite power and authority to enter into this Agreement on behalf of each of the Lenders and bind each of the Lenders to all provisions of this Agreement.
 
4.           Successors and Assigns.
 
This Agreement (i) shall be binding on each of the Borrowers and the Lenders and on their respective nominees, successors, and assigns, and (ii) shall inure to the benefit of the Borrowers and the Lenders and to their respective nominees, successors, and assigns.
 
5.           Governing Law.
 
This Agreement shall be construed in accordance with and governed by the internal laws of the State of California without reference to conflict of laws principles and irrespective of the governing law clauses in the Credit Facilities.
 
6.           Non-Severability of Provisions.
 
The provisions of this Agreement must be read as a whole and are not severable and/or separately enforceable by any party hereto.  If any provision of this Agreement is held to be inoperative, unenforceable, void or invalid, then this Agreement shall be considered void ab initio and of no force or effect.

 
-4-
 

 
7.           Integration.
 
This Agreement and the documents referred to, comprising, or relating to this Agreement constitute the sole agreement of the parties with respect to the subject matter hereof and thereof and supersede all oral negotiations and prior writings with respect to the subject matter hereof and thereof.
 
8.           References to Credit Facilities
 
The Credit Facilities and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Facilities, as amended or modified hereby, are hereby amended and modified so that any reference to the Credit Facilities shall mean a reference to the Credit Facilities, as amended or modified hereby.
 
9.           No Third-Party Beneficiaries.
 
Notwithstanding anything to the contrary contained herein, no provision of this Agreement or any other document executed in connection herewith is intended to benefit any party other than the signatories hereto nor shall any such provision be enforceable by any other party.
 
10.           Headings.
 
The headings and underscoring of articles, sections, and clauses have been included herein for convenience only and shall not be considered in interpreting this Agreement.
 
11.           Amendment and Waiver.
 
No amendment of this Agreement and no waiver, discharge, or termination of any one or more of the provisions hereof, shall be effective unless set forth in writing and signed by all of the parties hereto.
 
12.           Counterparts.
 
This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.  This Agreement shall be deemed to have been executed and delivered when the Secured Party has received counterparts hereof executed by all parties listed on the signature pages below.  Counterpart signature pages received by telecopy or electronically by PDF attachment shall be deemed original signature pages.
 




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
-5-
 


IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be executed individually, or by their duly authorized officers or members on the date first written above.

 
BORROWERS:
INTEGRATED HEALTHCARE
HOLDINGS, INC., a Nevada corporation,
 
By:           /s/ Kenneth K. Westbrook                                          
Kenneth K. Westbrook, President
 
WMC-A, INC., a California corporation,
 
By:           /s/ Kenneth K. Westbrook                                          
Kenneth K. Westbrook, President
WMC-SA, INC., a California corporation,
 
By:           /s/ Kenneth K. Westbrook                                          
Kenneth K. Westbrook, President
COASTAL COMMUNITIES
HOSPITAL, INC., a California corporation,
 
By:           /s/ Kenneth K. Westbrook                                          
Kenneth K. Westbrook, President
CHAPMAN MEDICAL CENTER, INC.,
a California corporation,
 
By:           /s/ Kenneth K. Westbrook                                          
Kenneth K. Westbrook, President
  
 


 
-6-
 

 

 
LENDERS:
           /s/ Thomas A. Seaman                                                      
Thomas A. Seaman, as Receiver, appointed by the United States District Court for the Central District of California, Southern Division for the Lenders
  
 




 
-7-
 


EXHIBIT A
Notes and Outstanding Balances
 
Principal balances outstanding as of April 13, 2010
 
$10.7 Million Credit Agreement (convertible note)
   $ 5,968,268  
$80.0 Million Credit Agreement (secured term note)
     45,000,000  
$80.0 Million Credit Agreement (secured non-revolving line of credit)
     29,999,633  
$50.0 Million Credit Agreement (credit balance)
     ( 4,903,037 ) 1


 
1      This amount is net of credits given against accrued interest under all of the above loans

 
-8-
 

EXHIBIT B
Loan Documents
 

 

 
 
 
 
 
 
 
 
 
 
 

 
-9-
 

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