-----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, EWC1IribMX6Y9+gSZ5W5+CqFm9lkPVcYKoIfEj9UErpxfMxs3fgipWn4hwyZ2b29 C2HFAdrjMsm1ZIt71bNZiw== 0001144204-05-019668.txt : 20050622 0001144204-05-019668.hdr.sgml : 20050622 20050622170840 ACCESSION NUMBER: 0001144204-05-019668 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050616 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Triggering Events That Accelerate or Increase a Direct Financial Obligation under an Off-Balance Sheet Arrangement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050622 DATE AS OF CHANGE: 20050622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Integrated Healthcare Holdings Inc CENTRAL INDEX KEY: 0001051488 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 870412182 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23511 FILM NUMBER: 05910723 BUSINESS ADDRESS: STREET 1: 695 TOWN CENTER DRIVE STREET 2: SUITE 260 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 714-434-9191 MAIL ADDRESS: STREET 1: 695 TOWN CENTER DRIVE STREET 2: SUITE 260 CITY: COSTA MESA STATE: CA ZIP: 92626 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 v020013_8k.txt ================================================================================ United States Securities and Exchange Commission Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): June 16, 2005 Integrated Healthcare Holdings, Inc. (Exact Name of Registrant as Specified in Charter) Nevada 0-23511 87-0412182 (State or Other Jurisdiction of (Commission File Number) (IRS Employer Incorporation) No.) Identification 695 Town Center Drive, Suite 260, Costa Mesa, California 92626 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (714) 434-9191 -------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 1.01. Entry into a Material Definitive Agreement. On June 16, 2005, Integrated Healthcare Holdings, Inc. (the "Company") entered into the following material agreements: o First Amendment to Stock Purchase Agreement, dated as of June 1, 2005, by and among the Company, Orange County Physicians Investment Network ("OCPIN"), Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, and Ganesha Realty LLC (the "First Amendment"); o Escrow Agreement, dated as of June 1, 2005, by and among IHHI, OCPIN and City National Bank (the "Escrow Amendment"); and o Agreement to Forbear, dated as of June 1, 2005, by and among the Company, certain of its subsidiaries, OCPIN, West Coast Holdings, LLC, and Medical Provider Financial Corporation II (the "Forbearance Agreement"). The First Amendment amends the Stock Purchase Agreement, dated January 28, 2005, between the Company and OCPIN (the "SPA"), pursuant to which OCPIN agreed to invest $30,000,000 in the Company for an aggregate of 108,000,000 shares of common stock of the Company. As previously disclosed, OCPIN has, to date, funded $10,000,000 of its obligation under the SPA. The following are material terms contained in the First Amendment and the Escrow Agreement: o A total of 57,250,000 shares of Company common stock previously issued to OCPIN are placed in an escrow account with City National Bank. OCPIN will have until September 1, 2005 to make aggregate payments of up to approximately $15,000,000 in monthly installments into the escrow account. Such portion of the escrowed shares which are fully paid will be returned to OCPIN and the balance will be transferred back to the Company. If there is a shortfall, the Company will use its reasonable best efforts to sell equity to new investors to cover the shortfall; o OCPIN will reimburse the Company for certain of its additional debt financing costs incurred since March 8, 2005; o The Company will work to complete a new borrowing transaction with Capital Source Finance LLC; and o Upon receipt of at least $5,000,000 of new capital under the First Amendment, the Company will call a shareholders meeting to re-elect directors. The nominees for the Board will consist of two current directors, two members of OCPIN (Ajay Meka, M.D. and Syed Naqvi, M.D.), two independent directors unaffiliated with IHHI or OCPIN, and Anil V. Shah, M.D. As previously announced, on or about May 9, 2005, the Company received a Notice of Default from Medical Provider Financial Corporation II ("MedCap"). MedCap is the lender to the Company under a $50 million acquisition loan and a working capital non-revolving line of credit of up to $30 million under a Credit Agreement, dated as of March 3, 2005 (the "Credit Agreement"). The Forbearance Agreement relates to the Notice of Default and contains the following material terms: 1 o MedCap agrees for 100 days (as long as another default does not occur) to forbear from (i) recording Notices of Default, (ii) filing a judicial foreclosure lawsuit against the Company, OCPIN and West Coast Holdings, LLC, and (iii) filing lawsuits against the Company, OCPIN and West Coast Holdings, LLC; o So long as the Events of Default referenced in the Forbearance Agreement remain uncured and are continuing, the interest rate applicable to the outstanding loans with MedCap will remain at the Default Rate of interest, as defined in the Credit Agreement; o The Company's Line of Credit facility with MedCap is suspended with respect to additional advances; and o During the forbearance period, OCPIN and other investors will invest not less than approximately $15,000,000 in new equity capital in the Company. Larry Anderson, President of Integrated Healthcare Holdings, stated in connection with these settlement agreements, "We are very pleased to have been able to resolve this dispute with OCPIN and our lender in a manner that protects the equity position of the Company." The President of MedCap, Joseph J. Lampariello, stated, "I am very pleased to see that the parties have been able to resolve this dispute without need for any formal proceedings." The forms of definitive agreements described above are furnished as exhibits to this Report. The preceding descriptions of these agreements are summary in nature and do not purport to be complete. This summary should be read in connection with the exhibits hereto. Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement. The disclosures contained in Item 1.01 of this Report are hereby incorporated under this item by reference. 2 Item 9.01 Financial Statements and Exhibits. (c) Exhibits. Exhibit Number Description 99.1 First Amendment to Stock Purchase Agreement, dated as of June 1, 2005, by and among the Company, OCPIN, Pacific Coast Holdings Investment, LLC, West Coast Holdings, LLC, and Ganesha Realty LLC 99.2 Escrow Agreement, dated as of June 1, 2005, by and among the Company, OCPIN and City National Bank 99.3 Agreement to Forbear, dated as of June 1, 2005, by and among the Company, certain of its subsidiaries, OCPIN, West Coast Holdings, LLC, and Medical Provider Financial Corporation II 99.4 Press release dated June 22, 2005 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Integrated Healthcare Holdings, Inc. By: /s/ Larry Anderson ------------------------------------ Name: Larry Anderson Title: President Date: June 22, 2005 3 EX-99.1 2 v020013_ex99-1.txt FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT This First Amendment to Stock Purchase Agreement (this "Amendment") is entered into as of June 1, 2005, by and among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OCPIN" or the "Purchaser"), PACIFIC COAST HOLDINGS INVESTMENT, LLC, a California limited liability company ("PCHI"), WEST COAST HOLDINGS, LLC ("WCH"), a California limited liability company, and GANESHA REALTY LLC, a California limited liability company ("Ganesha"), and amends that certain Stock Purchase Agreement entered into by the parties dated January 28, 2005 (the "Agreement"). RECITALS A. IHHI and OCPIN are each parties to the Agreement, which relates to, among other things, the purchase of 108,000,000 shares of common stock of IHHI in exchange for an investment of $30,000,000 and other consideration. B. To date (i) OCPIN has satisfied its obligations under Sections 1.2(a)-(d) of the Agreement and (ii) IHHI has satisfied its obligations under Sections 1.3(a)-(b) of the Agreement. C. By letter agreement dated March 1, 2005, the parties agreed, among other things, that IHHI will extend the date of delivery of funds due from OCPIN under Section 1.2(e) of the Agreement until March 31, 2005. However such funds were not delivered by such date. D. The parties now desire to amend the terms of the Agreement to modify the provisions relating to the delivery of funds to IHHI and delivery of Shares to OCPIN, and to enter into other agreements as set forth herein. E. Concurrently with the execution of this Amendment, the parties will enter into and deliver (i) an Escrow Agreement substantially in the form attached hereto as Exhibit A (the "Escrow Agreement"), fully executed by IHHI and OCPIN but subject to such changes as may be reasonably requested by the Escrow Agent named therein, and (ii) an Agreement to Forbear substantially in the form attached hereto as Exhibit B. AGREEMENT In consideration of the foregoing premises, the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. Unless otherwise set forth herein, capitalized terms or matters of construction deemed or established in the Agreement, as amended hereby, shall be applied herein as defined or established in the Agreement. 1 2. Escrow of Shares. (a) OCPIN will make provision for delivery to the escrow agent named in the Escrow Agreement (the "Escrow Agent") of 57,250,000 Shares (the "Escrowed Shares") accompanied by stock powers executed in blank for such Escrowed Shares. Upon execution of this Amendment, OPCIN will deliver to IHHI's counsel, Morrison & Foerster LLP, in trust for delivery to IHHI's transfer agent, such stock powers and a stock certificate for at least the number of Escrowed Shares, along with irrevocable instructions to the transfer agent to divide such certificate into (i) one certificate for the amount of the Escrowed Shares, which shall be delivered by the transfer agent to the Escrow Agent along with the stock powers, and (ii) another certificate for the balance of the shares, to be returned to OPCIN. (b) The Escrowed Shares will be held and thereafter released by the Escrow Agent pursuant to and in accordance with the terms and conditions of the Escrow Agreement. Following the deposit of the Escrowed Shares, IHHI will not thereafter interfere with or challenge in any manner OCPIN's or Hari Lal's ownership of an aggregate of 45,350,000 shares of IHHI's common stock. (c) If any Escrowed Shares are returned to treasury of IHHI under the terms of the Escrow Agreement, such Escrowed Shares may be sold by IHHI and/or cancelled by IHHI. If IHHI intends to sell any Escrowed Shares that are returned to treasury within 12 months of the date hereof, IHHI will first provide written notice to OCPIN of such proposed sale, which will have a right of first refusal to purchase such shares on the same terms as those stated in the proposal within five business days of receipt of such written notice. The foregoing right shall only apply to sales of Escrowed Shares for cash and shall not include Escrowed Shares issued or sold pursuant to (i) any stock or option plan duly adopted by IHHI or (ii) mergers, acquisitions or strategic transactions approved by the Board of Directors. In the case of a proposed underwritten public offering of Escrowed Shares, the parties agree that the notice of proposed sale may only contain a range of terms delivered prior to the commencement of marketing activities by the underwriter. 3. Payments by Purchaser. (a) Section 1.2(e) of the Agreement is hereby amended in its entirety to read as follows: "(e) Concurrently with the execution of the First Amendment to this Agreement, IHHI and Purchaser are, pursuant to an Escrow Agreement, establishing an escrow account (the "Escrow Account") and appointing an escrow agent (the "Escrow Agent") to hold Shares and cash deliverable by the parties under this Agreement. Purchaser hereby agrees to deliver to the Escrow Agent, to be held and released in accordance with the terms of the aforementioned Escrow Agreement, wire transfers of immediately available funds totaling $14,809,020 (the "Escrowed Cash"), and further agrees to pay directly to IHHI Financing Costs (subject to Section 1.2(f) hereof), all as set forth below: (i) On or before July 1, 2005, Purchaser shall deliver to the Escrow Agent $5,000,000 minus $190,980; 2 (ii) On or before August 1, 2005, Purchaser shall deliver to the Escrow Agent $5,000,000; (iii) On or before September 1, 2005, Purchaser shall deliver to the Escrow Agent $5,000,000; and (iv) OCPIN agrees to pay directly to IHHI, on each of the dates specified in paragraphs (i)-(iii) above, IHHI's direct and indirect financing costs and expenses incurred as a result of Purchaser's failure to timely fund the balance of the Agreement, which the parties agree shall equal the lesser amount of (A) $4,000 per day from and including March 8, 2005, or (B) $5,538 per day from and including March 8, 2005 reduced on a daily basis by such percentage of Purchaser's payments required to be made under Sections 1.2(e)(i)-(iii) which have in fact been made as of such day (such amount, the "Financing Costs"). The Financing Costs shall be paid by OCPIN until the first to occur of the following: (i) completion by IHHI of a borrowing transaction with Capital Source Finance LLC; (ii) September 1, 2005; or (iii) the satisfaction by OCPIN of all of its obligations to pay money under this Section 1.2(e)." (b) A new Section 1.2(f) is hereby added to the Agreement to read in its entirety as follows: "(f) The parties further agree that (i) the payment of IHHI's aggregate Financing Costs through June 1, 2005 under Section 1.2(e)(iv) may be paid to IHHI in the form of cancellation of such proportion of rent (less such proportion of expenses allowed to be deducted under the Triple Net Lease) due from IHHI to PCHI under that certain Triple Net Hospital and Medical Office Building Lease, dated on or about March 7, 2005, as amended (the `Triple Net Lease'), equal to West Cost Holdings' percentage interest in PCHI; and (ii) if OCPIN makes each of its payments of $5,000,000 on time as required under Sections 1.2(e)(i)-(iii), the Financing Costs due to IHHI under Section 1.2(e)(iv) for the period from June 1, 2005 through the date that each such payment is made shall be forgiven and need not be paid to IHHI. Promptly following execution of the First Amendment to this Agreement, IHHI shall pay to Ganesha Realty LLC such proportion of rent (less such proportion of expenses allowed to be deducted under the Triple Net Lease) due from IHHI to PCHI under the Triple Net Lease equal to Ganesha's percentage interest in PCHI." (c) A new Section 1.2(g) is hereby added to the Agreement to read in its entirety as follows: "(g) If the amount of Escrowed Cash is less than $14,809,020 as of September 1, 2005 (such shortfall, the "Deficit"), then IHHI shall, during the ten (10) days following the Last Distribution Date, use its reasonable best efforts to sell such number of Shares, on terms that are reasonable to IHHI, that result in a net amount of cash to IHHI of no less than the Deficit, with such sale to close on the schedule set forth in Section 2.1 3 of the Escrow Agreement. OCPIN acknowledges and agrees that IHHI is not under an affirmative obligation to close such sale of Shares under terms that are not deemed to be reasonable to IHHI, nor will IHHI be subject to liability if it cannot sell such Shares on any reasonable terms." 4. Issuance of Stock to Purchaser. Section 1.3(c) of the Agreement is hereby amended in its entirety to read as follows: "(c) Promptly after September 1, 2005, IHHI shall issue to Purchaser a certificate for additional Shares equal to 5,400,000 Shares (as adjusted for any stock splits, dividends, combinations or the like since the date hereof) multiplied by such percentage of Purchaser's payments required to be made under Sections 1.2(a), (b), (c) and (e)(i)-(iii) which have in fact been made as of such date." 5. Capital Source Funding. (a) During the 45 days following May 20, 2005, IHHI will work expeditiously and in good faith to complete a borrowing transaction with Capital Source Finance LLC ("Capital Source") on terms that are no less favorable to IHHI than the term sheet received from Capital Source dated April 29, 2005. OCPIN shall pay the $50,000 due diligence fee payable to Capital Source, which shall be reimbursed by IHHI if such financing is completed with Capital Source. If a transaction is not completed with Capital Source, IHHI shall work expeditiously and in good faith to complete a borrowing transaction with another lender on terms approved by the Board of Directors but in any case superior to those currently in place with Medical Provider Financial Corporation II. (b) If OCPIN or its members borrow funds from Capital Source to meet OCPIN's obligations to pay $15,000,000 (or a portion thereof) under the Agreement, as amended hereby, such loan (i) will not be secured by IHHI or any of IHHI's assets (other than stock held by OCPIN), be a direct or indirect obligation or guaranty of IHHI, or have an impact on IHHI's balance sheet (as debt or otherwise), and (ii) will not be secured by Pacific Coast Holdings Investment, LLC ("PCHI") or any of PCHI's assets (other than WCH's interest in PCHI), be a direct or indirect obligation or guaranty of PCHI, or have an impact on PCHI's balance sheet (as debt or otherwise). (c) If, within 45 days following May 20, 2005, Capital Source completes the financing necessary to satisfy IHHI's obligations to Medical Provider Financial Corporation II and OCPIN is not otherwise in default on any of its obligations under the Agreement or this Amendment, then IHHI will reduce the third $5,000,000 payment required to be paid by OCPIN under Section 1.2(e)(iii) of the Agreement to $2,500,000. 6. Forbearance under 999 Building Agreement. (a) Reference is made to the "Agreement for Compensation Related to the 999 Medical Office Building" (the "999 Agreement") executed on or about March 3, 2005 by IHHI, PCHI, WCH and Ganesha Realty LLC ("Ganesha"). PCHI and WCH each agree that no compensation shall be payable or accrue to either of them, under Section 4 of the 999 Agreement with respect to and during the 90-day period following the date hereof. Notwithstanding the foregoing, IHHI shall promptly 4 pay and continue to pay to Ganesha all sums otherwise due to PCHI under the 999 Agreement equal to Ganesha's percentage interest in PCHI. (b) IHHI hereby confirms its obligations under the 999 Agreement to transfer title to the 999 Medical Office Building to PCHI and to do so following receipt by IHHI of $5,000,000 pursuant to Section 1.2(e) of the Agreement, provided, however, that if such $5,000,000 is not received by IHHI pursuant to Section 1.2(e), IHHI will not be obligated to transfer 51% of the condominium units comprising the 999 Medical Office Building but will instead transfer 49% of the condominium units directly to Ganesha under the terms and conditions set forth in the 999 Agreement. 7. Shareholders' Meeting. Upon receipt of $5,000,000 under Section 1.2(e) of the Agreement, as amended hereby, IHHI will promptly proceed to call a shareholders meeting to re-elect directors (the "Annual Meeting"). The slate of nominees for the Board at the Annual Meeting will consist of two current directors, two individuals who are members of OCPIN (Ajay Meka, M.D. and Syed Naqvi, M.D., as nominated by OCPIN), two independent directors unaffiliated with IHHI or OCPIN, and Dr. Shah, for a total of seven directors. The two independent director nominees will be selected by the decision of four of the five individuals identified in the preceding sentence other than the independent director nominees. OCPIN agrees (a) to vote all of its shares in favor of such slate at the Annual Meeting, and (b) to refrain from voting to change the size of the Board until the term of the Board elected at the Annual Meeting has ended. After the Annual Meeting, all further elections of Directors shall be pursuant to the Bylaws of IHHI and applicable law. 8. Employment Agreements. OCPIN hereby consents and agrees to a proposed amendment by IHHI of the employment agreements of each of Bruce Mogel, Larry Anderson and James Ligon to provide for 3-year severance payment (instead of 1-year currently provided for), payable in a lump sum at employees request, if any of them are terminated without cause or if they resign for good cause. The severance amount shall be three years' compensation beginning from the date of this Agreement, and shall be reduced by one month for each month employed. However, the severance shall not be reduced to less than 12 months. For the purposes of this Amendment, "good cause" shall mean that OCPIN has requested an executive to engage in an illegal act or violation of any law, rule, regulation or accounting principle applicable to IHHI (each, a "Violation"), that IHHI's counsel or auditors has confirmed that such request is a Violation and OCPIN persists in making the request following receipt of notice of the improper nature of the request. 9. No Retaliation. OCPIN agrees not to retaliate or take any adverse action against Bruce Mogel, Larry Anderson, or James Ligon (the "Managers") in their current capacities as employees, managers or directors of IHHI as a result of the transactions contemplated by this Amendment. OCPIN agrees that, as of the date hereof, there is no known basis to terminate any of the Managers for "cause" under their respective employment agreements, nor shall "cause" exist as a result of or in connection with the transactions contemplated by this Amendment or the Agreement or any of the Managers' respective actions in connection therewith. OCPIN further agrees that there is, as of the date hereof, no known basis to take any adverse action against any of the Managers under their respective employment agreements or otherwise. IHHI agrees not to retaliate or take any adverse action against Dr. Anil V. Shah in his current 5 capacity as employee, manager or chairman of IHHI as a result of the transactions contemplated by this Amendment or the Agreement. 10. Authority. Each of OCPIN, PCHI, WCH and Ganesha, as to themselves, represent and warrant to IHHI that (a) Anil Shah and Ajay Meka are the sole Managing Members of OCPIN authorized to enter into and bind OCPIN under this Amendment, (b) Anil Shah and Kali Chaudhuri are together authorized to enter into and bind PCHI under this Agreement, (c) Anil Shah is authorized to enter into and bind WCH under this Agreement, (d) Kali Chaudhuri is authorized to enter into and bind Ganesha under this Agreement, and (e) all actions on the part of each of them or their respective members for the authorization, execution and delivery of this Amendment and the performance of their respective obligations hereunder has been taken. 11. Amendment of the Agreement. Section 3.2 of the Agreement is hereby amended in its entirety to read as follows: t 6 6 "3.2 Amendment. No part of this Agreement, the First Amendment to this Agreement dated June 1, 2005, or this Section 3.2 may be modified or amended in any respect except by (i) mutual written agreement of the parties and (ii) the written consent of the holders of a majority of the outstanding common stock of the Company other than the Purchaser or any Affiliate of the Purchaser. Any such modification or amendment must be in writing, dated and signed by the parties and attached to this Agreement. For purpose of this paragraph, the term "Affiliate" shall have the meaning in Rule 13e-2 under the Securities and Exchange Act of 1934, as amended." 12. Mutual Release. (a) In consideration of the agreements in this Amendment and in the Agreement, each of IHHI, on the one hand, and OCPIN and WCH, on the other hand (each, a "Releasor"), hereby waives all claims against the other, each of their respective affiliates (other than the waiving party to the extent it is an affiliate of the Releasor) and their respective officers, directors and executives (each, a "Releasee"), and further releases and discharges each Releasee from liability for any and all claims and damages that Releasor may have against them as of the date of this Agreement, whether known or unknown, including, but not limited to, any claims arising out of the Agreement, as amended hereby, or the transactions referenced in the Agreement; provided, however, that nothing herein shall be deemed a waiver or release of Releasor's right to enforce the obligations of any Releasee under the Agreement, as amended hereby, or any other agreement between such parties. (b) Each party hereby expressly waives and relinquishes all rights and benefits under Section 1542 of the California Civil Code, which provides: "Section 1542. General Release - Claim extinguished. A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." 13. Effect of Amendment. Except as expressly provided herein, the Agreement shall remain unchanged and shall continue in full force and effect. 6 14. Counterparts. This Amendment may be signed by the parties in counterparts, which together shall constitute one and the same agreement among the parties. 15. Information Rights. Following the execution of this Amendment, IHHI agrees to share with OCPIN's board of managers (or equivalent body), upon its request, any board packages, monthly budgets, monthly performance data, and other operational data as shall be reasonably requested by such board, provided that each individual member of such board enters into a confidentiality agreement with IHHI prior to receiving such information and such information is not distributed to any person not covered by such confidentiality agreement. [Signature pages to follow] 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.
Integrated Healthcare Holdings, Inc. Orange County Physicians Investment Network, LLC /s/ Larry B. Anderson /s/ Anil Shah - ---------------------------------------------------- ------------------------ Larry B. Anderson, President and Director Anil V. Shah, M.D. Manager /s/ Bruce Mogel - ---------------------------------------------------- Bruce Mogel, Chief Executive Officer and Director /s/ Ajay Meka ------------------------ Ajay Meka, M.D. /s/ James Ligon Manager - ---------------------------------------------------- James T. Ligon, Chief Financial Officer and Director /s/ Anil Shah - -------------------------------------- Anil V. Shah, M.D., as Director (solely with respect to Section 7) Pacific Coast Holdings Investment, LLC West Coast Holdings, LLC /s/ Anil Shah /s/ Anil Shah - ---------------------------- ------------------------ Anil V. Shah, M.D. Anil V. Shah, M.D. Manager Manager
/s/ Kali P. Chaudhuri - ----------------------- Kali P. Chaudhuri, M.D. Manager Ganesha Realty, LLC /s/ Kali P. Chaudhuri Name: Title: 8 EX-99.2 3 v020013_ex99-2.txt EXHIBIT A ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Agreement") is made and entered into effective as of June 1, 2005, by and among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OCPIN"), and City National Bank, national association (the "Escrow Agent"). IHHI and OCPIN are sometimes collectively referred to herein as the "Parties" and individually as a "Party." Upon execution of this Agreement by IHHI and OCPIN, this Agreement shall be binding on each of them, but shall not become effective as to any of its terms outside of this paragraph until this Agreement is also executed by the Escrow Agent. Each of IHHI and OCPIN agree to promptly make such changes to this Agreement as may be reasonably requested by the Escrow Agent, and that this Agreement will thereafter be enforceable against each of them subject to such changes. W I T N E S S E T H: WHEREAS, IHHI and OCPIN have entered into that certain Stock Purchase Agreement, dated as of January 28, 2005, as amended as of June 1, 2005 (as so amended, the "Stock Purchase Agreement"), pursuant to which OCPIN has, among other things, agreed to acquire 108,000,000 shares of common stock, par value $0.001 per share ("Shares"), of IHHI; WHEREAS, pursuant to the Stock Purchase Agreement, IHHI has to date issued certificates in the name of OCPIN or its designee in an aggregate amount of 102,600,000 Shares; WHEREAS, pursuant to the Stock Purchase Agreement and as part of the transactions contemplated thereby, IHHI and OCPIN have agreed to enter into this Agreement and that OCPIN will provide for the deposit with the Escrow Agent (i) upon execution of this Agreement, 57,250,000 Shares (the "Escrowed Shares"), and (ii) up to $14,809,020 in cash (the "Escrowed Cash") on the schedule set forth in the Stock Purchase Agreement. WHEREAS, the Parties desire to specifically set forth their rights and obligations with respect to the Escrowed Shares and Escrowed Cash, and the distribution and release thereof; and WHEREAS, the execution and delivery of this Agreement is intended to be executed concurrently with the amendment to the Stock Purchase Agreement of even date hereof. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 1 1. ESTABLISHMENT OF ESCROW. 1.1 DEPOSIT OF ESCROWED SHARES AND ESCROWED CASH. (a) Concurrently with the execution of this Agreement, OCPIN will make provision for delivery to the Escrow Agent of stock certificates (the "Stock Certificates") representing the Escrowed Shares, accompanied by stock powers duly executed in blank (the "Stock Powers") with respect to such Stock Certificates. (b) From time to time through September 1, 2005, OCPIN will deliver to the Escrow Agent the Escrowed Cash in the form of wire transfers of immediately available funds. (c) The Escrowed Shares and the Escrowed Cash shall be held by the Escrow Agent in the Escrow Account (as defined below) in accordance with the provisions of this Agreement and shall not be subject to any effective lien, attachment, trustee process or any other judicial process of any creditor of any party hereto or OCPIN which has not otherwise been waived. 1.2 ESCROW ACCOUNT. The Escrow Agent agrees to hold the Escrowed Shares and Escrowed Cash in one or more separate and distinct accounts (collectively, the "Escrow Account"), subject to the terms and conditions of this Agreement. The Escrowed Cash shall bear interest at the rate applicable to interest-bearing money market accounts of the Escrow Agent, which interest shall accrue in the Escrow Account. The Escrow Agent shall not distribute or release any of the Escrowed Shares, Escrowed Cash or accrued interest except in accordance with the express terms and conditions of this Agreement. 1.3 VOTING OF ESCROWED SHARES During the pendency of this Agreement, the Escrowed Shares which have not been released pursuant to Section 2.1 shall not be voted by OCPIN or any of its affiliates, and no proxy will be granted as to any Escrowed Shares. Neither OCPIN nor IHHI will exercise any rights in the Escrowed Shares until such time as they are released according to the terms of this Agreement. 1.4 DIVIDENDS, ETC. Any cash, securities or other property distributable (whether by way of dividend, stock split or otherwise) in respect of or in exchange for any Escrowed Shares shall not be distributed to OCPIN, but rather shall be deposited with the Escrow Agent to be held in the Escrow Account. At the time any Escrowed Shares are required to be released from the Escrow Account to the Parties pursuant to this Escrow Agreement, any cash, securities or other property previously distributed in respect of or in exchange for such Escrowed Shares shall be released from the Escrow Account to such Person. 2 1.5 TRANSFERABILITY. The interests of OCPIN in the Escrow Account and in the Escrowed Shares shall not be assignable or transferable, other than by operation of law. No transfer of any of such interests by operation of law shall be recognized or given effect until IHHI shall have received written notice of such transfer. 1.6 FRACTIONAL SHARES. No fractional Shares shall be retained in or released from the Escrow Account pursuant to this Escrow Agreement. In connection with any release of Escrowed Shares from the Escrow Account, any Person who would otherwise be entitled to receive a fraction of a Share (after aggregating all fractional Shares issuable to OCPIN) shall be paid by IHHI in cash, the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the average closing price for the five trading days immediately preceding the date of such release, and such fraction of a share shall be returned to IHHI. 1.7 SCOPE OF POWERS, DUTIES AND OBLIGATIONS OF THE ESCROW AGENT. Subject to the Parties' directions, the Escrow Agent has whatever powers are conferred by law and which are required to discharge its obligations and exercise its rights under this Escrow Agreement, including but not limited to the powers specified in the Section 1.9 below, and the powers and authority granted to the Escrow Agent under other provisions of this Escrow Agreement. The Escrow Agent shall have no duties or obligations except those specifically set forth in this Agreement. 1.8 POWERS EXERCISABLE BY THE ESCROW AGENT, SUBJECT TO THIS AGREEMENT. The Escrow Agent is authorized and empowered to exercise the following powers, subject to the limitations contained in this Agreement: (a) If required by the Escrow Agent's procedures for handling the Escrowed Shares, to utilize registered securities depositories to hold assets of the Escrow Account, provided however that the Escrow Agent shall not be relieved of any fiduciary responsibility with respect to the assets so held. (b) To employ agents, including public accountants and legal counsel (which may be counsel for Parties), as it shall determine appropriate, and to pay their reasonable expenses and compensation from the Escrow Account; (c) To rely on Parties to defend and litigate, or settle, at their expense, any suit brought against the Escrow Account or any order sought to be satisfied out of the Escrow Account, without duty on the Escrow Agent beyond forwarding related papers to Parties and complying with any final order to the extent of the Escrow Account; (d) To withhold from taking any action until it receives proper written notice of an occurrence of an event affecting the Escrow Account; 3 (e) To treat as genuine, sufficient and correct, in form, execution and validity, and as the document it purports to be, and from the party it purports to be from, any notice, instruction, letter, paper, telex or other document purported to be furnished to Escrow Agent by Parties and believed by Escrow Agent to be both genuine and to have been transmitted by the proper party or parties, and Escrow Agent shall have no liability with respect to any action taken or foregone by Escrow Agent in good faith in reliance on such document; (f) To be fully released and discharged from any obligation to perform any further duties imposed upon it with respect to this Escrow following its resignation or removal and the appointment of a successor or the deposit of the Escrow Account under Section 3.3 below; and (g) To be free from any liabilities or change in duties, other than as may be specifically described elsewhere herein, for the action or inaction of a party to this Escrow Agreement, or any other party, or the occurrence or non-occurrence of an event outside of this Escrow. 1.9 NOTIFICATION OF RIGHTS REGARDING SECURITIES. Following receipt of information, the Escrow Agent will notify the Parties of any conversion, redemption, exchange, subscription or other right relating to any securities purchased hereunder of which notice was given after the acquisition of such securities by the Escrow Agent, and the Escrow Agent shall have no obligation to exercise any such right unless it is instructed by the Parties or their Representative in writing to exercise such right, within a reasonable time prior to the expiration of such right. 1.10 SHAREHOLDER COMMUNICATIONS. The Parties directs the Escrow Agent not to disclose to any company requesting shareholder information the name and the address of the Parties or the share position of the securities of the inquiring company in the Escrow Fund. 1.11 ELECTRONIC AFFIRMATION. Notwithstanding any other provision of this Agreement, the Escrow Agent may settle securities trades effected by the Parties through a securities depository that utilizes an institutional delivery system, in which event the Escrow Agent may deliver or receive securities in accordance with appropriate trade reports or statements given to the Escrow Agent by such depository without having received direct communications or instructions from the Parties. 1.12 ADDITIONAL INSTRUCTIONS. In any matter under this Escrow Agreement in which the Escrow Agent is permitted or required to act upon instructions, the Escrow Agent, where it deems necessary, may request further instructions from the person or entity giving the original instructions, or from the Parties, as the case may be, and may defer any and all action pending receipt thereof. 4 2. RELEASE OF ESCROWED SHARES AND ESCROWED CASH. The Escrowed Shares and Escrowed Cash shall only be distributed or released as set forth in this Article 2. 2.1 RELEASE DATES AND TERMS. (a) The following schedule sets forth OCPIN's agreement to pay Escrowed Cash to the Escrow Agent on July 1, 2005, August 1, 2005 and September 1, 2005 (each, a "Distribution Date"). (i) On or before July 1, 2005, Purchaser shall deliver to the Escrow Agent $4,809,020; (ii) On or before August 1, 2005, Purchaser shall deliver to the Escrow Agent an additional $5,000,000; and (iii) On or before September 1, 2005, Purchaser shall deliver to the Escrow Agent an additional $5,000,000. (b) At the close of business on September 1, 2005 or such sooner date that the total amount of Escrowed Cash held by the Escrow Agent equals or exceeds $14,809,020 (in either case, the "Last Distribution Date"), the Escrow Agent shall deliver by facsimile to each of IHHI and OCPIN a written notice (the "Notice") setting forth: (i) the amount of Escrowed Cash, if any, received from OCPIN on or before each Distribution Date; (ii) for each Distribution Date, the amount of any shortfall in funds received from OCPIN compared to the amounts payable on or before each such Distribution Date under the schedule set forth in Section 2.1(a) above; and (iii) the aggregate shortfall, if any, of funds received by all Distribution Dates (such aggregate amount, the "Deficit"). The Parties intend that any shortfall in amounts payable on or before any Distribution Date may not be made up by a late payment or extra payment after such Distribution Date. For example, if OCPIN makes a payment of only $3,000,000 by July 1, 2005, the shortfall of $1,809,020 may not be made up by an extra payment after July 1, 2005. If OCPIN thereafter makes two payments of $4,000,000 by each of August 1, 2005 and September 1, 2005, the total Deficit on the Last Distribution Date will be $3,809,020 ($1,809,020 plus $1,000,000 plus $1,000,000). The Parties further intend that payments in excess of the amounts due on or before any Distribution Date shall be applied towards the next Distribution Date. (c) If the amount of the Deficit indicated in the Notice is zero, then promptly following the Last Distribution Date the Escrow Agent shall distribute from the Escrow Account (i) to OCPIN Stock Certificates evidencing all of the Escrowed Shares and (ii) to IHHI all of the Escrowed Cash and accrued interest. 5 (d) If the amount of the Deficit indicated in the Notice is greater than zero, then IHHI shall, during the ten (10) days following the Last Distribution Date, use its reasonable best efforts to sell such number of Shares, on terms that are reasonable to IHHI, that result in a net amount of cash to IHHI of no less than the amount of the Deficit, with such sale to close (the "New Share Closing") on or before September 12, 2005, unless such date is extended by mutual written consent of IHHI and OCPIN (IHHI and OCPIN hereby agree that any such extension shall require the prior consent of Medical Provider Financial Corporation II) (the "Closing Deadline"). No later than two business days prior to the New Share Closing, IHHI will provide to the Escrow Agent and OCPIN a certificate of its CEO and CFO indicating: (i) the anticipated date of the New Share Closing; (ii) the net amount expected to be raised by IHHI in the New Share Closing (which shall be equal to or greater than the amount of the Deficit); (iii) the amount of the "Deficit" for purposes of this Agreement; and (iv) the calculation of the number of Escrowed Shares issuable to OCPIN under Section 2.1(e)(ii) below (the "Officers Certificate"). (e) Subject to receipt of the Officers Certificate, simultaneously with the New Share Closing, the Escrow Agent shall distribute from the Escrow Account (i) to IHHI all of the Escrowed Cash and accrued interest, (ii) to OCPIN Stock Certificates evidencing such number of Escrowed Shares equal to the amount of Escrowed Cash that is timely received from OCPIN (under the timeframes set forth in Section 2.1(a) above) divided by $0.2586728 per share, which number shall be set forth in the Officers Certificate, and (iii) to IHHI or its designee all of the Escrowed Shares that are not distributed to OCPIN in accordance with clause (ii) of this paragraph. (f) If the Deficit is greater than zero and IHHI has advised the Escrow Agent in writing that the New Share Closing will not occur by the Closing Deadline, then promptly following the Closing Deadline the Escrow Agent shall distribute from the Escrow Account (i) to IHHI Stock Certificates evidencing all of the Escrowed Shares and (ii) to OCPIN all of the Escrowed Cash and accrued interest; provided, however, that if OCPIN notifies IHHI and the Escrow Agent in writing prior to the Closing Deadline that it desires to use the Escrowed Cash to acquire Escrowed Shares notwithstanding the failure to occur of the New Share Closing, then the Escrow Agent shall, promptly after the Closing Deadline, distribute from the Escrow Account (i) to IHHI all of the Escrowed Cash and accrued interest, (ii) to OCPIN that number of Shares which is equal to the amount of Escrowed Cash and accrued interest divided by $0.2586728, and (iii) to IHHI the remaining Shares not purchased by OCPIN with the Escrowed Cash. (g) IHHI's transfer agent (the "Transfer Agent") is StockTrans, Inc., and the Escrow Agent is hereby authorized to provide stock transfer instructions to the Transfer Agent, consistent with this Agreement. 2.2 DISPUTES. If IHHI or OCPIN has received a Notice and either of them believes in good faith that (a) OCPIN has, in fact, delivered to the Escrow Agent a different amount of funds than the amount set forth in the Notice within the timeframes permitted for delivery of such funds under Section 2.1(a) above, (b) there exists an error in calculating the Deficit stated in the Notice or (c) there exists in error in the calculations contained in the Officers Certificate, then either of them may deliver to the Escrow Agent a written objection (a "Dispute 6 Notice") to such Notice, accompanied by written proof of the facts underlying its disagreement with the Notice within two (2) business days following delivery of such Notice. Upon receipt of all such information, the Escrow Agent shall not distribute to either IHHI or OCPIN Stock Certificates or Escrowed Cash (as the case may be) that is the subject of the Dispute Notice until the Escrow Agent (i) receives written instructions signed by each of the undersigned Anil Shah and Bruce Mogel (or successors appointed by either of them) authorizing the distribution of the portion of the Escrowed Shares or Escrowed Cash that is the subject of the Dispute Notice, or (ii) receives a final decision of an arbitrator from Judicial Arbitration and Mediation Service, located in Orange County, selected pursuant to the Stock Purchase Agreement directing the distribution of Stock Certificates evidencing the portion of the Escrowed Shares, and/or the Escrowed Cash, that is the subject of the Dispute Notice. Upon resolution of the Dispute Notice in accordance with the preceding sentence, the Escrow Agent shall distribute Stock Certificates (along with appropriate Stock Powers) evidencing the Escrowed Shares and/or Escrowed Cash subject to dispute in accordance with such resolution. Any Dispute Notice shall describe in reasonable detail the basis for objection to the Notice and the portion of such Notice (if less than all) which is the subject of such Dispute Notice. 2.3 PARTIAL DISTRIBUTION. If any Dispute Notice includes an objection to only a portion of a Notice, the Escrow Agent shall promptly distribute from the Escrow Account Stock Certificates (along with appropriate Stock Powers) and/or Escrowed Cash equal to the portion to which no objection is raised; provided, that no such partial release by the Escrow Agent shall terminate or otherwise prejudice any rights of either party with respect to amounts claimed in any Notice which are in excess of the amounts so released. 2.4 MANNER OF DISTRIBUTIONS. All distributions of Stock Certificates evidencing Escrowed Shares and Escrowed Cash shall be made as set forth in this Article 2. Distributions of Stock Certificates evidencing the Escrowed Shares or Escrowed Cash shall be made to an account or accounts designated in writing by OCPIN or IHHI, as applicable. Following the distribution of the Escrowed Shares to OCPIN, IHHI will not thereafter interfere with or challenge in any manner OCPIN's ownership in such shares of IHHI's common stock or its rights as a shareholder of IHHI on the basis of amounts owed to IHHI under the Stock Purchase Agreement. 2.5 TERMINATION. This Agreement shall terminate when the entire amount of Escrowed Shares and Escrowed Cash has been released and distributed in accordance with this Article 2. Upon such termination this Agreement shall have no further force and effect, except that the provisions of this Section 2.5 and Articles 3, 4 and 5 and Articles 7 through 18 below shall survive such termination. 3. CONDITIONS TO ESCROW. The Escrow Agent agrees to hold the Escrowed Shares and Escrowed Cash and to perform in accordance with the terms and provisions of this Agreement. The 7 Parties agree that the Escrow Agent shall not assume any responsibility for the failure of the Parties to perform in accordance with the Stock Purchase Agreement or this Agreement. The acceptance by the Escrow Agent of its responsibilities hereunder is subject to the following terms and conditions which the Parties hereto agree shall govern and control with respect to the Escrow Agent's rights, duties and liabilities hereunder: 3.1 LIABILITY. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein, and no additional duties or obligations shall be implied hereunder. In performing its duties under this Agreement, or upon the claimed failure to perform any of its duties hereunder, the Escrow Agent shall not be liable to anyone for any damages, losses or expenses which may be incurred as a result of the Escrow Agent so acting or failing to so act; provided, however, that the Escrow Agent shall not be relieved from liability for damages arising out of its proven gross negligence or willful misconduct under this Agreement. The Escrow Agent shall in no event incur any liability with respect to (i) any action taken or omitted to be taken in good faith upon advice of legal counsel (which counsel may not also be counsel to any Party) given with respect to any question relating to the duties and responsibilities of the Escrow Agent hereunder or (ii) any action taken or omitted to be taken in reliance upon any instrument delivered to the Escrow Agent and believed by it to be genuine and to have been signed or presented by the proper Party or Parties. The Escrow Agent shall not be bound in any way by any agreement or contract between or among the Parties, whether or not the Escrow Agent has knowledge of any such agreement or contract, including, but not limited to, the Stock Purchase Agreement. The Escrow Agent is not a party to, nor is it bound by, nor need it give consideration to the terms or provisions of, any other agreement or undertaking among the Parties or any of them, or between the Parties or any of them and other persons (other than this Agreement), it being the intention of the parties hereto that the Escrow Agent assent to and be obligated to give consideration only to the terms and provisions hereof. 3.2 RIGHTS IN EVENT OF DISPUTE. It is understood and agreed that, in the event of any dispute between the Parties or among them or any other person resulting in adverse claims and demands being made in connection with or for any money or other property involved in or affected by this Agreement, the Escrow Agent shall refuse to comply with such demands or claims, so long as such dispute shall continue. In such event, the Escrow Agent shall make no distribution, release or other disposition of the Stock Certificates evidencing the Escrowed Shares or Escrowed Cash, or any portion thereof. Anything herein to the contrary notwithstanding, the Escrow Agent shall not be or become liable to such Parties or persons or any of them for the failure of the Escrow Agent to comply with such conflicting or adverse demands. The Escrow Agent shall be entitled to continue to refrain and refuse to distribute, release or otherwise dispose of the Stock Certificates evidencing the Escrowed Shares and Escrowed Cash or any part thereof, or to otherwise act hereunder, as stated above, unless and until such dispute is resolved in accordance with Section 2.2 of this Agreement. In the event of such a dispute, the Escrow Agent shall have the right, in addition to the rights described above and at the option of the Escrow Agent, to tender into the custody of any court having jurisdiction or the successor escrow agent 8 identified in Section 3.3, all money, Stock Certificates, Stock Powers and property comprising the Escrowed Shares and Escrowed Cash. Upon such tender, the parties hereto agree that the Escrow Agent shall be discharged from all further duties under this Agreement; provided, however, that such tender shall not deprive the Escrow Agent of its compensation hereunder earned prior to such tender and discharge of the Escrow Agent of its duties hereunder. 3.3 RESIGNATION OR TERMINATION OF ESCROW AGENT. The Escrow Agent shall have the right to resign at any time by giving written notice of such resignation to the Parties and the Parties shall have the right to terminate the services of the Escrow Agent hereunder at any time by giving thirty (30) days' written notice (with such written notice being signed by IHHI and OCPIN) of such termination to the Escrow Agent, in each case specifying the effective date of such resignation or termination. Within thirty (30) days after receiving or delivering the aforesaid notice, as the case may be, the Parties agree to appoint a successor escrow agent to which the Escrow Agent shall distribute the funds and property then held hereunder, less the amount of any fees owing to the Escrow Agent hereunder as of such date. If a successor escrow agent has not been appointed and has not accepted such appointment by the end of such thirty (30)-day period, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor escrow agent and shall be entitled to tender into the custody of such court all funds and property then held by it hereunder, and the costs, expenses and reasonable attorneys' fees which are incurred in connection with any such proceeding shall be paid 50% by IHHI and 50% by OCPIN. Thereupon, the Escrow Agent shall be relieved of all further duties and obligations under this Agreement. The Escrow Agent shall have no responsibility for the appointment of a successor escrow agent hereunder. Except as otherwise agreed to in writing by the Parties, none of the Stock Certificates evidencing the Escrowed Shares, Stock Powers, or Escrowed Cash shall be released from the Escrow Account unless and until a successor escrow agent has been appointed in accordance with this Section 3.3. 3.4 DISCHARGE OF ESCROW AGENT. Upon delivery of all of the Escrowed Shares and Escrowed Cash pursuant to the terms of Article 2 above or to a successor escrow agent, the Escrow Agent shall thereafter be discharged from any further obligations hereunder. The Escrow Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders and decrees of any court of competent jurisdiction which may be filed, entered or issued, and all final arbitration awards and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience. 4. INDEMNIFICATION. The Escrow Agent shall have no obligation to take any legal action in connection with this Agreement or towards its enforcement, or to appear in, prosecute or defend any action or legal proceeding which would or might involve it in any cost, expense, loss or liability unless security and indemnity, as provided herein, shall be furnished. IHHI and OCPIN hereby, jointly and severally, agree to indemnify the Escrow Agent and its officers, directors, employees and agents and save the Escrow Agent and its officers, directors, employees and agents harmless from and against any and all Claims (as defined below) and Agent Losses (as defined below) which may be incurred by the Escrow Agent or any of such officers, directors, employees or agents as a result of Claims asserted by any person against the Escrow Agent or any of such officers, directors, employees or agents as a result of or in connection with its 9 performance as the Escrow Agent under this Agreement. As between IHHI and OCPIN, each of IHHI's and OCPIN's obligation to so jointly and severally indemnify and hold harmless the Escrow Agent and its officers, directors, employees and agents shall be limited to one-half (1/2) the amount of the Claim. For the purposes hereof, the term "Claim" or "Claims" shall mean all claims, lawsuits, causes of action or other legal actions and proceedings of whatever nature brought against (whether by way of direct action, counterclaim, cross action or impleader) the Escrow Agent or any such officer, director, employee or agent, even if groundless, false or fraudulent, so long as the claim, lawsuit, cause of action or other legal action or proceeding is alleged or determined, directly or indirectly, to arise out of, result from, relate to or be based upon, in whole or in part: (a) the acts or omissions of any of the Parties, (b) the appointment of the Escrow Agent as escrow agent under this Agreement, or (c) the performance by the Escrow Agent of its duties under this Agreement; and the term "Agent Losses" shall mean losses, costs and expenses and amounts paid in settlement, directly or indirectly resulting from, arising out of or relating to one or more Claims. Upon the written request of the Escrow Agent or any such officer, director, employee or agent (each referred to herein as an "Indemnified Party") IHHI and/or OCPIN shall assume the investigation and defense of any Claim, including the employment of counsel reasonably acceptable to the applicable Indemnified Party and the payment of all expenses related thereto and, notwithstanding any such assumption, such Indemnified Party shall have the right, and IHHI and/or OCPIN shall pay the cost and expense thereof, to employ separate counsel with respect to any such Claim and participate in the investigation and defense thereof in the event that such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to such Indemnified Party that are different from or in addition to those available to any Party. IHHI and OCPIN hereby agree that the indemnification and protections afforded the Escrow Agent in this Article 4 shall survive the termination of this Agreement, the resignation or removal of the Escrow Agent pursuant to Section 3.3 hereof or the tender by the Escrow Agent of the Escrowed Shares and Escrowed Cash to a court pursuant to Section 3.2 hereof. 5. ESCROW COSTS. The Escrow Agent shall be entitled to be paid a fee for its services pursuant to the Fee Schedule attached hereto. In addition, the Escrow Agent shall be entitled to recover all expenses incurred by it in connection with this Agreement, including but not limited to the reasonable cost and expenses of legal services (including attorneys' fees) in the event the Escrow Agent deems it necessary to retain counsel. All such fees and expenses whenever incurred shall be paid one-half by each of IHHI and OCPIN. 6. LIMITATIONS ON RIGHTS TO ESCROWED SHARES AND ESCROWED CASH. None of the Parties shall have any right, title or interest in or to, or possession of, the Escrow Account and therefore shall not have the ability to pledge, convey, hypothecate or grant as security all or any portion of the Escrowed Shares or Escrowed Cash unless and until such portion of the Escrowed Shares and/or Escrowed Cash has been released pursuant to Article 2 above. Accordingly, the Escrow Agent shall be in sole possession of the Escrowed Shares and Escrowed Cash, and shall not act as custodian of the Parties under this Agreement for the purposes of perfecting a security interest therein, and no 10 creditor of any of the Parties shall have any right to have or to hold or otherwise attach or seize all or any portion of the Escrowed Shares or Escrowed Cash as collateral for any obligation and shall not be able to obtain a security interest in any of the Escrowed Shares or Escrowed Cash unless and until such portion of the Escrowed Shares or Escrowed Cash, as the case may be, has been released pursuant to Article 2 above. 7. NOTICES. All notices, requests or other communications required or permitted hereunder shall be sufficient if in writing and (a) delivered in person against written receipt therefor, or by nationally recognized express delivery or courier service requiring acknowledgment of receipt, (b) sent by facsimile, or (c) deposited in the mail registered or certified first class, postage prepaid and return receipt requested (provided that any notice given pursuant to clause (b) is also confirmed by the means described in clause (a) or (c)) to such address or facsimile of the party set forth below or to such other place or places as such party from time to time may designate in writing in compliance with the terms hereof. Each such notice, request or other communication shall be deemed given when so delivered personally, or sent by facsimile transmission, or, if sent by express delivery or courier service one (1) business day after being sent, or if mailed, three (3) business days after the date of deposit in the mail. A notice of change of address or facsimile number shall be effective only when done in accordance with this Article 7. The Escrow Agent in its discretion may act upon oral instructions if it believes them to be genuine, but the Escrow Agent shall not be required to do so. If the Escrow Agent requires, all oral instructions are to be promptly confirmed in writing, but the Escrow Agent shall not be liable for any action or any failure to act in accordance with oral instructions, even though it fails to receive written confirmation from the Parties. The Escrow Agent shall be provided with specimen signatures of the authorized representatives of the Parties. The Escrow Agent shall be entitled to rely in good faith upon any instructions signed by any authorized representative of the Parties, and shall incur no liability for following such directions. To IHHI: Integrated Healthcare Holdings, Inc. 695 Town Center Drive, Suite 260 Costa Mesa, CA 92626 Telephone: (714) 434-9191 Facsimile: Attention: Bruce Mogel With copies to: Morrison & Foerster LLP 555 West Fifth Street, Suite 3500 Los Angeles, CA 90013 Telephone: (213) 892-5200 Facsimile: (213) 892-5454 Attention: Allen Z. Sussman, Esq. To OCPIN: Orange County Physicians Investment Network, LLC 2621 South Bristol Street, #108 Santa Ana, California 92704 11 Attention: Anil V. Shah, M.D. Telephone: 714-290-5322 Facsimile: 714-297-9588 With copies to: Cummins & White Newport Beach, CA 2424 S.E. Bristol Street, Suite 300 Newport Beach, California 92660-0757 Attention: William Mitchell, Esq. Telephone: (949) 852-1800 Facsimile: (949) 852-8510 To the Escrow Agent: City National Bank, national association Wealth Management Services Attention: Sue Behning/VP 1950 Avenue of the Stars, 2nd Floor Los Angeles, CA 90067 Telephone: (310) 282-2921 Facsimile: (310) 282-2936 To the Transfer Agent: StockTrans, Inc 44 West Lancaster Avenue Ardmore, PA 19003 Attention: Ms. Gina Hardin Telephone: 610-649-7300 Facsimile: 610-649-7302 8. ENTIRE AGREEMENT, AMENDMENTS. This Agreement, together with the Stock Purchase Agreement (as the same applies solely to the Parties), embodies the entire understanding of the parties hereto with respect to the subject matter hereof and there are no other agreements or understandings, written or oral, in effect between the parties hereto relating to the subject matter hereof, except as specifically referenced herein or in the Stock Purchase Agreement. This Agreement, together with the Stock Purchase Agreement (as the same applies solely to the Parties) supersedes and terminates all prior discussions, negotiations, understandings, arrangements and agreements by or among the parties hereto relating to the subject matters hereof. Subject to the first paragraph of this Agreement, this Agreement may be amended, or any provision of this Agreement may be waived, so long as such amendment or waiver is set forth in a writing executed by IHHI and OCPIN (a copy of which shall be promptly provided by the Parties to the Escrow Agent); provided that if any such amendment or waiver would have the effect of increasing or expanding the Escrow Agent's obligations or duties under this Agreement, the written consent of the Escrow Agent shall be required in addition to the written consent of IHHI and OCPIN. No course of dealing between or among the parties hereto shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any party hereto under or by reason of this Agreement. 12 9. ASSIGNS AND ASSIGNMENT. This Agreement and the provisions hereof shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto; provided that the Escrow Agent shall not be permitted to assign its obligations hereunder except as provided in Section 3.2 and 3.3 above. 10. TAXATION OF DIVIDENDS. OCPIN hereby acknowledges that, for federal and state income tax purposes, any dividends, distributions or interest on the Escrowed Shares then evidenced by Stock Certificates, or Escrowed Cash, held by the Escrow Agent shall be income of OCPIN. 11. NO OTHER THIRD PARTY BENEFICIARIES. Neither this Agreement nor any provision hereof, nor any document executed or delivered herewith, shall create any right in favor of or impose any obligation upon any person or entity other than the parties hereto and their respective successors and permitted assigns. 12. INTERPRETATION. The headings in this Agreement are inserted for convenience of reference only and shall not be a part of or control or affect the meaning hereof. 13. NO WAIVER. Any failure of any of the parties hereto to comply with any of its obligations or agreements or to fulfill any conditions herein contained may be waived only by a written waiver from the other parties hereto. No failure by any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder by such party preclude any other or future exercise of that right or any other right hereunder by that party. 14. SEVERABILITY. The parties hereto agree that (a) the provisions of this Agreement shall be severable in the event that for any reason whatsoever the provisions hereof are invalid, void or otherwise unenforceable, (b) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions, but are valid and enforceable, and (c) the remaining provisions shall remain enforceable to the fullest extent permitted by law. 15. NO STRICT CONSTRUCTION. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their collective mutual intent, and no rule of strict construction shall be applied against any person. The term "including" as used herein shall be by way of example, and shall not be deemed 13 to constitute a limitation of any term or provision contained herein. Each defined term used in this Agreement has a comparable meaning when used in its plural or singular form. 16. RELEASES ON NON-BUSINESS DAYS. In the event that a release of a portion of the Escrowed Shares or Escrowed Cash hereunder is required to be made on a date that is not a business day, such release may be made on the next succeeding business day with the same force and effect as if made when required. 17. GOVERNING LAW; SERVICE OF PROCESS. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF CALIFORNIA SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION MAY ORDINARILY APPLY. It is the intention of the parties hereto, however, that the situs of the Escrowed Shares and Escrowed Cash created hereunder is and shall be administered in the state in which the principal office of the Escrow Agent from time to time acting hereunder is located. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought pursuant to the provisions for dispute resolution contained in the Stock Purchase Agreement. 18. COUNTERPARTS. This Agreement may be executed in any number of duplicate counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. [Signature page follows.] 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
"IHHI" "Escrow Agent" INTEGRATED HEALTHCARE HOLDINGS, INC. CITY NATIONAL BANK, national association By: /s Bruce Mogel By:_____________________________________ Name: Bruce Mogel Name:___________________________________ Title: Chief Executive Officer Title:__________________________________
"OCPIN" ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC By: /s/ Anil V. Shah, M.D. Name: Anil V. Shah, M.D. Title: Manager By: /s/ Ajay Meka, M.D. Name: Ajay Meka, M.D. Title: Manager 15 SCHEDULE OF FEES 16 EX-99.3 4 v020013_ex99-3.txt AGREEMENT TO FORBEAR This AGREEMENT TO FORBEAR ("Forbearance Agreement") is made to be effective as of June 1, 2005 (the "Effective Date") 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"), ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company ("OC-PIN"), WEST COAST HOLDINGS, LLC, a California limited liability company ("West Coast"), and MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation ("Lender"). IHHI, WMC-SA, WMC-A, Coastal and Chapman are hereinafter together sometimes referred to as the "Borrowers"; West Coast is hereinafter referred to as the "Credit Party"; and OC-PIN is hereinafter referred to as the "Guarantor." RECITALS A. Lender, Borrowers and the Credit Party are some, but not all, of the parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and OC-PIN are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); and Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("IHHI Pledge Agreement"). The Credit Agreement, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement and the IHHI Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." The terms and condition set forth in the Loan Documents are incorporated herein by reference even though not physically attached hereto. Capitalized terms not defined in this Forbearance Agreement shall have the same meaning as set forth in the Loan Documents. B. Pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." Borrowers, Credit Party and Guarantor acknowledge and agree that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57. C. The Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005 (a copy of which is attached hereto as Exhibit "A") (the "Contract Default Notice"), and (ii) in that certain letter from Lender to 1 Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005 (a copy of which is attached hereto as Exhibit "B") (the "Covenant Failure Notice"). Borrowers, Credit Party and Guarantor each acknowledge receipt of the Contract Default Notice and the Covenant Failure Notice, and agree that the Events of Default specified therein occurred and are continuing. D. A dispute has arisen by and between IHHI on the one hand and OC-PIN on the other, in that IHHI claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to IHHI. E. IHHI and OC-PIN have agreed to resolve their dispute on the terms and conditions set forth in that certain First Amendment to Stock Purchase Agreement dated June 1, 2005, executed by and between IHHI and OC-PIN ("First Amendment"). F. Borrowers, Credit Party and Guarantor acknowledge and agree that Lender currently has the right to exercise its rights and remedies under the Loan Documents, including but not limited to recording notices of default and elections to sell in the official records of Orange County, California, judicially and/or non-judicially foreclosing on the Hospital Facilities, bringing legal action against OC-PIN to enforce its obligations under the OC-PIN Guaranty, and bringing legal action against West Coast, the members of West Coast and IHHI to enforce their obligations under their respective Pledge Agreements. However, Borrowers, Credit Party and Guarantor have requested that Lender forbear from exercising the foregoing rights and remedies granted to Lender under the Loan Documents. Lender has agreed to forbear solely for the purposes of providing IHHI and OC-PIN additional time to cure the Events of Default; provided, however, Lender's agreement to forbear is made solely on the terms and conditions set forth in this Forbearance Agreement. AGREEMENTS NOW, THEREFORE, in consideration of the covenants and conditions set forth in this Forbearance Agreement, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Borrowers, Credit Party, Guarantor and Lender agree as follows: 1. INCORPORATION OF RECITALS. The foregoing Recitals are incorporated by reference as if fully set forth herein. 2. NOTICES OF DEFAULT; DEEDS OF TRUST. Based on the occurrence of the Events of Default, Borrowers, Credit Party and Guarantor acknowledge and agree that Lender has the right to record in the Official Records of the Recorder of Orange County ("Official Records") (a) a Notice of Default and Election to Sell with respect to that certain Fee Deed of Trust, Security Agreement, Fixture Filing and Assignment of Rents dated as of March 3, 2005 and recorded in the Official Records on March 8, 2005 as Document No. 2005000169280; and (b) a Notice of Default and Election to Sell with respect to that certain Leasehold Deed of 2 Trust, Security Agreement, Fixture Filing and Assignment of Rents dated as of March 3, 2005 and recorded in the Official Records on March 8, 2005 as Document No. 2005000169281 (respectively, the "Notices of Default" and the "Deeds of Trust"). 3. AGREEMENTS 3.1 Forbearance Period; Lender's Agreement to Forbear. The period commencing on the Effective Date of this Forbearance Agreement and ending one hundred (100) calendar days thereafter is hereinafter referred to as the "Forbearance Period." So long as IHHI and OC-PIN timely comply with their respective obligations under the Loan Documents and this Forbearance Agreement, and so long as no Event of Default occurs under the Loan Documents or this Forbearance Agreement, then Lender agrees as follows ("Lender's Agreement to Forbear"): (a) During the Forbearance Period, Lender will forbear from recording the Notices of Default in the Official Records; and (b) During the Forbearance Period, Lender will (i) forbear from filing a judicial foreclosure lawsuit against the Borrowers and the Credit Party, (ii) forbear from filing a lawsuit against OC-PIN to enforce its obligations under the OC-PIN Guaranty, (iii) forbear from filing a lawsuit against West Coast to enforce its obligations under the West Coast Pledge Agreement, (iv) forbear from filing a lawsuit against the members of West Coast to enforce their obligations under the Members of West Coast Pledge Agreement, and (v) forbear from filing a lawsuit against IHHI to enforce its obligations under the IHHI Pledge Agreement. 3.2 Express Reservation of Other Remedies. Lender's Agreement to Forbear is the exclusive and only forbearance to which Lender has agreed. Lender expressly reserves the right to exercise each and every of its other rights and remedies under the Loan Documents not specifically included within Lender's Agreement to Forbear. 3.3 Default Interest. So long as the referenced Events of Default remain uncured and are continuing, the interest rate applicable to the Loans (including but not limited to amounts outstanding under the Line of Credit) is and will remain at the Default Rate, and all outstanding Obligations shall bear interest at the Default Rate until the Events of Default are cured. 3.4 Suspension of Line of Credit. The Line of Credit facility with respect to additional Advances is and shall remain suspended, and any additional Advances will be made or incurred in Lender's sole discretion, at the Default Rate, so long as the referenced Events of Default remain uncured and are continuing. 3.5 Affirmative Covenants During the Forbearance Period. Borrowers, Credit Party and Guarantor each promise, covenant and agree as follows: (a) New Capital Investment in IHHI. Prior to expiration of the Forbearance Period, any combination of the Borrowers, the Credit Party, the Guarantor, or any new third party investor ("New Investor") shall contribute not less than $14,809,019.31 in new capital ("New Capital") to IHHI. The New Capital must be in addition to the $10,190,980.69 in capital contributed to IHHI by OC-PIN prior to execution of the Loan Documents and in addition to the $5,000,000 in capital contributed by Pacific Coast Holdings Investment, LLC, a 3 California limited partnership ("PCHI") to IHHI (together the "Existing Capital"). The New Capital must be contributed to IHHI not later than the last day of the Forbearance Period. (b) Total Paid-In-Capital of IHHI. At expiration of the Forbearance Period, IHHI shall provide to Lender written proof (in form and content reasonably satisfactory to Lender) that (i) IHHI's total paid-in-capital is not less than $30,000,000 (i.e., the Existing Capital plus the New Capital), (ii) the source of the New Capital is from contributions from the Borrowers and/or the Credit Party and/or the Guarantor and/or New Investors, and (iii) that no part of the New Capital consists of funds borrowed by IHHI from any source. (c) Prepayment Amount. Borrower's failure to pay Lender a $5,000,000 prepayment against the Acquisition Loan ("Prepayment Amount") by the Mandatory Prepayment Date constitutes one of the referenced Events of Default under the Credit Agreement. Borrower hereby agrees to and shall pay to Lender the Prepayment Amount on or before expiration of the Forbearance Period, in good and drawable funds, as and for a prepayment of principal balance of the Acquisition Loan. 3.6 Negative Covenants During the Forbearance Period. Borrowers, Credit Party and Guarantor each promise, covenant and agree as follows: (a) Borrowers, Credit Party and Guarantor will not during the Forbearance Period directly or indirectly file, serve, take, initiate, prosecute, participate or cooperate in the filing, serving, taking, initiating or prosecuting of, any legal action or proceeding against Lender. (b) Borrowers, Credit Party and Guarantor will not during the Forbearance Period directly or indirectly (1) unless otherwise permitted by the Credit Agreement with respect to the North Tustin Avenue medical office building in Santa Ana, California, sell, transfer, assign, convey, lease, sublease, or otherwise transfer, or agree to sell, transfer, assign, convey, lease or sublease, or otherwise transfer, any interest in any real property or improvements (together "Real Property Assets") owned, controlled, leased or subleased by Borrowers, or Credit Party or Guarantor as of the Effective Date hereof; (2) grant a lien or security interest in, or otherwise pledge, encumber or hypothecate, or agree to grant a lien or security interest in, or agree to pledge, encumber or hypothecate, any interest in any portion of the Real Property Assets or otherwise use any of the Real Property Assets as collateral or security for any debt, obligation or liability of any of the Borrowers, Credit Party or Guarantor; (3) amend, modify or change its articles of incorporation, bylaws, articles of organization or operating agreement, as applicable, without first receiving the prior written consent of Lender, which consent will not be unreasonably withheld; (4) increase, decrease, change, amend, modify, expand or contract on the power or authority of any officer, director, manager, member or managing member of the entity of which any Borrower, Credit Party or Guarantor is comprised, without first receiving the prior written consent of Lender, which consent will not be unreasonably withheld; (5) amend, modify, alter or change any shareholders agreement or voting trust; (6) change its name as it appears in official filings in the state of its incorporation or other organization; (7) change its chief executive office, principal place of business, corporate office or location at which the location of its business records are currently located; (8) change the type of entity that it is; (9) change its organization identification number, if any, issued by its state of incorporation or other organization; (10) change its 4 state of incorporation or organization or incorporate or organize in any additional jurisdictions; (11) appoint a new person as an officer, director, member or manager, without first receiving the prior written consent of Lender, which consent will not be unreasonably withheld; or (12) terminate any person as an officer, director, member or manager. 3.7 Requirements to Cure Events of Defaults and Rescind Notices of Default. If: (a) by expiration of the Forbearance Period (i) each of the Events of Default have been fully cured, and (ii) Lender has received from IHHI written proof (in form and content reasonably satisfactory to Lender) that (1) IHHI's total paid-in-capital is not less than $30,000,000 (i.e., the Existing Capital plus the New Capital), and (2) the source of the New Capital is from contributions from the Borrowers and/or the Credit Party and/or the Guarantor and/or New Investors, and (3) that no part of the New Capital consists of funds borrowed by IHHI from any source, and (iii) the Prepayment Amount has been paid to Lender, and (iv) there exists no breach or Event of Default under this Forbearance Agreement or under the Loan Documents which remains uncured or continuing, and (v) all of Lenders' attorneys' fees, costs, charges, expenses, foreclosure fees, trustee fees, recording charges and other costs or expenses paid or incurred by Lender with respect to the Events of Default and this Forbearance Agreement have been paid in full; and (b) at least $14,809,019.31 in New Capital has been contributed to IHHI as and when required by Section 3.5(a) of this Forbearance Agreement, then in said event Lender agrees to and shall within five (5) Business Days from receipt of written demand therefore from IHHI (A) declare as cured and satisfied each of the Events of Default referenced in and withdraw the Contract Default Notice and in the Covenant Failure Notice, (B) terminate application of the Default Interest Rate, and (C) terminate suspension of the Line of Credit facility with respect to additional Advances. 3.8 Termination of Lender's Agreement to Forbear. If: (a) by expiration if the Forbearance Period (i) each of the Events of Default have not been fully cured, or (ii) Lender has not received from IHHI written proof (in form and content reasonably satisfactory to Lender) that (1) IHHI's total paid-in-capital is $30,000,000 or more (i.e., the Existing Capital plus the New Capital), or (2) the source of the New Capital is from contributions from the Borrowers and/or the Credit Party and/or the Guarantor and/or New Investors, or (3) that the New Capital does not consist of funds borrowed by IHHI from any source, or (iii) the Prepayment Amount has not been paid to Lender, or (iv) there exists one or more breaches or Events of Default under this Forbearance Agreement or under the Loan Documents which remain uncured or continuing, or (v) Lenders' attorneys' fees, costs, charges, expenses, foreclosure fees, trustee fees, recording charges and other costs or expenses paid or incurred by Lender with respect to the Events of Default or this Forbearance Agreement have not been paid in full; or (b) by expiration of the Forbearance Period, less than $14,809,019.31 in New Capital has been contributed to IHHI, then upon the occurrence of any one or more of the foregoing Lender's Agreement to Forbear shall automatically terminate, expire and have no further force or effect. In said event, Borrowers, Credit Party and Guarantor acknowledge and agree that Lender shall have the right but not the obligation to take any one or more of the following acts: (A) record the Notices of Default in the Official Records; (B) file a judicial foreclosure lawsuit against the Borrowers and the Credit Party, (C) file a lawsuit against OC-PIN to enforce its obligations under the OC-PIN Guaranty, (D) file a lawsuit against West Coast to enforce its obligations under the West Coast Pledge Agreement, (E) file a lawsuit against the members of West Coast to enforce their obligations under the Members of West Coast Pledge Agreement, (F) file a lawsuit against 5 IHHI to enforce its obligations under the IHHI Pledge Agreement, (G) process, file, serve, take or initiate any other legal action or proceeding against any one or more of the Borrowers or Credit Party or Guarantor or PCHI or Ganesha Realty, LLC, a California limited liability partnership ("Ganesha") that Lender is permitted to take under the Loan Documents and applicable law, (H) maintain Default Interest in force and effect, and (I) in Lender's sole and absolute discretion, either continue in effect the suspension of the Line of Credit facility with respect to further Advances or terminate the Line of Credit facility with respect to further Advances. 3.9 Releases and Waivers. In consideration for Lender's Agreement to Forbear, and effective as of the Effective Date of this Forbearance Agreement: (a) Subject to the last sentence of this Section 3.9(a), Borrowers, Credit Party and Guarantor, together with their respective officers, directors, shareholders, members, managers, employees, agents, representatives and assigns (collectively the "Releasing Parties") hereby fully, forever and irrevocably release, waive and relinquish their right to file or record in the Official Records a lis pendens against any of the Hospital Facilities, or file in any court in any venue any legal action or proceeding (including but not limited to a complaint to enjoin foreclosure, or an order to show cause, or a complaint to set aside foreclosure sale, or an action to quiet title, or an action to cancel one or more of the Loan Documents) against Lender or any trustee under any of the Deeds of Trust, the purpose of which is to directly or indirectly procure from any court or tribunal issuance of a temporary restraining order, or a preliminary injunction, or a permanent injunction, or any other equitable relief (collectively, "Injunctive Relief") which seeks to prohibit or prevent Lender or any trustee under any Deed of Trust (i) from recording a Notice of Sale with respect to any of the Deeds of Trust, or (ii) from conducting a sale of any of the Hospital Facilities at a public auction as permitted by the power of sale provisions in the Deeds of Trust, or (iii) from conveying title to any one or more of the Hospital Facilities via trustee's deed to a purchaser at foreclosure, or (iv) from conducting a sale of the personal property Collateral pursuant to the California Uniform Commercial Code, or (v) from conducting a "mixed-collateral" sale of any one or more of the Hospital Facilities and any or all of the personal property Collateral, or (vi) from attaching or garnishing or seeking any other provisional remedy against any real or personal property of any Borrowers, Credit Party or Guarantor, or (vii) from taking any other action or pursuing any other right or remedy that Lender is permitted to pursue under the Loan Documents, or in law or equity. Notwithstanding the foregoing, the releases and waivers set forth in this Section 3.9(a) shall apply only to Injunctive Relief based on alleged acts or omissions of Lender which occurred prior to the Effective Date of this Forbearance Agreement. (b) Each of the Releasing Parties hereby fully, forever and irrevocably release, waive and relinquish any claim or cause of action (collectively, "Lender Liability Claims") that the Releasing Parties now have or in the future may have against Lender to the effect that, prior to the Effective Date of this Forbearance Agreement: (i) Lender committed a breach or default under any of the Loan Documents, or (ii) Lender conspired with the executive officers of IHHI to deprive OC-PIN of its stock ownership in IHHI or otherwise inflicted any actionable damage on OC-PIN, or (iii) Lender committed an act not permitted by the Loan Documents or applicable law, or (iv) Lender omitted to take an act required by the Loan Documents or under applicable law, or (v) any of the Loan Documents (including, but not limited to, the OC-PIN Guaranty) or this Forbearance Agreement is/are invalid or unenforceable in whole or in part for any reason, or (vi) Lender suggested, implied, induced, cajoled or required that IHHI include any terms or conditions in any agreements between IHHI and OC-PIN (including, but not limited to, the First Amendment ), or (vii) Lender 6 suggested, implied, induced, cajoled or required that IHHI not include any terms or conditions in any agreements between IHHI and OC-PIN (including, but not limited to, the First Amendment), or (viii) Lender improperly interfered with or improperly exercised any control over the Borrowers, or (ix) that Lender breached in any way any alleged duty of good faith or fair dealing, or any alleged duty of commercial reasonableness, or any quasi-duty, or any implied duty, or (x) that Lender committed any unlawful, unfair or fraudulent business act or practice, or (xi) that Lender engaged in any unfair, deceptive, untrue or misleading advertising, or (xii) that Lender committed any act prohibited by California Business and Professions Code Section 17500, or (xiii) that Lender engaged in predatory lending practices, or (xiv) that Lender engaged in or committed any act or omission which constitutes fraud, duress, negligence, conversion, defamation or infliction of emotional distress, or (xv) that Lender interfered with IHHI's prospective business advantage, or (xvi) that Lender interfered with IHHI's contractual relations. (c) In order to induce Lender to enter into this Forbearance Agreement and to agree to the terms of Lender's Agreement to Forbear, effective upon the Effective Date of this Forbearance Agreement, each of the Releasing Parties fully, forever and irrevocably releases, waives, relinquishes and discharges Lender and its successors and assigns, predecessors, related or affiliated companies or entities, and their respective officers, directors, shareholders, agents, employees, attorneys and representatives (collectively, the "Lender Released Parties") from any and all claims, rights, demands, debts, causes of action, charges, expenses, damages, attorneys' fees and costs, obligations or liabilities of any and every kind, nature and character whatsoever, whether or not now known, suspected or unsuspected, which any of the Releasing Parties may have had, may now have or may in the future claim to have against the Lender Released Parties arising out of, or related in any manner to any alleged act or omission to act which occurred prior to the Effective Date of this Forbearance Agreement. The Releasing Parties hereto have been fully advised by their respective attorneys of the contents and effect of Section 1542 of the Civil Code of California upon the rights of each of them, which reads as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. EACH OF THE RELEASING PARTIES ACKNOWLEDGES THAT THEY MAY HAVE SUSTAINED DAMAGES, LOSSES, FEES, COSTS OR EXPENSES WHICH ARE PRESENTLY UNKNOWN AND UNSUSPECTED, AND, NOTWITHSTANDING THE PROVISIONS OF SECTION 1542, AND ARE EXPRESSLY WAIVING THE SAME. EACH OF THE RELEASING PARTIES AGREES THAT IT INTENDS TO RELEASE EVEN UNKNOWN OR UNSUSPECTED CLAIMS. EACH OF THE RELEASING PARTIES REPRESENTS THAT IT HAS CONSULTED WITH ITS LEGAL COUNSEL REGARDING ITS CLAIMS AND POTENTIAL CLAIMS AGAINST LENDER, AND HAS CAREFULLY READ AND UNDERSTAND ALL THE PROVISIONS OF THIS FORBEARANCE AGREEMENT, AND HAS VOLUNTARILY ENTERED INTO THIS FORBEARANCE AGREEMENT. 7 3.10 Covenants Not To Sue. Each of the Releasing Parties hereby promises, covenants and agrees not to sue Lender, and not to bring any legal action or proceeding of any kind against Lender, in any court or administrative proceeding, in any venue, which legal action or proceeding directly or indirectly seeks to (a) obtain or procure issuance of any temporary restraining order, or a preliminary injunction, or a permanent injunction, or any other equitable or provisional relief against Lender based on acts or omissions which occurred prior to the Effective Date of this Forbearance Agreement, or (b) impose any Lender Liability Claims on or against Lender based on acts or omissions which occurred prior to the Effective Date of this Forbearance Agreement, or (c) obtain or impose on Lender any Injunctive Relief based on acts or omissions which occurred prior to the Effective Date of this Forbearance Agreement, or (d) which legal action or proceeding violates any covenant, condition, representation or warranty made by the Releasing Parties in this Forbearance Agreement. 3.11 Indemnity. Each Borrower, Credit Party and Guarantor hereby jointly and severally agrees to and shall indemnify, defend, protect and hold Lender and each of its Affiliates and their respective officers, directors, members, employees, attorneys, agents, and representatives (each, an "Indemnified Person") free and harmless from and against any and all legal actions, suits, proceedings or claims brought or asserted against any Indemnified Person for damages, losses, liabilities and expenses (including reasonable attorneys' fees, witness and expert witness fees, court fees and charges, and disbursements and other costs of investigation or defense, including those incurred upon any appeal or in any Bankruptcy Proceeding defined below) (collectively the "Indemnified Liabilities") directly or indirectly arising out of or relating to (a) the execution and delivery of this Forbearance Agreement by an Indemnified Person, or (b) the execution and delivery of any Loan Document by an Indemnified Person, or (c) the making of the Loan by an Indemnified Person, or (d) a Lender Liability Claim brought or asserted against an Indemnified Person; provided, that neither Borrowers nor Credit Party nor Guarantor shall be liable for any Indemnified Liabilities to the extent that such Indemnified Liability directly results from the accused Indemnified Person's own gross negligence or willful misconduct; and the liability of the Credit Party for the Indemnified Liabilities shall not exceed the liability limitations set forth in Section 1.10 in the Credit Agreement. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS FORBEARANCE AGREEMENT OR TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF HAVING EXECUTED THIS AGREEMENT OR AS A RESULT OF ANY CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. 3.12 Absence of PCHI and Ganesha; Release and Indemnity. Lender, Borrowers, Credit Party and Guarantor acknowledge that PCHI and Ganesha are also parties to some but not all of the Loan Documents, and that PCHI and Ganesha refused to execute this Forbearance Agreement. Nonetheless, Lender, Borrowers, Credit Party and Guarantor have determined it to be in their respective best interests to proceed without PCHI and Ganesha, and therefore have agreed to execute this Forbearance Agreement and comply with its terms and conditions despite the fact that PCHI and Ganesha refused to execute the same. 8 (a) Lender, Borrowers, Credit Party and Guarantor, together with their respective officers, directors, shareholders, members, managers, employees, agents, representatives and assigns, hereby fully, forever and irrevocably release, waive and relinquish their right to file in any court in any venue any legal action or proceeding against any other party to this Forbearance Agreement, which legal action or proceeding alleges directly or indirectly that this Forbearance Agreement is unenforceable because PCHI and/or Ganesha are not parties to this Forbearance Agreement. Lender, Borrowers, Credit Party and Guarantor each agree that the foregoing release, waiver and relinquishment is intended to constitute a material inducement to each of the other parties to execute and deliver this Forbearance Agreement. (b) Borrowers, Credit Party and Guarantor hereby jointly and severally agree to and shall indemnify, defend, protect and hold each Indemnified Person (as defined in Section 3.11 above) free and harmless from and against any and all legal actions, suits, proceedings or claims brought or asserted against any Indemnified Person for any Indemnified Liabilities (defined in Section 3.11 above) directly or indirectly arising out of or relating to (a) the execution and delivery of this Forbearance Agreement by an Indemnified Person, (b) the execution and delivery of this Forbearance Agreement by any of the Borrowers, or Credit Party, or Guarantor, (c) the refusal of PCHI and/or Ganesha to execute and deliver this Forbearance Agreement, or (d) any damage or injury claimed by PCHI and/or Ganesha against an any Indemnified Person as a direct or indirect consequence of the execution and delivery of this Forbearance Agreement by Lender, Borrowers, Credit Party and Guarantor. 4. REPRESENTATIONS AND WARRANTIES. To induce Lender to forbear from pursuing its rights and remedies under the Loan Documents, Borrowers, Credit Party and Guarantor jointly and severally make the following representations and warranties to Lender, each and all of which shall survive the execution, delivery, expiration or earlier termination of this Forbearance Agreement. 4.1 Existence; Compliance with Applicable Laws. Each Borrower, Credit Party and Guarantor (a) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation or organization; (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification; (c) has the requisite power and authority and the legal right to own, pledge, mortgage, or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; and (d) is in compliance with its articles of incorporation or articles of organization, and its bylaws and operating agreements, as applicable. 4.2 Power, Authorization, Enforceable Obligations. The execution, delivery and performance by each Borrower, Credit Party and Guarantor (individually a "Person") of this Forbearance Agreement is: (a) within such Person's power; (b) have been duly authorized by all necessary corporate or limited liability company action; (c) does not contravene any provision of such Person's articles, bylaws, agreement of organization, or operating agreement as applicable; (d) does not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) does not conflict with or result in 9 the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) does not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Lender pursuant to the Loan Documents; and (g) does not require the consent or approval of any Governmental Authority or any other Person. This Forbearance Agreement shall be duly executed and delivered by each Borrower, Credit Party and Guarantor and shall constitute a legal, valid and binding obligation of each such Borrower, and Credit Party, and Guarantor, enforceable against it in accordance with its terms. 4.3 Ratification of Loan Documents. Each Borrower, Credit Party and Guarantor hereby ratifies and confirms that (a) each and every of the Loan Documents remains enforceable according to their terms, and (b) there are no known defenses and they have no known defenses to enforcement of the Loan Documents according to their terms. 4.4 Other Obligations Subordinate to Obligations in Loan Documents. Each Borrower, Credit Party and Guarantor represents and warrants that all loans, debts, agreements, liabilities and other obligations of said parties are subordinate to their obligation to repay the Obligations set forth in the Loan Documents. 4.5 No Litigation. No action, claim, lawsuit, demand, investigation or proceeding is now pending or threatened against any Borrower or Credit Party or Guarantor before any Governmental Authority or before any arbitrator or panel of arbitrators; and no Borrower, Credit Party or Guarantor has brought an action, claim, lawsuit, demand, investigation or proceeding against Lender. 4.6 Confirmation of Loan Documents; Confirmation of Guaranties; Unconditional Obligations; Waivers. Each of the Borrowers, Credit Party, and Guarantor hereby reaffirms, remakes and confirms each of their respective representations and warranties made in each of the Loan Documents. In addition, Guarantor reaffirms and remakes each of its obligations under its Guaranty and reaffirms and restates each and every term, condition, and provision of its Guaranty. In addition, Guarantor hereby agrees that its obligations under its Guaranty shall be unconditional, irrespective of (a) the absence of any attempt to collect the Loan from Borrower or any other Guarantor or other action to enforce the same, (c) the absence of PCHI and Ganesha as parties to this Forbearance Agreement, (d) the waiver or consent by Lender with respect to any provision of any of the Loan Documents, or any other agreement now or hereafter executed by Borrower and delivered to Lender, (e) Lender's election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. ss.101 et seq.) (the "Bankruptcy Code"), of the application of Section 1111(b)(2) of the Bankruptcy Code, (e) any borrowing or grant of a security interest by Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code, or (f) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Lender's claims for repayment of the Loan. Guarantor further reaffirms that its obligations under its Guaranty are primary and are separate and distinct from Borrower's obligations. Guarantor further represents and warrants that it has no defenses or claims against Lender that would or might affect the enforceability of its Guaranty and that its Guaranty remains in full force and effect. Guarantor irrevocably and permanently waives any and all rights of subrogation, reimbursement, indemnity, contribution or any 10 other claim arising from the existence of performance of its Guaranty which Guarantor may now or hereafter have against Borrower or any other person or entity (or their respective properties) directly or contingently liable for said obligations. Guarantor understands that if Lender forecloses by trustee's sale on one or more of the Deeds of Trust, Guarantor would then have a defense preventing Lender from thereafter enforcing said Guarantor's liability for the unpaid balance of the Loan. This defense arises because the trustee's sale would eliminate Guarantor's right of subrogation, and therefore Guarantor would be unable to obtain reimbursement from Borrower. Guarantor specifically waives this defense and all rights and defenses that Guarantor may have because the Loan is secured by real property. This means, among other things: (i) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; and (ii) if Lender forecloses on any real property collateral pledged by Borrower: (A) the amount of the Loan may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because the Loan is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or similar laws in other states. Guarantor waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, such as non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed said Guarantor's rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise. 4.7 Waiver of Objection to Lender's Motion for Relief from Automatic Stay. As consideration for and as an inducement to Lender to enter into this Forbearance Agreement, each Borrower, Credit Party and Guarantor represents and warrants that (a) should any Borrower or Credit Party or Guarantor file a petition or have a petition filed against it seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law ("Bankruptcy Proceeding"), and (b) should Lender become subject to any automatic stay imposed in said Bankruptcy Proceeding, then (c) each Borrower, Credit Party and Guarantor which is subject to a Bankruptcy Proceeding hereby irrevocably and unequivocally agree that it shall not object to nor file any motion or pleading or document in objection to, any motion filed by the Lender in the Bankruptcy Proceeding seeking relief from the automatic stay. 4.8 No Defaults. Except for the referenced Events of Default, no other known breaches, defaults or Events of Default have occurred under the Loan Documents, the Environmental Indemnity and the OC-PIN Guaranty, which have not been cured or which are continuing. 4.9 No Offsets. Each Borrower, Credit Party and Guarantor represents and warrants that it has no offset, credit, claim or setoff against any amount due or owing under the Loan Document, including but not limited to the aggregate total of $63,533,555.57 in principal and interest due and owing on the Loan as of May 18, 2005. 4.10 Authorizing Resolutions. Attached hereto as Exhibit "D" is the Unanimous Resolution of the Board of Directors of IHHI authorizing IHHI to execute this Forbearance Agreement and to agree to the terms and conditions set forth herein. Attached hereto as Exhibit "E" is the Unanimous Resolution of the Board of Directors of WMC-SA authorizing WMC-SA to execute this Forbearance 11 Agreement and to agree to the terms and conditions set forth herein. Attached hereto as Exhibit "F" is the Unanimous Resolution of the Board of Directors of WMC-A authorizing WMC-A to execute this Forbearance Agreement and to agree to the terms and conditions set forth herein. Attached hereto as Exhibit "G" is the Unanimous Resolution of the Board of Directors of Coastal authorizing Coastal to execute this Forbearance Agreement and to agree to the terms and conditions set forth herein. Attached hereto as Exhibit "H" is the Unanimous Resolution of the Board of Directors of Chapman authorizing Chapman to execute this Forbearance Agreement and to agree to the terms and conditions set forth herein. Attached hereto as Exhibit "J" is the Unanimous Resolution of the Managers of West Coast authorizing West Coast to execute this Forbearance Agreement and to agree to the terms and conditions set forth herein. Attached hereto as Exhibit "L" is the Unanimous Resolution of the Managers of OC-PIN authorizing OC-PIN to execute this Forbearance Agreement and to agree to the terms and conditions set forth herein. 4.11 Advice of Legal Counsel. Each Borrower, Credit Party and Guarantor represents, warrants and covenants that it has consulted with and received advice from its own legal counsel, that it has read this Forbearance Agreement and/or that its legal counsel has explained the contents of this Forbearance Agreement, that it understands the terms and conditions of this Forbearance Agreement, that it understands the legal consequences of executing this Forbearance Agreement, and agrees to execute the same. 5. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 5.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Forbearance Agreement: (a) Borrower fails to pay the Prepayment Amount to Lender on or before expiration of the Forbearance Period. (b) Any of the Borrowers, and/or Credit Party, and/or Guarantor, and/or any New Investor, for any reason fails to contribute all of the New Capital to IHHI prior to expiration of the Forbearance Period on the terms and conditions required by this Forbearance Agreement. (c) By expiration of the Forbearance Period, IHHI for any reason fails to have total paid-in-capital which equals or exceeds $30,000,000. (d) An Event of Default (other than the Events of Default existing as of the Effective Date of this Forbearance Agreement) occurs under any of the Loan Documents, the OC-PIN Guaranty, or the Environmental Indemnity. (e) A case or proceeding is commenced against any Borrower or Credit Party or Guarantor seeking a decree or order in respect of such Borrower or Credit Party or Guarantor (i) under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or Credit Party or Guarantor or for any substantial part of any such Borrower's or Credit Party's or Guarantor's assets, or (iii) ordering the winding-up or liquidation of the affairs of such Borrower or Credit 12 Party or Guarantor, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or a decree or order granting the relief sought in such case or proceeding is granted by a court of competent jurisdiction. (f) Any Borrower or Credit Party or Guarantor (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Borrower or Credit Party or Guarantor or for any substantial part of any such Borrower's or Credit Party's or Guarantor's assets, (iii) makes a general assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing; or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due. (g) Any Borrower or Credit Party or Guarantor enters into any agreement with any other lender, creditor or third party which materially impairs the ability of any Borrower, Credit Party or Guarantor to perform their obligations under this Forbearance Agreement or to perform their obligations under the Loan Documents. (h) Any Borrower or Credit Party or Guarantor commits a breach or default under this Forbearance Agreement (other than those referenced in Sections 5.1(a) through and including (g) hereinabove) and the same remains uncured for five (5) or more calendar days after receipt of notice thereof from Lender. 5.2 Remedies. If an Event of Default occurs under this Forbearance Agreement, Lender may, without notice, terminate Lender's Agreement to Forbear, in which event Lender shall have the right in its sole and absolute discretion, but not the obligation, to (a) record the Notices of Default with respect to each of the Deeds of Trust and proceed with the non-judicial foreclosure process, (b) file, serve, take or initiate any legal action or proceeding against any one or more of the Borrowers, Credit Party or Guarantor that Lender is permitted to take under the Loan Documents (including, but not limited to, filing a complaint for judicial foreclosure, and/or filing a complaint to enforce the obligations of OC-PIN under its Guaranty), (c) pursue each and every of the other rights and remedies granted to Lender in the Loan Documents, the OC-PIN Guaranty, and the Environmental Indemnity, (d) maintain the Default Interest in force and effect, (e) exercise any rights and remedies against PCHI and/or Ganesha granted to Lender in the Loan Documents, and (f) either continue in effect the suspension of the Line of Credit facility with respect to further Advances or terminate the Line of Credit facility with respect to further Advances, in Lender's sole and absolute discretion. 5.3 Waivers. Each Borrower, Credit Party and Guarantor agrees as follows: (a) Except as otherwise provided for in this Forbearance Agreement or by applicable law, each Borrower, Credit Party and Guarantor waives (i) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, (ii) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevy, attachment or levy upon, the Collateral or any bond or security that 13 might be required by any court prior to allowing Lender to exercise any of its remedies, and (iii) the benefit of all valuation, appraisal, marshaling and exemption laws. (b) One or more persons who may be a director, or an officer, or a shareholder, or a manager, or a member, of a Borrower or Credit Party or Guarantor, may also be a director, or an officer, or a shareholder, or a manager, or a member, in another Borrower or Credit Party or Guarantor. If said person is in a position to manage or control one or both of said Borrowers, or Credit Party, or Guarantor, said person may be deemed to be an "Insider" as that term is defined in 11 U.S.C. ss. 101. If any Borrowers or Credit Party or Guarantor have or share an Insider, then each such Borrower and/or Credit Party and/or Guarantor that has or shares an Insider hereby expressly waives, covenants and agrees not to bring or assert any cause of action or claim (as defined in 11 U.S.C. ss. 101) against any other Borrower or Credit Party or Guarantor that it may now have or that it may hereafter have, which cause of action or claim seeks to prevent any Borrower or Credit Party or Guarantor from making a payment to Lender of any amounts which said Borrower or Credit Party or Guarantor is obligated to make to Lender under this Forbearance Agreement or under any of the Loan Documents. 6. MISCELLANEOUS 6.1 Complete Agreement. This Forbearance Agreement constitutes the complete agreement between the parties with respect to the subject matter hereof. 6.2 Amendments and Waivers. Except for actions expressly permitted to be taken by Lender, no amendment, modification, termination or waiver of any provision of this Forbearance Agreement shall be effective unless the same shall be in writing and signed by the Lender and the Borrowers, Credit Party and Guarantor. 6.3 Reimburse Lender for All Fees and Expenses. Borrowers hereby agree to and shall (a) on the Effective Date, pay to Lender all attorneys' fees (including in-house counsel and outside counsel), costs, charges, expenses, foreclosure fees, trustee fees, recording charges, consultants fees, appraisal fees and other costs or expenses directly or indirectly paid or incurred by Lender in connection with the Events of Default and this Forbearance Agreement, and (b) following the Effective Date, within ten (10) calendar days of receipt of written demand therefore, reimburse Lender for all attorneys' fees (including in-house counsel and outside counsel), costs, charges, expenses, foreclosure fees, trustee fees, recording charges, consultants fees, appraisal fees and other costs or expenses directly or indirectly paid or incurred by Lender in connection with the Events of Default and this Forbearance Agreement. If Borrower for any reason fails to reimburse Lender the referenced fees and costs within ten (10) calendar days of receipt of written demand therefore, Lender shall have the right, without further notice, to make a draw upon the Line of Credit in the name and for the benefit of Borrower in the amount of the fees and costs demanded. In said event, the amount drawn by Lender shall automatically be deemed a Line of Credit Advance made by Borrower from the Line of Credit pursuant to Section 1.1(b)(i) of the Credit Agreement and the same shall be repaid by Borrower pursuant to the terms of the Line of Credit Note. 6.4 No Waiver. Lender's failure, at any time or times, to require strict performance by the Borrowers and the Credit Party and the Guarantor of any 14 provision of this Forbearance Agreement or any other Loan Document shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same is of a different type. None of the undertakings, agreements, warranties, covenants and representations of any Borrower or Credit Party or Guarantor contained in this Forbearance Agreement, and no Event of Default, shall be deemed to have been suspended or waived by Lender, unless an unequivocal waiver or suspension is set forth in a writing signed by Lender. 6.5 Remedies. Lender's rights and remedies under this Forbearance Agreement shall be cumulative and nonexclusive of any other rights and remedies that Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. 6.6 Severability. Wherever possible, each provision of this Forbearance Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Forbearance Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Forbearance Agreement. 6.7 Survival. Each and every of the promises, covenants, representations, warranties, obligations, releases, waivers and indemnities of the parties to this Forbearance Agreement and the parties to the Loan Documents shall survive the expiration or termination of this Forbearance Agreement, the expiration or termination of Lender's Agreement to Forbear, and the expiration or termination of the Forbearance Period. 6.8 Conflict of Terms. Except as otherwise provided in this Forbearance Agreement, if any provision contained in this Forbearance Agreement conflicts with any provision in any of the Loan Documents, the provision contained in this Forbearance Agreement shall govern and control. 6.9 Confidentiality. Each of the Borrowers, Credit Party and Guarantor and Lender covenants and agrees to keep and maintain this Forbearance Agreement, the terms and conditions set forth in this Forbearance Agreement, and all documents and instruments executed or delivered in connection with this Forbearance Agreement (hereinafter, "Confidential Information") confidential for a period of two (2) years following the Effective Date hereof, except that Confidential Information: (a) may be disclosed to persons employed or engaged by Lender and the Borrowers, Credit Party and Guarantor; (b) may be disclosed as required or requested by any Governmental Authority or reasonably believed (based on advice of counsel) to be compelled by any court decree, subpoena or legal or administrative order or process; (c) may be disclosed to as required by law; (d) may be disclosed in connection with the exercise by Lender of any right or remedy granted to it under the Loan Documents and/or this Forbearance Agreement or in connection with any legal action or proceeding relative enforcing or interpreting any of the Loan Documents and/or this Forbearance Agreement; or (e) 15 may be disclosed to if the Confidential Information ceases to be confidential through no fault of any of the parties to this Forbearance Agreement. If any party to this Forbearance Agreement is required in any proceeding, by any court decree, subpoena or legal or administrative order or process, to disclose any Confidential Information, said party will use commercially reasonable efforts to give the other Borrowers and Credit Party and Guarantor and Lender, as applicable, prompt written notice of such request so that any Borrower or Credit Party or Guarantor or Lender may seek an appropriate protective order. If in the absence of a protective order, a party to this Forbearance Agreement is compelled in a proceeding to disclose any such Confidential Information, the disclosing party may disclose such portion of such Confidential Information that it is compelled to disclose; provided, however, that the disclosing party agrees to and shall use commercially reasonable efforts to provide Borrowers and to Credit Party and to Guarantor and to Lender, as applicable, written notice of the information to be disclosed as far in advance of its disclosure as is practicable. 6.10 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS FORBEARANCE AGREEMENT AND THE OBLIGATIONS SET FORTH HEREIN SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH BORROWER AND CREDIT PARTY AND GUARANTOR AND LENDER HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF NEVADA AND/OR THE FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA USING NEVADA LAW, SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE BORROWERS AND THE CREDIT PARTY AND THE GUARANTOR ON THE ONE HAND, AND LENDER, ON THE OTHER HAND, PERTAINING TO THIS FORBEARANCE AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS FORBEARANCE AGREEMENT. PROVIDED HOWEVER, NOTHING IN THIS FORBEARANCE AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN THE STATE OF CALIFORNIA, UNDER CALIFORNIA LAW, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS SET FORTH IN THE LOAN DOCUMENTS OR IN THIS FORBEARANCE AGREEMENT, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH BORROWER AND CREDIT PARTY AND GUARANTOR AND LENDER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION(S) IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT(S), AND EACH BORROWER, CREDIT PARTY, GUARANTOR, AND LENDER HEREBY WAIVES ANY OBJECTION THAT SUCH BORROWER OR CREDIT PARTY OR GUARANTOR OR LENDER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS 16 DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER, CREDIT PARTY, GUARANTOR AND LENDER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER, CREDIT PARTY, GUARANTOR OR TO LENDER AT THE ADDRESS SET FORTH IN ANNEX D OF THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S, CREDIT PARTY'S, GUARANTOR'S OR LENDER'S ACTUAL RECEIPT THEREOF OR THREE (3) BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID. 6.11 Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Forbearance Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered upon the earlier of: (a) actual receipt; or (b) three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with postage prepaid; or (c) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as provided in this Section 6.11(b) above); or (d) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (e) when delivered, if hand-delivered by messenger. All of the foregoing shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Annex D to the Credit Agreement or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person designated in Annex D to the Credit Agreement to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 6.12 No Third Party Beneficiaries. The undersigned do not intend that there are or will be, and there are not, any third party beneficiaries to this Forbearance Agreement, including any debtor or trustee in bankruptcy or successor-in-interest to any of the undersigned. 6.13 Time. Time is of the essence of this Forbearance Agreement. 6.14 Attorneys' Fees and Costs. If any party to this Forbearance Agreement institutes a suit against any other party to this Forbearance Agreement for violation of or to enforce or interpret this Forbearance Agreement, or if any party to this Forbearance Agreement intervenes in any suit in which any other party to this Forbearance Agreement seeks to enforce or protect its interest or rights hereunder, the prevailing party shall be entitled to all of its costs and expenses, including, without limitation, reasonable attorneys' fees, costs of suit, filing fees and charges, expert witness fees, fees of any arbitrators or mediators, printing, copying, telephone and facsimile expenses, messenger and courier services costs, and other similar costs or expenses of suit. 6.15 Section Titles. The Section titles contained in this Forbearance Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 17 6.16 Counterparts. This Forbearance Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. 6.17 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER, ANY BORROWER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS FORBEARANCE AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 6.18 Reinstatement. This Forbearance Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Borrower or Credit Party or Guarantor for liquidation or reorganization, should any Borrower or Credit Party or Guarantor become insolvent or make a general assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Borrower's or Credit Party's or Guarantor's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 6.19 Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Forbearance Agreement with its counsel and has received and considered the advice of its counsel. 6.20 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Forbearance Agreement. In the event an ambiguity or question of intent or interpretation arises, this Forbearance Agreement shall be construed as if drafted jointly by all parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Forbearance Agreement. 6.21 Exhibits. Exhibits "A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "K" and "L" attached to this Forbearance Agreement are incorporated by this reference as if fully set forth herein. 18 6.22 Authority. The persons signing below represent and warrant that they have the requisite authority to bind the entities on whose behalf they are signing. IN WITNESS WHEREOF, this Forbearance Agreement has been duly executed as of the date first written above. BORROWERS: INTEGRATED HEALTHCARE HOLDINGS, INC. a Nevada corporation By: /s/ Larry B. Anderson -------------------------------------------- Larry B. Anderson, President WMC-SA, INC., a California corporation By: /s/ Larry B. Anderson -------------------------------------------- Larry B. Anderson, President WMC-A, INC. a California corporation By: /s/ Larry B. Anderson -------------------------------------------- Larry B. Anderson, President COASTAL COMMUNITIES HOSPITAL, INC. a California corporation By: /s/ Larry B. Anderson -------------------------------------------- Larry B. Anderson, President [SIGNATURE PAGE CONTINUES] 19 CHAPMAN MEDICAL CENTER, INC., a California corporation By: /s/ Larry B. Anderson -------------------------------------------- Larry B. Anderson, President CREDIT PARTY: WEST COAST HOLDINGS, LLC, a California limited liability company, By: /s/ Anil Shah ----------------------------------- Anil V. Shah, M.D., Manager GUARANTOR: ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, \ a Nevada limited liability company, By: /s/ Anil Shah ----------------------------------------- Anil V. Shah, M.D., Manager LENDER: MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation, By: /s/ Joseph Lampariello ---------------------------------------- Joseph J. Lampariello, President and COO 20 EXHIBIT "A" May 9, 2005
VIA FEDERAL EXPRESS (TELEPHONE: VIA FEDERAL EXPRESS (TELEPHONE: 714-935-3575), AND VIA 714-434-9191), AND VIA FACSIMILE FACSIMILE (714-434-9505), AND VIA U.S. MAIL (POSTAGE (714-434-9505), AND VIA U.S. MAIL PREPAID, REGISTERED OR CERTIFIED, RETURN RECEIPT (POSTAGE PREPAID, REGISTERED OR CERTIFIED, RETURN RECEIPT REQUESTED) REQUESTED) INTEGRATED HEALTHCARE HOLDINGS, INC. INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 1301 North Tustin Avenue 695 Town Center Drive, Suite 260 Santa Ana, California 92705 Costa Mesa, California 92626 Attn: Larry Anderson, President Attn: Larry Anderson, President Bruce Mogel, CEO Bruce Mogel, CEO
AND TO THE CO-BORROWERS, CREDIT PARTY, GUARANTOR AND THEIR RESPECTIVE ATTORNEYS IDENTIFIED IN ANNEX A ATTACHED TO THIS LETTER Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 File No.: 2994-128721 Gentlemen: As you know, we are legal counsel to MEDICAL PROVIDER FINANCIAL CORPORATION II ("Medical Provider"). Medical Provider (as "Lender") and Integrated Healthcare Holdings, Inc. ("IHHI"), WMC-SA, Inc. ("WMC-SA"), WMC-A, Inc. ("WMC-A"), Coastal Communities Hospital, Inc. ("Coastal") and Chapman Medical Center, Inc. ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman INTEGRATED HEALTHCARE HOLDINGS, INC. Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 May 9, 2005 Page 22 collectively as "Borrowers") are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). Pacific Coast Holdings Investment, LLC ("PCHI"), Ganesha Realty, LLC ("Ganesha"), and West Coast Holdings, LLC ("West Coast") (collectively as "Credit Party") are also parties to the Credit Agreement. Pursuant to the Credit Agreement, Lender made available to the Borrowers the Acquisition Loan and the Line of Credit Commitment (together, the "Loan"). Borrowers have committed the following Events of Default under the Credit Agreement: a. Section 1.2(b)(ii) of the Credit Agreement provides as follows: In addition to the foregoing, if by the date which is thirty (30) calendar days from the Closing Date ("Mandatory Prepay Date"), Borrowers for any reason fail to acquire all of the Condominium Units from Sellers as provided in the Asset Sale Agreement with capital contributed to IHHI by its shareholders, then Borrowers agree to and shall on the Mandatory Prepay Date prepay the amount of $5,000,000 against outstanding principal balance of the Loans. Said $5,000,000 must consist of capital contributed to IHHI by its shareholders and may not constitute funds borrowed from any source. Said mandatory $5,000,000 prepayment shall be applied to the principal balance of the Acquisition Loan outstanding to Borrowers. Borrowers failed to purchase the Condominium Units and failed to prepay the $5,000,000 by the Mandatory Prepay Date, therefore Borrowers have committed an Event of Default under Sections 8.1(a) and (b) of the Credit Agreement. b. Section 8.1(v) of the Credit Agreement provides as follows: 8.1 Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "Event of Default" hereunder: (v) A Material Adverse Effect shall exist as determined in the sole judgment of Lender."(1) - ---------------------- (1) "Material Adverse Effect" is defined in Annex A to the Credit Agreement to mean "a material adverse effect on (a) the business, assets, operations, or financial or other condition of the Borrowers considered as a whole, (b) Borrowers' ability to pay any of the Loans or any of the other Obligations in accordance with the terms of the Agreement, (c) the Collateral or Lender's Liens on the Collateral or the priority of such Liens, or (d) Lender's rights and remedies under the Agreement and the other Loan Documents. INTEGRATED HEALTHCARE HOLDINGS, INC. Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 May 9, 2005 Page 23 Lender has determined that a combination of the following factors constitutes a Material Adverse Effect under the Credit Agreement: (i) pursuant to a Stock Purchase Agreement dated January 28, 2005 between IHHI and OC-PIN, OC-PIN promised, but failed, to invest $30,000,000 in IHHI for an aggregate 108,000,000 shares of common stock of IHHI; (ii) IHHI represented to Lender that OC-PIN would invest $30,000,000 in IHHI, and Lender relied on that representation when it agreed to make the Loan; (iii) IHHI failed by the Mandatory Prepay Date to either purchase the Condominium Units or make the mandatory $5,000,000 prepayment to Lender; (iv) in the approximate two month period since closing of the Loan, Borrower has borrowed $13,200,000 from the Line of Credit Loan, which is approximately $5,000,000 more than Borrower represented to Lender that it would borrow during that same time period; (v) Borrower is incurring significantly higher interest expenses than it originally projected because it has been required to borrow more money on the Line of Credit Loan than originally intended, in order to make up for the cash shortfall caused by OC-PIN's failed to invest the promised $30,000,000; and (vi) due to the foregoing, Lender believes that, without infusion of the entire $30,000,000 as promised, there is a substantial likelihood that Borrower will soon exhaust the Line of Credit Loan and run out of cash to operate the Hospital Facilities. Therefore, Lender has determined that a Material Adverse Effect has occurred and that an Event of Default under Section 8.1(v) of the Credit Agreement exists and is continuing. Pursuant to and as provided by Section 8.2(a) of the Credit Agreement, from and after the date of this Notice, and so long as the referenced Events of Default are continuing, the interest rates applicable to the Loans is hereby increased to the Default Rate, and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Pursuant to and as provided by Section 8.2(a) of the Credit Agreement, Lender hereby suspends the Line of Credit facility with respect to additional Advances, and any additional Advances will be made or incurred in Lender's sole discretion, at the Default Rate, so long as such Events of Default are continuing. Pursuant to and as provided by Section 8.2(b) of the Credit Agreement, Lender hereby declares all of the Obligations, including but not limited to the Loan, to be forthwith due and payable. The total amount of principal due and owing under the Acquisition Loan is $50,000,000, plus accrued plus unpaid interest through May 8, 2005 in the amount of $583,333.33, and the total amount of principal due and owing under the Line of Credit Loan is $13,200,000, plus $154,000 in accrued but unpaid interest through May 8, 2005. Additional accrued but unpaid interest (at the Default Rate), attorneys' fees and costs, costs of collection, trustee's fees and costs, and all other fees, charges and expenses paid or incurred by Lender will be in addition to the foregoing. INTEGRATED HEALTHCARE HOLDINGS, INC. Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 May 9, 2005 Page 24 Be advised that Lender has the right, but is under no legal obligation to, discuss and negotiate with any Borrower, any Credit Party or any Guarantor with respect to the foregoing. In no event will any such discussion or negotiation with any Borrower, any Credit Party or any Guarantor be construed as a forbearance by Lender of the right to exercise its rights and remedies under the Loan Documents, the Guaranties, or applicable law. Further, no discussion or negotiation with any Borrower, any Credit Party, or any Guarantor shall constitute a waiver, amendment or modification of any Loan Document or Guaranty. The failure or delay by Lender to exercise any of its rights and remedies under the Loan Documents or Guaranties, or under applicable law, shall not constitute a waiver of Lender's right to exercise the same at any time or from time to time. Very truly yours, Gary C. Sheppard Sedgwick, Detert, Moran & Arnold LLP GCS/ms Annex A Attached cc: Joey Lampariello, President and COO (via email) Adam Field, Sr. Vice President Development (via email) Thomas Fazio, General Counsel (via email) INTEGRATED HEALTHCARE HOLDINGS, INC. Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 May 9, 2005 Page 1 ATTACHMENT A TO NOTICE OF DEFAULT NOTICE ADDRESSES OF CO-BORROWERS, CREDIT PARTY AND GUARANTOR DELIVER A SEPARATE COPY TO EACH ADDRESSEE IDENTIFIED BELOW BY FACSIMILE AND, ON THE SAME DAY, DEPOSIT A COPY IN THE U.S. MAIL ADDRESSED TO EACH ADDRESSEE (POSTAGE PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED) To: WMC-SA, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: WMC-A, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: COASTAL COMMUNITIES HOSPITAL, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 INTEGRATED HEALTHCARE HOLDINGS, INC. Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 May 9, 2005 Page 2 To: CHAPMAN MEDICAL CENTER, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: Hooper Lundy & Bookman, Inc. 1875 Century Park East, Suite 1600 Los Angeles, CA 90067-3208 Attn: Todd E. Swanson, Esq. Ph: 310-551-8195 Fax: 310-551-8181 To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Attn: Anil Shah, Co-Manager Ph: 714-290-5322 Fax: 714-297-9588 To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 To: GANESHA REALTY LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 INTEGRATED HEALTHCARE HOLDINGS, INC. Re: Notice of Events of Default Credit Agreement Dated as of March 3, 2005 May 9, 2005 Page 3 To: WEST COAST HOLDINGS, LLC 2621 South Bristol, Suite 108 Santa Ana, California 92704 Attn: Anil V. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 To: Hari Lal, Esq. 1000 South Anaheim Boulevard, Suite 230 Anaheim, CA 92805 Ph: 714-635-1646 Fax: 714-635-2457 To: ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC 2621 South Bristol, Suite 108 Santa Ana, California 92704 Attn: Anil V. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 EXHIBIT "B" May 9, 2005
VIA FEDERAL EXPRESS (TELEPHONE: VIA FEDERAL EXPRESS (TELEPHONE: 714-953-3575), AND VIA 714-434-9191), AND VIA FACSIMILE FACSIMILE (714-434-9505), AND VIA U.S. MAIL (POSTAGE (714-434-9505), AND VIA U.S. MAIL PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT (POSTAGE PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN REQUESTED) RECEIPT REQUESTED) INTEGRATED HEALTHCARE HOLDINGS, INC. INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 1301 North Tustin Avenue 695 Town Center Drive, Suite 260 Santa Ana, California 92705 Costa Mesa, California 92626 Attn: Larry Anderson, President Attn: Larry Anderson, President Bruce Mogel, CEO Bruce Mogel, CEO
AND TO THE CO-BORROWERS, CREDIT PARTY, GUARANTOR AND THEIR RESPECTIVE ATTORNEYS IDENTIFIED IN ANNEX A ATTACHED TO THIS LETTER Re: Notice of Failure To Comply With Covenant Credit Agreement Dated as of March 3, 2005 File No.: 2994-128721 Gentlemen: As you know, we are legal counsel to MEDICAL PROVIDER FINANCIAL CORPORATION II ("Medical Provider"). Medical Provider (as "Lender") and Integrated Healthcare Holdings, Inc. ("IHHI"), WMC-SA, Inc. ("WMC-SA"), WMC-A, Inc. ("WMC-A"), Coastal Communities Hospital, Inc. ("Coastal") and Chapman Medical Center, Inc. ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman collectively as "Borrowers") are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). Pacific Coast Holdings Investment, LLC ("PCHI"), Ganesha Realty, LLC ("Ganesha"), and West Coast Holdings, LLC ("West Coast") (collectively as "Credit Parties") are also parties to the Credit Agreement. Pursuant to the Credit Agreement, Lender made available to the Borrowers, and for the benefit of the Credit Party, the Acquisition Loan and the Line of Credit Commitment (together, the "Loan"). Borrowers have failed to comply with the following covenant under the Credit Agreement: a. Section 2.1(s) of the Credit Agreement provides as follows: 2.1 Conditions Precedent to the Closing Date. Lender shall not be obligated to take, fulfill, or perform any action hereunder on or after the Closing Date until the following conditions precedent have been satisfied or provided for in a manner satisfactory to Lender, in its sole discretion, or waived in writing by Lender, it being understood that Lender shall consider a constituent transaction referred to in this Section 2.1 to have been consummated when all conditions precedent to such transaction have been satisfied or waived and that the only remaining action is the funding of the Acquisition Loan and the Initial Draw: (s) Lender shall have received evidence satisfactory to it that IHHI has received capital contributions of not less than Fifteen Million Dollars ($15,000,000). Section 8.1(d) of the Credit Agreement provides that an Event of Default shall occur if any Borrower or any Credit Party fails or neglects to perform, keep or observe any other provision of this Agreement (other than any provision embodied in or covered by any other clause of this Section 8.1) and the same shall remain unremedied in whole or in part for fifteen (15) calendar days or more after the earlier of (i) such Borrowers' actual knowledge thereof or (ii) such Borrowers' receipt of notice thereof from Lender. Please accept this as the notice required by Section 8.1(d)(ii) of the Credit Agreement. Borrower has fifteen (15) calendar days following the date of its receipt of this notice within which to provide Lender with satisfactory evidence that IHHI has received capital contributions of not less than Fifteen Million Dollars ($15,000,000). Otherwise, an Event of Default will have occurred. In said event, Lender will exercise its rights and remedies as provided in the Loan Documents, the Guaranties, at law or in equity. In addition, Lender will have the right, but will be under no legal obligation to, discuss and negotiate with any Borrower, any Credit Party or any Guarantor with respect to the foregoing. In no event will any such discussion or negotiation with any Borrower, any Credit Party or any Guarantor be construed as a forbearance by Lender of the right to exercise its rights and remedies under the Loan Documents, the Guaranties, or applicable law. Further, no discussion or negotiation with any Borrower, any Credit Party, or any Guarantor shall constitute a waiver, amendment or modification of any Loan Document or Guaranty. The failure or delay by Lender to exercise any of its rights and remedies under the Loan Documents or Guaranties, or under applicable law, shall not constitute a waiver of Lender's right to exercise the same at any time or from time to time. Very truly yours, Gary C. Sheppard Sedgwick, Detert, Moran & Arnold LLP GCS/ms Annex A Attached cc: Joey Lampariello, President and COO (via email) Adam Field, Sr. Vice President Development (via email) Thomas Fazio, General Counsel (via email) ATTACHMENT A TO NOTICE OF FAILURE TO COMPLY WITH COVENANT NOTICE ADDRESSES OF CO-BORROWERS, CREDIT PARTY AND GUARANTOR DELIVER A SEPARATE COPY TO EACH ADDRESSEE IDENTIFIED BELOW BY FACSIMILE AND, ON THE SAME DAY, DEPOSIT A COPY IN THE U.S. MAIL ADDRESSED TO EACH ADDRESSEE (POSTAGE PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED) To: WMC-SA, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: WMC-A, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: COASTAL COMMUNITIES HOSPITAL, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: CHAPMAN MEDICAL CENTER, INC. c/o INTEGRATED HEALTHCARE HOLDINGS, INC. c/o Mogel Management Group, LLC 695 Town Center Drive, Suite 260 Costa Mesa, California 92626 Attn: Larry Anderson, President Bruce Mogel, Chairman Ph: 714-434-9191 Fax: 714-434-9505 To: Hooper Lundy & Bookman, Inc. 1875 Century Park East, Suite 1600 Los Angeles, CA 90067-3208 Attn: Todd E. Swanson, Esq. Ph: 310-551-8195 Fax: 310-551-8181 To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC 2621 S. Bristol Street Suite 108 Santa Ana, CA 92704 Attn: Anil Shah, Co-Manager Ph: 714-290-5322 Fax: 714-297-9588 To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph: 951-782-8812 Fax: 951-766-9944 To: GANESHA REALTY LLC c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, California 92506 Attn: Dr. Chaudhuri William Thomas, Esq. Ph : 951-782-8812 Fax: 951-766-9944 To: WEST COAST HOLDINGS, LLC 2621 South Bristol, Suite 108 Santa Ana, California 92704 Attn: Anil V. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 To: Hari Lal, Esq. 1000 South Anaheim Boulevard, Suite 230 Anaheim, CA 92805 Ph: 714-635-1646 Fax: 714-635-2457 To: ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC 2621 South Bristol, Suite 108 Santa Ana, California 92704 Attn: Anil V. Shah, Manager Ph: 714-290-5322 Fax: 714-297-9588 EXHIBIT "C" [RESERVED] EXHIBIT "D" UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF INTEGRATED HEALTHCARE HOLDINGS, INC. June __, 2005 Pursuant to N.R.S. Section 78.315, as amended, the undersigned, being the entire Board of Directors (the "Board") of Integrated Healthcare Holdings, Inc., a Nevada corporation (the "Corporation"), does hereby consent to and adopt in all respects the following resolutions. AGREEMENT TO FORBEAR WHEREAS, the Corporation, 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") (the Corporation, WMC-SA, WMC-A, Chapman and Coastal together as "Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC, a California limited liability company ("West Coast"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and the Corporation are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Corporation acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between the Corporation on the one hand and OC-PIN on the other, in that the Corporation claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to the Corporation; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to the Corporation; and WHEREAS, the Corporation has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the Corporation and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Corporation (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the Board has determined it to be in the best interest of the Corporation to execute the Forbearance Agreements on behalf of the Corporation; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the Board, and the Board believes that it is in the best interest of the Corporation to approve same on behalf of the Corporation. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial Officer, President, any Vice President, Treasurer, Assistant Treasurer, Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby is, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the Board, for and on behalf of the Corporation, with such changes thereto as the Proper Officer executing the same shall in his sole discretion deem necessary or desirable and in the best interest of the Corporation, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that any Proper Officer of the Corporation be, and each hereby is, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the Proper Officer so acting deems necessary or desirable, for and on behalf of the Corporation, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the Corporation is hereby authorized, on behalf of the Corporation, to certify and attest any documents that such officer may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that all Proper Officers of the Corporation are hereby severally authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Corporation, or otherwise, as any such Proper Officer shall, in such Proper Officer's sole discretion, deem necessary or desirable and in the best interest of the Corporation in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such Proper Officer's signature, or such actions taken by such Proper Officer, shall be conclusive evidence that such Proper Officer did deem same to be necessary or desirable and in the best interest of the Corporation in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by any Proper Officer of the Corporation prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. DIRECTORS: ------------------------------ Bruce Mogel ------------------------------ Larry B. Anderson ------------------------------ James T. Ligon ------------------------------ Anil V. Shah, M.D. EXHIBIT "E" UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF WMC-SA, INC. June __, 2005 Pursuant to Section 307(b) of the California Corporations Code, the undersigned, being the entire Board of Directors (the "Board") of WMC-SA, Inc., a California corporation (the "Corporation"), does hereby consent to and adopt in all respects the following resolutions. AGREEMENT TO FORBEAR WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), WMC-A, INC., a California corporation ("WMC-A"), Chapman Medical Center, Inc., a California corporation ("Chapman"), Coastal Communities Hospital, Inc., a California corporation ("Coastal") (the Corporation, IHHI, WMC-A, Chapman and Coastal together as "Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC, a California limited liability company ("West Coast"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Corporation acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between IHHI on the one hand and OC-PIN on the other, in that IHHI claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to IHHI; and WHEREAS, the Corporation has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the IHHI and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Corporation (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the Board has determined it to be in the best interest of the Corporation to execute the Forbearance Agreements on behalf of the Corporation; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the Board, and the Board believes that it is in the best interest of the Corporation to approve same on behalf of the Corporation. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial Officer, President, any Vice President, Treasurer, Assistant Treasurer, Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby is, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the Board, for and on behalf of the Corporation, with such changes thereto as the Proper Officer executing the same shall in his sole discretion deem necessary or desirable and in the best interest of the Corporation, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that any Proper Officer of the Corporation be, and each hereby is, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the Proper Officer so acting deems necessary or desirable, for and on behalf of the Corporation, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the Corporation is hereby authorized, on behalf of the Corporation, to certify and attest any documents that such officer may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that all Proper Officers of the Corporation are hereby severally authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Corporation, or otherwise, as any such Proper Officer shall, in such Proper Officer's sole discretion, deem necessary or desirable and in the best interest of the Corporation in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such Proper Officer's signature, or such actions taken by such Proper Officer, shall be conclusive evidence that such Proper Officer did deem same to be necessary or desirable and in the best interest of the Corporation in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by any Proper Officer of the Corporation prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. DIRECTORS: ------------------------------ Bruce Mogel ------------------------------ Larry B. Anderson EXHIBIT "F" UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF WMC-A, INC. June __, 2005 Pursuant to Section 307(b) of the California Corporations Code, the undersigned, being the entire Board of Directors (the "Board") of WMC-A, Inc., a California corporation (the "Corporation"), does hereby consent to and adopt in all respects the following resolutions. AGREEMENT TO FORBEAR WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), Chapman Medical Center, Inc., a California corporation ("Chapman"), Coastal Communities Hospital, Inc., a California corporation ("Coastal") (the Corporation, IHHI, WMC-SA, Chapman and Coastal together as "Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC, a California limited liability company ("West Coast"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Corporation acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between IHHI on the one hand and OC-PIN on the other, in that IHHI claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to IHHI; and WHEREAS, the Corporation has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the IHHI and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Corporation (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the Board has determined it to be in the best interest of the Corporation to execute the Forbearance Agreements on behalf of the Corporation; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the Board, and the Board believes that it is in the best interest of the Corporation to approve same on behalf of the Corporation. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial Officer, President, any Vice President, Treasurer, Assistant Treasurer, Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby is, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the Board, for and on behalf of the Corporation, with such changes thereto as the Proper Officer executing the same shall in his sole discretion deem necessary or desirable and in the best interest of the Corporation, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that any Proper Officer of the Corporation be, and each hereby is, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the Proper Officer so acting deems necessary or desirable, for and on behalf of the Corporation, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the Corporation is hereby authorized, on behalf of the Corporation, to certify and attest any documents that such officer may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that all Proper Officers of the Corporation are hereby severally authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Corporation, or otherwise, as any such Proper Officer shall, in such Proper Officer's sole discretion, deem necessary or desirable and in the best interest of the Corporation in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such Proper Officer's signature, or such actions taken by such Proper Officer, shall be conclusive evidence that such Proper Officer did deem same to be necessary or desirable and in the best interest of the Corporation in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by any Proper Officer of the Corporation prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. DIRECTORS: ------------------------------ Bruce Mogel ------------------------------ Larry B. Anderson EXHIBIT "G" UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF COASTAL COMMUNITIES HOSPITAL, INC. June __, 2005 Pursuant to Section 307(b) of the California Corporations Code, the undersigned, being the entire Board of Directors (the "Board") of Coastal Communities Hospital, Inc., a California corporation (the "Corporation"), does hereby consent to and adopt in all respects the following resolutions. AGREEMENT TO FORBEAR WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), and Chapman Medical Center, Inc., a California corporation ("Chapman") (the Corporation, IHHI, WMC-SA, WMC-A and Chapman together as "Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC, a California limited liability company ("West Coast"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Corporation acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between IHHI on the one hand and OC-PIN on the other, in that IHHI claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to IHHI; and WHEREAS, the Corporation has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the IHHI and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Corporation (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the Board has determined it to be in the best interest of the Corporation to execute the Forbearance Agreements on behalf of the Corporation; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the Board, and the Board believes that it is in the best interest of the Corporation to approve same on behalf of the Corporation. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial Officer, President, any Vice President, Treasurer, Assistant Treasurer, Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby is, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the Board, for and on behalf of the Corporation, with such changes thereto as the Proper Officer executing the same shall in his sole discretion deem necessary or desirable and in the best interest of the Corporation, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that any Proper Officer of the Corporation be, and each hereby is, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the Proper Officer so acting deems necessary or desirable, for and on behalf of the Corporation, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the Corporation is hereby authorized, on behalf of the Corporation, to certify and attest any documents that such officer may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that all Proper Officers of the Corporation are hereby severally authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Corporation, or otherwise, as any such Proper Officer shall, in such Proper Officer's sole discretion, deem necessary or desirable and in the best interest of the Corporation in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such Proper Officer's signature, or such actions taken by such Proper Officer, shall be conclusive evidence that such Proper Officer did deem same to be necessary or desirable and in the best interest of the Corporation in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by any Proper Officer of the Corporation prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. DIRECTORS: ------------------------------ Bruce Mogel ------------------------------ Larry B. Anderson EXHIBIT "H" UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF CHAPMAN MEDICAL CENTER, INC. June __, 2005 Pursuant to Section 307(b) of the California Corporations Code, the undersigned, being the entire Board of Directors (the "Board") of Chapman Medical Center, Inc., a California corporation (the "Corporation"), does hereby consent to and adopt in all respects the following resolutions. AGREEMENT TO FORBEAR WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), and Coastal Community Hospital, Inc., a California corporation ("Coastal") (the Corporation, IHHI, WMC-SA, WMC-A and Coastal together as "Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC, a California limited liability company ("West Coast"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Corporation acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between IHHI on the one hand and OC-PIN on the other, in that IHHI claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to IHHI; and WHEREAS, the Corporation has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the IHHI and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Corporation (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the Board has determined it to be in the best interest of the Corporation to execute the Forbearance Agreements on behalf of the Corporation; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the Board, and the Board believes that it is in the best interest of the Corporation to approve same on behalf of the Corporation. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial Officer, President, any Vice President, Treasurer, Assistant Treasurer, Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby is, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the Board, for and on behalf of the Corporation, with such changes thereto as the Proper Officer executing the same shall in his sole discretion deem necessary or desirable and in the best interest of the Corporation, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that any Proper Officer of the Corporation be, and each hereby is, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the Proper Officer so acting deems necessary or desirable, for and on behalf of the Corporation, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the Corporation is hereby authorized, on behalf of the Corporation, to certify and attest any documents that such officer may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that all Proper Officers of the Corporation are hereby severally authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Corporation, or otherwise, as any such Proper Officer shall, in such Proper Officer's sole discretion, deem necessary or desirable and in the best interest of the Corporation in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such Proper Officer's signature, or such actions taken by such Proper Officer, shall be conclusive evidence that such Proper Officer did deem same to be necessary or desirable and in the best interest of the Corporation in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by any Proper Officer of the Corporation prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. DIRECTORS: ------------------------------ Bruce Mogel ------------------------------ Larry B. Anderson EXHIBIT "I" [RESERVED] EXHIBIT "J" UNANIMOUS WRITTEN CONSENT OF THE MANAGERS OF WEST COAST HOLDINGS, LLC June __, 2005 The undersigned, constituting all of the managers of West Coast Holdings, LLC, a California limited liability company (the "Company"), acting pursuant to the authority granted to them under the Beverly-Killea Limited Liability Company Act of the State of California and the Operating Agreement of the Company, do hereby adopt, ratify and approve the following resolutions and direct the managers of the Company to place a copy hereof in the Company's book of minutes. AGREEMENT TO FORBEAR WHEREAS, Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), Coastal Community Hospital, Inc., a California corporation ("Coastal") and Chapman Medical Center, Inc., a California corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Chapman and Coastal together as "Borrowers"), and the Company, Pacific Coast Holdings, LLC, a California limited liability company ("PCHI"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha") (the Company, PCHI and Ganesha together as "Credit Party"), and Medical Provider Financial Company II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, PCHI and the Lender are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and the Company are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Company Pledge Agreement"); Lender and the individual members of the Company are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of the Company Pledge Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("IHHI Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the Company Pledge Agreement, the Members of the Company Pledge Agreement, the IHHI Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Company acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Company acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between IHHI on the one hand and OC-PIN on the other, in that IHHI claims that the Events of Default occurred because of OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and OC-PIN claims that it was not required to contribute a total of $30,000,000 in capital to IHHI; and WHEREAS, the Company has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the IHHI and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Company (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the managers of the Company have determined it to be in the best interest of the Company to execute the Forbearance Agreements on behalf of the Company; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the managers of the Company, and the managers of the Company believes that it is in the best interest of the Company to approve same on behalf of the Company. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the managers be, and hereby are, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the managers, for and on behalf of the Company, with such changes thereto as the manager executing the same shall in his discretion deem necessary or desirable and in the best interest of the Company, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that the managers be, and hereby are, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the managers deem necessary or desirable, for and on behalf of the Company, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the managers are hereby authorized, on behalf of the Company, to certify and attest any documents that such managers may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that the managers are hereby authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Company, or otherwise, as said managers shall in their discretion deem necessary or desirable and in the best interest of the Company in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such managers signature, or such actions taken by such managers, shall be conclusive evidence that such managers did deem same to be necessary or desirable and in the best interest of the Company in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by such manager s prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. MANAGERS: ------------------------------ A.J. Meka, M.D. ------------------------------ Anil V. Shah, M.D. EXHIBIT "K" [RESERVED] EXHIBIT "L" WRITTEN CONSENT OF THE MANAGER OF ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC June __, 2005 The undersigned, constituting the sole manager of Orange County Physicians Investment Network, LLC, a Nevada limited liability company (the "Company"), acting pursuant to the laws of the State of Nevada, do hereby adopt, ratify and approve the following resolutions and direct the manager of the Company to place a copy hereof in the Company's book of minutes. AGREEMENT TO FORBEAR WHEREAS, Integrated Healthcare Holdings, Inc., a Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), Coastal Community Hospital, Inc., a California corporation ("Coastal") and Chapman Medical Center, Inc., a California corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Chapman and Coastal together as "Borrowers"), and Ganesha Realty, LLC, a California limited liability company ("Ganesha"), West Coast Holdings, LLC, a California limited liability company ("West Coast"), and Pacific Coast Holdings, LLC, a California limited liability company ("PCHI") (the Company, West Coast and PCHI together as "Credit Party"), and Medical Provider Financial Company II, a Nevada corporation ("Lender"), are parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and the PCHI are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and the company are parties to that certain Guaranty Agreement dated as of March 3, 2005 ("Company Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the individual members of West Coast are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated as of March 3, 2005 ("IHHI Pledge Agreement"); and Lender and Ganesha are parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the Company Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the IHHI Pledge Agreement, the Ganesha Pledge Agreement, and each of the other documents and instruments executed in connection with the Credit Agreement are hereinafter collectively referred to as the "Loan Documents." Capitalized terms not defined herein shall have the same meaning as in the Loan Documents; and WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital Facilities; and Lender extended to Borrowers a non-revolving line of credit facility of up to $30,000,000 ("Line of Credit Loan") to be used for working capital and the other purposes permitted by the Loan Documents. The Acquisition Loan and Line of Credit Loan are hereinafter together referred to as the "Loan." The Company acknowledges and agrees that the aggregate total of principal and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and WHEREAS, the Borrowers have committed certain events of default ("Events of Default") under the Loan Documents, as more particularly set forth (i) in that certain letter from Lender to Borrowers and others entitled Notice of Events of Default dated May 9, 2005, and (ii) in that certain letter from Lender to Borrowers and others entitled Notice of Failure to Comply With Covenant dated May 9, 2005. The Company acknowledges receipt of these two notices and agrees that the Events of Default specified therein occurred and are continuing; and WHEREAS, a dispute has arisen by and between IHHI on the one hand and the Company on the other, in that IHHI claims that the Events of Default occurred because of the Company's failure to contribute a total of $30,000,000 in capital to IHHI; and the Company claims that it was not required to contribute a total of $30,000,000 in capital to IHHI; and WHEREAS, the Company has requested that Lender forbear from exercising its rights and remedies granted to Lender under the Loan Documents, and the Lender has agreed to forbear from exercising its rights and remedies under the Loan Documents solely for the purposes of providing the IHHI and OC-PIN additional time to cure the Events of Default; and WHEREAS, a condition to Lender agreeing to forbear is that the Company (along with the other Borrowers, the Client Parties and the Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated June __, 2005 ("Forbearance Agreement"); and WHEREAS, the manager s of the Company has determined it to be in the best interest of the Company to execute the Forbearance Agreements on behalf of the Company; and WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or discussed with the manager and with the members of the Company, and the manager and the members of the Company believe that it is in the best interest of the Company to approve same on behalf of the Company. NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions of the Forbearance Agreement, and any and all such actions contemplated thereby, are hereby adopted and approved in all respects, as the same may be changed in accordance with these resolutions. RESOLVED FURTHER, that the manager be, and each hereby is, authorized, empowered and directed to execute and deliver the Forbearance Agreement in substantially the form and content as approved hereby by the manager and the members, for and on behalf of the Company, with such changes thereto as the manager shall in his discretion deem necessary or desirable and in the best interest of the Company, the execution and delivery of the Forbearance Agreement with such changes to be conclusive evidence that such changes did meet such standard. RESOLVED FURTHER, that the manager be, and each hereby is, authorized, empowered and directed to execute such other instruments and documents (including without limitation any and all other agreements, financing statements, mortgages, deeds of trust, security agreements, pledge agreements, collateral assignments, certificates, or other documents which may be described in the Forbearance Agreement and/or the documents related thereto or necessary or required by the Lender), and to take such other actions as the manager deems necessary or desirable, for and on behalf of the Company, to comply with and to carry out the terms and provisions of the Forbearance Agreement, and otherwise to effectuate the transactions contemplated by these resolutions. RESOLVED FURTHER, that the manager is hereby authorized, on behalf of the Company, to certify and attest any documents that such manager may deem necessary or appropriate to consummate the transactions contemplated by the Forbearance Agreement; provided that such certification and attestation shall not be required for the validity of any such documents. RESOLVED FURTHER, that the Lender may rely on these resolutions and these resolutions shall remain in full force and effect until such time as notice to the contrary is duly delivered to the Lender and receipted for in writing by the Lender. GENERAL RESOLUTIONS RESOLVED, that the manager is hereby authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, consents, waivers and documents, and to take, or cause to be taken, any and all actions, in the name and on behalf of the Company, or otherwise, as such manager shall in his discretion deem necessary or desirable and in the best interest of the Company in order to effect the transactions contemplated by the foregoing resolutions, and in order to carry out the purposes of the foregoing resolutions, and such managers signatures, or such actions taken by such manager shall be conclusive evidence that such manager did deem same to be necessary or desirable and in the best interest of the Company in order to effect such purposes. RESOLVED FURTHER, that each and every action taken by such manager prior to the date of the adoption of the foregoing resolutions which would have been authorized by the foregoing resolutions but for the fact that such actions were taken prior to such date, be, and each is hereby, ratified, approved, confirmed, and adopted in all respects, including but not limited to the actions under the Forbearance Agreement and any agreements, consents and/ or waivers required by any other third party or lender to permit the transactions described herein. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous Consent to be effective as of the date first above written. MANAGER: ------------------------------ Anil V. Shah, M.D. -----END PRIVACY-ENHANCED MESSAGE-----