EXHIBIT 99.1
AGREEMENT TO FORBEAR
This AGREEMENT TO FORBEAR ("FORBEARANCE AGREEMENT") is made to be effective
as of June 18, 2007 (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"), PACIFIC COAST HOLDINGS
INVESTMENT, LLC, a California limited liability company ("PCHI"), ORANGE COUNTY
PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company
("OC-PIN"), GANESHA REALTY, LLC, a California limited liability company
("GANESHA"), WEST COAST HOLDINGS, LLC, a California limited liability company
("WEST COAST"), MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada corporation
("MPFC II"), MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation
("MPFC III"); and MEDICAL CAPITAL CORPORATION, a Nevada corporation ("MCC").
RECITALS
A. MPFC II (as "$80 MILLION LENDER"), IHHI, WMC-SA, WMC-A, Chapman and
Coastal (as "$80 MILLION BORROWERS"), PCHI, Ganesha and West Coast (as "$80
MILLION CREDIT PARTIES"), and PCHI and OC-PIN (as "$80 MILLION GUARANTORS") are
parties to that certain Credit Agreement dated as of March 3, 2005 ("$80 MILLION
CREDIT AGREEMENT"). Pursuant to the $80 Million Credit Agreement, the $80
Million Lender made available to the $80 Million Borrowers a credit facility in
the total amount of $80,000,000 ("$80 MILLION CREDIT FACILITY"). The $80 Million
Credit Facility is composed of two (2) separate loans: (i) a $50,000,000
Acquisition Advance loan ("$50 MILLION ACQUISITION LOAN"); and (ii) a
$30,000,000 Line of Credit Loan ("$30 MILLION LINE OF CREDIT LOAN"). The $50
Million Acquisition Loan is evidenced by that certain $50,000,000 Acquisition
Promissory Note dated as of March 3, 2005, executed by the $80 Million Borrowers
in favor of the $80 Million Lender ("$50 MILLION NOTE"); and the $30 Million
Line of Credit Loan is evidenced by that certain $30,000,000 Line of Credit
Promissory Note dated as of March 3, 2005, executed by the $80 Million Borrowers
in favor of the $80 Million Lender ("$30 MILLION LINE OF CREDIT NOTE").
Repayment of the $50 Million Note and the $30 Million Line of Credit Note is
secured in part by (a) 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 of the recorder of Orange County, California ("OFFICIAL
RECORDS") on March 8, 2005 as Document no. 2005000169280 and encumbers the fee
title to the Western Medical Center - Santa Ana, the Western Medical Center -
Anaheim, and the Coastal Communities Hospital (all as defined in the $80 Million
Credit Agreement) (hereinafter the "$80 MILLION FEE DEED OF TRUST"); and (b)
that certain Leasehold 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. 2005000169281 and encumbering IHHI's
interest, as tenant/lessee, in the Chapman Medical Office Building Lease and in
the Chapman Hospital Lease (all as defined therein) (hereinafter, the "$80
MILLION LEASEHOLD DEED OF TRUST") (the $80 Million Fee Deed of Trust and the $80
Million Leasehold Deed of Trust are hereinafter together referred to as the "$80
MILLION DEEDS OF TRUST"). The $80 Million Credit Agreement, the $50 Million
Note, the $30 Million Line of Credit Note, the $80 Million Deeds of Trust, the
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Security Agreement executed by the $80 Million Borrowers in favor of the $80
Million Lender (the "$80 MILLION SECURITY AGREEMENT"), the Pledge Agreements
executed by IHHI, Ganesha, West Coast, and certain Members of West Coast in
favor of the $80 Million Lender (collectively the "$80 MILLION PLEDGE
AGREEMENTS"), the Guaranty Agreements executed by PCHI and OC-PIN in favor of
the $80 Million Lender (together the "$80 MILLION GUARANTY AGREEMENTS"), and
each of the other documents and instruments executed in connection with the $80
Million Credit Agreement are hereinafter collectively referred to as the "$80
MILLION LOAN DOCUMENTS."
B. MPFC III (as the "$10.7 MILLION LENDER"), IHHI (as the $10.7 MILLION
BORROWER"), WMC-SA, WMC-A, Chapman, Coastal, PCHI, OC-PIN, Ganesha and West
Coast (as "$10.7 MILLION CREDIT PARTIES"), and PCHI and OC-PIN (as "$10.7
MILLION GUARANTORS") are parties to that certain Credit Agreement dated as of
December 12, 2005 ("$10.7 MILLION CREDIT Agreement"). Pursuant to the $10.7
Million Credit Agreement, the $10.7 Million Lender made available to the $10.7
Borrower a new loan in the amount of $10,700,000 ("$10.7 MILLION LOAN"). The
$10.7 Million Loan is evidenced by that certain $10,700,000 Promissory Note
dated as of December 12, 2005, executed by the $10.7 Borrower in favor of the
$10.7 Million Lender ("$10.7 MILLION NOTE"). Repayment of the $10.7 Million Note
is secured in part by (a) that certain Security Agreement dated as of December
12, 2005, executed by the $10;7 Borrower and the $10.7 Million Lender ("$10.7
MILLION SECURITY AGREEMENT"), (b) that certain Guaranty Agreement (OC-PIN) dated
as of December 12, 2005, executed by OC-PIN in favor of the $10.7 Million Lender
("$10.7 MILLION GUARANTY AGREEMENT (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by PCHI in favor of the
$10.7 Million Lender ("$10.7 MILLION GUARANTY AGREEMENT (PCHI)"). The $10.7
Million Credit Agreement, the $10.7 Million Note, the $10.7 Million Security
Agreement, $10.7 Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty
Agreement (PCHI), the Pledge Agreements executed by IHHI, Ganesha, West Coast
and certain Members of West Coast in favor of the $10.7 Million Lender
(collectively the "$10.7 MILLION PLEDGE AGREEMENTS"), and each of the other
documents and instruments executed in connection with the $10.7 Million Credit
Agreement are hereinafter collectively referred to as the "$10.7 MILLION LOAN
DOCUMENTS."
C. Capitalized terms not defined herein shall have the same meaning as set
forth in the $80 Million Credit Agreement or the $10.7 Million Credit Agreement,
as applicable. For convenience, the $80 Million Credit Agreement and the $10.7
Million Credit Agreement are hereinafter referred to individually as a "CREDIT
AGREEMENT" and together as the "CREDIT AGREEMENTS" as the context dictates; the
$80 Million Lender and the $10.7 Million Lender are hereinafter referred to
individually as a "LENDER" or together as the "LENDERS" as the context dictates;
the $80 Borrowers and the $10.7 Million Borrower are hereinafter referred to
individually as a "BORROWER" or together as the "BORROWERS" as the context
dictates; the $80 Million Credit Parties and the $10.7 Million Credit Parties
are hereinafter referred to individually as a "CREDIT PARTY" and together as the
"CREDIT PARTIES" as the context dictates; and the $80 Million Guarantors and the
$10.7 Million Guarantors are hereinafter referred to individually as a
"GUARANTOR" and together as the "GUARANTORS" as the context dictates.
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D. The $10.7 Million Note matured, and was due and payable in full, on
December 12, 2006; and the $50 Million Note and the $30 Million Line of Credit
Note each matured, and were each due and payable in full, on March 2, 2007.
Borrower failed to pay the $10.7 Million Note when due and have committed an
event of default under the $10.7 Million Credit Agreement ("$10.7 MILLION EVENT
OF DEFAULT"); and Borrowers failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and have committed an event of default
under the $80 Million Credit Agreement ("$80 MILLION EVENT OF DEFAULT"). For
convenience, the $10.7 Million Event of Default and the $80 Million Event of
Default are hereinafter together referred to as the "EVENTS OF DEFAULT."
E. (i) The $80 Million Borrowers, the $80 Million Credit Parties and the
$80 Million Guarantors each acknowledge and agree that the $80 Million Lender
currently has the right to exercise its rights and remedies under the $80
Million Loan Documents and all applicable laws, including but not limited to
recording in the Official Records notices of default and elections to sell
pursuant to the $80 Million Fee Deed of Trust and the $80 Million Leasehold Deed
of Trust, judicially and/or non-judicially foreclosing on the Hospital
Facilities (defined in the $80 Million Credit Agreement), bringing legal action
against PCHI to enforce its obligations under its $80 Million Guaranty Agreement
(PCHI), bringing legal action against OCPIN to enforce its obligations under its
$80 Million Guaranty Agreement (OC-PIN), and bringing legal action against IHHI,
Ganesha, West Coast and certain members of West Coast to enforce their
obligations under their respective $80 Million Pledge Agreements.
(ii) The $10.7 Million Borrower, the $10.7 Million Credit Parties and
the $10.7 Million Guarantors each acknowledge and agree that the $10.7 Million
Lender currently has the right to exercise its rights and remedies under the
$10.7 Million Loan Documents and all applicable laws, including but not limited
to foreclosing on the security interests in the Collateral described in the
$10.7 Million Security Agreement, bringing legal action against PCHI to enforce
its obligations under the $10.7 Million Guaranty Agreement (PCHI), bringing
legal action against OC-PIN to enforce its obligations under the $10.7 Million
Guaranty Agreement (OC-PIN), and bringing legal action against IHHI, Ganesha,
West Coast and certain members of West Coast to enforce their obligations under
their respective $10.7 Million Pledge Agreements.
F. On February 21, 2007, MCC and IHHI executed a letter agreement entitled
Expression Of Interest in Providing Credit Facilities ("TERM SHEET"), pursuant
to which MCC offered to refinance the $80 Million Credit Facility and the $10.7
Million Loan with new loans at substantially lower interest rates. The Term
Sheet required that the proposed refinancing close by March 8, 2007. On several
occasions, IHHI requested, and MCC agreed, to extend the proposed closing date.
However, due to continuing dissension on IHHI's board of directors and attempts
by OC-PIN and PCHI to replace IHHI's management, OC-PIN and PCHI rejected MCC's
refinancing proposal. As a consequence, IHHI was unable to proceed with the
proposed refinancing. On June 12, 2007, MCC terminated the refinancing proposal
set forth in the Term Sheet.
G. Subsequently, the Borrowers, the Credit Parties and the Guarantors (as
applicable) each requested that Lenders each forbear from exercising their
respective rights and remedies under the $80 Million Loan Documents and under
the $10.7 Million Loan Documents. Lenders each agreed to forbear solely for the
purposes of providing Borrowers with additional time to
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refinance the $80 Million Credit Facility and the $10.7 Million Loan with new
financing to be provided by a third-party lender.
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, the Borrowers, the
Credit Parties, the Guarantors and the Lenders (as applicable) each agree as
follows:
1. INCORPORATION OF RECITALS.
The foregoing Recitals are incorporated by reference as if fully set forth
herein.
2. NOTICE OF EVENTS OF DEFAULT.
2.1 Based on the occurrence of the $80 Million Event of Default:
(A) As permitted by and pursuant to Section 8.2(b)(i) of the $80
Million Credit Agreement, MPFC II hereby terminates the Line of Credit with
respect to further Advances;
(B) As permitted by and pursuant to Section 8.2(b)(iii) of the $80
Million Credit Agreement, MPFC II hereby declares that all principal, interest,
late charges, attorneys' fees, costs and expenses, costs of enforcement, and
other sums owing under the $50 Million Note and the $30 Million Line of Credit
Note are immediately due and payable. Each Borrower, each Credit Party and each
Guarantor hereby acknowledge and agree as follows:
(i) The principal amount due and owing under the $50 Million Note
as of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as
of June 1, 2007 was $542,500; and that interest has and will accrue after June
1, 2007 at the rate of 14% per annum, or $17,500 per day; and
(ii) The principal amount due and owing under the $30 Million
Line of Credit Note as of June 1, 2007 was $27,341,458.61; the amount of accrued
but unpaid interest as of June 1, 2007 was $329,616.45; and that interest has
and will accrue after June 1, 2007 at the rate of 14% per annum, or $10,632.79
per day;
(C) Each Borrower, each Credit Party and each Guarantor under said
Credit Agreement hereby acknowledge and agree that MPFC II has the right to
record in the Official Records (i) a notice of default and election to sell with
respect to the $80 Million Fee Deed of Trust, and (ii) a notice of default and
election to sell with respect to the $80 Million Leasehold Deed of Trust
(respectively, the "NOTICES OF DEFAULT"); and
(D) Each Borrower, each Credit Party and each Guarantor (as
applicable) hereby acknowledge and agree that this Forbearance Agreement
constitutes the notice of the $80 Million Event of Default in compliance with
and pursuant to Section 11.10 of the $80 Million
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Credit Agreement, and that no further notice shall be required by MPFC II of the
$80 Million Event of Default.
2.2 Based on the occurrence of the $10.7 Million Event of Default:
(A) As permitted by and pursuant to Section 10.2(d)(i) of the $10.7
Million Credit Agreement, MPFC III hereby declares that all principal, interest,
late charges, attorneys' fees, costs and expenses, costs of enforcement, and
other sums owing under the $10.7 Million Note are immediately due and payable.
Each Borrower, each Credit Party and each Guarantor under said Credit Agreement
hereby acknowledge and agree that the principal amount due and owing under the
$10.7 Million Note as of June 1, 2007 was $10,700,000; the amount of accrued but
unpaid interest as of June 1, 2007 was $109,052.05; and that interest has and
will accrue after June 1, 2007 at the rate of 12% per annum, or $3,517.81 per
day; and
(B) Each Borrower, each Credit Party and each Guarantor under said
Credit Agreement hereby acknowledge and agree that this Forbearance Agreement
constitutes the notice of the $10.7 Million Event of Default in compliance with
and pursuant to Section 13.12 of the $10.7 Million Credit Agreement, and that no
further notice shall be required by MPFC III of the $10.7 Million Event of
Default.
3. AGREEMENTS.
3.1 Forbearance Period; Agreement to Forbear. The period commencing on the
Effective Date of this Forbearance Agreement and ending ninety (90) calendar
days thereafter is hereinafter referred to as the "FORBEARANCE PERIOD." So long
as no further or additional event(s) of default occur under the $80 Million Loan
Documents or under the $10.7 Million Loan Documents or under this Forbearance
Agreement, then each Lender agrees as follows ("AGREEMENT TO FORBEAR"):
(A) During the Forbearance Period, MPFC II will forbear from recording
the Notices of Default in the Official Records;
(B) During the Forbearance Period, each Lender will: (i) forbear from
filing a judicial foreclosure lawsuit against the applicable Borrowers and
Credit Parties; (ii) forbear from filing a legal action against PCHI to enforce
PCHI's obligations under the $80 Million Guaranty Agreement (PCHI) or under the
$10.7 Million Guaranty Agreement (PCHI); (iii) forbear from filing a legal
action against OC-PIN to enforce OC-PIN's obligations under the under the $80
Million Guaranty Agreement (OC-PIN) or under the $10.7 Million Guaranty
Agreement (OCPIN); (iv) forbear from filing a legal action against West Coast to
enforce its obligations under its $80 Million Pledge Agreement or under its
$10.7 Million Pledge Agreement; (v) forbear from filing a legal action against
certain members of West Coast to enforce their obligations under their $80
Million Pledge Agreement or under their $10.7 Million Pledge Agreement; (vi)
forbear from filing a legal action against IHHI to enforce its obligations under
its $80 Million Pledge Agreement or under its $10.7 Million Pledge Agreement;
and (vii) forbear from filing a legal action against Ganesha to enforce its
obligations under the $80 Million Pledge Agreement; and
(C) During the Forbearance Period: (i) MPFC II will forbear from
charging Default Interest (as that term is defined in the $80 Million Credit
Agreement) on the $80 Million
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Credit Facility as permitted by the $80 Million Credit Agreement; and (ii) MPFC
III will forbear from charging Default Interest (as that term is defined in the
$10.7 Million Credit Agreement) on the $10.7 Million Loan as permitted by the
$10.7 Million Credit Agreement.
3.2 Limited Waiver by MCC. MCC hereby waives and relinquishes its right
under paragraph III.G. of the Term Sheet to charge IHHI liquidated damages equal
to two percent (2%) of the aggregate amount of the proposed refinancing set
forth in the Term Sheet.
3.3 Express Reservation of Other Remedies. Each Lender's Agreement to
Forbear is the exclusive and only forbearance to which each Lender has agreed.
Each Lender expressly reserves the right to exercise each and every of its other
rights and remedies under the $80 Million Loan Documents and under the $10.7
Million Loan Documents not specifically included within such Lender's Agreement
to Forbear.
3.4 Negative Covenants During the Forbearance Period. Each Borrower, each
Credit Party and each Guarantor hereby promise, covenant and agree as follows:
(A) No Borrower and no Credit Party and no Guarantor will 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 either the Lenders or
MCC.
(B) No Borrower and no Credit Party and no Guarantor will during the
Forbearance Period directly or indirectly (i) 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 owned, controlled, leased or subleased by Borrowers
and/or Credit Parties and/or Guarantors as of the Effective Date hereof
(together "REAL PROPERTY ASSETS"); (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 or Credit Parties or Guarantors; (3) amend, modify or change its
articles of incorporation or bylaws, articles of organization or operating
agreement, as applicable, without first receiving the prior written consent of
each Lender and MCC, which consent will not be unreasonably withheld; (4)
increase, decrease, change, amend, modify, expand or contract the power or
authority of any officer, director, manager, member or managing member of any
Borrower or any Credit Party or any Guarantor, without first receiving the prior
written consent of each Lender and MCC, which consent will not be unreasonably
withheld; (5) amend, modify, alter or change any shareholders agreement or
voting trust or operating agreement; (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 state of incorporation or organization or
incorporate or organize in any additional jurisdictions; (11) nominate, elect or
appoint a new person as an officer, director, member or manager, without first
receiving the prior written consent of each
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Lender and MCC, which consent will not be unreasonably withheld; or (12)
terminate any person as an officer, director, member or manager.
3.5 Termination of Agreement to Forbear. If by 5:00 p.m. Los Angeles time
on the last day of the Forbearance Period (a) Borrowers for any reason have
failed to pay to MPFC II, in immediately available funds, all amounts due and
owing under the $80 Million Loan Documents, including but not limited to all
costs, expenses and attorneys' fees and costs to which MPFC II is entitled, AND
(b) Borrowers for any reason have failed to pay to MPFC III, in immediately
available funds, all amounts due and owing under the $10.7 Million Loan
Documents, including but not limited to all costs, expenses and attorneys' fees
and costs to which MPFC III is entitled, then this Agreement to Forbear shall
automatically terminate, expire and have no further force or effect (a
"TERMINATING EVENT"); provided, however, all releases, waivers, indemnities and
covenants not to sue made by Borrowers and Credit Parties and Guarantors in
favor of the Lenders and MCC in this Forbearance Agreement (including but not
limited to those releases and waivers, covenants not to sue, and indemnities set
forth in Section 3.6, Section 3.7 and Section 3.8 below) shall survive such
termination and Terminating Event. Upon the occurrence of a Terminating Event,
each Borrower and each Credit Party and each Guarantor acknowledge and agree
that each Lender shall have the unconditional right but not the obligation to
take any one or more of the following acts: (i) record notices of default in the
Official Records; (ii) file a judicial foreclosure lawsuit against the Borrowers
with respect to the $80 Million Credit Facility and/or the $10.7 Million Loan;
(iii) conduct a unified sale, or conduct a mixed collateral sale, under the
Uniform Commercial Code; (iv) file a legal action against PCHI to enforce its
obligations under its $80 Million Guaranty Agreement (PCHI) and/or under its
$10.7 Million Guaranty Agreement (PCHI); (v) file a legal action against OC-PIN
to enforce its obligations under its $80 Million Guaranty Agreement (OC-PIN)
and/or under its $10.7 Million Guaranty Agreement (OC-PIN; (vi) file a legal
action against West Coast to enforce its obligations under its $80 Million
Pledge Agreement and/or under its $10.7 Million Pledge Agreement; (vii) file a
legal action against the members of West Coast to enforce their respective
obligations under their $80 Million Pledge Agreement and/or under their $10.7
Million Pledge Agreement; (viii) file a legal action against IHHI to enforce its
obligations under its $80 Million Pledge Agreement and/or under its $10.7
Million Pledge Agreement; (ix) file a legal action against Ganesha to enforce
its obligations under its $80 Million Pledge Agreement and/or under its $10.7
Million Pledge Agreement; (x) process, file, serve, take or initiate any other
legal action or proceeding against any one or more of the Borrowers or Credit
Parties or Guarantors that either Lender is permitted to take under the $80
Million Loan Documents or under the $10.7 Million Loan Documents, and/or under
applicable law; (xi) commence and continue charging Default Interest under the
$80 Million Loan Documents and $10.7 Million Loan Documents; and (xii) in each
Lender's sole and absolute discretion, take any other act or initiate any other
proceeding permitted by law, equity or any of the $80 Million Loan Documents and
$10.7 Million Loan Documents.
3.6 Releases and Waivers. In consideration for each Lender's Agreement to
Forbear, and in consideration for MCC's agreement to waive the two percent (2%)
charge under the Term Sheet, effective as of the Effective Date of this
Forbearance Agreement:
(A) Subject to the last sentence of this Section 3.6(a), each
Borrower, each Credit Party, each Guarantor, and any related or affiliated
entity or person, together with their
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respective officers, directors, shareholders, members, managers,
employees, agents, representatives, successors 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 (defined in the $80 Million Credit
Agreement and the $10.7 Million Credit Agreement), 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 $80 Million Loan Documents or $10.7 Million Loan Documents) against
either Lender or MCC or any trustee under either of the $80 Million 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 either
Lender or MCC or any trustee under any of the $80 Million Deeds of Trust (i)
from recording a notice of sale with respect to any of the $80 Million 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 applicable
$80 Million Deed 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 unified sale of the personal property Collateral pursuant
to the 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 Borrower, Credit
Party or Guarantor, or (vii) from taking any other action or pursuing any other
right or remedy that either Lender is permitted to pursue under the $80 Million
Loan Documents or $10.7 Million Loan Documents, or in law or equity. The
foregoing releases and waivers are permanent and shall survive the expiration or
termination of this Forbearance Agreement. Notwithstanding the foregoing, the
releases and waivers set forth in this Section 3.6(a) shall apply only to
Injunctive Relief based on alleged acts or omissions of either 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 MPFC II, or against MPFC III, or against MCC, or
against any related or affiliated entity or person, or their respective
officers, directors, shareholders, members, managers, employees, agents,
representatives, successors and assigns (collectively the "RELEASED PARTIES")
that, at any time prior to the Effective Date of this Forbearance Agreement: (i)
any of the Released Parties committed a breach or default under any of the $80
Million Loan Documents or under any of the $10.7 Million Loan Documents or under
the Term Sheet; or (ii) any of the Released Parties conspired with the executive
officers, representatives or agents of IHHI to deprive OC-PIN of its stock
ownership in IHHI or otherwise inflicted any actionable damage on OC-PIN; or
(iii) any of the Released Parties committed an act not permitted by the $80
Million Loan Documents or by the $10.7 Million Loan Documents or by the Term
Sheet or by applicable law; or (iv) any of the Released Parties omitted to take
an action required by the $80 Million Loan Documents or by the $10.7 Million
Loan Documents or by the Term Sheet or under applicable law; or (v) any of the
$80 Million Loan Documents or any of the $10.7 Million Loan Documents or this
Forbearance Agreement is/are invalid or unenforceable in whole or in part for
any reason; or (vi) any of the Released Parties suggested, implied, induced,
cajoled or required that IHHI include any terms or conditions in any
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agreements between IHHI and OC-PIN in connection with the $80 Million Loan
Documents or $10.7 Million Loan Documents or the Term Sheet or with respect to
any of the Borrowers, or Credit Parties or Guarantors; or (vii) any of the
Released Parties suggested, implied, induced, cajoled or required that IHHI not
include any terms or conditions in any agreements between IHHI and OC-PIN in
connection with the $80 Million Loan Documents or $10.7 Million Loan Documents
or the Term Sheet or with respect to any of the Borrowers, or Credit Parties or
Guarantors; or (viii) any of the Released Parties improperly interfered with, or
improperly exercised control, or exercised excessive control, over any of the
Borrowers in connection with the $80 Million Loan Documents or $10.7 Million
Loan Documents or with respect to any of the Borrowers, or Credit Parties or
Guarantors; or (ix) any of the Released Parties breached in any way any alleged
duty of good faith or fair dealing, any alleged fiduciary duty, or any alleged
duty of commercial reasonableness, or any quasi-duty, or any implied duty in
connection with the $80 Million Loan Documents or $10.7 Million Loan Documents
or the Term Sheet or with respect to any of the Borrowers or Credit Parties or
Guarantors; or (x) any of the Released Parties committed any unlawful, unfair or
fraudulent business act or practice in connection with the $80 Million Loan
Documents or $10.7 Million Loan Documents or the Term Sheet or with respect to
any of the Borrowers, or Credit Parties or Guarantors; or (xi) any of the
Released Parties engaged in any unfair, deceptive, untrue or misleading
advertising in connection with the $80 Million Loan Documents or $10.7 Million
Loan Documents or the Term Sheet or with respect to any of the Borrowers, or
Credit Parties or Guarantors; or (xii) any of the Released Parties committed any
act prohibited by California Business and Professions Code Section 17500 in
connection with the $80 Million Loan Documents or the $10.7 Million Loan
Documents or the Term Sheet or with respect to any of the Borrowers, or Credit
Parties or Guarantors; or (xiii) any of the Released Parties engaged in
predatory lending practices in connection with the $80 Million Loan Documents or
$10.7 Million Loan Documents or the Term Sheet or with respect to any of the
Borrowers, or Credit Parties or Guarantors; or (xiv) any of the Released Parties
engaged in or committed any act or omission which constitutes fraud, duress,
negligence, conversion, defamation or infliction of emotional distress in
connection with the $80 Million Loan Documents or $10.7 Million Loan Documents
or the Term Sheet or with respect to any of the Borrowers, or Credit Parties or
Guarantors; or (xv) any of the Released Parties interfered with IHHI's
prospective business advantage in connection with the $80 Million Loan Documents
or $10.7 Million Loan Documents or the Term Sheet or with respect to any of the
Borrowers, or Credit Parties or Guarantors; or (xvi) any of the Released Parties
interfered with IHHI's contractual relations in connection with the $80 Million
Loan Documents or $10.7 Million Loan Documents or the Term Sheet or with respect
to any of the Borrowers, or Credit Parties or Guarantors; or (xvii) any of the
Released Parties acted or failed to act in a manner which directly or indirectly
caused or contributed to the business decline, lost profits or other detrimental
effects with respect to any of the Borrowers, or Credit Parties or Guarantors;
or (xviii) any of the Released Parties acted or failed to act in a manner which
directly or indirectly caused or contributed to any of the Borrowers continuing
in business while insolvent or otherwise delaying any filing of bankruptcy or
similar proceedings; or (xix) any of the Released Parties utilized threats,
coercion, undue influence or other methods of causing the Releasing Parties to
voluntarily or involuntarily agree to the releases, waivers, covenants not to
sue and indemnities set forth in Sections 3.6, 3.7 and 3.8 of this Forbearance
Agreement; or (xx) any of the Released Parties was party to or acted or failed
to act in a manner which directly or indirectly gave rise to a principal-agent
relationship with any of the Releasing Parties. The foregoing releases and
waivers are permanent and shall survive the expiration or termination of this
Forbearance Agreement
9
(C) In order to induce the Released Parties to enter into this
Forbearance Agreement, effective upon the Effective Date of this Forbearance
Agreement, each of the Releasing Parties fully, forever and irrevocably
releases, waives, relinquishes and discharges each of the 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 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 the applicable provisions under the laws
of the State of Nevada and the State of California upon the rights of each of
them, which provisions state substantially as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
EACH OF THE RELEASING PARTIES ACKNOWLEDGES THAT THEY MAY HAVE SUSTAINED DAMAGES,
LOSSES, FEES, COSTS OR EXPENSES WHICH ARE PRESENTLY UNKNOWN AND UNSUSPECTED,
AND, NOTWITHSTANDING THE FOREGOING PROVISIONS OF STATE LAW, 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 THE RELEASED PARTIES, AND HAS CAREFULLY READ AND
UNDERSTAND ALL THE PROVISIONS OF THIS FORBEARANCE AGREEMENT, AND HAS VOLUNTARILY
ENTERED INTO THIS FORBEARANCE AGREEMENT. THE FOREGOING RELEASES AND WAIVERS
SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS FORBEARANCE AGREEMENT.
3.7 Covenants Not to Sue. Each of the Releasing Parties hereby promises,
covenants and agrees not to sue any of the Released Parties, and not to bring
any legal action or proceeding of any kind against any of the Released Parties,
in any court or administrative proceeding, in any venue, which legal action or
proceeding violated any covenant, condition, representation or warranty made by
the Released Parties in this forbearance agreement, or 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 any of the released parties based on acts or
omissions which occurred prior to the effective date of this forbearance
agreement, or (b) impose or bring any lender liability claims on or against any
of the Released Parties based on acts or omissions which occurred prior to the
effective date of this forbearance agreement, or (c) obtain or impose on any of
the released parties any Injunctive
10
Relief based on acts or omissions which occurred prior to the Effective Date of
this Forbearance Agreement. The foregoing covenants not to sue are permanent and
shall survive the expiration or termination of this Forbearance Agreement.
3.8 Indemnity. Each of the Releasing Parties hereby jointly and severally
agrees to and shall indemnify, defend, protect and hold each of the Released
Parties free and harmless from and against any and all legal actions, suits,
proceedings or claims brought or asserted against any of the Released Parties
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 any Released
Party; or (b) the execution and delivery of any of the $80 Million Loan
Documents or of any of the $10.7 Million Loan Documents or the Term Sheet by any
of the Released Parties; or (c) the making of the $80 Million Credit Facility
and/or the $10.7 Million Loan by any of the Released Parties; or (d) any Lender
Liability Claim brought or asserted against any of the Released Parties;
provided, that neither Borrowers nor any Credit Party nor any Guarantor shall be
liable for any Indemnified Liabilities to the extent that such Indemnified
Liability directly results from the accused Released Parties' own gross
negligence or willful misconduct. NO RELEASED PARTY SHALL BE RESPONSIBLE OR
LIABLE TO ANY OF THE RELEASING PARTIES, OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH RELEASING 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 $80 MILLION LOAN DOCUMENT OR ANY $10.7 MILLION LOAN
DOCUMENT OR THE TERM SHEET, OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER. THE FOREGOING INDEMNITIES SHALL SURVIVE THE EXPIRATION
OR TERMINATION OF THIS FORBEARANCE AGREEMENT.
3.9 Reaffirmations, Amendments and Restatements. Each Borrower, each Credit
Party and each Guarantor hereby reaffirms the grants of security interests given
by each Borrower and each Credit Party to each Lender under the $80 Million Loan
Documents and under the $10.7 Million Loan Documents. Each Borrower, each Credit
Party and each Guarantor agrees that the $80 Million Loan Documents and the
$10.7 Million Loan Documents shall be and hereby are deemed amended to provide
that the same secure and evidence the Obligations set forth in said $80 Million
Loan Documents and $10.7 Million Loan Documents, as applicable, as may be
modified by this Forbearance Agreement and by all renewals of extensions of
modifications of, refinancing of consolidations of and substitutions for the
Obligations set forth in the $80 Million Loan Documents and in the $10.7 Million
Loan Documents, as applicable. Each Borrower, each Credit Party and each
Guarantor agrees that the security interests granted by each Borrower and each
Credit Party to each Lender are valid and perfected by the Financing Statements
on file in the State of California and in the State of Nevada showing the
applicable Lender as the Secured Party and showing the applicable Borrower and
Credit Party as the Debtor.
11
4. REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS AND WAIVERS.
To induce each of the Released Parties to forbear from pursuing its rights
and remedies under the $80 Million Loan Documents and under the $10.7 Million
Loan Documents and under the Term Sheet, each of the Releasing Parties make the
following representations and warranties to each of the Released Parties, each
and all of which are permanent and shall survive the execution, delivery,
expiration or earlier termination of this Forbearance Agreement and the
occurrence of a Terminating Event.
4.1 Existence; Compliance with Applicable Laws. Each Borrower, each Credit
Party and each 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, each Credit Party and each Guarantor
(individually a "PERSON") of this Forbearance Agreement: (a) is 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 (as defined in the $80 Million Credit
Agreement); (e) does not conflict with or result in the breach or termination
of, constitute a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Person is a party or by which such
Person or any of its property is bound; (f) does not result in the creation or
imposition of any Lien (as defined in the $80 Million Credit Agreement) upon any
of the property of such Person other than those in favor of each Lender pursuant
to the $80 Million Loan Documents and the $10.7 Million Loan Documents; and (g)
does not require the consent or approval of any Governmental Authority or any
other Person. This Forbearance Agreement has been duly executed and delivered by
each Borrower, each Credit Party and each Guarantor and constitutes the legal,
valid and binding obligation of each such Borrower, and each such Credit Party,
and each such Guarantor, enforceable against it in accordance with its terms.
4.3 Ratification of Loan Documents. Each Borrower, each Credit Party and
each Guarantor hereby ratifies and confirms that (a) each and every of the $80
Million Loan Documents and $10.7 Million 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 $80 Million Loan Documents and/or the $10.7
Million Loan Documents.
12
4.4 Other Obligations Subordinate to Obligations in Loan Documents. Each
Borrower, each Credit Party and each 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 as defined in and as
set forth in the $80 Million Loan Documents and the $10.7 Million Loan
Documents.
4.5 No Litigation. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or threatened against any Borrower or any Credit Party
or any Guarantor before any Governmental Authority or before any arbitrator or
panel of arbitrators; and no Borrower, or Credit Party, or Guarantor has brought
or is contemplating bringing an action, claim, lawsuit, demand, investigation or
proceeding against either Lender.
4.6 Reaffirmation of Guaranties. Each of the Guarantors hereby reaffirms,
remakes and restates each and every term, condition, and provision of its
respective $80 Million Guaranty Agreement and $10.7 Million Guaranty Agreement.
Each Guarantor hereby agrees that its obligations under its respective $80
Million Guaranty Agreement and $10.7 Million Guaranty Agreement shall be
unconditional, irrespective of: (a) the absence of any attempt to collect the
$80 Million Credit Facility and/or the $10.7 Million Loan from any Borrower or
any Guarantor or other action to enforce the same; (b) the waiver or consent by
a Lender with respect to any provision of any of the $80 Million Loan Documents
or $10.7 Million Loan Documents, or any other agreement now or hereafter
executed by any Borrower and delivered to either Lender; (c) either 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; (d) any borrowing or
grant of a security interest by any Borrower, as debtor-in-possession, under
Section 364 of the Bankruptcy Code; or (e) the disallowance, under Section 502
of the Bankruptcy Code, of all or any portion of either Lender's claims for
repayment of the $80 Million Credit Facility and/or $10.7 Million Loan. Each
Guarantor further reaffirms that its obligations under its respective $80
Million Guaranty Agreement and $10.7 Million Guaranty Agreement are primary and
are separate and distinct from each Borrower's obligations. Each Guarantor
further represents and warrants that it has no defenses or claims against either
Lender that would or might affect the enforceability of its $80 Million Guaranty
Agreement or $10.7 Million Guaranty Agreement and that its guaranty under its
respective Guaranty Agreements remains in full force and effect. Each Guarantor
irrevocably and permanently waives any and all rights of subrogation,
reimbursement, indemnity, contribution or any other claim arising from the
existence of performance of its guaranty under each of such Guaranty Agreements
which each Guarantor now has or hereafter may have against any Borrower or any
other person or entity (or their respective properties) directly or contingently
liable for said obligations. Each Guarantor understands that if either Lender
forecloses by trustee's sale on one or more of the $80 Million Deeds of Trust,
each Guarantor might then have a defense preventing either Lender from
thereafter enforcing said Guarantor's liability for the unpaid balance of the
$80 Million Credit Facility and/or $10.7 Million Loan. This defense arises
because the trustee's sale would eliminate such Guarantor's right of
subrogation, and therefore such Guarantor would be unable to obtain
reimbursement from any Borrower. Each Guarantor specifically waives this defense
and all rights and defenses that such Guarantor may have because the $80 Million
Credit Facility or $10.7 Million Loan is secured by real property. This means,
among other things: (i) each Lender may collect from each Guarantor without
first foreclosing on any real or personal property collateral pledged by any
13
Borrower; and (ii) if either Lender forecloses on any real property collateral
pledged by any Borrower: (A) the amount of the $80 Million Credit Facility
and/or the $10.7 Million 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) either Lender may collect from each Guarantor even
if such Lender, by foreclosing on the real property collateral, has destroyed
any right such Guarantor may have to collect from any Borrower. This is an
unconditional and irrevocable waiver of any rights and defenses each Guarantor
may have because the $80 Million Credit Facility and/or $10.7 Million 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, including
the State of Nevada. Each Guarantor waives all rights and defenses arising out
of an election of remedies by either 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 any Borrower by operation of Section 580d of the
California Code of Civil Procedure or any similar laws in other states,
including the State of Nevada.
4.7 Waiver of Objection to Lender's Motion for Relief from Automatic Stay.
As consideration for and as an inducement to each of the Released Parties to
enter into this Forbearance Agreement, each Borrower, each Credit Party and each
Guarantor represents and warrants that (a) should any Borrower or any Credit
Party or any 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 any of the Released Parties become subject to any automatic stay imposed
in said Bankruptcy Proceeding, then (c) each Borrower, each Credit Party and
each 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 any of the
Released Parties in the Bankruptcy Proceeding seeking relief from the automatic
stay.
4.8 No Defaults. Each Borrower, each Credit Party and each Guarantor
represents and warrants that, except for the referenced $80 Million Event of
Default and the $10.7 Million Event of Default, no other known breaches,
defaults or events of default have occurred under the $80 Million Loan Documents
or the $10.7 Million Loan Documents which have not been cured or which are
continuing.
4.9 No Offsets. Each Borrower, each Credit Party and each Guarantor
represents and warrants that it has no offset, credit, claim or setoff against
any amount due or owing under the $80 Million Loan Documents or $10.7 Million
Loan Documents, including but not limited to the aggregate total of
$73,213,575.06 in principal and interest due and owing on the $80 Million Credit
Facility as of June 1, 2007 and the aggregate total of $10,809,052.05 in
principal and interest due and owing on the $10.7 Million Loan as of June 1,
2007.
4.10 Authorizing Resolutions. Attached hereto as Exhibit "A" is the
Unanimous Written Consent 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 "B" is the Unanimous Written Consent of
the Board of Directors of WMC-SA authorizing WMC-SA to execute this Forbearance
Agreement and to agree to the terms and conditions set
14
forth herein. Attached hereto as Exhibit "C" is the Unanimous Written Consent 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 "D" is the Unanimous Written Consent 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
"E" is the Unanimous Written Consent 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 "F" is the
Unanimous Written Consent of the Managers and Members of PCHI authorizing PCHI
to execute this Forbearance Agreement and to agree to the terms and conditions
set forth herein. Attached hereto as Exhibit "G" is the Unanimous Written
Consent 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 "H" is the Unanimous Written Consent of the Sole
Manager and Sole Member of Ganesha authorizing Ganesha to execute this
Forbearance Agreement and to agree to the terms and conditions set forth herein.
Attached hereto as Exhibit "I" is the Unanimous Written Consent of the Sole
Manager 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, each Credit Party and each
Guarantor represents, warrants and covenants that it has consulted with and
received advice from its own legal counsel, that it has read this 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) An Event of Default (other than the $80 Million Event of Default
or the $10.7 Million Event of Default) occurs under any of the $80 Million Loan
Documents or under any of the $10.7 Million Loan Documents.
(B) A case or proceeding is commenced against any Borrower or any
Credit Party or any Guarantor seeking a decree or order in respect of such
Borrower or such Credit Party or such 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 such Credit Party or
such Guarantor or for any substantial part of any such Borrower or such Credit
Party or such Guarantor's assets; or (iii) ordering the winding-up or
liquidation of the affairs of such Borrower or such Credit Party or such
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.
(C) Any Borrower or any Credit Party or any Guarantor (i) files a
petition seeking relief under the Bankruptcy Code, or any other applicable
federal, state or foreign
15
bankruptcy or other similar law; or (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 such Credit Party or such Guarantor or for any
substantial part of any such Borrower or such Credit Party or such Guarantor's
assets; or (iii) makes a general assignment for the benefit of creditors; or
(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.
(D) Any Borrower or any Credit Party or any Guarantor enters into any
agreement with any other lender, creditor or third party which materially
impairs the ability of any Borrower, any Credit Party or any Guarantor to
perform their obligations under this Forbearance Agreement or to perform their
obligations under the $80 Million Loan Documents or the $10.7 Million Loan
Documents.
(E) Any Borrower or any Credit Party or any Guarantor asserts that any
of the $80 Million Loan Documents, or any of the $10.7 Million Loan Documents,
or this Forbearance Agreements, is/are invalid or unenforceable for any reason.
(F) Any Borrower or any Credit Party or any Guarantor commits a breach
or default under this Forbearance Agreement (other than those referenced in
Sections 5.1(a) through and including (d) hereinabove) and the same remains
uncured for five (5) or more calendar days after receipt of notice thereof from
any of the Released Parties.
5.2 Remedies. If an Event of Default occurs under this Forbearance
Agreement, either Lender may, without notice, terminate the Agreement to
Forbear, in which event each Lender shall have the right in its sole and
absolute discretion, but not the obligation, to: (a) record notices of default
with respect to any or all of the $80 Million Deeds of Trust and proceed with
the non-judicial foreclosure process; or (b) file, serve, take or initiate any
legal action or proceeding against any one or more of the Borrowers, or Credit
Parties or Guarantors that such Lender is permitted to take under the $80
Million Loan Documents and/or $10.7 Million Loan Documents (including, but not
limited to, filing a complaint for judicial foreclosure, and/or filing a
complaint to enforce the obligations of PCHI and/or OC-PIN under their
respective $80 Million Guaranty Agreements and $10.7 Million Guaranty
Agreements); or (c) pursue each and every of the other rights and remedies
granted to either Lender in the $80 Million Loan Documents, the $10.7 Million
Loan Documents, the PCHI $80 Million Guaranty Agreement and PCHI $10.7 Million
Guaranty Agreement, the OC-PIN $80 Million Guaranty Agreement and OC-PIN $10.7
Million Guaranty Agreement; (d) commence charging, and maintain in effect at the
Default Rate of interest (as defined in the $80 Million Credit Agreement and the
$10.7 Million Credit Agreement, as applicable) then in force and effect; or (e)
either continue in effect the suspension of the Line of Credit with respect to
further Advances or terminate the $30 Million Line of Credit with respect to
further Advances, in each Lender's sole and absolute discretion; or (f) take any
other act permitted by the $80 Million Loan Documents, or by the $10.7 Million
Loan Documents, or in law or in equity.
16
5.3 Waivers. Each Borrower, each Credit Party and each Guarantor agrees as
follows:
(A) Except as otherwise provided for in this Forbearance Agreement or
by applicable law, each Borrower, each Credit Party and each Guarantor waives:
(i) presentment, demand and protest and notice of presentment, dishonor, notice
of intent to accelerate and notice of acceleration, protest, default,
nonpayment, maturity, release, compromise, or settlement; (ii) all rights to
notice and a hearing prior to either Lender's taking possession or control of,
or to either Lender's replevy, attachment or levy upon, the Collateral (as
defined in the $80 Million Credit Agreement or the $10.7 Million Credit
Agreement, as applicable); or (iii) the requirement of any bond or security that
might be required by any court prior to allowing either Lender to exercise any
of its remedies; and (iv) 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 a Credit Party or a
Guarantor, may also be a director, or an officer, or a shareholder, or a
manager, or a member, in another Borrower or another Credit Party or another
Guarantor. If said person is in a position to manage or control one or both of
said Borrowers, or one or both of said Credit Parties, or one or both of said
Guarantors, 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 any Credit Parties or any Guarantors
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 any Credit Party or any Guarantor from making a
payment to either Lender of any amounts which said Borrower or Credit Party or
Guarantor is obligated to make to such Lender under this Forbearance Agreement
or under any of the $80 Million Loan Documents or $10.7 Million Loan Documents.
6. MISCELLANEOUS.
6.1 Complete Agreement. This Forbearance Agreement constitutes the complete
agreement between the Releasing Parties and the Released Parties with respect to
the subject matter hereof.
6.2 Amendments and Waivers. Except for actions expressly permitted to be
taken by any of the Released Parties, 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 each Lender, by MCC, by all of
the Borrowers, by the Credit Parties and by the Guarantors.
6.3 Reimburse Lender for All Fees and Expenses. All Borrowers hereby agree
to and shall: (a) on the Effective Date, pay to each Lender and MCC all
attorneys' fees (including inhouse counsel and outside counsel), statutory and
non-statutory 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 either Lender or MCC in connection
with
17
the $80 Million Event of Default, and the $10.7 Million Event of Default, and
the Term Sheet, and this Forbearance Agreement; and (b) following the Effective
Date, within ten (10) calendar days of receipt of written demand therefor,
reimburse each Lender and/or MCC for all attorneys' fees (including in-house
counsel and outside counsel), statutory and non-statutory 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 either Lender or MCC in connection with the $80 Million Event of
Default and the $10.7 Million Event of Default, and the Term Sheet, and this
Forbearance Agreement. If Borrowers for any reason fails to reimburse any Lender
or MCC the referenced fees and costs within ten (10) calendar days of receipt of
written demand therefor, such Lender or MCC shall have the right, without
further notice, to make a draw upon the $30 Million Line of Credit Loan in the
name and for the benefit of Borrowers in the amount of the fees and costs
demanded. In said event, the amount drawn by such Lender or MCC shall
automatically be deemed an approved Line of Credit Advance made by Borrowers
from the $30 Million Line of Credit Loan pursuant to Section 1.8(b) of the $80
Million Credit Agreement and the same shall be repaid by Borrowers pursuant to
the terms of the $30 Million Line of Credit Note.
6.4 No Waiver. A Lender's failure, at any time or times, to require strict
performance by the Borrowers or the Credit Parties or the Guarantors of any
provision of this Forbearance Agreement or any $80 Million Loan Document or any
$10.7 Million Loan Document shall not waive, affect or diminish any right of
either Lender or MCC thereafter to demand strict compliance and performance
herewith or therewith. Any suspension or waiver of an Event of Default under
this Forbearance Agreement 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 the same or a different type. None of the undertakings, agreements, waivers,
releases, warranties, covenants and representations of any Borrower or any
Credit Party or any Guarantor contained in this Forbearance Agreement, and no
Event of Default, shall be deemed to have been suspended or waived by either
Lender, unless an unequivocal waiver or suspension is set forth in a writing
signed by the waiving said Lender.
6.5 Remedies. Each Lender's and MCC's rights and remedies under this
Forbearance Agreement shall be cumulative and nonexclusive of any other rights
and remedies that either Lender or MCC may have under any other agreement,
including the $80 Million Loan Documents and the $10.7 Million Loan Documents,
by operation of law or otherwise.
6.6 Discretion. If any term or condition of this Forbearance Agreement
requires the submission of evidence of the existence or non-existence of a
specified fact or facts, Lenders and MCC shall, at all times, be free
independently to establish to their reasonable satisfaction and in their
reasonable discretion such existence or non-existence. Whenever Lender's or
MCC's judgment, consent or approval is required hereunder or thereunder for any
matter, or either Lender or MCC shall have an option or election hereunder or
thereunder, such judgment, the decision as to whether or not to consent to or
approve the same or the exercise of such option or election shall be in the
discretion of each Lender and MCC, reasonably exercised, unless otherwise
specifically provided herein. Such reasonable exercise of discretion may include
reliance upon advice from counsel for the Lenders and for MCC, or other
professionals, as the context may require. Wherever it is specifically provided
in this Forbearance Agreement the consent or approval of each Lender and MCC
must be obtained by a Borrower or Credit Party or
18
Guarantor, such consent or approval shall not be unreasonably withheld or
delayed, but in all cases such consent or approval shall be provided to a
Borrower or a Credit Party or a Guarantor, as the case may be, conditioned upon
all other required consents or approvals from other parties having been obtained
prior to the consent or approval of either Lender and MCC becoming effective; in
any case, neither Lender nor MCC shall have any liability to any Borrower or to
any Credit Party or to any Guarantor or to any other party for their reasonable
and good faith refusal or failure to give any such consent or approval, and each
Borrower and each Credit Party and each Guarantor shall indemnify, protect,
defend and hold each Lender and MCC harmless against any such claims, losses and
liabilities arising therefrom. Notwithstanding the foregoing, upon the
occurrence and during the continuance of any Event of Default under this
Forbearance Agreement, all consents and approvals and other matters requiring
either Lender's or MCC's discretion under this Forbearance Agreement shall be at
the sole discretion of said Lender and MCC.
6.7 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.
6.8 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 $80 Million Loan Documents and
$10.7 Million Loan Documents shall survive the expiration or termination of this
Forbearance Agreement, the expiration or termination of the Agreement to
Forbear, and the expiration or termination of the Forbearance Period.
6.9 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 $80 Million Loan Documents or $10.7 Million
Loan Documents, the provision contained in this Forbearance Agreement shall
govern and control.
6.10 Confidentiality. Each of the Borrowers, the Credit Parties and the
Guarantors 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
either Lender or MCC or the Borrowers, the Credit Parties and the Guarantors;
(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 as required by law; (d) may be disclosed in connection with the
exercise by either Lender of any right or remedy granted to it under the $80
Million Loan Documents or under the $10.7 Million Loan Documents or this
Forbearance Agreement or in connection with any legal action or proceeding
relating to enforcing or interpreting any of the $80 Million Loan Documents or
the $10.7 Million Loan Documents or this Forbearance Agreement; or (e) may be
disclosed to if the Confidential Information ceases to be confidential
19
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 parties prompt written notice of such request so that any
Borrower or any Credit Party or any Guarantor or either Lender or MCC 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 to Borrowers and to Credit Parties and to
Guarantors and to both Lenders and MCC, as applicable, written notice of the
information to be disclosed as far in advance of its disclosure as is
practicable.
6.11 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
$80 MILLION LOAN DOCUMENTS OR IN ANY OF THE $10.7 MILLION 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 EACH CREDIT PARTY AND EACH
GUARANTOR AND EACH LENDER AND MCC 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
PARTIES AND THE GUARANTORS ON THE ONE HAND, AND THE LENDERS AND MCC, 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 EITHER LENDER
OR MCC 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 $80 MILLION LOAN DOCUMENTS OR IN
THE $10.7 MILLION LOAN DOCUMENTS OR IN THIS FORBEARANCE AGREEMENT, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF EITHER LENDER OR MCC. EACH BORROWER
AND EACH CREDIT PARTY AND EACH GUARANTOR AND EACH LENDER AND MCC EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION(S) IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT(S), AND EACH BORROWER, EACH CREDIT PARTY, EACH
GUARANTOR, AND EACH LENDER AND MCC HEREBY WAIVE ANY OBJECTION THAT SUCH BORROWER
OR SUCH CREDIT PARTY OR GUARANTOR OR SUCH LENDER OR MCC MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH BORROWER, EACH CREDIT
20
PARTY, EACH GUARANTOR AND EACH LENDER AND MCC HEREBY WAIVE 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 PARTIES,
GUARANTORS OR TO EITHER LENDER OR MCC AT THE ADDRESS SET FORTH IN ANNEX D OF THE
$80 MILLION CREDIT AGREEMENT OR IN ANNEX B OF THE $10.7 MILLION CREDIT
AGREEMENT, AS APPLICABLE, AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH BORROWER'S, SUCH CREDIT PARTY'S, SUCH GUARANTOR'S OR
SUCH LENDER'S OR MCC'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.
6.12 Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this 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 $80
Million Credit Agreement or Annex B to the $10.7 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 $80 Million
Credit Agreement or Annex B to the $10.7 Credit Agreement shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
6.13 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.
6.14 Time. Time is of the essence of this Forbearance Agreement.
6.15 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,
21
including, without limitation, reasonable attorneys' fees, statutory and
non-statutory 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, which shall be the joint and several obligation(s) of the
non-prevailing party or parties and shall be payable upon demand.
6.16 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.
6.17 Counterparts. This Forbearance Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement.
6.18 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, AND TO THE EXTENT PERMITTED BY APPLICABLE LAWS, 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
EITHER LENDER AND/OR MCC, AND ANY BORROWER, ANY CREDIT PARTY AND/OR ANY
GUARANTOR 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 $80 MILLION LOAN DOCUMENTS OR ANY OF THE $10.7 MILLION
LOAN DOCUMENTS OR THE TERM SHEET OR THE TRANSACTIONS RELATED HERETO OR THERETO.
6.19 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 any Credit Party or any Guarantor for liquidation or
reorganization, should any Borrower or any Credit Party or any 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 any Credit Party's or any 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 (as defined in the $80
Million Credit Agreement or the $10.7 Million Credit Agreement, as applicable),
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.
22
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" and "I"
attached to this Forbearance Agreement are incorporated by this reference as if
fully set forth herein.
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.
[NO FURTHER TEXT ON THIS PAGE. SIGNATURE PAGE FOLLOWS]
23
IN WITNESS WHEREOF, this Forbearance Agreement will be deemed effective as
of the Effective Date first above written.
BORROWERS:
----------
INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation
By: /s/ Bruce Mogel
---------------------------------
Bruce Mogel, CEO
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
CHAPMAN MEDICAL CENTER, INC.,
a California corporation
By: /s/ Larry B. Anderson
---------------------------------
Larry B. Anderson, President
[SIGNATURE PAGE CONTINUES]
24
CREDIT PARTIES:
---------------
PACIFIC COAST HOLDINGS INVESTMENT, LLC,
a California limited liability company,
By: /s/ Anil V. Shah
---------------------------------
Anil V. Shah, M.D., Manager
By: /s/ Kali P. Chaudhuri
---------------------------------
Kali P. Chaudhuri, M.D., Manager
WEST COAST HOLDINGS, LLC,
a California limited liability company,
By: /s/ Anil V. Shah
---------------------------------
Anil V. Shah, M.D., Manager
GANESHA REALTY, LLC,
a California limited liability company
By: /s/ Kali P. Chaudhuri
---------------------------------
Kali P. Chaudhuri, M.D., Manager
GUARANTORS:
-----------
PACIFIC COAST HOLDINGS INVESTMENT, LLC,
a California limited liability company,
By: /s/ Anil V. Shah
---------------------------------
Anil V. Shah, M.D., Manager
By: /s/ Kali P. Chaudhuri
---------------------------------
Kali P. Chaudhuri, M.D., Manager
ORANGE COUNTY PHYSICIANS INVESTMENT
NETWORK, LLC, a Nevada limited
liability company,
By: /s/ Anil V. Shah
---------------------------------
Anil V. Shah, M.D., Manager
By: ____________________________________
Name:_______________________________
Title: _____________________________
[SIGNATURE PAGE CONTINUES]
25
LENDERS:
--------
MEDICAL PROVIDER FINANCIAL CORPORATION II,
a Nevada corporation,
By: /s/ Joseph J. Lampariello
---------------------------------
Joseph J. Lampariello, President and COO
MEDICAL PROVIDER FINANCIAL CORPORATION III,
a Nevada corporation,
By: /s/ Joseph J. Lampariello
---------------------------------
Joseph J. Lampariello, President and COO
MCC:
----
MEDICAL CAPITAL CORPORATION,
a Nevada corporation,
By: /s/ Joseph J. Lampariello
---------------------------------
Joseph J. Lampariello, President and COO
26
EXHIBIT "A"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
INTEGRATED HEALTHCARE HOLDINGS, INC.
June __, 2007
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"), Orange County Physicians
Investment Network, LLC, a Nevada limited liability company ("OC-PIN"), Pacific
Coast Holdings Investment, LLC, a California limited liability company ("PCHI"),
West Coast Holdings, LLC, a California limited liability company ("West Coast"),
Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI,
Ganesha, and West Coast are hereinafter together sometimes referred to as the
"Credit Parties"; and PCHI and OC-PIN are hereinafter together sometimes
referred to as the "Guarantors"), and Medical Provider Financial Corporation II,
a Nevada corporation ("MPFC II") are parties to that certain $80 Million Credit
Agreement dated as of March 3, 2005 ("$80 Million Credit Agreement"), and/or
certain other agreements, documents or instruments executed in connection with
the $80 Million Credit Agreement. Pursuant to the $80 Million Credit Agreement,
MPFC II made available to Borrowers a credit facility in the total amount of
$80,000,000 ("$80 Million Credit Facility"). The $80 Million Credit Facility was
composed of two (2) separate loans: (i) a $50,000,000 Acquisition Loan ("$50
Million Acquisition Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit
("$30 Million Line of Credit Loan"). The $50 Million Acquisition Loan was
evidenced by that certain $50,000,000 Acquisition Promissory Note dated as of
March 3, 2005, executed by Borrowers in favor of MPFC II ("$50 Million Note");
and the $30 Million Line of Credit Loan was evidenced by that certain
$30,000,000 Line of Credit Promissory Note dated as of March 3, 2005, executed
by Borrowers in favor of MPFC II ("$30 Million Line of Credit Note"). Repayment
of the $50 Million Note and the $30 Million Line of Credit Note is secured in
part by (a) 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 of the recorder of Orange County, California ("Official Records") on
March 8, 2005 as Document no. 2005000169280 and encumbers the fee title to the
Western Medical Center - Santa Ana, the Western Medical Center - Anaheim, and
the Coastal Communities Hospital (all as defined in the $80 Million Credit
Agreement) (hereinafter the "$80 Million Fee Deed of Trust"); and (b) that
certain Leasehold Deed of Trust, Security Agreement,
1
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 and
encumbering the Corporation's interest, as tenant/lessee in the Chapman MOB
Lease and the Chapman Hospital Lease (all as defined in the $80 million Credit
Agreement (hereinafter, the "$80 Million Leasehold Deed of Trust"). The $80
Million Credit Agreement, the $50 Million Note, the $30 Million Line of Credit
Note, the $80 Million Fee Deed of Trust, the $80 Million Leasehold Deed of
Trust, and each of the other documents and instruments (including but not
limited to the Guaranty Agreements and Pledge Agreements) executed in connection
with the $80 Million Credit Agreement are hereinafter collectively referred to
as the "$80 Million Loan Documents." The terms and condition set forth in the
$80 Million Loan Documents are incorporated herein by reference even though not
physically attached hereto; and
WHEREAS, the Corporation, WMC-SA, WMC-A, Coastal, Chapman, PCHI, OC-PIN,
Ganesha, West Coast and Medical Provider Financial Corporation III, a Nevada
corporation ("MPFC III") are parties to that certain Credit Agreement dated as
of December 12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7
Million Credit Agreement, MPFC III made available to the Corporation (as
Borrower) a new loan in the amount of $10,700,000 ("$10.7 Million Loan"). The
$10.7 Million Loan was evidenced by that certain $10,700,000 Promissory Note
dated as of December 12, 2005, executed by Borrower in favor of MPFC III ("$10.7
Million Note"). Repayment of the $10.7 Million Note is secured in part by (a)
that certain Security Agreement dated as of December 12, 2005, executed by the
Corporation and MPFC III ("$10.7 Million Security Agreement"), (b) that certain
Guaranty Agreement (OCPIN) dated as of December 12, 2005, executed by OC-PIN in
favor of MPFC III ("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that
certain Guaranty Agreement (PCHI) dated as of December 12, 2005, executed by
PCHI in favor of MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7
Million Credit Agreement, the $10.7 Million Note, the $10.7 Million Security
Agreement, $10.7 Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty
Agreement (PCHI), and each of the other documents and instruments (including but
not limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
2
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and the Corporation executed a letter agreement entitled
Expression Of Interest in Providing Credit Facilities ("Term Sheet"), pursuant
to which MCC offered to refinance the $80 Million Credit Facility and the $10.7
Million Loan with new loans at substantially lower interest rates. The Term
Sheet required that the proposed refinancing close by March 8, 2007. On several
occasions, the Corporation requested, and MCC agreed, to extend the proposed
closing date. However, due to continuing dissension on Corporation `s board of
directors and attempts by OC-PIN and PCHI to replace the Corporation's
management, OC-PIN and PCHI rejected MCC's refinancing proposal. As a
consequence, the Corporation was unable to proceed with the proposed
refinancing. On June 12, 2007, MCC terminated the refinancing proposal set forth
in the Term Sheet; and
WHEREAS, the Corporation, the other Borrowers, the Credit Parties and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties and the Guarantors additional time to refinance
the $80 Million Credit Facility and the $10.7 Million Loan with new financing
provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Corporation (along with the other Borrowers, the Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreement on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed with the Board and its legal counsel, and the Board and its legal
counsel believe 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.
3
RESOLVED FURTHER, that the Chief Executive Officer and the President of the
Corporation (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 either Lender or by MCC), 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
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.
4
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the Board
of the Corporation, do hereby execute this Unanimous Written Consent of the
Board of Directors of the Corporation to be effective as of the date first above
written.
DIRECTORS:
------------------------------
Bruce Mogel
------------------------------
Fernando Niebla
------------------------------
Anil V. Shah, M.D.
------------------------------
Ajay Meka, M.D.
------------------------------
Salman Naqvi, M.D.
------------------------------
Maury DeWald
5
EXHIBIT "B"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
WMC-SA, INC.
June __, 2007
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, Integrated Healthcare Holdings, Inc., a Nevada corporation
("IHHI"), the Corporation, WMC-A, INC., a California corporation ("WMC-A"),
Chapman Medical Center, Inc., a California corporation ("Chapman"), Coastal
Communities Hospital, Inc., a California corporation ("Coastal") (IHHI, the
Corporation, WMC-A, Chapman and Coastal together as "Borrowers"), Orange County
Physicians Investment Network, LLC, a Nevada limited liability company
("OC-PIN"), Pacific Coast Holdings Investment, LLC, a California limited
liability company ("PCHI"), West Coast Holdings, LLC, a California limited
liability company ("West Coast"), Ganesha Realty, LLC, a California limited
liability company ("Ganesha") (PCHI, Ganesha, and West Coast are hereinafter
together sometimes referred to as the "Credit Parties"; and PCHI and OC-PIN are
hereinafter together sometimes referred to as the "Guarantors"), and Medical
Provider Financial Corporation II, a Nevada corporation ("MPFC II") are parties
to that certain $80 Million Credit Agreement dated as of March 3, 2005 ("$80
Million Credit Agreement"), and/or certain other agreements, documents, or
instruments executed in connection with the $80 Million Credit Agreement.
Pursuant to the $80 Million Credit Agreement, MPFC II made available to
Borrowers a credit facility in the total amount of $80,000,000 ("$80 Million
Credit Facility"). The $80 Million Credit Facility was composed of two (2)
separate loans: (i) a $50,000,000 Acquisition Loan ("$50 Million Acquisition
Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit ("$30 Million Line
of Credit Loan"). The $50 Million Acquisition Loan was evidenced by that certain
$50,000,000 Acquisition Promissory Note dated as of March 3, 2005, executed by
Borrowers in favor of MPFC II ("$50 Million Note"); and the $30 Million Line of
Credit Loan was evidenced by that certain $30,000,000 Line of Credit Promissory
Note dated as of March 3, 2005, executed by Borrowers in favor of MPFC II ("$30
Million Line of Credit Note"). Repayment of the $50 Million Note and the $30
Million Line of Credit Note is secured in part by (a) 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 of the recorder of Orange
County, California ("Official Records") on March 8, 2005 as Document no.
2005000169280 and encumbers the fee title to the Western Medical Center - Santa
Ana, the Western Medical Center - Anaheim, and the Coastal Communities Hospital
(all as defined in the $80 Million Credit Agreement) (hereinafter the "$80
Million Fee Deed of Trust"); and (b) that certain Leasehold Deed of Trust,
1
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 and encumbering the IHHI's interest, as tenant/lessee in the
Chapman MOB Lease and the Chapman Hospital Lease (all as defined in the $80
million Credit Agreement (hereinafter, the "$80 Million Leasehold Deed of
Trust"). The $80 Million Credit Agreement, the $50 Million Note, the $30 Million
Line of Credit Note, the $80 Million Fee Deed of Trust, the $80 Million
Leasehold Deed of Trust, and each of the other documents and instruments
(including but not limited to the Guaranty Agreements and Pledge Agreements)
executed in connection with the $80 Million Credit Agreement are hereinafter
collectively referred to as the "$80 Million Loan Documents." The terms and
condition set forth in the $80 Million Loan Documents are incorporated herein by
reference even though not physically attached hereto; and
WHEREAS, the Corporation, IHHI, WMC-A, Coastal, Chapman, PCHI, OC-PIN,
Ganesha, West Coast and Medical Provider Financial Corporation III, a Nevada
corporation ("MPFC III") are parties to that certain Credit Agreement dated as
of December 12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7
Million Credit Agreement, MPFC III made available to IHHI (as Borrower) a new
loan in the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan
was evidenced by that certain $10,700,000 Promissory Note dated as of December
12, 2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by OC-PIN in favor of MPFC III
("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by PCHI in favor of
MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million Credit
Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement, $10.7
Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
2
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
PCHI to replace IHHI's management, OC-PIN and PCHI rejected MCC's refinancing
proposal. As a consequence, IHHI was unable to proceed with the proposed
refinancing. On June 12, 2007, MCC terminated the refinancing proposal set forth
in the Term Sheet; and
WHEREAS, the Corporation, the other Borrowers, the Credit Parties and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties and the Guarantors additional time to refinance
the $80 Million Credit Facility and the $10.7 Million Loan with new financing
provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Corporation (along with the other Borrowers, the Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreement on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed with the Board and its legal counsel, and the Board and its legal
counsel believe 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 and the President of the
Corporation (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
3
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 either Lender or by MCC), 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
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.
4
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the Board
of the Corporation, do hereby execute this Unanimous Written Consent of the
Board of Directors of the Corporation to be effective as of the date first above
written.
DIRECTORS:
-------------------------
Bruce Mogel
-------------------------
Larry B. Anderson
5
EXHIBIT "C"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
WMC-A, INC.
June __, 2007
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, Integrated Healthcare Holdings, Inc., a Nevada corporation
("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), the Corporation,
Chapman Medical Center, Inc., a California corporation ("Chapman"), Coastal
Communities Hospital, Inc., a California corporation ("Coastal") (IHHI, WMC-SA,
the Corporation, Chapman and Coastal together as "Borrowers"), Orange County
Physicians Investment Network, LLC, a Nevada limited liability company
("OC-PIN"), Pacific Coast Holdings Investment, LLC, a California limited
liability company ("PCHI"), West Coast Holdings, LLC, a California limited
liability company ("West Coast"), Ganesha Realty, LLC, a California limited
liability company ("Ganesha") (PCHI, Ganesha, and West Coast are hereinafter
together sometimes referred to as the "Credit Parties"; and PCHI and OC-PIN are
hereinafter together sometimes referred to as the "Guarantors"), and Medical
Provider Financial Corporation II, a Nevada corporation ("MPFC II") are parties
to that certain $80 Million Credit Agreement dated as of March 3, 2005 ("$80
Million Credit Agreement"). Pursuant to the $80 Million Credit Agreement, MPFC
II made available to Borrowers a credit facility in the total amount of
$80,000,000 ("$80 Million Credit Facility"), and/or certain other agreements,
documents, or instruments executed in connection with the $80 Million Credit
Agreement. The $80 Million Credit Facility was composed of two (2) separate
loans: (i) a $50,000,000 Acquisition Loan ("$50 Million Acquisition Loan"); and
(ii) a $30,000,000 Non-Revolving Line of Credit ("$30 Million Line of Credit
Loan"). The $50 Million Acquisition Loan was evidenced by that certain
$50,000,000 Acquisition Promissory Note dated as of March 3, 2005, executed by
Borrowers in favor of MPFC II ("$50 Million Note"); and the $30 Million Line of
Credit Loan was evidenced by that certain $30,000,000 Line of Credit Promissory
Note dated as of March 3, 2005, executed by Borrowers in favor of MPFC II ("$30
Million Line of Credit Note"). Repayment of the $50 Million Note and the $30
Million Line of Credit Note is secured in part by (a) that certain Fee Deed of
1
Trust, Security Agreement, Fixture Filing and Assignment of Rents dated as of
March 3, 2005 and recorded in the official records of the recorder of Orange
County, California ("Official Records") on March 8, 2005 as Document no.
2005000169280 and encumbers the fee title to the Western Medical Center - Santa
Ana, the Western Medical Center - Anaheim, and the Coastal Communities Hospital
(all as defined in the $80 Million Credit Agreement) (hereinafter the "$80
Million Fee Deed of Trust"); and (b) that certain Leasehold 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.
2005000169281 and encumbering IHHI's interest, as tenant/lessee in the Chapman
MOB Lease and the Chapman Hospital Lease (all as defined in the $80 million
Credit Agreement (hereinafter, the "$80 Million Leasehold Deed of Trust"). The
$80 Million Credit Agreement, the $50 Million Note, the $30 Million Line of
Credit Note, the $80 Million Fee Deed of Trust, the $80 Million Leasehold Deed
of Trust, and each of the other documents and instruments (including but not
limited to the Guaranty Agreements and Pledge Agreements) executed in connection
with the $80 Million Credit Agreement are hereinafter collectively referred to
as the "$80 Million Loan Documents." The terms and condition set forth in the
$80 Million Loan Documents are incorporated herein by reference even though not
physically attached hereto; and
WHEREAS, the Corporation, IHHI, WMC-SA, Coastal, Chapman, PCHI, OC-PIN,
Ganesha, West Coast and Medical Provider Financial Corporation III, a Nevada
corporation ("MPFC III") are parties to that certain Credit Agreement dated as
of December 12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7
Million Credit Agreement, MPFC III made available to IHHI (as Borrower) a new
loan in the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan
was evidenced by that certain $10,700,000 Promissory Note dated as of December
12, 2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by OC-PIN in favor of MPFC III
("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by PCHI in favor of
MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million Credit
Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement, $10.7
Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
2
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
PCHI to replace IHHI's management, OC-PIN and PCHI rejected MCC's refinancing
proposal. As a consequence, IHHI was unable to proceed with the proposed
refinancing. On June 12, 2007, MCC terminated the refinancing proposal set forth
in the Term Sheet; and
WHEREAS, the Corporation, the other Borrowers, the Credit Parties and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties and the Guarantors additional time to refinance
the $80 Million Credit Facility and the $10.7 Million Loan with new financing
provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Corporation (along with the other Borrowers, the Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreement on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed with the Board and its legal counsel, and the Board and its legal
counsel believe 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 and the President of the
Corporation (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
3
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 either Lender or by MCC), 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
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.
4
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the Board
of the Corporation, do hereby execute this Unanimous Written Consent of the
Board of Directors of the Corporation to be effective as of the date first above
written.
DIRECTORS:
-------------------------
Bruce Mogel
-------------------------
Larry B. Anderson
5
EXHIBIT "D"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
COASTAL COMMUNITIES HOSPITAL, INC.
June __, 2007
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, Integrated Healthcare Holdings, Inc., a Nevada corporation
("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a
California corporation ("WMC-A"), the Corporation, Chapman Medical Center, Inc.,
a California corporation ("Chapman"), (IHHI, WMC-SA, WMC-A, the Corporation and
Chapman together as "Borrowers"), Orange County Physicians Investment Network,
LLC, a Nevada limited liability company ("OC-PIN"), Pacific Coast Holdings
Investment, LLC, a California limited liability company ("PCHI"), West Coast
Holdings, LLC, a California limited liability company ("West Coast"), Ganesha
Realty, LLC, a California limited liability company ("Ganesha") (PCHI, Ganesha,
and West Coast are hereinafter together sometimes referred to as the "Credit
Parties"; and PCHI and OC-PIN are hereinafter together sometimes referred to as
the "Guarantors"), and Medical Provider Financial Corporation II, a Nevada
corporation ("MPFC II") are parties to that certain $80 Million Credit Agreement
dated as of March 3, 2005 ("$80 Million Credit Agreement"), and/or certain other
agreements, documents, or instruments executed in connection with the $80
Million Credit Agreement. Pursuant to the $80 Million Credit Agreement, MPFC II
made available to Borrowers a credit facility in the total amount of $80,000,000
("$80 Million Credit Facility"). The $80 Million Credit Facility was composed of
two (2) separate loans: (i) a $50,000,000 Acquisition Loan ("$50 Million
Acquisition Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit ("$30
Million Line of Credit Loan"). The $50 Million Acquisition Loan was evidenced by
that certain $50,000,000 Acquisition Promissory Note dated as of March 3, 2005,
executed by Borrowers in favor of MPFC II ("$50 Million Note"); and the $30
Million Line of Credit Loan was evidenced by that certain $30,000,000 Line of
Credit Promissory Note dated as of March 3, 2005, executed by Borrowers in favor
of MPFC II ("$30 Million Line of Credit Note"). Repayment of the $50 Million
Note and the $30 Million Line of Credit Note is secured in part by (a) that
1
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 of the
recorder of Orange County, California ("Official Records") on March 8, 2005 as
Document no. 2005000169280 and encumbers the fee title to the Western Medical
Center - Santa Ana, the Western Medical Center - Anaheim, and the Coastal
Communities Hospital (all as defined in the $80 Million Credit Agreement)
(hereinafter the "$80 Million Fee Deed of Trust"); and (b) that certain
Leasehold 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. 2005000169281 and encumbering IHHI's interest, as
tenant/lessee in the Chapman MOB Lease and the Chapman Hospital Lease (all as
defined in the $80 million Credit Agreement (hereinafter, the "$80 Million
Leasehold Deed of Trust"). The $80 Million Credit Agreement, the $50 Million
Note, the $30 Million Line of Credit Note, the $80 Million Fee Deed of Trust,
the $80 Million Leasehold Deed of Trust, and each of the other documents and
instruments (including but not limited to the Guaranty Agreements and Pledge
Agreements) executed in connection with the $80 Million Credit Agreement are
hereinafter collectively referred to as the "$80 Million Loan Documents." The
terms and condition set forth in the $80 Million Loan Documents are incorporated
herein by reference even though not physically attached hereto; and
WHEREAS, the Corporation, IHHI, WMC-SA, WMC-A, Chapman, PCHI, OC-PIN,
Ganesha, West Coast and Medical Provider Financial Corporation III, a Nevada
corporation ("MPFC III") are parties to that certain Credit Agreement dated as
of December 12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7
Million Credit Agreement, MPFC III made available to IHHI (as Borrower) a new
loan in the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan
was evidenced by that certain $10,700,000 Promissory Note dated as of December
12, 2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by OC-PIN in favor of MPFC III
("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by PCHI in favor of
MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million Credit
Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement, $10.7
Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
2
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
PCHI to replace IHHI's management, OC-PIN and PCHI rejected MCC's refinancing
proposal. As a consequence, IHHI was unable to proceed with the proposed
refinancing. On June 12, 2007, MCC terminated the refinancing proposal set forth
in the Term Sheet; and
WHEREAS, the Corporation, the other Borrowers, the Credit Parties and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties and the Guarantors additional time to refinance
the $80 Million Credit Facility and the $10.7 Million Loan with new financing
provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Corporation (along with the other Borrowers, the Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreement on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed with the Board and its legal counsel, and the Board and its legal
counsel believe 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.
3
RESOLVED FURTHER, that the Chief Executive Officer and the President of the
Corporation (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 either Lender or by MCC), 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
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.
4
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the Board
of the Corporation, do hereby execute this Unanimous Written Consent of the
Board of Directors of the Corporation to be effective as of the date first above
written.
DIRECTORS:
---------------------------
Bruce Mogel
---------------------------
Larry B. Anderson
5
EXHIBIT "E"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF
CHAPMAN MEDICAL CENTER, INC.
June __, 2007
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, 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 Communities Hospital, Inc., a
California corporation ("Coastal"), and the Corporation (IHHI, WMC-SA, WMC-A,
Coastal and the Corporation together as "Borrowers"), Orange County Physicians
Investment Network, LLC, a Nevada limited liability company ("OC-PIN"), Pacific
Coast Holdings Investment, LLC, a California limited liability company ("PCHI"),
West Coast Holdings, LLC, a California limited liability company ("West Coast"),
Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI,
Ganesha, and West Coast are hereinafter together sometimes referred to as the
"Credit Parties"; and PCHI and OC-PIN are hereinafter together sometimes
referred to as the "Guarantors"), and Medical Provider Financial Corporation II,
a Nevada corporation ("MPFC II") are parties to that certain $80 Million Credit
Agreement dated as of March 3, 2005 ("$80 Million Credit Agreement"), and/or
certain other agreements, documents, or instruments executed in connection with
the $80 Million Credit Agreement. Pursuant to the $80 Million Credit Agreement,
MPFC II made available to Borrowers a credit facility in the total amount of
$80,000,000 ("$80 Million Credit Facility"). The $80 Million Credit Facility was
composed of two (2) separate loans: (i) a $50,000,000 Acquisition Loan ("$50
Million Acquisition Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit
("$30 Million Line of Credit Loan"). The $50 Million Acquisition Loan was
evidenced by that certain $50,000,000 Acquisition Promissory Note dated as of
March 3, 2005, executed by Borrowers in favor of MPFC II ("$50 Million Note");
and the $30 Million Line of Credit Loan was evidenced by that certain
$30,000,000 Line of Credit Promissory Note dated as of March 3, 2005, executed
by Borrowers in favor of MPFC II ("$30 Million Line of Credit Note"). Repayment
of the $50 Million Note and the $30 Million Line of Credit Note is secured in
part by (a) 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 of the recorder of Orange County, California ("Official Records") on
March 8, 2005 as Document no. 2005000169280 and encumbers the fee title to the
Western Medical Center - Santa Ana, the Western Medical Center - Anaheim, and
the Coastal Communities Hospital (all as defined in the $80 Million Credit
1
Agreement) (hereinafter the "$80 Million Fee Deed of Trust"); and (b) that
certain Leasehold 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. 2005000169281 and encumbering IHHI's
interest, as tenant/lessee in the Chapman MOB Lease and the Chapman Hospital
Lease (all as defined in the $80 million Credit Agreement (hereinafter, the "$80
Million Leasehold Deed of Trust"). The $80 Million Credit Agreement, the $50
Million Note, the $30 Million Line of Credit Note, the $80 Million Fee Deed of
Trust, the $80 Million Leasehold Deed of Trust, and each of the other documents
and instruments (including but not limited to the Guaranty Agreements and Pledge
Agreements) executed in connection with the $80 Million Credit Agreement are
hereinafter collectively referred to as the "$80 Million Loan Documents." The
terms and condition set forth in the $80 Million Loan Documents are incorporated
herein by reference even though not physically attached hereto; and
WHEREAS, the Corporation, IHHI, WMC-SA, WMC-A, Coastal, PCHI, OC-PIN,
Ganesha, West Coast and Medical Provider Financial Corporation III, a Nevada
corporation ("MPFC III") are parties to that certain Credit Agreement dated as
of December 12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7
Million Credit Agreement, MPFC III made available to IHHI (as Borrower) a new
loan in the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan
was evidenced by that certain $10,700,000 Promissory Note dated as of December
12, 2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by OC-PIN in favor of MPFC III
("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by PCHI in favor of
MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million Credit
Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement, $10.7
Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
2
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
PCHI to replace IHHI's management, OC-PIN and PCHI rejected MCC's refinancing
proposal. As a consequence, IHHI was unable to proceed with the proposed
refinancing. On June 12, 2007, MCC terminated the refinancing proposal set forth
in the Term Sheet; and
WHEREAS, the Corporation, the other Borrowers, the Credit Parties and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish is right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties and the Guarantors additional time to refinance
the $80 Million Credit Facility and the $10.7 Million Loan with new financing
provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Corporation (along with the other Borrowers, the Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreement on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed with the Board and its legal counsel, and the Board and its legal
counsel believe 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.
3
RESOLVED FURTHER, that the Chief Executive Officer and the President of the
Corporation (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 either Lender or by MCC), 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
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.
4
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the Board
of the Corporation, do hereby execute this Unanimous Written Consent of the
Board of Directors of the Corporation to be effective as of the date first above
written.
DIRECTORS:
--------------------------
Bruce Mogel
--------------------------
Larry B. Anderson
5
EXHIBIT "F"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE MANAGERS AND MEMBERS
OF
PACIFIC COAST HOLDINGS INVESTMENT, LLC
June __, 2007
The undersigned, constituting all of the Managers and all of the Members of
Pacific Coast Holdings Investment, 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, acting together,
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 Communities Hospital, Inc., a
California corporation ("Coastal"), Chapman Medical Center, Inc., a California
corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman together as
"Borrowers"), and the Company, Orange County Physicians Investment Network, LLC,
a Nevada limited liability company ("OC-PIN"), West Coast Holdings, LLC, a
California limited liability company ("West Coast"), Ganesha Realty, LLC, a
California limited liability company ("Ganesha") (the Company, Ganesha, and West
Coast are hereinafter together sometimes referred to as the "Credit Parties";
and the Company and OC-PIN are hereinafter together sometimes referred to as the
"Guarantors"), and Medical Provider Financial Corporation II, a Nevada
corporation ("MPFC II") are parties to that certain $80 Million Credit Agreement
dated as of March 3, 2005 ("$80 Million Credit Agreement"), and/or certain other
agreements, documents, or instruments executed in connection with the $80
Million Credit Agreement. Pursuant to the $80 Million Credit Agreement, MPFC II
made available to Borrowers a credit facility in the total amount of $80,000,000
("$80 Million Credit Facility"). The $80 Million Credit Facility was composed of
two (2) separate loans: (i) a $50,000,000 Acquisition Loan ("$50 Million
Acquisition Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit ("$30
Million Line of Credit Loan"). The $50 Million Acquisition Loan was evidenced by
that certain $50,000,000 Acquisition Promissory Note dated as of March 3, 2005,
executed by Borrowers in favor of MPFC II ("$50 Million Note"); and the $30
Million Line of Credit Loan was evidenced by that certain $30,000,000 Line of
Credit Promissory Note dated as of March 3, 2005, executed by Borrowers in favor
of MPFC II ("$30 Million Line of Credit Note"). Repayment of the $50 Million
Note and the $30 Million Line of Credit Note is secured in part by (a) 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 of the
recorder of Orange County, California ("Official Records") on March 8, 2005 as
Document no. 2005000169280 and encumbers the fee title to the Western Medical
Center - Santa Ana, the Western Medical Center - Anaheim, and the Coastal
Communities Hospital (all as defined in the $80 Million Credit Agreement)
1
(hereinafter the "$80 Million Fee Deed of Trust"); and (b) that certain
Leasehold 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. 2005000169281 and encumbering IHHI's interest, as
tenant/lessee in the Chapman MOB Lease and the Chapman Hospital Lease (all as
defined in the $80 million Credit Agreement (hereinafter, the "$80 Million
Leasehold Deed of Trust"). The $80 Million Credit Agreement, the $50 Million
Note, the $30 Million Line of Credit Note, the $80 Million Fee Deed of Trust,
the $80 Million Leasehold Deed of Trust, and each of the other documents and
instruments (including but not limited to the Guaranty Agreements and Pledge
Agreements) executed in connection with the $80 Million Credit Agreement are
hereinafter collectively referred to as the "$80 Million Loan Documents." The
terms and condition set forth in the $80 Million Loan Documents are incorporated
herein by reference even though not physically attached hereto; and
WHEREAS, the Company, IHHI, WMC-SA, WMC-A, Coastal, Chapman, OC-PIN,
Ganesha, West Coast the Borrowers, the Credit Parties (including the Company),
the Guarantors (including the Company) and Medical Provider Financial
Corporation III, a Nevada corporation ("MPFC III") are parties to that certain
Credit Agreement dated as of December 12, 2005 ("$10.7 Million Credit
Agreement"). Pursuant to the $10.7 Million Credit Agreement, MPFC III made
available to IHHI (as Borrower) a new loan in the amount of $10,700,000 ("$10.7
Million Loan"). The $10.7 Million Loan was evidenced by that certain $10,700,000
Promissory Note dated as of December 12, 2005, executed by Borrower in favor of
MPFC III ("$10.7 Million Note"). Repayment of the $10.7 Million Note is secured
in part by (a) that certain Security Agreement dated as of December 12, 2005,
executed by IHHI and MPFC III ("$10.7 Million Security Agreement"), (b) that
certain Guaranty Agreement (OC-PIN) dated as of December 12, 2005, executed by
OC-PIN in favor of MPFC III ("$10.7 Million Guaranty Agreement (OC-PIN)"), and
(c) that certain Guaranty Agreement (PCHI) dated as of December 12, 2005,
executed by the Company in favor of MPFC III ("$10.7 Million Guaranty Agreement
(PCHI)"). The $10.7 Million Credit Agreement, the $10.7 Million Note, the $10.7
Million Security Agreement, $10.7 Million Guaranty Agreement (OC-PIN), the $10.7
Million Guaranty Agreement (PCHI), and each of the other documents and
instruments (including but not limited to Pledge Agreements) executed in
connection with the $10.7 Million Credit Agreement are hereinafter collectively
referred to as the "$10.7 Million Loan Documents." The terms and condition set
forth in the $10.7 Million Loan Documents are incorporated herein by reference
even though not physically attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
2
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
the Company to replace IHHI's management, OC-PIN and the Company rejected MCC's
refinancing proposal. As a consequence, IHHI was unable to proceed with the
proposed refinancing. On June 12, 2007, MCC terminated the refinancing proposal
set forth in the Term Sheet; and
WHEREAS, the Borrowers, the Credit Parties (including the Company) and the
Guarantors (including the Company) have requested that MPFC II and MPFC III
(together, the "Lenders") forbear from exercising their rights and remedies
granted to Lenders under the $80 Million Loan Documents and the $10.7 Million
Loan Documents, and that MCC waive and relinquish its right under the Term Sheet
to charge a two percent (2%) fee; and each Lender has desires to forbear from
exercising their rights and remedies under the $80 Million Loan Documents and
under the $10.7 Million Loan Documents and MCC desires to waive and relinquish
is right under the Term Sheet to charge a two percent (2%) fee, solely for the
purposes of providing the Borrowers and the Credit Parties (including the
Company) and the Guarantors (including the Company) additional time to refinance
the $80 Million Credit Facility and the $10.7 Million Loan with new financing
provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Company (along with the Borrowers, the other Credit Parties and the
other Guarantors) execute and deliver to each Lender and MCC that certain
Agreement to Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Managers have determined it to be in the best interest of the
Company to execute the Forbearance Agreement on behalf of the Company; and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed by the Managers and the Company's legal counsel, and the Managers and
the Company's legal counsel believe that it is in the best interest of the
Company to approve same on behalf of the Company.
3
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 of the Company (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 Managers, for and on behalf of the Company, 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 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 any Proper Officer of the Company 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 either Lender or by MCC), and to take such other
actions as the Proper Officer so acting 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 Proper Officers are hereby authorized, on behalf
of the Company, 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
GENERAL RESOLUTIONS
-------------------
RESOLVED, that all Proper Officers of the Company 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 Company, 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 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 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 Company in order to effect such
purposes.
4
RESOLVED FURTHER, that each and every action taken by any Proper Officer of
the Company 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.
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the
Managers and Members of the Company, do hereby execute this Unanimous Written
Consent of the Managers and Members to be effective as of the date first above
written.
MANAGERS:
----------------------------------
Kali P. Chaudhuri, M.D., Co-Manager
----------------------------------
Anil V. Shah, M.D., Co-Manager
MEMBERS:
WEST COAST HOLDINGS, LLC, a
California limited liability company,
By:______________________________
Anil V. Shah, M.D., Manager
GANESHA REALTY, LLC, a
California limited liability company.,
By:______________________________
Kali P. Chaudhuri, M.D., Manager
5
EXHIBIT "G"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE MANAGERS
OF
WEST COAST HOLDINGS, LLC
June __, 2007
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 Communities Hospital, Inc., a
California corporation ("Coastal"), Chapman Medical Center, Inc., a California
corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman together as
"Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited
liability company ("PCHI"), Orange County Physicians Investment Network, LLC, a
Nevada limited liability company ("OC-PIN"), the Company, Ganesha Realty, LLC, a
California limited liability company ("Ganesha") (PCHI, Ganesha, and the Company
are hereinafter together sometimes referred to as the "Credit Parties"; and PCHI
and OC-PIN are hereinafter together sometimes referred to as the "Guarantors"),
and Medical Provider Financial Corporation II, a Nevada corporation ("MPFC II")
are parties to that certain $80 Million Credit Agreement dated as of March 3,
2005 ("$80 Million Credit Agreement"), and/or certain other agreements,
documents, or instruments executed in connection with the $80 Million Credit
Agreement. Pursuant to the $80 Million Credit Agreement, MPFC II made available
to Borrowers a credit facility in the total amount of $80,000,000 ("$80 Million
Credit Facility"). The $80 Million Credit Facility was composed of two (2)
separate loans: (i) a $50,000,000 Acquisition Loan ("$50 Million Acquisition
Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit ("$30 Million Line
of Credit Loan"). The $50 Million Acquisition Loan was evidenced by that certain
$50,000,000 Acquisition Promissory Note dated as of March 3, 2005, executed by
Borrowers in favor of MPFC II ("$50 Million Note"); and the $30 Million Line of
Credit Loan was evidenced by that certain $30,000,000 Line of Credit Promissory
Note dated as of March 3, 2005, executed by Borrowers in favor of MPFC II ("$30
Million Line of Credit Note"). Repayment of the $50 Million Note and the $30
Million Line of Credit Note is secured in part by (a) 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 of the recorder of Orange
County, California ("Official Records") on March 8, 2005 as Document no.
2005000169280 and encumbers the fee title to the Western Medical Center - Santa
1
Ana, the Western Medical Center - Anaheim, and the Coastal Communities Hospital
(all as defined in the $80 Million Credit Agreement) (hereinafter the "$80
Million Fee Deed of Trust"); and (b) that certain Leasehold 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.
2005000169281 and encumbering IHHI's interest, as tenant/lessee in the Chapman
MOB Lease and the Chapman Hospital Lease (all as defined in the $80 million
Credit Agreement (hereinafter, the "$80 Million Leasehold Deed of Trust"). The
$80 Million Credit Agreement, the $50 Million Note, the $30 Million Line of
Credit Note, the $80 Million Fee Deed of Trust, the $80 Million Leasehold Deed
of Trust, and each of the other documents and instruments (including but not
limited to the Guaranty Agreements and Pledge Agreements) executed in connection
with the $80 Million Credit Agreement are hereinafter collectively referred to
as the "$80 Million Loan Documents." The terms and condition set forth in the
$80 Million Loan Documents are incorporated herein by reference even though not
physically attached hereto; and
WHEREAS, the Company, IHHI, WMC-SA, WMC-A, Coastal, Chapman, PCHI, OCPIN,
Ganesha and Medical Provider Financial Corporation III, a Nevada corporation
("MPFC III") are parties to that certain Credit Agreement dated as of December
12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7 Million
Credit Agreement, MPFC III made available to IHHI (as Borrower) a new loan in
the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan was
evidenced by that certain $10,700,000 Promissory Note dated as of December 12,
2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by OC-PIN in favor of MPFC III
("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by the Company in favor
of MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million
Credit Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement,
$10.7 Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
2
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
PCHI to replace IHHI's management, OC-PIN and PCHI rejected MCC's refinancing
proposal. As a consequence, IHHI was unable to proceed with the proposed
refinancing. On June 12, 2007, MCC terminated the refinancing proposal set forth
in the Term Sheet; and
WHEREAS, the Borrowers, the Credit Parties (including the Company) and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties (including the Company) and the Guarantors
additional time to refinance the $80 Million Credit Facility and the $10.7
Million Loan with new financing provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Company (along with the Borrowers, the other Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Managers have determined it to be in the best interest of the
Company to execute the Forbearance Agreement on behalf of the Company; and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed by the Managers and the Company's legal counsel, and the Managers and
the Company's legal counsel believe that it is in the best interest of the
Company to approve same on behalf of the Company.
3
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 of the Company (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 Managers, for and on behalf of the Company, 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 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 any Proper Officer of the Company 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 either Lender or by MCC), and to take such other
actions as the Proper Officer so acting 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 Proper Officers are hereby authorized, on behalf
of the Company, 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
GENERAL RESOLUTIONS
-------------------
RESOLVED, that all Proper Officers of the Company 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 Company, 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 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 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 Company in order to effect such
purposes.
4
RESOLVED FURTHER, that each and every action taken by any Proper Officer of
the Company 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.
IN WITNESS WHEREOF, the undersigned, constituting all (100%) of the
Managers of the Company, do hereby execute this Unanimous Consent of the
Managers to be effective as of the date first above written.
MANAGERS:
---------------------------
A. J. Meka, M.D.
---------------------------
Anil V. Shah, M.D.
5
EXHIBIT "H"
-----------
UNANIMOUS WRITTEN CONSENT
OF THE SOLE MANAGER AND SOLE MEMBER
OF
GANESHA REALTY, LLC
June __, 2007
The undersigned, constituting the sole Manager and the sole Member of
Ganesha Realty, 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 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 Communities Hospital, Inc., a
California corporation ("Coastal"), Chapman Medical Center, Inc., a California
corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman together as
"Borrowers"), and Pacific Coast Holdings Investment, LLC, a California limited
liability company ("PCHI"), 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 the Company (PCHI, West
Coast and the Company are hereinafter together sometimes referred to as the
"Credit Parties"; and PCHI and OC-PIN are hereinafter together sometimes
referred to as the "Guarantors"), and Medical Provider Financial Corporation II,
a Nevada corporation ("MPFC II") are parties to that certain $80 Million Credit
Agreement dated as of March 3, 2005 ("$80 Million Credit Agreement"), and/or
certain other agreements, documents, or instruments executed in connection with
the $80 Million Credit Agreement. Pursuant to the $80 Million Credit Agreement,
MPFC II made available to Borrowers a credit facility in the total amount of
$80,000,000 ("$80 Million Credit Facility"). The $80 Million Credit Facility was
composed of two (2) separate loans: (i) a $50,000,000 Acquisition Loan ("$50
Million Acquisition Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit
("$30 Million Line of Credit Loan"). The $50 Million Acquisition Loan was
evidenced by that certain $50,000,000 Acquisition Promissory Note dated as of
March 3, 2005, executed by Borrowers in favor of MPFC II ("$50 Million Note");
and the $30 Million Line of Credit Loan was evidenced by that certain
$30,000,000 Line of Credit Promissory Note dated as of March 3, 2005, executed
by Borrowers in favor of MPFC II ("$30 Million Line of Credit Note"). Repayment
of the $50 Million Note and the $30 Million Line of Credit Note is secured in
part by (a) 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 of the recorder of Orange County, California ("Official Records") on
March 8, 2005 as Document no. 2005000169280 and encumbers the fee title to the
1
Western Medical Center - Santa Ana, the Western Medical Center - Anaheim, and
the Coastal Communities Hospital (all as defined in the $80 Million Credit
Agreement) (hereinafter the "$80 Million Fee Deed of Trust"); and (b) that
certain Leasehold 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. 2005000169281 and encumbering IHHI's
interest, as tenant/lessee in the Chapman MOB Lease and the Chapman Hospital
Lease (all as defined in the $80 million Credit Agreement (hereinafter, the "$80
Million Leasehold Deed of Trust"). The $80 Million Credit Agreement, the $50
Million Note, the $30 Million Line of Credit Note, the $80 Million Fee Deed of
Trust, the $80 Million Leasehold Deed of Trust, and each of the other documents
and instruments (including but not limited to the Guaranty Agreements and Pledge
Agreements) executed in connection with the $80 Million Credit Agreement are
hereinafter collectively referred to as the "$80 Million Loan Documents." The
terms and condition set forth in the $80 Million Loan Documents are incorporated
herein by reference even though not physically attached hereto; and
WHEREAS, the Company, IHHI, WMC-SA, WMC-A, Coastal, Chapman, PCHI, OCPIN,
West Coast and Medical Provider Financial Corporation III, a Nevada corporation
("MPFC III") are parties to that certain Credit Agreement dated as of December
12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7 Million
Credit Agreement, MPFC III made available to IHHI (as Borrower) a new loan in
the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan was
evidenced by that certain $10,700,000 Promissory Note dated as of December 12,
2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by OC-PIN in favor of MPFC III
("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by the Company in favor
of MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million
Credit Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement,
$10.7 Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
2
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by OC-PIN and
PCHI the to replace IHHI's management, OC-PIN and PCHI rejected MCC's
refinancing proposal. As a consequence, IHHI was unable to proceed with the
proposed refinancing. On June 12, 2007, MCC terminated the refinancing proposal
set forth in the Term Sheet; and
WHEREAS, the Borrowers, the Credit Parties (including the Company) and the
Guarantors have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties (including the Company) and the Guarantors
additional time to refinance the $80 Million Credit Facility and the $10.7
Million Loan with new financing provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Company (along with the Borrowers, the other Credit Parties and the
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Manager has determined it to be in the best interest of the
Company to execute the Forbearance Agreement on behalf of the Company; and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed by the Manager and the Company's legal counsel, and the Manager and
the Company's legal counsel believe that it is in the best interest of the
Company to approve same on behalf of the Company.
3
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 of the Company (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 Manager, for and on behalf of the Company, 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 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 any Proper Officer of the Company 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 either Lender or by MCC), and to take such other
actions as the Proper Officer so acting 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 Proper Officers are hereby authorized, on behalf
of the Company, 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
GENERAL RESOLUTIONS
-------------------
RESOLVED, that all Proper Officers of the Company 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 Company, 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 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 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 Company in order to effect such
purposes.
4
RESOLVED FURTHER, that each and every action taken by any Proper Officer of
the Company 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.
IN WITNESS WHEREOF, the undersigned, constituting the sole Manager and the
sole Member of the Company, do hereby execute this Unanimous Written Consent of
Sole Manager and Sole Member to be effective as of the date first above written.
MANAGER:
------------------------------
Kali P. Chaudhuri, M.D.,
MEMBER:
------------------------------
Kali P. Chaudhuri, M.D.
5
EXHIBIT "I"
-----------
WRITTEN CONSENT
OF THE SOLE MANAGER
OF
ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC
June __, 2007
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 Communities Hospital, Inc., a
California corporation ("Coastal"), Chapman Medical Center, Inc., a California
corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman together as
"Borrowers"), Pacific Coast Holdings Investment, LLC, a California limited
liability company ("PCHI"), the Company, West Coast Holdings, LLC, a California
limited liability company ("West Coast"), Ganesha Realty, LLC, a California
limited liability company ("Ganesha") (PCHI, West Coast and Ganesha are
hereinafter together sometimes referred to as the "Credit Parties"; and PCHI and
the Company are hereinafter together sometimes referred to as the "Guarantors"),
and Medical Provider Financial Corporation II, a Nevada corporation ("MPFC II")
are parties to that certain $80 Million Credit Agreement dated as of March 3,
2005 ("$80 Million Credit Agreement"), and/or certain other agreements,
documents, or instruments executed in connection with the $80 Million Credit
Agreement. Pursuant to the $80 Million Credit Agreement, MPFC II made available
to Borrowers a credit facility in the total amount of $80,000,000 ("$80 Million
Credit Facility"). The $80 Million Credit Facility was composed of two (2)
separate loans: (i) a $50,000,000 Acquisition Loan ("$50 Million Acquisition
Loan"); and (ii) a $30,000,000 Non-Revolving Line of Credit ("$30 Million Line
of Credit Loan"). The $50 Million Acquisition Loan was evidenced by that certain
$50,000,000 Acquisition Promissory Note dated as of March 3, 2005, executed by
Borrowers in favor of MPFC II ("$50 Million Note"); and the $30 Million Line of
Credit Loan was evidenced by that certain $30,000,000 Line of Credit Promissory
Note dated as of March 3, 2005, executed by Borrowers in favor of MPFC II ("$30
Million Line of Credit Note"). Repayment of the $50 Million Note and the $30
Million Line of Credit Note is secured in part by (a) 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 of the recorder of Orange
County, California ("Official Records") on March 8, 2005 as Document no.
2005000169280 and encumbers the fee title to the Western Medical Center - Santa
Ana, the Western Medical Center - Anaheim, and the Coastal Communities Hospital
(all as defined in the $80 Million Credit Agreement) (hereinafter the "$80
1
Million Fee Deed of Trust"); and (b) that certain Leasehold 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.
2005000169281 and encumbering IHHI's interest, as tenant/lessee in the Chapman
MOB Lease and the Chapman Hospital Lease (all as defined in the $80 million
Credit Agreement (hereinafter, the "$80 Million Leasehold Deed of Trust"). The
$80 Million Credit Agreement, the $50 Million Note, the $30 Million Line of
Credit Note, the $80 Million Fee Deed of Trust, the $80 Million Leasehold Deed
of Trust, and each of the other documents and instruments (including but not
limited to the Guaranty Agreements and Pledge Agreements) executed in connection
with the $80 Million Credit Agreement are hereinafter collectively referred to
as the "$80 Million Loan Documents." The terms and condition set forth in the
$80 Million Loan Documents are incorporated herein by reference even though not
physically attached hereto; and
WHEREAS, the Company, IHHI, WMC-SA, WMC-A, Coastal, Chapman, PCHI, Ganesha,
West Coast and Medical Provider Financial Corporation III, a Nevada corporation
("MPFC III") are parties to that certain Credit Agreement dated as of December
12, 2005 ("$10.7 Million Credit Agreement"). Pursuant to the $10.7 Million
Credit Agreement, MPFC III made available to IHHI (as Borrower) a new loan in
the amount of $10,700,000 ("$10.7 Million Loan"). The $10.7 Million Loan was
evidenced by that certain $10,700,000 Promissory Note dated as of December 12,
2005, executed by Borrower in favor of MPFC III ("$10.7 Million Note").
Repayment of the $10.7 Million Note is secured in part by (a) that certain
Security Agreement dated as of December 12, 2005, executed by IHHI and MPFC III
("$10.7 Million Security Agreement"), (b) that certain Guaranty Agreement
(OC-PIN) dated as of December 12, 2005, executed by the Company in favor of MPFC
III ("$10.7 Million Guaranty Agreement (OC-PIN)"), and (c) that certain Guaranty
Agreement (PCHI) dated as of December 12, 2005, executed by PCHI in favor of
MPFC III ("$10.7 Million Guaranty Agreement (PCHI)"). The $10.7 Million Credit
Agreement, the $10.7 Million Note, the $10.7 Million Security Agreement, $10.7
Million Guaranty Agreement (OC-PIN), the $10.7 Million Guaranty Agreement
(PCHI), and each of the other documents and instruments (including but not
limited to Pledge Agreements) executed in connection with the $10.7 Million
Credit Agreement are hereinafter collectively referred to as the "$10.7 Million
Loan Documents." The terms and condition set forth in the $10.7 Million Loan
Documents are incorporated herein by reference even though not physically
attached hereto; and
WHEREAS, the $10.7 Million Note matured, and was due and payable in full,
on December 12, 2006; and the $50 Million Note and the $30 Million Line of
Credit Note each matured, and were each due and payable in full, on March 2,
2007. Borrower under the $10.7 Million Credit Agreement failed to pay the $10.7
Million Note when due and have committed an event of default under the $10.7
Million Credit Agreement ("$10.7 Million Event of Default"); Borrowers under the
$80 Million Credit Agreement failed to pay the $50 Million Note and the $30
Million Line of Credit Note when due and committed an event of default under the
$80 Million Credit Agreement ("$80 Million Event of Default"); and
2
WHEREAS, the principal amount due and owing under the $50 Million Note as
of June 1, 2007 was $45,000,000; the amount of accrued but unpaid interest as of
June 1, 2007 was $542,500; and that interest has and will accrue after June 1,
2007 at the rate of 14% per annum, or $17,500 per day; and the principal amount
due and owing under the $30 Million Line of Credit Note as of June 1, 2007 was
$27,341,458.61; the amount of accrued but unpaid interest as of June 1, 2007 was
$329,616.45; and that interest has and will accrue after June 1, 2007 at the
rate of 14% per annum, or $10,632,70 per day; and the principal amount due and
owing under the $10.7 Million Note as of June 1, 2007 was $10,700,000; the
amount of accrued but unpaid interest as of June 1, 2007 was $109,052,05; and
that interest has and will accrue after June 1, 2007 at the rate of 12% per
annum, or $3,517.81 per day; and
WHEREAS, on February 21, 2007, Medical Capital Corporation, a Nevada
corporation ("MCC") and IHHI executed a letter agreement entitled Expression Of
Interest in Providing Credit Facilities ("Term Sheet"), pursuant to which MCC
offered to refinance the $80 Million Credit Facility and the $10.7 Million Loan
with new loans at substantially lower interest rates. The Term Sheet required
that the proposed refinancing close by March 8, 2007. On several occasions, IHHI
requested, and MCC agreed, to extend the proposed closing date. However, due to
continuing dissension on IHHI's board of directors and attempts by the Company
and PCHI the to replace IHHI's management, the Company and PCHI rejected MCC's
refinancing proposal. As a consequence, IHHI was unable to proceed with the
proposed refinancing. On June 12, 2007, MCC terminated the refinancing proposal
set forth in the Term Sheet; and
WHEREAS, the Borrowers, the Credit Parties and the Guarantors (including
the Company) have requested that MPFC II and MPFC III (together, the "Lenders")
forbear from exercising their rights and remedies granted to Lenders under the
$80 Million Loan Documents and the $10.7 Million Loan Documents, and that MCC
waive and relinquish its right under the Term Sheet to charge a two percent (2%)
fee; and each Lender desires to forbear from exercising their rights and
remedies under the $80 Million Loan Documents and under the $10.7 Million Loan
Documents and MCC desires to waive and relinquish is right under the Term Sheet
to charge a two percent (2%) fee, solely for the purposes of providing the
Borrowers and the Credit Parties and the Guarantors (including the Company)
additional time to refinance the $80 Million Credit Facility and the $10.7
Million Loan with new financing provided by a third-party lender; and
WHEREAS, a condition to each Lender and MCC agreeing to the foregoing is
that the Company (along with the Borrowers, the Credit Parties and the other
Guarantors) execute and deliver to each Lender and MCC that certain Agreement to
Forbear of even date herewith ("Forbearance Agreement"); and
WHEREAS, the Manager has determined it to be in the best interest of the
Company to execute the Forbearance Agreement on behalf of the Company; and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed by or
discussed by the Manager and the Company's legal counsel, and the Manager and
the Company's legal counsel 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.
3
RESOLVED FURTHER, that the Manager of the Company (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 Manager, for and on behalf of the Company, 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 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 any Proper Officer of the Company 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 either Lender or by MCC), and to take such other
actions as the Proper Officer so acting 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 Proper Officers are hereby authorized, on behalf
of the Company, 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 each Lender and MCC 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 each Lender and MCC and receipted
for in writing by each Lender and MCC.
GENERAL RESOLUTIONS
-------------------
RESOLVED, that all Proper Officers of the Company 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 Company, 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 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 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 Company in order to effect such
purposes.
RESOLVED FURTHER, that each and every action taken by any Proper Officer of
the Company 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.
4
IN WITNESS WHEREOF, the undersigned, the sole Manager of the Company, does
hereby execute this Unanimous Consent of the Sole Manager to be effective as of
the date first above written.
MANAGER:
------------------------------
Anil V. Shah, M.D.
5