AGREEMENT TO FORBEAR
This AGREEMENT TO FORBEAR ("Forbearance Agreement") is made to be
effective as of June 1, 2005 (the "Effective Date") by and among INTEGRATED
HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), WMC-SA, INC., a
California corporation ("WMC-SA"), WMC-A, INC., a California corporation
("WMC-A"), CHAPMAN MEDICAL CENTER, INC., a California corporation ("Chapman"),
COASTAL COMMUNITIES HOSPITAL, INC., a California corporation ("Coastal"), ORANGE
COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability company
("OC-PIN"), WEST COAST HOLDINGS, LLC, a California limited liability company
("West Coast"), and MEDICAL PROVIDER FINANCIAL CORPORATION II, a Nevada
corporation ("Lender"). IHHI, WMC-SA, WMC-A, Coastal and Chapman are hereinafter
together sometimes referred to as the "Borrowers"; West Coast is hereinafter
referred to as the "Credit Party"; and OC-PIN is hereinafter referred to as the
"Guarantor."
RECITALS
A. Lender, Borrowers and the Credit Party are some, but not all, of the
parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit
Agreement"). In addition, Lender and OC-PIN are parties to that certain Guaranty
Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast
are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West
Coast Pledge Agreement"); Lender and the individual members of West Coast are
parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of
West Coast Pledge Agreement"); and Lender and IHHI are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("IHHI Pledge Agreement"). The Credit
Agreement, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of
West Coast Pledge Agreement and the IHHI Pledge Agreement, and each of the other
documents and instruments executed in connection with the Credit Agreement are
hereinafter collectively referred to as the "Loan Documents." The terms and
condition set forth in the Loan Documents are incorporated herein by reference
even though not physically attached hereto. Capitalized terms not defined in
this Forbearance Agreement shall have the same meaning as set forth in the Loan
Documents.
B. Pursuant to the Loan Documents, Lender extended to Borrowers a loan
in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
Borrowers, Credit Party and Guarantor acknowledge and agree that the aggregate
total of principal and interest due and owing under the Loan as of May 18, 2005
is $63,533,555.57.
C. The Borrowers have committed certain events of default ("Events of
Default") under the Loan Documents, as more particularly set forth (i) in that
certain letter from Lender to Borrowers and others entitled Notice of Events of
Default dated May 9, 2005 (a copy of which is attached hereto as Exhibit "A")
(the "Contract Default Notice"), and (ii) in that certain letter from Lender to
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Borrowers and others entitled Notice of Failure to Comply With Covenant dated
May 9, 2005 (a copy of which is attached hereto as Exhibit "B") (the "Covenant
Failure Notice"). Borrowers, Credit Party and Guarantor each acknowledge receipt
of the Contract Default Notice and the Covenant Failure Notice, and agree that
the Events of Default specified therein occurred and are continuing.
D. A dispute has arisen by and between IHHI on the one hand and OC-PIN
on the other, in that IHHI claims that the Events of Default occurred because of
OC-PIN's failure to contribute a total of $30,000,000 in capital to IHHI; and
OC-PIN claims that it was not required to contribute a total of $30,000,000 in
capital to IHHI.
E. IHHI and OC-PIN have agreed to resolve their dispute on the terms
and conditions set forth in that certain First Amendment to Stock Purchase
Agreement dated June 1, 2005, executed by and between IHHI and OC-PIN ("First
Amendment").
F. Borrowers, Credit Party and Guarantor acknowledge and agree that
Lender currently has the right to exercise its rights and remedies under the
Loan Documents, including but not limited to recording notices of default and
elections to sell in the official records of Orange County, California,
judicially and/or non-judicially foreclosing on the Hospital Facilities,
bringing legal action against OC-PIN to enforce its obligations under the OC-PIN
Guaranty, and bringing legal action against West Coast, the members of West
Coast and IHHI to enforce their obligations under their respective Pledge
Agreements. However, Borrowers, Credit Party and Guarantor have requested that
Lender forbear from exercising the foregoing rights and remedies granted to
Lender under the Loan Documents. Lender has agreed to forbear solely for the
purposes of providing IHHI and OC-PIN additional time to cure the Events of
Default; provided, however, Lender's agreement to forbear is made solely on the
terms and conditions set forth in this Forbearance Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the covenants and conditions set
forth in this Forbearance Agreement, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged,
Borrowers, Credit Party, Guarantor and Lender agree as follows:
1. INCORPORATION OF RECITALS. The foregoing Recitals are incorporated by
reference as if fully set forth herein.
2. NOTICES OF DEFAULT; DEEDS OF TRUST. Based on the occurrence of the Events of
Default, Borrowers, Credit Party and Guarantor acknowledge and agree that Lender
has the right to record in the Official Records of the Recorder of Orange County
("Official Records") (a) a Notice of Default and Election to Sell with respect
to that certain Fee Deed of Trust, Security Agreement, Fixture Filing and
Assignment of Rents dated as of March 3, 2005 and recorded in the Official
Records on March 8, 2005 as Document No. 2005000169280; and (b) a Notice of
Default and Election to Sell with respect to that certain Leasehold Deed of
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Trust, Security Agreement, Fixture Filing and Assignment of Rents dated as of
March 3, 2005 and recorded in the Official Records on March 8, 2005 as Document
No. 2005000169281 (respectively, the "Notices of Default" and the "Deeds of
Trust").
3. AGREEMENTS
3.1 Forbearance Period; Lender's Agreement to Forbear. The period
commencing on the Effective Date of this Forbearance Agreement and ending one
hundred (100) calendar days thereafter is hereinafter referred to as the
"Forbearance Period." So long as IHHI and OC-PIN timely comply with their
respective obligations under the Loan Documents and this Forbearance Agreement,
and so long as no Event of Default occurs under the Loan Documents or this
Forbearance Agreement, then Lender agrees as follows ("Lender's Agreement to
Forbear"):
(a) During the Forbearance Period, Lender will forbear from
recording the Notices of Default in the Official Records; and
(b) During the Forbearance Period, Lender will (i) forbear
from filing a judicial foreclosure lawsuit against the Borrowers and the Credit
Party, (ii) forbear from filing a lawsuit against OC-PIN to enforce its
obligations under the OC-PIN Guaranty, (iii) forbear from filing a lawsuit
against West Coast to enforce its obligations under the West Coast Pledge
Agreement, (iv) forbear from filing a lawsuit against the members of West Coast
to enforce their obligations under the Members of West Coast Pledge Agreement,
and (v) forbear from filing a lawsuit against IHHI to enforce its obligations
under the IHHI Pledge Agreement.
3.2 Express Reservation of Other Remedies. Lender's Agreement to
Forbear is the exclusive and only forbearance to which Lender has agreed. Lender
expressly reserves the right to exercise each and every of its other rights and
remedies under the Loan Documents not specifically included within Lender's
Agreement to Forbear.
3.3 Default Interest. So long as the referenced Events of Default
remain uncured and are continuing, the interest rate applicable to the Loans
(including but not limited to amounts outstanding under the Line of Credit) is
and will remain at the Default Rate, and all outstanding Obligations shall bear
interest at the Default Rate until the Events of Default are cured.
3.4 Suspension of Line of Credit. The Line of Credit facility with
respect to additional Advances is and shall remain suspended, and any additional
Advances will be made or incurred in Lender's sole discretion, at the Default
Rate, so long as the referenced Events of Default remain uncured and are
continuing.
3.5 Affirmative Covenants During the Forbearance Period. Borrowers,
Credit Party and Guarantor each promise, covenant and agree as follows:
(a) New Capital Investment in IHHI. Prior to expiration of the
Forbearance Period, any combination of the Borrowers, the Credit Party, the
Guarantor, or any new third party investor ("New Investor") shall contribute not
less than $14,809,019.31 in new capital ("New Capital") to IHHI. The New Capital
must be in addition to the $10,190,980.69 in capital contributed to IHHI by
OC-PIN prior to execution of the Loan Documents and in addition to the
$5,000,000 in capital contributed by Pacific Coast Holdings Investment, LLC, a
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California limited partnership ("PCHI") to IHHI (together the "Existing
Capital"). The New Capital must be contributed to IHHI not later than the last
day of the Forbearance Period.
(b) Total Paid-In-Capital of IHHI. At expiration of the Forbearance
Period, IHHI shall provide to Lender written proof (in form and content
reasonably satisfactory to Lender) that (i) IHHI's total paid-in-capital is not
less than $30,000,000 (i.e., the Existing Capital plus the New Capital), (ii)
the source of the New Capital is from contributions from the Borrowers and/or
the Credit Party and/or the Guarantor and/or New Investors, and (iii) that no
part of the New Capital consists of funds borrowed by IHHI from any source.
(c) Prepayment Amount. Borrower's failure to pay Lender a $5,000,000
prepayment against the Acquisition Loan ("Prepayment Amount") by the Mandatory
Prepayment Date constitutes one of the referenced Events of Default under the
Credit Agreement. Borrower hereby agrees to and shall pay to Lender the
Prepayment Amount on or before expiration of the Forbearance Period, in good and
drawable funds, as and for a prepayment of principal balance of the Acquisition
Loan.
3.6 Negative Covenants During the Forbearance Period. Borrowers, Credit
Party and Guarantor each promise, covenant and agree as follows:
(a) Borrowers, Credit Party and Guarantor will not during the
Forbearance Period directly or indirectly file, serve, take, initiate,
prosecute, participate or cooperate in the filing, serving, taking, initiating
or prosecuting of, any legal action or proceeding against Lender.
(b) Borrowers, Credit Party and Guarantor will not during the
Forbearance Period directly or indirectly (1) unless otherwise permitted by the
Credit Agreement with respect to the North Tustin Avenue medical office building
in Santa Ana, California, sell, transfer, assign, convey, lease, sublease, or
otherwise transfer, or agree to sell, transfer, assign, convey, lease or
sublease, or otherwise transfer, any interest in any real property or
improvements (together "Real Property Assets") owned, controlled, leased or
subleased by Borrowers, or Credit Party or Guarantor as of the Effective Date
hereof; (2) grant a lien or security interest in, or otherwise pledge, encumber
or hypothecate, or agree to grant a lien or security interest in, or agree to
pledge, encumber or hypothecate, any interest in any portion of the Real
Property Assets or otherwise use any of the Real Property Assets as collateral
or security for any debt, obligation or liability of any of the Borrowers,
Credit Party or Guarantor; (3) amend, modify or change its articles of
incorporation, bylaws, articles of organization or operating agreement, as
applicable, without first receiving the prior written consent of Lender, which
consent will not be unreasonably withheld; (4) increase, decrease, change,
amend, modify, expand or contract on the power or authority of any officer,
director, manager, member or managing member of the entity of which any
Borrower, Credit Party or Guarantor is comprised, without first receiving the
prior written consent of Lender, which consent will not be unreasonably
withheld; (5) amend, modify, alter or change any shareholders agreement or
voting trust; (6) change its name as it appears in official filings in the state
of its incorporation or other organization; (7) change its chief executive
office, principal place of business, corporate office or location at which the
location of its business records are currently located; (8) change the type of
entity that it is; (9) change its organization identification number, if any,
issued by its state of incorporation or other organization; (10) change its
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state of incorporation or organization or incorporate or organize in any
additional jurisdictions; (11) appoint a new person as an officer, director,
member or manager, without first receiving the prior written consent of Lender,
which consent will not be unreasonably withheld; or (12) terminate any person as
an officer, director, member or manager.
3.7 Requirements to Cure Events of Defaults and Rescind Notices of
Default. If: (a) by expiration of the Forbearance Period (i) each of the Events
of Default have been fully cured, and (ii) Lender has received from IHHI written
proof (in form and content reasonably satisfactory to Lender) that (1) IHHI's
total paid-in-capital is not less than $30,000,000 (i.e., the Existing Capital
plus the New Capital), and (2) the source of the New Capital is from
contributions from the Borrowers and/or the Credit Party and/or the Guarantor
and/or New Investors, and (3) that no part of the New Capital consists of funds
borrowed by IHHI from any source, and (iii) the Prepayment Amount has been paid
to Lender, and (iv) there exists no breach or Event of Default under this
Forbearance Agreement or under the Loan Documents which remains uncured or
continuing, and (v) all of Lenders' attorneys' fees, costs, charges, expenses,
foreclosure fees, trustee fees, recording charges and other costs or expenses
paid or incurred by Lender with respect to the Events of Default and this
Forbearance Agreement have been paid in full; and (b) at least $14,809,019.31 in
New Capital has been contributed to IHHI as and when required by Section 3.5(a)
of this Forbearance Agreement, then in said event Lender agrees to and shall
within five (5) Business Days from receipt of written demand therefore from IHHI
(A) declare as cured and satisfied each of the Events of Default referenced in
and withdraw the Contract Default Notice and in the Covenant Failure Notice, (B)
terminate application of the Default Interest Rate, and (C) terminate suspension
of the Line of Credit facility with respect to additional Advances.
3.8 Termination of Lender's Agreement to Forbear. If: (a) by expiration if
the Forbearance Period (i) each of the Events of Default have not been fully
cured, or (ii) Lender has not received from IHHI written proof (in form and
content reasonably satisfactory to Lender) that (1) IHHI's total paid-in-capital
is $30,000,000 or more (i.e., the Existing Capital plus the New Capital), or (2)
the source of the New Capital is from contributions from the Borrowers and/or
the Credit Party and/or the Guarantor and/or New Investors, or (3) that the New
Capital does not consist of funds borrowed by IHHI from any source, or (iii) the
Prepayment Amount has not been paid to Lender, or (iv) there exists one or more
breaches or Events of Default under this Forbearance Agreement or under the Loan
Documents which remain uncured or continuing, or (v) Lenders' attorneys' fees,
costs, charges, expenses, foreclosure fees, trustee fees, recording charges and
other costs or expenses paid or incurred by Lender with respect to the Events of
Default or this Forbearance Agreement have not been paid in full; or (b) by
expiration of the Forbearance Period, less than $14,809,019.31 in New Capital
has been contributed to IHHI, then upon the occurrence of any one or more of the
foregoing Lender's Agreement to Forbear shall automatically terminate, expire
and have no further force or effect. In said event, Borrowers, Credit Party and
Guarantor acknowledge and agree that Lender shall have the right but not the
obligation to take any one or more of the following acts: (A) record the Notices
of Default in the Official Records; (B) file a judicial foreclosure lawsuit
against the Borrowers and the Credit Party, (C) file a lawsuit against OC-PIN to
enforce its obligations under the OC-PIN Guaranty, (D) file a lawsuit against
West Coast to enforce its obligations under the West Coast Pledge Agreement, (E)
file a lawsuit against the members of West Coast to enforce their obligations
under the Members of West Coast Pledge Agreement, (F) file a lawsuit against
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IHHI to enforce its obligations under the IHHI Pledge Agreement, (G) process,
file, serve, take or initiate any other legal action or proceeding against any
one or more of the Borrowers or Credit Party or Guarantor or PCHI or Ganesha
Realty, LLC, a California limited liability partnership ("Ganesha") that Lender
is permitted to take under the Loan Documents and applicable law, (H) maintain
Default Interest in force and effect, and (I) in Lender's sole and absolute
discretion, either continue in effect the suspension of the Line of Credit
facility with respect to further Advances or terminate the Line of Credit
facility with respect to further Advances.
3.9 Releases and Waivers. In consideration for Lender's Agreement to
Forbear, and effective as of the Effective Date of this Forbearance Agreement:
(a) Subject to the last sentence of this Section 3.9(a), Borrowers,
Credit Party and Guarantor, together with their respective officers, directors,
shareholders, members, managers, employees, agents, representatives and assigns
(collectively the "Releasing Parties") hereby fully, forever and irrevocably
release, waive and relinquish their right to file or record in the Official
Records a lis pendens against any of the Hospital Facilities, or file in any
court in any venue any legal action or proceeding (including but not limited to
a complaint to enjoin foreclosure, or an order to show cause, or a complaint to
set aside foreclosure sale, or an action to quiet title, or an action to cancel
one or more of the Loan Documents) against Lender or any trustee under any of
the Deeds of Trust, the purpose of which is to directly or indirectly procure
from any court or tribunal issuance of a temporary restraining order, or a
preliminary injunction, or a permanent injunction, or any other equitable relief
(collectively, "Injunctive Relief") which seeks to prohibit or prevent Lender or
any trustee under any Deed of Trust (i) from recording a Notice of Sale with
respect to any of the Deeds of Trust, or (ii) from conducting a sale of any of
the Hospital Facilities at a public auction as permitted by the power of sale
provisions in the Deeds of Trust, or (iii) from conveying title to any one or
more of the Hospital Facilities via trustee's deed to a purchaser at
foreclosure, or (iv) from conducting a sale of the personal property Collateral
pursuant to the California Uniform Commercial Code, or (v) from conducting a
"mixed-collateral" sale of any one or more of the Hospital Facilities and any or
all of the personal property Collateral, or (vi) from attaching or garnishing or
seeking any other provisional remedy against any real or personal property of
any Borrowers, Credit Party or Guarantor, or (vii) from taking any other action
or pursuing any other right or remedy that Lender is permitted to pursue under
the Loan Documents, or in law or equity. Notwithstanding the foregoing, the
releases and waivers set forth in this Section 3.9(a) shall apply only to
Injunctive Relief based on alleged acts or omissions of Lender which occurred
prior to the Effective Date of this Forbearance Agreement.
(b) Each of the Releasing Parties hereby fully, forever and
irrevocably release, waive and relinquish any claim or cause of action
(collectively, "Lender Liability Claims") that the Releasing Parties now have or
in the future may have against Lender to the effect that, prior to the Effective
Date of this Forbearance Agreement: (i) Lender committed a breach or default
under any of the Loan Documents, or (ii) Lender conspired with the executive
officers of IHHI to deprive OC-PIN of its stock ownership in IHHI or otherwise
inflicted any actionable damage on OC-PIN, or (iii) Lender committed an act not
permitted by the Loan Documents or applicable law, or (iv) Lender omitted to
take an act required by the Loan Documents or under applicable law, or (v) any
of the Loan Documents (including, but not limited to, the OC-PIN Guaranty) or
this Forbearance Agreement is/are invalid or unenforceable in whole or in part
for any reason, or (vi) Lender suggested, implied, induced, cajoled or required
that IHHI include any terms or conditions in any agreements between IHHI and
OC-PIN (including, but not limited to, the First Amendment ), or (vii) Lender
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suggested, implied, induced, cajoled or required that IHHI not include any terms
or conditions in any agreements between IHHI and OC-PIN (including, but not
limited to, the First Amendment), or (viii) Lender improperly interfered with or
improperly exercised any control over the Borrowers, or (ix) that Lender
breached in any way any alleged duty of good faith or fair dealing, or any
alleged duty of commercial reasonableness, or any quasi-duty, or any implied
duty, or (x) that Lender committed any unlawful, unfair or fraudulent business
act or practice, or (xi) that Lender engaged in any unfair, deceptive, untrue or
misleading advertising, or (xii) that Lender committed any act prohibited by
California Business and Professions Code Section 17500, or (xiii) that Lender
engaged in predatory lending practices, or (xiv) that Lender engaged in or
committed any act or omission which constitutes fraud, duress, negligence,
conversion, defamation or infliction of emotional distress, or (xv) that Lender
interfered with IHHI's prospective business advantage, or (xvi) that Lender
interfered with IHHI's contractual relations.
(c) In order to induce Lender to enter into this Forbearance
Agreement and to agree to the terms of Lender's Agreement to Forbear, effective
upon the Effective Date of this Forbearance Agreement, each of the Releasing
Parties fully, forever and irrevocably releases, waives, relinquishes and
discharges Lender and its successors and assigns, predecessors, related or
affiliated companies or entities, and their respective officers, directors,
shareholders, agents, employees, attorneys and representatives (collectively,
the "Lender Released Parties") from any and all claims, rights, demands, debts,
causes of action, charges, expenses, damages, attorneys' fees and costs,
obligations or liabilities of any and every kind, nature and character
whatsoever, whether or not now known, suspected or unsuspected, which any of the
Releasing Parties may have had, may now have or may in the future claim to have
against the Lender Released Parties arising out of, or related in any manner to
any alleged act or omission to act which occurred prior to the Effective Date of
this Forbearance Agreement.
The Releasing Parties hereto have been fully advised by their respective
attorneys of the contents and effect of Section 1542 of the Civil Code of
California upon the rights of each of them, which reads as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
EACH OF THE RELEASING PARTIES ACKNOWLEDGES THAT THEY MAY HAVE SUSTAINED DAMAGES,
LOSSES, FEES, COSTS OR EXPENSES WHICH ARE PRESENTLY UNKNOWN AND UNSUSPECTED,
AND, NOTWITHSTANDING THE PROVISIONS OF SECTION 1542, AND ARE EXPRESSLY WAIVING
THE SAME. EACH OF THE RELEASING PARTIES AGREES THAT IT INTENDS TO RELEASE EVEN
UNKNOWN OR UNSUSPECTED CLAIMS. EACH OF THE RELEASING PARTIES REPRESENTS THAT IT
HAS CONSULTED WITH ITS LEGAL COUNSEL REGARDING ITS CLAIMS AND POTENTIAL CLAIMS
AGAINST LENDER, AND HAS CAREFULLY READ AND UNDERSTAND ALL THE PROVISIONS OF THIS
FORBEARANCE AGREEMENT, AND HAS VOLUNTARILY ENTERED INTO THIS FORBEARANCE
AGREEMENT.
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3.10 Covenants Not To Sue. Each of the Releasing Parties hereby
promises, covenants and agrees not to sue Lender, and not to bring any legal
action or proceeding of any kind against Lender, in any court or administrative
proceeding, in any venue, which legal action or proceeding directly or
indirectly seeks to (a) obtain or procure issuance of any temporary restraining
order, or a preliminary injunction, or a permanent injunction, or any other
equitable or provisional relief against Lender based on acts or omissions which
occurred prior to the Effective Date of this Forbearance Agreement, or (b)
impose any Lender Liability Claims on or against Lender based on acts or
omissions which occurred prior to the Effective Date of this Forbearance
Agreement, or (c) obtain or impose on Lender any Injunctive Relief based on acts
or omissions which occurred prior to the Effective Date of this Forbearance
Agreement, or (d) which legal action or proceeding violates any covenant,
condition, representation or warranty made by the Releasing Parties in this
Forbearance Agreement.
3.11 Indemnity. Each Borrower, Credit Party and Guarantor hereby
jointly and severally agrees to and shall indemnify, defend, protect and hold
Lender and each of its Affiliates and their respective officers, directors,
members, employees, attorneys, agents, and representatives (each, an
"Indemnified Person") free and harmless from and against any and all legal
actions, suits, proceedings or claims brought or asserted against any
Indemnified Person for damages, losses, liabilities and expenses (including
reasonable attorneys' fees, witness and expert witness fees, court fees and
charges, and disbursements and other costs of investigation or defense,
including those incurred upon any appeal or in any Bankruptcy Proceeding defined
below) (collectively the "Indemnified Liabilities") directly or indirectly
arising out of or relating to (a) the execution and delivery of this Forbearance
Agreement by an Indemnified Person, or (b) the execution and delivery of any
Loan Document by an Indemnified Person, or (c) the making of the Loan by an
Indemnified Person, or (d) a Lender Liability Claim brought or asserted against
an Indemnified Person; provided, that neither Borrowers nor Credit Party nor
Guarantor shall be liable for any Indemnified Liabilities to the extent that
such Indemnified Liability directly results from the accused Indemnified
Person's own gross negligence or willful misconduct; and the liability of the
Credit Party for the Indemnified Liabilities shall not exceed the liability
limitations set forth in Section 1.10 in the Credit Agreement. NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS FORBEARANCE
AGREEMENT OR TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF HAVING EXECUTED THIS AGREEMENT OR AS A
RESULT OF ANY CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY
LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
3.12 Absence of PCHI and Ganesha; Release and Indemnity. Lender,
Borrowers, Credit Party and Guarantor acknowledge that PCHI and Ganesha are also
parties to some but not all of the Loan Documents, and that PCHI and Ganesha
refused to execute this Forbearance Agreement. Nonetheless, Lender, Borrowers,
Credit Party and Guarantor have determined it to be in their respective best
interests to proceed without PCHI and Ganesha, and therefore have agreed to
execute this Forbearance Agreement and comply with its terms and conditions
despite the fact that PCHI and Ganesha refused to execute the same.
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(a) Lender, Borrowers, Credit Party and Guarantor, together with
their respective officers, directors, shareholders, members, managers,
employees, agents, representatives and assigns, hereby fully, forever and
irrevocably release, waive and relinquish their right to file in any court in
any venue any legal action or proceeding against any other party to this
Forbearance Agreement, which legal action or proceeding alleges directly or
indirectly that this Forbearance Agreement is unenforceable because PCHI and/or
Ganesha are not parties to this Forbearance Agreement. Lender, Borrowers, Credit
Party and Guarantor each agree that the foregoing release, waiver and
relinquishment is intended to constitute a material inducement to each of the
other parties to execute and deliver this Forbearance Agreement.
(b) Borrowers, Credit Party and Guarantor hereby jointly and
severally agree to and shall indemnify, defend, protect and hold each
Indemnified Person (as defined in Section 3.11 above) free and harmless from and
against any and all legal actions, suits, proceedings or claims brought or
asserted against any Indemnified Person for any Indemnified Liabilities (defined
in Section 3.11 above) directly or indirectly arising out of or relating to (a)
the execution and delivery of this Forbearance Agreement by an Indemnified
Person, (b) the execution and delivery of this Forbearance Agreement by any of
the Borrowers, or Credit Party, or Guarantor, (c) the refusal of PCHI and/or
Ganesha to execute and deliver this Forbearance Agreement, or (d) any damage or
injury claimed by PCHI and/or Ganesha against an any Indemnified Person as a
direct or indirect consequence of the execution and delivery of this Forbearance
Agreement by Lender, Borrowers, Credit Party and Guarantor.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to forbear from pursuing its
rights and remedies under the Loan Documents, Borrowers, Credit Party and
Guarantor jointly and severally make the following representations and
warranties to Lender, each and all of which shall survive the execution,
delivery, expiration or earlier termination of this Forbearance Agreement.
4.1 Existence; Compliance with Applicable Laws. Each Borrower,
Credit Party and Guarantor (a) is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization; (b) is duly qualified
to conduct business and is in good standing in each other jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification; (c) has the requisite power and authority and the legal right to
own, pledge, mortgage, or otherwise encumber and operate its properties, to
lease the property it operates under lease and to conduct its business as now
conducted or proposed to be conducted; and (d) is in compliance with its
articles of incorporation or articles of organization, and its bylaws and
operating agreements, as applicable.
4.2 Power, Authorization, Enforceable Obligations. The execution,
delivery and performance by each Borrower, Credit Party and Guarantor
(individually a "Person") of this Forbearance Agreement is: (a) within such
Person's power; (b) have been duly authorized by all necessary corporate or
limited liability company action; (c) does not contravene any provision of such
Person's articles, bylaws, agreement of organization, or operating agreement as
applicable; (d) does not violate any law or regulation, or any order or decree
of any court or Governmental Authority; (e) does not conflict with or result in
9
the breach or termination of, constitute a default under or accelerate or permit
the acceleration of any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which such Person is a party
or by which such Person or any of its property is bound; (f) does not result in
the creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Lender pursuant to the Loan Documents; and (g) does
not require the consent or approval of any Governmental Authority or any other
Person. This Forbearance Agreement shall be duly executed and delivered by each
Borrower, Credit Party and Guarantor and shall constitute a legal, valid and
binding obligation of each such Borrower, and Credit Party, and Guarantor,
enforceable against it in accordance with its terms.
4.3 Ratification of Loan Documents. Each Borrower, Credit Party and
Guarantor hereby ratifies and confirms that (a) each and every of the Loan
Documents remains enforceable according to their terms, and (b) there are no
known defenses and they have no known defenses to enforcement of the Loan
Documents according to their terms.
4.4 Other Obligations Subordinate to Obligations in Loan Documents. Each
Borrower, Credit Party and Guarantor represents and warrants that all loans,
debts, agreements, liabilities and other obligations of said parties are
subordinate to their obligation to repay the Obligations set forth in the Loan
Documents.
4.5 No Litigation. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or threatened against any Borrower or Credit Party or
Guarantor before any Governmental Authority or before any arbitrator or panel of
arbitrators; and no Borrower, Credit Party or Guarantor has brought an action,
claim, lawsuit, demand, investigation or proceeding against Lender.
4.6 Confirmation of Loan Documents; Confirmation of Guaranties;
Unconditional Obligations; Waivers. Each of the Borrowers, Credit Party, and
Guarantor hereby reaffirms, remakes and confirms each of their respective
representations and warranties made in each of the Loan Documents. In addition,
Guarantor reaffirms and remakes each of its obligations under its Guaranty and
reaffirms and restates each and every term, condition, and provision of its
Guaranty. In addition, Guarantor hereby agrees that its obligations under its
Guaranty shall be unconditional, irrespective of (a) the absence of any attempt
to collect the Loan from Borrower or any other Guarantor or other action to
enforce the same, (c) the absence of PCHI and Ganesha as parties to this
Forbearance Agreement, (d) the waiver or consent by Lender with respect to any
provision of any of the Loan Documents, or any other agreement now or hereafter
executed by Borrower and delivered to Lender, (e) Lender's election, in any
proceeding instituted under Chapter 11 of Title 11 of the United States Code (11
U.S.C. ss.101 et seq.) (the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code, (e) any borrowing or grant of a security
interest by Borrower, as debtor-in-possession, under Section 364 of the
Bankruptcy Code, or (f) the disallowance, under Section 502 of the Bankruptcy
Code, of all or any portion of Lender's claims for repayment of the Loan.
Guarantor further reaffirms that its obligations under its Guaranty are primary
and are separate and distinct from Borrower's obligations. Guarantor further
represents and warrants that it has no defenses or claims against Lender that
would or might affect the enforceability of its Guaranty and that its Guaranty
remains in full force and effect. Guarantor irrevocably and permanently waives
any and all rights of subrogation, reimbursement, indemnity, contribution or any
10
other claim arising from the existence of performance of its Guaranty which
Guarantor may now or hereafter have against Borrower or any other person or
entity (or their respective properties) directly or contingently liable for said
obligations. Guarantor understands that if Lender forecloses by trustee's sale
on one or more of the Deeds of Trust, Guarantor would then have a defense
preventing Lender from thereafter enforcing said Guarantor's liability for the
unpaid balance of the Loan. This defense arises because the trustee's sale would
eliminate Guarantor's right of subrogation, and therefore Guarantor would be
unable to obtain reimbursement from Borrower. Guarantor specifically waives this
defense and all rights and defenses that Guarantor may have because the Loan is
secured by real property. This means, among other things: (i) Lender may collect
from Guarantor without first foreclosing on any real or personal property
collateral pledged by Borrower; and (ii) if Lender forecloses on any real
property collateral pledged by Borrower: (A) the amount of the Loan may be
reduced only by the price for which the collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price; and (B) Lender
may collect from Guarantor even if Lender, by foreclosing on the real property
collateral, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses
Guarantor may have because the Loan is secured by real property. These rights
and defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or
similar laws in other states. Guarantor waives all rights and defenses arising
out of an election of remedies by the Lender, even though that election of
remedies, such as non-judicial foreclosure with respect to security for a
guaranteed obligation, has destroyed said Guarantor's rights of subrogation and
reimbursement against Borrower by operation of Section 580d of the California
Code of Civil Procedure or otherwise.
4.7 Waiver of Objection to Lender's Motion for Relief from Automatic Stay.
As consideration for and as an inducement to Lender to enter into this
Forbearance Agreement, each Borrower, Credit Party and Guarantor represents and
warrants that (a) should any Borrower or Credit Party or Guarantor file a
petition or have a petition filed against it seeking relief under the Bankruptcy
Code, or any other applicable federal, state or foreign bankruptcy or other
similar law ("Bankruptcy Proceeding"), and (b) should Lender become subject to
any automatic stay imposed in said Bankruptcy Proceeding, then (c) each
Borrower, Credit Party and Guarantor which is subject to a Bankruptcy Proceeding
hereby irrevocably and unequivocally agree that it shall not object to nor file
any motion or pleading or document in objection to, any motion filed by the
Lender in the Bankruptcy Proceeding seeking relief from the automatic stay.
4.8 No Defaults. Except for the referenced Events of Default, no other
known breaches, defaults or Events of Default have occurred under the Loan
Documents, the Environmental Indemnity and the OC-PIN Guaranty, which have not
been cured or which are continuing.
4.9 No Offsets. Each Borrower, Credit Party and Guarantor represents and
warrants that it has no offset, credit, claim or setoff against any amount due
or owing under the Loan Document, including but not limited to the aggregate
total of $63,533,555.57 in principal and interest due and owing on the Loan as
of May 18, 2005.
4.10 Authorizing Resolutions. Attached hereto as Exhibit "D" is the
Unanimous Resolution of the Board of Directors of IHHI authorizing IHHI to
execute this Forbearance Agreement and to agree to the terms and conditions set
forth herein. Attached hereto as Exhibit "E" is the Unanimous Resolution of the
Board of Directors of WMC-SA authorizing WMC-SA to execute this Forbearance
11
Agreement and to agree to the terms and conditions set forth herein. Attached
hereto as Exhibit "F" is the Unanimous Resolution of the Board of Directors of
WMC-A authorizing WMC-A to execute this Forbearance Agreement and to agree to
the terms and conditions set forth herein. Attached hereto as Exhibit "G" is the
Unanimous Resolution of the Board of Directors of Coastal authorizing Coastal to
execute this Forbearance Agreement and to agree to the terms and conditions set
forth herein. Attached hereto as Exhibit "H" is the Unanimous Resolution of the
Board of Directors of Chapman authorizing Chapman to execute this Forbearance
Agreement and to agree to the terms and conditions set forth herein. Attached
hereto as Exhibit "J" is the Unanimous Resolution of the Managers of West Coast
authorizing West Coast to execute this Forbearance Agreement and to agree to the
terms and conditions set forth herein. Attached hereto as Exhibit "L" is the
Unanimous Resolution of the Managers of OC-PIN authorizing OC-PIN to execute
this Forbearance Agreement and to agree to the terms and conditions set forth
herein.
4.11 Advice of Legal Counsel. Each Borrower, Credit Party and Guarantor
represents, warrants and covenants that it has consulted with and received
advice from its own legal counsel, that it has read this Forbearance Agreement
and/or that its legal counsel has explained the contents of this Forbearance
Agreement, that it understands the terms and conditions of this Forbearance
Agreement, that it understands the legal consequences of executing this
Forbearance Agreement, and agrees to execute the same.
5. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
5.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default" under this Forbearance Agreement:
(a) Borrower fails to pay the Prepayment Amount to Lender on or
before expiration of the Forbearance Period.
(b) Any of the Borrowers, and/or Credit Party, and/or Guarantor,
and/or any New Investor, for any reason fails to contribute all of the New
Capital to IHHI prior to expiration of the Forbearance Period on the terms and
conditions required by this Forbearance Agreement.
(c) By expiration of the Forbearance Period, IHHI for any reason
fails to have total paid-in-capital which equals or exceeds $30,000,000.
(d) An Event of Default (other than the Events of Default existing
as of the Effective Date of this Forbearance Agreement) occurs under any of the
Loan Documents, the OC-PIN Guaranty, or the Environmental Indemnity.
(e) A case or proceeding is commenced against any Borrower or Credit
Party or Guarantor seeking a decree or order in respect of such Borrower or
Credit Party or Guarantor (i) under the Bankruptcy Code, or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Borrower or Credit Party or Guarantor or for any substantial
part of any such Borrower's or Credit Party's or Guarantor's assets, or (iii)
ordering the winding-up or liquidation of the affairs of such Borrower or Credit
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Party or Guarantor, and such case or proceeding shall remain undismissed or
unstayed for sixty (60) days or more or a decree or order granting the relief
sought in such case or proceeding is granted by a court of competent
jurisdiction.
(f) Any Borrower or Credit Party or Guarantor (i) files a petition
seeking relief under the Bankruptcy Code, or any other applicable federal, state
or foreign bankruptcy or other similar law, (ii) consents to or fails to contest
in a timely and appropriate manner the institution of proceedings thereunder or
the filing of any such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Borrower or Credit Party or Guarantor or for any substantial
part of any such Borrower's or Credit Party's or Guarantor's assets, (iii) makes
a general assignment for the benefit of creditors, (iv) takes any action in
furtherance of any of the foregoing; or (v) admits in writing its inability to,
or is generally unable to, pay its debts as such debts become due.
(g) Any Borrower or Credit Party or Guarantor enters into any
agreement with any other lender, creditor or third party which materially
impairs the ability of any Borrower, Credit Party or Guarantor to perform their
obligations under this Forbearance Agreement or to perform their obligations
under the Loan Documents.
(h) Any Borrower or Credit Party or Guarantor commits a breach or
default under this Forbearance Agreement (other than those referenced in
Sections 5.1(a) through and including (g) hereinabove) and the same remains
uncured for five (5) or more calendar days after receipt of notice thereof from
Lender.
5.2 Remedies. If an Event of Default occurs under this Forbearance
Agreement, Lender may, without notice, terminate Lender's Agreement to Forbear,
in which event Lender shall have the right in its sole and absolute discretion,
but not the obligation, to (a) record the Notices of Default with respect to
each of the Deeds of Trust and proceed with the non-judicial foreclosure
process, (b) file, serve, take or initiate any legal action or proceeding
against any one or more of the Borrowers, Credit Party or Guarantor that Lender
is permitted to take under the Loan Documents (including, but not limited to,
filing a complaint for judicial foreclosure, and/or filing a complaint to
enforce the obligations of OC-PIN under its Guaranty), (c) pursue each and every
of the other rights and remedies granted to Lender in the Loan Documents, the
OC-PIN Guaranty, and the Environmental Indemnity, (d) maintain the Default
Interest in force and effect, (e) exercise any rights and remedies against PCHI
and/or Ganesha granted to Lender in the Loan Documents, and (f) either continue
in effect the suspension of the Line of Credit facility with respect to further
Advances or terminate the Line of Credit facility with respect to further
Advances, in Lender's sole and absolute discretion.
5.3 Waivers. Each Borrower, Credit Party and Guarantor agrees as follows:
(a) Except as otherwise provided for in this Forbearance Agreement
or by applicable law, each Borrower, Credit Party and Guarantor waives (i)
presentment, demand and protest and notice of presentment, dishonor, notice of
intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, (ii) all rights to notice and a
hearing prior to Lender's taking possession or control of, or to Lender's
replevy, attachment or levy upon, the Collateral or any bond or security that
13
might be required by any court prior to allowing Lender to exercise any of its
remedies, and (iii) the benefit of all valuation, appraisal, marshaling and
exemption laws.
(b) One or more persons who may be a director, or an officer, or a
shareholder, or a manager, or a member, of a Borrower or Credit Party or
Guarantor, may also be a director, or an officer, or a shareholder, or a
manager, or a member, in another Borrower or Credit Party or Guarantor. If said
person is in a position to manage or control one or both of said Borrowers, or
Credit Party, or Guarantor, said person may be deemed to be an "Insider" as that
term is defined in 11 U.S.C. ss. 101. If any Borrowers or Credit Party or
Guarantor have or share an Insider, then each such Borrower and/or Credit Party
and/or Guarantor that has or shares an Insider hereby expressly waives,
covenants and agrees not to bring or assert any cause of action or claim (as
defined in 11 U.S.C. ss. 101) against any other Borrower or Credit Party or
Guarantor that it may now have or that it may hereafter have, which cause of
action or claim seeks to prevent any Borrower or Credit Party or Guarantor from
making a payment to Lender of any amounts which said Borrower or Credit Party or
Guarantor is obligated to make to Lender under this Forbearance Agreement or
under any of the Loan Documents.
6. MISCELLANEOUS
6.1 Complete Agreement. This Forbearance Agreement constitutes the
complete agreement between the parties with respect to the subject matter
hereof.
6.2 Amendments and Waivers. Except for actions expressly permitted to be
taken by Lender, no amendment, modification, termination or waiver of any
provision of this Forbearance Agreement shall be effective unless the same shall
be in writing and signed by the Lender and the Borrowers, Credit Party and
Guarantor.
6.3 Reimburse Lender for All Fees and Expenses. Borrowers hereby agree to
and shall (a) on the Effective Date, pay to Lender all attorneys' fees
(including in-house counsel and outside counsel), costs, charges, expenses,
foreclosure fees, trustee fees, recording charges, consultants fees, appraisal
fees and other costs or expenses directly or indirectly paid or incurred by
Lender in connection with the Events of Default and this Forbearance Agreement,
and (b) following the Effective Date, within ten (10) calendar days of receipt
of written demand therefore, reimburse Lender for all attorneys' fees (including
in-house counsel and outside counsel), costs, charges, expenses, foreclosure
fees, trustee fees, recording charges, consultants fees, appraisal fees and
other costs or expenses directly or indirectly paid or incurred by Lender in
connection with the Events of Default and this Forbearance Agreement. If
Borrower for any reason fails to reimburse Lender the referenced fees and costs
within ten (10) calendar days of receipt of written demand therefore, Lender
shall have the right, without further notice, to make a draw upon the Line of
Credit in the name and for the benefit of Borrower in the amount of the fees and
costs demanded. In said event, the amount drawn by Lender shall automatically be
deemed a Line of Credit Advance made by Borrower from the Line of Credit
pursuant to Section 1.1(b)(i) of the Credit Agreement and the same shall be
repaid by Borrower pursuant to the terms of the Line of Credit Note.
6.4 No Waiver. Lender's failure, at any time or times, to require strict
performance by the Borrowers and the Credit Party and the Guarantor of any
14
provision of this Forbearance Agreement or any other Loan Document shall not
waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance herewith or therewith. Any suspension or waiver of an
Event of Default shall not suspend, waive or affect any other Event of Default
whether the same is prior or subsequent thereto and whether the same is of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of any Borrower or Credit Party or Guarantor contained in this
Forbearance Agreement, and no Event of Default, shall be deemed to have been
suspended or waived by Lender, unless an unequivocal waiver or suspension is set
forth in a writing signed by Lender.
6.5 Remedies. Lender's rights and remedies under this Forbearance
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise.
6.6 Severability. Wherever possible, each provision of this Forbearance
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Forbearance Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Forbearance Agreement.
6.7 Survival. Each and every of the promises, covenants, representations,
warranties, obligations, releases, waivers and indemnities of the parties to
this Forbearance Agreement and the parties to the Loan Documents shall survive
the expiration or termination of this Forbearance Agreement, the expiration or
termination of Lender's Agreement to Forbear, and the expiration or termination
of the Forbearance Period.
6.8 Conflict of Terms. Except as otherwise provided in this Forbearance
Agreement, if any provision contained in this Forbearance Agreement conflicts
with any provision in any of the Loan Documents, the provision contained in this
Forbearance Agreement shall govern and control.
6.9 Confidentiality. Each of the Borrowers, Credit Party and Guarantor and
Lender covenants and agrees to keep and maintain this Forbearance Agreement, the
terms and conditions set forth in this Forbearance Agreement, and all documents
and instruments executed or delivered in connection with this Forbearance
Agreement (hereinafter, "Confidential Information") confidential for a period of
two (2) years following the Effective Date hereof, except that Confidential
Information: (a) may be disclosed to persons employed or engaged by Lender and
the Borrowers, Credit Party and Guarantor; (b) may be disclosed as required or
requested by any Governmental Authority or reasonably believed (based on advice
of counsel) to be compelled by any court decree, subpoena or legal or
administrative order or process; (c) may be disclosed to as required by law; (d)
may be disclosed in connection with the exercise by Lender of any right or
remedy granted to it under the Loan Documents and/or this Forbearance Agreement
or in connection with any legal action or proceeding relative enforcing or
interpreting any of the Loan Documents and/or this Forbearance Agreement; or (e)
15
may be disclosed to if the Confidential Information ceases to be confidential
through no fault of any of the parties to this Forbearance Agreement. If any
party to this Forbearance Agreement is required in any proceeding, by any court
decree, subpoena or legal or administrative order or process, to disclose any
Confidential Information, said party will use commercially reasonable efforts to
give the other Borrowers and Credit Party and Guarantor and Lender, as
applicable, prompt written notice of such request so that any Borrower or Credit
Party or Guarantor or Lender may seek an appropriate protective order. If in the
absence of a protective order, a party to this Forbearance Agreement is
compelled in a proceeding to disclose any such Confidential Information, the
disclosing party may disclose such portion of such Confidential Information that
it is compelled to disclose; provided, however, that the disclosing party agrees
to and shall use commercially reasonable efforts to provide Borrowers and to
Credit Party and to Guarantor and to Lender, as applicable, written notice of
the information to be disclosed as far in advance of its disclosure as is
practicable.
6.10 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THIS FORBEARANCE AGREEMENT AND THE OBLIGATIONS SET FORTH HEREIN
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH BORROWER AND CREDIT
PARTY AND GUARANTOR AND LENDER HEREBY CONSENT AND AGREE THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE STATE OF NEVADA AND/OR THE FEDERAL COURTS LOCATED
IN THE STATE OF CALIFORNIA USING NEVADA LAW, SHALL HAVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE BORROWERS AND THE CREDIT
PARTY AND THE GUARANTOR ON THE ONE HAND, AND LENDER, ON THE OTHER HAND,
PERTAINING TO THIS FORBEARANCE AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS FORBEARANCE AGREEMENT. PROVIDED HOWEVER, NOTHING IN THIS
FORBEARANCE AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN THE STATE OF CALIFORNIA, UNDER
CALIFORNIA LAW, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS SET FORTH IN THE LOAN DOCUMENTS OR IN THIS FORBEARANCE AGREEMENT, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH BORROWER AND
CREDIT PARTY AND GUARANTOR AND LENDER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION(S) IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT(S),
AND EACH BORROWER, CREDIT PARTY, GUARANTOR, AND LENDER HEREBY WAIVES ANY
OBJECTION THAT SUCH BORROWER OR CREDIT PARTY OR GUARANTOR OR LENDER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
16
DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER, CREDIT PARTY, GUARANTOR AND
LENDER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH BORROWER, CREDIT PARTY, GUARANTOR OR TO LENDER AT THE
ADDRESS SET FORTH IN ANNEX D OF THE CREDIT AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S, CREDIT PARTY'S,
GUARANTOR'S OR LENDER'S ACTUAL RECEIPT THEREOF OR THREE (3) BUSINESS DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID.
6.11 Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this Forbearance Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered upon the earlier of: (a) actual receipt; or (b) three
(3) Business Days after deposit in the United States Mail, registered or
certified mail, return receipt requested, with postage prepaid; or (c) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as provided in this Section 6.11(b)
above); or (d) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid; or (e) when delivered, if hand-delivered by
messenger. All of the foregoing shall be addressed to the party to be notified
and sent to the address or facsimile number indicated in Annex D to the Credit
Agreement or to such other address (or facsimile number) as may be substituted
by notice given as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person designated in Annex D to the
Credit Agreement to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
6.12 No Third Party Beneficiaries. The undersigned do not intend that
there are or will be, and there are not, any third party beneficiaries to this
Forbearance Agreement, including any debtor or trustee in bankruptcy or
successor-in-interest to any of the undersigned.
6.13 Time. Time is of the essence of this Forbearance Agreement.
6.14 Attorneys' Fees and Costs. If any party to this Forbearance Agreement
institutes a suit against any other party to this Forbearance Agreement for
violation of or to enforce or interpret this Forbearance Agreement, or if any
party to this Forbearance Agreement intervenes in any suit in which any other
party to this Forbearance Agreement seeks to enforce or protect its interest or
rights hereunder, the prevailing party shall be entitled to all of its costs and
expenses, including, without limitation, reasonable attorneys' fees, costs of
suit, filing fees and charges, expert witness fees, fees of any arbitrators or
mediators, printing, copying, telephone and facsimile expenses, messenger and
courier services costs, and other similar costs or expenses of suit.
6.15 Section Titles. The Section titles contained in this Forbearance
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
17
6.16 Counterparts. This Forbearance Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
6.17 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG LENDER, ANY BORROWER AND ANY CREDIT PARTY
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS FORBEARANCE AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
6.18 Reinstatement. This Forbearance Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Borrower or Credit Party or Guarantor for liquidation or
reorganization, should any Borrower or Credit Party or Guarantor become
insolvent or make a general assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Borrower's or Credit Party's or Guarantor's assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
6.19 Advice of Counsel. Each of the parties represents to each other party
hereto that it has discussed this Forbearance Agreement with its counsel and has
received and considered the advice of its counsel.
6.20 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Forbearance Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Forbearance
Agreement shall be construed as if drafted jointly by all parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Forbearance Agreement.
6.21 Exhibits. Exhibits "A", "B", "C", "D", "E", "F", "G", "H", "I", "J",
"K" and "L" attached to this Forbearance Agreement are incorporated by this
reference as if fully set forth herein.
18
6.22 Authority. The persons signing below represent and warrant that they
have the requisite authority to bind the entities on whose behalf they are
signing.
IN WITNESS WHEREOF, this Forbearance Agreement has been duly executed as
of the date first written above.
BORROWERS:
INTEGRATED HEALTHCARE HOLDINGS, INC.
a Nevada corporation
By: /s/ Larry B. Anderson
--------------------------------------------
Larry B. Anderson, President
WMC-SA, INC.,
a California corporation
By: /s/ Larry B. Anderson
--------------------------------------------
Larry B. Anderson, President
WMC-A, INC.
a California corporation
By: /s/ Larry B. Anderson
--------------------------------------------
Larry B. Anderson, President
COASTAL COMMUNITIES HOSPITAL, INC.
a California corporation
By: /s/ Larry B. Anderson
--------------------------------------------
Larry B. Anderson, President
[SIGNATURE PAGE CONTINUES]
19
CHAPMAN MEDICAL CENTER, INC.,
a California corporation
By: /s/ Larry B. Anderson
--------------------------------------------
Larry B. Anderson, President
CREDIT PARTY:
WEST COAST HOLDINGS, LLC,
a California limited liability company,
By: /s/ Anil Shah
-----------------------------------
Anil V. Shah, M.D., Manager
GUARANTOR:
ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, \
a Nevada limited liability company,
By: /s/ Anil Shah
-----------------------------------------
Anil V. Shah, M.D., Manager
LENDER:
MEDICAL PROVIDER FINANCIAL CORPORATION II,
a Nevada corporation,
By: /s/ Joseph Lampariello
----------------------------------------
Joseph J. Lampariello, President and COO
20
EXHIBIT "A"
May 9, 2005
VIA FEDERAL EXPRESS (TELEPHONE: VIA FEDERAL EXPRESS (TELEPHONE: 714-935-3575), AND VIA
714-434-9191), AND VIA FACSIMILE FACSIMILE (714-434-9505), AND VIA U.S. MAIL (POSTAGE
(714-434-9505), AND VIA U.S. MAIL PREPAID, REGISTERED OR CERTIFIED, RETURN RECEIPT
(POSTAGE PREPAID, REGISTERED OR CERTIFIED, RETURN RECEIPT REQUESTED)
REQUESTED)
INTEGRATED HEALTHCARE HOLDINGS, INC. INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC 1301 North Tustin Avenue
695 Town Center Drive, Suite 260 Santa Ana, California 92705
Costa Mesa, California 92626 Attn: Larry Anderson, President
Attn: Larry Anderson, President Bruce Mogel, CEO
Bruce Mogel, CEO
AND TO THE CO-BORROWERS, CREDIT PARTY, GUARANTOR AND THEIR
RESPECTIVE ATTORNEYS IDENTIFIED IN ANNEX A ATTACHED TO THIS
LETTER
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
File No.: 2994-128721
Gentlemen:
As you know, we are legal counsel to MEDICAL PROVIDER FINANCIAL
CORPORATION II ("Medical Provider"). Medical Provider (as "Lender") and
Integrated Healthcare Holdings, Inc. ("IHHI"), WMC-SA, Inc. ("WMC-SA"), WMC-A,
Inc. ("WMC-A"), Coastal Communities Hospital, Inc. ("Coastal") and Chapman
Medical Center, Inc. ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman
INTEGRATED HEALTHCARE HOLDINGS, INC.
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
May 9, 2005
Page 22
collectively as "Borrowers") are parties to that certain Credit Agreement dated
as of March 3, 2005 ("Credit Agreement"). Pacific Coast Holdings Investment, LLC
("PCHI"), Ganesha Realty, LLC ("Ganesha"), and West Coast Holdings, LLC ("West
Coast") (collectively as "Credit Party") are also parties to the Credit
Agreement. Pursuant to the Credit Agreement, Lender made available to the
Borrowers the Acquisition Loan and the Line of Credit Commitment (together, the
"Loan").
Borrowers have committed the following Events of Default under the
Credit Agreement:
a. Section 1.2(b)(ii) of the Credit Agreement provides as follows:
In addition to the foregoing, if by the date which is thirty (30)
calendar days from the Closing Date ("Mandatory Prepay Date"),
Borrowers for any reason fail to acquire all of the Condominium Units
from Sellers as provided in the Asset Sale Agreement with capital
contributed to IHHI by its shareholders, then Borrowers agree to and
shall on the Mandatory Prepay Date prepay the amount of $5,000,000
against outstanding principal balance of the Loans. Said $5,000,000
must consist of capital contributed to IHHI by its shareholders and may
not constitute funds borrowed from any source. Said mandatory
$5,000,000 prepayment shall be applied to the principal balance of the
Acquisition Loan outstanding to Borrowers.
Borrowers failed to purchase the Condominium Units and failed to prepay
the $5,000,000 by the Mandatory Prepay Date, therefore Borrowers have committed
an Event of Default under Sections 8.1(a) and (b) of the Credit Agreement.
b. Section 8.1(v) of the Credit Agreement provides as follows:
8.1 Events of Default. The occurrence of any one or more of
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
(v) A Material Adverse Effect shall exist as determined in the
sole judgment of Lender."(1)
- ----------------------
(1) "Material Adverse Effect" is defined in Annex A to the Credit Agreement to
mean "a material adverse effect on (a) the business, assets, operations, or
financial or other condition of the Borrowers considered as a whole, (b)
Borrowers' ability to pay any of the Loans or any of the other Obligations in
accordance with the terms of the Agreement, (c) the Collateral or Lender's Liens
on the Collateral or the priority of such Liens, or (d) Lender's rights and
remedies under the Agreement and the other Loan Documents.
INTEGRATED HEALTHCARE HOLDINGS, INC.
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
May 9, 2005
Page 23
Lender has determined that a combination of the following factors
constitutes a Material Adverse Effect under the Credit Agreement: (i) pursuant
to a Stock Purchase Agreement dated January 28, 2005 between IHHI and OC-PIN,
OC-PIN promised, but failed, to invest $30,000,000 in IHHI for an aggregate
108,000,000 shares of common stock of IHHI; (ii) IHHI represented to Lender that
OC-PIN would invest $30,000,000 in IHHI, and Lender relied on that
representation when it agreed to make the Loan; (iii) IHHI failed by the
Mandatory Prepay Date to either purchase the Condominium Units or make the
mandatory $5,000,000 prepayment to Lender; (iv) in the approximate two month
period since closing of the Loan, Borrower has borrowed $13,200,000 from the
Line of Credit Loan, which is approximately $5,000,000 more than Borrower
represented to Lender that it would borrow during that same time period; (v)
Borrower is incurring significantly higher interest expenses than it originally
projected because it has been required to borrow more money on the Line of
Credit Loan than originally intended, in order to make up for the cash shortfall
caused by OC-PIN's failed to invest the promised $30,000,000; and (vi) due to
the foregoing, Lender believes that, without infusion of the entire $30,000,000
as promised, there is a substantial likelihood that Borrower will soon exhaust
the Line of Credit Loan and run out of cash to operate the Hospital Facilities.
Therefore, Lender has determined that a Material Adverse Effect has occurred and
that an Event of Default under Section 8.1(v) of the Credit Agreement exists and
is continuing.
Pursuant to and as provided by Section 8.2(a) of the Credit Agreement,
from and after the date of this Notice, and so long as the referenced Events of
Default are continuing, the interest rates applicable to the Loans is hereby
increased to the Default Rate, and all outstanding Obligations shall bear
interest at the Default Rate applicable to such Obligations.
Pursuant to and as provided by Section 8.2(a) of the Credit Agreement,
Lender hereby suspends the Line of Credit facility with respect to additional
Advances, and any additional Advances will be made or incurred in Lender's sole
discretion, at the Default Rate, so long as such Events of Default are
continuing.
Pursuant to and as provided by Section 8.2(b) of the Credit Agreement,
Lender hereby declares all of the Obligations, including but not limited to the
Loan, to be forthwith due and payable. The total amount of principal due and
owing under the Acquisition Loan is $50,000,000, plus accrued plus unpaid
interest through May 8, 2005 in the amount of $583,333.33, and the total amount
of principal due and owing under the Line of Credit Loan is $13,200,000, plus
$154,000 in accrued but unpaid interest through May 8, 2005. Additional accrued
but unpaid interest (at the Default Rate), attorneys' fees and costs, costs of
collection, trustee's fees and costs, and all other fees, charges and expenses
paid or incurred by Lender will be in addition to the foregoing.
INTEGRATED HEALTHCARE HOLDINGS, INC.
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
May 9, 2005
Page 24
Be advised that Lender has the right, but is under no legal obligation
to, discuss and negotiate with any Borrower, any Credit Party or any Guarantor
with respect to the foregoing. In no event will any such discussion or
negotiation with any Borrower, any Credit Party or any Guarantor be construed as
a forbearance by Lender of the right to exercise its rights and remedies under
the Loan Documents, the Guaranties, or applicable law. Further, no discussion or
negotiation with any Borrower, any Credit Party, or any Guarantor shall
constitute a waiver, amendment or modification of any Loan Document or Guaranty.
The failure or delay by Lender to exercise any of its rights and remedies under
the Loan Documents or Guaranties, or under applicable law, shall not constitute
a waiver of Lender's right to exercise the same at any time or from time to
time.
Very truly yours,
Gary C. Sheppard
Sedgwick, Detert, Moran & Arnold LLP
GCS/ms
Annex A Attached
cc: Joey Lampariello, President and COO (via email)
Adam Field, Sr. Vice President Development (via email)
Thomas Fazio, General Counsel (via email)
INTEGRATED HEALTHCARE HOLDINGS, INC.
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
May 9, 2005
Page 1
ATTACHMENT A TO NOTICE OF DEFAULT
NOTICE ADDRESSES OF CO-BORROWERS, CREDIT PARTY AND GUARANTOR
DELIVER A SEPARATE COPY TO EACH ADDRESSEE IDENTIFIED BELOW BY FACSIMILE AND, ON
THE SAME DAY, DEPOSIT A COPY IN THE U.S. MAIL ADDRESSED TO EACH ADDRESSEE
(POSTAGE PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED)
To: WMC-SA, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: WMC-A, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: COASTAL COMMUNITIES HOSPITAL, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
INTEGRATED HEALTHCARE HOLDINGS, INC.
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
May 9, 2005
Page 2
To: CHAPMAN MEDICAL CENTER, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: Hooper Lundy & Bookman, Inc.
1875 Century Park East, Suite 1600
Los Angeles, CA 90067-3208
Attn: Todd E. Swanson, Esq.
Ph: 310-551-8195
Fax: 310-551-8181
To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC
2621 S. Bristol Street Suite 108
Santa Ana, CA 92704
Attn: Anil Shah, Co-Manager
Ph: 714-290-5322
Fax: 714-297-9588
To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, California 92506
Attn: Dr. Chaudhuri William Thomas, Esq.
Ph: 951-782-8812
Fax: 951-766-9944
To: GANESHA REALTY LLC
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, California 92506
Attn: Dr. Chaudhuri William Thomas, Esq.
Ph: 951-782-8812
Fax: 951-766-9944
INTEGRATED HEALTHCARE HOLDINGS, INC.
Re: Notice of Events of Default
Credit Agreement Dated as of March 3, 2005
May 9, 2005
Page 3
To: WEST COAST HOLDINGS, LLC
2621 South Bristol, Suite 108
Santa Ana, California 92704
Attn: Anil V. Shah, Manager
Ph: 714-290-5322
Fax: 714-297-9588
To: Hari Lal, Esq.
1000 South Anaheim Boulevard, Suite 230
Anaheim, CA 92805
Ph: 714-635-1646
Fax: 714-635-2457
To: ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC
2621 South Bristol, Suite 108
Santa Ana, California 92704
Attn: Anil V. Shah, Manager
Ph: 714-290-5322
Fax: 714-297-9588
EXHIBIT "B"
May 9, 2005
VIA FEDERAL EXPRESS (TELEPHONE: VIA FEDERAL EXPRESS (TELEPHONE: 714-953-3575), AND VIA
714-434-9191), AND VIA FACSIMILE FACSIMILE (714-434-9505), AND VIA U.S. MAIL (POSTAGE
(714-434-9505), AND VIA U.S. MAIL PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
(POSTAGE PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN REQUESTED)
RECEIPT REQUESTED)
INTEGRATED HEALTHCARE HOLDINGS, INC. INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC 1301 North Tustin Avenue
695 Town Center Drive, Suite 260 Santa Ana, California 92705
Costa Mesa, California 92626 Attn: Larry Anderson, President
Attn: Larry Anderson, President Bruce Mogel, CEO
Bruce Mogel, CEO
AND TO THE CO-BORROWERS, CREDIT PARTY, GUARANTOR AND THEIR
RESPECTIVE ATTORNEYS IDENTIFIED IN ANNEX A ATTACHED TO THIS
LETTER
Re: Notice of Failure To Comply With Covenant
Credit Agreement Dated as of March 3, 2005
File No.: 2994-128721
Gentlemen:
As you know, we are legal counsel to MEDICAL PROVIDER FINANCIAL
CORPORATION II ("Medical Provider"). Medical Provider (as "Lender") and
Integrated Healthcare Holdings, Inc. ("IHHI"), WMC-SA, Inc. ("WMC-SA"), WMC-A,
Inc. ("WMC-A"), Coastal Communities Hospital, Inc. ("Coastal") and Chapman
Medical Center, Inc. ("Chapman") (IHHI, WMC-SA, WMC-A, Coastal and Chapman
collectively as "Borrowers") are parties to that certain Credit Agreement dated
as of March 3, 2005 ("Credit Agreement"). Pacific Coast Holdings Investment, LLC
("PCHI"), Ganesha Realty, LLC ("Ganesha"), and West Coast Holdings, LLC ("West
Coast") (collectively as "Credit
Parties") are also parties to the Credit Agreement. Pursuant to the Credit
Agreement, Lender made available to the Borrowers, and for the benefit of the
Credit Party, the Acquisition Loan and the Line of Credit Commitment (together,
the "Loan").
Borrowers have failed to comply with the following covenant under the
Credit Agreement:
a. Section 2.1(s) of the Credit Agreement provides as follows:
2.1 Conditions Precedent to the Closing Date. Lender shall not be
obligated to take, fulfill, or perform any action hereunder on or after
the Closing Date until the following conditions precedent have been
satisfied or provided for in a manner satisfactory to Lender, in its sole
discretion, or waived in writing by Lender, it being understood that
Lender shall consider a constituent transaction referred to in this
Section 2.1 to have been consummated when all conditions precedent to such
transaction have been satisfied or waived and that the only remaining
action is the funding of the Acquisition Loan and the Initial Draw:
(s) Lender shall have received evidence satisfactory to it that IHHI
has received capital contributions of not less than Fifteen Million
Dollars ($15,000,000).
Section 8.1(d) of the Credit Agreement provides that an Event of Default
shall occur if any Borrower or any Credit Party fails or neglects to perform,
keep or observe any other provision of this Agreement (other than any provision
embodied in or covered by any other clause of this Section 8.1) and the same
shall remain unremedied in whole or in part for fifteen (15) calendar days or
more after the earlier of (i) such Borrowers' actual knowledge thereof or (ii)
such Borrowers' receipt of notice thereof from Lender.
Please accept this as the notice required by Section 8.1(d)(ii) of the
Credit Agreement. Borrower has fifteen (15) calendar days following the date of
its receipt of this notice within which to provide Lender with satisfactory
evidence that IHHI has received capital contributions of not less than Fifteen
Million Dollars ($15,000,000). Otherwise, an Event of Default will have
occurred. In said event, Lender will exercise its rights and remedies as
provided in the Loan Documents, the Guaranties, at law or in equity. In
addition, Lender will have the right, but will be under no legal obligation to,
discuss and negotiate with any Borrower, any Credit Party or any Guarantor with
respect to the foregoing. In no event will any such discussion or negotiation
with any Borrower, any Credit Party or any Guarantor be construed as a
forbearance by Lender of the right to exercise its rights and remedies under the
Loan Documents, the Guaranties, or applicable law. Further, no discussion or
negotiation with any Borrower, any Credit Party, or any Guarantor shall
constitute a waiver, amendment or modification of any Loan Document or Guaranty.
The failure or delay by Lender to exercise any of its rights and remedies under
the Loan Documents or Guaranties, or under applicable law, shall not constitute
a waiver of Lender's right to exercise the same at any time or from time to
time.
Very truly yours,
Gary C. Sheppard
Sedgwick, Detert, Moran & Arnold LLP
GCS/ms
Annex A Attached
cc: Joey Lampariello, President and COO (via email)
Adam Field, Sr. Vice President Development (via email)
Thomas Fazio, General Counsel (via email)
ATTACHMENT A TO NOTICE OF FAILURE TO COMPLY WITH COVENANT
NOTICE ADDRESSES OF CO-BORROWERS, CREDIT PARTY AND GUARANTOR
DELIVER A SEPARATE COPY TO EACH ADDRESSEE IDENTIFIED BELOW BY FACSIMILE AND, ON
THE SAME DAY, DEPOSIT A COPY IN THE U.S. MAIL ADDRESSED TO EACH ADDRESSEE
(POSTAGE PREPAID, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED)
To: WMC-SA, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: WMC-A, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: COASTAL COMMUNITIES HOSPITAL, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: CHAPMAN MEDICAL CENTER, INC.
c/o INTEGRATED HEALTHCARE HOLDINGS, INC.
c/o Mogel Management Group, LLC
695 Town Center Drive, Suite 260
Costa Mesa, California 92626
Attn: Larry Anderson, President
Bruce Mogel, Chairman
Ph: 714-434-9191
Fax: 714-434-9505
To: Hooper Lundy & Bookman, Inc.
1875 Century Park East, Suite 1600
Los Angeles, CA 90067-3208
Attn: Todd E. Swanson, Esq.
Ph: 310-551-8195
Fax: 310-551-8181
To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC
2621 S. Bristol Street Suite 108
Santa Ana, CA 92704
Attn: Anil Shah, Co-Manager
Ph: 714-290-5322
Fax: 714-297-9588
To: PACIFIC COAST HOLDINGS INVESTMENTS, LLC
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, California 92506
Attn: Dr. Chaudhuri William Thomas, Esq.
Ph: 951-782-8812
Fax: 951-766-9944
To: GANESHA REALTY LLC
c/o Strategic Global Management, Inc.
6800 Indiana Avenue, Suite 130
Riverside, California 92506
Attn: Dr. Chaudhuri William Thomas, Esq.
Ph : 951-782-8812
Fax: 951-766-9944
To: WEST COAST HOLDINGS, LLC
2621 South Bristol, Suite 108
Santa Ana, California 92704
Attn: Anil V. Shah, Manager
Ph: 714-290-5322
Fax: 714-297-9588
To: Hari Lal, Esq.
1000 South Anaheim Boulevard, Suite 230
Anaheim, CA 92805
Ph: 714-635-1646
Fax: 714-635-2457
To: ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC
2621 South Bristol, Suite 108
Santa Ana, California 92704
Attn: Anil V. Shah, Manager
Ph: 714-290-5322
Fax: 714-297-9588
EXHIBIT "C"
[RESERVED]
EXHIBIT "D"
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
INTEGRATED HEALTHCARE HOLDINGS, INC.
June __, 2005
Pursuant to N.R.S. Section 78.315, as amended, the undersigned, being the
entire Board of Directors (the "Board") of Integrated Healthcare Holdings, Inc.,
a Nevada corporation (the "Corporation"), does hereby consent to and adopt in
all respects the following resolutions.
AGREEMENT TO FORBEAR
WHEREAS, the Corporation, WMC-SA, INC., a California corporation
("WMC-SA"), WMC-A, INC., a California corporation ("WMC-A"), Chapman Medical
Center, Inc., a California corporation ("Chapman"), Coastal Communities
Hospital, Inc., a California corporation ("Coastal") (the Corporation, WMC-SA,
WMC-A, Chapman and Coastal together as "Borrowers"), and Pacific Coast Holdings
Investment, LLC, a California limited liability company ("PCHI"), West Coast
Holdings, LLC, a California limited liability company ("West Coast"), and
Ganesha Realty, LLC, a California limited liability company ("Ganesha") (PCHI,
West Coast and Ganesha together as "Credit Party"), and Medical Provider
Financial Corporation II, a Nevada corporation ("Lender"), are parties to that
certain Credit Agreement dated as of March 3, 2005 ("Credit Agreement"). In
addition, Lender and PCHI are parties to that certain Guaranty Agreement dated
as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County Physicians
Investment Network, LLC, a Nevada limited liability company ("OC-PIN") are
parties to that certain Guaranty Agreement dated as of March 3, 2005 ("OC-PIN
Guaranty"); Lender and West Coast are parties to that certain Pledge Agreement
dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and the
individual members of West Coast are parties to that certain Pledge Agreement
dated as of March 3, 2005 ("Members of West Coast Pledge Agreement"); Lender and
the Corporation are parties to that certain Pledge Agreement dated as of March
3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are parties to
that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge
Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN Guaranty, the
West Coast Pledge Agreement, the Members of West Coast Pledge Agreement, the
Corporation Pledge Agreement, the Ganesha Pledge Agreement, and each of the
other documents and instruments executed in connection with the Credit Agreement
are hereinafter collectively referred to as the "Loan Documents." Capitalized
terms not defined herein shall have the same meaning as in the Loan Documents;
and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Corporation acknowledges and agrees that the aggregate total of principal
and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57;
and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between the Corporation on the one
hand and OC-PIN on the other, in that the Corporation claims that the Events of
Default occurred because of OC-PIN's failure to contribute a total of
$30,000,000 in capital to the Corporation; and OC-PIN claims that it was not
required to contribute a total of $30,000,000 in capital to the Corporation; and
WHEREAS, the Corporation has requested that Lender forbear from
exercising its rights and remedies granted to Lender under the Loan Documents,
and the Lender has agreed to forbear from exercising its rights and remedies
under the Loan Documents solely for the purposes of providing the Corporation
and OC-PIN additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the
Corporation (along with the other Borrowers, the Client Parties and the
Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated
June __, 2005 ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreements on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the Board, and the Board believes that it is in the best
interest of the Corporation to approve same on behalf of the Corporation.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial
Officer, President, any Vice President, Treasurer, Assistant Treasurer,
Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby
is, authorized, empowered and directed to execute and deliver the Forbearance
Agreement in substantially the form and content as approved hereby by the Board,
for and on behalf of the Corporation, with such changes thereto as the Proper
Officer executing the same shall in his sole discretion deem necessary or
desirable and in the best interest of the Corporation, the execution and
delivery of the Forbearance Agreement with such changes to be conclusive
evidence that such changes did meet such standard.
RESOLVED FURTHER, that any Proper Officer of the Corporation be, and
each hereby is, authorized, empowered and directed to execute such other
instruments and documents (including without limitation any and all other
agreements, financing statements, mortgages, deeds of trust, security
agreements, pledge agreements, collateral assignments, certificates, or other
documents which may be described in the Forbearance Agreement and/or the
documents related thereto or necessary or required by the Lender), and to take
such other actions as the Proper Officer so acting deems necessary or desirable,
for and on behalf of the Corporation, to comply with and to carry out the terms
and provisions of the Forbearance Agreement, and otherwise to effectuate the
transactions contemplated by these resolutions.
RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the
Corporation is hereby authorized, on behalf of the Corporation, to certify and
attest any documents that such officer may deem necessary or appropriate to
consummate the transactions contemplated by the Forbearance Agreement; provided
that such certification and attestation shall not be required for the validity
of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that all Proper Officers of the Corporation are hereby
severally authorized, empowered, and directed to sign, execute, certify to,
verify, acknowledge, deliver, accept, file, and record any and all such
instruments, agreements, consents, waivers and documents, and to take, or cause
to be taken, any and all actions, in the name and on behalf of the Corporation,
or otherwise, as any such Proper Officer shall, in such Proper Officer's sole
discretion, deem necessary or desirable and in the best interest of the
Corporation in order to effect the transactions contemplated by the foregoing
resolutions, and in order to carry out the purposes of the foregoing
resolutions, and such Proper Officer's signature, or such actions taken by such
Proper Officer, shall be conclusive evidence that such Proper Officer did deem
same to be necessary or desirable and in the best interest of the Corporation in
order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by any Proper
Officer of the Corporation prior to the date of the adoption of the foregoing
resolutions which would have been authorized by the foregoing resolutions but
for the fact that such actions were taken prior to such date, be, and each is
hereby, ratified, approved, confirmed, and adopted in all respects, including
but not limited to the actions under the Forbearance Agreement and any
agreements, consents and/ or waivers required by any other third party or lender
to permit the transactions described herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
DIRECTORS:
------------------------------
Bruce Mogel
------------------------------
Larry B. Anderson
------------------------------
James T. Ligon
------------------------------
Anil V. Shah, M.D.
EXHIBIT "E"
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
WMC-SA, INC.
June __, 2005
Pursuant to Section 307(b) of the California Corporations Code, the
undersigned, being the entire Board of Directors (the "Board") of WMC-SA, Inc.,
a California corporation (the "Corporation"), does hereby consent to and adopt
in all respects the following resolutions.
AGREEMENT TO FORBEAR
WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a
Nevada corporation ("IHHI"), WMC-A, INC., a California corporation ("WMC-A"),
Chapman Medical Center, Inc., a California corporation ("Chapman"), Coastal
Communities Hospital, Inc., a California corporation ("Coastal") (the
Corporation, IHHI, WMC-A, Chapman and Coastal together as "Borrowers"), and
Pacific Coast Holdings Investment, LLC, a California limited liability company
("PCHI"), West Coast Holdings, LLC, a California limited liability company
("West Coast"), and Ganesha Realty, LLC, a California limited liability company
("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and
Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are
parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit
Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty
Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County
Physicians Investment Network, LLC, a Nevada limited liability company
("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3,
2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement");
Lender and the individual members of West Coast are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge
Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated
as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are
parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha
Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN
Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge
Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and
each of the other documents and instruments executed in connection with the
Credit Agreement are hereinafter collectively referred to as the "Loan
Documents." Capitalized terms not defined herein shall have the same meaning as
in the Loan Documents; and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Corporation acknowledges and agrees that the aggregate total of principal
and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57;
and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between IHHI on the one hand and
OC-PIN on the other, in that IHHI claims that the Events of Default occurred
because of OC-PIN's failure to contribute a total of $30,000,000 in capital to
IHHI; and OC-PIN claims that it was not required to contribute a total of
$30,000,000 in capital to IHHI; and
WHEREAS, the Corporation has requested that Lender forbear from
exercising its rights and remedies granted to Lender under the Loan Documents,
and the Lender has agreed to forbear from exercising its rights and remedies
under the Loan Documents solely for the purposes of providing the IHHI and
OC-PIN additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the
Corporation (along with the other Borrowers, the Client Parties and the
Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated
June __, 2005 ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreements on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the Board, and the Board believes that it is in the best
interest of the Corporation to approve same on behalf of the Corporation.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial
Officer, President, any Vice President, Treasurer, Assistant Treasurer,
Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby
is, authorized, empowered and directed to execute and deliver the Forbearance
Agreement in substantially the form and content as approved hereby by the Board,
for and on behalf of the Corporation, with such changes thereto as the Proper
Officer executing the same shall in his sole discretion deem necessary or
desirable and in the best interest of the Corporation, the execution and
delivery of the Forbearance Agreement with such changes to be conclusive
evidence that such changes did meet such standard.
RESOLVED FURTHER, that any Proper Officer of the Corporation be, and
each hereby is, authorized, empowered and directed to execute such other
instruments and documents (including without limitation any and all other
agreements, financing statements, mortgages, deeds of trust, security
agreements, pledge agreements, collateral assignments, certificates, or other
documents which may be described in the Forbearance Agreement and/or the
documents related thereto or necessary or required by the Lender), and to take
such other actions as the Proper Officer so acting deems necessary or desirable,
for and on behalf of the Corporation, to comply with and to carry out the terms
and provisions of the Forbearance Agreement, and otherwise to effectuate the
transactions contemplated by these resolutions.
RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the
Corporation is hereby authorized, on behalf of the Corporation, to certify and
attest any documents that such officer may deem necessary or appropriate to
consummate the transactions contemplated by the Forbearance Agreement; provided
that such certification and attestation shall not be required for the validity
of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that all Proper Officers of the Corporation are hereby
severally authorized, empowered, and directed to sign, execute, certify to,
verify, acknowledge, deliver, accept, file, and record any and all such
instruments, agreements, consents, waivers and documents, and to take, or cause
to be taken, any and all actions, in the name and on behalf of the Corporation,
or otherwise, as any such Proper Officer shall, in such Proper Officer's sole
discretion, deem necessary or desirable and in the best interest of the
Corporation in order to effect the transactions contemplated by the foregoing
resolutions, and in order to carry out the purposes of the foregoing
resolutions, and such Proper Officer's signature, or such actions taken by such
Proper Officer, shall be conclusive evidence that such Proper Officer did deem
same to be necessary or desirable and in the best interest of the Corporation in
order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by any Proper
Officer of the Corporation prior to the date of the adoption of the foregoing
resolutions which would have been authorized by the foregoing resolutions but
for the fact that such actions were taken prior to such date, be, and each is
hereby, ratified, approved, confirmed, and adopted in all respects, including
but not limited to the actions under the Forbearance Agreement and any
agreements, consents and/ or waivers required by any other third party or lender
to permit the transactions described herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
DIRECTORS:
------------------------------
Bruce Mogel
------------------------------
Larry B. Anderson
EXHIBIT "F"
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
WMC-A, INC.
June __, 2005
Pursuant to Section 307(b) of the California Corporations Code, the
undersigned, being the entire Board of Directors (the "Board") of WMC-A, Inc., a
California corporation (the "Corporation"), does hereby consent to and adopt in
all respects the following resolutions.
AGREEMENT TO FORBEAR
WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a
Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"),
Chapman Medical Center, Inc., a California corporation ("Chapman"), Coastal
Communities Hospital, Inc., a California corporation ("Coastal") (the
Corporation, IHHI, WMC-SA, Chapman and Coastal together as "Borrowers"), and
Pacific Coast Holdings Investment, LLC, a California limited liability company
("PCHI"), West Coast Holdings, LLC, a California limited liability company
("West Coast"), and Ganesha Realty, LLC, a California limited liability company
("Ganesha") (PCHI, West Coast and Ganesha together as "Credit Party"), and
Medical Provider Financial Corporation II, a Nevada corporation ("Lender"), are
parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit
Agreement"). In addition, Lender and PCHI are parties to that certain Guaranty
Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and Orange County
Physicians Investment Network, LLC, a Nevada limited liability company
("OC-PIN") are parties to that certain Guaranty Agreement dated as of March 3,
2005 ("OC-PIN Guaranty"); Lender and West Coast are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement");
Lender and the individual members of West Coast are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("Members of West Coast Pledge
Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated
as of March 3, 2005 ("Corporation Pledge Agreement"); and Lender and Ganesha are
parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha
Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN
Guaranty, the West Coast Pledge Agreement, the Members of West Coast Pledge
Agreement, the Corporation Pledge Agreement, the Ganesha Pledge Agreement, and
each of the other documents and instruments executed in connection with the
Credit Agreement are hereinafter collectively referred to as the "Loan
Documents." Capitalized terms not defined herein shall have the same meaning as
in the Loan Documents; and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Corporation acknowledges and agrees that the aggregate total of principal
and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57;
and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between IHHI on the one hand and
OC-PIN on the other, in that IHHI claims that the Events of Default occurred
because of OC-PIN's failure to contribute a total of $30,000,000 in capital to
IHHI; and OC-PIN claims that it was not required to contribute a total of
$30,000,000 in capital to IHHI; and
WHEREAS, the Corporation has requested that Lender forbear from
exercising its rights and remedies granted to Lender under the Loan Documents,
and the Lender has agreed to forbear from exercising its rights and remedies
under the Loan Documents solely for the purposes of providing the IHHI and
OC-PIN additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the
Corporation (along with the other Borrowers, the Client Parties and the
Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated
June __, 2005 ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreements on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the Board, and the Board believes that it is in the best
interest of the Corporation to approve same on behalf of the Corporation.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial
Officer, President, any Vice President, Treasurer, Assistant Treasurer,
Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby
is, authorized, empowered and directed to execute and deliver the Forbearance
Agreement in substantially the form and content as approved hereby by the Board,
for and on behalf of the Corporation, with such changes thereto as the Proper
Officer executing the same shall in his sole discretion deem necessary or
desirable and in the best interest of the Corporation, the execution and
delivery of the Forbearance Agreement with such changes to be conclusive
evidence that such changes did meet such standard.
RESOLVED FURTHER, that any Proper Officer of the Corporation be, and
each hereby is, authorized, empowered and directed to execute such other
instruments and documents (including without limitation any and all other
agreements, financing statements, mortgages, deeds of trust, security
agreements, pledge agreements, collateral assignments, certificates, or other
documents which may be described in the Forbearance Agreement and/or the
documents related thereto or necessary or required by the Lender), and to take
such other actions as the Proper Officer so acting deems necessary or desirable,
for and on behalf of the Corporation, to comply with and to carry out the terms
and provisions of the Forbearance Agreement, and otherwise to effectuate the
transactions contemplated by these resolutions.
RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the
Corporation is hereby authorized, on behalf of the Corporation, to certify and
attest any documents that such officer may deem necessary or appropriate to
consummate the transactions contemplated by the Forbearance Agreement; provided
that such certification and attestation shall not be required for the validity
of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that all Proper Officers of the Corporation are hereby
severally authorized, empowered, and directed to sign, execute, certify to,
verify, acknowledge, deliver, accept, file, and record any and all such
instruments, agreements, consents, waivers and documents, and to take, or cause
to be taken, any and all actions, in the name and on behalf of the Corporation,
or otherwise, as any such Proper Officer shall, in such Proper Officer's sole
discretion, deem necessary or desirable and in the best interest of the
Corporation in order to effect the transactions contemplated by the foregoing
resolutions, and in order to carry out the purposes of the foregoing
resolutions, and such Proper Officer's signature, or such actions taken by such
Proper Officer, shall be conclusive evidence that such Proper Officer did deem
same to be necessary or desirable and in the best interest of the Corporation in
order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by any Proper
Officer of the Corporation prior to the date of the adoption of the foregoing
resolutions which would have been authorized by the foregoing resolutions but
for the fact that such actions were taken prior to such date, be, and each is
hereby, ratified, approved, confirmed, and adopted in all respects, including
but not limited to the actions under the Forbearance Agreement and any
agreements, consents and/ or waivers required by any other third party or lender
to permit the transactions described herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
DIRECTORS:
------------------------------
Bruce Mogel
------------------------------
Larry B. Anderson
EXHIBIT "G"
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
COASTAL COMMUNITIES HOSPITAL, INC.
June __, 2005
Pursuant to Section 307(b) of the California Corporations Code, the
undersigned, being the entire Board of Directors (the "Board") of Coastal
Communities Hospital, Inc., a California corporation (the "Corporation"), does
hereby consent to and adopt in all respects the following resolutions.
AGREEMENT TO FORBEAR
WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a
Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"),
WMC-A, INC., a California corporation ("WMC-A"), and Chapman Medical Center,
Inc., a California corporation ("Chapman") (the Corporation, IHHI, WMC-SA, WMC-A
and Chapman together as "Borrowers"), and Pacific Coast Holdings Investment,
LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC,
a California limited liability company ("West Coast"), and Ganesha Realty, LLC,
a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha
together as "Credit Party"), and Medical Provider Financial Corporation II, a
Nevada corporation ("Lender"), are parties to that certain Credit Agreement
dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are
parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI
Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a
Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty
Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast
are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West
Coast Pledge Agreement"); Lender and the individual members of West Coast are
parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of
West Coast Pledge Agreement"); Lender and IHHI are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and
Lender and Ganesha are parties to that certain Pledge Agreement dated as of
March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI
Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of
West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha
Pledge Agreement, and each of the other documents and instruments executed in
connection with the Credit Agreement are hereinafter collectively referred to as
the "Loan Documents." Capitalized terms not defined herein shall have the same
meaning as in the Loan Documents; and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Corporation acknowledges and agrees that the aggregate total of principal
and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57;
and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between IHHI on the one hand and
OC-PIN on the other, in that IHHI claims that the Events of Default occurred
because of OC-PIN's failure to contribute a total of $30,000,000 in capital to
IHHI; and OC-PIN claims that it was not required to contribute a total of
$30,000,000 in capital to IHHI; and
WHEREAS, the Corporation has requested that Lender forbear from
exercising its rights and remedies granted to Lender under the Loan Documents,
and the Lender has agreed to forbear from exercising its rights and remedies
under the Loan Documents solely for the purposes of providing the IHHI and
OC-PIN additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the
Corporation (along with the other Borrowers, the Client Parties and the
Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated
June __, 2005 ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreements on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the Board, and the Board believes that it is in the best
interest of the Corporation to approve same on behalf of the Corporation.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial
Officer, President, any Vice President, Treasurer, Assistant Treasurer,
Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby
is, authorized, empowered and directed to execute and deliver the Forbearance
Agreement in substantially the form and content as approved hereby by the Board,
for and on behalf of the Corporation, with such changes thereto as the Proper
Officer executing the same shall in his sole discretion deem necessary or
desirable and in the best interest of the Corporation, the execution and
delivery of the Forbearance Agreement with such changes to be conclusive
evidence that such changes did meet such standard.
RESOLVED FURTHER, that any Proper Officer of the Corporation be, and
each hereby is, authorized, empowered and directed to execute such other
instruments and documents (including without limitation any and all other
agreements, financing statements, mortgages, deeds of trust, security
agreements, pledge agreements, collateral assignments, certificates, or other
documents which may be described in the Forbearance Agreement and/or the
documents related thereto or necessary or required by the Lender), and to take
such other actions as the Proper Officer so acting deems necessary or desirable,
for and on behalf of the Corporation, to comply with and to carry out the terms
and provisions of the Forbearance Agreement, and otherwise to effectuate the
transactions contemplated by these resolutions.
RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the
Corporation is hereby authorized, on behalf of the Corporation, to certify and
attest any documents that such officer may deem necessary or appropriate to
consummate the transactions contemplated by the Forbearance Agreement; provided
that such certification and attestation shall not be required for the validity
of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that all Proper Officers of the Corporation are hereby
severally authorized, empowered, and directed to sign, execute, certify to,
verify, acknowledge, deliver, accept, file, and record any and all such
instruments, agreements, consents, waivers and documents, and to take, or cause
to be taken, any and all actions, in the name and on behalf of the Corporation,
or otherwise, as any such Proper Officer shall, in such Proper Officer's sole
discretion, deem necessary or desirable and in the best interest of the
Corporation in order to effect the transactions contemplated by the foregoing
resolutions, and in order to carry out the purposes of the foregoing
resolutions, and such Proper Officer's signature, or such actions taken by such
Proper Officer, shall be conclusive evidence that such Proper Officer did deem
same to be necessary or desirable and in the best interest of the Corporation in
order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by any Proper
Officer of the Corporation prior to the date of the adoption of the foregoing
resolutions which would have been authorized by the foregoing resolutions but
for the fact that such actions were taken prior to such date, be, and each is
hereby, ratified, approved, confirmed, and adopted in all respects, including
but not limited to the actions under the Forbearance Agreement and any
agreements, consents and/ or waivers required by any other third party or lender
to permit the transactions described herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
DIRECTORS:
------------------------------
Bruce Mogel
------------------------------
Larry B. Anderson
EXHIBIT "H"
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
CHAPMAN MEDICAL CENTER, INC.
June __, 2005
Pursuant to Section 307(b) of the California Corporations Code, the
undersigned, being the entire Board of Directors (the "Board") of Chapman
Medical Center, Inc., a California corporation (the "Corporation"), does hereby
consent to and adopt in all respects the following resolutions.
AGREEMENT TO FORBEAR
WHEREAS, the Corporation, Integrated Healthcare Holdings, Inc., a
Nevada corporation ("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"),
WMC-A, INC., a California corporation ("WMC-A"), and Coastal Community Hospital,
Inc., a California corporation ("Coastal") (the Corporation, IHHI, WMC-SA, WMC-A
and Coastal together as "Borrowers"), and Pacific Coast Holdings Investment,
LLC, a California limited liability company ("PCHI"), West Coast Holdings, LLC,
a California limited liability company ("West Coast"), and Ganesha Realty, LLC,
a California limited liability company ("Ganesha") (PCHI, West Coast and Ganesha
together as "Credit Party"), and Medical Provider Financial Corporation II, a
Nevada corporation ("Lender"), are parties to that certain Credit Agreement
dated as of March 3, 2005 ("Credit Agreement"). In addition, Lender and PCHI are
parties to that certain Guaranty Agreement dated as of March 3, 2005 ("PCHI
Guaranty"); Lender and Orange County Physicians Investment Network, LLC, a
Nevada limited liability company ("OC-PIN") are parties to that certain Guaranty
Agreement dated as of March 3, 2005 ("OC-PIN Guaranty"); Lender and West Coast
are parties to that certain Pledge Agreement dated as of March 3, 2005 ("West
Coast Pledge Agreement"); Lender and the individual members of West Coast are
parties to that certain Pledge Agreement dated as of March 3, 2005 ("Members of
West Coast Pledge Agreement"); Lender and IHHI are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("Corporation Pledge Agreement"); and
Lender and Ganesha are parties to that certain Pledge Agreement dated as of
March 3, 2005 ("Ganesha Pledge Agreement"). The Credit Agreement, the PCHI
Guaranty, the OC-PIN Guaranty, the West Coast Pledge Agreement, the Members of
West Coast Pledge Agreement, the Corporation Pledge Agreement, the Ganesha
Pledge Agreement, and each of the other documents and instruments executed in
connection with the Credit Agreement are hereinafter collectively referred to as
the "Loan Documents." Capitalized terms not defined herein shall have the same
meaning as in the Loan Documents; and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Corporation acknowledges and agrees that the aggregate total of principal
and interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57;
and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Corporation acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between IHHI on the one hand and
OC-PIN on the other, in that IHHI claims that the Events of Default occurred
because of OC-PIN's failure to contribute a total of $30,000,000 in capital to
IHHI; and OC-PIN claims that it was not required to contribute a total of
$30,000,000 in capital to IHHI; and
WHEREAS, the Corporation has requested that Lender forbear from
exercising its rights and remedies granted to Lender under the Loan Documents,
and the Lender has agreed to forbear from exercising its rights and remedies
under the Loan Documents solely for the purposes of providing the IHHI and
OC-PIN additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the
Corporation (along with the other Borrowers, the Client Parties and the
Guarantor) execute and deliver to Lender that certain Agreement to Forbear dated
June __, 2005 ("Forbearance Agreement"); and
WHEREAS, the Board has determined it to be in the best interest of the
Corporation to execute the Forbearance Agreements on behalf of the Corporation;
and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the Board, and the Board believes that it is in the best
interest of the Corporation to approve same on behalf of the Corporation.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the Chief Executive Officer, Chief Financial
Officer, President, any Vice President, Treasurer, Assistant Treasurer,
Secretary and Assistant Secretary (each a "Proper Officer") be, and each hereby
is, authorized, empowered and directed to execute and deliver the Forbearance
Agreement in substantially the form and content as approved hereby by the Board,
for and on behalf of the Corporation, with such changes thereto as the Proper
Officer executing the same shall in his sole discretion deem necessary or
desirable and in the best interest of the Corporation, the execution and
delivery of the Forbearance Agreement with such changes to be conclusive
evidence that such changes did meet such standard.
RESOLVED FURTHER, that any Proper Officer of the Corporation be, and
each hereby is, authorized, empowered and directed to execute such other
instruments and documents (including without limitation any and all other
agreements, financing statements, mortgages, deeds of trust, security
agreements, pledge agreements, collateral assignments, certificates, or other
documents which may be described in the Forbearance Agreement and/or the
documents related thereto or necessary or required by the Lender), and to take
such other actions as the Proper Officer so acting deems necessary or desirable,
for and on behalf of the Corporation, to comply with and to carry out the terms
and provisions of the Forbearance Agreement, and otherwise to effectuate the
transactions contemplated by these resolutions.
RESOLVED FURTHER, that the Secretary or any Assistant Secretary of the
Corporation is hereby authorized, on behalf of the Corporation, to certify and
attest any documents that such officer may deem necessary or appropriate to
consummate the transactions contemplated by the Forbearance Agreement; provided
that such certification and attestation shall not be required for the validity
of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that all Proper Officers of the Corporation are hereby
severally authorized, empowered, and directed to sign, execute, certify to,
verify, acknowledge, deliver, accept, file, and record any and all such
instruments, agreements, consents, waivers and documents, and to take, or cause
to be taken, any and all actions, in the name and on behalf of the Corporation,
or otherwise, as any such Proper Officer shall, in such Proper Officer's sole
discretion, deem necessary or desirable and in the best interest of the
Corporation in order to effect the transactions contemplated by the foregoing
resolutions, and in order to carry out the purposes of the foregoing
resolutions, and such Proper Officer's signature, or such actions taken by such
Proper Officer, shall be conclusive evidence that such Proper Officer did deem
same to be necessary or desirable and in the best interest of the Corporation in
order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by any Proper
Officer of the Corporation prior to the date of the adoption of the foregoing
resolutions which would have been authorized by the foregoing resolutions but
for the fact that such actions were taken prior to such date, be, and each is
hereby, ratified, approved, confirmed, and adopted in all respects, including
but not limited to the actions under the Forbearance Agreement and any
agreements, consents and/ or waivers required by any other third party or lender
to permit the transactions described herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
DIRECTORS:
------------------------------
Bruce Mogel
------------------------------
Larry B. Anderson
EXHIBIT "I"
[RESERVED]
EXHIBIT "J"
UNANIMOUS WRITTEN CONSENT
OF THE MANAGERS OF
WEST COAST HOLDINGS, LLC
June __, 2005
The undersigned, constituting all of the managers of West Coast
Holdings, LLC, a California limited liability company (the "Company"), acting
pursuant to the authority granted to them under the Beverly-Killea Limited
Liability Company Act of the State of California and the Operating Agreement of
the Company, do hereby adopt, ratify and approve the following resolutions and
direct the managers of the Company to place a copy hereof in the Company's book
of minutes.
AGREEMENT TO FORBEAR
WHEREAS, Integrated Healthcare Holdings, Inc., a Nevada corporation
("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a
California corporation ("WMC-A"), Coastal Community Hospital, Inc., a California
corporation ("Coastal") and Chapman Medical Center, Inc., a California
corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Chapman and Coastal together as
"Borrowers"), and the Company, Pacific Coast Holdings, LLC, a California limited
liability company ("PCHI"), and Ganesha Realty, LLC, a California limited
liability company ("Ganesha") (the Company, PCHI and Ganesha together as "Credit
Party"), and Medical Provider Financial Company II, a Nevada corporation
("Lender"), are parties to that certain Credit Agreement dated as of March 3,
2005 ("Credit Agreement"). In addition, PCHI and the Lender are parties to that
certain Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender
and Orange County Physicians Investment Network, LLC, a Nevada limited liability
company ("OC-PIN") are parties to that certain Guaranty Agreement dated as of
March 3, 2005 ("OC-PIN Guaranty"); Lender and the Company are parties to that
certain Pledge Agreement dated as of March 3, 2005 ("Company Pledge Agreement");
Lender and the individual members of the Company are parties to that certain
Pledge Agreement dated as of March 3, 2005 ("Members of the Company Pledge
Agreement"); Lender and IHHI are parties to that certain Pledge Agreement dated
as of March 3, 2005 ("IHHI Pledge Agreement"); and Lender and Ganesha are
parties to that certain Pledge Agreement dated as of March 3, 2005 ("Ganesha
Pledge Agreement"). The Credit Agreement, the PCHI Guaranty, the OC-PIN
Guaranty, the Company Pledge Agreement, the Members of the Company Pledge
Agreement, the IHHI Pledge Agreement, the Ganesha Pledge Agreement, and each of
the other documents and instruments executed in connection with the Credit
Agreement are hereinafter collectively referred to as the "Loan Documents."
Capitalized terms not defined herein shall have the same meaning as in the Loan
Documents; and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Company acknowledges and agrees that the aggregate total of principal and
interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Company acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between IHHI on the one hand and
OC-PIN on the other, in that IHHI claims that the Events of Default occurred
because of OC-PIN's failure to contribute a total of $30,000,000 in capital to
IHHI; and OC-PIN claims that it was not required to contribute a total of
$30,000,000 in capital to IHHI; and
WHEREAS, the Company has requested that Lender forbear from exercising
its rights and remedies granted to Lender under the Loan Documents, and the
Lender has agreed to forbear from exercising its rights and remedies under the
Loan Documents solely for the purposes of providing the IHHI and OC-PIN
additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the Company
(along with the other Borrowers, the Client Parties and the Guarantor) execute
and deliver to Lender that certain Agreement to Forbear dated June __, 2005
("Forbearance Agreement"); and
WHEREAS, the managers of the Company have determined it to be in the
best interest of the Company to execute the Forbearance Agreements on behalf of
the Company; and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the managers of the Company, and the managers of the
Company believes that it is in the best interest of the Company to approve same
on behalf of the Company.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the managers be, and hereby are, authorized,
empowered and directed to execute and deliver the Forbearance Agreement in
substantially the form and content as approved hereby by the managers, for and
on behalf of the Company, with such changes thereto as the manager executing the
same shall in his discretion deem necessary or desirable and in the best
interest of the Company, the execution and delivery of the Forbearance Agreement
with such changes to be conclusive evidence that such changes did meet such
standard.
RESOLVED FURTHER, that the managers be, and hereby are, authorized,
empowered and directed to execute such other instruments and documents
(including without limitation any and all other agreements, financing
statements, mortgages, deeds of trust, security agreements, pledge agreements,
collateral assignments, certificates, or other documents which may be described
in the Forbearance Agreement and/or the documents related thereto or necessary
or required by the Lender), and to take such other actions as the managers deem
necessary or desirable, for and on behalf of the Company, to comply with and to
carry out the terms and provisions of the Forbearance Agreement, and otherwise
to effectuate the transactions contemplated by these resolutions.
RESOLVED FURTHER, that the managers are hereby authorized, on behalf of
the Company, to certify and attest any documents that such managers may deem
necessary or appropriate to consummate the transactions contemplated by the
Forbearance Agreement; provided that such certification and attestation shall
not be required for the validity of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that the managers are hereby authorized, empowered, and
directed to sign, execute, certify to, verify, acknowledge, deliver, accept,
file, and record any and all such instruments, agreements, consents, waivers and
documents, and to take, or cause to be taken, any and all actions, in the name
and on behalf of the Company, or otherwise, as said managers shall in their
discretion deem necessary or desirable and in the best interest of the Company
in order to effect the transactions contemplated by the foregoing resolutions,
and in order to carry out the purposes of the foregoing resolutions, and such
managers signature, or such actions taken by such managers, shall be conclusive
evidence that such managers did deem same to be necessary or desirable and in
the best interest of the Company in order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by such manager s
prior to the date of the adoption of the foregoing resolutions which would have
been authorized by the foregoing resolutions but for the fact that such actions
were taken prior to such date, be, and each is hereby, ratified, approved,
confirmed, and adopted in all respects, including but not limited to the actions
under the Forbearance Agreement and any agreements, consents and/ or waivers
required by any other third party or lender to permit the transactions described
herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
MANAGERS:
------------------------------
A.J. Meka, M.D.
------------------------------
Anil V. Shah, M.D.
EXHIBIT "K"
[RESERVED]
EXHIBIT "L"
WRITTEN CONSENT
OF THE MANAGER OF
ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC
June __, 2005
The undersigned, constituting the sole manager of Orange County
Physicians Investment Network, LLC, a Nevada limited liability company (the
"Company"), acting pursuant to the laws of the State of Nevada, do hereby adopt,
ratify and approve the following resolutions and direct the manager of the
Company to place a copy hereof in the Company's book of minutes.
AGREEMENT TO FORBEAR
WHEREAS, Integrated Healthcare Holdings, Inc., a Nevada corporation
("IHHI"), WMC-SA, INC., a California corporation ("WMC-SA"), WMC-A, INC., a
California corporation ("WMC-A"), Coastal Community Hospital, Inc., a California
corporation ("Coastal") and Chapman Medical Center, Inc., a California
corporation ("Chapman") (IHHI, WMC-SA, WMC-A, Chapman and Coastal together as
"Borrowers"), and Ganesha Realty, LLC, a California limited liability company
("Ganesha"), West Coast Holdings, LLC, a California limited liability company
("West Coast"), and Pacific Coast Holdings, LLC, a California limited liability
company ("PCHI") (the Company, West Coast and PCHI together as "Credit Party"),
and Medical Provider Financial Company II, a Nevada corporation ("Lender"), are
parties to that certain Credit Agreement dated as of March 3, 2005 ("Credit
Agreement"). In addition, Lender and the PCHI are parties to that certain
Guaranty Agreement dated as of March 3, 2005 ("PCHI Guaranty"); Lender and the
company are parties to that certain Guaranty Agreement dated as of March 3, 2005
("Company Guaranty"); Lender and West Coast are parties to that certain Pledge
Agreement dated as of March 3, 2005 ("West Coast Pledge Agreement"); Lender and
the individual members of West Coast are parties to that certain Pledge
Agreement dated as of March 3, 2005 ("Members of West Coast Pledge Agreement");
Lender and IHHI are parties to that certain Pledge Agreement dated as of March
3, 2005 ("IHHI Pledge Agreement"); and Lender and Ganesha are parties to that
certain Pledge Agreement dated as of March 3, 2005 ("Ganesha Pledge Agreement").
The Credit Agreement, the PCHI Guaranty, the Company Guaranty, the West Coast
Pledge Agreement, the Members of West Coast Pledge Agreement, the IHHI Pledge
Agreement, the Ganesha Pledge Agreement, and each of the other documents and
instruments executed in connection with the Credit Agreement are hereinafter
collectively referred to as the "Loan Documents." Capitalized terms not defined
herein shall have the same meaning as in the Loan Documents; and
WHEREAS, pursuant to the Loan Documents, Lender extended to Borrowers a
loan in the amount of $50,000,000 ("Acquisition Loan") to acquire the Hospital
Facilities; and Lender extended to Borrowers a non-revolving line of credit
facility of up to $30,000,000 ("Line of Credit Loan") to be used for working
capital and the other purposes permitted by the Loan Documents. The Acquisition
Loan and Line of Credit Loan are hereinafter together referred to as the "Loan."
The Company acknowledges and agrees that the aggregate total of principal and
interest due and owing under the Loan as of May 18, 2005 is $63,533,555.57; and
WHEREAS, the Borrowers have committed certain events of default
("Events of Default") under the Loan Documents, as more particularly set forth
(i) in that certain letter from Lender to Borrowers and others entitled Notice
of Events of Default dated May 9, 2005, and (ii) in that certain letter from
Lender to Borrowers and others entitled Notice of Failure to Comply With
Covenant dated May 9, 2005. The Company acknowledges receipt of these two
notices and agrees that the Events of Default specified therein occurred and are
continuing; and
WHEREAS, a dispute has arisen by and between IHHI on the one hand and
the Company on the other, in that IHHI claims that the Events of Default
occurred because of the Company's failure to contribute a total of $30,000,000
in capital to IHHI; and the Company claims that it was not required to
contribute a total of $30,000,000 in capital to IHHI; and
WHEREAS, the Company has requested that Lender forbear from exercising
its rights and remedies granted to Lender under the Loan Documents, and the
Lender has agreed to forbear from exercising its rights and remedies under the
Loan Documents solely for the purposes of providing the IHHI and OC-PIN
additional time to cure the Events of Default; and
WHEREAS, a condition to Lender agreeing to forbear is that the Company
(along with the other Borrowers, the Client Parties and the Guarantor) execute
and deliver to Lender that certain Agreement to Forbear dated June __, 2005
("Forbearance Agreement"); and
WHEREAS, the manager s of the Company has determined it to be in the
best interest of the Company to execute the Forbearance Agreements on behalf of
the Company; and
WHEREAS, the Forbearance Agreement has been submitted to and reviewed
by or discussed with the manager and with the members of the Company, and the
manager and the members of the Company believe that it is in the best interest
of the Company to approve same on behalf of the Company.
NOW, THEREFORE, IT IS RESOLVED, that each of the terms and provisions
of the Forbearance Agreement, and any and all such actions contemplated thereby,
are hereby adopted and approved in all respects, as the same may be changed in
accordance with these resolutions.
RESOLVED FURTHER, that the manager be, and each hereby is, authorized,
empowered and directed to execute and deliver the Forbearance Agreement in
substantially the form and content as approved hereby by the manager and the
members, for and on behalf of the Company, with such changes thereto as the
manager shall in his discretion deem necessary or desirable and in the best
interest of the Company, the execution and delivery of the Forbearance Agreement
with such changes to be conclusive evidence that such changes did meet such
standard.
RESOLVED FURTHER, that the manager be, and each hereby is, authorized,
empowered and directed to execute such other instruments and documents
(including without limitation any and all other agreements, financing
statements, mortgages, deeds of trust, security agreements, pledge agreements,
collateral assignments, certificates, or other documents which may be described
in the Forbearance Agreement and/or the documents related thereto or necessary
or required by the Lender), and to take such other actions as the manager deems
necessary or desirable, for and on behalf of the Company, to comply with and to
carry out the terms and provisions of the Forbearance Agreement, and otherwise
to effectuate the transactions contemplated by these resolutions.
RESOLVED FURTHER, that the manager is hereby authorized, on behalf of
the Company, to certify and attest any documents that such manager may deem
necessary or appropriate to consummate the transactions contemplated by the
Forbearance Agreement; provided that such certification and attestation shall
not be required for the validity of any such documents.
RESOLVED FURTHER, that the Lender may rely on these resolutions and
these resolutions shall remain in full force and effect until such time as
notice to the contrary is duly delivered to the Lender and receipted for in
writing by the Lender.
GENERAL RESOLUTIONS
RESOLVED, that the manager is hereby authorized, empowered, and
directed to sign, execute, certify to, verify, acknowledge, deliver, accept,
file, and record any and all such instruments, agreements, consents, waivers and
documents, and to take, or cause to be taken, any and all actions, in the name
and on behalf of the Company, or otherwise, as such manager shall in his
discretion deem necessary or desirable and in the best interest of the Company
in order to effect the transactions contemplated by the foregoing resolutions,
and in order to carry out the purposes of the foregoing resolutions, and such
managers signatures, or such actions taken by such manager shall be conclusive
evidence that such manager did deem same to be necessary or desirable and in the
best interest of the Company in order to effect such purposes.
RESOLVED FURTHER, that each and every action taken by such manager
prior to the date of the adoption of the foregoing resolutions which would have
been authorized by the foregoing resolutions but for the fact that such actions
were taken prior to such date, be, and each is hereby, ratified, approved,
confirmed, and adopted in all respects, including but not limited to the actions
under the Forbearance Agreement and any agreements, consents and/ or waivers
required by any other third party or lender to permit the transactions described
herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned does hereby execute this Unanimous
Consent to be effective as of the date first above written.
MANAGER:
------------------------------
Anil V. Shah, M.D.