PLEDGE AGREEMENT [$10,700,000 LOAN]

 

EXHIBIT 99.8

PLEDGE AGREEMENT

[$10,700,000 LOAN]

(Integrated Healthcare Holdings, Inc.)

THIS PLEDGE AGREEMENT (the “Pledge Agreement ”) is dated as of December 12, 2005 and is made by and among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation, with its chief executive office located at 1301 North Tustin Avenue, Santa Ana, California 92705, as pledgor ( “Pledgor” ”), and MEDICAL PROVIDER FINANCIAL CORPORATION III, a Nevada corporation, as lender (the “ Lender ”).

RECITALS:

A.   This Pledge Agreement is made in connection with a certain Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) by and among Lender, Pledgor (as Borrower) and certain other Credit Parties defined in the Credit Agreement.

B.   Pledgor owns one hundred percent (100%) of the authorized, issued and outstanding equity interests (the “ Pledged Interests ”) in WMC-SA, INC., a California corporation (“ WMC-SA ”), WMC-A, INC., a California corporation (“ WMC-A ”), CHAPMAN MEDICAL CENTER, INC., a California corporation (“ Chapman ”), and COASTAL COMMUNITIES HOSPITAL, INC., a California corporation (“ Coastal ”) (WMC-SA, WMC-A, Chapman and Coastal are hereinafter together referred to as “ the Companies ”).

C.   Pledgor is in the business of delivering acute care services to the public through four (4) separate acute care hospital facilities located in Orange County, California ( “Hospital Facilities” ) identified in Annex D to the Credit Agreement; and, along with one or more of the Credit Parties, is also in the business of owning and operating certain medical office buildings and other healthcare businesses related thereto.

D.   Pursuant to that certain Credit Agreement dated as of March 3, 2005, as amended ( “Original Credit Agreement” ) by and between Pledgor and the Companies (together as Borrowers), the Credit Parties named therein and Medical Provider Financial Corporation II, a Nevada corporation, an affiliate of Lender ( “Original Lender” ), Original Lender loaned $50,000,000 to IHHI, WMC-SA, WMC-A, Chapman and Coastal (the “Acquisition Loan” ) for the purpose of acquiring the Hospital Facilities, and made available to IHHI, WMC-SA, WMC-A, Chapman and Coastal a $30,000,000 line of credit (the “Line of Credit Loan” ) for the purpose of operating the Hospital Facilities (the Acquisition Loan and the Line of Credit Loan are hereinafter referred to as the “Original Loan” ).

E.   Pledgor (as Borrower under the Credit Agreement) has requested that Lender make a new loan in the amount of $10,700,000 ( “New Loan” ) for the purpose of operating the Hospital Facilities. Lender has agreed, on the terms and conditions set forth in this Agreement

and in the other documents and instruments evidencing the New Loan (the “New Loan Documents” ).

 

 

 

F.   For the purposes set forth above, Lender is willing to make the New Loan and other extensions of credit to or for the benefit of Borrower of up to such amount upon the terms and conditions set forth in the Credit Agreement.

G.   Among other conditions for making the New Loan, Lender has required that Pledgor pledge to Lender its ownership interest in the Companies as additional collateral for the payment and performance of the New Loan and the other Obligations as defined in the Credit Agreement.

H.   Pledgor will derive substantial direct and indirect economic benefits from the Loan.

I.   The parties intend that these Recitals are made a part of this Agreement.

NOW, THEREFORE, for and in consideration of the foregoing and of any financial accommodations or extensions of credit (including, without limitation, any loan or advance by renewal, refinancing or extension of the agreements described hereinabove or otherwise) heretofore, now or hereafter made to or for the benefit of any Borrower pursuant to the Credit Agreement or any other agreement, instrument or document executed pursuant to or in connection therewith, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Lender hereby agree as follows:

SECTION 1.   Definitions .

(a)   Except as otherwise defined herein, all initially capitalized terms shall have the respective meanings given to such terms in the Credit Agreement.

(b)   As used herein, the term “ Articles of Incorporation ” collectively means the Articles of Incorporation of WMC-SA, WMC-A, Chapman and Coastal filed with the California Secretary of State (i) by WMC-SA on October 5, 2004, (ii) by WMC-A on October 5, 2004, (iii) by Chapman on October 23, 2004, and (iv) by Coastal on October 5, 2004.

(c)   As used herein, the term “ Bylaws ” collectively means the Bylaws of each of the Companies duly adopted (i) by WMC-SA on October 13, 2004, (ii) by WMC-A on October 13, 2004, (iii) by Chapman on October 13, 2004, and (iv) by Coastal on October 13, 2004.

(d)   As used herein, the term “ Equity Interest s” means all shares of capital stock, options and warrants to purchase equity securities or other forms of equity, membership interests, general or limited partnership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act).

 

 

 

(e)   As used herein, the term “Lien” means any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction).

SECTION 2.   Security Interest . As security for the payment and performance of the Obligations, Pledgor hereby pledges, grants and assigns to the Lender, and creates in the Lender a security interest in and Lien on, all of its right, title and interest in, to and under the Pledged Interests, whether now existing or hereafter acquired or arising, including, without limitation, (i) all of Pledgor's interest in the capital of the Companies and Pledgor's interest in all undistributed profits and distributions to which Pledgor shall at any time be entitled in respect of such Pledged Interests; (ii) all other payments, if any, due or to become due to Pledgor in respect of the Pledged Interests pursuant to the Articles of Incorporation or Bylaws, as applicable, whether as contractual obligations, damages, insurance proceeds or otherwise; (iii) all of Pledgor's rights, powers and remedies under the Articles of Incorporation or Bylaws, as applicable, as a member thereunder or arising from its ownership of the Pledged Interests pursuant thereto, whether now existing or hereafter arising or acquired, in, to and under the Articles of Incorporation or Bylaws, as applicable, including, without limitation, Pledgor’s rights to receive from time to time its share of profits, income, surplus, compensation, return of capital, distributions and other reimbursements and payments from the Companies (including, without limitation, specific properties of the Companies upon dissolution and otherwise); (iv) all of Pledgor's rights under the Articles of Incorporation or Bylaws, as applicable, as a member thereunder to manage the affairs of the Companies (including, without limitation, the power to sell, mortgage or otherwise deal with the property of the Companies), to make determinations, to exercise any election or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, execute, endorse or cash any checks or other payments, or other instruments or orders, to file any claims and to take any action that (in the opinion of Lender) may be necessary or advisable in connection with any of the foregoing; (v) any certificates representing the Pledged Interests, and all undistributed dividends, distributions, cash, instruments and other property or proceeds from time to time receivable in respect of or in exchange for any or all of the Pledged Interests; (vi) any additional Equity Interests of or in the Companies from time to time acquired by Pledgor in any manner (which Equity Interests shall be deemed to be part of the Pledged Equity), and the certificates representing such additional Equity Interests, and all undistributed dividends, distributions, cash, instruments and other property or proceeds from time to time receivable in respect of or in exchange for any or all of such Equity Interests; and (vii) any and all rents, issues, profits, returns, income, allocations, distributions and proceeds of and from any and all of the foregoing (collectively, the “ Collateral ”).

(b)   All certificates and all promissory notes and instruments evidencing the Collateral shall be delivered to and held by or on behalf of Lender or Original Lender pursuant hereto or that certain Membership Pledge Agreement ( “Original Pledge Agreement” ) by and between Pledgor and Medical Provider Financial Corporation II ( “Original Lender” ) dated as of March 3, 2005. All Collateral shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Lender.

 

 

 

(c)   Pledgor hereby irrevocably authorizes the Lender to file one or more financing or continuation statements and amendments thereto, disclosing and perfecting the Lien granted to the Lender under this Agreement without Pledgor’s signatures appearing thereon, and the Lender agrees to notify Pledgor when such a filing has been made. Pledgor agrees that a carbon, photographic, photostatic, or other reproduction of this Pledge Agreement or of a financing statement is sufficient as a financing statement. Pledgor agrees that such authorization includes a ratification and authorization with respect to any initial financing statements filed prior to the date hereof.

SECTION 3.   Distributions . Prior to the full payment and performance of the Obligations, the Lender or the Original Lender shall receive, as Collateral, any and all additional membership interests, partnership interests, membership interests, capital stock, options, warrants, or other property of any kind received, receivable, distributed or distributable on or by reason of the Collateral pledged hereunder, whether in the form of cash, securities or property or by way of liquidation, conversion, merger, consolidation, redemption or otherwise. Subject to Pledgor’s right to receive and retain Distributions so long as an Event of Default under the Loan Documents has not occurred or is continuing, Pledgor shall deliver to the Lender or Original Lender, or cause the Companies to deliver directly to the Lender or Original Lender, all property, including any cash distributions representing or constituting any Collateral received or receivable by Pledgor after the date of this Pledge Agreement. Any such property received by Pledgor shall be held by Pledgor in trust for the Lender and shall forthwith be delivered by Pledgor to the Lender or Original Lender as aforesaid.

SECTION 4.   Registration of Pledge . The Pledgor hereby represents and warrants that as of the date hereof the Pledged Interests are not represented by any instruments or certificates and hereby instructs the Companies to register on the books and records of the Companies the pledge of the Pledged Interests in the Companies by the Pledgor to the Lender. In the event that at any time after the date hereof any Collateral shall be evidenced by an instrument or a certificate, the Pledgor shall or shall cause the Companies to promptly deliver any such instruments or certificates representing one hundred percent (100%) of the Pledged Interests of the Companies, duly endorsed or subscribed by the Pledgor or accompanied by appropriate instruments of transfer or assignment duly executed in blank by the Pledgor, to the Lender or Original Lender as additional Collateral. Any additional instruments or certificates received by the Pledgor shall be held by the Pledgor in trust, as agent for the Lender, and Pledgor shall immediately advise Lender in writing that Pledgor is holding the same..

SECTION 5.   Power of Attorney . The Pledgor hereby constitutes and irrevocably appoints the Lender, with full power of substitution and revocation by the Lender, as each Pledgor's true and lawful attorney-in-fact, for the purpose from time to time upon the occurrence and during the continuance of an Event of Default of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Lender deems necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to affix to certificates and documents representing any Collateral the endorsements or other instruments of transfer or assignment delivered with respect thereto and to transfer or cause the transfer of the Collateral, or any part thereof, on the books of the Companies. The power of attorney granted pursuant to this Pledge Agreement and all authority hereby conferred are granted and conferred solely to protect the Lender's interest in the Collateral and shall not impose any duty upon the Lender to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest until the Obligations have been paid in full and the commitments of Lender under the Credit Agreement have been terminated.

 

 

 

SECTION 6.   Representations of Pledgor . Pledgor represents and warrants to the Lender that:

(a)   Pledgor has the power and authority and the legal right to execute, deliver and perform this Pledge Agreement and to grant the Lien on the Collateral contemplated hereby in favor of the Lender;

(b)   The execution, delivery and performance of this Pledge Agreement by Pledgor and the granting of the Lien on the Collateral contemplated hereby has been duly authorized by all necessary action and does not and will not (i) violate any applicable law, rule or regulation or any provision of the organizational documents of the Companies, (ii) conflict with, result in a breach of, or constitute a default under any provision of the Articles of Incorporation, Bylaws, or any partnership agreement, indenture, mortgage or other agreement or instrument to which Pledgor or any of its Affiliates is a party or by which any of them or their respective properties or assets is bound or subject or any license, judgment order or decree of any Governmental Authority having jurisdiction over Pledgor or any of its Affiliates or their respective activities, properties or assets or (iii) result in or require the creation or imposition of any Lien upon or with respect to any properties or assets now or hereafter owned by Pledgor or any of its Affiliates (other than the Liens created hereunder).

(c)   This Pledge Agreement has been duly executed and delivered by Pledgor and constitutes a legal, valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles.

(d)   No consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person is required (i) for the execution, delivery and performance of this Pledge Agreement by Pledgor, (ii) for the pledge by Pledgor of the Collateral to the Lender pursuant to this Pledge Agreement, or (iii) for the exercise by the Lender of the rights provided for in this Pledge Agreement or the remedies in respect of the Collateral pursuant to this Pledge Agreement, except such as (A) have been obtained, made or taken and are in full force and effect or (B) may be required under federal or state securities laws in connection with any sale of the Collateral, or (C) in connection with the ownership, as may be required by Governmental Authorities, relating to the operation of acute general care hospitals;

(e)   Pledgor is the sole legal and beneficial owner of, and has valid and transferable title to, its Collateral, free and clear of all Liens, other than the Lien in favor of the Lender created by this Pledge Agreement and the Lien in favor of the Original Lender created by the Original Pledge Agreement;

 

 

 

(f)   There are no outstanding options, warrants or other agreements with respect to the Collateral;

(g)   The Pledged Interests has been duly authorized and validly issued, and is fully paid and non-assessable, and is not subject to, nor will Pledgor at any time permit it to become subject to, any restrictions governing its issuance, transfer, ownership or control except those limitations described on Schedule I hereto, all of which have been waived;

(h)   The information set forth in Schedule I is true, correct, complete and accurate;

(i)   All actions (including, without limitation, registration of the Lien created hereby on the Pledged Interests on the books and records of the Companies and consent to the filing of UCC-1 financing statements by Lender in all appropriate jurisdictions) required to create and perfect the Lien of the Lender in the Collateral have been taken and the Lien on the Collateral in favor of the Lender is superior in right to any rights or claims of any other Person other than the rights of the Original Lender; !

(j)   The Bylaws and Articles of Incorporation delivered to Lender is a true, correct, complete and accurate copy of the complete and entire Bylaws and Articles of Incorporation in effect on the date hereof and the same has not, as of the date hereof, been further amended, modified, terminated, nor cancelled or superseded;

(k)   There are no unpaid expenses, capital contributions, costs, fees, charges, interest payments or other payments of any kind required to be funded or contributed a Pledgor pursuant to the Articles of Incorporation or Bylaws that accrued prior to the date hereof;

(l)   There are no actions, suits, proceedings or investigations pending or, to the best knowledge of Pledgor, threatened, against or affecting Pledgor that are likely to have a Material Adverse Effect on the validity or enforceability of this Pledge Agreement, or on the validity or priority of the Liens and security interests granted by Pledgor as provided for herein, before or by any court, arbitrator or Governmental Authority;

(m)   Pledgor is not insolvent; and

(n)   Pledgor has been given a true, correct, complete and accurate set of the Credit Agreement and the other New Loan Documents and the opportunity to review them with counsel.

SECTION 7.   Obligations of Pledgor . Pledgor further represents, warrants, and covenants to the Lender that:

(a)   Pledgor will not sell, transfer, convey or otherwise dispose of any interest in the Collateral.

(b)   Pledgor will not suffer or permit any Lien to exist on or with respect to the Collateral except the Lien created under this Pledge Agreement and the Lien created by that certain Pledge Agreement by and between Pledgor and the Original Lender dated as of March 3, 2005.

 

 

 

(c)   Pledgor will, at its own expense, at any time and from time to time at the request of the Lender, do, make, procure, execute and deliver all acts, things, writings, assurances and other documents as may be reasonably requested by the Lender to further enhance, preserve, establish, demonstrate, perfect or enforce the Lender's rights, interests and remedies created by, provided in or emanating from this Pledge Agreement.

(d) Pledgor shall not permit the Companies to issue any additional Equity Interests.

(e)   Pledgor will defend the Lender's right, title and interest in, to and under the Collateral against the claims and demands of all Persons whomsoever.

(f)   Pledgor hereby authorizes the Lender to file one or more financing or continuation statements and amendments thereto relating to all or part of the Collateral without such Pledgor's signature. A photocopy or other reproduction of this Pledge Agreement shall be sufficient as a financing statement.

(g)   Pledgor will cause the Companies to execute and deliver to the Lender on the date hereof a letter in substantially the form attached hereto as Exhibit A .

(h)   Pledgor shall use all reasonable efforts to cause the Companies to perform and observe all of the terms, covenants, conditions and obligations required to be performed and observed by the Companies under (i) the New Loan Documents and (ii) any other contract or agreement with any Person, which, if not performed and observed, would materially and adversely affect the value of the Collateral or the security interest of Pledgee in the Collateral.

(i)   Pledgor shall, at its sole cost and expense, perform and observe all of the terms, covenants, conditions and obligations required to be performed or observed by Pledgor under the Bylaws or Articles of Incorporation.

(j)   Upon an Event of Default, Pledgor shall not waive any right or remedy under the Bylaws or Articles of Incorporation without the prior written consent of Lender; provided that no waiver occurring prior to an Event of Default shall have a Material Adverse Effect upon the Liens granted to Lender in the Loan Documents or upon any of Lender’s rights and remedies.

(k)   Pledgor shall, at its sole cost and expense (i) use reasonable efforts to enforce the Bylaws and Articles of Incorporation in accordance with its terms in such a manner so as to preserve, and not to materially and adversely affect (A) the value of the Collateral or (B) the security interest of Lender in the Collateral, and (iii) appear in and defend any action or proceeding to which Pledgor is made a party arising under the Bylaws or Articles of Incorporation and take all additional action to these ends as from time to time may be reasonably requested in writing by Lender.

(l)   Pledgor shall not amend or modify the Articles of Incorporation or Bylaws in any way that adversely affects the Liens granted to Lender in the New Loan Documents or upon any of Lender’s rights or remedies, without the prior written consent of Lender.

 

 

 

(m)   Pledgor shall not authorize or enter into any transaction for the termination, dissolution or winding up of, or the merger or consolidation with another entity or entities by, the admission of additional members to, or the elimination of members from, or otherwise effect or change the structure or organization of the Companies without the prior written consent of the Lender.

SECTION 8.   Rights of Pledgor . (a) So long as no Event of Default has occurred and is continuing, Pledgor shall be entitled to vote or consent with respect to the Collateral in any manner not inconsistent with this Pledge Agreement, the Credit Agreement or any other New Loan Document. Upon the occurrence and during the continuance of an Event of Default, the Lender shall have the exclusive right to vote or give consents with respect to the Collateral. Pledgor hereby grants to the Lender an irrevocable proxy to vote the Collateral, which proxy shall be effective immediately upon the occurrence of and during the continuance of an Event of Default, and upon request of the Lender, Pledgor agrees to deliver to the Lender such further evidence of such irrevocable proxy or such further irrevocable proxy to vote the Collateral as the Lender may request.

(b) Subject to Pledgor’s right to receive and retain Distributions so long as an Event of Default under the New Loan Documents has not occurred or is continuing, any and all (i) distributions paid or payable in cash in respect of any Collateral whether in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital or otherwise, and (ii) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for Collateral, shall be forthwith delivered to the Lender or Original Lender in accordance with Section 3 hereof, to be held as Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Lender, be segregated from the other property or funds of the Pledgor and be forthwith delivered to the Lender or Original Lender as Collateral in the same form as so received (with any necessary endorsement or assignment).

SECTION 9. -   - Rights of the Lender . (a) If Pledgor fails to perform any agreement contained herein, the Lender may (but shall not be obligated or required to) perform, or cause the performance, of such agreement.

(b)   At any time upon and during the continuance of an Event of Default, the Lender may (but shall not be obligated or required to):