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Will&Emery
Boston Brussels Chicago Disseldorf London Los Angeles Miami Milan
Munich New York Orange County Rome San Diego Silicon Valley Washington, ▇.▇.
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Attorney at Law
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310.551.9308
January 28, 2005
VIA PDF
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Re: ▇▇▇▇▇/IHH Asset Sale Agreement - Proposal Regarding Extension of
Asset Sale Agreement Including Treatment of Good Faith Deposit
Pending DHS Approval
Gentlemen:
Section 1.4(a) of the Asset Sale Agreement dated September 29, 2004 (the
"Agreement"), by and among AHM CGH, Inc., a California corporation ("AHM"),
Health Resources Corporation of America - California, a Delaware corporation
("HRC"), SHL/O Corp., a Delaware corporation ("SHL/O") and UWMC Hospital
Corporation, a California corporation ("UWMC") (AHM, HRC, SHL/O and UWMC are
collectively referred to herein as "Seller") and Integrated Healthcare Holdings,
Inc., a Nevada corporation ("Purchaser"), provides for the delivery by Purchaser
of a Good Faith Deposit in the amount of Ten Million Dollars ($10,000,000) in
connection with the execution of the Agreement. Section 1.4(a) of the Agreement
further provides that the Good Faith Deposit is non-refundable upon termination
of the Agreement unless the Agreement terminates under very limited specific
circumstances. As you know, because December 31, 2004 (i.e., the Drop Dead Date)
has passed without Closing having occurred, both Seller and Purchaser currently
have a right to terminate the Agreement pursuant to Section 8.1 of the
Agreement. Capitalized terms not defined in this letter have the same meanings
as set forth in the Agreement.
This letter sets forth Seller's offer to waive its rights to terminate the
Agreement for a limited period of time pursuant to an amendment to the
Agreement, to be effective January 1, 2005, reflecting the following terms and
conditions, all of which are material to such offer:
1. Section 1.4(a) of the Agreement will be amended to provide that Five Million
Dollars ($5,000,000) of the Good Faith Deposit (the "Hard Good Faith Deposit")
will be non-refundable
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January 28, 2005
Page 2
regardless of the termination of the Agreement pursuant to Section 8.1 of the
Agreement, with no exceptions.
2. Section 1.4(a) of the Agreement will be further amended to provide that, from
January 1, 2005 until 12:00 p.m. Pacific time on February 4, 2005, the remaining
portion of the Good Faith Deposit (i.e., Five Million Dollars ($5,000,000) plus
all interest accrued on the entire amount of the Good Faith Deposit) (the
"Residual Good Faith Deposit"), will be non-refundable regardless of the
termination of the Agreement pursuant to Section 8.1 of the Agreement, except
that Purchaser shall be entitled to the return of the Residual Good Faith
Deposit if (i) the Agreement is terminated by Seller or Purchaser because of a
failure to obtain reasonable assurances from the California Department of Health
Services ("DHS") for any reason (which assurances are reasonably acceptable to
Purchaser), that Purchaser's CHOW applications will be approved and an acute
care hospital license will be issued for all four (4) purchased hospitals, (ii)
Purchaser terminates the Agreement pursuant to Section 8.1(c), 8.1(d) (other
than because of a failure to obtain reasonable assurances of approval of
Purchaser's CHOW applications by the DHS), 8.1(f) or 8.1(h) (provided the
failure of the applicable event or condition(s) under 8.1(c), 8.1(d), 8.1 (f) or
8.1(h) giving rise to Purchaser's right to terminate under such subsection is
not in any manner due to Purchaser's fault, as provided therein, including
without limitation an inability of Purchaser to obtain financing or funding for
the payment of the Cash Purchase Price), or (iii) the Agreement is terminated by
Seller under Section 8.1(e) (other than because of a failure to obtain
reasonable assurances of approval of Purchaser's CHOW applications by the DHS)
based upon the failure of a condition or a failure to close, respectively, that
is not in any manner due to Purchaser's failure to perform, including without
limitation an inability of Purchaser to obtain financing or funding for the
payment of the Cash Purchase Price.
3. Section 1.4(a) of the Agreement will be further amended to provide that, on
and after 12:01 p.m. Pacific time on February 4, 2005, the Residual Good Faith
Deposit will become nonrefundable regardless of the termination of the Agreement
pursuant to Section 8.1 of the Agreement, except that Purchaser shall be
entitled to the return of the Residual Good Faith Deposit if the Agreement is
terminated by Purchaser pursuant to Section 8.1(c).
4. Section 1.5 of the Agreement will be amended to provide that the Closing Date
is February 28, 2005.
5. Section 8.1(g) of the Agreement shall be amended to change the Drop Dead Date
set forth in the Agreement to February 28, 2005.
6. Seller and Purchaser acknowledge and agree that KPMG Peat Marwick shall be
retained to perform an audit of the Hospitals to the extent reasonably necessary
in connection with Purchaser's filings required pursuant to the federal
securities laws following the Closing, and Purchaser shall bear all costs of
such audit.
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January 28, 2005
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Seller and ▇▇▇▇▇▇▇▇▇ agree to proceed in good faith to prepare and execute
formal amendments to the Agreement, the Good Faith Deposit Agreement, and any
other agreements referenced in or contemplated by the Agreement as necessary to
reflect this letter. Notwithstanding the immediately preceding sentence, pending
execution of such other amendments, this letter shall constitute a binding
agreement by Seller, Purchaser and their respective affiliates with respect to
all matters addressed herein. The offer set forth in this letter shall remain
open until 5:00 pm Pacific time on Monday, January 31, and will be not extended.
If the foregoing is acceptable to you, please countersign this letter on or
before such time and date and return it to me.
Sincerely,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Integrated Healthcare Holdings, Inc.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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cc: Distribution List:
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