FIRST AMENDMENT TO
SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT
This First Amendment to Secured Convertible Note Purchase Agreement (this
"FIRST AMENDMENT") is entered into as of November 16, 2004, by and between
Integrated Healthcare Holdings, Inc., a Nevada corporation (the "COMPANY"), and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D. ("PURCHASER").
R E C I T A L S
A. The Company and Purchaser are parties to a Secured Convertible Note
Purchase Agreement dated as of September 28, 2004 (the "PURCHASE AGREEMENT").
B. The Company has entered into a letter of intent dated November 5, 2004,
with ▇▇▇▇ ▇. ▇▇▇▇, M.D. ("▇▇. ▇▇▇▇") in which it is contemplated that ▇▇. ▇▇▇▇
and/or his assignees or designees ("SHAH GROUP") would have options to acquire
up to (i) 49% of a limited liability company to be formed for the purpose of
acquiring the real estate components (in fee) of the Hospitals and (ii)
50,000,000 shares of the Company's Common Stock.
C. The Company and the Purchaser desire to permit the matters referred to
in Recital B provided that a portion of the proceeds received by the Company are
used to repay certain indebtedness from the Company to Purchaser, and to waive
Purchaser's pre-emptive rights with respect thereto as set forth in Section 1.7
of the Purchase Agreement.
D. In consideration for the Purchaser's agreement to the matters referred
to in Recitals B and C, the Company desires to grant the Purchaser an option to
purchase shares of the Company's common stock under the terms and conditions
provided herein.
E. The parties desire to amend the Purchase Agreement to accommodate the
matters referred to in Recitals B, C and D.
A G R E E M E N T
In consideration of the foregoing premises, the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS. For the purposes of this First Amendment, unless otherwise
set forth herein, capitalized terms or matters of construction deemed or
established in the Purchase Agreement, as amended hereby, shall be applied
herein as defined or established therein.
2. AMENDMENT OF SECTION 1.3. Section 1.3 of the Purchase Agreement is
hereby deleted in its entirety and replaced with the following:
"1.3 PURCHASER'S OPTION TO PURCHASE REAL ESTATE.
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(a) In order to induce Purchaser to enter into the
foregoing transaction to provide the financial support as set
forth above, the Company grants an option to Purchaser (or his
assignee or designee) to acquire all of the membership
interests of a limited liability company (the `LLC') that the
Company will form to acquire the real estate (owned in fee) in
the ▇▇▇▇▇ Transaction (i.e. Western Medical Center - Santa
▇▇▇, Western Medical Center - Anaheim and Coastal Community
Hospital and the medical office buildings, but not the leased
▇▇▇▇▇▇▇ Hospital and medical office building) for the price of
$5,000,000. The LLC will acquire the real estate free and
clear of all liens of all liens and encumbrances except only
those exceptions to title agreed to in the ▇▇▇▇▇ Transaction
and the real estate loan the Company will incur in connection
with the closing of the ▇▇▇▇▇ Transaction. The Company and
Purchaser agree to cooperate in negotiating with Company's
lenders to organize the financing in a manner which permits
the LLC to acquire the real property subject to the real
estate loan while the Company will remain liable for the
working capital loan. Purchaser may exercise the option to
acquire the LLC membership interests at any time commencing
with the closing of the ▇▇▇▇▇ Transaction and for a period of
five years thereafter. The option shall be in the form
attached hereto as Exhibit D.
(b) The LLC shall lease the real property back to the
Company on a triple net lease at a fair market value rental
which shall not be less than a 2.5% margin over the financing
cost. The term of the lease shall be 15 years, with two 5-year
renewal options.
(c) Purchaser or his designee shall be named the sole
manager of the LLC if and when Purchaser exercises the option
to acquire at least a majority interest in the LLC. As
described in the Purchase Option Agreement dated November 16,
2004, the Company has also granted to ▇▇▇▇ ▇. ▇▇▇▇, M.D. or
his assignees or designees (the `SHAH GROUP') options to
acquire up to (i) 49% of the membership interests in the LLC
for aggregate consideration of $2,500,000 and (ii) 50,000,000
shares of the Company's Common Stock for $0.30 per share. Shah
Group exercises this option, at least $714,285.74 shall be
paid by the Shah Group concurrently with the closing of the
▇▇▇▇▇ Transaction, in which case the Shah Group will own 14%
of the membership interests of the LLC, and Purchaser's option
shall be reduced as described in Exhibit D."
3. AMENDMENT OF SECTION 1.7. Section 1.7 of the Purchase Agreement is
hereby deleted in its entirety and replaced with the following:
"1.7 PRE-EMPTIVE RIGHT TO PURCHASE ADDITIONAL SHARES.
(a) Subject to the terms and conditions specified in
this Section 1.7, the Company hereby grants to Purchaser a
right of first refusal with respect to future sales by the
Company of its equity securities or securities convertible
into or exercisable for equity securities, where issuance of
those securities will result in a dilution of Purchaser's
as-converted equity position to less than 75% of the Common
Stock of the Company on a fully-diluted basis. Each time the
Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class
of the Company's equity securities (the "NEW SHARES"), the
Company shall first make an offer to Purchaser of such portion
of the New Shares which equals the proportion that all
securities in the Company held by to Purchaser, on an
as-converted basis, bears to the total number of shares of
Common Stock of the Company on a fully-diluted basis plus the
New Shares (the "PRO RATA SHARE"). The closing of the sale of
the Pro Rata Share shall occur simultaneously with the sale of
the New Shares to other investors.
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(b) The right of first refusal in this Section 1.7
shall not be applicable to the issuance or sale of (i) up to
60,000,000 shares of Common Stock; (ii) securities issued
pursuant to stock splits, stock dividends, or similar
transactions approved by Purchaser; (iii) shares of Common
Stock issued to employees, consultants, officers or directors
of the company pursuant to stock option plans or restricted
stock plans or agreements approved by the Company's Board of
Directors and by Purchaser; (vi) securities issued to
financial institutions or lessors in connection with
commercial credit arrangements, equipment financings,
commercial property lease transactions, or similar
transactions approved by the Board of Directors and Purchaser
and not for the purpose of raising capital, (v) shares of
Common Stock issued in an underwritten public offering; or
(vi) securities issued in connection with bona fide
acquisition transactions approved by the Board of Directors
and by Purchaser.
(c) The right of first refusal in this Section 1.7
shall terminate and cease to have effect upon the closing of
an acquisition of the Company to an unrelated third party in a
transaction approved by Purchaser."
4. ATTACHMENT OF STOCK OPTION AGREEMENT AS EXHIBIT. The Stock Option
Agreement attached to this First Amendment as Exhibit I shall be deemed attached
to the Purchase Agreement as Exhibit I thereto.
5. AMENDMENT OF DEFINITION OF "REGISTRABLE SECURITIES". The definition of
"Registrable Securities" contained in Section 2.1 is hereby deleted in its
entirety and replaced with the following:
"`REGISTRABLE SECURITIES' means, collectively, the Shares, any
other shares of common stock issued to the Purchaser pursuant
to this Agreement (including any shares issued pursuant to
Section 1.2.4(a) or pursuant to the Stock Option Agreement
described in Section 1.4) and any securities issued or
issuable upon any stock dividend, stock split,
recapitalization, merger, consolidation or similar event with
respect to such shares of common stock. As to any particular
Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement
covering such securities shall have become effective under the
1933 Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) such
securities shall have been distributed to the public pursuant
to Rule 144 or Rule 144A (or any successor provisions) under
the 1933 Act, or (iii) such securities shall have ceased to be
outstanding."
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6. AMENDMENT OF REAL ESTATE PURCHASE OPTION. Pursuant to Section 1.3 of
the Purchase Agreement, and pursuant to the Option Agreement dated September 28,
2004, a form of which is attached as Exhibit D to the Purchase Agreement,
Purchaser has an option to purchase the real estate components of the Hospitals
being acquired by the Company. As noted above, the Company shall form the LLC
for purposes of acquiring that real estate, and. shall ensure that Purchaser or
his designee is made the sole manager of the LLC if and when Purchaser exercises
the option to acquire at least a majority interest in the LLC. Exhibit D to the
Purchase Agreement is hereby deleted and replaced in its entirety by Exhibit D
to this First Amendment and, upon execution by the parties, the Option Agreement
reflected by Exhibit D to this First Amendment shall replace in its entirety the
Option Agreement dated September 28, 2004, which shall from that point forward
be of no further force and effect.
7. AMENDMENT OF ASSIGNMENT PROVISION. Section 6.2 is hereby deleted in its
entirety and replaced with the following:
"6.2 Assignment. The Company may not assign any interest or
obligation under this Agreement without Purchaser's prior written consent.
Purchaser may freely assign his interests under this Agreement without the
consent of the Company, but may not assign his obligations under this Agreement,
in whole or in part, without the consent of the Company, which consent may be
withheld in the sole discretion of the Company."
8. MISCELLANEOUS.
8.1 EFFECT OF AMENDMENT. Except as expressly provided herein, the
Purchase Agreement shall remain unchanged and shall continue in full force and
effect.
8.2 SEVERABILITY. Any provision of this First Amendment that is
prohibited or otherwise unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction.
8.3 COUNTERPARTS. This First Amendment may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed and delivered by their duly authorized representatives as of the
date first written above.
THE COMPANY: INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
PURCHASER: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
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EXHIBIT D
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT") is made this 16th day of
November, 2004, ("GRANT DATE") by and between INTEGRATED HEALTHCARE HOLDINGS,
INC., a Nevada corporation ("OPTIONOR") and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D. (or his
assignee or designee) ("OPTIONEE").
R E C I T A L S:
A. Optionee and Optionor are parties to that certain Secured Convertible
Note Purchase Agreement dated as of September 28, 2004 (the "PURCHASE
AGREEMENT"), as amended by that certain First Amendment to Secured Convertible
Note Purchase Agreement dated on or about the date hereof, pursuant to which the
Optionor and the Optionee have agreed to enter into this Agreement. Capitalized
terms not otherwised defined in this Agreement have the same meanings as in the
Purchase Agreement.
B. Optionor expects to acquire title to that certain real property located
in the cities of Santa ▇▇▇ and Anaheim, County of Orange, State of California,
more particularly described in Exhibit A attached hereto (the "Property"). Title
to the Property will be acquired by a limited liability company to be formed by
Optionor (the "LLC").
C. Optionor is willing to grant Optionee an option to purchase all of the
membership interests in the LLC subject to all of the terms, conditions and
provisions of this Agreement.
1. OPTION TO PURCHASE.
1.1 GRANT OF OPTION. Subject to the other terms of this Agreement,
Optionor hereby grants to Optionee an option to purchase all of the membership
interests in the LLC except those interests sold to the Shah Group pursuant to
the Shah Option Agreement (the "CHAUDHURI OPTION") for a purchase price of
$50,000 for each 1% of membership interest being acquired (up to $5,000,000
total) ("PURCHASE PRICE"). The Option shall commence on the date the Property is
acquired by the Optionor or the LLC and continue for a period ending at 4:00
p.m. on the fifth anniversary of the closing of the acquisition of the Property
by the LLC ("OPTION PERIOD").
1.2 AUTOMATIC TERMINATION. If Optionee has not exercised the
Chaudhuri Option pursuant to Article II, on or before 4:00 p.m. on the date of
expiration of the Option Period, the Chaudhuri Option shall automatically
terminate without notice to Optionee, and all rights of Optionee under this
Agreement shall then and there cease.
2. PRO RATA REDUCTION OF OPTION. Optionee acknowledges that Optionor has,
currently with the execution of this Agreement, granted an option (the "Shah
Option Agreement") to ▇▇▇▇ ▇. ▇▇▇▇, M.D. or his assignees or designees (the
"SHAH GROUP") options to acquire up to (i) 49% of the membership interests of
the LLC (the "SHAH LLC OPTION")and (ii) 50,000,000 shares of Optionor's Common
Stock (the "SHAH STOCK OPTION"). If the Shah Group exercises the Shah LLC Option
(or any portion thereof), the Chaudhuri Option shall be reduced pro rata by the
amount acquired by the Shah Group upon such exercise. The Shah LLC Option
provides that, at the closing of the purchase of the Property, the Shah Group
must exercise the Shah LLC Option to the extent of acquiring at least 14% of the
LLC membership interests for $714,285.74. As a result of that exercise, the
Chaudhuri Option shall be reduced to an option to acquire up to 86% of the
membership interests of the LLC for $4,285,714.26. Additional exercises by the
Shah Group of the Shah LLC Option shall result in similar pro rata reductions.
If Optionee exercises the Chaudhuri Option prior to the exercise by the Shah
Group of all or any portion of the Shah LLC Option, then Optionee shall honor
the terms of the Shah LLC Option and shall sell to the Shah Group additional LLC
membership interests (up to 49% of the LLC's total membership interests, with
Optionee retaining 51%) upon payment by the Shah Group of the exercise price
therefor to Optionee in cash. Any proceeds of the exercise of the Shah LLC
Option and/or the Shah Stock Option received by Optionor shall immediately be
paid to Optionee as a repayment of either the Note or of the Ten Million Dollar
Loan until the Note and the Ten Million Dollar Loan are repaid in full. Optionee
shall designate whether the repayment shall be against the Note or against the
Ten Million Dollar Loan, or if it shall be divided between the two (and shall
also designate the amount of the division)
3. EXERCISE OF OPTION TO PURCHASE. Optionee may exercise the Chaudhuri
Option, at any time during the Option Period by either (a) paying the Purchase
Price by wire transfer or other immediately available funds to Optionor or (b)
delivering to Optionor appropriate, fully-executed documentation providing an
offset of the Purchase Price against either the Note or against the Ten Million
Dollar Loan.
4. ENTRY FOR INVESTIGATION OF PROPERTY. Optionor hereby grants to Optionee
a license to enter upon any portion of the Property for the purpose of
conducting engineering surveys, investigations, soil tests and other studies.
Optionee agrees to indemnify and hold Optionor and the Property free from any
and all liability, claims, damage and expense (including but not limited to
attorney's fees) caused by or resulting from the exercise of said license. Such
undertaking of indemnity shall survive the exercise of the Chaudhuri Option or
the expiration thereof. The limited license herein granted shall be co-extensive
with the term of the Chaudhuri Option or any extension thereof.
5. MISCELLANEOUS PROVISIONS.
5.1 ATTORNEYS' FEES. In the event of any dispute between the parties
hereto involving the covenants or conditions contained in this Agreement or
arising out of the subject matter of this Agreement, the prevailing party shall
be entitled to recover reasonable expenses, attorneys' fees and costs.
5.2 NOTICES. Unless otherwise provided for herein, any notice to be
given or other document to be delivered by either party to the other hereunder
shall be delivered in person to either party or may be deposited in the United
States mail in the State of California, by registered or certified mail, with
postage prepaid and addressed to the party to whom intended as follows:
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To Optionor: Integrated Healthcare Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
To Optionee: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
c/o Strategic Global Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either party hereto may from time to time, by written notice to the
other, designate a different address which shall be substituted for the
one above. Notwithstanding anything to the contrary herein contained,
any notices or documents which may be delivered by mail pursuant to
this Section 5.2 must be actually received by the other party on the
last business day immediately preceding any deadline date specified in
this Agreement.
5.3 ENTIRE AGREEMENT AND INUREMENT. This Agreement and other
documents incorporated herein by reference contain the entire agreement of the
parties with respect to the subject matter herein, and all negotiations and
agreements between the parties hereto or their agents with respect to this
transaction are merged in such instruments, which alone express the parties'
rights and obligations. All obligations herein contained shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
heirs, and assigns.
5.4 TIME OF THE ESSENCE. It is understood and agreed that time is of
the essence for all performances herein contained.
5.5 MODIFICATION. Any amendments or modifications to this Agreement
must be in writing and executed by all of the parties to this Agreement.
5.6 ASSIGNMENT. Optionee may not assign the Chaudhuri Option, or any
rights hereunder, in whole or in part, without the prior written consent of
Optionor, which consent may be withheld at the sole discretion of Optionor.
Optionor's consent to an assignment by Optionee shall not relieve Optionee from
his obligations under this Agreement.
5.7 DISPUTE RESOLUTION. In the event of any dispute arising out of
or relating to this Agreement, then such dispute shall be resolved solely and
exclusively by confidential binding arbitration with the Orange County branch of
JAMS ("JAMS") to be governed by JAMS' Commercial Rules of Arbitration in effect
at the time of the commencement of the arbitration (the "JAMS RULES") and heard
before one arbitrator. The parties shall attempt to mutually select the
arbitrator. In the event they are unable to mutually agree, the arbitrator shall
be selected by the procedures prescribed by the JAMS Rules. Each party shall
bear its own attorneys' fees, expert witness fees, and costs incurred in
connection with any arbitration.
5.8 OPTIONOR'S COOPERATION AND DELIVERY. Optionor agrees to
reasonably cooperate with Optionee in providing access to all documents in
Optionor's possession concerning the Property. All documents made available or
provided by Optionor to Optionee shall be delivered without representation or
responsibility of Optionor for the truth, accuracy or quality of material
contained in such documents. Such cooperation shall not, however, require
Optionor to: (i) obtain any documents not already in its possession, (ii)
provide technical assistance from persons, or (iii) expend any funds with
respect to its cooperation with Optionee.
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5.9 AUTHORITY TO EXECUTE. Each individual executing this Agreement
on behalf of a corporation represents and warrants that he or she is duly
authorized to execute and deliver this Agreement on behalf of such corporation,
in accordance with a duly adopted resolution of the board of directors of such
corporation, or in accordance with the by-laws of such corporation, and that
this Agreement is binding upon such corporation in accordance with its terms.
5.10 INTERPRETATION. This Agreement shall be construed according to
its fair meaning and as if prepared by both parties hereto. Titles and captions
are for convenience only and shall not constitute a portion of this Agreement.
As used in this Agreement, masculine, feminine or neuter gender and the singular
or plural number shall each be deemed to include the others wherever and
whenever the context so dictates.
5.11 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of California in effect at the time of the execution
of this Agreement.
5.12 SEVERABILITY. If any term, provision, condition or covenant of
this Agreement or the application thereof to any party or circumstances shall,
to any extent, be held invalid or unenforceable, the remainder of this
Agreement, or the application of such term, provision, condition or covenant to
persons or circumstances other than those as to whom or which it is held invalid
or unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
5.13 NO WAIVER. No delay or omission by either party hereto in
exercising any right or power accruing upon the compliance or failure of
performance by the other party hereto under the provisions of this Agreement
shall impair any such right or power or be construed to be a waiver thereof. A
waiver by either party hereto of a breach of any of the covenants, conditions or
agreements hereof to be performed by the other party shall not be construed as a
waiver of any succeeding breach of the same or other covenants, agreements,
restrictions or conditions hereof.
5.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
Signed by Optionor on:
November 16, 2004 INTEGRATED HEALTHCARE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
"Optionor"
Signed by Optionee on:
November 16, 2004 /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
"Optionee"
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EXHIBIT I
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is made this 16th day of
November, 2004, by and between Integrated Healthcare Holdings, Inc., a Nevada
corporation ("Optionor"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D. ("Optionee"):
R E C I T A L S
A. Optionee and Optionor are parties to that certain Secured t 6 0
Convertible Note Purchase Agreement dated as of September 28, 2004 (the
"Purchase Agreement"), as amended by that certain First Amendment to Secured
Convertible Note Purchase Agreement ("First Amendment") dated on or about the
date hereof, pursuant to which Optionor and Optionee have agreed to enter into
this Agreement.
B. In consideration of the mutual agreements set forth in the Purchase
Agreement, the First Amendment and this Agreement, Optionor desires to grant to
Optionee an option to acquire shares of its common stock on the terms and
conditions specified herein.
A G R E E M E N T
1. GRANT OF OPTION. In consideration of the mutual agreements set forth in
the Purchase Agreement, the First Amendment and this Agreement, and for other
valuable consideration, the receipt of which is hereby acknowledged, Optionor
hereby grants to Optionee an irrevocable option (the "OPTION") to purchase
50,000,000 shares of the Optionor's Common Stock (the "SHARES"), at the exercise
price (the "EXERCISE PRICE") of $0.30 per share.
2. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number of Shares purchasable upon the exercise of this Option shall be
subject to adjustment from time to time upon the happening of any of the
following events:
(a) If at any time Optionor subdivides its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced. If at
any time the outstanding shares of Common Stock of Optionor are combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.
(b) Whenever the Exercise Price payable upon exercise of this Option
is adjusted pursuant to this Section 2, the number of Shares purchasable upon
exercise hereof simultaneously shall be adjusted by multiplying the number of
Shares issuable immediately prior to such adjustment by the Exercise Price in
effect immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price, as adjusted.
(c) Optionor shall give notice to Optionee of any event or
transaction that results in an adjustment in the Exercise Price, within ten
business days thereof, at Optionee's address as it appears on the books of
Optionor, including a computation of such adjustment and any adjustment in the
number of Shares for which Optionee may exercise this Option and any further
information as shall be necessary to confirm the computation of such
adjustments.
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(d) So long as this Option is outstanding, if (i) Optionor pays any
dividend or makes any distribution upon the Common Stock, (ii) Optionor offers
to the holders of the Common Stock for subscription or purchase by them any
share of any class of capital stock or any other rights or (iii) any capital
reorganization of Optionor, reclassification of the capital stock of Optionor,
consolidation, merger or other business combination of Optionor with or into
another entity, sale, lease or transfer of all or substantially all of the
assets of Optionor to another entity, or voluntary or involuntary dissolution,
liquidation or winding up of Optionor shall be effected, then in any such case,
Optionor shall cause to be mailed by certified mail to Optionee, at least ten
days prior to the date specified in clause (x) or (y) below, as the case may be,
a notice containing a brief description of the proposed action and stating the
date on which (x) a record date shall be established for the purpose of such
dividend, distribution or rights offering or (y) such reclassification,
reorganization, consolidation, merger, conveyance, sale, lease, transfer,
dissolution, liquidation or winding up shall take place and the date, if any to
be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
3. TIME AND MANNER OF EXERCISE. This Option may be exercised in whole or
in part at any time during the period commencing on the date that ▇▇▇▇ ▇. ▇▇▇▇,
M.D. ("SHAH"), or his assignee or designee, exercises the first tranche of the
option as provided in Section 1.1(a) of the Purchase Option Agreement between
Optionor and Shah dated as of November 16, 2004, and expiring at the close of
business on the first business day (the "EXPIRATION DATE") on or after the fifth
anniversary of the date of this Agreement. Optionee may exercise this Option by
delivery to the Optionor, on or prior to the Expiration Date, of a written
notice of election to exercise this Option ("NOTICE OF EXERCISE"). The Notice of
Exercise shall state the election to exercise the Option and the number of
shares in respect of which it is being exercised and shall be signed by the
Optionee. Such notice shall be accompanied by payment in cash, certified check
or bank draft in the amount of, or with the prior consent of the Optionor's
board of directors, any other lawful form of consideration representing, the
full purchase price of such shares. As soon as practicable following receipt by
the Optionor of the Notice of Exercise and full payment of the Exercise Price,
the Optionor shall deliver (or cause to be delivered) to Optionee, appropriate
original stock certificates in the name of Optionee representing the Shares. The
Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable. If this Option is exercised in
part, the remaining portion of this Option shall continue to be exercisable
during the term hereof, and Optionor shall, upon Optionee's request, issue to
Optionee a replacement Option for the remaining amount of Shares.
4. INCENTIVE. If the entire amount of this Option is exercised as provided
herein, then IHHI shall deliver to Optionee an additional, non-transferable
option to purchase up to 10,000,000 additional shares of Common Stock at any
time prior to November 30, 2005 for a purchase price of $0.25 per share.
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5. RESTRICTED SECURITIES. The share certificates delivered to the Optionee
upon exercise of this Option will bear a legend indicating that the Shares
represented thereby are "restricted securities" as defined in Rule 144
promulgated under the Securities Act of 1933, as amended ("RULE 144") and are
not transferable outside of Rule 144 unless a registration statement filed with
the Securities and Exchange Commission covering the Shares is in effect at the
time of the transfer thereof.
6. TRANSFERABILITY. This Option shall be transferable by Optionee subject
to compliance with law.
7. TAXES. Optionor shall pay any transfer tax payable by reason of the
granting of this Option and all other fees and expenses necessarily incurred by
the Optionor in connection therewith.
8. MISCELLANEOUS.
8.1. NOTICES. All notices or communications required or permitted
under this Agreement shall be given in writing and delivered personally or sent
by United States registered or certified mail with postage prepaid and return
receipt requested or by overnight delivery service (e.g., Federal Express, DHL).
Notice shall be deemed given when sent, if sent as specified in this Section, or
otherwise deemed given when received. In each case, notice shall be delivered or
sent to:
If to Optionor, addressed to: Integrated Healthcare Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
If to Optionee, addressed to: c/o Strategic Global Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
8.2. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, the First Amendment and any document referenced herein or therein,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and may not be modified or amended except in writing.
8.3. SEVERABILITY. If any term, covenant, or condition of this Agreement
or the application thereof, to any extent, is deemed invalid or unenforceable,
the remainder of this Agreement, or the application of such term, covenant, or
condition to parties or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each other term,
covenant or condition of this Agreement shall be valid and enforced.
8.4. BINDING ON SUCCESSORS. This Agreement binds and benefits the
respective parties hereto and their respective heirs, legal representations,
designees, successors and assigns.
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8.5. ATTORNEYS' FEES. In any legal action or proceeding to enforce or
interpret the terms of this Agreement, the finally prevailing party shall be
entitled to recover reasonable attorneys' fees, in addition to any other relief
to which that party may be entitled.
8.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California without regard to its choice
of laws principles.
8.7. GENDER. As used herein, the masculine gender includes the feminine
and neuter, and the singular number includes the plural and the plural number
includes the singular, wherever the context requires.
8.8. DISPUTE RESOLUTION. In the event of any dispute arising out of or
relating to this Agreement, then such dispute shall be resolved solely and
exclusively by confidential binding arbitration with the Orange County branch of
JAMS ("JAMS") to be governed by JAMS' Commercial Rules of Arbitration in effect
at the time of the commencement of the arbitration (the "JAMS RULES") and heard
before one arbitrator. The parties shall attempt to mutually select the
arbitrator. In the event they are unable to mutually agree, the arbitrator shall
be selected by the procedures prescribed by the JAMS Rules. Each party shall
bear its own attorneys' fees, expert witness fees, and costs incurred in
connection with any arbitration.
8.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"OPTIONEE": /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D., an individual
"OPTIONOR": INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
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