-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pwj5Ht61qD+0r76A7XLFbkKxtQmaXWz+yzOJBq95RjXguL4HhfayGCw5cnH1CPue 0lZKf+uecsFYAbW8zcOKTA== 0001144204-04-020166.txt : 20041122 0001144204-04-020166.hdr.sgml : 20041122 20041122172656 ACCESSION NUMBER: 0001144204-04-020166 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20041116 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041122 DATE AS OF CHANGE: 20041122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Integrated Healthcare Holdings CENTRAL INDEX KEY: 0001051488 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 870412182 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23511 FILM NUMBER: 041161735 BUSINESS ADDRESS: STREET 1: 695 TOWN CENTER DRIVE STREET 2: SUITE 260 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 714-434-9191 MAIL ADDRESS: STREET 1: 695 TOWN CENTER DRIVE STREET 2: SUITE 260 CITY: COSTA MESA STATE: CA ZIP: 92626 FORMER COMPANY: FORMER CONFORMED NAME: FIRST DELTAVISION INC DATE OF NAME CHANGE: 19971216 8-K 1 v09142.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): NOVEMBER 16, 2004 INTEGRATED HEALTHCARE HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) NEVADA 0-23511 87-0412182 (STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER OF INCORPORATION) IDENTIFICATION NO.) 695 TOWN CENTER DRIVE, SUITE 260, COSTA MESA, CALIFORNIA 92626 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (714) 434-9191 _______________________________ (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. First Amendment to Secured Convertible Note Purchase Agreement On November 16, 2004, Integrated Healthcare Holdings Inc. (the "Company") entered into a First Amendment to Secured Convertible Note Purchase Agreement (the "Amendment") with Dr. Kali P. Chaudhuri, which amended the Secured Convertible Note Purchase Agreement executed between the parties as of September 28, 2004 (the "Original Agreement"). The Amendment also includes as exhibits an Option Agreement (Exhibit D) and Stock Option Agreement (Exhibit I), both of which were executed by the Company and Dr. Chaudhuri on November 16, 2004. The Amendment provides for certain changes to the Original Agreement in order to accommodate the transactions with Dr. Anil V. Shah discussed below. The following material terms are contained in the Amendment: o Dr. Chaudhuri's option to acquire real estate which the Company expects to acquire from subsidiaries of Tenet Healthcare Corporation has been changed to an option to acquire all or a portion of a new limited liability company (the "Real Estate LLC") expected to be formed for the purpose of holding the real estate. Up to 49% of the new Real Estate LLC may be acquired by Dr. Shah, as discussed below. o Dr. Chaudhuri agreed to waive his pre-emptive rights with respect to the new investment by Dr. Shah. o Dr. Chaudhuri was granted an additional option to acquire 50,000,000 shares of the Company's common stock for $0.30 per share, and 10,000,000 shares of common stock for $0.25 per share. Purchase Option Agreement On November 16, 2004, the Company entered into a Purchase Option Agreement with Dr. Anil V. Shah or his assignee, The Orange County Physicians Investment Network, LLC (collectively, "OC-PIN"), granting to OC-PIN an option (the "Purchase Option") to purchase (i) up to 50,000,000 shares of common stock of the Company for an aggregate of $15,000,000 (or $0.30 per share) and (ii) up to a 49% membership interest in the Real Estate LLC for an aggregate of $2,500,000. The Purchase Option may be exercised in three tranches, with the first tranche exercisable upon closing of the pending acquisition by the Company of four Tenet Health System hospitals, the second tranche exercisable by February 25, 2005, and the third tranche exercisable by June 1, 2005 (subject to extension under certain circumstances to December 1, 2005). In connection with the Purchase Option, the Company also granted a stock option to Dr. Anil Shah individually providing that, if the Purchase Option is exercised in full by OC-PIN, the Company will provide Dr. Shah with an additional right to purchase 10,000,000 shares of common stock of the Company for $0.25 per share. As of the date of the filing of this report, OC-PIN has delivered $5,000,000 into escrow to cover the exercise of the first tranche under the Purchase Option. The foregoing descriptions of the Company's material agreements are a summary only and are qualified in their entirety by reference to Exhibits 10.1, 10.2 and 10.3 filed herewith, which are incorporated by reference herein in their entirety. ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES. On November 16, 2004, the Company entered into definitive forms of agreements with Dr. Chaudhuri and Dr. Shah granting new options to acquire common stock of the Company. Reference is made to Exhibit 10.1 filed herewith (and specifically Exhibit D thereto), Exhibit 10.2 filed herewith, and Exhibit 10.3 filed herewith, each of which is incorporated by reference herein in its entirety. 2 ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 10.1 First Amendment to Secured Convertible Note Purchase Agreement, dated as of November 16, 2004, by and between the Registrant and Kali P. Chaudhuri, M.D. 10.2 Purchase Option Agreement, dated as of November 16, 2004, by and between the Registrant and Anil V. Shah, M.D. 10.3 Stock Option Agreement, dated as of November 16, 2004, by and between the Registrant and Anil V. Shah, M.D. 99.1 Press Release issued by the Registrant on November 22, 2004. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Integrated Healthcare Holdings, Inc. By: /s/ Bruce Mogel ------------------------------------ Name: Bruce Mogel Title: Chief Executive Officer Date: November 22, 2004 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION 10.1 First Amendment to Secured Convertible Note Purchase Agreement, dated as of November 16, 2004, by and between the Registrant and Kali P. Chaudhuri, M.D. 10.2 Purchase Option Agreement, dated as of November 16, 2004, by and between the Registrant and Anil V. Shah, M.D. 10.3 Stock Option Agreement, dated as of November 16, 2004, by and between the Registrant and Anil V. Shah, M.D. 99.1 Press Release issued by the Registrant on November 22, 2004. 4 EX-10.1 2 v09142_ex10-1.txt 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 Kali P. Chaudhuri, 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 Anil V. Shah, M.D. ("DR. SHAH") in which it is contemplated that Dr. Shah 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. 1 (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 Tenet Transaction (i.e. Western Medical Center - Santa Ana, Western Medical Center - Anaheim and Coastal Community Hospital and the medical office buildings, but not the leased Chapman 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 Tenet Transaction and the real estate loan the Company will incur in connection with the closing of the Tenet 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 Tenet 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 Anil V. Shah, 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 Tenet 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. 2 (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." 3 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. * * * 4 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/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President PURCHASER: /s/ Kali P. Chaudhuri, M.D. ------------------------------------- KALI P. CHAUDHURI, M.D. 5 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 KALI CHAUDHURI, 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 Ana 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 Anil V. Shah, 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: 2 To Optionor: Integrated Healthcare Holdings, Inc. 695 Town Center Drive, Suite 260 Costa Mesa, CA 92626 Attention: Chief Executive Officer To Optionee: Kali P. Chaudhuri, M.D. c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 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. 3 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. 4 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/ Larry B. Anderson ---------------------------- Larry B. Anderson, President "Optionor" Signed by Optionee on: November 16, 2004 /s/ Kali P. Chaudhuri, M.D. ---------------------------- KALI P. CHAUDHURI, M.D. "Optionee" 5 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 Kali P. Chaudhuri, 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. 1 (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 Anil V. Shah, 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. 2 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. 695 Town Center Drive, Suite 260 Costa Mesa, CA 92626 Attention: Chief Executive Officer If to Optionee, addressed to: c/o Strategic Global Management, Inc. 6800 Indiana Avenue, Suite 130 Riverside, CA 92506 Attention: Kali P. Chaudhuri, 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. 3 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. 4 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "OPTIONEE": /s/ Kali P. Chaudhuri, M.D. -------------------------------------- KALI P. CHAUDHURI, M.D., an individual "OPTIONOR": INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation By: /s/ Larry B. Anderson -------------------------------------- Larry B. Anderson, President 5 EX-10.2 3 v09142_ex10-2.txt PURCHASE OPTION AGREEMENT THIS PURCHASE OPTION AGREEMENT (this "Agreement") is made this 16th day of November, 2004 by and among INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation ("IHHI"), and ANIL V. SHAH, M.D. (or his assignee, Orange County Physicians Investment Network, LLC, a California limited liability company) (collectively, "Shah"). R E C I T A L S: A. In connection with the pending Asset Sale Agreement, dated September 29, 2004, by and among IHHI and certain subsidiaries of Tenet Healthcare Corporation (the "Asset Sale Agreement"), IHHI expects to acquire title to certain real property located in the cities of Santa Ana and Anaheim, County of Orange, State of California, more particularly described in Exhibit A attached hereto (the "Property"). B. IHHI intends to contribute the Property to a limited liability company to be formed by IHHI (the "LLC") in which Kali P. Chaudhuri M.D. ("Chaudhuri") has certain rights to become a member pursuant to that certain Option Agreement, dated on or about the date hereof, between Chaudhuri and IHHI. C. IHHI desires to grant to Shah certain rights to acquire up to 49% of the membership interests in the LLC and to purchase up to 50,000,000 shares of common stock, $0.0001 par value per share (the "Common Stock"), of IHHI. 1. The Option. 1.1 Tranches. IHHI hereby grants to Shah an option (the "Option") to purchase (i) from IHHI up to 50,000,000 shares of Common Stock for $0.30 per share and (ii) from IHHI (or from Chaudhuri as provided in Section 1.2 below) up to a 49% of the membership interests in the LLC. The Option may be exercised in three tranches (each, a "Tranche") as follows: (a) 14,285,000 shares of the Common Stock and 14% of the membership interests of the LLC may be purchased by depositing $5,000,000 in cash into an escrow account established by IHHI with Chicago Title Insurance Company (the "Escrow Account") pursuant to the Asset Sale Agreement, dated September 29, 2004 between IHHI and the Tenet Sellers (the "Asset Sale Agreement") on the date hereof, and paid over to IHHI at the closing of the transactions contemplated under the Asset Sale Agreement. Concurrently upon execution of this Agreement, Shah shall deposit such $5,000,000 into the Escrow Account or an account to be designated the Escrow Account upon establishment of the formal escrow arrangements under the Asset Sale Agreement. Such deposit shall be irrevocable by Shah; provided, however, if the transactions under the Asset Sale Agreement are not completed, then the $5,000,000 shall be returned to Shah in which case this Tranche shall not be deemed to have been exercised and the Option shall terminate. 1 (b) 14,285,000 shares of Common Stock and 14% of the membership interests in the LLC may be purchased by paying $5,000,000 in cash to IHHI on or before February 25, 2005. (c) 21,430,000 shares of Common Stock and 21% of the membership interests in the LLC may be purchased by paying $7,500,000 in cash to IHHI on or before June 1, 2005; provided, however, that should the weighted-average closing price of the Common Stock be less than $0.45 during the 20 trading day period immediately prior to June 1, 2005, then the expiration of this Tranche shall be extended to December 1, 2005; provided, further, that if the weighted-average closing price during any 20 trading day period following June 1, 2005 exceeds $0.45 per share, then the Shah Group will be required to exercise this Tranche within 5 business days following the end of such period or else this Tranche will immediately terminate. In no event will this Tranche be exercisable past December 1, 2005. 1.2 Chaudhuri Participation in Option. Shah acknowledges that IHHI has granted an option to Chaudhuri to acquire all of IHHI's membership interests in the LLC. Therefore, if, upon the due exercise by Shah of any Tranche, Chaudhuri (or his assignee) has exercised his option and become a member of the LLC, Chaudhuri (or his assignee) shall honor the terms of Shah's Option under this Agreement and sell to Shah additional membership interests in the LLC in an amount up to 49% of the LLC's total membership interests, as provided in this Section 1. 1.3 Allocation of Purchase Price. The exercise price for the Option, if exercised in full, shall be allocated $15,000,000 to the Common Stock and $2,500,000 to the LLC, and if exercised in part, then according to the same proportion. 1.4 Notice of Exercise. A Tranche may be exercised by delivering a written notice to IHHI specifying the election to exercise the Tranche and payment for the Tranche by delivery of immediately available funds to IHHI by bank check or wire transfer. After receiving proper notice, IHHI shall cause to be issued certificates for shares of Common Stock and membership interests in the LLC. As a condition to exercise of each Tranche, Shah shall deliver to IHHI an Investor Representation Statement in a form provided by IHHI. 1.5 Additional Provisions. None of the Tranches may be transferable without the prior written consent of IHHI prior to exercise. If any Tranche is not exercised within the periods of time set forth above, the remaining unexercised Tranches shall terminate. Each of the Tranches may only be exercised in full and not in part. 2. Other Agreements. 2.1 Intentionally Omitted. 2.2 Transfer of LLC Interests. Shah shall be permitted to transfer to a new entity the membership interests in the LLC that he acquires pursuant to this Agreement and sell participation interests in the new entity on such terms as he may deem appropriate; provided, however, that any such transactions shall be conducted at all times in accordance with all applicable law, including without limitation applicable securities law, and shall be subject to the reasonable review and prior approval by the manager of the LLC. 2 2.3 Exclusivity. Between the date of execution of this Agreement by Shah and June 1, 2005, IHHI agrees not to, without the prior written consent of Shah, sell any additional shares of Common Stock (other than pursuant to conversion or exercise of outstanding convertible notes, warrants and options, and other than pursuant to Board approved equity compensation plans or issuances with grants to be based on fair market value at the time of grant, and bona fide acquisitions for stock) for a price per share (or equivalent value per share) of less than $0.35 (subject to adjustment for any stock splits, combinations or dividends). 2.4 Proposed Positions for Dr. Shah. Subject to IHHI's obligations under applicable law, medical ethics guidelines and similar requirements, IHHI agrees for a period of 3 years to propose and support Dr. Anil V. Shah for the position of Chairman of the medical advisory board of Coastal Communities Hospital and Co-Chairman of the other hospitals acquired by IHHI under the Asset Sale Agreement, provided that Dr. Shah continues to satisfactorily meet the professional requirements and skills to hold such positions during such time. 2.5 Secured Loans. The loans to be obtained by IHHI and/or the LLC with respect to the purchase of the hospitals under the Asset Purchase Agreement and collateralized against the real estate shall not exceed an aggregate of $120 million, consisting of (a) a maximum of $50 million which may be a term loan secured by the real property, (b) a maximum of $50 million which may be asset based financing secured by, among other things, the accounts receivables of the hospitals based on revolving round of credit and cross collateralized against the real property and (c) a credit facility not to exceed $20 million to purchase new equipment secured by furniture, fixtures and equipment to the extent such facility is cross collateralized against the real estate. No such debt limitations shall apply to loans not secured against the real estate. 3. Confidentiality. The obligations of Shah and his assignees or designees under the "Confidentiality" provisions (Part Two, Section C) of the letter of intent, dated November 5, 2004, executed by Shah and IHHI shall remain in full force and effect following the execution of this Agreement. 4. Miscellaneous Provisions. 4.1 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. 4.2 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: 3 To IHHI: Integrated Healthcare Holdings, Inc. 695 Town Center Drive, Suite 260 Costa Mesa, CA 92626 Attention: Chief Executive Officer To Shah: Anil V. Shah, M.D. 2621 South Bristol Street, #108 Santa Ana, California 92704 Any 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 4.2 must be actually received by the other party on the last business day immediately preceding any deadline date specified in this Agreement. 4.3 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. 4.4 Entire Agreement and Inurnment. This Agreement and other documents referred to herein contain the entire agreements 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. 4.5 Time of the Essence. It is understood and agreed that time is of the essence for all performances herein contained. 4.6 Modification. Any amendments or modifications to this Agreement must be in writing and executed by all of the parties to this Agreement. 4.7 Assignment. Shah may not assign this Agreement, the Option or any Tranche, or any rights thereunder, in whole or in part, without the prior written consent of IHHI, which consent may be withheld at the sole discretion of IHHI. IHHI's consent to an assignment by Shah shall not relieve Shah from his obligations under this Agreement. 4.8 IHHI's Cooperation and Delivery. IHHI agrees to reasonably cooperate with Shah in providing access to all documents in IHHI's possession concerning the Property. All documents made available or provided by IHHI to Shah shall be delivered without representation or responsibility of IHHI for the truth, accuracy or quality of material contained in such documents. Such cooperation shall not, however, require IHHI 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 Shah. 4 4.9 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. 4.10 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. 4.11 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. 4.12 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. 4.13 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. 4.14 First Amendment. This Agreement is subject to (1) IHHI and Chaudhuri modifying his Secured Convertible Note Purchase Agreement with IHHI to accommodate the transactions contemplated herein and (2) the parties entering into a limited liability company operating agreement with respect to the real estate entity acceptable to Chaudhuri and IHHI. 4.15 Further Assurances. The parties hereto agree that each will execute and deliver to the other any and all documents, and take such further acts, in addition to those expressly provided for herein, that may be reasonably necessary or appropriate to effectuate the provisions of this Agreement. 5 4.16 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. [Signatures appear on following page] 6 IN WITNESS WHEREOF, the parties hereto have executed this Purchase Option Agreement the day and year first above written. Signed by IHHI on: November 16, 2004 INTEGRATED HEALTHCARE HOLDINGS, INC. By: /s/ Larry B. Anderson ------------------------------------ Larry B. Anderson, President Signed by Shah on: November 16, 2004 /s/ Anil V. Shah, M.D. ------------------------------------ ANIL V. SHAH, M.D. 7 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY 8 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY WESTERN MEDICAL CENTER - ANAHEIM, CA: PARCEL A: PARCELS 1 AND 2, IN THE CITY OF ANAHEIM, COUNTY OF ORANGE, STATE OF CALIFORNIA AS SHOWN ON A MAP RECORDED IN BOOK 48 PAGE 16 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT FROM A PORTION OF SAID LAND ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES AND MINERALS IN AND UNDER SAID LAND BELOW 500 FEET FROM THE SURFACE THEREOF, BUT WITHOUT THE RIGHT TO ENTER UPON ANY PART OF SAID LAND FOR THE PURPOSE OF RECOVERING SAID SUBSTANCES, AS RESERVED BY DESSA I. WAGONER, A WIDOW, IN DEED DATED APRIL 1, 1960 IN BOOK 5226 PAGE 241, OFFICIAL RECORDS. PARCEL B: LOTS 10, 12, 13 AND 14 INCLUSIVE OF TRACT 3222, IN THE CITY OF ANAHEIM, AS SHOWN ON A MAP RECORDED IN BOOK 97, PAGES 19 AND 20, OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL C: LOT 11 OF TRACT 3222, IN THE CITY OF ANAHEIM, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 97, PAGES 19 AND 20, OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. COASTAL COMMUNITIES HOSPITAL - SANTA ANA, CA: THAT PORTION OF LOT 3 OF MABURY TRACT, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 165, PAGE 301 OF DEEDS, RECORDS OF LOS ANGELES COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT IN THE NORTH LINE OF THAT CERTAIN PARCEL OF LAND CONVEYED TO OSCAR GREENWALD BY DEED RECORDED JANUARY 13, 1920 IN BOOK 355, PAGE 205 OF DEEDS, RECORD OF ORANGE COUNTY, CALIFORNIA, SAID POINT BEING 1675.18 FEET WESTERLY FROM THE NORTHEAST CORNER OF SAID PARCEL, SAID POINT ALSO BEING THE NORTHEAST CORNER OF THAT CERTAIN PARCEL OF LAND CONVEYED TO CHARLES C. BRISCO AND WIFE BY DEED RECORDED OCTOBER 16, 1943 IN BOOK 1214, PAGE 275 OF OFFICIAL RECORDS; THENCE SOUTH 0(degrees) 47(feet) 00(inches) WEST 435.68 FEET ALONG A LINE PARALLEL TO AND 1675.18 FEET WESTERLY FROM THE EAST LINE OF SECTION 2, TOWNSHIP 5 SOUTH, RANGE 10 WEST, S.B.B.&M., SAID PARALLEL LINE BEING THE EASTERLY LINE OF SAID PARCEL CONVEYED TO BRISCO, TO A POINT IN A LINE PARALLEL WITH AND 614.26 FEET NORTHERLY MEASURED AT RIGHT ANGLES TO THE CENTERLINE OF 17TH STREET; THENCE SOUTH 88(degrees) 52(feet) 40(inches) WEST 422.68 FEET ALONG LAST MENTIONED PARALLEL LINE TO A POINT IN THE EAST LINE OF THAT CERTAIN PARCEL OF LAND CONVEYED TO STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY BY DEED RECORDED DECEMBER 17, 1963 IN BOOK 2634, PAGE 603 OF OFFICIAL RECORDS; THENCE NORTH 0(degrees) 47(feet) 00(inches) EAST 445.00 FEET ALONG THE EAST LINE OF SAID PARCEL CONVEYED TO STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY TO THE NORTHEAST CORNER THEREOF, SAID CORNER BEING ON THE SAID NORTH LINE OF THE PARCEL CONVEYED TO GREENWALD; THENCE SOUTH 89(degrees) 51(feet) 30(inches) EAST 422.48 FEET ALONG SAID NORTH LINE TO THE POINT OF BEGINNING. PARCEL A: THAT PORTION OF PARCEL 2 MAP NO. 79-887, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 136, PAGES 32 AND 33 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY LYING WITHIN THE LAND SHOWN AS PARCEL 2 OF THAT CERTAIN LOT LINE ADJUSTMENT LL79-10 RECORDED JANUARY 3, 1980 AS INSTRUMENT NO. 2228, IN BOOK 13456 PAGE 985, OFFICIAL RECORDS. PARCEL B: PARCEL 2 OF PARCEL MAP, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP FILED IN BOOK 74, PAGES 46 AND 47 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. 9 CHAPMAN MEDICAL CENTER - ORANGE, CA: PARCEL B-1: PARCEL 1 OF LOT LINE ADJUSTMENT NO. 94-6, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SAID LOT LINE ADJUSTMENT WAS RECORDED MARCH 1, 1995 AS INSTRUMENT NO. 95-81919, OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL B-2: PARCEL 1, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP FILED IN BOOK 96, PAGES 19 AND 20 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL B-3: NON-EXCLUSIVE EASEMENTS FOR INGRESS, EGRESS, DRIVEWAY, UTILITY AND DRAINAGE PURPOSES AS SET FORTH AND FURTHER DESCRIBED IN A DOCUMENT ENTITLED "AGREEMENT TO QUITCLAIM EXISTING EASEMENT, ESTABLISH NEW EASEMENT, AND FOR MAINTENANCE" RECORDED NOVEMBER 15, 1990 AS INSTRUMENT NO. 90-602723 OF OFFICIAL RECORDS OVER PORTIONS OF THE EASTERLY 80 FEET OF THE FOLLOWING DESCRIBED LAND: THAT PORTION OF LOTS 14 AND 15 IN BLOCK F OF THE A.B. CHAPMAN TRACT SURVEYED BY FRANK LECOUVREUR IN 1870, AS SHOWN ON A MAP RECORDED IN BOOK 102, PAGE 15 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, AS MODIFIED BY LOT LINE ADJUSTMENT 90-2, RECORDED JUNE 25, 1990 AS INSTRUMENT NO. 90-335624 OF OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF CHAPMAN AVENUE (100 FEET WIDE), SAID POINT BEING NORTH 00(degrees) 45(feet) 30(inches) EAST, 50.00 FEET FROM THE SOUTHEASTERLY CORNER OF SAID LOT 14; THENCE NORTH 89(degrees) 46(feet) 00(inches) WEST, ALONG SAID NORTHERLY RIGHT OF WAY LINE, A DISTANCE OF 444.74 FEET; THENCE NORTH 27(degrees) 11(feet) 13(inches) EAST, A DISTANCE OF 473.57 FEET; THENCE SOUTH 89(degrees) 46(feet) 00(inches) EAST, A DISTANCE OF 230.26 FEET, TO THE EASTERLY LINE OF SAID LOT 14; THENCE NORTH 00(degrees) 45(feet) 30(inches) EAST, ALONG SAID EASTERLY LINE, OF SAID LOT 14; THENCE NORTH 00(degrees) 45(feet) 30(inches) EAST, ALONG SAID EASTERLY LINE A DISTANCE OF 5.15 FEET; THENCE SOUTH 89(degrees) 46(feet) 00(inches) EAST, A DISTANCE OF 55.00 FEET; THENCE SOUTH 00(degrees) 45(feet) 30(inches) WEST, A DISTANCE OF 425.41 FEET, TO THE NORTHERLY RIGHT OF WAY LINE OF SAID CHAPMAN AVENUE; THENCE NORTH 89(degrees) 46(feet) 00(inches) WEST, ALONG SAID NORTHERLY RIGHT OF WAY LINE, A DISTANCE OF 55.00 FEET, TO THE POINT OF BEGINNING. PARCEL C-1: THAT PORTION OF LOT 15 IN BLOCK F OF THE A.B. CHAPMAN TRACT SURVEYED BY FRANK LECOUVREUR IN 1870, AS SHOWN ON A MAP RECORDED IN BOOK 102, PAGE 15 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF LOT 1 OF TRACT NO. 4279 AS SHOWN ON A MAP RECORDED IN BOOK 156, PAGES 40 AND 41 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG THE WESTERLY BOUNDARY OF SAID TRACT NO. 4279, THE FOLLOWING COURSES AND DISTANCES: NORTH 00(degrees) 19(feet) 20(inches) EAST 118.82 FEET; THENCE SOUTH 89(degrees) 40(feet) 40(inches) EAST 15.00 FEET; THENCE NORTH 00(degrees) 19(feet) 20(inches) EAST 71.00 FEET; THENCE NORTH 89(degrees) 40(feet) 40(inches) WEST 15.00 FEET; THENCE NORTH 00(degrees) 19(feet) 20(inches) 280.18 FEET; THENCE LEAVING THE WEST BOUNDARY OF SAID TRACT NO. 4279 AND RUNNING NORTH 89(degrees) 46(feet) 00(inches) WEST 48.00 FEET; THENCE SOUTH 00(degrees) 19(feet) 20(inches) WEST 470.00 FEET TO THE NORTHERLY LINE OF THE CHAPMAN AVENUE (100 FEET WIDE); THENCE SOUTH 89(degrees) 46(feet) 40(inches) EAST 48.00 FEET ALONG SAID NORTHERLY 10 LINE 48.00 FEET TO THE POINT OF BEGINNING. PARCEL C-2: THAT PORTION OF LOT 15 IN BLOCK F OF THE A.B. CHAPMAN TRACT SURVEYED BY FRANK LECOUVREUR IN 1870, AS SHOWN ON A MAP RECORDED IN BOOK 102, PAGE 15 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, DESCRIBED AS FOLLOWS: A 15 FOOT BY 15 FOOT TRIANGULAR AREA FORMED BY THE INTERSECTION OF THE WEST LINE OF PARCEL C-1 HEREINABOVE DESCRIBED WITH THE NORTHERLY LINE OF CHAPMAN AVENUE (100 FEET WIDE) SAID NORTHERLY LINE BEING MORE PARTICULARLY DESCRIBED IN A DEED TO THE CITY OF ORANGE RECORDED IN BOOK 7479, PAGE 985 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY. WESTERN MEDICAL CENTER - SANTA ANA, CA: PARCEL A: THAT PORTION OF LOT 4 OF THE FELIPE YORBA TRACT, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 4, PAGE 206 OF MISCELLANEOUS MAPS, RECORDS OF LOS ANGELES COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS: BEGINNING AT THE POINT OF INTERSECTION OF A LINE THAT IS PARALLEL WITH AND DISTANT EASTERLY 30.00 FEET, MEASURED AT RIGHT ANGLES FROM THE WESTERLY LINE OF SAID LOT 4, WITH A LINE THAT IS PARALLEL WITH AND DISTANT SOUTHERLY 305.00 FEET, MEASURED AT RIGHT ANGLES FROM THE NORTH LINE OF SAID LOT 4; THENCE NORTH 88(degrees) 49(feet) 47(inches) EAST, PARALLEL WITH SAID NORTH LINE OF LOT 4, A DISTANCE OF 718.43 FEET TO A POINT IN THE EASTERLY LINE OF THE LAND DESCRIBED IN DEED TO SIMON WARONKER, RECORDED JANUARY 5, 1965 IN BOOK 7369, PAGE 708 OF OFFICIAL RECORDS; THENCE SOUTH 3(degrees) 52(feet) 29(inches) WEST ALONG SAID EASTERLY LINE, 273.66 FEET TO AN ANGLE POINT THEREIN; THENCE SOUTH 0(degrees) 06(feet) 02(inches) WEST, ALONG SAID EASTERLY LINE, 32.54 FEET TO A POINT IN A LINE THAT IS PARALLEL WITH AND DISTANT SOUTHERLY 610.14 FEET, MEASURED AT RIGHT ANGLES FROM SAID NORTH LINE OF LOT 4; THENCE SOUTH 88(degrees) 49(feet) 47(inches) WEST, PARALLEL WITH SAID NORTH LINE OF LOT 4, A DISTANCE OF 695.07 FEET TO SAID LINE THAT IS PARALLEL WITH THE WESTERLY LINE OF LOT 4; THENCE NORTH 0(degrees) 54(feet) 38(inches) WEST, PARALLEL WITH SAID WESTERLY LINE, 305.14 FEET TO THE POINT OF BEGINNING. EXCEPTING FROM THAT PORTION OF SAID LAND THAT IS INCLUDED WITHIN THE LAST HALF OF SAID LOT 4, ALL MINERALS, OILS, GASES, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER SAID LAND, WITHOUT, HOWEVER, THE RIGHT TO DRILL, DIG OR MINE THROUGH THE SURFACE THEREOF, AS RESERVED IN THE DEED EXECUTED BY THE STATE OF CALIFORNIA, RECORDED JANUARY 5, 1965 IN BOOK 7369, PAGE 708 OF OFFICIAL RECORDS. ALSO EXCEPTING FROM THE REMAINDER, ALL INTEREST IN AND TO ALL MINERALS, OILS, GASES AND OTHER HYDROCARBONS BY WHATSOEVER NAME, IN AND UNDER THE SUBJECT PROPERTY, WITHOUT RIGHT, HOWEVER, TO ENTER UPON THE SURFACE OF SAID LAND OR THE SUBSURFACE AREA THEREOF TO A DEPTH OF 300 FEET BELOW THE SURFACE, AS RESERVED IN THE DEEDS FROM SIMON WARONKER AND JEANETTE WARONKER, RECORDED JANUARY 15, 1965. 11 PARCEL B: PARCEL B-1: PARCEL 1, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN OF PARCEL MAP NO. 85-234, FILED IN BOOK 211, PAGES 10, 11 AND 12 OF PARCEL MAPS, RECORDS OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION DESCRIBED IN THE DEED TO THE STATE OF CALIFORNIA RECORDED JANUARY 16, 1984 AS INSTRUMENT NO. 84-020617, OFFICIAL RECORDS. ALSO EXCEPT ALL MINERALS, OIL, GASES AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THAT PORTION OF SAID LOT 2, WITHOUT, HOWEVER, THE RIGHT TO DRILL, DIG OR MINE THROUGH THE SURFACE OF THE UPPER 500 FEET THEREOF, AS SET FORTH IN THE DEED FROM THE STATE OF CALIFORNIA, RECORDED MAY 4, 1971 IN BOOK 9629, PAGE 298 OF OFFICIAL RECORDS. PARCEL B-1A: ALL OF THOSE CERTAIN EASEMENTS, EXCLUSIVE OF NONEXCLUSIVE (THE "EASEMENTS") GRANTED TO OR RESERVED BY WESTERN MEDICAL CENTER, A CALIFORNIA NONPROFIT CORPORATION (FORMERLY, SANTA ANA - TUSTIN COMMUNITY HOSPITAL), AS MORE PARTICULARLY SET FORTH IN THAT CERTAIN OPERATING AND EASEMENT AGREEMENT, DATED AS OF DECEMBER 12, 1979 AND RECORDED IN THE OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA ON MARCH 24, 1981 IN BOOK 13991, AT PAGES 1798 TO 1825, INCLUSIVE, AS INSTRUMENT NUMBER 30426 AND AS AMENDED BY THAT CERTAIN AMENDMENT TO OPERATING AND EASEMENT AGREEMENT DATED AS OF FEBRUARY 22, 1982 AND RECORDED IN THE OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA ON SEPTEMBER 20, 1982 AS INSTRUMENT NUMBER 82-329898, AND AS AMENDED AND RESTATED BY THAT CERTAIN AMENDED AND RESTATED OPERATING AND EASEMENT AGREEMENT DATED MARCH 31, 1988, AND RECORDED IN THE OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA ON MAY 2, 1988 AS INSTRUMENT NO. 88-201966, ALL OF WHICH EASEMENTS ARE COVENANTS THAT RUN WITH THE LAND TO WHICH THEY PERTAIN AND MAY BE GRANTED BY THE HOLDER OR HOLDERS THEREOF TO OTHER PERSONS. PARCEL B-2: PARCEL 2, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 82-879, FILED IN BOOK 200, PAGES 48, 49 AND 50 OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, AND PARCEL 3, AS SHOWN ON PARCEL MAP NO. 88-234, FILED IN BOOK 211, PAGES 10, 11 AND 12 OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPT ALL MINERALS, OIL, GASES AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THAT PORTION OF SAID LOT 2, WITHOUT, HOWEVER, THE RIGHT TO DRILL, DIG OR MINE THROUGH THE SURFACE OF THE UPPER 500 FEET THEREOF, AS SET FORTH IN THE DEED FROM THE STATE OF CALIFORNIA, RECORDED MAY 4, 1971 IN BOOK 9629, PAGE 298 OF OFFICIAL RECORDS. PARCEL B-3: PARCEL 2, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 85-234, FILED IN BOOK 211, PAGES 10, 11 AND 12 OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPT ALL MINERALS, OIL, GASES AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THAT PORTION OF SAID LOT 2, WITHOUT, HOWEVER, THE RIGHT TO DRILL, DIG OR MINE THROUGH THE SURFACE OF THE UPPER 500 FEET THEREOF, AS SET FORTH IN THE DEED FROM THE STATE OF CALIFORNIA, RECORDED MAY 4, 1971 IN BOOK 9629, PAGE 298 OF OFFICIAL RECORDS. PARCEL C: PARCEL 1: AN UNDIVIDED 20/72 INTEREST IN PARCEL 1, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 159, PAGES 35 AND 36 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, EXCEPT THEREFROM CONDOMINIUM UNITS 1 THROUGH 23 INCLUSIVE, 101 THROUGH 124 INCLUSIVE AND 201 THROUGH 225 INCLUSIVE, AS SHOWN ON THE CONDOMINIUM PLAN REFERRED TO IN PARCEL 2 HEREIN, AND ALSO EXCEPT ALL BUILDINGS, IMPROVEMENTS AND OTHER APPURTENANCES ERECTED OR INSTALLED ON SAID LAND. 12 PARCEL 2: UNITS 1, 2, 3, 4, 5, 6, 7, 8, 188, 120, 121, 201, 202, 203, 204, 213, 214, 215, 218 AND 225, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A CONDOMINIUM PLAN RECORDED AUGUST 5, 1982 AS DOCUMENT NO. 82-272137, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. PARCEL 3: AN UNDIVIDED 21/72 INTEREST IN FEE IN AND TO ALL BUILDINGS AND OTHER IMPROVEMENTS LOCATED ON PARCEL 1, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 81-866, FILED FOR RECORD IN BOOK 159, PAGES 35 AND 36 OF PARCEL MAPS, OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA. PARCEL 4: A NON-EXCLUSIVE EASEMENT OVER, UPON AND THROUGH PORTIONS OF PARCEL 1 OF PARCEL MAP RECORDED IN BOOK 147, PAGES 26 AND 27 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA, FOR THE PURPOSES OF VEHICULAR PARKING, PEDESTRIAN TRAFFIC, PEDESTRIAN AND VEHICULAR ACCESS, UTILITY AND CONSTRUCTION, AS MORE PARTICULARLY DESCRIBED AND SET FORTH AND CREATED BY THAT CERTAIN OPERATING AND EASEMENT AGREEMENT DATED DECEMBER 12, 1979 BY AND BETWEEN SANTA ANA - TUSTIN COMMUNITY HOSPITAL, A CALIFORNIA NON-PROFIT CORPORATION, AND SATCH - MED, INC., A CALIFORNIA CORPORATION, RECORDED MARCH 24, 1981 AS INSTRUMENT NO. 30426 IN BOOK 13991, PAGE 1798, OFFICIAL RECORDS AND AMENDED BY INSTRUMENT RECORDED SEPTEMBER 20, 1982 AS INSTRUMENT NO. 82-329898, OFFICIAL RECORDS AND FURTHER AMENDED AND RESTATED BY INSTRUMENT RECORDED MAY 2, 1988 AS INSTRUMENT NO. 88-20966, OFFICIAL RECORDS. PARCEL D: PARCEL 1: AN UNDIVIDED 1/72 INTEREST IN PARCEL 1, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 159, PAGES 35 AND 36 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, EXCEPTING THEREFROM CONDOMINIUM UNITS 1 THROUGH 23 INCLUSIVE, 101 THROUGH 124 INCLUSIVE AND 201 THROUGH 225 INCLUSIVE, AS SHOWN ON THE CONDOMINIUM PLAN RECORDED AUGUST 5, 1982 AS INSTRUMENT NO. 82-272137, OFFICIAL RECORDS, AND ALSO EXCEPTING ALL BUILDINGS, IMPROVEMENTS AND OTHER APPURTENANCES ERECTED OR INSTALLED ON SAID LAND. PARCEL 2: UNIT 11 SHOWN ON A CONDOMINIUM PLAN RECORDED AUGUST 5, 1982 AS INSTRUMENT NO. 82-272137M OFFICIAL RECORDS. PARCEL E: PARCEL 1: AN UNDIVIDED 1/72 INTEREST IN PARCEL 1, IN THE CITY OF SANTA ANA, AS SHOWN ON A MAP RECORDED IN BOOK 159, PAGES 35 AND 36 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, EXCEPTING THEREFROM CONDOMINIUM UNITS 1 THROUGH 23 INCLUSIVE, 101 THROUGH 124 INCLUSIVE AND 201 THROUGH 225 INCLUSIVE, AS SHOWN ON THE CONDOMINIUM PLAN REFERRED TO IN PARCEL 2 HEREIN. PARCEL 2: UNIT 12 SHOWN ON A CONDOMINIUM PLAN RECORDED AUGUST 5, 1982 AS INSTRUMENT NO. 82-272137, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. 11 EX-10.3 4 v09142_ex10-3.txt STOCK OPTION (ANIL V. SHAH, M.D.) THIS STOCK OPTION (the "Option") is issued this 16th day of November, 2004, by Integrated Healthcare Holdings, Inc., a Nevada corporation ("Optionor"), to Anil V. Shah, M.D. ("Optionee"). R E C I T A L S A. Optionor and Optionee are parties to that certain Purchase Option Agreement, dated November 16, 2004 (the "Purchase Option Agreement"). B. In consideration of the mutual agreements set forth in the Purchase Option Agreement, Optionor desires to grant to Optionee this 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. Optionor hereby grants to Optionee an irrevocable, non-transferable option (the "Option") to purchase 10,000,000 shares of Optionor's Common Stock (the "SHARES") at an exercise price (the "EXERCISE PRICE") of $0.25 per share, subject to adjustment as provided herein. The Option shall be exercisable at any time prior to November 30, 2005 (the "EXPIRATION DATE"), but only if Optionee (or his assignee under the Purchase Option Agreement) has fully exercised the "Option" under the Purchase Option Agreement by exercising all three "Tranches" (as such terms are defined in the Purchase Option Agreement) and delivering to Optionor a total of $17,500,000 in connection with such exercise. The Expiration Date will be extended to a date that is one year after the Optionor's closing at its acquisition of the property as defined in the Purchase Option Agreement, if later than November 30, 2004. 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. 1 (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. (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. MANNER OF EXERCISE. Optionee may exercise this Option by delivering to Optionor, on or prior to the Expiration Date, 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. 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. 5. 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. 6. MISCELLANEOUS. 2 6.1. NOTICES. All notices or communications required or permitted under this Option 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. 695 Town Center Drive, Suite 260 Costa Mesa, CA 92626 Attention: Chief Executive Officer If to Optionee, addressed to: Anil V. Shah, M.D. 2621 South Bristol Street, #108 Santa Ana, California 92704 6.2. ENTIRE AGREEMENT. This Option, together with the Purchase Option Agreement, 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. 6.3. BINDING ON SUCCESSORS. This Option binds and benefits the respective parties hereto and their respective heirs, legal representations, designees, successors and assigns. 6.4. ATTORNEYS' FEES. In any legal action or proceeding to enforce or interpret the terms of this Option, 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. 6.5. GOVERNING LAW. This Option shall be governed by and construed in accordance with the laws of the state of California without regard to its choice of laws principles. 6.6. 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. 6.7. DISPUTE RESOLUTION. In the event of any dispute arising out of or relating to this Option, 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. 3 6.8. COUNTERPARTS. This Option 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. IN WITNESS WHEREOF, the Optionor has executed this Option as of the date first above written. "OPTIONOR": INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada corporation By: /s/ Larry B. Anderson ------------------------------------- Larry B. Anderson, President 4 EX-99.1 5 v09142_ex99-1.txt INTEGRATED HEALTHCARE HOLDINGS ANNOUNCES $20 MILLION PACT WITH ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK NEW INVESTMENT AND CO-OPERATION FROM OC-PHYSICIANS GROUP Costa Mesa, California, Nov. 22, 2004 (PRNewswire-FirstCall) -- Integrated Healthcare Holdings Inc. (OTC Bulletin Board: IHCH) today announced that it has entered into agreements with Orange County Physicians Investment Network, LLC (OC-PIN), a group of physicians in Orange County, involving a new investment in IHHI of up to $20 million to be used for IHHI's purchase and operation of four Tenet Health System hospitals that IHHI agreed to acquire in September 2004. OC-PIN has deposited an initial $5 Million into escrow to be applied to the hospital acquisitions at closing. IHHI currently expects to close its acquisition of the hospitals in the fourth quarter of 2004. Under the agreements with OC-PIN, an additional $5 Million may be invested in IHHI by February 25, 2004 and an additional $7.5 Million by June 1, 2005 (subject to extension in certain circumstances to December 1, 2005). A further $2.5 million investment may be made by November 30, 2005 by either OC-PIN or Dr. Anil V. Shah. If the full amount is invested, OC-PIN will receive 50 million shares of common stock of IHHI and a 49% ownership interest in a new company holding most of the real estate underlying the four newly acquired hospitals (subject to underlying debt on the real estate), and OC-PIN or Dr. Shah will receive 10 million shares of common stock of IHHI. According to Larry Anderson, President of IHHI, "This transaction greatly strengthens IHHI financially and demonstrates the commitment of the physicians in Orange County to the future of these four (4) key hospitals." Dr. Anil V. Shah, President of OC-PIN, stated that the partnership between OC-PIN and IHHI strengthens the support of the medical community in Orange County to Integrated Healthcare Holdings. Dr. Anil V. Shah, a cardiologist at Western Medical Center, Santa Ana and Coastal Communities, will Co-Chair the Medical Advisory Boards of the acquired hospitals. The Los Angeles law firms of Morrison & Foerster LLP and Hooper, Lundy & Bookman, Inc acted for IHHI, and the Anaheim law firm of The Lal Law Firm, APLC, acted as counsel for OC-PIN. The above discussion of IHHI's agreements with OC-PIN and Dr. Shah are of a summary nature only, and are qualified by reference to the full text of these agreements, copies of which will be filed by IHHI with the Securities and Exchange Commission. This press release contains forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed or projected. Statements in this press release regarding the business of Integrated Healthcare Holdings, Inc., which are not historical in nature, are "forward-looking statements" that involve risks and uncertainties. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Actual results may differ materially from those anticipated, estimated, or projected in the forward-looking statements due to risks and uncertainties, including those discussed in our Annual Report on Form 10-KSB under the caption "Risk Factors." Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates. -----END PRIVACY-ENHANCED MESSAGE-----