RESCISSION, RESTRUCTURING
AND ASSIGNMENT AGREEMENT
This Rescission, Restructuring and Assignment Agreement (this "AGREEMENT")
is entered into as of January 27, 2005, by and among Integrated Healthcare
Holdings, Inc., a Nevada corporation (the "COMPANY"), Xxxx X. Xxxxxxxxx, M.D.
("XX. XXXXXXXXX"), Xxxxxxx X. Xxxxxx ("XXXXXX") (for purposes of Sections 3 and
10 only), Xxxx X. Xxxx, M.D. ("XX. XXXX") (for purposes of Sections 2(a) and 9
only), and Orange County Physicians Investment Network, LLC, a Nevada limited
liability company ("OC-PIN").
R E C I T A L S
A. The Company and Xx. Xxxxxxxxx are parties to a Secured Convertible Note
Purchase Agreement dated as of September 28, 2004, which was amended by a First
Amendment to Secured Convertible Note Purchase Agreement dated as of November
16, 2004 (collectively, the "PURCHASE AGREEMENT"), pursuant to which Xx.
Xxxxxxxxx was issued a $500,000 Secured Convertible Promissory Note
("CONVERTIBLE NOTE"), a $10,000,000 Secured Promissory Note ("SECURED NOTE"),
and a Stock Option Agreement dated November 16, 2004 ("STOCK OPTION AGREEMENT").
B. The Company is in default of its obligation to repay the Convertible
Note by December 31, 2004.
C. The Company desires that OC-PIN invest in the Company.
D. Xx. Xxxxxxxxx and Xx. Xxxx, an authorized representative and affiliate
of OC-PIN, are parties to a Non-Circumvention Agreement dated November 11, 2004
("NON-CIRCUMVENTION AGREEMENT").
E. As a condition to investment, OC-PIN has requested that the Convertible
Note, the Secured Note, the Stock Option Agreement and certain provisions of the
Agreement be rescinded and canceled, and Xx. Xxxxxxxxx restructure his financial
arrangements with the Company, and that he terminate the Non-Circumvention
Agreement. Xx. Xxxxxxxxx is willing to reduce his contractual rights and
participation and otherwise accommodate the Company and OC-PIN on the terms and
subject to the conditions set forth in this Agreement.
F. The parties acknowledge that Xx. Xxxxxxxxx had the right to acquire a
majority interest in the Company, which right he has agreed (subject to the
conditions herein) to rescind, and accept in its place stock purchase warrants
in favor of Xx. Xxxxxxxxx and Xxxxxx to acquire only up to (and not to exceed)
24.9% of the Company's capital stock, which warrants are not exercisable for two
years from the date of issuance, and the Company and OC-PIN are willing to
consent to this arrangement.
G. The Company is a party to a definitive Asset Sale Agreement, dated
September 29, 2004 (the "ASSET SALE AGREEMENT"), pursuant to which the Company
has agreed to purchase four hospitals from subsidiaries of Xxxxx Healthcare
Corporation located in Orange County, California, known as Western Medical
Center - Santa Xxx, Western Medical Center - Anaheim, Costal Communities
Hospital, and Xxxxxxx Medical Center. The transactions contemplated under the
Asset Sale Agreement are collectively referred to herein as the "XXXXX
TRANSACTION".
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H. The Xxxxx Transaction has not yet closed, and the parties desire to
reflect and memorialize certain understandings among them with respect to the
Xxxxx Transaction. This Agreement is expressly conditioned upon Xxxxx'x
acceptance of the restructuring contemplated by this Agreement and its release
of Xx. Xxxxxxxxx from his guarantee of the Xxxxxxx lease.
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, and subject to
satisfaction of the conditions set forth in Section 9, the parties hereto hereby
agree as follows:
1. DEFINITIONS. For the purposes of this Agreement (including amendments
to the Purchase Agreement contained herein), (i) 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, and (ii) the term "FULLY-DILUTED" includes all shares of
Common Stock of the Company issued and outstanding at the date in question plus
all shares of Common Stock of the Company issuable (whether or not vested) at
that date upon full exercise of all options, warrants or other rights to acquire
Common Stock of the Company and full conversion of all securities convertible
into Common Stock of the Company, but excluding from that amount up to
10,000,000 shares (or rights to acquire shares) of Common Stock per year to
employees, consultants, officers or directors of the Company pursuant to stock
option or restricted stock plans or agreements approved by the Company's Board
of Directors.
2. RESCISSION AND CANCELLATION OF NOTES, OPTION, NON-CIRCUMVENTION
AGREEMENT AND CERTAIN PROVISIONS OF PURCHASE AGREEMENT.
(a) Upon fulfillment of the conditions set forth in Section 9, the
Convertible Note, the Secured Note, the Stock Option Agreement and the
Non-Circumvention Agreement are hereby rescinded and canceled. Within two (2)
business days after receipt of the $10,000,000 plus accrued interest referred to
in Section 6, Xx. Xxxxxxxxx shall, and he shall cause his attorneys and agents
to, (i) return to the Company the originals of the Convertible Note and the
Secured Note for cancellation and (ii) deliver to OC-PIN copies of all material
agreements executed by Xx. Xxxxxxxxx with the Company or in connection with the
Xxxxx Transaction. Except as provided in this Agreement with respect to Xxxxxx,
Xx. Xxxxxxxxx hereby represents and warrants to the Company that he has not,
directly or indirectly, transferred, sold or syndicated any part of the
securities that he received or was entitled to acquire from the Company.
(b) The Purchase Agreement is hereby rescinded and canceled, except
that the provisions of: (i) Section 1.7 thereof shall remain in effect (as
amended by Section 4 below) (ii) Article II thereof shall remain in effect (as
amended by Section 4 below) and shall be applicable to the shares of the
Company's Common Stock issuable pursuant to the warrants described in Section 3
below; (iii) Articles III and IV thereof shall remain in effect and the
provisions thereof shall be deemed to apply with respect to the issuances
described in Section 3 below; and (iv) Section 5.3 thereof shall remain in
effect for the benefit of both Xx. Xxxxxxxxx and Xxxxxx for so long as either of
them holds either stock purchase warrants pursuant to the new warrants described
in Section 3 below or shares of the Company's Common Stock obtained by them upon
exercise thereof, provided, however that (A) Section 5.3 shall terminate and
cease to have effect upon an acquisition of the Company by an unrelated third
party and (B) each of Xx. Xxxxxxxxx and Xxxxxx shall execute appropriate
confidentiality agreements in customary form with respect to information
obtained pursuant to these sections.
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(c) Xx. Xxxxxxxxx agrees to reasonably cooperate with the Company
and California Department of Health Services at no or minimal cost to Xx.
Xxxxxxxxx by providing information and other reasonable assistance so that the
Company may promptly complete the Xxxxx Transaction and obtain licensing of the
hospital facilities to be acquired therein; provided that such cooperation shall
not result in any material modification to this Agreement.
3. ISSUANCE OF NEW NON-CONVERTIBLE NOTES AND WARRANTS; ASSIGNMENT TO
XXXXXX. The Company has agreed to issue to Xx. Xxxxxxxxx (i) a new
non-convertible secured promissory note reflecting amounts loaned to the Company
by Xx. Xxxxxxxxx as well as expenditures made by Xx. Xxxxxxxxx on the Company's
behalf or for the Company's benefit, plus accrued interest to date, and (ii) a
new stock purchase warrant reflecting the right to purchase shares of the
Company's Common Stock. Xx. Xxxxxxxxx has assigned to Xxxxxx certain of his
rights with respect thereto, to which assignments the Company and OC-PIN hereby
consent. As a result of the assignment, the parties acknowledge and agree that,
within 48 hours after the execution of this Agreement, but dated and effective
as of the date of this Agreement, the Company shall issue to (A) Xx. Xxxxxxxxx a
non-convertible secured promissory note, in substantially the form of Exhibit
A-1, and in a principal amount equal to 80% of the sum of all amounts loaned by
Xx. Xxxxxxxxx to the Company or paid, advanced or incurred by Xx. Xxxxxxxxx on
behalf or for the benefit of the Company, or in connection with the Purchase
Agreement and related documents, or in connection with the Xxxxx Transaction
(collectively, the "ADVANCES"), (B) Xxxxxx a non-convertible secured promissory
note, in substantially the form of Exhibit A-2, and in a principal amount equal
to 20% of the Advances (collectively, the "NEW NOTES"), (C) Xx. Xxxxxxxxx a
stock purchase warrant reflecting the right to purchase up to 60,000,000 shares
of the Company's Common Stock (but not to exceed 20% of the Company's
Fully-Diluted capital stock) in substantially the form of Exhibit B-1 and (D)
Xxxxxx a stock purchase warrant reflecting the right to purchase up to
14,700,000 shares of the Company's Common Stock (but not to exceed 4.9% of the
Company's Fully-Diluted capital stock) in substantially the form of Exhibit B-2
(collectively, the "NEW WARRANTS"). Repayment of the New Notes shall be
guaranteed by OC-PIN pursuant to a General Continuing Guaranty substantially in
the form of Exhibit C.
4. CERTAIN AMENDMENTS.
(a) Section 1.7 of the Purchase Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
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"1.7 PRE-EMPTIVE RIGHTS.
1.7.1 GENERAL PRE-EMPTIVE RIGHT. Provided that Purchaser and
Xxxxxxx X. Xxxxxx ("XXXXXX") have exercised their Stock Purchase
Warrants dated January 17, 2005, the Company hereby grants to
Purchaser and Xxxxxx 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 would result in dilution of Purchaser's
and Xxxxxx'x combined equity position to less than 24.9% 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 which would reduce Purchaser's and Xxxxxx'x
combined equity position to below 24.9% (the "NEW SHARES"), the
Company shall first make an offer to Purchaser and Xxxxxx of such
portion of the New Shares which would maintain Purchaser's and
Xxxxxx'x combined equity position at a minimum of 24.9% (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, and the Pro Rata Share shall be priced equal to the
lowest price paid by any of the other investors, including any who
may be purchasing New Shares by virtue of similar pre-emptive or
other purchase rights.
1.7.2 TAG-ALONG RIGHT RELATING TO OC-PIN. The Company hereby
grants to Purchaser and Xxxxxx a purchase right with respect to
future issuances by the Company of any of its securities to Xxxx X.
Xxxx, M.D. or Orange County Physicians Investment Network, or
affiliates of either of them (collectively, "OC-PIN GROUP"), where
the issuance of such additional shares of Common Stock would result
in the OC-PIN Group having been issued, in the aggregate, more than
187,240,000 shares of the Company's Common Stock on a Fully-Diluted
basis (as adjusted for any stock splits, dividends, combinations or
the like). Upon satisfaction of these conditions, Purchaser and
Xxxxxx shall have the right to acquire, for a period of 90 days
following notification by the Company to Purchaser and Xxxxxx that
the pre-emptive right is triggered (which notice shall be given
within 10 business days of such trigger), the same securities, and
at the same price, as the member of the OC-PIN Group purchasing the
Company's securities, in an amount that represents the same
proportion as Purchaser's and Xxxxxx'x combined holdings of the
Company's Common Stock on a Fully-Diluted basis bears to the OC-PIN
Group's combined holdings of the Company's Common Stock on a
Fully-Diluted basis immediately prior to the issuance in question.
1.7.3 EXCLUSIONS. The rights in this Section 1.7 shall not be
applicable to the issuance or sale of (i) securities issued pursuant
to stock splits, stock dividends, or similar transactions; (ii)
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; (iii) 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 not for the
purpose of raising capital, (iv) shares of Common Stock issued in an
underwritten public offering; or (v) securities issued in connection
with bona fide acquisition transactions approved by the Board of
Directors.
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1.7.4 TERMINATION. The pre-emptive rights in this Section 1.7
shall terminate and cease to have effect upon the earlier of (i) the
closing of an acquisition of the Company to an unrelated third party
or (ii) the later of one-half (3 1/2) years from the date of this
Agreement or the termination of any similar pre-emptive rights
granted to OC-PIN or its affiliates."
(b) Article II of the Purchase Agreement is hereby amended to
reflect that references to "Purchaser" or "the Holder" shall now mean Xx.
Xxxxxxxxx and Xxxxxx. The definition of "REGISTRABLE SECURITIES" contained in
Section 2.1 of the Purchase Agreement is hereby deleted in its entirety and
replaced with the following:
"`REGISTRABLE SECURITIES' means, collectively, any shares of common
stock of the Company issued to Xxxx X. Xxxxxxxxx, M.D. or Xxxxxxx X.
Xxxxxx pursuant to Stock Purchase Warrants issued to those
individuals on January 17, 2005, 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, or all
such securities may be sold publicly without registration, 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."
5. AMENDMENT OF SECURITY AGREEMENT. The Security Agreement between the
Company and Xx. Xxxxxxxxx dated September 28, 2004, is hereby amended to provide
that the secured parties are Xx. Xxxxxxxxx and Xxxxxx, and that the obligations
secured are the obligations under the New Notes and any other obligations of the
Company to Xx. Xxxxxxxxx arising thereunder or under this Agreement; however,
the security interest securing the New Notes shall be terminated effective at
the closing of the Xxxxx Transaction. Xx. Xxxxxxxxx (and Xxxxxx if necessary)
shall execute and, if requested by the Company and the lender in the Xxxxx
Transaction, deliver to the escrow agent for the Xxxxx Transaction an executed
UCC termination statement to accomplish the foregoing.
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6. PAYMENT TO XX. XXXXXXXXX; CERTAIN DISCLAIMERS. On the date of approval
of this Agreement by Xxxxx as contemplated by Section 9, OC-PIN shall pay, or
shall cause the Company to pay, or shall cause to be released from the Escrow
Fund, $10,000,000 plus the accrued interest in the Escrow Fund to Xx. Xxxxxxxxx,
in immediately available funds. Nothing in this Agreement or any of the exhibits
hereto shall be effective or of any force and effect until Xx. Xxxxxxxxx has
received this payment of $10,000,000 plus accrued interest. Any agreements or
arrangements between OC-PIN and the Company with respect to this payment of
$10,000,000 plus accrued interest shall be pursuant to a separate agreement
between them, and Xx. Xxxxxxxxx shall have no involvement therewith or
responsibility therefor. Furthermore, Xx. Xxxxxxxxx makes, and the Company and
OC-PIN expressly acknowledge that Xx. Xxxxxxxxx has made, no representations or
warranties to OC-PIN or the Company or any of their affiliates regarding the
Company, OC-PIN, OC-PIN's financial wherewithal, the Xxxxx Transaction, the
financing related to the Xxxxx Transaction (or the Company's ability to obtain
it), licensing (or the Company's ability to obtain it) or any other matter
relating in any way to OC-PIN's investment in or other financial arrangements
with the Company. Each of the Company and OC-PIN has done its own independent
investigation of the other, and is fully satisfied with the results of those
investigations. The Company and OC-PIN hereby agree to indemnify, defend and
hold Xx. Xxxxxxxxx harmless from and against any claims, liabilities or losses
incurred by either of them as a result of the financial or other arrangements
between them.
7. AMENDMENT AND EXERCISE OF AMENDED AND RESTATED REAL ESTATE PURCHASE
OPTION. Pursuant to Section 3 of the Option Agreement dated September 28, 2004,
as amended and restated on November 16, 2004 ("LLC OPTION AGREEMENT"), Xx.
Xxxxxxxxx currently has an option to purchase 100% of the membership interests
of the LLC (as defined in the LLC Option Agreement) for $5,000,000. The LLC
Option Agreement is hereby amended to provide that Xx. Xxxxxxxxx'x option shall
be to purchase 49% of the membership interests of the LLC for $2,450,000, and
may be assigned to and exercised by an affiliate of Xx. Xxxxxxxxx. Xx. Xxxxxxxxx
hereby exercises that option, as so amended, such exercise to be conditioned
upon, and effective at, the Closing (as defined in the Asset Sale Agreement) of
the Xxxxx Transaction. The exercise is also conditioned upon (a) receipt by Xx.
Xxxxxxxxx of receipt of evidence satisfactory to him that OC-PIN has acquired
the remaining 51% of the LLC membership interests simultaneously with Xx.
Xxxxxxxxx'x acquisition of the 49% interest, (b) receipt by Xx. Xxxxxxxxx of
receipt of evidence satisfactory to him that the LLC has acquired the real
estate (owned in fee) in the Xxxxx Transaction (i.e. Western Medical Center -
Santa Xxx, Western Medical Center - Anaheim and Coastal Community Hospital and
the medical office buildings, but not the leased Xxxxxxx Hospital and medical
office building), (c) execution by Xx. Xxxxxxxxx, OC-PIN and Xx. Xxxx, and by
the Company if initially required, of a customary Operating Agreement for a
California manager-managed limited liability company reasonably satisfactory to
Xx. Xxxxxxxxx and OC-PIN in which (i) Xx. Xxxxxxxxx and Xx. Xxxx have equal
rights of management of the LLC, and (ii) Xx. Xxxxxxxxx may not sell, syndicate
or otherwise transfer any of his management rights in the LLC without the
consent of the holder(s) of a majority of the LLC membership interests (although
it is expressly understood that Xx. Xxxxxxxxx may hold title to the LLC
membership interests through an affiliate), and (d) execution by the Company, as
tenant, of a lease with the LLC, as landlord, in substantially the form of
Exhibit D. The exercise price shall be placed into escrow and released against
delivery of certificates or other satisfactory evidence of transfer to Xx.
Xxxxxxxxx or an affiliate of 49% of the membership interests of the LLC. The
Company and OC-PIN agree to comply with all of the aforesaid covenants which
may, at Xx. Xxxxxxxxx'x election, be specifically enforced as provided in
Section 11.6.
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8. CERTAIN AGREEMENTS RELATED TO XXXXX TRANSACTION AND RELATED FINANCING.
The parties have agreed as follows with respect to the Xxxxx Transaction and the
proposed $80,000,000 credit facility ("FACILITY") from Company's current Lender,
or other lender agreeable to the parties ("LENDER") related thereto:
(a) The Company and the LLC shall be co-borrowers with respect to
the Facility, with the Company and the LLC each fully liable for the entire
amount borrowed thereunder.
(b) The Company and the LLC will enter into a mutually acceptable
inter-borrower and cross-indemnity agreement.
(c) If requested by the Lender, the Lender will have a security
interest not only in all of the assets of the Company and the LLC, but also in
all LLC membership interests and in the master lease from the LLC to the
Company.
9. CONDITIONS PRECEDENT. This Agreement, and specifically Xx. Xxxxxxxxx'x
and Xxxxxx'x obligations hereunder, are expressly conditioned upon Xxxxx'x
acceptance of the restructuring and other terms set forth herein, and, because
Xx. Xxxxxxxxx is rescinding his right to receive any interest in the Xxxxxxx
Hospital real estate, upon Xxxxx'x release of Xx. Xxxxxxxxx'x guarantee in
Xxxxx'x favor of the tenant's obligations under the Xxxxxxx Hospital lease. Xx.
Xxxx shall provide his personal guarantee of the tenant's obligations in place
of that of Xx. Xxxxxxxxx, in a for substantially identical to the form of
guaranty provided by Xx. Xxxxxxxxx to Xxxxx. The provisions of this Agreement,
including the exhibits hereto, shall only be effective upon (i) receipt by Xx.
Xxxxxxxxx of written evidence reasonably satisfactory to him, and executed by
Xxxxx, setting forth Xxxxx'x acceptance and release as described above, (ii)
receipt by Xx. Xxxxxxxxx of the payment of $10,000,000 plus accrued interest
referred to in Section 6, (iii) receipt by Xx. Xxxxxxxxx and Xxxxxx of fully
executed originals of the New Notes and New Warrants, and (iv) execution and
delivery of a mutually agreeable Operating Agreement for the LLC pursuant to
Section 7 above. If all of the foregoing conditions are not fully satisfied by
5:00 p.m. on January 31, 2005, Xx. Xxxxxxxxx shall be entitled to terminate this
Agreement, in which case nothing in this Agreement, including all rescissions,
amendments and restructurings, shall be of any force or effect.
10. MUTUAL RELEASE. Except with respect to obligations created in or
expressly continued by this Agreement and in the New Warrants and New Notes,
each of Xx. Xxxxxxxxx and Xxxxxx, on the one hand, and the Company and OC-PIN,
on the other hand, on behalf of themselves and their successors and assigns,
hereby release and discharge the other and the other's representatives,
officers, directors, agents, employees, attorneys, successors and assigns from
any claims, demands, actions, causes of action, losses and liabilities of any
kind or nature whatsoever that the party may have, may have had in the past, or
may have in the future, whether known or unknown, suspected or unsuspected, now
due or contingent, to the full extent that any such claim, demand, action, cause
of action, loss or liability arises out of or is in any way related to the
Purchase Agreement, the Convertible Note, the Secured Note, the Stock Option
Agreement, the Xxxxx Transaction or OC-PIN's investment in or other financial
arrangements with the Company. Each of the parties hereby acknowledges and
agrees that he or it is aware of, has read, has had explained to him or it by
independent counsel of his or its own choosing, understands, and hereby waives
the provisions of California Civil Code Section 1542, which reads:
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A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which, if known by him must materially have affected
his settlement with the debtor.
Xx. Xxxxxxxxx also agrees to release the individual members of the Medical
Staff, as that term is defined in the Agreement dated as of January 25, 2005
among the Company, Xx. Xxxxxxxxx, Xxxxxxx Medical Center, Inc., Coastal
Communities Hospital, Inc.; WMCA, Inc. and WMC-SA, Inc. and the Medical Staff of
Western Medical Center - Santa Xxx, an unincorporated association (the "STAFF
AGREEMENT"), as more specifically set forth in Section 11 of the Staff
Agreement.
11. MISCELLANEOUS.
11.1 AMENDMENT. This Agreement may be modified or amended only by
mutual written agreement of the parties. Any such modification or amendment must
be in writing, dated and signed by the parties and attached to this Agreement.
11.2 BINDING EFFECT. Subject to the foregoing, this Agreement shall
be binding on and shall inure to the benefit of the parties and their respective
successors and assigns.
11.3 ATTORNEYS' FEES. In any action or dispute, at law or in equity,
that may arise under or otherwise relate to this Agreement, the prevailing party
shall be entitled to the award of reasonable attorneys' fees and costs, in
addition to whatever relief the prevailing party may be awarded; provided,
however, that so long as the present Company Board of Directors remains in
place, the parties agree to bear their own fees and costs in the event of any
dispute.
11.4 VENUE. The parties agree that Orange County, California shall
be the only proper venue for disputes related to this Agreement.
11.5 ENTIRE AGREEMENT. This Agreement, along with the New Notes, New
Warrants and General Continuing Guaranty, and the Purchase Agreement and the
Security Agreement, as amended hereby, represents the entire understanding and
agreement of the parties regarding its subject matter, and supersedes any prior
oral or written agreements, representations, understandings or discussions
between the parties. No other understanding between the parties shall be binding
on them unless set forth in writing and signed by the party against whom the
understanding is to be enforced.
11.6 SPECIFIC PERFORMANCE. The parties acknowledge that the LLC
membership interests, the real estate to be acquired by the LLC, the New Notes
and the New Warrants are unique, and that damages would not be an adequate
remedy for Xx. Xxxxxxxxx and Xxxxxx in the event of the Company's or OC-PIN's
failure to perform any of their obligations hereunder and under the New Warrants
(including, without limitation, its obligation to deliver the Shares if Xx.
Xxxxxxxxx or Xxxxxx elects to exercise his New Warrant). As a result, the
parties agree that this Agreement may be enforced by any party by specific
performance.
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11.7 GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of California, except the conflicts
of laws provisions that would require the application of the laws of any other
jurisdiction.
11.8 HEADINGS. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
11.9 MEANING OF CERTAIN WORDS. Wherever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular form of nouns shall include the
plural and vice versa.
11.10 NO THIRD-PARTY BENEFICIARY RIGHTS. The parties do not intend
to confer and this Agreement shall not be construed to confer any rights or
benefits to any person, firm, corporation or entity other than the parties.
11.11 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 COMPANY, ADDRESSED TO:
Integrated Healthcare Holdings, Inc.
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Chief Executive Officer
IF TO XX. XXXXXXXXX OR TO XXXXXX, ADDRESSED TO:
c/o Strategic Global Management, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
IF TO XX. XXXX OR TO OC-PIN, ADDRESSED TO:
c/o Orange County Physicians Investment Network, LLC
0000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Attention: Xxxx X. Xxxx, Manager
11.12 SEVERABILITY. If any provision of this Agreement is determined
to be illegal or unenforceable, that provision shall be severed from this
Agreement, and such severance shall have no effect upon the enforceability of
the remainder of this Agreement.
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11.13 WAIVER. No delay or failure to require performance of any
provision of this Agreement shall constitute a waiver of that provision as to
that or any other instance. Any waiver granted by a party must be in writing to
be effective, and shall apply solely to the specific instance expressly stated.
11.14 CONFIDENTIALITY. Neither party shall disclose any of the terms
of this Agreement to any person or entity (other than its attorneys or
accountants) without the prior written consent of the other party, unless and
only to the extent such disclosure is required by law, including the 1933 Act.
11.15 DISPUTE RESOLUTION. In the event of any dispute arising out of
or relating to this Agreement, 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.
11.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
* * *
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first written above.
THE COMPANY: INTEGRATED HEALTHCARE HOLDINGS,
INC., a Nevada corporation
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxx, President
XX. XXXXXXXXX: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------------
XXXX X. XXXXXXXXX, M.D.
OC-PIN: ORANGE COUNTY PHYSICIANS
INVESTMENT NETWORK, LLC, a Nevada
limited liability company
By: /s/ Xxxx X. Xxxx
-------------------------------------
Xxxx X. Xxxx, M.D., Manager
For purposes of Sections 3 and 10 only:
I hereby accept the assignment of a portion of Xx. Xxxxxxxxx'x rights as set
forth in Section 3, and agree to be bound by the provisions of a Stock Purchase
Warrant substantially in the form attached hereto as Exhibit B-2, and by the
provisions of Section 10. Except as expressly set forth above, I am not a party
to this Agreement and have given no representations, warranties or assurances to
any person.
XXXXXX: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
XXXXXXX X. XXXXXX
For purposes of Sections 2(a) and 9 only:
I hereby agree to the rescission of the Non-Circumvention Agreement on the terms
and conditions set forth in Section 2(a), and to providing a personal guarantee
as set forth in Section 9. Except as expressly set forth above, I am not a party
to this Agreement and have given no representations, warranties or assurances to
any person.
XX. XXXX /s/ Xxxx X. Xxxx
-----------------------------------------
XXXX X. XXXX, M.D.
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Approved as to form:
----------------------------------------
Xxxxx Xxxxx, Esq. of Xxxxx & Xxxxxx, LLP
attorneys for Xx. Xxxxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxx, Esq. of Xxxxxxxx &
Xxxxxxxx, LLP
attorneys for the Company
----------------------------------------
Xxxx X. Xxx, Esq. of The Lal Law Firm,
Inc.
attorneys for Xx. Xxxx and OC-PIN
12
EXHIBIT A-1
FORM OF
NON-CONVERTIBLE NOTE
$__________ Costa Mesa, California
January 27, 2005
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation (the "COMPANY"), promises to pay to the order of Xxxx X.
Xxxxxxxxx, M.D. ("HOLDER"), at c/o 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxxx 00000, or at such other location as is designated by Holder in
writing hereunder, the aggregate sum of ________________ Dollars ($_______),
bearing simple interest on the unpaid principal balance of this Note, from the
date of this Note until this Note is paid in full at a rate of five percent
(5.0%) per annum. Accrued interest shall be computed based on the actual number
of days elapsed. Interest only shall be payable on the first Business Day of
each calendar month beginning February 1, 2005. All principal and accrued but
unpaid interest will be due and payable in full at the Closing of the Xxxxx
Transaction, or on demand at any time after February 28, 2005 if the Xxxxx
Transaction has not closed by that date (the "DUE DATE"). All payments shall be
made in lawful money of the United States, without offset, deduction, or
counterclaim of any kind.
1. TERMS. Capitalized terms used herein without definition have the
meanings ascribed to them in the Rescission, Restructuring and Assignment
Agreement of even date herewith by and among the Company, Holder and certain
other parties thereto.
2 PAYMENTS AND COMPUTATIONS. All payments on account of indebtedness
evidenced by this Note shall be made not later than 11:00 A.M. (California time)
on the day when due in lawful money of the United States and shall be first
applied to interest due on the unpaid principal balance and the remainder to any
principal due. Payments are to be made at such place as Holder or any legal
holder of this Note may, from time to time, in writing specify, and in the
absence of a specification, at the principal place of business of Holder as set
forth in the first paragraph of this Note. The Company may pre-pay the full
amount of all principal of and accrued interest under this Note at any time
without premium or penalty.
3. SECURITY. Repayment of this Note is secured pursuant to the terms of a
Security Agreement dated September 28, 2004, and is guarantied by a Continuing
General Guaranty dated January 27, 2005 by Orange County Physicians Investment
Network, LLC.
4. ATTORNEYS' FEES. If any action is instituted on this Note, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which the party or parties may be
entitled. Diligence, demand, presentment, notice of dishonor, and protest are
waived by the Company, and any and all makers, sureties, guarantors, and
endorsers of this Note, and their successors and assigns. Time is of the essence
for every obligation under this Note.
1
6. LAW. This Note shall be construed under the laws of the State of
California, as such laws are applied to contracts entered into and performed
entirely within that state by residents thereof.
7. RULES OF CONSTRUCTION/REPRESENTATION. The parties agree that they are
sophisticated business persons or entities who have had the opportunity to be
represented by counsel during the negotiation and execution of this Note and,
therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8. DISPUTE RESOLUTION. In the event of any dispute arising out of or
relating to this Note, 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.
IN WITNESS WHEREOF, the Company has executed and delivered this Note as of
the day and year and at the place first above written.
INTEGRATED HEALTHCARE HOLDINGS, INC.
By:
--------------------------------------
Xxxxx X. Xxxxxxxx, President
2
EXHIBIT A-2
FORM OF
NON-CONVERTIBLE NOTE
$__________ Costa Mesa, California
January 27, 2005
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation (the "COMPANY"), promises to pay to the order of Xxxxxxx X.
Xxxxxx ("HOLDER"), at c/o 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx
00000, or at such other location as is designated by Holder in writing
hereunder, the aggregate sum of ________________ Dollars ($_______), bearing
simple interest on the unpaid principal balance of this Note, from the date of
this Note until this Note is paid in full at a rate of five percent (5.0%) per
annum. Accrued interest shall be computed based on the actual number of days
elapsed. Interest only shall be payable on the first Business Day of each
calendar month beginning February 1, 2005. All principal and accrued but unpaid
interest will be due and payable in full at the Closing of the Xxxxx
Transaction, or on demand at any time after February 28, 2005 if the Xxxxx
Transaction has not closed by that date (the "DUE DATE"). All payments shall be
made in lawful money of the United States, without offset, deduction, or
counterclaim of any kind.
1. TERMS. Capitalized terms used herein without definition have the
meanings ascribed to them in the Rescission, Restructuring and Assignment
Agreement of even date herewith by and among the Company, Holder and certain
other parties thereto.
2 PAYMENTS AND COMPUTATIONS. All payments on account of indebtedness
evidenced by this Note shall be made not later than 11:00 A.M. (California time)
on the day when due in lawful money of the United States and shall be first
applied to interest due on the unpaid principal balance and the remainder to any
principal due. Payments are to be made at such place as Holder or any legal
holder of this Note may, from time to time, in writing specify, and in the
absence of a specification, at the principal place of business of Holder as set
forth in the first paragraph of this Note. The Company may pre-pay the full
amount of all principal of and accrued interest under this Note at any time
without premium or penalty.
3. SECURITY. Repayment of this Note is secured pursuant to the terms of a
Security Agreement dated September 28, 2004, and is guarantied by a Continuing
General Guaranty dated January 27, 2005 by Orange County Physicians Investment
Network, LLC.
4. ATTORNEYS' FEES. If any action is instituted on this Note, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which the party or parties may be
entitled. Diligence, demand, presentment, notice of dishonor, and protest are
waived by the Company, and any and all makers, sureties, guarantors, and
endorsers of this Note, and their successors and assigns. Time is of the essence
for every obligation under this Note.
1
6. LAW. This Note shall be construed under the laws of the State of
California, as such laws are applied to contracts entered into and performed
entirely within that state by residents thereof.
7. RULES OF CONSTRUCTION/REPRESENTATION. The parties agree that they are
sophisticated business persons or entities who have had the opportunity to be
represented by counsel during the negotiation and execution of this Note and,
therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8. DISPUTE RESOLUTION. In the event of any dispute arising out of or
relating to this Note, 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.
IN WITNESS WHEREOF, the Company has executed and delivered this Note as of
the day and year and at the place first above written.
INTEGRATED HEALTHCARE HOLDINGS, INC.
By:
--------------------------------------
Xxxxx X. Xxxxxxxx, President
2
EXHIBIT B-1
FORM OF
STOCK PURCHASE WARRANT
60,000,000 Shares January 27, 2005
This certifies that, for good and valuable consideration, receipt of which
is hereby acknowledged, Xxxx X. Xxxxxxxxx, M.D. (the "HOLDER") is entitled to
purchase, subject to the terms and conditions of this Warrant, from Integrated
Healthcare Holdings, Inc, a Nevada corporation (the "COMPANY"), Sixty Million
(60,000,000) shares of the Company's common stock (the "SHARES") in accordance
with Section 3 during the period commencing on the second anniversary of the
date hereof (the "COMMENCEMENT DATE") and ending at 5:00 p.m. California time,
on the date which is three and one-half (3 1/2) years from the date hereof (the
"EXPIRATION DATE"), at which time this Warrant will expire and become void
unless earlier terminated as provided herein. Notwithstanding the foregoing,
this Warrant may not be exercised in an amount that would exceed, when added to
the number of shares of common stock of the Company previously acquired by the
Holder by virtue of exercise of this Warrant (or any replacement Warrant),
twenty percent (20%) of the total number of outstanding shares of capital stock
of the Company on a Fully-Diluted basis on the date of exercise. Capitalized
terms used herein without definition have the meanings ascribed to them in the
Rescission, Restructuring and Assignment Agreement of even date herewith by and
among the Company, the Holder and certain other parties thereto.
1. VESTING AND EXERCISE PRICE.
(a) The right to exercise this Warrant shall fully vest on the
Commencement Date.
(b) The exercise or purchase price for the first 34,538,153 Shares
purchased upon exercise of this Warrant shall be $0.003125 per Share, and
the exercise or purchase price for the remainder of the Shares shall be
$0.078 per Share if exercised between January 27, 2007 and July 26, 2007,
$0.11 per Share if exercised between July 27, 2007 and January 26, 2008,
and $0.15 thereafter, all subject to adjustment as provided in Section 2
(the "EXERCISE PRICE").
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 the Company 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 the Company are
combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.
1
(b) Whenever the Exercise Price payable upon exercise of this
Warrant 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) the Company shall give notice to the Holder of any event or
transaction that results in an adjustment in the Exercise Price, within
ten (10) business days thereof, at the Holder's address as it appears on
the books of the Company, including a computation of such adjustment and
any adjustment in the number of Shares for which the Holder may exercise
this Warrant and any further information as shall be necessary to confirm
the computation of such adjustments.
(d) So long as this Warrant is outstanding, if (i) the Company pays
any dividend or makes any distribution upon the Common Stock, (ii) the
Company 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 the Company,
reclassification of the capital stock of the Company, consolidation,
merger or other business combination of the Company with or into another
entity, sale, lease or transfer of all or substantially all of the assets
of the Company to another entity, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, then in any
such case, the Company shall cause to be mailed by certified mail to the
Holder, at least ten (10) 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. EXERCISE AND PAYMENT.
3.1 CASH EXERCISE. At any time after the Commencement Date, this
Warrant may be exercised, in whole or in part, from time to time by the Holder,
during the term hereof, by surrender of this Warrant and the Notice of Exercise
annexed hereto duly completed and executed by the Holder to the Company at the
principal executive offices of the Company, together with payment in the amount
of the Exercise Price then in effect, as designated in the Notice of Exercise.
Payment may be in cash or by check payable to the order of the Company.
3.2 NET ISSUANCE. In lieu of payment of the Exercise Price described
in Section 3.1, the Holder may elect to receive, without the payment by the
Holder of any additional consideration, Shares equal to the value of this
Warrant or any portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto (the "NET
ISSUANCE ELECTION NOTICE") duly executed, at the office of the Company.
Thereupon, the Company shall issue to the Holder such number of fully paid and
nonassessable Shares as is computed using the following formula:
2
where: X = Y (A-B)
-------
A
X = the number of Shares to be issued to the Holder pursuant to
this Section 3.
Y = the number of Shares covered by this Warrant in respect of
which the net issuance election is made pursuant to this
Section 3.
A = the fair market value of one Share, as determined in
accordance with the provisions of this Section 3.
B = the Exercise Price in effect under this Warrant at the time
the net issuance election is made pursuant to this Section 3.
For purposes of this Section 3, the "fair market value" per Share shall mean:
i. If the class of Shares is traded on a national securities
exchange or is listed on the Nasdaq National Market (the "NNM")
or other over-the-counter quotation system, the fair market value
shall be the last reported sale price of a Share on such exchange
or on the NNM or other over-the-counter quotation system on the
last business day before the effective date of exercise of the
net issuance election or if no such sale is made on such day, the
mean of the closing bid and asked prices for such day on such
exchange, the NNM or over-the-counter quotation system; and
ii. If the class of Shares is not so listed and bid and ask
prices are not reported, the fair market value shall be the price
per Share which the Company could obtain from a willing buyer for
Shares sold by the Company, as such price shall be determined in
good faith by the Company's Board of Directors.
3.3 NO PARTIAL EXERCISE. This Warrant, if exercised, may only be
exercised as to the full number of Shares that may be permitted to be purchased
at the time of exercise. No partial exercises are permitted.
4. DELIVERY OF CERTIFICATES. Within five (5) business days after exercise,
in whole or in part, of this Warrant, the Company shall issue in the name of and
deliver to the Holder, a certificate or certificates for the number of fully
paid and nonassessable Shares which the Holder shall have requested in the
Notice of Exercise or Net Issuance Election Notice. If this Warrant is exercised
in part, the Company shall deliver to the Holder a new Warrant for the
unexercised portion of this Warrant at the time of delivery of such certificate
or certificates.
5. NO FRACTIONAL SHARES. No fractional Shares or scrip representing
fractional Shares will be issued upon exercise of this Warrant. If upon any
exercise of this Warrant a fraction of a Share results, the Company will pay the
Holder the difference between the cash value of the fractional Share and the
portion of the Exercise Price allocable to the fractional Share.
3
6. CHARGES, TAXES AND EXPENSES. The Holder shall pay all transfer taxes or
other incidental charges, if any, in connection with the transfer of the Shares
purchased pursuant to the exercise hereof from the Company to the Holder.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
8. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights as a shareholder of the Company with respect
to the Shares, including (without limitation) the right to vote such Shares,
receive dividends or other distributions thereon, or be notified of Shareholder
meetings, and the Holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company. However, in the
event of any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any Common Stock or any
other securities or property, or to receive any other right, the Company shall
mail to each Holder of this Warrant, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
9. RESTRICTED SECURITIES. The Holder understands that this Warrant and the
Shares purchasable hereunder constitute "restricted securities" under the
federal securities laws inasmuch as they are, or will be, acquired from the
Company in transactions not involving a public offering and accordingly may not,
under such laws and applicable regulations, be resold or transferred without
registration under the Securities Act of 1933 (the "1933 ACT") or an applicable
exemption from such registration. In this connection, the Holder acknowledges
that Rule 144 of the Securities and Exchange Commission (the "SEC") is not now,
and may not in the future be, available for resale of the Warrant and the Shares
purchasable hereunder. Unless the Shares are subsequently registered, the Holder
further acknowledges that the securities legend on Exhibit A to the Notice of
Exercise attached hereto shall be placed on any Shares issued to the Holder upon
exercise of this Warrant.
10. CERTIFICATION OF INVESTMENT PURPOSE. Unless a current registration
statement under the 1933 Act is in effect with respect to the securities to be
issued upon exercise of this Warrant, the Holder covenants and agrees that, at
the time of exercise hereof, he will deliver to the Company a written
certification executed by the Holder that the securities acquired by such Holder
upon exercise hereof are for the account of such Holder and acquired for
investment purposes only and that such securities are not acquired with a view
to, or for sale in connection with, any distribution thereof.
4
11. TRANSFERABILITY. This Warrant shall be transferable by the Holder
subject to compliance with law.
12. MISCELLANEOUS.
12.1 CONSTRUCTION. Unless the context indicates otherwise, the term
"Holder" shall include any transferee or transferees of this Warrant, and the
term "Warrant" shall include any and all warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer.
12.2 RESTRICTIONS. By receipt of this Warrant, the Holder makes the
same representations with respect to the acquisition of this Warrant as the
Holder is required to make upon the exercise of this Warrant and acquisition of
the Shares purchasable hereunder as set forth in the Form of Investment Letter
attached as Exhibit A to the Notice of Exercise attached hereto.
12.3 NOTICES. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or three
(3) days following deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified (or
one (1) day following timely deposit with a reputable overnight courier with
next day delivery instructions), or upon confirmation of receipt by the sender
of any notice by facsimile transmission, at the address indicated below or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties.
If to the Company, addressed to: Integrated Healthcare Holdings, Inc.
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Chief Executive Officer
If to the Holder, addressed to: c/o Strategic Global Management, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
12.4 GOVERNING LAW. This Warrant shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
12.5 ENTIRE AGREEMENT. This Warrant, the exhibits and schedules
hereto, and the documents referred to herein, constitute the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof.
5
12.6 BINDING EFFECT. This Warrant and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Company and its successors and assigns, and Holder and its successors and
assigns.
12.7 WAIVER; CONSENT. This Warrant may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Warrant or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto.
12.8 SEVERABILITY. If one or more provisions of this Warrant are
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and the balance shall be enforceable in accordance
with its terms.
12.9 DISPUTE RESOLUTION. In the event of any dispute arising out of
or relating to this Warrant, 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.
IN WITNESS WHEREOF, the parties have executed this Warrant as of the date
first above written.
"HOLDER": -----------------------------------------
XXXX X. XXXXXXXXX, M.D., an individual
"COMPANY": INTEGRATED HEALTHCARE HOLDINGS,
INC., a Nevada corporation
By:
--------------------------------------
Xxxxx X. Xxxxxxxx, President
6
NOTICE OF EXERCISE
To: INTEGRATED HEALTHCARE HOLDINGS, INC.
The undersigned hereby elects to purchase _____________ shares of
_________ Stock (the "Shares") of Integrated Healthcare Holdings, Inc., a Nevada
corporation (the "Company") pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price pursuant to the terms of the
Warrant.
Attached as Exhibit A is an investment representation letter
addressed to the Company and executed by the undersigned as required by Section
10 of the Warrant.
Please issue certificates representing the Common Stock purchased
hereunder in the names and in the denominations indicated on Exhibit A attached
hereto.
Please issue a new Warrant for the unexercised portion of the
attached Warrant, if any, in the name of the undersigned.
Dated:
-------------------------------- -----------------------------------
Name:
-----------------------------
Title:
-----------------------------
NET ISSUANCE ELECTION NOTICE
To: INTEGRATED HEALTHCARE HOLDINGS, INC.
Date:_____________
The undersigned hereby elects under Section 3.2 of the attached Warrant to
surrender the right to purchase ___________ shares of ___________ Stock (the
"Shares") pursuant to the attached Warrant. The Certificate(s) for the Shares
issuable upon such net issuance election shall be issued in the name of the
undersigned or as otherwise indicated below.
Attached as Exhibit A is an investment representation letter addressed to
the Company and executed by the undersigned as required by Section 10 of the
Warrant.
Please issue certificates representing the Shares purchased hereunder in
the names and in the denominations indicated on Exhibit A attached hereto.
Please issue a new Warrant for the unexercised portion of the attached
Warrant, if any, in the name of the undersigned.
---------------------------
Signature
---------------------------
Name for Registration
---------------------------
Mailing Address
EXHIBIT A
To: INTEGRATED HEALTHCARE HOLDINGS, INC.
In connection with the purchase by the undersigned of _________ shares of
Common Stock (the "SHARES") of Integrated Healthcare Holdings, Inc., a Nevada
corporation (the "COMPANY"), upon exercise of that certain Warrant dated as of
January 27, 2005, the undersigned hereby represents and warrants as follows:
The Shares to be received by the undersigned upon exercise of the Warrant
are being acquired for his own account, not as a nominee or agent, and not with
a view to resale or distribution of any part thereof, and the undersigned has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The undersigned further represents that he does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to the Shares. The undersigned believes he has received all the
information he considers necessary or appropriate for deciding whether to
purchase the Shares.
The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"ACT"), only in certain limited circumstances. In this connection, the
undersigned represents that he is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
Without in any way limiting the representations set forth above, the
undersigned agrees not to make any disposition of all or any portion of the
Shares unless and until:
There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or
(i) The undersigned has notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement
of the circumstances surrounding the proposed disposition, and
(ii) if requested, the undersigned has furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such shares under the Act.
The Company will not require an opinion of counsel for sales made pursuant
to Rule 144 except in unusual circumstances.
The undersigned understands the instruments evidencing the Shares may bear
a legend similar to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
Dated:
-------------------------------- ------------------------------------
Name:
-----------------------------
Title:
-----------------------------
EXHIBIT B-2
FORM OF
STOCK PURCHASE WARRANT
14,700,000 Shares January 27, 2005
This certifies that, for good and valuable consideration, receipt of which
is hereby acknowledged, Xxxxxxx X. Xxxxxx (the "HOLDER") is entitled to
purchase, subject to the terms and conditions of this Warrant, from Integrated
Healthcare Holdings, Inc, a Nevada corporation (the "COMPANY"), Fourteen
Million, Seven Hundred Thousand (14,700,000) shares of the Company's common
stock (the "SHARES") in accordance with Section 3 during the period commencing
on the second anniversary of the date hereof (the "COMMENCEMENT DATE") and
ending at 5:00 p.m. California time, on the date which is three and one-half (3
1/2) years from the date hereof (the "EXPIRATION DATE"), at which time this
Warrant will expire and become void unless earlier terminated as provided
herein. Notwithstanding the foregoing, this Warrant may not be exercised in an
amount that would exceed, when added to the number of shares of common stock of
the Company previously acquired by the Holder by virtue of exercise of this
Warrant (or any replacement Warrant), four and nine-tenths percent (4.9%) of the
total number of outstanding shares of capital stock of the Company on a
Fully-Diluted basis on the date of exercise. Capitalized terms used herein
without definition have the meanings ascribed to them in the Rescission,
Restructuring and Assignment Agreement of even date herewith by and among the
Company, the Holder and certain other parties thereto.
1. VESTING AND EXERCISE PRICE.
(a) The right to exercise this Warrant shall fully vest on the
Commencement Date.
(b) The exercise or purchase price for the first 8,461,847 Shares
purchased upon exercise of this Warrant shall be $0.003125 per Share, and
the exercise or purchase price for the remainder of the Shares shall be
$0.078 per Share if exercised between January 27, 2007 and July 26, 2007,
$0.11 per Share if exercised between July 27, 2007 and January 26, 2008,
and $0.15 thereafter, all subject to adjustment as provided in Section 2
(the "EXERCISE PRICE").
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 the Company 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 the Company are
combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.
1
(b) Whenever the Exercise Price payable upon exercise of this
Warrant 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) the Company shall give notice to the Holder of any event or
transaction that results in an adjustment in the Exercise Price, within
ten (10) business days thereof, at the Holder's address as it appears on
the books of the Company, including a computation of such adjustment and
any adjustment in the number of Shares for which the Holder may exercise
this Warrant and any further information as shall be necessary to confirm
the computation of such adjustments.
(d) So long as this Warrant is outstanding, if (i) the Company pays
any dividend or makes any distribution upon the Common Stock, (ii) the
Company 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 the Company,
reclassification of the capital stock of the Company, consolidation,
merger or other business combination of the Company with or into another
entity, sale, lease or transfer of all or substantially all of the assets
of the Company to another entity, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, then in any
such case, the Company shall cause to be mailed by certified mail to the
Holder, at least ten (10) 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. EXERCISE AND PAYMENT.
3.1 CASH EXERCISE. At any time after the Commencement Date, this
Warrant may be exercised, in whole or in part, from time to time by the Holder,
during the term hereof, by surrender of this Warrant and the Notice of Exercise
annexed hereto duly completed and executed by the Holder to the Company at the
principal executive offices of the Company, together with payment in the amount
of the Exercise Price then in effect, as designated in the Notice of Exercise.
Payment may be in cash or by check payable to the order of the Company.
3.2 NET ISSUANCE. In lieu of payment of the Exercise Price described
in Section 3.1, the Holder may elect to receive, without the payment by the
Holder of any additional consideration, Shares equal to the value of this
Warrant or any portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto (the "NET
ISSUANCE ELECTION NOTICE") duly executed, at the office of the Company.
Thereupon, the Company shall issue to the Holder such number of fully paid and
nonassessable Shares as is computed using the following formula:
2
where: X = Y (A-B)
-------
A
X = the number of Shares to be issued to the Holder pursuant to
this Section 3.
Y = the number of Shares covered by this Warrant in respect of
which the net issuance election is made pursuant to this
Section 3.
A = the fair market value of one Share, as determined in
accordance with the provisions of this Section 3.
B = the Exercise Price in effect under this Warrant at the time
the net issuance election is made pursuant to this Section 3.
For purposes of this Section 3, the "fair market value" per Share shall mean:
i. If the class of Shares is traded on a national securities
exchange or is listed on the Nasdaq National Market (the "NNM")
or other over-the-counter quotation system, the fair market value
shall be the last reported sale price of a Share on such exchange
or on the NNM or other over-the-counter quotation system on the
last business day before the effective date of exercise of the
net issuance election or if no such sale is made on such day, the
mean of the closing bid and asked prices for such day on such
exchange, the NNM or over-the-counter quotation system; and
ii. If the class of Shares is not so listed and bid and ask
prices are not reported, the fair market value shall be the price
per Share which the Company could obtain from a willing buyer for
Shares sold by the Company, as such price shall be determined in
good faith by the Company's Board of Directors.
3.3 NO PARTIAL EXERCISE. This Warrant, if exercised, may only be
exercised as to the full number of Shares that may be permitted to be purchased
at the time of exercise. No partial exercises are permitted.
4. DELIVERY OF CERTIFICATES. Within five (5) business days after exercise,
in whole or in part, of this Warrant, the Company shall issue in the name of and
deliver to the Holder, a certificate or certificates for the number of fully
paid and nonassessable Shares which the Holder shall have requested in the
Notice of Exercise or Net Issuance Election Notice. If this Warrant is exercised
in part, the Company shall deliver to the Holder a new Warrant for the
unexercised portion of this Warrant at the time of delivery of such certificate
or certificates.
5. NO FRACTIONAL SHARES. No fractional Shares or scrip representing
fractional Shares will be issued upon exercise of this Warrant. If upon any
exercise of this Warrant a fraction of a Share results, the Company will pay the
Holder the difference between the cash value of the fractional Share and the
portion of the Exercise Price allocable to the fractional Share.
3
6. CHARGES, TAXES AND EXPENSES. The Holder shall pay all transfer taxes or
other incidental charges, if any, in connection with the transfer of the Shares
purchased pursuant to the exercise hereof from the Company to the Holder.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
8. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights as a shareholder of the Company with respect
to the Shares, including (without limitation) the right to vote such Shares,
receive dividends or other distributions thereon, or be notified of Shareholder
meetings, and the Holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company. However, in the
event of any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any Common Stock or any
other securities or property, or to receive any other right, the Company shall
mail to each Holder of this Warrant, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
9. RESTRICTED SECURITIES. The Holder understands that this Warrant and the
Shares purchasable hereunder constitute "restricted securities" under the
federal securities laws inasmuch as they are, or will be, acquired from the
Company in transactions not involving a public offering and accordingly may not,
under such laws and applicable regulations, be resold or transferred without
registration under the Securities Act of 1933 (the "1933 ACT") or an applicable
exemption from such registration. In this connection, the Holder acknowledges
that Rule 144 of the Securities and Exchange Commission (the "SEC") is not now,
and may not in the future be, available for resale of the Warrant and the Shares
purchasable hereunder. Unless the Shares are subsequently registered, the Holder
further acknowledges that the securities legend on Exhibit A to the Notice of
Exercise attached hereto shall be placed on any Shares issued to the Holder upon
exercise of this Warrant.
10. CERTIFICATION OF INVESTMENT PURPOSE. Unless a current registration
statement under the 1933 Act is in effect with respect to the securities to be
issued upon exercise of this Warrant, the Holder covenants and agrees that, at
the time of exercise hereof, he will deliver to the Company a written
certification executed by the Holder that the securities acquired by such Holder
upon exercise hereof are for the account of such Holder and acquired for
investment purposes only and that such securities are not acquired with a view
to, or for sale in connection with, any distribution thereof.
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11. TRANSFERABILITY. This Warrant shall be transferable by the Holder
subject to compliance with law.
12. MISCELLANEOUS.
12.1 CONSTRUCTION. Unless the context indicates otherwise, the term
"Holder" shall include any transferee or transferees of this Warrant, and the
term "Warrant" shall include any and all warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer.
12.2 RESTRICTIONS. By receipt of this Warrant, the Holder makes the
same representations with respect to the acquisition of this Warrant as the
Holder is required to make upon the exercise of this Warrant and acquisition of
the Shares purchasable hereunder as set forth in the Form of Investment Letter
attached as Exhibit A to the Notice of Exercise attached hereto.
12.3 NOTICES. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or three
(3) days following deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified (or
one (1) day following timely deposit with a reputable overnight courier with
next day delivery instructions), or upon confirmation of receipt by the sender
of any notice by facsimile transmission, at the address indicated below or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties.
If to the Company, addressed to: Integrated Healthcare Holdings, Inc.
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Chief Executive Officer
If to the Holder, addressed to: c/o Strategic Global Management, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
12.4 GOVERNING LAW. This Warrant shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
12.5 ENTIRE AGREEMENT. This Warrant, the exhibits and schedules
hereto, and the documents referred to herein, constitute the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof.
5
12.6 BINDING EFFECT. This Warrant and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Company and its successors and assigns, and Holder and its successors and
assigns.
12.7 WAIVER; CONSENT. This Warrant may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Warrant or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto.
12.8 SEVERABILITY. If one or more provisions of this Warrant are
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and the balance shall be enforceable in accordance
with its terms.
12.9 DISPUTE RESOLUTION. In the event of any dispute arising out of
or relating to this Warrant, 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.
IN WITNESS WHEREOF, the parties have executed this Warrant as of the date
first above written.
"HOLDER": -----------------------------------------
XXXXXXX X. XXXXXX, an individual
"COMPANY": INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation
By:
--------------------------------------
Xxxxx X. Xxxxxxxx, President
6
NOTICE OF EXERCISE
To: INTEGRATED HEALTHCARE HOLDINGS, INC.
The undersigned hereby elects to purchase _____________ shares of
_________ Stock (the "Shares") of Integrated Healthcare Holdings, Inc., a Nevada
corporation (the "Company") pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price pursuant to the terms of the
Warrant.
Attached as Exhibit A is an investment representation letter
addressed to the Company and executed by the undersigned as required by Section
10 of the Warrant.
Please issue certificates representing the Common Stock purchased
hereunder in the names and in the denominations indicated on Exhibit A attached
hereto.
Please issue a new Warrant for the unexercised portion of the
attached Warrant, if any, in the name of the undersigned.
Dated:
------------------------------- ----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
NET ISSUANCE ELECTION NOTICE
To: INTEGRATED HEALTHCARE HOLDINGS, INC.
Date:_____________
The undersigned hereby elects under Section 3.2 of the attached Warrant to
surrender the right to purchase ___________ shares of ___________ Stock (the
"Shares") pursuant to the attached Warrant. The Certificate(s) for the Shares
issuable upon such net issuance election shall be issued in the name of the
undersigned or as otherwise indicated below.
Attached as Exhibit A is an investment representation letter addressed to
the Company and executed by the undersigned as required by Section 10 of the
Warrant.
Please issue certificates representing the Shares purchased hereunder in
the names and in the denominations indicated on Exhibit A attached hereto.
Please issue a new Warrant for the unexercised portion of the attached
Warrant, if any, in the name of the undersigned.
---------------------------
Signature
---------------------------
Name for Registration
---------------------------
Mailing Address
EXHIBIT A
To: INTEGRATED HEALTHCARE HOLDINGS, INC.
In connection with the purchase by the undersigned of _________ shares of
Common Stock (the "SHARES") of Integrated Healthcare Holdings, Inc., a Nevada
corporation (the "COMPANY"), upon exercise of that certain Warrant dated as of
January 27, 2005, the undersigned hereby represents and warrants as follows:
The Shares to be received by the undersigned upon exercise of the Warrant
are being acquired for his own account, not as a nominee or agent, and not with
a view to resale or distribution of any part thereof, and the undersigned has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The undersigned further represents that he does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to the Shares. The undersigned believes he has received all the
information he considers necessary or appropriate for deciding whether to
purchase the Shares.
The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"ACT"), only in certain limited circumstances. In this connection, the
undersigned represents that he is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
Without in any way limiting the representations set forth above, the
undersigned agrees not to make any disposition of all or any portion of the
Shares unless and until:
There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or
(i) The undersigned has notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement
of the circumstances surrounding the proposed disposition, and
(ii) if requested, the undersigned has furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such shares under the Act. The
Company will not require an opinion of counsel for sales made pursuant to
Rule 144 except in unusual circumstances.
The undersigned understands the instruments evidencing the Shares may bear
a legend similar to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
Dated:
------------------------------- --------------------------------------
Name:
----------------------------------
Title:
----------------------------------
EXHIBIT C
FORM OF
GENERAL CONTINUING GUARANTY
THIS GENERAL CONTINUING GUARANTY ("GUARANTY"), dated as of January 27,
2005, is executed and delivered by Orange County Physicians Investment Network,
LLC ("GUARANTOR") in favor of Xxxx X. Xxxxxxxxx, M.D. and Xxxxxxx X. Xxxxxx
(collectively, the "HOLDERS"), in light of the following:
WHEREAS, the Company, Guarantor and the Holders have entered into a
Rescission Restructuring and Assignment Agreement dated as of January 27, 2005
("AGREEMENT"), pursuant to which, among other things, the Company is issuing to
the Holders non-convertible secured promissory notes in the aggregate principal
amount of $____ (collectively, the "NOTES");
WHEREAS, in order to induce the Holders to enter into the Agreement, and
in consideration thereof, and in consideration of any loans or other financial
accommodations heretofore or hereafter extended by the Holders to the Company,
whether pursuant to the Agreement, the Notes or otherwise, each of the
Guarantors has agreed to guaranty the Guarantied Obligations (as defined below);
and
WHEREAS, Guarantor has a financial stake in the Company and derives
substantial economic benefits from the accommodations made by the Holders to the
Company in the Agreement.
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of the Holders, as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Agreement. The
term "Guarantied Obligations", as used in this Guaranty, means: (a) the due and
punctual payment of the principal of, and interest (including, any and all
interest which, but for the application of the provisions of the United States
Bankruptcy Code, would have accrued on such amounts) on, and premium, if any,
on, and the performance of, the Notes; and (b) the due and punctual payment of
all other present or future obligations owing by the Company to the Holders.
1.2 CONSTRUCTION. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the part includes the whole, the terms
"include" and "including" are not limiting, and the term "or" has the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and other similar terms refer to this Guaranty as a whole
and not to any particular provision of this Guaranty. Any reference in this
Guaranty to any of the following documents includes any and all alterations,
amendments, restatements, extensions, modifications, renewals, joinders, or
supplements thereto or thereof, as applicable: the Agreement; this Guaranty; and
the Notes. Neither this Guaranty nor any uncertainty or ambiguity herein shall
be construed or resolved against the Holders or Guarantor whether under any rule
of construction or otherwise. On the contrary, this Guaranty has been reviewed
by Guarantor, the Holders, and their respective counsel, and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of the Holders and Guarantor.
2. GUARANTIED OBLIGATIONS. Guarantor hereby irrevocably and
unconditionally guaranties to the Holders, as and for its own debt, until final
and indefeasible payment thereof has been made, (a) the payment of the
Guarantied Obligations, in each case when and as they become due and payable,
whether at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that the guaranty
set forth herein shall be a guaranty of payment and not a guaranty of
collection; and (b) the punctual and faithful performance, keeping, observance,
and fulfillment by the Company of all of the agreements, conditions, covenants,
and obligations of the Company contained in the Purchase Agreement, and under
each of the Notes.
3. CONTINUING GUARANTY. This Guaranty includes Guarantied Obligations
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the Guarantied Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guarantied Obligations after prior
Guarantied Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, Guarantor hereby waives any right to revoke this
Guaranty as to future Indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a)
no such revocation shall be effective until written notice thereof has been
received by the Holders, (b) no such revocation shall apply to any Guarantied
Obligations in existence on such date (including any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms, or
other terms and conditions thereof), (c) no such revocation shall apply to any
Guarantied Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of the Holders in existence on
the date of such revocation, (d) no payment by Guarantor, the Company, or from
any other source, prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by the Company or from
any source other than Guarantor subsequent to the date of such revocation shall
first be applied to that portion of the Guarantied Obligations as to which the
revocation is effective and which are not, therefore, guarantied hereunder, and
to the extent so applied shall not reduce the maximum obligation of Guarantor
hereunder.
4. PERFORMANCE UNDER THIS GUARANTY. If the Company fails to make any
payment of any Guarantied Obligations, on or before the due date thereof, or if
the Company fails to perform, keep, observe, or fulfill any other obligation
referred to in clause (b) of Section 2 in the manner provided in the Agreement
or the Notes, as applicable, Guarantor immediately shall cause the payment to be
made or each of the obligations to be performed, kept, observed, or fulfilled.
5. PRIMARY OBLIGATIONS. This Guaranty is a primary and original obligation
of Guarantor, is not merely the creation of a surety relationship, and is an
absolute, unconditional, and continuing guaranty of payment and performance
which shall remain in full force and effect without respect to future changes in
conditions. Guarantor agrees that it is directly, jointly and severally with any
other guarantor of the Guarantied Obligations, liable to the Holders, that the
obligations of Guarantor hereunder are independent of the obligations of the
Company or any other guarantor, and that a separate action may be brought
against Guarantor, whether the action is brought against the Company or any
other guarantor or whether the Company or any other guarantor is joined in the
action. Guarantor agrees that its liability hereunder shall be immediate and
shall not be contingent upon the exercise or enforcement by the Holders of
whatever remedies they may have against the Company or any other guarantor, or
the enforcement of any lien or realization upon any security the Holders may at
any time possess. Guarantor agrees that any release which may be given by the
Holders to the Company or any other guarantor shall not release Guarantor.
Guarantor consents and agrees that the Holders shall be under no obligation to
marshal any property or assets of the Company or any other guarantor in favor of
Guarantor, or against or in payment of any or all of the Guarantied Obligations.
2
6. WAIVERS. Guarantor hereby waives: (i) notice of acceptance hereof; (ii)
notice of any loans or other financial accommodations made or extended under the
Agreement, or the creation or existence of any Guarantied Obligations; (iii)
notice of the amount of the Guarantied Obligations, subject, however, to
Guarantor's right to make inquiry of the Holders to ascertain the amount of the
Guarantied Obligations at any reasonable time; (iv) notice of any adverse change
in the financial condition of the Company or of any other fact that might
increase Guarantor's risk hereunder; (v) notice of presentment for payment,
demand, protest, and notice thereof as to the Notes; (vi) notice of any
unmatured event of default or event of default under the Notes; and (vii) all
other notices (except if the notice is specifically required to be given to
Guarantor under this Guaranty or the Notes) and demands to which Guarantor might
otherwise be entitled. To the fullest extent permitted by applicable law,
Guarantor waives the right by statute or otherwise to require the Holders to
institute suit against the Company or to exhaust any rights and remedies which
the Holders have or may have against the Company. In this regard, Guarantor
agrees that it is bound to the payment of each and all Guarantied Obligations,
whether now existing or hereafter arising, as fully as if such Guarantied
Obligations were directly owing to the Holders by Guarantor. Guarantor further
waives any defense arising by reason of any disability or other defense (other
than the defense that the Guarantied Obligations shall have been fully and
finally performed and indefeasibly paid) of the Company or by reason of the
cessation from any cause whatsoever of the liability of the Company in respect
thereof. To the maximum extent permitted by law, Guarantor hereby waives: (i)
any rights to assert against the Holders any defense (legal or equitable), set
off, counterclaim, or claim which any Guarantor may now or at any time hereafter
have against the Company or any other party liable to the Holders; (ii) any
defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guarantied Obligations or any
security therefor; (iii) any defense arising by reason of any claim or defense
based upon an election of remedies by the Holders; (iv) the benefit of any
statute of limitations affecting the Guarantors' liability hereunder or the
enforcement thereof, and any act which shall defer or delay the operation of any
statute of limitations applicable to the Guarantied Obligations shall similarly
operate to defer or delay the operation of such statute of limitations
applicable to the Guarantors' liability hereunder.
3
Until such time as all of the Guarantied Obligations have been fully, finally,
and indefeasibly paid in full in cash: (i) each Guarantor hereby waives and
postpones any right of subrogation any Guarantor has or may have as against the
Company with respect to the Guarantied Obligations; (ii) in addition, each
Guarantor hereby waives and postpones any right to proceed against the Company
or any other Person, now or hereafter, for contribution, indemnity,
reimbursement, or any other suretyship rights and claims (irrespective of
whether direct or indirect, liquidated or contingent), with respect to the
Guarantied Obligations; and (iii) in addition, each Guarantor also hereby waives
and postpones any right to proceed or to seek recourse against or with respect
to any property or asset of the Company. If any of the Guarantied Obligations at
any time are secured by a mortgage or deed of trust upon real property, the
Holders may elect, in their sole discretion, upon a default with respect to the
Guarantied Obligations, to foreclose such mortgage or deed of trust judicially
or nonjudicially in any manner permitted by law, before or after enforcing this
Guaranty, without diminishing or affecting the liability of Guarantor hereunder
except to the extent the Guarantied Obligations are repaid with the proceeds of
the foreclosure.
WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH
IN THIS GUARANTY, GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN
ELECTION OF REMEDIES BY THE CREDITOR, EVEN THOUGH THAT ELECTION OF REMEDIES HAS
DESTROYED GUARANTOR'S RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST THE
PRINCIPAL.
Guarantor agrees that all of the foregoing waivers shall be effective even
though any rights or defenses which Guarantor might otherwise have, by
subrogation, reimbursement, indemnification or otherwise, against the Company,
the Holders or any other person may be diminished, destroyed or otherwise
adversely affected, all to the end that Guarantor shall not be exonerated,
released or discharged (by virtue of the provisions of any statute, case law or
any other law, rule, arrangement or relationship) from its absolute,
unconditional and independent liabilities under this Guaranty.
7. RELEASES. Guarantor consents and agrees that, without notice to or by
Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, the Holders may, by action or inaction, compromise or settle, extend
the period of duration or the time for the payment, or discharge the performance
of, or may refuse to, or otherwise not enforce, or may, by action or inaction,
release all or any one or more parties to, any one or more of the terms and
provisions of the Agreement or the Notes or may grant other indulgences to the
Company in respect thereof, or may amend or modify in any manner and at any time
(or from time to time) any one or more of the Agreement or any of the Notes, or
may, by action or inaction, release or substitute any other guarantor, if any,
of the Guarantied Obligations, or may enforce, exchange, release, or waive, by
action or inaction, any security for the Guarantied Obligations or any other
guaranty of the Guarantied Obligations, or any portion thereof.
8. NO ELECTION. The Holders shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein and no election by the
Holders to proceed in one form of action or proceeding, or against any party, or
on any obligation, shall constitute a waiver of the Holders' right to proceed in
any other form of action or proceeding or against other parties unless the
Holders have expressly waived that right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by the Holders
under any document or instrument evidencing the Guarantied Obligations shall
serve to diminish the liability of Guarantor under this Guaranty except to the
extent that the Holders finally and unconditionally shall have realized
indefeasible payment by the action or proceeding.
4
9. INDEFEASIBLE PAYMENT. The Guarantied Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to the Holders are no longer subject to any right on the part of any
person whomsoever, including the Company, the Company as a debtor in possession,
or any trustee (whether appointed under the United States Bankruptcy Code or
otherwise) of the Company's assets to invalidate or set aside such payments or
to seek to recoup the amount of such payments or any portion thereof, or to
declare same to be fraudulent or preferential. If, for any reason, all or any
portion of the payments to the Holders is set aside or restored, whether
voluntarily or involuntarily, after the making thereof, the obligation or part
thereof intended to be satisfied thereby shall be revived and continued in full
force and effect as if said payment or payments had not been made and Guarantor
shall be liable for the full amount the Holders is required to repay plus any
and all costs and expenses (including attorneys fees) paid by the Holders in
connection therewith.
10. FINANCIAL CONDITION OF THE COMPANY AND OF GUARANTOR. Guarantor
represents and warrants to the Holders that it is currently informed of the
financial condition of the Company and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Guarantied Obligations. Guarantor further represents and warrants to the Holders
that it has read and understands the terms and conditions of the Agreement and
the Notes. Guarantor hereby covenants that it will continue to keep itself
informed of the Company's financial condition, the financial condition of other
guarantors, if any, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guarantied Obligations. Guarantor further
represents and warrants to the Holders that, as of the execution of this
Guaranty, and after giving effect to this Guaranty, it is solvent.
11. SUBORDINATION. Guarantors hereby agrees that any and all present and
future indebtedness of the Company owing to Guarantor is postponed in favor of
and subordinated to payment, in full, in cash, of the Guarantied Obligations. In
this regard, no payment of any kind whatsoever shall be made with respect to any
future indebtedness to Guarantor until the Guarantied Obligations have been
indefeasibly paid in full.
12. PAYMENTS; APPLICATION. All payments to be made hereunder by Guarantor
shall be made in lawful money of the United States of America at the time of
payment, shall be made in immediately available funds, and shall be made without
deduction (whether for taxes or otherwise) or offset. All payments made by
Guarantor hereunder shall be applied as follows: first, to all reasonable costs
and expenses (including attorneys fees) incurred by the Holders in enforcing
this Guaranty or in collecting the Guarantied Obligations; second, to all
accrued and unpaid interest, premium, if any, and fees owing to the Holders
constituting Guarantied Obligations; and third, to the balance of the Guarantied
Obligations.
5
13. ATTORNEYS' FEES AND COSTS. Guarantor agree to pay, on demand, all
reasonable attorneys fees and all other reasonable costs and expenses which may
be incurred by the Holders in the enforcement of this Guaranty or in any way
arising out of, or consequential to the protection, assertion, or enforcement of
the Guarantied Obligations (or any security therefor), irrespective of whether
suit is brought.
14. NOTICES. Unless otherwise specifically provided in this Guaranty, any
notice or other communication relating to this Guaranty shall be delivered as
set forth in the Agreement. All notices or demands sent in accordance with this
Section 14, other than notices by the Holders in connection with Sections 9-611
or 9-621 of the Code, shall be deemed received on the earlier of the date of
actual receipt or three calendar days after the deposit thereof in the mail. The
Guarantors acknowledge and agree that notices sent by the Holders in connection
with Sections 9-611 or 9-621 of the Code shall be deemed sent when deposited in
the mail or transmitted by telefacsimile or other similar method set forth
above.
15. CUMULATIVE REMEDIES. No remedy under this Guaranty, under the
Agreement, or under the Notes is intended to be exclusive of any other remedy,
but each and every remedy shall be cumulative and in addition to any and every
other remedy given under this Guaranty, under the Agreement, or under the Notes,
and those provided by law. No delay or omission by the Holders to exercise any
right under this Guaranty shall impair any such right nor be construed to be a
waiver thereof. No failure on the part of the Holders to exercise, and no delay
in exercising, any right under this Guaranty shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under this Guaranty
preclude any other or further exercise thereof or the exercise of any other
right.
16. SEVERABILITY. Any provision of this Guaranty which is prohibited or
unenforceable under applicable law shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
17. AMENDMENTS. This Guaranty may not be altered, amended, or modified,
nor may any provision hereof be waived or noncompliance therewith consented to,
except by means of a writing executed by both Guarantor and the Holders. Any
such alteration, amendment, modification, waiver, or consent shall be effective
only to the extent specified therein and for the specific purpose for which
given. No course of dealing and no delay or waiver of any right or default under
this Guaranty shall be deemed a waiver of any other, similar or dissimilar,
right or default or otherwise prejudice the rights and remedies hereunder.
18. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor
and its successors and assigns and shall inure to the benefit of the successors
and assigns of the Holders; provided, however, that Guarantor shall not assign
this Guaranty or delegate any of its duties hereunder without the Holders' prior
written consent and any unconsented to assignment shall be absolutely void. In
the event of any assignment or other transfer of rights by the Holders, the
rights and benefits herein conferred upon the Holders shall automatically extend
to and be vested in such assignee or other transferee.
6
19. NO THIRD PARTY BENEFICIARY. This Guaranty is solely for the benefit of
the Holders and their successors and assigns and may not be relied on by any
other person or entity.
20. DISPUTE RESOLUTION. In the event of any dispute arising out of or
relating to this Guaranty, 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.
21. COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become effective
as to Guarantor upon the execution of a counterpart hereof by Guarantor and
receipt by the Holders of written or telephonic notification of such execution
and authorization of delivery thereof.
IN WITNESS WHEREOF, the undersigned Guarantor has caused this Guaranty to
be duly executed and delivered by its official thereunto duly authorized as of
the date first written above.
ORANGE COUNTY PHYSICIANS
INVESTMENT NETWORK, LLC, a California
limited liability company
By:
-------------------------------------
Xxxx X. Xxxx, M.D., Manager
7
EXHIBIT D
FORM OF
TRIPLE NET HOSPITAL AND MEDICAL
OFFICE BUILDING LEASE
between
PACIFIC COAST HOLDINGS, LLC
(Landlord)
and
INTEGRATED HEALTHCARE HOLDINGS, INC.
(Tenant)
----------------------------------------
TRIPLE NET HOSPITAL AND MEDICAL OFFICE BUILDING
LEASE
THIS TRIPLE NET HOSPITAL AND MEDICAL OFFICE BUILDING LEASE (the "Lease")
is made this ___ day of January, 2005 by and between Pacific Coast Holdings,
LLC, a California limited liability company ("Landlord") and Integrated
Healthcare Holdings, Inc. a Nevada corporation ("Tenant"), with reference to the
following facts:
RECITALS
A. Tenant is acquiring from Xxxxx Healthcare System the Property described
below pursuant to a certain Asset Sale Agreement incorporated by reference
herein ("Xxxxx Transaction"). Concurrent with the closing of the Xxxxx
Transaction, Tenant is transferring the Property to Landlord whereupon Landlord
shall lease back the Property to Tenant on the terms and conditions set forth
herein.
B. Upon the closing of the Xxxxx Transaction, Landlord shall be the owner
of the Property consisting of hospital properties ("Hospital Properties") and
medical office buildings ("MOB Properties") more particularly described in
Exhibit "A" attached hereto together with the buildings, improvements and
fixtures (hereinafter collectively referred to as the "Property").
C. Tenant is willing to lease the Property from Landlord and Landlord is
willing to lease the Property to Tenant on the terms and conditions set forth in
this Lease.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
TERMS
1.1 Hospital Properties Lease Term. The term of this Lease for the
Hospital Properties shall be twenty-five (25) years, commencing upon the closing
of the Xxxxx Transaction and acquisition of the Hospital Properties by Landlord
(the "Commencement Date") and which shall terminate on the last day of the month
following twenty-fifth (25th) anniversary of the Commencement Date.
1.2 Option To Renew Hospital Properties Lease Term. Landlord hereby grants
to Tenant the option to extend the term of this Lease for the Hospital
Properties (the "Option") for one (1) additional term of twenty-five (25) years
each commencing when the initial term expires (the "Option Period") upon each
and all of the following terms and conditions:
1
(a) This lease shall automatically renew for the Option Period
unless, Tenant gives to Landlord, and Landlord actually receives, on a date
which is at least six (6) and not more than nine (9) months prior to the date
that such Option Period would commence (if exercised), a written notice that
Tenant has declined to exercise of the Option to extend this Lease. If said
notification of the exercise of the Option is not so given and received, the
Option shall automatically renew as herein provided.
(b) Tenant shall not be in breach of this Lease at the time of
exercise of each of the Options.
(c) All of the terms and conditions of the Lease except where
specifically modified by this Option shall apply.
1.3 MOB Properties Lease Term. The term of this Lease for the MOB
Properties shall be one (1) year, commencing upon the closing of the Xxxxx
Transaction and acquisition of the MOB Properties by Landlord (the "Commencement
Date") and which shall terminate on the last day of the month following first
(1st) anniversary of the Commencement Date.
ARTICLE II
RENT
2.1 Joint Financing. Landlord and Tenant are both sophisticated entities.
Tenant has requested and Landlord has agreed to permit Tenant to use the
Property as collateral for the purposes of joint financing of the Property and
Tenant's business operation for an initial period of time and subject to the
terms herein, the operations of Tenant and the Property. Tenant's obligation for
base rent (Base Rent) payments shall be set in relationship to said financing.
2.2 Initial Financing. Tenant has arranged for an initial financing
(Initial Financing) in the form of a loan with interest at the rate of Fourteen
percent (14%) per annum in the amount of Eighty Million Dollars ($80,000,000) of
which Thirty Million Dollars ($30,000,000) will be in the form of an operating
loan ("Operating Loan") and Fifty Million Dollars ($50,000,000) will be a real
estate loan ("Real Estate Loan"). In addition the Tenant may borrow additional
funds against accounts receivable ("A/R Financing"). The Operating Loan, the
Real Estate Loan and the A/R Financing will be secured by both the Property and
Tenant's operations.
2.3 Refinancing. Tenant and Landlord agree that the Initial Financing should be
replaced as soon as practical but in any event within two (2) years of the
Commencement Date of the lease term. Tenant and Landlord covenant and agree to
work cooperatively to secure said refinancing meeting the following criteria:
2
(a) The refinancing shall be provided by an institutional lender
in an arms length transaction.
(b) The refinancing shall not exceed One Hundred Million Dollars
($100,000,000) of which not more than Fifty Million Dollars
($50,000,000) will be a Real Estate Loan.
(c) The terms of said refinancing shall not impair the financial
viability of either the Tenant or the Landlord.
(d) Neither the Landlord, nor any of Landlord's members shall be
required to assume any personal liability or obligation for
said refinancing. The sole recourse of the lender shall be to
the Property and the Tenant's assets.
(e) The loan shall be at commercially reasonable rates and upon
commercially reasonable terms including reasonable
amortization of principal.
(f) The loan will not include any contingent interest provisions
or any payments other than interest upon a principal sum.
(g) The loan shall not limit the sale or transfer of all or
portions of the Property or of interests in the Landlord for a
period greater than five (5) years.
2.4 Cross Payment Duties. So long as the Real Estate Loan , Operating Loan
and/or A/R Financing are cross collateralized, the Tenant shall have an
obligation and duty to the Landlord to pay when due all sums coming due under
the Operating Loan and A/R Financing and to otherwise fully comply with all
terms and conditions of the Operating Loan and A/R Financing and the Landlord
shall have an obligation and duty to the Tenant to pay when due all sums coming
due under the Real Estate Loan and to otherwise fully comply with all terms and
conditions of the Real Estate Loan.
2.5 Information and Notices. Tenant shall provide copies to Landlord of
all notices, reports, information and communications received from or provided
to any lender.
2.6 Time Limit on Cross Collateralization. Five (5) years after the
commencement of the lease term, the Landlord shall have the right to terminate
the cross collateralization of Operating Loan and A/R Financing with the Real
Estate Loan and to refinance the Real Estate Loan as provided in Section 2.13.
3
2.8 Base Rent Definitions. The following definitions shall apply to the
determination of Base Rent:
(a) Principal Sum. The "Principal Sum" is Fifty Million Dollars
($50,000,000).
(b) Cost of Landlord's Principal Sum. The "Cost of Landlord's
Principal Sum" is the average annual interest rate charged on
loan secured by the first lien Deed of Trust (or Mortgage) on
the Property for the preceding month, as the same may vary
from time to time.
(c) Landlord's Spread. "The "Landlord's Spread" for the first one
(1) year of the lease term is the difference between Twelve
percent (12%) per annum and the annual interest rate (which
may vary monthly) of the Real Estate Loan but in no event more
than Two and One-Half percent (2 1/2 %) per annum, thereafter
"Landlord's Spread" is Two and One-Half percent (2 1/2%) over
the Cost of Landlord's Principal Sum.
(d) Amortization Expense. Commencing on the earlier of (i) the
refinancing contemplated by Section 2.3 hereof or (ii) two (2)
years following the commencement of the lease term, then the
"Amortization Expense" shall be the annual sum of Two Million
Five Hundred Thousand Dollars ($2,500,000) until such time as
a total Amortization Expense of Fifty Million Dollars
($50,000,000) has been paid..
(e) Consumer Price Index. "Consumer Price Index" or "CPI" shall
refer to the "Consumer Price Index, Los Angeles-Long
Beach-Anaheim Average, All Items (1982-1984=100)" as published
by the United States Department of Labor. In the event that
the Bureau shall cease to publish said Consumer Price Index,
then the national index shall apply and if the national index
is no longer published, then the successor or most nearly
comparable index thereto shall be used as determined by
Landlord.
2.9 Hospital Properties Base Rent Calculation. The monthly Hospital
Properties Base Rent shall be equal the Principal Sum multiplied by the sum of
the Cost of the Landlord's Principal Sum plus the Landlord's Spread the product
of which shall be added to Landlord's Amortization Expense, then divided by
twelve (12). Set forth as a formula this calculation is as follows:
4
Monthly Base Rent =
[Principal Sum x (Cost of Landlord's Principal Sum +Landlord's
Spread)] + Amortization Expense 12
2.10 Hospital Properties Base Rent Market Adjustment. On each five
(5) year anniversary of the commencement of this Lease the Hospital Base Rent
shall be increased (but not decreased) to an amount equal to the then current
fair market rental rate, but in no event increased by more than five percent
(5%) over the preceding month's Hospital Base Rent (provided however that such
time as the Amortization Payment is no longer being made the five percent (5%)
limitation shall cease to apply). Commencing not less than ninety (90) days
prior to each fifth (5th) anniversary of the Lease commencement, Landlord and
Tenant shall attempt to agree on the fair market rental rate for the Hospital
Properties. If the Parties are not able to agree to the fair market rental rate
within thirty (30) days, Landlord and Tenant shall each choose an independent,
licensed real estate broker, with not less than five (5) years experience in
leasing healthcare related facilities including hospitals. The two real estate
brokers so appointed shall appoint a third real estate broker, similarly
qualified. Each broker shall independently determine the fair market rental
rate. The three rates so determined will be averaged. The rate determined by the
brokers which varies the most from the average shall be discarded and the two
remaining values and the average value shall be averaged and said second average
shall constitute the fair market rental rate. Each party shall bear the costs of
the real estate broker appointed by that party and the parties shall equally
divide the costs of the third real estate broker. Notwithstanding the provisions
of this Section 2.10 if at any time the monthly Hospital Base Rent determined in
accordance with Section 2.9 hereof would exceed the monthly Hospital Base Rent
determined in accordance with this Section 2.10, then this Section 2.10 shall be
discarded and the monthly Hospital Base Rent shall be determined in accordance
with Section 2.9.
2.11 MOB Properties Base Rent Calculation. The monthly MOB
Properties Base Rent shall be equal the rent received from the MOB Properties,
less the actual monthly costs to operate said MOB Properties, and also less a
monthly charge for insurance and real property taxes equal to one-twelfth (12th)
the estimated cost thereof. In the event the estimated monthly charge for
insurance and real property taxes is in error at the end of the lease term, then
the Landlord and Tenant shall make an appropriate adjustment so that the sum
deducted in order to calculate base rent is correct.
2.12 Invoicing for Base Rent. Landlord shall on or before the second
business day of each month invoice the Tenant for the monthly Base Rent due for
the prior month. Base Rent shall be due on or before ten (10) days following the
date upon which the Landlord delivers the monthly Base Rent invoice to the
Tenant. Any partial month shall be prorated on a daily basis at the rate of
1/30th of the monthly rent per day. Base Rent shall be paid for the month in
advance.
5
2.13 Landlord's Rights Regarding Financing. Upon termination of the
cross collateralization obligations as set forth above, the Landlord shall have
the right in the Landlord's commercially reasonable discretion to from time to
time alter, replace or revise the loan secured by the first lien Deed of Trust
(or Mortgage) on the Property and therefore change the Cost of Landlord's
Principal Sum but such refinancing shall not increase Tenant's then prevailing
rent over that of the then prevailing fair market value rental rent for the
Property. Any dispute under this provision shall be referred to binding
arbitration under the provisions of Section 20.22. Tenant shall cooperate in all
respects with executing such documents as may be requested by Landlord's lender.
2.14 Hedging. Either Landlord or Tenant may at their individual
options elect to hedge interest rate exposure; however, such hedging shall be
undertaken at the sole risk of the party so electing to hedge. Hedging by Tenant
shall in no way restrict the Landlord's right to alter, replace or revise the
loan secured by the first lien Deed of Trust (or Mortgage) on the Property.
2.15 CPI Adjustment. On January 1st (or as soon thereafter as
available) of each year, the Consumer Price Index figure for the preceding year
shall be determined, and the portion of the Base Rent attributable to the
Landlord's Spread shall be increased (but not decreased) by the same percentage
as the percentage, if any, by which the Consumer Price Index for the January of
the preceding year shall have increased as compared with the Consumer Price
Index for the January of the current year. Landlord shall provide written notice
of the CPI Adjustment to Tenant. In the event that the adjustment has not been
determined in time for any invoicing sent, then upon determination of the
adjustment, Landlord shall send out adjustment invoices.
2.16 Other Charges. Except as otherwise expressly provided herein,
this Lease is what is commonly called a net-net-net lease, it being understood
that Landlord shall receive the Base Rent free and clear of any and all
impositions of real and personal Property taxes, or other taxes (excepting
Landlord's income tax), insurance costs, costs of repair and maintenance, liens
and all other charges, costs, expenses and liabilities in connection with the
ownership and operation of the Property and the businesses conducted thereon.
2.17 Delinquent Rent. Tenant acknowledges that late payment of rent
by Tenant to Landlord will cause Landlord to incur costs not contemplated by
this Lease, and the exact amount of such costs being extremely difficult and
impracticable to fix. Therefore, if any installment of rent is not received
within ten (10) days of when due, Tenant shall pay Landlord the additional sum
of Five Thousand Dollars ($5,000) of the overdue rent as a late charge. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payments. Additionally, any
payments of Base Rent and any other sums payable by Tenant pursuant to the terms
shall bear interest at the maximum legal rate.
6
2.18 Minimum Base Rent. Notwithstanding anything elsewhere provided,
at all times the minimum monthly Base Rent shall be equal to the Landlord's
payment obligations under the Real Estate Loan.
2.19 MOB Rent Deferral. In the event the Tenant is financially
unable to pay the monthly rent on the MOB Properties as provided in Section
2.11, it is agreed that such unpaid shall be amortized together with interest at
the rate of four percent (4%) per annum and paid over the subsequent thirty-six
(36) months as additional rent.
ARTICLE III
INTENTIONAL LEFT BLANK
ARTICLE IV
TAXES
4.1 Real Property Taxes. Tenant shall pay, as additional rent, when
and as the same become due, and prior to delinquency, all taxes, both general
and special, and other charges, including transient occupancy taxes and rental
taxes, if any, lawfully imposed or assessed against the Property, including but
not limited to any and all licenses, fees or charges, improvement bonds,
ordinary and extraordinary, general and special, foreseen and unforeseen, which
may be lawfully levied, assessed or imposed during the term of this Lease upon
or against Tenant or the Property, and/or the businesses conducted thereon, and
including any future tax adopted in lieu of a Property tax, any and all general
and special taxes, including any increase in such taxes resulting from a "change
in ownership" of Landlord or Tenant (as defined in California Revenue and
Taxation Code Section 60, et seq.).
Where any assessment may, at the option of the taxpayer, be payable in
installments, Tenant shall have the right to exercise the option, and Tenant's
liability for the payment of the assessment shall be limited to the payment of
the installments which become due during the term of this Lease.
If separate bills are not sent directly to Tenant, Landlord shall furnish
Tenant, upon receipt by Landlord, with true copies of each xxxx to be paid by
Tenant in whole or in part.
4.2 Tax Contest. Upon written application, Tenant shall furnish to
Landlord for inspection, and for such use as may be proper for the protection of
Landlord's interest in the Property, written evidence duly certified that any
and all taxes, assessments or charges required to be paid by Tenant hereunder
have been paid, satisfied or otherwise discharged. Tenant, at its sole cost and
expense, shall have the right to employ and exhaust all available remedies to
protest and contest the amount of any liability for any taxes, assessments,
licenses, fees or charges imposed or assessed against the Property, or otherwise
to seek reduction or refund. Tenant shall post a bond (or, in lieu thereof,
equivalent cash collateral) to prevent enforcement of any lien resulting from
the foregoing.
7
4.3 Personal Property Taxes. Tenant shall pay, before delinquency,
all taxes and assessments levied against any of personal Property that is
located on the Property.
ARTICLE V
UTILITIES
5.1 Utilities. In addition to the rents, taxes, and other charges
herein provided, Tenant shall pay, or cause to be paid, as additional rent, all
charges for public or private utility services, including, but not limited to,
those for water, sewage, electricity, gas, telephone and other utility services,
including trash collection supplied to and used on the Property.
ARTICLE VI
USE OF THE PROPERTY
6.1 Use of the Property. Tenant shall use the Property for the
purpose of operation of an acute care hospital and delivery of health care
services, and any other uses reasonably related thereto (the "Permitted Uses").
Tenant shall not use or permit the Property to be used for any other purpose
without the prior written consent of Landlord, which consent may be granted or
withheld in the sole and absolute discretion of the Landlord.
ARTICLE VII
MAINTENANCE, ALTERATIONS IMPROVEMENTS
7.1 Maintenance and Repair. Tenant shall, at Tenant's sole cost,
keep and maintain the Property in good and sanitary order, condition and repair,
including, without limitation, interior and exterior walls, roof, foundation,
and equipment. Tenant hereby accepts the Property in its as is condition
existing as of the Commencement Date, subject to all applicable zoning,
municipal, county and state laws, ordinances and regulations governing and
regulating the use of the Property,
7.2 Alterations and Improvements.
(a) Tenant shall be responsible for making any alterations or
improvements to the Property required in order to enable Tenant to use the
Property for the Permitted Uses, including without limitation any and all
repairs, alterations, improvements of any nature or anything else which may be
required for compliance with SB 1953, including without limitation any
structural or non-structural alterations. All alterations, improvements,
additions and installations (whether or not such installations constitute trade
fixtures of Tenant), which may be made to the Property by Tenant, including but
not limited to, floor coverings, paneling, doors, drapes, built-ins, moldings,
sound attenuation, lighting and telephone or communication systems, conduit,
wiring and outlets shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the Property of
Landlord and remain upon and be surrendered with the Property at the expiration
of the Lease.
8
(b) Tenant shall promptly pay and discharge all claims for
work or labor done, supplies furnished or services rendered and shall keep the
Property free and clear of all mechanic and materialman liens in connection
therewith. Landlord shall have the right to post or keep posted on the Property,
or in the immediate vicinity thereof, any notices of non-responsibility for any
construction, alteration, or repair of the Property by Tenant. If any such lien
is filed, Landlord may, but shall not be required to take such action or pay
such amount as may be necessary to remove such lien; and Tenant shall pay to
Landlord as additional rent any such amounts expended by Landlord within five
(5) days after notice is received by Tenant of the amount expended by Landlord.
ARTICLE VIII
COMPLIANCE WITH LAWS
8.1 Generally. Tenant, as additional rent, at its sole cost and
expense, shall make any and all additions to, repairs and alterations in, the
Improvements, the Property which may be required by law or governmental
authority, and shall otherwise observe and comply with any and all public laws,
ordinances, regulations, agreements, and covenants, conditions and/or
restrictions of public record applicable to the Property. Tenant shall be
obligated to obtain, at its sole effort, cost and expense, all permits, approval
and licenses required for the operation, alteration, addition to or repair of
the Improvements.
8.2 Hazardous Substances - Reportable Uses; Required Consent. The
terms Hazardous Substance and Hazardous Substances shall mean any hazardous or
toxic materials, pollutants, effluents, contaminants, radioactive materials,
flammable explosives, chemicals known to cause cancer or reproductive toxicity,
emissions or wastes and any other chemical, material or substance, the handling,
storage, release, transportation, or disposal of which is or becomes prohibited,
limited or regulated by any federal, state, county, regional or local authority
or which, even if not so regulated, is or becomes known to pose a hazard to the
health and safety of the occupants of the Property, including, without
limitation, (I) petroleum and petroleum by-products, (ii) urea formaldehyde foam
insulation, (iii) polychlorinate biphenyls, (iv) all substances now or hereafter
designated as "hazardous substances, "hazardous materials" or "toxic substances"
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA), 42 U.S.C. Section 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986 (XXXX), the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq., or the Resource, Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., or (vi) all substances now or hereafter designated
as hazardous substances, hazardous materials, or toxic substances under any
other federal, state or local laws or in any regulations adopted and
publications promulgated pursuant to said laws.
9
8.3 Reportable Use. Tenant shall not engage in any activity in, on
or about the Property that constitutes a Reportable Use (as hereinafter defined)
of Hazardous Substances without the express prior written consent of Landlord
and compliance in a timely manner, at Tenant's sole cost and expense, with all
Applicable Law (as defined hereinafter). Reportable Use shall mean (I) the
installation or use of any above or below ground storage tank (ii) the
generation, possession, storage, use, transportation, or disposal of a Hazardous
Substance that requires a permit from, or with respect to which a report and
notice, registration or business plan is required to be filed with any
governmental authority. Reportable Use shall also include Tenant's being
responsible for the presence in, on or about the Property of a Hazardous
Substance with respect to which any Applicable Law requires that a notice be
given to persons entering or occupying the Property or neighboring properties.
Notwithstanding the foregoing, Tenant may, without Landlord's prior consent, but
in full compliance with all Applicable Law, use, generate and store any ordinary
and customary materials reasonably required to be used by Tenant in the normal
course of Tenant's business permitted on the Property by the terms of this
Lease, so long as such use does not expose the Property or neighboring
properties to any risk of contamination or damage or expose Landlord to any
liability therefor. In addition Landlord may (but without any obligation to do
so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Tenant upon Tenant's giving Landlord such additional
assurances as Landlord, in its sole discretion, deems necessary to protect
itself, the public, the Property, the Improvements and the environment against
damage, contamination or injury and/or liability therefrom or therefor,
including, but not limited to, the installation (and removal on or before the
expiration of the term of the Lease or earlier termination) of reasonably
necessary protective modifications to the Property and the Improvements and/or
the disposal and/or the deposit of a security deposit or increase thereof.
8.4 Duty to Inform Landlord. If Tenant's officers, directors or
general manager know, or have reasonable cause to believe, that a Hazardous
Substance or a condition involving or resulting from same, has come to be
located on, in or under the Property, the Improvements or adjoining properties,
other than as previously consented to by Landlord, Tenant shall immediately give
written notice of such fact to Landlord. Tenant shall also immediately give
Landlord a copy of any statement, report, notice, registration, application,
permit, business plan, license, claim, action or proceeding given to, or
received from, any governmental authority or private party, any persons entering
or occupying the Property concerning the presence, spill, release, discharge of,
or exposure to any hazardous substance or contamination in, on or about the
Property, including, but not limited to, all such documents as may be involved
in any reportable uses involving the Property.
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8.5 Indemnification. Tenant shall indemnify, protect, defend and
hold Landlord, its agents, employees, members and lenders, if any, and the
Property harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorneys fees and consultants fees arising out of or involving the presence,
storage, use or transport of any Hazardous Substance or storage tank, whenever
arising. Tenant's obligations under this Section shall include, but not be
limited to, the effects of any contamination or injury to person, Property or
the environment created or suffered by Landlord and for Tenant, and their
respective agents, employees, guests, invitees and other persons on the
Property, and the cost of investigation (including consultant's and attorney's
fees and testing), removal, remediation, restoration, and/or abatement thereof,
or of any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Landlord and Tenant shall release Tenant from its
obligations under this Lease with respect to the Hazardous Substances or storage
tanks, unless specifically so agreed by Landlord in writing at the time of such
release.
8.6 Tenant's Compliance With Applicable Laws. Tenant shall, at
Tenant's sole cost and expense, fully, diligently and in a timely manner comply
with all Applicable Law, which term is used in this Lease to include all laws,
rules, regulations, ordinances, directives, covenants, easements, and
restrictions of record, permits, the requirements of any applicable federal,
state or municipal governmental authority, applicable fire insurance,
underwriter or rating bureau and the recommendations of Landlord's engineers
and/or consultants, relating, in any manner, to the Property including, but not
limited to, matters pertaining to (I) industrial hygiene (ii) environmental
conditions on, in, under, or about the Property, including soil and ground water
contamination, (iii) the use, generation, manufacture, production, installation,
maintenance, removal, transportation, signage, spill or release of any Hazardous
Substances or storage tank), (iv) the American with Disabilities Act of 1990, as
amended, (v) OSHA, (vi) the California Building Code, and (vii) Title 24 now in
effect which may hereinafter come into effect, and whether or not reflecting a
change in policy from any previous existing policy. Tenant shall, within five
(5) days after receipt of Landlord's written request, provide Landlord with
copies of all documents and information, including, but not limited to, permits,
registrations, notices, applications, reports and certificates, evidencing
Tenant's compliance with any Applicable Law specified by Landlord and shall
immediately upon receipt notify Landlord, in writing (with copies of any
documents involved), of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Tenant or the
Property to comply with any Applicable Law. In the event that as a result of any
alteration, addition or change to the Property, or any portion thereof or any
improvement constructed thereon, by Tenant which results in the violation of an
Applicable Law, then Tenant shall be responsible for compliance with such
Applicable Law, including any asbestos abatement or containment required as a
result of or in connection with such alteration, addition or change.
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ARTICLE IX
INTENTIONALLY DELETED
ARTICLE X
EXCULPATION AND INDEMNITY
10.1 Waiver of Landlord Liability. Landlord shall not be liable for
any loss, damage or injury of any kind or character to any person or Property
(a) arising from any use and/or condition and extent of the Property, or any
part thereof including, without limitation, environmental contamination, (b)
caused by any defect in the equipment or other facility located therein, (c)
caused by or arising from any act or omission of Tenant, or any of its agents,
employees, licensees or invitees, (d) arising from or in connection with the
conduct of any business, occupation, transaction, event or other activity
occurring on the Property, (e) arising from any accident on the Property or any
fire or casualty thereon, (f) occasioned by the failure of Tenant to maintain
the Property in a safe condition, or (g) arising from any other cause
whatsoever, except as occasioned by the act or gross negligence of any duty by
Landlord or its agents or employees occurring after the Commencement Date.
Tenant, as a material part of the consideration of this Lease, hereby waives, on
its behalf, all claims and damages against Landlord for any such loss, damage or
injury to Tenant.
10.2 Tenant Indemnification. Tenant, for itself and its successors
and assigns, hereby agrees to indemnify Landlord, and Landlord's members,
managers, agents, representatives, employees and attorneys, free and harmless
from and against any and all claims, actions, damages, liabilities and expenses,
including attorneys fees and costs, in connection with or arising out of (I) any
loss of life, personal injury and/or damage to Property arising from or out of
any occurrence in, upon or at the Property, (ii) the occupancy or use by Tenant
of the Property, or any part thereof, (iii) arising from or out of Tenants
failure to comply with any provision of this Lease, and (iv) with respect to the
violation of any of the provisions of this Lease including but not limited to
Article VIII hereof, in the event Landlord shall, without fault on its part, be
made a party to any litigation, arbitration or other proceeding commenced by or
against Tenant, then Tenant shall protect and hold Landlord harmless, and shall
pay all costs, expenses and attorneys fees incurred or paid by Landlord in
connection with such litigation, arbitration or other proceeding. Landlord may,
at its option, require Tenant to assume Landlord defense in any action covered
by this paragraph through counsel satisfactory to Landlord.
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10.3 Survival of Indemnity Obligation. The obligations of Tenant
under this Article X shall survive the expiration of the term, or the
termination, of this Lease.
ARTICLE XI
INSURANCE
11.1 Liability. Tenant agrees to maintain, at its expense, as
additional rent, during the term of this Lease comprehensive public liability
insurance insuring against liabilities related to the condition of or use of the
Property and the Improvements, bodily injury, employment related liability,
liquor liability, blanket contractual liability, garage liability, garage
keepers legal liability, non-owned auto liability and advertising injury, in
such amount as may be required by any beneficiary of any deed of trust
encumbering the Property, but in no event less than Ten Million Dollars
($10,000,000), combined single limit coverage, specifically insuring performance
by Tenant of the indemnity set forth in Article X above, and containing the
following provisions:
(a) Providing that the coverage is primary and that any
coverage Landlord may maintain shall be in excess thereto;
(b) Naming Landlord and any beneficiary under any deed of
trust encumbering the Property as additional insureds;
(c) Providing that the policy cannot be canceled or modified
without thirty (30) days prior written notice to Landlord and any beneficiary of
a deed of trust encumbering the Property;
(d) Providing for a cross liability or a severability of
interest endorsement or equivalent thereof;
(e) With respect to improvements, alterations, demolitions,
and changes required or permitted to be made by Tenant pursuant to the terms of
this Lease, contingent liability and builders- risk insurance;
(f) Workers' compensation coverage as required by law,
together with employer's liability coverage;
(g) A waiver by Tenant's insurers of any right to subrogation
against Landlord, its agents, members, managers, employees and representatives
which arises or might arise by reason of any payment under such policy or by
reason of any act or admission of Landlord, its agents, members, managers,
employees or representatives; and
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11.2 Adjustments. The foregoing limits of coverage and the coverages
may be adjusted reasonably by Landlord and Tenant, with the consent of any
beneficiary of any deed of trust encumbering the Property, from time to time,
but not more often than once during any three (3) year period, during the term
of this Lease based upon changes in the amounts of judgments for personal injury
and Property damage, industry standards, inflation, and other relevant factors
in order to maintain insurance protection at least equivalent to the protection
afforded on the Commencement Date. In the event that the Landlord and Tenant are
unable to agree upon an adjustment then Landlord and Tenant, the issue shall be
resolved by arbitration in accordance with the binding arbitration provisions of
Section 20.22. The cost of such arbitration shall be born by the party whose
insurance proposal is closest to the insurance proposal decided upon by the
arbitration process.
11.3 Property. Tenant agrees to maintain, at its expense, as
additional rent, during the term of this Lease (a) standard form fire, extended
coverage, vandalism, malicious mischief, boiler and machinery coverage, and
building ordinance and law coverage endorsements, and special extended
insurance, including all risk insurance, and other Property insurance coverage
(except earthquake coverage which shall not be required) as may be required by
any beneficiary of any deed of trust encumbering the Property, with respect to
the Improvements and the Assets in amounts at least equal to the greater of full
replacement costs thereof or the amount required by any beneficiary of a deed of
trust encumbering the Property, (b) with respect to the construction,
demolition, additions, alterations and the like required or permitted to be
constructed by Tenant hereunder, builders all-risk insurance insuring the full
replacement value of all construction in process on the Property, and (c)
business interruption insurance, in an amount satisfactory to Landlord. Tenant
shall also maintain, at Tenants expense, earthquake insurance, including
sprinkler leakage coverage, building, contents and loss of income, with a limit
no less than the probable maximum loss limit as valued either through Landlord
or any beneficiary under a deed of trust encumbering the Property. Each policy
shall specifically (I) name the beneficiary under any deed of trust encumbering
the Property and then Landlord as additional insureds, (ii) provide that all
payments shall be made as provided in Article XII above, and that the
beneficiary of a deed of trust encumbering the Property shall have first
priority and claim to any payments as provided in its deed of trust, and (iii)
provide that it cannot be canceled or modified by the insurer without thirty
(30) days prior written notice to Landlord and such beneficiary
11.4 Personal Property Insurance. Tenant, at Tenant's cost, shall
maintain a policy of standard fire and extended coverage insurance (with
vandalism and malicious mischief endorsements) on all Tenant's personal Property
and alterations to the extent of at least their full replacement value. Tenant
shall use the proceeds from any such policy for the replacement of personal
Property or the restoration of Tenant's improvements or alterations.
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11.5 Rental Loss and Business Interruption. Tenant shall, at its
sole cost and expense, as additional rent, at all times during the term of this
Lease, maintain in force a policy of rental loss or business interruption
insurance in an amount at least sufficient to pay, for a period of twelve (12)
months following any applicable loss, the sum of the following: (a) the then
applicable Base Rent as provided in Article II above; (b) all additional rent as
provided in this Lease; and (c) the insurance premiums provided in this Article
XI.
11.6 Quality of Policies. The minimum limits of policies of
insurance required of Tenant under this Lease shall in no event limit the
liability of Tenant under this Lease. Such insurance policy shall be issued by
an insurance company having a rating of not less than A (or equivalent) in Bests
Insurance Guide or which is otherwise acceptable to Landlord, and licensed to do
business in the State of California. Upon execution of this Lease and thereafter
not less than thirty (30) days prior to the expiration date of each insurance
policy required to be furnished hereunder, Tenant shall deliver to Landlord a
certificate of the insurer reasonably satisfactory to Landlord bearing a
notation evidencing the payment of the premium or accompanied by other evidence
of payment reasonably satisfactory to Landlord.
11.7 Adjustments. All policies of insurance required or permitted
under this Article XI shall provide for loss thereunder to be adjusted by and
payable to the beneficiary under any deed of trust encumbering the Property and
then to Landlord or its designee.
11.8 Payment of Loss. All policies of insurance shall provide for
payment of loss to the holder of any security interest in the Property and
Landlord, jointly, and if there is no such security interest, or as to any
excess, the proceeds shall be paid to Landlord and Tenant, jointly, in trust or
if Tenant so elects, to a mutually approved corporate trustee, to be held in
trust and applied to the repair and restoration of the Property. When the
Improvements have been fully repaired and restored, any excess shall be paid to
Tenant. Landlord and Tenant shall use due diligence to cause the holder of any
security interest in the Property to make the proceeds of such insurance
available for repair and restoration following any casualty or loss covered
thereby.
11.9 Cancellation. Each policy or certificate therefor issued by the
insurer shall to the extent obtainable contain a provision that no act or
omission of Tenant which would otherwise result in forfeiture or reduction of
the insurance therein provided shall affect or limit the obligation of the
insurance company to pay the amount of any loss sustained.
15
11.10 Compliance with Insurance Requirements. Tenant shall observe
and comply with the requirements of all policies of public liability, fire and
other policies of insurance in force with respect to the Property.
11.11 Failure to Obtain Insurance. In the event that Tenant fails to
maintain and pay for any of the insurance required by this Article XI, Landlord
may (but without obligation to do so) procure such insurance and pay the
premiums therefor, in which event Tenant shall repay Landlord all sums so paid
by Landlord within ten (10) days following Landlords written demand to Tenant
for such payment.
11.12 Subrogation. The parties release each other, and their
respective authorized representatives, from any claims for damage to any person
or to the Property and to the fixtures, personal Property, Tenant's
improvements, and alterations of either Landlord or Tenant in or on the Property
that are caused by or result from risks insured against any insurance policies
carried by the parties and in force at the time of any such damage. Each party
shall cause each insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation against either party
in connection with any damage covered by any policy. Neither party shall be
liable to the other for any damages caused by fire or any of the risks insured
against under any insurance policy required by this Lease.
ARTICLE XII
DESTRUCTION
12.1 Rent Continues. In case of damage to or destruction of the
Property by fire or any other casualty whatsoever, Tenants rental obligations
shall continue as provided in Article III above (and elsewhere in this Lease),
and Tenant shall, at no cost or expense to Landlord, restore, repair, replace or
rebuild improvements of comparable value, use, design, size and utility as
existed immediately prior to such damage or destruction. Such obligation of
Tenant to restore, repair or rebuild is not conditioned upon the recovery of any
insurance proceeds for such damage or destruction. Such restoration, repairs,
replacements or rebuilding shall be commenced within a reasonable period of time
following such damage and destruction and thereafter diligently prosecuted to
completion. All work required to be performed by Tenant under this Article shall
be performed in accordance with the provisions of Article VII above and may be
performed by Tenant's agents, employees or subtenants.
12.2 Insurance Available. All insurance proceeds paid as provided in
Section 11.9, less Landlord's actual costs, fees, and expenses, if any, incurred
in connection with adjustment of the loss, shall be applied to pay or reimburse
Tenant for the payment of the cost of the repair or restoration of the
Improvements (including the cost of temporary repairs for the protection of the
Improvements pending the completion of the permanent repair or restoration of
the Improvements) and shall be paid out from time to time as such restoration
progresses upon the written request of Tenant, which request shall be
accompanied by a certificate signed by Tenant and Tenant's architect or engineer
in charge of the restoration, dated not more than thirty (30) days prior to such
request, setting forth the following:
16
(a) That the sum then requested either has been paid by Tenant
or is justly due to contractors, subcontractors, materialmen, engineers,
architects, or other persons who have rendered services or furnished materials
for the restoration; that no part of such request covers expenditures for which
a request for payment has previously been made; and that to the best of Tenant's
knowledge, the sum requested does not exceed the value of the services and
materials described in the certificate; and
(b) That, except for the amounts, if any, stated (pursuant to
Subsection (a) above) in such certificate to be due for services and materials
and except for work in progress on the restoration and materials and supplies
ordered and services rendered but not yet billed, there is no outstanding
indebtedness known to Tenant, after due inquiry, that is then due and payable
for labor, wages, materials, supplies, or services in connection with the
restoration.
12.3 Proceeds Payment. Upon compliance with the foregoing provisions
of this Article XII, the person or persons holding the proceeds shall pay from
such proceeds to Tenant or the persons named in Tenant's certificate the
respective amounts stated in the certificate to have been paid by Tenant or to
be due to them as the case may be.
12.4 Deficiencies. If the insurance proceeds received as a result of
the damage or destruction, less the actual costs, fees, and expenses, if any,
incurred in connection with the adjustment of the loss, are insufficient to pay
the entire cost of restoration, Tenant shall promptly pay the deficiency.
12.5 Landlord Cure. Notwithstanding any of the foregoing provisions
of this Article XII, if Tenant has not commenced construction or has not
notified the Landlord that it intends to promptly commence construction within
thirty (30) days from the date of the damage or destruction which under the
provisions of this Article XII Tenant is obligated to repair, Landlord may
thereupon, and without further notice to Tenant, commence such work, or Landlord
may exercise any of the rights or remedies provided in this Lease for a default
by Tenant. If Landlord elects to undertake the work, all insurance proceeds
payable under Article XII as a result of the damage or destruction to the
Improvements shall then be held by Landlord for use by Landlord in doing such
work. If Landlord undertakes such work, Tenant shall be liable to Landlord for
any and all costs and expenses incurred by Landlord in connection therewith in
excess of the insurance proceeds.
12.6 No Rent Abatement. There shall be not abatement of Base Rent or
additional rent, or any other sums or obligations of Tenant under this Lease, by
reason of any such damage or destruction.
17
12.7 No Surrender. Except as otherwise provided in this Lease, no
destruction of or damage to the Property, or any part thereof, by fire or any
other casualty shall terminate or permit Tenant to surrender this Lease, or
relieve Tenant of its obligations to pay the full Base Rent, additional rent and
other sums and charges payable under this Lease, or from any of its other
obligations under this Lease, and Tenant waives any rights now or hereafter
conferred upon it by statute or otherwise, to quit or surrender this Lease or
the Property, or any part thereof, or to any suspension, diminution, abatement
or reduction of rent, or other charges payable under this Lease on account of
such destruction or damage.
ARTICLE XIII
CONDEMNATION
13.1 Lease Governs. If, during the term or during the period of time
between the execution of this Lease and the date the term commences, there is
any taking by condemnation of all or any part of the Property, the rights of the
parties shall be determined pursuant to the provisions of this Section.
13.2 Total Taking. If the Property is totally taken by condemnation,
this Lease shall terminate on the date of taking and the entire award shall be
payable to the Landlord.
13.3 Partial Taking. If only a portion of the Property is taken by
condemnation, this Lease shall continue in effect. Provided, however, Tenant can
elect to terminate this Lease if the remaining portion of the Property, other
improvements or parking areas are rendered unsuitable for Tenant's continued use
of the Property. If Tenant elects to terminate this Lease, Tenant must exercise
such right by giving written notice to Landlord within ninety (90) days after
the nature and the extent of the taking have been fully determined. Such
termination date shall not be earlier than ninety (90) days nor later than one
hundred eighty (180) days after Tenant has given termination notice. If Tenant
does not terminate this Lease within the time period set forth above, the Lease
shall continue in force, except that the base monthly rent shall be reduced by
an amount that is in the same ratio to base monthly rent as the value of the
area of the portion of the Property taken bears the total value of the Property
immediately before the date of taking.
13.4 Distribution of Award. The condemnation award shall belong to
Landlord.
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ARTICLE XIV
ASSIGNMENT
14.1 Assignment. Except for an assignment or sublease to an
affiliated company, including, but not limited to, a wholly owned subsidiary or
parent entity, Tenant shall not assign, mortgage or encumber this Lease, nor
sublet, nor suffer or permit the Property or any part thereof to be used by
others, without the prior written consent of Landlord in each instance, which
consent, which may be granted or withheld in Landlord's reasonable discretion.
Landlord shall be under no obligation to consider a request for Landlord's
consent to an assignment until Tenant shall have submitted in writing to
Landlord a request for Landlord's consent to such assignment together with
audited financial statements of Tenant and the proposed assignee, a history of
the proposed assignee's business experience and such other information as
required by Landlord to verify that the creditworthiness and business background
of the proposed assignee Tenant reimburse Landlord for its time and expense in
considering such request. Notwithstanding any other provision of the Lease,
Landlord shall have the right to condition Landlord's approval of the assignment
or sublease of the Lease by Tenant to a third party on the payment to Landlord
of any rent payable under said assignment or sublease in excess of the then
current rent payable under the Lease.
14.2 No Release of Tenant. Regardless of Landlords consent, no
subletting or assignment shall release Tenant of Tenants obligation or alter the
primary liability of Tenant to pay the rent or to perform all other obligations
to be performed by Tenant hereunder. The acceptance of rent by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any provision
hereof. Consent to one assignment or subletting shall not be deemed consent to
any subsequent assignment or subletting. In the event of default by any assignee
of Tenant or any successor of Tenant, in the performance of any of the terms
hereof, Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against said assignee. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant or the successor of
Tenant, and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease.
14.3 Involuntary Assignment. No interest of Tenant in this Lease
shall be assignable by operation of law. Each of the following acts shall be
considered an involuntary assignment:
(a) If Tenant becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or is the debtor in a proceeding under
the Bankruptcy Act; or, if Tenant is a partnership or consists of more than one
person or entity, if any partner or other person or entity becomes bankrupt or
insolvent, or makes an assignment for the benefit of others. Provided that in
the event of an involuntary bankruptcy proceeding, Tenant shall have sixty (60)
days in which to have the proceeding dismissed, before such proceedings shall be
considered an involuntary transfer.
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(b) If a writ of attachment or execution if levied on this
Lease and Tenant has not caused the same to be released or discharged within
sixty (60) days . Any such involuntary assignment shall constitute a default by
Tenant and Landlord shall have the right to elect to terminate this Lease upon
fifteen (15) days prior written notice, if such event giving rise to the notice
is not removed or cured within the notice period.
ARTICLE XV
DEFAULT
15.1 Default by Tenant. The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
Tenant:
(a) The vacating or abandonment of the Property by Tenant;
(b) The failure by Tenant to make any payment of rent or any
other payment required to be made by Tenant hereunder, as and when due, where
such failure shall continue for a period of fifteen (15) days after notice by
Landlord to Tenant of the failure to receive payment;
(c) The failure by Tenant to observe or perform any of the
covenants, conditions, or provisions of any franchise agreement affecting the
Property or the business operated thereon, or under this Lease to be observed or
performed by Tenant, where such failure shall continue for a period of thirty
(30) days after written notice thereof, from Landlord to Tenant; provided,
however, that if the nature of Tenant's default is such that more than thirty
(30) days are reasonably required for its cure, than Tenant shall not be deemed
to be in default if Tenant commenced the cure within the thirty (30) day period
and thereafter diligently prosecutes the cure to completion;
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors without the consent of Landlord or the
beneficiary under any deed of trust encumbering the Property;
(e) The filing by or against Tenant, or any guarantor of this
Lease, of a petition to have Tenant, or any guarantor of this Lease, adjudicated
a bankrupt or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
or any guarantor of this Lease, the same is dismissed within ninety (90) days);
(f) The appointment of a trustee or receiver to take
possession of substantially all of Tenant's, or any guarantor's of this Lease,
assets located at the Property or of Tenant's, or any guarantor's of this Lease,
interest in this Lease, where possession is not restored to Tenant, or any
guarantor of this Lease, within ninety (90) days; or
20
(g) The attachment, execution or judicial seizure of
substantially all of Tenant's, or any guarantor's of this Lease, assets located
at the Property or of Tenant's, or any guarantor's of this Lease, interest in
this Lease, if not discharged within ninety (90) days.
15.2 Termination Remedies. Subject to Section 15.7 below, should
Tenant breach this Lease or abandon the Property before the end of the term of
this Lease, Landlord may terminate this Lease. Upon termination, Tenant shall
immediately surrender the Property, the Improvements and the Assets to Landlord,
and if Tenant fails to do so, Landlord may, without prejudice to any of the
remedy which it may have for possession or arrearages in rent, enter upon and
take possession of the Property, the Improvements and the Assets, and expel or
remove Tenant and any other person who may be occupying the Property, or any
part thereof, without being liable for prosecution or any claim or damages
therefore, and Landlord may recover from Tenant the following:
(a) The worth at the time of award of the unpaid rent which
had been earned at the time of termination; plus
(b) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided, subject to the provisions of this Section 15.2; plus
(c) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after time of award exceeds the amount
of such rental loss for such period Tenant proves could be reasonably avoided,
subject to the provisions of this Section 15.6; plus
The worth at the time of award of the amount referred to in Subsections
15.2(a) and (b) above, is computed by allowing interest at ten percent (10%) per
annum. The worth at the time of award of the amount referred to in Subsection
15.2(c) above is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award, plus one percent
(1%).
For purposes of this Section 15.2, the Property shall be deemed to be
abandoned by Tenant, and this Lease shall terminate, if Landlord gives written
notice of its belief of abandonment to Tenant, personally delivered or sent by
first class mail, postage prepaid to Tenant at Tenant's last known address and
Tenant thereafter fails to give Landlord written notice, prior to the date of
termination specified in Landlord's notice, stating that Tenant does not intend
to abandon the Property and stating an address at which Tenant may be served by
certified mail in any action for unlawful detainer. Landlord may give notice of
belief of abandonment to Tenant only where the rent on the Property has been due
and unpaid for at least twenty (20) consecutive days and Landlord reasonably
believes that Tenant has abandoned the Property. The date of termination of this
Lease shall be specified in Landlord's notice and shall not be less than fifteen
(15) days after notice is personally served or not less than eighteen (18) days
after notice is deposited in the mail. Nothing contained herein shall preclude
Landlord from otherwise proving that the Property has been abandoned by Tenant
within the meaning of this Section.
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15.3 Breach Without Termination. Even though Tenant has breached
this Lease or abandoned the Property, this Lease continues in effect for so long
as Landlord does not terminate Tenant's right to possession, and Landlord may,
from time to time, enforce all or any of its rights and remedies under this
Lease, including the right to recover the rental amounts as they become due. For
purposes of this Section 15.3, acts of maintenance or preservation, or efforts
to relet the Property, or the appointment of a receiver on initiative of
Landlord to protect its interest in this Lease, shall not constitute acts of
termination of Tenant's right of possession of the Property.
15.4 Right of Landlord to Perform. In the event of any default of
Tenant, including the payment of money, other than rent, or the performance of
obligations required of Tenant under this Lease, then in addition to the other
remedies herein granted to Landlord, Landlord may, but shall not be obligated
to, and without waiving or releasing Tenant from any obligations of this Lease,
make any payment and perform any other acts on Tenant's part to be made or
performed. All sums paid by Landlord and all necessary costs incident thereto
shall be deemed additional rent.
15.5 Remedies Not Exclusive. Except as otherwise provided herein, no
right or remedy herein conferred on or reserved to Landlord is intended to be
exclusive of any other remedy or right, and each and every right or remedy shall
be cumulative and in addition to any right or remedy given hereunder or now or
hereafter existing at law, in equity or by statute.
15.6 Default by Landlord. Landlord shall not be deemed to be in
default of the performance of any obligation required to be performed by it
hereunder unless and until it has failed to perform within thirty (30) days
after written notice by Tenant to Landlord specifying therein that Landlord has
failed to perform its obligations; provided, however, that if the nature of
Landlord's obligations are such that more than thirty (30) days are required for
performance, then Landlord shall not be deemed to be in default if Landlord
shall commence performance within the thirty (30) day period and thereafter
diligently prosecute the same until completion.
15.7 Expenses of Reletting. Tenant shall be immediately liable to
pay Landlord, in addition to any other indebtedness hereunder, the costs and
expenses of retaking possession and reletting of the Property and of alterations
or repairs to the Property incurred by Landlord for the purposes of reletting
the Property after any default of Tenant.
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15.8 Application of Rentals and Receipts. The rentals and receipts
received by Landlord shall be applied.
(a) First to the payment of any indebtedness other than rent
due hereunder from Tenant to Landlord; and
(b) Second, to the payment of any costs and expenses of
retaking and reletting, and of all alterations and repairs as are expended by
Landlord; and
(c) Third, to the payment of rent due and unpaid hereunder.
ARTICLE XVI
WAIVER
16.1 Waiver. No delay or omission in the exercise of any remedies of
a party upon the default of the other party shall be construed as a waiver.
Landlord's approval of any of Tenant's acts which require Landlord's approval
shall not be deemed to waive or render unnecessary Landlord's consent to any
subsequent acts by Tenant.
ARTICLE XVII
LANDLORD'S ENTRY ONTO PROPERTY
17.1 Landlord's Entry onto Property. Landlord, and Landlord's
agents, representatives and other acting on behalf of or with Landlord's
authority, shall have the right to enter the Property at any time, upon
reasonable notice and from time to time for purposes of inspection of the
Property, to assure Tenant's performance of Tenant's obligations under this
Lease, and for such other purposes as Landlord may reasonably determine.
ARTICLE XVIII
SURRENDER OF PROPERTY AND HOLDING OVER
18.1 Surrender of Property. On expiration of this Lease Tenant shall
surrender the Property to Landlord (along with all Tenant's improvements except
those which Tenant has the right or obligation to remove) in good condition,
reasonable wear and tear excepted. Tenant shall also perform all restorations
made necessary by the removal of Tenant's improvements and/or personal Property
within the time periods stated in this Paragraph.
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18.2 Holding Over. If Tenant remains in possession of the Property
after expiration of the term, or after the date in any notice given by Landlord
to Tenant to terminate this Lease, such possession by Tenant shall be deemed to
be a month-to-month tenancy terminable on thirty (30) days' written notice given
at any time by either party. During any such month-to-month tenancy, Tenant
shall pay all rent required by this Lease, except that Base Rent shall be equal
to the last month of the then term Base Rent multiplied by One Hundred ten
percent (110%). All provisions of this Lease, except those pertaining to the
term and option to extend, shall apply to the month-to-month tenancy.
XIX
ESTOPPEL CERTIFICATES
19.1 Estoppel Certificates. At any time and from time to time, but
not more frequently than twice per calendar year, Landlord, on fourteen (14)
days' prior written request by Tenant, and Tenant, on fourteen (14) days' prior
written request by Landlord, will deliver to the party making the request, and
such designees specified by the requesting party, a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there shall have been modifications, stating the modifications), the current
monthly Base Rent, the dates to which the rent and any other deposits or charges
have been paid, and stating whether or not, to the best knowledge of the party
executing the certificate, the party requesting the statement is in default in
the performance of any covenant, agreement or condition contained in this Lease
and, if so, specifying each default of which the executing party may have
knowledge. In addition, Tenant shall provide to Landlord such additional
information, confirmations and/or statements as may reasonably be requested by
Landlord or Landlord's lender.
ARTICLE XX
GENERAL PROVISIONS
20.1 Attorneys' Fees. If either party commences an action against
the other party arising out of or in connection with this Lease, the prevailing
party shall be entitled to recover from the other party their reasonable
attorneys' fees and costs.
20.2 Notice. Any notice the parties are required to give under this
Lease shall be in writing and either served personally or sent by prepaid,
first-class mail addressed as follows:
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If to Landlord: Pacific Coast Holdings, LLC
c/o Xxxx Xxxx, Co-Manager
0000 Xxxxxxxxxxxx Xxxxxx Xxxxx 000
Xxxxx Xxx, XX 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
And
Xxxx X. Xxxxxxxxx, Co-Manager
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
With Copy to: Xxxxx Xxx
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
If to Tenant: Integrated Healthcare Holdings, Inc.
Attn: Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
Notice shall be deemed communicated within forty-eight (48) hours from the
time of mailing if mailed as provided in this Section.
20.3 Corporate Authority. If either party is a corporation, that
party shall deliver to the other party on execution of this Lease a certified
copy of a resolution of its board of directors authorizing the execution of this
Lease and naming the officers that are authorized to execute this Lease on
behalf of the corporation.
20.4 Headings. The word titles underlying the Article and Section
designations contained herein are inserted solely for convenience and under no
circumstances are they to be treated or construed as any part of this
instrument.
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20.5 Covenants and Conditions. Each term and each provision of this
Lease performable by Tenant and/or Landlord shall be deemed both a covenant and
a condition.
20.6 Successors and Assigns. Subject to the provisions hereof, this
Lease shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns.
20.7 Partial Invalidity. If any term or provision of this Lease or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease shall be valid and
enforced to the fullest extent permitted by law.
20.8 Amendment. This Lease may be amended only by a writing signed
by all the parties hereto.
20.9 Entire Agreement. This Lease contains the entire agreement of
the parties hereto with respect to the matters set forth herein with respect to
the leasing of the Property and the Improvements, and supersedes any prior
written or oral agreement between them respecting the subject matter contained
herein.
20.10 Construction of Lease. In determining the meaning of, or
resolving any ambiguity with respect to, any word, phrase or provision of this
Lease, no uncertainty or ambiguity shall be construed or resolved against any
party under any rule of construction, including the party primarily responsible
for the drafting and preparation of this Lease.
20.11 Currency. All sums payable hereunder shall be determined and
paid in United States Dollars.
20.12 Quitclaim Deed. At the expiration or earlier termination of
this Lease, Tenant shall, upon request of Landlord, execute, acknowledge and
deliver to Landlord within thirty (30) days, any quitclaim deeds or other
documents to remove the cloud of this Lease from the Property.
20.13 Recording of Memorandum of Lease. At the request of Tenant,
Landlord shall execute and Tenant may record a Memorandum of Lease referencing
the Lease in the Official Records of the County Recorder for the County in which
the Property is located.
20.14 Financial Information. During the term of this Lease, Tenant
shall provide to Landlord, monthly, quarterly and annual financial statements
(audited annually) for the businesses conducted on the Property prepared by an
independent certified public accountant using generally accepted accounting
principles consistently applied. Landlord shall retain such financial statements
in confidence, but may, nevertheless, deliver copies thereof to its advisors,
lenders, buyers, investors, attorney, and accountants. In the event of default,
Tenant shall provide Landlord full and complete access to all financial
information.
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20.15 Relationship of the Parties. Nothing herein shall create
between the parties hereto, or be relied upon by others as creating, any
relationship of partnership, association, joint venture, or otherwise. The sole
relationship of the parties hereto shall be that of Landlord and Tenant.
20.16 Time of Essence. Time is of the essence of each provision of
this Lease.
20.17 Successors. Subject to the limitations on assignment, this
Lease shall be binding on and inure to the benefit of the parties and their
successors.
20.18 Integrated Agreement, Modification. This Lease contains all
the agreements of the parties pertaining to the lease of the Property and cannot
be amended or modified except by another written agreement.
20.19 Severability. The unenforceability, invalidity or illegality
of any provision of this Lease shall not render the other provisions
unenforceable, invalid or illegal.
20.20 Real Estate Brokers, Finders. Each party represents that it
has not had dealings with any real estate broker, finder, or other person, with
respect to this Lease in any manner. Each party shall hold harmless the other
party from all damages resulting from any claims that may be asserted against
the other party by any broker, finder, or other person, with whom the other
party has or purportedly has dealt.
20.21 State Law. This Lease shall be construed and interpreted in
accordance with the laws of the State of California.
20.22 Dispute Resolution. All disputes under this Agreement shall be
resolved by arbitration in accordance with the Judicial Arbitration and
Mediation Service Comprehensive Arbitration Rules and Procedures before the
Judicial Arbitration and Mediation Service ("JAMS"). The arbitration shall be
held in Orange County, California (or any place agreed to by the Parties and the
arbitrator). The decision of the arbitrator shall be final and binding as to any
matters submitted hereunder; provided, however, the Superior Court for the
County of Orange shall have jurisdiction for the purpose of compelling
arbitration, awarding provisional or equitable relief, confirming the award of
the arbitrator, enforcing judgment and similar matters.
Notwithstanding any provision of the California Code of Civil
Procedure or the applicable rules of the JAMS to the contrary, each Party will
have all of the rights of discovery pertaining to civil litigation as provided
in the California Code of Civil Procedure. Unless the Parties otherwise agree in
writing, any arbitration hereunder will be conducted in accordance with the
rules of evidence existing in the State of California at the time of the
arbitration.
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20.23 Landlord Authority. The parties recognize that Landlord is a
manager managed California limited liability company operated by co-managers.
Any approval, disapproval or other action by landlord shall require a writing
executed by both co-managers.
20.24 Subordination. This Lease shall be subject and subordinate at
all times to the lien of any mortgage or deed of trust or other encumbrance(s)
which may now or which may at any time hereafter be made upon the Property or
any portion thereof, or upon Landlord interest therein. This clause shall be
self-operative, and no further instrument of subordination shall be required to
effect the subordination of this Lease. Nonetheless, in confirmation of such
subordination, Tenant shall execute and deliver such further instrument(s)
subordinating this Lease to the lien of any such mortgage or deed of trust
thereby, and Tenant hereby appoints Landlord the attorney-in-fact of Tenant,
irrevocably, to execute and deliver any such instrument(s) for Tenant. If the
interests of Landlord under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any mortgage or deed of
trust on the Property, Tenant shall be bound to the transferee at the option of
the transferee, under the terms, covenants and conditions of this Lease for the
remaining term, including any extensions or renewals, with the same force and
effect as if the transferee were Landlord under this Lease, and, if requested by
such transferee, Tenant agrees to attorn to the transferee as its Landlord. The
holder of any mortgage or deed of trust encumbering the Property shall have the
right, unilaterally, at any time to subordinate fully or partially its mortgage
or deed of trust or other security instrument to this Lease on such terms and
subject to such conditions as such holder may consider appropriate in its
discretion. Upon request Tenant shall execute and deliver an instrument
confirming any such full or partial subordination.
20.25 Sale by Landlord. In the event the original Landlord
hereunder, or any successor owner of the Property or any portion thereof, shall
sell or convey same, all liabilities and obligations on the part of the original
Landlord, or such successor owner, under this Lease accruing thereafter shall
terminate, and thereupon all such liabilities and obligations shall be binding
upon the new owner. Tenant agrees to attorn to each such new owner.
ARTICLE XXI
TRANSFER OF OPERATIONS UPON TERMINATION OF LEASE
21.1. Closing Date. The date on which this Lease either terminates
or expires pursuant to its terms or is terminated by either party whether
pursuant to a right granted to it hereunder or otherwise shall be referred to as
the "Closing Date" in this Article. On the Closing Date, this Lease shall be
deemed and construed as an absolute assignment for purposes of vesting in
Landlord (or Landlord's designee) all of Tenant's right, title and interest in
and to the following intangible Property which is now or hereafter used in
connection with the operation of the Property (the "Intangibles") and an
assumption by Landlord of Tenant's obligations under the Intangibles from and
after the Closing Date; provided that, from and after the Closing Date, Tenant
shall indemnify, defend and hold harmless Landlord against any claims, losses,
costs or damages, including reasonable attorneys' fees incurred or arising by
reason of Tenant's obligations under the Intangibles prior to the Closing Date:
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(a) service contacts and equipment leases for the benefit of
the Property to which Tenant is a party, and which can be terminated without
penalty by Tenant within sixty (60) or fewer days' notice or which Landlord
requests be assigned to Landlord pursuant to this Article XXI;
(b) any provider agreements with Medicare, Medicaid or any
other third-party payor programs (excluding the right to any reimbursement for
periods prior to the Closing Date, as defined above) entered in connection with
the Property to the extent assignable by Tenant;
(c) all existing agreements with residents and any guarantors
thereof of the Property, to the extent assignable by Tenant (excluding the right
to any payments for periods prior to the Closing Date) and any and all patient
trust fund accounts; and
(d) at Landlord's option, the business of Tenant as conducted
at the Property as a going concern, including but not limited to the name of the
business conducted thereon and all telephone numbers presently in use therein.
21.2. Proration. Landlord shall be responsible for and shall pay all
accrued expenses with respect to the Property accruing on or after 12:01 a.m. on
the day of the Closing Date and shall be entitled to receive and retain all
revenues from the Property accruing on or after the Closing Date. Within fifteen
(15) business days after the Closing Date, the following adjustments and
prorations shall be determined as of the Closing Date:
(a) Real estate taxes, ad valorem taxes, school taxes,
assessments and personal Property, intangible and use taxes, if any. If the
information as to the actual amount of any of the foregoing taxes and
assessments are not available for the tax year in which the Closing Date occurs,
the proration of such taxes shall be estimated based upon reasonable information
available to the parties, including information disclosed by the local tax
office or other public information, and an adjustment shall be made when actual
figures are published or otherwise become available.
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(b) Tenant will terminate the employment of all employees on
the Closing Date and shall be and remain liable for any and all wages, accrued
vacation and sick leave pay for employees of the Property with respect to the
period prior to and including the Closing Date.
(c) Landlord shall receive a credit equal to any advance
payments by patients at the Property to the extent attributable to periods on
and after the Closing Date.
(d) The present insurance coverage on the Property shall be
terminated as of the Closing Date and there shall be no proration of insurance
premiums.
(e) All other income from, and expenses of, the Property
(other than mortgage interest and principal), including but not limited to
public utility charges and deposits, maintenance charges and service charges
shall be prorated between Tenant and Landlord as of the Closing Date. Tenant
shall, if possible, obtain final utility meter readings as of the Closing Date.
To the extent that information for any such proration is not available, Tenant
and Landlord shall effect such proration within ninety (90) days after the
Closing Date.
(f) Tenant shall be and remain responsible for any employee
severance pay and accrued benefits which may be payable as the result of any
termination of an employee's employment on or prior to the Closing Date.
21.3. Possession. All necessary arrangements shall be made to
provide possession of Leased Property to Landlord on the Closing Date, at which
time Tenant shall also deliver to Landlord all medical records, patient records
and other personal information concerning all patients residing at the Property
as of the Closing Date and other relevant records used or developed in
connection with the business conducted at the Property. Such transfer and
delivery shall be in accordance with all applicable laws, rules and regulations
concerning the transfer of medical records and other types of patient records.
21.4. Interim Operation. For the period commencing on the Closing
Date and ending on the date Landlord, or its designee, obtains any and all
appropriate state or other governmental licenses and certifications required to
operate the Facility, Tenant hereby agrees that Landlord, or Landlord's
designee, shall have the right, but not the obligation, to manage and operate
the Property, on a triple net basis, and shall be entitled to all revenues of
the Property during such period, and to use any and all licenses, certifications
and provider agreements issued to Tenant by any federal, state or other
governmental authority for such operation of the Property, if permitted by any
such governmental authorities. If Landlord or its designee exercises the right
described above in this Section 21.4, the provisions of this Section 21.4 shall
be self-operative and shall constitute a management agreement between Tenant, on
the one hand, and Landlord or its designee, on the other hand, on the terms set
forth above in this Section 21.4 provided, however, that upon the request of
Landlord or its designee, Tenant shall enter into a separate management
agreement on the terms set forth in this Section 21.4 and on such other terms
and provisions as may be specified by Landlord or its designee.
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21.5. Patient Funds. Tenant shall provide Landlord with an
accounting within fifteen (15) days after the Closing Date of all funds
belonging to patients at the Property, which are held by Tenant in a custodial
capacity. Such accounting shall set forth the names of the patients for whom
such funds are held, the amounts held on behalf of each such patient and
Tenant's warranty that the accounting is true, correct and complete.
Additionally, Tenant, in accordance with all applicable rules and regulations,
shall make all necessary arrangements to transfer such funds to a bank account
designated by Landlord, and Landlord shall in writing acknowledge receipt of and
expressly assume all Tenant's financial and custodial obligations with respect
thereto. Notwithstanding the foregoing, Tenant will indemnify, defend and hold
Landlord harmless from all liabilities, claims and demands, including reasonable
attorney's fees, in the event the amount of funds, if any, transferred to
Landlord's bank account as provided above, did not represent the full amount of
the funds then or thereafter shown to have been delivered to Tenant as custodian
that remain undisbursed for the benefit of the patient for whom such funds were
deposited, or with respect to any matters relating to patient funds which
accrued prior to the Closing Date.
21.6. Cash and Cash Equivalents. All cash, checks and cash
equivalent at the Property and deposits in bank accounts (other than patient
trust accounts) relating to the Property on the Closing Date shall remain
Tenant's Property after the Closing Date. All accounts receivable, loans
receivable and other receivables of Tenant, whether derived from operation of
the Property or otherwise, shall remain the Property of Tenant after the Closing
Date. Tenant shall retain full responsibility for the collection thereof.
Landlord shall assume responsibility for the billing and collection of payments
on account of services rendered by it on and after the Closing Date. In order to
facilitate Tenant's collection efforts, Tenant agrees to deliver to Landlord,
within a reasonable time after the Closing Date, a schedule identifying all of
those private pay balances owing for the month prior to the Closing Date and
Landlord agrees to apply any payments received which are specifically designated
as being applicable to services rendered prior to the Closing Date to reduce the
pre-Closing Date balances of said patients by promptly remitting said payments
to Tenant. Landlord shall retain all other payments received as being applicable
to services rendered after the Closing Date. Landlord shall cooperate with
Tenant in Tenant's collection of its pre-Closing accounts receivable. Landlord
shall have no liability for uncollectible receivables and shall not be obligated
to bear any expense as a result of such activities on behalf of Tenant. Landlord
shall remit to Tenant or its assignee those portions of any payments received by
Landlord which are specifically designated as repayment or reimbursement arising
out of cost reports filed for the cost reporting periods ending on or prior to
the Closing Date.
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21.7. Residents. With respect to residents at the Property on the
Closing Date, Landlord and Tenant agree as follows:
(a) With respect to Medicare and Medicaid residents, Landlord
and Tenant agree payment for in-house residents covered by Medicare or Medicaid
on the Closing Date will be made (on a per diem basis) by Medicare or Medicaid
under current regulations directly to Tenant for services rendered at the
Property prior to the Closing Date. Said payments shall be the sole
responsibility of Tenant and Landlord shall in no way be liable therefore. After
the Closing Date, Landlord and Tenant shall each have the right to review
supporting books, records and documentation that are in the possession of the
other relating to Medicaid or Medicare payments.
(b) If, following the Closing Date, Landlord receives payment
from any state or federal agency or third-party provider that represents
reimbursement with respect to services provided at the Property prior to the
Closing Date, Landlord agrees that it shall remit such payments to Tenant. A
copy of the appropriate remittance shall accompany payments by Landlord to
Tenant.
21.8. Additional Documents. In addition to the obligations required
to be performed hereunder by Tenant and Landlord on and after the Closing Date,
Tenant and Landlord agree to perform such other acts, and to execute,
acknowledge, and/or deliver subsequent to the Closing Date such other
instruments, documents and materials, as the other may reasonably request in
order to effectuate the consummation of the transaction contemplated herein.
21.9. Tenant Indemnity. Tenant for itself, its successors and
assigns hereby indemnifies and agrees to defend and hold Landlord and its
successors and assigns harmless from any and all claims, demands, obligations,
losses, liabilities, damages, recoveries and deficiencies (including interest,
penalties and reasonable attorney's fees, costs and expenses) which any of them
may suffer as a result of the breach by Tenant in the performance of any of its
commitments, covenants or obligations under this Article XXI, or with respect to
any suits, arbitration proceedings, administrative actions or investigations
which relate to the use by Tenant of the Property during the Term or for any
liability which may arise from operation of the Property as an acute care
hospital during the Term, including without limitation, any amounts due or to be
reimbursed to any governmental authority based upon any audit or review of
Tenant or of the Facility or the operation thereof and pertaining to the period
prior to the Closing Date or any amounts recaptured under Title XIX based upon
applicable Medicaid/Medicare recapture regulations. The rights of Landlord under
this paragraph are without prejudice to any other remedies not inconsistent
herewith which Landlord may have against Tenant pursuant to the terms of this
Lease. The foregoing indemnity shall survive the expiration or termination of
this Lease, whether due to lapse of time or otherwise.
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21.10. Landlord Indemnity. So long as the termination of this Lease
is not due to a default by Tenant hereunder, Landlord for itself, its successors
and assigns hereby indemnifies and agrees to defend and hold Tenant and its
successors and assigns harmless from any and all claims, demands, obligations,
losses, liabilities, damages, recoveries and deficiencies (including interest,
penalties and reasonable attorney's fees, costs and expenses) which any of them
may suffer as a result of the breach by Landlord in the performance of any of
its commitments, covenants or obligations under this Article XXI, or with
respect to any suits, arbitration proceedings, administrative actions or
investigations which relate to the use of the Property after the Term or for any
liability which may arise from operation of the Property as an acute care
hospital after the Term. The rights of Tenant under this paragraph are without
prejudice to any other remedies not inconsistent herewith which Tenant may have
against Landlord pursuant to the terms of this Lease or otherwise.
21.11. Offset Rights. Landlord shall have the right to offset
against any monies due Tenant pursuant to the terms of this Article XXI, any
amounts due by Tenant to Landlord pursuant to this Lease or due by Tenant to any
third party, including without limitation any amounts due for, utilities,
insurance premiums, payroll obligations or any other obligation arising from the
Property.
21.12. No Waiver. Anything to the contrary contained in this Article
XII notwithstanding, in the event of termination of this Lease is due to a
default by Tenant hereunder, none of the provisions of this Article shall in any
way limit, reduce, restrict or modify the rights granted to Landlord.
21.13. Cooperation. Landlord and Tenant agree to cooperate with each
other in order to effectuate the terms and provisions of this Article XXI.
ARTICLE XXII
LIMITATION OF LANDLORD'S LIABILITY
22.1. Limitation of Landlord's Liability. In the event of any
conveyance or other divestiture of title to the Leased Property the grantor or
the person who is divested of title shall be entirely freed and relieved of all
covenants and obligations thereafter accruing hereunder, and the grantee or the
person who otherwise succeeds to title shall be deemed to have assumed the
covenants and obligations of Landlord thereafter accruing hereunder and shall
then be Landlord under this Lease. Notwithstanding anything to the contrary
provided in this Lease, if Landlord or any successor in interest of Landlord
shall be an individual, partnership, limited liability company, corporation,
trust, tenant in common or mortgagee, there shall be absolutely no personal,
corporate or entity liability on the part of such Landlord or any individual or
member of Landlord or any manager, stockholder, director, officer, employee,
partner or trustee of Landlord with respect to the terms, covenants or
conditions of this Lease, and Tenant shall look solely to the interest of
Landlord in the Leased Property for the satisfaction of each and every remedy
which Tenant may have for the breach of this Lease; such exculpation from
personal, corporate or entity liability to be absolute and without any
exception, whatsoever.
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ARTICLE XXIII
TENANT OPTION TO PURCHASE
Upon the condition that Tenant has exercised Tenant's option to renew as
provided in Section 1.2 hereof, and provided that Tenant is not in default
hereunder, Tenant shall have the option to purchase the Hospital Properties upon
each and all of the following terms:
(a) Tenant gives to Landlord, and Landlord actually receives, on a
date which is at least six (6) and not more than nine (9)
months prior to expiration of the lease term as extended by
the exercise of the renewal option. If said notification of
the exercise of this Option is not so given and received, the
Option shall automatically terminate and be of no further
force and effect.
(b) The Purchase Price for the Hospital Properties shall be the
fair market value thereof. The parties agree to meet within
thirty (30) days of the exercise of notice of the exercise of
said option and attempt to agree upon the fair market price,
which if agreed upon shall constitute the purchase price. If
the parties are unable to agree, then each shall appoint an
appraiser with not less than five (5) years experience in the
valuation of hospital properties, the two appraisers shall
appoint a third appraiser. Each appraiser shall separately
appraise the Hospital Properties. The three appraisals shall
then be averaged, the appraisal which deviates the most from
the average shall be disregarded and the remaining two
appraisals and the average of the three appraisals shall then
be averaged, the resulting average shall be deemed the fair
market value and shall constitute the purchase price.
(c) The Hospital Properties shall be transferred in "As Is" "Where
Is" condition free of any liens other than for real estate
taxes and installments of special assessments not yet due and
payable and any other lien which is the obligation of the
Tenant under this Agreement.
(d) The closing date for the sale of the Hospital Properties shall
be the date of expiration of the lease term as extended by the
exercise of the option, or such other date as the parties may
agree upon.
(e) Any dispute with respect to this option shall be resolved in
accordance with Section 20.22 hereof.
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EXECUTION
IN WITNESS THEREOF, Landlord and Tenant have executed this Lease in one or
more counterparts which, taken together, shall constitute one agreement.
TENANT
By:
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Its:
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LANDLORD
By:
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Its:
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EXHIBIT A
HOSPITAL PROPERTIES
Western Medical Center-Santa Xxx
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
Western Medical Center-Anaheim
0000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Costal Communities Hospital
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
MEDICAL OFFICE BUILDING PROPERTIES
Hospital Department (WMCSA)
000 Xxxxx Xxxxxx Xxx.
Xxxxx Xxx, XX 00000
Doctor's Hospital (Coastal)
0000 X. Xxxxxxx Xxx.
Xxxxx Xxx, XX 00000
Doctor's MOB (Coastal)
0000 X. Xxxxxxx Xxx.
Xxxxx Xxx, XX 00000
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