SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
EXHIBIT
99.1
SECOND
AMENDMENT TO
This
Second Amendment to Stock Purchase Agreement (this “Amendment”)
is
entered into as of October 31, 2005, by and among INTEGRATED HEALTHCARE
HOLDINGS, INC., a Nevada corporation (“IHHI”),
and
ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC, a Nevada limited liability
company (“OCPIN”),
and
amends that certain Stock Purchase Agreement entered into by the parties
dated
January 28, 2005, as amended by that certain First Amendment to Stock Purchase
Agreement dated as of June 1, 2005 (the “First
Amendment”)
(the
Stock Purchase Agreement, as amended by the First Amendment, is referred
to
herein as the “Agreement”).
Capitalized
terms or matters of construction deemed or established in the Agreement shall
be
applied in this Amendment as defined or established in the Agreement.
RECITALS
A. IHHI
and
OCPIN are each parties to the Agreement and to that certain Escrow Agreement,
dated June 1, 2005 (the “Escrow
Agreement”).
B. OCPIN
has, to date, deposited with the Escrow Agent an aggregate of $12,500,000
and
has agreed to provide other value to IHHI as provided herein and in the
Agreement.
C. The
parties now desire to terminate the Escrow Account and distribute the assets
in
the Escrow Account pursuant to the terms and conditions of this Amendment.
AGREEMENT
In
consideration of the foregoing premises, the mutual covenants and agreements
set
forth herein, and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Release
from Escrow Account.
Subject
to the other provisions of this Amendment and the Agreement, within one business
day following execution of this Amendment (or such later date as the parties
shall mutually agree to accommodate the requirements of Section 3 below):
(a) IHHI
and
OCPIN will provide joint, irrevocable instructions to the Escrow Agent to
immediately terminate the Escrow Account, immediately transfer the Escrowed
Cash
and, within the timeframes reasonably required by IHHI’s transfer agent to
deliver and divide stock certificates, transfer the Escrowed Shares, as follows:
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(A)
$1,500,000 of the Escrowed Cash, plus a pro rata portion of all
accumulated and accrued interest in the Escrow Account, shall be
delivered
to IHHI, and (B) $11,000,000 of the Escrowed Cash, plus a pro rata
portion
of all accumulated and accrued interest in the Escrow Account, shall
be
delivered to OCPIN; and
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(A)
5,798,831 of the Escrowed Shares shall be delivered to OCPIN, and
(B) 51,451,169 of the Escrowed Shares shall be delivered to
IHHI,
along with all originals and copies of stock powers that are being
held by
the Escrow Agent.
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(b) OCPIN
will transfer to IHHI from another account at Citibank the sum of $2,800,000
and, upon receipt thereof, IHHI will issue to OCPIN (or authorize the Escrow
Agent to transfer to OCPIN) 10,824,485 of the Escrowed Shares;
(c) IHHI
will
instruct its transfer agent to issue to OCPIN a certificate (or certificates)
for 5,400,000 Shares multiplied by such
percentage of OCPIN’s payments required to be made under Sections 1.2(a), (b),
(c) and (e)(i)-(iii) of the Agreement (as amended by the First Amendment)
which
have been made to date.
2. Right
to Acquire Additional Shares.
(a) Subject
to the other provisions of this Amendment and the Agreement, IHHI hereby
grants
to OCPIN the right to purchase from IHHI up to $6.7 million in additional
Shares
within
30
calendar days following the Default Termination Date (the
“Payment
Deadline”)
at a
price of $0.2586728
per share, or a maximum of 25,901,447 Shares, plus interest on the purchase
price at the rate of 14% per annum from September 12, 2005 through the date
of
closing on the funds by IHHI. OCPIN shall deliver to IHHI payment of the
purchase price in immediately available funds no later than the close of
business on the Payment Deadline, and, subject to the other provisions of
this
Amendment, IHHI shall deliver to OCPIN certificates for the additional Shares
no
later than three business days following receipt of payment therefore (or
clearance of New Investors with respect to particular funds, if necessary
under
Section 3). Upon one or more closings on funds received under this Section
2(a),
IHHI shall promptly issue to OCPIN such additional portion of the 5,400,000
Shares referred to in Section 1(c) above as is represented by the additional
funds being paid to IHHI under this Section 2(a), under the formula described
in
Section 1(c).
(b) For
purposes of Section 2(a) above, the term “Default Termination Date” shall mean
the date on which IHHI notifies OCPIN (or one of its managing members) that
it
has been notified by Medical Provider Financial Corporation II (“MedCap”)
that
all events of default have been cured under that certain Credit Agreement,
dated
as of March 3, 2005, between IHHI and MedCap (the “Credit
Agreement”).
3. Clearance
of New Investors.
Notwithstanding any provisions of Sections 1 and 2 above, IHHI’s obligations to
issue or authorize the transfer of any Shares or Escrowed Shares to OCPIN
hereunder shall be contingent on OCPIN:
(a) Promptly
supplying to the members of the Audit Committee of IHHI information (and
followup information) that the Audit Committee may reasonably request (including
without limitation identity and professional background) concerning investors
who have furnished funds to be delivered to IHHI under this Amendment
representing the potential acquisition of control of OCPIN or more than 5%
of
the outstanding shares of IHHI (the “New
Investors”).
The
Audit Committee shall make a reasonable and prompt assessment as to whether
prior approval of any New Investor is required, and whether the information
concerning any New Investor raises an unreasonable risk of violation, under
any
legal requirement applicable to IHHI, including without limitation the laws
and
regulations pertaining to control and licensing of IHHI or its hospitals.
If, in
the reasonable judgment of the Audit Committee, the acceptance of funds from
a
New Investor requires prior approval under any legal requirement or raises
an
unreasonable risk of violation to IHHI, then IHHI shall reject or return
to
OCPIN the funds (or such portion thereof) obtained from such New Investor
and
shall not issue or transfer to OCPIN the Shares corresponding to such funds
(but
such action shall not affect any funds received from other investors).
2
(b) Promptly
supplying to Medical Provider Financial Corporation (and/or such other lender
to
IHHI that has the right to approve a change of control of IHHI) (the
“Lender”)
information (and followup information) that it may reasonably request (including
without limitation identity and professional background) concerning the New
Investors. If the Lender objects, in accordance with its contractual
rights
to
object,
to the
acceptance of funds from a New Investor, IHHI shall reject or return to OCPIN
the funds (or such portion thereof) obtained from such New Investor and shall
not issue or transfer to OCPIN the Shares corresponding to such funds (but
such
action shall not affect any funds received from other investors). In
the
event that the Lender objects to a New Investor as provided in this Section
3(b), OCPIN shall have the right to present an alternative New Investor and
corresponding funds to IHHI to replace any funds which are rejected or returned
pursuant to this Section 3(b), during the 10-day period following receipt
of
notice of such action by IHHI or the Lender. Such right may only be exercised
by
OCPIN once.
(c) If
acceptance of any funds by IHHI under Sections 3(a) or 3(b) requires prior
approval of a New Investor by a regulatory body, IHHI will hold such funds
in a
segregated account that it controls until such time that the New Investor
is
approved or rejected, at which time IHHI will accept such funds or return
them
to OCPIN, as appropriate.
4. Forbearance
under 999 Building Agreement.
The
parties agree that:
(a) The
90-day period referred to in Section 6(b) of the First Amendment is extended
until the Payment Deadline.
(b) The
reference in Section 6(b) of the First Amendment to the receipt of $5,000,000
pursuant to Section 1.2(e) of the Agreement shall be satisfied upon the receipt
by IHHI of an aggregate of $5,000,000 under Sections 1 and 2 of this Amendment.
5. Discharge
under Agreement.
Upon
performance of all of the obligations and agreements of OCPIN and IHHI under
this Amendment, each party will be deemed to have fully discharged their
respective obligations under Sections 1.2 and 1.3 of the Agreement, other
than
Sections 1.2(e)(iv) and 1.2(f) of the Agreement, and under Section 2.1(a)
of the
Escrow Agreement.
6. Effect
of Amendment.
Except
as expressly provided herein, the Agreement shall remain unchanged and shall
continue in full force and effect.
7. Counterparts.
This
Amendment may be signed by the parties in counterparts, which together shall
constitute one and the same agreement among the parties.
3
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
in
counterparts by their duly authorized officers, all as of the day and year
first
above written.
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Integrated
Healthcare Holdings, Inc.
/s/ Xxxxx X. Xxxxxxxx
Xxxxx
X. Xxxxxxxx, President
/s/ Xxxxx Xxxxx
Xxxxx
Xxxxx, Chief Executive Officer and Director
Xxxxx
X. Xxxxx, Director
/s/
Xxxx X. Xxxx
Xxxx
X. Xxxx, M.D., as Director
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Orange
County Physicians Investment Network, LLC
/s/
Xxxx X. Xxxx
Name:
Xxxx X. Xxxx, M.D.
Title:
Manager
/s/
Xxxxxx Xxxxx
Name:
Xxxxxx Xxxxx, M.D.
Title:
Manager
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In
their individual capacities as shareholders of IHHI:
/s/ Xxxxx X.
Xxxxxxxx
Xxxxx
X. Xxxxxxxx
/s/ Xxxxx Xxxxx
Xxxxx
Xxxxx
Xxxxx
X. Xxxxx
/s/
Xxxx
Xxx
Xxxx
X. Xxx
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