EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into
effective as of June 1, 2005, by and among INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation ("IHHI"), ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC,
a Nevada limited liability company ("OCPIN"), and City National Bank, national
association (the "Escrow Agent"). IHHI and OCPIN are sometimes collectively
referred to herein as the "Parties" and individually as a "Party." Upon
execution of this Agreement by IHHI and OCPIN, this Agreement shall be binding
on each of them, but shall not become effective as to any of its terms outside
of this paragraph until this Agreement is also executed by the Escrow Agent.
Each of IHHI and OCPIN agree to promptly make such changes to this Agreement as
may be reasonably requested by the Escrow Agent, and that this Agreement will
thereafter be enforceable against each of them subject to such changes.
W I T N E S S E T H:
WHEREAS, IHHI and OCPIN have entered into that certain Stock Purchase
Agreement, dated as of January 28, 2005, as amended as of June 1, 2005 (as so
amended, the "Stock Purchase Agreement"), pursuant to which OCPIN has, among
other things, agreed to acquire 108,000,000 shares of common stock, par value
$0.001 per share ("Shares"), of IHHI;
WHEREAS, pursuant to the Stock Purchase Agreement, IHHI has to date
issued certificates in the name of OCPIN or its designee in an aggregate amount
of 102,600,000 Shares;
WHEREAS, pursuant to the Stock Purchase Agreement and as part of the
transactions contemplated thereby, IHHI and OCPIN have agreed to enter into this
Agreement and that OCPIN will provide for the deposit with the Escrow Agent (i)
upon execution of this Agreement, 57,250,000 Shares (the "Escrowed Shares"), and
(ii) up to $14,809,020 in cash (the "Escrowed Cash") on the schedule set forth
in the Stock Purchase Agreement.
WHEREAS, the Parties desire to specifically set forth their rights and
obligations with respect to the Escrowed Shares and Escrowed Cash, and the
distribution and release thereof; and
WHEREAS, the execution and delivery of this Agreement is intended to be
executed concurrently with the amendment to the Stock Purchase Agreement of even
date hereof.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
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1. ESTABLISHMENT OF ESCROW.
1.1 DEPOSIT OF ESCROWED SHARES AND ESCROWED CASH.
(a) Concurrently with the execution of this Agreement, OCPIN will
make provision for delivery to the Escrow Agent of stock certificates (the
"Stock Certificates") representing the Escrowed Shares, accompanied by stock
powers duly executed in blank (the "Stock Powers") with respect to such Stock
Certificates.
(b) From time to time through September 1, 2005, OCPIN will deliver
to the Escrow Agent the Escrowed Cash in the form of wire transfers of
immediately available funds.
(c) The Escrowed Shares and the Escrowed Cash shall be held by the
Escrow Agent in the Escrow Account (as defined below) in accordance with the
provisions of this Agreement and shall not be subject to any effective lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto or OCPIN which has not otherwise been waived.
1.2 ESCROW ACCOUNT.
The Escrow Agent agrees to hold the Escrowed Shares and Escrowed Cash in
one or more separate and distinct accounts (collectively, the "Escrow Account"),
subject to the terms and conditions of this Agreement. The Escrowed Cash shall
bear interest at the rate applicable to interest-bearing money market accounts
of the Escrow Agent, which interest shall accrue in the Escrow Account. The
Escrow Agent shall not distribute or release any of the Escrowed Shares,
Escrowed Cash or accrued interest except in accordance with the express terms
and conditions of this Agreement.
1.3 VOTING OF ESCROWED SHARES
During the pendency of this Agreement, the Escrowed Shares which have not
been released pursuant to Section 2.1 shall not be voted by OCPIN or any of its
affiliates, and no proxy will be granted as to any Escrowed Shares. Neither
OCPIN nor IHHI will exercise any rights in the Escrowed Shares until such time
as they are released according to the terms of this Agreement.
1.4 DIVIDENDS, ETC.
Any cash, securities or other property distributable (whether by way of
dividend, stock split or otherwise) in respect of or in exchange for any
Escrowed Shares shall not be distributed to OCPIN, but rather shall be deposited
with the Escrow Agent to be held in the Escrow Account. At the time any Escrowed
Shares are required to be released from the Escrow Account to the Parties
pursuant to this Escrow Agreement, any cash, securities or other property
previously distributed in respect of or in exchange for such Escrowed Shares
shall be released from the Escrow Account to such Person.
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1.5 TRANSFERABILITY.
The interests of OCPIN in the Escrow Account and in the Escrowed Shares
shall not be assignable or transferable, other than by operation of law. No
transfer of any of such interests by operation of law shall be recognized or
given effect until IHHI shall have received written notice of such transfer.
1.6 FRACTIONAL SHARES.
No fractional Shares shall be retained in or released from the Escrow
Account pursuant to this Escrow Agreement. In connection with any release of
Escrowed Shares from the Escrow Account, any Person who would otherwise be
entitled to receive a fraction of a Share (after aggregating all fractional
Shares issuable to OCPIN) shall be paid by IHHI in cash, the dollar amount
(rounded to the nearest whole cent), without interest, determined by multiplying
such fraction by the average closing price for the five trading days immediately
preceding the date of such release, and such fraction of a share shall be
returned to IHHI.
1.7 SCOPE OF POWERS, DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
Subject to the Parties' directions, the Escrow Agent has whatever powers
are conferred by law and which are required to discharge its obligations and
exercise its rights under this Escrow Agreement, including but not limited to
the powers specified in the Section 1.9 below, and the powers and authority
granted to the Escrow Agent under other provisions of this Escrow Agreement. The
Escrow Agent shall have no duties or obligations except those specifically set
forth in this Agreement.
1.8 POWERS EXERCISABLE BY THE ESCROW AGENT, SUBJECT TO THIS AGREEMENT.
The Escrow Agent is authorized and empowered to exercise the following
powers, subject to the limitations contained in this Agreement:
(a) If required by the Escrow Agent's procedures for handling the
Escrowed Shares, to utilize registered securities depositories to hold assets of
the Escrow Account, provided however that the Escrow Agent shall not be relieved
of any fiduciary responsibility with respect to the assets so held.
(b) To employ agents, including public accountants and legal counsel
(which may be counsel for Parties), as it shall determine appropriate, and to
pay their reasonable expenses and compensation from the Escrow Account;
(c) To rely on Parties to defend and litigate, or settle, at their
expense, any suit brought against the Escrow Account or any order sought to be
satisfied out of the Escrow Account, without duty on the Escrow Agent beyond
forwarding related papers to Parties and complying with any final order to the
extent of the Escrow Account;
(d) To withhold from taking any action until it receives proper
written notice of an occurrence of an event affecting the Escrow Account;
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(e) To treat as genuine, sufficient and correct, in form, execution
and validity, and as the document it purports to be, and from the party it
purports to be from, any notice, instruction, letter, paper, telex or other
document purported to be furnished to Escrow Agent by Parties and believed by
Escrow Agent to be both genuine and to have been transmitted by the proper party
or parties, and Escrow Agent shall have no liability with respect to any action
taken or foregone by Escrow Agent in good faith in reliance on such document;
(f) To be fully released and discharged from any obligation to
perform any further duties imposed upon it with respect to this Escrow following
its resignation or removal and the appointment of a successor or the deposit of
the Escrow Account under Section 3.3 below; and
(g) To be free from any liabilities or change in duties, other than
as may be specifically described elsewhere herein, for the action or inaction of
a party to this Escrow Agreement, or any other party, or the occurrence or
non-occurrence of an event outside of this Escrow.
1.9 NOTIFICATION OF RIGHTS REGARDING SECURITIES.
Following receipt of information, the Escrow Agent will notify the Parties
of any conversion, redemption, exchange, subscription or other right relating to
any securities purchased hereunder of which notice was given after the
acquisition of such securities by the Escrow Agent, and the Escrow Agent shall
have no obligation to exercise any such right unless it is instructed by the
Parties or their Representative in writing to exercise such right, within a
reasonable time prior to the expiration of such right.
1.10 SHAREHOLDER COMMUNICATIONS.
The Parties directs the Escrow Agent not to disclose to any company
requesting shareholder information the name and the address of the Parties or
the share position of the securities of the inquiring company in the Escrow
Fund.
1.11 ELECTRONIC AFFIRMATION.
Notwithstanding any other provision of this Agreement, the Escrow Agent
may settle securities trades effected by the Parties through a securities
depository that utilizes an institutional delivery system, in which event the
Escrow Agent may deliver or receive securities in accordance with appropriate
trade reports or statements given to the Escrow Agent by such depository without
having received direct communications or instructions from the Parties.
1.12 ADDITIONAL INSTRUCTIONS.
In any matter under this Escrow Agreement in which the Escrow Agent is
permitted or required to act upon instructions, the Escrow Agent, where it deems
necessary, may request further instructions from the person or entity giving the
original instructions, or from the Parties, as the case may be, and may defer
any and all action pending receipt thereof.
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2. RELEASE OF ESCROWED SHARES AND ESCROWED CASH.
The Escrowed Shares and Escrowed Cash shall only be distributed or
released as set forth in this Article 2.
2.1 RELEASE DATES AND TERMS.
(a) The following schedule sets forth OCPIN's agreement to pay
Escrowed Cash to the Escrow Agent on July 1, 2005, August 1, 2005 and September
1, 2005 (each, a "Distribution Date").
(i) On or before July 1, 2005, Purchaser shall deliver to the Escrow Agent
$4,809,020;
(ii) On or before August 1, 2005, Purchaser shall deliver to the Escrow
Agent an additional $5,000,000; and
(iii) On or before September 1, 2005, Purchaser shall deliver to the
Escrow Agent an additional $5,000,000.
(b) At the close of business on September 1, 2005 or such sooner
date that the total amount of Escrowed Cash held by the Escrow Agent equals or
exceeds $14,809,020 (in either case, the "Last Distribution Date"), the Escrow
Agent shall deliver by facsimile to each of IHHI and OCPIN a written notice (the
"Notice") setting forth:
(i) the amount of Escrowed Cash, if any, received from OCPIN on or before
each Distribution Date;
(ii) for each Distribution Date, the amount of any shortfall in funds
received from OCPIN compared to the amounts payable on or before each such
Distribution Date under the schedule set forth in Section 2.1(a) above;
and
(iii) the aggregate shortfall, if any, of funds received by all
Distribution Dates (such aggregate amount, the "Deficit").
The Parties intend that any shortfall in amounts payable on or before any
Distribution Date may not be made up by a late payment or extra payment after
such Distribution Date. For example, if OCPIN makes a payment of only $3,000,000
by July 1, 2005, the shortfall of $1,809,020 may not be made up by an extra
payment after July 1, 2005. If OCPIN thereafter makes two payments of $4,000,000
by each of August 1, 2005 and September 1, 2005, the total Deficit on the Last
Distribution Date will be $3,809,020 ($1,809,020 plus $1,000,000 plus
$1,000,000). The Parties further intend that payments in excess of the amounts
due on or before any Distribution Date shall be applied towards the next
Distribution Date.
(c) If the amount of the Deficit indicated in the Notice is zero,
then promptly following the Last Distribution Date the Escrow Agent shall
distribute from the Escrow Account (i) to OCPIN Stock Certificates evidencing
all of the Escrowed Shares and (ii) to IHHI all of the Escrowed Cash and accrued
interest.
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(d) If the amount of the Deficit indicated in the Notice is greater
than zero, then IHHI shall, during the ten (10) days following the Last
Distribution Date, use its reasonable best efforts to sell such number of
Shares, on terms that are reasonable to IHHI, that result in a net amount of
cash to IHHI of no less than the amount of the Deficit, with such sale to close
(the "New Share Closing") on or before September 12, 2005, unless such date is
extended by mutual written consent of IHHI and OCPIN (IHHI and OCPIN hereby
agree that any such extension shall require the prior consent of Medical
Provider Financial Corporation II) (the "Closing Deadline"). No later than two
business days prior to the New Share Closing, IHHI will provide to the Escrow
Agent and OCPIN a certificate of its CEO and CFO indicating: (i) the anticipated
date of the New Share Closing; (ii) the net amount expected to be raised by IHHI
in the New Share Closing (which shall be equal to or greater than the amount of
the Deficit); (iii) the amount of the "Deficit" for purposes of this Agreement;
and (iv) the calculation of the number of Escrowed Shares issuable to OCPIN
under Section 2.1(e)(ii) below (the "Officers Certificate").
(e) Subject to receipt of the Officers Certificate, simultaneously
with the New Share Closing, the Escrow Agent shall distribute from the Escrow
Account (i) to IHHI all of the Escrowed Cash and accrued interest, (ii) to OCPIN
Stock Certificates evidencing such number of Escrowed Shares equal to the amount
of Escrowed Cash that is timely received from OCPIN (under the timeframes set
forth in Section 2.1(a) above) divided by $0.2586728 per share, which number
shall be set forth in the Officers Certificate, and (iii) to IHHI or its
designee all of the Escrowed Shares that are not distributed to OCPIN in
accordance with clause (ii) of this paragraph.
(f) If the Deficit is greater than zero and IHHI has advised the
Escrow Agent in writing that the New Share Closing will not occur by the Closing
Deadline, then promptly following the Closing Deadline the Escrow Agent shall
distribute from the Escrow Account (i) to IHHI Stock Certificates evidencing all
of the Escrowed Shares and (ii) to OCPIN all of the Escrowed Cash and accrued
interest; provided, however, that if OCPIN notifies IHHI and the Escrow Agent in
writing prior to the Closing Deadline that it desires to use the Escrowed Cash
to acquire Escrowed Shares notwithstanding the failure to occur of the New Share
Closing, then the Escrow Agent shall, promptly after the Closing Deadline,
distribute from the Escrow Account (i) to IHHI all of the Escrowed Cash and
accrued interest, (ii) to OCPIN that number of Shares which is equal to the
amount of Escrowed Cash and accrued interest divided by $0.2586728, and (iii) to
IHHI the remaining Shares not purchased by OCPIN with the Escrowed Cash.
(g) IHHI's transfer agent (the "Transfer Agent") is StockTrans,
Inc., and the Escrow Agent is hereby authorized to provide stock transfer
instructions to the Transfer Agent, consistent with this Agreement.
2.2 DISPUTES.
If IHHI or OCPIN has received a Notice and either of them believes in good
faith that (a) OCPIN has, in fact, delivered to the Escrow Agent a different
amount of funds than the amount set forth in the Notice within the timeframes
permitted for delivery of such funds under Section 2.1(a) above, (b) there
exists an error in calculating the Deficit stated in the Notice or (c) there
exists in error in the calculations contained in the Officers Certificate, then
either of them may deliver to the Escrow Agent a written objection (a "Dispute
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Notice") to such Notice, accompanied by written proof of the facts underlying
its disagreement with the Notice within two (2) business days following delivery
of such Notice. Upon receipt of all such information, the Escrow Agent shall not
distribute to either IHHI or OCPIN Stock Certificates or Escrowed Cash (as the
case may be) that is the subject of the Dispute Notice until the Escrow Agent
(i) receives written instructions signed by each of the undersigned Anil Shah
and Bruce Mogel (or successors appointed by either of them) authorizing the
distribution of the portion of the Escrowed Shares or Escrowed Cash that is the
subject of the Dispute Notice, or (ii) receives a final decision of an
arbitrator from Judicial Arbitration and Mediation Service, located in Orange
County, selected pursuant to the Stock Purchase Agreement directing the
distribution of Stock Certificates evidencing the portion of the Escrowed
Shares, and/or the Escrowed Cash, that is the subject of the Dispute Notice.
Upon resolution of the Dispute Notice in accordance with the preceding sentence,
the Escrow Agent shall distribute Stock Certificates (along with appropriate
Stock Powers) evidencing the Escrowed Shares and/or Escrowed Cash subject to
dispute in accordance with such resolution. Any Dispute Notice shall describe in
reasonable detail the basis for objection to the Notice and the portion of such
Notice (if less than all) which is the subject of such Dispute Notice.
2.3 PARTIAL DISTRIBUTION.
If any Dispute Notice includes an objection to only a portion of a Notice,
the Escrow Agent shall promptly distribute from the Escrow Account Stock
Certificates (along with appropriate Stock Powers) and/or Escrowed Cash equal to
the portion to which no objection is raised; provided, that no such partial
release by the Escrow Agent shall terminate or otherwise prejudice any rights of
either party with respect to amounts claimed in any Notice which are in excess
of the amounts so released.
2.4 MANNER OF DISTRIBUTIONS.
All distributions of Stock Certificates evidencing Escrowed Shares and
Escrowed Cash shall be made as set forth in this Article 2. Distributions of
Stock Certificates evidencing the Escrowed Shares or Escrowed Cash shall be made
to an account or accounts designated in writing by OCPIN or IHHI, as applicable.
Following the distribution of the Escrowed Shares to OCPIN, IHHI will not
thereafter interfere with or challenge in any manner OCPIN's ownership in such
shares of IHHI's common stock or its rights as a shareholder of IHHI on the
basis of amounts owed to IHHI under the Stock Purchase Agreement.
2.5 TERMINATION.
This Agreement shall terminate when the entire amount of Escrowed Shares
and Escrowed Cash has been released and distributed in accordance with this
Article 2. Upon such termination this Agreement shall have no further force and
effect, except that the provisions of this Section 2.5 and Articles 3, 4 and 5
and Articles 7 through 18 below shall survive such termination.
3. CONDITIONS TO ESCROW.
The Escrow Agent agrees to hold the Escrowed Shares and Escrowed Cash and
to perform in accordance with the terms and provisions of this Agreement. The
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Parties agree that the Escrow Agent shall not assume any responsibility for the
failure of the Parties to perform in accordance with the Stock Purchase
Agreement or this Agreement. The acceptance by the Escrow Agent of its
responsibilities hereunder is subject to the following terms and conditions
which the Parties hereto agree shall govern and control with respect to the
Escrow Agent's rights, duties and liabilities hereunder:
3.1 LIABILITY.
The Escrow Agent undertakes to perform only such duties as are expressly
set forth herein, and no additional duties or obligations shall be implied
hereunder. In performing its duties under this Agreement, or upon the claimed
failure to perform any of its duties hereunder, the Escrow Agent shall not be
liable to anyone for any damages, losses or expenses which may be incurred as a
result of the Escrow Agent so acting or failing to so act; provided, however,
that the Escrow Agent shall not be relieved from liability for damages arising
out of its proven gross negligence or willful misconduct under this Agreement.
The Escrow Agent shall in no event incur any liability with respect to (i) any
action taken or omitted to be taken in good faith upon advice of legal counsel
(which counsel may not also be counsel to any Party) given with respect to any
question relating to the duties and responsibilities of the Escrow Agent
hereunder or (ii) any action taken or omitted to be taken in reliance upon any
instrument delivered to the Escrow Agent and believed by it to be genuine and to
have been signed or presented by the proper Party or Parties. The Escrow Agent
shall not be bound in any way by any agreement or contract between or among the
Parties, whether or not the Escrow Agent has knowledge of any such agreement or
contract, including, but not limited to, the Stock Purchase Agreement. The
Escrow Agent is not a party to, nor is it bound by, nor need it give
consideration to the terms or provisions of, any other agreement or undertaking
among the Parties or any of them, or between the Parties or any of them and
other persons (other than this Agreement), it being the intention of the parties
hereto that the Escrow Agent assent to and be obligated to give consideration
only to the terms and provisions hereof.
3.2 RIGHTS IN EVENT OF DISPUTE.
It is understood and agreed that, in the event of any dispute between the
Parties or among them or any other person resulting in adverse claims and
demands being made in connection with or for any money or other property
involved in or affected by this Agreement, the Escrow Agent shall refuse to
comply with such demands or claims, so long as such dispute shall continue. In
such event, the Escrow Agent shall make no distribution, release or other
disposition of the Stock Certificates evidencing the Escrowed Shares or Escrowed
Cash, or any portion thereof. Anything herein to the contrary notwithstanding,
the Escrow Agent shall not be or become liable to such Parties or persons or any
of them for the failure of the Escrow Agent to comply with such conflicting or
adverse demands. The Escrow Agent shall be entitled to continue to refrain and
refuse to distribute, release or otherwise dispose of the Stock Certificates
evidencing the Escrowed Shares and Escrowed Cash or any part thereof, or to
otherwise act hereunder, as stated above, unless and until such dispute is
resolved in accordance with Section 2.2 of this Agreement. In the event of such
a dispute, the Escrow Agent shall have the right, in addition to the rights
described above and at the option of the Escrow Agent, to tender into the
custody of any court having jurisdiction or the successor escrow agent
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identified in Section 3.3, all money, Stock Certificates, Stock Powers and
property comprising the Escrowed Shares and Escrowed Cash. Upon such tender, the
parties hereto agree that the Escrow Agent shall be discharged from all further
duties under this Agreement; provided, however, that such tender shall not
deprive the Escrow Agent of its compensation hereunder earned prior to such
tender and discharge of the Escrow Agent of its duties hereunder.
3.3 RESIGNATION OR TERMINATION OF ESCROW AGENT.
The Escrow Agent shall have the right to resign at any time by giving
written notice of such resignation to the Parties and the Parties shall have the
right to terminate the services of the Escrow Agent hereunder at any time by
giving thirty (30) days' written notice (with such written notice being signed
by IHHI and OCPIN) of such termination to the Escrow Agent, in each case
specifying the effective date of such resignation or termination. Within thirty
(30) days after receiving or delivering the aforesaid notice, as the case may
be, the Parties agree to appoint a successor escrow agent to which the Escrow
Agent shall distribute the funds and property then held hereunder, less the
amount of any fees owing to the Escrow Agent hereunder as of such date. If a
successor escrow agent has not been appointed and has not accepted such
appointment by the end of such thirty (30)-day period, the Escrow Agent may
apply to a court of competent jurisdiction for the appointment of a successor
escrow agent and shall be entitled to tender into the custody of such court all
funds and property then held by it hereunder, and the costs, expenses and
reasonable attorneys' fees which are incurred in connection with any such
proceeding shall be paid 50% by IHHI and 50% by OCPIN. Thereupon, the Escrow
Agent shall be relieved of all further duties and obligations under this
Agreement. The Escrow Agent shall have no responsibility for the appointment of
a successor escrow agent hereunder. Except as otherwise agreed to in writing by
the Parties, none of the Stock Certificates evidencing the Escrowed Shares,
Stock Powers, or Escrowed Cash shall be released from the Escrow Account unless
and until a successor escrow agent has been appointed in accordance with this
Section 3.3.
3.4 DISCHARGE OF ESCROW AGENT.
Upon delivery of all of the Escrowed Shares and Escrowed Cash pursuant to
the terms of Article 2 above or to a successor escrow agent, the Escrow Agent
shall thereafter be discharged from any further obligations hereunder. The
Escrow Agent is hereby authorized, in any and all events, to comply with and
obey any and all final judgments, orders and decrees of any court of competent
jurisdiction which may be filed, entered or issued, and all final arbitration
awards and, if it shall so comply or obey, it shall not be liable to any other
person by reason of such compliance or obedience.
4. INDEMNIFICATION.
The Escrow Agent shall have no obligation to take any legal action in
connection with this Agreement or towards its enforcement, or to appear in,
prosecute or defend any action or legal proceeding which would or might involve
it in any cost, expense, loss or liability unless security and indemnity, as
provided herein, shall be furnished. IHHI and OCPIN hereby, jointly and
severally, agree to indemnify the Escrow Agent and its officers, directors,
employees and agents and save the Escrow Agent and its officers, directors,
employees and agents harmless from and against any and all Claims (as defined
below) and Agent Losses (as defined below) which may be incurred by the Escrow
Agent or any of such officers, directors, employees or agents as a result of
Claims asserted by any person against the Escrow Agent or any of such officers,
directors, employees or agents as a result of or in connection with its
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performance as the Escrow Agent under this Agreement. As between IHHI and OCPIN,
each of IHHI's and OCPIN's obligation to so jointly and severally indemnify and
hold harmless the Escrow Agent and its officers, directors, employees and agents
shall be limited to one-half (1/2) the amount of the Claim. For the purposes
hereof, the term "Claim" or "Claims" shall mean all claims, lawsuits, causes of
action or other legal actions and proceedings of whatever nature brought against
(whether by way of direct action, counterclaim, cross action or impleader) the
Escrow Agent or any such officer, director, employee or agent, even if
groundless, false or fraudulent, so long as the claim, lawsuit, cause of action
or other legal action or proceeding is alleged or determined, directly or
indirectly, to arise out of, result from, relate to or be based upon, in whole
or in part: (a) the acts or omissions of any of the Parties, (b) the appointment
of the Escrow Agent as escrow agent under this Agreement, or (c) the performance
by the Escrow Agent of its duties under this Agreement; and the term "Agent
Losses" shall mean losses, costs and expenses and amounts paid in settlement,
directly or indirectly resulting from, arising out of or relating to one or more
Claims. Upon the written request of the Escrow Agent or any such officer,
director, employee or agent (each referred to herein as an "Indemnified Party")
IHHI and/or OCPIN shall assume the investigation and defense of any Claim,
including the employment of counsel reasonably acceptable to the applicable
Indemnified Party and the payment of all expenses related thereto and,
notwithstanding any such assumption, such Indemnified Party shall have the
right, and IHHI and/or OCPIN shall pay the cost and expense thereof, to employ
separate counsel with respect to any such Claim and participate in the
investigation and defense thereof in the event that such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or in addition to
those available to any Party. IHHI and OCPIN hereby agree that the
indemnification and protections afforded the Escrow Agent in this Article 4
shall survive the termination of this Agreement, the resignation or removal of
the Escrow Agent pursuant to Section 3.3 hereof or the tender by the Escrow
Agent of the Escrowed Shares and Escrowed Cash to a court pursuant to Section
3.2 hereof.
5. ESCROW COSTS.
The Escrow Agent shall be entitled to be paid a fee for its services
pursuant to the Fee Schedule attached hereto. In addition, the Escrow Agent
shall be entitled to recover all expenses incurred by it in connection with this
Agreement, including but not limited to the reasonable cost and expenses of
legal services (including attorneys' fees) in the event the Escrow Agent deems
it necessary to retain counsel. All such fees and expenses whenever incurred
shall be paid one-half by each of IHHI and OCPIN.
6. LIMITATIONS ON RIGHTS TO ESCROWED SHARES AND ESCROWED CASH.
None of the Parties shall have any right, title or interest in or to, or
possession of, the Escrow Account and therefore shall not have the ability to
pledge, convey, hypothecate or grant as security all or any portion of the
Escrowed Shares or Escrowed Cash unless and until such portion of the Escrowed
Shares and/or Escrowed Cash has been released pursuant to Article 2 above.
Accordingly, the Escrow Agent shall be in sole possession of the Escrowed Shares
and Escrowed Cash, and shall not act as custodian of the Parties under this
Agreement for the purposes of perfecting a security interest therein, and no
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creditor of any of the Parties shall have any right to have or to hold or
otherwise attach or seize all or any portion of the Escrowed Shares or Escrowed
Cash as collateral for any obligation and shall not be able to obtain a security
interest in any of the Escrowed Shares or Escrowed Cash unless and until such
portion of the Escrowed Shares or Escrowed Cash, as the case may be, has been
released pursuant to Article 2 above.
7. NOTICES.
All notices, requests or other communications required or permitted
hereunder shall be sufficient if in writing and (a) delivered in person against
written receipt therefor, or by nationally recognized express delivery or
courier service requiring acknowledgment of receipt, (b) sent by facsimile, or
(c) deposited in the mail registered or certified first class, postage prepaid
and return receipt requested (provided that any notice given pursuant to clause
(b) is also confirmed by the means described in clause (a) or (c)) to such
address or facsimile of the party set forth below or to such other place or
places as such party from time to time may designate in writing in compliance
with the terms hereof. Each such notice, request or other communication shall be
deemed given when so delivered personally, or sent by facsimile transmission,
or, if sent by express delivery or courier service one (1) business day after
being sent, or if mailed, three (3) business days after the date of deposit in
the mail. A notice of change of address or facsimile number shall be effective
only when done in accordance with this Article 7. The Escrow Agent in its
discretion may act upon oral instructions if it believes them to be genuine, but
the Escrow Agent shall not be required to do so. If the Escrow Agent requires,
all oral instructions are to be promptly confirmed in writing, but the Escrow
Agent shall not be liable for any action or any failure to act in accordance
with oral instructions, even though it fails to receive written confirmation
from the Parties. The Escrow Agent shall be provided with specimen signatures of
the authorized representatives of the Parties. The Escrow Agent shall be
entitled to rely in good faith upon any instructions signed by any authorized
representative of the Parties, and shall incur no liability for following such
directions.
To IHHI: Integrated Healthcare Holdings, Inc.
695 Town Center Drive, Suite 260
Costa Mesa, CA 92626
Telephone: (714) 434-9191
Facsimile:
Attention: Bruce Mogel
With copies to: Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013
Telephone: (213) 892-5200
Facsimile: (213) 892-5454
Attention: Allen Z. Sussman, Esq.
To OCPIN: Orange County Physicians Investment Network, LLC
2621 South Bristol Street, #108
Santa Ana, California 92704
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Attention: Anil V. Shah, M.D.
Telephone: 714-290-5322
Facsimile: 714-297-9588
With copies to: Cummins & White
Newport Beach, CA
2424 S.E. Bristol Street, Suite 300
Newport Beach, California 92660-0757
Attention: William Mitchell, Esq.
Telephone: (949) 852-1800
Facsimile: (949) 852-8510
To the Escrow Agent: City National Bank, national association
Wealth Management Services
Attention: Sue Behning/VP
1950 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067
Telephone: (310) 282-2921
Facsimile: (310) 282-2936
To the Transfer Agent: StockTrans, Inc
44 West Lancaster Avenue
Ardmore, PA 19003
Attention: Ms. Gina Hardin
Telephone: 610-649-7300
Facsimile: 610-649-7302
8. ENTIRE AGREEMENT, AMENDMENTS.
This Agreement, together with the Stock Purchase Agreement (as the same
applies solely to the Parties), embodies the entire understanding of the parties
hereto with respect to the subject matter hereof and there are no other
agreements or understandings, written or oral, in effect between the parties
hereto relating to the subject matter hereof, except as specifically referenced
herein or in the Stock Purchase Agreement. This Agreement, together with the
Stock Purchase Agreement (as the same applies solely to the Parties) supersedes
and terminates all prior discussions, negotiations, understandings, arrangements
and agreements by or among the parties hereto relating to the subject matters
hereof. Subject to the first paragraph of this Agreement, this Agreement may be
amended, or any provision of this Agreement may be waived, so long as such
amendment or waiver is set forth in a writing executed by IHHI and OCPIN (a copy
of which shall be promptly provided by the Parties to the Escrow Agent);
provided that if any such amendment or waiver would have the effect of
increasing or expanding the Escrow Agent's obligations or duties under this
Agreement, the written consent of the Escrow Agent shall be required in addition
to the written consent of IHHI and OCPIN. No course of dealing between or among
the parties hereto shall be deemed effective to modify, amend or discharge any
part of this Agreement or any rights or obligations of any party hereto under or
by reason of this Agreement.
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9. ASSIGNS AND ASSIGNMENT.
This Agreement and the provisions hereof shall be binding upon and inure
to the benefit of the respective successors and permitted assigns of the parties
hereto; provided that the Escrow Agent shall not be permitted to assign its
obligations hereunder except as provided in Section 3.2 and 3.3 above.
10. TAXATION OF DIVIDENDS.
OCPIN hereby acknowledges that, for federal and state income tax purposes,
any dividends, distributions or interest on the Escrowed Shares then evidenced
by Stock Certificates, or Escrowed Cash, held by the Escrow Agent shall be
income of OCPIN.
11. NO OTHER THIRD PARTY BENEFICIARIES.
Neither this Agreement nor any provision hereof, nor any document executed
or delivered herewith, shall create any right in favor of or impose any
obligation upon any person or entity other than the parties hereto and their
respective successors and permitted assigns.
12. INTERPRETATION.
The headings in this Agreement are inserted for convenience of reference
only and shall not be a part of or control or affect the meaning hereof.
13. NO WAIVER.
Any failure of any of the parties hereto to comply with any of its
obligations or agreements or to fulfill any conditions herein contained may be
waived only by a written waiver from the other parties hereto. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder by such party preclude any other or future exercise of that
right or any other right hereunder by that party.
14. SEVERABILITY.
The parties hereto agree that (a) the provisions of this Agreement shall
be severable in the event that for any reason whatsoever the provisions hereof
are invalid, void or otherwise unenforceable, (b) such invalid, void or
otherwise unenforceable provisions shall be automatically replaced by other
provisions which are as similar as possible in terms to such invalid, void or
otherwise unenforceable provisions, but are valid and enforceable, and (c) the
remaining provisions shall remain enforceable to the fullest extent permitted by
law.
15. NO STRICT CONSTRUCTION.
The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their collective mutual intent, and no
rule of strict construction shall be applied against any person. The term
"including" as used herein shall be by way of example, and shall not be deemed
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to constitute a limitation of any term or provision contained herein. Each
defined term used in this Agreement has a comparable meaning when used in its
plural or singular form.
16. RELEASES ON NON-BUSINESS DAYS.
In the event that a release of a portion of the Escrowed Shares or
Escrowed Cash hereunder is required to be made on a date that is not a business
day, such release may be made on the next succeeding business day with the same
force and effect as if made when required.
17. GOVERNING LAW; SERVICE OF PROCESS.
ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA
IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF CALIFORNIA
SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN THOUGH
UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION MAY ORDINARILY APPLY. It is the
intention of the parties hereto, however, that the situs of the Escrowed Shares
and Escrowed Cash created hereunder is and shall be administered in the state in
which the principal office of the Escrow Agent from time to time acting
hereunder is located. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement may be brought pursuant
to the provisions for dispute resolution contained in the Stock Purchase
Agreement.
18. COUNTERPARTS.
This Agreement may be executed in any number of duplicate counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"IHHI" "Escrow Agent"
INTEGRATED HEALTHCARE HOLDINGS, INC. CITY NATIONAL BANK, national association
By: /s Bruce Mogel By:_____________________________________
Name: Bruce Mogel Name:___________________________________
Title: Chief Executive Officer Title:__________________________________
"OCPIN"
ORANGE COUNTY PHYSICIANS INVESTMENT NETWORK, LLC
By: /s/ Anil V. Shah, M.D.
Name: Anil V. Shah, M.D.
Title: Manager
By: /s/ Ajay Meka, M.D.
Name: Ajay Meka, M.D.
Title: Manager
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SCHEDULE OF FEES
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