EXHIBIT 99.1 Letter Agreement, dated as of August 27, 2007, by and between the
Registrant and Medical Capital Corporation.
August 27, 2007
HAND DELIVERED
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Xxxxx Xxxxxxxx, President
Xxxxx Xxxxx, Chief Executive Officer
Integrated Healthcare Holdings, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Re: Expression of Interest in Providing Credit Facilities
Gentlemen:
We are pleased to provide you with a summary of the terms and conditions
pursuant to which Medical Capital Corporation (by and through one or more of its
affiliated entities) (for convenience, "MCC") would consider making available to
Integrated Healthcare Holdings, Inc. ("Borrower") (i) a $45,000,000 real estate
term loan ("$45 Million Real Estate Term Loan"), (ii) a $35,000,000
non-revolving line of credit loan ("$35 Million Non-Revolving Line of Credit
Loan"), (iii) a $10,700,000 term loan ("$10.7 Million Term Loan"), and (iv) a
$50,000,000 revolving line of credit loan ("$50 Million Revolving Line of Credit
Loan") (the $45 Million Real Estate Term Loan, $35 Million Non-Revolving Line of
Credit Loan, $10.7 Million Term Loan and $50 Million Revolving Line of Credit
Loan are hereinafter together referred to as the "Credit Facilities"). The terms
and conditions pursuant to which MCC proposes to provide the Credit Facilities
are set forth below:
I. CREDIT FACILITIES.
A. $45 Million Real Estate Term Loan. MCC proposes to make available to
Borrower the following $45 Million Real Estate Term Loan:
1. Advance: A term loan made in a single advance on the Initial Funding
Date.
2. Amount of Loan: $45,000,000.
3. Purpose: To repay all amounts due and owing under the existing
$50,000,000 real estate term loan owed by Borrower to MCC.
4. Interest: During the first year, simple interest would be charged at
the annual rate of 9.0% fixed. At commencement of the second year and
thereafter, simple interest would be charged at the annual rate of
14.0%
0000 Xxxxx Xxxxx Xxxxxxx Xxxx, Xxxxxxx Xxxxxxxxxx 00000 3 tel: 000-000-0000
fax: 000-000-0000
xxx.xxxxxxxxxxxxxx.xxx
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fixed. Interest on the balance of the $45 Million Real Estate Term
Loan shall be calculated on the basis of the actual number of days
elapsed in a 360-day year.
5. Monthly Interest-Only Payments: Interest-only payments due and payable
monthly, in arrears.
6. Balloon Payment: The unpaid principal balance plus accrued but unpaid
interest shall be due in a balloon payment on the Maturity Date.
7. Maturity Date: Three (3) years from the Initial Funding Date.
8. Prepayment: No prepayment penalty or charge.
9. Origination Fee: $675,000 (1.5% of $45,000,000) due at the Initial
Funding Date.
10. Loan to Value: The $45 Million Real Estate Term Loan combined with the
$35 Million Non-Revolving Line of Credit Loan cannot exceed 70% of the
M.A.I. appraised value of the Hospital Properties.
11. Collateral and Security: All Credit Facilities will be secured by a
single first priority deed of trust on the fee simple interest in each
of the Hospital Properties and a first priority perfected lien on and
security interest in all assets of Borrower (including, without
limitation, the Hospital Properties, fixtures, improvements,
assignments of leases, equity interest in the Hospital Properties (if
any), accounts receivable and proceeds thereof, and all other assets
(including, without limitation, the inventory, equipment, intellectual
property, contracts and other general intangibles, cash and proceeds
of each of the foregoing) of Borrower and its direct and indirect
subsidiaries, whether existing at Closing or thereafter organized or
acquired.
12. Hospital Properties:
a. Western Medical Center Santa Xxx, a 282-bed acute care hospital
in Santa Ana, California.
b. Western Medical Center Anaheim, a 188-bed acute care hospital in
Anaheim, California.
c. Coastal Communities Hospital, a 178-bed acute care hospital in
Santa Ana, California.
x. Xxxxxxx Medical Center, a 114-bed acute care hospital in Orange,
California and all related and attached properties owned by
Borrower.
B. $35 Million Non-Revolving Line of Credit Loan. A non-revolving line of
credit loan in one or more advances, upon request of Borrower.
1. Maximum Line of Credit Commitment: $35,000,000.
2. Non-Revolving: Borrower may borrow and repay, but may not repay and
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reborrow.
3. Approved Uses: The proceeds may be used only for the following
purposes:
a. To repay all amounts due and owing under the existing $30,000,000
line of credit loan to MCC.
b. To pay the Origination Fee on all Credit Facilities, Unused
Commitment Fees, MCC's Costs on all Credit Facilities.
c. To pay for working capital as approved by MCC.
4. Interest: Simple interest at the annual rate of 9.25% fixed. Interest
on the balance of the $35 Million Non-Revolving Line of Credit Loan
shall be calculated on the basis of the actual number of days elapsed
in a 360-day year.
5. Monthly Interest-Only Payments: Interest-only payments due and payable
monthly, in arrears.
6. Balloon Payment. The unpaid principal balance plus accrued but unpaid
interest shall be due in a balloon payment on the Maturity Date.
7. Maturity Date: Three (3) years from the Initial Funding Date.
8. Prepayment: No prepayment penalty or charge.
9. Loan to Value: The $45 Million Real Estate Term Loan combined with the
$35 Million Non-Revolving Line of Credit Loan cannot exceed 70% of the
M.A.I. appraised value of the Hospital Properties.
10. Collateral and Security: All Credit Facilities will be secured by a
single first priority deed of trust in the fee simple interest in each
of the Hospital Properties and a first priority perfected lien on and
security interest in all assets of Borrower (including, without
limitation, the Hospital Properties, fixtures, improvements,
assignments of leases, equity interest in the Hospital Properties (if
any), accounts receivable and proceeds thereof, and all other assets
(including, without limitation, the inventory, equipment, intellectual
property, contracts and other general intangibles, cash and proceeds
of each of the foregoing) of Borrower and its direct and indirect
subsidiaries, whether existing at Closing or thereafter organized or
acquired.
11. Unused Commitment Fee: 0.50% per annum of the average daily difference
between $35,000,000 minus the sum of the outstanding
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principal amount of all advances for the period for which the Unused
Commitment Fee is being paid.
12. Origination Fee: $525,000 (1.5% of $35,000,000) due at the Initial
Funding Date.
C. $10.7 Million Term Loan. MCC proposes to make available to Borrower the
following $10.7 Million Term Loan:
1. Advance: A term loan made in a single advance on the Initial Funding
Date.
2. Amount of Loan: $10,700,000.
3. Purpose: To repay the existing $10,700,000 loan owed by Borrower to
MCC.
4. Interest: Simple interest at the annual rate of 9.25% fixed. Interest
on the balance of the $10.7 Million Term Loan shall be calculated on
the basis of the actual number of days elapsed in a 360-day year.
5. Monthly Interest-Only Payments: Interest-only payments due and payable
monthly, in arrears.
6. Balloon Payment: The unpaid principal balance plus accrued but unpaid
interest shall be due in a balloon payment on the Maturity Date.
7. Maturity Date: Three (3) years from the Initial Funding Date.
8. Prepayment: No prepayment penalty or charge.
9. Origination Fee: $160,500 (1.5% of $10,700,000) due at the Initial
Funding Date.
10. Loan Convertible Into Common Stock. At any time prior to the Maturity
Date, MCC shall have the right, at its option, to convert the $10.7
Million Convertible Loan into fully paid and nonassessable shares of
Borrower's voting common stock ("Common Stock"). The number of shares
of Common Stock into which the $10.7 Million Convertible Loan may be
converted ("Common Stock Conversion Shares") shall be determined by
dividing the entire unpaid principal amount of the $10.7 Million
Convertible Loan together with all accrued but unpaid interest thereon
by the Common Stock Conversion Price in effect at the time of such
conversion. The Common Stock Conversion Price per share of
Common Stock shall be determined prior to closing. The Common Stock
Conversion Price shall be subject to anti-dilution and other customary
adjustments.
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11. Collateral and Security: All Credit Facilities will be secured by a
single first priority deed of trust in the fee simple interest in each
of the Hospital Properties and a first priority perfected lien on and
security interest in all assets of Borrower (including, without
limitation, the Hospital Properties, fixtures, improvements,
assignments of leases, equity interest in the Hospital Properties (if
any), accounts receivable and proceeds thereof, and all other assets
(including, without limitation, the inventory, equipment, intellectual
property, contracts and other general intangibles, cash and proceeds
of each of the foregoing) of Borrower and its direct and indirect
subsidiaries, whether existing at Closing or thereafter organized or
acquired.
12. MCC Right to Assign: MCC shall have the right to sell, assign,
transfer and convey its interest in the $10.7 Million Term Loan
documents.
D. $50 Million Revolving Line of Credit Loan. A revolving line of credit loan
in one or more advances, upon request of Borrower.
1. Maximum Line of Credit Commitment: The maximum amount of advances
available under the $50 Million Revolving Line of Credit Loan during
the Term shall be $50,000,000. The amount available to Borrower at any
one time shall be based upon the Availability (as defined below) which
shall be determined subsequent to MCC's on-site due diligence.
2. Availability: Availability under the $50 Million Revolving Line of
Credit Loan shall be an amount (a) up to 90% of the net collectable
value of the accounts receivable from third-party payors that are aged
less than 150 days from date of service and (b) up to 50% of unbilled
accounts receivable from third party payors for up to 15 days
subsequent to patient discharge. The "net collectable value" of
Borrower's accounts receivable is the amount Borrower bills
third-party payors less deductible obligations and contractual
allowances, which Availability shall be determined by MCC upon
completion of its on-site due diligence and which shall be set forth
in applicable loan documents to be provided to Borrower.
3. Revolving: Borrower may borrow and repay, and may repay and reborrow.
4. Approved Uses: The proceeds may be used only to purchase Borrower's
accounts receivable.
5. Interest: Simple interest at the annual rate of 24% fixed; provided,
however, if the $45 Million Real Estate Term Loan is repaid in full
and satisfied prior to its Maturity Date, the interest rate on the $50
Million Revolving Line of Credit Loan will at that time decrease to
simple interest at the annual rate of $18% fixed. Interest on the
balance of the $50
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Million Revolving Line of Credit Loan shall be calculated on the basis
of the actual number of days elapsed in a 360-day year. Collections of
Borrower's accounts receivable, in cash, by MCC under the $50 Million
Revolving Line of Credit Loan shall be credited to Borrower's
obligations thereunder on a daily basis, subject to five (5) business
clearance days.
6. Monthly Interest-Only Payments: Interest-only payments due and payable
monthly, in arrears.
7. Obligations. All obligations under the $50 Million Revolving Line of
Credit Loan shall be due and payable in full on the Maturity Date.
8. Maturity Date: Three (3) years from the Initial Funding Date.
9. Prepayment: Not permitted during the eighteen (18) month period
commencing on the Initial Funding Date.
10. Collateral and Security: All Credit Facilities will be secured by a
single first priority deed of trust in the fee simple interest in each
of the Hospital Properties and a first priority perfected lien on and
security interest in all assets of Borrower (including, without
limitation, the Hospital Properties, fixtures, improvements,
assignments of leases, equity interest in the Hospital Properties (if
any), accounts receivable and proceeds thereof, and all other assets
(including, without limitation, the inventory, equipment, intellectual
property, contracts and other general intangibles, cash and proceeds
of each of the foregoing) of Borrower and its direct and indirect
subsidiaries, whether existing at Closing or thereafter organized or
acquired.
11. Unused Commitment Fee: 0.50% per annum of the average daily difference
between $50,000,000 minus the sum of the outstanding principal amount
of all advances for the period for which the Unused Commitment Fee is
being paid.
12. Origination Fee: $750,000 (1.5% of $50,000,000) due at the Initial
Funding Date.
II. WARRANT. Borrower shall grant MCC a warrant to subscribe for and
purchase up to 4.95% of Borrower's fully paid and nonassessable shares Common
Stock at a price per share to be determined prior to closing (the "Exercise
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. The Exercise Price shall be subject to anti-dilution and other
customary adjustments.
III. GENERAL TERMS AND CONDITIONS.
A. General. The definitive credit documentation to be provided to
Borrower relating to the Credit Facilities shall contain certain
representations, warranties, covenants and other terms and conditions consistent
with those customarily found in similar financings and such other
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terms and conditions as shall be agreed upon by Borrower and MCC. The $45
Million Real Estate Term Loan, the $35 Million Non-Revolving Line of Credit
Loan, the $10.7 Million Term Loan and the $50 Million Revolving Line of Credit
Loan shall be cross-collateralized and cross-defaulted.
B. Loan Documents. Borrower shall execute and deliver to MCC such loan
and security agreements, notes, mortgages, deeds of trust, subordination and
inter-creditor agreements, instruments, documents, certificates, opinions,
environmental indemnities, right of first refusals, fraud guaranties, third
party reports and assurances as are reasonable and customary for similar loans,
and as MCC may require in connection with the Closing in its sole discretion.
C. Guaranty. The Credit Facilities will be guaranteed by a full
guaranty of payment and performance by the Ganesha Realty, LLC., OC-PIN, and
West Coast Holdings, LLC.
D. Closing Conditions. (1) Prior to Closing, there shall be no
material change in Borrower's business or general financial condition; (2) there
shall be no material default in any of Borrower's obligations under any
contract; (3) Borrower shall be in compliance with all applicable laws; (4) MCC
shall receive legal opinions from Borrower's counsel satisfactory to MCC; (5)
Borrower shall maintain and pay for one or more Lock Box Accounts mutually
satisfactory to Borrower and MCC for Borrower's cash collections; (6) MCC shall
receive all items typically required in connection with similar commercial real
estate mortgages (including without limitation third party reports which include
but are not limited to title insurance, appraisal, environmental report and
survey); (7) Borrower (as Tenant) and PCHI (as Landlord) shall each have
executed and delivered to MCC an estoppel certificate in form and content
acceptable to MCC in its sole and absolute discretion, confirming that there are
no defaults, disputes or disagreements between Landlord and Tenant in connection
with that certain Triple Net Hospital and Medical Office Building Lease dated
March 3, 2005 (as amended from time to time) with respect to the Western Medical
Center Santa Xxx, Western Medical Center Anaheim, Coastal Communities Hospital,
Medical Office Building at Coastal Community Hospital and (if applicable) any
after-acquired medical office buildings; (8) Xxxx Xxxx shall have voluntarily
resigned as a director of Borrower and shall not at any time while any of the
Credit Facilities remain outstanding serve as an officer, director, employee,
manager, consultant, agent or representative of Borrower; and (9) MCC and its
advisors shall have the right to perform due diligence prior to Closing to
determine the liquidity of Borrower's accounts receivable and the general
financial and operational state of the Borrower. MCC's due diligence shall
include, but not be limited to, a review of the collateral files, relevant
financial information and other materials relevant to the Closing. The
undersigned, being duly authorized by and on behalf of the Borrower, hereby
grants to MCC a security interest in the Collateral securing repayment of all
obligations arising under this letter and to further secure all other
obligations of Borrower to MCC whether now existing or hereafter arising in the
future. Borrower hereby authorizes MCC to file a UCC Financing Statement for
each Borrower-affiliated entity with respect to such Collateral. Following the
Closing, MCC shall have the right to conduct periodic due diligence to assess
the on-going collateral value of Borrower's accounts receivable.
E. Closing. The closing of the Credit Facilities will occur on a date
that is mutually satisfactory to Borrower and MCC; however, if the Credit
Facilities do not close on or before October 1, 2007, this proposal shall expire
and (except for such provisions which survive) have no further force or effect,
unless extended by MCC.
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F. Costs and Expenses. All costs associated with establishing the
Credit Facilities, but not limited to, MCC's out-of-pocket expenses associated
with the transaction, professional fees, recording fees, search fees and filing
fees shall be paid by Borrower regardless of whether the transaction closes.
Upon acceptance of the general terms of this letter, Borrower shall remit a
$10,000 deposit, which shall be applied to all fees and expenses associated with
the above-mentioned transactions. In addition to this deposit, Borrower shall be
solely responsible for the payment of all expenses related to the issuance of
third party reports. To the extent that any third party reports are ordered by
MCC, Borrower may be required to remit an additional deposit to cover such
expenses. Furthermore, Borrower represents and warrants to MCC that it has not
contracted with, or does it know of, any broker to be paid by Borrower who has
participated in the transactions contemplated herein.
G. Confidentiality. Borrower will not disclose the contents of this
letter (or that Borrower and MCC are having any discussions related to a
possible Credit Facility including the status thereof, termination thereof, any
decision on Borrower's or MCC's part to no longer consider such Credit
Facilities or any terms, conditions, or other facts with respect thereof) to any
third party, including, without limitation, any financial institution or
intermediary, without MCC's prior written consent, other than to Borrower's
officers and advisors on a need-to-know basis. Borrower agrees to inform all
such persons who receive information concerning this letter that such
information is confidential and may not be disclosed to any other person.
Further, until all of the Credit Facilities proposed herein are consummated or a
determination is made by MCC not to pursue such financing pursuant to the terms
and conditions herein, Borrower agrees to negotiate exclusively with MCC
regarding any financing the purpose of which is substantially the same as that
of the proposed transactions. It is the intention of the parties hereto that the
exclusivity provisions in favor of MCC shall apply separately to each of the
Credit Facilities and that MCC's continued pursuit of or commitment to either
facility shall preserve the exclusivity provisions in favor of MCC with respect
to such facility. Consequently, if Borrower fails to comply with any of the
provisions of this paragraph and/or consummates a transaction (except for an
extension of Borrower's existing credit facilities) with an entity other than
MCC during the one-year period following the date hereof, Borrower shall (no
later than the closing date of such transaction) pay MCC liquidated damages
equal to two percent (2%) of the aggregate amount to be made available under the
Credit Facilities, if one or more transactions similar to the Credit Facility
transactions described in this letter are consummated in violation of this
paragraph. Borrower acknowledges that such liquidated damages are intended to
compensate MCC for its estimated added administrative costs incurred and the
amount of damage sustained by MCC as a result of Borrower's decision not to
pursue the loan. Notwithstanding the foregoing, the exclusivity provisions with
respect to the Credit Facilities shall not apply in favor of MCC if Borrower
otherwise satisfies all terms and conditions herein. In connection with the
requested Credit Facilities, Borrower understands that MCC will continue to make
financial, legal and collateral investigations and determinations. Any dispute
arising under or in connection with this letter shall be governed by the laws of
the State of California without reference to internal choice of law. The
undersigned hereby consents to jurisdiction and venue of the state and federal
courts located in the State of California for the resolution of all disputes
arising under or in connection with this letter.
H. Expiration. If MCC does not receive this accepted term sheet and
the deposit on or before August 31, 2007, the proposals set forth in this letter
shall automatically expire.
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By signing this letter, Borrower agrees to indemnify MCC, its
managers, officers, and principals and hold each of them harmless against any
and all losses, liabilities and claims arising out of or by reason of any
investigation, litigation, or other proceeding brought or threatened relating to
any loan made or proposed to be made, including without limitation the claims of
any brokers or anyone claiming a right to any fees in connection with the Credit
Facilities. If the terms and conditions set forth above are satisfactory, please
sign the enclosed copy of this letter and return it to my attention along with
the $10,000 deposit.
Very truly yours,
MEDICAL CAPITAL CORPORATION
By: /s/Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx, President and COO
BORROWER HAS REVIEWED THE FOREGOING
AND HEREBY AGREES TO ITS TERMS:
INTEGRATED HEALTHCARE HOLDINGS, INC.,
a Nevada corporation
By: /s/ Xxxxx Xxxxx
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Title: CEO
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