EXHIBIT 99.1
MEDICAL CAPITAL CORPORATION
Feb. 21, 2007
HAND DELIVERED
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Larry Anderson, President
Bruce Mogel, Chief Executive Officer
Integrated Healthcare Holdings, Inc.
1301 North Tustin Avenue
Santa Ana, California 92705
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 term loan
("$45 MILLION 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
convertible term loan ("$10.7 MILLION CONVERTIBLE TERM LOAN"), and (iv) a
$50,000,000 revolving line of credit loan ("$50 MILLION REVOLVING LINE OF CREDIT
LOAN") (the $45 Million Term Loan, $35 Million Non-Revolving Line of Credit
Loan, $10.7 Million Convertible 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 TERM LOAN. MCC proposes to make available to Borrower
the following $45 Million 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 term loan owed by Borrower to MCC.
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4. INTEREST: Simple interest at the annual rate of 9.0% fixed.
Interest on the balance of the $45 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: Not permitted for 6 months then can prepay w/o
penalty.
9. ORIGINATION FEE: $675,000 (1.5% of $45,000,000) due at the
Initial Funding Date.
10. LOAN TO VALUE: The $45 Million 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 Ana, 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.
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d. Chapman 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 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 $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: Not permitted for 18 months.
9. LOAN TO VALUE: The $45 Million 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 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.
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11. UNUSED COMMITMENT FEE: 0.50% per annum of the average daily
difference between $35,000,000 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: $525,000 (1.5% of $35,000,000) due at the
Initial Funding Date.
C. $10.7 MILLION CONVERTIBLE TERM LOAN. MCC proposes to make available
to Borrower the following $10.7 Million Convertible 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: Not permitted for 18 months.
9. ORIGINATION FEE: $160,500 (1.5% of $10,700,000) due at the
Initial Funding Date.
10. 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.
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11. MCC RIGHT TO ASSIGN: MCC shall have the right to sell, assign,
transfer and convey (a) its interest in the $10.7 Million
Convertible Loan documents, and (b) if the $10.7 Million
Convertible Loan has been converted to Common Conversion
Shares, to a third party or entity of its selection.
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.
Interest on the balance of $50 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 business clearance days.
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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 for 18 months.
10. 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.
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. On or before August 1, 2008 Borrower shall issue to MCC (a) a
warrant to subscribe for and purchase up to 4.95% of Borrower's fully paid and
nonassessable shares of Common Stock, and (b) a warrant to subscribe for and
purchase such number of shares of Borrower's fully paid and nonassessable shares
Common Stock equal to $10.7 million divided by [the fair market value per share
of Common Stock on the date of exercise], payable by cancellation of all or a
portion of the principal owing under the $10.7 Million Convertible Term Loan.
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 terms and conditions as shall be agreed
upon by Borrower and MCC. The $45 Million Term Loan, the $35 Million
Non-Revolving Line of Credit Loan, the $10.7 Million Convertible
Loan the $50 Million Revolving Line of Credit Loan shall be
cross-collateralized and cross-defaulted.
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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); and (7) 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 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 March 8, 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 financial 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 exclusively 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 exclusively 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
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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 February 21, 2007, the proposals set forth in
this letter shall automatically expire.
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/ Joseph J. Lampariello
Name: Joseph J. Lampariello
Title: President
BORROWER HAS REVIEWED THE FOREGOING
AND HEREBY AGREES TO ITS TERMS
INTEGRATED HEALTHCARE HOLDINGS, INC.
a Nevada corporation
By: /s/ Bruce Mogel Date: February 21, 2007
Name: Bruce Mogel
Title: CEO
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