EXHIBIT 99.1
AMENDED AND RESTATED
MEMORANDUM OF UNDERSTANDING
This Amended and Restated Memorandum of Understanding (this "Amended and
Restated MOU") is made and entered into effective this 13th day of January, 2010
("Effective Date"), by INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada
corporation ("IHHI"), WMC-A INC., a California corporation, WMC-SA, INC., a
California corporation, COASTAL COMMUNITIES HOSPITAL, INC., a California
corporation, and CHAPMAN MEDICAL CENTER, INC., a California corporation (IHHI,
WMC-A INC., WMC-SA, INC., COASTAL COMMUNITIES HOSPITAL, INC., and CHAPMAN
MEDICAL CENTER, INC., are individually referred to herein as "Borrower", and
collectively as "Borrowers"), Kali P. Chaudhuri ("Dr. Chaudhuri"), and KPC
Resolution Company, LLC, a California limited liability company ("KPC Resolution
Company") with reference to the facts set forth below. This Amended and Restated
MOU shall, upon execution by each of Borrowers, KPC Resolution Company and Dr.
Chaudhuri, amend and restate in its entirety that certain Memorandum of
Understanding (the "MOU") by and between IHHI and Dr. Chaudhuri dated August 12,
2009. All terms not otherwise defined in the body of this Amended and Restated
MOU shall have the meaning set forth in Schedule 1 attached hereto.
RECITALS
A. IHHI and Dr. Chaudhuri entered into the MOU on or about August 12,
2009.
B. Borrowers, KPC Resolution Company and Dr. Chaudhuri have now decided
to amend and restate the MOU in its entirety as provided herein.
C. Medical Capital Holdings, Inc., Medical Capital Corporation, Medical
Provider Funding Corporation I, Medical Provider Funding Corporation II, Medical
Provider Funding Corporation III, Medical Provider Funding Corporation IV and
Medical Provider Funding Corporation V are affiliated entities hereinafter
referred to as "MedCap". The Medical Provider Funding Corporations are sometime
referred to as MPFC I, MPFC II, MPFC III, MPFC IV and MPFC V.
D. Borrowers are obligated to MedCap on account of the following loan
agreements:
i. A $45 million term loan ("$45 Million Term Loan") and a $35
million non-revolving line of credit ("$35 Million Non-Revolver"), all as
described in the $80,000,000 Credit Agreement. The current balance owed on the
$35 Million Non-Revolver is approximately $30 million. The current balance owed
on the $45 Million Term Loan is $45 million.
ii. A $50 million revolving line of credit ("$50 Million
Revolver") pursuant to the $50,000,000 Credit Agreement. The obligations with
respect to the $50 Million Revolver are described in Recital E.
iii. The $10,700,000 Loan pursuant to the $10,700,000 Credit
Agreement. The current balance owed on the $10,700,000 Loan is approximately $6
million.
The above-described MedCap credit facilities are hereinafter referred to
collectively as the "Credit Facilities" or "Loans".
E. Borrowers estimate that they currently have a credit balance
("Credit Balance") of approximately $11.3 million with respect to the $50
Million Revolver based upon the wrongful conversion of Borrowers' funds by
MedCap. The credit balance may be reduced in the future as an offset by
Borrowers for debt service on the Credit Facilities. IHHI has sought permission
of the U.S. District Court to assert certain lender liability claims against
MedCap in connection with the formation, administration and operation of the
Credit Facilities.
F. Dr. Chaudhuri has a legally binding agreement with MedCap to acquire
all or part of the Credit Facilities. The agreement is contained in a certain
Letter Agreement dated May 28, 2008, a further Letter Agreement dated May 23,
2009 and an amendment to such the aforesaid letter agreements dated June 29,
2009 (collectively the "Letter Agreements").
G. On or about August 3, 2009, the United States District Court for the
Central District of California granted the application of the Securities
Exchange Commission for a receiver (Mr. Thomas Seaman) ("MedCap Receiver") for
certain of the MedCap affiliates ("MedCap Receivership").
H. Borrowers have been negotiating with a qualified health care lender
("AR Lender") to obtain financing based on Borrowers' accounts receivable.
Borrowers are concerned that they will have difficulty facilitating the AR
Lender financing unless the Credit Facilities are restructured such that AR
Lender can obtain a first and senior lien on Borrowers' receivables. Currently
the Credit Facilities are cross-collateralized on all of the assets of Borrowers
and Pacific Coast Holdings Investment, LLC ("PCHI"). PCHI owns the real estate
on which three of the four Borrowers' hospitals are situated. Borrowers lease
the three hospitals from PCHI.
I. Dr. Chaudhuri is a principal of PCHI. Dr. Chaudhuri believes it is
in the best interest of PCHI that the MedCap loans be restructured such that
PCHI will become the borrower on the real estate loan affecting its real
property ("Real Estate Loan") rather than Borrowers and that PCHI's real
property not be cross-collateralized against Borrower's debts. Borrowers do not
want their assets pledged to secure PCHI's Real Estate Loan.
J. In connection with the Credit Facilities, IHHI issued to MedCap
certain warrants to purchase IHHI's stock (the "Warrants") which are subject to
a Standstill Agreement in favor of Dr. Chaudhuri.
K. Dr. Chaudhuri, KPC Resolution Company and Borrowers wish to
cooperate with each other in order to negotiate a transaction with the MedCap
Receiver whereby KPC Resolution Company will acquire the Credit Facilities and
Warrants and thereafter attempt to restructure the Credit Facilities for the
benefit of Borrowers and PCHI as more particularly described below.
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NOW THEREFORE, the parties agree to proceed as follows:
AGREEMENT
1. In reliance in part on the terms and conditions of this Amended and
Restated MOU, KPC Resolution Company is negotiating a definitive loan purchase
agreement ("Definitive Agreement") with MedCap Receiver to purchase the Credit
Facilities and Warrants. The Definitive Agreement shall provide for a closing
date ("Closing Date") which is the date KPC Resolution Company successfully
closes on and acquires the Credit Facilities and Warrants.
2. The MedCap Receiver has required as a condition to closing under the
Definitive Agreement that KPC Resolution Company deliver a release of claims by
Borrowers against MedCap and its affiliates. Borrowers are willing to provide
such a release on the condition that:
a. Borrowers receive a release from the MedCap Receiver
substantially in the form of the Mutual Release attached hereto EXHIBIT A and
made a part hereof, and;
b. Dr. Chaudhuri agrees to pay Borrowers an amount equal to the
value the Credit Balance (less offsets as described in Recital E) would have had
as an unsecured claim in the receivership estate. Such amount shall be payable
at such time or times as the federal court has approved the distribution of
funds to the unsecured creditors of the receivership estate or the date(s) such
funds are actually distributed to the unsecured creditors of MedCap. By way of
illustration if an unsecured claim in the MedCap receivership will be paid
thirty (30) cents on the dollar then the Credit Balance, less offsets, as of the
Closing Date will have a value equal to 30% of such amount as of the Closing
Date.
3. After the Closing Date, Borrowers, Dr. Chaudhuri and KPC Resolution
Company will cooperate in good faith in attempting to restructure the Credit
Facilities in a mutually beneficial manner ("Restructuring"); provided however
that KPC Resolution Company shall not be required to agree to a Restructuring
that impairs its collateral securing repayment of the Credit Facilities in any
material respect. In addition, on the Closing Date, Dr. Chaudhuri and KPC
Resolution Company shall waive and consent to any "Default" or "Event of
Default" (as those terms are defined in the Credit Facilities) or other breach
or default that may exist or have occurred under any of the Credit Facilities as
of the Closing Date and that as of the Closing Date the regular rates of
interest and not the Default Rates shall apply under the Credit Facilities
(subject to any Defaults or Events of Default that may occur following the
Closing Date).
4. Dr. Chaudhuri shall support, subject to the consent of the requisite
majority of PCHI's other members ("PCHI Member Consent"), PCHI's continuation
through October, 2011 of the rent abatement described in and under the terms of
section 14 of the Settlement Agreement by and among IHHI, PCHI, MedCap, Dr.
Chaudhuri and others dated March 25, 2009 ("PCHI Rent Abatement"), even if PCHI
refinances the Real Estate Loan before October, 2011. IHHI values the PCHI Rent
abatement in the amount of $5.1 million.
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5. Dr. Chaudhuri and KPC Resolution Company acknowledge and agree that
after KPC Resolution Company acquires the Credit Facilities on the Closing Date,
neither Dr. Chaudhuri, KPC Resolution Company, nor any subsequent holders of the
Credit Facilities shall have the right (a) to assert that any interest,
penalties or fees are due and owing by Borrowers under any of the Credit
Facilities for the period prior to the Closing Date ("Retroactive Period"),
and/or (b) to collect any interest, penalties or fees alleged to have been due
and owing by Borrowers under any of the Credit Facilities during the Retroactive
Period. Dr. Chaudhuri and KPC Resolution Company acknowledge that Borrowers have
accounted for all or a portion of the interest accrued during the Retroactive
Period as being paid. Borrowers value the debt service during the Retroactive
Period in the amount of $4.8 million.
6. Borrowers shall agree, if so requested by KPC Resolution Company, to
extend the Stated Maturity Date (as such term is defined in the Credit
Agreements) of the Credit Facilities for a period of up to three (3) years past
the current Stated Maturity Date of October 8, 2010.
7. In consideration of (1) Dr. Chaudhuri's and KPC Resolution Company's
cooperation in acquiring the Credit Facilities and Restructuring, (2) Dr.
Chaudhuri's support of PCHI's continuation of the PCHI Rent Abatement through
October, 2011, (3) Dr. Chaudhuri's and KPC Resolution Company's agreement to
release claims for debt service during the Retroactive Period and (4) other
concessions for the benefit of IHHI, on the Closing Date, IHHI will issue a
warrant to Dr. Chaudhuri in customary form to acquire up to one hundred seventy
million (170,000,000) shares of IHHI common stock, exercisable in whole or in
part at any time or from time to time during the five (5) year period commencing
on the Closing Date, at an exercise price of five (5) cents per share. Such
warrant shall be exercisable at any time by Dr. Chaudhuri upon at least 61 days'
prior written notice to IHHI, it being understood that IHHI shall not be
required to issue shares upon exercise in excess of the number of shares of
common stock then reserved and available for issuance under the warrants, it
being further understood that IHHI shall use its commercially reasonable efforts
in good faith to increase IHHI's authorized capital as contemplated below in
this Paragraph 7. If IHHI fails to realize the full PCHI Rent Abatement through
October, 2011 then the number of shares issuable under the warrant to Dr.
Chaudhuri shall be reduced ratably by a percentage, the numerator of which shall
equal the amount of the PCHI Rent Abatement that IHHI is not able to realize
through October, 2011 and the denominator of which shall equal $9.9 million,
which is the total economic benefit received by IHHI under this Amended and
Restated MOU. The reduced number of shares issuable upon exercise of the warrant
shall be referred to herein as the "Reduced Number". If the actual number of
shares issued upon exercises, if any, of the warrant prior to October 31, 2011
exceeds the Reduced Number, then Dr. Chaudhuri shall return to IHHI the excess
number of shares for cancellation upon delivery to Dr. Chaudhuri of the exercise
price paid for such shares. IHHI acknowledges, consents, and agrees that on the
Closing Date, any and all warrants, options and other rights issued by IHHI to
MedCap, or any related entity of MedCap, for the purchase of capital stock of
IHHI shall be transferred and assigned to KPC Resolution Company or its
assign(s) and shall remain in full force and effect in accordance with their
respective terms and shall continue to bear registration rights. The new warrant
issuable pursuant to this Paragraph 7 shall bear registration rights consistent
with those granted to Dr. Chaudhuri for "Securities" as set forth in the
Securities Purchase Agreement dated effective as of July 18, 2008, as amended,
among IHHI, Dr. Chaudhuri and William E. Thomas. IHHI covenants and agrees to
promptly use all commercially reasonable efforts in good faith to increase
IHHI's authorized capital from time to time as and to the extent necessary to
ensure there are sufficient authorized shares of common stock reserved and
available for issuance under the new and transferred warrants, subject to Dr.
Chaudhuri's cooperation in approving by vote or written consent from time to
time resolutions approving such increases in authorized capital. IHHI will
procure at its sole expense upon each such authorization and reservation of
shares the listing thereof (subject to issuance or notice of issuance) on all
stock exchanges on which the common stock is then listed or inter-dealer trading
systems or markets on which the common stock is then traded. IHHI will take all
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such actions as may be necessary to assure that such shares of common stock may
be so issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the common stock may
be listed or inter-dealer trading system on which the common stock is then
traded. In furtherance, and not in limitation, of the foregoing, IHHI covenants
and agrees to prepare and file with the Securities and Exchange Commission
preliminary and definitive versions of a Schedule 14C Information Statement and
make such other filings and mailings to IHHI's stockholders as Dr. Chaudhuri
reasonably requests and/or as otherwise are necessary or appropriate to cause an
increase in IHHI's authorized capital to a number that is sufficient to
accommodate exercise of the warrants and is otherwise acceptable to Dr.
Chaudhuri, to become effective as soon as practicable after the Closing Date.
8. Borrowers agree they will cooperate exclusively with Dr. Chaudhuri's
and KPC Resolution Company's efforts to acquire the Credit Facilities from the
MedCap Receiver. IHHI acknowledges and agrees that KPC Resolution Company and/or
Dr. Chaudhuri may, in their discretion, form a syndicate of lenders and/or
investors to acquire the Credit Facilities and/or provide the funding and
commitments contemplated by this Amended and Restated MOU; provided, that the
rights and obligations of KPC Resolution Company hereunder shall be binding upon
and inure to the benefit of any acquirer of the Credit Facilities.
9. Borrowers acknowledge that there is currently no outstanding loan
balance on the $50,000,000 Note. Borrowers further agree that (i) they will not
request any draws under the $50,000,000 Loan while the sale of the Loans to KPC
Resolution Company is pending, and (ii) effective immediately upon KPC
Resolution Company becoming the owner of the $50,000,000 Loan, such Loan and all
of the $50,000,000 Loan Documents and all liens and security interests granted
in connection therewith shall, automatically and without any further action by
any person, be terminated and of no further force or effect, without penalty or
claim by either party. Within ten (10) business days after written request
therefor, KPC Resolution Company and Borrowers agree that they will execute and
deliver such documents or certificates necessary or appropriate to terminate all
of the $50,000,000 Loan Documents. Nothing in this Paragraph 9 shall in any way
affect the $80,000,000 Loan or the $10,700,000 Loan or the security interests or
collateral related thereto, which shall remain in full force and effect
following the acquisition of the Loans by KPC Resolution Company, except that
the cross-default provisions contained therein relating to the $50,000,000 Loan
shall no longer apply following the termination of the $50,000,000 Loan
Documents.
10. Borrowers represent, warrant and certify that as of the Effective
Date, (i) the Loan Documents are the legal, valid and binding obligations of the
Borrowers, enforceable against the Borrowers in accordance with their terms,
subject to (x) applicable bankruptcy, insolvency, reorganization, or similar
laws or enactments in effect now or in the future affecting the enforceability
of creditors' rights generally, and (y) the exercise of judicial discretion, and
(ii) there is no default by Borrowers or Lender, or occurrence, event or state
of facts which, but for the giving of notice or the passage of time or both,
would constitute a default by Borrowers or Lender, in the performance of any
obligation under any of the Loan Documents. In addition, Borrowers represent,
warrant and certify as follows as of the Effective Date:
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a. The outstanding principal balance of the $45,000,000 Note is
$45,000,000;
b. The outstanding principal balance of the $35,000,000 Note is
$29,999,633;
c. The outstanding principal balance of the $10,700,000 Note is
$5,968,268;
d. The outstanding principal balance of the $50,000,000 note as
of the date hereof (without regard to the Credit Balance) is $0; and
e. The Warrants were duly authorized and issued by IHHI to
Healthcare Financial Management & Acquisitions, Inc., a Nevada corporation and
affiliate of MedCap, and consist of: (a) a warrant dated October 9, 2007 to
purchase a minimum of 16,880,484 shares of common stock (subject to certain
adjustments described in the warrant) of IHHI, as amended by amendment no. 1
dated effective as of July 18, 2009. and (b) a warrant dated December 12, 2005
to purchase a minimum of 26,097,561 shares of common stock (subject to certain
adjustments described in the warrant) of IHHI, as amended by amendment no. 1
dated effective as of April 26, 2006, amendment no. 2 dated effective as October
9, 2007, and amendment no. 3 dated effective as of July 18, 2008. The Warrants
remain in full force and effect and have not been further amended, and IHHI has
no actual or anticipated claims of invalidity, reductions in number or changes
in type of underlying securities, or increases in exercise price of the
Warrants. IHHI shall work in good faith with Dr. Chaudhuri promptly upon request
to determine and agree upon the extent of reductions in exercise price that may
be appropriate under the anti-dilution provisions of the Warrants. IHHI
currently has sufficient authorized capital to support full exercise of the
Warrants and other outstanding securities that are exercisable for or
convertible into capital stock of IHHI. No options, warrants or other rights to
purchase capital stock of IHHI that were issued or transferred to MedCap or
MedCap's affiliates or assignees are outstanding other than the Warrants and the
$10,700,000 Note.
On the Closing Date, Borrowers agree to deliver to KPC Resolution Company a
written estoppel signed by the Borrowers wherein Borrowers (i) represent,
warrant and certify as of the Closing Date as to the absence of any claim,
counterclaim, right of offset, right of rescission or defense by Borrowers
against KPC Resolution Company with respect to the Loans or the Loan Documents,
and (ii) update their representations, warranties and certifications contained
in the first sentence of this Paragraph 10 as of the Closing Date.
11. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, effective immediately upon KPC Resolution Company
becoming the owner of the Loans, each Borrower, for itself, its partners and
members (if any) and its respective successors and assigns, does hereby forever
release, discharge and acquit KPC Resolution Company and Dr. Chaudhuri, and
their respective affiliates, agents, employees, representatives and trustees,
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and the existing trustees under any deed of trust securing any Loan
(collectively, the "Released Parties"), and each of the Released Parties shall
be, and are hereby, fully and forever released and discharged from any and all
Claims, whether direct or indirect, known or unknown, foreseen or unforeseen,
that may arise on account of or in any way be connected with the Loans, the Loan
Documents, or the Property during the period of time prior to the Closing Date,
or that may arise on account of or in any way be connected with (i) the Case,
(ii) MedCap or MedCap Receiver's alleged failure to fund advances of the
$50,000,000 Loan, or (iii) MedCap's alleged "oversweeping" of Borrowers'
accounts receivable. The foregoing release shall not apply to the obligations of
KPC Resolution Company and Dr. Chaudhuri under this Amended and Restated MOU or
any events occurring in connection with the Loans, the Loan Documents, or the
Property after the Closing Date. Each Borrower expressly waives the provisions
of Section 1542 of the California Civil Code which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR."
and all similar provisions or rules of law. Each Borrower elects to and does
assume all risk for such Claims heretofore and hereafter arising, whether now
known or unknown by such party.
In this connection and to the greatest extent permitted by law, each
Borrower hereby agrees, represents and warrants that such party realizes and
acknowledges that factual matters now unknown to him, her or it may have given
or may hereafter give rise to causes of action, claims, demands, debts,
controversies, damages, costs, losses and expenses which are presently unknown,
unanticipated and unsuspected, and each Borrower further agrees, represents and
warrants that the waivers and releases herein have been negotiated and agreed
upon in light of that realization and that each Borrower nevertheless hereby
intends to release, discharge and acquit the Released Parties from any such
unknown Claims, debts, and controversies which might in any way arise out of,
are connected with, or relate to, the Case, any Loan, any Loan Document or the
Property.
12. If requested, Borrowers will expeditiously assist Dr. Chaudhuri and
KPC Resolution Company in obtaining the modification of (i) the $80,000,000 Loan
Documents and the $10,700,000 Loan Documents in order to remove the accounts
receivable as security for those Loans and (ii) any third party loan documents
and UCC Financing Statements in order to remove the lien thereof from the
accounts receivable generated by the Property. Upon request, Borrowers will
further use commercially reasonable efforts to have the equipment leasing
companies modify their blanket UCC filings encumbering the Property to only
cover the equipment in question.
13. If requested by KPC Resolution Company, Borrowers will execute
replacement notes upon the same terms and conditions of the original Notes
within ten (10) business days of request therefor.
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14. This Amended and Restated MOU constitutes a legally binding
agreement between Borrowers, KPC Resolution Company and Dr. Chaudhuri and is
supported by a written opinion by a qualified valuation consultant satisfactory
to IHHI's Board of Directors. If the Closing Date shall not have occurred within
12 months after the date hereof, any party may elect to terminate this Amended
and Restated MOU by delivering written notice to the other parties.
15. In all respects, including all matters of construction, validity and
performance, this Amended and Restated MOU shall be governed by, and construed
and enforced in accordance with, the laws of the State of California applicable
to contracts made and performed entirely in that State and any applicable laws
of the United States of America.
16. This Amended and Restated MOU is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person or entity. This Amended and Restated MOU shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns.
17. This Amended and Restated MOU may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile or other form of electronic transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or electronic signature page were an original thereof.
[Signatures Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated MOU to be duly executed by their respective authorized signatories as
of the date first indicated above.
Integrated Healthcare Holdings, Inc.
/s/ Kenneth K. Westbrook
-----------------------------------------------
By: Kenneth K. Westbrook
President and Chief Executive Officer
WMC-A INC., a California corporation
By: /s/ Kenneth K. Westbrook
------------------------------------------
Kenneth K. Westbrook
President and Chief Executive Officer
WMC-SA, INC., a California corporation
By: /s/ Kenneth K. Westbrook
------------------------------------------
Kenneth K. Westbrook
President and Chief Executive Officer
COASTAL COMMUNITIES HOSPITAL, INC., a
California corporation
By: /s/ Kenneth K. Westbrook
------------------------------------------
Kenneth K. Westbrook
President and Chief Executive Officer
CHAPMAN MEDICAL CENTER, INC.,
a California corporation
By: /s/ Kenneth K. Westbrook
------------------------------------------
Kenneth K. Westbrook
President and Chief Executive Officer
[Signatures Continued on Next Page]
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/s/ Kali P. Chaudhuri, M.d.
-----------------------------------------------
Kali P. Chaudhuri, M.D.
KPC Resolution Company, LLC,
a California limited liability company
By: /s/ Kali P. Chaudhuri, M.D
------------------------------------------
Kali P. Chaudhuri, M.D.
Its: Manager
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SCHEDULE 1
1. MedCap II, Integrated Healthcare Holdings, Inc., a Nevada
corporation ("IHHI"), WMC-SA, Inc., a California corporation ("WMC-SA"), WMC-A,
Inc., a California corporation ("WMC-A"), Chapman Medical Center, Inc., a
California corporation ("CHAPMAN"), Coastal Communities Hospital, Inc., a
California corporation ("COASTAL") (IHHI, WMC-SA, WMC-A, Chapman and Coastal are
sometimes collectively referred to herein as "BORROWERS" and individually as
"BORROWER"), Pacific Coast Holdings Investment, LLC, a California limited
liability company ("PCHI"), West Coast Holdings, LLC, a California limited
liability company ("WEST COAST"), Ganesha Realty, LLC, a California limited
liability company ("GANESHA"), and Orange County Physicians Investment Network,
LLC, a Nevada limited liability company ("OC-PIN") (PCHI, West Coast, Ganesha
and OC-PIN are sometimes collectively referred to herein as "CREDIT PARTIES")
are parties to that certain Credit Agreement ($80,000,000 Facility), dated
October 9, 2007 (the "$80,000,000 CREDIT AGREEMENT"), pursuant to which MedCap
II made available to Borrowers a credit facility in the aggregate amount of
$80,000,000 (the "$80,000,000 LOAN"). Pursuant to the $80,000,000 Credit
Agreement, MedCap II extended to Borrowers a $45,000,000 real estate term loan
and a $35,000,000 non-revolving line of credit loan. The $80,000,000 Loan is
evidenced by that certain $45,000,000 Term Note ($80 Million Credit Agreement),
dated October 9, 2007 from Borrowers in favor of MedCap II and that certain
$35,000,000 Non-Revolving Line of Credit Note, dated October 9, 2007 from
Borrowers in favor of MedCap II (collectively, the "$80,000,000 NOTES"). The
$80,000,000 Notes are secured by, among other things, (i) that certain Deed of
Trust, Security Agreement, Fixture Filing and Assignment of Rents ($80,000,000
Facility) (Western Medical Center - Santa Ana), dated as of October 9, 2007,
made by PCHI to Chicago Title Insurance Company in favor of MedCap II, recorded
on October 10, 2007 in Orange County, California as Instrument No. 2007000620712
(which Deed of Trust was assigned by MedCap II to The Bank of New York pursuant
to that certain Assignment of Deed of Trust, dated October 29, 2007, recorded on
November 9, 2007 in Orange County, California as Instrument No. 2007000676164),
(ii) that certain Deed of Trust, Security Agreement, Fixture Filing and
Assignment of Rents ($80,000,000 Facility) (Western Medical Center - Anaheim),
dated as of October 9, 2007, made by PCHI to Chicago Title Insurance Company in
favor of MedCap II, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620711 (which Deed of Trust was assigned by MedCap II to
The Bank of New York pursuant to that certain Assignment of Deed of Trust, dated
October 29, 2007, recorded on November 9, 2007 in Orange County, California as
Instrument No. 2007000676163), (iii) that certain Deed of Trust, Security
Agreement, Fixture Filing and Assignment of Rents ($80,000,000 Facility)
(Coastal Communities Hospital - Santa Ana), dated as of October 9, 2007, made by
PCHI to Chicago Title Insurance Company in favor of MedCap II, recorded on
October 10, 2007 in Orange County, California as Instrument No. 2007000620710
(which Deed of Trust was assigned by MedCap II to The Bank of New York pursuant
to that certain Assignment of Deed of Trust, dated October 29, 2007, recorded on
November 9, 2007 in Orange County, California as Instrument No. 2007000676162),
(iv) that certain Leasehold Deed of Trust, Security Agreement, Fixture Filing
and Assignment of Rents ($80,000,000 Facility) (Chapman Medical Center - Medical
Office Building), dated as of October 9, 2007, made by IHHI to Chicago Title
Insurance Company in favor of MedCap II, recorded on October 10, 2007 in Orange
County, California as Instrument No. 2007000620709 (which Leasehold Deed of
Trust was assigned by MedCap II to The Bank of New York pursuant to that certain
Assignment of Deed of Trust, dated October 29, 2007, recorded on November 9,
2007 in Orange County, California as Instrument No. 2007000676161), (v) that
certain Leasehold Deed of Trust, Security Agreement, Fixture Filing and
Assignment of Rents ($80,000,000 Facility) (Chapman Medical Center - Hospital
Premises), dated as of October 9, 2007, made by IHHI to Chicago Title Insurance
Company in favor of MedCap II, recorded on October 10, 2007 in Orange County,
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California as Instrument No. 2007000620708 (which Leasehold Deed of Trust was
assigned by MedCap II to The Bank of New York pursuant to that certain
Assignment of Deed of Trust, dated October 29, 2007, recorded on November 9,
2007 in Orange County, California as Instrument No. 2007000676165) (such Deeds
of Trust and Leasehold Deeds of Trust, collectively, the "$80,000,000 DEEDS OF
TRUST") and (vi) that certain Pledge Agreement ($80 Million Credit Agreement),
dated October 9, 2007, among MedCap II, West Coast, Ganesha and IHHI (the
"$80,000,000 PLEDGE AGREEMENT"). The $80,000,000 Credit Agreement, the
$80,000,000 Notes, the $80,000,000 Deeds of Trust, the $80,000,000 Pledge
Agreement and all other agreements, documents, and instruments evidencing and/or
securing the payment or performance of the $80,000,000 Loan, as may be amended
or modified from time to time, are hereinafter collectively sometimes referred
to as the "$80,000,000 LOAN DOCUMENTS". The $80,000 Loan Documents were assigned
to The Bank of New York pursuant to that certain Collateral Assignment to
Trustee (Non-Recordable Acquired Assets), dated as of October 26, 2007.
2. MedCap III, Borrowers and Credit Parties are parties to that certain
Credit Agreement ($10,700,000 Facility), dated October 9, 2007 (the "$10,700,000
CREDIT AGREEMENT", pursuant to which MedCap III made available to Borrowers a
credit facility in the aggregate amount of $10,700,000 (the "$10,700,000 LOAN").
The $10,700,000 Loan is evidenced by that certain $10,700,000 Convertible Term
Note ($10.7 Million Credit Agreement), dated October 9, 2007 from Borrowers in
favor of MedCap III (the "$10,700,000 NOTE"). The $10,700,000 Note is secured
by, among other things, (i) that certain Deed of Trust, Security Agreement,
Fixture Filing and Assignment of Rents ($10.7 Million Facility) (Western Medical
Center - Santa Ana), dated as of October 9, 2007, made by PCHI to Chicago Title
Insurance Company in favor of MedCap III, recorded on October 10, 2007 in Orange
County, California as Instrument No. 2007000620731 (which Deed of Trust was
assigned by MedCap III to Wells Fargo Bank, N.A. pursuant to that certain
Assignment of Deed of Trust, dated October 30, 2007, recorded on November 9,
2007 in Orange County, California as Instrument No. 2007000676171), (ii) that
certain Deed of Trust, Security Agreement, Fixture Filing and Assignment of
Rents ($10.7 Million Facility) (Western Medical Center - Anaheim), dated as of
October 9, 2007, made by PCHI to Chicago Title Insurance Company in favor of
MedCap III, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620732 (which Deed of Trust was assigned by MedCap III to
Wells Fargo Bank, N.A. pursuant to that certain Assignment of Deed of Trust,
dated October 30, 2007, recorded on November 9, 2007 in Orange County,
California as Instrument No. 2007000676172), (iii) that certain Deed of Trust,
Security Agreement, Fixture Filing and Assignment of Rents ($10.7 Million
Facility) (Coastal Communities Hospital - Santa Ana), dated as of October 9,
2007, made by PCHI to Chicago Title Insurance Company in favor of MedCap III,
recorded on October 10, 2007 in Orange County, California as Instrument No.
2007000620733 (which Deed of Trust was assigned by MedCap III to Wells Fargo
Bank, N.A. pursuant to that certain Assignment of Deed of Trust, dated October
30, 2007, recorded on November 9, 2007 in Orange County, California as
Instrument No. 2007000676173), (iv) that certain Leasehold Deed of Trust,
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Security Agreement, Fixture Filing and Assignment of Rents (($10.7 Million
Facility) (Chapman Medical Center - Medical Office Building), dated as of
October 9, 2007, made by IHHI to Chicago Title Insurance Company in favor of
MedCap III, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620734 (which Deed of Leasehold Trust was assigned by
MedCap III to Wells Fargo Bank, N.A. pursuant to that certain Assignment of Deed
of Trust, dated October 30, 2007, recorded on November 9, 2007 in Orange County,
California as Instrument No. 2007000676175), (v) that certain Leasehold Deed of
Trust, Security Agreement, Fixture Filing and Assignment of Rents (($10.7
Million Facility) (Chapman Medical Center - Hospital Premises), dated as of
October 9, 2007, made by IHHI to Chicago Title Insurance Company in favor of
MedCap III, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620735 (which Leasehold Deed of Trust was assigned by
MedCap III to Wells Fargo Bank, N.A. pursuant to that certain Assignment of Deed
of Trust, dated October 30, 2007, recorded on November 9, 2007 in Orange County,
California as Instrument No. 2007000676174) (such Deeds of Trust and Leasehold
Deeds of Trust, collectively, the "$10,700,000 DEEDS OF TRUST") and (vi) that
certain Pledge Agreement ($10.7 Million Credit Agreement), dated October 9,
2007, among MedCap III, West Coast, Ganesha and IHHI (the "$10,700,000 PLEDGE
AGREEMENT"). The $10,700,000 Credit Agreement, the $10,700,000 Note, the
$10,700,000 Deeds of Trust, the $10,700,000 Pledge Agreement and all other
agreements, documents, and instruments evidencing and/or securing the payment or
performance of the $10,700,000 Loan, as may be amended or modified from time to
time, are hereinafter collectively sometimes referred to as the "$10,700,000
LOAN DOCUMENTS". The $10,700,000 Loan Documents were assigned to Wells Fargo
Bank, N.A. pursuant to that certain Collateral Assignment to Trustee
(Non-Recordable Acquired Assets) dated as of October 26, 2007.
3. MedCap I, Borrowers and Credit Parties are parties to that certain
Revolving Credit Agreement ($50 Million Facility), dated October 9, 2007 (the
"$50,000,000 CREDIT AGREEMENT") and together with the $80,000,000 Credit
Agreement and the $10,700,000 Credit Agreement, individually a "CREDIT
AGREEMENT" and collectively, the "CREDIT AGREEMENTS"), pursuant to which MedCap
I made available to Borrowers a credit facility in the aggregate amount of
$50,000,000 (the "$50,000,000 LOAN" and together with the $80,000,000 Loan and
the $10,700,000 Loan, individually, a "LOAN" and collectively, the "LOANS"). The
$50,000,000 Loan is evidenced by that certain $50,000,000 Revolving Line of
Credit Note, dated October 9, 2007 from Borrowers in favor of MedCap I (the
"$50,000,000 NOTE" and together with the $80,000,000 Notes and the $10,700,000
Note, individually, a "NOTE" and collectively, the "NOTES"). The $50,000,000
Note is secured by, among other things, (i) that certain Deed of Trust, Security
Agreement, Fixture Filing and Assignment of Rents ($50,000,000 Revolving Credit
Agreement) (Western Medical Center - Santa Ana), dated as of October 9, 2007,
made by PCHI to Chicago Title Insurance Company in favor of MedCap I, recorded
on October 10, 2007 in Orange County, California as Instrument No. 2007000620754
(which Deed of Trust was assigned by MedCap I to The Bank of New York pursuant
to that certain Assignment of Deed of Trust, dated October 29, 2007, recorded on
November 9, 2007 in Orange County, California as Instrument No. 2007000676169),
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(ii) that certain Deed of Trust, Security Agreement, Fixture Filing and
Assignment of Rents ($50,000,000 Revolving Credit Agreement) (Western Medical
Center - Anaheim), dated as of October 9, 2007, made by PCHI to Chicago Title
Insurance Company in favor of MedCap I, recorded on October 10, 2007 in Orange
County, California as Instrument No. 2007000620755 (which Deed of Trust was
assigned by MedCap I to The Bank of New York pursuant to that certain Assignment
of Deed of Trust, dated October 29, 2007, recorded on November 9, 2007 in Orange
County, California as Instrument No. 2007000676168), (iii) that certain Deed of
Trust, Security Agreement, Fixture Filing and Assignment of Rents ($50,000,000
Revolving Credit Agreement) (Coastal Communities Hospital - Santa Ana), dated as
of October 9, 2007, made by PCHI to Chicago Title Insurance Company in favor of
MedCap I, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620756 (which Deed of Trust was assigned by MedCap I to
The Bank of New York pursuant to that certain Assignment of Deed of Trust, dated
October 29, 2007, recorded on November 9, 2007 in Orange County, California as
Instrument No. 2007000676170), (iv) that certain Leasehold Deed of Trust,
Security Agreement, Fixture Filing and Assignment of Rents ($50,000,000
Revolving Credit Agreement) (Chapman Medical Center - Medical Office Building),
dated as of October 9, 2007, made by IHHI to Chicago Title Insurance Company in
favor of MedCap I, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620757 (which Leasehold Deed of Trust was assigned by
MedCap I to The Bank of New York pursuant to that certain Assignment of Deed of
Trust, dated October 29, 2007, recorded on November 9, 2007 in Orange County,
California as Instrument No. 2007000676167), (v) that certain Leasehold Deed of
Trust, Security Agreement, Fixture Filing and Assignment of Rents ($50,000,000
Revolving Credit Agreement) (Chapman Medical Center - Hospital Premises), dated
as of October 9, 2007, made by IHHI to Chicago Title Insurance Company in favor
of MedCap I, recorded on October 10, 2007 in Orange County, California as
Instrument No. 2007000620758 (which Leasehold Deed of Trust was assigned by
MedCap I to The Bank of New York pursuant to that certain Assignment of Deed of
Trust, dated October 29, 2007, recorded on November 9, 2007 in Orange County,
California as Instrument No. 2007000676166) (such Deeds of Trust and Leasehold
Deeds of Trust, collectively, the "$50,000,000 DEED OF TRUST") and (vi) that
certain Pledge Agreement ($50,000,000 Revolving Credit Agreement), dated October
9, 2007, among MedCap I, West Coast, Ganesha and IHHI (the "$50,000,000 PLEDGE
AGREEMENT"). The $50,000,000 Credit Agreement, the $50,000,000 Note, the
$50,000,000 Deeds of Trust, the $50,000,000 Pledge Agreement and all other
agreements, documents, and instruments evidencing and/or securing the payment or
performance of the $50,000,000 Loan, as may be amended or modified from time to
time, are hereinafter collectively sometimes referred to as the "$50,000,000
LOAN DOCUMENTS" and together with the $80,000,000 Loan Documents, the
$10,700,000 Loan Documents and the Warrants, collectively, the "LOAN DOCUMENTS".
The $50,000,000 Loan Documents were assigned to The Bank of New York pursuant to
that certain Collateral Assignment to Trustee (Non-Recordable Acquired Assets)
dated as of October 26, 2007.
4. The term "CLAIM" or "CLAIMS" shall mean any and all liabilities,
losses, claims (including third party claims), demands, damages (of any nature
whatsoever), causes of action, costs, penalties, fines, judgments, attorneys'
fees, consultants' fees and costs and experts' fees.
5. The term "PROPERTY" shall mean the real and personal property
described in the deeds of trust securing the Loans.
6. The term "CASE" shall mean Case No. SACV 09-818 DOC (RNBx) in United
States District Court for the Central District of California, Southern Division.
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