<PAGE>
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-K
[/] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year ended September 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-6639
CHARTER MEDICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 58-1076937
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 841-9200
See Table of Additional Registrants below.
___________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock ($0.25 par value) American Stock Exchange
11.25% Series A Senior Subordinated Notes
due 2004 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
___________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at November 30, 1994 was approximately $605 million.
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / No
The number of shares of the Registrant's Common Stock outstanding as of
November 30, 1994 was 26,909,259.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Proxy
Statement for the annual meeting of stockholders (which Proxy Statement will
be filed with the Securities and Exchange Commission on or before January 28,
1995) are incorporated by reference in Part III hereof.
_______________________________________________________________________________
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<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Ambulatory Resources, Inc. Georgia 58-1456102 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Atlanta MOB, Inc. Georgia 58-1558215 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Beltway Community Hospital, Texas 58-1324281 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
C.A.C.O. Services, Inc. Ohio 58-1751511 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
CCM, Inc. Nevada 58-1662418 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
CMCI, Inc. Nevada 88-0224620 1061 East Flamingo Road
Suite One
Las Vegas, NV 89119
(702) 737-0282
CMFC, Inc. Nevada 88-0215629 1061 East Flamingo Road
Suite One
Las Vegas, NV 89119
(702) 737-0282
CMSF, Inc. Florida 58-1324269 3550 Colonial Boulevard
Fort Myers, FL 33912
(813) 939-0403
CPS Associates, Inc. Virginia 58-1761039 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Charter Alvarado Behavioral California 58-1394959 7050 Parkway Drive
Health System, Inc. La Mesa, CA 91942-2352
(619) 465-4411
Charter Appalachian Hall North Carolina 58-2097827 60 Caledonia Road
Behavioral Health System, Inc. Asheville, NC 28803
(704) 253-3681
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Augusta Behavioral Georgia 58-1615676 3100 Perimeter Parkway
Health System, Inc. Augusta, GA 30909
(404) 868-6625
Charter Arbor Indy Indiana 35-1916340 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Bay Harbor Behavioral Florida 58-1640244 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, Georgia 30326
(404) 841-9200
Charter Beacon Behavioral Indiana 58-1524996 1720 Beacon Street
Health System, Inc. Fort Wayne, IN 46805
(219) 423-3651
Charter Behavioral Health System New Jersey 58-2097832 19 Prospect Street
at Fair Oaks, Inc. Summit, NJ 07901
(908) 277-9102
Charter Behavioral Health System Maryland 52-1866212 522 Thomas Run Road
at Hidden Brook, Inc. Bel Air, MD 21014
(410) 879-1919
Charter Behavioral Health System California 33-0606642 3414 Peachtree Rd., N.E., Suite 1400
at Los Altos, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System Maryland 52-1866221 14901 Broschart Road
at Potomac Ridge, Inc. Rockville, MD 20850
(301) 251-4500
Charter Behavioral Health System Maryland 52-1866214 3680 Warwick Road, Route 1
at Warwick Manor, Inc. East New Market, MD 21631
(410) 943-8108
Charter Behavioral Health System Georgia 58-1513304 240 Mitchell Bridge Road
of Athens, Inc. Athens, GA 30606
(404) 546-7277
Charter Behavioral Health System Texas 58-1440665 8402 Cross Park Drive
of Austin, Inc. Austin, TX 78754
(512) 837-1800
Charter Behavioral Health System Texas 76-0430571 709 Medical Center Boulevard
of Baywood, Inc. Webster, TX 77598
(713) 332-9550
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</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health System Florida 58-1527678 1324 37th Avenue, E.
of Bradenton, Inc. Bradenton, FL 34208
(813) 746-1388
Charter Behavioral Health System California 95-4470774 3414 Peachtree Rd., N.E., Suite 1400
of Canoga Park, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System Georgia 58-1408670 3500 Riverside Drive
of Central Georgia, Inc. Macon, GA 31210
(912) 474-6200
Charter Behavioral Health System South Carolina 58-1761157 2777 Speissegger Drive
of Charleston, Inc. Charleston, SC 29405-8299
(803) 747-5830
Charter Behavioral Health System Virginia 58-1616917 2101 Arlington Boulevard
of Charlottesville, Inc. Charlottesville, VA
22903-1593
(804) 977-1120
Charter Behavioral Health System Illinois 58-1315760 4700 North Clarendon Avenue
of Chicago, Inc. Chicago, IL 60640
(312) 728-7100
Charter Behavioral Health System California 58-1473063 3414 Peachtree Rd., N.E., Suite 1400
of Chula Vista, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System Missouri 61-1009977 200 Portland Street
of Columbia, Inc. Columbia, MO 65201
(314) 876-8000
Charter Behavioral Health System Texas 58-1513305 3126 Rodd Field Road
of Corpus Christi, Inc. Corpus Christi, TX 78414
(512) 993-8893
Charter Behavioral Health System Texas 58-1513306 6800 Preston Road
of Dallas, Inc. Plano, TX 75024
(214) 964-3939
Charter Behavioral Health System Indiana 35-1916338 7200 East Indiana
of Evansville, Inc. Evansville, IN 47715
(812) 476-7200
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health System Texas 58-1643151 6201 Overton Ridge Blvd.
of Fort Worth, Inc. Fort Worth, TX 76132
(817) 292-6844
Charter Behavioral Health System Mississippi 58-1616919 East Lakeland Drive
of Jackson, Inc. Jackson, MS 39208
(601) 939-9030
Charter Behavioral Health System Florida 58-1483015 3947 Salisbury Road
of Jacksonville, Inc. Jacksonville, FL 32216
(904) 296-2447
Charter Behavioral Health System Indiana 35-1916342 3414 Peachtree Rd., N.E., Suite 1400
of Jefferson, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System Kansas 58-1603154 8000 West 127th Street
of Kansas City, Inc. Overland Park, KS 66213
(913) 897-4999
Charter Behavioral Health System Louisiana 72-0686492 310 Youngsville Highway
of Lafayettte, Inc. Lafayette, LA 70508
(317) 448-6999
Charter Behavioral Health System Louisiana 62-1152811 4250 Fifth Avenue, South
of Lake Charles, Inc. Lake Charles, LA 70605
(318) 474-6133
Charter Behavioral Health System California 33-0606647 3414 Peachtree Rd., N.E., Suite 1400
of Lakewood, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System Indiana 35-1916343 3714 S. Franklin Street
of Michigan City, Inc. Michigan City, IN 46360
(219) 872-0531
Charter Behavioral Health System Alabama 58-1569921 5800 Southland Drive
of Mobile, Inc. Mobile, AL 36609
(205) 661-3001
Charter Behavioral Health System New Hampshire 02-0470752 29 Northwest Boulevard
of Nashua, Inc. Nashua, NH 03063
(603) 886-5000
Charter Behavioral Health System Nevada 58-1321317 7000 West Spring Mountain Rd.
of Nevada, Inc. Las Vegas, NV 89117
(702) 876-4357
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<PAGE>
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health System New Mexico 58-1479480 5901 Zuni Road, SE
of New Mexico, Inc. Albuquerque, NM 87108
(505) 265-8800
Charter Behavioral Health System California 58-1857277 101 Cirby Hills Drive
of Northern California, Inc. Roseville, CA 95678
(916) 969-4666
Charter Behavioral Health System Arkansas 58-1449455 4253 Crossover Road
of Northwest Arkansas, Inc. Fayetteville, AR 72703
(501) 521-5731
Charter Behavioral Health System Indiana 58-1603160 101 West 61st Avenue
of Northwest Indiana, Inc. State Road 51
Hobart, IN 46342
(219) 947-4464
Charter Behavioral Health System Kentucky 61-1006115 435 Berger Road
of Paducah, Inc. Paducah, KY 42002-7609
(502) 444-0444
Charter Behavioral Health System Illinois 36-3946945 3414 Peachtree Rd., N.E., Suite 1400
of Rockford, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System California 58-1747020 455 Silicon Valley Boulevard
of San Jose, Inc. San Jose, CA 95138
(408) 224-2020
Charter Behavioral Health System Georgia 58-1750583 1150 Cornell Avenue
of Savannah, Inc. Savannah, GA 31406
(912) 354-3911
Charter Behavioral Health System California 58-1366605 3414 Peachtree Rd., N.E., Suite 1400
of Southern California, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System Florida 58-1616916 4004 North Riverside Drive
of Tampa Bay, Inc. Tampa, FL 33603
(813) 238-8671
Charter Behavioral Health System Arkansas 71-0752815 801 Arkansas Boulevard
of Texarkana, Inc. Texarkana, AR 75502
(501) 773-3131
Charter Behavioral Health System California 95-2685883 2055 Kellogg Drive
of the Inland Empire, Inc. Corona, CA 91719
(714) 735-2910
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health System Ohio 58-1731068 1725 Timberline Road
of Toledo, Inc. Maumee, Ohio 43537
(419) 891-9333
Charter Behavioral Health System Arizona 86-0757462 7220 E. Rosewood Street
of Tucson, Inc. Tucson, AZ 85710
(602) 296-2828
Charter Behavioral Health System North Carolina 56-1050502 3637 Old Vineyard Road
of Winston-Salem, Inc. Winston-Salem, NC 27104
(919) 768-7710
Charter Behavioral Health System Virginia 54-1703071 3414 Peachtree Rd., N.E., Suite 1400
of Virginia Beach, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health System California 33-0606644 1100 S. Akers
of Visalia, Inc. Visalia, CA 93277
(209) 627-3301
Charter Behavioral Health System Minnesota 41-1775626 109 North Shore Drive
of Waverly, Inc. Waverly, MN 55390
(612) 658-4811
Charter Behavioral Health System California 33-0606646 3414 Peachtree Rd., N.E., Suite 1400
of Yorba Linda, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Behavioral Health Georgia 58-1900736 3414 Peachtree Rd., N.E., Suite 1400
Systems of Atlanta, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Brawner Behavioral Georgia 58-0979827 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter By-The-Sea Georgia 58-1351301 2927 Demere Road
Behavioral Health System, Inc. St. Simons Island, GA 31522
(912) 638-1999
Charter Canyon Behavioral Health Utah 58-1557925 175 West 7200 South
System, Inc. Midvale, UT 84047
(801) 561-8181
Charter Canyon Springs California 33-0606640 69696 Ramon Road
Behavioral Health System, Inc. Cathedral City, CA 92234
(619) 321-2000
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Centennial Peaks Colorado 58-1761037 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Colonial Institute, Virginia 58-1492652 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Community Hospital, California 58-1398708 21530 South Pioneer Boulevard
Inc. Hawaiian Gardens, CA 90716
(310) 860-0401
Charter Community Hospital Iowa 58-1523702 3414 Peachtree Rd., N.E., Suite 1400
of Des Moines, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Contract Services, Inc. Georgia 58-2100699 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Charter Cove Forge Behavioral Pennsylvania 25-1730464 New Beginnings Road
Health System, Inc. Williamsburg, PA 16693
(814) 832-2121
Charter Crescent Pines Behavioral Georgia 58-1249663 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Fairbridge Maryland 52-1866218 14907 Broschart Road
Behavioral Health System, Inc. Rockville, MD 20850
(301) 251-4565
Charter Fairmount Behavioral Pennsylvania 58-1616921 561 Fairthorne Avenue
Health System, Inc. Philadelphia, PA 19128
(215) 487-4000
Charter Fenwick Hall South Carolina 57-0995766 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Financial Offices, Inc. Georgia 58-1527680 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Charter Forest Behavioral Louisiana 58-1508454 9320 Linwood Avenue
Health System, Inc. Shreveport, LA 71106
(318) 688-3930
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Grapevine Behavioral Texas 58-1818492 2300 William D. Tate Ave.
Health System, Inc. Grapevine, TX 76051
(817) 481-1900
Charter Greensboro Behavioral North Carolina 58-1335184 700 Walter Reed Drive
Health System, Inc. Greensboro, NC 27403
(919) 852-4821
Charter Health Management Texas 58-2025056 3414 Peachtree Rd., N.E., Suite 1400
of Texas, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Ohio 58-1598899 3414 Peachtree Rd., N.E., Suite 1400
Columbus, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Denver, Colorado 58-1662413 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Ft. Collins, Colorado 58-1768534 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Laredo, Inc. Texas 58-1491620 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Miami, Florida 61-1061599 11100 N.W. 27th Street
Inc. Miami, FL 33172
(305) 591-3230
Charter Hospital of Mobile, Alabama 58-1318870 251 Cox Street
Inc. Mobile, AL 36604
(205) 432-4111
Charter Hospital of Northern New Jersey 58-1852138 3414 Peachtree Rd., N.E., Suite 1400
New Jersey, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Santa New Mexico 58-1584861 3414 Peachtree Rd., N.E., Suite 1400
Teresa, Inc. Atlanta, GA 30326
(404) 841-9200
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Hospital of St. Louis, Missouri 58-1583760 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Hospital of Torrance, California 58-1402481 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Indianapolis Behavioral Indiana 58-1674291 5602 Caito Drive
Health System, Inc. Indianapolis, IN 46226
(317) 545-2111
Charter Lafayette Behavioral Indiana 58-1603158 3700 Rome Drive
Health System, Inc. Lafayette, IN 47905
(317) 448-6999
Charter Lakehurst New Jersey 22-3286879 440 Beckerville Road
Behavioral Health System, Inc. Lakehurst, NJ 08733
(908) 657-4800
Charter Lakeside Behavioral Tennessee 62-0892645 2911 Brunswick Road
Health System, Inc. Memphis, TN 38134
(901) 377-4700
Charter Laurel Heights Georgia 58-1558212 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Laurel Oaks Behavioral Florida 58-1483014 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Linden Oaks Illinois 36-3943776 852 West Street
Behavioral Health System, Inc. Naperville, IL 60540
(708) 305-5500
Charter Little Rock Behavioral Arkansas 58-1747019 1601 Murphy Drive
Health System, Inc. Maumelle, AR 72113
(501) 851-8700
Charter Louisville Behavioral Kentucky 58-1517503 1405 Browns Lane
Health System, Inc. Louisville, KY 40207
(502) 896-0495
Charter MOB of Virginia 58-1761158 1023 Millmont Avenue
Charlottesville, Inc. Charlottesville, VA 22901
(804) 977-1120
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<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Meadows Maryland 52-1866216 730 Maryland, Route 3
Behavioral Health System, Inc. Gambrills, MD 21054
(410) 923-6022
Charter Medfield Behavioral Florida 58-1705131 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical - California, Georgia 58-1357345 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical - Clayton Georgia 58-1579404 3414 Peachtree Rd., N.E., Suite 1400
County, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical - Cleveland, Texas 58-1448733 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical - Dallas, Texas 58-1379846 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical - Long California 58-1366604 6060 Paramount Boulevard
Beach, Inc. Long Beach, CA 90805
(310) 220-1000
Charter Medical - New York, New York 58-1761153 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical (Cayman Cayman Islands, BWI 58-1841857 Caledonian Bank & Trust
Islands) Swiss Bank Building
Georgetown-Grand Cayman
Cayman Islands
(809) 949-0050
Charter Medical Executive Georgia 58-1538092 3414 Peachtree Rd., N.E., Suite 1400
Corporation Atlanta, GA 30326
(404) 841-9200
Charter Medical Information Georgia 58-1530236 3414 Peachtree Rd., N.E., Suite 1400
Services, Inc. Atlanta, GA 30326
(404) 841-9200
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<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Medical International, Cayman Islands, BWI N/A Caledonian Bank & Trust
Inc. Swiss Bank Building
Georgetown-Grand Cayman
Cayman Islands
(809) 949-0050
Charter Medical International, Nevada 58-1605110 3414 Peachtree Rd., N.E., Suite 1400
S.A., Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical Management Georgia 58-1195352 3414 Peachtree Rd., N.E., Suite 1400
Company Atlanta, GA 30326
(404) 841-9200
Charter Medical of East Arizona 58-1643158 2190 N. Grace Boulevard
Valley, Inc. Chandler, AZ 85224-2195
(602) 899-8989
Charter Medical of England, Ltd. United Kingdom N/A 111 Kings Road
SW3 4PB
London, England
44-71-351-1272
Charter Medical of Florida, Inc. Florida 58-2100703 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Charter Medical of North Arizona 58-1643154 6015 W. Peoria Avenue
Phoenix, Inc. Glendale, AZ 85302
(602) 878-7878
Charter Medical of Orange Florida 58-1615673 3414 Peachtree Rd., N.E., Suite 1400
County, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Medical of Puerto Commonwealth of 58-1208667 Caso Building, Suite 1504
Rico, Inc. Puerto Rico 1225 Ponce De Leon Avenue
Santurce, P.R. 00907
(809) 723-8666
Charter Mental Health Florida 58-2100704 3414 Peachtree Rd., N.E., Suite 1400
Options, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Mid-South Behavioral Tennessee 58-1860496 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, GA 30326
(404) 841-9200
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<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Milwaukee Behavioral Wisconsin 58-1790135 11101 West Lincoln Avenue
Health System, Inc. West Allis, WI 53227
(414) 327-3000
Charter Mission Viejo Behavioral California 58-1761156 23228 Madero
Health System, Inc. Mission Viejo, CA 92691
(714) 830-4800
Charter North Behavioral Alaska 58-1474550 2530 DeBarr Road
Health System, Inc. Anchorage, AK 99508-2996
(907) 258-7575
Charter Northbrooke Wisconsin 39-1784461 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter North Counseling Alaska 58-2067832 2530 DeBarr Road
Center, Inc. Anchorage, AL 99508-2996
(907) 258-7575
Charter Northridge Behavioral North Carolina 58-1463919 400 Newton Road
Health System, Inc. Raleigh, NC 27615
(919) 847-0008
Charter Northside Hospital, Georgia 58-1440656 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Oak Behavioral California 58-1334120 1161 East Covina Boulevard
Health System, Inc. Covina, CA 91724
(818) 966-1632
Charter of Alabama, Inc. Alabama 63-0649546 3414 Peachtree Rd., N.E., Suite 1400
Macon, Georgia 31298
(404) 841-9200
Charter Palms Behavioral Texas 58-1416537 1421 E. Jackson Avenue
Health System, Inc. McAllen, TX 78502
(512) 631-5421
Charter Peachford Behavioral Georgia 58-1086165 2151 Peachford Road
Health System, Inc. Atlanta, GA 30338
(404) 455-3200
Charter Pines Behavioral North Carolina 58-1462214 3621 Randolph Road
Health System, Inc. Charlotte, NC 28211
(704) 365-5368
-xii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Plains Behavioral Texas 58-1462211 801 N. Quaker Avenue
Health System, Inc. Lubbock, TX 79416
(806) 744-5505
Charter-Provo School, Inc. Utah 58-1647690 4501 North University Ave.
Provo, UT 84604
(801) 227-2000
Charter Psychiatric Hospitals, Delaware 58-1852072 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Charter Real Behavioral Texas 58-1485897 8550 Huebner Road
Health System, Inc. San Antonio, TX 78240
(512) 699-8585
Charter Regional Medical Texas 74-1299623 3414 Peachtree Rd., N.E., Suite 1400
Center, Inc. Atlanta, Georgia 30326
(404) 841-9200
Charter Richmond Behavioral Virginia 58-1761160 3414 Peachtree Rd., N.E., Suite 1400
Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Ridge Behavioral Kentucky 58-1393063 3050 Rio Dosa Drive
Health System, Inc. Lexington, KY 40509
(606) 269-2325
Charter Rivers Behavioral South Carolina 58-1408623 2900 Sunset Boulevard
Health System, Inc. West Columbia, SC 29169
(803) 796-9911
Charter San Diego Behavioral California 58-1669160 11878 Avenue of Industry
Health System, Inc. San Diego, CA 92128
(619) 487-3200
Charter Serenity Lodge Virginia 54-1703066 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Sioux Falls Behavioral South Dakota 58-1674278 2812 South Louise Avenue
Health System, Inc. Sioux Falls, SD 57106
(605) 361-8111
Charter South Bend Behavioral Indiana 58-1674287 6704 North Main Street
Health System, Inc. Granger, IN 46530
(219) 272-9799
-xiii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Springs Behavioral Florida 58-1517461 3130 S.W. 27th Avenue
Health System, Inc. Ocala, FL 32674
(904) 237-7293
Charter Springwood Virginia 58-2097829 Route 4, Box 50
Behavioral Health System, Inc. Leesburg, VA 22075
(703) 777-0800
Charter Suburban Hospital Texas 75-1161721 3414 Peachtree Rd., N.E., Suite 1400
of Mesquite, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Terre Haute Behavioral Indiana 58-1674293 1400 Crossing Boulevard
Health System, Inc. Terre Haute, IN 47802
(812) 299-4196
Charter Thousand Oaks Behavioral California 58-1731069 150 Via Merida
Health System, Inc. Thousand Oaks, CA 91361
(805) 495-3292
Charter Tidewater Virginia 54-1703069 3414 Peachtree Rd., N.E., Suite 1400
Behavioral Health System, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Treatment Center of Michigan 58-2025057 3414 Peachtree Rd., N.E., Suite 1400
Michigan, Inc. Atlanta, GA 30326
(404) 841-9200
Charter Westbrook Behavioral Virginia 54-0858777 1500 Westbrook Avenue
Health System, Inc. Richmond, VA 23227
(804) 266-9671
Charter White Oak Maryland 52-1866223 Post Office Box 56
Behavioral Health System, Inc. 1441 Taylors Island Road
Woolford, MD 21677
(410) 228-7000
Charter Wichita Behavioral Kansas 58-1634296 8901 East Orme
Health System, Inc. Wichita, KS 67207
(316) 686-5000
Charter Woods Behavioral Alabama 58-1330526 700 Cottonwood Road
Health System, Inc. Dothan, AL 36301
(205) 794-4357
Charter Woods Hospital, Inc. Alabama 58-2102628 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
-xiv-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charterton/LaGrange, Inc. Kentucky 61-0882911 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Desert Springs Hospital, Inc. Nevada 88-0117696 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, Georgia 30326
(404) 841-9200
Employee Assistance Services, Georgia 58-1501282 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Florida Health Facilities, Florida 58-1860493 21808 State Road 54
Inc. Lutz, FL 33549
(813) 948-2441
Gulf Coast EAP Services, Inc. Alabama 58-2101394 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Gwinnett Immediate Care Georgia 58-1456097 3414 Peachtree Rd., N.E., Suite 1400
Center, Inc. Atlanta, GA 30326
(404) 841-9200
HCS, Inc. Georgia 58-1527679 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Holcomb Bridge Immediate Georgia 58-1374463 3414 Peachtree Rd., N.E., Suite 1400
Care Center, Inc. Atlanta, GA 30326
(404) 841-9200
Hospital Investors, Inc. Georgia 58-1182191 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Mandarin Meadows, Inc. Florida 58-1761155 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Metropolitan Hospital, Inc. Georgia 58-1124268 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Middle Georgia Hospital, Inc. Georgia 58-1121715 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
-xv-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
NEPA - Massachusetts, Inc. Massachusetts 58-2116751 #6 Courthouse Lane
Chelmsford, MA 01863
(508) 441-2332
NEPA - New Hampshire, Inc. New Hampshire 58-2116398 29 Northwest Boulevard
Nashua, NH 03063
(603) 886-5000
Pacific-Charter Medical, Inc. California 58-1336537 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Peachford Professional Georgia 58-2100700 3414 Peachtree Rd., N.E., Suite 1400
Network, Inc. Atlanta, GA 30326
(404) 841-9200
Rivoli, Inc. Georgia 58-1686160 3414 Peachtree Rd., N.E., Suite 1400
Atlanta, GA 30326
(404) 841-9200
Schizophrenia Treatment and Georgia 58-1672912 209 Church Street
Rehabilitation, Inc. Decatur, GA 30030
(404) 377-1986
Shallowford Community Hospital, Georgia 58-1175951 3414 Peachtree Rd., N.E., Suite 1400
Inc. Atlanta, GA 30326
(404) 841-9200
Sistemas De Terapia Georgia 58-1181077 3414 Peachtree Rd., N.E., Suite 1400
Respiratoria, S.A., Inc. Atlanta, GA 30326
(404) 841-9200
Stuart Circle Hospital Virginia 54-0855184 3414 Peachtree Rd., N.E., Suite 1400
Corporation Atlanta, GA 30326
(404) 841-9200
Western Behavioral California 58-1662416 3414 Peachtree Rd., N.E., Suite 1400
Systems, Inc. Atlanta, GA 30326
(404) 841-9200
(1) The Additional Registrants listed are wholly-owned subsidiaries of the Registrant and are guarantors of
the Registrant's 11 1/4% Series A Senior Subordinated Notes due 2004. The Additional Registrants have
been conditionally exempted, pursuant to Section 12(h) of the Securities Exchange Act of 1934, from
filing reports under Section 13 of the Securities Exchange Act of 1934.
-xvi-
</TABLE>
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION
ANNUAL REPORT ON FORM 10-K
For the Year Ended September 30, 1994
Table of Contents
Page
PART I
Item 1. Business....................................... I-3
Item 2. Properties..................................... I-18
Item 3. Legal Proceedings.............................. I-18
Item 4. Submission of Matters to a Vote of
Security Holders.............................. I-18
PART II
Item 5. Market Price for Registrant's Common Equity
and Related Stockholder Matters............... II-1
Item 6. Selected Financial Data........................ II-1
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... II-3
Item 8. Financial Statements and Supplementary Data.... II-13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........ II-13
PART III
Item 10. Directors and Executive Officers of the
Registrant.................................... III-1
Item 11. Executive Compensation......................... III-1
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................... III-1
Item 13. Certain Relationships and Related Trans-
actions....................................... III-1
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K....................... IV-1
I-2
<PAGE>
<PAGE>
PART I
Item 1. Business
General
Charter Medical Corporation (the "Company") is a behavioral healthcare
company. As of September 30, 1994, the Company operated 98 acute care
psychiatric hospitals, three residential treatment centers and one physician
outpatient practice with an aggregate capacity of 8,908 licensed beds.
Additionally, 92 of the Company's hospitals operate partial hospitalization
programs, and the Company operates 150 outpatient centers, staffed by mental
health professionals. Between September 30, 1994 and November 30, 1994, the
Company acquired 13 additional facilities. In this report, the Company uses
the term "psychiatric hospitals" or "hospitals" to refer to the 98 facilities
licensed as acute care psychiatric hospitals, the three facilities licensed as
residential treatment centers and the physician outpatient practice. A
residential treatment center offers less intensive and longer stay services
than do acute care psychiatric hospitals.
The Company's business strategy is to develop and operate integrated
behavioral healthcare delivery systems in certain markets in which it
presently operates one or more hospitals and in selected other markets in
which the Company does not presently operate a hospital. The integrated
delivery systems that the Company is developing offer a comprehensive range of
behavioral healthcare services including inpatient treatment, day and partial
hospitalization services, group and individual outpatient treatment, and
residential and other less intensive services. The Company is establishing
such systems by using its hospitals as a base and by arranging for other
services through acquisitions, contracts or affiliations with physicians,
psychologists and other mental health professionals and, in some markets, with
general acute care hospitals and other institutional healthcare providers.
The Company is also developing information systems that will assist in the
integration of the financing and delivery of behavioral healthcare services.
Recent Developments
Acquisition of Hospitals
As of March 29, 1994 the Company entered into two agreements with
National Medical Enterprises, Inc. ("NME") providing for the purchase by the
Company of substantially all of the assets of 36 psychiatric hospitals, eight
chemical-dependency treatment facilities, two residential treatment centers
and one physician outpatient practice, including related outpatient facilities
and other associated assets. Under a consent order that has been
conditionally approved by the Federal Trade Commission, the Company has agreed
not to acquire six of such facilities; the Company and NME subsequently agreed
that the Company will not acquire one facility. The remaining 40 facilities
(the "Acquired Hospitals") have, as of November 30, 1994, been acquired (the
"Acquisition") by subsidiaries of the Company. The purchase price for the
Acquired Hospitals was approximately $120.4 million in cash plus an additional
cash amount of approximately $51 million, subject to adjustment, for the net
working capital of the Acquired Hospitals. The Acquired Hospitals have an
aggregate capacity of 2,873 licensed beds and are located in 19 states. For
their fiscal year ended May 31, 1994, the Acquired Hospitals had net revenue
of approximately $315.1 million.
I-3
<PAGE>
<PAGE>
On June 30, 1994, the Company completed the purchase of 27 of the
Acquired Hospitals for a cash purchase price of approximately $129.6 million,
which included approximately $39.3 million, subject to adjustment, for the net
working capital of the facilities. On October 31, 1994, the Company completed
the purchase of three additional Acquired Hospitals for a cash purchase price
of approximately $5 million, which included approximately $2.2 million related
to the net working capital of the facilities. On November 30, 1994, the
Company completed the purchase of the remaining ten Acquired Hospitals for a
cash purchase price of approximately $36.8 million, including approximately
$9.5 million related to the net working capital of the ten Acquired
Hospitals. The Company accounted for the Acquisition using the purchase
method of accounting.
Debt Refinancing
In order to finance the Acquisition and to refinance substantially all of
the Company's outstanding long-term debt, on May 2, 1994 the Company entered
into a Second Amended and Restated Credit Agreement with certain financial
institutions for a five-year reducing, revolving credit facility in an
aggregated committed amount of $300 million (the "Revolving Credit Agreement")
and issued $375 million of 11.25% Series A Senior Subordinated Notes which
mature on April 15, 2004 (the "Notes") and are general unsecured obligations
of the Company. (See Note 6 of the Company's Consolidated Financial
Statements.)
Sale of General Hospitals
On September 30, 1993, the Company sold its general hospitals and related
assets to Quorum, Inc., for approximately $338 million. The Company retained
the assets and liabilities relating to these hospitals for professional
liability claims incurred and cost report settlements for periods prior to
September 30, 1993.
For fiscal 1993, the general hospitals had net revenue of approximately
$347 million, a net loss of approximately $15 million, and admissions and
patient days of 39,669 and 205,843, respectively. In 1993, the Company
restated its consolidated financial statements to reflect the sales of the
general hospitals and its interest in a non-hospital subsidiary as
discontinued operations.
Financial Restructuring
In its 1992 fiscal year, the Company completed a restructuring of its
debt and equity capitalization (the "Restructuring") pursuant to a prepackaged
plan of reorganization filed under chapter 11 of the United States Bankruptcy
Code (the "Plan"), which became effective on July 21, 1992. As a result of
the Restructuring, the Company's long-term debt was reduced by approximately
$700 million and its redeemable preferred stock of $233 million was
eliminated. The holders of the debt and preferred stock that were reduced or
eliminated received approximately 97% of the Company's common stock
outstanding on July 21, 1992.
Psychiatric Hospital Operations
The Company's psychiatric hospitals operated on September 30, 1994 are
located in well-populated urban and suburban locations in 31 states and two
I-4
<PAGE>
<PAGE>
foreign countries. Thirteen of the Company's hospitals are affiliated with
medical schools for residency and other post-graduate teaching programs.
Following are financial and statistical results from operations of
hospitals which are included in the Company's consolidated financial
statements:
<TABLE>
<CAPTION>
Selected Psychiatric Hospital Operating Data
Fiscal Year ended September 30
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Number of Psychiatric Hospitals.. 91 80 79 74 101
Bed Capacity:
Licensed Beds.................. 8,124 7,310 7,228 6,902 8,908
Average Licensed Beds.......... 7,660 7,284 7,288 7,145 7,468
Licensed Bed Days................ 2,795,793 2,658,760 2,667,428 2,607,996 2,725,679
Net Revenue (In Thousands)(1).... $893,105 $838,167 $875,776 $853,792 $850,575
Total Patient Days(2)............ 1,768,387 1,494,844 1,430,815 1,373,835 1,383,388
Total Equivalent Patient Days(3). 1,818,634 1,551,180 1,508,716 1,481,221 1,527,855
Net Revenue/Equivalent Patient
Day(3).......................... $491 $540 $580 $576 $557
Admissions....................... 74,254 73,120 81,311 86,794 102,802
Average Length of Stay (Days).... 23.7 20.4 17.8 15.8 13.6
Private Pay and Other Sources/
Gross Revenue(4)................ 74% 70% 65% 56% 49%
Government Programs/Gross
Revenue(4)(5)................... 26% 30% 35% 44% 51%
_____________
<FN>
(1) Includes inpatient and outpatient revenue.
(2) Provision of care to one patient for one day.
(3) Represents inpatient days adjusted to reflect outpatient utilization,
computed by dividing patient charges by inpatient charges per day.
(4) Gross Revenue is revenue before deducting contractual allowances and
discounts from established billing rates. Gross Revenue is not separately
identified in the Company's Consolidated Statements of Operations;
instead, Net Revenue in the Consolidated Statements of Operations reflects
gross revenue after deductions for contractual allowances and discounts
from established billing rates.
(5) Government Programs include Medicare, Medicaid and the Civilian Health and
Medical Program of the Uniformed Services ("CHAMPUS"), which provides
payment for medical services to military dependents and retired military
personnel.
</TABLE>
Most of the Company's hospitals offer a full continuum of behavioral care
in their service area. The continuum includes inpatient hospitalization,
partial hospitalization, intensive outpatient services and, in some markets,
residential treatment services.
The Company's hospitals provide structured and intensive treatment
programs for mental health, and alcohol and drug dependency disorders in
children, adolescents and adults. The specialization of programs enables the
clinical staff to provide care that is specific to the patient's needs and
I-5
<PAGE>
<PAGE>
facilitates monitoring the patient's progress. A typical treatment program of
the Company integrates physicians and other patient-care professionals with
structured activities, providing patients with testing, adjunctive therapies
(occupational, recreational and other), group therapy, individual therapy and
educational programs. A treatment program includes one or more of the types
of treatment settings provided by the Company's continuum of care. For those
patients who do not have a personal psychiatrist or other specialist, the
hospital refers the patient to a member of its medical staff.
A significant portion of hospital admissions are provided by physician
referrals, and professional relationships are an important aspect of the
Company's ongoing business. Management believes that the quality of the
Company's treatment programs, staff employees and physical facilities are
important factors in maintaining good professional relationships.
The Company's hospitals work closely with mental health professionals,
non-psychiatric physicians, emergency rooms and community agencies that come
in contact with individuals who may need treatment for mental illness or
substance abuse. A portion of the Company's marketing efforts are directed at
increasing general awareness of mental health and addictive disease and the
services offered by the Company's hospitals.
In addition to receiving hospital admissions from physicians, other
healthcare professionals and community agencies, the Company's hospitals also
seek to provide services to persons covered by managed care plans by offering
a continuum of care that is conducive to cost-effective care management and,
in certain cases, a capitated or other at-risk payment methods.
Seasonality
The Company's business is seasonal in nature, with a reduced demand for
certain services generally occurring in the fourth fiscal quarter and around
major holidays, such as Thanksgiving and Christmas.
Related Businesses
As part of the Company's business strategy, the Company in fiscal 1993
and 1994, (i) acquired a company that develops information systems relating to
the financing and delivery of behavioral healthcare services; (ii) acquired a
company that provides outpatient treatment for schizophrenia patients; and
(iii) organized a subsidiary, Group Practice Affiliates, Inc., that acquires
or manages professional group practices. Group Practice Affiliates, Inc. has
acquired one such practice and a related managed behavioral care company and
has entered into agreements or letters of intent to acquire two additional
practices. To date, the activities of these subsidiaries have not been
material to the Company.
I-6
<PAGE>
<PAGE>
Hospital Properties
The following table provides information relating to the 101 hospitals
operated by the Company as of September 30, 1994. Each hospital is operated
by a wholly-owned subsidiary of the Company, except for the hospital located
in Naperville, Illinois which is 75% owned by the Company.
<TABLE>
<CAPTION>
Number of Date of Acquisition
State/ Licensed or Opening
Name Country City Beds by the Company
<S> <C> <C> <C> <C>
Charter Woods Behavioral Health
System ("BHS")(2) Alabama Dothan 75 June 1980
Charter Academy of Mobile(2)(3) Alabama Mobile 72 September 1987
Charter Behavioral Health
System ("CBHS") of Mobile(4) Alabama Mobile 84 June 1978
Charter North BHS(2) Alaska Anchorage 74 May 1984
CBHS of Arizona/East Valley(2) Arizona Chandler 80 June 1987
CBHS of Arizona/Glendale(2) Arizona Glendale 90 May 1987
CBHS of Arizona/Tucson Arizona Tucson 60 June 1994
CBHS of Northwest Arkansas(2) Arkansas Fayetteville 65 March 1983
CBHS of Little Rock(2) Arkansas Maumelle 60 May 1990
CBHS of Texarkana Arkansas Texarkana 60 June 1994
CBHS of Southern California/Palm Springs California Cathedral City 80 June 1994
CBHS of Southern California/Corona(2) California Corona 92 December 1978
CBHS of Southern California/Charter Oak(2) California Covina 95 September 1980
CBHS of Southern California/Mission Viejo(2) California El Toro 80 April 1990
CBHS of San Diego/API California La Mesa 62 June 1994
CBHS of Southern California/Long Beach(4) California Long Beach 227 January 1980
CBHS of Northern California California Roseville 80 August 1988
CBHS of San Diego California San Diego 80 May 1988
CBHS of Northern California/San Jose California San Jose 80 June 1994
CBHS of Southern California/Thousand Oaks(2) California Thousand Oaks 80 March 1990
CBHS of Central California/Visalia California Visalia 64 June 1994
CBHS at Centennial Peaks(4) Colorado Louisville 72 June 1994
Charter Clinic Chelsea(4) England London 45 July 1980
Charter Nightingale England London 78 February 1987
CBHS of Tampa Bay at Manatee Palms Florida Bradenton 72 June 1994
Charter Glade BHS(2) Florida Ft. Myers 154 August 1983
CBHS of Jacksonville(2) Florida Jacksonville 64 January 1987
CBHS Orlando(2) Florida Kissimmee 60 July 1989
CBHS of Tampa Bay at Pasco(2) Florida Lutz 72 March 1990
CBHS of South Florida(2) Florida Miami 88 October 1986
Charter Springs BHS(2) Florida Ocala 92 October 1985
CBHS of Tampa Bay at Tampa(2) Florida Tampa 146 July 1985
CBHS of Athens(2) Georgia Athens 80 July 1985
CBHS of Atlanta at Peachford(2) Georgia Atlanta 224 January 1974
Charter Augusta BHS(2) Georgia Augusta 63 January 1987
CBHS of Central Georgia(2) Georgia Macon 118 September 1982
Charter Savannah BHS(2) Georgia Savannah 112 July 1972
Charter By-the-Sea BHS(2) Georgia St. Simons 101 September 1982
CBHS of Chicago(2) Illinois Chicago 123 March 1978
Linden Oaks(1)(4) Illinois Naperville 92 June 1994
CBHS of Indiana/Evansville Indiana Evansville 60 June 1994
Charter Beacon BHS(2) Indiana Fort Wayne 97 September 1985
Charter South Bend BHS(2) Indiana Granger 60 January 1990
I-7
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Number of Date of Acquisition
State/ Licensed or Opening
Name Country City Beds by the Company
<S> <C> <C> <C> <C>
CBHS of Northwest Indiana(2) Indiana Hobart 60 January 1990
Charter Indianapolis BHS(2) Indiana Indianapolis 80 March 1990
Charter Lafayette BHS(2) Indiana Lafayette 64 September 1986
CBHS of Indiana/Michigan City Indiana Michigan City 89 June 1994
Charter Terre Haute BHS Indiana Terre Haute 66 March 1988
CBHS of Kansas City(2) Kansas Overland Park 80 November 1986
Charter Wichita BHS(2) Kansas Wichita 80 November 1986
Charter Ridge BHS(2) Kentucky Lexington 110 August 1982
Charter Louisville BHS(2) Kentucky Louisville 66 October 1978
CBHS of Paducah(2) Kentucky Paducah 80 July 1985
CBHS at Acadian Oaks Louisiana Lafayette 70 June 1994
CBHS of Lake Charles(2) Louisiana Lake Charles 60 July 1985
Charter Forest BHS(2) Louisiana Shreveport 83 July 1985
CBHS of Maryland at Hidden Brook Maryland Bel Air 51 June 1994
CBHS of Chesapeake/Warwick(4) Maryland East New Market 42 June 1994
CBHS of Maryland at Meadows Maryland Gambrills 60 June 1994
CBHS of Maryland at Fairbridge(4) Maryland Rockville 60 June 1994
CBHS of Maryland at Potomac Ridge(4) Maryland Rockville 97 June 1994
CBHS of Chesapeake/White Oak(4) Maryland Woolford 40 June 1994
CBHS of Waverly Minnesota Waverly 40 June 1994
CBHS of Mississippi(2) Mississippi Jackson 111 July 1985
CBHS of Columbia(2) Missouri Columbia 96 December 1984
CBHS of Nevada(2) Nevada Las Vegas 84 April 1986
Charter Brookside BHS of New England New Hampshire Nashua 100 June 1994
CBHS of New Jersey/Lakehurst New Jersey Lakehurst 24 June 1994
CBHS of New Jersey/Summit New Jersey Summit 150 June 1994
CBHS of New Mexico(1)(4) New Mexico Albuquerque 80 March 1985
Charter Asheville BHS North Carolina Asheville 139 June 1994
Charter Pines BHS(2) North Carolina Charlotte 60 April 1985
CBHS of Greensboro(2) North Carolina Greensboro 100 July 1981
Charter Northridge BHS(2) North Carolina Raleigh 85 September 1984
CBHS of Winston-Salem(2) North Carolina Winston-Salem 99 July 1981
CBHS of Toledo(2) Ohio Maumee 38 September 1990
Charter Fairmount BHS Pennsylvania Philadelphia 169 July 1985
CBHS at Cove Forge(4) Pennsylvania Williamsburg 96 June 1994
Charter Charleston BHS(2) South Carolina Charleston 102 January 1990
Charter Greenville BHS(2) South Carolina Greer 60 August 1989
Charter Rivers BHS(2) South Carolina West Columbia 80 February 1983
Charter Sioux Falls BHS(2) South Dakota Sioux Falls 60 July 1989
La Metairie Clinic(2) Switzerland Nyon 69 June 1985
Charter Lakeside BHS(2) Tennessee Memphis 204 August 1976
CBHS of Austin(2) Texas Austin 94 January 1986
CBHS of Corpus Christi(2) Texas Corpus Christi 80 June 1986
CBHS of Ft. Worth(2) Texas Ft. Worth 80 January 1987
Charter Grapevine BHS(2) Texas Grapevine 80 September 1989
CBHS of Kingwood(2) Texas Kingwood 80 October 1986
Charter Plains BHS(2) Texas Lubbock 80 February 1984
Charter Palms BHS(2) Texas McAllen 80 May 1983
CBHS of Dallas(2) Texas Plano 116 August 1987
I-8
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Number of Date of Acquisition
State/ Licensed or Opening
Name Country City Beds by the Company
<S> <C> <C> <C> <C>
Charter Real BHS(2) Texas San Antonio 106 October 1985
CBHS of Sugar Land(2) Texas Sugar Land 68 October 1986
CBHS of Clear Lake Texas Webster 131 June 1994
Charter Provo Canyon School(2)(3) Utah Provo 212 December 1985
Charter Canyon BHS(2) Utah Salt Lake City 62 January 1986
CBHS of Charlottesville(2) Virginia Charlottesville 75 July 1985
CBHS at Springwood(4) Virginia Leesburg 77 June 1994
Charter Westbrook BHS(2) Virginia Richmond 210 April 1970
CBHS of Milwaukee/West Allis Wisconsin West Allis 80 May 1989
______________
<FN>
(1) Leasehold interest is mortgaged.
(2) Assets of hospital facility are mortgaged.
(3) Licensed as an intensive residential treatment center.
(4) A leased hospital facility or property.
</TABLE>
All of the Company's hospitals located in the United States have been
accredited by the Joint Commission on Accreditation of Healthcare
Organizations (the "Joint Commission"). The Joint Commission is a national
commission which establishes standards relating to the physical plant,
administration, quality of patient care, governing body and medical staffs of
hospitals.
The Company operates 13 leased hospitals, including one 150-bed general
hospital, not listed above, which is managed by an unaffiliated third party.
The leased hospitals have terms expiring between 1996 and 2069. The leases
for two hospitals contain options to purchase these hospitals for nominal
consideration at the end of their respective lease terms.
Sixty-seven of the Company's hospitals listed above are subject to
mortgages. The stock of substantially all of the domestic subsidiaries of the
Company has been pledged as collateral for the Company's secured bank
financing.
The Company owns 15 medical office buildings (with an aggregate of
approximately 187,000 square feet) and leases an additional six (with an
aggregate of approximately 19,000 square feet), all of which are located near
certain of the Company's hospitals. These buildings have a total of
approximately 120 tenants. Five of the Company's medical office buildings are
subject to mortgages.
The Company leases office space for approximately 150 outpatient centers
located in 31 states. The leases for these centers aggregate approximately
330,000 square feet of office space, and generally have lease terms of less
than five years.
I-9
<PAGE>
<PAGE>
Divestitures
During fiscal 1994, the Company sold the following facilities which had
been closed during fiscal 1992 and fiscal 1993:
<TABLE>
<CAPTION>
Location Size/Type of Facility Date
<S> <C> <C>
Denver, CO 60-bed psychiatric hospital October 1993
Laredo, TX 64-bed psychiatric hospital December 1993
West Palm Beach, FL 60-bed psychiatric hospital August 1994
</TABLE>
In addition, the Company leases, with options to purchase by the lessees,
two facilities which it previously operated prior to fiscal 1991. The Company
is also attempting to sell or lease two other previously operated hospitals
and a related medical office building and certain unimproved real estate.
Competition
Each of the Company's hospitals competes with other hospitals, some of
which are larger and have greater financial resources. Some competing
hospitals are owned and operated by governmental agencies, others by nonprofit
organizations supported by endowments and charitable contributions and others
by proprietary hospital corporations. The hospitals frequently draw patients
from areas outside their immediate locale and, therefore, the Company's
hospitals may, in certain markets, compete with both local and distant
hospitals. In addition, the Company's hospitals compete not only with other
psychiatric hospitals, but also with psychiatric units in general hospitals,
and outpatient services provided by the Company may compete with private
practicing mental health professionals. The competitive position of a
hospital is, to a significant degree, dependent upon the number and quality of
physicians who practice at the hospital and who are members of its medical
staff.
In recent years, the competitive position of hospitals has been affected
by the ability of such hospitals to obtain contracts with Preferred Provider
Organizations ("PPO's"), Health Maintenance Organizations ("HMO's") and other
managed care programs to provide inpatient and other services. Such contracts
normally involve a discount from the hospital's established charges, but
provide a base of patient referrals. These contracts also frequently provide
for pre-admission certification and for concurrent length of stay reviews.
The importance of obtaining contracts with HMO's, PPO's and other managed care
companies varies from market-to-market, depending on the individual market
strength of the managed care companies. The Company's strategy is intended,
in part, to increase the Company's revenues from managed care companies or
managed care employers by offering the continuum of care described above,
information systems that support care management and at-risk pricing
mechanisms.
State certificate of need laws place limitations on the Company's and its
competitors' ability to build new hospitals and to expand existing hospitals.
Protection from new competition is reduced in those states where there is no
certificate of need law. The Company operates 47 hospitals in 12 states
(Arizona, Arkansas, California, Colorado, Indiana, Kansas, Louisiana, Nevada,
New Mexico, South Dakota, Texas and Utah) which do not have certificate of
need laws applicable to hospitals. In most cases, these state laws do not
I-10
<PAGE>
<PAGE>
restrict the ability of the Company or its competitors to offer new outpatient
services.
Industry Trends
The Company's hospitals have been adversely affected by factors
influencing the entire psychiatric hospital industry. Factors which affect
the Company include (i) the imposition of more stringent length of stay and
admission criteria by payors; (ii) the failure of reimbursement rate increases
from certain payors that reimburse on a per diem or other discounted basis to
offset increases in the cost of providing services; (iii) an increase in the
percentage of its business that the Company derives from payors that reimburse
on a per diem or other discounted basis; (iv) a trend toward higher deductible
and co-insurance for individual patients; (v) a trend toward limiting employee
health benefits, such as reductions in annual and lifetime limits on mental
health coverage; and (vi) a trend toward agreements with payors where the
Company agrees to assume the risk for the provision of treatment to all
members of a particular group for a specified revenue amount. In response to
these conditions, the Company has (i) strengthened controls to reduce cost
increases and capital expenditures, (ii) reviewed its portfolio of hospitals
and sold, closed or leased hospitals or consolidated operations in certain
locations and (iii) developed strategies to increase outpatient services and
partial hospitalization programs to meet the demands of the marketplace.
Healthcare Reform
Between October 1993 and the early fall of 1994, President Clinton and
various U.S. Senators and Representatives introduced in Congress a number of
healthcare reform proposals. The proposals ranged from the Clinton
Administration's comprehensive healthcare reform proposal that would have
restructured the financing and delivery of healthcare services through a
combination of managed competition and mandated employer coverage of employees
to less comprehensive proposals that would have required private health
insurance to be "portable" and eliminated coverage limitations for
pre-existing health conditions. The numerous proposals varied in their
proposed coverage of behavioral healthcare services and in their potential
effect on the Company. No proposal was adopted by either house of Congress.
The Company anticipates that numerous healthcare reform proposals will be
introduced in the next session of Congress beginning in January 1995.
Particularly in light of the change in control of both houses of Congress as
the result of the November 1994 elections, the Company is unable to predict
whether any such proposal will be adopted or the effect on the Company of any
proposal that does become law.
A number of states in which the Company has operations have either
adopted or are considering the adoption of healthcare reform proposals at the
state level. Various reform measures have been adopted in Florida, Minnesota
and Tennessee, among others. These state reform laws have, in many cases, not
been fully implemented. The Company cannot predict the effect of these state
healthcare reform laws on its operations.
Sources of Revenue
Payments are made to the Company's hospitals by patients, by insurance
companies and self-insured employers, by the federal and state governments
I-11
<PAGE>
<PAGE>
under Medicare, Medicaid, CHAMPUS and other programs and by HMO's, PPO's and
other managed care programs. Amounts received under government programs, HMO,
PPO and other managed health care arrangements, certain self-insured employers
and certain Blue Cross plans are generally less than the hospital's
established charges. The approximate percentages of gross patient revenue
(which is revenue before deducting contractual allowances and discounts from
established billing rates) derived by the Company's hospitals from various
payment sources for the last three fiscal years were as follows:
<TABLE>
<CAPTION>
Percentage of Hospital Gross
Patient Revenue for the Year
ended September 30
1992 1993 1994
<S> <C> <C> <C>
Medicare.............................. 18% 23% 27%
Medicaid.............................. 11 15 16
29 38 43
HMO's and PPO's....................... 9 11 14
CHAMPUS............................... 6 6 5
Other Government Programs............. -- -- 3
Other (primarily Blue Cross and
Commercial Insurance)................ 56 45 35
Total.............................. 100% 100% 100%
</TABLE>
Most private insurance carriers reimburse their policyholders or make
direct payments to the hospitals for charges at rates specified in their
policies. The patient remains responsible to the hospital for any difference
between the insurance proceeds and the total charges. Certain Blue Cross
programs have negotiated reimbursement rates with certain of the Company's
hospitals which are less than the hospital's charges.
Most of the Company's hospitals have entered into contracts with HMO's,
PPO's, certain self-insured employers and other managed care plans which
provide for reimbursement at rates less than the hospital's normal charges.
In addition to contracts entered into by individual hospitals with such
managed care plans, the Company has entered into regional and national
contracts with HMO's, PPO's, self-insured employers and other managed care
plans that apply to all of the Company's hospitals in the geographic areas
covered by a contract. The Company is seeking to obtain additional regional
and national contracts. The Company expects its percentage of revenue from
these payor sources to increase in the future.
Under the Medicare provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 ("TEFRA"), costs per Medicare case are determined for each of the
Company's hospitals. A target cost per case is established for each year (the
"Target Rate"). If a hospital's costs per case are less than the Target Rate,
the hospital receives a bonus of 50% of the difference between its actual
costs per case and the Target Rate (limited to 5% of the Target Rate).
Hospitals with costs which exceed the Target Rate are paid an additional
amount equal to 50% of the excess, up to 10% of the Target Rate. These limits
apply only to operating costs and do not apply to capital costs, including
lease expense, depreciation and interest associated with capital
expenditures. The Target Rate for each hospital is increased annually by the
application of an "update factor".
I-12
<PAGE>
<PAGE>
Most of the Company's hospitals participate in state operated Medicaid
programs. Federal law prohibits Medicaid funding for inpatient services in
freestanding psychiatric hospitals for patients between the ages of 21 and
64. Each state is responsible for establishing the Medicaid eligibility and
coverage criteria, payment methodology and funding mechanisms which apply in
that state, subject to federal guidelines. Accordingly, the level of Medicaid
payments received by the Company's hospitals varies from state to state. In
addition to the basic payment level for patient care, several state programs
include a financial benefit for hospitals which treat a disproportionately
large volume of Medicaid patients as a percentage of the total patient
population. These "disproportionate share" benefits are subject to annual
review and revision by the related state governments and could be
substantially reduced or eliminated at any point in the future. The Omnibus
Budget Reconciliation Act of 1993 ("OBRA 93") prohibits disproportionate share
payments to hospitals which have a Medicaid utilization rate of less than 1%
effective for state fiscal years ending in 1994. For state fiscal years
beginning on or after January 1, 1995, the amount of disproportionate share
payments each hospital can receive will be limited through the use of formulas
based generally on the cost of providing services to Medicaid and uninsured
patients. The Company received approximately $13 million, $15 million and $11
million in Medicaid disproportionate share payments in fiscal 1992, 1993 and
1994, respectively.
Within the statutory framework of the Medicare and Medicaid programs,
there are substantial areas subject to administrative rulings and
interpretations which may affect payments made under either or both of such
programs. In addition, federal or state governments could reduce the future
funds available under such programs or adopt additional restrictions on
admissions and more stringent requirements for utilization of services. These
types of measures could adversely affect the Company's operations. Final
determination of amounts payable under Medicare and certain Medicaid programs
are subject to review and audit. The Company's management believes that
adequate provisions have been made for any adjustments that might result from
such reviews or audits.
Most of the Company's hospitals receive revenues from the CHAMPUS
program. Under CHAMPUS, psychiatric hospitals are classified into two groups,
each with different payment methods. The first group, classified as high
volume CHAMPUS hospitals, are those hospitals with 25 or more CHAMPUS
discharges during a federal fiscal year. The Company has 54 hospitals
included within this group. These hospitals receive a per diem payment,
subject to a limitation of $732 per day. The remainder of the Company's
psychiatric hospitals are classified as low volume CHAMPUS hospitals and
receive a per diem based on a wage-adjusted regional rate.
CHAMPUS patients are subject to annual limits on the number of
psychiatric days covered by CHAMPUS. Covered inpatient services are generally
limited to 30 days for adult acute patients, 45 days for child and adolescent
acute patients, and 150 days for residential treatment center patients.
The Company's Medicare revenue has been and may in the future be reduced
under the Balanced Budget and Emergency Deficit Control Act of 1985, as
amended by The Budget Enforcement Act of 1990 and OBRA 93 (the "Budget
Acts"). These laws remain in effect through fiscal year 1998, and require
that federal spending automatically be reduced in amounts determined by
calculations set out in the Budget Acts, if certain requirements relating to
I-13
<PAGE>
<PAGE>
the amount of the federal deficit are not met. Under the Budget Acts,
Medicare expenditures for a fiscal year can be reduced by no more than 4%.
Medicaid funding is exempt from reductions under the Budget Acts. There were
no reductions in fiscal 1992, 1993 or 1994. Payment reductions under the
Budget Acts, if implemented in future years, could have a material adverse
effect on the Company's net revenue. However, because the actual amount of
the reduction for any fiscal year may vary according to the federal deficit,
the financial impact of the Budget Acts on the Company cannot be predicted.
Regulation and Other Factors
Operations of psychiatric hospitals are subject to substantial federal,
state and local government regulation. Such regulations provide for periodic
inspections or other reviews by state agencies, the United States Department
of Health and Human Services (the "Department") and CHAMPUS to determine
compliance with their respective standards of medical care, staffing,
equipment and cleanliness necessary for continued licensing or participation
in the Medicare, Medicaid or CHAMPUS programs. The admission and treatment of
patients at the Company's hospitals are also subject to substantial state
regulation relating to involuntary admissions, confidentiality and patients'
rights and to federal regulation relating to confidentiality of medical
records of substance abuse patients.
The obtaining of approvals for construction of new hospitals and for
renovation of and additions to existing hospitals is subject to various
governmental requirements, such as approval of sites and findings of community
need for additional hospital facilities and services. In addition, in certain
states, as a practical matter, it is necessary to pledge to provide various
amounts of uncompensated care to indigent persons in order to obtain a
certificate of need. Except for Arizona, Arkansas, California, Colorado,
Indiana, Kansas, Louisiana, Nevada, New Mexico, South Dakota, Texas and Utah,
the states in which the Company presently operates hospitals have adopted
certificate of need or similar statutes.
Federal law contains numerous provisions designed to insure that services
rendered by hospitals to Medicare and Medicaid patients are medically
necessary and are of a quality which meets professionally recognized standards
and to insure that claims for reimbursement under the Medicare and Medicaid
programs are properly filed. Among other things, services provided at the
Company's hospitals are subject to periodic review by Peer Review
Organizations ("PRO's"). All hospitals which participate in the Medicare
program are subject to review by PRO's. PRO activities include reviews of
certain admissions and services to determine medical necessity and to
determine whether quality of care meets professionally recognized standards.
PRO's have the authority to recommend to the Department that a provider who is
in substantial noncompliance with the medical necessity and quality of care
standards of a PRO or who has grossly and flagrantly violated an obligation to
render quality care be excluded from participation in the Medicare program or
be required to reimburse the federal government for certain payments
previously made to the provider under the Medicare program.
The Company's hospitals have been subject to and have complied with
various forms of utilization review since 1970. The Company has implemented a
quality assurance program in each of its hospitals, which includes procedures
for utilization review and retrospective patient care evaluation.
I-14
<PAGE>
<PAGE>
The Medicare and Medicaid Patient and Program Protection Act of 1987
expanded the authority of the Department to exclude from participation in the
Medicare and Medicaid programs those hospitals which engage in defined
prohibited activities. The Department is required under this Act to exclude
from participation in the Medicare and Medicaid programs any individual or
entity that has been convicted of a criminal offense relating to the delivery
of services under Medicare and Medicaid or to the neglect or abuse of
patients. In addition, the Department has authority to exclude from
participation in the Medicare program individuals or hospitals under certain
other circumstances. These include engaging in illegal remuneration
arrangements with physicians and other healthcare providers, license
revocation, exclusion from some other government programs (such as CHAMPUS),
filing claims for excess charges or for unnecessary services, failure to
comply with conditions of participation and failure to disclose certain
required information or to grant proper access to hospital books and records.
The Department has authority to impose civil monetary penalties against
any participant in the Medicare program which makes claims for payment for
services which were not rendered or were rendered by a person or entity not
properly licensed under state law. The Department also has authority to
impose a penalty of not more than $2,000 for each improperly claimed service
and an assessment equal to not more than twice the amount claimed for each
service not rendered.
Federal law makes it a felony, subject to certain exceptions, for a
hospital to make false statements relating to claims for payments under the
Medicare program, to engage in illegal remuneration arrangements with
physicians and other healthcare providers, to make false statements relating
to compliance with the Medicare conditions of participation, or to make false
claims for Medicare or Medicaid payments. A number of states have adopted
laws that also make illegal under state law certain remuneration and referral
arrangements with physicians and other healthcare providers.
In order to provide guidance to healthcare providers with respect to the
statute that makes certain remuneration arrangements between hospitals and
physicians and other healthcare providers illegal, the Department has issued
regulations outlining certain "safe harbor" practices, which, although
potentially capable of inducing prohibited referrals of business, would not be
subject to enforcement action under the illegal remuneration statute. The
practices covered by the regulations include, among others, certain investment
transactions, lease of space and equipment, personal services and management
contracts, sales of physician practices, payments to employees and waivers of
beneficiary deductibles and co-payments. Additional proposed safe harbors
were published in 1993 by the Department. Certain transactions and agreements
of the Company do not satisfy all the applicable criteria contained in the
final and proposed safe harbor regulations that relate to such transactions
and agreements. However, the Company believes that such leases and contracts
do not violate the statute that makes certain remuneration arrangements
illegal. There can be no assurance that (i) government enforcement agencies
will not assert that certain of these arrangements are in violation of the
illegal remuneration statute or (ii) the statute will ultimately be
interpreted by the courts in a manner consistent with the Company's practices.
CHAMPUS regulations authorize CHAMPUS to exclude from the CHAMPUS program
any provider who has committed fraud or engaged in abusive practices. The
regulations permit CHAMPUS to make its own determination of abusive practices
without reliance on any actions of the Department. The term "abusive
I-15
<PAGE>
<PAGE>
practices" is defined broadly to include, among other things, the provision of
medically unnecessary services, the provision of care of inferior quality, and
the failure to maintain adequate medical or financial records.
A number of states have adopted hospital rate review legislation, which
generally provides for state regulation of rates charged for various hospital
services. Such laws are in effect in the state of Florida in which the
Company operates eight hospitals. In Florida, the Health Care Board approves
a budget for each hospital, which establishes a permitted level of revenues
per discharge. If this level of permitted revenues per discharge is exceeded
by a hospital in a particular year by more than a specified amount, certain
penalties, including cash penalties, can be imposed.
The Company's subsidiary that owns or manages professional group
practices is subject to the federal and state illegal remuneration statutes
described above. In addition, in some states, practice of medicine and
certain other health professions' laws prohibit the subsidiary from owning,
but not from managing, professional practices.
Medical Staffs and Employees
At September 30, 1994, approximately 1,600 licensed physicians were
active members of the medical staffs of the Company's hospitals. Many of
these physicians also serve on the medical staffs of other hospitals. A
number of these physicians serve in administrative capacities in the Company's
hospitals. Most of these physicians are independent contractors who have
private practices in addition to their duties for the Company, while certain
of these physicians are employees of the Company. The medical and
professional affairs of each hospital are supervised by the medical staff of
the hospital, under the control of its board of trustees. The Company
recruits physicians to serve in administrative capacities at its hospitals and
to engage in private practice in communities where the Company's hospitals are
located. The Company's agreements with recruited physicians generally provide
for, among other things, allowances for reimbursement of relocation and office
start-up expenses and a guarantee of a specified level of physician income
during the recruited physician's first year of practice.
Registered nurses and certain other hospital employees are required to be
licensed under the professional licensing laws of most states. The Company's
hospital subsidiaries require such employees to maintain such professional
licenses as a condition of employment.
At September 30, 1994, the Company had approximately 9,500 full-time and
4,000 part-time employees. The Company's hospitals have had generally
satisfactory labor relations.
Liability Insurance
Effective June 1, 1994, Plymouth Insurance Company, Ltd. ("Plymouth"), a
wholly-owned Bermuda subsidiary of the Company, provides $25 million per
occurrence general and hospital professional liability insurance for the
Company's hospitals. The insurance coverage does not contain a per occurrence
deductible. Between 90% and 100% of the risk of losses from $1.5 million to
$25 million per occurrence has been reinsured with unaffiliated insurers; and
the percentage so insured varies by layer. The Company also insures with an
unaffiliated insurer 100% of the risk of losses between $25 million and $100
million per occurrence. The Company's general and professional liability
coverage is written on a "claims made or circumstances reported" basis.
I-16
<PAGE>
<PAGE>
For the five years from June 1, 1989, through May 31, 1994, the Company
had a similar general and hospital professional liability insurance program.
For those years, the per occurrence deductible (with respect to which the
Company was self-insured) was $2.5 million for the years ended May 31, 1990
and 1991, $2 million for the years ended May 31, 1992 and 1993 and $1.5
million (relating to the Company's general hospitals sold on September 30,
1993) for the year ended May 31, 1994. For psychiatric hospitals, Plymouth's
coverage did not contain a per occurrence deductible for the year ended
May 31, 1994.
<TABLE>
<CAPTION>
Executive Officers of the Registrant
Name and Age Position with the Company and Principal
of Executive Officer Occupations During the Past Five Years
<S> <C>
E. Mac Crawford Chairman of the Board of Directors,
45 President and Chief Executive Officer
(since 1993) President and Chief
Operating Officer (1992-1993) and
Director (since 1990); Executive Vice
President - Hospital Operations (1990-
1992); Assistant to the President and
Chairman (1990); President of Mulberry
Street Investment Co., Macon, Georgia
(1988-1990).
Lawrence W. Drinkard Executive Vice President and Chief
55 Financial Officer (since 1994) and
Director (since 1991); Senior Vice
President (1990-1993); Treasurer
(1986-1991); Vice President (1987-1990).
William E. Hale Senior Vice President - Operations
49 (since 1994); Vice President - Hospital
Operations (1993-1994); Chief Operating
Officer of Behavioral Health Resources
(1987-1993).
C. Clark Wingfield Vice President - Administrative Services
44 (since 1990); Vice President - Human
Resources (1990); Senior Executive
Director - Compensation and Benefits
(1989-1990).
</TABLE>
Mulberry Street Investment Company manages the personal investments of
William A. Fickling, Jr., former Chairman of the Board of Directors of the
Company, and his family. As president of Mulberry Street Investment Company,
Mr. Crawford had responsibility for managing real estate and other investments
and related financings.
Behavioral Health Resources is a diversified company which specializes in
patient care, managed care and employee assistance program services. As chief
operating officer of Behavioral Health Resources, Mr. Hale oversaw the
development and operation of a psychiatric hospital and various clinics,
outpatient programs, partial hospitalization programs and employee assistance
programs.
I-17
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<PAGE>
International Operations
The Company owns and operates two psychiatric hospitals in London,
England (a 45-bed hospital and a 78-bed hospital) and a 69-bed psychiatric
hospital in Nyon, Switzerland. In July 1991, the Company began managing three
psychiatric-substance abuse hospitals in Jeddah, Riyadh and Damman in the
Kingdom of Saudi Arabia (with 180 beds each) pursuant to a fixed-price
contract for a period of approximately three years. This contract was not
renewed during fiscal 1994. These activities do not represent a significant
portion of the Company's operations.
The Company's international operations also include the Bermuda insurance
company that provides the coverages described under "Liability Insurance."
Item 2. Properties
Information relating to the Company's owned and leased operating hospital
facilities, their location, licensed bed capacity and usage is contained under
the caption "Item 1. Business - Hospital Properties." Such information is
incorporated herein by reference.
The Company owns or leases five hospital facilities which are not
operated by the Company. Two of the facilities have been leased to other
operators, with options to purchase by the lessees. Three of the hospitals
are subject to a mortgage.
The Company leases one 150-bed general hospital which is managed by an
unaffiliated third party. The lease and the management agreement expire in
1997.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
I-18
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<PAGE>
PART II
Item 5. Market Price for Registrant's Common Equity and Related Stockholder
Matters
The Company has one class of Common Stock, which is listed for trading on
the American Stock Exchange (ticker symbol "CMD"). As of November 30, 1994,
there were 10,746 holders of record of the Company's $0.25 par value Common
Stock. The following table sets forth the high and low sales prices of the
Company's Common Stock from October 1, 1992 through the fiscal year ended
September 30, 1994 as reported by the American Stock Exchange:
<TABLE>
<CAPTION>
Common Stock Sales Prices
Calendar Year High Low
<S> <C> <C>
1992
Fourth Quarter.................... 8 4 5/8
1993
First Quarter..................... 16 1/8 8
Second Quarter.................... 17 5/8 12 3/4
Third Quarter..................... 24 17 5/8
Fourth Quarter.................... 27 21
1994
First Quarter..................... 28 21 3/8
Second Quarter.................... 26 1/8 21 3/4
Third Quarter..................... 28 1/2 21 1/4
</TABLE>
The Company is prohibited from paying dividends (other than dividends
payable in shares of Common Stock) on its Common Stock under the terms of its
Revolving Credit Agreement, except for cash dividends that, in the aggregate
from May 1994, do not exceed 6% of the net cash proceeds from issuances of
capital stock, reduced by the aggregate cost of stock purchases since May 1994
and certain other limited circumstances.
Item 6. Selected Financial Data
The following table sets forth selected historical financial information
of the Company for each of the five years in the period ended September 30,
1994. The information is not comparable because of the consummation of the
Company's Restructuring and the implementation of fresh start accounting in
fiscal 1992, which included the revaluation of the Company's assets and
liabilities and resulted in, among other things, significant reductions in
long-term debt and interest expense and elimination of preferred stock and
preferred stock dividend requirements. In 1993, the Company restated its
consolidated financial statements to reflect the sale of certain subsidiaries
as discontinued operations. The Summary of Operations and Balance Sheet Data
for the five years ended September 30, 1994, presented below, have been
derived from, and should be read in conjunction with, the Company's audited
consolidated financial statements and the related notes thereto. The
following financial information should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company indicated
in the Index on page F-1 of this Annual Report on Form 10-K.
II-1
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<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
(In thousands, except per share amounts)
Ten Months Two Months
ended ended
Year Ended September 30, July 31, September 30, Year ended September 30,
1990 1991 1992 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue....................... $ 954,508 $ 868,264 : $777,855 $142,850 $897,907 $904,646
Salaries, general and admini- :
strative expenses................ 804,897 656,828 : 563,600 107,608 640,847 661,516
Bad debt expense.................. 78,944 51,617 : 50,403 14,804 67,300 70,623
Depreciation and amortization..... 66,571 48,659 : 35,126 3,631 26,382 28,354
Amortization of reorganization :
value in excess of amounts :
allocable to identifiable :
assets........................... -- -- : -- 7,167 42,678 31,200
Interest, net..................... 205,723 232,218 : 169,244 12,690 74,156 39,394
ESOP expense (credit)............. 52,033 (3,962) : 33,714 4,811 45,874 49,197
Stock option expense (credit)..... -- -- : -- (789) 38,416 10,614
Unusual items..................... 105,000 45,000 : -- -- -- 71,287
Deferred compensation expense..... 6,815 5,061 : 3,190 -- -- --
Loss from continuing operations :
before income taxes, :
reorganization items, :
extraordinary item and :
cumulative effect of a change :
in accounting principle......... (365,475) (167,157) : (77,422) (7,072) (37,746) (57,539)
Provision for (Benefit from) :
income taxes..................... (43,132) -- : 4,259 1,054 1,874 (10,536)
Loss from continuing operations :
before reorganization items, :
extraordinary item and :
cumulative effect of a :
change in accounting principle... (322,343) (167,157) : (81,681) (8,126) (39,620) (47,003)
:
Discontinued operations: :
Income (Loss) from discontinued :
operations..................... 18,606 37,115 : 24,211 930 (14,703) --
Gain on disposal of discon- :
tinued operations.............. -- -- : -- -- 10,657 --
Loss before reorganization items, :
extraordinary item and cumula- :
tive effect of a change in :
accounting principle............. (303,737) (130,042) : (57,470) (7,196) (43,666) (47,003)
Reorganization items: :
Professional fees and other :
expenses....................... -- -- : (8,156) -- --
Adjust accounts to fair value... -- -- : 83,004 -- --
Extraordinary item - gain (loss) :
on early extinguishment or :
discharge of debt................ -- -- : 730,589 -- (8,561) (12,616)
Cumulative effect of a change :
in accounting principle.......... (7,567) -- : -- -- -- --
Net income (loss)................. $(311,304) $(130,042) : $747,967 $ (7,196) $(52,227) $(59,619)
Earnings (Loss) per common share: :
Loss from continuing operations :
before extraordinary item...... : $(.33) $(1.59) $(1.78)
Income (Loss) from discontinued :
operations and disposal of :
discontinued operations........ : .04 (.16) --
Loss before extraordinary :
item........................... : (.29) (1.75) (1.78)
Extraordinary loss on early :
extinguishment of debt......... : -- (.35) (.48)
Net loss........................ --(A) --(A) : --(A) $(.29) $(2.10) $(2.26)
(Footnotes on following page)
II-2
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
(In thousands)
September 30,
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Current assets.................... $ 255,644 $ 320,755 : $ 290,742 $231,915 $ 324,627
Current liabilities............... 1,986,748 2,123,006 : 296,144 272,598 215,048
Working capital................... (1,731,104) (1,802,251) : (5,402) (40,683) 109,579
Working capital ratio............. -- -- : -- -- 1.51:1
Property and equipment -- net..... 696,813 645,173 : 486,762 444,786 494,345
Total assets...................... 1,333,659 1,338,823 : 1,299,198 838,186 961,480
Long-term debt and capital :
lease obligations................ 12,633 5,920 : 844,839 350,205 533,476
Redeemable preferred stock........ 189,989 214,842 : -- -- --
Common stockholders' equity :
(deficit)........................ (984,954) (1,138,279) : 10,424 57,298 56,221
<FN>
(A) Earnings (loss) per share for periods prior to the two months ended September 30, 1992 are not
presented because they are not meaningful due to the implementation of fresh start accounting and
increase in the number of shares outstanding as a result of the Plan.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
For the fiscal years ended September 30, 1992, 1993 and 1994, the Company
derived approximately 9%, 11% and 14%, respectively, of its gross patient
revenue from HMO's and PPO's; 56%, 45% and 38%, respectively, from other
private payor sources (primarily Blue Cross and commercial insurance); 18%,
23% and 27%, respectively, from Medicare; 11%, 15% and 16%, respectively, from
Medicaid; and 6%, 6% and 5%, respectively, from CHAMPUS. The Company does not
expect its current payor mix to be altered significantly as a result of the
acquisition of 40 behavioral healthcare systems (the "Acquired Hospitals")
from National Medical Enterprises, Inc. Changes in the mix of the Company's
patients among the private-pay, Medicare and Medicaid categories, and among
different types of private-pay sources, can significantly affect the
profitability of the Company's operations. The psychiatric hospital industry
has been adversely affected by the trends described under "Item 1. Business -
Industry Trends."
The Company continues to experience admission increases at its hospitals,
but as a result of the reductions in average length of stay, aggregate patient
days have decreased except for an increase in the fourth quarter due to the
effect of 27 Acquired Hospitals purchased on June 30, 1994. Also an increasing
percentage of the Company's revenue is coming from Medicare, Medicaid and
HMO's and PPO's and less from traditional commercial insurance.
Because of the industry factors referred to previously and the impact of
the 27 facilities purchased on June 30, 1994, the Company's operating margins
declined to 19.1% in fiscal year 1994 from 21.1% for the prior year. Operating
income (net revenue less salaries, general and administrative expenses and bad
debt expenses) was $172.5 million for fiscal 1994, compared with $189.8
million in fiscal 1993. The Company may continue to experience reduced
II-3
<PAGE>
<PAGE>
margins when compared to prior periods. The Company intends to increase its
outpatient services and to enter new markets, in addition to those the Company
entered as a result of the purchase of the Acquired Hospitals, in response to
this trend. The Company continues to broaden the scope of healthcare services
it provides by offering alternatives to traditional inpatient treatment
settings, such as partial hospitalization, intensive outpatient and
residential treatment programs.
The Company's ability to increase the rates it charges to offset
increased costs is limited because the Company derives a significant portion
of its revenues from patients covered by governmental and managed-care
programs. With respect to governmental programs, the amount the Company is
paid for its services is established by law and regulation. With respect to
managed-care programs, the amount is established by the managed-care
contracts. Although inflation has not been a significant factor in the
Company's results of operations in recent years, a resurgence of inflation
could adversely affect the Company's results of operations because of such
limitations on the Company's ability to increase its rates. It is unlikely
that federal and state governments will increase reimbursement rates under
their programs in amounts sufficient to offset future price increases that
result from general inflationary pressures.
The Company's business is seasonal in nature, with a reduced demand for
certain services generally occurring in the fourth quarter and around major
holidays, such as Thanksgiving and Christmas.
Management believes that the purchase of the Acquired Hospitals will
assist the Company in implementing its strategy by increasing the Company's
size, market position and geographical coverage. For example, the acquisition
permits the Company to enter 16 new markets, including markets in the
mid-Atlantic and northeastern United States. Management believes the
operating results of the Acquired Hospitals will provide sufficient cash flow
for debt service and capital expenditures related to those facilities. The
aggregate purchase price for the Acquired Hospitals was approximately $120.4
million in cash plus approximately $51 million for the related net working
capital. Of this amount, $106.3 million was obtained from the net proceeds of
the Notes issued in May 1994, $39.1 million was borrowed pursuant to the
Revolving Credit Agreement and approximately $26 million of cash on hand was
used. Pro forma results of operations for fiscal 1994 which include the 40
Acquired Hospitals are included in Note 2 of the Company Consolidated
Financial Statements.
As of September 30, 1990, the Company operated 91 psychiatric hospitals
and 12 general hospitals with an aggregate capacity of 9,798 licensed beds.
During fiscal years 1991, 1992, 1993 and 1994, the Company sold nine
psychiatric hospitals for a total of $46.1 million, leased two psychiatric
hospitals, with options to purchase by the lessees, and closed four
psychiatric hospitals. Of these 15 hospitals, 11 were included in the
divestiture plan and written down to net realizable value and their estimated
carrying costs accrued as part of the restructuring charges recorded in fiscal
1990 and 1991; therefore, these eleven facilities had no impact on the
Company's results of operations in subsequent periods. The four hospitals not
in the divestiture plan did not have a material impact on the Company's
results of operations. Of the four psychiatric hospitals that were closed, one
of the closed hospitals was leased, and the lease was terminated, one facility
II-4
<PAGE>
<PAGE>
is being marketed for sublease and two facilities are now being used for
residential treatment programs by existing Company facilities. During fiscal
year 1992, the Company closed one general hospital, and on September 30, 1993,
it sold ten general hospitals. As a result of these transactions, the
combining into one facility of two psychiatric hospitals formerly licensed
separately and the acquisition of 27 Acquired Hospitals on June 30, 1994, the
Company operated 101 psychiatric hospitals as of September 30, 1994. The
Company leases one general hospital, which is managed by an unrelated third
party. The lease and management agreement expire in 1997.
The ten general hospitals were sold on September 30, 1993, for
approximately $338.0 million. The Company retained the assets and liabilities
for professional liability claims incurred and cost report settlements for
periods prior to September 30, 1993. The results of operations of the general
hospitals sold on September 30, 1993 have been reported as discontinued
operations in the Company's financial statements. For fiscal 1993, the
general hospitals had net revenue of approximately $347 million and a net loss
of approximately $15 million. The sale of the general hospitals enabled the
Company to concentrate its efforts on behavioral healthcare systems and to
reduce its long-term debt by approximately $310.3 million.
During fiscal 1992, the Company filed a voluntary petition for relief
pursuant to chapter 11 of the U.S. Bankruptcy Code. The prepackaged plan of
reorganization (the "Plan") effected a restructuring of the Company's debt and
equity capitalization (the "Restructuring"). The Restructuring, which became
effective on July 21, 1992, resulted in a reduction of approximately $700
million principal amount of long-term debt and the elimination of redeemable
preferred stock having an aggregate liquidation preference of $233 million.
The Company accounted for the Restructuring by using the principles of fresh
start accounting. Accordingly, the Company's total assets were recorded at
their assumed reorganization value, with the reorganization value allocated to
identified tangible assets on the basis of their estimated fair value at
July 31, 1992. The excess of the reorganization value over the value of
identifiable assets is reported as "reorganization value in excess of amounts
allocable to identifiable assets."
Results of Operations
Effect of the Plan and Fresh Start Accounting
As a result of the consummation of the Plan and the implementation of
fresh start accounting, the results of operations of the Company after
consummation of the Plan are not comparable to results of operations for prior
periods. Additionally, under fresh start accounting, the statement of
operations for fiscal 1992 is separated into two statements: one for the
period prior to consummation of the Plan (July 31, 1992 for accounting
purposes) and for the period subsequent to consummation.
Depreciation and amortization expense was reduced due to the write-down
of depreciable property and equipment and the write-off of deferred charges
and goodwill which occurred upon consummation of the Plan and the
implementation of fresh start accounting. This reduction is offset by
additional depreciation expense related to the Acquisition. In addition, the
excess of reorganization value over the value of identifiable assets, recorded
in connection with fresh start accounting, is being amortized over a
three-year period.
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<PAGE>
<PAGE>
The Company also recognized certain nonrecurring items in fiscal 1992
related to the Plan and fresh start accounting. The Company recognized a net
credit of approximately $83 million representing the adjustment of accounts to
fair value resulting from the implementation of fresh start accounting. The
gain on extinguishment of debt of approximately $731 million includes the
forgiven principal and interest reduced by the value of Common Stock issued to
the holders of certain debt securities outstanding prior to consummation of
the Plan.
Discontinued Operations
The results of operations of the general hospitals sold on September 30,
1993 have been reported as discontinued operations in the Company's financial
statements. Included in these amounts are net interest expenses related to
debt specifically identifiable as debt of the general hospitals.
On September 15, 1993, the Company sold its interest in Beech Street of
California, Inc. ("Beech Street"). Beech Street operates preferred provider
networks and provides utilization review services to third parties.
Immediately prior to the sale, the Company owned 71.1% of the voting stock and
19.8% of the equity ownership of Beech Street. The operations of Beech Street
were consolidated with the Company and have been reported as discontinued
operations in the Company's financial statements. For fiscal 1993, Beech
Street had revenues of approximately $26 million and net income of
approximately $700,000.
The Company recognized after-tax gains from the sale of the general
hospitals and Beech Street of approximately $10.7 million during the fourth
quarter of fiscal 1993.
Psychiatric Hospital Results
The Company's consolidated financial statements include results of
operations for the 27 Acquired Hospitals purchased on June 30, 1994 for the
three months ended September 30, 1994. The comparability of the Company's
psychiatric hospital net revenue, operating expenses and bad debt expense was
not affected by the consummation of the Plan or the sale of the general
hospitals.
The following table summarizes, for the periods indicated, changes in
selected operating indicators.
<TABLE>
<CAPTION>
Percentage of Net Revenue % Change
1992 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Net revenue................... 100.0% 100.0% 100.0% (3) 1
Operating expenses:
Salaries and benefits....... 39.9 39.4 41.6 (4) 6
Other operating expenses.... 33.0 32.0 31.5 (6) (1)
Bad debt expenses............. 7.1 7.5 7.8 3 5
Total expenses.............. 80.0 78.9 80.9 (4) 3
Operating margin.............. 20.0 21.1 19.1 3 (9)
II-6
</TABLE>
<PAGE>
<PAGE>
The table below presents "same store" data for facilities in operation on
September 30, 1994.
<TABLE>
<CAPTION>
Selected Psychiatric Hospital Operating Data
Fiscal Year ended September 30
1992 1993 % Change 1994 % Change
<S> <C> <C> <C> <C> <C>
Number of Psychiatric Hospitals..... 75 75 -- 101 35%
Average Licensed Beds............... 7,011 7,013 -- 7,468 6
Licensed Bed Days................... 2,565,974 2,559,839 -- 2,725,679 6
Net Revenue (In thousands)(1)....... $851,501 $843,842 (1)% $850,575 1
Total Patient Days(2)............... 1,395,961 1,358,857 (3) 1,383,388 2
Total Equivalent Patient Days(3).... 1,471,389 1,465,368 -- 1,527,855 4
Net Revenue/Equivalent Patient
Day(1)(3).......................... $579 $576 (1) $557 (3)
Admissions.......................... 79,128 86,067 9 102,802 19
Average Length of Stay (Days)....... 17.8 15.7 (12) 13.6 (13)
Private Pay and Other Sources/
Gross Revenue(4)................... 64% 55% (14) 49% (11)
Government Programs/ Gross
Revenue(4)(5)...................... 36% 45% 25 51% 13
_____________
<FN>
(1) Includes inpatient and outpatient revenue.
(2) Provision of care to one patient for one day.
(3) Represents inpatient days adjusted to reflect outpatient utilization,
computed by dividing patient charges by inpatient charges per day.
(4) Gross Revenue is revenue before deducting contractual allowances and
discounts from established billing rates. Gross revenue is not
separately identified in the Company's Consolidated Statements of
Operations; instead, Net Revenue in the Consolidated Statements of
Operations reflects gross revenue after deductions for contractual
allowances and discounts from established billing rates.
(5) Government Programs include Medicare, Medicaid and CHAMPUS.
</TABLE>
Fiscal 1993 Compared to Fiscal 1994. Patient days at the Company's
hospitals increased 24,531 or 2%, to 1,383,388 in fiscal 1994 from 1,358,857
in fiscal 1993. The increase resulted from the Acquired Hospitals, which
provided 92,994 patient days. Patient days at the same store hospitals
decreased 68,463, or 5%, due to a 17% decrease in the average length of stay
from 15.7 days in fiscal 1993 to 13.4 days in fiscal 1994 for the same store
hospitals. Total admissions increased 19%, or 16,735, from 86,067 in fiscal
1993 to 102,802 in fiscal 1994. Of that increase, 5,794 admissions were
provided by the Acquired Hospitals.
The Company's net revenue increased $6,739,000, or 1%, from $897,907,000
in fiscal 1993 to $904,646,000 in fiscal 1994. Net revenue at the Company's
non-psychiatric operations increased $9,648,000, including $3,444,000 at the
Company's general hospital which is managed by a third party and $1,874,000
provided by companies acquired or developed in the Company's expansion of
services pursuant to its business strategy. Net revenue decreased $9,642,000
due to the disposal of hospitals which were considered core hospitals during
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<PAGE>
<PAGE>
portions of fiscal 1993. Net revenue at the Company's same store hospitals
decreased $45,356,000 from $843,842,000 in fiscal 1993 to $798,486,000 in
fiscal 1994. The Company derived net revenue in fiscal 1994 of $52,089,000
from the Acquired Hospitals. Net revenue per equivalent patient day decreased
3% to $557 in fiscal 1994 from $576 in fiscal 1993. The decreases resulted
primarily from a continued shift in payor mix toward Medicare and Medicaid
programs. Services to Medicare and Medicaid patients have increased due to
increased recognition and treatment of the behavioral illnesses of the elderly
and disabled and, in some states, improved coverage of behavioral services in
psychiatric hospitals for Medicaid beneficiaries. The Company believes that,
at the same time, revenue from Blue Cross and commercial insurance payors has
declined because of a shift by purchasers of health coverage to HMOs and PPOs.
Following is a discussion of changes in operating expenses for fiscal
1993 compared to fiscal 1994.
The Company's salaries, general and administrative expenses increased
$20,669,000, or 3%, to $661,516,000 in fiscal 1994 from $640,847,000 in fiscal
1993, due to expenses incurred by the Acquired Hospitals of $40,173,000. The
same store psychiatric hospitals and other operations of the Company decreased
their salaries, general and administrative expenses primarily by reducing
advertising expenses, purchased services, salaries and benefits and medical
professional fees.
The Company's bad debt expenses increased to $70,623,000 in fiscal 1994
from $67,300,000 in fiscal 1993, an increase of $3,323,000, or 5%. The
Acquisition resulted in additional bad debt expense of $3,727,000 during
fiscal 1994. Bad debt expenses as a percentage of net revenue increased to
7.8% for fiscal 1994 from 7.5% for fiscal 1993. The Company anticipates
future increases in bad debt expenses due to increased deductibles and
co-insurance and reduced annual and lifetime psychiatric maximum payment
limits for individual patients, which will result in the Company not
collecting full charges on an increasing number of patients.
Depreciation and amortization increased $1,972,000, or 7% to $28,354,000
in fiscal 1994. The increase resulted primarily from depreciation of the
Acquired Hospitals, $1,133,000, and the amortization of the related covenant
not to compete and goodwill purchased during fiscal 1994.
Reorganization value in excess of amounts allocable to identifiable
assets (the "Excess Reorganization Value") is being amortized over the
three-year period ending July 1995. During fiscal 1993, Excess Reorganization
Value was reduced by approximately $21 million to reflect the recognition of
tax benefits related to pre-Reorganization tax loss carryforwards and
accordingly, amortization expense for the Excess Reorganization Value
decreased $11,478,000, or 27%, to $31,200,000 in fiscal 1994 from $42,678,000
in fiscal 1993.
Net interest expense for fiscal 1994 decreased 47% from the previous
fiscal year due to the debt reductions resulting from the sale of the general
hospitals on September 30, 1993, mandatory and voluntary prepayments and
scheduled payments in fiscal 1993 and fiscal 1994. Interest expense during
the fourth quarter of fiscal 1994 increased over the first three quarters due
to the issuance of the Notes and to borrowings under the Revolving Credit
Agreement used in the Acquisition.
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<PAGE>
<PAGE>
Interest expense was significantly reduced by the consummation of the
Plan and as a result of the payments on debt made with proceeds from the sale
of the general hospitals. Interest expense for fiscal 1995 will increase due
to borrowings under the Revolving Credit Agreement and the issuance of the
Notes in connection with the Acquisition.
ESOP expense for fiscal 1994 increased $3,323,000, or 7%, to $49,197,000
from $45,874,000 for fiscal 1993. These increases resulted primarily from
changes in eligibility requirements, which increased the number of employees
who participate in the ESOP.
Stock option expense for fiscal 1994 decreased from the previous year due
to a one-time charge during the second quarter of fiscal 1993 of $21.3 million
related to the vesting of certain options held by a former employee and
director. Under the terms of the 1992 Stock Option Plan (on March 4, 1993),
upon the satisfaction of certain financial targets and the termination of
employment, all of the employee's options vested immediately and the option
prices were reduced to $.25 per share. Prior to March 4, 1993, such options
were accounted for as a variable stock option plan because the option price
was not determinable at the date of grant. Subsequent to March 4, 1993, the
options were accounted for as a fixed plan because both the number of shares
to be issued and the option price were known. Accordingly, on March 4, 1993,
the Company recognized $21.3 million of stock option expense. On December 3
and December 29, 1993, all of the options under the 1992 Stock Option Plan
were exercised by the former employee. On December 3, 1993, 326,000 options
were exercised and the option exercise price was paid by reducing the number
of shares issuable by the number of shares having a fair market value equal to
the option exercise price (3,326 shares). An exercise in this manner triggers
a new measurement date for the options exercised and, since the stock price
had increased since March 4, 1993, additional compensation expense of $3.9
million was recognized in December 1993. The option exercise price for the
1,894,336 options exercised on December 29, 1993, was paid in cash;
accordingly, no additional compensation expense was triggered. For both of
the exercises, the former employee elected to surrender optioned shares
(approximately 570,000 shares) as consideration for the payment of required
withholding taxes of approximately $14.2 million. These withholdings
represent the minimum required tax withholding amounts required in order to
avoid triggering a new measurement date and additional compensation expense.
The Company was required to make withholding tax payments on behalf of the
former employee of approximately $14.2 million which was charged against
additional paid-in capital. This charge was offset by a tax benefit recorded
of approximately $9.4 million related to additional stock option expense
allowable for income tax purposes. The remaining decrease in stock option
expense for fiscal 1994 was due to fluctuations in the market price of the
Company's common stock.
During fiscal 1994 the Company recorded unusual items of approximately
$71.3 million. Included in the unusual charges was the resolution in November
1994 between the Company and a group of insurance carriers of disputes that
arose in the fourth quarter related to claims paid predominantly in the
1980's. As part of the resolution, the Company will pay the insurance
carriers approximately $31 million plus interest, for a total of $37.5 million
in four installments over a three year period. The Company and the insurance
carriers will continue to do business at the same or similar general levels.
Furthermore, the parties will seek additional business opportunities that will
serve to enhance their present relationships.
II-10
<PAGE>
<PAGE>
As a result of the Acquisition, the Company reassessed its business
strategy in certain markets. The Company plans to consolidate services in
selected markets and close or sell certain facilities owned prior to the
Acquisition. Accordingly, the Company recorded a charge of $23 million in the
fourth quarter of 1994 to write down the assets of those facilities to their
net realizable value. Also recorded as an unusual charge during fiscal 1994
were expenses related to the relocation of the Company's executive offices.
As of September 30, 1994, the Company had estimated tax net operating
loss (NOL) carryforwards of approximately $247 million available to reduce
future federal taxable income. These NOL carryforwards expire in 2006 through
2009 and are subject to examination by the Internal Revenue Service. Due to
the ownership change which occurred as a result of the Reorganization, the
Company's utilization of NOLs generated prior to the consummation of the
Reorganization is significantly limited. The Internal Revenue Service is
currently examining the Company's income tax returns for fiscal 1989 through
1993. Adjustments arising from such examination could reduce or eliminate the
NOL carryforwards. In Management's opinion adequate provisions have been made
for any adjustments which may result from such examinations.
During fiscal 1994 the Company recorded an extraordinary loss of
approximately $12.6 million (net of income tax benefit of approximately $8.4
million) related to the defeasance of the Company's 7.5% Senior Subordinated
Debentures due 2003 and the pay-off of certain subsidiary mortgages. The
extraordinary loss includes the difference between the redemption price and
the carrying value of the debentures and prepayment penalties related to the
subsidiary mortgages.
Fiscal 1992 Compared to Fiscal 1993. The Company had 1,358,857 patient
days in fiscal 1993, a decrease of 37,104, or 3%, from 1,395,961 in fiscal
1992. The decrease in patient days occurred despite an increase of 6,939, or
9%, in admissions from 79,128 in fiscal 1992 to 86,067 in fiscal 1993. The
decline in average length of stay from 17.8 days to 15.7 days was caused by
stringent criteria regarding inpatient treatment by payors and changes in
program mix.
The Company's net revenue decreased $22,798,000, or 2%, from $920,705,000
in fiscal 1992 to $897,907,000 in fiscal 1993. Of this decline, $14,325,000
resulted from the disposal of hospitals in fiscal 1992, and $814,000 was
related to non-psychiatric operations. Net revenue at the "same store" core
hospitals in operation at September 30, 1993 decreased to $843,842,000 in
fiscal 1993 as compared to $851,501,000 for fiscal 1992, a decrease of
$7,659,000, or 1%. Net revenue per equivalent patient day also decreased 1% in
fiscal 1993 from $579 in fiscal 1992 to $576 in fiscal 1993. The decreases
were primarily the result of an increase in the percentage of business the
Company derived from Medicare and Medicaid patients during fiscal 1993.
Services to Medicare and Medicaid patients have increased due to increased
recognition and treatment of the behavioral illnesses of the elderly and
disabled and, in some states, improved coverage of behavioral services in
psychiatric hospitals for Medicaid beneficiaries. The Company believes that,
at the same time, revenue from Blue Cross and commercial insurance payors has
declined because of a shift by purchasers of health coverage to HMOs and
PPOs. Net revenue in 1993 includes approximately $8 million over the prior
year from the normal settlement of reimbursement issues. In fiscal 1993, gross
outpatient revenue increased 53% to $100,376,000 from $65,686,000 in fiscal
1992.
II-11
<PAGE>
<PAGE>
Following is a discussion of changes in operating expenses for fiscal
1992 compared to fiscal 1993.
The Company's salaries, general and administrative expenses declined from
$671,208,000 in fiscal 1992 to $640,847,000 in fiscal 1993, a decrease of
$30,361,000, or approximately 5%. The decrease in fiscal 1993 resulted
primarily from reductions in salaries and benefits and purchased services and
the sale of two facilities during the year. The reductions in salaries and
benefits and purchased services were the result of the Company's continued
focus on controlling its variable costs including a decrease in the number of
employees and reduced fees for professional services.
The Company's bad debt expense increased $2,093,000, or 3%, from
$65,207,000 in fiscal 1992 to $67,300,000 in fiscal 1993. Bad debt expenses as
a percentage of net revenue were 7.5% for fiscal 1993.
Depreciation and amortization expense decreased $12,375,000, or 32%, in
fiscal 1993 from $38,757,000 in fiscal 1992 to $26,382,000 in fiscal 1993 due
to the writedown of depreciable property and equipment and the write-off of
deferred charges which occurred upon consummation of the Restructuring and the
implementation of fresh start accounting.
Net interest expense decreased $107,778,000, or 59%, in fiscal 1993 to
$74,156,000 as compared to $181,934,000 in fiscal 1992 due to the reduction of
debt upon consummation of the Reorganization and the significant debt
reductions which occurred since consummation of the Restructuring.
ESOP expense for fiscal 1993 increased $7,349,000, or 19% to $45,874,000
as compared to $38,525,000 for fiscal 1992 due primarily to increased
contributions to the ESOP, which were required as a result of larger debt
service requirements in fiscal 1993. Also, the ESOP plan was amended to permit
broader participation in the plan which increased the number of employees
eligible to receive an ESOP contribution in calendar 1993.
Upon consummation of the Reorganization, the Company implemented the 1992
Stock Option Plan. A former employee and director of the Company was granted
options under the 1992 Stock Option Plan to purchase approximately 2.2 million
shares at exercise prices of either $4.36 per share or $9.60 per share. On
March 4, 1993, all of the options issued to the former employee and director
vested and the option prices were reduced to $.25 per share, which resulted in
the Company recognizing approximately $21.3 million in additional stock option
expense during the second quarter of fiscal 1993. The remaining expenses
related to the 1992 Stock Option Plan were due to increases in the market
price of the underlying Common Stock and the impact of additional shares
vesting in fiscal 1993.
The Company's tax provision in fiscal 1993 resulted primarily from the
fact that the amortization of reorganization value in excess of amounts
allocable to identifiable assets is not deductible for tax purposes.
The consolidated statements of operations for the year ended
September 30, 1993 include extraordinary after-tax losses of $8,561,000 on
early extinguishment of debt which includes fees incurred upon the retirement
of the Company's Senior Secured Notes, certain debt under the credit
agreement, mortgages on the general hospitals and the write-off of the
unamortized discount or premium remaining on certain debt.
II-12
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<PAGE>
See "Business -- Competition," "-- Sources of Revenues," "-- Regulation
and Other Factors," "-- Medical Staffs and Employees," "-- Industry Trends,"
and "-- Liability Insurance" for additional information on trends that may
affect operations.
Liquidity and Sources of Capital
Operational Activities. Management believes that the Company will have
adequate cash flow from operations to fund its operations, capital
expenditures and debt service obligations over the next year. The Company had
working capital deficiencies at September 30, 1992 and 1993 due primarily to
the retention of liabilities for cost report settlements for the general
hospitals sold on September 30, 1993, and $19.5 million and $13.9 million of
long-term debt classified as current at September 30, 1992 and 1993,
respectively, resulting from mandatory payments made in October 1992 and 1993.
Although the Acquired Hospitals have historically provided a negative
cash flow (approximately $4.3 million for the year ended May 31, 1994), the
Company believes that improved operating management along with reductions in
overhead and intercompany allocations will allow the Acquired Hospitals to
provide adequate cash flow to fund their operations.
The number of days of net patient revenue in net patient accounts
receivable was 65 days at September 30, 1994 and 61 days at September 30, 1993.
Investing Activities. During fiscal 1993 and fiscal 1994, the Company
incurred approximately $11 million and $15 million, respectively, in capital
expenditures, primarily for routine capital replacement. During fiscal 1994,
the Company also incurred expenditures of approximately $127 million in
connection with the Acquisition and approximately $3 million for the
acquisitions of businesses related to the implementation of the Company's new
growth and expansion strategy. The capital outlays were financed from
borrowings under the Revolving Credit Agreement, proceeds from the issuance of
the Notes and from cash provided by operations.
Future cash flows provided by investing activities will be reduced by the
amount of cash previously provided by the discontinued operations which was
approximately $42.5 million in fiscal year 1993. However, the sale of the
general hospitals allowed the Company to reduce its debt and save
approximately $32.3 million in annual interest expense. The Company believes
the sale of the general hospitals will not have a material adverse effect on
the financial position, results of operation or liquidity of the Company.
Financing Activities. On May 2, 1994, the Company entered into the
Revolving Credit Agreement and issued the 11.25% Senior Subordinated Notes
(the "Notes"). The net proceeds from the sale of the Notes, together with
borrowings pursuant to the Revolving Credit Agreement, were used to refinance
the indebtedness outstanding pursuant to the Company's previous credit
agreement, to retire the 7 1/2% Senior Subordinated Debentures, to refinance
certain existing mortgage indebtedness of certain of the subsidiaries of the
Company and to finance the Acquisition and to pay related transaction
expenses. Commitments under the Revolving Credit Agreement will automatically
be reduced by $24.5 million on March 31, 1996, $49.1 million each on March 31,
1997 and 1998 and $175 million on March 31, 1999. The Company believes that
its hospitals, including the Acquired Hospitals, will generate sufficient cash
flows from operations to meet its debt service requirements. The Notes mature
II-13
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<PAGE>
on April 15, 2004. Interest on the Notes is payable each April 15 and
October 15, commencing on October 15, 1994.
The Company obtained increased operational and financial flexibility as a
result of entering into the Revolving Credit Agreement and issuing the Notes
because the covenants contained in the Revolving Credit Agreement and the
indenture for the Notes are less restrictive than those formerly in effect.
However, the Revolving Credit Agreement and the indenture for the Notes
contain a number of restrictive covenants, which, among other things, limit
the ability of the Company to incur other indebtedness, engage in transactions
with affiliates, incur liens, make certain restricted payments, and enter into
certain business combination and asset sale transactions. The Revolving Credit
Agreement also limits the Company's ability to incur capital expenditures and
requires the Company to maintain certain specified financial ratios. A failure
by the Company to maintain such financial ratios or to comply with the
restrictions contained in the Revolving Credit Agreement, the indenture for
the Notes or other agreements relating to the Company's debt could cause such
indebtedness (and by reason of cross-acceleration provisions, other
indebtedness) to become immediately due and payable.
Item 8. Financial Statements and Supplementary Data
Information with respect to this Item is contained in the Company's
consolidated financial statements and financial statement schedules indicated
in the Index on Page F-1 of this Annual Report on Form 10-K and is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
II-14
<PAGE>
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the Company's executive officers is contained
under "Item 1. Business - Executive Officers of the Registrant." Pursuant to
General Instruction G(3) to Form 10-K, the information required by this item
with respect to directors has been omitted inasmuch as the Company files with
the Securities and Exchange Commission a definitive proxy statement not later
than 120 days subsequent to the end of its fiscal year. Such information is
incorporated herein by reference.
Item 11. Executive Compensation
Pursuant to General Instruction G(3) to Form 10-K, the information
required with respect to this item has been omitted inasmuch as the Company
files with the Securities and Exchange Commission a definitive proxy statement
not later than 120 days subsequent to the end of its fiscal year. Such
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Pursuant to General Instruction G(3) to Form 10-K, the information
required with respect to this item has been omitted inasmuch as the Company
files with the Securities and Exchange Commission a definitive proxy statement
not later than 120 days subsequent to the end of its fiscal year. Such
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Pursuant to General Instruction G(3) to Form 10-K, the information
required with respect to this item has been omitted inasmuch as the Company
files with the Securities and Exchange Commission a definitive proxy statement
not later than 120 days subsequent to the end of its fiscal year. Such
information is incorporated herein by reference.
III-1
<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of the Report:
1. Financial Statements
Information with respect to this item is contained on Pages F-2 to
F-32 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
Information with respect to this item is contained on pages S-1 to
S-4 of this Annual Report on Form 10-K.
3. Exhibits
Exhibit
No. Description of Exhibit
2(a) - Asset Sale Agreement (First Facilities), dated March 29, 1994,
between National Medical Enterprises, Inc., as Seller, and the
Company, as Buyer, which was filed as Exhibit 2(d) to the
Company's Amendment No. 1 to Registration Statement on Form S-4
(No. 33-53701) filed July 1, 1994, and is incorporated herein
by reference.
2(b) - Asset Sale Agreement (Subsequent Facilities), dated March 29,
1994, between National Medical Enterprises, Inc., as Seller,
and the Company, as Buyer, which was filed as Exhibit 2(e) to
the Company's Amendment No. 1 to Registration Statement on Form
S-4 (No. 33-53701) filed July 1, 1994, and is incorporated
herein by reference.
Exhibit 2(a) and 2(b) do not contain copies of the
exhibits and schedules to such agreements. Such agreement
describe such exhibits and schedules. The Company agrees
to furnish supplementally to the Commission, upon request,
a copy of any omitted exhibit or schedule to such
agreements.
2(c) - Amendment No. 1, dated September 12, 1994, to Asset Sale
Agreement (First Facilities), dated March 29, 1994, between
National Medical Enterprises, Inc., as Seller and the Company,
as Buyer.
2(d) - Amendment No. 1, dated September 12, 1994, to Asset Sale
Agreement (Subsequent Facilities), dated March 29, 1994,
between National Medical Enterprises, Inc., as Seller and the
Company, as Buyer.
2(e) - Amendment No. 2, dated September 29, 1994, to Asset Sale
Agreement (Subsequent Facilities), dated March 29, 1994,
between National Medical Enterprises, Inc., as Seller and the
Company, as Buyer.
2(f) - Amendment No. 3, dated November 15, 1994, to Asset Sale
Agreement (Subsequent Facilities), dated March 29, 1994,
between National Medical Enterprises, Inc., as Seller and the
Company, as Buyer.
IV-1
<PAGE>
<PAGE>
Exhibit
No. Description of Exhibit
2(g) - Incorporation, Conveyance and Stock Purchase Agreement, dated
August 16, 1993, among Quorum, Inc., the Company and certain
subsidiaries which was filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated as of September 30, 1993, and
which is incorporated herein by reference.
3(a) - Restated Certificate of Incorporation of the Company, as filed
in Delaware on October 16, 1992, which was filed as Exhibit
3(a) to the Company's Annual Report on Form 10-K for the year
ended September 30, 1992, and is incorporated herein by
reference.
3(b) - Bylaws of the Company, as amended, effective July 21, 1994.
4(a) - Indenture, dated as of May 2, 1994, among the Company, the
Guarantors listed therein and Marine Midland Bank, as Trustee,
relating to the 11.25% Senior Subordinated Notes due April 15,
2004 of the Company, which was filed as Exhibit 4(a) to the
Company's Registration Statement on Form S-4 (No. 33-53701)
filed May 18, 1994, and is incorporated herein by reference.
4(b) - Second Amended and Restated Credit Agreement, dated as of
May 2, 1994, among the Company, the financial institutions
listed therein, Bankers Trust Company, as Agent, and First
Union National Bank of North Carolina, as Co-Agent, which was
filed as Exhibit 4(e) to the Company's Registration Statement
on Form S-4 (No. 33-53701) filed May 18, 1994, and is
incorporated herein by reference.
4(c) - Second Amended and Restated Subsidiary Credit Agreement, dated
as of May 2, 1994, among certain subsidiaries of the Company,
the financial institutions listed therein, Bankers Trust
Company, as Agent, and First Union National Bank of North
Carolina, as Co-Agent, which was filed as Exhibit 4(f) to the
Company's Registration Statement on Form S-4 (No. 33-53701)
filed May 18, 1994, and is incorporated herein by reference.
4(d) - Second Amended and Restated Company Stock and Notes Pledge
Agreement, dated as of May 2, 1994, between the Company and
Bankers Trust Company, as Collateral Agent, which was filed as
Exhibit 4(g) to the Company's Registration Statement on Form
S-4 (No. 33-53701) filed May 18, 1994, and is incorporated
herein by reference.
4(e) - Second Amended and Restated Subsidiary Stock and Notes Pledge
Agreement, dated as of May 2, 1994, among various subsidiaries
of the Company and Bankers Trust Company, as Collateral Agent,
which was filed as Exhibit 4(h) to the Company's Registration
Statement on Form S-4 (No. 33-53701) filed May 18, 1994, and is
incorporated herein by reference.
4(f) - Second Amended and Restated Subsidiary Pledge and Security
Agreement, dated as of May 2, 1994, among various subsidiaries
of the Company and Bankers Trust Company, as Collateral Agent,
which was filed as Exhibit 4(i) to the Company's Registration
Statement on Form S-4 (No. 33-53701) filed May 18, 1994, and is
incorporated herein by reference.
4(g) - Second Amended and Restated Subsidiary Pledge and Security
Agreement (ESOP collateral), dated as of May 2, 1994, between
the Company and Bankers Trust Company, as Collateral Agent,
which was filed as Exhibit 4(j) to the Company's Registration
Statement on Form S-4 (No. 33-53701) filed May 18, 1994, and is
incorporated herein by reference.
IV-2
<PAGE>
<PAGE>
Exhibit
No. Description of Exhibit
4(h) - Second Amended and Restated FINCO Pledge and Security Agreement
I, dated as of May 2, 1994, between CMFC, Inc. and Bankers
Trust Company, as Collateral Agent, which was filed as Exhibit
4(k) to the Company's Registration Statement on Form S-4 (No.
33-53701) filed May 18, 1994, and is incorporated herein by
reference.
4(i) - Second Amended and Restated Subsidiary Guaranty, dated as of
May 2, 1994, executed by various subsidiaries of the Company,
which was filed as Exhibit 4(l) to the Company's Registration
Statement on Form S-4 (No. 33-53701) filed May 18, 1994, and is
incorporated herein by reference.
4(j) - Second Amended and Restated Company Collateral Accounts
Assignment Agreement, dated as of May 2, 1994, between the
Company and Bankers Trust Company, as agent, which was filed as
Exhibit 4(m) to the Company's Registration Statement on Form
S-4 (No. 33-53701) filed May 18, 1994, and is incorporated
herein by reference.
4(k) - Company Pledge and Security Agreement, dated as of May 2, 1994,
between the Company and Bankers Trust Company, as Collateral
Agent, which was filed as Exhibit 4(n) to the Company's
Registration Statement on Form S-4 (No. 33-53701) filed May 18,
1994, and is incorporated herein by reference.
4(l) - Second Amended and Restated FINCO Pledge and Security Agreement
II, dated as of May 2, 1994, between CMCI, Inc. and Bankers
Trust Company, as Collateral Agent, which was filed as Exhibit
4(o) to the Company's Registration Statement on Form S-4 (No.
33-53701) filed May 18, 1994, and is incorporated herein by
reference.
4(m) - Second Amended and Restated Company Guaranty, dated as of
May 2, 1994, executed by the Company, which was filed as
Exhibit 4(p) to the Company's Registration Statement on Form
S-4 (No. 33-53701) filed May 18, 1994, and is incorporated
herein by reference.
4(n) - Second Amended and Restated Subsidiary Collateral Accounts
Assignment Agreement, dated as of May 2, 1994, among various
subsidiaries of the Company and Bankers Trust Company, as
Agent, which was filed as Exhibit 4(q) to the Company's
Registration Statement on Form S-4 (No. 33-53701) filed May 18,
1994, and is incorporated herein by reference.
4(o) - Form of Indenture of Mortgage, Deed to Secure Debt, Deed of
Trust, Security Agreement and Assignment of Leases and Rents;
Amended Indenture of Mortgage, Deed to Secure Debt, Deed of
Trust, Security Agreement and Assignment of Leases and Rents;
and Consolidated Agreement, executed as of May 2, 1994, by 71
subsidiaires of the Company and Bankers Trust Company, as
Agent, and various trustees as shown on individual subsidiary
cover pages attached, which was filed as Exhibit 4(t) to the
Company's Registration Statement on Form S-4 (No. 33-53701)
filed May 18, 1994, and is incorporated herein by reference.
4(p) - Purchase Agreement, dated April 22, 1994, between the Company
and Bear, Stearns & Co. Inc. and BT Securities Corporation,
which was filed as Exhibit 4(u) to the Company's Registration
Statement on Form S-4 (No. 33-53701) filed May 18, 1994, and is
incorporated herein by reference.
IV-3
<PAGE>
<PAGE>
Exhibit
No. Description of Exhibit
4(q) - Exchange and Registration Rights Agreement, dated April 22,
1994 between the Company and Bear, Stearns & Co. Inc. and BT
Securities Corporation, which was filed as Exhibit 4(v) to the
Company's Registration Statement on Form S-4 (No. 33-53701)
filed May 18, 1994, and is incorporated herein by reference.
4(r) - Amendment No. 1, dated as of June 9, 1994, to Second Amended
and Restated Credit Agreement, dated as of May 2, 1994, among
the Company, the financial institutions listed therein, Bankers
Trust Company, as Agent, and First Union National Bank of North
Carolina, as Co-Agent, which was filed as Exhibit 4(w) to the
Company's Amendment No. 1 to Registration Statement on Form S-4
(No. 33-53701) filed July 1, 1994, and is incorporated herein
by reference.
4(s) - Amendment No. 2, dated September 30, 1994, to Second Amended
and Restated Credit Agreement, dated as of May 2, 1994, among
the Company, the financial institutions listed therein, Bankers
Trust Company, as Agent, and First Union National Bank of North
Carolina, as Co-Agent.
4(t) - Indenture Supplement No. 1, dated June 3, 1994, among the
Company, the Guarantors listed therein and Marine Midland Bank,
as Trustee, relating to the 11.25% Senior Subordinated Notes
due April 15, 2004, together with a schedule identifying
substantially similar documents, pursuant to Instruction 2 to
Item 601 of Regulation S-K.
4(u) - Indenture Supplement No. 3, dated August 30, 1994, among the
Company, the Guarantors listed therein and Marine Midland Bank,
as Trustee, relating to the 11.25% Senior Subordinated Notes
due April 15, 2004.
The Company and the Additional Registrants agree, pursuant
to (b)(4)(iii) of Item 601 of Regulation S-K, to furnish
to the Commission, upon request, a copy of each agreement
relating to long-term debt where the total amount of debt
under each such agreement does not exceed 10% of the
Registrants' respective total assets on a consolidated
basis.
10(a) - Written description of Corporate Annual Incentive Plan for the
year ended September 30, 1994.
10(b) - 1989 Non-Qualified Deferred Compensation Plan of the Company,
adopted January 1, 1989, as amended, which was filed as Exhibit
10(f) to the Company's Annual Report on Form 10-K dated as of
September 30, 1989 and is incorporated herein by reference.
10(c) - 1992 Stock Option Plan of the Company, as amended.
10(d) - Directors' Stock Option Plan of the Company, as amended.
10(e) - 1994 Stock Option Plan of the Company, as amended.
10(f) - Directors' Unit Award Plan of the Company, which was filed as
Exhibit 10(i) to the Company's Registration Statement on Form
S-4 (No. 33-53701) filed May 18, 1994, and is incorporated
herein by reference.
10(g) - Description of Flexible Benefits Plan.
IV-4
<PAGE>
<PAGE>
Exhibit
No. Description of Exhibit
10(h) - Employment Agreement, dated July 21, 1992, between the Company
and William A. Fickling, Jr., Chairman of the Board of
Directors and Chief Executive Officer of the Company which was
filed as Exhibit 10(e) the Company's Annual Report on Form 10-K
dated September 30, 1992 and is incorporated herein by
reference.
10(i) - Employment Agreement, dated July 21, 1992, between the Company
and E. Mac Crawford, Director, President and Chief Operating
Officer of the Company which was filed as Exhibit 10(f) the
Company's Annual Report on Form 10-K dated September 30, 1992
and is incorporated herein by reference.
10(j) - Employment Agreement, dated July 21, 1992, between the Company
and Lawrence W. Drinkard, Director and Senior Vice President -
Finance (principal financial officer) of the Company which was
filed as Exhibit 10(g) the Company's Annual Report on Form 10-K
dated September 30, 1992 and is incorporated herein by
reference.
21 - List of subsidiaries of the Company.
23 - Consent of independent public accountants.
27 - Financial Data Schedules
(b) Reports on Form 8-K:
On September 20, 1994, the Company filed a Form 8-K/A (Amendment No. 2)
dated June 30, 1994 disclosing the acquisition of substantially all the
assets of 18 psychiatric hospitals, seven chemical-dependency treatment
facilities, one residential treatment facility and one physician
outpatient practice from National Medical Enterprises, Inc., a Nevada
corporation, for a purchase price of approximately $88.7 million in cash,
plus $2 million in cash for a covenant not to compete, plus an additional
amount of cash equal to the net working capital of the facilities
acquired, amounting to approximately $38.4 million.
(c) Exhibits Required by Item 601 of Regulation S-K:
Exhibits required to be filed by the Company pursuant to Item 601 of
Regulation S-K are contained in a separate volume.
(d) Financial Statement Schedules Required By Regulation S-X:
Separate financial statements and schedules of Charter Medical
Corporation (Parent Company) have been omitted since the restricted net
assets as defined by Rule 4-08(e)(3) of Regulation S-X of the Parent
Company's consolidated subsidiaries do not exceed 25% of the consolidated
net assets of the Company as of September 30, 1994.
IV-5
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
CHARTER MEDICAL CORPORATION
(Registrant)
Date: December 13, 1994 /s/ Lawrence W. Drinkard
Lawrence W. Drinkard
Executive Vice President and
Chief Financial Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ E. Mac Crawford Chairman of the Board of December 13, 1994
E. Mac Crawford Directors, President and
Chief Executive Officer
/s/ John R. Day Vice President-Controller December 13, 1994
John R. Day
/s/ Edwin M. Banks Director December 13, 1994
Edwin M. Banks
/s/ Andre C. Dimitriadis Director December 13, 1994
Andre C. Dimitriadis
/s/ Raymond H. Kiefer Director December 13, 1994
Raymond H. Kiefer
/s/ Gerald L. McManis Director December 13, 1994
Gerald L. McManis
IV-6
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
The following consolidated financial statements of the Registrant and its
subsidiaries are submitted herewith in response to Item 8 and Item 14(a)1:
Page
Charter Medical Corporation:
Report of independent public accountants....................... F-2
Consolidated balance sheets as of September 30, 1993
and 1994...................................................... F-3
Consolidated statements of operations for the ten months
ended July 31, 1992, the two months ended September 30,
1992 and the years ended September 30, 1993 and 1994.......... F-5
Consolidated statements of changes in stockholders'
equity for the ten months ended July 31, 1992,
the two months ended September 30, 1992 and the years ended
September 30, 1993 and 1994................................... F-6
Consolidated statements of cash flows for the ten months
ended July 31, 1992, the two months ended September 30,
1992, and the years ended September 30, 1993 and 1994......... F-7
Notes to consolidated financial statements..................... F-8
The following financial statement schedules of the Registrant and its
subsidiaries are submitted herewith in response to Item 14(a)2:
Page
Schedule V -- Property and Equipment....................... S-1
Schedule VI -- Accumulated depreciation, depletion and
amortization of property and equipment....... S-2
Schedule VIII -- Valuation and qualifying accounts............ S-3
Schedule X -- Supplemental income statement information.... S-4
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore,
have been omitted.
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Charter Medical Corporation:
We have audited the accompanying consolidated balance sheets of Charter
Medical Corporation (a Delaware Corporation) and subsidiaries as of
September 30, 1993 and 1994, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the ten months
ended July 31, 1992, the two months ended September 30, 1992 and the years
ended September 30, 1993 and 1994. These financial statements and the
schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Charter Medical
Corporation and subsidiaries as of September 30, 1993 and 1994, and the
results of their operations and their cash flows for the ten months ended July
31, 1992, the two months ended September 30, 1992 and the years ended
September 30, 1993 and 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 3, the Company's reorganization plan was
confirmed by the U.S. Bankruptcy Court on July 8, 1992 and became effective on
July 21, 1992 (effective on July 31, 1992 for financial reporting purposes).
In accordance with Statement of Position No. 90-7 of the American Institute of
Certified Public Accountants, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," the Company was required to account
for the reorganization using fresh start reporting. Accordingly, all
consolidated financial statements prior to July 31, 1992 are not comparable to
the consolidated financial statements for periods after the implementation of
fresh start reporting.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 2, 1994
F-2
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<TABLE>
<CAPTION>
September 30,
1993 1994
<S> <C> <C>
Current Assets
Cash, including cash equivalents
of $60,242 in 1993 and $68,237
in 1994, at cost which approximates
market.................................... $ 86,002 $ 129,603
Accounts receivable, less allowance
for doubtful accounts of $28,843 in
1993 and $43,555 in 1994.................. 119,638 170,295
Supplies................................... 5,051 6,097
Other current assets....................... 21,224 18,632
Total Current Assets................... 231,915 324,627
Assets Restricted for Settlement
of Unpaid Claims............................ 81,608 74,532
Property and Equipment
Land....................................... 95,886 96,373
Buildings and improvements................. 310,649 360,586
Equipment.................................. 67,421 92,044
473,956 549,003
Accumulated depreciation................... (30,098) (56,967)
443,858 492,036
Construction in progress................... 928 2,309
444,786 494,345
Other Long-Term Assets....................... 22,676 14,355
Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets............ 57,201 26,001
Other Intangible Assets...................... -- 27,620
________ ________
$838,186 $961,480
</TABLE>
F-3
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30,
1993 1994
<S> <C> <C>
Current Liabilities
Accounts payable........................... $ 52,264 $ 50,745
Accrued salaries and wages................. 28,298 29,110
Other accrued liabilities.................. 109,600 129,791
Current income taxes payable............... 11,479 2,749
Current maturities of long-term debt and
capital lease obligations................. 70,957 2,653
Total Current Liabilities............. 272,598 215,048
Long-Term Debt and Capital Lease
Obligations................................. 350,205 533,476
Deferred Income Tax Liabilities.............. 38,789 12,380
Reserve for Unpaid Claims.................... 99,675 100,250
Deferred Credits and Other
Long-Term Liabilities....................... 19,621 44,105
Stockholders' Equity
Preferred Stock, without par value
Authorized - 10,000,000 shares
Issued and outstanding - none............ -- --
Common Stock, par value $0.25
per share
Authorized - 80,000,000 shares
Issued and outstanding - 25,001,042
shares in 1993 and 26,899,471
shares in 1994.......................... 6,250 6,725
Other Stockholders' Equity
Additional paid-in capital............... 237,581 244,339
Accumulated deficit...................... (59,423) (119,042)
Unearned compensation under ESOP......... (122,724) (73,527)
Warrants outstanding..................... 274 180
Cumulative foreign currency
adjustments............................. (4,660) (2,454)
57,298 56,221
Commitments and Contingencies
________ ________
$838,186 $961,480
The accompanying Notes to Consolidated Financial Statements are an integral
part of these balance sheets.
</TABLE>
F-4
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Net revenue................................. $ 777,855 : $ 142,850 $ 897,907 $ 904,646
:
Costs and expenses :
Salaries, general and administrative :
expenses................................. 563,600 : 107,608 640,847 661,516
Bad debt expense.......................... 50,403 : 14,804 67,300 70,623
Depreciation and amortization............. 35,126 : 3,631 26,382 28,354
Amortization of reorganization value in :
excess of amounts allocable to identifi- :
able assets.............................. -- : 7,167 42,678 31,200
Interest, net............................. 169,244 : 12,690 74,156 39,394
ESOP expense.............................. 33,714 : 4,811 45,874 49,197
Stock option expense (credit)............. -- : (789) 38,416 10,614
Unusual items............................. -- : -- -- 71,287
Deferred compensation expense............. 3,190 : -- -- --
855,277 : 149,922 935,653 962,185
Loss from continuing operations before :
income taxes, reorganization items :
and extraordinary item..................... (77,422) : (7,072) (37,746) (57,539)
Provision for (Benefit from) income taxes... 4,259 : 1,054 1,874 (10,536)
Loss from continuing operations before :
reorganization items and extraordinary :
item....................................... (81,681) : (8,126) (39,620) (47,003)
Discontinued operations: :
Income (Loss) from discontinued :
operations(1)........................... 24,211 : 930 (14,703) --
Gain on disposal of discontinued :
operations (net of income tax provision :
of $42,838).............................. -- : -- 10,657 --
Loss before reorganization items and :
extraordinary item......................... (57,470) : (7,196) (43,666) (47,003)
Reorganization items: :
Professional fees and other expenses...... (8,156) : -- -- --
Adjust accounts to fair value............. 83,004 : -- -- --
Extraordinary item - gain (loss) on early :
extinguishment or discharge of debt (net :
of income tax benefit of $5,298 :
in 1993 and $8,410 in 1994)................ 730,589 : -- (8,561) (12,616)
:
Net income (loss)........................... $ 747,967 : $ (7,196) $ (52,227) $ (59,619)
Average number of common shares :
outstanding(2)............................. -- : 24,828 24,875 26,394
Earnings (Loss) per common share(2): :
Loss from continuing operations before :
extraordinary item....................... -- : $(.33) $(1.59) $(1.78)
Income (Loss) from discontinued :
operations and gain on disposal of :
discontinued operations.................. -- : .04 (.16) --
Loss before extraordinary item............ -- : (.29) (1.75) (1.78)
Extraordinary loss on early extinguish- :
ment of debt............................. -- : -- (.35) (.48)
Net loss.................................. -- : $(.29) $(2.10) $(2.26)
__________________
<FN>
(1) Net of income tax provisions of $79, $122 and $10,708 in the ten months
ended July 31, 1992, the two months ended September 30, 1992 and fiscal
1993, respectively.
(2) Share and per share amounts for the period ended July 31, 1992 has not
been presented because it is not meaningful due to the implementation of
fresh start accounting and the substantial change in the number of shares
outstanding subsequent to the consummation of the Plan.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
F-5
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Common Stock:
Balance, beginning of period............. $ -- : $ 6,207 $ 6,207 $ 6,250
Exercise of options and warrants......... -- : -- 43 475
Consummation of the Restructuring........ 6,207 : -- -- --
Balance, end of period................... 6,207 : 6,207 6,250 6,725
:
Class B Common Stock: :
Balance, beginning of period............. 3,537 : -- -- --
Consummation of the Restructuring........ (3,537) : -- -- --
Balance, end of period................... -- : -- -- --
:
Additional Paid-in Capital: :
Balance, beginning of period............. 39,891 : 199,412 198,623 237,581
Deferred compensation and stock option :
expense (credit)........................ 3,190 : (789) 38,416 10,614
Exercise of options and warrants......... -- : -- 542 (3,856)
Consummation of the Restructuring........ 364,888 : -- -- --
Adjust accounts to fair value............ 3,993 : -- -- --
Fresh start equity reclassifications..... (212,550) : -- -- --
Balance, end of period................... 199,412 : 198,623 237,581 244,339
:
Accumulated Deficit: :
Balance, beginning of period............. (945,222) : -- (7,196) (59,423)
Net income (loss)........................ 747,967 : (7,196) (52,227) (59,619)
Fresh start equity reclassifications..... 215,479 : -- -- --
Cumulative redeemable preferred stock :
dividend requirements................... (18,224) : -- -- --
Balance, end of period................... -- : (7,196) (59,423) (119,042)
:
Unearned Compensation under ESOP: :
Balance, beginning of period............. (240,461) : (193,990) (187,128) (122,724)
ESOP expense............................. 33,714 : 4,811 45,874 49,197
ESOP expense of discontinued operations.. 12,757 : 2,051 18,530 --
Balance, end of period................... (193,990) : (187,128) (122,724) (73,527)
:
Warrants Outstanding: :
Balance, beginning of period............. 3,993 : 283 283 274
Exercise of warrants..................... -- : -- (9) (94)
Consummation of the Restructuring........ 283 : -- -- --
Adjust accounts to fair value............ (3,993) : -- -- --
Balance, end of period................... 283 : 283 274 180
:
Cumulative Foreign Currency Adjustments: :
Balance, beginning of period............. (17) : -- (365) (4,660)
Foreign currency translation gain :
(loss).................................. 3,088 : (365) (4,295) 2,206
Fresh start equity reclassifications..... (3,071) : -- -- --
Balance, end of period................... -- : (365) (4,660) (2,454)
:
Total Stockholders' Equity................. $ 11,912 : $ 10,424 $ 57,298 $ 56,221
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
F-6
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss)...................................... $ 747,967 : $ (7,196) $ (52,227) $(59,619)
Adjustments to reconcile net income (loss) to net :
cash provided by operating activities: :
(Income) Loss from discontinued operations........ (24,211) : (930) 14,703 --
Gain on sale of discontinued operations........... -- : -- (10,657) --
Depreciation and amortization..................... 35,126 : 10,798 69,060 59,554
Non-cash portion of unusual items................. -- : -- -- 70,207
ESOP expense...................................... 33,714 : 4,811 45,874 49,197
Deferred compensation and stock option expense :
(credit)......................................... 3,190 : (789) 38,416 10,614
Non-cash interest expense......................... 38,245 : 917 7,866 2,005
Cash flows from changes in assets and liabilities, :
net of reorganization items and effects from :
sales and acquisitions of businesses: :
Accounts receivable, net........................ (133) : 10,960 7,909 (7,533)
Other current assets............................ (7,492) : (685) (2,541) 4,563
Other long-term assets.......................... (8,761) : 471 (5,239) 2,860
Accounts payable and other accrued :
liabilities................................... 76,354 : 25,401 (30,443) (13,017)
Income taxes payable and deferred income taxes.. 1,585 : 942 1,482 (26,759)
Reserve for unpaid claims....................... 7,348 : (1,479) 4,119 1,215
Reorganization items: :
Professional fees and other expenses............ (20,208) : (6,161) -- --
Adjust accounts to fair value................... (83,004) : -- -- --
Extraordinary (gain) loss on early :
extinguishment or discharge of debt.............. (730,589) : -- 8,561 12,616
Other............................................. 7,810 : 1,300 (6,925) (7,556)
Total adjustments............................... (671,026) : 45,556 142,185 157,966
Net cash provided by operating activities..... 76,941 : 38,360 89,958 98,347
:
Cash Flows From Investing Activities :
Capital expenditures................................. (8,868) : (1,430) (11,101) (14,626)
Acquisitions of businesses........................... -- : -- -- (130,550)
(Increase) Decrease in assets restricted for :
settlement of unpaid claims........................ (1,629) : (16,438) (14,152) 7,076
Proceeds from sale of assets (including discontinued :
operations)......................................... 3,008 : -- 354,173 16,584
Cash flows from discontinued operations.............. 33,812 : 10,977 42,487 --
Net cash provided by (used in) investing :
activities.................................. 26,323 : (6,891) 371,407 (121,516)
:
Cash Flows From Financing Activities :
Payments on debt and capital lease obligations....... (120,197) : (42,931) (533,942) (311,553)
Proceeds from issuance of debt....................... 1,462 : -- 17,200 381,798
Proceeds from exercise of stock options and :
warrants............................................ -- : -- 576 1,315
Tax benefit related to the exercise of stock :
options............................................. -- : -- -- 9,424
Income tax payments made on behalf of stock :
optionee............................................ -- : -- -- (14,214)
Net cash provided by (used in) financing :
activities.................................. (118,735) : (42,931) (516,166) 66,770
:
Net increase (decrease) in cash and cash equivalents..... (15,471) : (11,462) (54,801) 43,601
Cash and cash equivalents at beginning of period......... 167,736 : 152,265 140,803 86,002
Cash and cash equivalents at end of period............... $ 152,265 : $ 140,803 $ 86,002 $129,603
The accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
F-7
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of the Company include the accounts
of the Company and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
On June 2, 1992, the Company filed a voluntary petition under chapter 11
of the United States Bankruptcy Code. The prepackaged plan of reorganization
(the "Plan") effected a restructuring of the Company's debt and equity
capitalization (the "Restructuring"). The Company's Plan was confirmed on
July 8, 1992, and became effective on July 21, 1992 (effective on July 31,
1992 for financial reporting purposes). The consolidated financial statements
as of and for the two months ended September 30, 1992 and the years ended
September 30, 1993 and 1994 are presented for the Company after the
consummation of the Plan. These statements were prepared under the principles
of fresh start accounting and are not comparable to the statements of prior
periods. Accordingly, a line has been used to separate the financial
statements of the Company after the consummation of the Plan from those of the
Company prior to the consummation of the Plan.
Property and Equipment
As a result of the adoption of fresh start accounting, property and
equipment were adjusted to their estimated fair value as of July 31, 1992 and
historical accumulated depreciation was eliminated. Expenditures for renewals
and improvements are charged to the property accounts; however, replacements,
maintenance and repairs which do not improve or extend the life of the
respective assets are expensed currently. The Company removes the cost and
related accumulated depreciation from the accounts for property sold or
retired, and any resulting gain or loss is included in operations.
Amortization of capital lease assets is included in depreciation expense.
Depreciation is provided on a straight-line basis. Upon implementation of
fresh start accounting, the average of the remaining useful lives of buildings
and improvements was approximately 22 years. The general range of estimated
useful lives is three to ten years for equipment.
Excess Reorganization Value
Excess Reorganization Value is being amortized on a straight-line basis
over three years. Amortization expense for the two months ended September 30,
1992 and the years ended September 30, 1993 and 1994 was $7.2 million, $42.7
million and $31.2 million, respectively. The unamortized Excess
Reorganization Value of $58.6 million attributable to the general hospitals
sold on September 30, 1993, reduced the gain from the disposal of such
hospitals. Excess Reorganization Value was reduced by approximately $21
million during fiscal 1993 to reflect the recognition of tax benefits related
to pre-Plan tax loss carryforwards. (See Note 8.)
F-8
<PAGE>
<PAGE>
Foreign Currency
Changes in the cumulative translation of foreign currency assets and
liabilities are presented as a separate component of stockholders' equity.
Gains and losses resulting from foreign currency transactions, which were not
material, are included in operations as incurred.
Net Revenue
Net revenue is based on established billing rates, less estimated
allowances for patients covered by Medicare and other contractual
reimbursement programs and discounts from established billing rates. Amounts
received by the Company for treatment of patients covered by Medicare and
other contractual reimbursement programs, which may be based on cost of
services provided or predetermined rates, are generally less than the
established billing rates of the Company's hospitals. Final determination of
amounts earned under contractual reimbursement programs is subject to review
and audit by the appropriate agencies. Management believes that adequate
provision has been made for any adjustments that may result from such reviews.
Charity Care
The Company provides care without charge or at amounts less than its
established rates to patients who meet certain criteria under its charity care
policies. Because the Company does not pursue collection of amounts
determined to be charity care, they are not reported as revenue. For the ten
months ended July 31, 1992, the two months ended September 30, 1992 and the
years ended September 30, 1993 and 1994 the Company provided, at its
established billing rates, approximately $30 million, $5.8 million, $33.1
million and $29.3 million, respectively, of such care.
Interest, Net
The Company records interest expense net of capitalized interest and
interest income. Interest income for the ten months ended July 31, 1992, the
two months ended September 30, 1992 and the years ended September 30, 1993 and
1994 was approximately $6.7 million, $.8 million, $3.6 million and $4.4
million, respectively.
Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid interest-bearing
investments with a maturity of three months or less when purchased, consisting
primarily of money market instruments.
Assets Restricted for the Settlement of Unpaid Claims
Assets restricted for the settlement of unpaid claims include marketable
securities which are carried at fair market value. Transfer of such
investments from the insurance subsidiaries to the Company or any of its other
subsidiaries is subject to meeting certain criteria under the Revolving Credit
Agreement and approval by certain regulatory authorities.
During fiscal 1994 the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities ("SFAS 115"). Under SFAS 115, investments are classified into
F-9
<PAGE>
<PAGE>
three categories: i) held to maturity; ii) available for sale; and iii)
trading. Unrealized holding gains or losses are recorded for trading and
available for sale securities. The Company's investments are classified as
available for sale and the adoption of SFAS 115 did not have a material effect
on the Company's financial statements, financial condition and liquidity or
results of operations.
Net Loss Per Common Share
Net loss per common share for periods subsequent to the Restructuring was
computed based on the weighted average number of shares of Common Stock
outstanding during the period. Common stock equivalents were not dilutive and
therefore were not included in the calculation.
2. Significant Transactions
Acquisitions
As of March 29, 1994 the Company entered into two agreements with
National Medical Enterprises, Inc. ("NME") providing for the purchase by the
Company of substantially all of the assets of 36 psychiatric hospitals, eight
chemical-dependency treatment facilities, two residential treatment centers
and one physician outpatient practice, including related outpatient facilities
and other associated assets. Under a consent order that has been
conditionally approved by the Federal Trade Commission, the Company has agreed
not to acquire six of such facilities; the Company and NME subsequently agreed
that the Company will not acquire one facility. The remaining 40 facilities
(the "Acquired Hospitals") have, as of November 30, 1994, been acquired (the
"Acquisition") by subsidiaries of the Company. The purchase price for the
Acquired Hospitals was approximately $120.4 million in cash plus an additional
cash amount of approximately $51 million, subject to adjustment, for the net
working capital of the Acquired Hospitals.
On June 30, 1994, the Company completed the purchase of 27 of the
Acquired Hospitals for a cash purchase price of approximately $129.6 million,
which included approximately $39.3 million, subject to adjustment, for the net
working capital of the facilities. On October 31, 1994 the Company completed
the purchase of three additional Acquired Hospitals for a cash purchase price
of approximately $5 million which included approximately $2.2 million related
to the net working capital of the facilities. On November 30, 1994, the
Company completed the purchase of the remaining ten Acquired Hospitals for a
cash purchase price of approximtely $36.8 million, including approximately
$9.5 million related to the net working capital of ten Acquired Hospitals.
The Company accounted for the Acquisition using the purchase method of
accounting.
The Company's Consolidated Statement of Operations for the year ended
September 30, 1994 includes results of operations of 27 of the Acquired
Hospitals for the three months ended September 30, 1994. Because all of the
Acquired Hospitals have been purchased as of November 30, 1994, the purchases
have been considered one transaction for pro forma disclosure. Below are
unaudited pro forma results of operations for the years ended September 30,
1993 and 1994 as though the Acquired Hospitals had been purchased on
October 1, 1992 and 1993, respectively. The pro forma information does not
purport to be indicative of the results which would actually have been
F-10
<PAGE>
<PAGE>
attained had the acquisition been completed on such date or which may be
attained in the future. (In thousands, except for per share data.)
<TABLE>
<CAPTION>
For the Year Ended
September 30, 1993 September 30, 1994
Actual Pro Forma Actual Pro Forma
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenue................ $897,907 $1,230,851 $904,646 $1,161,250
Loss from continuing
operations before
discontinued operations
and extraordinary items... $(39,620) $ (5,845) $(47,003) $ (41,733)
Net loss................... $(52,227) $ (18,452) $(59,619) $ (54,349)
Loss per common share:
Loss from continuing
operations before
discontinued
operations and
extraordinary items..... $(1.59) $(.23) $(1.78) $(1.58)
Net loss................. $(2.10) $(.74) $(2.26) $(2.06)
</TABLE>
Discontinued Operations
On September 30, 1993, the Company sold its general hospitals and the
related assets for approximately $338 million. The Company retained the
assets and liabilities relating to these subsidiaries for professional
liability claims incurred and cost report settlements for periods prior to
September 30, 1993. On September 15, 1993, the Company sold its interest in
Beech Street of California, Inc. ("Beech Street") (see Note 12). Beech Street
operates preferred provider networks and provides utilization review services
to third parties. Immediately prior to the sale, the Company owned 71.1% of
the voting stock and 19.8% of the equity ownership of Beech Street.
Summarized results of the discontinued operations were as follows (in
thousands):
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended Year ended
July 31, September 30, September 30,
1992 1992 1993
<S> <C> <C> <C> <C>
Net revenue..................... $292,266 : $ 61,779 $372,431
Operating and bad debt :
expenses........................ 241,942 : 50,533 308,706
Amortization of reorganiza- :
tion value in excess of :
amounts allocable to identi- :
fiable assets.................. -- : 5,333 32,000
Other expenses(1)............... 26,113 : 4,983 46,428
Net income (loss)............... $ 24,211 : $ 930 $(14,703)
______________
<FN>
(1) Included in these amounts are income taxes and interest expense related
to debt specifically identifiable as debt of the discontinued
operations. Such interest expense is not material.
</TABLE>
F-11
<PAGE>
<PAGE>
The net assets, results of operations and the gains on the sales of the
general hospitals and Beech Street have been reported in the accompanying
financial statements as discontinued operations. Therefore, the financial
statements for all prior periods presented have been restated to segregate
these amounts from continuing operations.
3. The Restructuring and Fresh Start Reporting
The consummation of the Plan discussed above in Note 1 resulted in, among
other things, (i) a reduction of approximately $700 million in long-term debt,
(ii) elimination of $233 million of preferred stock and (iii) the issuance of
approximately 24.8 million shares of Common Stock to certain holders of debt
securities, the preferred stockholders and common stockholders.
As a result of the consummation of the Plan, the financing under the $880
Million Credit Agreement between the Company and certain banks dated
September 1, 1988, was replaced by new facilities under the Amended and
Restated Credit Agreement dated July 21, 1992, among the Company and certain
banks (the "Credit Agreement").
Upon consummation of the Plan, the Company recognized an extraordinary
gain on debt discharge of approximately $731 million which represented
forgiveness of debt, principal and interest, reduced by the estimated fair
value of common stock issued to certain debtholders of the Company. The
Company's long-term debt was stated at the present value of amounts to be
paid, based on market interest rates on July 31, 1992. This adjustment to
present value resulted in an aggregate carrying amount for the Company's
long-term debt which was less than the aggregate principal amount thereof, and
resulted in the amortization of the difference into interest expense over the
terms of the debt instruments and, upon extinguishment of the debt prior to
scheduled maturity, resulted in a loss on debt extinguishment.
Under the principles of fresh start accounting, the Company's total
assets were recorded at their assumed reorganization value, with the
reorganization value allocated to identifiable tangible assets on the basis of
their estimated fair value. Accordingly, the Company's property and equipment
was reduced and its intangible assets were written off. In addition, the
Company's accumulated deficit, common stock in treasury and cumulative foreign
currency adjustments were eliminated. The excess of the reorganization value
over the value of identifiable assets is reported as "reorganization value in
excess of amounts allocable to identifiable assets" (the "Excess
Reorganization Value").
The total reorganization value assigned to the Company's assets was
estimated by calculating projected cash flows before debt service
requirements, for a five-year period, plus an estimated terminal value of the
Company (calculated using a multiple of approximately six (6) on projected
EBDIT (which is net revenue less operating and bad debt expenses)), each
discounted back to its present value using a discount rate of 12%
(representing the estimated after-tax weighted cost of capital). This amount
was approximately $1.2 billion and was increased by (i) the estimated net
realizable value of assets to be sold and (ii) estimated cash in excess of
normal operating requirements. The above calculations resulted in an
estimated reorganization value of approximately $1.3 billion, of which the
Excess Reorganization Value was $225 million, of which $129 million related to
continuing operations. The Excess Reorganization Value is being amortized
over three years.
F-12
<PAGE>
<PAGE>
4. Unusual Items
During fiscal 1994 the Company recorded a charge for unusual items of
approximately $71.3 million. Included in the unusual charges is the
resolution in November 1994 between the Company and a group of insurance
carriers of disputes that arose in the fourth quarter of fiscal 1994 related
to claims paid predominantly in the 1980's. As part of the resolution, the
Company will pay the insurance carriers approximately $31 million plus
interest, for a total of $37.5 million in four installments over a three year
period. The Company and the insurance carriers will continue to do business
at the same or similar general levels. Furthermore, the parties will seek
additional business opportunities that will serve to enhance their present
relationships.
As a result of the Acquisition, the Company reassessed its business
strategy in certain markets. The Company plans to consolidate services in
selected markets and close or sell certain facilities owned prior to the
Acquisition. Accordingly, the Company recorded a charge of $23 million in the
fourth quarter of 1994 to write down the assets of those facilities to their
net realizable value. Also recorded as an unusual charge during fiscal 1994
were expenses related to the relocation of the Company's executive offices.
5. Benefit Plans
The Company maintains an Employee Stock Ownership Plan (the "ESOP"), a
noncontributory retirement plan that enables eligible employees to participate
in the ownership of the Company. The ESOP borrowed approximately $455 million
from the Company to acquire its ownership interest. At September 30, 1994,
the ESOP owed the Company approximately $65.6 million.
The Company has recorded unearned compensation to reflect the cost of
Common Stock purchased by the ESOP but not yet allocated to participants'
accounts. In the period that shares are allocated, or projected to be
allocated, to participants, ESOP expense is recorded and unearned compensation
is reduced. Interest expense on the remaining portion of the debt incurred to
finance the ESOP transaction amounted to $2,472,000, $10,380,000 and
$6,197,000 for the two months ended September 30, 1992, fiscal 1993 and 1994,
respectively, and $16,169,000 for the ten months ended July 31, 1992 and is
included in interest expense in the statements of operations.
The Internal Revenue Service has ruled that the ESOP qualifies under
Section 401 of the Internal Revenue Code of 1986, as amended. Such
determination allows the Company to deduct its contributions to the ESOP for
federal income tax purposes.
During fiscal 1992, the Company reinstated a defined contribution plan
(the "401-K Plan"). Effective January 1, 1992, employee participants could
elect to voluntarily contribute up to 5% of their compensation to the 401-K
Plan. Effective October 1, 1992, the Company began making contributions to
the 401-K Plan based on employee compensation and contributions. The Company
makes a discretionary contribution of 2% of each employee's compensation and
matches 50% of each employee's contribution up to 3% of their compensation.
During the years ended September 30, 1993 and 1994, the Company made
contributions of $2,539,000 and $4,870,000, respectively, to the 401-K Plan.
F-13
<PAGE>
<PAGE>
6. Long-Term Debt and Capital Lease Obligations
Information with regard to the Company's long-term debt and capital lease
obligations at September 30, 1993 and 1994 follows (in thousands):
September 30 September 30
1993 1994
Revolving Credit Agreement due through
1999 (7.0% at September 30, 1994).............. $ -- $ 72,584
Financing under the Credit Agreement............ 161,490 --
11.25% (11.75% at September 30, 1994) Senior
Subordinated Notes due 2004.................... -- 375,000
Debentures due 2003 (net of discount of
$43,997 at September 30, 1993)................. 156,003 --
8% to 10.75% Mortgage and other
collateralized notes payable through
1999........................................... 21,502 6,434
Variable rate secured notes due through
2013 (3.65% to 3.852% at September 30, 1994)... 64,175 63,125
7.5% Swiss Bonds................................ 6,443 6,443
3.65% to 12.5% Capital lease obligations
due through 2014............................... 11,965 12,870
421,578 536,456
Less amounts due within one year.............. 70,957 2,653
Less debt service funds....................... 416 327
$350,205 $533,476
The aggregate scheduled maturities of long-term debt and capital lease
obligations during the five years subsequent to September 30, 1994, follow:
1995 -- $2,653,000; 1996 -- $2,795,000; 1997 -- $2,964,000; 1998 --
$2,519,000; and 1999 -- $74,866,000.
The Company's debt is carried at cost which approximates fair market
value.
Revolving Credit Agreement
On May 2, 1994 the Company entered into a Second Amended and Restated
Credit Agreement with certain financial institutions for a five-year reducing,
revolving credit facility in an aggregate committed amount of $300 million
(the "Revolving Credit Agreement"). Proceeds from the Revolving Credit
Agreement were used (i) to refinance certain mortgage indebtedness of certain
subsidiaries of the Company in the principal amount of approximately $14.7
million and the loans to certain subsidiaries of the Company outstanding under
the Credit Agreement in the principal amount of approximately $46.8 million,
(ii) for continued credit enhancement of certain currently outstanding
variable rate demand notes issued by or for the benefit of certain
subsidiaries of the Company and (iii) for working capital and other general
corporate purposes, including to finance, in part, the Acquisition and to
finance other permitted acquisitions and investments.
F-14
<PAGE>
<PAGE>
The amounts available under the Revolving Credit Agreement will be
reduced by the amounts and on the dates indicated below:
Amount Date
$ 24,537,446 March 31, 1996
49,074,892 March 31, 1997
49,074,892 March 31, 1998
175,000,000 March 31, 1999
In addition to the scheduled reductions above, the Revolving Credit
Commitment shall be reduced (i) by an amount equal to 70% (or if a default or
an event of default exists, 100%) of the net proceeds of certain asset sales,
(ii) by an amount equal to 25% (or if a default or an event of default exists,
100%) of the net proceeds of certain issuances or sales of the Company's
capital stock or other equity interests, except that no such reduction shall
be required if the Company meets specified financial ratios and no default or
event of default has occurred and is continuing, and (iii) by an amount equal
to the principal amount of permitted subordinated indebtedness subject to a
required repurchase or repurchase offer by the Company as a result of any
asset sale. All such reductions described in the foregoing clauses (i)
through (iii) shall be applied first on a pro rata basis to all scheduled
reductions of the Revolving Credit Agreement other than the last scheduled
reduction of the Revolving Credit Agreement, and thereafter to the last
scheduled reduction.
The loans outstanding under the Revolving Credit Agreement bear interest
(subject to certain potential adjustments) at a rate per annum equal to (a)
the sum of the Base Lending Rate plus 3/4 of 1%, or (b) at the option of the
Company, the sum of the maximum reserve-adjusted one, two, three or six-month
LIBOR plus 1 3/4%. The Base Lending Rate is the higher of (x) the rate
announced from time to time as Bankers Trust Company's prime lending rate, (y)
the Federal Reserve's reported weekly average dealer offering rate for
three-month certificates of deposit, adjusted for maximum reserves, plus 1/2
of 1%, and (z) the Federal Funds Rate plus 1/2 of 1%.
Senior Subordinated Notes
Also on May 2, 1994, the Company issued $375 million of 11.25% Senior
Subordinated Notes which mature on April 15, 2004 (the "Notes") and are
general unsecured obligations of the Company. Interest on the Notes is
payable semi-annually on each April 15 and October 15, commencing on
October 15, 1994. The Notes were originally issued as unregistered securities
and later exchanged for securities which were registered with the Securities
and Exchange Commission. Due to a delay in the registration of the notes to
be exchanged, the Company was required to increase the interest rate on the
Notes by 50 basis points per annum for the period September 1, 1994 through
October 21, 1994, the date of issuance of the notes to be exchanged. Proceeds
of $181.8 million from the sale of the Notes were used to defease, and,
subsequently on June 9, 1994, to redeem the Company's outstanding 7.5% Senior
Subordinated Debentures due 2003 (the "Debentures"). Certain remaining
proceeds were used, along with proceeds from the Revolving Credit Agreement,
to finance the Acquisition. The Notes are guaranteed on an unsecured senior
subordinated basis by substantially all of the Company's existing subsidiaries
and certain subsidiaries created after the issuance of the Notes.
F-15
<PAGE>
<PAGE>
The Notes are not redeemable at the option of the Company prior to
April 15, 1999. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, at the redemption prices
(expressed as a percentage of the principal amount) set forth below, plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning April 15 of the years
indicated below:
Redemption
Year Price
1999..................... 105.625%
2000..................... 103.750%
2001..................... 101.875%
2002 and thereafter...... 100.000%
Covenants
The Revolving Credit Agreement and the indenture for the Notes contain a
number of restrictive covenants, which, among other things, limit the ability
of the Company and certain of its subsidiaries to incur other indebtedness,
engage in transactions with affiliates, incur liens, make certain restricted
payments, and enter into certain business combination and asset sale
transactions. The Revolving Credit Agreement also limits the Company's
ability to incur capital expenditures and requires the Company to maintain
certain specified financial ratios.
Extraordinary Losses
The consolidated statements of operations for the years ended
September 30, 1993 and 1994 include extraordinary after-tax losses of
$8,561,000 and $12,616,000, respectively, resulting from the early
extinguishment of debt. The loss during fiscal 1993 includes fees incurred
upon the retirement of the Senior Secured Notes, certain debt under the credit
agreement and mortgages on the general hospitals and the write-off of the
unamortized discount or premium remaining on certain debt. The extraordinary
loss in fiscal 1994 was related to the defeasance of the Debentures and the
pay-off of certain subsidiary mortgages and includes the difference between
the redemption price and the carrying value of the Debentures and prepayment
penalties related to the subsidiary mortgages.
Leases
The Company leases certain hospital facilities, some of which may be
purchased during the term or at expiration of the leases. The book value of
capital leased assets was approximately $9.0 million at September 30, 1994.
The leases, which expire through 2069, generally require the Company to pay
all maintenance, property tax and insurance costs.
At September 30, 1994, aggregate amounts of future minimum payments under
operating leases were as follows: 1995 - $6.4 million; 1996 - $4.6 million;
1997 - $2.1 million; 1998 - $1.3 million; 1999 - $.9 million; subsequent to
1999 - $39.8 million.
F-16
<PAGE>
<PAGE>
Operations for the ten months ended July 31, 1992 included rental expense
on operating leases of $10.4 million. Operations for the two months ended
September 30, 1992, and the years ended September 1993 and 1994 included
rental expenses on operating leases of $1.9 million, $11.3 million and $11.4
million, respectively.
7. Stockholders' Equity
Pursuant to the Company's Restated Certificate of Incorporation, the
Company is authorized to issue 80 million shares of common stock, $.25 par
value per share, and 10 million shares of preferred stock, without par value.
Under the terms of the Plan, approximately 24,828,000 shares of common stock
were issued to certain holders of debt securities, the preferred stockholders,
and common stockholders. No shares of preferred stock have been issued as of
September 30, 1994.
Common Stock
The Company is prohibited from paying dividends (other than dividends
payable in shares of common stock) on its common stock under the terms of the
Revolving Credit Agreement except under certain limited circumstances.
1992 Stock Option Plan
The 1992 Stock Option Plan provides for the issuance of 3,437,939 options
to purchase common stock. A summary of changes in options outstanding and
other related information is as follows:
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year Ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Balance, beginning of period... -- : 3,416,826 3,416,826 3,228,076
Granted...................... 3,416,826 : -- 21,750 6,000
Cancelled.................... -- : -- (27,000) (24,000)
Exercised.................... -- : -- (183,500) (2,437,560)
Balance, end of period......... 3,416,826 : 3,416,826 3,228,076 772,516
:
Option prices, end of period... $4.36 - $9.60 : $4.36 - $9.60 $.25 - $16.875 $4.36 - $22.75
Price range of exercised :
options....................... -- : -- $ 4.36 $ .25 - $ 4.36
Average exercise price......... -- : -- $ 4.36 $ .62
</TABLE>
The exercise price of certain options will be reduced if a change in
control of the Company occurs prior to July 1995 or, in the case of
termination of employment of certain optionees without cause, if certain
financial targets included in the 1992 Stock Option Plan are achieved.
Options issued pursuant to the 1992 Stock Option Plan are exercisable
upon vesting and expire through October 2000. As of September 30, 1994, 70.3%
of the options outstanding were vested. The remaining options vest over the
next fiscal year if the Company achieves certain financial targets. If a
change in control of the Company occurs, all options vest immediately prior to
such event, and upon termination of employment of certain optionees without
F-17
<PAGE>
<PAGE>
cause, all options granted to such optionees vest immediately, provided
certain financial targets have been met.
Upon the termination of the employment of the Company's former Chairman
of the Board on March 4, 1993, and under the provisions of the 1992 Stock
Option Plan, all of the former employee's options vested and the option prices
were reduced to $.25 per share. Such options totalled 2,220,336 at
September 30, 1993. As a result, the Company recognized approximately $21.3
million in additional stock option expense during the second quarter of fiscal
1993. On December 3 and December 29, 1993, all of the options under the 1992
Stock Option Plan were exercised by the former employee. On December 3, 1993,
326,000 options were exercised and the option exercise price was paid by
reducing the number of shares issueable by the number of shares having a fair
market value equal to the option exercise price (3,326 shares). An exercise
in this manner triggers a new measurement date for the options exercised and,
since the stock price had increased since March 4, 1993, additional
compensation expense of $3.9 million was recognized in December 1993. The
option exercise price for the 1,894,336 options exercised on December 29,
1993, was paid in cash; accordingly, no additional compensation expense was
triggered. For both of the exercises, the former employee elected to
surrender optioned shares (approximately 570,000 shares) as consideration for
the payment of required withholding taxes of approximately $14.2 million.
These withholdings represent the minimum required tax withholding amounts
required in order to avoid triggering a new measurement date and additional
compensation expense. The Company was required to make withholding tax
payments on behalf of the former employee of approximately $14.2 million which
was charged against additional paid-in capital. This charge was offset by a
tax benefit recorded of approximately $9.4 million related to additional stock
option expense allowable for income tax purposes.
1994 Stock Option Plan
During 1994 the Company adopted the 1994 Stock Option Plan covering 1.3
million shares of common stock. Options must be granted on or before
December 31, 1996. Officers and key employees of the Company are eligible to
participate. The options have an exercise price which approximates fair
market value of the common stock at the date of grant. A summary of changes
in options outstanding and other related information is as follows:
Year ended
September 30,
1994
Balance, beginning of period... --
Granted...................... 921,000
Cancelled.................... 44,500
Exercised.................... --
Balance, end of period......... 876,500
Option prices.................. $22.687 - $28.312
Options granted under the 1994 Stock Option Plan are exercisable to the
extent vested. An option vests at the rate of 33-1/3% of the shares covered
by the option on each of the first three anniversary dates of the grant of the
option if the optionee is an employee of the Company on such dates. Options
must be exercised no later than ten years after the date of grant.
F-18
<PAGE>
<PAGE>
1994 Employee Stock Purchase Plan
During 1994 the Company also adopted the 1994 Employee Stock Purchase
Plan ("ESPP") covering 600,000 shares of common stock that can be purchased by
eligible employees of the Company.
The ESPP consists of three offerings of a maximum of 300,000 shares each,
except that the maximum number of shares offered in the third offering period
may not exceed the then remaining number of shares available under the ESPP.
The first offering period began on April 1, 1994 and will end on March 31,
1995. On the first date of each offering period, a participant will be
granted an option to purchase a certain number of shares of common stock
(85,115 aggregate options granted for the first offering period). The
purchase price for the first offering period is $21.144 per share.
Directors' Stock Option Plan and Directors' Unit Award Plan
The Directors' Stock Option Plan provides for the grant of options to
non-employee members of the Company's Board of Directors to purchase up to
175,000 shares of the Company's common stock, subject to adjustments to
reflect certain changes in capitalization. The options have an exercise price
which approximates the fair market value of the common stock on the date of
grant. During fiscal 1993, 100,000 options were granted at an exercise price
of $14.56 per share. During fiscal 1994, 25,000 of these options were
exercised and an additional 25,000 options were granted at an exercise price
of $23.163 per share.
Options granted can be exercised from the date of vesting until
February 1, 2003. No options can be granted after February 4, 1998. Options
vest 20% when granted and an additional 20% on each successive February 1 for
a period of four years, if the optionee continues to serve as a non-employee
director on the applicable February 1. Unvested options vest in full in
certain instances of termination.
In addition, during 1994, the Company approved the Directors' Unit Award
Plan (the "Unit Plan") which provides for the award of a maximum of 15,000
units (the "Units") that, upon vesting under the terms of the Unit Plan, would
result in the issuance of an aggregate of 15,000 shares of common stock in
settlement of Units.
The Unit Plan provides for the award to each director who is not an
employee of the Company of 2,500 Units. Upon vesting of the Units awarded to
a director, the Company will settle the Units by issuing to the director, with
no exercise price, a number of shares of the Company's common stock equal to
the number of vested Units.
Rights Plan
Also upon consummation of the Plan, the Company adopted a Share Purchase
Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan, each share of
common stock also represents one Share Purchase Right (collectively, the
"Rights"). The Rights trade automatically with the underlying shares of
common stock. Upon becoming exercisable, but prior to the occurrence of
certain events, each Right initially entitles its holder to buy one share of
common stock from the Company at an exercise price of $60.00. The Rights will
be distributed and become exercisable only if a person or group acquires, or
F-19
<PAGE>
<PAGE>
announces its intention to acquire, common stock exceeding certain levels, as
specified in the Rights Plan. Upon the occurrence of such events, the
exercise price of each Right reduces to one-half of the then current market
price. The Rights also give the holder certain rights in an acquiring
company's common stock. The Company is entitled to redeem the Rights at a
price of $.01 per Right at any time prior to the distribution of the Rights.
The Rights have no voting power until exercised.
Common Stock Warrants
The Company has two series of warrants outstanding, the 2002 Warrants and
the 2006 Warrants.
In connection with the Plan, the Company issued 114,690 of the 2002
Warrants to purchase one share each of the Company's common stock. These
warrants, which expire on June 30, 2002, have an exercise price of $5.24 per
share. During fiscal 1994, 37,395 shares were issued upon the exercise of
these warrants.
The 2006 Warrants, which expire on September 1, 2006, were subject to
certain adjustments as a result of the Plan, and accordingly, 146,791 of such
warrants are currently outstanding with an exercise price of $38.70 per share.
8. Income Taxes
The provision (benefit) for income taxes attributable to continuing
operations consisted of the following (in thousands):
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Income taxes currently payable: :
Federal................................. $ 14 : $ 3 $ 181 $ --
State................................... 1,055 : 113 315 639
Foreign................................. 803 : 461 986 1,466
Deferred income taxes: :
Federal................................. 2,387 : 477 370 (11,106)
State................................... -- : -- (39) (1,587)
Foreign................................. -- : -- 61 52
$ 4,259 : $ 1,054 $ 1,874 $(10,536)
</TABLE>
F-20
<PAGE>
<PAGE>
The Company's income tax provision (benefit) attributable to continuing
operations differs from that computed based on the statutory federal income
tax rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Income tax benefit at federal statutory
income tax rate............................ $(26,323) : $(2,404) $(13,117) $(20,139)
State income taxes, net of federal income :
tax benefit................................ 699 : 75 180 (616)
Amortization of Excess Reorganization :
Value...................................... -- : 2,437 14,831 10,920
Losses for which no tax benefit has been :
recorded................................... 26,323 : -- -- --
Other -- net.............................. 3,560 : 946 (20) (701)
Income tax provision (benefit).............. $ 4,259 : $ 1,054 $ 1,874 $(10,536)
</TABLE>
Under the federal income tax laws, the Company was not required to
include in its federal taxable income any cancellation of debt income as a
result of the debt forgiven pursuant to the Plan. Accordingly, no income
taxes have been provided on the $731 million extraordinary gain on debt
discharge in the statement of operations for the ten months ended July 31,
1992.
As of September 30, 1994, the Company has estimated tax net operating
loss ("NOL") carryforwards of approximately $247 million available to reduce
future federal taxable income. These NOL carryforwards expire in 2006 through
2009 and are subject to examination by the Internal Revenue Service. Due to
the ownership change which occurred as a result of the Restructuring, the
Company's utilization of NOLs generated prior to the Effective Date is
significantly limited. Based on these limitations and certain other factors,
the Company has recorded a valuation allowance against the entire amount of
the NOL deferred tax asset and other deferred tax assets, that in management's
opinion, are not likely to be recovered.
F-21
<PAGE>
<PAGE>
Components of the net deferred income tax liability at September 30, 1993
and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
1993 1994
<S> <C> <C>
Deferred tax liabilities:
Property and depreciation............. $ 14,991 $ 6,636
Long-term debt and interest........... 44,157 26,623
ESOP.................................. 17,013 26,019
Other................................. 22,847 11,200
Total deferred tax liabilities........ 99,008 70,478
Deferred tax assets:
Operating loss carryforwards.......... (66,122) (101,443)
Insurance settlement.................. -- (16,031)
Self-insurance reserves............... (47,307) (48,222)
Restructuring costs................... (25,397) (9,365)
Stock option expense.................. (14,898) (6,649)
Tax capitalization of costs
expensed for book purposes........... (10,030) (5,338)
Accruals.............................. (10,018) (14,504)
Other................................. (19,861) (18,632)
Total deferred tax assets............. (193,633) (220,184)
Valuation allowance................... 133,414 162,086
Deferred tax assets after
valuation allowance.................. (60,219) (58,098)
Net deferred tax liabilities........... $ 38,789 $ 12,380
</TABLE>
Effective January 1, 1993, the federal statutory corporate tax rate
increased from 34% to 35%. The effect of the increase was not material to the
Company.
The Internal Revenue Service is currently examining the Company's income
tax returns for fiscal 1989 through 1993. In management's opinion, adequate
provisions have been made for any adjustments which may result from these
examinations.
9. Other Accrued Liabilities
Other accrued liabilities include amounts due health insurance programs
of $59.3 million and $37.6 million at September 30, 1993 and 1994,
respectively. Also included in other accrued liabilities is accrued interest
payable of $2.8 million and $18.5 million as of September 30, 1993 and 1994,
respectively.
10. Supplemental Cash Flow Information
Below is supplemental cash flow information related to the ten months
ended July 31, 1992, the two months ended September 30, 1992 and the years
ended September 30, 1993 and 1994 (see Note 3 for a discussion of the non-cash
financing activities related to the consummation of the Plan) (in thousands):
F-22
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Federal and state income taxes paid, :
net of refunds received............ $ 2,944 : $ 269 $ 11,136 $ 7,097
Payments to ESOP.................... 40,697 : 23,000 69,123 42,000
Interest paid, net of amounts :
capitalized........................ 69,658 : 6,803 74,167 25,554
Liabilities assumed in connection :
with acquisitions: :
Long-term debt.................... -- : -- -- 4,573
Other liabilities................. -- : -- -- 12,578
</TABLE>
11. Commitments and Contingencies
The Company is self-insured for a substantial portion of its general and
professional liability risks. The reserves for self-insured general and
professional liability losses, including loss adjustment expenses, are based
on actuarial estimates using the Company's historical claims experience
adjusted for current industry trends. The reserve for unpaid claims is
adjusted, as such claims mature, to reflect revised actuarial estimates based
on actual experience. While management and its actuaries believe that the
present reserve is reasonable, ultimate settlement of losses may vary from the
amount provided.
In addition to general and professional liability claims, the Company is
subject to other claims, suits, surveys and investigations. The Company has
reached an agreement-in-principle to settle one of such matters upon payment
of an amount that the Company believes will not exceed $2 million. The terms
of such settlement are subject to certain third-party approvals. In the
opinion of management, the ultimate resolution of such other pending matters
will not have a material adverse effect on the Company's financial position or
results of operations.
Subsequent to the resolution of disputes with a group of insurance
carriers, as described in Note 4, the Company was contacted by and began
negotiations with two additional insurance carriers concerning similar
issues. While the ultimate outcome of these discussions can not be predicted
at this time, management believes that it has meritorious defenses to any
related lawsuits which may be filed if satisfactory resolution is not achieved
and that resolution of any disputes with these two additional insurance
carriers would not have a material effect on the consolidated balance sheet or
future results of operations.
The Resolution Trust Corporation ("RTC"), for itself or in its capacity
as conservator or receivor for 12 financial institutions, formerly held
certain debt securities that were issued by the Company in 1988. RTC has
indicated to the Company that it believes that certain financial statements
and other disclosures made by the Company in connection with such debt
securities contained materially misleading statements or material omissions
and that such misleading statements or omissions resulted in an overvaluation
of such debt securities. Specifically, the RTC has indicated its belief that
the Company's financial statements overstated net income for the 1987 fiscal
F-23
<PAGE>
<PAGE>
year and the first three quarters of the 1988 fiscal year due to
understatement of contractual allowances and the allowance for bad debts and
that the Company believed, but did not disclose, that certain negative
industry factors or trends would occur in the foreseeable future. The Company
believes that the financial institutions represented by RTC purchased in 1988
and 1989 $103.4 million face amount of subordinated debt securities originally
issued by the Company in September 1988. Although the RTC has not disclosed
to the Company its (or its financial institutions') trading losses from the
purchases and sales of these subordinated debt securities, the RTC has
disclosed the dates purchases and sales were made and the face amounts of the
subordinated debt securities involved in these transactions. The Company
believes that the trading losses were approximately $45 million. The Company
has agreed to a tolling of the statute of limitations applicable to RTC's
claims. Based on a review of relevant law and the facts known to the Company,
the Company believes it has a substantial defense to a potential claim by RTC
and that such claim would not have a material adverse effect on the Company's
financial position or results of operations.
12. Certain Relationships and Related Transactions
The Company owns 50% of the Charter Medical Building in Macon, Georgia,
and leases space in such building for certain corporate offices. Through
September 30, 1994 the Company's corporate headquarters were located in the
building and the lease, which expired September 30, 1994, provided for an
average annual rental of approximately $1.2 million. Currently the Company is
paying approximately $45,000 per month in rent on the building. Mr. William
A. Fickling, Jr., a former Director and former Chairman of the Board of
Directors of the Company, and his father's estate own 25% of the building. In
the opinion of management, such office space has been leased on terms as
favorable as could be obtained from an unaffiliated party. As a result of the
Company's interest in the building, the Company received distributions of
approximately $280,000 in fiscal 1994.
On September 15, 1993, the Company sold its ownership interest in Beech
Street to the children of Mr. Fickling for approximately $5.5 million, plus
the right to receive additional consideration, if certain events (e.g. a
public offering of Beech Street stock or if Beech Street sells 50% or more of
its assets) occur within two years. The Company obtained a fairness opinion
by an independent appraisal firm stating that the financial consideration was
fair. The Company acquired its ownership interest in a series of related
transactions beginning in May 1989, for a total purchase price of $2,956,000.
During the period of its ownership, the Company received $1,242,000 in
dividend distributions from Beech Street.
Beech Street was, prior to May 1989, a wholly owned subsidiary of Beech
Street, Inc., in which Mr. Fickling beneficially owns a majority of the
outstanding stock.
The Company also has agreements with Beech Street where certain of the
Company's hospitals provide services to employers (and their related employee
and covered dependent groups) who have entered into agreements with Beech
Street to utilize a Beech Street Preferred Provider Organization ("PPO") for
hospital and other healthcare services. Such agreements provide for covered
services to be rendered under terms (including discounts from the hospital's
normal charges) which management of the Company believes are customary for
hospital PPO agreements. The Beech Street PPO reviews claims and serves as an
F-24
<PAGE>
<PAGE>
intermediary between the Company's hospitals and the contracting employers.
The Company derived approximately $14.8 million, $21.4 million and $5.2
million in revenue from these agreements during fiscal 1992, 1993 and 1994,
respectively. The aggregate discount from customary charges was 17% in fiscal
1992, 12% in fiscal 1993 and 19% in 1994.
Gerald L. McManis, who was elected director on February 18, 1994, is the
President of McManis Associates, Inc. ("MAI"), a healthcare development and
management consulting firm and a subsidiary of MMI Companies, Inc. ("MMI").
Mr. McManis also serves on the Board of Directors of MMI. During fiscal 1993
and 1994, MAI provided consulting services for the Company related to the
development of strategic plans and a review of the Company's business
processes. The Company incurred $1,003,000 and $1,321,000 in fees for such
services during fiscal 1993 and 1994, respectively, and reimbursed MAI
$128,000 and $244,000, respectively, for expenses.
13. Selected Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the
years ended September 30, 1993 and 1994. Certain amounts presented below
differ from amounts previously reported in the Company's Quarterly Reports on
Form 10-Q due to the restatement of the consolidated financial statements to
reflect as discontinued operations the sale of certain subsidiaries in the
fourth quarter of fiscal 1993. The fourth quarter of fiscal 1994 contained
unusual changes of approximately $71.3 million. See Note 4 for an explanation
of these charges.
<TABLE>
<CAPTION>
Fiscal Quarters
First Second Third Fourth
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
1993
Net revenue...................... $226,390 $233,160 $231,737 $206,620
Loss from continuing operations
before extraordinary item....... (4,028) (16,879) (2,473) (16,240)
Income (Loss) from discontinued
operations and gain on disposal
of discontinued operations...... (3,196) (2,812) (2,872) 4,834
Loss before extraordinary item... (7,224) (19,691) (5,345) (11,406)
Net loss......................... (7,224) (19,691) (5,345) (19,967)
Loss per common share:
Loss from continuing
operations before extra-
ordinary item................. $(0.16) $(0.68) $(0.10) $(0.65)
Net loss....................... (0.29) (0.79) (0.21) (0.80)
1994
Net revenue...................... $208,817 $212,610 $220,857 $262,362
Income (Loss) from continuing
operations before extra-
ordinary item................... (3,866) 1,123 2,110 (46,370)
Net income (loss)................ (3,866) 1,123 (10,506) (46,370)
Income (Loss) per common share:
Income (Loss) from continuing
operations before extra-
ordinary item................. $(.15) $.04 $.08 $(1.72)
Net income (loss).............. (.15) .04 (.39) (1.72)
</TABLE>
F-25
<PAGE>
<PAGE>
14. Guarantor Condensed Consolidating Financial Statements
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands, except shares and per share amounts)
September 30, 1993
Charter
Medical
Corporation Consolidated
Guarantor Nonguarantor (Parent Elimination Consolidated
ASSETS Subsidiaries Subsidiaries Corporation) Entries Total
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents........................ $ 45,147 $ 2,756 $ 38,099 $ -- $ 86,002
Accounts receivable, net......................... 118,398 1,699 (459) -- 119,638
Supplies......................................... 4,641 68 342 -- 5,051
Other current assets............................. 8,138 66 25,799 (12,779) 21,224
Total Current Assets.......................... 176,324 4,589 63,781 (12,779) 231,915
Assets restricted for settlement of unpaid
claims............................................ -- 61,351 20,257 -- 81,608
Property and Equipment
Land............................................. 89,440 5,432 1,014 -- 95,886
Buildings and improvements....................... 304,313 5,000 1,336 -- 310,649
Equipment........................................ 64,621 863 1,937 -- 67,421
458,374 11,295 4,287 -- 473,956
Accumulated depreciation......................... (30,141) (487) 530 -- (30,098)
Construction in progress......................... 924 4 -- -- 928
429,157 10,812 4,817 -- 444,786
Other Long-Term Assets(1).......................... 354,315 2,539 715,993 (1,050,171) 22,676
Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets, net............. -- -- 57,201 -- 57,201
__________ _______ __________ ___________ __________
$ 959,796 $79,291 $ 862,049 $(1,062,950) $ 838,186
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable................................. $ 41,977 $ 421 $ 9,866 $ -- $ 52,264
Accrued expenses and other current liabilities... 86,397 912 62,068 -- 149,377
Current maturities of long-term debt and
capital lease obligations....................... 6,102 28 64,827 -- 70,957
Total Current Liabilities................... 134,476 1,361 136,761 -- 272,598
Long-Term Debt and Capital Lease Obligations....... 137,081 1,094 544,050 (332,020) 350,205
Deferred Income Taxes.............................. -- 946 37,843 -- 38,789
Reserve for Unpaid Claims.......................... -- 45,816 66,638 (12,779) 99,675
Deferred Credits and Other Long-Term
Liabilities(1).................................... 29,895 -- 19,459 (29,733) 19,621
Stockholders' Equity
Common Stock, par value $0.25 per share
Authorized - 80,000,000 shares
Issued and outstanding - 25,001,042 shares..... 2,833 586 6,250 (3,419) 6,250
Other Stockholders' Equity
Additional paid-in capital..................... 713,705 25,079 237,581 (738,784) 237,581
Retained earnings (Accumulated deficit)........ (57,147) 5,580 (59,423) 51,567 (59,423)
Unearned compensation under ESOP............... -- -- (122,724) -- (122,724)
Warrants outstanding........................... -- -- 274 -- 274
Cumulative foreign currency adjustments........ (1,047) (1,171) (4,660) 2,218 (4,660)
658,344 30,074 57,298 (688,418) 57,298
Commitments and Contingencies
__________ _______ __________ ___________ ___________
$ 959,796 $79,291 $ 862,049 $(1,062,950) $ 838,186
<FN>
(1) Elimination entry related to intercompany receivables and payables and investment in consolidated subsidiaries.
The accompanying Notes to Condensed Consolidating Financial Statements are an integral part of these balance sheets.
</TABLE>
F-26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)
September 30, 1994
Charter
Medical
Corporation Consolidated
Guarantor Nonguarantor (Parent Elimination Consolidated
ASSETS Subsidiaries Subsidiaries Corporation) Entries Total
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents........................ $ 71,850 $ 8,606 $ 49,147 $ -- $129,603
Accounts receivable, net......................... 166,191 2,780 1,324 -- 170,295
Supplies......................................... 5,713 75 309 -- 6,097
Other current assets............................. 11,461 177 19,018 (12,024) 18,632
Total Current Assets.......................... 255,215 11,638 69,798 (12,024) 324,627
Assets Retricted for Settlement of Unpaid Claims.. -- 61,475 13,057 -- 74,532
Property and Equipment
Land............................................. 89,340 6,019 1,014 -- 96,373
Buildings and improvements....................... 369,518 5,666 (14,598) -- 360,586
Equipment........................................ 88,483 1,262 2,299 -- 92,044
547,341 12,947 (11,285) -- 549,003
Accumulated depreciation......................... (55,505) (1,056) (406) -- (56,967)
Construction in progress......................... 2,143 166 -- -- 2,309
493,979 12,057 (11,691) -- 494,345
Other Long-Term Assets(1)......................... 44,400 11,003 972,059 (1,013,107) 14,355
Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets, net............ -- -- 26,001 -- 26,001
Other Intangibles................................. 8,038 3,382 16,200 -- 27,620
$ 801,632 $99,555 $1,085,424 $(1,025,131) $961,480
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable................................. $ 43,476 $ 1,107 $ 6,162 $ -- $ 50,745
Accrued expenses and other current liabilities... 63,742 1,684 96,224 -- 161,650
Current maturities of long-term debt and
capital lease obligations....................... 2,537 116 -- -- 2,653
Total Current Liabilities..................... 109,755 2,907 102,386 -- 215,048
Long-Term Debt and Capital Lease Obligations...... (258,010) 1,497 789,989 -- 533,476
Deferred Income Taxes............................. -- 647 11,733 -- 12,380
Reserve for Unpaid Claims......................... -- 54,759 57,515 (12,024) 100,250
Deferred Credits and Other Long-Term
Liabilities(1)................................... 349,146 669 67,580 (373,290) 44,105
Stockholders' Equity
Common Stock, par value $0.25 per share
Authorized - 80,000,000 shares
Issued and outstanding - 26,899,486............ 2,866 587 6,725 (3,453) 6,725
Other Stockholders' Equity
Additional paid-in capital..................... 707,744 30,455 244,339 (738,199) 244,339
Retained earnings (Accumulated deficit)........ (109,093) 7,734 (119,042) 101,359 (119,042)
Unearned compensation under ESOP............... -- -- (73,527) -- (73,527)
Warrants outstanding........................... -- -- 180 -- 180
Cumulative foreign currency adjustments........ (776) 300 (2,454) 476 (2,454)
600,741 39,076 56,221 (639,817) 56,221
Commitments and Contingencies
__________ _______ __________ ___________ ___________
$ 801,632 $99,555 $1,085,424 $(1,025,131) $ 961,480
<FN>
(1) Elimination entry related to intercompany receivables and payables and investment in consolidated subsidiaries.
The accompanying Notes to Condensed Consolidating Financial Statements are an integral part of these balance sheets.
</TABLE>
F-27
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
For the Ten Months Ended July 31, 1992
Charter
Medical
Corporation Consolidated
Guarantor Nonguarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
<S> <C> <C> <C> <C> <C>
Net revenue....................................... $ 818,308 $14,989 $(32,279) $(23,163) $ 777,855
Costs and expenses
Salaries, general and administrative
expenses....................................... 709,559 10,931 (133,727) (23,163) 563,600
Bad debt expense................................ 55,150 56 (4,803) -- 50,403
Depreciation and amortization................... 39,316 343 (4,533) -- 35,126
Interest, net................................... 2,261 84 166,928 (29) 169,244
ESOP expense.................................... 31,477 -- 2,208 29 33,714
Deferred compensation expense................... -- -- 3,190 -- 3,190
837,763 11,414 29,263 (23,163) 855,277
Income (Loss) from continuing operations
before income taxes, equity in earnings
(loss) of subsidiaries, reorganization
items and extraordinary item..................... (19,455) 3,575 (61,542) -- (77,422)
Provision for income taxes........................ 1,393 372 2,494 -- 4,259
Income (Loss) from continuing operations
before equity in earnings (loss) of subsidiaries,
reorganization items and extraordinary item...... (20,848) 3,203 (64,036) -- (81,681)
Equity in earnings (loss) of continuing
subsidiaries..................................... 614 -- (17,645) 17,031 --
Income (Loss) from discontinued operations........ 25,230 3,362 (4,381) -- 24,211
Equity in earnings (loss) of discontinued
subsidiaries..................................... -- -- 28,592 (28,592) --
Income (Loss) before reorganization items and
extraordinary item............................... 4,996 6,565 (57,470) (11,561) (57,470)
Reorganization items.............................. (206,274) -- 74,848 206,274 74,848
Extraordinary gain (loss) on early discharge of
debt............................................. (2,851) -- 730,589 2,851 730,589
Net income (loss)................................. $(204,129) $ 6,565 $747,967 $197,564 $ 747,967
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Cash provided by (used in) operating activities... $ 85,616 $ 1,897 $(10,572) $ -- $ 76,941
Cash Flows from Investing Activities:
Cash flows from discontinued operations......... 33,812 -- -- -- 33,812
Cash flows from other investing activities...... (5,506) (618) (1,365) -- (7,489)
Cash provided by (used in) investing activities... 28,306 (618) (1,365) -- 26,323
Cash Flows from Financing Activities:
Payments on debt and capital lease obligations.. (63,494) (1,160) (55,543) -- (120,197)
Cash flows from other financing activities...... 302 1,160 -- -- 1,462
Cash used in financing activities................. (63,192) -- (55,543) -- (118,735)
Net increase (decrease) in cash and cash
equivalents...................................... 50,730 1,279 (67,480) -- (15,471)
Cash and cash equivalents at beginning of period.. 45,779 1,941 120,016 -- 167,736
Cash and cash equivalents at end of period........ $ 96,509 $ 3,220 $ 52,536 $ -- $ 152,265
The accompanying Notes to Condensed Consolidating Financial Statements are an integral part of these statements.
</TABLE>
F-28
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
For the Two Months Ended September 30, 1992
Charter
Medical
Corporation Consolidated
Guarantor Nonguarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
<S> <C> <C> <C> <C> <C>
Net revenue....................................... $149,152 $ 2,281 $ (3,472) $ (5,111) $142,850
Costs and expenses
Salaries, general and administrative expenses... 136,375 (98) (23,560) (5,109) 107,608
Bad debt expense................................ 15,110 (2) (304) -- 14,804
Depreciation and amortization................... 3,731 74 (172) (2) 3,631
Amortization of reorganization value in excess
of amounts allocable to identifiable assets.... -- -- 7,167 -- 7,167
Interest, net................................... (169) 1 12,829 29 12,690
ESOP expense.................................... 4,306 -- 534 (29) 4,811
Stock option expense (credit)................... -- -- (789) -- (789)
159,353 (25) (4,295) (5,111) 149,922
Income (Loss) from continuing operations before
income taxes and equity in earnings (loss) of
subsidiaries..................................... (10,201) 2,306 823 -- (7,072)
Provision for income taxes........................ 277 625 152 -- 1,054
Income (Loss) from continuing operations before
equity in earnings (loss) of subsidiaries........ (10,478) 1,681 671 -- (8,126)
Equity in earnings (loss) of continuing
subsidiaries..................................... (413) -- (8,797) 9,210 --
Income (Loss) from discontinued operations........ 6,581 1,084 (6,735) -- 930
Equity in earnings (loss) of discontinued
subsidiaries..................................... -- -- 7,665 (7,665) --
Net income (loss)................................. $ (4,310) $ 2,765 $ (7,196) $ 1,545 $ (7,196)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Cash provided by (used in) operating activities... $ 30,049 $10,491 $ (2,180) $ -- $ 38,360
Cash Flows from Investing Activities:
Increase in assets restricted for the
settlement of unpaid claims.................... -- (11,535) (4,903) -- (16,438)
Cash flows from discontinued operations......... 10,977 -- -- -- 10,977
Cash flows from other investing activities...... (1,374) (36) (20) -- (1,430)
Cash provided by (used in) investing activities... 9,603 (11,571) (4,923) -- (6,891)
Cash Flows from Financing Activities:
Payments on debt and capital lease obligations.. (21,983) -- (20,948) -- (42,931)
Cash used in financing activities................. (21,983) -- (20,948) -- (42,931)
Net increase (decrease) in cash and cash
equivalents...................................... 17,669 (1,080) (28,051) -- (11,462)
Cash and cash equivalents at beginning of period.. 96,509 3,220 52,536 -- 152,265
Cash and cash equivalents at end of period........ $114,178 $ 2,140 $ 24,485 $ -- $140,803
The accompanying Notes to Condensed Consolidating Financial Statements are an integral part of these statements.
</TABLE>
F-29
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
For the Year Ended September 30, 1993
Charter
Medical
Corporation Consolidated
Guarantor Nonguarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
<S> <C> <C> <C> <C> <C>
Net revenue............................................. $ 922,221 $ 16,911 $ (20,514) $(20,711) $ 897,907
Costs and expenses
Salaries, general and administrative expenses......... 876,792 11,913 (227,147) (20,711) 640,847
Bad debt expense...................................... 68,086 121 (907) -- 67,300
Depreciation and amortization......................... 26,816 411 (845) -- 26,382
Amortization of reorganization value in excess
of amounts allocable to identifiable assets.......... (8) -- 42,686 -- 42,678
Interest, net......................................... (7,465) 36 81,585 -- 74,156
ESOP expense.......................................... 41,563 -- 4,311 -- 45,874
Stock option expense.................................. -- -- 38,416 -- 38,416
1,005,784 12,481 (61,901) (20,711) 935,653
Income (Loss) from continuing operations before
income taxes and extraordinary item and equity
in earnings (loss) of subsidiaries..................... (83,563) 4,430 41,387 -- (37,746)
Provision for (benefit from) income taxes............... (30,313) 520 31,667 -- 1,874
Income (Loss) from continuing operations before
extraordinary item and equity in earnings (loss)
of subsidiaries........................................ (53,250) 3,910 9,720 -- (39,620)
Equity in earnings (loss) of continuing subsidiaries.... 909 -- (49,340) 48,431 --
Discontinued operations:
Income (Loss) from discontinued operations............ 14,734 5,492 (34,929) -- (14,703)
Equity in earnings (loss) of discontinued
subsidiaries......................................... -- -- 104,402 (104,402) --
Gain (Loss) on disposal of discontinued operations.... 84,176 -- (73,519) -- 10,657
Income (Loss) before extraordinary item................. 46,569 9,402 (43,666) (55,971) (43,666)
Extraordinary loss on early extinguishment of debt...... 314 -- 8,561 (314) 8,561
Net income (loss)....................................... $ 46,255 $ 9,402 $ (52,227) $(55,657) $ (52,227)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Cash provided by (used in) operating activities......... $(404,185) $ 5,066 $ 489,077 $ -- $ 89,958
Cash Flows from Investing Activities:
Capital expenditures.................................. (10,806) (76) (219) -- (11,101)
Increase in assets restricted for the
settlement of unpaid claims.......................... -- (10,084) (4,068) -- (14,152)
Proceeds from the sale of assets...................... 342,781 5,710 5,682 -- 354,173
Cash flows from discontinued operations............... 42,487 -- -- -- 42,487
Cash provided by (used in) investing activities......... 374,462 (4,450) 1,395 -- 371,407
Cash Flows from Financing Activities:
Proceeds from the issuance of debt.................... 17,200 -- -- -- 17,200
Payments on debt and capital lease obligations........ (56,508) -- (477,434) -- (533,942)
Cash flows from other financing activities............ -- -- 576 -- 576
Cash used in financing activities....................... (39,308) -- (476,858) -- (516,166)
Net increase (decrease) in cash and cash equivalents.... (69,031) 616 13,614 -- (54,801)
Cash and cash equivalents at beginning of period........ 114,178 2,140 24,485 -- 140,803
Cash and cash equivalents at end of period.............. $ 45,147 $ 2,756 $ 38,099 $ -- $ 86,002
The accompanying Notes to Condensed Consolidating Financial Statements are an integral part of these statements.
</TABLE>
F-30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
For the Year Ended September 30, 1994
Charter
Medical
Corporation Consolidated
Guarantor Nonguarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
<S> <C> <C> <C> <C> <C>
Net revenue....................................... $ 890,737 $24,390 $ 6,931 $(17,412) $904,646
Costs and expenses
Salaries, general and administrative expenses... 794,650 21,187 (136,909) (17,412) 661,516
Bad debt expense................................ 70,856 (2) (231) -- 70,623
Depreciation and amortization................... 26,602 1,027 725 -- 28,354
Amortization of reorganization value in excess
of amounts allocable to identifiable assets.... -- -- 31,200 -- 31,200
Interest, net................................... (20,830) 21 60,203 -- 39,394
ESOP expense.................................... 46,316 -- 2,881 -- 49,197
Stock option expense............................ -- -- 10,614 -- 10,614
Unusual items................................... 787 196 70,304 -- 71,287
918,381 22,429 38,787 (17,412) 962,185
Income (Loss) from continuing operations before
income taxes, equity in earnings (loss) of
subsidiaries and extraordinary item.............. (27,644) 1,961 (31,856) -- (57,539)
Income tax benefit................................ (8,753) (195) (1,588) -- (10,536)
Income (Loss) from continuing operations before
equity in earnings (loss) of subsidiaries and
extraordinary item............................... (18,891) 2,156 (30,268) -- (47,003)
Equity in earnings (loss) of subsidiaries......... 1,889 -- (16,735) 14,846 --
Income (Loss) before extraordinary item........... (17,002) 2,156 (47,003) 14,846 (47,003)
Extraordinary item - loss on early extinguishment
or discharge of debt (net of income tax benefit
of $8,410)....................................... -- -- (12,616) -- (12,616)
Net income (loss)................................. $ (17,002) $ 2,156 $(59,619) $ 14,846 $(59,619)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Cash provided by (used in) operating activities... $ 153,152 $ 7,097 $(61,902) $ -- $ 98,347
Cash Flows from Investing Activities:
Capital expenditures............................ (14,282) (344) -- -- (14,626)
Proceeds from the sale of assets................ 11,584 -- 5,000 -- 16,584
Acquisitions of businesses...................... (129,816) (734) -- -- (130,550)
(Increase) Decrease in assets restricted for
settlement of unpaid claims.................... -- (124) 7,200 -- 7,076
Cash provided by (used in) investing activities... (132,514) (1,202) 12,200 -- (121,516)
Cash Flows from financing activities:
Proceeds from the issuance of debt.............. 25,862 -- 355,936 -- 381,798
Payments on debt and capital lease obligations.. (19,797) (45) (291,711) -- (311,553)
Cash flows from other financing activities...... -- -- (3,475) -- (3,475)
Cash provided by (used in) financing activities... 6,065 (45) 60,750 -- 66,770
Net increase in cash and cash equivalents......... 26,703 5,850 11,048 -- 43,601
Cash and cash equivalents at beginning of period.. 45,147 2,756 38,099 -- 86,002
Cash and cash equivalents at end of period........ $ 71,850 $ 8,606 $ 49,147 $ -- $129,603
The accompanying Notes to Condensed Consolidating Financial Statements are an integral part of these statements.
</TABLE>
F-31
<PAGE>
<PAGE>
14. Guarantor Condensed Consolidating Financial Statements
Notes to the Condensed Consolidating Fianncial Statements
General - These condensed consolidating financial statements reflect the
Guarantors under the Notes and the Revolving Credit Agreement consummated in
May 1994. The direct and indirect Guarantors are wholly owned by the Company
or a Guarantor Subsidiary of the Company. Separate financial statements of
the Guarantors are not presented because the Guarantors are jointly, severally
and unconditionally liable under the guarantee, and the Company believes the
condensed consolidating financial statements presented are more meaningful in
understanding the financial position of the Guarantor Subsidiaries, and the
separate financial statements are deemed not material to investors.
Distributions - There are no restrictions on the ability of the Guarantor
Subsidiaries to make distributions to the Company.
Transfers from Guarantors to Nonguarantors - The Revolving Credit
Agreement permits the Company to contribute the assets of hospitals and
related medical facilities to joint ventures that conduct a healthcare
business, provided that certain conditions are satisfied and that the
aggregate fair market value or book value, whichever is greater, of all such
facilities contributed to joint ventures with respect to which the Company and
its wholly-owned subsidiaries do not have a majority of the equity interests
or are not entitled to elect or appoint the directors, managers or trustees,
as applicable, does not exceed $100 million. Furthermore, the Revolving
Credit Agreement permits the Company and its Restricted Subsidiaries (as
defined in the Revolving Credit Agreement), subject to the satisfaction of
certain conditions, to invest up to $70 million plus the lesser of $30 million
and an amount equal to "accumulated excess cash flow" (as defined in the
Revolving Credit Agreement), of cash and other assets (other than hospitals
and related medical facilities) in subsidiaries of the Company formed to
pursue strategic investments and joint ventures in clinical services and
management information services and to invest up to $80 million in other types
of investments. The indenture related to the Notes also contains provisions
that permit the Company and its Restricted Subsidiaries (as defined in the
indenture for the Notes) to make investments in non-guarantors. The
provisions contained in the indenture are less restrictive than those
contained in the Revolving Credit Agreement and are, therefore, not relevant
to the ability of the Company and its Restricted Subsidiaries to make
investments in non-guarantors as long as the Revolving Credit Agreement is in
effect.
The Company intends to make investments in Permitted Joint Ventures (as
defined in the Revolving Credit Agreement) and Unrestricted Subsidiaries (as
defined in the Revolving Credit Agreement) to the extent it believes doing so
will be consistent with its business strategy. To the extent the Company or
its Restricted Subsidiaries make investments of the type described above, the
assets available for debt payments and guarantee obligations could be
diminished.
F-32
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY AND EQUIPMENT
(In thousands)
Balance at Retirements Other Changes Balance at
Beginning Additions and/or Add (Deduct) End of
Classification of Period at Cost Dispositions -- Describe Period
<S> <C> <C> <C> <C> <C>
Ten months ended July 31, 1992:
Land........................ $ 93,052 $ -- $ 350 816 (C) $ 101,727
(20)(E)
8,229 (B)
Buildings and improvements.. 575,877 1,227 3,540 12,848 (A) 324,534
1,781 (C)
(1,857)(E)
(261,802)(B)
Equipment................... 147,817 4,021 2,321 472 (A) 61,320
444 (C)
568 (E)
(89,681)(B)
Construction in progress.... 11,091 2,820 -- (13,320)(A) 1,632
29 (C)
1,270 (E)
(258)(B)
$ 827,837 $ 8,068 $ 6,211 $(340,481) $ 489,213
Two months ended September 30,
1992 (See Note 2):
Land........................ $ 101,727 $ -- $ -- $ 165 (C) $ 101,892
Buildings and improvements.. 324,534 469 37 436 (A) 324,921
(477)(C)
(4)(E)
Equipment................... 61,320 1,601 74 68 (A) 62,940
10 (C)
15 (E)
Construction in progress.... 1,632 160 -- (504)(A) 1,322
34 (C)
$ 489,213 $ 2,230 $ 111 $ (257) $ 491,075
Year ended September 30, 1993
Land........................ $ 101,892 $ -- $ 4,824 $ (1,251)(C) $ 95,886
69 (E)
Buildings and improvements.. 324,921 1,909 11,474 1,594 (A) 310,649
(2,182)(C)
103 (E)
(4,222)(F)
Equipment................... 62,940 6,792 3,043 1,001 (A) 67,421
(277)(C)
8 (E)
Construction in progress.... 1,322 2,400 -- (2,595)(A) 928
(116)(C)
(83)(E)
$ 491,075 $ 11,101 $19,341 $ (7,951) $ 474,884
Year ended September 30, 1994:
Land........................ $ 95,886 $ 3,729 $ 3,943 $ 701 (C) $ 96,373
Buildings and improvements.. 310,649 72,223 6,409 1,146 (A) 360,586
966 (C)
87 (E)
(18,076)(F)
Equipment................... 67,421 25,351 2,123 1,284 (A) 92,044
158 (C)
(47)(E)
Construction in progress.... 928 3,973 -- (2,430)(A) 2,309
4 (C)
(166)(E)
$ 474,884 $105,276 (G) $12,475 $ (16,373) $ 551,312
_________________
<FN>
(A) Reclassification of completed construction to property and equipment.
(B) Adjust accounts to fair value pursuant to the implementation of fresh
start accounting.
(C) Adjustment for foreign currency translation.
(D) Write-off of construction costs of discontinued projects.
(E) Property reclassifications.
(F) Adjustment to net realizable value of assets.
(G) Includes $90.4 million related to the acquisition of assets from National
Medical Enterprises, Inc.
</TABLE>
S-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY AND EQUIPMENT
(In Thousands)
Balance at Retirements Other Changes Balance at
Beginning and/or Add (Deduct) End of
Classification of Period Additions Dispositions -- Describe Period
<S> <C> <C> <C> <C> <C>
Ten months ended July 31, 1992:
Buildings and improvements.. $108,233 $14,799 $ 1,512 $ 2 (A) $ --
357 (B)
(713)(C)
(121,166)(D)
Equipment................... 74,431 12,879 1,184 70 (A) --
279 (B)
(86,475)(D)
$182,664 $27,678 $ 2,696 $(207,646) $ --
Two months ended September 30,
1992 (See Note 2):
Buildings and improvements.. $ -- $ 2,765 $ -- $ (72)(A) $ 3,399
(7)(B)
713 (C)
Equipment................... -- 920 49 43 (B) 914
$ -- $ 3,685 $ 49 $ 677 $ 4,313
Year ended September 30, 1993:
Buildings and improvements.. $ 3,399 $14,402 $ 287 $ (750)(A) $ 16,710
(21)(B)
(33)(C)
Equipment................... 914 11,980 235 750 (A) 13,388
(6)(B)
(15)(C)
$ 4,313 $26,382 $ 522 $ (75) $ 30,098
Year ended September 30, 1994:
Buildings and improvements.. $ 16,710 $15,070 $ 172 $ 72 (B) $ 31,966
286 (C)
Equipment................... 13,388 12,083 445 51 (B) 25,001
(76)(C)
$ 30,098 $27,153 $ 617 $ 333 $ 56,967
_________________
(A) Property reserve reclassifications.
(B) Adjustment for foreign currency translation.
(C) Other reclassifications and adjustments.
(D) Write-off of accumulated depreciation pursuant to the implementation of fresh start accounting.
</TABLE>
S-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Additions
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts-- Deductions-- End of
Classification of Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
Ten months ended July 31, 1992:
Allowance for doubtful
accounts.................... $30,734 $ 50,403 $15,837 (A) $ 1,540 (B) $31,095
2,513 (B) 66,852 (C)
$30,734 $ 50,403 $18,350 $ 68,392 $31,095
Two months ended September 30,
1992 (See Note 2):
Allowance for doubtful
accounts.................... $31,095 $ 14,804 $ 3,044 (A) $ 18,931 (C) $30,272
260 (B)
$31,095 $ 14,804 $ 3,304 $ 18,931 $30,272
Year ended September 30, 1993:
Allowance for doubtful
accounts................. $30,272 $ 67,300 $19,598 (A) $ 89,272 (C) $28,843
945 (B)
$30,272 $ 67,300 $20,543 $ 89,272 $28,843
Year ended September 30, 1994:
Allowance for doubtful
accounts.................... $28,843 $ 70,623 $19,877 (A) $ 109 (B) $43,555
8,560 (D) 84,239 (C)
$28,843 $ 70,623 $28,437 $ 84,348 $43,555
______________
<FN>
(A) Recoveries of amounts previously charged to income.
(B) Included in provision for restructuring of operations or reorganization items.
(C) Accounts written off.
(D) Allowance for doubtful accounts purchased in acquisitions.
</TABLE>
S-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTAL INCOME STATEMENT INFORMATION
(In thousands)
Ten Months Two Months
ended ended
July 31, September 30, Year ended September 30,
1992 1992 1993 1994
(See Note 2)
<S> <C> <C> <C> <C> <C>
Advertising costs............... $31,996 : $ 6,485 $39,393 $35,641
:
:
Amortization of reorganization :
value in excess of amounts :
allocable to identifiable :
assets......................... -- : $ 7,167 $42,678 $31,200
______________
<FN>
Certain items noted in Rule 12-11 of Regulation S-X have been excluded from the above
schedule on the basis that each is less than 1% of net revenue as reported in the related
Consolidated Statements of Operations.
</TABLE>
S-4
<PAGE>
AMENDMENT NO. 1
TO
ASSET SALE AGREEMENT
(FIRST FACILITIES)
THIS AMENDMENT NO. 1 TO ASSET SALE AGREEMENT (FIRST
FACILITIES) (this "Amendment") is entered into as of the 12th day
of September 1994 by and between NATIONAL MEDICAL ENTERPRISES,
INC., a Nevada corporation ("Seller"), and CHARTER MEDICAL
CORPORATION, a Delaware corporation ("Buyer"), with reference to
the following facts:
A. Buyer and Seller are parties to that certain Asset Sale
Agreement (First Facilities) between them dated as of March 29,
1994 (the "Asset Sale Agreement").
B. Buyer and Seller wish to amend certain of the
provisions of the Asset Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals
and the agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
1. Defined Terms (Article 1). Unless otherwise defined in
this Amendment, all capitalized terms herein shall have the
meanings given to them in the Asset Sale Agreement.
2. Purchase Price (Section 2.5). The dollar amount set
forth in Section 2.5(a) of the Asset Sale Agreement is hereby
amended to read "Ninety-One Million One Hundred Thirty-Four
Thousand Dollars ($91,134,000)."
3. Allocation of Purchase Price (Section 2.7). The
Allocation Schedule set forth in Schedule 2.7, as modified in
accordance with the second sentence of Section 2.7, shall be
further modified, as to Facilities Nos. 35, 36 and 53 as set
forth in Schedule 2.7(A), attached hereto. The Allocation
Schedule for all purposes of the Asset Sale Agreement shall be
Schedule 2.7, as modified prior to the date hereof, and as
further modified by Schedule 2.7(A).
4. Termination (Section 10.1(b)). Section 10.1(b) of the
Asset Sale Agreement is hereby amended to add, after the last
sentence thereof, the following: "Notwithstanding the foregoing,
the Termination Date as to Facilities Nos. 35, 36 and 53 shall be
October 31, 1994."
5. Efficacy. This Amendment shall become effective upon
its execution, which may occur in one or more counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Captions,
paragraph headings and introductory language used herein that do
not actually amend the Asset Sale Agreement are used herein for
<PAGE>
<PAGE>
convenience only, are not a part of the Asset Sale Agreement as
amended by this Amendment, and shall not be used in construing
the Asset Sale Agreement as amended by this Amendment. Each
reference to the Asset Sale Agreement in any Related Agreement,
whether or not accompanied by a reference to this Amendment,
shall be deemed a reference to the Asset Sale Agreement as
amended by this Amendment.
IN WITNESS WHEREOF, the parties have duly executed this
Amendment No. 1 to the Asset Sale Agreement as of the date first
above written.
Buyer:
CHARTER MEDICAL CORPORATION
By: /s/ Lawrence W. Drinkard
Name: Lawrence W. Drinkard
Title: Exec. V.P. and C.F.O.
Seller:
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Donald W. Thayer
Name: Donald W. Thayer
Title: Vice President
<PAGE>
<PAGE>
AMENDMENT NO. 1
TO
ASSET SALE AGREEMENT
(SUBSEQUENT FACILITIES)
THIS AMENDMENT NO. 1 TO ASSET SALE AGREEMENT (SUBSEQUENT
FACILITIES) (this "Amendment") is entered into as of the 12th day of
September 1994 by and between NATIONAL MEDICAL ENTERPRISES, INC., a
Nevada corporation ("Seller"), and CHARTER MEDICAL CORPORATION, a
Delaware corporation ("Buyer"), with reference to the following facts:
A. Buyer and Seller are parties to that certain Asset Sale
Agreement (Subsequent Facilities) between them dated as of March 29,
1994 (the "Asset Sale Agreement").
B. Buyer and Seller wish to amend certain of the provisions of
the Asset Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Defined Terms (Article 1). Unless otherwise defined in this
Amendment, all capitalized terms herein shall have the meanings given to
them in the Asset Sale Agreement. The "Subsequent Facilities" or the
"Facilities", as set forth in Recital A of the Asset Sale Agreement
shall be limited to the following:
NME No. Name City State
4. Los Altos Hospital & Medical Center Long Beach CA
6. Yorba Hills Hospital and Mental
Health Center Yorba Linda CA
11. Bay Harbor Residential Treatment Center Largo FL
14. Medfield Hospital Largo FL
15. Laurel Heights Hospital Atlanta GA
17. Brawner Midtown Mental Health System Atlanta GA
18. Arbor Hospital of Greater Indianapolis Indianapolis IN
19. Jefferson Hospital Jeffersonville IN
37. Northbrooke Hospital Brown Deer WI
38. New Beginnings at Lakewood Lakewood CA
50. Fenwick Hall Johns Island SC
2. Purchase Price (Section 2.5). The dollar amount set forth in
Section 2.5(a) of the Asset Sale Agreement is hereby amended to read
"Thirty-One Million Sixty Thousand Dollars ($31,060,000)."
3. Allocation of Purchase Price (Section 2.7). The Allocation
Schedule set forth in Schedule 2.7, as modified prior to the date
hereof, shall be further modified as set forth in Schedule 2.7(A)
attached hereto. The Allocation Schedule for all purposes of the Asset
Sale Agreement shall be Schedule 2.7, as modified prior to the date
<PAGE>
<PAGE>
hereof, and as further modified by Schedule 2.7(A).
C. Efficacy. It is the intent of the parties hereto that
Section 1 of this Amendment shall operate to rescind the Asset Sale
Agreement as it relates to the following facilities which were
originally included in such Asset Sale Agreement:
NME No. Name City State
13. Laurel Oaks Hospital Orlando FL
16. Brawner South Mental Health System Stockbridge GA
32. MidSouth Hospital Memphis TN
34. Psychiatric Institute of Richmond Richmond VA
42. Brawner North Mental Health System Smyrna GA
59. Laurel Oaks Residential Treatment Center Orlando FL
This Amendment shall become effective upon its execution, which
may occur in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Captions, paragraph headings and introductory language used
herein that do not actually amend the Asset Sale Agreement are used
herein for convenience only, are not a part of the Asset Sale Agreement
as amended by this Amendment, and shall not be used in construing the
Asset Sale Agreement as amended by this Amendment. Each reference to
the Asset Sale Agreement in any Related Agreement, whether or not
accompanied by a reference to this Amendment, shall be deemed a
reference to the Asset Sale Agreement as amended by this Amendment.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Amendment
No. 1 to Asset Sale Agreement as of the date first above written.
Buyer:
CHARTER MEDICAL CORPORATION
By: /s/ Lawrence W. Drinkard
Name: Lawrence W. Drinkard
Title: Exec. V.P. and C.F.O.
Seller:
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Donald W. Thayer
Name: Donald W. Thayer
Title: Vice President
<PAGE>
<PAGE>
AMENDMENT NO. 2
TO
ASSET SALE AGREEMENT
(SUBSEQUENT FACILITIES)
THIS AMENDMENT NO. 2 TO ASSET SALE AGREEMENT (SUBSEQUENT
FACILITIES) (this "Amendment") is entered into as of the 29th day of
September 1994 by and between NATIONAL MEDICAL ENTERPRISES, INC., a
Nevada corporation ("Seller"), and CHARTER MEDICAL CORPORATION, a
Delaware corporation ("Buyer"), with reference to the following facts:
A. Buyer and Seller are parties to that certain Asset Sale
Agreement (Subsequent Facilities) between them dated as of March 29,
1994, as amended by that certain Amendment No. 1 to Asset Sale Agreement
(Subsequent Facilities) dated as of September 12, 1994 (the "Asset Sale
Agreement").
B. Buyer and Seller wish to amend further certain of the
provisions of the Asset Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Defined Terms (Article 1). Unless otherwise defined in this
Amendment, all capitalized terms herein shall have the meanings given to
them in the Asset Sale Agreement.
2. Buyer's Conditions to Closing (Section 8.5). Subsection
8.5(c)(ii)(C) is hereby amended by adding the following parenthetical
phrase immediately after the first use of the phrase "written agreement"
and immediately prior to the phrase "which would resolve."
(or if an agreement is required of only one
party, then such agency and such party)
3. Seller's Conditions to Closing (Section 9.5). Subsection
9.5(c)(ii)(C) is hereby amended by adding the following parenthetical
phrase immediately after the first use of the phrase "written agreement"
and immediately prior to the phrase "which would resolve:"
(or if an agreement is required of only one
party, then such agency and such party)
4. Termination (Section 10.1). The second sentence of Section
10.1(b) is hereby amended to read as follows:
The Termination Date for the First Closing shall
be September 1, 1994, unless on or prior to such
date there has been a "First Closing" under the
<PAGE>
<PAGE>
First Facilities Agreement, in which case, the
Termination Date for the First Closing under this
Agreement shall be October 15, 1994, and the
Termination Date for all other Closings under
this Agreement shall be October 31, 1994.
5. Efficacy. This Amendment shall become effective upon its
execution, which may occur in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument. Captions, paragraph headings and
introductory language used herein that do not actually amend the Asset
Sale Agreement are used herein for convenience only, are not a part of
the Asset Sale Agreement as amended by this Amendment, and shall not be
used in construing the Asset Sale Agreement as amended by this
Amendment. Each reference to the Asset Sale Agreement in any Related
Agreement, whether or not accompanied by a reference to this Amendment,
shall be deemed a reference to the Asset Sale Agreement as amended by
this Amendment.
IN WITNESS WHEREOF, the parties have duly executed this Amendment
No. 2 to Asset Sale Agreement as of the date first above written.
Buyer:
CHARTER MEDICAL CORPORATION
By: /s/ Lawrence W. Drinkard
Name: Lawrence W. Drinkard
Title: Exec. V.P. and C.F.O.
Seller:
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Donald W. Thayer
Name: Donald W. Thayer
Title: Vice President
<PAGE>
AMENDMENT NO. 3
TO
ASSET SALE AGREEMENT
(SUBSEQUENT FACILITIES)
THIS AMENDMENT NO. 3 TO ASSET SALE AGREEMENT (SUBSEQUENT
FACILITIES) (this "Amendment") is entered into as of the 15th day
of November 1994 by and between NATIONAL MEDICAL ENTERPRISES,
INC., a Nevada corporation ("Seller"), and CHARTER MEDICAL
CORPORATION, a Delaware corporation ("Buyer"), with reference to
the following facts:
A. Buyer and Seller are parties to that certain Asset Sale
Agreement (Subsequent Facilities) between them dated as of March
29, 1994, as amended by that certain Amendment No. 1 to Asset
Sale Agreement (Subsequent Facilities) dated as of September 12,
1994 and by that certain Amendment No. 2 to Asset Sale Agreement
(Subsequent Facilities) dated as of September 29, 1994 (the
"Asset Sale Agreement").
B. Buyer and Seller wish to amend further certain of the
provisions of the Asset Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals
and the agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
1. Defined Terms (Article 1). Unless otherwise defined in
this Amendment, all capitalized terms herein shall have the
meanings given to them in the Asset Sale Agreement.
2. Purchase Price (Section 2.5). In the first sentence of
Section 2.5, in clause "(a)," the amount of "Fifty-Two Million
Four Hundred Two Thousand Dollars ($52,402,000)" is hereby
deleted and the following is inserted in its place:
Twenty-Six Million Two Hundred Seventy
One Thousand Dollars ($26,271,000).
3. Termination (Section 10.1). The second sentence of
Section 10.1(b) is hereby amended to read as follows:
The Termination Date for the First Closing
shall be September 1, 1994, unless on or
prior to such date there has been a "First
Closing" under the First Facilities Agreement,
in which case, the Termination Date for all
Closings under this Agreement shall be
November 30, 1994.
4. Efficacy. This Amendment shall become effective upon
its execution, which may occur in one or more counterparts, each
<PAGE>
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Captions,
paragraph headings and introductory language used herein that do
not actually amend the Asset Sale Agreement are used herein for
convenience only, are not a part of the Asset Sale Agreement as
amended by this Amendment, and shall not be used in construing
the Asset Sale Agreement as amended by this Amendment. Each
reference to the Asset Sale Agreement in any Related Agreement,
whether or not accompanied by a reference to this Amendment,
shall be deemed a reference to the Asset Sale Agreement as
amended by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Amendment No. 3 to Asset Sale Agreement (Subsequent Facilities)
as of the date first above written.
Buyer:
CHARTER MEDICAL CORPORATION
BY: /s/ Lawrence W. Drinkard
Name: Lawrence W. Drinkard
Title: Exec. V.P. and C.F.O.
Seller:
NATIONAL MEDICAL ENTERPRISES, INC.
BY: /s/ Donald W. Thayer
Name: Donald W. Thayer
Title: Vice President
<PAGE>
<PAGE>
BYLAWS
OF
CHARTER MEDICAL CORPORATION
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Macon, State of Georgia, at such place
as may be fixed from time to time by the Board of Directors, or at such other
place either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the last
Thursday of January if not a legal holiday, and if a legal holiday then on the
next secular day following, at 11:00 A.M., or at such other date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which the stockholders shall elect members of
the Board of Directors and transact such other business as may properly be
brought before the meeting. Election of directors need not be by written
ballot.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, or cause to be prepared and made, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
<PAGE>
<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called only by the affirmative vote of a majority of the
Board of Directors.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the shares of all classes of
stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented any business may be transacted which might have been transacted
at the meeting as originally notified. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 9. Except as provided in Section 3 of Article III of these
Bylaws, or unless the question is one upon which, by express provision of
statute or the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of
such question, (1) when a quorum is present at any meeting of stockholders,
the vote of the holders of a majority of the voting power of the shares of all
classes of stock having voting power present in person or represented by proxy
shall decide any question brought before such meeting, and (2) in voting on
such questions, every stockholder of record who is entitled to vote shall be
entitled to one vote for each share of stock held by him on the record date
for such meeting.
Section 10. Except as otherwise provided by law or by the certificate of
incorporation, the holders of shares of all classes of stock shall have the
right to vote, in person or by proxy, together on all matters to come before a
meeting of the stockholders.
Section 11. No proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
corporation generally. In the event that any proxy shall designate two or more
persons to act as proxies, a majority of such persons present at the meeting,
or if only one be present that one, shall have all of the powers conferred by
the proxy upon all of the persons so designated unless the proxy shall
otherwise provide.
<PAGE>
<PAGE>
Section 12. The stockholders may not take any actions required to be
taken at an annual or special meeting of the stockholders, or any actions
which may be taken at an annual meeting or special meeting of the
stockholders, by written consent in lieu of a meeting.
Section 13. The Board of Directors, in advance of any meeting of the
stockholders of the Corporation, shall appoint one or more inspectors of
elections to act at such meeting, and any adjournment thereof. In case any
person who has been designated as an inspector of elections fails to appear or
act, the vacancy may be filled by an alternate appointed by the Board, in
advance of the meeting, or at the meeting by the person presiding thereat. An
inspector, before entering upon discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability. The inspector or inspectors so
appointed shall perform the duties required by Section 231 of the Delaware
General Corporation Law.
Section 14. The Chairman of the Board of Directors, or in his absence
the President, shall serve as Chairman of every stockholders' meeting unless
some other person is elected to serve as Chairman by a majority vote of the
voting power of the shares represented at the meeting. The Chairman shall
appoint the Secretary of the corporation, or in his absence an Assistant
Secretary, as Secretary of every stockholders' meeting and such other persons
as he deems required to assist with the meeting.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be eight. A change in the number of directors shall only occur by
an affirmative vote of at least seventy-five percent (75%) of the issued and
outstanding shares of the corporation entitled to vote thereon cast at a
meeting of the stockholders called for such purpose. The Board of Directors
shall be divided into three classes, as nearly equal in numbers as the then
total number of directors constituting the whole Board permits, with the term
of office of one class expiring each year. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Sections 2 and 3
of this Article, and each director elected shall hold office until his
successor is elected and qualifies. Directors need not be stockholders or a
resident of the State of Delaware.
Section 2. Any vacancies in the Board of Directors for any reason, and
any newly created directorships resulting from any increase in the authorized
number of directors, may be filled by a majority of the directors then in
office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next election of the
respective class or classes for which such directors shall have been chosen
and until their successors are duly elected and shall qualify, unless sooner
displaced. If there are no directors in office, then an election of directors
may be held in the manner provided by statute.
Section 3. Notwithstanding any other provision of these Bylaws (and
notwithstanding the fact that some lesser percentage may be specified by law),
any director or the entire Board of Directors of the corporation may be
removed from office at any time, but only (i) for cause by the affirmative
<PAGE>
<PAGE>
vote of the holders of a majority of the issued and outstanding shares of the
capital stock of the corporation entitled to vote thereon cast at a meeting of
the stockholders called for that purpose, or (ii) without cause by the
affirmative vote of the holders of at least seventy-five percent (75%) of the
issued and outstanding shares of capital stock of the corporation entitled to
vote thereon cast at a meeting of the stockholders called for that purpose.
Section 4. The business of the corporation shall be managed by its Board
of Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware. The
Board of Directors shall appoint from its members a Chairman of the Board of
Directors who shall preside at all meetings of the stockholders and the Board
of Directors. In the absence of the Chairman of the Board of Directors from a
meeting of the Board of Directors, the Board of Directors shall appoint from
its members, by a majority vote of all directors constituting a quorum,
another director who shall preside at such meeting. The Chairman of the Board
of Directors may but need not be an officer of or employed in an executive or
any other capacity by the corporation.
Section 6. A meeting of the Board of Directors shall be held immediately
following the annual meeting of stockholders at the same place as such annual
meeting or, in the alternative, at such time and place as shall be fixed by
the vote of the stockholders at the annual meeting. No notice of such meeting
shall be necessary, provided a quorum shall be present. In the event such
meeting is not held at the time and place determined under the preceding
sentence, the meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
directors.
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 8. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the President, or a majority of the
directors then in office (a) by written notice mailed to each director first
class postage prepaid, not later than the fifth day before the meeting, or (b)
by either written or oral notice given personally or by telephone or other
means of electronic communication, in which case the meeting may be held as
soon after such notice is given as a quorum shall be assembled at the place of
the meeting or by telephone conference call, unless another time shall be
specified in the notice.
Section 9. At all meetings of the Board of Directors, a majority of the
directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
<PAGE>
<PAGE>
incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting
of the board of directors, or any committee, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, by resolution adopted by a
majority of the whole Board of Directors, appoint three or more of its members
to constitute an Executive Committee which to the extent provided by the Board
of Directors shall have and exercise all of the authority of the Board of
Directors, except as otherwise provided by law, in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it. All action taken
by the Executive Committee shall be reported to the Board of Directors at its
first meeting thereafter.
The Board of Directors may also from time to time by resolution passed
by a majority of the whole Board appoint other committees, consisting of one
or more members, from among its members; and such committee or committees
shall have such powers and duties as the Board of Directors may from time to
time prescribe.
Unless otherwise provided by the Board of Directors, a majority of the
members of any committee appointed by the Board of Directors pursuant to this
Section 12 shall constitute a quorum at any meeting thereof and the act of a
majority of the members present at a meeting at which a quorum is present
shall be the act of such committee. Action may be taken by any such committee
without a meeting by a writing as provided in Section 10 of this Article III.
Any such committee shall, subject to any rules prescribed by the Board of
Directors, prescribe its own rules for calling, giving notice of and holding
meetings and its method of procedure at such meetings and shall keep a written
record of all action taken by it.
Section 13. Each committee shall keep regular minutes of its meetings
and periodically report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 14. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
<PAGE>
<PAGE>
sum for attendance at each meeting of the Board of Directors or a stated
salary as director or a combination thereof. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records
of the corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given as provided in Section 8 of
Article III.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
Notice of all stockholders' meetings, whether annual or special, shall
be given in writing and may be given by the Chairman of the Board of Directors
or the Secretary (or in case of their refusal, by the person or persons
entitled to call meetings under the provisions of these Bylaws). The notice
shall state the general nature of the business to be transacted at the meeting
and the place, day and hour thereof. If such notice is mailed or telegraphed,
it shall be deemed to have been given when deposited in the United States mail
or with a telegraph office for transmission, as the case may be. If any
meeting is adjourned to another time or place, no notice as to such adjourned
meeting or of the business to be transacted thereat need be given other than
by announcement at the meeting at which such adjournment is given, except as
otherwise expressly provided in Section 8 of Article II.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors and shall be a President, a Vice President, a Secretary and a
Treasurer. The Board of Directors may also choose additional Vice Presidents,
and one or more Assistant Secretaries and Assistant Treasurers.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a President, one or more Vice Presidents,
a Secretary and a Treasurer, or shall continue the incumbents in office.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
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Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors or by a duly authorized committee.
Section 5. Each officer of the Corporation shall hold office until the
earliest to occur of (a) his successor is elected and qualifies, (b) death or
retirement of such officer, (c) resignation of such officer or (d) removal of
such officer in the manner provided by these bylaws. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors or, in the case of
all officers except the President, by the President. Any vacancy occurring in
any office of the Corporation and all newly created officer positions shall be
filled by the Board of Directors.
PRESIDENT
Section 6. The President shall be and perform the duties and
responsibilities of the Chief Executive Officer of the corporation and as such
shall have general supervision and control over all the affairs of the
corporation, its officers and employees. The President may, but need not, be
designated the Chief Operating Officer of the corporation. The President shall
report to the Board of Directors regarding the affairs of the corporation and
shall have such other duties and powers as may be assigned to or vested in him
from time to time by the Board of Directors or by the Executive Committee and
as prescribed by these Bylaws.
Section 7. The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors or the Executive Committee to some other officer or agent of the
corporation.
THE VICE PRESIDENTS
Section 8. The Vice President, or if there shall be more than one the
Vice Presidents, shall perform such duties and have such powers as the Board
of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record or cause to be
recorded all the proceedings of the meetings of the corporation and of the
Board of Directors in a book to be kept for that purpose and shall perform
like duties for the standing committees when required. He shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings
of the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or Chairman of the Board of Directors,
under whose supervision he shall be. He shall have custody of the corporate
seal of the corporation, and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it; when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
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Section 10. The Assistant Secretary, or if there be more than one the
Assistant Secretaries in the order determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 11. The Treasurer shall have custody of the corporate funds and
securities, shall together with the Controller keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
Section 12. The Treasurer and Controller shall disburse the funds of the
corporation as may be ordered by the Board of Directors, and shall render to
the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of the financial condition of the
corporation.
Section 13. The Assistant Treasurer, or if there shall be more than one
the Assistant Treasurers in the order determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe. Any one or more of the duties of the Treasurer may be delegated by
the Board of Directors to the Controller, an Assistant Treasurer or any other
officer of the corporation.
BONDS
Section 14. If required by the Board of Directors, any officer shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the corporation, in
case of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation.
ARTICLE VI
CERTIFICATES FOR SHARES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation, by the
Chairman of the Board of Directors, the President or a Vice President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares of capital stock
of the corporation owned by him in the corporation.
Section 2. If the corporation shall be authorized to issue more than one
class of stock, or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the
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certificate which the corporation shall issue to represent such class of
stock; provided, however, that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements
there may be set forth on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests, the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 3. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) a registrar, the signature of any such officer
may be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of
such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, in each
case with signatures guaranteed, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
FIXING OF RECORD DATE
Section 6. The Board of Directors shall fix in advance a date, not less
than ten nor more than sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining a
consent, as a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting, and any adjournment thereof,
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or entitled to receive payment of any such dividend, or to any such allotment
of rights, or to exercise the rights in respect of any such change, conversion
or exchange of capital stock, or to give such consent, and in such case such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment
of rights, or to exercise such rights, or to give such consent, as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
INDEMNIFICATION
Section l. Actions Not By Or In The Right Of The Corporation. The
corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer or employee of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Actions By Or In The Right Of The Corporation. The
corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer or employee of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
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in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
Section 3. Indemnification Where Director or Officer Successfully
Defends Action. To the extent that a director, officer or employee of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections l and 2 of this Article
VII, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 4. Determinations Required Prior To Indemnification. Except as
provided in Section 3 of this Article VII and except as may be ordered by a
court, any indemnification under Sections 1 and 2 of this Article VII shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer or employee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 1 and 2 of this Article VII, as the case may be.
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
Section 5. Advances. Expenses (including attorney's fees) incurred by an
officer or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Article. Such expenses
(including attorney's fees) incurred by other employees may be so paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 6. General. The indemnification and advancement of expenses
provided by or granted pursuant to these Bylaws shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be or shall become entitled under any agreement, vote of
stockholders or disinterested directors or otherwise, both as to actions in an
official capacity and as to actions in another capacity while holding such
office.
Section 7. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
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indemnify him against such liabilities under the certificate of incorporation,
the provisions of these Bylaws or under the provisions of the General
Corporation Law of the State of Delaware.
Section 8. The Corporation. For purposes of this Article VII, references
to "the corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers and employees, so that any person who is or was a director, officer
or employee of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer or employee of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article VII with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
Section 9. Employee Benefit Plans. For purposes of this Article VII,
references to "other enterprises" shall include employee benefit plans; the
reference to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer or employee with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this Article VII.
Section 10. Continuation. The indemnification and advancement of
expenses provided by, or granted pursuant to, these Bylaws shall continue as
to a person who has ceased to be a director, officer or employee and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Future Amendments. In the event of any amendment or addition
to Section 145 of the General Corporation Law of the State of Delaware or the
addition of any other section of such law with regard to indemnification, the
corporation shall indemnify to the fullest extent authorized or permitted by
such then-existing General Corporation Law of the State of Delaware, as
amended, any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of the corporation), by reason of the fact that he is or was a
director, officer or employee of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding.
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Board of Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting, of the stockholders when called for by vote of the
stockholders a concise statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be determined by the
Board of Directors, and shall be from October 1 through September 30, unless
otherwise determined by the Board of Directors.
SEAL
Section 6. The corporate seal shall be in the form prescribed by the
Board of Directors. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
MISCELLANEOUS
Section 7. Unless otherwise ordered by the Board of Directors, the
President, any Vice President, the Secretary, any Assistant Secretary or the
Treasurer in person or by proxy appointed by any of them shall have full power
and authority on behalf of the corporation to vote, act and consent with
respect to any shares of stock issued by other corporations which the
corporation may own or as to which the corporation has the right to vote, act
or consent.
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ARTICLE IX
AMENDMENTS
These Bylaws may be altered or repealed at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if such notice of such alteration or
repeal be contained in the notice of such special meeting. No Bylaw adopted by
vote of the stockholders shall be subject to amendment by the Board of
Directors if such Bylaw so provides. Notwithstanding the foregoing, neither
Sections 5 nor 12 of Article II may be amended, altered, changed or repealed
except by the affirmative vote of the holders of at least seventy-five percent
(75%) of the issued and outstanding shares of capital stock of the Corporation
entitled to vote thereon cast at a meeting of the stockholders called for that
purpose.
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AMENDMENT NO. 2
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 2 dated as of September 30, 1994 (this "Amendment")
to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 2, 1994
(as amended by Amendment No. 1 thereto dated as of June 9, 1994, the "Credit
Agreement"), each among CHARTER MEDICAL CORPORATION, a Delaware corporation
(the "Company"), the banking and other financial institutions from time to
time party thereto (the "Lenders"), BANKERS TRUST COMPANY, as agent for the
Lenders, and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Co-Agent.
Capitalized terms used herein and not defined herein shall have the respective
meanings set forth for such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Company has requested that the Credit Agreement be
amended to, among other things: (a) permit the Company and its Wholly-Owned
Restricted Subsidiaries to lease Facilities from time to time to Permitted
Joint Ventures in which it or any of its Wholly-Owned Restricted Subsidiaries
has an equity interest; (b) permit a Wholly-Owned Restricted Subsidiary to be
converted into a Permitted Joint Venture by, among other things, issuing
shares of its capital stock to, or merging or consolidating with, a
third-party and (c) obligate the Agent to release (i) in connection with the
conversion of any series of Variable Rate Notes into fixed rate notes, the
Liens granted the Collateral Agent on the Facility that was financed with such
series of Variable Rate Notes, and (ii) in connection with the conversion of
any Wholly-Owned Restricted Subsidiary into a Permitted Joint Venture, such
Wholly-Owned Restricted Subsidiary from the Subsidiary Guaranty and its
property and assets from the Liens of the Security Documents; and
WHEREAS, subject to and upon certain terms and conditions, the
Lenders party hereto are willing to permit the foregoing;
NOW THEREFORE, the parties hereto hereby agree as follows:
Section 1. Amendments to Credit Agreement. The Credit Agreement is
hereby amended as follows:
(a) Section 6.16 of the Credit Agreement is amended by inserting
the parenthetical "(except, in the case of Permitted Joint Ventures that are
Restricted Subsidiaries, to the extent disclosed to the Agent in writing)"
after the word "has" in the second line of the last sentence of such Section.
(b) Section 7.1(e) of the Credit Agreement is amended by (i)
renumbering clause (v) thereof as "(vii)", and (ii) inserting the following
after clause (iv) thereof:
", (v) without duplication of the requirements of the preceding clause
(iv), a description in reasonable detail of each Permitted JV
Transaction entered into during such Report Period, the parties thereto
and the properties and assets subject thereto, the material terms
thereof, whether the Company and its Wholly-Owned Restricted
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Subsidiaries have a Controlling Interest in the Permitted Joint Venture
resulting therefrom and, if such Permitted JV Transaction involved the
lease or sublease of a Facility to a Permitted Joint Venture pursuant to
Section 8.2(i), the amount of the annual base rentals to be paid to the
Company and its Wholly-Owned Restricted Subsidiaries under such lease or
sublease, (vi) a description in reasonable detail of each amendment and
other modification entered into during such Report Period to any lease
or sublease of a Facility entered into pursuant to Section 8.2(i),".
(c) Section 8.1(g) of the Credit Agreement is amended by inserting
"on assets (other than a VRN Facility)" after the word "Liens" in the first
line thereof.
(d) Section 8.2(d) of the Credit Agreement is amended by inserting
the following after the semi-colon (";") ending such Section:
"provided that the foregoing provisions of this Section 8.2(d) shall not
permit the Company or any of its Restricted Subsidiaries to sell or
otherwise dispose of pursuant to any transaction any equity interests
(including, without limitation, any warrants, options or other rights to
acquire equity interests) in any Restricted Subsidiary unless either (A)
all of the equity interests in such Restricted Subsidiary that are owned
by the Company and its Restricted Subsidiaries are simultaneously sold
to Persons other than the Company and any of its Subsidiaries, or (B)
after giving effect to such transaction the Restricted Subsidiary whose
equity securities are the subject thereof is a Wholly-Owned Restricted
Subsidiary;".
(e) Section 8.2(e) of the Credit Agreement is amended by (i)
deleting the parenthetical "(except for a contribution permitted by Section
8.8 of a Facility and its related working capital to a Permitted Joint
Venture)" from clause (iv) thereof, and (ii) inserting the following after the
semi-colon (";") ending such Section:
"provided that the foregoing provisions of this Section 8.2(e) shall not
permit the Company or any of its Restricted Subsidiaries to sell
pursuant to any transaction any equity interests (including, without
limitation, any warrants, options or other rights to acquire equity
interests) in any Restricted Subsidiary unless either (A) all of the
equity interests in such Restricted Subsidiary that are owned by the
Company and its Restricted Subsidiaries are simultaneously sold to
Persons other than the Company and any of its Subsidiaries, or (B) after
giving effect to such transaction the Restricted Subsidiary whose equity
securities are the subject thereof is a Wholly-Owned Restricted
Subsidiary;".
(f) Section 8.2 of the Credit Agreement is further amended by (i)
deleting the word "and" at the end of paragraph (g) thereof, (ii) replacing
the period (".") at the end of paragraph (h) thereof with a semi-colon (";"),
and (iii) inserting the following after such semi-colon:
"(i) so long as no Default or Event of Default has occurred
and is continuing or would result therefrom, the Company and its
Wholly-Owned Restricted Subsidiaries may enter into a lease or sublease
of Facilities to Permitted Joint Ventures; provided that no such
entering into of a lease or sublease of a Facility to a Permitted Joint
Venture shall be permitted unless:
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(i) the Minimum Income Tests and Debt Service Coverage Tests
are satisfied with respect thereto;
(ii) after giving effect to the entering into of such lease
or sublease the Company or such Wholly-Owned Restricted Subsidiary, as
the case may be, shall have a Controlling Interest in such Permitted
Joint Venture (or the additional requirements in clause (v) below shall
be satisfied);
(iii) such Permitted Joint Venture is not restricted by its
governing documents or otherwise from making cash distributions to the
Company or such Wholly-Owned Restricted Subsidiary, as the case may be;
(iv) the Company, its Restricted Subsidiaries and the
Collateral Agent are insured with respect to the leased or subleased
Facility and the businesses conducted thereon (either directly or as
named additional insureds on insurance obtained by the lessee or
sublessee of such Facility) in the manner and to the extent required by
Section 7.3 as fully as if such property had not been leased or
subleased to a Permitted Joint Venture;
(v) after giving effect to the entering into of such lease
or sublease, (A) the Company or a Wholly-Owned Restricted Subsidiary
owns common stock of, or a partnership interest or other equity
interests of a substantially similar nature in, such Permitted Joint
Venture, and (B) the aggregate Deemed Value of all Facilities subject to
Limited Permitted JV Transactions after the Closing Date does not exceed
$100,000,000;
(vi) the Board of Directors of the Company determines in
good faith that the business purpose achieved by such lease or sublease
renders the terms of such lease or sublease, taking into account the
other terms of such Permitted JV Transaction, reasonable, and, if the
Deemed Value of such Facility exceeds $25,000,000, the Company has
received an opinion from a nationally recognized investment banking firm
that such lease or sublease, taking into account the other terms of such
Permitted JV Transaction, is fair to the Company from a financial point
of view;
(vii) such lease or sublease contains an environmental
indemnity that is either in form and substance substantially similar to
Section 5.11(f) of the Mortgages or otherwise reasonably satisfactory to
the Agent with respect to acts and omissions occurring on or after the
effective date of such lease or sublease, which indemnity shall be made
by such Permitted Joint Venture in favor of the lessor or sublessor, as
applicable, of such Facility and the Company; and
(viii) the Company complies with Section 4.2(a) or (c), as
the case may be;
(j) so long as no Default or Event of Default has occurred
and is continuing or would result therefrom, a Restricted Subsidiary may
merge with or into, or consolidate with, any Person or Persons other
than the Company or a Subsidiary thereof in order to convert such
Restricted Subsidiary into a Permitted Joint Venture (other than a
Wholly-Owned Restricted Subsidiary) between the owners of such Person or
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Persons and the Company or a Wholly-Owned Restricted Subsidiary;
provided that (i) the Board of Directors of the Company determines in
good faith that the business purpose achieved by such merger or
consolidation renders the terms of such merger or consolidation
reasonable, and, if the aggregate Deemed Value of the assets of the
Restricted Subsidiary party to such merger or consolidation exceeds
$25,000,000, the Company has received an opinion from a nationally
recognized investment banking firm that such merger or consolidation is
fair to the Company from a financial point of view; (ii) the Company
complies with Section 4.2(a) or (c), as the case may be; (iii) the
Collateral Agent has pursuant to the Security Documents or other
security agreements reasonably satisfactory to the Agent a perfected
first priority Lien on any non-cash consideration (including, without
limitation, equity interests in the surviving Person of such merger or
consolidation) received by the Company or any of its Restricted
Subsidiaries (other than the Restricted Subsidiary that is a party to
such merger or consolidation) in connection with the consummation of
such merger or consolidation, other than notes and similar instruments
having, in the aggregate for such merger or consolidation, a principal
amount of less than $500,000; (iv) the Minimum Income Tests and Debt
Service Coverage Tests are satisfied with respect thereto at the time of
such merger or consolidation; (v) the surviving Person of such merger or
consolidation is not restricted by its governing documents or otherwise
from making cash distributions to the Company or such Wholly-Owned
Restricted Subsidiary; (vi) after giving effect to such merger or
consolidation, the aggregate Deemed Value of all Facilities subject to
Limited Permitted JV Transactions after the Closing Date does not exceed
$100,000,000; (vii) after giving effect to such merger or consolidation,
the sum of (A) the aggregate Deemed Value of property and other assets
(other than Facilities) subject to Limited Permitted JV Transactions
after the Closing Date, (B) the then Outstanding JV Credit Amount, and
(C) the aggregate amount of Investments outstanding pursuant to Section
8.8(r) does not exceed the then maximum amount of Investments permitted
to be outstanding pursuant to Section 8.8(r); and (viii) the Company or
a Wholly-Owned Restricted Subsidiary receives in connection therewith
common stock of, or a partnership interest or other equity interests of
a substantially similar nature in, the surviving Person of such merger
or consolidation;
(k) so long as no Default or Event of Default has occurred
and is continuing or would result therefrom, the Company or any
Restricted Subsidiary may sell less than all of the shares of capital
stock it owns of any of its Subsidiaries to any Person or Persons other
than the Company or a Subsidiary thereof in order to convert such
Subsidiary into a Permitted Joint Venture between such Person or Persons
and the Company or a Wholly-Owned Restricted Subsidiary; provided that
(i) the Board of Directors of the Company determines in good faith that
the business purpose achieved by such sale renders the terms of such
sale reasonable, and, if the aggregate Deemed Value of the assets of the
Subsidiary whose shares of capital stock are being sold exceeds
$25,000,000, the Company has received an opinion from a nationally
recognized investment banking firm that such sale is fair to the Company
from a financial point of view; (ii) the Company complies with Section
4.2(a) or (c), as the case may be; (iii) the Collateral Agent has
pursuant to the Security Documents or other security agreements
reasonably satisfactory to the Agent a perfected first priority Lien on
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any non-cash proceeds received by the Company or any of its Restricted
Subsidiaries (other than the Restricted Subsidiary whose stock is being
sold) in connection with the consummation of such sale, other than notes
and similar instruments having, in the aggregate for such sale, a
principal amount of less than $500,000; (iv) the Minimum Income Tests
and Debt Service Coverage Tests are satisfied with respect thereto at
the time of such sale; (v) after giving effect to such sale, such
Permitted Joint Venture is not restricted by its governing documents or
otherwise from making cash distributions to the Company or such
Wholly-Owned Restricted Subsidiary; (vi) after giving effect to such
sale, the aggregate Deemed Value of all Facilities subject to Limited
Permitted JV Transactions after the Closing Date does not exceed
$100,000,000; and (vii) after giving effect to such sale, the sum of (A)
the aggregate Deemed Value of all property and other assets (other than
Facilities) subject to Limited Permitted JV Transactions after the
Closing Date, (B) the then Outstanding JV Credit Amount, and (C) the
aggregate amount of Investments outstanding pursuant to Section 8.8(r)
does not exceed the then maximum amount of Investments permitted to be
outstanding pursuant to Section 8.8(r); and
(l) the Company or a Restricted Subsidiaries may issue
shares of its capital stock to the extent permitted by Section 8.5."
(g) Section 8.5 of the Credit Agreement is amended by (i) deleting
the word "and" at the end of clause (c) thereof, and (ii) replacing the period
(".") at the end of paragraph (d) thereof with the following:
; and (e) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, a Restricted Subsidiary may issue
or sell shares of its capital stock to a Person or Persons other than
the Company or a Subsidiary thereof in order to convert such Restricted
Subsidiary into a Permitted Joint Venture between such Person or Persons
and the Company or a Wholly-Owned Restricted Subsidiary; provided that
(i) the Board of Directors of the Company determines in good faith that
the business purpose achieved by such issuance or sale renders the terms
of such issuance reasonable, and, if the aggregate Deemed Value of the
assets of the Restricted Subsidiary issuing or selling shares of its
capital stock exceed $25,000,000, the Company has received an opinion
from a nationally recognized investment banking firm that such issuance
or sale is fair to the Company from a financial point of view; (ii) the
Company complies with Section 4.2(a) or (c), as the case may be; (iii)
the Collateral Agent has pursuant to the Security Documents or other
security agreements reasonably satisfactory to the Agent a perfected
first priority Lien on any non-cash proceeds received by the Company or
any of its Restricted Subsidiaries (other than the Restricted Subsidiary
whose capital stock is being issued or sold) in connection with the
consummation of such issuance or sale, other than notes and similar
instruments having, in the aggregate for such issuance, a principal
amount of less than $500,000; (iv) the Minimum Income Tests and Debt
Service Coverage Tests are satisfied with respect thereto at the time of
such issuance or sale; (v) after giving effect to such issuance or sale,
such Restricted Subsidiary is not restricted by its governing documents
or otherwise from making cash distributions to the Company or such
Wholly-Owned Restricted Subsidiary; (vi) after giving effect to such
issuance or sale, the aggregate Deemed Value of all Facilities subject
to Limited Permitted JV Transactions does not exceed $100,000,000; and
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(vii) after giving effect to such issuance or sale, the sum of (A) the
aggregate Deemed Value of all property and other assets (other than
Facilities) subject to Limited Permitted JV Transactions, (B) the then
Outstanding JV Credit Amount, and (C) the aggregate amount of
Investments outstanding pursuant to Section 8.8(r) does not exceed the
then maximum amount of Investments permitted to be outstanding pursuant
to Section 8.8(r)."
(h) Section 8.8(n) of the Credit Agreement is amended by replacing
all of clauses (ii) and (v) thereof with the following clauses (ii) and (v),
respectively:
"(ii) after giving effect to such contribution, the Company
or such Wholly-Owned Restricted Subsidiary, as the case may be, shall
have a Controlling Interest in such Permitted Joint Venture (or the
additional requirements of clause (v) below shall be satisfied);" and
"(v) after giving effect to such contribution, (A) the
Company or a Wholly-Owned Restricted Subsidiary owns common stock of, or
a partnership interest or other equity interests of a substantially
similar nature in, such Permitted Joint Venture, and (B) the aggregate
Deemed Value of all Facilities subject to Limited Permitted JV
Transactions after the Closing Date does not exceed $100,000,000;".
(i) Section 8.8(n) of the Credit Agreement is further amended by
(i) deleting the word "and" at the end of clause (iv) thereof, and (ii)
inserting the following after clause (v) thereof:
"(vi) the Board of Directors of the Company determines in
good faith that the business purpose achieved by such contribution
renders the terms of such contribution reasonable, and, if the Deemed
Value of such Facility exceeds $25,000,000, the Company has received an
opinion from a nationally recognized investment banking firm that such
contribution is fair to the Company from a financial point of view; and
(vii) the Company complies with Section 4.2(a) or (c), as
the case may be;".
(j) Section 8.8(r) of the Credit Agreement is amended by (i)
inserting the words "sum of the" after the word "the" in the second line of
clause (ii) of the third proviso thereto; (ii) replacing the words "other
types of Restricted Subsidiaries and Unrestricted Subsidiaries" in the last
two lines of such clause (ii) with the words "other types of Restricted
Subsidiaries, Unrestricted Subsidiaries and joint ventures permitted by this
Agreement in which the Company and its Wholly-Owned Restricted Subsidiaries
have a minority equity interest"; and (iii) inserting the following after the
word "Investments" in the third line of such clause (ii):
"plus the sum of the then aggregate Deemed Value of all property and
other assets (other than Facilities) subject to Limited Permitted JV
Transactions after the Closing Date and the Outstanding JV Credit
Amount".
(k) Section 8.10(b) of the Credit Agreement is amended by (i)
inserting "(without duplication)" after the words "the sum" in the fifth line
of clause (B) of the third proviso thereto; (ii) deleting the word "and"
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before clause (ii) of such clause (B); (iii) replacing the words "other types
of Restricted Subsidiaries and Unrestricted Subsidiaries" in the fifth, sixth
and seventh lines of such clause (ii) with the words "other types of
Restricted Subsidiaries, Unrestricted Subsidiaries and joint ventures
permitted by this Agreement in which the Company and its Wholly-Owned
Restricted Subsidiaries have a minority equity interest"; and (iv) inserting
the following at the end of such clause (ii):
", (iii) the then aggregate Deemed Value of all property and other
assets (other than Facilities) subject to Limited Permitted JV
Transactions after the Closing Date, and (iv) the then Outstanding JV
Credit Amount".
(l) Section 8.10(c) of the Credit Agreement is amended by
inserting the following at the end of clause (ii) thereof:
"; and (iii) for all purposes of paragraph (b) above the word
'expenditures' shall include, without limitation, with respect to any
Facility Acquisition: (A) the issuance by the Company of shares of
Company Common Stock as complete or partial consideration for the assets
acquired by the Company and its Restricted Subsidiaries in such Facility
Acquisition; provided that the amount of any such expenditure shall be
deemed to be zero; (B) the aggregate principal amount of Indebtedness
assumed by the Company or any of its Restricted Subsidiaries in
connection with such Facility Acquisition; and (C) except to the extent
the same is repaid by a Person other than the Company or any of its
Restricted Subsidiaries prior to a Facility Acquisition, the aggregate
outstanding principal amount of all Indebtedness of any Person acquired
by the Company or any of its Restricted Subsidiaries in such Facility
Acquisition".
(m) Section 8.11 of the Credit Agreement is amended by (i)
deleting the "or" at the end of paragraph (d) thereof, (ii) replacing the
period (".") at the end of paragraph (e) thereof with "; or", and (iii)
inserting the following after paragraph (e) thereof:
"(f) decrease the amount of, or change the payment date for, any rent
payable to the Company or any Wholly-Owned Restricted Subsidiary under a
lease or sublease of a Facility to a Permitted Joint Venture that was
entered into pursuant to Section 8.2(i) unless the Agent is given prior
notice thereof and the Minimum Income Tests and Debt Service Coverage
Tests are satisfied with respect thereto at the time of such change, or
otherwise amend, supplement or modify any such lease or sublease in any
manner that is adverse to the Lenders."
(n) Section 8.15(a) of the Credit Agreement is amended by
replacing the words "other type of Restricted Subsidiary or any Unrestricted
Subsidiary" in the fourth and fifth lines of clause (ix) thereof with the
words "other type of Restricted Subsidiary, Unrestricted Subsidiary or joint
venture permitted by this Agreement in which the Company and its Wholly-Owned
Restricted Subsidiaries have a minority equity interest".
(o) The following is inserted after Section 8.15 of the Credit
Agreement:
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"8.16 Maintenance of Controlling Interests. If, after giving
effect to any Permitted JV Transaction entered into pursuant to Section
8.2(i) or 8.8(n), the Company and its Wholly-Owned Restricted
Subsidiaries have a Controlling Interest in the Permitted Joint Venture
that is a party to such Permitted JV Transaction, the Company shall not,
and shall not permit any of its Restricted Subsidiaries to, take or
refrain from taking any action of any nature whatsoever (other than the
entering into in accordance with this Agreement of another Permitted JV
Transaction with respect to such Permitted Joint Venture and the
consummation of any sale or other transfer permitted by this Agreement
of all of the Company's and its Wholly-Owned Restricted Subsidiaries'
equity interests in such Permitted Joint Venture) that would cause the
Company and its Wholly-Owned Restricted Subsidiaries to fail to have a
Controlling Interest in such Permitted Joint Venture, unless, after
giving effect to such failure to have a Controlling Interest: (a) no
Default or Event of Default exists, (b) the Minimum Income Tests and
Debt Service Coverage Tests are satisfied as of the date such failure
occurs, and (c) the aggregate Deemed Value of all Facilities subject to
Limited Permitted JV Transactions after the Closing Date does not exceed
$100,000,000."
(p) Section 10 of the Credit Agreement is amended as follows:
(i) The definition therein of the term "Asset Sale" is
amended by (A) inserting "and subleases" after the word "leases" in
clause (vi) of the second proviso to such definition, (B) inserting
"(other than ones received in a Permitted JV Transaction)" after the
word "instruments" in the third line of clause (ii) of the second
proviso to such definition, (C) inserting "except to the extent the same
constitutes a transfer pursuant to the immediately following sentence,"
after each of the respective comma's (",") ending clauses (iii) and (vi)
of the second proviso of such definition, and (D) inserting the
following after the end of such definition:
"Without limitation of the foregoing, but in furtherance thereof,
a Permitted JV Transaction shall be deemed to be a sale, lease,
conveyance, disposition or transfer of assets to the extent the
Company or any of its Restricted Subsidiaries (other than the
Permitted Joint Venture resulting from such Permitted JV
Transaction) receives any Cash ((including Cash receivable (when
received) by way of a deferred payment obligation pursuant to a
promissory note or preferred stock or otherwise (other than
interest and dividends accruing thereon at a rate no greater than
the sum of 6% and the then yield for actively traded United States
securities having a weighted average life to maturity that is
substantially the same as the weighted average life to maturity of
such deferred payment obligation), but excluding, in the case of a
lease or a sublease of a Facility to a Permitted Joint Venture
pursuant to Section 8.2(i), any base rent payable under such lease
or sublease)) or other property or assets (other than, except to
the extent the same are substantially equivalent to Cash
receivable by way of deferred payments obligations, equity
interests in the Permitted Joint Venture resulting from such
Permitted JV Transaction) in connection with the consummation of
such Permitted JV Transaction."
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(ii) The definition therein of the term "Base Core EBITDA"
is amended in its entirety to read as follows:
"'Base Core EBITDA'means, for any period, the total of (a)
consolidated EBITDA of the Company and the Domestic Guarantors for
such period, excluding, to the extent included therein, (i) the
income (or loss) of any Person (other than a Domestic Guarantor)
in which the Company or any Domestic Guarantor has an ownership
interest, whether or not any such income has been actually
received by the Company or any Domestic Guarantor in the form of
dividends or similar distributions, and (ii) any rent payable to
the Company or any of its Subsidiaries under a lease or sublease
of a Facility to a joint venture pursuant to Section 8.2(i),
whether or not such rent has been actually received by the Company
or any of its Subsidiaries, minus (b) the excess, if any, of (i)
income taxes paid by the Company or any Domestic Guarantor during
such period in respect of its pro rata share of any Subsidiary's
(other than a Wholly-Owned Restricted Subsidiary's) Net Income,
over (ii) the amount of distributions made by such Subsidiary to
the Company or any Domestic Guarantor during such period, plus,
without duplication, (c) the Acquired NME Facilities EBITDA, if
any, minus (d) the Company's and the Domestic Guarantors'
aggregate pro rata share of the absolute amount of the net loss
for such period of each Permitted Joint Venture in which the
Company or a Domestic Guarantor has an ownership interest that has
incurred a loss for such period and owns, leases or subleases a
Facility that was subject to a Permitted JV Transaction; provided
that in determining the net loss of any such Permitted Joint
Venture for purposes of this clause (d), the aggregate amount of
rent payable to the Company and the Domestic Guarantors under a
lease or sublease of a Facility to any such Permitted Joint
Venture that was entered into pursuant to Section 8.2(i) shall not
be considered an expense of such Permitted Joint Venture."
(iii) The following is inserted after the definition therein
of the term "Continuing Lenders":
"'Controlling Interest' means, with respect to any
Person, (a) the ownership of at least a majority of the equity
interests in such Person on a fully diluted basis, and (b) the
ownership of equity interests in such Person providing the
unlimited right to elect or appoint at least the greater of (i)
60% of the authorized number of directors, managers or trustees,
as applicable, of such Person and (ii) such percentage of the
authorized number of such directors, managers or trustees, as
applicable, as are necessary under the governing documents of such
Person or otherwise to authorize (and prevent) the taking by such
Person of each and any action that may from time to time be
proposed to be taken by such Person or to approve or adopt (and
prevent the approval or adoption of) any other matter (including,
without limitation, the appointment or removal of any individual
as an officer of such Person) that may from time to time require
the approval of, or adoption by, all or any portion of the
directors, managers or trustees, as applicable, of such Person."
(iv) The definition therein of the term "Core EBITDA" is
amended in its entirety to read as follows:
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"'Core EBITDA'means, for any period, the total of (a)
consolidated EBITDA of the Company and its Wholly-Owned Restricted
Subsidiaries for such period, excluding, to the extent included
therein, (i) the income (or loss) of any Person (other than a
Wholly-Owned Restricted Subsidiary) in which the Company or any
Wholly-Owned Restricted Subsidiary has an equity interest, whether
or not any such income has been actually received by the Company
or any Wholly-Owned Restricted Subsidiary in the form of dividends
or similar distributions, and (ii) any rent payable to the Company
or any of its Subsidiaries under a lease or sublease of a Facility
to a joint venture pursuant to Section 8.2(i), whether or not such
rent has been actually received by the Company or any of its
Subsidiaries, plus (b) to the extent the same does not exceed the
product of (i) the Net Income of the payor thereof for such period
or for the immediately preceding period and not previously
received, and (ii) the Company's and its Wholly-Owned Restricted
Subsidiaries aggregate percentage ownership interest therein, cash
dividends and other cash distributions of profits and capital
received in such period by the Company and its Wholly-Owned
Restricted Subsidiaries from (i) Unrestricted Subsidiaries, (ii)
joint ventures which are not Subsidiaries, and (iii) other
Restricted Subsidiaries, minus (c) the Company's and its
Wholly-Owned Restricted Subsidiaries' aggregate pro rata share of
the absolute amount of net loss for such period of each (i)
Unrestricted Subsidiary, (ii) other Restricted Subsidiary, and
(iii) joint venture in which the Company or any Wholly-Owned
Restricted Subsidiary has an ownership interest that (A) is not a
Subsidiary of the Company, and (B) owns, leases or subleases a
Facility that was subject to a Permitted JV Transaction, in each
case that has incurred a loss for such period, plus, without
duplication, (d) the Acquired NME Facilities EBITDA, if any, plus,
without duplication, (e) rent received in such period by the
Company or any Wholly-Owned Restricted Subsidiary under a lease or
sublease of a Facility to a joint venture pursuant to Section
8.2(i), but only to the extent such rent accrued during such
period or the immediately preceding period."
(v) The following is inserted after the definition therein
of the term "Debt Service Coverage Tests":
"'Deemed Value' means, with respect to any property or
other assets subject or to be subject to a Permitted JV
Transaction, the greatest of (a) the fair market value of such
property or other asset on the first date on which such property
or other asset was or is to be subject to a Permitted JV
Transaction (for purposes of the foregoing, the fair market value
of a Facility and its related working capital shall be deemed to
be equal to the product of 4.5 and the EBITDA of the Company and
its Wholly-Owned Restricted Subsidiaries attributable to such
Facility for the 12-month period preceding the Test Date
applicable to the first date on which such Facility was or is to
be subject to a Permitted JV Transaction), (b) the book value of
such property or other asset on the first date on which such
property or other asset was or is to be subject to a Permitted JV
Transaction, and (c) in the case of a Facility and/or other asset
or property that was or is to be subject to a Limited Permitted JV
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Transaction described in clause (b) or (d) of the definition of
such term, the sum of the aggregate amount of cash and the
aggregate fair market value of all other property received by the
Company and its Restricted Subsidiaries in consideration for the
capital stock issued or sold in such Limited Permitted JV
Transaction."
(vi) the definition therein of the term "Investment" is
amended by inserting "(except as otherwise expressly set forth herein)"
in lieu of "(except as otherwise set forth in Section 8.8(n) for
contributions of Facilities to Permitted Joint Ventures)" appearing in
the proviso to such definition.
(vii) The following is inserted after the definition therein
of the term "Liens":
"'Limited Permitted JV Transaction' means any of the
following: (a) the contribution pursuant to Section 8.8(n), or the
lease or sublease pursuant to Section 8.2(i), of a Facility by the
Company or a Wholly-Owned Restricted Subsidiary to a Permitted
Joint Venture, unless after giving effect thereto the Company and
its Wholly-Owned Restricted Subsidiaries have a Controlling
Interest in such Permitted Joint Venture, (b) the issuance or sale
by a Restricted Subsidiary of its capital stock to a Person or
Persons other than the Company or any Subsidiary thereof pursuant
to clause (e) of Section 8.5, unless after giving effect thereto
such Restricted Subsidiary is a Wholly-Owned Restricted
Subsidiary, (c) the merger of a Restricted Subsidiary with or
into, or the consolidation of a Restricted Subsidiary with, a
Person or Persons other than the Company or any Subsidiary thereof
pursuant to Section 8.2(j), (d) the sale pursuant to Section
8.2(k) by the Company or any of its Restricted Subsidiaries to a
Person or Persons other than the Company or any Subsidiary thereof
of less than all of the capital stock of a Restricted Subsidiary
owned by the Company and its Restricted Subsidiaries, unless after
giving effect thereto the Restricted Subsidiary whose capital
stock is being sold is a Wholly-Owned Restricted Subsidiary, and
(e) the failure for any reason of the Company and its Wholly-Owned
Restricted Subsidiaries to have at any time a Controlling Interest
in any Permitted Joint Venture that, as a result of the occurrence
of any Permitted JV Transaction (other than a Limited Permitted JV
Transaction described in the foregoing clauses (a) through (d)),
owns, leases or subleases a Facility at the time of such failure,
unless such failure results from the entering into of another
Permitted JV Transaction with respect to such Permitted Joint
Venture or the sale of all of the Company's and its Wholly-Owned
Restricted Subsidiaries' equity interests in such Permitted Joint
Venture. For purposes of this Agreement, any property or other
asset (including, without limitation, a Facility and Cash) shall
be deemed to have been subject to a Limited Permitted JV
Transaction if it is contributed, leased or subleased pursuant to
a transaction described in clause (a) of this definition of
Limited Permitted JV Transaction, if it is owned by a Restricted
Subsidiary at the time such Restricted Subsidiary enters into a
transaction described in clause (b) or (c) of this definition of
Limited Permitted JV Transaction, if it is owned by the Restricted
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Subsidiary whose capital stock is being sold pursuant to a
transaction described in clause (d) of this definition of Limited
Permitted JV Transaction or if it is a Facility that is owned by,
or leased or subleased to, a Permitted Joint Venture as a result
of a Permitted JV Transaction (other than a Limited Permitted JV
Transaction) at the time a Limited Permitted JV Transaction
described in clause (e) above occurs with respect to such
Permitted Joint Venture.
(viii) The definition therein of the term "Minimum Income
Tests" is amended by replacing the first three lines of paragraph (a)
thereof with the following:
"(a) in the case of a Permitted JV Transaction, an
amendment or other modification to a lease or sublease of a
Facility to a Permitted Joint Venture pursuant to Section 8.2(i)
that decreases the amount of, or changes the payment date for, any
installment of rent payable thereunder to the Company or any
Wholly-Owned Restricted Subsidiary or a Facility Acquisition
only:".
(ix) The definition therein of the term "Net Proceeds" is
amended by (A) replacing "or otherwise (other than interest payable
thereon)" in the fourth and fifth lines thereof with ", preferred stock
or otherwise (other than interest and dividends accruing thereon at a
rate no greater than the sum of 6% and the then yield for actively
traded United States securities having a weighted average life to
maturity that is substantially the same as the weighted average life to
maturity of such deferred payment obligation)", and (B) inserting the
following sentence at the end of such definition:
"Notwithstanding the foregoing, except to the extent the same is
substantially equivalent to Cash receivable by way of deferred
payment, 'Net Proceeds' shall not include any equity interest in a
Permitted Joint Venture resulting from the consummation of a
Permitted JV Transaction that is received by the Company or any of
its Restricted Subsidiaries in connection with the consummation of
such Permitted JV Transaction."
(x) The following is inserted after the definition therein
of the term "Original Company Credit Agreement":
"'Outstanding JV Credit Amount' means, at any time,
the sum of (a) the then aggregate outstanding principal amount of
each Subsidiary Loan initially made to a Wholly-Owned Restricted
Subsidiary that was, at any time after the making of such
Subsidiary Loan, converted into a Permitted Joint Venture pursuant
to a Limited Permitted JV Transaction, (b) the then aggregate
amount which is then available to be drawn (assuming the
conditions for drawing thereunder have been met) under each
Subsidiary Letter of Credit initially issued for the account of a
Wholly-Owned Restricted Subsidiary that was, at any time after the
issuance of such Subsidiary Letter of Credit, converted into a
Permitted Joint Venture pursuant to a Limited Permitted JV
Transaction, and (c) the then aggregate amount of all drawings
under each such Subsidiary Letter of Credit referenced in clause
(b) above honored by the applicable L/C Bank and not theretofore
reimbursed by the Company or any of its Restricted Subsidiaries."
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(xi) The following is inserted after the definition therein
of the term "Permitted Joint Venture"
"'Permitted JV Transaction' means any of the
following: (a) the contribution of a Facility by the Company or a
Wholly-Owned Restricted Subsidiary to a Permitted Joint Venture
pursuant to Section 8.8(n), (b) the lease or sublease of a
Facility to a Permitted Joint Venture pursuant to Section 8.2(i),
and (c) each and any Limited Permitted JV Transaction not
described in the preceding clause (a) or (b). For purposes of this
Agreement, any property or other asset (including, without
limitation, a Facility and Cash) shall be deemed to have been
subject to a Permitted JV Transaction if it is contributed, leased
or subleased to a Permitted Joint Venture pursuant to Section
8.8(n) or 8.2(i), as applicable, if it is owned by a Restricted
Subsidiary at the time such Restricted Subsidiary enters into a
transaction described in clause (b) or (c) of the definition of
Limited Permitted JV Transaction, if it is owned by a Restricted
Subsidiary whose capital stock is being sold pursuant to a
transaction described in clause (d) of the definition of Limited
Permitted JV Transaction or if it is a Facility that is owned by,
or leased or subleased to, a Permitted Joint Venture as a result
of a Permitted JV Transaction (other than a Limited Permitted JV
Transaction) at the time a Limited Permitted JV Transaction
described in clause (e) of the definition of Limited Permitted JV
Transaction occurs with respect to such Permitted Joint Venture."
(xii) The definitions therein of the terms "Pro Forma Base
Core EBITDA" and "Pro Forma Core EBITDA" are amended in their entirety
to read as follows:
"'Pro Forma Base Core EBITDA'means, for any period,
with respect to any Subject Transaction, the total, without
duplication, of (a) Base Core EBITDA for such period, plus (b) the
EBITDA for such period of (i) any Person acquired directly by the
Company or a Domestic Guarantor and which becomes a Domestic
Guarantor, or (ii) any Facility (determined as if such Facility
was a separate Person) acquired directly by the Company or any
Domestic Guarantor, in either such case as part of such Subject
Transaction, minus (c) in the case of a Permitted JV Transaction,
the portion of the Base Core EBITDA for such period attributable
to each Facility, if any, subject to such Permitted JV
Transaction. In the case of a Subject Transaction involving the
acquisition of a Person or a Facility that, as of the time of such
acquisition has been in existence for less than 12 months, the
EBITDA for such Person or Facility, as the case may be, for such
period shall be deemed to be, for purposes of the preceding clause
(b), the product of (1) its actual EBITDA, and (2) the quotient,
expressed as percentage, of the number of months in such period
divided by the number of months for which such Person or Facility,
as the case may be, has any EBITDA.
'Pro Forma Core EBITDA'means, for any period, with
respect to any Subject Transaction, the total, without
duplication, of (a) Core EBITDA for such period, plus (b) the
EBITDA for such period of (i) any Person which is directly
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acquired by the Company or a Wholly-Owned Restricted Subsidiary
and becomes a Wholly-Owned Restricted Subsidiary of the Company,
or (ii) any Facility (determined as if such Facility was a
separate Person) directly acquired by the Company or any of its
Wholly-Owned Restricted Subsidiaries, in either such case as part
of such Subject Transaction, minus (c) in the case of a Permitted
JV Transaction, the product of (i) the portion of the Core EBITDA
for such period attributable to each Facility, if any, subject to
such Permitted JV Transaction (minus, in the case of a lease or a
sublease of a Facility to a Permitted Joint Venture pursuant to
Section 8.8(i), the aggregate rent payable to the Company and its
Wholly-Owned Restricted Subsidiaries under such lease or sublease
during such period, assuming for such purpose that such lease or
sublease had been entered into at the beginning of such period),
and (ii) the excess of 100% over the Company's and its
Wholly-Owned Restricted Subsidiaries aggregate percentage
ownership interest in such Permitted Joint Venture after giving
effect to such Permitted JV Transaction, plus (minus) (d) in the
case of any change to the amount of, or any change in the payment
date for, any rent payable to the Company or any of its
Wholly-Owned Restricted Subsidiaries under a lease or sublease by
any such Person of a Facility to a Permitted Joint Venture
pursuant to Section 8.2(i), the change resulting therefrom to the
aggregate amount of rent payable during such period, assuming for
such purpose that such change became effective at the beginning of
such period. In the case of a Subject Transaction involving the
acquisition of a Person or a Facility that, as of the time of such
acquisition has been in existence for less than 12 months, the
EBITDA for such Person or Facility, as the case may be, for such
period shall be deemed to be, for purposes of the preceding clause
(b), the product of (1) its actual EBITDA, and (2) the quotient,
expressed as a percentage, of the number of months in such period
divided by the number of months for which such Person or Facility,
as the case may be, has any EBITDA."
(xiii) The definition therein of the term "Subject
Transactions" is amended by (A) replacing the text of clause (a) thereof
with "any Permitted JV Transaction,", (B) deleting the word "and" before
clause (e) thereof, and (C) inserting the following after the end of
such clause (e):
", and (f) the entering into of any amendment or other
modification to a lease or sublease of a Facility to a Permitted
Joint Venture pursuant to Section 8.2(i) that decreases the amount
of, or changes the payment date for, any installment of rent
payable to the Company or any Wholly-Owned Restricted Subsidiary
pursuant thereto".
(xiv) The following is inserted after the definition therein
of the term "Variable Rate Notes": "'VRN Facility' means each and any of
the Facilities listed as number 29, 30, 31, 32, 33, 35, 36, 37, 38, 39,
40 or 41 on Schedule 10.1(d) hereto as in effect on the Closing Date and
the Facility owned by Charter Fairmount Behavioral Health System, Inc.
that is located at 561 Fairthorne Avenue, Philadelphia, PA 19128."
(i) Section 12.12 of the Credit Agreement is amended by (i)
inserting "(other than pursuant to a Limited Permitted JV Transaction)" after
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the words "disposed of" in clause (ii)(A) of paragraph (b) thereof; and (ii)
inserting the following after paragraph (b) thereof:
"(c) Each Lender, the Agent and the Co-Agent hereby
authorizes the Collateral Agent to, and, upon the request of the
Company, the Collateral Agent, at the sole cost and expense of the
Company and its Restricted Subsidiaries, shall, release a VRN Facility
from the Mortgage, if any, applicable thereto; provided that (i) the
Agent is satisfied that, simultaneously with such release, the Variable
Rate Notes issued to finance such VRN Facility will be converted into
fixed-rate notes or bonds in accordance with the terms thereof and
hereof, (ii) no Default or Event of Default has occurred and is
continuing at the time of such release or has or will result from the
conversion of such Variable Rate Notes into fixed-rate notes or bonds,
(iii) simultaneously with such release the Letter of Credit or
Subsidiary Letter of Credit, as the case may be, providing direct or
indirect, as applicable, credit support for such Variable Rate Notes is
surrendered to the Agent or the applicable L/C Bank (or provisions
reasonably satisfactory to the Agent and the applicable L/C Bank for
such surrender are made), and (iv) the Agent is satisfied that the
fixed-rates notes or bonds into which such Variable Rate Notes are
converted will not be secured by a Lien on such VRN Facility.
(d) Each Lender, the Agent and the Co-Agent hereby
authorizes the Collateral Agent to, and, upon the request of the
Company, the Collateral Agent, at the sole cost and expense of the
Company and its Restricted Subsidiaries, shall, simultaneously with the
consummation of any Limited Permitted JV Transaction described in clause
(b), (c) or (d) of the definition thereof, release (i) the Restricted
Subsidiary whose capital stock is sold or issued, or that is a party to
a merger or consolidation, as applicable, pursuant to such Limited
Permitted JV Transaction from any and all of its obligations under the
Subsidiary Guaranty; and (ii) the property and other assets subject to
such Limited Permitted JV Transaction from the Liens thereon, if any,
under the Security Documents; Provided that, in the case of each and any
release described in the preceding clause (i) or (ii): (A) the Agent is
satisfied that, simultaneously with such release, a Limited Permitted JV
Transaction involving such Restricted Subsidiary or property or other
assets, as the case may be, will occur in accordance with the terms
hereof, (B) no Default or Event of Default has occurred and is
continuing at the time of such release or will result from the
consummation of such Limited Permitted JV Transaction, (C) the Company
has given the Agent at least five Business Days prior written notice of
the date of such Limited Permitted JV Transaction and a description, in
reasonable detail, of such transaction, the parties thereto, the
property and other assets to be subject thereto and the respective
Deemed Values of such property and other assets, (D) if a Subsidiary
Borrower is to be a party to such Limited Permitted JV Transaction or
any of its capital stock is being sold pursuant thereto, then (1) if
after giving effect to such Limited Permitted JV Transaction such
Subsidiary Borrower would no longer be a Subsidiary of the Company, then
all Subsidiary Loans made to such Subsidiary Borrower shall have been
repaid in full, together with all accrued and unpaid interest thereon,
all outstanding amounts payable by such Subsidiary Borrower under the
Credit Documents shall have been paid in full, and all Subsidiary
Letters of Credit issued for the account of such Subsidiary Borrower
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shall have been surrendered to the Agent or the applicable L/C Bank, and
(2) such Subsidiary Borrower shall have acknowledged to the Agent for
the benefit of the Lenders in a writing reasonably satisfactory to the
Agent that such Subsidiary Borrower shall no longer be entitled to
request the making of Subsidiary Loans or the issuance of Subsidiary
Letters of Credit for its account pursuant to the Subsidiary Credit
Agreement, and (E) the Restricted Subsidiary that is (or whose assets
are) the subject of such requested release is simultaneously released
from all of its obligations under each guaranty made by it of any
Permitted Subordinated Indebtedness."
Section 2. Clarification of Section 1.15 of Mortgages. The Agent
and each Lender party hereto agrees that nothing contained in Section 1.15 of
any Mortgage shall be construed as a requirement that the Company and its
Wholly-Owned Restricted Subsidiaries are required to manage any Facility that
is contributed, leased or subleased by the Company or any Wholly-Owned
Restricted Subsidiary to a Permitted Joint Venture pursuant to Section 8.2 or
Section 8.8.
Section 3. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Lenders that:
(a) the execution and delivery by the Company of this
Amendment and the performance by the Company of the Credit Agreement as
amended hereby are within the Company's corporate powers, have been duly
authorized by all necessary corporate or other action and will not (i)
contravene the certificate or articles of incorporation or the bylaws of
the Company, (ii) contravene any law, regulation, order, writ, judgment,
decree, determination or award currently in effect binding on or
affecting the Company or any of its Subsidiaries or any of their re-
spective assets, except where such contravention would not have a
Material Adverse Effect, or (iii) will not conflict with or result in
any breach of any of the terms, covenants, conditions or provisions of,
or constitute a default under, or result in the creation or imposition
of any Lien (except pursuant to the Security Documents) upon any of the
property or assets of the Company or any of its Subsidiaries pursuant to
the terms of, any indenture, mortgage, deed of trust, agreement or other
instrument (including, without limitation, the Senior Subordinated Notes
Indenture) to which the Company or any of its Subsidiaries is a party or
by which the Company, any of its Subsidiaries or any of their respective
properties or assets is bound or subject to, except to the extent such
conflict, breach, default or creation or imposition would not have a
Material Adverse Effect;
(b) this Amendment, the Credit Agreement as amended hereby
and, after giving effect to this Amendment, the other Credit Documents
constitute the legal, valid and binding obligations of the Company and
the Credit Parties party thereto, enforceable against the Company and
such Credit Parties in accordance with their respective terms, except to
the extent such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law); and
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(c) on and as of the date hereof, and both before and after
giving effect to this Amendment, no Default or Event of Default has
occurred and is continuing.
Section 4. Effectiveness. This Amendment shall become effective
when the Agent shall have received duly executed counterparts of this
Amendment from the Company, each Subsidiary of the Company that is a party to
any Credit Document and as many of the Lenders as shall be necessary to
comprise the "Required Lenders".
Section 5. Status of Credit Documents. This Amendment is limited
solely for the purposes and to the extent expressly set forth herein, and,
except as expressly modified hereby, the terms, provisions and conditions of
the Credit Documents and the Liens granted thereunder shall continue in full
force and effect and are hereby ratified and confirmed in all respects.
Section 6. Counterparts. This Amendment may be executed and
delivered in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Company
and the Agent.
Section 7. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
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IN WITNESS WHEREOF, the parties hereto have caused their
respective duly authorized officers to execute and deliver this Amendment No.
2 to the Second Amended and Restated Credit Agreement as of the date first
above written.
CHARTER MEDICAL CORPORATION
By:
Name:
Title:
BANKERS TRUST COMPANY,
as Agent and a Lender
By:
Name:
Title:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Co-Agent
and a Lender
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
Name:
Title:
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<PAGE>
INDENTURE SUPPLEMENT
NO. 1
This Indenture Supplement No. 1 (the "Supplement"), dated as of June 3,
1994, is among Marine Midland Bank, as Trustee, Charter Medical Corporation,
(the "Company"), the Guarantors listed in the Indenture, as defined below, and
Schizophrenia Treatment and Rehabilitation, Inc. All defined terms used in
this Supplement and not otherwise defined shall have the meanings ascribed to
such terms in the Indenture.
For and in consideration of the premises, the Company, the Guarantors
and the Trustee agree as follows:
1. Recital. This Supplement relates to the Indenture, dated as of
May 2, 1994, among the Company, the Guarantors listed therein and Marine
Midland Bank, with respect to the Company's 11 1/4% Senior Subordinated Notes
due 2004 (the "Indenture"). This Supplement is executed by the Trustee
pursuant to Section 10.01(5) of the Indenture.
2. Supplement. The Indenture is supplemented by adding Schizophrenia
Treatment and Rehabilitation, Inc., Subsidiary of the Company, as Guarantor,
pursuant to the provisions of Section 5.09 of the Indenture relating to
additional Guarantors. By executing this Supplement, Schizophrenia Treatment
and Rehabilitation, Inc. agrees that, effective as of the date first above
written, it is a Guarantor under the Indenture.
3. Miscellaneous.
(a) Instruments to be Read Together. This Indenture Supplement
No. 1 is an indenture supplemental to the Indenture, and such Indenture, and
this Indenture Supplement No. 1 shall henceforth be read together.
(b) Confirmation. The Indenture as amended and supplemented by
this Indenture Supplement No. 1, is in all respects confirmed and preserved.
(c) Governing Law. This Indenture Supplement No. 1 shall be
construed in accordance with and governed by the laws of the State of New
York, without reference to principles of conflicts of law.
(d) Severability. Any provision of this Indenture Supplement No.
1 which is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(e) Headings. Section, subsection and other headings used in
this Indenture Supplement No. 1 are for convenience only and shall not affect
the construction of this Indenture Supplement No. 1.
(f) Counterparts. This Indenture Supplement No. 1 may be
executed in any number of counterparts, each of which, when so executed in any
number of counterparts, shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
Supplement No. 1 to be duly executed as of the date and year first above
written.
MARINE MIDLAND BANK,
as Trustee
By: /s/ Frank J. Godino
Name: Frank J. Godino
Title: Asst. Corp. Trust Officer
Attest:
/s/ Richard G. Pittius
Name: Richard G. Pittius CHARTER MEDICAL CORPORATION
Title: Assistant Vice President
By: /s/ James R. Bedenbaugh
Name: James R. Bedenbaugh
Title: Treasurer
Attest:
/s/ Linton Newlin
Name: Linton Newlin
Title: Secretary
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<PAGE>
Each of the Guarantors listed
in the Indenture as listed in Exhibit A
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title:Treasurer or as Director of
Attest: Charter Medical of England, Limited
/s/ James R. Bedenbaugh
Name: James R. Bedenbaugh
Title: Assistant Secretary
Schizophrenia Treatment and
Rehabilitation, Inc.
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title: Treasurer
Attest:
/s/ James M. Filush
Name: James M. Filush
Title: Secretary
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<PAGE>
Exhibit 4(t) Schedule
The form of Indenture Supplement filed as Exhibit 4(t) is used to admit
certain subsidiaries of the Company as new Guarantors under the Indenture. In
addition to Indenture Supplement No. 1, new Guarantors have been admitted as
follows:
Supplement No. Date New Guarantor
2 July 15, 1994 NEPA - New Hampshire, Inc.
NEPA - Massachusetts, Inc.
4 November 22, 1994 Charter Behavioral Health
System at Manatee Palms
Therapeutic Group Inc.
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<PAGE>
INDENTURE SUPPLEMENT
NO. 3
This Indenture Supplement No. 3 (the "Supplement"), dated as of
August 30, 1994, is among Marine Midland Bank, as Trustee, Charter Medical
Corporation, (the "Company"), the Guarantors listed in the Indenture, as
defined below, and Schizophrenia Treatment and Rehabilitation, Inc. All
defined terms used in this Supplement and not otherwise defined shall have the
meanings ascribed to such terms in the Indenture.
For and in consideration of the premises, the Company, the Guarantors and
the Trustee agree as follows:
1. Recital. This Supplement relates to the Indenture, dated as of
May 2, 1994, among the Company, the Guarantors listed therein and Marine
Midland Bank, with respect to the Company's 11 1/4% Senior Subordinated Notes
due 2004 (the "Indenture"). This Supplement is executed by the Trustee
pursuant to Section 10.01(5) of the Indenture.
2. Amendment. Section 6.02 of the Indenture is amended by replacing
the term "Restricted Subsidiary" in the proviso of Section 6.02, which states
"provided that if any Guarantor consolidates into, or merges with or into, a
Restricted Subsidiary," and in clause (i) of Section 6.02, which states "such
Restricted Subsidiary is or becomes a Guarantor," with the term "Person".
3. Miscellaneous.
(a) Instruments to be Read Together. This Indenture Supplement No.
3 is an indenture supplemental to the Indenture, and such Indenture, and this
Indenture Supplement No. 3 shall henceforth be read together.
(b) Confirmation. The Indenture as amended and supplemented by
this Indenture Supplement No. 3, is in all respects confirmed and preserved.
(c) Governing Law. This Indenture Supplement No. 3 shall be
construed in accordance with and governed by the laws of the State of New
York, without reference to principles of conflicts of law.
(d) Severability. Any provision of this Indenture Supplement No. 3
which is prohibited or unenforceable in any jurisdiction shall not invalidate
the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
(e) Headings. Section, subsection and other headings used in this
Indenture Supplement No. 3 are for convenience only and shall not affect the
construction of this Indenture Supplement No. 3.
(f) Counterparts. This Indenture Supplement No. 3 may be executed
in any number of counterparts, each of which, when so executed in any number
of counterparts, shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
Supplement No. 3 to be duly executed as of the date and year first above
written.
MARINE MIDLAND BANK,
as Trustee
By: /s/ Frank J. Godino
Name: Frank J. Godino
Title: Asst. Corp. Trust Officer
Attest:
/s/ Richard G. Pittius
Name: Richard G. Pittius CHARTER MEDICAL CORPORATION
Title: Assistant Vice President
By: /s/ James R. Bedenbaugh
Name: James R. Bedenbaugh
Title: Treasurer
Attest:
/s/ Linton Newlin
Name: Linton Newlin
Title: Secretary
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<PAGE>
Each of the Guarantors listed
in the Indenture as listed in Exhibit A
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title:Treasurer or as Director of
Attest: Charter Medical of England, Limited
/s/ James R. Bedenbaugh
Name: James R. Bedenbaugh
Title: Assistant Secretary
Schizophrenia Treatment and
Rehabilitation, Inc.
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title: Treasurer
Attest:
/s/ James M. Filush
Name: James M. Filush
Title: Secretary
<PAGE>
<PAGE>
CMC/CORPORATE INCENTIVE PLAN
FY 94
I. PURPOSE
The purpose of this plan is to provide an incentive to certain
executives and key employees of the Company who contribute to the
success of the enterprise by offering an opportunity to such persons to
earn compensation in addition to their salaries, based on the operating
income of the Company.
II. ELIGIBLE PARTICIPANTS
Eligibility for participation in the Incentive Plan shall be determined
by management from among those key employees who are in a position to
materially contribute to the success of the Company. Specific
requirements for participation are outlined in Section VIII C,
Conditions for Receiving Payment, in the Definition of Terms.
If a person otherwise eligible for participation in the Incentive Plan
becomes an employee of the Company during the fiscal year, such
employee shall be eligible to receive a prorated portion of an annual
bonus (number of semimonthly pay periods of employment divided by
twenty-four), subject to approval of such employee's vice president or,
in the case of an officer, his superior's approval.
III. METHOD OF ALLOCATION
Each participant must meet the goals established by management. In
order to receive a bonus, each participant must be recommended for all,
part or none of his bonus by his superior, with the approval of the
Chairman. Each participant's assigned bonus percentage corresponds to
established targets set by management. The percentages are on a
variable scale. The various percentages of achievement are:
Target Bonus Percentage
90% 95% 100% 110% 120%
Executive Officer 0% 40% 50.0% 67.5% 85%
Senior Vice President 0% 32% 40.0% 65.0% 85%
Vice President 0% 32% 40.0% 65.0% 85%
Assistant Vice President 0% 26% 32.5% 60.0% 80%
Sr. Exec., Exec. and Sr. Director 0% 20% 25.0% 40.0% 50%
Director 0% 12% 15.0% 25.0% 35%
Corporate 0% 4% 5.0% 10.0% 15%
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<PAGE>
IV. PLAN SEGMENTS
For corporate personnel, the Incentive Plan consists of one segment
with one target:
1. an EBDIT (defined in Section VIII A.) bonus target for the
corporation
V. DISTRIBUTION
The distribution of bonuses shall be made promptly after completion of
unaudited financial statements for the 1994 Fiscal Year or as may be
otherwise approved by the Board of Directors. Specific provisions
regarding distribution are outlined in Section VIII C, Conditions for
Receiving Payment, in the Definition of Terms.
VI. ADMINISTRATION
The Plan will be administered by the Executive Committee of the Company.
VII. INTERPRETATION AND DURATION
Any areas of question, interpretation, dispute, etc., concerning any
area of this plan shall be governed by the Executive Committee of the
Company. The Executive Committee is defined as the Chairman, the
Executive Vice President and Chief Financial Officer, and the Vice
President of Administrative Services. This plan shall be effective for
the fiscal year beginning October 1, 1993. The Executive Committee and
the Board of Directors each retain the authority to modify, repeal or
discontinue the plan.
VIII. DEFINITION OF TERMS
A. EBDIT
EBDIT is income of the Company before (1) interest expense, (2)
ESOP expense, (3) depreciation and amortization, (4) provision for
state and federal income taxes, (5) interest income, (6)
restructuring charges, and (7) stock option expense, subject to
adjustment for the following:
A significant, unexpected change in the operation of the
company as a result of condemnation, major physical damage
from a fire or other catastrophe, strike, governmental
seizure, or disruption due to construction will result in an
adjustment to income. This will avoid any penalty or
windfall as a result of changes in capacity to contribute to
overall parent company earnings which are not the result of
the participant's ability to manage the operation. This does
not include changes in Blue Cross or governmental
reimbursement policies, loss of a prime admitter, expansion
by another hospital, etc., which are regarded as normal
business risks.
2
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B. Change in Accounting Policy or Practice
A material change (from the prior year) in accounting policy or
practice which has an effect on the Company's EBDlT (i.e., changes
in the procedures for reserving for doubtful accounts, asset sales
or acquisitions, etc.) will be considered as an adjustment to
EBDIT. Year end adjustments to correct prior errors or to adjust
previous estimates and accruals will not be regarded as changes in
policy or practice.
C. Conditions For Receiving Payment
Incentive compensation under the Incentive Plan is not an integral
part of an employee's compensation package. An employee's base
salary compensates the employee for the expected results of any
given job. Payment of incentive compensation is in the discretion
of the Executive Committee.
No incentive compensation will be paid to any employee if
employment is terminated, whether voluntary or involuntary, prior
to the actual payment date. However, the Executive Committee
retains authority to make exceptions to the foregoing policy in
unusual or meritorious cases including, but not limited to, the
death of an employee during the fiscal year or termination of
employment due to total or partial disability or retirement with
the consent of the Company.
If a person (eligible for the Incentive Plan) joins the Company
within the first three quarters of the fiscal year, he will be
eligible for the prorated amount of his bonus subject to the
approval of the Executive Committee.
3
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CHARTER MEDICAL CORPORATION
1992 STOCK OPTION PLAN
(as amended on 8/27/92, 4/1/93, 12/2/93 and 9/15/94)
1. Purpose. The purpose of the Charter Medical Corporation
1992 Stock Option Plan is to motivate and retain key employees of
Charter Medical Corporation and its Subsidiaries who have major
responsibility for the attainment of the primary long-term
performance goals of Charter Medical Corporation.
2. Definitions. The following terms shall have the
following meanings:
"Board" means the Board of Directors of the
Corporation.
"Cause" means a finding by the Corporation that the
Participant (i) has materially breached any material term of
any employment contract between the Participant and the
Corporation or any Subsidiary; (ii) is convicted by a court
of competent jurisdiction of, or pleads nolo contendere to,
a felony; (iii) refuses, fails or neglects to perform his
employment duties as specified under any employment contract
with the Corporation or any Subsidiary or as specified by
his superiors or the Board, and such refusal, failure or
neglect is substantially detrimental to the business of the
Corporation or any Subsidiary; (iv) engages in illegal or
other wrongful conduct substantially detrimental to the
business or reputation of the Corporation or any Subsidiary;
or (v) develops or pursues interests substantially adverse
to the Corporation or any Subsidiary.
"Change in Control" means at any time following the
consummation of the Restructuring (i) the sale, lease,
transfer or other disposition in one or more related
transactions of all or substantially all of the
Corporation's assets, or the sale of substantially all of
the stock or assets of the Corporation's subsidiaries that
constitute a sale of substantially all of the Corporation's
assets, to any person or related group of persons (including
a "group" as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the merger or consolidation of the
Corporation with or into another corporation, or the merger
of another corporation into the Corporation or any other
transaction, with the effect that the stockholders of the
Corporation immediately prior to such transaction hold less
than 50% of the total voting power entitled to vote in the
election of directors, managers or trustees of the surviving
corporation resulting from such consolidation or such other
transaction, (iii) any person or related group of persons
acquires a majority in interest of the voting power or
voting stock of the Corporation, or (iv) the liquidation or
dissolution of the Corporation.
4
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"Code" means the Internal Revenue Code of 1986, as
amended, and the rules promulgated thereunder.
"Committee" means a committee of two or more members of
the Board constituted and empowered by the Board to
administer the Plan in accordance with its terms.
"Contract Target EBDIT" means 100% of Target EBDIT for
the Corporation's 1991 fiscal year, 80% of Target EBDIT for
the Corporation's 1992 fiscal year and, for each fiscal year
of the Corporation during the period commencing October 1,
1992 and ending September 30, 1995, 90% of Target EBDIT, as
illustrated on Exhibit A.
"Corporation" means Charter Medical Corporation, a
Delaware corporation.
"Director" means a member of the Board.
"Disability" means a physical or mental condition under
which the Participant qualifies for (or will qualify for
after expiration of a waiting period) disability benefits
under the long-term disability plan of the Corporation or
Subsidiary that employs such Participant.
"EBDIT" means earnings of the Corporation, on a
consolidated basis, before depreciation and amortization,
interest, taxes, ESOP expense and deferred compensation
expense, expense of the Plan and provision for restructuring
of operations, any gains (or losses) resulting from the
early extinguishment of debt, any gains (or losses)
resulting from the sale of assets other than in the ordinary
course of business, and any gains (or losses) resulting from
the termination of any interest rate or currency rate
protection agreement, determined in accordance with
generally accepted accounting principles consistently
applied over the period.
"Effective Date" means the date that the Corporation's
Plan of Reorganization pursuant to chapter 11 of the United
States Bankruptcy Code and the rules promulgated thereunder
becomes effective and the Restructuring is consummated.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules promulgated
thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means: (1) If the Stock is listed
on a national securities exchange (as such term is defined
by the Exchange Act) or is regularly traded in the
over-the-counter market on the date of determination, the
price equal to the mean between the high and low sales
prices of a share of Stock on said national securities
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exchange on that day (or if no shares of the Stock are
traded on that date but there were shares traded on dates
within a reasonable period both before and after such date,
the Fair Market Value shall be the weighted average of the
means between the high and low sales prices of the Stock on
the nearest date before and the nearest date after that date
on which shares of the Stock are traded) or of the mean
between the high "bid" and low "asked" prices per share in
said over-the-counter market on that day, as reported by the
National Association of Securities Dealers Automated
Quotation System (or a successor to such system); (2) If the
Stock is traded both on a national securities exchange and
in the over-the-counter market, the Fair Market Value shall
be determined by the prices on the national securities
exchange, unless transactions on such exchange and in the
over-the-counter market are jointly reported on a
consolidated reporting system, in which case the Fair Market
Value shall be determined by reference to such consolidated
reporting system; (3) If the Stock is not listed for trading
on a national securities exchange and is not regularly
traded in the over-the-counter market, then the Committee
shall determine the Fair Market Value of the Stock from time
to time in its sole discretion.
"Financial Target EBDIT" means, for each fiscal year of
the Corporation during the period commencing October 1, 1990
and ending September 30, 1995, 95% of Target EBDIT, as
illustrated on Exhibit A. For the purpose only of
determining whether Financial Target EBDIT or cumulative
Financial Target EBDIT has been achieved, an amount not in
excess of $10 million will be added to EBDIT for the
Corporation's 1992 fiscal year to the extent necessary in
order for EBDIT for such fiscal year to equal 95% of Target
EBDIT for the Corporation's 1992 fiscal year.
"Option" means a Series A Option or a Series B Option
granted pursuant to Section 6.
"Participant" means an employee of the Corporation or
any of its Subsidiaries who is selected to participate in
the Plan in accordance with Section 4.
"Plan" means the Charter Medical Corporation 1992 Stock
Option Plan.
"Restructuring" means the restructuring of the
Corporation's debt and equity capitalization to be effected
pursuant to the Corporation's Plan of Reorganization
pursuant to chapter 11 of the Bankruptcy Code.
"Series A Options" means options to purchase shares of
Stock granted pursuant to Section 6, which options shall
have a per share exercise price of $4.36 unless adjusted in
accordance with the terms and provisions of this Plan.
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"Series B Options" means options to purchase shares of
Stock granted pursuant to Section 6, which options shall
have a per share exercise price of $9.60 unless adjusted in
accordance with the terms and provisions of this Plan.
"Stock" means the common stock, par value $0.25 per
share, of the Corporation to be authorized upon consummation
of the Restructuring.
"Stock Option Agreement" means the written agreement or
instrument which sets forth the terms of an Option granted
to a Participant under this Plan.
"Subsidiary" means any corporation, as defined in
Section 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, of
which the Corporation, at the time, directly or indirectly,
owns 50% or more of the outstanding securities having
ordinary voting power to elect directors (other than
securities having voting power only by reason of a
contingency).
"Target EBDIT" means, for each fiscal year of the
Corporation commencing October 1, 1990, the amount of EBDIT
set forth for such year in Section 8, and as illustrated on
Exhibit A.
3. Administration. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee,
acting in its absolute discretion, shall exercise such powers and
take such action as expressly called for under this Plan and,
further, the Committee shall have the power to interpret the Plan
and (subject to Section 19 and Rule 16b-3 under the Exchange Act,
if applicable) to take such other action in the administration
and operation of this Plan as the Committee deems equitable under
the circumstances. All actions of the Committee shall be binding
on the Corporation, on each affected Participant and on each
other person directly or indirectly affected by such action.
Following such time as the Stock is first registered under
Section 12 of the Exchange Act, no member of the Board shall
serve as a member of the Committee unless such member is a
"disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act.
4. Participation. Participants in the Plan shall be
limited to those employees of the Corporation or any of its
Subsidiaries who have been selected to participate in the Plan by
the Committee acting in its absolute discretion.
5. Maximum Number of Shares Subject to Options. Subject to
the provisions of Section 10, there shall be 3,437,939 shares of
Stock reserved for use under this Plan, and such shares of Stock
shall be reserved to the extent that the Committee and the Board
deems appropriate from authorized but unissued shares of Stock or
from shares of Stock which have been reacquired by the
Corporation. Furthermore, any shares of Stock subject to any
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Option which remain after the cancellation, expiration, exchange
or forfeiture of such Option thereafter shall again become
available for use under this Plan. All authorized and unissued
shares issued upon exercise of Options under the Plan shall be
fully paid and nonassessable shares.
6. Grant of Options. The Committee, acting in its absolute
discretion, shall have the right to grant Options to Participants
under this Plan from time to time and, further, shall have the
right to grant new Options in exchange for outstanding Options
granted pursuant to this Section 6; provided, however, that the
maximum number of shares of Stock issuable upon exercise of
Series A Options shall not exceed 2,435,207, subject to
adjustment as provided in Section 10.
7. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by Stock Option
Agreements in such form as the Committee from time to time shall
approve and including such terms and conditions not inconsistent
with the provisions set forth in the Plan as the Committee may
determine; provided, that such Stock Option Agreements and the
Options granted shall comply with and be subject to the following
terms and conditions:
(a) Employment. Each Participant shall agree to
remain in the employ of and to render services to the
Corporation or a Subsidiary thereof for such period as the
Committee may require in the Stock Option Agreement;
provided, however, that such agreement shall not impose upon
the Corporation or any Subsidiary thereof any obligation to
retain the Participant in its employ for any period.
(b) Number of Shares. Each Stock Option Agreement
shall state the total number of shares of Stock to which it
pertains.
(c) Exercise Price. With respect to options granted prior
to March 31, 1993, the exercise price per share for Series A
Options shall be $4.36, subject to adjustment as contemplated by
Section 9 and 10. With respect to options granted on or after
March 31, 1993, the exercise price per share for Series A Options
shall be Fair Market Value of the Stock on the date of grant, but
not less than $4.36 per share, subject to adjustment as
contemplated by Sections 9 and 10. The exercise price per share
for Series B Options shall be $9.60, subject to adjustment as
contemplated by Sections 9 and 10.
(d) Medium and Time of Payment. The exercise price
shall be payable upon the exercise of the Option, or as
provided in Section 7(e) if the Corporation adopts a
broker-directed cashless exercise/resale procedure, in each
case in an amount equal to the number of shares then being
purchased times the per share exercise price. Payment, at
the election of the Participant, shall be (i) in cash; (ii)
by delivery to the Corporation of a certificate or
certificates for shares of Stock duly endorsed for transfer
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to the Corporation with signature guaranteed by a member
firm of the New York Stock Exchange or by a national banking
association, (iii) by the withholding by the Corporation of
shares of stock that otherwise would be issued to the
Participant as a result of the exercise of such Option to
the extent that the Participant elects to pay such exercise
price through such withheld shares of Stock (provided,
however, that any such election and withholding of shares of
Stock pursuant to this clause (iii) shall be effected so as
to comply with the provisions of Rule 16b-3 under the
Exchange Act, if applicable), or (iv) by a combination of
(i), (ii) and (iii). In the event of any payment by
delivery or withholding of shares of Stock, such shares
shall be valued on the basis of their Fair Market Value
determined as of the day prior to the date of delivery or
withholding. If payment is made by delivery of shares of
Stock, the value of such Stock may not exceed the total
exercise price payment; but the preceding clause shall not
prevent delivery of a stock certificate for a number of
shares having a greater value, if the number of shares to be
applied to payment of the exercise price is designated by
the Participant and the Participant requests that a
certificate for the remainder shares be delivered to the
Participant.
In addition to the payment of the purchase price of the
shares of Stock then being purchased, a Participant shall
also, pursuant to Section 16, pay to the Corporation or
otherwise provide for an amount equal to the amount, if any,
which the Corporation at the time of exercise is required to
withhold under the income tax withholding provisions of the
Internal Revenue Code and other applicable income tax laws.
(e) Method of Exercise. All Options shall be
exercised (i) by written notice directed to the Secretary of
the Corporation at its principal place of business,
accompanied by payment made in accordance with the foregoing
subsection (d) of the option exercise price for the number
of shares specified in the notice of exercise and by any
documents required by Section 14, or (ii) by complying with
the exercise and other provisions of any broker-directed
cashless exercise/resale procedure adopted by the
Corporation and approved by the Committee, and by delivery
of any documents required by Section 14. The Corporation
shall make delivery of such shares within a reasonable
period of time or in accordance with applicable provisions
of any such broker-directed cashless exercise/resale
procedure; provided, however, that if any law or regulation
requires the Corporation to take any action (including but
not limited to the filing of a registration statement under
the Securities Act of 1933 and causing such registration
statement to become effective) with respect to the shares
specified in such notice before their issuance, then the
date of delivery of such shares shall be extended for the
period necessary to take such action.
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(f) Term of Options. Except as otherwise specifically
provided in the Plan or in a particular Stock Option
Agreement, the terms of all Options shall commence on the
date of grant and shall expire on October 1, 2000.
(g) Exercise of Options. Options are exercisable only
to the extent they are vested as provided in Section 8.
After Options have vested in accordance with Section 8, such
Options are exercisable at any time, in whole or in part
during their terms, except that Options that vest prior to
December 31, 1995 shall not be exercisable after
September 30, 2000. If a Participant's employment with the
Corporation or any Subsidiary is terminated without Cause,
the vested portion of each Option held by such Participant
on the date of such termination (after giving effect to the
provisions of Section 8) may be exercised for one year
following the date of termination of employment, or, if such
termination occurs subsequent to September 30, 1995, within
six months of such termination of employment. In the event
of the death, Disability or retirement at or after age 65 of
a Participant, the vested portion of each Option held by
such Participant on the date of such event may be exercised
within six months of the date of such event.
In the event of the death of a Participant, the vested
portion of each Option previously held by such Participant may be
exercised within the time set forth above by the executor or
other legal representative of such Participant.
(h) Adjustments Upon Changes in Capitalization. Upon
a change in capitalization pursuant to Section 10, the
number of shares covered by an Option and the per share
option exercise price shall be adjusted in accordance with
the provisions of Section 10.
(i) Transferability. No Option shall be assignable or
transferable by the Participant except by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA.
The designation of a beneficiary shall not constitute a
transfer; and, during the lifetime of a Participant, all
Options held by such Participant shall be exercisable only
by him or his lawful representative in the event of his
incapacity.
(j) Rights as a Stockholder. A Participant shall have
no rights as a stockholder with respect to shares covered by
his Option until the date of the issuance of the shares to
him and only after such shares are fully paid. Unless
specified in Section 10, no adjustment will be made for
dividends or other rights for which the record date is prior
to the date of such issuance.
(k) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan may contain such other
provisions not inconsistent with the terms of this Plan as
the Committee shall deem advisable.
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8. Vesting. Options granted under this Plan shall be
exercisable only to the extent such Options have become vested
pursuant to this Section 8.
(a) Options granted under this Plan prior to, on or
within ninety (90) days following the Effective Date (1)
shall become vested as follows, or (2), in the discretion of
the Committee, shall become vested on terms that are no more
favorable to a Participant than the following terms:
(i) 20% (or such lesser amount as the Committee
may determine) of each Option shall be deemed vested on
the Effective Date or date of grant, whichever is
later.
(ii) 20% of each Option shall vest as of the last
day of each of the fiscal years 1992 through 1995 in
which the Corporation achieves 100% of cumulative
Target EBDIT through such fiscal year. If cumulative
Target EBDIT is achieved through a given fiscal year
between the end of fiscal year 1991 through fiscal year
1995, such percentage of each Option which would have
become vested had the Corporation achieved Target EBDIT
for prior fiscal years shall be deemed vested as of the
last day of the fiscal year in which cumulative Target
EBDIT was achieved by the Corporation. Target EBDIT
for each of the fiscal years 1991 through 1995 is set
forth below and on Exhibit A:
Fiscal Year Target EBDIT
1991 Actual
1992 $222.000 million
1993 $231.000 million
1994 $154.692 million
1995 $255.000 million
(iii) 10% of each Option shall vest as of the
last day of each of the fiscal years 1992 through 1995
in which the Corporation achieves exactly 100% of
cumulative Financial Target EBDIT through such fiscal
year. If cumulative Financial Target EBDIT is exactly
achieved through a given fiscal year between the end of
fiscal year 1991 through fiscal year 1995, such
percentage of each Option which would have become
vested had the Corporation achieved exactly 100% of
Financial Target EBDIT for prior fiscal years shall be
deemed vested as of the last day of the fiscal year in
which cumulative Financial Target EBDIT was achieved
exactly by the Corporation.
(iv) To the extent that the Corporation achieves
a level of cumulative EBDIT between cumulative Target
EBDIT and cumulative Financial Target EBDIT as of the
end of any of the fiscal years 1992 through 1995, there
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shall be deemed to have vested as of the last day of
such fiscal year such percentage of each Option as
shall equal [A - (B X C)] - D where:
A equals:
the cumulative percentage of Options which would
be deemed vested as of the last day of the fiscal
year with respect to which this calculation is
made had the Corporation achieved cumulative
Target EBDIT through such date;
B equals:
(1) the difference between (a) the cumulative
percentage of Options which would be deemed vested
as of the last day of the fiscal year with respect
to which this calculation is made had the
Corporation achieved cumulative Target EBDIT
through such date and (b) the cumulative
percentage of Options which would be deemed vested
as of the same date had the Corporation achieved
exactly the cumulative Financial Target EBDIT for
each of the fiscal years through such date,
divided by (2) the difference between cumulative
Target EBDIT through such date and cumulative
Financial Target EBDIT through such date;
C equals:
the difference between cumulative Target EBDIT and
cumulative EBDIT as of the last day of the fiscal
year with respect to which this calculation is
made; and
D equals:
the percentage of each Option which has already
become vested.
(v) The unvested portion of each Option shall
become fully vested in the event of a Change in
Control.
(vi) The unvested portion of each Option shall
terminate and be cancelled immediately upon the
termination of a Participant's employment with the
Corporation or any Subsidiary for Cause.
(vii) With respect to Options granted prior to
August 27, 1992, if a Participant's employment with the
Corporation or any Subsidiary is terminated without
Cause or upon the death, Disability or retirement at or
after age 65, the unvested portion of each Option
shall: (a) vest as of the date of termination of
employment, death, Disability or retirement at or after
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age 65 if cumulative Contract Target EBDIT has been
achieved by the Corporation through the end of the
fiscal year ending most recently prior to the date of
such termination of employment, death, Disability or
retirement at or after age 65, or (b) terminate and be
cancelled immediately upon termination of employment if
cumulative Contract Target EBDIT has not been achieved
by the Corporation through the end of the fiscal year
ending most recently prior to the date of such
termination of employment. With respect to Options
granted on or after August 27, 1992, if a Participant's
employment is terminated without Cause or upon the
death, Disability or retirement at or after age 65, the
unvested portion of each Option shall: (a) terminate
and be cancelled immediately as of the date of
termination of employment, death, Disability or
retirement at or after age 65, or (b) vest, in whole or
in part, as provided by the Committee in its
discretion.
(b) Options granted under this Plan after ninety (90)
days following the Effective Date shall become vested on
such terms and conditions as the Committee shall determine,
after consultation with the Chief Executive Officer.
9. Adjustment of Exercise Price.
In addition to adjustments made as a result of a change in
the capitalization of the Corporation as provided in Section 10,
the exercise price of Options shall be adjusted as follows:
(a) Change in Control. In the event of a Change in
Control within three years following the Effective Date, the
option exercise price per share shall be automatically
reduced so as to equal the applicable percentage of the full
exercise price per share set forth in the table below:
If Change in Control
Occurs: Percent of Full Exercise Price
Within twelve months
of the Effective Date
(Year One) 50%
First Quarter of
Year Two 56.25%
Second Quarter of
Year Two 62.5%
Third Quarter of
Year Two 68.75%
Fourth Quarter of
Year Two 75%
First Quarter of
Year Three 81.25%
Second Quarter of
Year Three 87.5%
Third Quarter of
Year Three 93.75%
Fourth Quarter of
Year Three and Thereafter 100%
(b) Termination Without Cause. With respect to
Options granted prior to August 27, 1992, the exercise price of
Options shall be adjusted as follows:
(i) If a Participant's employment with the Corporation
or any Subsidiary is terminated without Cause, the exercise
price per share of the vested portion of each Option of such
Participant shall be reduced to 50% of the full exercise
price if cumulative Contract Target EBDIT has been achieved
by the Corporation through the end of the fiscal year ending
most recently prior to the date of termination of employment
of a Participant without Cause.
(ii) If cumulative Target EBDIT has been achieved by
the Corporation through the end of the fiscal year ending
most recently prior to the date of termination of employment
of a Participant without Cause, the exercise price per share
of the vested portion of each Option of such Participant
shall be equal to: (a) the par value per share of shares of
Stock issued from authorized but unissued shares of Stock in
satisfaction of the exercise of the vested portion of such
Options, and (b) $0.10 per share for shares of Stock issued
from shares of Stock held by the Corporation as treasury
shares in satisfaction of the exercise of the vested portion
of such Options.
(iii) If the Corporation has achieved a level of
cumulative EBDIT in excess of cumulative Contract Target
EBDIT through the end of the fiscal year most recently
preceding the date of a Participant's termination of
employment without Cause, but such cumulative EBDIT achieved
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by the Corporation does not equal or exceed cumulative
Target EBDIT through such period, the percentage of the full
exercise price per share of the vested percentage of each
Option of such Participant shall equal the product of A and
B where:
A equals:
(a) 50 divided by (b) the difference between 100% and the
percentage derived by dividing cumulative Contract Target
EBDIT by cumulative Target EBDIT through the end of the
fiscal year with respect to which this calculation relates;
and
B equals:
the difference between 100% and the percentage of cumulative
Target EBDIT achieved by the Corporation through the end of
the fiscal year with respect to which this calculation
relates;
provided, however, that in no event shall the exercise price per
share of Stock be reduced to an amount per share of less than (i)
the par value per share of shares of Stock issued from authorized
but unissued shares of Stock, or (ii) $.10 per share for shares
of Stock issued from shares of Stock held by the Corporation as
treasury shares, in satisfaction of the exercise of the vested
portion of any Option.
With respect to Options granted on or after August 27, 1992,
the exercise price of Options shall not be adjusted upon
termination of employment without Cause, except as may be
otherwise provided by the Committee, in its discretion.
10. Change in Capitalization. If the Stock should, as a
result of a stock split or stock dividend, combination of shares,
recapitalization or other change in the capital structure of the
Corporation or exchange of Stock for other securities by
reclassification or otherwise, be increased or decreased or
changed into, or exchanged for, a different number or kind of
shares or other securities of the Corporation, or any other
corporation, then the number of shares covered by Options, the
number and kind of shares which thereafter may be distributed or
issued under the Plan and the per share option price of Options
shall be appropriately adjusted consistent with such change in
such manner as the Committee may deem equitable to prevent
dilution of or increase in the rights granted to, or available
for, Participants.
11. Fractional Shares. In the event that any provision of
this Plan or a Stock Option Agreement would create a right to
acquire a fractional share of Stock, such fractional share shall
be disregarded.
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12. Successor Corporation. The obligations of the
Corporation under the Plan shall be binding upon any successor
corporation or organization succeeding to substantially all of
the assets and business of the Corporation and shall continue to
be binding upon the Corporation notwithstanding any change in
ownership of the Corporation. The Corporation agrees that it
will make appropriate provision for the preservation of
Participants' rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such transfer of
assets or ownership.
13. Non-Alienation of Benefits. Except insofar as
applicable law may otherwise require, (i) no Options, rights or
interest of Participants or Stock deliverable to any Participant
at any time under the Plan shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge of encumbrance of any
kind, and any attempt to so alienate, sell, transfer, assign,
pledge, attach, charge or otherwise encumber any such amount,
whether presently or thereafter payable, shall be void; and (ii),
to the fullest extent permitted by law, the Plan shall in no
manner be liable for, or subject to, claims, liens, attachments
or other like proceedings or the debts, liabilities, contracts,
engagements, or torts of any Participant or beneficiary. Nothing
in this Section 13 shall prevent a Participant's rights and
interests under the Plan from being transferred by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA;
provided, however, that no transfer by will or by the laws of
descent and distribution shall be effective to bind the
Corporation unless the Committee or its designee shall have been
furnished before or after the death of such Participant with a
copy of such will or such other evidence as the Committee may
deem necessary to establish the validity of the transfer.
14. Listing and Qualification of Shares. The Corporation,
in its discretion, may postpone the issuance or delivery of
shares of Stock until completion of any stock exchange listing,
or other qualification or registration of such shares under any
state or federal law, rule or regulation, as the Corporation may
consider appropriate, and may require any Participant to make
such representations, including, but not limited to, a written
representation that the shares are to be acquired for investment
and not for resale or with a view to the distribution thereof,
and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations. The
Corporation may cause a legend or legends to be placed on such
certificates to make appropriate reference to such representation
and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
15. No Claim or Right Under the Plan. No employee of the
Corporation or any Subsidiary shall at any time have the right to
be selected as a Participant in the Plan nor, having been
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selected as a Participant and granted an Option, to be granted
any additional Option. Neither the action of the Corporation in
establishing the Plan, nor any action taken by it or by the Board
or the Committee thereunder, nor any provision of the Plan, nor
participation in the Plan, shall be construed to give, and does
not give, to any person the right to be retained in the employ of
the Corporation or any Subsidiary, or interfere in any way with
the right of the Corporation or any Subsidiary to discharge or
terminate any person at any time without regard to the effect
such discharge or termination may have upon such person's rights,
if any, under the Plan.
16. Taxes. The Corporation may make such provisions and
take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required
by law to be withheld with respect to Options under the Plan,
including, but not limited to, (i) deducting the amount required
to be withheld from salary or any other amount then or thereafter
payable to a Participant, beneficiary or legal representative,
(ii) requiring a Participant, beneficiary or legal representative
to pay to the Corporation the amount required to be withheld as a
condition of releasing the Stock or (iii) complying with
applicable provisions of any broker-directed cashless
exercise/resale procedure adopted by the Corporation pursuant to
Section 7(e). If, in the exercise of an Option, the Corporation
requires payment pursuant to (ii), then, to the extent permitted
by the Corporation in its discretion, payment may be made in any
medium provided for in subsection (d) of Section 7. The
Committee also shall have the right to provide in any Stock
Option Agreement that a Participant may elect to satisfy federal
and state withholding requirements through a reduction in the
number of shares of Stock actually transferred to such
Participant under this Plan and, if applicable, any such election
and any such reduction shall be effected so as to satisfy the
conditions of Rule 16b-3 under the Exchange Act.
17. No Liability of Directors. No member of the Board or
Committee shall be personally liable by reason of any contract or
other instrument executed by such member on his behalf in his
capacity as a member of the Board or Committee, nor for any
mistake of judgment made in good faith, and the Corporation shall
indemnify and hold harmless each employee, officer and Director
of the Corporation, to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Board) arising out of any act or
omission to act in connection with the Plan to the fullest extent
permitted or required by the Corporation's governing instruments
and, in addition, to the fullest extent of any applicable
insurance policy purchased by the Corporation.
18. Other Plans. Nothing contained in the Plan is intended
to amend, modify or rescind any previously approved compensation
plans or programs entered into by the Corporation or its
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Subsidiaries. The Plan shall be construed to be in addition to
any and all such plans or programs. No award of Options under
the Plan shall be construed as compensation under any other
executive compensation or employee benefit plan of the
Corporation or any of its Subsidiaries, except as specifically
provided in any such plan or as otherwise provided by the
Committee. The adoption of the Plan by the Board shall not be
construed as creating any limitations on the power or authority
of the Board to adopt such additional compensation or incentive
arrangements as the Board may deem necessary or desirable.
19. Amendment or Termination. This Plan may be amended by
the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the stockholders of the
Corporation: (1) if stockholder approval of such amendment is
required for continued compliance with Rule 16b-3 of the Exchange
Act, or (2) if stockholder approval of such amendment is required
by any other applicable laws or regulations or by the rules of
the American Stock Exchange as long as the Stock is listed for
trading on such Exchange. The Committee also may suspend the
granting of Options under this Plan at any time and may terminate
this Plan at any time; provided, however, the Corporation shall
not have the right initially to modify, amend or cancel any
Option granted before such suspension or termination unless (1)
the Participant consents in writing to such modification,
amendment or cancellation or (2) there is a dissolution or
liquidation of the Corporation or a transaction described in
Section 10 of this Plan or (3) there is a Change in Control.
20. Captions. The captions preceding the sections of the
Plan have been inserted solely as a matter of convenience and
shall not, in any manner, define or limit the scope or intent of
any provisions of the Plan.
21. Governing Law. The Plan and all rights thereunder
shall be governed by, and construed in accordance with, the laws
of the State of Georgia, without reference to the principles of
conflicts of law thereof.
22. Expenses. All expenses of administering the Plan shall
be borne by the Corporation.
23. Effective Date. The Plan shall be effective as of the
Effective Date following its adoption by the Board, provided that
the stockholders of the Corporation shall approve this Plan after
the date of its adoption in accordance with the requirements of
Rule 16b-3 under the Exchange Act at a meeting of stockholders to
be held prior to the Effective Date.
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<PAGE>
<TABLE>
<CAPTION>
ANNEX I
1992 STOCK OPTION PLAN - EXHIBIT A
Cumulative
Cumulative Financial Financial Contract Cumulative
Fiscal Target Target Target Target Target Target
Year EBDIT EBDIT EBDIT EBDIT EBDIT EBDIT
<S> <C> <C> <C> <C> <C> <C>
1991 216 216 205.2 205.2 216 216
1992 222 438 210.9 416.1 177.6 393.6
1993 231 669 219.5 635.6 207.9 601.5
1994 154.692 -- -- -- -- --
1995 255 -- -- -- -- --
NOTE: All EBDIT figures are in millions.
</TABLE>
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CHARTER MEDICAL CORPORATION
DIRECTORS' STOCK OPTION PLAN
(as amended on December 15, 1993 and September 15, 1994)
1. Purpose. The Charter Medical Corporation Directors'
Stock Option Plan (the "Plan") is intended as an incentive and as a
means of encouraging stock ownership by non-employee members of the
Board of Directors of Charter Medical Corporation (the "Company").
2. Administration.
(a) The Plan shall be administered, construed and interpreted
by the Compensation Committee (the "Committee") of the Board of
Directors. During any time that the Board of Directors does not have
a Compensation Committee, the duties of the Committee under the Plan
shall be performed by the Board of Directors.
(b) The interpretation and construction by the Committee of
any provision of the Plan, any option granted under it or any Stock
Option Agreement and any determination by the Committee, pursuant to
any provision of the Plan, any such option or any provisions of a
Stock Option Agreement, shall be final and conclusive. The terms and
conditions of each individual Stock Option Agreement shall be in
accordance with the provisions of the Plan, but the Committee may
provide for such additional terms and conditions, not in conflict
with the provisions of the Plan, as it deems advisable.
3. Eligibility. Members of the Board of Directors who are
not employees of the Company or any subsidiary shall be granted
options under and pursuant to the terms of the Plan.
4. Stock. The stock subject to the options and other
provisions of the Plan shall be authorized but unissued or reacquired
shares of the $.25 par value Common Stock of the Company (the "Common
Stock"). Subject to readjustment in accordance with the provisions
of Section 6(h), the total amount of Common Stock on which options
may be granted to Directors under the Plan shall not exceed in the
aggregate 175,000 shares.
If any outstanding option (or portion thereof) under the Plan
for any reason expires unexercised or is terminated without exercise
prior to the end of the period during which options may be granted,
the shares of Common Stock allocable to the unexercised portion of
such option again may be subjected to an option under the Plan.
5. Grant of Options. Each eligible Director shall be
granted on the later of February 4, 1993, or the date he or she first
becomes a Director an option to purchase 25,000 shares of Common
Stock, for so long as shares are available under the Plan, but no
option shall be granted after February 4, 1998. Options granted
shall be subject to the vesting and other terms and conditions of the
Plan and each optionee's Stock Option Agreement.
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6. Terms and Conditions of Options. Stock options granted
pursuant to the Plan shall be evidenced by Stock Option Agreements in
such form as the Committee from time to time shall approve; such
agreements and the stock options granted thereby shall comply with
and be subject to the following terms and conditions:
(a) Number of Shares. Each Stock Option Agreement
shall state the total number of shares of Common Stock to which
it pertains.
(b) Exercise Price. The exercise price per share shall
be the arithmetic average of the Fair Market Value per share of
the Common Stock on the ten trading days that precede the date
of grant, including the date of grant as the tenth trading day,
on which shares of the Common Stock are traded.
(c) Medium and Time of Payment. The exercise price
shall be payable upon the exercise of the option, or as provided
in Section 6(f) if the Company adopts a broker-directed cashless
exercise/resale procedure, in each case in an amount equal to
the number of shares then being purchased times the per share
exercise price. Payment at the election of the optionee, shall
be (i) in cash; (ii) by delivery to the Company of a certificate
or certificates for shares of Common Stock, duly endorsed for
transfer to the Company with signature guaranteed by a member
firm of the New York Stock Exchange or by a national banking
association; (iii) by the withholding by the Company of shares
of stock that otherwise would be issued to the optionee as a
result of the exercise of such option to the extent that the
optionee elects to pay such exercise price through such withheld
shares of Common Stock (provided, however, that any such
election and withholding of shares pursuant to this clause (iii)
shall be effected so as to comply with the provisions of Rule
16b-3 under the Securities Exchange Act of 1934, if applicable);
or (iv) by a combination of (i), (ii) and (iii). In the event
of any payment by delivery or withholding of shares of Common
Stock, such shares shall be valued on the basis of their Fair
Market Value determined as of the day prior to the date of
delivery or withholding. If payment is made by delivery of
shares of Common Stock, the value of such shares may not exceed
the total exercise price payment; but the preceding clause shall
not prevent delivery of a stock certificate for a number of
shares having a greater value, if the number of shares to be
applied to payment of the exercise price is designated by the
optionee and the optionee requests that a certificate for the
remainder shares be delivered to the optionee.
In addition to the payment of the purchase price of the
shares then being purchased, an optionee shall also, pursuant to
Section 12, pay to the Company or otherwise provide for an
amount equal to the amount, if any, which the Company at the
time of exercise is required to withhold under the income tax
withholding provisions of the Internal Revenue Code and other
applicable income tax laws.
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(d) Fair Market Value. For purposes of Sections 6(b)
and (c), Fair Market Value of Common Stock shall be determined
on the applicable date as follows. If the Common Stock is
registered on a national securities exchange (as such term is
defined by the Securities Exchange Act of 1934) or is regularly
traded in the over-the-counter market on the date of
determination, the Fair Market Value per share of the Common
Stock shall be determined as the price equal to the mean between
the high and low sales prices of a share of the Common Stock on
said national securities exchange on that day [or, for purposes
of Section 6(c), if no shares of the stock are traded on that
date but there were shares traded on dates within a reasonable
period both before and after such date, the Fair Market Value
shall be the weighted average of the means between the high and
low sales prices of the stock on the nearest date before and the
nearest date after that date on which shares of the stock are
traded] or of the mean between the high "bid" and low "asked"
prices per share in said over-the-counter market on that day, as
reported by the National Association of Securities Dealers
Automated Quotation System (or a successor to such system). If
the Common Stock is traded on two national securities exchanges,
the Fair Market Value shall be determined by the weighted
average Fair Market Value on such exchanges unless one of such
exchanges is the American Stock Exchanges in which case Fair
Market Value shall be determined by prices on that exchange. If
the Common Stock is traded both on a national securities
exchange and in the over-the-counter market, the Fair Market
Value shall be determined by the prices on the national
securities exchange, unless transactions on such exchange and in
the over-the-counter market are jointly reported on a
consolidated reporting system in which case the Fair Market
Value shall be determined by reference to such consolidated
reporting system. If the Common Stock is not listed for trading
on a national securities exchange and is not regularly traded in
the over-the-counter market, then the Committee shall determine
the Fair Market Value of the stock from all relevant available
facts which may include opinions of independent experts as to
value and may take into account any recent sales and purchases
of such stock to the extent they are representative.
(e) Terms of Options; Date of Exercise. Terms of
options granted under the Plan shall commence on the date of
grant and shall expire on February 3, 2003, subject to Section
6(g). Each option shall become exercisable when vested.
(f) Method of Exercise. Options shall be exercised (i) by
written notice directed to the Secretary of the Company at its
principal place of business, accompanied by payment [made in
accordance with Section 6(c)], in cash or personal check (which will
be accepted subject to collection), or by certificates for shares of
the Common Stock, or by directions for withholding of shares, or by a
combination of the foregoing, of the option price for the number of
shares specified in the notice of exercise and by any documents
required by Section 6(j), or (ii) by complying with the exercise and
other provisions of any broker-directed cashless exercise/resale
procedure adopted by the Company and approved by the Committee, and by
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delivery of any documents required by Section 6(j). The Company shall
make delivery of such shares within a reasonable period of time or in
accordance with applicable provisions of any such broker-directed
cashless exercise/resale procedure; provided, however, that if any law
or regulation requires the Company to take any action (including but
not limited to the filing of a registration statement under the
Securities Act of 1933 and causing such registration statement to
become effective) with respect to the shares specified in such notice
before the issuance thereof, then the date of delivery of such shares
shall be extended for the period necessary to take such action.
(g) Effect of Termination of Service as a Director. If
an optionee during his life ceases to be a non-employee Director
of the Company (including its subsidiaries) due to voluntary
resignation as a Director, voluntary decision not to stand for
reelection or removal as a Director by the stockholders for
cause, then the unvested portion of any option shall terminate
on the earlier to occur of (i) the expiration date of the
option, or (ii) the date of termination of service as a non-
employee Director. If an optionee ceases to be a Director for
any other reason, the unvested portion of options shall vest on
the date of termination of service and may thereafter be
exercised in accordance with their terms. In the event of the
death of the optionee while he is a non-employee Director of the
Company or after termination of such service, the vested portion
any option may be exercised by his personal representatives,
heirs or legatees at any time prior to the expiration of six
months from the date of death of the optionee, but in no event
later than the date of expiration of the option.
(h) Adjustments Upon Changes in Capitalization. If the
Common Stock should, as a result of a stock split or stock
divided, combination of shares, recapitalization or other change
in the capital structure of the company or exchange of Common
Stock for other securities by reclassification or otherwise, be
increased or decreased or changed into, or exchanged for, a
different number or kind of shares of other securities of the
Company, or any other corporation, then the number of shares
covered by options, the number and kind of shares which
thereafter may be distributed or issued under the Plan and the
per share option price of options shall be appropriately
adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent dilution of or increase
in the rights granted to, or available for, optionees.
(i) Who May Exercise. No option shall be assignable or
transferable by the optionee except by will or by the laws of
descent and distribution; and, during the lifetime of an
optionee, the option shall be exercisable only by him.
(j) Optionee's Agreement. If, in the opinion of counsel
for the Company, such action is necessary or desirable, no
option shall be granted to any optionee unless at such time such
optionee represents and warrants that the stock will be acquired
for investment only and not for purposes of resale or
distribution and makes such further representation and
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<PAGE>
warranties as are deemed necessary or desirable by counsel to
the Company with regard to holding and resale of the stock. If
at the time of the exercise of any option, in the opinion of
counsel for the Company, it is necessary or desirable, in order
to comply with any applicable laws or regulations relating to
the sale of securities, that the optionee shall represent and
warrant that he is purchasing the shares that are subject to the
option for investment and not with any present intention to
resell or distribute the same or make other and further
representations and warranties with regard to the holding and
resale of the shares, the optionee, upon the request of the
Committee, will execute and deliver to the Company an agreement
or affidavit to such effect. All certificates issued pursuant
to the exercise of any option shall be marked with a restrictive
legend, if such marking, in the opinion of counsel to the
Company, is necessary or desirable.
(k) Rights as a Stockholder. An optionee shall have no
rights as a stockholder with respect to shares covered by his
option until the date of the issuance of the shares to him and
only after such shares are fully paid. Unless specified in
Section 6(h), no adjustment will be made for dividends or other
rights for which the record date is prior to the date of such
issuance.
(l) Vesting. The right to purchase 20% of the shares of
Common Stock covered by an option shall vest on the date of
grant. An additional 20% of the shares of Common Stock covered
by an option shall vest on the February 1st next following the
date of grant and on each succeeding February 1st until fully
vested, provided that the optionee must be a non-employee
Director of the Company on a February 1st in order for options
to vest on such February 1st.
(m) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan shall contain such other
provisions, including, without limitation, restrictions upon the
exercise of the option as the Committee shall deem advisable.
7. Effective Date and Termination of Plan.
(a) The Plan shall become effective upon adoption by the Board
of Directors of the Company, provided the Plan is approved by the
holders of a majority of the shares of Common Stock voting on the
matter at an annual or special meeting of stockholders held within
twelve months of adoption by the Board of Directors.
(b) The Plan, with respect to the granting of options, shall
terminate at midnight on February 4, 1998, but the Board of Directors
may terminate the Plan at any time prior to said time and date. Such
termination of the Plan by the Board of Directors shall not alter or
impair any of the rights or obligations under any option theretofore
granted under the Plan unless the affected optionee shall so consent.
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8. Fractional Shares. If any provision of this Plan or a
Stock Option Agreement would create a right to acquire a fractional
share, such fractional share shall be disregarded.
9. Successor Corporation. The obligations of the Company under
the Plan shall be binding upon any successor corporation or
organization succeeding to substantially all of the assets and
business of the Company and shall continue to be binding upon the
Company notwithstanding any change in ownership of the Company. The
Company agrees that it will make appropriate provision for the
preservation of optionees' rights under the Plan in any agreement or
plan which it may enter into or adopt to effect any such transfer of
assets or ownership.
10. Non-Alienation of Benefits. Except insofar as applicable
law may otherwise require, (i) no options, rights or interest of
optionees or Common Stock deliverable to any optionee at any time
under the Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge of encumbrance of any kind, and any attempt to so
alienate, sell, transfer, assign, pledge, attach, charge or otherwise
encumber any such amount, whether presently or thereafter payable,
shall be void; and (ii), to the fullest extent permitted by law, the
Plan shall in no manner be liable for, or subject to, claims, liens,
attachments or other like proceedings or the debts, liabilities,
contracts, engagements, or torts of any optionee. Nothing in this
Section 10 shall prevent a optionee's rights and interests under the
Plan from being transferred by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or ERISA; provided, however, that no transfer by
will or by the laws of descent and distribution shall be effective to
bind the Company unless the Committee or its designee shall have been
furnished before or after the death of such optionee with a copy of
such will or such other evidence as the Committee may deem necessary
to establish the validity of the transfer.
11. Listing and Qualification of Shares. The Company, in its
discretion, may postpone the issuance or delivery of shares of Common
Stock until completion of any stock exchange listing, or other
qualification or registration of such shares under any state or
federal law, rule or regulation, as the Company may consider
appropriate, and may require any optionee to furnish such information
as it may consider appropriate in connection with the issuance or
delivery of the shares in compliance with applicable laws, rules and
regulations.
12. Taxes. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of
all federal, state, local and other taxes required by law to be
withheld with respect to options under the Plan, including, but not
limited to, (i) deducting the amount required to be withheld from any
amount then or thereafter payable to an optionee, beneficiary or legal
representative, (ii) requiring an optionee , beneficiary or legal
representative to pay to the Company the amount required to be
withheld as a condition of releasing shares, or (iii) complying with
applicable provisions of any broker-directed cashless exercise/resale
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procedure adopted by the Company pursuant to Section 6(f). If, in the
exercise of an Option, the Company requires payment pursuant to (ii),
then, to the extent permitted by the Company in its discretion,
payment may be made in any medium provided for in subsection (d) of
Section 6.
13. No Liability of Directors. No member of the Board or the
Committee shall be personally liable by reason of any contract or
other instrument executed by such member on his behalf in his capacity
as a member of the Board or Committee, nor for any mistake of judgment
made in good faith, and the Company shall indemnify and hold harmless
each employee, officer and Director of the Company, to whom any duty
or power relating to the administration or interpretation of the Plan
may be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board) arising out of any act or
omission to act in connection with the Plan to the fullest extent
permitted or required by the Company's governing instruments and, in
addition, to the fullest extent of any applicable insurance policy
purchased by the Company.
14. Amendment. This Plan may be amended by the Board from time
to time to the extent that the Board deems necessary or appropriate;
provided, however, no such amendment shall be made absent the approval
of the stockholders of the Company: (1) if stockholder approval of
such amendment is required for continued compliance with Rule 16b-3 of
the Securities Exchange Act, or (2) if stockholder approval of such
amendment is required by any other applicable laws or regulations or
by the rules of the American Stock Exchange as long as the Common
Stock is listed for trading on such Exchange. The Committee also may
suspend the granting of options under this Plan at any time; provided,
however, the Company shall not have the right initially to modify,
amend or cancel any option granted before such suspension unless (1)
the optionee consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of the
Company or a transaction described in Section 6(h) of this Plan.
15. Captions. The captions preceding the sections of the Plan
have been inserted solely as a matter of convenience and shall not, in
any manner, define or limit the scope or intent of any provisions of
the Plan.
16. Governing Law. The Plan and all rights thereunder shall be
governed by, and construed in accordance with, the laws of the State
of Georgia, without reference to the principles of conflicts of law
thereof.
17. Expenses. All expenses of administering the Plan shall be
borne by the Company.
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CHARTER MEDICAL CORPORATION
1994 STOCK OPTION PLAN
(as amended 9/15/94)
1. Purpose. The purpose of the Charter Medical Corporation
1994 Stock Option Plan is to motivate and retain officers and
other key employees of Charter Medical Corporation and its
Subsidiaries who have major responsibility for the attainment of
the primary long-term performance goals of Charter Medical
Corporation.
2. Definitions. The following terms shall have the
following meanings:
"Board" means the Board of Directors of the
Corporation.
"Code" means the Internal Revenue Code of 1986, as
amended, and the rules promulgated thereunder.
"Committee" means a committee of two or more members of
the Board constituted and empowered by the Board to
administer the Plan in accordance with its terms.
"Corporation" means Charter Medical Corporation, a
Delaware corporation.
"Director" means a member of the Board.
"Disability" means a physical or mental condition under
which the Participant qualifies for (or will qualify for
after expiration of a waiting period) disability benefits
under the long-term disability plan of the Corporation or
Subsidiary that employs such Participant.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules promulgated
thereunder.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Fair Market Value" means: (1) If the Stock is listed
on a national securities exchange (as such term is defined
by the Exchange Act) or is traded on the Nasdaq National
Market System on the date of determination, the price equal
to the mean between the high and low sales prices of a share
of Stock on said national securities exchange or on said
Nasdaq National Market System on that day (or if no shares
of the Stock are traded on that date but there were shares
traded on dates within a reasonable period both before and
after such date, the Fair Market Value shall be the weighted
average of the means between the high and low sales prices
of the Stock on the nearest date before and the nearest date
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after that date on which shares of the Stock are traded);
(2) If the Stock is traded both on a national securities
exchange and in the over-the-counter market, the Fair Market
Value shall be determined by the prices on the national
securities exchange; and (3) If the Stock is not listed for
trading on a national securities exchange and is not traded
on the Nasdaq National Market System or otherwise in the
over-the-counter market, then the Committee shall determine
the Fair Market Value of the Stock from time to time in its
sole discretion.
"Option" means an Option granted pursuant to Section 6.
"Participant" means an employee of the Corporation or
any of its Subsidiaries who is selected to participate in
the Plan in accordance with Section 4.
"Plan" means the Charter Medical Corporation 1994 Stock
Option Plan.
"Stock" means the common stock, par value $0.25 per
share, of the Corporation.
"Stock Option Agreement" means the written agreement or
instrument which sets forth the terms of an Option granted
to a Participant under this Plan.
"Subsidiary" means any corporation, as defined in
Section 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, of
which the Corporation, at the time, directly or indirectly,
owns 50% or more of the outstanding securities having
ordinary voting power to elect directors (other than
securities having voting power only by reason of a
contingency).
3. Administration. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee,
acting in its absolute discretion, shall exercise such powers and
take such action as expressly called for under this Plan and,
further, the Committee shall have the power to interpret the
Plan, to determine the terms of each Stock Option Agreement
(subject to the provisions of the Plan) and (subject to Section
18 and Rule 16b-3 under the Exchange Act, if applicable) to take
such other action in the administration and operation of this
Plan as the Committee deems equitable under the circumstances.
All actions of the Committee shall be binding on the Corporation,
on each affected Participant and on each other person directly or
indirectly affected by such action. No member of the Board shall
serve as a member of the Committee unless such member is a
"disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. The Committee shall have the right to delegate to
the chief executive officer of the Corporation the authority to
select Participants and to grant Options (except to any person
subject to Section 16 of the Exchange Act), subject to any
review, approval, or notification required by the Committee or as
may otherwise be required by law.
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4. Participation. Participants in the Plan shall be
limited to those officers and employees of the Corporation or any
of its Subsidiaries who have been selected to participate in the
Plan by the Committee acting in its absolute discretion.
5. Maximum Number of Shares Subject to Options. Subject to
the provisions of Section 9, there shall be 1,300,000 shares of
Stock reserved for use under this Plan, and such shares of Stock
shall be reserved to the extent that the Committee and the Board
deems appropriate from authorized but unissued shares of Stock or
from shares of Stock which have been reacquired by the
Corporation. Any shares of Stock subject to any Option which
remain after the cancellation, expiration, exchange or forfeiture
of such Option thereafter shall again become available for use
under this Plan. All authorized and unissued shares issued upon
exercise of Options under the Plan shall be fully paid and
nonassessable shares.
6. Grant of Options. The Committee, acting in its absolute
discretion, shall have the right to grant Options to Participants
under this Plan from time to time; provided, however, that the
maximum number of shares of Stock issuable upon exercise of
Options shall not exceed 1,300,000, subject to adjustment as
provided in Section 9. No Option shall be granted after December
31, 1996. The maximum number of Options that are granted to any
Participant shall not exceed 150,000, subject to adjustment as
provided in Section 9.
7. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by Stock Option
Agreements in such form as the Committee from time to time shall
approve and including such terms and conditions not inconsistent
with the provisions set forth in the Plan as the Committee may
determine; provided, that such Stock Option Agreements and the
Options granted shall comply with and be subject to the following
terms and conditions:
(a) Employment. Each Participant shall agree to
remain in the employ of and to render services to the
Corporation or a Subsidiary thereof for such period as the
Committee may require in the Stock Option Agreement;
provided, however, that such agreement shall not impose upon
the Corporation or any Subsidiary thereof any obligation to
retain the Participant in its employ for any period.
(b) Number of Shares. Each Stock Option Agreement
shall state the total number of shares of Stock to which it
pertains.
(c) Exercise Price. The exercise price per share for
Options shall be Fair Market Value of the Stock on the date
of grant, subject to adjustment as contemplated by Section
9.
(d) Medium and Time of Payment. The exercise price
shall be payable upon the exercise of the Option, or as
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provided in Section 7(e) if the Corporation adopts a
broker-directed cashless exercise/resale procedure, in each
case in an amount equal to the number of shares then being
purchased times the per share exercise price. Payment shall
be in cash; except that the Corporation, in its sole
discretion, may permit payment by delivery to the
Corporation of a certificate or certificates for shares of
Stock duly endorsed for transfer to the Corporation with
signature guaranteed by a member firm of the New York Stock
Exchange or by a national banking association. In the event
of any payment by delivery of shares of Stock, such shares
shall be valued on the basis of their Fair Market Value
determined as of the day prior to the date of delivery. If
payment is made by delivery of shares of Stock, the value of
such Stock may not exceed the total exercise price payment;
but the preceding clause shall not prevent delivery of a
stock certificate for a number of shares having a greater
value, if the number of shares to be applied to payment of
the exercise price is designated by the Participant and the
Participant requests that a certificate for the remainder
shares be delivered to the Participant.
In addition to the payment of the purchase price of the
shares of Stock then being purchased, a Participant shall
also, pursuant to Section 15, pay to the Corporation or
otherwise provide for payment of an amount equal to the
amount, if any, which the Corporation at the time of
exercise is required to withhold under the income tax
withholding provisions of the Code and other applicable
income tax laws.
(e) Method of Exercise. All Options shall be
exercised (i) by written notice directed to the Secretary of
the Corporation at its principal place of business,
accompanied by payment made in accordance with the foregoing
subsection (d) of the option exercise price for the number
of shares specified in the notice of exercise and by any
documents required by Section 13, or (ii) by complying with
the exercise and other provisions of any broker-directed
cashless exercise/resale procedure adopted by the
Corporation and approved by the Committee, and by delivery
of any documents required by Section 13. The Corporation
shall make delivery of such shares within a reasonable
period of time or in accordance with applicable provisions
of any such broker-directed cashless exercise/resale
procedure; provided, however, that if any law or regulation
requires the Corporation to take any action (including but
not limited to the filing of a registration statement under
the Securities Act of 1933 and causing such registration
statement to become effective) with respect to the shares
specified in such notice before their issuance, then the
date of delivery of such shares shall be extended for the
period necessary to take such action.
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(f) Term of Options. Except as otherwise specifically
provided in the Plan, the terms of all Options shall
commence on the date of grant and shall expire ten years
after the date of grant.
(g) Exercise of Options. Options are exercisable only
to the extent they are vested as provided in Section 8.
After Options have vested in accordance with Section 8, such
Options are exercisable at any time, in whole or in part
during their terms if the Participant is at the time of
exercise employed by the Company or a Subsidiary. If a
Participant's employment with the Corporation or any
Subsidiary is terminated for any reason other than death or
disability, the vested portion of each Option held by such
Participant on the date of such termination may be exercised
for 90 days following the date of termination of employment
(but not after expiration of the term of the option). In
the event of the death or Disability of a Participant, the
vested portion of each Option held by such Participant on
the date of such event may be exercised within twelve months
of the date of such event (but not after the expiration of
the term of the option).
In the event of the death of a Participant, the vested
portion of each Option previously held by such Participant
may be exercised within the time set forth above by the
executor, other legal representative or, if none, the heir
or legatee of such Participant.
(h) Adjustments Upon Changes in Capitalization. Upon
a change in capitalization pursuant to Section 9, the number
of shares covered by an Option and the per share option
exercise price shall be adjusted in accordance with the
provisions of Section 9.
(i) Transferability. No Option shall be assignable or
transferable by the Participant except by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA.
The designation of a beneficiary shall not constitute a
transfer; and, during the lifetime of a Participant, all
Options held by such Participant shall be exercisable only
by him or his lawful representative in the event of his
incapacity.
(j) Rights as a Stockholder. A Participant shall have
no rights as a stockholder with respect to shares covered by
his Option until the date of the issuance of the shares to
him and only after such shares are fully paid. Unless
specified in Section 9, no adjustment will be made for
dividends or other rights for which the record date is prior
to the date of such issuance.
(k) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan may contain such other
provisions not inconsistent with the terms of this Plan as
the Committee shall deem advisable.
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8. Vesting. Options granted under this Plan shall be
exercisable only to the extent such Options have become vested
pursuant to this Section 8. An Option shall vest at the rate of
33-1/3% of the shares covered by the Option on each of the first
three anniversary dates of the grant of the Option if the
Participant is an employee of the Company or a Subsidiary on such
dates.
9. Change in Capitalization. If the Stock should, as a
result of a stock split or stock dividend, combination of shares,
recapitalization or other change in the capital structure of the
Corporation or exchange of Stock for other securities by
reclassification or otherwise, be increased or decreased or
changed into, or exchanged for, a different number or kind of
shares or other securities of the Corporation, or any other
corporation, then the number of shares covered by Options, the
number and kind of shares which thereafter may be distributed or
issued under the Plan and the per share option price of Options
shall be appropriately adjusted consistent with such change in
such manner as the Committee may deem equitable to prevent
dilution of or increase in the rights granted to, or available
for, Participants.
10. Fractional Shares. In the event that any provision of
this Plan or a Stock Option Agreement would create a right to
acquire a fractional share of Stock, such fractional share shall
be disregarded.
11. Successor Corporation. If the Company is merged or
consolidated with another corporation or other legal entity and
the Company is not the surviving corporation or legal entity, or
in the event all or substantially all of the property or common
stock of the Company is acquired by another corporation or legal
entity, or in case of a dissolution, reorganization or
liquidation of the Company, the Board of Directors of the
Company, or the board of directors or governing body of any
corporation or other legal entity assuming the obligations of the
Company hereunder, shall either: (i) make appropriate provision
for the preservation of Participants' rights under the Plan in
any agreement or plan it may enter into or adopt to effect any of
the foregoing transactions; or (ii) upon written notice to each
Participant, provide that all Options, whether or not vested, may
be exercised within thirty days of the date of such notice and if
not so exercised, shall be terminated.
12. Non-Alienation of Benefits. Except insofar as
applicable law may otherwise require, (i) no Options, rights or
interest of Participants or Stock deliverable to any Participant
at any time under the Plan shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge of encumbrance of any
kind, and any attempt to so alienate, sell, transfer, assign,
pledge, attach, charge or otherwise encumber any such amount,
whether presently or thereafter payable, shall be void; and (ii),
to the fullest extent permitted by law, the Plan shall in no
manner be liable for, or subject to, claims, liens, attachments
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or other like proceedings or the debts, liabilities, contracts,
engagements, or torts of any Participant or beneficiary. Nothing
in this Section 12 shall prevent a Participant's rights and
interests under the Plan from being transferred by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA;
provided, however, that no transfer by will or by the laws of
descent and distribution shall be effective to bind the
Corporation unless the Committee or its designee shall have been
furnished before or after the death of such Participant with a
copy of such will or such other evidence as the Committee may
deem necessary to establish the validity of the transfer.
13. Listing and Qualification of Shares. The Corporation,
in its discretion, may postpone the issuance or delivery of
shares of Stock until completion of any stock exchange listing,
or other qualification or registration of such shares under any
state or federal law, rule or regulation, as the Corporation may
consider appropriate, and may require any Participant to make
such representations, including, but not limited to, a written
representation that the shares are to be acquired for investment
and not for resale or with a view to the distribution thereof,
and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations. The
Corporation may cause a legend or legends to be placed on such
certificates to make appropriate reference to such representation
and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
14. No Claim or Right Under the Plan. No employee of the
Corporation or any Subsidiary shall at any time have the right to
be selected as a Participant in the Plan nor, having been
selected as a Participant and granted an Option, to be granted
any additional Option. Neither the action of the Corporation in
establishing the Plan, nor any action taken by it or by the Board
or the Committee thereunder, nor any provision of the Plan, nor
participation in the Plan, shall be construed to give, and does
not give, to any person the right to be retained in the employ of
the Corporation or any Subsidiary, or interfere in any way with
the right of the Corporation or any Subsidiary to discharge or
terminate any person at any time without regard to the effect
such discharge or termination may have upon such person's rights,
if any, under the Plan.
15. Taxes. The Corporation may make such provisions and
take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required
by law to be withheld with respect to Options under the Plan,
including, but not limited to, (i) deducting the amount required
to be withheld from salary or any other amount then or thereafter
payable to a Participant, beneficiary or legal representative,
(ii) requiring a Participant, beneficiary or legal representative
to pay to the Corporation the amount required to be withheld as a
condition of releasing the Stock, or (iii) complying with
applicable provisions of any broker-directed cashless
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exercise/resale procedure adopted by the Corporation pursuant to
Section 7(e).
16. No Liability of Directors. No member of the Board or
Committee shall be personally liable by reason of any contract or
other instrument executed by such member on his behalf in his
capacity as a member of the Board or Committee, nor for any
mistake of judgment made in good faith, and the Corporation shall
indemnify and hold harmless each employee, officer and Director
of the Corporation, to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Board) arising out of any act or
omission to act in connection with the Plan to the fullest extent
permitted or required by the Corporation's governing instruments
and, in addition, to the fullest extent of any applicable
insurance policy purchased by the Corporation.
17. Other Plans. Nothing contained in the Plan is intended
to amend, modify or rescind any previously approved compensation
plans or programs entered into by the Corporation or its
Subsidiaries. The Plan shall be construed to be in addition to
any and all such plans or programs. No award of Options under
the Plan shall be construed as compensation under any other
executive compensation or employee benefit plan of the
Corporation or any of its Subsidiaries, except as specifically
provided in any such plan or as otherwise provided by the
Committee. The adoption of the Plan by the Board shall not be
construed as creating any limitations on the power or authority
of the Board to adopt such additional compensation or incentive
arrangements as the Board may deem necessary or desirable.
18. Amendment or Termination. This Plan may be amended by
the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the stockholders of the
Corporation: (1) if stockholder approval of such amendment is
required for continued compliance with Rule 16b-3 of the Exchange
Act, or (2) if stockholder approval of such amendment is required
by any other applicable laws or regulations or by the rules of
any stock exchange as long as the Stock is listed for trading on
such exchange. The Committee also may suspend the granting of
Options under this Plan at any time and may terminate this Plan
at any time; provided, however, the Corporation shall not have
the right to modify, amend or cancel any Option granted before
such suspension or termination unless (1) the Participant
consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of the
Corporation or a transaction described in Section 11 of this
Plan.
19. Captions. The captions preceding the sections of the
Plan have been inserted solely as a matter of convenience and
shall not, in any manner, define or limit the scope or intent of
any provisions of the Plan.
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20. Governing Law. The Plan and all rights thereunder
shall be governed by, and construed in accordance with, the laws
of the State of Georgia, without reference to the principles of
conflicts of law thereof.
21. Expenses. All expenses of administering the Plan shall
be borne by the Corporation.
22. Effective Date. The Plan shall be effective as of the
date of its adoption by the Board, subject to approval of this
Plan by the stockholders of the Corporation after the date of its
adoption in accordance with the requirements of Rule 16b-3 under
the Exchange Act.
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EXECUTIVE BENEFIT PLAN
Plan Year
The Plan Year for Executive Benefits is January 1 to December
31, and benefit levels will be based upon salary. Changes in
benefit selections will be permitted annually, during the
enrollment period.
FLEX Benefits
Participants may choose among tax-sheltered options to create
a benefit package of the greatest value.
The amount of the FLEX Allowance is equal to 11% of base
salary as of January 1.
It is important to note that to preserve the tax-favored
status of benefits within the Execu-FLEX Benefit Plan, the
FLEX Allowance cannot be distributed in cash under current
tax law.
The calculations of benefit costs are estimated. Final
calculations will be shown on Summary of Elections which will
be sent to participants approximately 90 days after the
enrollment period.
Individual Long-Term Disability Coverage
Overview. Using tax-sheltered FLEX dollars, a participant can
purchase a personal disability insurance policy with
provisions designed especially for the needs of executives,
including a much greater benefit and more liberal definition
of disability.
Amount of benefit. Up to the carrier maximum.
Term of benefit. Benefits are paid until age 65, unless a
participant becomes disabled after age 61:
Total Disability Beginning Benefit Period
At age 62 42 months
At age 63 36 months
At age 64 30 months
At age 65 24 months
At age 66 21 months
At age 67 18 months
At age 68 15 months
At age 69 or older 12 months
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Waiting period. Benefits commence after a 180-day waiting
period.
Definition of disability. Inability to perform the duties of
the participant's occupation.
Benefit offsets. Benefits are not reduced by Social Security
or any other disability income payments.
Partial disability. If partially disabled, benefits are paid
for loss of earnings to age 65. All income earned prior to
disability will be considered when determining the percentage
of income which is lost.
Policy renewal. The policy is non-cancelable and guaranteed
renewable.
Portability. Participants own the disability insurance policy
and may continue it if the participants leave Charter.
Benefit increases. Coverage will increase automatically each
year for five years regardless of health condition. The
annual increase will match actual percentage increases in
income not to exceed 15%, to a maximum total benefit of
$15,000 per month.
Optional provisions. The following coverages may be added to
the individual long-term disability policy at an additional
charge:
- Inflation adjustment
- Lifetime accident
- Premium refund
Group benefit is discontinued.
Tax status. Premiums for this benefit are charged against
tax-sheltered FLEX dollars, and any benefits received will be
subject to income tax.
However, a participant may pay some or all of the premiums
with after-tax dollars to receive a tax-free benefit. The IRS
considers the proportion of premiums contributed after-tax to
the total of premiums paid during the prior year in
determining the percentage of benefit sheltered; i.e.,
executive pays 60% of premium via payroll deduction, 60% of
benefits received are tax free.
Evidence of insurability. FLEX disability coverage is subject
to medical evidence of insurability, and a physical exam will
be scheduled with a health care professional selected by the
insurance company.
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Integration of coverage. The individual disability policy
will integrate with any existing individual disability
policies.
Benefit charge. The FLEX account will be charged with the
annual cost of the coverage selected. The annual cost will
increase at approximately the same percentage amount per year
for the first five years as coverage automatically increases.
Supplemental Survivor Plan
Overview. A participant may allocate a portion of FLEX
benefit dollars to the Supplemental Survivor Plan, for
additional life insurance coverage both pre- and
post-retirement. Charter will assist with the purchase of a
permanent insurance policy by advancing premiums for a
ten-year period. This benefit option is in addition to
Charter-provided Benefits Plus Plan and the Executive
Survivor insurance.
Amount of benefit. A participant may elect life insurance
coverage of up to four times plan entry salary over and above
the Basic and Executive survivor benefits. Insurance coverage
is selected in whole multiples of salary.
Benefit increases. The benefit will not increase each year
with compensation. Coverage will increase or decrease based
upon the financial performance of the investment funds
selected.
Type of insurance. This benefit is provided through a
specially-selected variable universal life insurance policy.
Investment choices. The participant directs the investment of
the premium deposits among portfolios within the insurance
policy plus a Real Property Account and fixed-rate option.
The participant may move the money within the portfolios up
to four times per year without charge.
Charter sponsorship. To assist with the purchase of this
benefit, Charter will deposit premiums, as an advance, into
the life insurance contract for ten years. Upon retirement or
at the end of 15 years, whichever is later, funds will be
withdrawn and/or borrowed from the cash value of the policy
to repay Charter's advances. The participant will retain
ownership of the policy.
Post-Retirement Death Benefit. The amount and duration of the
policy's post-retirement death benefit depend upon the amount
of cash value retained in the policy after Charter withdraws
its premium advances.
Early policy distribution. A participant may request an
early release of the policy when the cash value equals the
cumulative premium advances.
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Split Dollar insurance. The insurance is provided on a Split
Dollar basis. In this case, the participant will legally own
the policy. Cash accumulation value equal to Charter's
deposits will be legally assigned to Charter and will be paid
either from proceeds at death, or from cash values upon
retirement (or at the end of 15 years, if later).
Termination of employment. The Supplemental Survivor policy
is portable, and the participant may elect to continue it
upon leaving Charter by repaying Charter its premium advances
and making future premium payments.
After-tax contributions. Based on IRS rules, the participant
will make after-tax contributions through payroll deductions
in equal installments. By using Split Dollar, the lowest
possible rates for valuing this benefit are used when
calculating payments.
Evidence of insurability. Supplemental Survivor coverage is
subject to medical evidence of insurability.
Benefit charge. The charge to the tax-sheltered FLEX
Allowance is for the Time Value of Money (TVM) multiplied by
Charter's cumulative outstanding advances. The current TVM is
3%.
Spouse Survivor Benefits
Overview. The participant may allocate a portion of the
participant's tax-sheltered FLEX Allowance to the Spouse
Survivor Benefit to purchase life insurance coverage on the
participant's spouse.
Amount of benefit. The participant may elect either $50,000
or $100,000 of insurance coverage.
Charter sponsorship. To assist with the purchase of this
benefit, Charter will deposit premiums, as an advance, into
the life insurance contract for ten years.
Benefit increases. The amount of benefit does not change over
time.
Type of insurance. This benefit is provided through a
specially selected universal life insurance policy.
Split Dollar insurance. The insurance is provided on a Split
Dollar basis. The participant legally owns the policy. Cash
accumulation value equal to Charter deposits will be assigned
to Charter and will be paid either from proceeds at death or
from cash values at the end of 12 years.
Policy distribution. At the end of the twelfth year, the
participant will withdraw and/or borrow funds from the cash
value of the policy to repay Charter's advances.
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Termination of employment. A spouse's policy is portable. If
a participant leaves Charter before the end of 12 years, a
participant may continue the policy by repaying Charter for
its premium advances and by personally making future premium
payments.
After-tax contributions. Based on IRS rules, a participant
will make after-tax contributions through payroll deductions
in equal installments. By using Split Dollar, the lowest
possible rates for valuing this benefit are used when
calculating payments.
Evidence of insurability. The Spouse Survivor Benefit is
subject to medical evidence of insurability.
Benefit charge. The charge to a tax-sheltered FLEX Allowance
is for the Time Value of Money (TVM) multiplied by Charter's
cumulative outstanding advances. The current TVM is 3%.
Executive Retirement Benefits - Annual Incentive Match
Overview. As of January 1, 1994 each Annual Incentive plan
award will be matched by a 33 1/3% contribution by Charter.
Tax status. Credits to and earnings on the Annual Incentive
match are tax-sheltered until the vesting date. Upon
vesting, a benefit equal to the account balance will be
distributed, and the participant will owe income taxes on the
full amount.
Vesting. A participant may elect a vesting date from one of
three options.
- Two years
- Mid-term date (more than two years but less than
specified retirement date)
- Specified retirement date
Once a participant selects a mid-term date and/or specified
retirement, all future deposits will be limited to two years
or the previously-selected mid-term and retirement dates. One
year prior to a selected mid-term date, a participant will
have the opportunity to elect a new mid-term vesting date.
The vesting date will be the earliest of the following dates:
- Date elected
- Death
- Termination as a result of disability
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- Involuntary termination without cause
Or in the case of any other termination, whether voluntary or
terminated with cause:
- Twenty-four months following any other termination,
provided the participant fulfills the terms of the
noncompetition agreement
Substantial risk of forfeiture. The Annual Incentive Match is
subject to a substantial risk of forfeiture in the form of a
non-competition agreement. The non-competition agreement
stipulates that the participant will not work for a competitor
in the same or similar job duties for a period of 24 months as
described in the agreement.
Employer insolvency. If Charter becomes insolvent, the
participant will be an unsecured creditor and will have no
preferred claim to any assets. However, a special trust is
being implemented to safeguard assets informally funding the
Annual Incentive Match benefits from any other contingencies
such as change in control of Charter.
Method of investment. A participant may elect from several
investment funds within a mutual fund family. The interest
credited will be equal the total investment returns on your
selected funds, less any applicable loads and charges as
described in the fund(s) prospectus.
Timing of deposits. Deposits will be made annually in January
based on the previous year's incentive award.
FLEX Retirement Benefits - Capital Accumulation Account
Overview. The Capital Accumulation Account is a tax-sheltered
opportunity to build net worth on a medium- or long-term basis.
It is designed to be an effective means of supplementing
retirement income from other sources.
This account is subject to the same elective vesting rules, the
Substantial Risk of Forfeiture, and the risk of Employer
insolvency as the Annual Incentive Match. A participant may
elect the same or a different vesting date for a Capital
Accumulation Account.
Timing of credits. FLEX Fund dollars allocated to the Capital
Accumulation Account will be credited annually in April 1994.
Benefit charge. Tax-sheltered FLEX Allowance dollars are used
to pay for this benefit should the participant elect it.
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Exhibit 21
CHARTER MEDICAL CORPORATION
SUBSIDIARY CORPORATIONS
September 30, 1994
The following corporations are all of the direct or indirect subsidiary
corporations of Charter Medical Corporation, a Delaware corporation. Charter
Medical Corporation directly or indirectly owns all of the outstanding voting
securities of such subsidiaries except where noted.
State or Jurisdiction
Name of Corporation: Of Incorporation
Ambulatory Resources, Inc. Georgia
Subsidiaries:
Gwinnett Immediate Care Center, Inc. Georgia
Holcomb Bridge Immediate Care Center, Inc. Georgia
Atlanta MOB, Inc. Georgia
Beltway Community Hospital, Inc. Texas
C.A.C.O. Services, Inc. Ohio
CCM, Inc. (1) Nevada
Charter of Alabama, Inc. Alabama
Charter Alvarado Behavioral Health System, Inc. California
Charter Appalachian Hall Behavioral Health System, Inc. North Carolina
Charter Arbor Indy Behavioral Health System, Inc. Indiana
Charter Augusta Behavioral Health System, Inc. Georgia
Charter Bay Harbor Behavioral Health System, Inc. Florida
Charter Beacon Behavioral Health System, Inc. Indiana
Charter Behavioral Health System of Athens, Inc. Georgia
Charter Behavioral Health Systems of Atlanta, Inc. Georgia
Charter Behavioral Health System of Austin, Inc. Texas
Charter Behavioral Health System of Baywood, Inc. Texas
Charter Behavioral Health System of Bradenton, Inc. Florida
Subsidiary:
Charter Behavioral Health System at Manatee Palms
Therapeutic Group Home, Inc. Florida
Charter Behavioral Health System of Canoga Park, Inc. California
Charter Behavioral Health System of Central Georgia, Inc. Georgia
Charter Behavioral Health System of Charleston, Inc. South Carolina
Charter Behavioral Health System of Charlottesville, Inc. Virginia
Charter Behavioral Health System of Chicago, Inc. Illinois
Charter Behavioral Health System of Chula Vista, Inc. California
Charter Behavioral Health System of Columbia, Inc. Missouri
Charter Behavioral Health System of Corpus Christi, Inc. Texas
Charter Behavioral Health System of Dallas, Inc. Texas
Charter Behavioral Health System of Evansville, Inc. Indiana
Charter Behavioral Health System at Fair Oaks, Inc. New Jersey
Charter Behavioral Health System of Fort Worth, Inc. Texas
Charter Behavioral Health System at Hidden Brook, Inc. Maryland
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State or Jurisdiction
Name of Corporation: Of Incorporation
Charter Behavioral Health System of Jackson, Inc. Mississippi
Subsidiary:
Charter Behavioral Health System of Mississippi, Inc. Mississippi
Charter Behavioral Health System of Jacksonville, Inc. Florida
Charter Behavioral Health System of Jefferson, Inc. Indiana
Charter Behavioral Health System of Kansas City, Inc. Kansas
Charter Behavioral Health System of Lafayette, Inc. Louisiana
Charter Behavioral Health System of Lake Charles, Inc. Louisiana
Charter Behavioral Health System of Lakewood, Inc. California
Charter Behavioral Health System at Los Altos, Inc. California
Charter Behavioral Health System of Michigan City, Inc. Indiana
Charter Behavioral Health System of Mobile, Inc. Alabama
Charter Behavioral Health System of Nashua, Inc. New Hampshire
Charter Behavioral Health System of Nevada, Inc. Nevada
Charter Behavioral Health System of New Mexico, Inc. New Mexico
Charter Behavioral Health System of Northwest
Arkansas, Inc. Arkansas
Charter Behavioral Health System of Northwest
Indiana, Inc. Indiana
Charter Behavioral Health System of Paducah, Inc. Kentucky
Charter Behavioral Health System at Potomac Ridge, Inc. Maryland
Charter Behavioral Health System of Rockford, Inc. Illinois
Charter Behavioral Health System of San Jose, Inc. California
Charter Behavioral Health System of Southern
California, Inc. California
Charter Behavioral Health System of Tampa Bay, Inc. Florida
Subsidiary:
Tampa Bay Behavioral Health Alliance, Inc. Florida
Charter Behavioral Health System of Texarkana, Inc. Arkansas
Charter Behavioral Health System of Toledo, Inc. Ohio
Charter Behavioral Health System of Tucson, Inc. Arizona
Charter Behavioral Health System of Virginia Beach, Inc. Virginia
Charter Behavioral Health System of Visalia, Inc. California
Charter Behavioral Health System at Warwick Manor, Inc. Maryland
Charter Behavioral Health System of Waverly, Inc. Minnesota
Charter Behavioral Health System of Winston-Salem, Inc. North Carolina
Charter Behavioral Health System of Yorba Linda, Inc. California
Charter Brawner Behavioral Health System, Inc. Georgia
Subsidiary:
Charter Behavioral Health System of Savannah, Inc. Georgia
Charter-By-The Sea Behavioral Health System, Inc. Georgia
Charter Canyon Behavioral Health System, Inc. Utah
Charter Canyon Springs Behavioral Health System, Inc. California
Charter Centennial Peaks Behavioral Health System, Inc. Colorado
Charter Colonial Institute, Inc. Virginia
Charter Community Hospital, Inc. California
Charter Community Hospital of Des Moines, Inc. Iowa
Charter Contract Services, Inc. Georgia
Charter Cove Forge Behavioral Health System, Inc. Pennsylvania
Charter Crescent Pines Behavioral Health System, Inc. Georgia
Charter Fairbridge Behavioral Health System, Inc. Maryland
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State or Jurisdiction
Name of Corporation: Of Incorporation
Charter Fairmount Behavioral Health System, Inc. Pennsylvania
Charter Fenwick Hall Behavioral Health System, Inc. South Carolina
Charter Financial Offices, Inc. Georgia
Charter Forest Behavioral Health System, Inc. Louisiana
Charter Grapevine Behavioral Health System, Inc. Texas
Charter Greensboro Behavioral Health System, Inc. North Carolina
Charter Health Management of Texas, Inc. Texas
Charter Hospital of Columbus, Inc. Ohio
Charter Hospital of Denver, Inc. Colorado
Charter Hospital of Ft. Collins, Inc. Colorado
Charter Hospital of Laredo, Inc. Texas
Charter Hospital of Mobile, Inc. Alabama
Charter Hospital of Northern New Jersey, Inc. New Jersey
Charter Hospital of Santa Teresa, Inc. New Mexico
Charter Hospital of St. Louis, Inc. Missouri
Subsidiary:
Charter Hospital of Miami, Inc. Florida
Charter Hospital of Torrance, Inc. California
Charter Indianapolis Behavioral Health System, Inc. Indiana
Charter Lafayette Behavioral Health System, Inc. Indiana
Charter Lakehurst Behavioral Health System, Inc. New Jersey
Charter Lakeside Behavioral Health System, Inc. Tennessee
Charter Laurel Heights Behavioral Health System, Inc. Georgia
Charter Laurel Oaks Behavioral Health System, Inc. Florida
Charter Linden Oaks Behavioral Health System, Inc. Illinois
Charter Little Rock Behavioral Health System, Inc. Arkansas
Charter Louisville Behavioral Health System, Inc. Kentucky
Charter Meadows Behavioral Health System, Inc. Maryland
Charter Medfield Behavioral Health System, Inc. Florida
Charter Medical - California, Inc. Georgia
Subsidiary:
Charter Behavioral Health System of Northern
California, Inc. California
Charter Medical (Cayman Islands) Ltd. Cayman Islands
Charter Medical - Clayton County, Inc. Georgia
Charter Medical - Cleveland, Inc. Texas
Subsidiaries:
Charter Regional Medical Center, Inc. Texas
Charter Medical - Dallas, Inc. Texas
Charter Medical of East Valley, Inc. Arizona
Charter Medical Executive Corporation Georgia
Charter Medical of England Limited United Kingdom
Charter Medical of Florida, Inc. Florida
Charter Medical Information Services, Inc. Georgia
Charter Medical International, Inc. Cayman Islands
Charter Medical International, S.A., Inc. Nevada
Subsidiary:
Societe Anonyme De La Metairie Switzerland
Charter Medical - Long Beach, Inc. California
Charter Medical Management Company Georgia
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State or Jurisdiction
Name of Corporation: Of Incorporation
Charter Medical - New York, Inc. New York
Charter Medical of North Phoenix, Inc. Arizona
Charter Medical of Orange County, Inc. Florida
Charter Medical of Puerto Rico, Inc. Commonwealth
of Puerto Rico
Charter Mental Health Options, Inc. Florida
Charter Mid-South Behavioral Health System, Inc. Tennessee
Charter Milwaukee Behavioral Health System, Inc. Wisconsin
Charter Mission Viejo Behavioral Health System, Inc. California
Charter MOB of Charlottesville, Inc. Virginia
Charter North Behavioral Health System, Inc. Alaska
Charter North Counseling Center, Inc. Alaska
Charter Northbrooke Behavioral Health System, Inc. Wisconsin
Charter Northridge Behavioral Health System, Inc. North Carolina
Charter Northside Hospital, Inc. Georgia
Charter Oak Behavioral Health System, Inc. California
Charter Palms Behavioral Health System, Inc. Texas
Charter Peachford Behavioral Health System, Inc. Georgia
Charter Pines Behavioral Health System, Inc. North Carolina
Charter Plains Behavioral Health System, Inc. Texas
Charter - Provo School, Inc. Utah
Charter Psychiatric Hospitals, Inc. Delaware
Charter Real Behavioral Health System, Inc. Texas
Charter Richmond Behavioral Health System, Inc. Virginia
Charter Ridge Behavioral Health System, Inc. Kentucky
Charter Rivers Behavioral Health System, Inc. South Carolina
Charter San Diego Behavioral Health System, Inc. California
Charter Serenity Lodge Behavioral Health System, Inc. Virginia
Charter Sioux Falls Behavioral Health System, Inc. South Dakota
Charter South Bend Behavioral Health System, Inc. Indiana
Charter Springs Behavioral Health System, Inc. Florida
Charter Springwood Behavioral Health System, Inc. Virginia
Charter Suburban Hospital of Mesquite, Inc. Texas
Charter Terre Haute Behavioral Health System, Inc. Indiana
Charter Thousand Oaks Behavioral Health System, Inc. California
Charter Tidewater Behavioral Health System, Inc. Virginia
Charterton/LaGrange, Inc. Kentucky
Charter Treatment Center Of Michigan, Inc. Michigan
Charter Westbrook Behavioral Health System, Inc. Virginia
Subsidiary:
CPS Associates, Inc. Virginia
Charter White Oak Behavioral Health System, Inc. Maryland
Charter Wichita Behavioral Health System, Inc. Kansas
Charter Woods Behavioral Health System, Inc. Alabama
Subsidiary:
Charter Woods Hospital, Inc. Alabama
CMSF, Inc. Florida
Desert Springs Hospital, Inc. Nevada
Subsidiary:
CMCI, Inc. Nevada
CMFC, Inc. Nevada
<PAGE>
<PAGE>
State or Jurisdiction
Name of Corporation: Of Incorporation
Employee Assistance Services, Inc. Georgia
Florida Health Facilities, Inc. Florida
Golden Isle Assurance Company Ltd. Bermuda
Group Practice Affiliates, Inc. Delaware
Subsidiaries:
GPA NovaPsy Clinic, Inc. Virginia
GPA Management of Virginia, Inc. (2) Virginia
GPA Pennsylvania, Inc. Pennsylvania
Gulf Coast EAP Services, Inc. Alabama
HCS, Inc. Georgia
Hospital Investors, Inc. Georgia
Mandarin Meadows, Inc. Florida
Metroplex Behavioral Healthcare Services, Inc. Texas
Metropolitan Hospital, Inc. Georgia
Middle Georgia Hospital, Inc. Georgia
NEPA - Massachusetts, Inc. Massachusetts
NEPA - New Hampshire, Inc. New Hampshire
Pacific - Charter Medical, Inc. California
Subsidiary:
Charter Behavioral Health System of the Inland
Empire, Inc. California
Peachford Professional Network, Inc. Georgia
Plymouth Insurance Company, Ltd. Bermuda
Rivoli, Inc. Georgia
Schizophrenia Treatment and Rehabilitation, Inc. Georgia
Shallowford Community Hospital, Inc. Georgia
Sistemas De Terapia Respiratoria S.A., Inc. Georgia
Strategic Advantage, Inc. Minnesota
Stuart Circle Hospital Corporation Virginia
Western Behavioral Systems, Inc. California
(1) 50% owned by Charter Medical Corporation; 50% owned by CMCI, Inc., a
subsidiary of Desert Springs
Hospital, Inc.
(2) 90% owned by Group Practice Affiliates, Inc.
<PAGE>
<PAGE>
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 2, 1994, for Charter Medical
Corporation (and to all references to our firm) included in this Form 10-K
into the previously filed registration statements on Form S-8 (File Nos.
33-57210 and 33-62542).
/s/ Arthur Andersen LLP
Atlanta, Georgia
December 8, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 129,603,000
<SECURITIES> 0
<RECEIVABLES> 178,067,000
<ALLOWANCES> 43,555,000
<INVENTORY> 6,097,000
<CURRENT-ASSETS> 324,627,000
<PP&E> 551,312,000
<DEPRECIATION> 56,967,000
<TOTAL-ASSETS> 961,480,000
<CURRENT-LIABILITIES> 215,048,000
<BONDS> 533,476,000
<COMMON> 6,725,000
0
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<OTHER-SE> 49,496,000
<TOTAL-LIABILITY-AND-EQUITY> 961,480,000
<SALES> 904,646,000
<TOTAL-REVENUES> 904,646,000
<CGS> 0
<TOTAL-COSTS> 732,139,000
<OTHER-EXPENSES> 190,652,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,394,000
<INCOME-PRETAX> (57,539,000)
<INCOME-TAX> (10,536,000)
<INCOME-CONTINUING> (47,003,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (12,616,000)
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<NET-INCOME> (59,619,000)
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