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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ____________TO___________
COMMISSION FILE NUMBER 0-13849
RAMSAY HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0857352
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ENTERGY CORPORATION BUILDING 70113
639 LOYOLA AVENUE, SUITE 1700 (ZIP CODE)
NEW ORLEANS, LOUISIANA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (504) 525-2505
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)
Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] 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 number of shares of the registrant's Common Stock outstanding as of
September 22, 1995 was 7,732,328. The aggregate market value of Common Stock
held by non-affiliates on such date was $23,628,536.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's definitive Proxy Statement to be filed
for the 1995 Annual Meeting of Stockholders are incorporated by reference into
Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
Ramsay Health Care, Inc. ("RHCI" or the "Company") is one of the
leading providers of behavioral health services in the country. RHCI offers
patient care through integrated networks of mental health delivery systems in
eleven states principally in the southeast and southwest built around 15
inpatient hospitals with 1,280 licensed beds (including medical subacute units
and residential treatment units), day hospitals, and outpatient centers. The
Company also operates mental health programs for public sector and private
owners under management contracts.
The Company's business strategy is to develop and operate integrated
behavioral healthcare delivery systems in the markets in which its facilities
are located. The integrated delivery systems being developed 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 contracts or affiliations with physicians,
psychologists and other mental health professionals. Further, in some markets,
the Company is seeking to integrate through a joint venture or other affiliation
agreement with a significant acute-care provider lacking behavioral health
services in the vicinity of the Company's hospital. To date, no such agreements
of significance have been signed.
Effective April 24, 1995, the Company distributed, on a pro rata basis
in the form of a dividend, the common stock of its subsidiary, Ramsay Managed
Care, Inc. ("RMCI"), held by the Company, to the holders of record on April 21,
1995 of the Company's common and preferred stock (the "RMCI Distribution").
RMCI, which was formed in October 1993, manages the delivery of mental health
and substance abuse care and provides employee assistance and mental health and
substance abuse treatment programs for and on behalf of self insured employers,
health maintenance organizations ("HMOs"), insurance companies, government
agencies and other third-party payors. Subsequent to the RMCI Distribution,
RMCI ceased being a subsidiary of the Company.
FACILITY OPERATIONS
The Company's facilities are dedicated to the treatment of psychiatric
and chemical dependency disorders. Substance abuse treatment is provided to
patients who have a primary diagnosis of alcohol or substance abuse; however,
many of these patients have a secondary diagnosis of, and are treated for,
mental illness. Each facility also conducts outpatient programs within the
facility and within clinics located in the surrounding area. The Company
continues to seek ways to expand its outpatient network in its continued effort
to provide intermediate mental health care for patients who do not require
inpatient care.
The initial goal of acute psychiatric hospitalization treatment is to
evaluate and stabilize the patient so that effective treatment can be continued
either on an inpatient, partial
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hospitalization or an outpatient basis. Under the direction of a psychiatrist,
the patient's condition is assessed, a diagnosis is made and prescribed
treatment follows. The treatment regimen utilizes, where appropriate,
medication, individual and group therapy, adjunctive therapy and family therapy.
The most common disorders for which adult patients are admitted to the
Company's hospitals are mood and affective disorders (such as depression),
schizophrenia, situational crises and alcohol and drug dependency. For children
and adolescents, common disorders include those seen in adult patients, as well
as attention deficit disorders and conduct disorders. Many of these disorders
are often associated with child abuse. The Company has evaluation and treatment
programs designed specifically for adults, adolescents and children. Specialized
programs focusing upon neuropsychiatric disorders and pain and sleep disorders
have also been developed. All units and programs emphasize family involvement in
the evaluation and treatment process.
Each psychiatric hospital has a multidisciplinary team of health care
professionals, including psychiatrists, psychologists, social workers, nurses,
mental health and substance abuse counselors and therapists. Generally,
physician members of the professional staffs maintain a private practice. In
certain situations the Company guarantees minimum incomes, usually for one year,
to psychiatrists willing to relocate to certain facilities. All of the Company's
hospitals have a medical director who acts as liaison between the professional
staff and the hospital administration staff. In addition, each clinical program
has a medical unit administrator.
Each of the Company's hospitals has a consulting board, comprised of
hospital executives, consulting physicians and other members of the local
community, which is responsible for standards of patient care. A hospital CEO
supervises and is responsible for the day-to-day operations of each hospital.
The Company emphasizes frequent communication, the setting of operational and
financial goals and the monitoring of actual results against targeted goals. To
this end, the Company collects and analyzes information on key indicators such
as admissions by treatment program and payor category, daily census, full-time
equivalent employees per patient day and average length of stay. On the basis of
this information, the administrative staff of each hospital, together with the
corporate staff of the Company, adopts new programs and modifies existing
programs to improve performance.
All of the Company's hospitals have been accredited by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"). The JCAHO is
a voluntary national organization which undertakes a comprehensive review for
purposes of accreditation of health care facilities. In general, hospitals and
certain other health care facilities are initially surveyed by JCAHO within 12
months after the commencement of operations and resurveyed at appropriate
intervals thereafter. Of the Company's fifteen hospitals, three were resurveyed
in fiscal 1995 and 10 were resurveyed in fiscal 1994 and, in each instance, the
facilities retained their JCAHO accreditation for an additional three years.
The following tables summarize certain operating data related to (i)
the facilities currently operated by the Company and which were also operated by
the Company throughout the fiscal years referred to below ("same facilities")
and (ii) all facilities operated by the Company during the fiscal years referred
to below ("all facilities"). However, Three Rivers
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Hospital, which was closed on June 30, 1995, is included in the same facilities
and all facilities statistics.
SAME FACILITIES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 /(1)/
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Inpatient admissions.................... 13,149 12,019 11,442
Average bed days available.............. 392,740 424,130 425,590
Inpatient days.......................... 216,239 218,173 208,592
Overall inpatient occupancy percentage.. 55% 51% 49%
Partial hospitalization days /(2)/...... 65,280 57,414 33,009
Outpatient visits /(3)/................. 49,043 31,027 (4)
</TABLE>
ALL FACILITIES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30/ (1)/
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Inpatient admissions.................... 13,469 12,474 12,917
Average bed days available.............. 422,670 448,585 507,715
Inpatient days.......................... 222,734 225,392 234,294
Overall inpatient occupancy percentage.. 53% 50% 46%
Partial hospitalization days/ (2)/...... 65,280 60,699 40,077
Outpatient visits /(3)/................. 82,240 47,725 (4)
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</TABLE>
(1) During fiscal 1994, the Company converted approximately 77 beds available in
four of its facilities from beds utilized by behavioral health patients to
beds utilized by medical subacute patients. Statistics related to subacute
services are included in the all facilities amounts above but are excluded
from the same facilities amounts since such services were not in operation
during all three fiscal years shown above. For fiscal 1995, total inpatient
admissions, inpatient days and occupancy percentage related to subacute
services were 323, 6,548 and 26%, respectively. Operating statistics related
to the subacute units in fiscal 1994 were not material.
(2) Partial hospitalization days refers to treatment of patients which exceed
three hours and do not require an overnight stay at an inpatient facility.
(3) Outpatient visits refer to home health visits and behavioral health patient
services which do not exceed three hours in a given day.
(4) Data not available for fiscal 1993.
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MANAGED CARE DIVISION
RHCI, through its subsidiary RMCI, entered the managed mental health
business in October 1993 with the acquisition of Florida Psychiatric Management,
Inc. ("FPM") for a purchase price of $6.5 million. The managed care division
expanded in June 1994 with the acquisition of a Phoenix, Arizona-based managed
mental health business. During fiscal 1995, RMCI expanded its operations to
Hawaii and West Virginia and obtained a license to operate (and began
developing) a health maintenance organization in Louisiana.
In October 1994, RHCI announced plans to distribute its holdings of
common stock of RMCI to the holders of the Company's common and preferred stock.
At that time, the Company also announced that RMCI completed a private placement
of its common stock, which reduced the Company's percentage stock ownership in
RMCI from approximately 97% to approximately 58%. On April 24, 1995, the Company
distributed, on a pro rata basis in the form of a dividend, the common stock of
RMCI held by the Company to the holders of record on April 21, 1995 of the
Company's common and preferred stock. Subsequent to this distribution, RMCI
ceased being a subsidiary of the Company.
COMPETITION
At June 30, 1995, the Company operated 15 inpatient facilities in 11
states. The Company's facilities are located in rural areas and in suburban
areas of large metropolitan cities. Each facility competes with other
facilities, including proprietary free-standing hospitals, not-for-profit
hospitals, governmental free-standing hospitals and psychiatric units of acute
care hospitals. Some of these other facilities are larger and have greater
financial resources than the Company's hospitals. In addition, some of these
competing hospitals are substantially exempt from income and property taxation.
The Company's outpatient centers are generally located in the areas surrounding
its inpatient facilities and compete with private practitioners, community
mental health centers, and other companies which provide outpatient services in
the markets in which the Company's outpatient centers are doing business. The
number of behavioral health service competitors located within each of the
Company's service areas varies significantly. Also, in certain markets, the
Company treats certain patient populations (e.g., adolescents or geriatrics) or
provides services which are different from those provided by the Company's
competitors in the particular market. The Company does not consider any of the
behavioral health service competitors in its markets as dominant providers that
place the Company at a competitive disadvantage.
The ability of a psychiatric facility to compete with other facilities
depends on the number and quality of psychiatrists and clinical psychologists
practicing at the facility, and the number, type and quality of other
psychiatric facilities in the area. Another factor affecting the competitiveness
of psychiatric facilities is the extent to which the facility's clinical
programs satisfy community needs in an effective manner from both a clinical and
an economic standpoint. The Company believes that the quality of its
professional staff as well as the quality and effectiveness of its programs
permit it to compete effectively with the other providers of psychiatric and
chemical dependency care in the communities served by the Company's facilities.
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In addition, the Company's facilities actively seek relationships with managed
care companies, which are increasingly responsible for steering patients to high
quality, cost-effective providers of behavioral health care.
Prior to the RMCI Distribution, RMCI competed directly with
independent local and national entities that offered managed mental health care
services, as well as with large insurance companies, health maintenance
organizations and other provider groups that have established or acquired
managed mental health care capabilities. In addition, RMCI competed with not-
for-profit health plan corporations, preferred provider organizations, other
provider networks and third party administrators. Certain of these operations
and facilities have substantially greater financial resources than RMCI and
offer a wider range of services than RMCI.
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 deductibles
and co-insurance for individual patients; and (v) a trend by self-insured
employers and managed mental health organizations toward limiting employee
health benefits, including annual and lifetime limits on mental health coverage.
In response to these conditions, the Company has (i) tightened its staffing
levels within its facilities, particularly in the areas which are not directly
responsible for the provision of patient care, (ii) renegotiated contracts to
reduce other operating expenses within its facilities and (iii) developed
strategies to increase outpatient services and partial hospitalization programs
to meet the demands of the marketplace.
SOURCES OF REVENUE
The Company's facilities receive payments from third-party
reimbursement sources, including commercial insurance carriers (which provide
coverage to insureds on both an indemnity basis and through various managed care
plans), Medicare, Medicaid, the Civilian Health and Medical Program of the
Uniformed Services ("CHAMPUS") and Blue Cross, in addition to payments directly
from patients.
Third-party reimbursement programs generally reimburse facilities
either on the basis of facility charges (charge-based), on the basis of the
facility's costs as audited or projected by the third-party payor (cost-based),
or on the basis of negotiated rates (per diem-based). Generally, charge-based
programs are more profitable to the Company. The following table sets forth, by
category, the approximate percentages of the Company's consolidated gross
patient revenues charged by the Company's facilities derived from various
sources for the periods indicated.
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<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
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1995 1994 1993
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<S> <C> <C> <C>
Charge-based programs:
Commercial Insurance.................... 10% 15% 20%
Blue Cross.............................. 1 1 3
Other Private Pay....................... 6 5 2
--- --- ----
Sub-total............................ 17 21 25
--- --- ----
Cost-based and per diem-based programs:
Blue Cross.............................. 6 6 9
CHAMPUS................................. 5 7 10
Medicare................................ 22 21 22
Medicaid................................ 31 32 25
State, HMO and PPO...................... 19 13 9
--- --- ----
Sub-total............................ 83 79 75
--- --- ----
Total............................. 100% 100% 100%
=== === ====
</TABLE>
Most commercial insurance carriers reimburse their policyholders or
make direct payment to facilities for charges at rates and limits specified in
their policies. Patients generally remain responsible to the facilities for any
amounts not covered under their insurance policies. The trend in reimbursement
for psychiatric inpatient and chemical dependency care by commercial insurance
carriers is to limit inpatient days to a maximum number per year or for the
patient's lifetime, or to limit the maximum dollar amount expended for a patient
in a given period.
Most third-party payors and other commercial carriers have also
expanded benefit coverage to include partial hospitalization and other
outpatient services. Partial hospitalization is formally recognized by Medicare
and CHAMPUS as a covered service. In addition, managed care companies are
seeking to contract with providers that offer the full spectrum of psychiatric
care.
Medicare is the federal health insurance program for the aged and
disabled. Medicare reimbursement is typically less than the Company's
facilities' established charges for services provided to Medicare patients.
Patients are not responsible for the difference between the reimbursed amount
and the facilities' established charges other than for applicable noncovered
charges, coinsurance and deductibles. In 1983, Congress changed the Medicare law
applicable to Medicare reimbursement for medical/surgical services from a
retrospectively determined reasonable cost system to a prospectively determined
diagnosis-related grouping ("DRG") system. Psychiatric and chemical dependency
hospitals and units are exempt from the DRG reimbursement system.
Medicare reimbursement to exempt psychiatric and chemical dependency
hospitals and units is currently subject to the payment limitations and
incentives established in the Tax
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Equity and Fiscal Responsibility Act of 1982 ("TEFRA"). These facilities are
paid on the basis of each facility's historical costs trended forward, with a
limit placed on the rate of increase in per case reimbursable costs. These TEFRA
"target" rates are updated annually. Facilities with costs less than the target
rate per discharge are reimbursed based on allowable Medicare costs plus an
additional incentive payment. Beginning in the federal fiscal year 1992 and
continuing through June 30, 1995, providers with costs exceeding their target
rates are subject to a payment ceiling of the target amount plus the lesser of
5% of the target amount or 50% of the amount in excess of the target amount.
Exemptions and exceptions are available to hospitals when events beyond the
hospitals' control result in an increase in costs for a reporting period.
Moreover, "new hospitals" are eligible to be exempt from the limits until they
have been in operation for three years. At June 30, 1995, 14 of the Company's
facilities were subject to the TEFRA provisions.
The Health Care Financing Administration ("HCFA") has implemented
changes to Medicare covering inpatient services which are reimbursed under
TEFRA. These changes provide for an increase to the TEFRA payment limitations,
subject to annual revision. However, since 13 of the Company's 14 facilities
which are subject to the TEFRA payment limitations are currently operating at
cost levels below their respective TEFRA payment limitations, any increase in
the TEFRA payment limitations has a minimal effect on the Company's results of
operations. In addition, each year HCFA modifies the fee reimbursement schedules
related to physician services. While these changes affect Medicare reimbursement
paid directly to physicians, they do not affect the rate of Medicare
reimbursement to the Company's facilities. These changes in physician
reimbursement have had only a minimal effect on the Company's results of
operations since most of the physicians practicing at the Company's facilities
bill their fees directly.
Medicaid is the federal/state health insurance program for the
underprivileged. Subject to certain minimum federal requirements, each state
defines the extent and duration of the services covered by its Medicaid program.
Moreover, although there are certain federal requirements governing the payment
levels for Medicaid services, each state has its own methodology for making
payment for services provided to Medicaid patients. Various state Medicaid
programs cover payment for services provided to Medicaid patients at 14 of the
Company's facilities. During fiscal years 1995, 1994 and 1993, the Company
received significant payments from State Medicaid programs pursuant to enhanced
reimbursement rates under certain state "disproportionate share" programs.
Disproportionate share payments were severely restricted by Congress effective
July 1, 1995. Accordingly, the Company expects that any future payments made
under this program will be minimal. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations."
Acute psychiatric services for CHAMPUS patients are reimbursed on a
prospectively determined per diem basis. For the Company's high volume
facilities (as defined by CHAMPUS), 1991-1992 rates were fixed at 1988 levels
subject to an all-inclusive cap of $714 per day. This capped rate is higher than
the Company's net revenue per patient day for all of the Company's acute
psychiatric services. The Company's low volume facilities (as defined by
CHAMPUS) are reimbursed at prospectively determined per diem rates established
on a regional basis. These regional rates are lower than the hospitals'
established charges. However,
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CHAMPUS revenues in these low volume facilities were an insignificant portion of
the Company's consolidated gross revenues for the fiscal years ended June 30,
1995, 1994 and 1993.
Residential treatment center ("RTC") reimbursement for CHAMPUS
patients is currently capped on a per diem basis at the lesser of $477 per day
or an inflation adjusted hospital-specific rate based on per diem rates
generally paid as of June 30, 1988. These rates are adjusted annually each
October 1 for inflation. The legislated reimbursement cap is higher than the
Company's CHAMPUS net revenue per patient day for the Company's two CHAMPUS
certified RTC facilities. Consequently, the CHAMPUS RTC reimbursement cap did
not adversely affect the Company's CHAMPUS RTC net revenues in the fiscal years
ended June 30, 1995, 1994 and 1993.
In 1991, Congress imposed a reduction in the annual reimbursable
length of stay for patients covered under the CHAMPUS program. Effective
October 1, 1991, CHAMPUS began to limit its coverage for hospital psychiatric
services to 30 days for adult patients, 45 days for child and adolescent
patients and 150 days for RTC services, subject to waivers which are available
under limited circumstances if an extension of the length of stay can be
justified. The lengths of stay currently experienced by the Company on CHAMPUS
adult, child and adolescent beneficiaries have generally been within the above
limits. Given that certain of the Company's facilities are located in close
proximity to major military installations, these limits have reduced the volume
of CHAMPUS patients treated at the Company's facilities. As set forth in the
above table, the amount of the Company's patient revenues attributable to
CHAMPUS have decreased from 10% in fiscal 1993 to 5% in fiscal 1995.
Blue Cross plans in all areas in which the Company presently operates
facilities, except Alabama and Michigan, reimburse based on charges or
negotiated rates. In many states in which the Company operates, Blue Cross
charges are approved through a rate-setting process and, therefore, Blue Cross
may reimburse the Company at a rate less than billed charges. Under cost-based
Blue Cross programs, such as those in Alabama and Michigan, direct reimbursement
to hospitals typically is lower than the hospital's charges, and patients are
not responsible for the difference between the amount reimbursed by Blue Cross
and the hospital's charges.
Prior to the RMCI Distribution, the subsidiaries of RMCI typically
charged each customer a monthly fee for each beneficiary enrolled in the
customer's mental health benefit program. Depending upon both the type of
program from which a customer contracted and the benefits covered under such
program, the fee arrangement was designed so that, with respect to both
inpatient and outpatient care, RMCI accepted either full risk (all services
capitated), as is generally the case, partial risk (selected services capitated)
or limited risk (full risk up to a maximum amount) for costs that exceed the
fees attributable to such program. See "Item 1. Business -- Managed Care
Division."
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MARKETING
The Company's marketing programs are directed to referral sources
within a selected service area rather than to the general public and are
designed to increase awareness of a facility's programs and services. Referral
sources include psychiatrists, medical practitioners, managed mental health
organizations, courts and probationary officers, law enforcement agencies,
schools and clergy. Each facility's marketing staff, together with other
facility personnel, maintains direct contact with referral sources to meet the
needs of the referral sources. These needs may be related to a desired treatment
program, the desires of the patient's family, hospital policies or the timely
receipt of accurate information. Each facility establishes admission targets for
each referral source and results are monitored and evaluated at the facility and
by the corporate staff.
Prior to the RMCI Distribution, marketing of RMCI's services was
provided at both a regional and national level. The RMCI regional offices
employed marketing personnel to interface with existing and potential customers
in the immediate area and surrounding networks. RMCI's offices in Florida
employed a national marketing team which coordinated regional marketing efforts
and directed its national marketing strategies.
RMCI focused its marketing and sales efforts primarily on insurance
carriers, nonprofit health care corporations, HMOs, government employee groups
and self-insured employers. RMCI also targeted employee benefit consulting
firms that represent employers and groups of employers in the selection and
purchase of managed mental health care benefit programs. Typically, RMCI
marketed its services to the potential customer's senior operating and marketing
staff, medical director or health care managers. See "Item 1. Business --
Managed Care Division."
REGULATION
Operations of psychiatric hospitals are subject to extensive federal,
state and local government regulation, including periodic inspection and
licensing requirements. This regulation is primarily concerned with the fitness
and adequacy of the facility, equipment and personnel, standards of medical care
provided, the dispensing of drugs and the adequacy of fire prevention measures
and other building standards. In addition, the admission and treatment of
patients at the Company's hospitals are subject to certain state regulation
regarding involuntary admissions, patient rights and the confidentiality of
patient medical records.
The Company believes that federal and state regulation may become more
comprehensive and restrictive in the future, particularly with respect to
reimbursement rates. In addition, numerous healthcare reform proposals have been
and are expected to continue to be introduced in Congress. The Company cannot
predict the form or timing of any prospective legislation or regulation, nor the
effect which any legislation or regulation might have on its revenues or
profitability.
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Capital expenditures for the construction of new facilities, the
addition of beds or the acquisition of facilities or medical equipment are
reviewable by governmental authorities in certain states in which approximately
half the Company's facilities are located. State certificate of need or similar
statutes provide generally that prior to the construction of new beds or
facilities or the introduction of a new service, a state agency must determine
that a need exists for those beds, facilities or services. A certificate of
need is generally issued for a specific maximum amount of expenditures, number
of beds or services to be provided and the holder is generally required to
implement the approved project within a specific time period. In most cases,
state certificate of need or similar statutes do not restrict the ability of the
Company or its competitors from offering new or expanded outpatient services.
Except for Arizona, Texas, Louisiana and Utah, all of the states in which the
Company operates facilities have adopted certificate of need or similar
statutes.
Federal law contains a number of provisions designed to ensure that
services rendered by health care facilities to Medicare and Medicaid patients
are medically necessary, meet professionally recognized standards and are billed
properly. These provisions include a requirement that admissions of Medicare and
Medicaid patients to hospitals must be reviewed in a timely manner to determine
the medical necessity of the admissions. In addition, the Peer Review
Improvement Act of 1982 ("Peer Review Act") provides that a hospital may be
required by the federal government to reimburse the government for the cost of
Medicare paid services determined by a peer review organization to have been
medically unnecessary. Each of the Company's hospitals has developed and
implemented a quality assurance program and implemented procedures for
utilization review and retrospective patient care evaluation to meet its
obligations under the Peer Review Act. As a result of legislation passed in
Texas in September 1993 and as described below, Peer Review Organizations
("PRO's") in that state began applying extremely restrictive interpretations to
the medical necessity of admissions and other services. Consequently,
significant amounts of the Texas facilities' charges in fiscal 1994 were denied
by such organizations until the facilities gained a full understanding of the
PRO's interpretations and modified their internal systems accordingly. Charges
denied in the Company's Texas facilities in fiscal 1995 were less than 2% of
these facilities' gross charges in such fiscal year.
To be covered by CHAMPUS, RTC services must be preauthorized as being
medically necessary. Effective October 1, 1991, hospital psychiatric services
are also required to be preauthorized. If the criteria for establishing medical
necessity are not met or the services are not preauthorized, CHAMPUS will not
pay for the services provided.
The Defense Appropriations Act of 1991 provides that no funds will be
appropriated for CHAMPUS care when a patient is referred to a provider of
inpatient mental health care or residential treatment care by a medical or
health care professional having an economic interest in the facility to which
the patient is referred. The Medicare and Medicaid Anti-Fraud and Abuse
Amendments (the "Amendments") to the Social Security Act prohibit individuals or
entities participating in the Medicare or Medicaid programs from knowingly and
willfully offering, paying, soliciting, or receiving remuneration in order to
induce referrals for items or services reimbursed under those programs. The
policy objective of the Amendments is
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to ensure that the purpose for a referral is quality of care and not monetary
gain by the referring individual. The Amendments' prohibitions only apply to
Medicare and Medicaid patients and impose felony criminal penalties and civil
sanctions, as well as exclusion from the Medicare or Medicaid programs. In 1989,
CHAMPUS adopted regulations authorizing it to exclude from the CHAMPUS program
any provider who has committed fraud or engaged in abusive practices. The term
"abusive 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 financial or medical records. The
Company believes that it is in compliance with all aspects of these regulations.
The Company has entered into various types of agreements with
physicians and other health care providers in the ordinary course of operating
its facilities, many of which provide for payments to physicians or other health
care providers by the Company as compensation for services or other
consideration by the 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 United States Department of Health and Human Services (the
"Department") issued regulations in 1991 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.
Although a relationship that fails to satisfy a safe harbor is not
necessarily illegal, that relationship will not be exempt from scrutiny under
the Amendments. The Company believes that its agreements and arrangements in
this area comply with the Amendments or are otherwise protected under the safe
harbors provided. However, 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.
Several states and the Federal government have been investigating
whether psychiatric hospitals have engaged in fraudulent practices such as
inflating bills for medications and services, billing for services never
rendered and admitting patients, especially children, who do not require
hospitalization. In 1991, the Texas Attorney General disclosed that several of
the Company's competitors doing business in Texas were under investigation for
fraudulent practices and a lawsuit seeking injunctive relief was filed against
one of those competitors. This led to the passage of legislation in Texas,
effective September 1, 1993, that placed severe restrictions on the marketing of
behavioral health care services. In general, the legislation prohibits certain
advertisement and solicitation techniques. Specifically, advertisements may not
promise a cure or guarantee treatment results that cannot be substantiated, and
mental health intervention and assessment services must be available and
properly credentialed before they are advertised. The
11
<PAGE>
legislation also requires disclosure of any relationship between the treatment
facility and its referral sources and prohibits a referral service from holding
itself out as a qualified mental health referral service without complying with
the legislation's definition of such (which requires, among other things,
compliance with regulations regarding confidentiality, participation in and
staffing of the referral service and payments to referral sources). Violation of
the legislation may result in injunctive relief and civil penalties of up to
$25,000 per violation. In June 1993, the Company signed an agreement with the
Texas Attorney General whereby it agreed to continue to comply with Texas
statutes regarding marketing and operating standards applicable to all
psychiatric hospital companies.
ACQUISITIONS, SALES AND LEASE COMMITMENTS
In November 1992, the Company purchased a 64-bed hospital facility in
Covington, Louisiana for $2,000,000. The facility, Three Rivers Hospital, opened
in January 1993 and, on June 30, 1995, the hospital was closed due to reduced
patient volume and projected negative operating margins and its operations were
consolidated with the Company's facility located less than five miles away. See
"Ownership Arrangements and Operating Agreements" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations."
In January 1993, the Company leased Harbor Oaks Hospital in Fort
Walton Beach, Florida to another health care provider for a period of three
years. The lease gives the lessee the option to renew the lease for a specified
period or purchase the facility at a price equal to the current recorded book
value of the facility; however, the lessee failed to timely exercise the renewal
option. The Company is currently in negotiation with the lessee regarding the
terms of this lease. Should the lease not be renewed or the purchase option not
be exercised, the Company would take possession of the building and evaluate its
business alternatives with respect to this property.
In August 1993, the Company sold its inpatient facility (Cumberland
Hospital) in Fayetteville, North Carolina to Cape Fear Valley Medical Center for
approximately $12.3 million. The decision to sell this facility occurred in
June 1993, at which time the facility's basis of accounting was changed from the
going concern basis to the liquidation basis. As a result, the July and August
1993 operating results of Cumberland Hospital were recorded as part of the loss
on sale of this facility in the Company's June 1993 financial statements and the
net revenues and expenses of Cumberland Hospital were not included in the
Company's operating results for the year ended June 30, 1994.
In October 1993, the Company, through its subsidiary RMCI, entered the
managed mental healthcare business by acquiring the stock of FPM. This business
subsequently expanded through an additional acquisition in June 1994 and through
on-going development efforts. As noted elsewhere in this report, in April 1995,
the Company distributed the common stock of RMCI held by it to the holders of
its common and preferred stock.
12
<PAGE>
In February 1994, the Company sold its 50-bed Atlantic Shores Hospital
in Daytona Beach, Florida to Halifax Medical Center for $4.8 million.
In April 1995, the Company consummated a sale/leaseback transaction
whereby the Company sold the land, buildings and fixed equipment of two of its
inpatient facilities (Desert Vista Hospital in Mesa, Arizona and Mission Vista
Hospital in San Antonio, Texas) for $12.5 million and agreed to lease this
property back over a term of 15 years (with three successive renewal options of
five years each). The leases, which are treated as operating leases under
generally accepted accounting principles, require aggregate annual minimum
rentals of $1.54 million, payable monthly. Beginning April 1, 1996, the lease
payments are subject to any upward adjustment (not to exceed 3% annually) in the
Consumer Price Index over the preceding 12 months.
In March and April 1995, the Company sold certain real estate located
in Flagstaff, Arizona and Houston, Texas. These properties were initially
acquired for development approximately 10 years ago and, as of the date of sale,
the properties had an aggregate book value of $1.15 million. Total net proceeds
from the sales of this real estate approximated $0.75 million.
Effective April 1995, the Company agreed to lease an 80-bed facility
near Salt Lake City, Utah from Charter Medical Corporation for four years, with
an option to renew for an additional three years. The lease, which is treated
as an operating lease under generally accepted accounting principles, requires
annual base rental payments of $456,000. In addition, the lease provides for
percentage rent payments to the lessor equal to 2% of the net revenues of the
facility, payable quarterly.
IMPAIRMENT OF ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement Number 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" (the "Statement"). Although the
Statement is effective for fiscal years beginning after December 15, 1995, the
Company elected to adopt the Statement in its fiscal 1995 fourth quarter.
As required by the Statement, the Company reviewed the long-lived
assets (land, buildings, fixed equipment and related cost in excess of net asset
value of purchased businesses) of each of its inpatient facilities to determine
if the carrying value of these assets was recoverable, based on the future cash
flows expected to be generated by each facility. Based on this review, the
Company determined that the carrying value of long-lived assets associated with
four facilities was impaired. The amount of the impairment, calculated as the
excess of carrying value of the long-lived assets over the discounted future
cash flows expected from the assets, totalled $20.3 million. See "Item 8.
Financial Statements and Supplementary Data."
13
<PAGE>
The Company is a minority stockholder in an enterprise which operates
primary care medical clinics on United States' military bases in Germany. Based
on a reassessment of the future expected cash flows to be realized by the
Company from this business in June 1995, the Company recorded a fourth quarter
impairment to the carrying value of the investment totalling approximately $1.5
million.
OWNERSHIP ARRANGEMENTS AND OPERATING AGREEMENTS
One physician owns a 5% interest in the subsidiary which owns the
Company's Harbor Oaks Hospital. The Company may be required to repurchase, and
the minority shareholder may be required to sell, the minority interest at a
formula price dependent upon many factors, including the earnings per share of
the subsidiary which owns the subject hospital and the price/earnings multiple
of the Company, after a fixed period of time. Although the amount of the
Company's repurchase obligation cannot be precisely determined, the Company does
not believe that this obligation will require a material payment by the Company
in the foreseeable future.
In 1985, the Company and Bethany General Hospital in Bethany, Oklahoma
entered into a joint development project. The general hospital and the Company
hold a joint certificate of need by which they have converted 23
medical/surgical beds to psychiatric beds, and constructed a psychiatric
pavilion containing an additional 20 psychiatric beds. Pursuant to a joint
venture agreement entered into in December 1985, the Company began managing the
23 existing beds in December 1985 and completed construction of the 20-bed
pavilion in October 1986. Under the joint venture agreement, the Company is
obligated to provide working capital to operate the 43-bed psychiatric unit. The
Company may, at its option, continue to operate and manage the unit in three-
year terms for an additional nine years. The Company is entitled to an annual
management fee of 5% of the unit's gross revenues and 65% of the net profits or
losses of the unit. The agreement also provides that the Company will recover
construction costs amortized over 15 years and working capital advances from
operating revenue, unless the Company does not renew or breaches the agreement.
In November 1992, the Company formed a limited partnership to operate
Three Rivers Hospital, a 64-bed facility located in Covington, Louisiana.
Pursuant to the terms of the partnership agreement, the Company, as general
partner, had a 55% interest in the operations of the business and limited
partners maintained a 45% interest. A wholly-owned subsidiary of the Company
owns the facility and leased it to the partnership at $276,000 per annum. Due
to reduced patient volume and projected negative operating margins, the Company
exercised its right as general partner to terminate the business and, effective
June 30, 1995, Three Rivers Hospital was closed.
14
<PAGE>
INSURANCE
The Company and its facilities are insured on a "claims made" basis
for professional and general liability incidents in the aggregate amount of
$25,000,000, with a self-insured retention of $500,000 per claim. The Company's
self-insurance program also includes "tail" coverage for prior acts retroactive
to the date on which the Company could become responsible for such acts. This
prior occurrence coverage operates with the same self-insured retention level.
It is the Company's policy to record the liability for uninsured professional
and general liability losses related to asserted and unasserted claims arising
from reported and unreported incidents based on independent valuations which
consider claim development factors, the specific nature of the facts and
circumstances giving rise to each reported incident and the Company's history
with respect to similar claims.
EMPLOYEES
As of June 30, 1995, the Company employed approximately 1,790 full-
time and 1,520 part-time employees at its facilities, including approximately
790 nurses. In addition, the Company has a corporate headquarters staff of
approximately 30, which includes individuals who specialize in various areas of
hospital operations to assist facilities with particular management issues. The
Company considers its relationship with its employees to be good.
15
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information with respect to the executive officers of the
Company is set forth below:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
PRINCIPAL OCCUPATIONS DURING
NAME OF EXECUTIVE OFFICER AGE THE PAST FIVE YEARS
------------------------- --- -----------------------------
<S> <C> <C>
Gregory H. Browne.......... 42 Chief Executive Officer of the Company from January 1992 through
September 1995 and acting Chief Financial Officer from September 1994 through
September 1995; President of the Company from January 1992 until September 1994;
Chief Executive Officer and Chief Financial Officer of Ramsay-HMO, Inc. from
prior to 1990 to January 1992.
Reynold J. Jennings........ 49 President of the Company beginning September 1995; President and Chief Operating
Officer of the Company since September 1994; Executive Vice President and
Chief Operating Officer of the Company from November 1993 until September 1994;
various management and administrative positions with National Medical Enterprises,
Inc. from prior to 1990 to October 1993.
Wallace E. Smith........... 52 Senior Vice President--Operations of the Company since June 1992. Vice President--
Regional Operations of the Company from prior to 1990 to June 1992.
John A. Quinn.............. 41 Senior Vice President--Operations of the Company since September 1991; various
administrative and management positions with Community Psychiatric Centers, Inc.
from prior to 1990 to September 1991.
Brent J. Bryson............ 46 Senior Vice President of the Company since October 1994; Senior Vice President,
Southern Region, with National Medical Enterprises, Inc. from November 1991 to
October 1994; Vice President with National Medical Enterprises, Inc. from
prior to 1990 to November 1991.
Curtis L. Dosch............ 43 Vice President--Finance of the Company since August 1993. Regional controller of the
Company from prior to 1990 to July 1993.
William N. Nyman........... 42 Vice President--Finance of the Company since August 1993. Regional controller of the
Company from prior to 1990 to July 1993.
</TABLE>
Effective September 30, 1995, Mr. Browne will resign from his position
as Chief Executive Officer and acting Chief Financial Officer of the Company.
16
<PAGE>
Item 2. PROPERTIES.
The following table provides information concerning the 15 inpatient
facilities owned and operated by the Company at June 30, 1995.
<TABLE>
<CAPTION>
DATE OPENED LICENSED
HOSPITAL OR ACQUIRED BEDS
- -------- ------------- --------
<S> <C> <C>
Havenwyck Hospital
Auburn Hills, MI............. November 1983 120
Brynn Marr Hospital
Jacksonville, NC............. December 1983 76
Hill Crest Hospital
Birmingham, AL............... January 1984 130
Heartland Hospital
Nevada, MO................... April 1984 128
Greenbrier Hospital
Covington, LA................ October 1984 61
Coastal Carolina Hospital
Conway, SC................... November 1984 98
Bayou Oaks Hospital
Houma, LA(1)................. November 1985 98
The Bethany Pavilion
Bethany, OK(2)................ December 1985 43
Meadowlake Hospital
Enid, OK..................... February 1986 50
Benchmark Regional Hospital
Woods Cross, UT.............. August 1986 56
Desert Vista Hospital
Mesa, AZ (6)................. February 1987 102
Chestnut Ridge Hospital
Morgantown, WV(3)............ November 1987 70
The Haven Hospital
DeSoto, TX................... April 1990 102
Mission Vista Hospital
San Antonio, TX (6).......... November 1991 66
Benchmark Behavioral Hospital
Midvale, UT (4).............. June 1995 80
-----
Total (5) 1,280
=====
</TABLE>
(1) The building in which the Company's facility in Houma, Louisiana is located
is leased for an initial period ending January 31, 2005 (with an option to
renew for 20 years).
(2) The Bethany, Oklahoma facility is operated as a joint venture in which the
Company operates and manages the behavioral health services of Bethany
General Hospital. See "Item 1. Business -- Ownership Arrangements and
Operating Agreements."
(3) The Company has entered into a 50-year ground lease for the property on
which its 70-bed facility in Morgantown, West Virginia is located.
(4) The building in which the Company's facility in Midvale, Utah is located is
leased for an initial period ending June 24, 1999 (with an option to renew
for an additional three years).
(5) Excludes Harbor Oaks Hospital and Three Rivers Hospital. Harbor Oaks
Hospital, a 98-bed facility in Fort Walton Beach, Florida is owned by the
Company but leased to another health care provider. Three Rivers Hospital,
a 64-bed facility located in Covington, Louisiana, was closed on June 30,
1995. See "Item 1. Business -- Ownership Arrangements and Operating
Agreements."
(6) In April 1995, the Company sold and immediately leased back the land,
building and fixed equipment associated with this facility. The leases
have an initial term of 15 years and three successive renewal options of
five years each.
17
<PAGE>
The Company leases its corporate headquarters in New Orleans,
Louisiana for a term of five years ending in April 1999, and leases other space
for various clinics and regional offices. The Company believes that its
facilities are well maintained and are of adequate size for present needs.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to claims and suits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
such pending legal proceedings will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
18
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded in the over-the-counter market
and is quoted on the NASDAQ National Market System under the symbol RHCI. On
September 22, 1995, there were 677 holders of record of the Company's Common
Stock. No dividends have been declared on the Common Stock since the Company was
organized. The Company's credit documents governing its credit facilities
include provisions which prohibit the payment of dividends unless the sum of (i)
all dividends, redemptions and all other distributions in respect of its capital
stock and (ii) all restricted investments (as defined) during the applicable
fiscal year would not exceed an amount equal to 50% of the consolidated net
income of the Company for the immediately preceding fiscal year and provided
that, at the time of such dividend and after giving effect thereto, certain
specified financial ratio covenants would not be violated and no other default
or event of default would occur. Notwithstanding the foregoing restrictions,
those provisions expressly permit the payment of regular fixed dividends from
time to time on the Company's issued and outstanding Class B Preferred Stock,
Series C, provided that such dividends may not exceed $387,200 in each 12-month
period and provided that no event of default exists or would occur as a result
of the payment. Under these provisions, the Company is permitted to pay the
full amount of the regular fixed dividends on its issued and outstanding Class B
Preferred Stock, Series C.
The following table sets forth the range of high and low closing sales
prices per share of the Company's Common Stock for each of the quarters during
the years ended June 30, 1995 and 1994, as reported on the NASDAQ National
Market System:
<TABLE>
<CAPTION>
High Low
------ -----
<S> <C> <C>
Year ended June 30, 1995
First Quarter.............. $8 1/8 $6
Second Quarter............. 8 1/8 6 1/4
Third Quarter.............. 7 7/8 5 3/4
Fourth Quarter*............ 7 1/2 3 5/8
Year ended June 30, 1994
First Quarter.............. $8 7/8 $6 3/8
Second Quarter............. 9 3/4 6 3/4
Third Quarter.............. 9 7/16 7 1/8
Fourth Quarter............. 8 1/8 6 5/8
</TABLE>
On September 22, 1995, the closing sales price of the Company's Common
Stock was $3 3/4 per share.
* The RMCI Distribution occurred during the Company's fourth fiscal
quarter. See "Item 1. Business--Managed Care Division."
19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial information
for the periods shown and is qualified by reference to, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" appearing elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended June 30
------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues.................................... $136,418 $137,002 $136,354 $136,946 $132,739
Salaries, wages and benefits.................... 72,061 64,805 63,810 60,626 55,524
Other operating expenses........................ 44,741 42,907 40,454 40,161 37,086
Provision for doubtful accounts................. 5,086 5,846 8,148 8,628 6,992
Depreciation and amortization................... 7,290 6,836 6,605 5,439 5,545
Interest and other financing charges............ 8,347 8,906 9,494 10,488 14,462
Loss on sales and closure of facilities......... 6,431 802 7,524 -- --
Asset impairment charges........................ 21,815 -- -- -- --
Restructuring and other charges................. -- -- 1,367 2,283 --
-------- -------- -------- -------- --------
165,771 130,102 137,402 127,625 119,609
-------- -------- -------- -------- --------
Income (loss) before minority interests, income
taxes, extraordinary items and cumulative
effect of accounting change.................... (29,353) 6,900 (1,048) 9,321 13,130
Minority interests.............................. 887 4,824 1,126 -- --
-------- -------- -------- -------- --------
Income (loss) before income taxes, extraordinary
items and cumulative effect of accounting
change......................................... (30,240) 2,076 (2,174) 9,321 13,130
Provision (benefit) for income taxes............ (13,195) 599 159 3,974 5,126
-------- -------- -------- -------- --------
Income (loss) before extraordinary items
and cumulative effect of accounting change..... (17,045) 1,477 (2,333) 5,347 8,004
Extraordinary items:
Loss from early extinguishment of debt, net
of income tax benefit......................... (257) (155) (1,580) (366) --
Income tax benefit from net operating loss
carryovers.................................... -- -- -- 953 922
Cumulative effect of change in accounting for
income taxes.................................... -- -- 2,353 -- --
-------- -------- -------- -------- --------
Net income (loss)............................... $(17,302) $ 1,322 $ (1,560) $ 5,934 $ 8,926
======== ======== ======== ======== ========
Primary earnings per share:
Income (loss) per common share before
extraordinary items and cumulative effect
of accounting change........................... $(2.25) $.15 $(.29) $.68 $1.57
Net income (loss)............................... $(2.28) $.14 $(.20) $.75 $1.75
Weighted average shares outstanding(1).......... 7,743 9,641 7,932 7,886 5,091
</TABLE>
(1) Includes common and dilutive common equivalent shares outstanding.
<TABLE>
<CAPTION>
June 30
------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital................................ $ 24,098 $ 21,148 $ 23,811 $ 26,718 $ 24,913
Total assets................................... 139,236 183,168 190,370 194,357 196,158
Long-term debt................................. 55,568 67,707 77,429 84,879 119,188
Class B preferred stock, Series 1987........... -- -- -- 2,500 2,537
Stockholders' equity........................... 61,779 80,468 79,997 76,068 40,550
</TABLE>
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Operating revenues of the facilities are affected by changes in the
rates the Company charges, changes in reimbursement rates by third-party payors
and changes in the number of patient days in the period. Patient days are
represented by the number of admissions multiplied by the average length of stay
of all patients. Accordingly, increases in admissions can be offset, in whole or
in part, by decreases in average length of stay.
Generally, charges for each facility's services are reimbursed under
third-party reimbursement programs at the amount billed or at rates which are
less than the facility's charges. These lower rates can be based on a negotiated
per diem amount or based on the facility's costs as audited or projected by the
third-party payors. When operating revenues (charges) per patient day are higher
than the negotiated per diem rate or the facility's costs, the difference is
recorded as a reduction of gross revenues. Bad debts consist primarily of
commercial and self-pay accounts receivable deemed uncollectible.
The Company records amounts due to or from third-party reimbursement
sources based on its best estimates of amounts to be ultimately received or paid
under cost reports filed with appropriate intermediaries. The final
determination of amounts earned under reimbursement programs is subject to
review and audit by these intermediaries. Differences between amounts recorded
as estimated settlements and the audited amounts are reflected as adjustments to
the Company's net revenues in the period in which the final determination is
made. During the years ended June 30, 1995, 1994, and 1993, the Company recorded
contractual adjustment benefits of approximately $1,000,000, $1,400,000, and
$2,300,000, respectively. The adjustments were made to reflect the combined
effects of intermediary audits and the routine evaluation of prior year
estimated settlements. There can be no assurances that any future adjustments
will be of a favorable nature or of a magnitude comparable to those made in
fiscal 1995, 1994, or 1993.
Several years ago, the Federal Government established a funding
mechanism, known as disproportionate share, which was meant to adequately
reimburse facilities serving a disproportionately high volume of Medicaid
patients, relative to other providers. Disproportionate share funding was
established under Title XIX of the Social Security Act, administered at the
State level and approved/overseen by the Health Care Financing Administration,
since Medicaid services are jointly funded by each State as well as the Federal
Government. In fiscal years 1995, 1994 and 1993, the Company received
significant disproportionate share payments from State Medicaid programs,
particularly in Louisiana. Statutory changes significantly decreased the level
of disproportionate share payments received by the Louisiana facilities in
fiscal year 1995 and the Company expects that any payments made under this
program after fiscal year 1995 will be minimal.
Management determined that the impact of disproportionate share
payments on income from continuing operations in fiscal 1995 was approximately
$3.7 million. The majority of disproportionate share payments were received at
the Company's Three Rivers facility, which treated primarily Medicaid-eligible
adolescents diagnosed with various behavioral disorders.
21
<PAGE>
This facility was further adversely impacted by the State of Louisiana's
application of significantly more restrictive admission criteria in December
1994 for adolescents seeking inpatient psychiatric treatment in the State. Due
to a negative operating margin in the fourth quarter of fiscal 1995 and a
significant decrease in admissions since December 1994, on June 30, 1995, the
Company closed Three Rivers Hospital and consolidated the operations of this
facility with the Company's facility located less than five miles away
(Greenbrier Hospital). The Company believes this consolidation will result in
cost savings as well as enhance the operating performance of Greenbrier in
fiscal 1996.
In recent years, approximately 5% to 10% of the Company's patient
revenues have come from CHAMPUS since some of the Company's hospitals are in
close proximity to major military installations in the United States. Congress
has imposed a reduction in the annual reimbursable length of stay for patients
covered by the mental health benefits of CHAMPUS, a federal government health
benefit program for the members (active and retired) of all seven uniformed
services and their families. Effective October 1, 1991, CHAMPUS began to limit
its coverage for hospital psychiatric services to 30 days for adult patients, 45
days for child and adolescent patients and 150 days for RTC services, subject to
waivers which will be available under limited circumstances if an extension of
the length of stay can be justified. The lengths of stay currently experienced
by the Company on CHAMPUS adult, child and adolescent beneficiaries have
generally been within the above limits. Given that certain of the Company's
facilities are located in close proximity to major military installations, these
limits have reduced the volume of CHAMPUS patients treated at the Company's
facilities.
The following table sets forth, for the periods indicated, certain
items of the Company's consolidated statements of operations as a percentage of
the Company's net revenues. The discussion following this table quantifies the
significant fluctuations in amounts reported in the Company's consolidated
statements of operations between periods.
<TABLE>
<CAPTION>
As a Percentage of Net Revenues
Year Ended June 30,
-------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Net revenues................................ 100.0 % 100.0 % 100.0%
Salaries, wages and benefits................ 52.8 47.3 46.8
Other operating expenses.................... 32.8 31.3 29.7
Provision for doubtful accounts............. 3.7 4.3 6.0
Depreciation and amortization............... 5.4 5.0 4.8
Interest and other financing charges........ 6.1 6.5 7.0
Loss on sales and closure of facilities..... 4.7 0.6 5.5
Asset impairment charges.................... 16.0 -- --
Restructuring and other charges............. -- -- 1.0
----- ----- -----
Income (loss) before minority interests,
income taxes, extraordinary items and
cumulative effect of accounting change..... (21.5)% 5.0 % (0.8)%
===== ===== =====
Net income (loss)........................... (12.7)% 1.0 % (1.1)%
===== ===== =====
</TABLE>
22
<PAGE>
1995 COMPARED TO 1994
The following are the significant changes in the Company's operations
between 1995 and 1994. These changes affect the comparison of revenues and
operating expenses of the Company between years as discussed below.
* In October 1993, the Company, through its subsidiary RMCI, entered the
managed mental health business through its acquisition of FPM. This
business was expanded in June 1994 with the acquisition of an Arizona-
based managed mental health business and, in succeeding months, with
the execution of additional contracts for the provision of managed
mental health care. The revenues and expenses of RMCI and its
subsidiaries were included in the Company's revenues and expenses from
October 1993 to April 24, 1995, when the RMCI Distribution was
effected.
* In February 1994, the Company sold its Atlantic Shores facility in
Daytona Beach, Florida. In addition, the Company closed several day
treatment centers and outpatient clinics during 1994 and 1995 due to
negative operating margins. The sale and these closures are
hereinafter referred to as the "sold/closed facilities".
* The Company opened four subacute units throughout the period (one in
the middle of fiscal 1994, two in late fiscal 1994 and one in the
middle of fiscal 1995).
* The Company expanded its contract services division during fiscal
1995.
__________________________
Net revenues for fiscal 1995 were $136.4 million, compared to $137.0
million in fiscal 1994. The material changes in net revenues consisted of (a) a
$12.6 million decrease (11%) in same facility net inpatient revenues, (b) a $2.9
million increase (21%) in same facility net outpatient revenues, (c) a $4.5
million increase in net revenues attributable to the Company's subacute
operations, (d) a $7.1 million increase (from $5.8 million to $12.9 million) in
net revenues related to RMCI, (e) a $0.6 million increase (from $0.5 million to
$1.1 million) in revenues associated with contract services and (f) a $3.1
million decrease in net patient revenues related to the sold/closed facilities
(excluding the Three Rivers facility, which was closed on June 30, 1995 but is
included in the same facility totals throughout this discussion).
Same facility net inpatient revenues decreased $12.6 million between
years. Of this amount, $8.7 million was related to a reduction in
disproportionate share payments by the Federal and State governments to the
Company's two Louisiana facilities treating a disproportionately high volume of
Medicaid patients (relative to other providers). Disproportionate share
payments were severely restricted by Congress effective July 1, 1995.
Accordingly, the Company expects that any future payments made under this
program will be minimal.
23
<PAGE>
Excluding the change in disproportionate share payments between
periods, same facility net inpatient revenues decreased approximately $3.9
million. Of this amount, $3.6 million is attributable to the decline in
admissions at the Three Rivers facility, which decline resulted from the State
of Louisiana's application of significantly more restrictive admission criteria
to facilities in the State treating the behavioral disorders of adolescents.
The inpatient census at this facility decreased from an average of 65 patients
in fiscal 1994 to 36 patients in fiscal 1995, with an average of 20 patients
subsequent to December 1, 1994 when the new admission rules became effective.
As stated earlier, on June 30, 1995, the Company closed Three Rivers Hospital
and consolidated the operations of this facility with its Greenbrier facility
located less than five miles away.
Excluding the above factors, net inpatient revenues related to all
other inpatient facilities were stable and patient days and admissions related
to these facilities increased 4.5% and 10%, respectively, between periods. The
growth rate in admissions exceeded that in patient days due to an overall
decline in the inpatient average length of stay from 17.6 days in 1994 to 15.7
days in 1995. In addition, these facilities experienced a decrease in net
inpatient revenue per patient day due to a continued shift in patient mix from
charge-based payors to cost-based and negotiated per-diem rate payors. Net
revenue per patient day on cost-based and negotiated per-diem rate payors is
generally less than that for charge-based payors. In addition, the rates
received from per-diem rate payors has declined between periods. The percentage
of the Company's net revenues related to charge-based payors decreased from 21%
in 1994 to 17% in 1995.
Same facility net outpatient revenues totalled $17.0 million in 1995
(which comprised 14.6% of total same facility net patient revenues in fiscal
1995) compared to $14.1 million in 1994 (or 11.3% of same facility net patient
revenues in fiscal 1994). This increase is due to demands by third-party payors
for increased outpatient treatment protocols and an expansion of outpatient
service levels, and a market focus by facility administrators on increasing
partial hospitalization day services.
Total salaries, wages and benefits in fiscal 1995 were $72.1 million,
compared to $64.8 million in fiscal 1994. The material changes in this expense
item consisted of (a) a $1.7 million (or 3.0%) increase in same facility
salaries, wages and benefits (from $56.9 million in fiscal 1994 to $58.6 million
in fiscal 1995), (b) an increase in salaries, wages and benefits of $2.1 million
attributable to the Company's subacute operations, (c) a $3.9 million increase
(from $1.6 million to $5.5 million) in salaries, wages and benefits related to
RMCI, (d) a $0.7 million increase in salaries, wages and benefits associated
with contract services and (e) a $1.2 million decrease in salaries, wages and
benefits attributable to the sold/closed facilities.
Other operating expenses in fiscal 1995 were $44.7 million, compared
to $42.9 million in fiscal 1994. The material changes in other operating
expenses consisted of (a) a $2.3 million decrease (6%) in same facility other
operating expenses (from $41.9 million in fiscal 1994 to $39.6 million in fiscal
1995), (b) an increase in other operating expenses of $3.4 million attributable
to the subacute operations, (c) a $2.8 million increase (from $3.4 million to
$6.2 million) in other operating expenses related to RMCI, (d) a $0.2 million
increase in other operating expenses associated with contract services and (e) a
decrease of $2.2 million in other operating expenses attributable to the
sold/closed facilities. The decrease in same facility other
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operating expenses was due to focused cost-cutting initiatives within these
facilities during the year.
The provision for doubtful accounts in fiscal 1995 was $5.1 million,
compared to $5.8 million in fiscal 1994. A $1.2 million decrease in same
facility provision for doubtful accounts (from $5.7 million in fiscal 1994 to
$4.5 million in fiscal 1995) was offset by increases in the provision for
doubtful accounts associated with subacute and contract services of $0.1 million
and $0.3 million, respectively. The decrease in same facility provision for
doubtful accounts was primarily the result of a continued shift in patient mix
and the corresponding shift from charge-based payors (which requires a larger
amount to be paid by the patient) to cost-based and negotiated per-diem rate
payors, particularly state governments and other government agency payors which
administer Medicaid programs. For fiscal 1995, approximately 83% of the
Company's net revenues were related to cost-based and negotiated per-diem rate
payors, compared to 79% in fiscal 1994. See "Item 1. Business--Sources of
Revenue".
Depreciation and amortization in fiscal 1995 totalled $7.3 million,
compared to $6.8 million in fiscal 1994. The overall change in this expense
item was primarily due to (a) a $0.5 million increase in depreciation and
amortization related to subacute operations, (b) a $0.5 million increase in
depreciation and amortization related to RMCI and (c) $0.5 million decrease in
depreciation and amortization attributable to the sold/closed facilities.
Interest expense decreased from $8.9 million in 1994 to $8.3 million
in 1995. Debt levels were reduced between periods through scheduled principal
payments of (a) $5.65 million on the Company's senior secured notes, (b) $0.5
million on the Company's subordinated secured notes and (c) $0.8 million on the
Company's variable rate demand revenue bonds. In addition, on May 1, 1995, the
Company prepaid $7.5 million of principal on the senior secured notes and, in
connection with the sale of Atlantic Shores Hospital in February 1994, the
variable rate demand revenue bonds associated with that facility, totalling $4.3
million, were redeemed. The reduction in interest as a result of these
principal payments was offset by an increase in interest rates on the variable
rate demand revenue bonds, interest on the working capital facility drawing and
interest incurred in fiscal 1995 prior to the RMCI Distribution on debt incurred
in connection with RMCI acquisitions made during the second half of fiscal 1994.
In fiscal 1995, the Company reported a loss associated with sales and
closures of facilities of $6.4 million. This amount is comprised of the
following significant items:
1. Sale/Leaseback Transaction: On April 12, 1995, the Company
consummated a sale/leaseback transaction whereby the Company sold the land,
buildings and fixed equipment of two of its inpatient facilities for $12.5
million and agreed to lease these properties back over a term of 15 years (with
three successive renewal options of five years each). The leases, which are
treated as operating leases under generally accepted accounting principles,
require aggregate annual minimum rental payments of $1.54 million, payable
monthly. Beginning April 1, 1996, the lease payments are subject to any upward
adjustment (not to exceed 3% annually) to the Consumer Price Index over the
preceding 12 months.
Net sale proceeds associated with this transaction totalled $12.1
million which, when compared to the net book value of assets sold of $15.7
million, resulted in a loss of $3.6
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million. On May 1, 1995, the Company utilized a portion of the proceeds from the
above transaction and prepaid $7.5 million of principal due on the senior
secured notes as follows: $3.5 million due on September 30, 1995, $3.5 million
due on March 31, 1996 and $0.5 million due on September 30, 1996. In connection
with this prepayment, the Company wrote down a proportionate amount of
unamortized loan costs related to the senior secured notes, totalling $229,000,
and incurred a yield maintenance charge from the holders of the senior secured
notes, totalling $234,000. These amounts are reported as a loss from early
extinguishment of debt, net of applicable income taxes, in the 1995 statement of
operations.
2. Real Estate Sales: In March and April 1995, the Company sold
certain real estate located in Flagstaff, Arizona and Houston, Texas,
respectively. These properties were acquired for development approximately 10
years ago and had an aggregate book value of $1.15 million. Net proceeds from
the sale of this real estate totalled approximately $0.75 million, resulting in
a recorded loss of $0.4 million.
3. Closure of Day Treatment and Other Outpatient Operations: During
1995, the Company closed its remaining day treatment centers as well as certain
outpatient clinics which were producing negative operating margins. In addition,
the Company recorded cost report settlements and asset write-downs totalling
$380,000 and $190,000, respectively, which became evident in 1995 subsequent to
these closures and the closure of day treatment centers in late fiscal 1994.
Finally, the Company sold an outpatient rehabilitation clinic in San Antonio,
Texas in June 1995. The total losses incurred related to these events was
approximately $1,300,000.
4. Closure of Three Rivers Hospital: The Company recorded certain
losses, totalling approximately $0.2 million, resulting from its decision to
close Three Rivers Hospital on June 30, 1995 and consolidate the operations of
this facility with its Greenbrier facility.
5. Development Projects: The Company pursued several development
opportunities during the year including the potential acquisition of a
competitor, the development of rural health clinics and the potential
acquisition of a contract management company. These efforts were abandoned or
otherwise terminated during the year resulting in a charge against earnings of
approximately $800,000.
In the fourth quarter of fiscal 1994, the Company decided to terminate
its development activities related to its day treatment division and to close
certain of these centers due to the poor operating performance of this division.
In addition, the Company also decided to close four outpatient clinics related
to its Heartland Hospital facility during this quarter. Finally, certain
adjustments were made which resulted in gain recognition on the sale of Atlantic
Shores Hospital facility, which was sold in February 1994. The total net losses
related to these closures and sale was $802,000.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement Number 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" (the "Statement"). The Statement
requires companies to compare the recorded values of long-lived assets (defined
as land, buildings, fixed equipment and related cost in excess of net asset
value of purchased businesses) against the expected future cash flows to be
generated by these assets. The Company elected to adopt the Statement in the
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fourth quarter of fiscal 1995 and, after applying the principles of measurement
contained in the Statement and the Company's expectations, recorded a charge
against earnings, before taxes, of $20.3 million. This amount is reflected as
an asset impairment charge in the accompanying 1995 statement of operations.
See "Item 8. Financial Statements and Supplementary Data."
The Company is a minority stockholder in an enterprise which operates
primary care medical clinics on United States' military bases in Germany.
Based on a reassessment in June 1995 of the future expected cash flows to be
realized by the Company from this business, the Company determined its
investment in this venture was impaired. The amount of this impairment, $1.5
million, is reflected as an asset impairment charge in the accompanying 1995
statement of operations.
Minority interests reflects the limited partner's share of net income
of Three Rivers Hospital and, from October 1994 through April 24, 1995, the
minority shareholders' share of net income of RMCI. The amount related to RMCI
was not material in fiscal 1995.
As mentioned previously, effective April 24, 1995, the Company
effected the RMCI Distribution. For the period July 1, 1994 to April 24, 1995,
net revenues of RMCI totalled $12.9 million (9.5% of total consolidated net
revenues of the Company). However, the operating results of RMCI for this
period, which were impacted by management fees payable to the Company totalling
$237,000, were not material to the consolidated operating results of the
Company. Management fees paid to the Company by all of the Company's
subsidiaries, including RMCI, represent reimbursement to the Company of its
indirect costs for providing financial oversight, information systems and other
support. The amount of such fees are determined based upon an estimate of the
amount of time spent by Company employees in providing such services. These
management fees are eliminated upon consolidation and have no effect on the
consolidated results of operations of the Company.
1994 COMPARED TO 1993
Net revenues for fiscal 1994 were $137.0 million, compared to $136.4
million in fiscal 1993. The material changes in net revenues consisted of (a)
an $11.1 million decrease (9%) in net inpatient revenues, (b) a $5.2 million
increase (43%) in net outpatient revenues and (c) $5.5 million of net revenues
associated with managed care businesses acquired during fiscal 1994. The
overall decrease in net inpatient revenues was attributable to the sale of the
Cumberland and Atlantic Shores Hospital facilities during fiscal 1994 and the
lease of the Harbor Oaks Hospital facility during mid-fiscal 1993 (the
"sold/leased facilities"). Same facility net inpatient revenues remained stable
between fiscal years as the increase in net inpatient revenues associated with
the Three Rivers facility, which was fully operational during all of fiscal 1994
but only four and one-half months in fiscal 1993, offset declines in net
inpatient revenues at the Company's other facilities during fiscal 1994. The
increase in net outpatient revenues was attributable to an increase in same
facility and free-standing outpatient clinic net revenue of $4.8 million (of
which $1.3 million relates to the Three Rivers facility) and $1.9 million,
respectively, net of a $1.5 million decrease in net outpatient revenues
associated with the sold/leased facilities. The increase in outpatient revenues
is due to an expansion of partial hospitalization day programs and other
outpatient services by the Company's inpatient facilities.
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Net outpatient revenues comprised 14.2% of total net patient revenues
for fiscal 1994 compared to 9.5% for the prior year. In addition, with respect
to the Company's inpatient business, same facility admissions in fiscal 1994
increased 5% over fiscal 1993 while same facility average length of stay
decreased from 18.3 days in fiscal 1993 to 17.6 days in fiscal 1994.
Total salaries, wages and benefits in fiscal 1994 were $64.8 million,
compared to $63.8 million in fiscal 1993. The material changes in this expense
item consisted of (a) a $4.3 million increase in same facility salaries, wages
and benefits (from $52.6 million in fiscal 1993 to $56.9 million in fiscal
1994), (b) salaries, wages, and benefits of $1.7 million attributable to managed
care businesses acquired during fiscal 1994, (c) $1.1 million of salaries, wages
and benefits attributable to subacute and management contract operations which
began during fiscal 1994 and (d) a decrease of $6.1 million in salaries, wages
and benefits attributable to the sold/leased facilities. The increase in same
facility salaries, wages and benefits was due primarily to a $3.7 million
increase at the Three Rivers Hospital facility.
Other operating expenses in fiscal 1994 were $42.9 million, compared
to $40.5 million in fiscal 1993. The material changes in other operating
expenses consisted of (a) a $1.7 million increase in same facility other
operating expenses (from $30.5 million in fiscal 1993 to $32.2 million in fiscal
1994), (b) other operating expenses of $3.3 million attributable to managed care
businesses acquired during fiscal 1994, (c) other operating expenses of $0.8
million attributable to subacute and management contract operations and (d) a
decrease of $4.0 million in other operating expenses attributable to the
sold/leased facilities. The increase in same facility other operating expenses
was due to a $2.1 million increase at the Three Rivers Hospital facility, net of
a $0.4 million decrease at the Company's other inpatient facilities.
The provision for doubtful accounts in fiscal 1994 was $5.8 million,
compared to $8.1 million in fiscal 1993. Same facility provision for doubtful
accounts decreased to $5.8 million in fiscal 1994 (from $7.2 million in fiscal
1993) and the provision for doubtful accounts attributable to the sold/leased
facilities was negligible in fiscal 1994 (compared to $0.9 million in fiscal
1993). The provision for doubtful accounts in fiscal 1994 attributable to the
Three Rivers Hospital facility, acquired managed care businesses and subacute
and management contract operations was not material. The decrease in same
facility provision for doubtful accounts was primarily the result of a continued
shift in patient mix and the corresponding shift from charge-based payors (which
requires a larger amount to be paid by the patient) to cost-based and negotiated
per diem rate payors, particularly state governments and other governmental
agency payors which administer Medicaid programs. For fiscal 1994,
approximately 80% of the Company's net revenues were related to cost-based and
negotiated per diem rate payors, compared to 75% in fiscal 1993. See "Item 1.
Business--Sources of Revenue."
Depreciation and amortization in fiscal 1994 totalled $6.8 million,
compared to $6.6 million in fiscal 1993. The overall change in this expense
item was primarily due to (a) increased depreciation and amortization of $0.5
million attributable to the same facilities (approximately $0.2 million of
which was due to the Three Rivers Hospital facility, which incurred this expense
for a full year in fiscal 1994), (b) $0.4 million related to managed care
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businesses acquired during fiscal 1994 and (c) a decrease of $0.9 million in
depreciation and amortization attributable to the sold/leased facilities.
Interest and other financing charges decreased from $9.5 million for
fiscal 1993 to $8.9 million for fiscal 1994. The decrease is attributable to
reduced levels of debt during fiscal 1994.
In the fourth quarter of fiscal 1994, the Company decided to terminate
its development activities related to its day treatment division and to close
certain of these centers due to the poor operating performance of this division.
In addition, the Company also decided to close four outpatient clinics related
to its Heartland Hospital facility during this quarter. Finally, certain
adjustments were made which resulted in gain recognition on the sale of its
Atlantic Shores Hospital facility, which was sold in February 1994. The total
net losses related to these closures and sale was $802,000.
During the first quarter of fiscal 1993, the Company recorded a loss
of $1,109,000 due to the closure of its leased facility, Oak Grove Hospital.
The loss included provisions for severance expense and other expenses incurred
in connection with the termination of this lease. During the fourth quarter of
fiscal 1993, the Company signed a letter of intent to sell its Cumberland
Hospital facility for approximately $12.3 million. In connection with this
decision, the Company recorded a provision for loss relating primarily to the
unamortized amount of cost in excess of net asset value of purchased businesses
of $3.6 million. In addition, the terms and conditions of a lease agreement
pursuant to which the Company agreed to lease its Harbor Oaks Hospital facility
to a third party were satisfied during the fourth quarter of fiscal 1993. As a
result, the Company recorded a loss of $2.8 million, which amount represented
the excess of the facility's net book value over the purchase option price
contained in the lease. Finally, during this quarter the Company decided to
terminate its efforts to develop psychiatric facilities in certain markets and
write-off certain deferred loan costs in connection with the consummation of the
Company's new credit agreement in May 1993. The total losses related to these
decisions ($1,367,000) is included under "Restructuring and other charges" in
the Company's Consolidated Statement of Operations for fiscal 1993.
Minority interests reflects the limited partners of Three Rivers
Hospital's share of income before income taxes at that facility.
The Company recognized an after-tax loss of $155,000 in 1994 from
early extinguishment of the industrial revenue bonds in connection with the sale
of Atlantic Shores Hospital. The Company recognized a loss of $1,580,000 on
early extinguishment of a 16.1% subordinated note in fiscal 1993. These losses
are reflected as extraordinary items in the consolidated statements of
operations.
IMPACT OF INFLATION
The psychiatric hospital industry is labor intensive, and wages and
related expenses increase in inflationary periods. Additionally, suppliers
generally seek to pass along rising costs to the Company in the form of higher
prices. The Company monitors the operations of its facilities to mitigate the
effect of inflation and increases in the costs of health care. To
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the extent possible, the Company seeks to offset increased costs through
increased rates, new programs, and operating efficiencies. However,
reimbursement arrangements may hinder the Company's ability to realize the full
effect of rate increases. To date, inflation has not had a significant impact on
operations.
FINANCIAL CONDITION
The Company records amounts to or from third-party contractual
agencies (Medicare, Medicaid and Blue Cross) based on its best estimate, using
the principles of cost reimbursement, of amounts to be ultimately received or
paid under current and prior years' cost reports filed (or to be filed) with the
appropriate intermediaries. Ultimate settlements and other lump-sum adjustments
due from and paid to these intermediaries occur at various times during the
fiscal year. At June 30, 1995, amounts due from Medicare, Medicaid and Blue
Cross totalled $3,273,000, $1,206,000 and $1,477,000, respectively. Also at
June 30, 1995, amounts due to Medicare, Medicaid and Blue Cross totalled
$4,114,000, $835,000 and $47,000, respectively.
Restricted cash at June 30, 1994 represented remaining proceeds from
the sale of Cumberland Hospital in August 1993. These monies were held in trust
and, during the current fiscal year, were used to fund the September 30, 1994
principal payment and approximately 60% of the March 31, 1995 principal payment
due on the senior secured notes and the subordinated secured notes.
At June 30, 1995, total net cash advances made by the Company to or on
behalf of RMCI, for purposes of partially funding acquisitions and for working
capital and other corporate purposes, totalled $7.4 million. Of this amount, $6
million is represented by an unsecured, interest-bearing (8%), subordinated
promissory note due from RMCI and issued on October 25, 1994. Interest on the
subordinated promissory note is payable quarterly commencing June 30, 1995 and
principal is payable over a four-year period in equal quarterly installments
commencing September 30, 1996. The remaining balance owed by RMCI to RHCI, $1.4
million, is governed by a Distribution Agreement which provides that $600,000 is
payable by RMCI on or before October 21, 1995 (or on such other terms and
conditions as mutually agreed to by RMCI and RHCI), with the balance due and
payable on or before December 31, 1996, together with interest at 7% per annum
beginning October 21, 1995. As of June 30, 1995, RMCI had paid the Company
$275,000 of the amount due on or before October 21, 1995.
As of the date of the RMCI Distribution in April 1995, the assets and
liabilities of RMCI were no longer reflected on the Company's balance sheet.
The significant components of the Company's consolidated balance sheet impacted
by the distribution were: (a) current assets (decrease of $3 million), (b) cost
in excess of net asset value of purchased businesses (decrease of $10 million),
(c) receivable due from RMCI (increase of $8 million), (d) other noncurrent
assets (decrease of $4 million), (e) property and equipment (decrease of $1
million), (f) current liabilities (decrease of $4 million), (g) long-term debt
(decrease of $2 million), (h) minority interests payable (decrease of $3
million) and (i) additional paid-in capital (decrease of $1 million).
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During the year ended June 30, 1995, amounts owed to minority
interests decreased by $1.9 million. During this period, distributions to the
minority partners in the Three Rivers Hospital Limited Partnership reduced the
amount owed by $2.5 million, compared to the partners' share of the income of
the partnership during this period, which increased the amount owed, by $0.9
million. Also included in amounts owed to minority interests at June 30, 1994
was $0.3 million related to minority stockholders of RMCI. This amount was
removed from the Company's consolidated balance sheet in April 1995 after the
RMCI Distribution.
In March and April 1995, the Company sold certain real estate located
in Flagstaff, Arizona and Houston, Texas, respectively. These properties were
reported as "Real estate held for sale" on the June 1994 balance sheet. Upon
the sale of the properties, the recorded value, totalling $1.15 million, was
removed from the consolidated balance sheet.
In April 1995, the Company consummated a sale/leaseback transaction
whereby the Company sold the land, buildings and fixed equipment of two of its
inpatient facilities for a net sale price of $12.1 million and agreed to lease
this property back over a term of 15 years (with three successive renewal
options of 5 years each). The leases are accounted for as operating leases
under generally accepted accounting principles and, accordingly, the Company's
basis in the assets sold, totalling $15.7 million, was removed from its
consolidated balance sheet in April 1995. On May 1, 1995, the Company utilized
certain of the proceeds from this transaction and prepaid $7.5 million of
principal due on its senior secured notes outstanding. The amount prepaid was
applied against the scheduled principal payments due on the senior secured notes
in September 1995 and March 1996. Accordingly, there are no current maturities
associated with this debt obligation as of June 30, 1995.
In June 1995, the Company elected to adopt, prior to the time it was
required to do so, the Statement and recorded a write-down of fixed and
intangible assets associated with four facilities totalling $20.3 million. In
accordance with the Statement, these facilities' carrying amount of cost in
excess of net asset value of purchased businesses, totalling $3.8 million, was
eliminated prior to making a reduction of these facilities' carrying amounts of
impaired property and equipment. This latter impairment, which totalled $16.5
million, was recorded pursuant to the Statement as a direct reduction in the
cost basis of the related property and equipment (rather than as an increase to
accumulated depreciation on these assets). The estimated depreciable lives
associated with these assets was then adjusted for future years.
The Company has net deferred tax assets of approximately $8.7 million
at June 30, 1995. Management has considered the effects of implementing tax
planning strategies, consisting of the sales of certain appreciated property, as
the primary basis for not recognizing a valuation allowance related to its
deferred tax assets at June 30, 1995. The ultimate realization of deferred tax
assets may be affected by changes in the underlying values of the properties
considered in the Company's tax planning strategies, which values are dependent
upon the operating results and cash flows of the individual properties. The
Company plans to evaluate the realizability of its deferred tax assets on a
quarterly basis by reviewing its tax planning strategies and assessing the need
for a valuation allowance.
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LIQUIDITY AND CAPITAL RESOURCES
On February 10, 1994, the Company sold its Atlantic Shores Hospital
for $4.8 million. The $4.3 million outstanding balance of the industrial
revenue bonds associated with this facility was repaid with the proceeds from
such sale.
On August 31, 1993, the Company sold its Cumberland Hospital facility
for $12.3 million. Of the total proceeds, $10.9 million was restricted for the
repayment of principal payments due on the senior and subordinated secured
notes. At June 30, 1994, $5.3 million was still available and included in
restricted cash on the consolidated balance sheet for such use. This amount was
used during fiscal 1995 to fully satisfy principal payments due on September 30,
1994 and partially satisfy principal payments due on March 31, 1995.
The Company's credit facilities include, net of a $7.5 million
prepayment on the senior secured notes in May 1995, $34.2 million in senior
secured notes, approximately $21 million in letters of credit, $2.3 million in
subordinated secured notes and, after the sale/leaseback transaction in April
1995, $2 million in a working capital facility. The senior secured notes bear
interest at 11.6% and, on September 30, 1996, resume semi-annual principal
payments of approximately $3.5 million through September 30, 1998 and semi-
annual principal payments of $5.65 million from March 31, 1999 through March 31,
2000. The subordinated secured notes bear interest at 15.6% and require semi-
annual principal payments of $0.2 million through March 31, 2000. Required
annual principal payments on the variable rate demand revenue bonds total $0.8
million through year 2000 and $0.9 million to $1.3 million in years 2001 through
2015. Amounts outstanding under the working capital facility, which bear
interest at a variable rate, totalled $1.5 million at June 30, 1995. The amount
drawn is structured as a revolving credit loan, bearing interest at 8.6% and
renewable in 30, 60 and 90-day increments, at the option of the Company. Under
the provisions of the Company's Credit Agreement, which governs the terms of the
letters of credit and the working capital facility, amounts outstanding under
the working capital facility must be reduced to zero for 30 consecutive days in
each fiscal year. In August 1995, the Company and banks supporting the Credit
Agreement agreed in principle to terms which will extend the expiration date of
the Credit Agreement from May 15, 1996 to February 15, 1997. In connection with
this extension, the Company agreed to reduce the banks' exposure by $2.8 million
on or before December 31, 1995 and an additional $3 million on or before July 1,
1996.
At the current time, the Company does not have any commitments to make
any material capital expenditures. The Company's current primary cash
requirements relate to its normal operating and debt service expenses, routine
capital improvements at its facilities and selective expansion of outpatient
programs and services. In addition, at the current time, the Company's specific
development projects include expansion of its contract services division and its
network of affiliations with medical/surgical hospitals and other healthcare
providers. Construction costs related to the Company's subacute business were
completed during fiscal 1995 and this business began generating positive cash
flow from operations in the fourth quarter of fiscal 1995. Also, in June 1994
and throughout 1995, the Company closed outpatient day treatment centers and
other outpatient clinics which were experiencing negative cash flow.
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On the basis of its historical cash collection experience and
projected cash needs, the Company believes that its internally generated funds
from operations, together with its working capital facility, remaining proceeds
from the April 1995 sale/leaseback transaction ($4.4 million), and funds derived
from any future asset sales will be sufficient to fund its current cash
requirements, commitments to reduce bank borrowings and future identifiable
needs. The Company does not at this time have any pending agreement to sell any
of its assets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements of the Company and its consolidated subsidiaries
are set forth herein beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the Company's executive officers is
contained in Part I under "Item 1. Business -- Executive Officers of the
Registrant." The information required by this Item with respect to directors
will be contained in the Company's definitive Proxy Statement ("Proxy
Statement") for its 1995 Annual Meeting of Stockholders to be held on November
10, 1995 and is incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days
subsequent to June 30, 1995.
ITEM 11. EXECUTIVE COMPENSATION.
The information required with respect to this Item will be contained
in the Proxy Statement, and such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required with respect to this Item will be contained
in the Proxy Statement, and such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required with respect to this Item will be contained
in the Proxy Statement, and such information is incorporated herein by
reference.
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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-1
to F-24 of this Annual Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
Information with respect to this Item is contained on Page S-1 of
this Annual Report on Form 10-K.
3. EXHIBITS
Information with respect to this Item is contained in the
attached Index to Exhibits.
(B) REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed by the Company for the
quarter ended June 30, 1995.
(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 Exhibits listed in response to Item
14(a)3, and are incorporated herein by reference. The management
contracts and compensatory plans and arrangements required to be filed
as an Exhibit to this Form 10-K are listed in Exhibits 10.71, 10.72,
10.73, 10.74, 10.75, 10.81, 10.82, 10.83, 10.85 and 10.91.
35
<PAGE>
POWER OF ATTORNEY
The registrant, and each person whose signature appears below, hereby
appoints Gregory H. Browne and Thomas M. Haythe as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more amendments to the annual report which amendments may make such
changes in the report as the attorney-in-fact acting deems appropriate and to
file any such amendment to the report with the Securities and Exchange
Commission.
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 fully authorized.
DATED:
RAMSAY HEALTH CARE, INC.
By /s/ Gregory H. Browne
--------------------------------------------
GREGORY H. BROWNE
CHIEF EXECUTIVE OFFICER, PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities and 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
---------------
DATED: September 28, 1995
By /s/ Paul J. Ramsay
------------------------------------------
PAUL J. RAMSAY
CHAIRMAN OF THE BOARD AND DIRECTOR
DATED: September 28, 1995
By /s/ Gregory H. Browne
------------------------------------------
GREGORY H. BROWNE
CHIEF EXECUTIVE OFFICER, PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER AND DIRECTOR
36
<PAGE>
SIGNATURE/TITLE
---------------
DATED: September 28, 1995
By /s/ Aaron Beam, Jr.
----------------------------------------
AARON BEAM, JR.
DIRECTOR
DATED: September 28, 1995
By /s/ Peter J. Evans
----------------------------------------
PETER J. EVANS
DIRECTOR
DATED: September 28, 1995
By /s/ Robert E. Galloway
----------------------------------------
ROBERT E. GALLOWAY
DIRECTOR
DATED: September 28, 1995
By /s/ Thomas M. Haythe
----------------------------------------
THOMAS M. HAYTHE
DIRECTOR
DATED: September 28, 1995
By /s/ Reynold J. Jennings
----------------------------------------
REYNOLD J. JENNINGS
PRESIDENT, CHIEF OPERATING
OFFICER AND DIRECTOR
DATED:
By
----------------------------------------
STEVEN J. SHULMAN
DIRECTOR
DATED: September 28, 1995
By /s/ Michael S. Siddle
----------------------------------------
MICHAEL S. SIDDLE
DIRECTOR
37
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries are submitted herewith in response to Item 8 and Item 14(a)(1):
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Auditors........................... F-3
Consolidated Balance Sheets -- June 30, 1995 and 1994.... F-4
Consolidated Statements of Operations-- For the Years
Ended June 30, 1995, 1994 and 1993..................... F-6
Consolidated Statements of Stockholders' Equity -- For
the Years Ended June 30, 1995, 1994 and 1993........... F-7
Consolidated Statements of Cash Flows -- For the Years
Ended June 30, 1995, 1994 and 1993..................... F-8
Notes to Consolidated Financial Statements............... F-9
</TABLE>
The following Financial Statement Schedule of the Registrant and its
subsidiaries is submitted herewith in response to Item 14(a)(2):
VIII -- Valuation and Qualifying Accounts............ S-1
All other schedules have been omitted because they are inapplicable or the
information is provided in the consolidated financial statements including the
notes thereto.
F-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
RAMSAY HEALTH CARE, INC.
We have audited the accompanying consolidated balance sheets of Ramsay
Health Care, Inc. and Subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1995. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Ramsay Health Care, Inc. and Subsidiaries at June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in the Note on Impairment of Assets on page F-12 to the
consolidated financial statements, the Company changed its method of accounting
for the impairment of long-lived assets in 1995. As discussed in the Note on
Income Taxes on page F-17 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993.
ERNST & YOUNG LLP
New Orleans, Louisiana
September 13, 1995
F-3
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................... $ 9,044,000 $ 6,207,000
Restricted cash.................................... -- 5,311,000
Patient accounts receivable, less allowances for
doubtful accounts of $3,886,000 and $3,925,000
at June 30, 1995 and 1994, respectively........... 21,564,000 23,019,000
Amounts due from third-party contractual agencies.. 5,956,000 6,604,000
Other receivables.................................. 3,655,000 2,139,000
Other current assets............................... 2,764,000 3,040,000
------------ ------------
Total current assets.............................. 42,983,000 46,320,000
Other assets
Cash held in trust................................. 1,778,000 1,805,000
Cost in excess of net asset value of purchased
businesses........................................ 663,000 12,042,000
Unamortized preopening and loan costs.............. 2,221,000 3,731,000
Other intangible assets............................ -- 3,048,000
Real estate held for sale.......................... -- 1,150,000
Receivable from affiliated company................. 7,170,000 --
Deferred income taxes.............................. 8,652,000 --
Other non-current assets........................... 2,301,000 4,911,000
------------ ------------
22,785,000 26,687,000
Property and equipment
Land............................................... 5,383,000 9,009,000
Building and improvements.......................... 77,630,000 118,555,000
Equipment, furniture and fixtures.................. 19,611,000 20,626,000
------------ ------------
120,624,000 148,190,000
Less accumulated depreciation...................... 29,156,000 38,039,000
------------ ------------
73,468,000 110,161,000
------------ ------------
$139,236,000 $183,168,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
---------------------------
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable........................................ $ 3,868,000 $ 2,306,000
Accrued salaries and wages.............................. 4,843,000 4,291,000
Other accrued liabilities............................... 1,347,000 4,386,000
Amounts due to third-party contractual agencies......... 4,996,000 4,729,000
Current portion of long-term debt....................... 3,831,000 9,460,000
------------ ------------
Total current liabilities.......................... 18,885,000 25,172,000
Deferred income taxes........................................ -- 4,932,000
Liabilities for unpaid self-insurance claims................. 1,337,000 1,341,000
Long-term debt, less current portion......................... 55,568,000 67,707,000
Minority interests........................................... 1,667,000 3,548,000
Stockholders' equity
Class A convertible preferred stock, $1 par value--
authorized 800,000 shares; issued 22,910 shares
at June 30, 1994...................................... -- 23,000
Class B convertible preferred stock, Series C, $1 par
value--authorized 152,321 shares; issued
142,486 shares (liquidation value of $7,244,000)
including accrued dividends of $91,000............... 233,000 233,000
Common stock, $.01 par value--authorized 20,000,000
shares; issued 8,290,795 shares at June 30, 1995 and
8,200,760 shares at June 30, 1994..................... 83,000 82,000
Additional paid-in capital.............................. 99,147,000 100,048,000
Retained earnings (deficit)............................. (33,785,000) (16,483,000)
Treasury stock--581,550 common shares at June 30, 1995
and 481,750 common shares at June 30, 1994, at cost... (3,899,000) (3,435,000)
------------ ------------
Total stockholders' equity......................... 61,779,000 80,468,000
------------ ------------
$139,236,000 $183,168,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
NET REVENUES.............................................. $136,418,000 $137,002,000 $136,354,000
Operating expenses:
Salaries, wages and benefits............................. 72,061,000 64,805,000 63,810,000
Other operating expenses................................. 44,741,000 42,907,000 40,454,000
Provision for doubtful accounts.......................... 5,086,000 5,846,000 8,148,000
Depreciation and amortization............................ 7,290,000 6,836,000 6,605,000
Interest and other financing charges..................... 8,347,000 8,906,000 9,494,000
Loss on sales and closure of facilities.................. 6,431,000 802,000 7,524,000
Asset impairment charges................................. 21,815,000 -- --
Restructuring and other charges.......................... -- -- 1,367,000
------------ ------------ ------------
TOTAL OPERATING EXPENSES.................................. 165,771,000 130,102,000 137,402,000
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS,
INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE................... (29,353,000) 6,900,000 (1,048,000)
Minority interests........................................ 887,000 4,824,000 1,126,000
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE.............................. (30,240,000) 2,076,000 (2,174,000)
Provision (benefit) for income taxes...................... (13,195,000) 599,000 159,000
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE................... (17,045,000) 1,477,000 (2,333,000)
Extraordinary item:
Loss from early extinguishment of debt, less
applicable income tax benefit of $206,000 in 1995 and
$103,000 in 1994....................................... (257,000) (155,000) (1,580,000)
Cumulative effect of change in accounting for
income taxes........................................... -- -- 2,353,000
------------ ------------ ------------
NET INCOME (LOSS)......................................... $(17,302,000) $ 1,322,000 $ (1,560,000)
============ ============ ============
Income (loss) per common and dilutive common
equivalent share:
Primary:
Before extraordinary item and cumulative effect of
accounting change...................................... $ (2.25) $ 0.15 $ (0.29)
Extraordinary item:
Loss from early extinguishment of debt................ (0.03) (0.01) (0.20)
Cumulative effect of change in accounting for
income taxes.......................................... -- -- 0.29
------------ ------------ ------------
$ (2.28) $ 0.14 $ (0.20)
============ ============ ============
Fully diluted:
Before extraordinary item and cumulative effect of
accounting change...................................... $ (2.24) $ 0.15 $ (0.29)
Extraordinary item:
Loss from early extinguishment of debt................ (0.03) (0.01) (0.20)
Cumulative effect of change in accounting for
income taxes.......................................... -- -- 0.29
------------ ------------ ------------
$ (2.27) $ 0.14 $ (0.20)
============ ============ ============
Weighted average number of common and dilutive common
equivalent shares outstanding:
Primary.................................................. 7,743,000 9,641,000 7,932,000
Fully diluted............................................ 7,794,000 9,679,000 7,932,000
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS B
CLASS A CONVERTIBLE
CONVERTIBLE PREFERRED ADDITIONAL RETAINED
PREFERRED STOCK COMMON PAID-IN EARNINGS TREASURY
STOCK SERIES C STOCK CAPITAL (DEFICIT) STOCK
------------ ----------- -------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1992...................... $ 23,000 $ -- $81,000 $ 93,794,000 $(16,245,000) $(1,585,000)
Dividends on Class B redeemable
convertible preferred stock............... -- -- -- (150,000) -- --
Purchase of treasury stock (120,000 shares).. -- -- -- -- -- (706,000)
Issuance of Class B preferred stock,
Series C (142,486 shares)................. -- 142,000 -- 6,203,000 -- --
Net loss..................................... -- -- -- -- (1,560,000) --
----------- ----------- -------- ------------ ------------ -----------
BALANCE AT JUNE 30, 1993..................... 23,000 142,000 81,000 99,847,000 (17,805,000) (2,291,000)
Exercise of stock options (112,834 shares)... -- -- 1,000 565,000 -- --
Dividends on Class B convertible preferred
stock, Series C........................... -- 91,000 -- (364,000) -- --
Purchase of treasury stock (160,000 shares).. -- -- -- -- (1,144,000)
Net income................................... -- -- -- -- 1,322,000 --
----------- ----------- -------- ------------ ------------ -----------
BALANCE AT JUNE 30, 1994..................... 23,000 233,000 82,000 100,048,000 (16,483,000) (3,435,000)
Exercise of stock options (74,166 shares).... -- -- 1,000 378,000 -- --
Shares issued in connection with employee
stock purchase plan (15,869 shares)....... -- -- -- 89,000 -- --
Dividends on Class B convertible
preferred stock, Series C................. -- -- -- (364,000) -- --
Purchase of treasury stock (99,800 shares)... -- -- -- -- -- (464,000)
Cancellation of Class A convertible
preferred stock........................... (23,000) -- -- (100,000) -- --
Distribution of subsidiary to
stockholders.............................. (904,000)
Net loss..................................... -- -- -- -- (17,302,000) --
----------- ----------- -------- ------------ ------------ -----------
BALANCE AT JUNE 30, 1995..................... $ -- $233,000 $83,000 $ 99,147,000 $(33,785,000) $(3,899,000)
=========== =========== ======== ============ ============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)............................................ $(17,302,000) $ 1,322,000 $(1,560,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of change in accounting for income
taxes................................................... -- -- (2,353,000)
Depreciation and amortization............................. 8,074,000 7,638,000 7,173,000
Asset impairment charges.................................. 21,815,000 -- --
Loss on early extinguishment of debt...................... 463,000 258,000 1,580,000
Write-off of development and other costs.................. 716,000 -- 1,367,000
(Gain) loss on disposal of assets......................... 5,096,000 722,000 (121,000)
Benefit for deferred income taxes......................... (13,584,000) (1,188,000) (696,000)
Provision for doubtful accounts........................... 5,086,000 5,846,000 8,148,000
Provision for loss on sales and closure of facilities..... -- -- 6,415,000
Minority interests........................................ 887,000 4,824,000 1,126,000
Cash flows from (increase) decrease in operating assets:
Patient accounts receivable............................. (4,410,000) (2,169,000) (8,833,000)
Other current assets.................................... (522,000) (2,071,000) 1,233,000
Other non-current assets................................ 616,000 (554,000) 164,000
Cash flows from increase (decrease) in operating
liabilities:
Accounts payable........................................ 2,466,000 (2,484,000) 940,000
Accrued salaries, wages and other liabilities........... (745,000) 3,150,000 (674,000)
Unpaid self-insurance claims............................ (4,000) (1,078,000) (456,000)
Amounts due to third-party contractual agencies......... 267,000 (1,385,000) 724,000
------------ ----------- -----------
Total adjustments..................................... 26,221,000 11,509,000 15,737,000
------------ ----------- -----------
Net cash provided by operating activities........... 8,919,000 12,831,000 14,177,000
------------ ----------- -----------
Cash flows from investing activities:
Proceeds from sales of assets............................. 970,000 16,422,000 300,000
Acquisitions of businesses................................. -- (6,022,000) --
Expenditures for property and equipment................... (2,726,000) (5,070,000) (5,569,000)
Development project costs................................. (2,124,000) (388,000) (1,878,000)
Preopening costs.......................................... (329,000) (2,195,000) (905,000)
Restricted cash (reserved) used for debt payments......... 5,311,000 (5,311,000) --
Cash held in trust........................................ (974,000) 806,000 166,000
------------ ----------- -----------
Net cash provided by (used in) investing activities. 128,000 (1,758,000) (7,886,000)
------------ ----------- -----------
Cash flows from financing activities
Loan costs................................................ (290,000) (220,000) (1,619,000)
Proceeds from sale/leaseback of facilities and equipment.. 12,015,000 -- 1,857,000
Distribution to minority interests........................ (2,466,000) (2,741,000) --
Proceeds from working capital facility.................... 2,500,000 -- --
Proceeds from private placement of shares of subsidiary... 3,320,000 -- --
Reduction in cash due to distribution of subsidiary....... (1,427,000) -- --
Payment of costs related to distribution of subsidiary.... (1,696,000) -- --
Proceeds from exercise of options and employee
stock purchases......................................... 468,000 566,000 --
Payments on debt.......................................... (17,683,000) (11,734,000) (3,884,000)
Payment of preferred stock dividends...................... (364,000) (273,000) (150,000)
Issuance of Class B preferred stock, Series C............. -- -- 265,000
Cancellation of Class A preferred stock................... (123,000) -- --
Purchase of treasury stock................................ (464,000) (1,144,000) (706,000)
------------ ----------- -----------
Net cash used in financing activities............... (6,210,000) (15,548,000) (4,237,000)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 2,837,000 (4,475,000) 2,054,000
Cash and cash equivalents at beginning of year.............. 6,207,000 10,682,000 8,628,000
------------ ----------- -----------
Cash and cash equivalents at end of year.................... $ 9,044,000 $ 6,207,000 $10,682,000
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Ramsay
Health Care, Inc. and its majority-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
INDUSTRY
The Company is a provider of a full continuum of behavioral health
services. It operates private, free-standing acute care psychiatric hospitals as
well as outpatient day hospitals, subacute units and residential treatment
units. In addition, the Company operates mental health programs for public
sector and private owners under management contracts.
In October 1993, the Company, through its subsidiary Ramsay Managed
Care, Inc. ("RMCI"), entered the managed mental healthcare business through its
acquisition of Florida Psychiatric Management, Inc. In October 1994, the
Company announced its intention to distribute its holdings of common stock of
RMCI to the holders of the Company's common and preferred stock. Also in
October 1994, RMCI completed a private placement of its common stock, which
diluted the Company's percentage stock ownership in RMCI from approximately 97%
to approximately 58%. On April 24, 1995, the Company distributed the stock of
RMCI held by it to the holders of record on April 21, 1995 of the Company's
common and preferred stock. The distribution of RMCI was recorded at net book
value. In addition, in connection with the "spin-off" of this subsidiary, RMCI
announced a rights offering to the holders of its common stock on the
distribution date. Subsequent to this distribution, RMCI ceased being a
subsidiary of the Company.
The distribution of RMCI reduced additional paid-in capital of the
Company by $904,000. In addition, costs related to the distribution of RMCI,
which include accounting, legal, printing, investment banking and distribution
agent fees and expenses, were charged to the operations of RMCI (and not the
Company) effective on the date of the distribution and costs related to the
private placement and rights offering by RMCI were deducted from additional
paid-in capital of RMCI (and not the Company) on the effective date of the
distribution.
AFFILIATED COMPANIES
Ramsay Holdings HSA Limited ("Holdings") owns approximately 18% of the
outstanding Common Stock of the Company and 50% of the outstanding Class B
Convertible Preferred Stock, Series C of the Company. Paul Ramsay Holdings Pty.
Limited owns the remaining 50% of the outstanding Class B Convertible Preferred
Stock, Series C. Together, these two entities affiliated with Paul J. Ramsay
own common stock and preferred stock in the Company which in total represents an
approximate 31% voting interest.
F-9
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
MEDICARE, MEDICAID AND OTHER CONTRACTED REIMBURSEMENT PROGRAMS
Net revenues include estimated reimbursable amounts from Medicare,
Medicaid and other contracted reimbursement programs. Amounts received by the
Company for treatment of patients covered by such programs, which may be based
on the 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 contracted reimbursement programs is subject to review and
audit by the appropriate agencies. Differences between amounts recorded as
estimated settlements and the audited amounts are reflected as adjustments to
net revenues in the period the final determination is made. See Note on
Reimbursement from Third-Party Contractual Agencies.
CHARITY CARE
The Company provides care to patients who meet certain criteria under
its charity care policy without charge or at amounts less than its established
rates. Because the Company does not pursue collection of amounts determined to
qualify as charity care, they are not reported as revenue.
INTANGIBLE ASSETS AND DEFERRED COSTS
Cost in excess of net asset value of purchased businesses includes
amounts related to certain inpatient psychiatric facilities acquired by the
Company from 1983 to 1990 and, at June 30, 1994, amounts related to managed
mental healthcare businesses acquired by RMCI. Cost in excess of net asset
value of purchased businesses related to the psychiatric facilities is being
amortized on a straight-line basis over 40 years whereas amounts related to RMCI
were being amortized on a straight-line basis over periods ranging from 15 to 25
years. Other intangible assets at June 30, 1994 related to RMCI and included
the value assigned to acquired clinical protocols, established provider networks
and existing contracts. These amounts were being amortized on a straight-line
basis over periods generally ranging from 10 to 20 years. In connection with the
spin-off of RMCI in April 1995, the intangible assets of RMCI ceased being
assets of the Company.
The carrying value of cost in excess of net asset value of purchased
businesses is reviewed by Company management if the facts and circumstances
suggest that it may be impaired. If this review indicates that these costs will
not be recoverable, as determined based on the undiscounted cash flows of the
entity over the remaining amortization period, the Company's carrying value of
these costs is reduced by the estimated shortfall of cash flows. In connection
with the Company's decision to adopt early the provisions of Financial
Accounting Standards Board (FASB) Statement Number 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of",
the Company determined that cost in excess of net asset value of purchased
businesses associated with three inpatient psychiatric facilities was impaired.
See Impairment of Assets below.
F-10
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Preopening costs, principally salaries and other costs incurred prior
to opening a new facility, program or business, are deferred and amortized on a
straight-line basis over two years.
Loan costs are deferred and amortized ratably over the life of the
loan and are included in interest and other financing charges. When a loan or a
portion thereof is prepaid, a proportionate amount of deferred loan costs
associated with the borrowing is written off and reported as an extraordinary
loss from early extinguishment of debt in the Company's statement of operations.
Accumulated amortization of the Company's intangible assets and
deferred costs as of June 30, 1995 and 1994 was $7,544,000 and $7,094,000,
respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, except for assets
considered to be impaired pursuant to FASB Statement Number 121, which are
stated at fair value of the assets as of the date the assets are determined to
be impaired. Upon the sale or retirement of property and equipment, the cost
and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in operations.
Depreciation is computed substantially on the straight-line method for
financial reporting purposes and on accelerated methods for income tax purposes.
The general range of estimated useful lives for financial reporting purposes is
twenty to forty years for buildings and five to twenty years for equipment.
PROFESSIONAL AND GENERAL LIABILITY INSURANCE
The Company maintains a self-insurance program for its hospital
professional liability insurance and commercial and general liability insurance.
The Company and its facilities are insured for professional and general
liability in the aggregate amount of $25 million with a self-insured retention
of $500,000 per claim. The Company records the liability for uninsured
professional and general liability losses related to asserted and unasserted
claims arising from reported and unreported incidents based on independent
valuations which consider claim development factors, the specific nature of the
facts and circumstances giving rise to each reported incident and the Company's
history with respect to similar claims. The development factors are based on a
blending of the Company's actual experience with industry standards.
F-11
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company
adopted FASB Statement Number 109 as of July 1, 1992 (See note on Income Taxes.)
LOSS ON SALES AND CLOSURE OF FACILITIES
The Company estimates and records losses on the sales of facilities in
the period in which the Company and buyer reach agreement and commit to the sale
transaction. The Company estimates and records losses on the closure of
facilities and clinics in the period in which the decision is made to close such
operations.
During the third quarter of fiscal 1995, the Company recorded a loss
in connection with the sale and leaseback of two inpatient facilities, totalling
$3,600,000, and a loss in connection with the sale of real estate, totalling
$400,000. In addition, the Company closed certain outpatient operations during
fiscal 1995, incurred additional losses in 1995 on outpatient operations closed
in fiscal 1994, and closed one of its inpatient facilities on June 30, 1995.
Losses recorded as a result of these closures totalled approximately $1,500,000.
During the fourth quarter of fiscal 1994, the Company terminated its
plan to develop additional outpatient treatment centers and closed or made the
decision to close certain of these centers already in operation. The losses
associated with these actions, which totalled approximately $1.3 million, were
offset by a $500,000 gain recognized on the sale of the Company's Atlantic
Shores Hospital facility.
During fiscal 1993, the Company terminated operations in a leased
facility in California, leased its Harbor Oaks Hospital facility in Fort Walton
Beach, Florida to a third party, and agreed to sell its Cumberland Hospital
facility in Fayetteville, North Carolina. As a result of these transactions,
the Company recorded a charge against earnings of $7,524,000 in fiscal 1993.
IMPAIRMENT OF ASSETS
In the fourth quarter of fiscal 1995, the Company elected to adopt
early the provisions of FASB Statement Number 121. Statement 121 requires that
a new cost basis be established for impaired assets based on the fair value of
the assets as of the date the assets are determined to be impaired, and that
previously recorded accumulated depreciation related to the impaired assets be
eliminated. Based on a comparison of the recorded values of the long-lived
assets (defined as land, buildings, fixed equipment and related cost in excess
of net asset value of purchased businesses) of four of the Company's facilities
which had experienced recent declines in operating performance, against the
expected future cash flows to be generated by
F-12
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
these assets, and after applying the principles of measurement contained in the
Statement, the Company recorded an asset impairment charge of $20.3 million
($11.4 million, after an income tax benefit of $8.9 million, or $1.47 per
share). In accordance with the Statement, these facilities' carrying amount of
cost in excess of net asset value of purchased businesses, totalling $3.8
million, was eliminated prior to recording an impairment to the carrying amount
of property and equipment, which totalled $16.5 million. The fair value of the
impaired assets was estimated using discounted future cash flows expected from
the assets.
The Company is a minority stockholder in an enterprise which operates
primary care medical clinics on United States' military bases in Germany. Based
on a reassessment of the future expected cash flows to be realized by the
Company from this business in June 1995, the Company determined its investment
in this venture was impaired and recorded an asset impairment charge of $1.5
million.
RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of fiscal 1993, the Company recorded a noncash,
non-recurring charge of $1,367,000, of which approximately $800,000 is
attributable to the Company's decision to terminate certain development projects
primarily related to inpatient facilities. In addition, upon consummation of
the Company's new credit agreement in the fourth quarter of fiscal 1993, the
Company determined that approximately $500,000 of deferred loan costs should be
written off.
EARNINGS PER SHARE
Primary earnings per share are calculated by dividing income before
extraordinary items and cumulative effect of accounting change and net income by
the weighted average number of common and dilutive common equivalent shares
outstanding during each period. The Company's common stock equivalents include
Class A Convertible Preferred Stock (which was cancelled by the holder in June
1995), Class B Convertible Preferred Stock, Series C and stock options and
warrants to purchase Common Stock. Fully diluted earnings per share are
calculated as if all conversions and exercises had occurred at the beginning of
the year.
MINORITY INTERESTS
The equity of minority partners in Company subsidiaries is reported on
the balance sheet as minority interests. Minority interests reflect changes for
the respective share of income of the subsidiaries attributable to the minority
partners, the effect of which is also reflected in the results of operations of
the Company, and for distributions made to the minority partners.
F-13
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid interest-bearing
investments consisting primarily of certificates of deposit, commercial paper,
money market mutual funds and demand revenue bonds. The carrying values of
these cash equivalents approximate fair value.
RESTRICTED CASH
Restricted cash at June 30, 1994 represents the remaining proceeds
from the sale of Cumberland Hospital in August 1993. These monies were held in
trust and used to fund the September 30, 1994 principal payment and partially
fund the March 31, 1995 principal payment due on the senior secured and
subordinated secured notes. The carrying value of restricted cash approximated
fair value at June 30, 1994.
CASH HELD IN TRUST
Cash held in trust is revocable by the Company under certain
circumstances and includes cash and short-term investments for payment of self-
insurance losses. The carrying value of cash held in trust approximates fair
value.
LONG-TERM DEBT
- --------------
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
JUNE 30
------------------------
1995 1994
----------- -----------
<S> <C> <C>
11.6% Senior secured notes due
March 31, 2000.......................... $34,169,000 $48,025,000
Variable rate revenue bonds through 2015.. 20,200,000 21,000,000
15.6% Subordinated secured notes due
March 31, 2000.......................... 2,308,000 2,769,000
Acquisition debt on RMCI subsidiaries:
7% debentures........................... --- 2,292,000
8.25% note payable...................... --- 1,000,000
Capital lease obligation.................. 919,000 1,318,000
Working capital facility.................. 1,500,000 ---
Other notes payable....................... 303,000 763,000
----------- -----------
59,399,000 77,167,000
Less amounts due within one year.......... 3,831,000 9,460,000
----------- -----------
$55,568,000 $67,707,000
=========== ===========
</TABLE>
The aggregate scheduled maturities of long-term debt during the five
years subsequent to June 30, 1995 are as follows: 1996 -- $3,831,000; 1997 --
$8,037,000; 1998 -- $8,324,000; 1999 -- $10,443,000; and 2000 -- $12,562,000.
F-14
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The Company has pledged as collateral substantially all of its real
property.
On May 21, 1993, the Company finalized a credit facility (the "1993
Credit Facility") for letters of credit (to support the variable rate demand
revenue bonds) and working capital with a group of banks. The 1993 Credit
Facility included approximately $27.5 million in letters of credit and $4.0
million in a working capital facility. Due to principal payments and the
redemption of the variable rate revenue bonds associated with the Atlantic
Shores Hospital facility, the letters of credit outstanding at June 30, 1995
totalled $21.1 million. In addition, the working capital facility, which was
reduced to a $2.0 million facility in April 1995, had amounts drawn of $1.5
million and zero at June 30, 1995 and 1994, respectively. Amounts outstanding
under the working capital facility bear interest at a variable rate which, at
June 30, 1995, was 8.6%.
The 1993 Credit Facility expires in May 1996. However, in August
1995, the Company and group of banks agreed in principle to a nine-month
extension of the 1993 Credit Facility. In connection with this extension,
certain financial covenants were modified and the Company agreed to reduce the
banks' exposure by $2.8 million on or before December 31, 1995 and an additional
$3.0 million on or before July 1, 1996.
On April 30, 1990, the Company entered into credit facilities (the
"1990 Credit Facilities") with a group of insurance companies and banks. The
1990 Credit Facilities included $56.5 million in Senior Secured Notes and $3.0
million in Subordinated Secured Notes. On May 1, 1995, the Company utilized a
portion of the proceeds from the sale/leaseback of two facilities and prepaid
$7.5 million of principal due on the Senior Secured Notes as follows:
$3,531,250 due on September 30, 1995, $3,531,250 due on March 31, 1996 and
$437,500 due on September 30, 1996. In connection with this prepayment, the
Company wrote down a proportionate amount of unamortized loan costs related to
the Senior Secured Notes totalling $229,000 and incurred a yield maintenance
charge from the holders of the Senior Secured Notes, totalling $234,000. These
amounts, net of an applicable income tax benefit of $206,000, are reported as a
loss from early extinguishment of debt in the 1995 statement of operations. The
Senior Secured Notes bear interest at 11.6% and are due in semi-annual
installments that began on March 31, 1993 and, after the May 1, 1995 prepayment,
resume semi-annual installments on September 30, 1996 through March 31, 2000.
The Subordinated Secured Notes bear interest at 15.6% and are due in semi-annual
installments that began on March 31, 1994 and end on March 31, 2000.
Under the 1993 and 1990 Credit Facilities, the Company is required to
meet certain covenants, including: (1) the maintenance of a minimum level of
consolidated tangible net worth; (2) the maintenance of a working capital ratio;
and (3) the maintenance of certain fixed charge coverage and debt service
ratios. At June 30, 1995, the Company was in compliance with the terms of the
1993 and 1990 Credit Facilities.
F-15
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The Company has entered into loan agreements with various state and
local governmental agencies for the purpose of financing or providing
reimbursement for the construction costs of certain of the Company's psychiatric
hospitals or treatment facilities within respective states. Each state
governmental agency funded its loan with proceeds of tax-exempt variable rate
demand revenue bonds in the same amount as its loan. These loans, which have a
term generally of 30 years, have an outstanding balance at June 30, 1995
totalling $20.2 million. The interest rate will be the same as the applicable
revenue bonds, which ranged from 4% to 7.2% at June 30, 1995. The Company is
required to deliver an irrevocable standby letter of credit for each bond in an
amount equal to the total principal payments due under the bond, plus a
stipulated number of days interest. Such letters of credit are provided in the
1993 Credit Facility.
FASB Statement No. 107, "Disclosures about Fair Value of Financial
Instruments", requires disclosure of fair value information about financial
instruments. The fair values of the Company's long-term debt (excluding capital
lease obligations) are estimated using discounted cash flow analyses, based on
the Company's estimated current incremental borrowing rates for similar types of
borrowing arrangements. The carrying amounts of all long-term debt are the same
as the estimated fair values with the exception of the Senior Secured Notes and
the Subordinated Secured Notes. The fair values of these two notes are
estimated to be $35,646,000 and $2,580,000, respectively, at June 30, 1995 and
$51,463,000 and $3,227,000, respectively, at June 30, 1994.
OPERATING LEASES
- ----------------
In April 1995, the Company sold and leased back the land, buildings
and fixed equipment of two of its inpatient facilities. The leases have a
primary term of 15 years (with three successive renewal options of 5 years each)
and require aggregate annual minimum rentals of $1.54 million, payable monthly.
Beginning April 1, 1996, the lease payments are subject to any upward adjustment
(not to exceed 3% annually) in the consumer price index over the preceding
twelve months. Effective April 1995, the Company agreed to lease an 80-bed
facility near Salt Lake City, Utah for four years, with an option to renew for
an additional three years. The lease requires annual base rental payments of
$456,000. In addition, the lease provides for percentage rent payments to the
lessor equal to 2% of the net revenues of the facility, payable quarterly. The
Company leases its Corporate headquarters for a term of five years ending in
April 1999 and various other clinics and outpatient operations over terms
ranging from one to five years. Rent expense related to noncancellable operating
leases amounted to $2,718,000, $2,052,000 and $1,687,000 for the years ended
June 30, 1995, 1994 and 1993, respectively.
Future minimum lease payments required under noncancellable operating
leases as of June 30, 1995 are as follows: 1996--$2,944,000; 1997--$2,689,000;
1998--$2,506,000; 1999--$2,198,000; 2000--$1,715,000; and thereafter--
$15,760,000.
F-16
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
INCOME TAXES
- ------------
During the fourth quarter of fiscal 1993, effective July 1, 1992, the
Company changed its method of accounting for income taxes from the deferred
method to the liability method as required by FASB Statement No. 109,
"Accounting for Income Taxes." As permitted by the Statement, prior years'
financial statements were not restated. The cumulative effect of adopting FASB
Statement No. 109 as of July 1, 1992 was to increase net income in 1993 by
$2,353,000.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
JUNE 30
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
Deferred tax liabilities:
Book basis of fixed assets over tax basis..... $ 4,023,000 $ 9,494,000
Change in tax accounting methods.............. 685,000 1,435,000
Economic performance.......................... 316,000 320,000
Other-net..................................... 248,000 679,000
----------- -----------
Total deferred tax liabilities........... 5,272,000 11,928,000
Deferred tax assets:.............................
Allowance for doubtful accounts............... 609,000 723,000
General and professional liability insurance.. 635,000 584,000
Accrued employee benefits..................... 417,000 312,000
Investment in nonconsolidated subsidiaries.... 1,401,000 460,000
Impairment of investment...................... 568,000 --
Other......................................... 604,000 --
Net operating loss carryovers................. 8,146,000 5,752,000
Alternative minimum tax credit carryovers..... 1,544,000 1,668,000
----------- -----------
Total deferred tax assets................ 13,924,000 9,499,000
Valuation allowance for deferred tax assets... -- (2,503,000)
----------- -----------
Net deferred tax assets.................. 13,924,000 6,996,000
----------- -----------
Net deferred tax assets (liabilities).... $ 8,652,000 $(4,932,000)
=========== ===========
</TABLE>
F-17
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------
1995 1994 1993
------------- --------------- --------------
<S> <C> <C> <C>
Income taxes currently payable:
Federal................................. $ --- $ 810,000 $ 686,000
State................................... 183,000 874,000 169,000
Deferred income taxes:
Federal................................. (12,154,000) (1,196,000) (621,000)
State................................... (1,430,000) 8,000 (75,000)
------------ ----------- ---------
$(13,401,000) $ 496,000 $ 159,000
============ =========== =========
</TABLE>
The provision (benefit) for income taxes is reported in the
consolidated statements of operations as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
Provision (benefit) for income taxes..... $(13,195,000) $ 599,000 $ 159,000
Income tax benefit from loss on early
extinguishment of debt.................. (206,000) (103,000) ---
------------ --------- ---------
$(13,401,000) $ 496,000 $ 159,000
============ ========= =========
</TABLE>
The provision (benefit) for income taxes included in the consolidated
statements of operations differs from the amounts computed by applying the
statutory rate to income (loss) before income taxes, as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------
1995 1994 1993
------------- --------------- --------------
<S> <C> <C> <C>
Income (loss) before income taxes,
extraordinary items and cumulative
effect of accounting change.............. $(30,240,000) $2,076,000 $(2,174,000)
Federal statutory income tax rate......... 34% 34% 34%
------------ ---------- -----------
(10,282,000) 706,000 (739,000)
------------ ---------- -----------
Benefit of net operating loss recognized.. (2,503,000) (921,000) (944,000)
Write-off of cost in excess of net asset
value of purchased businesses............ 956,000 -- 1,357,000
Income tax benefit from loss on early
extinguishment of debt................... (206,000) (103,000) --
State income taxes........................ (1,247,000) 882,000 175,000
Other..................................... (119,000) (68,000) 310,000
------------ ---------- -----------
$(13,401,000) $ 496,000 $ 159,000
============ ========== ===========
</TABLE>
F-18
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The Company's valuation allowance related to deferred tax assets was
reduced from $2,503,000 at June 30, 1994 to zero at June 30, 1995, based on
increases in the underlying values of the properties considered in the Company's
tax planning strategies. At June 30, 1995, net operating loss carryovers of
approximately $21.4 million (of which $17.6 million expires from 2000 to 2003
and $3.8 million expires in 2010) and alternative minimum tax credit carryovers
of approximately $1.5 million, are available to reduce future federal income
taxes, subject to certain annual limitations.
STOCKHOLDERS' EQUITY
- --------------------
The Class A Convertible Preferred Stock, which was not entitled to
receive dividends, did not have any liquidation preference, had no voting rights
and was convertible at any time into Common Stock on a share-for-share basis,
was cancelled by the holder in June 1995 at $5.36 per share. The excess of the
cancellation price over par value was accounted for as a reduction of additional
paid-in capital.
The Certificate of Incorporation of the Company, as amended,
authorizes the issuance of 1,000,000 shares of Class B Convertible Preferred
Stock, $1.00 par value.
In March 1993, the Board of Directors authorized 152,321 shares of
the Class B Convertible Preferred Stock as Class B Preferred Stock, Series C.
These shares are entitled to cumulative dividends at a rate of 5% per annum
payable quarterly in arrears. These shares are entitled to a liquidation
preference of $50.84 per share under certain circumstances. The shares are
convertible into that number of fully paid and nonassessable shares of Common
Stock that results from dividing the conversion price in effect at conversion
into $50.84 and multiplying the quotient obtained by the number of shares of
Series C Preferred Stock being converted. The current conversion price is
$5.084 per share. Each share of Series C Preferred Stock is entitled to ten
(10) votes on all matters put to a vote of the shareholders of the Company and
otherwise has voting rights and powers equal to the voting rights and powers of
the Common Stock.
On June 30, 1993, the Company issued 142,486 shares of Class B
Preferred Stock, Series C in a recapitalization of the interests of Paul J.
Ramsay, the Company's chairman. (See note on Related Party Transactions).
The Board of Directors has adopted a Stockholders Rights Plan, under
which the Company distributed a dividend of one common share purchase right for
each outstanding share of the Company's common stock (calculated as if all
outstanding shares of Class B preferred stock, Series C were converted into
shares of common stock). Each right becomes exercisable upon the occurrence of
certain events for a number of shares of the Company's common stock having a
market price totalling $24 (subject to certain anti-dilution adjustments which
may occur in the future). The rights currently are not exercisable and will be
exercisable only if a new person acquires 20% or more of the Company's common
stock or announces a tender offer resulting in ownership of 20% or more of the
Company's
F-19
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
common stock. The rights, which expire on August 14, 2005, are redeemable in
whole or in part at the Company's option at any time before a 20% or greater
position has been acquired, for a price of $.01 per right.
The Company's credit documents governing its credit facilities include
provisions which prohibit the payment of dividends unless the sum of (i) all
dividends, redemptions and all other distributions in respect of its capital
stock and (ii) all restricted investments (as defined) during the applicable
fiscal year would not exceed an amount equal to 50% of the consolidated net
income of the Company for the immediately preceding fiscal year and provided
that, at the time of such dividend and after giving effect thereto, certain
specified financial ratio covenants would not be violated and no other default
or event of default would occur. Notwithstanding the foregoing restrictions,
those provisions expressly permit the payment of regular fixed dividends from
time to time on the Company's issued and outstanding Class B Convertible
Preferred Stock, Series C, provided that such dividends may not exceed $387,200
in each 12-month period and provided no event of default exists or would occur
as a result of such payment.
OPTIONS AND WARRANTS
- --------------------
The Company's stock option plans provide incentive options to various
key employees and non-employee directors to purchase shares of Common Stock at
no less than the fair market value of the stock on the date of grant. Options
granted become exercisable in varying increments including (a) 100% one year
after the date of grant, (b) 50% each year beginning one year after the date of
grant and (c) 33% each year beginning on the date of grant.
Options issued to employees and directors generally expire the earlier
of 10 years after the date of grant or 60 days after the employee's termination
date or the director's resignation date. The number of options granted as well
as the option prices are also subject to antidilution adjustments such as that
which occurred in fiscal 1995 in connection with the Company's spin-off of RMCI.
F-20
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
At June 30, 1995, there were no shares available for grant under the
1990 Stock Option Plan and 39,321 and 123,795 shares available for grant under
the 1991 and 1993 Stock Option Plans, respectively. The table below summarizes
the activity in the plans in fiscal years 1993, 1994 and 1995.
<TABLE>
<CAPTION>
1990 PLAN 1991 PLAN 1993 PLAN
----------- ----------- -----------
PRICE PRICE PRICE
RANGE RANGE RANGE
NUMBER PER NUMBER PER NUMBER PER
OF OPTIONS SHARE OF OPTIONS SHARE OF OPTIONS SHARE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, June 30, 1992 369,997 $ 5.00 819,838 $ 5.00 -- --
Granted -- -- 377,003 $5.31-$6.25 -- --
Canceled (37,996) $ 5.00 (135,340) $ 5.00 -- --
------- --------- --------
Outstanding, June 30, 1993 332,001 $ 5.00 1,061,501 $5.00-$6.25 -- --
Granted -- -- 173,000 $6.88-$7.88 271,500 $6.88-$7.88
Canceled -- -- (33,991) $5.00-$7.88 (15,505) $ 7.88
Exercised (38,332) $ 5.00 (74,502) $5.00-$5.31 -- --
------- --------- --------
Outstanding, June 30, 1994 293,669 $ 5.00 1,126,008 $5.00-$7.88 255,995 $6.88-$7.88
Granted -- -- -- -- 65,000 $3.75-$6.63
Canceled (52,013) $ 4.01 (66,885) $4.25-$7.88 (101,037) $5.51-$7.88
Exercised (31,999) $ 5.00 (42,167) $5.00-$5.31 -- --
Effect of Distribution
of Subsidiary 64,972 266,924 46,930
------- --------- --------
Outstanding, June 30, 1995,
after certain antidilution
adjustments 274,629 $4.01-$5.00 1,283,880 $3.75-$6.31 266,888 $3.75-$6.31
======= ========= ========
Exercisable, June 30, 1995 274,629 -- 909,390 -- 210,669 --
======= ========= ========
Exercisable, June 30, 1994 293,669 -- 982,669 -- 9,999
======= ========= ========
</TABLE>
In connection with a 1988 refinancing, the Company issued to Citibank,
N.A. warrants to purchase 166,667 shares of the Company's Common Stock at $10.50
per share. The warrants contained an antidilution provision requiring
adjustment to the purchase price and the number of shares upon occurrence of
certain transactions. The issuance of the Class B Preferred Stock, Series C and
the granting and repricing of stock options resulted in an adjustment in the
number of warrants and purchase price. These warrants were not exercised and,
on April 1, 1995, the warrants expired. As part of the 1990 refinancing, the
Company issued warrants to Aetna Life Insurance Company and Monumental Life
Insurance Company to purchase an aggregate of 113,301 shares of the Company's
Common Stock at $9.61 per share. As a result of antidilution provision
adjustments, the purchase price is currently $7.20 per share and warrants for a
total of 124,668 shares are still outstanding. These warrants are exercisable
on or before March 31, 2000.
F-21
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
REIMBURSEMENT FROM THIRD-PARTY CONTRACTUAL AGENCIES
- ---------------------------------------------------
The Company records amounts due to or from third-party contractual
agencies based on its best estimates of amounts to be ultimately received or
paid under cost reports filed with the appropriate intermediaries. Final
determination of amounts earned under contractual reimbursement programs is
subject to review and audit by the appropriate intermediaries. Differences
between amounts recorded as estimated settlements and the audited amounts are
reflected as adjustments to net revenues in the period the final determination
is made. During the years ended June 30, 1995, 1994 and 1993, the Company
recorded contractual reimbursement benefits of approximately $1,000,000,
$1,400,000 and $2,300,000, respectively, for the combined effects of
intermediary audits and the routine evaluation of prior year estimated
settlements. Management believes that adequate provision has been made for any
adjustments that may result from future intermediary reviews or audits.
LITIGATION
- ----------
The Company is subject to claims and suits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
such pending legal proceedings will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
SAVINGS PLAN
- ------------
The Company has a 401(k) tax deferred savings plan, administered by an
independent trustee, covering substantially all employees over age twenty-one
meeting a one-year minimum service requirement. The plan was adopted for the
purpose of supplementing employees' retirement, death and disability benefits.
The Company may, at its option, contribute to the plan through an Employer
Matching Account, but is under no obligation to do so. An employee becomes
vested in his Employer Matching Account over a four-year period.
The Company contributed $0, $160,000, and $175,000 to the plan during
the years ended June 30, 1995, 1994 and 1993, respectively.
RELATED PARTY TRANSACTIONS
- --------------------------
On June 30, 1993, the interests in the Company controlled by Paul J.
Ramsay, the Company's chairman, were recapitalized. The Company issued 142,486
shares of Class B Preferred Stock, Series C in exchange for all outstanding
shares of the Company's Class B Convertible Preferred Stock, Series 1987, the
Company's $2 million 16.1% subordinated promissory note to affiliate and
$500,000 in cash. The early extinguishment of the $2 million 16.1% subordinated
promissory note resulted in an extraordinary loss of $1,580,000 in 1993.
The Company expensed $716,000, $698,000, and $678,000 in management
fees to a corporate affiliate of Paul J. Ramsay during the years ended June 30,
1995, 1994 and 1993, respectively.
F-22
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
There were no significant amounts due to or from related parties at
June 30, 1994. RMCI, which was distributed to the Company's stockholders in the
form of a dividend in April 1995, is governed by a Board of Directors which is
substantially the same as the Company's Board of Directors. At June 30, 1995,
total net cash advances made by the Company to or on behalf of RMCI, including
for purposes of partially funding acquisitions and for working capital and other
corporate purposes, totalled $7.4 million. Of this amount, $6 million is
represented by an unsecured, interest-bearing (8%), subordinated promissory note
due from RMCI and issued on October 25, 1994. Interest on the subordinated
promissory note is payable quarterly commencing June 30, 1995 and principal is
payable over a four-year period in equal quarterly installments commencing
September 30, 1996. The remaining balance owed by RMCI to RHCI, $1.4 million,
is governed by a Distribution Agreement which provides that $600,000 is payable
by RMCI on or before October 21, 1995 (or on such other terms and conditions as
mutually agreed to by RMCI and RHCI), with the balance due and payable on or
before December 31, 1996, together with interest at 7% per annum, beginning
October 21, 1995. As of June 30, 1995, RMCI had paid the Company $275,000 of
the amount due on October 21, 1995.
SUPPLEMENTAL CASH FLOW INFORMATION
- ----------------------------------
The Company's non-cash investing and financing activities and cash
payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Distribution of subsidiary to
stockholders.................... $ 904,000 $ -- $ --
Receivable from subsidiary
distributed to stockholders..... 7,600,000 -- --
Issuance of debt in connection
with acquisitions............... -- 3,500,000 --
Fixed assets acquired under
capital leases.................. -- -- 1,857,000
Issuance of Class B preferred
stock, Series C................. -- -- 6,080,000
Cash paid during the year for:
Interest (net of amount
capitalized).................... $6,518,000 $8,064,000 $8,788,000
Income taxes..................... 1,231,000 398,000 1,780,000
</TABLE>
F-23
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
QUARTERLY RESULTS OF OPERATIONS AND OTHER SUPPLEMENTAL INFORMATION (UNAUDITED)
Following is a summary of the Company's quarterly results of
operations for the years ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30(2)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
1995
----
Net revenues.................................. $35,823,000 $35,634,000 $33,547,000 $ 31,414,000
Income (loss) before income taxes and
extraordinary items......................... 939,000 613,000 (5,315,000) (26,477,000)
Income (loss) before extraordinary items...... 588,000 437,000 (3,960,000) (14,110,000)
Net income (loss)............................. 588,000 437,000 (4,321,000) (14,006,000)
Income (loss) per common and dilutive common
equivalent share(1)
Primary:
Before extraordinary items................ $ 0.06 $ 0.05 $ (0.52) $ (1.83)
Extraordinary items....................... -- -- (0.05) 0.01
----------- ----------- ----------- ------------
Income (loss) per common share............ $ 0.06 $ 0.05 $ (0.57) $ (1.82)
=========== =========== =========== ============
Fully diluted:
Before extraordinary items................ $ 0.06 $ 0.05 $ (0.52) $ (1.83)
Extraordinary items....................... -- -- (0.05) 0.01
----------- ----------- ----------- ------------
Income (loss) per common share............ $ 0.06 $ 0.05 $ (0.57) $ (1.82)
=========== =========== =========== ============
1994
----
Net revenues.................................. $31,983,000 $32,561,000 $36,179,000 $ 36,279,000
Income (loss) before income taxes and
extraordinary items......................... 844,000 563,000 1,163,000 (494,000)
Income (loss) before extraordinary items...... 608,000 475,000 822,000 (428,000)
Net income (loss)............................. 608,000 475,000 667,000 (428,000)
Income (loss) per common and dilutive common
equivalent share(1)
Primary:
Before extraordinary items................ $ 0.06 $ 0.05 $ 0.09 $ (0.04)
Extraordinary items....................... -- -- (0.02) --
----------- ----------- ----------- ------------
Income (loss) per common share............ $ 0.06 $ 0.05 $ 0.07 $ (0.04)
=========== =========== =========== ============
Fully diluted:
Before extraordinary items................ $ 0.06 $ 0.05 $ 0.09 $ (0.04)
Extraordinary items....................... -- -- (0.02) --
----------- ----------- ----------- ------------
Income (loss) per common share............ $ 0.06 $ 0.05 $ 0.07 $ (0.04)
=========== =========== =========== ============
</TABLE>
(1) The quarterly earnings per share amounts may not equal the annual amounts
due to changes in the average common and dilutive common equivalent shares
outstanding during the year.
(2) As further described in the note on Impairment of Assets, in the fourth
quarter of fiscal 1995, the Company adopted FASB Statement No. 121 and recorded
an asset impairment charge of $20.3 million ($11.4 million after income tax
benefit, or $1.47 per share).
F-24
<PAGE>
FINANCIAL STATEMENT SCHEDULE
<PAGE>
SCHEDULE VIII
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COST AND OTHER ACCOUNTS DEDUCTIONS END OF
OF PERIOD EXPENSES --DESCRIBE --DESCRIBE PERIOD
------------- ---------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995:
Allowance for doubtful
accounts............... $3,925,000 $5,086,000 $ --- $5,125,000(1) $3,886,000
========== ========== ========== ========== ==========
Year ended June 30, 1994:
Allowance for doubtful
accounts............... $4,955,000 $5,846,000 $ --- $6,876,000(1) $3,925,000
========== ========== ========== ========== ==========
Year ended June 30, 1993:
Allowance for doubtful
accounts............... $4,459,000 $8,148,000 $ --- $7,652,000(1) $4,955,000
========== ========== ========== ========== ==========
</TABLE>
_______________
(1) Write-offs of uncollectible patient accounts receivable.
S-1
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
2. Agreement and Plan of Merger dated as of June 27, 1991
among the Company, New Ramcorp Inc. and Ramsay Corporation
(incorporated by reference to Exhibit 2 to the Company's
Registration Statement on Form S-2, Registration No. 33-40762). --
2.1 Certificate of Merger of New Ramcorp Inc. into the Company
filed on June 27, 1991 (incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement on
Form S-2, Registration No. 33-40762)........................... --
2.2 Recapitalization Agreement dated as of June 30, 1993 by and
among the Company, Ramsay Holdings HSA Limited and Paul Ramsay
Holdings Pty. Limited (incorporated by reference to Exhibit 2.2
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1994)................................................. --
2.3 Asset Purchase Agreement dated as of August 25, 1993 among the
Company and Cumberland County Hospital System, Inc. and
Cumberland Mental Health, Inc. Pursuant to Reg. S-K,
Item 601(b)(2), the Company agrees to furnish a copy of the
Schedules to such Agreement to the Commission upon request
(incorporated by reference to Exhibit 2.3 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994)... --
2.4 Asset Purchase Agreement dated as of October 22, 1992 among
Louisiana Psychiatric Company, Inc., HCA Psychiatric Company
and Ramsay Louisiana, Inc. Pursuant to Reg. S-K, Item 601(b)(2),
the Company agrees to furnish a copy of the Disclosure Schedule
to such Agreement to the Commission upon request (incorporated
by reference to Exhibit 2.4 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994).................... --
2.5 Agreement dated as of October 12, 1993 by and among Florida
Psychiatric Management, Inc., the stockholders of Florida
Psychiatric Management, Inc., Ramsay Health Care, Inc. and
Ramsay Managed Mental Health Services, Inc..................... --
2.6 Asset Purchase Agreement dated as of January 14, 1994 between
Halifax Hospital Medical Center and Atlantic Treatment Center,
Inc. Pursuant to Reg. S-K, Item 601(b)(2), the Company agrees
to furnish a copy of the Schedules and Exhibits to such Agreement
to the Commission upon request (incorporated by reference to
Exhibit 2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1993)........................... --
2.7 Agreement of sale and purchase dated April 12, 1995 by and
between Mesa Psychiatric Hospital, Inc. and Capstone Capital
Corporation. Pursuant to Reg. S-K, Item 601(b)(2), the Company
agrees to furnish a copy of the Schedules and Exhibits to such
Agreement to the Commission upon request.......................
2.8 Agreement of sale and purchase dated April 12, 1995 by and
between RHCI San Antonio, Inc. and Capstone Capital Corporation.
Pursuant to Reg. S-K, Item 601(b)(2), the Company agrees to
furnish a copy of the Schedules and Exhibits to such Agreement
to the Commission upon request.................................
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1990)................................................. --
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company filed on April 17, 1991
(incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-2, Registration No. 33-40762). --
3.3 Certificate of Correction to Certificate of Amendment of
Restated Certificate of Incorporation of the Company filed on
April 18, 1991 (incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form Registration
No. 33-40762).................................................. --
3.4 By-Laws of the Company, as amended to date (incorporated by
reference to Exhibit 3.4 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994).................... --
3.5 Certificate of Designation of Preferred Stock of the Company
filed on June 27, 1991 (incorporated by reference to Exhibit
3.5 to the Company's Registration Statement on Form S-2,
Registration No. 33-40762)..................................... --
3.6 Certificate of Designation of Preferred Stock of the Company
filed on July 9, 1991 (incorporated by reference to Exhibit 3.6
to the Company's Registration Statement on Form S-2, Registration
No. 33-40762).................................................. --
3.7 Certificate of Designation of Preferred Stock of the Company
filed on June 29, 1993 (incorporated by reference to Exhibit 3.7
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1994)................................................. --
4.1 Trust Indenture dated as of March 31, 1990, between the Company,
Bountiful Psychiatric Hospital, Inc., Cumberland Mental Health,
Inc., East Carolina Psychiatric Services Corporation, Havenwyck
Hospital, Inc., Mesa Psychiatric Hospital, Inc., Psychiatric
Institute of West Virginia, Inc., and The Citizens and Southern
National Bank and Susan L. Adams (incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1990)...................................... --
4.2 First Supplemental Trust Indenture dated as of June 15, 1991
between the Company, Bountiful Psychiatric Hospital, Inc.,
Cumberland Mental Health, Inc., East Carolina Psychiatric
Services Corporation, Havenwyck Hospital, Inc., Mesa Psychiatric
Hospital, Inc. and Psychiatric Hospital of West Virginia, Inc.
and The Citizens and Southern National Bank, a national banking
association, and an individual trustee, as Trustees (incorporated
by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-2, Registration No.33-40762)............... --
4.3 Second Supplemental Trust indenture dated as of May 15, 1993
between the Company, Bountiful Psychiatric Hospital, Inc.,
Cumberland Mental Health, Inc., East Carolina Psychiatric Services
Corporation, Havenwyck Hospital, Inc., Mesa Psychiatric Hospital,
Inc. and Psychiatric Hospital of West Virginia, Inc. and
NationsBank of Georgia, National Association and Susan L. Adams
(incorporated by reference to Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994).......... --
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
4.4 Revolving Credit Note of the Company dated May 21, 1993 in the
principal amount of $4,000,000 payable to Societe Generale,
New York Branch (incorporated by reference to Exhibit 4.4 to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1994)............................................... --
4.5 Subsidiary Borrower Note of Atlantic Treatment Center, Inc.
dated May 21, 1993 in the principal amount of $4,607,945
payable to the order of Societe Generale, New York Branch
(incorporated by reference to Exhibit 4.5 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994). --
4.6 Subsidiary Borrower Note of Carolina Treatment Center, Inc.
dated May 21, 1993 in the principal amount of $5,030,000
payable to the order of Societe Generale, New York Branch
(substantially identical to Exhibit 4.5)..................... --
4.7 Subsidiary Borrower Note of Greenbrier Hospital, Inc. dated
May 21, 1993 in the principal amount of $5,973,125 payable to
the order of Societe Generale, New York Branch (substantially
identical to Exhibit 4.5).................................... --
4.8 Subsidiary Borrower Note of Gulf Coast Treatment Center, Inc.
dated May 21, 1993 in the principal amount of $4,392,500
payable to the order of Societe Generale, New York Branch
(substantially identical to Exhibit 4.5)..................... --
4.9 Subsidiary Borrower Note of Houma Psychiatric Hospital, Inc.
dated May 21, 1993 in the principal amount of $3,979,589
payable to the order of Societe Generale, New York Branch
(substantially identical to Exhibit 4.5)..................... --
4.10 Subsidiary Borrower Note of HSA of Oklahoma, Inc. dated
May 21, 1993 in the principal amount of $3,445,562 payable to
the order of Societe Generale, New York Branch (substantially
identical to Exhibit 4.5).................................... --
10.1 Asset Purchase Agreement, effective April 27, 1990, among the
Company, The Haven Hospital, Inc., The Ramsay Hospital
Corporation of Texas, and Ramsay Hospitals (Texas) Limited
(incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1990). --
10.2 Note Purchase Agreement dated as of March 31, 1990, among the
Company, Bountiful Psychiatric Hospital, Inc., Cumberland
Mental Health, Inc., East Carolina Psychiatric Services
Corporation, Havenwyck Hospital, Inc., Mesa Psychiatric Hospital,
Inc., Psychiatric Institute of West Virginia, Inc., and Aetna
Life Insurance Company regarding the purchase by Aetna Life
Insurance Company of $26,000,000 principal amount of 11.6%
Senior Secured $1,000,000 principal amount of 15.6% Subordinated
Secured Notes, and Warrants to Purchase Common Stock of the
Company (incorporated by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K the year ended
June 30, 1990)............................................... --
10.3 Note Purchase Agreement pursuant to which Monumental Life
Insurance Company purchased $15,500,000 principal amount of
11.6% Senior Secured Notes, $2,000,000 principal amount of
15.6% Subordinated Secured Notes, and Warrants to Purchase
Common Stock of the Company (substantially identical to
Exhibit 10.2)................................................ --
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
10.4 Note Purchase Agreement pursuant to which Connecticut Mutual
Life Insurance Company purchased $15,000,000 principal amount
of 11.6% Senior Secured Notes (substantially identical to
Exhibit 10.2)................................................ --
10.5 Pledge and Security Agreement dated as of March 31, 1990,
between the Company and The Citizens and Southern National
Bank (incorporated by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1990)............................................... --
10.6 Pledge and Security Agreement between Michigan Psychiatric
Services, Inc. and The Citizens and Southern National Bank
(substantially identical to Exhibit 10.5).................... --
10.7 Pledge and Security Agreement between Americare of Galax, Inc.
and The Citizens and Southern National Bank (substantially
identical to Exhibit 10.5)................................... --
10.8 Pledge and Security Agreement between Bountiful Psychiatric
Hospital, Inc. and The Citizens and Southern National Bank
(substantially identical to Exhibit 10.5).................... --
10.9 Deed of Trust, Security Agreement, and Financing Statement
dated as of March 31, 1990 from Bountiful Psychiatric Hospital,
Inc. to Merrill Title Company for the benefit of The Citizens
and Southern National Bank and Susan L. Adams covering certain
property in Woods Cross, Utah (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1990)................................ --
10.10 Deed of Trust and Security Agreement from Cumberland Mental
Health, Inc. to First American Title Insurance Company for the
benefit of The Citizens and Southern National Bank and Susan L.
Adams covering certain property in Fayetteville, North Carolina
(substantially identical to Exhibit 10.9).................... --
10.11 Deed of Trust and Security Agreement from East Carolina
Psychiatric Services Corporation to First American Title
Insurance Company for the benefit of The Citizens and Southern
National Bank and Susan L. Adams covering certain property in
Jacksonville, North Carolina (substantially identical to
Exhibit 10.9)................................................ --
10.12 Mortgage and Security Agreement dated as of March 31, 1990 from
Havenwyck Hospital, Inc. to The Citizens and Southern National
Bank and Susan L. Adams covering certain property in Auburn
Hills, Michigan (incorporated by reference to Exhibit 10.12
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1990)............................................... --
10.13 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement with Financing Statement dated as of March 31, 1990
from Mesa Psychiatric Hospital, Inc. to Transamerica Title
Insurance Company for the benefit of The Citizens and Southern
National Bank and Susan L. Adams covering certain property in
Mesa, Arizona (incorporated by reference to Exhibit 10.13 to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1990)............................................... --
10.14 Leasehold Deed of Trust and Security Agreement from Psychiatric
Institute of West Virginia, Inc. to J. Nicholas Barth, Esq.,
for the benefit of The Citizens and Southern National Bank and
Susan L. Adams covering certain property in Morgantown, West
Virginia (substantially identical to Exhibit 10.13).......... --
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
10.15 Obligor Subrogation and Contribution Agreement dated as of
April 30, 1990 among The Citizens and Southern National Bank,
Susan L. Adams, the Company, Bountiful Psychiatric Hospital,
Inc., Cumberland Mental Health, Inc., East Carolina Psychiatric
Services Corporation, Havenwyck Hospital, Inc., Mesa
Psychiatric Hospital, Inc., and Psychiatric Institute of West
Virginia, Inc. (incorporated by reference to Exhibit 10.15
to the Company's Annual Report on Form 10-K for the year ended
June 30,1990)................................................ --
10.16 Credit Agreement dated as of May 15, 1993 among the Company
and certain of its subsidiaries named therein, Societe Generale,
New York Branch, First Union National Bank of North Carolina
and Hibernia National Bank, as lenders, and Societe Generale,
as issuing bank and agent (incorporated by reference to Exhibit
10.16 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994)......................................... --
10.17 Security Agreement dated as of May 15, 1993 by Atlantic
Treatment Center, Inc. in favor of Societe Generale, as agent
for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, and covering certain
property in Daytona Beach, Florida (incorporated by reference to
Exhibit 10.17 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1994)................................ --
10.18 Security Agreement dated as of May 15, 1993 by Carolina
Treatment Center, Inc. in favor of Societe Generale, as agent
for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17).................................. --
10.19 Security Agreement dated as of May 15, 1993 by Great Plains
Hospital, Inc. in favor of Societe Generale, as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above (substantially identical to
Exhibit 10.17)............................................... --
10.20 Security Agreement dated as of May 15, 1993 by Greenbrier
Hospital, Inc. in favor of Societe Generale, as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above (substantially identical to
Exhibit 10.17)............................................... --
10.21 Security Agreement dated as of May 15, 1993 by Gulf Coast
Treatment Center, Inc. in favor of Societe Generale, as agent
for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17).................................. --
10.22 Security Agreement dated as of May 15, 1993 by Houma
Psychiatric Hospital, Inc. in favor of Societe Generale, as
agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17).................................. --
10.23 Security Agreement dated as of May 15, 1993 by HSA of Oklahoma,
Inc. in favor of Societe Generale, as agent for the lenders
which are parties to that certain Credit Agreement described in
Exhibit 10.16 above (substantially identical to Exhibit 10.17) --
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
10.24 Security Agreement dated as of May 15, 1993 by The Haven
Hospital, Inc. in favor of Societe Generale, as agent for
the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17).................................. --
10.25 Security Agreement dated as of May 15, 1993 by the Company in
favor of Societe Generale, as agent for the lenders which are
parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.17)....... --
10.26 Accounts Receivable Security Agreement dated as of May 15, 1993
by Americare of Galax, Inc. in favor of Societe Generale, as
agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (incorporated by
reference to Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994).................. --
10.27 Accounts Receivable Security Agreement dated as May 15, 1993
by Bountiful Psychiatric Hospital, Inc. in favor of Societe
Generale, as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.26)................... --
10.28 Accounts Receivable Security Agreement dated as of May 15,
1993 by Cumberland Mental Health, Inc. in favor of Societe
Generale, New York Branch, as agent for the lenders which are
parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.26)....... --
10.29 Accounts Receivable Security Agreement dated as of May 15,
1993 by East Carolina Psychiatric Services Corporation in
favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above (substantially identical to
Exhibit 10.26)............................................... --
10.30 Accounts Receivable Security Agreement dated as of May 15,
1993 by Havenwyck Hospital, Inc. in favor of Societe Generale,
New York Branch as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.26)................... --
10.31 Accounts Receivable Security Agreement dated as of May 15, 1993
by Mesa Psychiatric Hospital, Inc. in favor of Societe Generale,
New York Branch, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.26)................... --
10.32 Accounts Receivable Security Agreement dated as of May 15, 1993
by Michigan Psychiatric Services, Inc. in favor of Societe
Generale, New York Branch, as agent for the lenders which are
parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.26)....... --
10.33 Accounts Receivable Security Agreement dated as of May 15, 1993
by Psychiatric Institute of West Virginia, Inc. in favor of
Societe Generale, New York Branch, as agent for the lenders
which are parties to that certain Credit Agreement described
in Exhibit 10.16 above (substantially identical to Exhibit
10.26)....................................................... --
</TABLE>
E-6
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
10.34 Stock Pledge Agreement dated as of May 15, 1993, among the
Company in favor of Societe Generale, New York Branch, as
agent for the lenders which are parties to that certain
Credit Agreement described in Exhibit 10.16 above
(incorporated by reference to Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994). --
10.35 Revolving Credit Guarantee dated as of May 15, 1993 by
Americare of Galax, Inc. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16
above (incorporated by reference to Exhibit 10.35 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1994)............................................... --
10.36 Revolving Credit Guarantee dated as of May 15, 1993 by Bethany
Psychiatric Hospital, Inc. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.35)................... --
10.37 Revolving Credit Guarantee dated as of May 15, 1993 by
Bountiful Psychiatric Hospital, Inc. in favor of Societe
Generale, New York Branch, as agent for the lenders which
are parties to that certain Credit Agreement described in
Exhibit 10.16 above (substantially identical to Exhibit
10.35)....................................................... --
10.38 Revolving Credit Guarantee dated as of May 15, 1993 by
Cumberland Mental Health, Inc. in favor of Societe Generale,
New York Branch, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.35)................... --
10.39 Revolving Credit Guarantee dated as of May 15, 1993 by East
Carolina Psychiatric Services Corporation in favor of Societe
Generale, New York Branch, as agent for the lenders which are
parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.35)....... --
10.40 Revolving Credit Guarantee dated as of May 15, 1993 by
Havenwyck Hospital, Inc. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.35)................... --
10.41 Revolving Credit Guarantee dated as of May 15, 1993 by Mesa
Psychiatric Hospital, Inc. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.35)................... --
10.42 Revolving Credit Guarantee dated as of May 15, 1993 by Michigan
Psychiatric Services, Inc. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above
(substantially identical to Exhibit 10.35)................... --
10.43 Revolving Credit Guarantee dated as of May 15, 1993 by
Psychiatric Institute of West Virginia, Inc. in favor of
Societe Generale, New York Branch, as agent for the lenders
which are parties to that certain Credit Agreement described
in Exhibit 10.16 above (substantially identical to Exhibit
10.35)....................................................... --
</TABLE>
E-7
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<C> <S> <C>
10.44 Management Fee Subordination Agreement dated May 15, 1993,
among Paul J. Ramsay and Ramsay Health Care Pty. Ltd. in
favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above (incorporated by reference
to Exhibit 10.44 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1994)............................ --
10.45 Mortgage and Fixture Filing and Assignment of Leases and Rents
dated as of May 15, 1993 granted by Atlantic Treatment Center,
Inc. to Societe Generale, individually and as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above, with respect to certain real
property located in Volusia County, Florida (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994).................. --
10.46 Mortgage and Fixture Filing and Assignment of Leases and Rents
dated as of May 15, 1993 granted by Carolina Treatment Center,
Inc. to Societe Generale, individually and as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above, with respect to certain real
property located in Horry County, South Carolina (substantially
identical to Exhibit 10.45).................................. --
10.47 Deed of Trust and Fixture Filing and Assignment of Leases and
Rents dated as of May 15, 1993 granted by Great Plains
Hospital, Inc. to Jacob W. Bayer, Jr. as Trustee for the
benefit of Societe Generale, individually and as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above, with respect to certain real
property located in Vernon County, Missouri (substantially
identical to Exhibit 10.45).................................. --
10.48 Mortgage, Security and Assignment of Leases and Rents dated as
of May 15, 1993 by Greenbrier Hospital, Inc. to Societe
Generale individually and as agent for the lenders which are
parties to that certain Credit Agreement described in Exhibit
10.16 above, with respect to certain real property located in
St. Tammany Parish, Louisiana (substantially identical to
Exhibit 10.45)............................................... --
10.49 Mortgage and Fixture Filing and Assignment of Leases and Rents
dated as of May 15, 1993 granted by Gulf Coast Treatment
Center, Inc. to Societe Generale, individually and as agent
for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to
certain real property located in Okaloosa County, Florida
(substantially identical to Exhibit 10.45)................... --
10.50 Mortgage, Security Agreement and Assignment of Leases and
Rents dated as of May 15, 1993 granted by Houma Psychiatric
Hospital, Inc. to Societe Generale, individually and as agent
for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to
certain real property located in the City of Houma, Parish
of Terrebonne, Louisiana (substantially identical to Exhibit
10.45)....................................................... --
10.51 Mortgage with Power of Sale and Fixture Filing and Assignment
of Leases and Rents dated as of May 15, 1993 granted by HSA
of Oklahoma, Inc. to Societe Generale, individually and as
agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to
certain real property located in Garfield County, Oklahoma
(substantially identical to Exhibit 10.45)................... --
</TABLE>
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10.52 Deed of Trust and Fixture Filing and Assignment of Leases and
Rents dated as of May 15, 1993 granted by The Haven Hospital,
Inc. to Societe Generale, individually and as agent for the
lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above, with respect to certain real
property located in the City of DeSoto, Dallas County, Texas
(substantially identical to Exhibit 10.45)................... --
10.53 Loan Agreement between Okaloosa County, Florida and Gulf Coast
Treatment Center, Inc. dated October 1, 1984, relating to the
issuance of bonds for Gulf Coast Treatment Center, Inc.
(incorporated by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S-1, Registration No. 2-9892). --
10.54 Loan Agreement between Louisiana Public Facilities Authority
and Greenbrier Hospital, Inc. dated November 1, 1984, relating
to the issuance of bonds for Greenbrier Hospital, Inc.
(incorporated by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1, Registration No. 2-98921) --
10.55 Loan Agreement between Horry County, South Carolina and
Carolina Treatment Center, Inc. dated December 1, 1984,
relating to the issuance of bonds for Carolina Treatment
Center, Inc. (incorporated by reference to Exhibit 10.18 to
the Company's Registration Statement on Form S-1, Registration
No. 2-98921)................................................. --
10.56 Loan Agreement between Louisiana Public Facilities Authority
and Houma Psychiatric Hospital, Inc. dated as of September 1,
1985, relating to the issuance of bonds for HSA Bayou Oaks
Hospital (incorporated by reference to Exhibit 10.56 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1994)............................................... --
10.57 Ground Lease between Facilities Management Corporation, as
landlord, and Psychiatric Institute of West Virginia, Inc.,
as tenant, dated as of September 30, 1985 (incorporated by
reference to Exhibit 10.57 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1994).............. --
10.58 Lease Agreement between Houma Psychiatric Hospital, Inc. and
Hospital Service District No. 1 of the Parish of Terrebonne,
State of Louisiana, effective February 1, 1985 (incorporated
by reference to Exhibit 10.38 to the Company's Registration
Statement on Form S-1, Registration No. 2-98921)............. --
10.59 Lease among Bethany Psychiatric Hospital, Inc., Bethany
General Hospital, the City of Bethany, Oklahoma and the
Bethany General Hospital Trust dated December 9, 1985
(ground lease) (incorporated by reference to Exhibit 10.47.3
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1985)..................................... --
10.60 Loan Agreement between The Enid Development Authority and HSA
of Oklahoma, Inc. dated as of October 1, 1985, relating to The
Enid Development Authority Variable Rate Demand Revenue Bonds
(Meadowlake Hospital Project)................................ --
10.61 Option Agreement dated September 11, 1989, between the Company
and The Ramsay Hospital Corporation of Texas (incorporated by
reference to Exhibit 10.44 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1989).................. --
10.62 Ramsay Health Care, Inc. 1990 Stock Option Plan, as amended
to date (incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-8 filed on
March 6, 1991)............................................... --
</TABLE>
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10.63 Lease Agreement dated August 30, 1988 between the Company and
Ayshire Land Dome Joint Venture relating to office space at
One Poydras Plaza, New Orleans, Louisiana (incorporated by
reference to Exhibit 10.78 to the Company's Registration
Statement on Form S-2, Registration No. 33-40762)............ --
10.64 Ramsay Health Care, Inc. Deferred Compensation and Retirement
Plan (incorporated by reference to Exhibit 10.79 to the
Company's Registration Statement on Form S-2, Registration
No. 33-40762)................................................ --
10.65 Personnel and Facility Sharing Agreement dated as of June 27,
1991 between the Company and Ramsay Holdings HSA Limited
(incorporated by reference to Exhibit 10.83 to the Company's
Registration Statement on Form S-2, Registration No. 33-40762) --
10.66 Indemnity Agreement dated as of June 1991 between the Company
and Ramsay Holdings HSA Limited (incorporated by reference to
Exhibit 10.84 to the Company's Registration Statement on
Form S-2, Registration No. 33-40762)......................... --
10.67 Agreement dated January 7, 1992 between the Company and Ralph
J. Watts (incorporated by reference to Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1991)........................................... --
10.68 Warrant Certificate dated January 8, 1992 issued to Ralph J.
Watts (incorporated by reference to Exhibit 10(b) to the
Company's Quarterly Report on form 10-Q for the quarter ended
December 31, 1991)........................................... --
10.69 Management Agreement dated as of June 25, 1992 between the
Company and Ramsay Health Care Pty. Limited (incorporated by
reference to Exhibit 10.90 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992).................. --
10.70 Ramsay Health Care, Inc. 1991 Stock Option Plan (incorporated
by reference to Exhibit 10.91 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1992)............... --
10.71 Employment Agreement dated as of January 7, 1992 between the
Company and Gregory H. Browne (incorporated by reference to
Exhibit 10.92 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1992)............................ --
10.72 Employment Agreement dated as of July 7, 1992 between the
Company and Bruce R. Soden (incorporated by reference to
Exhibit 10.93 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1992)................................ --
10.73 Employment Agreement dated January 23, 1992 between the
Company and Wallace E. Smith (incorporated by reference to
Exhibit 10.94 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1992)................................ --
10.74 Employment Agreement dated January 23, 1992 between the
Company and John A. Quinn (incorporated by reference to
Exhibit 10.95 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1992)................................ --
</TABLE>
E-10
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10.75 Employment Agreement dated as of October 7, 1992 between the
Company and Rea A. Oliver (incorporated by reference to
Exhibit 10.75 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1994)............................ --
10.76 Lease dated April 4, 1992 between The Union Labor Life
Insurance Company and the Company (incorporated by reference
to Exhibit 10.98 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1992)............................ --
10.77 Lease dated May 27, 1992 between Gail Buy and Bountiful
Psychiatric Hospital (incorporated by reference to Exhibit
10.99 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).................................... --
10.78 Lease Agreement dated as of February 12, 1993 by and between
Gulf Coast Treatment Center, Inc and Vendell of Florida, Inc.
(incorporated by reference to Exhibit 10.82 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994). --
10.79 Ramsay Health Care, Inc. 1993 Stock Option Plan (incorporated
by reference to Exhibit 10.83 to the Company's Quarterly
Report on Form 10Q for the quarter ended December 31, 1993).. --
10.80 Ramsay Health Care, Inc. 1993 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.84 to the Company's
Quarterly Report on Form 10Q for the quarter ended December
31, 1993).................................................... --
10.81 Employment Agreement dated as of October 2, 1993 between the
Company and Reynold Jennings (incorporated by reference to
Exhibit 10.81 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1994)............................ --
10.82 Letter Agreement dated May 26, 1994 between the Company and
Reynold Jennings amending Mr. Jennings' Employment Agreement
(incorporated by reference to Exhibit 10.82 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994) --
10.83 Letter Agreement dated June 3,1994 between the Company and
Reynold Jennings amending Mr. Jennings' Employment Agreement
(incorporated by reference to Exhibit 10.83 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994) --
10.84 Fourth Modification, Extension and Amendment of Lease
Agreement dated November 15, 1993 between the Company and
One Poydras Plaza Venture relating to the Company's office
space at One Poydras Plaza, New Orleans, Louisiana
(incorporated by reference to Exhibit 10.84 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1994)............................................... --
10.85 Employment Agreement dated July 19, 1994 between the Company
and Brent J. Bryson..........................................
10.86 Rights Agreement dated as of August 1, 1995 between Ramsay
Health Care, Inc. and First Union National Bank of North
Carolina, as Rights Agent, which includes the form of Right
Certificate as Exhibit A and the Summary of Rights to Purchase
Common Shares as Exhibit B (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
August 1, 1995).............................................. --
</TABLE>
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10.87 Letter Agreement dated June 30, 1995 among Ramsay Health Care,
Inc., Ramsay Holdings HSA Limited and Paul Ramsay Holdings Pty.
Limited (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K dated August 1, 1995)... --
10.88 Lease Agreement dated April 12, 1995 between Capstone Capital
Corporation and Mesa Psychiatric Hospital, Inc...............
10.89 Lease Agreement dated April 12, 1995 between Capstone Capital
of San Antonio, LTD, d/b/a Cahaba of San Antonio, LTD. and
RHCI San Antonio, Inc........................................
10.90 Facility Lease Agreement dated June 26, 1995 by and between
Charter Canyon Behavioral Health System, Inc. and Bountiful
Psychiatric Hospital, Inc....................................
10.91 Employment termination letter dated September 15, 1995 between
the Company and Gregory H. Browne............................
10.92 Stock Purchase Agreement dated September 7, 1995 by and between
Paul Ramsay Holdings Pty. Limited and Ramsay Health Care, Inc.
10.93 Second Amended and Restated Distribution Agreement between the
Company and Ramsay Managed Care, Inc. ("RMCI") (incorporated by
reference to Exhibit 10.1 to RMCI's Registration Statement on
Form S-1 (Registration No. 33-78034) filed with the Commission
on April 24, 1995)........................................... --
10.94 Employee Benefit Agreement dated as of February 1, 1995 between
the Company and RMCI (incorporated by reference to Exhibit 10.4
to RMCI's Registration Statement on Form S-1 (Registration No.
33-78034) filed with the Commission on April 24, 1995)....... --
10.95 Tax Sharing Agreement dated as of October 25, 1994 between the
Company and RMCI (incorporated by reference to Exhibit 10.5 to
RMCI's Registration Statement on Form S-1 (Registration No.
33-78034) filed with the Commission on April 24, 1995)....... --
10.96 Corporate Services Agreement dated as of January 2, 1995
between the Company and RMCI (incorporated by reference to
Exhibit 10.6 to RMCI's Registration Statement on Form S-1
(Registration No. 33-78034) filed with the Commission on
April 24, 1995).............................................. --
10.97 Form of Withholding Tax Agreement between the Company, Ramsay
Holdings HSA Limited, Paul Ramsay Holdings Pty. Limited and
Ramsay Health Care Pty. Limited (incorporated by reference to
Exhibit 10.7 to RMCI's Registration Statement on Form S-1
(Registration No. 33-78034) filed with the Commission on
April 24, 1995).............................................. --
10.98 $6,000,000 Subordinated Promissory Note of RMCI, as amended
(incorporated by reference to Exhibit 10.13 to RMCI's
Registration Statement on Form S-1 (Registration No. 33-78034)
filed with the Commission on April 24, 1995.................. --
11 Computation of Net Income Per Share..........................
21 Subsidiaries of the Company..................................
</TABLE>
E-12
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23 Consent of Ernst & Young LLP.................................
27 Financial Data Schedule......................................
</TABLE>
Copies of exhibits filed with this Annual Report on Form 10-K or incorporated
herein by reference do not accompany copies hereof for distribution to
stockholders of the Company. The Company will furnish a copy of any of such
exhibits to any stockholder requesting it.
E-13
<PAGE>
AGREEMENT OF SALE AND PURCHASE
BY AND BETWEEN
MESA PSYCHIATRIC HOSPITAL, INC.,
an Arizona corporation
("SELLER")
AND
CAPSTONE CAPITAL CORPORATION,
a Maryland corporation
("PURCHASER")
April 12, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I
DEFINITIONS.......................................................... 1
-----------
ARTICLE II
AGREEMENTS TO SELL PURCHASE AND LEASE................................ 7
-------------------------------------
2.1 AGREEMENT TO SELL AND PURCHASE ............................ 7
2.2 AGREEMENT TO LEASE......................................... 7
ARTICLE III
PURCHASE PRICE....................................................... 7
--------------
3.1 PAYMENT OF PURCHASE PRICE.................................. 7
3.2 INDEPENDENT CONSIDERATION.................................. 7
ARTICLE IV
ITEM TO BE FURNISHED TO PURCHASER BY SELLER.......................... 7
-------------------------------------------
4.1 DUE DILIGENCE MATERIALS.................................... 7
4.2 DUE DILIGENCE REVIEW....................................... 8
ARTICLE V
TITLE AND SURVEY..................................................... 9
----------------
5.1 TITLE COMMITMENT, EXCEPTION DOCUMENTS AND SURVEY........... 9
5.2 REVIEW PERIOD.............................................. 9
5.3 ADDITIONAL EXCEPTIONS...................................... 9
ARTICLE VI
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS................ 9
-----------------------------------------------------
6.1 REPRESENTATIONS AND WARRANTIES OF SELLER................... 9
6.2 INDEMNITY OF SELLER ....................................... 13
6.3 INTENTIONALLY DELETED. .................................... 14
6.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER..... 14
ARTICLE VII
CONDITIONS TO THE PURCHASER'S AND SELLER'S OBLIGATIONS............... 15
------------------------------------------------------
7.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS.................. 15
7.2 FAILURE OF CONDITIONS TO PURCHASER'S OBLIGATIONS........... 16
7.3 CONDITIONS TO SELLER'S OBLIGATIONS ........................ 17
7.4 FAILURE OF CONDITIONS TO SELLER'S OBLIGATIONS.............. 17
ARTICLE VIII
PROVISIONS WITH RESPECT TO THE CLOSING............................... 18
--------------------------------------
8.1 SELLER'S CLOSING OBLIGATIONS .............................. 18
8.2 PURCHASER'S CLOSING OBLIGATIONS............................ 19
</TABLE>
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ARTICLE IX
EXPENSES OF CLOSING.................................................. 19
-------------------
9.1 ADJUSTMENTS................................................ 19
9.2 CLOSING COSTS.............................................. 19
ARTICLE X
DEFAULT AND REMEDIES................................................. 19
--------------------
10.1 SELLER'S DEFAULT; PURCHASER'S REMEDIES..................... 19
10.2 PURCHASER'S DEFAULT; SELLER'S REMEDIES..................... 20
ARTICLE XI
MISCELLANEOUS........................................................ 20
-------------
11.1 SURVIVAL................................................... 20
11.2 NOTICES.................................................... 21
11.3 ENTIRE AGREEMENT; MODIFICATIONS............................ 22
11.4 APPLICABLE LAW............................................. 22
11.5 CAPTIONS................................................... 22
11.6 BINDING EFFECT............................................. 22
11.7 EXTENSION OF DATES......................................... 23
11.8 TIME IS OF THE ESSENCE..................................... 23
11.9 WAIVER OF CONDITIONS....................................... 23
11.10 BROKERS.................................................... 23
11.11 RISK OF LOSS............................................... 23
11.12 NO ASSUMPTION OF LIABILITIES............................... 23
11.13 COUNTERPARTS............................................... 24
</TABLE>
<PAGE>
LIST OF EXHIBITS
Exhibit A - Real Property Description
Exhibit B - Bill of Sale and Assignment
Exhibit C - Certificate of Non-Foreign Status
Exhibit D - Closing Certificate
Exhibit E - Special Warranty Deed
Exhibit F - Guaranty
Exhibit G - Lease
Exhibit H - Permitted Exceptions
Exhibit I - [Intentionally Left Blank]
Exhibit J - Allocation of Purchase Price
Exhibit K - Survey Certificate
Exhibit L - Personal Property
Disclosure Schedule
<PAGE>
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE (the "Agreement") dated April 12, 1995,
is made and entered into by and between MESA PSYCHIATRIC HOSPITAL, INC., an
Arizona corporation (hereinafter referred to as "Seller"), and CAPSTONE CAPITAL
CORPORATION, a Maryland corporation, and/or its assigns (hereinafter referred to
as "Purchaser"). Seller and Purchaser are sometimes collectively referred to
herein as the "Parties" and each of the Parties is sometimes singularly referred
to herein as a "Party".
WHEREAS, Seller is the owner of the Property (as hereinafter defined),
consisting of certain real property and improvements thereon located at 570 West
Brown Road, Mesa, Maricopa County, Arizona, consisting of one two-story building
comprising Desert Vista Hospital and containing in the aggregate approximately
113,555 gross square feet, more or less, which together with all related land
and parking areas total approximately 10.485 acres, as more particularly
described on Exhibit A attached hereto and made a part hereof for all purposes
---------
by this reference; and
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
Property, and simultaneously therewith, to enter into a lease transaction
pursuant to which Purchaser shall lease to Seller, and Seller shall lease from
Purchaser, the Property.
NOW, THEREFORE, in consideration of the sum of $10.00, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I
DEFINITIONS
-----------
As used herein (including any Exhibits attached hereto), the following
terms shall have the meanings indicated:
"Bill of Sale" means a bill or bills of sale in the form attached as
Exhibit B hereto, and sufficient to transfer to Purchaser all of the items set
- ---------
forth therein.
"Bountiful" means Bountiful Psychiatric Hospital, Inc., a Utah corporation
and owner of 100% of the issued and outstanding shares of Seller.
"Business Agreement" means any management agreement, service contract,
easement, covenant, restriction or other agreement relating to the ownership or
maintenance of the Property pursuant to which Seller has agreed or may be
obligated to pay in excess of $50,000 in any period of twelve consecutive
calendar months.
"Business Day(s)" means calendar days other than Saturdays, Sundays and
legal holidays.
<PAGE>
"Certificate of Non-Foreign Status" means a certificate dated as of the
Closing Date, addressed to Purchaser and duly executed by Seller, in the form of
Exhibit C attached hereto.
- ---------
"Claim" means any obligation, liability, lien, encumbrance, loss, damage,
cost, expense or claim, including without limitation any claim for damage to
property or injury to or death of any person or persons.
"Closing" means the consummation of the sale and purchase provided for
herein, to be held at the offices of Sirote & Permutt, P.C., 2222 Arlington
Avenue South, Birmingham, Alabama or such other place as the Parties may
mutually agree.
"Closing Certificate" means a certificate in the form of Exhibit D wherein
---------
Seller shall represent that the representations and warranties of Seller
contained in this Agreement are true and correct as of the Closing Date as if
made on and as of the Closing Date, except with respect to those matters that
may be disclosed in writing to and accepted by Purchaser prior to the Closing
Date.
"Closing Date" means April 12, 1995.
"Closing Fee" means a closing fee payable by Seller to Purchaser at Closing
in the amount of $85,500.00, to be deducted from the proceeds of sale.
"Deed" means a special (limited) warranty deed substantially in the form of
Exhibit E attached hereto (as the same may be modified to comply with local law
- ---------
and custom), executed by Seller, as grantor, in favor of Purchaser, as grantee,
conveying the Land and Improvements to Purchaser, subject only to the Permitted
Exceptions.
"Disclosure Schedule" has the meaning set forth in Section 6.1(v).
"Due Diligence Materials" means the information to be provided by Seller to
Purchaser pursuant to the provisions of Section 4.1 hereof.
"Effective Date" means the later of the two dates on which this Agreement
is signed and all changes initialed by Seller and Purchaser, as indicated by
their signatures below; provided that in the event only one Party dates its
--------
signature, then the date of its signature shall be the Effective Date.
"Engineering Documents" means all site plans, surveys, soil and substrata
studies, architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, and other plans and studies that relate
to the Land, the Improvements or the Fixtures and are in Seller's possession or
control.
2
<PAGE>
"Exception Documents" means true, correct and legible copies of each
document listed as an exception to title on the Title Commitment.
"Fixtures" means all permanently affixed equipment, machinery, fixtures,
and other items of real and/or personal property, including all components
thereof, now and hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Improvements, including without
limitation all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, built-in
vacuum, cable transmission, oxygen and similar systems, all of which, to the
greatest extent permitted by law, are hereby deemed by the Parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding any Tenant's trade
fixtures or other fixtures or equipment that a Tenant is permitted to remove
pursuant to the applicable Tenant Lease.
"Guarantor" means Ramsay.
"Guaranty" means a guaranty of the obligations of Seller under the Lease in
substantially the form of Exhibit F attached hereto, executed by Guarantor.
---------
"Hazardous Materials" means any substance, including without limitation
asbestos or any substance containing asbestos and deemed hazardous under any
Hazardous Materials Law, the group of organic compounds known as polychlorinated
biphenyls, flammable explosives, radioactive materials, medical waste,
chemicals, pollutants, effluents, contaminants, emissions or any related or
other materials and items included in the definition of hazardous or toxic
wastes, materials or substances under any Hazardous Materials Law.
"Hazardous Materials Law" means any law, regulation or ordinance relating
to environmental conditions, medical waste and industrial hygiene, including
without limitation the Resource Conservation and Recovery Act of 1976 ("RCRA"),
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, and all similar federal,
state and local environmental statutes, ordinances and the regulations, orders,
or decrees now or hereafter promulgated thereunder.
"Indebtedness" with respect to Seller or Guarantor means: (i) any debt (a)
for borrowed money or (b) evidenced by a bond, note, debenture or similar
instrument (including purchase money obligations and accounts payable and other
obligations created or assumed in the course of business in connection with the
obtaining of materials or services) given in connection with the acquisition of
any business, property or assets, whether
3
<PAGE>
by purchase, merger, consolidation or otherwise, or (c) which is a direct or
indirect obligation which arises as a result of banker's acceptances or bank
letters of credit issued to secure obligations of such person, or to secure the
payment of bonds issued for the benefit of such person, whether contingent or
otherwise; (ii) any debt of others described in the preceding clause (i) which
such person has guaranteed or for which it is otherwise liable; (iii) the
obligation of such person as lessee under any lease of property which is (a)
reflected on such person's balance sheet as a capitalized lease or (b) an
operating lease; and (iv) any deferral, amendment, renewal, extension,
supplement or refunding of any liability of the kind described in any of the
preceding clauses (i), (ii) and (iii).
"Independent Consideration" means the sum of $100.00.
"Improvements" means all buildings, structures, Fixtures and other
improvements of every kind now or on the Closing Date located on the Land,
including without limitation all alleyways, connecting tunnels, crosswalks,
sidewalks, landscaping, parking lots and structures, roads, drainage and all
above-ground and underground utility structures, equipment systems that
constitute Fixtures and other so-called "infrastructure" improvements.
"Intangible Property" means all intangible property or any interest therein
now or on the Closing Date owned or held by Seller in connection with the Land,
the Improvements or the Fixtures, including without limitation all water rights
and reservations, zoning rights and warranties related to the Land, the
Improvements or the Fixtures, or any part thereof, provided "Intangible
--------
Property" shall not include the general corporate trademarks, service marks,
logos or insignia or books and records of Seller.
"Land" means the real property more particularly described on Exhibit A
---------
attached hereto and made a part hereof, together with all covenants, licenses,
privileges and benefits thereto belonging, and any easements, rights-of-way,
rights of ingress or egress or other interests of Seller in, on, or to any land,
highway, street, road or avenue, open or proposed, in, on, across, in front of,
abutting or adjoining such real property including without limitation all strips
and gores adjacent to or lying between such real property and any adjacent real
property.
"Laws" means all federal, state and local laws, moratoria, initiatives,
referenda, ordinances, rules, regulations, standards, orders and other
governmental requirements, including without limitation those relating to the
environment, health and safety, or disabled or handicapped persons.
"Lease" means a lease agreement in the form set forth on Exhibit G attached
---------
hereto and made a part hereof, which shall be executed and delivered by Seller
to Purchaser at the Closing, pursuant to the terms of which Purchaser shall
lease the Property to Seller following the Closing.
"Party" and "Parties" have the meanings set forth in the preamble to this
Agreement.
4
<PAGE>
"Permits" means all permits, licenses, approvals, entitlements,
notifications, determinations and other governmental and quasi-governmental
authorizations, including without limitation certificates of occupancy, required
in connection with the ownership, planning, development, construction,
maintenance, use or operation of the Property (other than such items related
solely to the conduct by Seller of its business on the Property or Seller's
other property or assets). As used herein, "quasi-governmental" shall include
the providers of all utility services to the Property.
"Permitted Exceptions" means, exclusively, the exceptions listed on Exhibit
-------
H hereto.
- -
"Personal Property" means, exclusively, the personal property listed in
Exhibit L hereto.
- ---------
"Property" means, collectively, the Land and all rights, titles, and
appurtenant interests, the Improvements, the Fixtures, the Intangible Property,
the Warranties, the Engineering Documents and the Personal Property. As used in
the foregoing, "appurtenant interests" shall mean those interests which pass by
operation of law with the conveyance of the fee simple estate in the Land and
Improvements. The parties agree that no Tenant Leases are being assigned to or
assumed by Purchaser pursuant to this Agreement and that Lessor shall have no
responsibilities under or with respect to any existing Tenant Leases.
"Purchase Price" means an amount equal to $8,550,000.00.
"Ramsay" means Ramsay Health Care, Inc., a Delaware corporation and owner
of 100% of the issued and outstanding shares of Bountiful.
"Real Property" means the Land, the Improvements and the Fixtures.
"Review Period" has the meaning set forth in Section 5.2.
"Search Reports" means the initial reports of searches made of the Uniform
Commercial Code Records of the County in which the Property is located, and of
the office of the Secretary of State of the State in which the Property is
located, which searches shall reflect that none of the Property is encumbered by
liens. The Search Reports shall be updated, at Seller's expense, at or within
one week prior to Closing.
"Survey" means a current "as-built" ALTA survey, certified to ALTA
requirements, prepared by an engineer or surveyor licensed in the State in which
the Land is located acceptable to Purchaser, which shall: (a) include a legal
description of the Land by metes and bounds (which shall include a reference to
the recorded plat, if any), and a computation of the area comprising the Land in
both acre, gross square feet and net square feet (to the nearest one-hundredth
of said respective measurement); (b) accurately (upon Seller's belief, without
inquiry) show the location on the Land of all improvements, building and set-
back lines, fences, evidence of abandoned fences, ponds, creeks, streams,
rivers, officially
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designated 100-year flood plains and flood prone areas, canals, ditches,
easements, roads, rights-of-way and encroachments; (c) be certified to the
Purchaser, the Title Company, and any third-party lender designated by Purchaser
pursuant to a certification in substantially the form of Exhibit K; (d) legibly
---------
identify any and all recorded matters shown on the Title Commitment or on said
survey by appropriate volume and page recording references and the survey shall
show the location of all adjoining streets; and (e) be satisfactory to the Title
Company so as to permit it to amend the standard exception for area and
boundaries in the Title Policy.
"Tenant" means the lessees or tenants under the Tenant Leases, if any.
"Tenant Leases" means all leases, subleases and other rental agreements, if
any (written or verbal, now or hereafter in effect) that grant a possessory
interest in and to any space in the Improvements or that otherwise have rights
with regard to the use of the Land or Improvements.
"Title Commitment" means a current commitment issued by the Title Company
to the Purchaser pursuant to the terms of which the Title Company shall commit
to issue the Title Policy to Purchaser in accordance with the provisions of this
Agreement, and reflecting all matters which would be listed as exceptions to
coverage on the Title Policy.
"Title Company" means Stewart Title Guaranty Corporation, whose address is
50 South Steele, Suite 600, Denver, Colorado 80209, Attention: Thomas Konkel.
"Title Policy" means an ALTA Extended Coverage owner's Policy of Title
Insurance (1970 Form B - 1987 revision), together with such endorsements thereto
as are reasonably and customarily required by institutional purchasers of real
property similar to the Property, with liability in the amount of the Purchase
Price, dated as of the Closing Date, issued by the Title Company, insuring title
to the fee interest in the Real Property in Purchaser, subject only to the
Permitted Exceptions and to the standard printed exceptions included in the ALTA
standard form owner's extended coverage policy of title insurance, with the
following modifications: (a) the exception for areas and boundaries shall be
deleted; (b) the exception for ad valorem taxes shall reflect only taxes for the
current and subsequent years; (c) any exception as to parties in possession
shall be limited to rights of tenants in possession, as tenants only, pursuant
to the Lease and the Tenant Leases; (d) there shall be no general exception for
visible and apparent easements or roads and highways or similar items (with any
exception for visible and apparent easements or roads and highways or similar
items to be specifically referenced to and shown on the Survey and also
identified by applicable recording information); and (e) all other exceptions
shall be modified or endorsed in a manner reasonably acceptable to Purchaser.
"Warranties" means all warranties, representations and guaranties with
respect to the Property, whether express or implied, which Seller now holds or
under which Seller is the
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beneficiary (other than such items related solely to the conduct by Seller of
its business on the Property or Seller's other property or assets).
ARTICLE II
AGREEMENTS TO SELL, PURCHASE AND LEASE
--------------------------------------
2.1 AGREEMENT TO SELL AND PURCHASE. Effective as of the Closing Date,
Seller shall sell, convey, assign, transfer and deliver to Purchaser and
Purchaser shall purchase, acquire and accept from Seller, the Property, for the
Purchase Price and subject to the terms and conditions of this Agreement. To the
extent permitted or required by law, Seller shall assign to Purchaser all of
Seller's right, title and interest in and to the Permits.
2.2 AGREEMENT TO LEASE. Effective as of the Closing Date, and subject to
performance by the Parties of the terms and provisions of this Agreement,
Purchaser shall lease to Seller and Seller shall lease from Purchaser, the
Property at the rental and upon the terms and conditions set forth in the Lease.
ARTICLE III
PURCHASE PRICE
--------------
3.1 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
Purchaser delivering to the Seller at the Closing a wire transfer or other
immediately available funds payable to the order of the Seller in the amount of
the Purchase Price, subject to adjustment as provided in Article IX hereof.
3.2 INDEPENDENT CONSIDERATION. Within three Business Days following the
Effective Date, Purchaser shall deliver to the Title Company, in funds
immediately forfeitable to Seller, the Independent Consideration, as independent
consideration for any option granted to Purchaser by Seller herein, and based
upon such consideration and the mutual covenants of Seller and Purchaser
contained herein, Seller hereby agrees that any such option granted to Purchaser
is irrevocable and Seller shall not terminate said option without the prior
written consent of Purchaser, except as may be expressly provided for herein.
ARTICLE IV
ITEMS TO BE FURNISHED TO PURCHASER BY SELLER
--------------------------------------------
4.1 DUE DILIGENCE MATERIALS. Within 15 days after the Effective Date,
Seller shall deliver to Purchaser or make available to Purchaser at the Property
for its review the following items:
(a) True, correct, complete and legible copies of all Tenant Leases,
Business Agreements, Warranties, Permits, and Engineering Documents;
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(b) A true, correct, complete and legible rent roll of all existing Tenant
Leases, if any, setting forth with respect to each of the Tenant Leases: (i) the
premises covered; ( ii) the date of such Tenant Lease and all amendments and
modifications thereto; (iii) the name of the Tenant, licensee or occupant; (iv)
the term, including specification of the commencement date and the termination
date; (v) the rents; (vi) the nature and amount of the security deposits
thereunder, if any; (vii) options to renew or extend contained in any of the
Tenant Leases; and (viii) the status of Tenant improvements to be performed by
Seller; and
(c) True, correct, complete and legible copies of the following items:
(i) tax statements or assessments for all real estate and personal
property taxes assessed against the Property for the current and the prior
two calendar years;
(ii) all existing fire and extended coverage insurance policies and
any other insurance policies pertaining to the Property;
(iii) all instruments evidencing, governing or securing the payment of
any loans secured by the Property or related thereto;
(iv) unaudited balance sheets and income statements of the Seller for
its fiscal years ending in 1993 and 1994, and unaudited quarterly balance
sheets and income statements for its fiscal quarters ending in September
and December of 1994;
(v) all environmental studies or impact reports relating to the
Property in possession or control of Seller, if any, and any approvals,
conditions, orders or declarations issued by any governmental authority
relating thereto or to any environmental matters (such studies and reports
to include, but not be limited to, reports indicating whether the Property
is or has been contaminated by Hazardous Materials); and
(vi) all litigation files, if any, with respect to any pending
litigation and claim files for any claims made or threatened, the outcome
of which might have a material adverse effect on the Property or the use
and operation of the Property.
4.2 DUE DILIGENCE REVIEW. During the Review Period Purchaser shall be
entitled to review the Due Diligence Materials delivered or made available by
Seller to Purchaser pursuant to the provisions of Section 4.1 above. If
Purchaser shall, for any reason in Purchaser's sole discretion, disapprove or be
dissatisfied with any aspect of such information, or the Property, then
Purchaser shall be entitled to terminate this Agreement by giving written notice
thereof to Seller on or before the expiration of the Review Period, whereupon
this Agreement shall automatically be rendered null and void, all moneys which
have been delivered by Purchaser to Seller or the Title Company (other than the
Independent
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Consideration) shall be immediately returned to Purchaser and thereafter neither
Party shall have any further obligations or liabilities to the other hereunder.
Alternatively, Purchaser may give written notice setting forth any defect,
deficiency or encumbrance and specify a time within which Seller may remedy or
cure such matter (before or after the expiration of the Review Period). If any
defect, deficiency or encumbrance, so noticed, is not satisfied or resolved to
the satisfaction of Purchaser, in Purchaser's sole discretion, within the time
period specified in such written notice, this Agreement shall automatically
terminate as provided in this section. If no such notice is timely given, then
Purchaser shall be deemed to have waived its right to so terminate. Purchaser
shall treat the Due Diligence Materials as confidential and shall use them
solely for the purpose of evaluating the Property. If this Agreement is
terminated, Purchaser shall promptly redeliver to Seller all Due Diligence
Materials .
ARTICLE V
TITLE AND SURVEY
----------------
5.1 TITLE COMMITMENT, EXCEPTION DOCUMENTS AND SURVEY. Within 15 days after
the Effective Date, Seller shall deliver or cause to be delivered to Purchaser
the Title Commitment, Exception Documents, Survey, and Search Reports.
5.2 RENEW PERIOD. [Intentionally left blank.]
5.3 ADDITIONAL EXCEPTIONS. [Intentionally left blank.]
ARTICLE VI
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
-----------------------------------------------------
6.1 REPRESENTATIONS AND WARRANTIES OF SELLER. To induce Purchaser to enter
into this Agreement and to purchase the Property, Seller represents and warrants
to Purchaser, to the best of its knowledge, as follows:
(a) Pursuant to Section 5.2 hereof, Seller has and at the Closing Seller
will have, and will convey, transfer and assign to Purchaser, good, marketable,
fee simple and insurable title to the Land, free and clear of any deeds of
mortgages, liens, encumbrances, leases, tenancies other than the Tenants or
Tenant Leases, licenses, chattel mortgages, conditional sales agreements,
security interests, covenants, conditions, restrictions, judgments, rights-of
way, easements, encroachments and any other matters affecting title or use of
the Property, except for the Permitted Exceptions.
(b) Seller has duly and validly authorized and executed this Agreement and
has right, title, power and authority to enter into this Agreement and, at
Closing, to consummate the actions provided for herein, and the joinder of no
person or entity will be necessary to convey the Property fully and completely
to Purchaser at Closing. The execution by Seller
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of this Agreement and the consummation by Seller of the transactions
contemplated hereby do not, and at the Closing will not (i) result in a breach
of any of the terms or provisions of, or constitute a default or a condition
which upon notice or lapse of time or both would ripen into a default under any
indenture, agreement, instrument or obligation to which Seller is a party or by
which Seller or the Property or any portion thereof is bound, or (ii)
constitute a violation of any order, rule or regulation of any court or of any
federal or state or municipal regulatory body or administrative agency or other
governmental body having jurisdiction over Seller or any portion of the
Property.
(c) There are no adverse or other parties in possession of the Property or
of any part thereof except Seller and Tenants under valid and effective Tenant
Leases delivered to Purchaser pursuant to Section 4.1 of this Agreement, and no
party has been granted any license, lease or other right relating to the use or
possession of the Property, except Tenants under Tenant Leases which have been
delivered to Purchaser pursuant to Section 4.1 of this Agreement.
(d) Each Tenant Lease, if any, furnished to Purchaser pursuant to this
Agreement is in full force and effect and has not been materially amended,
modified or supplemented in any way that has not been disclosed to Purchaser in
writing. The Tenant Leases, if any, furnished to Purchaser pursuant to this
Agreement constitute all material written and oral agreements of any kind for
the leasing, rental or occupancy of any portion of the Property. All material
Tenant improvements, repairs and other work and obligations, if any, then
required to be performed by the landlord under each of the Tenant Leases will be
fully performed and paid for in full on or prior to the Closing.
(e) None of the Tenant Leases and none of the rents or other charges
payable thereunder, if any, have been assigned, pledged or encumbered by Seller,
except as security given in respect of that certain Credit Agreement dated as of
May 15, 1993, among Ramsay Health Care, Inc., a Delaware corporation
("Ramsay"), certain subsidiaries of Ramsay, Hibernia National Bank, as lender,
First Union National Bank of North Carolina, as lender, and Soeiety Generale,
New York Branch, as lender, issuing bank and agent thereunder.
(f) No brokerage or leasing commissions or other compensation will be due
or payable to any person, firm, corporation or other entity with respect to, or
on account of, any Tenant Lease or any extensions or renewals thereof, if any,
except those agreements entered into or accepted in writing by Purchaser.
(g) No notice has been received by Seller and Seller is not aware of any
person having received notice from any insurance company that has issued a
policy with respect to any portion of the Property or from any board of fire
underwriters (or other body exercising similar functions), claiming any defects
or deficiencies or requiring the performance of any repairs, replacements,
alterations or other work. No notice has been received by Seller from any
issuing insurance company that any of such policies will not be renewed, or will
be
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renewed only at a higher premium rate than is presently payable therefor, except
as disclosed to and accepted by Purchaser in writing.
(h) No pending condemnation, eminent domain, assessment or similar
proceeding or charge affecting the Property or any portion thereof exists.
Seller has not received any notice of a proposed increase in the assessed
valuation of the Property.
(i) (i) All of the Improvements (including all utilities) have been
completed and installed and are being used in accordance in all material
respects with all applicable Laws, including all plans and specifications, if
any, approved by governmental authorities having jurisdiction; (ii) permanent
certificates of occupancy, all licenses, permits, authorizations and approvals
required by all governmental authorities having jurisdiction, and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the Improvements, and are in full force
and effect; and (iii) the Improvements, as designed and constructed, comply in
all material respects with all statutes, restrictions, regulations and
ordinances applicable thereto.
(j) (i) The existing water, sewer, gas and electricity lines, storm
sewer and other utility systems on the Land are adequate to serve the utility
needs of the Property; (ii) all utilities required for the operation of the
Improvements enter the Land through adjoining public streets or through
adjoining private land in accordance with valid public or private easements that
will inure to the benefit of Purchaser; (iii) all approvals, licenses and
permits required for said utilities have been obtained and are in force and
effect; and (iv) all of said utilities are installed and operating, all
installation and connection charges have been paid in full, and the right to the
return of any deposit or contribution in connection therewith shall inure to
Purchaser.
(k) (i) There are no material structural defects in any of the buildings
or other Improvements constituting the Property; (ii) the Improvements, all
heating, electrical, plumbing and drainage at or servicing the Property and all
facilities and equipment relating thereto are in reasonably good condition and
working order and adequate in quantity and quality for the normal operation of
the Property; (iii) no part of the Property has been destroyed or damaged by
fire or other casualty; and (iv) there are no unsatisfied requests for repairs,
restorations or alterations with regard to the Property from any Tenant, lender,
insurance provider or governmental authority.
(l) No work has been performed or is in progress at the Property, and no
materials will have been delivered to the Property, that might reasonably be
expected to provide the basis for a mechanic's, materialmen's or other lien
against the Property or any portion thereof.
(m) other than the Business Agreements delivered to Purchaser pursuant to
Section 4.1, there exist no material agreements or understandings (oral or
written) with respect to the Property or any portion thereof to which Seller is
a party (other than such
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items related solely to the conduct by Seller of its business on the Property or
Seller's other property or assets).
(n) No default or breach exists under any of the Business Agreements or
any covenant, condition, restriction, right-of-way or easement affecting the
Property or any portion thereof.
(o) There are no actions, suits or proceedings pending or, to the best
knowledge of Seller, threatened against or affecting the Property or any portion
thereof or relating to or arising out of the ownership of the Property before
any federal, state, county or municipal department, commission, board, bureau or
agency or other governmental instrumentality, other than those disclosed to
Purchaser pursuant to Section 4.1. All judicial proceedings concerning the
Property will be finally dismissed and terminated prior to Closing.
(p) The Property has free and unimpeded access to currently-existing
public highways and/or roads (either directly or by way of perpetual easements),
and all approvals necessary therefor have been obtained and in full force and
effect. No fact or condition exists which would result in the termination of the
current access from the Property to any currently-existing public highways
and/or roads adjoining or situated on the Property.
(q) There are no attachments, executions, assignments for the benefit of
creditors, or voluntary or involuntary proceedings in bankruptcy or under any
other debtor relief laws contemplated by or pending or threatened against Seller
or the Property.
(r) Other than with respect to activities in connection with or conditions
arising strictly from customary and ordinary use or maintenance of the Property
by Seller and Tenants in full compliance with any or all Hazardous Materials
Law, Seller is unaware of (i) any Hazardous Materials installed, used,
generated, manufactured, treated, handled, refined, produced, processed, stored
or disposed of, or otherwise on or under, the Property; (ii) any activity being
undertaken on the Property which could cause (a) the Property to become a
hazardous waste treatment, storage or disposal facility within the meaning of
any Hazardous Materials Law, (b) a release or threatened release of Hazardous
Materials from the Property within the meaning of any Hazardous Materials Law,
or (c) the discharge of Hazardous Materials into any watercourse, body of
surface or subsurface water or wetland, or the discharge into the atmosphere of
any Hazardous Material which would require a permit under any Hazardous
Materials Law; (iii) any activity undertaken with respect to the Property which
would cause a violation or support a claim under any Hazardous Materials Law;
(iv) any pending or threatened investigation, administrative order, litigation
or settlement with respect to any Hazardous Materials relating to or affecting
the Property; or (v) any notice being served on Seller from any entity,
governmental body or individual claiming any violation of any Hazardous
Materials Law, or requiring compliance with any Hazardous Materials Law, or
demanding payment or contribution for the environmental damage or injury to
natural resources. Seller has not obtained and is not required to obtain, and
Seller has no knowledge of any reason Purchaser will be required to obtain, any
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permits, licenses, or similar authorizations to occupy, operate or use the
Improvements or any part of the Property by reason of any Hazardous Materials
Law.
(s) The Purchase Price is being allocated to the Real Property and the
portion of the Property which is considered to be personal property as set forth
on Exhibit J attached hereto.
---------
(t) All certificates of need and approvals, consents, licenses and other
Permits of any Federal, state or local governmental authority necessary or
appropriate for Seller's use of the Property as currently used and the receipt
of Federal and state funds in payment of patient services have been finally and
properly obtained, and no transfer or reissuance of, or notice or approval in
connection with, any such certificate, approval, consent, license or other
Permit is or will be required as a result of this Agreement or the Lease or the
consummation of the transactions contemplated hereby and thereby.
(u) The number of parking spaces available for use in connection with the
Improvements complies with all applicable Laws.
(v) All documents and information delivered by Seller to Purchaser
pursuant to the provisions of this Agreement are true, correct and complete as
of the date hereof and will be correct and complete as of the Closing Date,
except as set forth in this Agreement and in the disclosure schedule
accompanying this Agreement and initialled by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered paragraphs in this Section 6.1. From time to time after the
execution of this Agreement until the Closing, Seller shall deliver to Purchaser
one or more supplemental schedules setting forth all changes in the schedules,
and in previously delivered supplemental schedules, if any, and in any of the
representations and warranties made herein whether or not previously modified by
a schedule, arising out of matters discovered or occurring prior to the Closing.
Purchaser and its counsel shall have 30 days to object in writing to any
material information in any supplemental schedule. Failure by Purchaser to
notify Seller within such 30-day period of any objection to information provided
in the supplemental schedule prior to the Closing shall be deemed to be approval
thereof.
6.2 INDEMNITY OF SELLER. Subject to the provisions provided hereafter
limiting the liability of Seller, Seller hereby agrees to indemnify and defend,
at its sole cost and expense, and hold Purchaser, its successors and assigns,
harmless from and against and to reimburse Purchaser with respect to any and all
claims, demands, actions, causes of action, losses, damages, liabilities; costs
and expenses (including without limitation reasonable attorneys' fees and court
costs) of any and every kind or character, known or unknown, fixed or
contingent, asserted against or incurred by Purchaser at any time and from time
to time by reason of or arising out of (a) the breach of any representation or
warranty of Seller set forth in this Agreement, (b) the failure of Seller, in
whole or in part, to perform any obligation required to be performed by Seller
pursuant to Section 6.1, or (c) except for the matters disclosed herein or in
the Disclosure Schedule, the ownership, construction,
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occupancy, operation, use and maintenance of the Property prior to the Closing
Date, or (d) the violation on or before the Closing Date of any Hazardous
Material Law in effect on or before the Closing Date and any and all matters
arising out of any act, omission, event or circumstance existing or occurring on
or prior to the Closing Date (including without limitation the presence on the
Property or release from the Property of Hazardous Materials disposed of or
otherwise released prior to the Closing Date) which results in a violation of a
Hazardous Materials Law, regardless of whether the act, omission, event or
circumstance constituted a violation of any Hazardous Materials Law at the time
of its existence or occurrence. The provisions of this Section 6.2 shall survive
the Closing of the transaction contemplated by this Agreement and shall continue
thereafter in full force and effect for the benefit of Purchaser, its successors
and assigns, and, notwithstanding any provision of this Agreement to the
contrary, Purchaser may exercise any right or remedy Purchaser may have at law
or in equity should Seller fail to meet, comply with or perform its indemnity
obligations required by this Section 6.2.
6.3 Intentionally Deleted.
6.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER. Purchaser
represents and warrants to Seller that:
(a) Purchaser has duly and validly authorized and executed this Agreement,
and has full right, power and authority to enter into this Agreement and to
consummate the actions provided for herein, and the joinder of no person or
entity will be necessary to purchase the Property from Seller at Closing.
(b) The execution by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby do not, and at the Closing
will not, result in any breach of any of the terms or provisions of or
constitute a default or a condition which upon notice or lapse of time or both
would ripen into a default under any indenture, agreement, instrument or
obligation to which Purchaser is a party, and do not constitute a violation of
any order, rule or regulation of any court or any federal or state or municipal
regulatory body. or administrative agency or other governmental body having
jurisdiction over Purchaser.
(c) Purchaser shall indemnify and hold Seller harmless from and against
any claims for any brokerage fee or commission, finder's fee or financial
advisory fee arising from or related to the transactions contemplated by this
Agreement and which is asserted by any person or entity claiming to have acted
as agent or a representative of Purchaser.
(d) All documents and information delivered by Purchaser to Seller
pursuant to the provisions of this Agreement are true, correct and complete as
of the date hereof and will be correct and complete as of the Closing Date,
except as set forth in this Agreement and in the Disclosure Schedule. From time
to time after the execution of this Agreement until the Closing, Purchaser shall
deliver to Seller one or more supplemental schedules
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setting forth all changes in the schedules, and in previously delivered
supplemental schedules, if any, and in any of the representations and warranties
made herein whether or not previously modified by a schedule, arising out of
matters discovered or occurring prior to the Closing. Seller and its counsel
shall have 30 days to object in writing to any material information in any
supplemental schedule, and failure by Seller to notify Purchaser within such
30-day period of any objection to information provided in the supplemental
schedule prior to the Closing shall be deemed to be approval thereof.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S AND SELLER'S OBLIGATIONS
------------------------------------------------------
7.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligations of
Purchaser to purchase the Property from Seller and to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, as
of the Closing, of each of the following conditions:
(a) All of the representations and warranties of Seller set forth in this
Agreement shall be true as of the Closing in all material respects except for
changes expressly permitted or contemplated by the terms of this Agreement.
(b) Seller and the Guarantor shall have delivered, performed, observed and
complied in all material respects with all of the items, instruments, documents,
covenants, agreements and conditions required by this Agreement to be delivered,
performed, observed and complied with by Seller and the Guarantor prior to, or
as of, the Closing.
(c) Neither Seller nor Guarantor shall be in receivership or dissolution
proceedings or have made any assignment for the benefit of creditors, or
admitted in writing its inability to pay its debts as they mature, or have been
adjudicated as bankrupt, or have filed a petition in voluntary bankruptcy, a
petition or answer seeking reorganization or an arrangement with creditors under
the federal bankruptcy law or any other similar law or statute of the United
States or any state and no such petition shall have been filed against it; and
neither Seller nor Guarantor shall be in default with respect to any
Indebtedness in the outstanding amount of (i) in the case of Seller, at least
$50,000, and (ii) in the case of Guarantor, at least $1,000,000.
(d) No material or substantial change shall have occurred with respect to
the condition, financial or otherwise, of the Property, Seller or Guarantor.
(e) Neither the Property nor any part thereof or interest therein shall
have been taken by execution or other process of law in any action prior to
Closing.
(f) Purchaser shall be reasonably satisfied with its inspection of the
Property with respect to the physical condition thereof by agents or contractors
selected by Purchaser.
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(g) Purchaser shall have received, in form acceptable to Purchaser,
evidence of compliance by the Property with all Permits required as of the
Effective Date hereof and such other Permits as may be necessary or appropriate
for the operation of the Property for the current and intended use and for the
transactions contemplated by this Agreement and the Lease.
(h) All necessary approvals, consents and the like of third parties to the
validity and effectiveness of the transactions contemplated hereby shall have
been obtained.
(i) Purchaser shall be reasonably satisfied that the Property is
sufficient and adequate for Seller to carry on the business now being conducted
thereon and that the Property is in good condition and repair as reasonably
required for the proper operation and use thereof in compliance with applicable
Laws and the requirements of applicable accreditation and licensing authorities.
(j) Purchaser shall be satisfied with all matters regarding title and
survey pursuant to Article V hereof.
(k) Purchaser shall have obtained an environmental site assessment report
covering the Property in form and content acceptable to Purchaser.
(l) No portion of the Property shall have been destroyed by fire or
casualty.
(m) No condemnation, eminent domain or similar proceeding shall have been
commenced or threatened with respect to any portion of the Property.
(n) Purchaser shall have received an appraisal satisfactory to Purchaser
in all respects, including without limitation a fair market value substantially
equivalent to the Purchase Price.
(o) Seller shall have provided such representations, warranties and
consents as may be reasonably required by the United States Securities and
Exchange Commission (including but not limited to inclusion of financial
statements, financial information and other required information concerning
Seller or any affiliate of Seller in any United States Securities and Exchange
Commission filings made by Purchaser or any affiliate of Purchaser).
(p) Capstone Capital of San Antonio, Ltd. shall have entered into an
Agreement of Sale and Purchase with RHCI San Antonio, Inc., a Delaware
corporation ("RHCI"), for the purchase of property constituting Mission Vista
Hospital in San Antonio, Texas, and there shall exist no event of default
thereunder on the part of RHCI.
7.2 FAILURE OF CONDITIONS TO PURCHASER'S OBLIGATIONS. In the event any one
or more of the conditions to Purchaser's obligations are not satisfied in whole
or in part as of
16
<PAGE>
the Closing, Purchaser, at Purchaser's option, shall be entitled to: (a)
terminate this Agreement by giving written notice thereto to Seller, whereupon
all moneys which have been delivered by Purchaser to Seller or the Title Company
(other than the Independent Consideration) shall be immediately refunded to
Purchaser and neither Purchaser nor Seller shall have any further obligations or
liabilities hereunder; (b) waive such failure of condition and proceed to
Closing hereunder; or (c) pursue such other remedies as may be available to
Purchaser.
7.3 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller to sell
the Property, to Purchaser and to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, as of the Closing Date, of each
of the following conditions:
(a) The representations and warranties of Purchaser contained herein shall
be in all material respects true and accurate as of the Closing Date.
(b) Purchaser shall have delivered, performed, observed and complied in
all material respects with all of the items, instruments, documents, covenants,
agreements and conditions required by this Agreement to be delivered,
performed, observed and complied with by Purchaser as of the Closing Date.
(c) No statute, rule, regulation, order, decree or injunction shall have
been enacted, entered, promulgated or enforced by any court of competent
jurisdiction or United States governmental authority which prohibits the
consummation of the transactions contemplated by this Agreement.
(d) All action required to be taken by the Purchaser to authorize the
execution, delivery, and performance of this Agreement and the other agreements
or documents related hereto, and the consummation of the transactions
contemplated hereby, shall have been duly and validly taken.
(e) Seller shall have received all necessary consents of lenders under
existing credit facilities to the transactions contemplated hereby and by the
Lease.
(f) Capstone Capital of San Antonio, Ltd. shall have entered into an
Agreement of Sale and Purchase with RHCI San Antonio, Inc., a Delaware
corporation, for the purchase of property constituting Mission Vista Hospital in
San Antonio, Texas, and there shall exist no event of default thereunder on the
part of the purchaser.
7.4 FAILURE OF CONDITIONS TO SELLER'S OBLIGATIONS. In the event any one or
more of the conditions to Seller's obligations are not satisfied in whole or in
part as of the Closing, Seller, at Seller's option, shall be entitled to: (a)
terminate this Agreement by giving written notice thereto to Purchaser,
whereupon all moneys which have been delivered by Purchaser to Seller or the
Title Company (other than the Independent Consideration) shall be immediately
refunded to Purchaser and neither Purchaser nor Seller shall have any
17
<PAGE>
further obligations or liabilities hereunder; or (b) waive such failure of
conditions and proceed to Closing hereunder.
ARTICLE VIII
PROVISIONS WlTH RESPECT TO THE CLOSING
--------------------------------------
8.1 SELLER'S CLOSING OBLIGATIONS. At Closing, Seller shall furnish and
deliver to the Title Company and/or Purchaser the following:
(a) The Deed, Title Commitment obligating the Title Company to issue the
Title Policy subject only to the Permitted Exceptions, Bill of Sale, Certificate
of Non-Foreign Status, Closing Certificate, the Guaranty and the Lease, each
duly executed and acknowledged by Seller or Guarantor, as the case may be.
(b) An affidavit, agreement and indemnity executed by Seller and dated as
of the Closing Date, stating that there are no unpaid debts for any work that
has been done or materials furnished to the Property prior to and as of Closing
and stating that Seller shall indemnify, save and protect Purchaser and its
assigns harmless from and against any and all Claims, including without
limitation court costs and reasonable attorneys' fees related thereto, arising
out of, in connection with, or resulting from the same, up to and including the
Closing Date, in form and substance mutually acceptable to Seller and Purchaser.
(c) Certificates of casualty and fire insurance for the Property required
pursuant to the Lease showing Purchaser as additional insured and loss payee
thereunder, with appropriate provisions for 30 days' prior notice to Purchaser
in the event of cancellation or termination of such policies.
(d) Updated Search Reports, dated not more than ten days prior to Closing,
evidencing no UCC-l Financing Statements or other filings in the name of Seller
with respect to the Property.
(e) Such affidavits, certificates or letters of indemnity as the Title
Company shall reasonably require in order to omit from its insurance policy all
exceptions for unfiled mechanic's, materialman's or similar liens.
(f) Any and all transfer declarations or disclosure documents, duly
executed by the appropriate parties, required in connection with the Deed by any
state, county or municipal agency having jurisdiction over the Property or the
transactions contemplated hereby.
(g) Such instruments or documents as are required by Purchaser or the
Title Company to evidence the status and capacity of Seller and the authority of
the person or persons who are executing the various documents on behalf of
Seller in connection with the purchase and sale transaction contemplated hereby.
18
<PAGE>
(h) The Closing Fee and all other costs and expenses payable by Seller to
Purchaser pursuant to Section 9.2.
(i) Rent for the month of April, 1995 in the amount set forth in Section
2.1(a) of the Lease.
8.2 PURCHASER'S CLOSING OBLIGATIONS. At Closing, Purchaser shall deliver
to the Title Company, and Seller the following:
(a) The Lease, duly executed and acknowledged by Purchaser.
(b) Such instruments as are necessary, or reasonably required by Seller or
the Title Company to evidence the authority of Purchaser to consummate the
transactions contemplated hereby and to execute and deliver the closing
documents on the Purchaser's part to be delivered.
(c) Purchaser shall have tendered the Purchase Price.
ARTICLE IX
EXPENSES OF CLOSING
-------------------
9.1 ADJUSTMENTS. There shall be no adjustment of taxes, assessments, water
or sewer charges, gas, electric, telephone or other utilities, operating
expenses, premiums on insurance policies or other normally proratable items, it
being agreed and understood by the Parties that the Seller shall be obligated to
pay such items under the terms of the Lease.
9.2 CLOSING COSTS. Seller shall pay all costs of closing, including
without limitation Purchaser's attorneys' fees and reasonable out of pocket
expenses related to the transactions contemplated herein, all title examination
fees and premiums for the Title Policy, the Search Reports, the Survey, any
environmental reports, appraisals, structural or engineering reports, all state,
municipal or other documentary or transfer taxes payable in connection with the
delivery of any instrument or document provided in or contemplated by this
Agreement or any agreement or commitment described or referred to herein, and
the charges for or in connection with the recording and/or filing of any
instrument or document provided herein or contemplated by this Agreement or any
agreement or document described or referred to herein.
ARTICLE X
DEFAULT AND REMEDIES
--------------------
l0.1 SELLER'S DEFAULT; PURCHASER'S REMEDIES.
(a) Seller's Default. Seller shall be deemed to be in default hereunder
----------------
upon the occurrence of any one or more of the following events: (i) any of
Seller's warranties or
19
<PAGE>
representations set forth herein shall be untrue in any material aspect when
made or at Closing, or (ii) Seller shall fail in any material respect to meet,
comply with, or perform any covenant, agreement or obligation on its part
required within the time limits and in the manner required in this Agreement.
(b) Purchaser's Remedies. In the event Seller shall be deemed to be in
--------------------
default hereunder Purchaser may, as its sole remedies: (i) terminate this
Agreement by written notice delivered to Seller on or before the Closing; or
(ii) enforce specific performance of this Agreement against Seller including
Purchaser's reasonable costs and attorneys fees in connection therewith. It is
understood and agreed that termination or specific performance as provided in
(i) and (ii) above constitute Purchaser's sole remedy against Seller, and that
Purchaser shall not be entitled to seek monetary damages from Seller or assert
any other remedy against Seller, except for the costs and expenses to be paid by
Seller pursuant to Section 9.2 hereof.
10.2 PURCHASER'S DEFAULT; SELLER'S REMEDIES.
(a) Purchaser's Default. Purchaser shall be deemed to be in default
-------------------
hereunder upon the occurrence of any one or more of the following events: (i)
any of Purchaser's warranties or representations set forth herein shall be
untrue in any material respect when made or at Closing; or (ii) Purchaser shall
fail in any material respect to meet, comply with, or perform any covenant,
agreement or obligation on its part within the time limits and in the manner
required in this Agreement.
(b) Seller's Remedy. In the event Purchaser shall be deemed to be in
---------------
default hereunder, Seller, as Seller's sole and exclusive remedy for such
default, shall be entitled to terminate this Agreement and all rights of
Purchaser hereunder and to receive the Independent Consideration, it being
agreed between Purchaser and Seller that such sum shall be liquidated damages
for a default of Purchaser hereunder because of the difficulty, inconvenience,
and uncertainty of ascertaining actual damages for such default. If Seller shall
be entitled to the Independent Consideration in accordance with this Section
l0.2, Purchaser agrees to deliver, on written request of Seller, such
instructions as may be reasonably necessary to cause the Title Company to
deliver the Independent Consideration to Seller. In such event, Purchaser will
pay the costs of the Survey, Title Commitment, Search Reports, appraisals and
any environmental survey, report or study, which shall be and become the
property of Purchaser.
ARTICLE Xl
MISCELLANEOUS
-------------
11.1 SURVIVAL. All of the representations, warranties, covenants,
agreements and indemnities (but not matters or items identified as conditions
for parties' obligation to close) of Seller and Purchaser contained in this
Agreement, to the extent not performed at the
20
<PAGE>
Closing, shall survive the Closing and shall not be deemed to merge upon the
acceptance of the Deed by Purchaser.
11.2 NOTICES. All notices, demands, requests and other communications or
documents to be provided under this Agreement shall be in writing and shall be
given to the party at its address or telecopy number set forth below or such
other address or telecopy number as the party may later specify for that purpose
by notice to the other party. Each notice shall, for all purposes shall be
deemed given and received:
(i) If given by telecopy, when the telecopy is transmitted to the
party's telecopy number specified below and confirmation of complete
receipt is received by that transmitting party during normal business
hours on any Business Day, or on the next Business Day if not confirmed
during normal business hours;
(ii) If hand delivered, when delivered;
(iii) If given by nationally recognized and reputable overnight
delivery service, the day on which the notice is actually received by the
party; or
(iv) If given by certified mail, return receipt requested, postage
prepaid, two Business Days after posted with the United States Postal
Service, at the address of the party specified below:
If to Purchaser:
CAPSTONE CAPITAL CORPORATION
l000 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
Attention: William C. Harlan, Vice President
Telephone: (205) 967-2092
Telecopy: (205) 967-9066
With a copy to:
Wanda S. McNeil, Esq.
Sirote & Permutt, P.C.
200 Clinton Avenue, N.W.
Huntsville, Alabama 35801
Telephone: (205) 536-1711
Telecopy: (205) 518-3681
21
<PAGE>
If intended for Seller:
Mesa Psychiatric Hospital, Inc.
Gregory H. Browne
Chief Executive Officer
Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
Telephone: (504) 525-2505
Telecopy: (504) 585-0505
With a copy to:
Mirek Fajt, Esq.
Haythe & Curley
237 Park Avenue
New York, New York l0017-3142
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
11.3 ENTIRE AGREEMENT; MODIFICATIONS. This Agreement embodies and
constitutes the entire understanding between the parties with respect to the
transactions contemplated herein, and all prior or contemporaneous agreements,
understandings, representations and statements (oral or written), other than the
Lease, the Guaranty and all other documents executed in connection therewith,
are merged into this Agreement. Neither this Agreement nor any provision hereof
may be waived, modified, amended, discharged or terminated except by an
instrument in writing signed by the Party against whom the enforcement of such
waiver, modification, amendment, discharge or termination is sought, and then
only to the extent set forth in such instrument.
11.4 APPLICABLE LAW. This Agreement and the transactions contemplated
hereby shall be governed by and construed in accordance with the laws of the
state in which the Property is located.
11.5 CAPTIONS. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe, or limit the scope or intent
of this Agreement or any of the provisions hereof.
11.6 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal and personal representatives, successors, and assigns.
22
<PAGE>
11.7 EXTENSION OF DATES. Notwithstanding anything to the contrary
contained in this Agreement, if Seller shall fail to deliver any document or
item required pursuant to any of the terms and provisions of Article IV and/or
Article V within the applicable time period required, Purchaser, at its option,
shall have the right to extend the date of expiration of the Review Period, and
correspondingly the date of Closing, by the number of days elapsing from the
date such items were required to be delivered and the date such items were
actually delivered to Purchaser; provided that Purchaser shall give Seller
--------
notice of its intent to extend such dates. Nothing herein shall diminish
Seller's obligation to timely furnish such items.
11.8 Time is of the Essence. With respect to all provisions of this
Agreement, time is of the essence. However, if the first date of any period
which is set out in any provision of this Agreement falls on a day which is not
a Business Day, then, in such event, the time of such period shall be extended
to the next day which is a Business Day.
11.9 WAIVER OF CONDITIONS. Any Party may at any time or times, at its
election, waive any of the conditions to its obligations hereunder, but any such
waiver shall be effective only if contained in a writing signed by such Party.
No waiver by a Party of any breach of this Agreement or of any warranty or
representation hereunder by the other Party shall be deemed to be a waiver of
any other breach by such other Party (whether preceding or succeeding and
whether or not of the same or similar nature), and no acceptance of payment or
performance by a Party after any breach by the other Party shall be deemed to be
a waiver of any breach of this Agreement or of any representation or warranty
hereunder by such other Party, whether or not the first Party knows of such
breach at the time it accepts such payment or performance. No failure or delay
by a Party to exercise any right it may have by reason of the default of the
other Party shall operate as a waiver of default or modification of this
Agreement or shall prevent the exercise of any right by the first Party while
the other Party continues to be so in default.
11.10 BROKERS. Each party hereby represents to the other party that it has
not discussed this Agreement or the subject matter thereof with any real estate
broker or salesman so as to create any legal rights in any such broker or
salesman to claim a real estate commission or similar fee with respect to the
purchase or sale of the Property, and agrees to defend, indemnify and hold the
other party harmless from any and all claims for any real estate commissions,
leasing fees or similar fees arising out of or in any way relating to a breach
of the foregoing representation.
11.11 RISK OF LOSS. Until the Closing Date, the risk of loss of any portion
of the Property shall be solely that of Seller. Risk of loss shall be that of
Purchaser from and after the Closing Date, at which time Seller shall deliver to
Purchaser possession of the Property.
11.12 NO ASSUMPTION OF LIABILITIES. Purchaser shall not assume any of the
existing liabilities, indebtedness, commitments or obligations of any nature
whatsoever (whether
23
<PAGE>
fixed or contingent) of Seller in respect of the Property or otherwise, except
those expressly assumed herein.
11.13 COUNTERPARTS. This Agreement may be executed 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.
24
<PAGE>
EXECUTED to be effective as of the Effective Date.
PURCHASER:
CAPSTONE CAPITAL CORPORATION, a
Maryland corporation
By: /s/ William C. Harlan
----------------------------------
William C. Harlan
Its: Senior Vice President
Date April 12, 1995
----------------------------------
Purchaser's Tax Identification Number:
63-1129622
SELLER:
MESA PSYCHIATRIC HOSPITAL, INC.,
an Arizona corporation
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Its: Vice President
----------------------------------
Date April 12, 1995
-----------------------------------
Seller's Tax Identification Number:
93-0925810
25
<PAGE>
AGREEMENT OF SALE AND PURCHASE
------------------------------
BY AND BETWEEN
RHCI SAN ANTONIO, INC.,
a Delaware corporation
("SEllER")
CAPSTONE CAPITAL OF SAN ANTONIO, LTD.,
d/b/a CAHABA OF SAN ANTONIO, LTD.,
an Alabama limited partnership
("PURCHASER")
April 12, 1995
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
DEFINITIONS................................................... 1
-----------
ARTICLE II
AGREEMENTS To SELL PURCHASE AND LEASE......................... 7
-------------------------------------
2.1 AGREEMENT TO SELL AND PURCHASE ........................ 7
2.2 AGREEMENT TO LEASE..................................... 7
ARTICLE III
PURCHASE PRICE................................................ 7
----------------
3.1 PAYMENT OF PURCHASE PRICE.............................. 7
3.2 INDEPENDENT CONSIDERATION.............................. 7
ARTICLE IV
lTEMS TO BE FURNISHED TO PURCHASER BY SELLER.................. 7
----------------------------------------------
4.1 DUE DILIGENCE MATERIALS................................ 7
4.2 DUE DILIGENCE REVIEW................................... 8
ARTICLE V
TITLE AND SURVEY ............................................. 9
------------------
5.1 TITLE COMMITMENT, EXCEPTION DOCUMENTS AND SURVEY....... 9
5.2 REVIEW PERIOD.......................................... 9
5.3 ADDITIONAL EXCEPTIONS.................................. 9
ARTICLE VI
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS......... 9
-----------------------------------------------------
6.l REPRESENTATIONS AND WARRANTIES OF SELLER............... 9
6.2 INDEMNITY OF SELLER.................................... 13
6.3 ....................................................... 14
6.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER. 14
ARTICLE VII
CONDITIONS TO THE PURCHASER'S AND SELLER'S OBLIGATIONS........ 15
------------------------------------------------------
7.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS.............. 15
7.2 FAILURE OF CONDITIONS TO PURCHASER'S OBLIGATIONS....... 16
7.3 CONDITIONS TO SELLER'S OBLIGATIONS..................... 17
7.4 FAILURE OF CONDITIONS TO SELLER'S OBLIGATIONS.......... 17
ARTICLE VIII
PROVISIONS WITH RESPECT TO THE CLOSING........................ 18
----------------------------------------
8.1 SELLER'S CLOSING OBLIGATIONS........................... 18
8.2 PURCHASER'S CLOSING OBLIGATIONS........................ 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
EXPENSES OF CLOSING.......................................... 19
-------------------
9.1 ADJUSTMENTS........................................... 19
9.2 CLOSING COSTS......................................... 19
ARTICLE X
DEFAULT AND REMEDIES......................................... 19
--------------------
l0.1 SELLER'S DEFAULT; PURCHASER'S REMEDIES................ 19
l0.2 PURCHASER'S DEFAULT; SELLER'S REMEDIES................ 20
ARTICLE XI
MISCELLANEOUS................................................ 20
-------------
11.1 SURVIVAL.............................................. 20
11.2 NOTICES............................................... 21
11.3 ENTIRE AGREEMENT; MODIFICATIONS....................... 22
11.4 APPLICABLE LAW........................................ 22
11.5 CAPTIONS.............................................. 22
11.6 BINDING EFFECT........................................ 22
11.7 EXTENSION OF DATES.................................... 23
11.8 TIME IS OF THE ESSENCE................................ 23
11.9 WAIVER OF CONDITIONS.................................. 23
11.10 BROKERS............................................... 23
11.11 RISK OF LOSS.......................................... 23
11.12 NO ASSUMPTION OF LIABILITIES.......................... 23
11.13 COUNTERPARTS.......................................... 24
</TABLE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Real Property Description
Exhibit B - Bill of Sale and Assignment
Exhibit C - Certificate of Non-Foreign Status
Exhibit D - Closing Certificate
Exhibit E - Special Warranty Deed
Exhibit F - Guaranty
Exhibit G - Lease
Exhibit H - Permitted Exceptions
Exhibit I - [Intentionally Left Blank]
Exhibit J - Allocation of Purchase Price
Exhibit K - Survey Certificate
Exhibit L - Personal Property
</TABLE>
Disclosure Schedule
<PAGE>
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE (the "Agreement") dated as of April 12,
1995, is made and entered into by and between RHCI SAN ANTONIO, INC., a Delaware
corporation (hereinafter referred to as "Seller"), and CAPSTONE CAPITAL OF SAN
ANTONIO, LTD., D/B/A CAHABA OF SAN ANTONIO, LTD., an Alabama limited
partnership, and/or its assigns (hereinafter referred to as "Purchaser"). Seller
and Purchaser are sometimes collectively referred to herein as the "Parties" and
each of the Parties is sometimes singularly referred to herein as a "Party".
WHEREAS, Seller is the owner of the Property (as hereinafter defined),
consisting of certain real property and improvements thereon located at 14747
Jones Maltsberger Road, San Antonio, Bexar County, Texas, consisting of five
one-story buildings comprising Mission Vista Hospital and containing in the
aggregate approximately 39,786 gross square feet, more or less, which together
with all related land and parking areas total approximately six acres, as more
particularly described on Exhibit A attached hereto and made a part hereof for
---------
all purposes by this reference; and
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
Property, and simultaneously therewith, to enter into a lease transaction
pursuant to which Purchaser shall lease to Seller, and Seller shall lease from
Purchaser, the Property.
NOW, THEREFORE, in consideration of the sum of $10.00, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I
DEFINITIIONS
------------
As used herein (including any Exhibits attached hereto), the following
terms shall have the meanings indicated:
"Bill of Sale" means a bill or bills of sale in the form attached as
Exhibit B hereto, and sufficient to transfer to Purchaser all of the items set
- ---------
forth therein.
"Business Agreement" means any management agreement, service contract,
easement, covenant, restriction or other agreement relating to the ownership or
maintenance of the Property pursuant to which Seller has agreed or may be
obligated to pay in excess of $50,000 in any period of twelve consecutive
calendar months.
"Business Day(s)" means calendar days other than Saturdays, Sundays and
legal holidays.
<PAGE>
"Certificate of Non-Foreign Status" means a certificate dated as of the
Closing Date, addressed to Purchaser and duly executed by Seller, in the form of
Exhibit C attached hereto.
- ---------
"Claim" means any obligation, liability, lien, encumbrance, loss, damage,
cost, expense or claim, including without limitation any claim for damage to
property or injury to or death of any person or persons.
"Closing" means the consummation of the sale and purchase provided for
herein, to be held at the offices of Sirote & Permutt, P.C., 2222 Arlington
Avenue South, Birmingham, Alabama or such other place as the Parties may
mutually agree.
"Closing Certificate" means a certificate in the form of Exhibit D wherein
---------
Seller shall represent that the representations and warranties of Seller
contained in this Agreement are true and correct as of the Closing Date as if
made on and as of the Closing Date, except with respect to those matters that
may be disclosed in writing to and accepted by Purchaser prior to the Closing
Date.
"Closing Date" means April 12, 1995.
"Closing Fee" means a closing fee payable by Seller to Purchaser at Closing
in the amount of $39,500.00, to be deducted from the proceeds of sale.
"Deed" means a special (limited) warranty deed substantially in the form of
Exhibit E attached hereto (as the same may be modified to comply with local law
- ------- -
and custom), executed by Seller, as grantor, in favor of Purchaser, as grantee,
conveying the Land and Improvements to Purchaser, subject only to the Permitted
Exceptions.
"Disclosure Schedule" has the meaning set forth in Section 6.1(v).
"Due Diligence Materials" means the information to be provided by Seller to
Purchaser pursuant to the provisions of Section 4.1 hereof.
"Effective Date" means April 12, 1995.
"Engineering Documents" means all site plans, surveys, soil and substrata
studies, architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, and other plans and studies that relate
to the Land, the Improvements or the Fixtures and are in Seller's possession or
control.
"Exception Documents" means true, correct and legible copies of each
document listed as an exception to title on the Title Commitment.
2
<PAGE>
"Fixtures" means all permanently affixed equipment, machinery, fixtures,
and other items of real and/or personal property, including all components
thereof, now and hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Improvements, including without
limitation all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, built-in
vacuum, cable transmission, oxygen and similar systems, all of which, to the
greatest extent permitted by law, are hereby deemed by the Parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding any Tenant's trade
fixtures or other fixtures or equipment that a Tenant is permitted to remove
pursuant to the applicable Tenant Lease.
"Guarantor" means Ramsay Health Care, Inc., a Delaware corporation, which
is the l00% owner of all of the issued and outstanding stock of Seller.
"Guaranty" means a guaranty of the obligations of Seller under the Lease in
substantially the form of Exhibit F attached hereto, executed by the Guarantor.
---------
"Hazardous Materials" means any substance, including without limitation
asbestos or any substance containing asbestos and deemed hazardous under any
Hazardous Materials Law, the group of organic compounds known as polychlorinated
biphenyls, flammable explosives, radioactive materials, medical waste,
chemicals, pollutants, effluents, contaminants, emissions or any related or
other materials and items included in the definition of hazardous or toxic
wastes, materials or substances under any Hazardous Materials Law.
"Hazardous Materials Law" means any law, regulation or ordinance relating
to environmental conditions, medical waste and industrial hygiene, including
without limitation the Resource Conservation and Recovery Act of 1976 ("RCRA"),
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, and all similar federal,
state and local environmental statutes, ordinances and the regulations, orders,
or decrees now or hereafter promulgated thereunder.
"Indebtedness" with respect to Seller or Guarantor means: (i) any debt (a)
for borrowed money or (b) evidenced by a bond, note, debenture or similar
instrument (including purchase money obligations and accounts payable and other
obligations created or assumed in the course of business in connection with the
obtaining of materials or services) given in connection with the acquisition of
any business, property or assets, whether by purchase, merger, consolidation or
otherwise, or (c) which is a direct or indirect obligation which arises as a
result of banker's acceptances or bank letters of credit issued
3
<PAGE>
to secure obligations of such person, or to secure the payment of bonds issued
for the benefit of such person, whether contingent or otherwise; (ii) any debt
of others described in the preceding clause (i) which such person has guaranteed
or for which it is otherwise liable; (iii) the obligation of such person as
lessee under any lease of property which is (a) reflected on such person's
balance sheet as a capitalized lease or (b) an operating lease; and (iv) any
deferral, amendment, renewal, extension, supplement or refunding of any
liability of the kind described in any of the preceding clauses (i), (ii) and
(iii).
"Independent Consideration" means the sum of $100.00.
"Improvements" means all buildings, structures, Fixtures and other
improvements of every kind now or on the Closing Date located on the Land,
including without limitation all alleyways, connecting tunnels, crosswalks,
sidewalks, landscaping, parking lots and structures, roads, drainage and all
above-ground and underground utility structures, equipment systems that
constitute Fixtures and other so-called "infrastructure" improvements.
"Intangible Property" means all intangible property or any interest therein
now or on the Closing Date owned or held by Seller in connection with the Land,
the Improvements or the Fixtures, including without limitation all water rights
and reservations, zoning rights and warranties related to the Land, the
Improvements or the Fixtures, or any part thereof, provided "Intangible
--------
Property" shall not include the general corporate trademarks, service marks,
logos or insignia or books and records of Seller.
"Land" means the real property more particularly described on Exhibit A
---------
attached hereto and made a part hereof, together with all covenants, licenses,
privileges and benefits thereto belonging, and any easements, rights-of-way,
rights of ingress or egress or other interests of Seller in, on, or to any land,
highway, street, road or avenue, open or proposed, in, on, across, in front of,
abutting or adjoining such real property including without limitation all strips
and gores adjacent to or lying between such real property and any adjacent real
property.
"Laws" means all federal, state and local laws, moratoria, initiatives,
referenda, ordinances, rules, regulations, standards, orders and other
governmental requirements, including without limitation those relating to the
environment, health and safety, or disabled or handicapped persons.
"Lease" means a lease agreement in the form set forth on Exhibit G attached
---------
hereto and made a part hereof, which shall be executed and delivered by Seller
to Purchaser at the Closing, pursuant to the terms of which Purchaser shall
lease the Property to Seller following the Closing.
"Party" and "Parties" have the meanings set forth in the preamble to this
Agreement.
4
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"Permits" means all permits, licenses, approvals, entitlements,
notifications, determinations and other governmental and quasi-governmental
authorizations, including without limitation certificates of occupancy, required
in connection with the ownership, planning, development, construction,
maintenance, use or operation of the Property (other than such items related
solely to the conduct by Seller of its business on the Property of Seller's
other property or assets). As used herein, "quasi-governmental" shall include
the providers of all utility services to the Property.
"Permitted Exceptions" means, exclusively, the exceptions listed on Exhibit
-------
H hereto.
- -
"Personal Property" means, exclusively, the personal property listed in
Exhibit L hereto.
- ---------
"Property" means, collectively, the Land and all rights, titles, and
appurtenant interests, the Improvements, the Fixtures, the Intangible Property,
the Warranties, the Engineering Documents and the Personal Property. As used in
the foregoing, "appurtenant interests" shall mean those interests which pass by
operation of law with the conveyance of the fee simple- estate in the Land and
Improvements. The parties agree that no Tenant Leases are being assigned to or
assumed by Purchaser pursuant to this Agreement and that Lessor shall have no
responsibilities under or with respect to any existing Tenant Leases.
"Purchase Price" means an amount equal to $3,950,000.00.
"Real Property" means the Land, the Improvements and the Fixtures.
"Review Period" has the meaning set forth in Section 5.2.
"Search Reports" means the initial reports of searches made of the Uniform
Commercial Code Records of the County in which the Property is located, and of
the office of the Secretary of State of the State in which the Property is
located, which searches shall reflect that none of the Property is encumbered by
liens. The Search Reports shall be updated, at Seller's expense, at or within
one week prior to Closing.
"Survey" means a current "as-built" ALTA survey, certified to ALTA
requirements, prepared by an engineer or surveyor licensed in the State in which
the Land is located acceptable to Purchaser, which shall: (a) include a legal
description of the Land by metes and bounds (which shall include a reference to
the recorded plat, if any), and a computation of the area comprising the Land in
both acre, gross square feet and net square feet (to the nearest one-hundredth
of said respective measurement); (b) accurately (upon Seller's belief, without
inquiry) show the location on the Land of all improvements, building and set-
back lines, fences, evidence of abandoned fences, ponds, creeks, streams,
rivers, officially designated l00-year flood plains and flood prone areas,
canals, ditches, easements, roads, rights-of-way and encroachments; (c) be
certified to the Purchaser, the Title Company, and any third-party lender
designated by Purchaser pursuant to a certification in substantially the
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form of Exhibit K; (d) legibly identify any and all recorded matters shown on
----------
the Title Commitment or on said survey by appropriate volume and page recording
references and the survey shall show the location of all adjoining streets; and
(e) be satisfactory to the Title Company so as to permit it to amend the
standard exception for area and boundaries in the Title Policy.
"Tenant" means the lessees or tenants under the Tenant Leases, if any.
"Tenant Leases" means all leases, subleases and other rental agreements, if
any (written or verbal, now or hereafter in effect) that grant a possessory
interest in and to any space in the Improvements or that otherwise have rights
with regard to the use of the Land or Improvements.
"Title Commitment" means a current commitment issued by the Title Company
to the Purchaser pursuant to the terms of which the Title Company shall commit
to issue the Title Policy to Purchaser in accordance with the provisions of this
Agreement, and reflecting all matters which would be listed as exceptions to
coverage on the Title Policy.
"Title Company" means Stewart Title Guaranty Corporation, whose address is
50 South Steele, Suite 600, Denver, Colorado 80209, Attention: Thomas Konkel.
"Title Policy" means an ALTA Extended Coverage Owner's Policy of Title
Insurance (1970 Form B - l990 revision), together with such endorsements thereto
as are reasonably and customarily required by institutional purchasers of real
property similar to the Property, with liability in the amount of the Purchase
Price, dated as of the Closing Date, issued by the Title Company, insuring title
to the fee interest in the Real Property in Purchaser, subject only to the
Permitted Exceptions and to the standard printed exceptions included in the ALTA
standard form owner's extended coverage policy of title insurance, with the
following modifications: (a) the exception for areas and boundaries shall be
deleted; (b) the exception for ad valorem taxes shall reflect only taxes for the
current and subsequent years; (c) any exception as to parties in possession
shall be limited to rights of tenants in possession, as tenants only, pursuant
to the Lease and the Tenant Leases; (d) there shall be no general exception for
visible and apparent easements or roads and highways or similar items (with any
exception for visible and apparent easements or roads and highways or similar
items to be specifically referenced to and shown on the Survey and also
identified by applicable recording information); and (e) all other exceptions
shall be modified or endorsed in a manner reasonably acceptable to Purchaser.
"Warranties" means all warranties, representations and guaranties with
respect to the Property, whether express or implied, which Seller now holds or
under which Seller is the beneficiary (other than such items related solely to
the conduct by Seller of its business on the Property or Seller's other property
or assets).
6
<PAGE>
ARTICLE II
AGREEMENTS TO SELL PURCHASE AND LEASE
-------------------------------------
2.1 AGREEMENT TO SELL AND PURCHASE. Effective as of the Closing Date,
Seller shall sell, convey, assign, transfer and deliver to Purchaser and
Purchaser shall purchase, acquire and accept from Seller, the Property, for the
Purchase Price and subject to the terms and conditions of this Agreement. To the
extent permitted or required by law, Seller shall assign to Purchaser all of
Seller's right, title and interest in and to the Permits.
2.2 AGREEMENT TO LEASE. Effective as of the Closing Date, and subject to
performance by the Parties of the terms and provisions of this Agreement,
Purchaser shall lease to Seller and Seller shall lease from Purchaser, the
Property at the rental and upon the terms and conditions set forth in the Lease.
ARTICLE III
PURCHASE PRICE
--------------
3.1 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
Purchaser delivering to the Seller at the Closing a wire transfer or other
immediately available funds payable to the order of the Seller in the amount of
the Purchase Price, subject to adjustment as provided in Article IX hereof.
3.2 INDEPENDENT CONSIDERATION. Within three Business Days following the
Effective Date, Purchaser shall deliver to the Title Company, in funds
immediately forfeitable to Seller, the Independent Consideration, as independent
consideration for any option granted to Purchaser by Seller herein, and based
upon such consideration and the mutual covenants of Seller and Purchaser
contained herein, Seller hereby agrees that any such option granted to Purchaser
is irrevocable and Seller shall not terminate said option without the prior
written consent of Purchaser, except as may be expressly provided for herein.
ARTICLE IV
ITEMS TO BE FURNISHED TO PURCHASER BY SELLER
--------------------------------------------
4.1 DUE DILIGENCE MATERIALS. Within l5 days after the Effective Date,
Seller shall deliver to Purchaser or make available to Purchaser at the Property
for its review the following items:
(a) True, correct, complete and legible copies of all Tenant Leases,
Business Agreements, Warranties, Permits, and Engineering Documents;
(b) A true, correct, complete and legible rent roll of all existing
Tenant Leases, if any, setting forth with respect to each of the Tenant Leases:
(i) the premises covered; ( ii) the date of such Tenant Lease and all amendments
and modifications thereto; (iii) the
7
<PAGE>
name of the Tenant, licensee or occupant; (iv) the term, including specification
of the commencement date and the termination date; (v) the rents; (vi) the
nature and amount of the security deposits thereunder, if any; (vii) options to
renew or extend contained in any of the Tenant Leases; and (viii) the status of
Tenant improvements to be performed by Seller; and
(c) True, correct, complete and legible copies of the following items:
(i) tax statements or assessments for all real estate and personal
property taxes assessed against the Property for the current and the prior
two calendar years;
(ii) all existing fire and extended coverage insurance policies and
any other insurance policies pertaining to the Property;
(iii) all instruments evidencing, governing or securing the payment of
any loans secured by the Property or related thereto;
(iv) unaudited balance sheets and income statements of the Seller for
its fiscal years ending in 1993 and 1994, and unaudited quarterly balance
sheets and income statements for its fiscal quarters ending in September
and December of 1994;
(v) all environmental studies or impact reports relating to the
Property in possession or control of Seller, if any, and any approvals,
conditions, orders or declarations issued by any governmental authority
relating thereto or to any environmental matters (such studies and reports
to include, but not be limited to, reports indicating whether the Property
is or has been contaminated by Hazardous Materials); and
(vi) all litigation files, if any, with respect to any pending
litigation and claim files for any claims made or threatened, the outcome
of which might have a material adverse effect on the Property or the use
and operation of the Property.
4.2 DUE DILIGENCE REVIEW. During the Review Period Purchaser shall be
entitled to review the Due Diligence Materials delivered or made available by
Seller to Purchaser pursuant to the provisions of Section 4.1 above. If
Purchaser shall, for any reason in Purchaser's sole discretion, disapprove or be
dissatisfied with any aspect of such information, or the Property, then
Purchaser shall be entitled to terminate this Agreement by giving written notice
thereof to Seller on or before the expiration of the Review Period, whereupon
this Agreement shall automatically be rendered null and void, all moneys which
have been delivered by Purchaser to Seller or the Title Company (other than the
Independent Consideration) shall be immediately returned to Purchaser and
thereafter neither Party shall have any further obligations or liabilities to
the other hereunder. Alternatively, Purchaser may give written notice setting
forth any defect, deficiency or encumbrance and specify a
8
<PAGE>
time within which Seller may remedy or cure such matter (before or after the
expiration of the Review Period). If any defect, deficiency or encumbrance, so
noticed, is not satisfied or resolved to the satisfaction of Purchaser, in
Purchaser's sole discretion, within the time period specified in such written
notice, this Agreement shall automatically terminate as provided in this
section. If no such notice is timely given, then Purchaser shall be deemed to
have waived its right to so terminate. Purchaser shall treat the Due Diligence
Materials as confidential and shall use them solely for the purpose of
evaluating the Property. If this Agreement is terminated, Purchaser shall
promptly redeliver to Seller all Due Diligence Materials.
ARTICLE V
TITLE AND SURVEY
----------------
5.1 TITLE COMMITMENT, EXCEPTION DOCUMENTS AND SURVEY. Within 15 days after
the Effective Date, Seller shall deliver or cause to be delivered to Purchaser
the Title Commitment, Exception Documents, Survey, and Search Reports.
5.2 REVIEW PERIOD. [Intentionally left blank.]
5.3 ADDITIONAL EXCEPTIONS. [Intentionally left blank.]
ARTICLE VI
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
-----------------------------------------------------
6.1 REPRESENTATIONS AND WARRANTIES OF SELLER. To induce Purchaser to enter
into this Agreement and to purchase the Property, Seller represents and warrants
to Purchaser, to the best of its knowledge, as follows:
(a) Pursuant to Section 5.2 hereof, Seller has and at the Closing Seller
will have, and will convey, transfer and assign to Purchaser, good, marketable,
fee simple and insurable title to the Land, free and clear of any deeds of
mortgages, liens, encumbrances, leases, tenancies other than the Tenants or
Tenant Leases, licenses, chattel mortgages, conditional sales agreements,
security interests, covenants, conditions, restrictions, judgments, rights-of-
way, easements, encroachments and any other matters affecting title or use of
the Property, except for the Permitted Exceptions.
(b) Seller has duly and validly authorized and executed this Agreement and
has right, title, power and authority to enter into this Agreement and, at
Closing, to consummate the actions provided for herein, and the joinder of no
person or entity will be necessary to convey the Property fully and completely
to Purchaser at Closing. The execution by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby do not, and at
the Closing will not (i) result in a breach of any of the terms or provisions
of, or constitute a default or a condition which upon notice or lapse of time or
both would
9
<PAGE>
ripen into a default under any indenture, agreement, instrument or obligation to
which Seller is a party or by which Seller or the Property or any portion
thereof is bound, or (ii) constitute a violation of any order, rule or
regulation of any court or of any federal or state or municipal regulatory body
or administrative agency or other governmental body having jurisdiction over
Seller or any portion of the Property.
(c) There are no adverse or other parties in possession of the Property or
of any part thereof except Seller and Tenants under valid and effective Tenant
Leases delivered to Purchaser pursuant to Section 4.1 of this Agreement, and no
party has been granted any license, lease or other right relating to the use or
possession of the Property, except Tenants under Tenant Leases which have been
delivered to Purchaser pursuant to Section 4.1 of this Agreement.
(d) Each Tenant Lease, if any, furnished to Purchaser pursuant to this
Agreement is in full force and effect and has not been materially amended,
modified or supplemented in any way that has not been disclosed to Purchaser in
writing. The Tenant Leases, if any, furnished to Purchaser pursuant to this
Agreement constitute all material written and oral agreements of any kind for
the leasing, rental or occupancy of any portion of the Property. All material
Tenant improvements, repairs and other work and obligations, if any, then
required to be performed by the landlord under each of the Tenant Leases will be
fully performed and paid for in full on or prior to the Closing.
(e) None of the Tenant Leases and none of the rents or other charges
payable thereunder, if any, have been assigned, pledged or encumbered by Seller,
except as security given in respect of that certain Credit Agreement dated as of
May 15, 1993, among Ramsay Health Care, Inc., a Delaware corporation ("Ramsay"),
certain subsidiaries of Ramsay, Hibernia National Bank, as lender, First Union
Bank of North Carolina, as lender, and Society Generale, New York Branch, as
lender, issuing bank and agent thereunder.
(f) No brokerage or leasing commissions or other compensation will be due
or payable to any person, firm, corporation or other entity with respect to, or
on account of, any Tenant Lease or any extensions or renewals thereof, if any,
except those agreements entered into or accepted in writing by Purchaser.
(g) No notice has been received by Seller and Seller is not aware of any
person having received notice from any insurance company that has issued a
policy with respect to any portion of the Property or from any board of fire
underwriters (or other body exercising similar functions), claiming any defects
or deficiencies or requiring the performance of any repairs, replacements,
alterations or other work. No notice has been received by Seller from any
issuing insurance company that any of such policies will not be renewed, or will
be renewed only at a higher premium rate than is presently payable therefor,
except as disclosed to and accepted by Purchaser in writing.
l0
<PAGE>
(h) No pending condemnation, eminent domain, assessment or similar
proceeding or charge affecting the Property or any portion thereof exists.
Seller has not received any notice of a proposed increase in the assessed
valuation of the Property.
(i) (i) All of the Improvements (including all utilities) have been
completed and installed and are being used in accordance in all material
respects with all applicable Laws, including all plans and specifications, if
any, approved by governmental authorities having jurisdiction; (ii) permanent
certificates of occupancy, all licenses, permits, authorizations and approvals
required by all governmental authorities having jurisdiction, and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the Improvements, and are in full force
and effect; and (iii) the Improvements, as designed and constructed, comply in
all material respects with all statutes, restrictions, regulations and
ordinances applicable thereto.
(j) (i) The existing water, sewer, gas and electricity lines, storm
sewer and other utility systems on the Land are adequate to serve the utility
needs of the Property; (ii) all utilities required for the operation of the
Improvements enter the Land through adjoining public streets or through
adjoining private land in accordance with valid public or private easements that
will inure to the benefit of Purchaser; (iii) all approvals, licenses and
permits required for said utilities have been obtained and are in force and
effect; and (iv) all of said utilities are installed and operating, all
installation and connection charges have been paid in full, and the right to the
return of any deposit or contribution in connection therewith shall inure to
Purchaser.
(k) (i) There are no material structural defects in any of the buildings
or other Improvements constituting the Property; (ii) the Improvements, all
heating, electrical plumbing and drainage at or servicing the Property and all
facilities and equipment relating thereto are in reasonably good condition and
working order and adequate in quantity and quality for the normal operation of
the Property; (iii) no part of the Property has been destroyed or damaged by
fire or other casualty; and (iv) there are no unsatisfied requests for repairs,
restorations or alterations with regard to the Property from any Tenant, lender,
insurance provider or governmental authority.
(l) No work has been performed or is in progress at the Property, and no
materials will have been delivered to the Property, that might reasonably be
expected to provide the basis for a mechanic's, materialmen's or other lien
against the Property or any portion thereof
(m) Other than the Business Agreements delivered to Purchaser pursuant to
Section 4.1, there exist no material agreements or understandings (oral or
written) with respect to the Property or any portion thereof to which Seller is
a party (other than such items related solely to the conduct by Seller of its
business on the Property or Seller's other property or assets).
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<PAGE>
(n) No default or breach exists under any of the Business Agreements or
any covenant, condition, restriction, right-of-way or easement affecting the
Property or any portion thereof
(o) There are no actions, suits or proceedings pending or, to the best
knowledge of Seller, threatened against or affecting the Property or any portion
thereof or relating to or arising out of the ownership of the Property before
any federal, state, county or municipal department, commission, board, bureau or
agency or other governmental instrumentality, other than those disclosed to
Purchaser pursuant to Section 4.1. All judicial proceedings concerning the
Property will be finally dismissed and terminated prior to Closing.
(p) The Property has free and unimpeded access to currently-existing
public highways and/or roads (either directly or by way of perpetual easements),
and all approvals necessary therefor have been obtained and in full force and
effect. No fact or condition exists which would result in the termination of the
current access from the Property to any currently-existing public highways
and/or roads adjoining or situated on the Property.
(q) There are no attachments, executions, assignments for the benefit of
creditors, or voluntary or involuntary proceedings in bankruptcy or under any
other debtor relief laws contemplated by or pending or threatened against Seller
or the Property.
(r) Other than with respect to activities in connection with or conditions
arising strictly from customary and ordinary use or maintenance of the Property
by Seller and Tenants in full compliance with any or all Hazardous Materials
Law, Seller is unaware of (i) any Hazardous Materials installed, used,
generated, manufactured, treated, handled, refined, produced, processed, stored
or disposed of, or otherwise on or under, the Property; (ii) any activity being
undertaken on the Property which could cause (a) the Property to become a
hazardous waste treatment, storage or disposal facility within the meaning of
any Hazardous Materials Law, (b) a release or threatened release of Hazardous
Materials from the Property within the meaning of any Hazardous Materials Law,
or (c) the discharge of Hazardous Materials into any watercourse, body of
surface or subsurface water or wetland, or the discharge into the atmosphere of
any Hazardous Material which would require a permit under any Hazardous
Materials Law; (iii) any activity undertaken with respect to the Property which
would cause a violation or support a claim under any Hazardous Materials Law;
(iv) any pending or threatened investigation, administrative order, litigation
or settlement with respect to any Hazardous Materials relating to or affecting
the Property; or (v) any notice being served on Seller from any entity,
governmental body or individual claiming any violation of any Hazardous
Materials Law, or requiring compliance with any Hazardous Materials Law, or
demanding payment or contribution for the environmental damage or injury to
natural resources. Seller has not obtained and is not required to obtain, and
Seller has no knowledge of any reason Purchaser will be required to obtain, any
permits, licenses, or similar authorizations to occupy, operate or use the
Improvements or any part of the Property by reason of any Hazardous Materials
Law.
12
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(s) The Purchase Price is being allocated to the Real Property and the
portion of the Property which is considered to be personal property as set forth
on Exhibit J attached hereto.
---------
(t) All certificates of need and approvals, consents, licenses and other
Permits of any Federal, state or local governmental authority necessary or
appropriate for Seller's use of the Property as currently used and the receipt
of Federal and state funds in payment of patient services have been finally and
properly obtained, and no transfer or reissuance of, or notice or approval in
connection with, any such certificate, approval, consent, license or other
Permit is or will be required as a result of this Agreement or the Lease or the
consumation of the transactions contemplated hereby and thereby.
(u) The number of parking spaces available for use in connection with the
Improvements complies with all applicable Laws.
(v) All documents and information delivered by Seller to Purchaser
pursuant to the provisions of this Agreement are true, correct and complete as
of the date hereof and will be correct and complete as of the Closing Date,
except as set forth in this Agreement and in the disclosure schedule
accompanying this Agreement and initialled by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered paragraphs in this Section 6.1. From time to time after the
execution of this Agreement until the Closing, Seller shall deliver to Purchaser
one or more supplemental schedules setting forth all changes in the schedules,
and in previously delivered supplemental schedules, if any, and in any of the
representations and warranties made herein whether or not previously modified by
a schedule, arising out of matters discovered or occurring prior to the Closing.
Purchaser and its counsel shall have 30 days to object in writing to any
material information in any supplemental schedule. Failure by Purchaser to
notify Seller within such 30-day period of any objection to information provided
in the supplemental schedule prior to the Closing shall be deemed to be approval
thereof.
6.2 INDEMNITY OF SELLER. Subject to the provisions provided hereafter
limiting the liability of Seller, Seller hereby agrees to indemnify and defend,
at its sole cost and expense, and hold Purchaser, its successors and assigns,
harmless from and against and to reimburse Purchaser with respect to any and
all claims, demands, actions, causes of action, losses, damages, liabilities,
costs and expenses (including without limitation reasonable attorneys' fees and
court costs) of any and every kind or character, known or unknown, fixed or
contingent, asserted against or incurred by Purchaser at any time and from time
to time by reason of or arising out of (a) the breach of any representation or
warranty of Seller set forth in this Agreement, (b) the failure of Seller, in
whole or in part, to perform any obligation required to be performed by Seller
pursuant to Section 6.1, or (c) except for the matters disclosed herein or in
the Disclosure Schedule, the ownership, construction, occupancy, operation, use
and maintenance of the Property prior to the Closing Date, or (d) the violation
on or before the Closing Date of any Hazardous Material Law in effect on or
before the Closing Date and any and all matters arising out of any act,
omission, event or
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<PAGE>
circumstance existing or occurring on or prior to the Closing Date (including
without limitation the presence on the Property or release from the Property of
Hazardous Materials disposed of or otherwise released prior to the Closing Date)
which results in a violation of a Hazardous Materials Law, regardless of whether
the act, omission, event or circumstance constituted a violation of any
Hazardous Materials Law at the time of its existence or occurrence. The
provisions of this Section 6.2 shall survive the Closing of the transaction
contemplated by this Agreement and shall continue thereafter in full force and
effect for the benefit of Purchaser, its successors and assigns, and,
notwithstanding any provision of this Agreement to the contrary, Purchaser may
exercise any right or remedy Purchaser may have at law or in equity should
Seller fail to meet, comply with or perform its indemnity obligations required
by this Section 6.2.
6.3 Intentionally Deleted.
6.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER. Purchaser
represents and warrants to Seller that:
(a) Purchaser has duly and validly authorized and executed this Agreement,
and has full right, power and authority to enter into this Agreement and to
consummate the actions provided for herein, and the joinder of no person or
entity will be necessary to purchase the Property from Seller at Closing.
(b) The execution by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby do not, and at the Closing
will not, result in any breach of any of the terms or provisions of or
constitute a default or a condition which upon notice or lapse of time or both
would ripen into a default under any indenture, agreement, instrument or
obligation to which Purchaser is a party, and do not constitute a violation of
any order, rule or regulation of any court or any federal or state or municipal
regulatory body or administrative agency or other governmental body having
jurisdiction over Purchaser.
(c) Purchaser shall indemnify and hold Seller harmless from and against
any claims for any brokerage fee or commission, finder's fee or financial
advisory fee arising from or related to the transactions contemplated by this
Agreement and which is asserted by any person or entity claiming to have acted
as agent or a representative of Purchaser.
(d) All documents and information delivered by Purchaser to Seller
pursuant to the provisions of this Agreement are true, correct and complete as
of the date hereof and will be correct and complete as of the Closing Date,
except as set forth in this Agreement and in the Disclosure Schedule. From time
to time after the execution of this Agreement until the Closing, Purchaser shall
deliver to Seller one or more supplemental schedules setting forth all changes
in the schedules, and in previously delivered supplemental schedules, if any,
and in any of the representations and warranties made herein whether or not
previously modified by a schedule, arising out of matters discovered or
occurring prior
14
<PAGE>
to the Closing. Seller and its counsel shall have 30 days to object in writing
to any material information in any supplemental schedule, and failure by Seller
to notify Purchaser within such 30-day period of any objection to information
provided in the supplemental schedule prior to the Closing shall be deemed to be
approval thereof.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S AND SELLER'S OBLIGATIONS
------------------------------------------------------
7.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligations of
Purchaser to purchase the Property from Seller and to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, as
of the Closing, of each of the following conditions:
(a) All of the representations and warranties of Seller set forth in this
Agreement shall be true as of the Closing in all material respects except for
changes expressly permitted or contemplated by the terms of this Agreement.
(b) Seller and Guarantor shall have delivered, performed, observed and
complied in all material respects with all of the items, instruments, documents,
covenants, agreements and conditions required by this Agreement to be delivered,
performed, observed and complied with by Seller or Guarantor prior to, or as of,
the Closing.
(c) Neither Seller nor Guarantor shall be in receivership or dissolution
proceedings or have made any assignment for the benefit of creditors, or
admitted in writing its inability to pay its debts as they mature, or have been
adjudicated as bankrupt, or have filed a petition in voluntary bankruptcy, a
petition or answer seeking reorganization or an arrangement with creditors under
the federal bankruptcy law or any other similar law or statute of the United
States or any state and no such petition shall have been filed against it; and
neither Seller nor Guarantor shall be in default with respect to any
Indebtedness in the outstanding amount of (i) in the case of Seller, at least
$50,000, and (ii) in the case of Guarantor, at least $1,000,000.
(d) No material or substantial change shall have occurred with respect to
the condition, financial or otherwise, of the Property, Seller or Guarantor.
(e) Neither the Property nor any part thereof or interest therein shall
have been taken by execution or other process of law in any action prior to
Closing.
(f) Purchaser shall be reasonably satisfied with its inspection of the
Property with respect to the physical condition thereof by agents or contractors
selected by Purchaser.
(g) Purchaser shall have received, in form acceptable to Purchaser,
evidence of compliance by the Property with all Permits required as of the
Effective Date hereof and such other Permits as may be necessary or appropriate
for the operation of the Property for
15
<PAGE>
the current and intended use and for the transactions contemplated by this
Agreement and the Lease.
(h) All necessary approvals, consents and the like of third parties to the
validity and effectiveness of the transactions contemplated hereby shall have
been obtained.
(i) Purchaser shall be reasonably satisfied that the Property is
sufficient and adequate for Seller to carry on the business now being conducted
thereon and that the Property is in good condition and repair as reasonably
required for the proper operation and use thereof in compliance with applicable
Laws and the requirements of applicable accreditation and licensing authorities.
(j) Purchaser shall be satisfied with all matters regarding title and
survey pursuant to Article V hereof.
(k) Purchaser shall have obtained an environmental site assessment report
covering the Property in form and content acceptable to Purchaser.
(l) No portion of the Property shall have been destroyed by fire or
casualty.
(m) No condemnation, eminent domain or similar proceeding shall have been
commenced or threatened with respect to any portion of the Property.
(n) Purchaser shall have received an appraisal satisfactory to Purchaser
in all respects, including without limitation a fair market value substantially
equivalent to the Purchase Price.
(o) Seller shall have provided such representations, warranties and
consents as may be reasonably required by the United States Securities and
Exchange Commission (including but not limited to inclusion of financial
statements, financial information and other required information concerning
Seller or any affiliate of Seller in any United States Securities and Exchange
Commission filings made by Purchaser or any affiliate of Purchaser).
(p) Capstone Capital Corporation or an affiliate shall have entered into
an Agreement of Sale and Purchase with Mesa Psychiatric Hospital, Inc., an
Arizona corporation ("Mesa"), for the purchase of property constituting Desert
Vista Hospital in Mesa, Arizona, and there shall exist no event of default
thereunder on the part of Mesa.
7.2 FAILURE OF CONDITIONS TO PURCHASER'S OBLIGATIONS. In the event any one
or more of the conditions to Purchaser's obligations are not satisfied in whole
or in part as of the Closing, Purchaser, at Purchaser's option, shall be
entitled to: (a) terminate this Agreement by giving written notice thereto to
Seller, whereupon all moneys which have been delivered by Purchaser to Seller or
the Title Company (other than the Independent
16
<PAGE>
Consideration) shall be immediately refunded to Purchaser and neither Purchaser
nor Seller shall have any further obligations or liabilities hereunder; (b)
waive such failure of condition and proceed to Closing hereunder; or (c) pursue
such other remedies as may be available to Purchaser.
7.3 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller to sell
the Property to Purchaser and to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, as of the Closing Date, of each
of the following conditions:
(a) The representations and warranties of Purchaser contained herein shall
be in all material respects true and accurate as of the Closing Date.
(b) Purchaser shall have delivered, performed, observed and complied in
all material respects with all of the items, instruments, documents, covenants,
agreements and conditions required by this Agreement to be delivered, performed,
observed and complied with by Purchaser as of the Closing Date.
(c) No statute, rule, regulation, order, decree or injunction shall have
been enacted, entered, promulgated or enforced by any court of competent
jurisdiction or United States governmental authority which prohibits the
consummation of the transactions contemplated by this Agreement.
(d) All action required to be taken by the Purchaser to authorize the
execution, delivery, and performance of this Agreement and the other agreements
or documents related hereto, and the consummation of the transactions
contemplated hereby, shall have been duly and validly taken.
(e) Seller shall have received all necessary consents of lenders under
existing credit facilities to the transactions contemplated hereby and by the
Lease.
(f) Capstone Capital Corporation shall have entered into an Agreement of
Sale and Purchase with Mesa Psychiatric Hospital, Inc., an Arizona corporation,
for the purchase of property constituting Desert Vista Hospital in Mesa,
Arizona, and there shall exist no event of default thereunder on the part of the
purchaser.
7.4 FAILURE OF CONDITIONS TO SELLER'S OBLIGATIONS. In the event any one or
more of the conditions to Seller's obligations are not satisfied in whole or in
part as of the Closing, Seller, at Seller's option, shall be entitled to: (a)
terminate this Agreement by giving written notice thereto to Purchaser,
whereupon all moneys which have been delivered by Purchaser to Seller or the
Title Company (other than the Independent Consideration) shall be immediately
refunded to Purchaser and neither Purchaser nor Seller shall have any further
obligations or liabilities hereunder; or (b) waive such failure of conditions
and proceed to Closing hereunder.
17
<PAGE>
ARTICLE VIII
PROVISIONS WITH RESPECT TO THE CLOSING
--------------------------------------
8.1 SELLER'S CLOSING OBLIGATIONS. At Closing, Seller shall furnish and
deliver to the Title Company and/or Purchaser the following:
(a) The Deed, Title Commitment obligating the Title Company to issue the
Title Policy subject only to the Permitted Exceptions, Bill of Sale, Certificate
of Non-Foreign Status, Closing Certificate, the Guaranty and the Lease, each
duly executed and acknowledged by Seller or Guarantor, as the case may be.
(b) An affidavit, agreement and indemnity executed by Seller and dated as
of the Closing Date, stating that there are no unpaid debts for any work that
has been done or materials furnished to the Property prior to and as of Closing
and stating that Seller shall indemnify, save and protect Purchaser and its
assigns harmless from and against any and all Claims, including without
limitation court costs and reasonable attorneys' fees related thereto, arising
out of, in connection with, or resulting from the same, up to and including the
Closing Date, in form and substance mutually acceptable to Seller and Purchaser.
(c) Certificates of casualty and fire insurance for the Property required
pursuant to the Lease showing Purchaser as additional insured and loss payee
thereunder, with appropriate provisions for 30 days' prior notice to Purchaser
in the event of cancellation or termination of such policies.
(d) Updated Search Reports, dated not more than ten days prior to Closing,
evidencing no UCC-l Financing Statements or other filings in the name of Seller
with respect to the Property.
(e) Such affidavits, certificates or letters of indemnity as the Title
Company shall reasonably require in order to omit from its insurance policy all
exceptions for unfiled mechanic's, materialman's or similar liens.
(f) Any and all transfer declarations or disclosure documents, duly
executed by the appropriate parties, required in connection with the Deed by any
state, county or municipal agency having jurisdiction over the Property or the
transactions contemplated hereby.
(g) Such instruments or documents as are required by Purchaser or the
Title Company to evidence the status and capacity of Seller and the authority of
the person or persons who are executing the various documents on behalf of
Seller in connection with the purchase and sale transaction contemplated hereby.
(h) The Closing Fee and all other costs and expenses payable by Seller to
Purchaser pursuant to Section 9.2.
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<PAGE>
(i) Rent for the month of April, 1995 in the amount set forth in Section
2.1(a) of the Lease.
8.2 PURCHASER'S CLOSING OBLIGATIONS. At Closing, Purchaser shall deliver
to the Title Company, and Seller the following:
(a) The Lease, duly executed and acknowledged by Purchaser.
(b) Such instruments as are necessary, or reasonably required by Seller or
the Title Company to evidence the authority of Purchaser to consummate the
transactions contemplated hereby and to execute and deliver the closing
documents on the Purchaser's part to be delivered.
(c) Purchaser shall have tendered the Purchase Price.
ARTICLE IX
EXPENSES OF CLOSING
-------------------
9.1 ADJUSTMENTS. There shall be no adjustment of taxes, assessments, water
or sewer charges, gas, electric, telephone or other utilities, operating
expenses, premiums on insurance policies or other normally proratable items, it
being agreed and understood by the Parties that the Seller shall be obligated to
pay such items under the terms of the Lease.
9.2 CLOSING COSTS. Seller shall pay all costs of closing, including
without limitation Purchaser's attorneys' fees and reasonable out of pocket
expenses related to the transactions contemplated herein, all title examination
fees and premiums for the Title Policy, the Search Reports, the Survey, any
environmental reports, appraisals, structural or engineering reports, all state,
municipal or other documentary or transfer taxes payable in connection with the
delivery of any instrument or document provided in or contemplated by this
Agreement or any agreement or commitment described or referred to herein, and
the charges for or in connection with the recording and/or filing of any
instrument or document provided herein or contemplated by this Agreement or any
agreement or document described or referred to herein.
ARTICLE X
DEFAULT AND REMEDIES
--------------------
l0.1 SELLER'S DEFAULT; PURCHASE'S REMEDIES.
(a) Seller's Default. Seller shall be deemed to be in default hereunder
----------------
upon the occurrence of any one or more of the following events: (i) any of
Seller's warranties or representations set forth herein shall be untrue in any
material aspect when made or at Closing, or (ii) Seller shall fail in any
material respect to meet, comply with, or perform any
19
<PAGE>
covenant, agreement or obligation on its part required within the time limits
and in the manner required in this Agreement.
(b) Purchaser's Remedies. In the event Seller shall be deemed to be in
--------------------
default hereunder Purchaser may, as its sole remedies: (i) terminate this
Agreement by written notice delivered to Seller on or before the Closing; or
(ii) enforce specific performance of this Agreement against Seller including
Purchaser's reasonable costs and attorneys fees in connection therewith. It is
understood and agreed that termination or specific performance as provided in
(i) and (ii) above constitute Purchaser's sole remedy against Seller, and that
Purchaser shall not be entitled to seek monetary damages from Seller or assert
any other remedy against Seller, except for the costs and expenses to be paid by
Seller pursuant to Section 9.2 hereof.
l0.2 PURCHASER'S DEFAULT; SELLER'S REMEDIES.
(a) Purchaser's Default. Purchaser shall be deemed to be in default
--------------------
hereunder upon the occurrence of any one or more of the following events: (i)
any of Purchaser's warranties or representations set forth herein shall be
untrue in any material respect when made or at Closing; or (ii) Purchaser shall
fail in any material respect to meet, comply with, or perform any covenant,
agreement or obligation on its part within the time limits and in the manner
required in this Agreement.
(b) Seller's Remedy. In the event Purchaser shall be deemed to be in
---------------
default hereunder, Seller, as Seller's sole and exclusive remedy for such
default, shall be entitled to terminate this Agreement and all rights of
Purchaser hereunder and to receive the Independent Consideration, it being
agreed between Purchaser and Seller that such sum shall be liquidated damages
for a default of Purchaser hereunder because of the difficulty, inconvenience,
and uncertainty of ascertaining actual damages for such default. If Seller shall
be entitled to the Independent Consideration in accordance with this Section
10.2, Purchaser agrees to deliver, on written request of Seller, such
instructions as may be reasonably necessary to cause the Title Company to
deliver the Independent Consideration to Seller. In such event, Purchaser will
pay the costs of the Survey, Title Commitment, Search Reports, appraisals and
any environmental survey, report or study, which shall be and become the
property of Purchaser.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 SURVIVAL. All of the representations, warranties, covenants,
agreements and indemnities (but not matters or items identified as conditions
for parties' obligation to close) of Seller and Purchaser contained in this
Agreement, to the extent not performed at the Closing, shall survive the Closing
and shall not be deemed to merge upon the acceptance of the Deed by Purchaser.
20
<PAGE>
11.2 NOTICES. All notices, demands, requests and other communications or
documents to be provided under this Agreement shall be in writing and shall be
given to the party at its address or telecopy number set forth below or such
other address or telecopy number as the party may later specify for that purpose
by notice to the other party. Each notice shall, for all purposes shall be
deemed given and received:
(i) If given by telecopy, when the telecopy is transmitted to the
party's telecopy number specified below and confirmation of complete
receipt is received by that transmitting party during normal business
hours on any Business Day, or on the next Business Day if not confirmed
during normal business hours;
(ii) If hand delivered, when delivered;
(iii) If given by nationally recognized and reputable overnight
delivery service, the day on which the notice is actually received by the
party; or
(iv) If given by certified mail, return receipt requested, postage
prepaid, two Business Days after posted with the United States Postal
Service, at the address of the party specified below:
If to Purchaser:
CAPSTONE CAPITAL OF SAN ANTONIO, LTD.
d/b/a CAHABA OF SAN ANTONIO, LTD.
l000 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
Attention: William C. Harlan, Vice President
Telephone: (205) 967-2092
Telecopy: (205) 967-9066
With a copy to:
Wanda S. McNeil, Esq.
Sirote & Permutt, P.C.
200 Clinton Avenue, N.W.
Huntsville, Alabama 35801
Telephone: (205) 536-1711
Telecopy: (205) 518-3681
21
<PAGE>
If intended for Seller:
RHCI San Antonio, Inc.
Gregory H. Browne
Chief Executive Officer
Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
Telephone: (504) 525-2505
Telecopy: (504) 585-0505
With a copy to:
Mirek Fajt, Esq.
Haythe & Curley
237 Park Avenue
New York, New York 10017-3142
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
11.3 ENTIRE AGREEMENT; MODIFICATIONS. This Agreement embodies and
constitutes the entire understanding between the parties with respect to the
transactions contemplated herein, and all prior or contemporaneous agreements,
understandings, representations and statements (oral or written), other than the
Lease, the Guaranty and all other documents executed in connection therewith,
are merged into this Agreement. Neither this Agreement nor any provision hereof
may be waived, modified, amended, discharged or terminated except by an
instrument in writing signed by the Party against whom the enforcement of such
waiver, modification, amendment, discharge or termination is sought, and then
only to the extent set forth in such instrument.
11.4 APPLICABLE LAW. This Agreement and the transactions contemplated
hereby shall be governed by and construed in accordance with the laws of the
state in which the Property is located.
11.5 CAPTIONS. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe, or limit the scope or intent
of this Agreement or any of the provisions hereof.
11.6 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal and personal representatives, successors, and assigns.
22
<PAGE>
11.7 EXTENSION OF DATES. Notwithstanding anything to the contrary
contained in this Agreement, if Seller shall fail to deliver any document or
item required pursuant to any of the terms and provisions of Article IV and/or
Article V within the applicable time period required, Purchaser, at its option,
shall have the right to extend the date of expiration of the Review Period, and
correspondingly the date of Closing, by the number of days elapsing from the
date such items were required to be delivered and the date such items were
actually delivered to Purchaser; provided that Purchaser shall give Seller
--------
notice of its intent to extend such dates. Nothing herein shall diminish
Seller's obligation to timely furnish such items.
11.8 TIME IS OF THE ESSENCE. With respect to all provisions of this
Agreement, time is of the essence. However, if the first date of any period
which is set out in any provision of this Agreement falls on a day which is not
a Business Day, then, in such event, the time of such period shall be extended
to the next day which is a Business Day.
11.9 WAIVER OF CONDITIONS. Any Party may at any time or times, at its
election, waive any of the conditions to its obligations hereunder, but any such
waiver shall be effective only if contained in a writing signed by such Party.
No waiver by a Party of any breach of this Agreement or of any warranty or
representation hereunder by the other Party shall be deemed to be a waiver of
any other breach by such other Party (whether preceding or succeeding and
whether or not of the same or similar nature), and no acceptance of payment or
performance by a Party after any breach by the other Party shall be deemed to be
a waiver of any breach of this Agreement or of any representation or warranty
hereunder by such other Party, whether or not the first Party knows of such
breach at the time it accepts such payment or performance. No failure or delay
by a Party to exercise any right it may have by reason of the default of the
other Party shall operate as a waiver of default or modification of this
Agreement or shall prevent the exercise of any right by the first Party while
the other Party continues to be so in default.
ll.l0 BROKERS. Each party hereby represents to the other party that it has
not discussed this Agreement or the subject matter thereof with any real estate
broker or salesman so as to create any legal rights in any such broker or
salesman to claim a real estate commission or similar fee with respect to the
purchase or sale of the Property, and agrees to defend, indemnify and hold the
other party harmless from any and all claims for any real estate commissions,
leasing fees or similar fees arising out of or in any way relating to a breach
of the foregoing representation.
11.11 RISK OF LOSS. Until the Closing Date, the risk of loss of any
portion of the Property shall be solely that of Seller. Risk of loss shall be
that of Purchaser from and after the Closing Date, at which time Seller shall
deliver to Purchaser possession of the Property.
11.12 NO ASSUMPTION OF LIABILITIES. Purchaser shall not assume any of the
existing liabilities, indebtedness, commitments or obligations of any nature
whatsoever (whether
23
<PAGE>
fixed or contingent) of Seller in respect of the Property or otherwise, except
those expressly assumed herein.
11.13 COUNTERPARTS. This Agreement may be executed 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.
24
<PAGE>
EXECUTED to be effective as of the Effective Date.
PURCHASER:
CAPSTONE CAPITAL OF SAN ANTONIO,
LTD., an Alabama limited partnership,
d/b/a CAHABA OF SAN ANTONIO, LTD.
By: CAPSTONE CAPITAL OF CAPE CORAL,
INC., an Alabama corporation,
d/b/a Cahaba of Cape Coral, Inc.
Its General Partner
By: /s/ William C. Harlan
-------------------------------
William C. Harlan
Its: Vice President
Date April 12, 1995
-----------------------------------
Purchaser's Tax Identification Number:
63-1129622
SELLER:
RHCI SAN ANTONIO, INC.,
a Delaware corporation
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Its: Vice President
-----------------------------------
Date April 12, 1995
-----------------------------------
Seller's Tax Identification Number:
74-2611258
25
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made by and between Ramsay Health Care, Inc., a Delaware
corporation (the "Company"), and Brent Bryson (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company wishes to retain the services of the Employee, and the
Employee wishes to serve in the employ of the Company, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment
1.1 The Company agrees to employ the Employee, and the Employee agrees to
serve in the employ of the Company, for the terms set forth in Section
1.2, in the position and with the responsibilities, obligations, duties,
and authority set forth in Sections 2 and 3 and on the other terms and
conditions set forth in this Agreement.
1.2 The term of the Employee's employment under this Agreement shall commence
on October 1, 1994 and continue until terminated in accordance with
Section 7 of this Agreement.
2. Position, Duties. The Employee shall serve in the position of Vice President,
Hospital Operations for the Company. The Employee shall perform faithfully
and diligently, such duties and obligations and shall have such other
responsibilities, appropriate to said position, as shall be assigned to him
from time-to-time by the Chief Executive Officer (the "CEO") or the Chief
Operating Officer and Executive Vice President (the "COO") of the Company or
their designee for such purposes. The Employee shall report directly to the
COO of the Company or his designee. The Employee shall devote his complete
and undivided attention to the performance of his duties, obligations, and
responsibilities hereunder during the normal working hours of executive
employees of the Company. The Employee hereby represents that he is not bound
by any confidentiality agreements or restrictive covenants which restrict or
may restrict his ability to perform his duties hereunder, and agrees that he
will not enter into any such agreements or covenants during the term of his
employment hereunder.
3. Compliance with Policies of the Company. The Employee acknowledges that he
has had an opportunity to ask any questions that he may have concerning the
employment policies of the Company and, as a condition of his employment,
agrees to comply with any and all such policies.
<PAGE>
4. Salary and Bonus.
4.1 During the term of this Agreement, in consideration of the performance by
the Employee of the services set forth in Section 2 and his observance of
the other covenants set forth herein, the Company shall pay the Employee,
and the Employee shall accept, a base salary at the rate of $175,000 per
annum, payable in accordance with the standard payroll practices of the
Company.
4.2 The base salary set forth in Section 4.1 shall be reviewed annually by
the Board of Directors of the Company, or its designee for such purposes,
and adjusted by such amount as the Board, or its designee, shall
determine, in its or its designee's discretion, from time to time.
4.3 In addition to the base salary set forth above, the Company will grant to
Employee options to purchase 15,000 shares of the Company's common stock,
at a price to be determined at the next meeting of the Company's Board of
Directors, which is scheduled for September 10, 1994. These options will
be granted pursuant to a separate stock option agreement between the
Company and Employee and will not be exercisable until Employee's
interest in such options has vested, which vesting will occur at a rate
of 5,000 per year, with the first 5,000 shares vesting on the first
anniversary of the commencement of Employee's term of employment, with an
additional 5,000 shares vesting on the next two subsequent anniversary
dates.
4.4 In addition to the base salary set forth above, the Employee shall have
the opportunity to earn for each fiscal year of the Company during the
term of this Agreement, a bonus of two percent (2%) of the improvement in
normalized operations income of assigned operations. The bonus shall be
based upon the achievement by the Company and the Employee during such
fiscal year of the performance targets established in the discretion of
the Board of Directors of the Company, or its designee for such purposes,
for the purpose of determining such fiscal year's bonus. The bonus, if
any, payable to the Employee for a fiscal year of the Company shall be
payable within 90 days after the close of such fiscal year. The Board of
Directors may, at its discretion, amend or change the bonus calculation.
5. Expense Reimbursement. During the term of this Agreement, the Company shall
reimburse the Employee for all reasonable and necessary out-of-pocket
expenses incurred by him in connection with the performance of his duties
hereunder, including, without limitation, professional dues, travel and
related expenses for meetings which are beneficial and advantageous to the
current and future operations of the Company.
6. Benefits.
6.1 Benefit Plans. during the term of this Agreement, the Employee will be
eligible to participate in all pension, health, and welfare employee
benefit plans and programs of the Company, including, without limitation,
the group life insurance,
-2-
<PAGE>
accidental death and dismemberment insurance ("AD&D insurance"),
disability, group hospitalization, surgical and major medical insurance
plans of the Company, in accordance with the provisions of such plans and
programs as in effect from time to time. The Employee shall have the
right to designate the beneficiary of all such life and AD&D insurance.
6.2 Vacation. The Employee shall be entitled to four (4) weeks vacation per
annum. Any unused vacation days shall carry over to succeeding years;
provided, however, that accumulated vacation may not exceed twenty (20)
days in the aggregate. The Company shall compensate the Employee for any
unused vacation days at the time of termination of the Employee's
employment hereunder by payment in a lump sum at the time of such
termination.
6.3 Sick Leave. The Employee shall be entitled to twelve (12) paid sick
day(s) per year. No unused sick days shall carry over to succeeding
years; and further provided that the Company shall not be required to
compensate the Employee for any unused sick days at the time of
termination of the Employee's employment hereunder.
6.4 Automobile. During the term of this Agreement, the Company shall provide
the Employee with a $400.00 per month allowance, or such other amount as
the Board of Directors of the Company, or its designee for such purposes,
may decide from time to time to use towards the costs of the operation
and maintenance of an automobile.
6.5 Relocation Expenses. The Company shall pay the reasonable and necessary
expenses incurred by the Employee in relocating his residence to New
Orleans, Louisiana, which the Company encourages Employee do to as soon
as possible after December 31, 1994, and which Employee must do prior to
June 30, 1995. In the future, in the event that the Board of Directors,
or its designee for such purposes, determines that relocation of the
residence of the Employee is necessary to the performance by the Employee
of his duties, obligations, and responsibilities as defined in Section 2,
the Company shall pay the reasonable and necessary expenses incurred by
the Employee in relocating his residence to such location determined by
the Board of Directors, or its designee for such purposes, subject to the
Company's relocation policy in effect at the time of the actual
relocation.
6.6 Temporary Lodging and Transportation. During the period of time prior to
Employee relocating his residence to New Orleans, Louisiana, the Company
shall provide employee with an apartment or other temporary lodging for
Employee's use during the time that Employee is required to be in New
Orleans. The Company will also pay for reasonable travel expenses of
Employee to and from his place of residence during such time period;
provided, however, that Employee shall coordinate such travel with the
travel that Employee is required to perform on behalf of the Company in
an effort to minimize expenses related to such transportation expense.
-3-
<PAGE>
7. Termination of Employment.
7.1 Death. In the event of the death of the Employee during the term of this
Agreement, the Company shall pay to the estate or other legal
representative of the Employee (a) the base salary provided for in
Sections 4.1 and 4.2 (at the annual rate then in effect) accrued to the
date of death and not theretofore paid to the Employee; (b) any bonus due
to the Employee under Section 4.3 which was earned by the Employee at the
date of his death and not theretofore paid to the Employee; (c) any
amounts due and payable pursuant to Section 5; and (d) any amounts due
and payable pursuant to Sections 6.2 and 6.5. Rights and benefits of the
estate or other legal representative of the Employee under the pension,
health, and welfare benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs
of the Company at the time of the effective date of the Employee's
termination pursuant to this Section 7.1. Neither the estate or other
legal representative of the Employee nor the Company shall have any
further rights or obligations under this Agreement.
7.2 Disability. If the Employee shall become incapacitated by reason of
sickness, accident, or other physical or mental disability and shall be
unable to perform the essential duties of his job and the Company is
unable reasonably to accommodate the Employee, the employment of the
Employee hereunder may be terminated by the Company or the Employee. In
the event of such termination, the Company shall pay to the Employee (a)
any bonus due to the Employee under Section 4.3 which was earned by the
Employee at the date of termination and not theretofore paid to the
Employee; (b) any amounts due and payable pursuant to Section 5; (c) any
amounts due and payable pursuant to Sections 6.2 and 6.5.; and (d)
continue to pay to the Employee the base salary provided for in Sections
4.1 and 4.2 (at the annual rate then in effect) until the first to occur
of (i) the expiration of a period of six (6) months from the date of such
termination, (ii) the commencement of payment of benefits the Employee
under any disability plan or policy maintained by the Company or (iii)
the death of the Employee. Rights and benefits of the Employee under the
pension, health, and welfare benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs of the Company at the time of the effective date of the
Employee's termination pursuant to this Section 7.2. Neither the Employee
nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 8, 9, and 10.
7.3 Good Cause. The employment of the Employee hereunder may be terminated by
the Company at any time for Good Cause (as hereinafter defined). In the
event of such termination, the Company shall pay to the Employee (a) the
base salary provided for in Sections 4.1 and 4.2 (at the annual rate then
in effect) accrued to the date of such termination and not theretofore
paid to the Employee; (b) any bonus due to the Employee under Section 4.3
which was earned by the Employee at the date of such termination and not
theretofore paid to the Employee; (c) any amounts due and payable
pursuant to Section 5; and (d) any amounts due and
-4-
<PAGE>
payable pursuant to Sections 6.2 and 6.5. Rights and benefits of the
Employee under the pension, health, and welfare benefit plans and
programs of the Company shall be determined in accordance with the
provisions of such plans and programs of the Company at the time of the
effective date of the Employee's termination pursuant to this Section
7.3. For purposes hereof, "Good Cause" shall include (a) the Employee's
failure to discharge his duties and responsibilities under this
Agreement, with such failure to discharge such duties and
responsibilities to be determined by a majority of the Board of Directors
of the Company, or its designee for such purposes, either of whose good
faith determination with respect thereto shall be conclusive, or (b) the
Employee's commission of (i) a felony or (ii) any crime or offense
involving moral turpitude. After the satisfaction of any claim of the
Company against the Employee incidental to such Good Cause, neither the
Employee nor the Company shall have any further rights or obligations
under this Agreement, except as provided in Sections 8, 9, and 10.
7.4 Other Termination by the Company. The Board of Directors of the Company,
or its designee for such purposes, may terminate the Employee's
employment at any time for whatever reason it, or its designee, deems
appropriate. In the event that such termination is not pursuant to
Sections 7.1, 7.2, or 7.3, the Company shall pay to the Employee (a) the
base salary provided for in Sections 4.1 and 4.2 (at the annual rate then
in effect) accrued to the date of termination and not theretofore paid to
the Employee; (b) any bonus due to the Employee under Section 4.3 which
was earned by the Employee at the date of such termination and not
theretofor paid to the Employee; (c) any amounts due and payable
pursuant to Section 5; (d) any amounts due and payable pursuant to
Section 6.2 and 6.5; and (e) continue to pay to the Employee the base
salary provided for in Sections 4.1 and 4.2 (at the annual rate then in
effect) until the first to occur of (i) the expiration of a period of six
(6) months following such termination or (ii) the death of the Employee.
Rights and benefits of the Employee, or in the event of death of the
Employee the estate or other legal representative of Employee, under the
benefit plans and programs of the Company shall be determined in
accordance with the provisions of such plans and programs. The Employee,
the Employee's estate or other legal representative, and the Company
shall not have any further rights or obligations under this Agreement,
except as provided in Sections 8, 9, and 10.
7.5 Termination by the Employee. The Employee may terminate his employment
with the Company upon thirty (30) days prior written notice to the
Company. In the event of such termination, the Company shall pay to the
Employee (a) the base salary provided for in Sections 4.1 and 4.2 (at the
annual rate then in effect) accrued to the date of termination and not
theretofore paid to the Employee; (b) any bonus due to the Employee under
Section 4.3 which was earned by the Employee at the date of termination
and not theretofore paid to the Employee; (c) any amounts due and payable
pursuant to Section 5; and (d) any amounts due and payable pursuant to
Sections 6.2 and 6.5. Rights and benefits of the Employee under the
benefit plans and programs of the Company shall be
-5-
<PAGE>
determined in accordance with the provisions of such plans and programs.
Neither the Employee nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 8, 9,
and 10.
7.6 Cobra Continuation Period. In the event that the Employee is terminated
pursuant to 7.1, 7.2, 7.3, or 7.4 and coverage for the Employee under the
Company's employee health plan is paid for by the Company for any
specified period of time, then such specified period of paid coverage
shall run, to the extent permitted by law, concurrently with the COBRA
continuation period to which the Employee is entitled pursuant to
Internal Revenue Code /S/ 4980B.
8. Confidential Information.
8.1 The Employee shall, during the Employee's employment with the Company and
thereafter, treat all confidential material confidentially and, except in
accordance with the terms of this Agreement, shall not, without the prior
written consent of a majority of the Board of Directors of the Company,
disclose such material, directly or indirectly, to any party not at the
time of such disclosure an employee or agent of the Company, or remove
from the Company's premises any notes or records relating thereto, copies
or facsimiles thereof (whether made by electronic, electrical, magnetic,
optical, laser, acoustic or other means), or any other property of the
Company. The Employee agrees that all confidential material, together
with all notes and records of the Employee relating thereto, and all
copies or facsimiles thereof in the possession of the Employee (whether
made by the foregoing or other means) are the exclusive property of the
Company. The Employee shall not in any manner use any confidential
material, or any other property of the Company, in any manner not
specifically directed by the Company or in any way which is detrimental
to the Company, as determined by a majority of the Board of Directors of
the Company in its sole discretion.
8.2 For the purposes hereof, the term "confidential material" shall mean all
information in any way concerning the activities, business or affairs of
the Company, or the Company's customers and clients, and all information
concerning the practices, customers and clients of the Company, and all
information in any way concerning the activities, business or affairs of
any of such customers or clients, as such, which is furnished to the
Employee by the Company or any of its agents, customers or clients, as
such, or otherwise acquired by the Employee in the course of the
Employee's employment with the Company; provided, however, that the term
"confidential material" shall not include information which (i) becomes
generally available to the public other than as a result of a disclosure
by the Employee, (ii) was available to the Employee on a non-confidential
basis prior to his employment with the Company or (iii) becomes
available to the Employee on a non-confidential basis from a source other
than the Company or any of its agents, customers, or clients, as such,
provided that such source is not bound by a confidentiality agreement
with the Company or any of such agents, customers, or clients.
-6-
<PAGE>
8.3 Promptly upon the request of the Company, the Employee shall deliver to
the Company all confidential material in the possession of the Employee
without retaining a copy thereof, unless, in the opinion of counsel for
the Company, either returning such confidential material or failing to
retain a copy thereof would violate any applicable federal, state, local,
or foreign law, in which event such confidential material shall be
returned without retaining any copies thereof as soon as practicable
after such counsel advises that the same may be lawfully done.
8.4 In the event that the Employee is required, by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process, to disclose any confidential
material, the Employee shall provide the Company with prompt notice
thereof so that the Company may seek an appropriate protective order
and/or waive compliance by the Employee with the provisions hereof;
provided, however, that if in the absence of a protective order or the
receipt of such a waiver, the Employee is, in the opinion of counsel for
the Company, compelled to disclose confidential material not otherwise
disclosable hereunder to any legislative, judicial, or regulatory body,
agency or authority, or else be exposed to liability for contempt, fine
or penalty, or to other censure, such confidential material may be
disclosed.
9. Interference With the Company.
9.1 The Employee acknowledges that the services to be rendered by him to the
Company are of a special and unique character. The Employee agrees that,
in consideration of his employment hereunder, the Employee will not (a)
for a period of twelve (12) months commencing on the date of termination
of his employment with the Company, (i) solicit or endeavor to solicit
patient referrals, either on his own account or for any person, firm,
corporation or other organization, from (x) any person, including any
physician, clinical psychologist, social worker, or consultant to the
Company, who, during the period of the Employee's employment with the
Company, made patient referrals to the Company, or (y) any employee of
the Company (provided, however, that the Employee shall not be deemed to
have breached this covenant if the contact with any person referred to in
clause (x) is initiated by such person), or (ii) solicit or entice or
endeavor to solicit or entice away from the Company any person who was a
director, officer, employee, or consultant of the Company, either on his
own account or for any person, firm, corporation, or other organization,
whether or not such person would commit any breach of his contract of
employment by reason of leaving the service of the Company, and the
Employee agrees not to employ, directly or indirectly, any person who was
a director, officer or employee of the Company or who by reason of such
position at any time is or may be likely to be in possession of any
confidential information or trade secrets relating to the businesses or
products of the Company or (b) for a period or twelve (12) months
commencing on the date of termination of his employment with the Company,
take any action or make any statement the effect of which would be,
directly or indirectly, to impair the good will of the Company or the
-7-
<PAGE>
business reputation or good name of the Company or be otherwise
detrimental to the interests of the Company, including any action or
statement intended, directly or indirectly, to benefit a competitor of
the Company.
9.2 The Employee and the Company agree that if, in any proceeding, the
court or other authority shall refuse to enforce the covenants herein
set forth because such covenants cover too extensive a geographic area
or too long a period of time, any such covenant shall be deemed
appropriately amended and modified in keeping with the intention of the
parties to the maximum extent permitted by law.
10. Equitable Relief. In the Event of a breach or threatened breach by the
Employee of any of the provisions of Sections 8 or 9 of this Agreement, the
Employee hereby consents and agrees that the Company shall be entitled to an
injunction or similar equitable relief from any court of competent
jurisdiction restraining the Employee from committing or continuing any such
breach or threatened breach or granting specific performance of any act
required to be performed by the Employee under any of such provisions,
without the necessity of showing any actual damage or that money damages
would not afford an adequate remedy and without the necessity of posting any
bond or other security. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies at law or in equity which it may
have. For purposes of Sections 8, 9, and 10 of this Agreement, the term
"Company" shall be deemed to include the subsidiaries and affiliates of the
Company.
11. Successors and Assigns.
11.1 Assignment by the Company. The Company shall require any successors
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
the Company to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform if no such succession had taken place. As used in this Section,
the term "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law and this Agreement shall be binding upon,
and inure to the benefit of, the Company, as so defined.
11.2 Assignment by the Employee. The Employee may not assign this Agreement,
or any part thereof, without the prior written consent of a majority of
the Board of Directors of the Company; provided, however, that nothing
herein shall preclude one or more beneficiaries of the Employee from
receiving any amount that may be payable following the occurrence of
his legal incompetency or his death and shall not preclude the legal
representative of his estate from receiving such amount or from
assigning any right hereunder to the person or persons entitled thereto
under his will, or in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate.
The term "beneficiaries," as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount
or, if no beneficiary has
-8-
<PAGE>
been so designated, the legal representative of the Employee (in the
event of his incompetency) or the Employee's estate.
12. Governing Law. This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Delaware applicable to contracts to be performed entirely within such State.
In the event that a court of any jurisdiction shall hold any of the
provisions of this Agreement to be wholly or partially unenforceable for any
reason, such determination shall not bar or in any way affect the Company's
right to relief as provided for herein in the courts of any other
jurisdiction. Such provisions, as they relate to each jurisdiction, are, for
this purpose, severable into diverse and independent covenants. Service of
process on the parties hereto at the addresses set forth herein shall be
deemed adequate service of such process.
13. Entire Agreement. This Agreement contains all the understandings and
representations between the parties hereto pertaining to the subject matter
hereof and supersedes all undertakings and agreements, whether oral or in
writing, if any there be, previously entered into by them with respect
thereto; provided, however, that Section 8 hereof shall not serve as a
limitation of the terms of any other non-compete agreement between the
parties hereto.
14. Amendment, Modification, Waiver. No provision of this Agreement may be
amended or modified unless such amendment or modification is agreed to in
writing and signed by the Employee and by a duly authorized representative
of the Company other than the Employee. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach
by the other party hereto of any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent
time, nor shall the failure of or delay by either party hereto in exercising
any right, power or privilege hereunder operate as a waiver thereof to
preclude any other or further exercise thereof or the exercise of any other
such right, power, or privilege.
15. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof, shall, except as provided in Section 9, be
settled by arbitration in accordance with the rules of the American
Arbitration Association then in effect and judgment upon such award rendered
by the arbitrator may be entered in any court having jurisdiction thereof.
The arbitration shall be held in the area where the Company then has its
principal place of business. The arbitration award shall include attorneys'
fees and costs to the prevailing party.
16. Notices. Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below
or at such other address as such party may subsequently designate by like
notice:
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<PAGE>
If to the Company:
Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1400
New Orleans, Louisiana 70113
If to the Employee:
Brent Bryson
3115 Sandspur Dr.
Tampa, FL 33618
17. Severability. Should any provision of this Agreement be held by a court or
arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of
this Agreement, the balance of which shall continue to be binding upon the
parties hereto with any such modification to become a part hereof and
treated as though originally set forth in this Agreement. The parties
further agree that any such court or arbitration panel is expressly
authorized to modify any such unenforceable provision of this Agreement in
lieu of severing such unenforceable provision from this Agreement in its
entirety, whether by rewriting the offending provision, deleting any or all
of the offending provision, adding additional language to this Agreement, or
by making such other modifications as it deems warranted to carry out the
intent and agreement of the parties as embodied herein to the maximum extent
permitted by law. The parties expressly agree that this Agreement as so
modified by the court or arbitration panel shall be binding upon and
enforceable against each of them. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions hereof, and if such
provision or provisions are not modified as provided above, this Agreement
shall be construed as if such invalid, illegal or unenforceable provisions
had never been set forth herein.
18. Withholding. Anything to the contrary notwithstanding, all payments required
to be made by the Company hereunder to the Employee or his beneficiaries,
including his estate, shall be subject to withholding of such amounts
relating to taxes as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding such
amounts, in whole or in part, the Company may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it
is satisfied in its sole discretion that all requirements of law affecting
its responsibilities to withhold such taxes have been satisfied.
19. Survivorship. The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to
the intended preservation of such rights and obligations.
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<PAGE>
20. Titles. Titles of the sections of this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
RAMSAY HEALTH CARE, INC.
BY:
(Signature of Reynold
J. Jennings appears here) 7/15/94
- ------------------------------ ------------
Reynold J. Jennings DATE
Chief Operating Officer and
Executive Vice President
EMPLOYEE
(Signature of Brent Bryson
appears here) 7/19/94
- ------------------------------ ------------
Brent Bryson DATE
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<PAGE>
LEASE AGREEMENT
CAPSTONE CAPITAL CORPORATION,
A MARYLAND CORPORATION
("LESSOR")
AND
MESA PSYCHIATRIC HOSPITAL, INC.,
AN ARIZONA CORPORATION
("LESSEE")
APRIL 12, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
LEASED PROPERTY: TERM ............................................. 1
---------------------
ARTICLE II
RENT .............................................................. 2
----
2.1 MINIMUM RENT AND ADJUSTMENTS TO MINIMUM RENT ............ 2
2.2 CALCULATION OF INCREASES TO MINIMUM RENT ................ 3
2.3 ADDITIONAL CHARGES ...................................... 3
2.4 NET LEASE ............................................... 3
ARTICLE III
IMPOSITIONS ....................................................... 4
-----------
3.1 PAYMENT OF IMPOSITIONS .................................. 4
3.2 PRORATION OF IMPOSITIONS ................................ 5
3.3 UTILITY CHARGES ......................................... 5
3.4 INSURANCE PREMIUMS ...................................... 5
ARTICLE IV
NO TERMINATION .................................................... 5
--------------
ARTICLE V
OWNERSHIP OF LEASED PROPERTY ...................................... 6
----------------------------
5.1 OWNERSHIP OF THE PROPERTY ............................... 6
5.2 PERSONAL PROPERTY ....................................... 6
ARTICLE VI
CONDITION AND USE OF LEASED PROPERTY .............................. 6
------------------------------------
6.1 CONDITION OF THE LEASED PROPERTY ........................ 6
6.2 USE OF THE LEASED PROPERTY .............................. 6
6.3 LESSOR TO GRANT EASEMENTS ............................... 7
ARTICLE VII
LEGAL INSURANCE AND FINANCIAL REQUIREMENTS ........................ 8
------------------------------------------
7.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS ........ 8
7.2 LEGAL REQUIREMENT COVENANTS ............................. 8
ARTICLE VIII
REPAIRS: RESTRICTIONS AND ANNUAL INSPECTIONS ...................... 8
---------------------------------------------
8.1 MAINTENANCE AND REPAIR; REMODELING ...................... 8
8.2 ENCROACHMENTS; RESTRICTIONS ............................. 9
8.3 ANNUAL INSPECTIONS ...................................... 10
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE IX
CAPITAL ADDITIONS ................................................. 10
-----------------
9.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY. 10
9.2 CAPITAL ADDITIONS FINANCED BY LESSEE .................... 11
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR .................... 12
9.4 REMODELING AND NON-CAPITAL ADDITIONS .................... 13
9.5 SALVAGE ................................................. 14
ARTICLE X
LIENS ............................................................. 14
-----
ARTICLE XI
PERMITTED CONTESTS ................................................ 14
------------------
ARTICLE XII
INSURANCE ......................................................... 15
---------
12.1 GENERAL INSURANCE REQUIREMENTS .......................... 15
12.2 REPLACEMENT COST ........................................ 17
12.3 ADDITIONAL INSURANCE .................................... 17
12.4 WAIVER OF SUBROGATION ................................... 17
12.5 FORM OF INSURANCE ....................................... 18
12.6 CHANGE IN LIMITS ........................................ 18
12.7 BLANKET POLICY .......................................... 18
12.8 NO SEPARATE INSURANCE ................................... 18
ARTICLE XIII
FIRE AND CASUALTY ................................................ 19
-----------------
13.1 INSURANCE PROCEEDS ...................................... 19
13.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION
COVERED BY INSURANCE .................................... 19
13.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT
COVERED BY INSURANCE .................................... 20
13.4 LESSEE'S PROPERTY ....................................... 21
13.5 RESTORATION OF LESSEE'S PROPERTY ........................ 21
13.6 NO ABATEMENT OF RENT .................................... 21
13.7 DAMAGE NEAR END OF TERM ................................. 21
13.8 WAIVER .................................................. 21
ARTICLE XIV
CONDEMNATION ...................................................... 22
------------
14.1 PARTIES' RIGHTS AND OBLIGATIONS.......................... 22
14.2 TOTAL TAKING............................................. 22
14.3 PARTIAL TAKING........................................... 22
14.4 RESTORATION.............................................. 23
</TABLE>
ii
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<TABLE>
<S> <C>
14.5 AWARD DISTRIBUTION ....................................... 23
14.6 TEMPORARY TAKING ......................................... 23
ARTICLE XV
DEFAULT ............................................................ 23
-------
15.1 EVENTS OF DEFAULT ........................................ 23
15.2 REMEDIES ................................................. 25
15.3 ADDITIONAL EXPENSES ...................................... 26
15.4 WAIVER ................................................... 27
15.5 APPLICATION OF FUNDS ..................................... 27
15.6 NOTICES BY LESSOR ........................................ 27
ARTICLE XVI
LESSOR'S RIGHT TO CURE ............................................. 27
----------------------
ARTICLE XVII
PURCHASE OF THE LEASED PROPERTY .................................... 28
-------------------------------
ARTICLE XVIII
HOLDING OVER ....................................................... 29
------------
ARTICLE XIX
ABANDONMENT: OBSOLESCENCE .......................................... 29
-------------------------
19.1 DISCONTINUANCE OF OPERATIONS ON THE LEASED PROPERTY ...... 29
19.2 OBSOLESCENCE OF THE LEASED PROPERTY; PURCHASE............. 29
19.3 CONVEYANCE OF LEASED PROPERTY ............................ 29
ARTICLE XX
SUBSTITUTION OF PROPERTY ................................................ 30
- ------------------------
20.l SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY ......... 30
20.2 CONDITIONS TO SUBSTITUTION ............................... 32
20.3 CONVEYANCE TO LESSEE ..................................... 33
20.4 EXPENSES ................................................. 33
ARTICLE XXI
RISK OF LOSS ....................................................... 34
------------
ARTICLE XXII
INDEMNIFICATION .................................................... 34
---------------
ARTICLE XXIII
SUBLETTING AND ASSIGNMENT .......................................... 35
-------------------------
23.1 SUBLETTING AND ASSIGNMENT ................................ 35
23.2 NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT ............ 35
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XXIV
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS ................... 36
-----------------------------------------------
ARTICLE XXV
INSPECTION ........................................................ 37
----------
ARTICLE XXVI
QUIET ENJOYMENT ................................................... 37
---------------
ARTICLE XXVII
NOTICES ........................................................... 37
-------
ARTICLE XXVIII
APPRAISAL ......................................................... 39
---------
ARTICLE XXIX
PURCHASE RIGHTS ................................................... 40
---------------
29.1 FIRST REFUSAL TO PURCHASE ............................... 40
ARTICLE XXX
DEFAULT BY LESSOR ................................................. 41
-----------------
30.1 DEFAULT BY LESSOR ....................................... 41
30.2 LESSEE'S RIGHT TO CURE .................................. 42
ARTICLE XXXI
ARBITRATION ....................................................... 42
-----------
31.1 CONTROVERSIES ........................................... 42
31.2 APPOINTMENT OF ARBITRATORS .............................. 42
31.3 THIRD ARBITRATOR ........................................ 42
31.4 ARBITRATION PROCEDURE ................................... 42
31.5 EXPENSES ................................................ 43
ARTICLE XXXII
FINANCING OF THE LEASED PROPERTY .................................. 43
--------------------------------
ARTICLE XXXIII
SUBORDINATION. ATTORNMENT AND NON-DISTURBANCE ..................... 44
---------------------------------------------
ARTICLE XXXIV
EXTENDED TERMS .................................................... 44
--------------
</TABLE>
iv
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<TABLE>
<S> <C>
ARTICLE XXXV
MISCELLANEOUS ..................................................... 45
-------------
35.1 NO WAIVER................................................ 45
35.2 REMEDIES CUMULATIVE...................................... 45
35.3 SURRENDER................................................ 45
35.4 NO MERGER OF TITLE....................................... 45
35.5 TRANSFERS BY LESSOR...................................... 45
35.6 GENERAL.................................................. 46
35.7 MEMORANDUM OF LEASE...................................... 46
35.8 TRANSFER OF LICENSES..................................... 46
ARTICLE XXXVI
GLOSSARY OF TERMS ................................................. 46
-----------------
</TABLE>
v
<PAGE>
LEASE
THIS LEASE ("Lease") dated April 12, 1995 is entered into by and between
-----
CAPSTONE CAPITAL CORPORATION, a Maryland corporation having its principal office
at 1000 Urban Center Drive, Suite 630, Birmingham, Alabama 35242 ("Lessor") and
MESA PSYCHIATRIC HOSPITAL, INC., an Arizona corporation, having an office at c/o
Ramsay Health Care, Inc., One Poydras Avenue, 639 Loyola Avenue, Suite 1700, New
Orleans, Louisiana 70113 ("Lessee").
ARTICLE I
LEASED PROPERTY: TERM
---------------------
Upon and subject to the terms and conditions hereinafter set forth, Lessor
Leases to Lessee and Lessee rents from Lessor all of Lessor's rights and
interest in and to the following real and personal property (collectively, the
"Leased Property"):
---------------
(a) the real property more particularly described on Exhibit A
---------
attached hereto together with all covenants, licenses, privileges and
benefits thereto belonging, and any easements, rights-of-way, rights of
ingress and egress or other interests of Lessor in, on or to any land,
highway, street, road or avenue, open or proposed, in, on, across, in front
of, abutting or adjoining such real property, including all strips and
gores adjacent to or lying between such real property and any adjacent real
property (the "Land");
----
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind (including all alleyways and connecting
tunnels, crosswalks, sidewalks, landscaping, parking lots and structures
and roadways appurtenant to such buildings and structures presently or
hereafter situated upon the Land and Capital Additions financed by Lessor
(but specifically excluding Capital Additions financed by Lessee), drainage
and all above-ground and underground utility structures) (collectively, the
"Leased Improvements");
-------------------
(c) all permanently affixed equipment, machinery, fixtures and other
items of real and/or personal property including all components thereof,
now and hereafter located in or on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements,
including all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air conditioning systems
and apparatus, sprinkler systems and fire and theft protection equipment,
carpet, moveable or immoveable walls or partitions and built-in oxygen and
vacuum systems, all of which are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Personal Property (collectively the
"Fixtures");
--------
(d) the Personal Property;
<PAGE>
(e) to the extent permitted by law, all permits, approvals and other
intangible property or any interest therein now or hereafter owned or held
by Lessor in connection with the Leased Property, including all contract
rights, agreements, water rights and reservations, zoning rights, business
licenses and warranties (including those relating to construction or
fabrication) related to the Leased Property or any part thereof; and
(f) all site plans, surveys, soil and substrata studies,
architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, and other plans and studies that
relate to the Land or the Improvements and are in Lessor's possession or
control;
SUBJECT, HOWEVER, to the matters set forth on Exhibit B attached hereto
---------
(the "Permitted Exceptions"), to have and to hold for a fixed term of 15 years
(the "Fixed Term") commencing on April 12, 1995 (the "Commencement Date") and
---------- -----------------
ending at midnight on the last day of the 180th month after the Commencement
Date.
ARTICLE II
RENT
----
2.1 MINIMUM RENT AND ADJUSTMENTS TO MINIMUM RENT. Lessee shall pay to
Lessor, without notice, demand, set off (except as set forth in Section 30.2
hereof) or counterclaim, in advance in lawful money of the United States of
America, at Lessor's address set forth herein or at such other place or to such
other person, firms or corporations as Lessor from time to time may designate in
writing, Minimum Rent, as adjusted annually pursuant to Section 2.1(b) during
the Term, as follows:
(a) Minimum Rent. Lessee will pay to Lessor as rent (as adjusted in
------------
accordance with clause (b) below, the "Minimum Rent") for the Leased Property
the annual sum of $1,026,00.00, payable in advance in 12 equal, consecutive
monthly installments of $85,500.00, on the first day of each calendar month
during the Term. Minimum Rent shall be prorated as to any partial month, and is
subject to adjustment as provided in Sections 9.3(b)(iv) and 20.1 below. The
prorated Minimum Rent for that portion of April, 1995, during which this Lease
is in effect is $54,150.00 and shall be paid upon the execution of this Lease.
(b) Increases to Minimum Rent. on each anniversary of the Commencement
--------------------------
Date (each such anniversary being hereinafter referred to as an "Adjustment
Date"), commencing with the Adjustment Date occurring on April 1, 1996 and
continuing throughout the remainder of the Fixed Term and any Extended Terms,
the then-current Minimum Rent shall be increased effective as of such Adjustment
Date (i) in the case of the Adjustment Date occurring on April 1, 1996, by the
increase in the Consumer Price Index from the Commencement Date to the date
immediately preceding said Adjustment Date, and (ii) in the case of each
Adjustment Date thereafter, by the increase in the
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Consumer Price Index from the immediately preceding Adjustment Date to the date
immediately preceding such Adjustment Date; provided that in no event shall any
--------
such annual increase exceed three percent of the Minimum Rent in effect
immediately prior to such Adjustment Date.
(c) Payment of Minimum Rent. All payments of Minimum Rent shall be made in
-----------------------
lawful money of the United States by wire transfer of same day funds to Lessor's
account # 0000040999 at First Commercial Bank, Birmingham, Alabama, ABA Routing
No. #062003605, Attention: Todd Beard, with advice to William C. Harlan at (205)
967-2092 (or such other account or location specified by Lessor from time to
time in writing) on or before 2:00 p.m., Birmingham time, on any Business Day.
2.2 CALCULATION OF INCREASES TO MINIMUM RENT. On each Adjustment Date,
----------------------------------------
Lessor will calculate the increase in the Minimum Rent for the one-year period
commencing with such Adjustment Date pursuant to the provisions of Section
2.1(b) hereof, and will provide Lessee written notice of same.
2.3 ADDITIONAL CHARGES. Lessee will also pay and discharge as and when due
all other amounts, liabilities, obligations and Impositions which Lessee assumes
or agrees to pay under this Lease and all fines, penalties, interest and costs
which may be added for non-payment or late payment of any such items
(collectively, the "Additional Charges"), and Lessor shall have all legal,
equitable and contractual rights, powers and remedies provided in this Lease,
by statute or otherwise, in the case of non-payment of the Additional Charges,
as well as the Minimum Rent. If any installment of Minimum Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Lessor) shall not be paid within five Business Days after the date when due,
Lessee will pay Lessor on demand, as Additional Charges, (a) with respect to any
overdue installment of Minimum Rent, an amount equal to 10% of such
installment, and (b) with respect to any Additional Charges, interest (to the
extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date when due to the date of payment in full thereof.
In the event Lessor provides Lessee with written notice of failure to timely pay
any Additional Charges pursuant to Section 15.1(b) more than one time within any
twelve-month period, Lessee shall pay an administrative fee to Lessor in the
amount of $1,000.00 for each additional written notice Lessor gives pursuant to
Section 15.1(b) during the next twelve months. To the extent that Lessee pays
any Additional Charges to Lessor pursuant to any requirement of this Lease,
Lessee shall be relieved of its obligation to pay such Additional Charges to the
entity to which such Additional Charges would otherwise be due. Additional
Charges shall constitute Rent payable hereunder.
2.4 NET LEASE. The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the installments of Minimum
Rent and the payments of Additional Charges throughout the Term but subject to
any provisions of this Lease which expressly provide for payments by Lessor or
the adjustment of the Rent or other charges.
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ARTICLE III
IMPOSITIONS
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3.1 PAYMENT OF IMPOSITIONS. Subject to Article XI relating to permitted
contests, Lessee will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and Lessee will promptly upon
request furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. Lessee's obligation to pay such Impositions and
the amount thereof shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Leased Property or any part thereof. If any
such Imposition may lawfully be paid in installments (whether or not interest
shall accrue on the unpaid balance of such Imposition), Lessee may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such installments
during the Term hereof as the same become due and before any fine, penalty,
premium, further interest or cost may be added thereto. Lessor at its expense
shall, to the extent permitted by applicable law, prepare and file all tax
returns and reports as may be required by governmental authorities in respect of
Lessor's net income, gross receipts, franchise taxes and taxes on its capital
stock. Lessee at its expense shall, to the extent permitted by applicable laws
and regulations, prepare and file all other tax returns and reports in respect
of any Imposition as may be required by governmental authorities. If any refund
shall be due from any taxing authority in respect of any Imposition paid by
Lessee in respect of any period prior or subsequent to the date hereof, the same
shall be paid over to or retained by Lessee if no Event of Default shall have
occurred hereunder and be continuing. Any such funds retained by Lessor due to
an Event of Default shall be applied as provided in Article XV. Lessor and
Lessee shall, upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Leased Property as may
be necessary to prepare any required returns and reports. In the event
governmental authorities classify any property covered by this Lease as personal
property, Lessee shall file all personal property tax returns in such
jurisdictions where filing is required. Lessor and Lessee will provide the other
party, upon request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property. Where Lessor is
legally required to file personal property tax returns, and Lessee is obligated
for the same hereunder, Lessee will be provided with copies of assessment
notices in sufficient time for Lessee to file a protest. Lessee may, upon giving
30 days' prior written notice to Lessor, at Lessee's option and at Lessee's sole
cost and expense, protest, appeal, or institute such other proceedings as Lessee
may deem appropriate to effect a reduction of real estate or personal property
assessments and Lessor, if requested by Lessee and at Lessee's expense as
aforesaid, will cooperate with Lessee in such protest, appeal, or other action.
Billings for reimbursement by Lessee to Lessor of personal property taxes shall
be accompanied by copies of an invoice therefor and payments thereof which
identify the personal property with respect to which such payments are made.
Lessor will cooperate with Lessee in order that Lessee may fulfill its
obligations hereunder, including the execution of any instruments or documents
reasonably requested by Lessee.
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3.2 PRORATION OF IMPOSITIONS. Any Imposition imposed in respect of the
tax-fiscal period during which the Term terminates shall be prorated between
Lessor and Lessee, whether or not such Imposition is imposed before or after
such termination, and Lessee's and Lessor's obligation to pay their respective
prorated shares thereof shall survive such termination.
3.3 UTILITY CHARGES. Lessee will, or will cause Tenants to, contract for,
in its own name, and will pay or cause to be paid, all charges for, electricity,
power, gas, oil, water and other utilities used in the Leased Property during
the Term.
3.4 INSURANCE PREMIUMS. Lessee will contract for, in its own name, and
will pay or cause to be paid all premiums for, the insurance coverage required
to be maintained by Lessee pursuant to Article XII.
ARTICLE IV
NO TERMINATION
--------------
Except as provided in this Lease, Lessee shall remain bound by this Lease
in accordance with its terms and shall neither take any action without the
consent of Lessor to modify, surrender or terminate the same, nor seek nor be
entitled to any abatement, deduction, deferment or reduction of Rent, or set-off
against the Rent, nor shall the respective obligations of Lessor, Lessee or
Guarantor be otherwise affected, by reason of (a) any damage to or destruction
of the Leased Property or any portion thereof from whatever cause, or any Taking
of the Leased Property or any portion thereof, (b) the lawful or unlawful
prohibition of or restriction upon Lessee's use of the Leased Property or any
portion thereof, or the interference with such use by any person, corporation,
partnership or other entity, or by reason of eviction by paramount title, (c)
any claim which Lessee has or might have against Lessor or by reason of any
default or breach of any warranty by Lessor under this Lease or any other
agreement between Lessor and Lessee or to which Lessor and Lessee are parties,
(d) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (e) for any other cause whatsoever,
whether similar or dissimilar to any of the foregoing. Lessee hereby
specifically waives all rights arising from any occurrence whatsoever which may
now or hereafter be conferred upon it by law to (i) modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof, or (ii) entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessor and
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue any
claim or seek any damages it may have against Lessor as a result of a breach by
Lessor of the terms of this Lease.
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ARTICLE V
OWNERSHIP OF LEASED PROPERTY
----------------------------
5.1 OWNERSHIP OF THE PROPERTY. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease.
5.2 PERSONAL PROPERTY. Lessee may (and shall as provided hereinbelow), at
its expense, install, affix or assemble or place on any parcels of the Land or
in any of the Improvements any items of the Personal Property, and may remove,
replace or substitute for the same from time to time in the ordinary course of
Lessee's business. Lessee shall provide and maintain during the entire Term all
such Personal Property as shall be necessary in order to operate the Facility in
compliance with all licensure and certification requirements, in compliance with
all applicable Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary Intended Use.
ARTICLE VI
CONDITION AND USE OF LEASED PROPERTY
------------------------------------
6.1 CONDITION OF THE LEASED PROPERTY. Lessee acknowledges receipt and
delivery of possession of the Leased Property and that Lessee has examined and
otherwise acquired knowledge of the condition of the Leased Property prior to
the execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purpose hereunder. Lessee is leasing
the Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property. Lessor
makes no warranty or representation, express or implied, in respect of the
Leased Property or any part thereof, either as to its fitness for use,
suitability, design or condition for any particular use or purpose or otherwise,
as to quality of the material or workmanship therein, latent or patent, it being
agreed that all such risks are to be borne by Lessee. Lessee acknowledges that
the Leased Property has been inspected by Lessee and is satisfactory to it in
all respects.
6.2 USE OF THE LEASED PROPERTY.
(a) After the Commencement Date and during the entire Term, Lessee shall
use or cause to be used the Leased Property and the improvements thereon as a
licensed comprehensive mental health hospital facility including a licensed
subacute care unit, and for such other uses as may be necessary in connection
with or incidental to such use (the "Primary Intended Use"). Lessee shall not
use the Leased Property or any portion thereof for any other use without the
prior written consent of Lessor.
(b) Lessee covenants and warrants that (i) it has obtained and will
maintain all Federal, state and local approvals, authorizations, consents and
permits necessary for the
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use and operation of the Leased Property and the Facility for the Primary
Intended Use, (ii) it is and will remain fully qualified to participate in and
receive payment under private insurance programs having broad application and
federal, state and local governmental programs providing for payment or
reimbursement for services rendered, and (iii) it is and will remain accredited
by the Joint Commission on Accreditation on Health Care Organizations or any
successor organization providing like inspection and accreditation.
(c) Lessee covenants and agrees that during the Term it will continuously
operate the Leased Property in accordance with its Primary Intended Use and
maintain its certifications for reimbursement, licensure and accreditation.
(d) Lessee shall not commit or suffer to be committed any waste on the
Leased Property or in the Facility, or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, including any Capital Addition whether or not financed by
Lessor, to be used in such a manner as (i) might reasonably tend to impair
Lessor's or Lessee's estate therein or in any portion thereof, or (ii) may
reasonably result in a claim or claims of adverse usage or adverse possession by
the public, as such, or of implied dedication of the Leased Property or any
portion thereof.
(f) Lessee will not utilize any Hazardous Materials on the Leased Property
except in accordance with applicable Legal Requirements and will not permit any
contamination which may require remediation under any applicable Hazardous
Materials Law. Lessee agrees not to dispose of any Hazardous Materials or
substances within the sewerage system of the Leased Property, and that it will
handle all "red bag" wastes in accordance with applicable Hazardous Materials
Laws.
6.3 LESSOR TO GRANT EASEMENTS. Lessor will, from time to time, at the
request of Lessee and at Lessee's cost and expense, but subject to the approval
of Lessor (which approval will not be unreasonably withheld), (a) grant
easements and other rights in the nature of easements, (b) release existing
easements or other rights in the nature of easements which are for the benefit
of the Leased Property, (c) dedicate or transfer unimproved portions of the
Leased Property for road, highway or other public purposes, (d) execute
petitions to have the Leased Property annexed to any municipal corporation or
utility district, (e) execute amendments to any covenants and restrictions
affecting the Leased Property, and (f) execute and deliver such instruments as
may be necessary or appropriate to confirm or effect such grants, releases,
dedications and transfers (to the extent of its interest in the Leased
Property), but only upon delivery to Lessor of an Officer's Certificate stating
(and such other information as Lessor may reasonably require confirming) that
such grant, release, dedication, transfer, petition or amendment is required or
beneficial for and not detrimental to the proper conduct of the business of
Lessee on the Leased Property and does not reduce the value thereof.
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ARTICLE VII
LEGAL, INSURANCE AND FINANCIAL REQUIREMENTS
-------------------------------------------
7.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS. Subject to Article
XI relating to permitted contests, Lessee, at its expense, will promptly (a)
comply with all material Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair and restoration of the Leased
Property, whether or not compliance therewith shall require structural change in
any of the Leased Improvements or interfere with the use and enjoyment of the
Leased Property, and (b) directly or indirectly with the cooperation of Lessor,
but at Lessee's sole cost and expense, procure, maintain and comply with all
material licenses, certificates of need and other authorizations required for
(i) any use of the Leased Property then being made, and for (ii) the proper
erection, installation, operation and maintenance of the Leased Improvements or
any part thereof, including any Capital Additions.
7.2 LEGAL REQUIREMENT COVENANTS. Lessee covenants and agrees that the
Leased Property shall not be used for any unlawful purpose. Lessee shall,
directly or indirectly with the cooperation of Lessor, but at Lessee's sole cost
and expense, acquire and maintain all licenses, certificates, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use and any other use conducted on the
Leased Property as may be permitted from time to time hereunder. Lessee further
covenants and agrees that Lessee's use of the Leased Property and Lessee's
maintenance, alteration, and operation of the same, and all parts thereof, shall
at all times conform to all applicable Legal Requirements.
ARTICLE VIII
REPAIRS: RESTRICTIONS AND ANNUAL INSPECTIONS
--------------------------------------------
8.1 MAINTENANCE AND REPAIR; REMODELING.
(a) Lessee, at its expense, will keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto in reasonably good order and
repair (whether or not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements, the age of the Leased Property or any portion
thereof), and except as otherwise provided in Articles XIII and XIV, with
reasonable promptness will make all necessary and appropriate repairs thereto of
every kind and nature (including remodeling to the extent necessary to maintain
the desirability of the Leased Property), whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to or after the commencement
of the Term of this Lease (concealed or otherwise). All repairs and remodeling
shall, to the extent reasonably achievable, be at least equivalent in quality to
the original work and shall be accomplished by Lessee or a party selected by
Lessee. Lessee will not take or omit to take any action the taking or omission
of which might impair the value or usefulness of the Leased Property or any part
thereof for the Primary Intended Use. If Lessee fails to perform any of its
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obligations hereunder, or if Lessor reasonably determines that action is
necessary and is not being taken, Lessor may, on giving thirty days' written
notice to Lessor (other than in a case reasonably deemed by Lessor to be an
emergency, in which no such notice shall be required), without demand on Lessee,
perform any such obligations in such manner and to such extent and take such
other action as Lessor may deem appropriate, and all costs, expenses and charges
of Lessor relating to any such action shall be payable by Lessee to Lessor in
accordance with Section 2.3.
(b) Except for the use of any insurance proceeds (to the extent required
by Sections 13.1 and 13.2 hereof) and any Award (to the extent required by
Section 14.3), Lessor shall not under any circumstances be required to build or
rebuild any improvements on the Leased Property, or to make any repairs,
replacements, alterations, restorations, or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto in connection with this Lease, or to maintain
the Leased Property in any way.
(c) Nothing contained in this Lease and no action or inaction by Lessor
shall be construed as (i) constituting the consent or request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any particular labor or services or the
furnishing of any particular materials or other property for the construction,
alteration, addition, repair or demolition of or to the Leased Property or any
part thereof, or (ii) giving Lessee any right, power or permission to contract
for or permit the performance of any labor or services or the finishing of any
materials or other property in such fashion as would permit the making of any
claim against Lessor in respect thereof or to make any agreement that may
create, or in any way be the basis for, any right, title, interest, lien, claim
or other encumbrance upon the estate of Lessor in the Leased Property or any
portion thereof.
(d) Unless Lessor shall convey any of the Leased Property to Lessee
pursuant to the provisions of this Lease, Lessee will, upon the expiration or
prior termination of this Lease, vacate and surrender the Leased Property to
Lessor in the condition in which the Leased Property was originally received
from Lessor and except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease, except for ordinary wear
and tear (subject to the obligation of Lessee to maintain the Property in good
order and repair during the entire Term), damage caused by the gross negligence
or willful acts of Lessor, and damage or destruction described in Article XIII
or resulting from a Taking described in Article XIV which Lessee is not required
by the terms of this Lease to repair or restore.
8.2 ENCROACHMENTS; RESTRICTIONS. If any of the Improvements shall at any
time encroach upon any property, street or right-of-way adjacent to the Leased
Property, or shall violate the agreements or conditions contained in any
applicable Legal Requirement, restrictive covenant or other agreement affecting
the Leased Property, or any part thereof,
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or shall impair the rights of others under any easement or right-of-way to which
the Leased Property is subject, then promptly upon the request of Lessor, Lessee
shall at its expense (a) obtain valid and effective waivers or settlements of
all claims, liabilities and damages resulting from each such encroachment,
violation or impairment, whether the same shall affect Lessor or Lessee, or (b)
make such changes in the Improvements, and take such other actions, as Lessor in
the good faith exercise of its judgment deems reasonably practicable, to remove
such encroachment or to end such violation or impairment including, if
necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to continue the operation of
the Facility for the Primary Intended Use in the manner and to the extent the
Facility was operated prior to the assertion of such violation or encroachment.
Any such alteration shall be made in conformity with the applicable requirements
of Article IX. Lessee's obligations under this Section 8.2 shall be in addition
to and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance and Lessee shall be entitled to a credit
for any sums recovered by Lessor under any such policy of title or other
insurance.
8.3 ANNUAL INSPECTIONS. During each year of the Term after the first
anniversary of the Commencement Date, Lessor and its agents shall have the
right to inspect the Leased Property and all systems contained therein at any
reasonable time to determine Lessee's compliance with its obligations under this
Lease, including those obligations set forth in Article VII and this Article
VIII. Lessee shall be responsible for the costs of such inspections, which costs
shall not exceed on an annual basis the sum of $1,500.00.
ARTICLE IX
CAPITAL ADDITIONS
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9.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY.
(a) If no Event of Default shall have occurred and be continuing, Lessee
shall have the right, upon and subject to the terms and conditions set forth
below, to construct or install Capital Additions on the Leased Property with the
prior written consent of Lessor; provided, however, that Lessor's consent shall
------------------
not be required for any Capital Addition the estimated cost of which, when added
to the estimated cost of all other Capital Additions commenced within the same
calendar year, does not exceed $50,000; and provided, further, that Lessee shall
------------------
not be permitted to create any Encumbrance on the Leased Property in connection
with such Capital Addition without first complying with Section 9.1(b) hereof.
Prior to commencing construction of any Capital Addition, Lessee shall submit to
Lessor in writing a proposal setting forth in reasonable detail any proposed
Capital Addition and shall provide to Lessor such plans and specifications,
permits, licenses, contracts and other information concerning the proposed
Capital Addition as Lessor may reasonably request. Without limiting the
generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such Capital Addition and the use or uses to
which it will be put.
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(b) Prior to commencing construction of any Capital Addition (other than a
Capital Addition the Capital Addition Cost of which is reasonably projected by
Lessee not to exceed $100,000 or a Capital Addition financed solely by Lessee or
an Affiliate of Lessee), Lessee shall first request Lessor to provide funds to
pay for such Capital Addition in accordance with the provisions of Section 9.3.
If Lessor declines or is unable to provide such financing on terms acceptable to
Lessee in Lessee's sole discretion, or if Lessee is prohibited under the terms
of any material credit facility (after having made reasonable requests
thereunder) from borrowing from Lessor, then Lessee may arrange or provide other
financing, subject to the provisions of Section 9.2. Additionally, Lessor shall
reasonably cooperate with Lessee regarding the grant of any consents or
easements or the like necessary or appropriate in connection with any Capital
Addition; provided that no Capital Addition shall be made which would tie in or
--------
connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease), including tie-ins of buildings or other structures
or utilities, unless Lessee shall have obtained the prior written approval of
Lessor. All proposed Capital Additions shall be architecturally integrated and
consistent with the Property.
9.2 CAPITAL ADDITIONS FINANCED BY LESSEE. If Lessee finances or arranges
to finance any Capital Addition with a party other than Lessor or if Lessee pays
cash for any Capital Addition, this Lease shall be and hereby is amended to
provide as follows:
(a) There shall be no adjustment in the Minimum Rent by reason of any such
Capital Addition.
(b) Upon the expiration or earlier termination of this Lease, Lessor
shall compensate Lessee for all Capital Additions paid for or financed by Lessee
in any of the following ways:
(i) By purchasing all Capital Additions paid for by Lessee from
Lessee for cash in the amount of the Fair Market Added Value at the time of
purchase by Lessor of all such Capital Additions paid for or financed by
Lessee; or
(ii) Such other arrangement regarding such compensation as shall be
mutually acceptable to Lessor and Lessee.
Any amount owed by Lessee to Lessor under this Lease at such termination or
expiration may be deducted from any compensation for Capital Additions payable
by Lessor to Lessee under this Section 9.2.
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9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
(a) If so required by Section 9.1, Lessee shall request that Lessor
provide or arrange financing for a Capital Addition by providing to Lessor such
information about the Capital Addition as Lessor may reasonably request (a
"Request"), including all information referred to in Section 9.1 above. Lessor
may but shall be under no obligation to provide or obtain funds necessary to
meet the Request. Within 30 days of receipt of a Request, Lessor shall notify
Lessee as to whether it will finance the proposed Capital Addition and, if so,
the terms and conditions upon which it would do so, including the terms of any
amendment to this Lease. In the case of any proposed financing to be provided by
Lessor, in no event (i) shall the portion of the projected Capital Addition Cost
comprised of land (if any), materials, labor charges and fixtures be less than
90% of the total amount of such cost, or (ii) shall Lessee or any of its
Affiliates be entitled to any commission or development fee, directly or
indirectly, as a portion of the Capital Addition Cost. Any Capital Addition not
financed by Lessor must still be approved in writing by Lessor pursuant to the
terms of Section 9.1 hereof. Lessee may withdraw its Request by notice to Lessor
at any time before or after receipt of Lessor's terms and conditions.
(b) If Lessor agrees to finance the proposed Capital Addition, Lessor's
obligation to advance any funds shall be subject to receipt of all of the
following, in form and substance reasonably satisfactory to Lessor:
(i) such loan documentation as may be required by Lessor;
(ii) any information, certificates, licenses, permits or documents
requested by Lessor, or by any lender with whom Lessor has agreed or may
agree to provide financing, necessary to confirm that Lessee will be able
to use the Capital Addition upon completion thereof in accordance with the
Primary Intended Use, including all required federal, state or local
government licenses and approvals;
(iii) an Officer's Certificate and, if requested, a certificate from
Lessee's architect, setting forth in detail reasonably satisfactory to
Lessor the projected (or actual, if available) cost of the proposed Capital
Addition;
(iv) an amendment to this Lease, duly executed and acknowledged, in
form and substance satisfactory to Lessor and Lessee (the "Lease
Amendment"), containing such provisions as may be necessary or appropriate
due to the Capital Addition, including any appropriate changes in the legal
description of the Land and the Rent, all such changes to be mutually
agreed upon by Lessor and Lessee;
(v) a deed conveying title to Lessor to any land and improvements or
other rights acquired for the purpose of constructing the Capital Addition,
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free and clear of any liens or encumbrances except those approved in
writing by Lessor and, both prior to and following completion of the
Capital Addition, an as-built survey thereof reasonably satisfactory to
Lessor;
(vi) endorsements to any outstanding policy of title insurance
covering the Leased Property or a supplemental policy of title insurance
covering the Leased Property reasonably satisfactory in form and substance
to Lessor (A) updating the same without any additional exceptions, except
as may be permitted by Lessor; and (B) increasing the coverage thereof by
an amount equal to the Fair Market Value of the Capital Addition (except to
the extent covered by the owner's policy of title insurance referred to in
subparagraph (vii) below);
(vii) if required by Lessor, (A) an owner's policy of title
insurance insuring fee simple title to any land conveyed to Lessor pursuant
to subparagraph (v), free and clear of all liens and encumbrances except
those approved by Lessor and (B) a lender's policy of title insurance
satisfactory in form and substance to Lessor and the Lending Institution
advancing any portion of the Capital Addition Cost ;
(viii) if required by Lessor upon completion of the Capital Addition,
an M.A I appraisal of the Leased Property; and
(ix) such other certificates (including endorsements increasing the
insurance coverage, if any, at the time required by Section 12.1),
documents, opinions of Lessee's counsel, appraisals, surveys, certified
copies of duly adopted resolutions of the Board of Directors of Lessee
authorizing the execution and delivery of the Lease Amendment and any other
instruments or documents as may be reasonably required by Lessor.
(c) Upon making a Request to finance a Capital Addition, whether or not
such financing is actually consummated, Lessee shall pay the reasonable costs
and expenses of Lessor and any Lending Institution which has committed to
finance such Capital Addition paid or incurred in connection with the financing
of the Capital Addition, including (i) the fees and expenses of their respective
counsel, (ii) the amount of any recording or transfer taxes and fees, (iii)
documentary stamp taxes, if any, (iv) title insurance charges, (v) appraisal
fees, if any, and (vi) commitment fees, if any.
9.4 REMODELING AND NON-CAPITAL ADDITIONS. Lessee shall have the right and
the obligation to make additions, modifications or improvements to the Leased
Property which are not Capital Additions, including tenant improvements made in
connection with the Tenant Leases, from time to time as may reasonably be
necessary for its uses and purposes and to permit the Lessee to comply fully
with its obligations set forth in this Lease; provided that such action will be
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undertaken expeditiously, in a workmanlike manner and will not
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significantly alter the character or purpose or detract from the value or
operating efficiency of the Leased Property and will not significantly impair
the revenue-producing capability of the Leased Property or adversely affect the
ability of the Lessee to comply with the provisions of this Lease. Title to all
non-Capital Additions, modifications and improvements shall, without payment by
Lessor at any time, be included under the terms of this Lease and, upon
expiration or earlier termination of this Lease, shall pass to and become the
property of Lessor.
9.5 Salvage. All materials which are scrapped or removed in connection
with the making of Capital Additions permitted by Section 9.1 or repairs
required by Article VIII . shall be or become the property of Lessee; provided
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that Lessor may require Lessee to dispose of such materials within 15 days.
ARTICLE X
LIENS
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Subject to the provisions of Article XI relating to permitted contests,
Lessee will not directly or indirectly create or suffer to exist and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, set forth in Exhibit B attached hereto, (c)
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restrictions, liens and other encumbrances which are consented to in writing by
Lessor, or any easements granted pursuant to the provisions of Section 6.3 of
this Lease, (d) liens for those taxes of Lessor which Lessee is not required to
pay hereunder, (e) subleases permitted by Article XXIII, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested in
accordance with the provisions of Article XI, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed or not yet due,
provided that (1) the payment of such sums shall not be postponed for more than
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60 days after the completion of the action (including any appeal from any
judgment rendered therein) giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor, or (2) any such liens are
in the process of being contested in accordance with the provisions of Article
XI, and (h) any Encumbrance placed on the Leased Property by Lessor.
ARTICLE XI
PERMITTED CONTESTS
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Lessee, after ten days' prior written notice to Lessor, on its own or on
Lessor's behalf (or in Lessor's name), but at Lessee's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any Imposition,
Legal Requirement, Insurance Requirement, lien, attachment, levy, encumbrance,
charge or claim (collectively "Charge") not otherwise permitted by
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Article X which is required to be paid or discharged by Lessee or any Tenant;
provided that (a) in the case of an unpaid Charge, the commencement and
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continuation of such proceedings, or the posting of a bond or certificate of
deposit as may be permitted by applicable law, shall suspend the collection
thereof from Lessor and from the Leased Property; (b) neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; (c)
Lessor would not be in any immediate danger of civil or criminal liability for
failure to comply therewith pending the outcome of such proceedings; (d) in the
event that any such contest shall involve a sum of money or potential loss in
excess of $25,000.00, then Lessee shall deliver to Lessor and its counsel an
Officer's Certificate as to the matters set forth in clauses (a), (b) and (c)
and such opinions of legal counsel to Lessee as Lessor may request; (e) in the
case of an Insurance Requirement, the coverage required by Article XII shall be
maintained; and (f) if such contest be finally resolved against Lessor or
Lessee, Lessee shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties accrued
thereon, or otherwise comply with the applicable Charge; provided further that
----------------
nothing contained herein shall be construed to permit Lessee to contest the
payment of Rent, or any other sums payable by Lessee to Lessor hereunder.
Lessor, at Lessee's expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in any such
contest and, if reasonably requested by Lessee or if Lessor so desires and then
at its own expense, Lessor shall join as a party therein. Lessor shall do all
things reasonably requested by Lessee in connection with such action. Lessee
shall indemnify and save Lessor harmless against any liability, cost or expense
of any kind that may be imposed upon Lessor in connection with any such contest
and any loss resulting therefrom.
ARTICLE XII
INSURANCE
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12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease, Lessee
shall at all times keep the Leased Property and all property located in or on
the Leased Property insured with the kinds and amounts of insurance described
below and written by companies reasonably acceptable to Lessor authorized to do
insurance business in the state in which the Leased Property is located. The
policies must name Lessor as an additional insured and losses shall be payable
to Lessor and/or Lessee as provided in Article XIII. In addition, the policies
shall name as an additional insured the holder ("Facility Mortgagee") of any
mortgage, deed of trust or other security agreement securing any Encumbrance
placed on the Leased Property or any part thereof in accordance with the
provisions of Article XXXII ("Facility Mortgage"), if any, by way of a standard
form of mortgagee's loss payable endorsement. Any loss adjustment in excess of
$50,000.00 shall require the written consent of Lessor and each affected
Facility Mortgagee. Evidence of insurance shall be deposited with Lessor and, if
requested, with any Facility Mortgagee(s). If any provision of any Facility
Mortgage which constitutes a first lien on the Leased Property requires deposits
of insurance to be made with such Facility Mortgagee, Lessee shall either pay to
Lessor monthly the amounts required and Lessor shall transfer such amounts to
such Facility
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Mortgagee or, pursuant to written direction by Lessor, Lessee shall make such
deposits directly with such Facility Mortgagee. The policies on the Leased
Property, including the Leased Improvements, the Fixtures and the Personal
Property, shall insure against the following risks:
(a) Loss or damage by fire, vandalism and malicious mischief,
extended coverage perils commonly known as "All Risk" and all physical loss
perils, including sprinkler leakage and business interruption, in an amount
not less than the then Full Replacement Cost thereof (as defined below in
Section 12.2) after deductible with a replacement cost endorsement
sufficient to prevent Lessee from becoming a co-insurer together with an
agreed value endorsement;
(b) Loss or damage by explosion of steam boilers, pressure vessels or
similar apparatus now or hereafter installed in the Facility, in such
limits with respect to any one accident as may be reasonably requested by
Lessor from time to time;
(c) Loss of rental under a rental value insurance policy covering
risk of loss during the first 12 months of reconstruction necessitated by
the occurrence of any of the hazards described in Sections 12.1(a) or
12.1(b), in an amount sufficient to prevent Lessee from becoming a co-
insurer; provided that in the event that Lessee shall not be in default
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hereunder and Lessor shall receive any proceeds from such rental insurance
which, when added to rental amounts received with respect to the applicable
time period, exceed the amount of rental owed by Lessee hereunder, Lessor
shall immediately pay such excess to Lessee;
(d) Loss or damage by hurricane and earthquake in the amount of the
Full Replacement Cost, after deductible;
(e) Claims for personal injury or property damage under a policy of
comprehensive general public liability insurance including insurance
against assumed or contractual liability including indemnities under this
Lease, with amounts not less than $5,000,000.00 per occurrence in respect
of bodily injury and death and $10,000,000.00 for property damage; provided
--------
that if it becomes customary for tenants occupying similar buildings in the
same City where the Leased Property is located to be required to provide
liability coverage with higher limits than the foregoing, then Lessee shall
provide Lessor with an insurance policy with coverage limits that are not
less than such customary limits;
(f) Claims for personal injury under such policies of hospital
professional liability insurance and physicians malpractice and
professional liability insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
usually carried by providers of similar health care services in the same
general areas in which Lessee operates, provided that the first $500,000
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<PAGE>
of such insurance may be pursuant to a plan of self-insurance for which
adequate provision has been made; and
(g) Flood (when the Leased Property is located in whole or in part
within a designated flood plain area) and such other hazards and in such
amounts as may be customary for comparable properties in the area issued by
insurance companies authorized to do business in the state in which the
Leased Property is located.
If Lessee shall engage or cause to be engaged any contractor to perform work on
the Leased Property, Lessee shall require such contractor to carry and maintain
insurance coverage comparable to the foregoing requirements, at no expense to
Lessor; except that in cases where such coverage is excessive in light of the
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work being done, Lessee may allow any such contractor to carry or maintain
alternative coverage in reasonable amounts upon Lessor's prior written consent,
which shall not be unreasonably withheld.
12.2 REPLACEMENT COST. The term "Full Replacement Cost" as used herein
shall mean the actual replacement cost of the Facility from time to time,
including increased cost of construction endorsement, less exclusions provided
in the normal fire insurance policy. In the event Lessor or Lessee believes that
the Full Replacement Cost has increased or decreased at any time during the
Term, it shall have the right at its own expense to have such Full Replacement
Cost redetermined by the insurance company which is then providing the largest
amount of casualty insurance carried on the Leased Property, hereinafter
referred to as the "impartial appraiser". The party desiring to have the Full
Replacement Cost so redetermined shall forthwith, on receipt of such
determination by the impartial appraiser, give written notice thereof to the
other party hereto. The determination of such impartial appraiser shall be final
and binding on the parties hereto, and Lessee shall forthwith increase, or may
decrease, the amount of the insurance carried pursuant to this Article to the
amount so determined by the impartial appraiser.
12.3 ADDITIONAL INSURANCE. In addition to the insurance described above,
Lessee shall maintain such additional insurance as may be reasonably required
from time to time by any Facility Mortgagee which is consistent with insurance
coverage for similar buildings in the city where the Leased Property is located
or required pursuant to any applicable Legal Requirement, and shall at all times
maintain adequate worker's compensation insurance coverage for all persons
employed on the Leased Property, in accordance with all applicable Legal
Requirements.
12.4 WAIVER OF SUBROGATION. All insurance policies carried by either party
covering the Leased Property, the Fixtures, the Facility and/or the Personal
Property, including contents, fire and casualty insurance, shall expressly waive
any right of subrogation on the part of the insurer against the other party. The
parties hereto agree that their policies will include such a waiver clause or
endorsement so long as the same is obtainable without extra cost, and in the
event of such an extra charge the other party, at its election, may request and
pay the same, but shall not be obligated to do so.
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12.5 FORM OF INSURANCE. All of the policies of insurance referred to
in this Section shall be written in form reasonably satisfactory to Lessor by
insurance companies reasonably satisfactory to Lessor; provided that the
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deductibles for insurance required by Sections 12.1(a) and (b) shall be no
greater than $50,000.00 and the deductible for coverage required by Section
12.1(c) shall be no greater than $100,000.00. Lessee shall pay all premiums
therefor, and deliver such policies or certificates thereof to Lessor prior to
their effective date (and, with respect to any renewal policy, at least 30 days
prior to the expiration of the existing policy). In the event of the failure of
Lessee to effect such insurance in the names herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to Lessor
at the times required, Lessor shall be entitled, but shall have no obligation,
to enact such insurance and pay the premiums therefor, which premiums shall be
repayable by Lessee to Lessor upon written demand therefor, and failure to repay
the same shall constitute an Event of Default within the meaning of Section
15.1(c). Each insurer mentioned in this Section shall agree, by endorsement on
the policy or policies issued by it, or by independent instrument furnished to
Lessor, that it will give to Lessor prior written notice before the policy or
policies in question shall be altered, allowed to expire or canceled.
12.6 CHANGE IN LIMITS. In the event that Lessor shall at any time
reasonably and in good faith believe the limits of the personal injury, property
damage or general public liability insurance then carried to be insufficient,
the parties shall endeavor to agree on the proper and reasonable limits for such
insurance to be carried and such insurance shall thereafter be carried with the
limits thus agreed on until further change pursuant to the provisions of this
Section. If the parties shall be unable to agree thereon, the proper and
reasonable limits for such insurance shall be determined by an impartial third
party selected by the parties, the costs of which shall be divided equally
between the parties. Such redeterminations, whether made by the parties or by
arbitration, shall be made no more frequently than every year. Nothing herein
shall permit the amount of insurance to be reduced below the amount or amounts
reasonably required by any Facility Mortgagee.
12.7 BLANKET POLICY. Notwithstanding anything to the contrary contained in
this Section, Lessee's obligations to carry the insurance provided for herein
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee; provided that the coverage afforded
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Lessor will not be reduced or diminished or otherwise be different from that
which would exist under separate policies meeting all other requirements of this
Lease; and provided further that the requirements of this Article XII are
----------------
otherwise satisfied.
12.8 NO SEPARATE INSURANCE. Without the prior written consent of Lessor,
Lessee shall not, on Lessee's own initiative or pursuant to the request or
requirement of any third party, take out separate insurance concurrent in form
or contributing in the event of loss with that required in this Article XII to
be furnished by, or which may reasonably be required by a Facility Mortgagee to
be furnished by, Lessee, or increase the amounts of any then-existing insurance
required under this Article XII by securing an additional policy or
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<PAGE>
additional policies, unless all parties having an insurable interest in the
subject matter of the insurance, including in all cases Lessor and all Facility
Mortgagees, are included therein as additional insureds and the loss is payable
under said insurance in the same manner as losses are required to be payable
under this Lease. Lessee shall immediately notify Lessor of the taking out of
any such separate insurance or of the increasing of any of the amounts of the
then-existing insurance required under this Article XII by securing an
additional policy or additional policies.
ARTICLE XIII
FIRE AND CASUALTY
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13.1 INSURANCE PROCEEDS. All proceeds payable by reason of any loss or
damage to the Leased Property or any portion thereof and insured under any
policy of insurance required by Article XII of this Lease shall be paid to
Lessor and held by Lessor in trust (subject to the provisions of Section 13.7)
and shall be made available for reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased Property, or any portion thereof, and
shall be paid out by Lessor from time to time for the reasonable cost of such
reconstruction or repair in accordance with this Article XIII after Lessee has
expended an amount equal to or exceeding the deductible under any applicable
insurance policy. Any excess proceeds of insurance remaining after the
completion of the restoration or reconstruction of the Leased Property shall be
retained by Lessee free and clear upon completion of any such repair and
restoration except as otherwise specifically provided below in this Article
XIII; provided that in the event neither Lessor nor Lessee is required or
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elects to repair or restore the Leased Property, then all such insurance
proceeds shall be retained by Lessor. All salvage resulting from any risk
covered by insurance shall belong to Lessee, including any salvage relating to
Capital Additions paid for by Lessee.
13.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED
BY INSURANCE.
(a) Except as provided in Section 13.7, if during the Term the Facility is
totally or partially destroyed from a risk covered by the insurance described in
Article XII and the Facility thereby is rendered Unsuitable for its Primary
Intended Use, Lessee shall have the option, by giving notice to Lessor within 60
days following the date of such destruction, to (i) apply all proceeds payable
with respect thereto to restore the Facility to substantially the same condition
as existed immediately before the damage or destruction or such other condition
consistent with the Primary Intended Use as may be approved by Lessor in
writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due, or (ii) offer to substitute a new property
pursuant to and in accordance with the provisions of Article XX. In the event
Lessee does not make an offer or Lessor does not accept Lessee's offer to
substitute for the Leased Property within 30 days after the date of such offer,
Lessee shall either (i) within 3O days after the end of such 30-day period
(or, if no offer is made, within 60 days following the date of such destruction)
proceed to restore the Facility to
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substantially the same condition as existed immediately before the damage or
destruction or such other condition consistent with the Primary Intended Use as
may be approved by Lessor in writing, which consent shall not be unreasonably
withheld if such other condition would not, in Lessor's good faith judgment,
result in a reduction in the value of the Leased Property or negatively affect
the ability of Lessee to pay Rent hereunder as and when due, or (ii) within 60
days after the end of such 30-day period (or, if no offer is made, within 60
days following the date of such destruction), acquire the Leased Property from
Lessor for a purchase price equal to the Minimum Repurchase Price of the Leased
Property immediately prior to such damage or destruction.
(b) Except as provided in Section 13.7, if during the Term the Facility is
partially destroyed from a risk covered by the insurance described in Article
XII, but the Facility is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Facility to substantially the same
condition as existed immediately before the damage or destruction or such other
condition consistent with the Primary Intended Use as may be approved by Lessor
in writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due. Such damage or destruction shall not
terminate this Lease; provided that if Lessee cannot within a reasonable time
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obtain all necessary governmental approvals, including building permits,
licenses, conditional use permits and any certificates of need, after diligent
efforts to do so, in order to be able to perform all required repair and
restoration work and to operate the Facility for its Primary Intended Use in
substantially the same manner as immediately prior to such damage or
destruction, Lessee may either (i) offer pursuant to Article XX to substitute a
new property, substantially equivalent to the Leased Property immediately before
such damage or destruction, or (ii) after the fourth anniversary of the
Commencement Date, purchase the Leased Property for a purchase price equal to
the Minimum Repurchase Price of the Leased Property immediately prior to such
damage or destruction.
(c) In the event Lessor accepts Lessee's offer to purchase the Leased
Property or to provide a Substitute Property, this Lease shall terminate upon
payment of the purchase price and execution and delivery of all appropriate
documentation, or execution and delivery of all documents required in connection
with a Substitute Property under Article XX and Lessor shall remit to Lessee, or
allow Lessee a credit toward the purchase price in an amount equal to, all
insurance proceeds being held in trust by Lessor.
13.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED BY
INSURANCE. Except as provided in Section 13.7 below, if during the Term the
Facility is totally or materially destroyed from a risk which is not covered by
Lessee's insurance described in Article XII (whether or not such damage or
destruction renders the Facility Unsuitable for Its Primary Intended Use),
Lessee at its option shall either (a) restore the Facility to substantially its
condition immediately before such damage or destruction or such other condition
consistent with the Primary Intended Use as may be approved by Lessor in
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writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due, and such damage or destruction shall not
terminate this Lease, or (b) acquire the Leased Property from Lessor for a
purchase price equal to the Minimum Repurchase Price immediately prior to such
damage or destruction or (c) if all of the criteria for such substitution are
satisfied, offer to substitute a new property substantially equivalent to the
Leased Property immediately before such damage or destruction pursuant to the
provisions of Article XX; provided, however, that if such damage or destruction
------------------
is not material in the reasonable opinion of Lessor, Lessee shall restore the
Leased Property.
13.4 LESSEE'S PROPERTY. Lessee shall use any insurance proceeds payable by
reason of any loss of or damage to any of the Personal Property to restore such
personal property to the Leased Property with items of substantially equivalent
value to the items being replaced.
13.5 RESTORATION OF LESSEE'S PROPERTY. If Lessee is required or elects to
restore the Facility as provided in Sections 13.2 or 13.3, Lessee shall also
restore the Personal Property as required pursuant to Section 13.4 and all
Capital Additions paid for or financed by Lessor. Insurance proceeds payable by
reason of damage to Capital Additions paid for or financed by Lessor shall be
paid to Lessor and Lessor shall hold such insurance proceeds in trust to pay the
cost of repairing or replacing such Capital Additions in the event Lessee does
not terminate this Lease or purchase or substitute for the Leased Property as
provided in Section 13.2 above.
13.6 NO ABATEMENT OF RENT. This Lease shall remain in full force and effect
and Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated during any period required for
repair and restoration.
13.7 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of Sections
13.2 or 13.3 to the contrary, if damage to or destruction of the Facility occurs
during the last 12 months of the Term, and if such damage or destruction cannot
be fully repaired and restored within the lesser of (i) six months or (ii) the
period remaining in the Term immediately following the date of loss, either
party shall have the right to terminate this Lease by giving notice to the other
within 30 days after the date of damage or destruction, in which event Lessor
shall be entitled to retain the insurance proceeds and Lessee shall pay to
Lessor on demand the amount of any deductible or uninsured loss arising in
connection therewith; provided that any such notice given by Lessor shall be
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void and of no force and effect if Lessee exercises an available option to
extend the Term for one Extended Term, or one additional Extended Term, as the
case may be, within 30 days following receipt of such termination notice.
13.8 WAIVER. Lessee hereby waives any statutory or common law rights of
termination which may arise by reason of any damage or destruction of the
Facility.
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ARTICLE XIV
CONDEMNATION
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14:1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease
by Condemnation, the rights and obligations of the parties shall be determined
by this Article XIV.
14.2 TOTAL TAKING. If there is a Taking of all of the Leased Property by
Condemnation, this Lease shall terminate on the Date of Taking, and the
Minimum Rent and all Additional Charges paid or payable hereunder shall be
prorated and paid to the date of Taking.
14.3 PARTIAL TAKING. If there is a Taking of a portion of the Leased
Property by Condemnation such that the Facility is not thereby rendered
Unsuitable for Its Primary Intended Use, this Lease shall remain in effect, and
to the extent required by the last sentence of Section 14.5 Lessor shall make
available to Lessee the proceeds of any such Taking for the restoration of the
Leased Property to substantially the same condition as existed immediately
before such Taking or such other condition consistent with the Primary Intended
Use as may be approved by Lessor in writing, which consent shall not be
unreasonably withheld if such other condition would not, in Lessor's good faith
judgment, result in a reduction in the value of the Leased Property or
negatively affect the ability of Lessee to pay Rent hereunder as and when due.
If, however, the Facility is thereby rendered Unsuitable for Its Primary
Intended Use, Lessee shall have the right (a) to take such proceeds of any Award
as shall be necessary and restore the Facility, at its own expense, to the
extent possible, to substantially the same condition as existed immediately
before the partial Taking or such other condition consistent with the Primary
Intended Use as may be approved by Lessor in writing, which consent shall not be
unreasonably withheld if such other condition would not, in Lessor's good faith
judgment, result in a reduction in the value of the Leased Property or
negatively affect the ability of Lessee to pay Rent hereunder as and when due,
or (b) to offer to substitute a new property pursuant to and in accordance with
the provisions of Article XX. Lessee shall exercise its option by giving Lessor
notice thereof within 60 days after Lessee receives notice of the Taking. In the
event Lessee does not make an offer or Lessor does not accept Lessee's offer to
substitute for the Leased Property within 30 days after receipt of the notice
described in the preceding sentence, Lessee shall either (a) withdraw its offer
to substitute for the Leased Property and within 30 days after the end of such
30-day period (or, if no offer is made, within 60 days following the date of
such Taking) proceed to restore the Facility, to the extent possible, to
substantially the same condition as existed immediately before the partial
Taking or such other condition consistent with the Primary Intended Use as may
be approved by Lessor in writing, which consent shall not be unreasonably
withheld if such other condition would not, in Lessor's good faith judgment,
result in a reduction in the value of the Leased Property or negatively affect
the ability of Lessee to pay Rent hereunder as and when due, or (b) within 60
days after the end of such 30-day period (or, if no offer is made, within 60
days following the date of such Taking), acquire the Leased Property from Lessor
for a purchase
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price equal to the Minimum Repurchase Price of the Leased Property immediately
prior to such Taking.
14.4 RESTORATION. If there is a partial Taking of the Leased Property and
this Lease remains in full force and effect pursuant to Section 14.3, Lessee
shall accomplish all necessary restoration.
14.5 AWARD DISTRIBUTION. In the event Lessor accepts Lessee's offer
substitute a new property for the Leased Property or Lessee purchases the Leased
Property pursuant to Section 14.3 above, the entire Award shall belong to Lessee
and Lessor agrees to assign to Lessee all of its rights thereto. Except as
otherwise provided in Section 14.3 above, in any other event, the entire Award
shall belong to and be paid to Lessor, except that, if this Lease is terminated,
and subject to the rights of the Facility Mortgagee, Lessee shall be entitled to
receive from the Award, if and to the extent there is included in such Award any
sum attributable to the Capital Additions for which Lessee would be entitled to
reimbursement at the end of the Term pursuant to the provisions of Section
9.2(b). If Lessee is required or elects to restore the Facility, Lessor agrees
that, subject to the rights of the Facility Mortgagees (as limited by clause (c)
of the second proviso of Article XXXIII), its portion of the Award shall be used
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for such restoration and it shall hold such portion of the Award in trust for
application to the cost of the restoration.
14.6 TEMPORARY TAKING. The Taking of the Leased Property, or any part
thereof, by military or other public authority shall constitute a Taking by
Condemnation only when the use and occupancy by the Taking authority has
continued for longer than six months. During any such six-month period all the
provisions of this Lease shall remain in full force and effect and the Rent
shall not be abated or reduced during such period of Taking; provided that
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Lessee will receive any compensation from the Taking authority as a result of
such temporary Taking.
ARTICLE XV
DEFAULT
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15.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute events of default (individually, an "Event of Default"
and, collectively, "Events of Default") hereunder:
(a) Lessee shall fail to make a payment of the Rent payable by Lessee
under this Lease within five (5) Business Days of the date when due; or
(b) Lessee or Guarantor shall fail to observe or perform any other term,
covenant or condition of this Lease, the Guaranty or any other document executed
in connection therewith, and either (i) such failure shall continue for more
than 30 days after notice thereof is given by Lessor to such party, unless such
failure is not reasonably capable of being cured within such 30-day period (but
is reasonably capable of being cured within 60
23
<PAGE>
days after such notice) and such party commences action to cure such failure
within such 30-day period and diligently and continuously prosecutes such action
to completion and causes such failure to be cured within 60 days after such
notice (or within 90 days after such notice, in the event that Unavoidable
Delays prevent completion within 60 days), or (ii) such failure is not
reasonably capable of being cured within 60 days after such notice of such
failure is given; or
(c) Lessee or Guarantor shall:
(i) admit in writing its inability to pay its debts generally as
they become due.
(ii) file a petition in bankruptcy or a petition to take advantage
of any insolvency law,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property,
(v) file a petition or answer seeking reorganization or arrangement
under the Federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof, or
(vi) be in default with respect to any Indebtedness in the
outstanding amount of (i) in the case of Lessee, at least $50,000, and (ii)
in the case of Guarantor, at least $1,000,000, which default shall have
resulted in an acceleration of the maturity of such Indebtedness; or
(d) An event of default shall occur under any other lease between Lessor
and Lessee or under the RHCI Lease or any other documents executed by RHCI or
any guarantor of the RHCI Lease in connection therewith; or
(e) Lessee shall attempt to make any assignment or sublease in violation
of Section 23.1 hereof; or
(f) As at the end of each fiscal quarter, commencing with the fiscal
quarter ending June 30, 1995, Lessee shall fail to maintain a Cash Flow Coverage
Ratio of at least 1.5 to 1.0 for the twelve-month period then ended; or
(g) As of the end of each fiscal quarter, commencing with the fiscal
quarter ending June 30, 1995, Lessee shall fail to maintained a Combined Cash
Flow Coverage Ratio of at least 1.15 to 1.0 at the end of each fiscal quarter
for the twelve-month period then ended; provided that a default under this
--------
clause (g) with respect to any twelve-month
24
<PAGE>
period shall not constitute an Event of Default hereunder if at the time of such
default (i) RHCI shall have maintained, based on audited Financial Statements, a
Cash Flow Coverage Ratio of 1.5 to l.0 for a period of two consecutive fiscal
years ending on or subsequent to June 30, 1997, and (ii) during such two-year
period Lessee shall have maintained a Cash Flow Coverage Ratio of at least 1.5
to 1.0 and a Combined Cash Flow Coverage Ratio of at least 1.15 to l.0.
15.2 REMEDIES. If an Event of Default shall have occurred, Lessor may, at
its election, then or at any time thereafter, pursue any one or more of the
following remedies, in addition to any remedies which may be permitted by law or
by other provisions of this Lease, without further notice or demand, except as
hereinafter provided:
(a) Without any notice or demand whatsoever, Lessor may take any one or
more actions permissible at law to ensure performance by Lessee of Lessee's
covenants and obligations under this Lease. In this regard, it is agreed that if
Lessee abandons or vacates the Leased Property, Lessor may enter upon and take
possession of such Leased Property in order to protect it from deterioration and
continue to demand from Lessee the monthly rentals and other charges provided in
this Lease. Lessor shall use reasonable efforts to relet but shall have no
absolute obligation to relet. If Lessor does, at its sole discretion, elect to
relet the Leased Property, such action by Lessor shall not be deemed as an
acceptance of Lessee's surrender of the Leased Property unless Lessor expressly
notifies Lessee of such acceptance in writing, Lessee hereby acknowledging that
Lessor shall otherwise be reletting as Lessee's agent. It is further agreed in
this regard that in the event of any Event of Default described in this Article
XV, Lessor shall have the right to enter upon the Leased Property and do
whatever Lessee is obligated to do under the terms of this Lease; and Lessee
agrees to reimburse Lessor on demand for any reasonable expenses which Lessor
may incur in thus effecting compliance with Lessee's obligations under this
Lease, and further agrees that Lessor shall not be liable for any damages
resulting to Lessee from such action, except as may result from Lessor's gross
negligence or willful misconduct.
(b) Lessor may terminate this Lease by written notice to Lessee, in which
event Lessee shall immediately surrender the Leased Property to Lessor, and if
Lessee fails to do so, Lessor may, without prejudice to any other remedy which
Lessor may have for possession or arrearage in rent (including any interest
which may have accrued pursuant to Section 2.3 of this Lease or otherwise),
enter upon and take possession of the Leased Property and expel or remove Lessee
and any other person who may be occupying said premises or any part thereof. In
addition, Lessee agrees to pay to Lessor on demand the amount of all loss and
damage which Lessor may suffer by reason of any termination effected pursuant to
this subsection (b), said loss and damage to be determined, at Lessor's option,
by either of the following alternative measures of damages:
(i) Although Lessor shall be under no absolute obligation to attempt
and shall be obligated only to use reasonable efforts to relet the Leased
Property, until the Leased Property is relet Lessee shall pay to Lessor
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on or before the first day of each calendar month the monthly rentals and
other charges provided in this Lease. After the Leased Property has been
relet by Lessor, Lessee shall pay to Lessor on the 5th (fifth) day of each
calendar month the excess, if any, of the monthly rentals and other charges
provided in this Lease for the preceding calendar month over the monthly
rentals and other charges actually collected by Lessor for such month. If
it is necessary for Lessor to bring suit in order to collect any
deficiency, Lessor shall have a right to allow such deficiencies to
accumulate and to bring an action on several or all of the accrued
deficiencies at one time. Any such suit shall not prejudice in any way the
right of Lessor to bring a similar action for any subsequent deficiency or
deficiencies. Any amount collected by Lessor from subsequent tenants for
any calendar month in excess of the monthly rentals and other charges
provided in this Lease shall be credited to Lessee in reduction of Lessee's
liability for any calendar month for which the amount collected by Lessor
will be less than the monthly rentals and other charges provided in this
Lease, but Lessee shall have no right to such excess other than the above
described credit; or
(ii) When Lessor desires, Lessor may demand a final settlement not
to exceed the Minimum Repurchase Price at the time of such final
settlement. Upon demand for a final settlement, Lessor shall have a right
to, and Lessee hereby agrees to pay, the difference between (a) the total
of all monthly rentals and other charges provided in this Lease for the
remainder of the Term and (b) the reasonable rental value of the Leased
Property for such period (including a reasonable time to relet the Leased
Property), as determined pursuant to the provisions of Article XXVIII
hereof, such difference to be discounted to present value at a rate equal
to the lowest rate of capitalization (highest present worth) reasonably
consistent with industry standards at the time of such determination and
allowed by applicable law.
The rights and remedies of Lessor hereunder are cumulative, and pursuit of
any of the above remedies shall not preclude pursuit of any other remedies
prescribed in other sections of this Lease and any other remedies provided by
law or equity. Forbearance by Lessor to enforce one or more of the remedies
herein provided upon an Event of Default shall not be deemed or construed to
constitute a waiver of such Event of Default.
l5.3 ADDITIONAL EXPENSES. In addition to payments required pursuant to
subsections (a) and (b) of Section 15.2 above, Lessee shall compensate Lessor
for all reasonable expenses incurred by Lessor in repossessing the Leased
Property (including any increase in insurance premiums caused by the vacancy of
the Leased Property), all reasonable expenses incurred by Lessor in reletting
(including repairs, remodeling, replacements, advertisements and brokerage
fees), all reasonable concessions granted to a new tenant upon reletting
(including renewal options), all fees and expenses incurred by Lessor as a
direct or indirect result of any appropriate action by a Facility Mortgagee, any
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expenses of Lessor incurred for the installation of separate lines or meters for
any public utilities not previously metered separately from adjacent property of
Lessee and a reasonable allowance for Lessor's administrative efforts, salaries
and overhead attributable directly or indirectly to Lessee's default and
Lessor's pursuing the rights and remedies provided herein and under applicable
law.
l5.4 WAIVER. If this Lease is terminated pursuant to law or the provisions
of this Article XV, Lessee waives, to the extent permitted by applicable law,
(a) any right of redemption, reentry or repossession and (b) the benefit of any
laws now or hereafter in force exempting property from liability for rent or for
debt.
l5.5 APPLICATION OF FUNDS. All payments otherwise payable to Lessee which
are received by Lessor under any of the provisions of this Lease during the
existence or continuance of any Event of Default shall be applied to Lessee's
obligations in the order which Lessor may reasonably determine or as may be
prescribed by the laws of the state in which the Facility is located.
l5.6 NOTICES BY LESSOR. The provisions of this Article XV concerning
notices shall be liberally construed insofar as the contents of such notices are
concerned, and any such notice shall be sufficient if it shall generally apprise
Lessee of the nature and approximate extent of any default.
ARTICLE XVI
LESSOR'S RIGHT TO CURE
----------------------
If Lessee, without the prior written consent of Lessor, shall fail to make
any payrnent, or to perform any act required to be made or performed under this
Lease and to cure the same within the relevant time periods provided in Section
15.l, Lessor, without waiving or releasing any obligation or Event of Default,
may (but shall be under no obligation to) make such payment or perform such act
for the account and at the expense of Lessee, and may, to the extent permitted
by law, enter upon the Leased Property for such purpose and take all such action
thereon as, in Lessor's opinion, may be necessary or appropriate therefor. No
such entry shall be deemed an eviction of Lessee. All sums so paid by Lessor,
together with a late charge thereon (to the extent permitted by law) at the
overdue Rate from the date on which such sums or expenses are paid or incurred
by Lessor, and all costs and expenses (including reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by Lessee to Lessor on demand. The obligations of Lessee and rights of
Lessor contained in this Article shall survive the expiration or earlier
termination of this Lease.
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ARTICLE XVII
PURCHASE OF THE LEASED PROPERTY
-------------------------------
In the event Lessee purchases the Leased Property from Lessor pursuant to
any of the terms of this Lease, Lessor shall, upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent due
and payable with respect to any period ending on or before the date of the
purchase and any other amounts owing to Lessor hereunder, deliver to Lessee an
appropriate special warranty deed (in substantially the same form used to convey
the Leased Property to Lessor) and any other documents reasonably requested by
Lessee to convey the interest of Lessor in and to the Leased Property to Lessee,
and such other standard documents usually and customarily prepared in connection
with such transfers, free and clear of all encumbrances other than (a) those
that Lessee has agreed hereunder to pay or discharge, (b) those mortgage liens,
if any, which Lessee has agreed in writing and in its discretion to accept and
to take title subject to, (c) any other Encumbrances permitted to be imposed on
the Leased Property under the provisions of Article XXXII which are assumable at
no cost to Lessee, and (d) any matters affecting the Leased Property on or as of
the Commencement Date. The difference between the applicable purchase price and
the total of the encumbrances assigned or taken subject to shall be paid in cash
to Lessor, or as Lessor may direct, in federal or other immediately available
funds except as otherwise mutually agreed by Lessor and Lessee. The closing of
any such sale shall be contingent upon and subject to Lessee obtaining all
required governmental consents and approvals for such transfer. If such sale
shall fail to be consummated by reason of the inability of Lessee to obtain
all such approvals and consents, any options to extend the Term which otherwise
would have expired during the period from the date when Lessee elected or became
obligated to purchase the Leased Property until Lessee's inability to obtain the
approvals and consents is confirmed shall be deemed to remain in effect for 30
days after the end of such period. The closing with respect to any such sale
shall be appropriately timed to accommodate the determination of the Minimum
Repurchase Price in accordance with Article XXVIII. All expenses of such
conveyance, including the cost of title examination or standard coverage title
insurance, attorneys' fees incurred by Lessor in connection with such
conveyance, and transfer taxes, shall be paid by Lessor. Recording fees and
similar charges shall be paid for by Lessee. Additionally, any sale to Lessee
shall be subject to delivery of an opinion of Lessor's counsel confirming that
(i) the sale will not result in ordinary recapture income to the Lessor pursuant
to Code Section 1245 or 1250 or any other Code provision, (ii) the sale will
result in income, if any, to the Lessor of a type described in Code Section
856(c)(2) or 856(c)(3) and will not result in income of the types described in
Code Section 856(c)(4) or in the tax imposed under Code Section 857(b)(6), and
(iii) the sale, together with all other substitutions and sales made or
requested by Lessee pursuant to any other leases with Lessor of properties
hereto or any other transfers of the Leased Property or the properties leased
under other such operating leases, during the relevant time period, will not
jeopardize the qualification of Lessor as a real estate investment trust under
Code Sections 856-860. In the event that Lessor's counsel cannot deliver such an
opinion, the parties hereto agree to endeavor to enter into an alternate
arrangement such that the economic benefits conferred upon the
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parties under this Lease are not impaired (such arrangements to include, by way
of example and not limitation, deferral of the conveyance until such time as
such opinion can be delivered).
ARTICLE XVIII
HOLDING OVER
------------
If Lessee shall for any reason remain in possession of the Leased Property
after the expiration of the Term or any earlier termination of the Term hereof,
such possession shall be as a tenancy at will during which time lessee shall pay
as rental each month an amount equal to the sum of (a) 150% of the aggregate of
1/12 of the aggregate Minimum Rent payable with respect to the last complete
year prior to the expiration of the Term plus (b) all Additional Charges
----
accruing during such month plus (c) all other sums, if any, payable pursuant to
----
the provisions of this Lease with respect to the leased Property. During such
period of tenancy, Lessee and Lessor shaLl be obligated to perform and observe
all of the terms, covenants and conditions of this Lease and to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
ARTICLE XIX
ABANDONMENT: OBSOLESCENCE
-------------------------
19.1 DISCONTINUANCE OF OPERATIONS ON THE LEASED PROPERTY; SUBSTITUTION. If
Lessee has discontinued use of the Leased Property for its Primary Intended Use
for 90 consecutive days without Lessor's prior written consent, for alterations
or remodeling pursuant to Article IX or otherwise, Lessee, if Lessor has not
terminated this Lease as provided in Section 15.1, will offer to substitute a
new property or properties pursuant to and in accordance with the provisions of
Article XX, on the first Payment Date occurring not less than 120 days after the
date of such discontinuance of business operations.
19.2 OBSOLESCENCE OF THE LEASED PROPERTY; PURCHASE. If the Leased Property
becomes Unsuitable for its Primary Intended Use, all as set forth in an
officer's Certificate delivered to Lessor, and if Lessor has not terminated this
Lease as provided in Section 15.1, Lessee may after the fifteenth anniversary of
the Commencement Date purchase the Leased Property for a purchase price equal to
the Minimum Repurchase Price on the first Payment Date occuring not less than
120 days after the date of such officer's Certificate.
19.3 CONVEYANCE OF LEASED PROPERTY. In the event Lessee elects to purchase
the Leased Property pursuant to Section 19.2, then on the first Payment Date
occurring not less than 120 days after the date of the Officer's Certificate
referred to in Section 19.2, Lessor shall, upon receipt from Lessee of the
purchase price provided for above and any Rent or other sums then due and
payable under this Lease (excluding the installment of Minimum Rent due on the
date of conveyance), convey the Leased Property to Lessee on such date
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in accordance with the provisions of Article XVII and this Lease shall thereupon
terminate as to the Leased Property.
ARTICLE XX
SUBSTITUTION OF PROPERTY
------------------------
20.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY.
(a) In the event a right or requirement of substitution of the leased
property arises as a result of (i) damage or destruction of the Leased Property
as set forth in Article XIII hereof, (ii) a Taking of a portion of the Leased
Property as set forth in Section 143 hereof, or (iii) the discontinuance of the
use of the Leased Property as set forth in Section 19.1 hereof, and provided
--------
that no Event of Default shall have occurred and be continuing, Lessee shall
have the right (subject to fulfillment of the conditions set forth below in this
Article XX and upon notice to Lessor) to substitute one or more properties
(collectively referred to as "Substitute Properties" or individually as a
"Substitute Property") on a monthly Payment Date specified in such notice
(the "Substitution Date") occurring not less than 90 days after receipt by
Lessor of such notice. The notice shall be in the form of an Officer's
Certificate and shall specify the reason(s) for the proposed substitution and
the proposed Substitution Date. Notwithstanding anything contained herein to the
contrary, any other substitution for the Leased Property shall require the prior
written consent of Lessor which shall be within the sole discretion of Lessor.
(b) If Lessee gives the notice referred to in Section 20.l(a) above,
Lessee shall present to Lessor one or more properties (or groups of properties)
each of which property (or groups of properties) shall provide Lessor with a
yield (i.e., an annual return on its equity in such property) not less than
-----
Lessor's yield from the Leased Property at the time of such proposed
substitution (or in the case of substitution because of damage or destruction,
the yield immediately prior to such damage or destruction) and as reasonably
projected over the remaining Term of this Lease and shall have a Fair Market
Value substantially equivalent to the Fair Market Value of the Leased Property.
Lessor shall have a period of 90 days within which to review such information
and either accept or reject the Substitute Properties so presented unless Lessee
is required by a court order or administrative action to divest or otherwise
dispose of the Leased Property within a shorter time period, in which case the
time period shall be shortened appropriately to meet the reasonable needs of
Lessee, but in no event shall said period be less than 30 Business Days after
Lessor's receipt of said notice (subject to further extension for any period of
time in which Lessor is not timely provided with the information provided for
--------
in Section 20.2 and Section 20.3 below); provided that if Lessor shall contend
that the Substitute Properties fail to meet all the conditions for substitution
set forth in this Article XX, including the provisions of Sections 20.1(d), (e)
and (f) below, the matter shall be submitted to arbitration in accordance with
Article XXXI and the time periods for Lessor's approval or rejection shall be
tolled during the period of such arbitration.
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(c) In the event that on or before the expiration of the applicable time
period for Lessor's review, Lessor has rejected the Substitute Property or
Properties so presented, then Lessee shall, for a period of 60 days after the
expiration of such period, have the right to terminate this Lease as to the
Leased Property upon notice to Lessor accompanied by an offer to purchase the
Leased Property on the first Payment Date occurring at least 90 days after the
date of such notice, as specified in such notice, for a purchase price equal to
the greater of the Fair Market Value Purchase Price or the Minimum Repurchase
Price, and this Lease shall terminate on the purchase date.
(d) Lessee's right to offer substitution as set forth in this Article XX
is subject to the conditions set forth in Section 20.2 below, and to the
delivery of an opinion of counsel for Lessor confirming that (i) the
substitution of the Substitute Property for the Leased Property will qualify as
an exchange solely of property of a like-kind under Section 1031 of the Code,
in which, generally, except for "boot" such as cash needed to equalize exchange
values or discharge indebtedness, no gain or loss is recognized to Lessor, (ii)
the substitution or sale will not result in ordinary recapture income to Lessor
pursuant to Code Section 1245 or 1250 or any other Code provision, (iii) the
substitution or sale will result in income, if any, to Lessor of a type
described in Code Section 856(c)(2) or 856(c)(3) and will not result in income
of the types described in Code Section 856(c)(4) or result in the tax imposed
under Code Section 857(b)(6), and (iv) the substitution or sale, together with
all other substitutions and sales made or requested by Lessee pursuant to any
other leases with Lessor of properties hereto or any other transfers of the
Leased Property or the properties leased under other such operating leases,
during the relevant time period, will not jeopardize the qualification of Lessor
as a real estate investment trust under Code Sections 856-860.
(e) In the event that the equity value of the Substitute Property or
group of Substitute Properties (i.e., the Fair Market Value of the Substitute
Property or group of Substitute Properties minus the encumbrances subject to
which Lessor will take the Substitute Property or group of Substitute
Properties) as of the Substitution Date is greater than the equity value of the
Leased Property (i.e., the Fair Market Value of the Leased Property minus the
encumbrances subject to which Lessee will take the Leased Property) as of the
Substitution Date (or in the case of damage or destruction, the Fair Market
Value immediately prior to such damage or destruction), Lessor shall pay to
Lessee an amount equal to the difference, subject to the limitation set forth
below. In the event that said equity value of the Substitute Property or group
of Substitute Properties is less than said equity value of the Leased Property,
Lessee shall pay to Lessor an amount equal to the difference, subject to the
limitation set forth below. Notwithstanding the foregoing, neither Lessor nor
Lessee shall be obligated to consummate any such substitution if such party
would be required to make a payment to the other in excess of an amount equal
to ten percent of the Fair Market Value of the Leased Property (the amount of
cash paid by one party to the other being hereinafter referred to as the "Cash
Adjustment").
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(f) The Rent for such Substitute Property in all respects shall
provide Lessor with a yield at the time of such substitution (i.e., annual
return on its investment in such Substitute Property) not less than the Current
Yield (and reasonably expected to be received thereafter throughout the Term of
this Lease) from the Leased Property, taking into account the Cash Adjustment
paid or received by Lessor and any other relevant factors.
(g) The Minimum Repurchase Price of the Substitute Property shall be an
amount equal to the Minimum Repurchase Price of the Leased Property (i)
increased by any Cash Adjustment paid by Lessor pursuant to paragraph (e) above,
or (ii) decreased by any Cash Adjustment paid by Lessee pursuant to paragraph
(e) above.
20.2 CONDITIONS TO SUBSTITUTION. On the Substitution Date, the Substitute
Property will become the Leased Property hereunder upon delivery by Lessee to
Lessor of the following items in form and substance reasonably satisfactory to
Lessor:
(a) an Officer's Certificate certifying that (i) the Substitute Property
has been accepted by Lessee for all purposes of this Lease and there has been no
material damage to the improvements located on the Substitute Property nor is
any condemnation or eminent domain proceeding pending with respect thereto;
(ii) all permits, licenses and certificates (including a permanent,
unconditional certificate of occupancy and, to the extent permitted by law, all
certificates of need and licenses) which are necessary to permit the use of the
Substitute Property in accordance with the provisions of this Lease have been
obtained and are in full force and effect; (iii) under applicable zoning and use
laws, ordinances, rules and regulations the Substitute Property may be used for
the purposes contemplated by Lessee and all necessary subdivision approvals have
been obtained; (iv) there are no mechanic's or materialmen's liens outstanding
or threatened to the knowledge of Lessee against the Substitute Property arising
out of or in connection with the construction of the improvements thereon, other
than those being contested by Lessee pursuant to Article XI; (v) any mechanic's
or materialmen's liens being contested by Lessee will be promptly paid by Lessee
if such contest is resolved in favor of the mechanic or materialman; (vi) to the
best knowledge of Lessee, there exists no Event of Default under this Lease, and
no defense, offset or claim exists with respect to any sums to be paid by Lessee
hereunder; and (vii) any exceptions to Lessor's title to the Substitute Property
do not materially interfere with the intended use of the Substitute Property by
Lessee;
(b) a special warranty deed with warranties against claims arising under
Lessee conveying to Lessor title to the Substitute Property free and clear of
any liens and encumbrances except those approved in writing or assumed by
Lessor;
(c) a lease duly executed, acknowledged and delivered by Lessee containing
the same terms and conditions as are contained herein except that (i) the legal
description of the Land shall refer to the Substitute Property, (ii) the Minimum
Repurchase Price, Rent and any Additional Charges for the Substitute Property
shall be consistent with the
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requirements of Section 20.1, and (iii) such other changes therein as may be
necessary or appropriate under the circumstances shall be made;
(d) a standard owner's or lessee's (as applicable) policy of title
insurance covering the Substitute Property (or a valid, binding, unconditional
commitment therefor), dated the Substitution Date, in current form and
including mechanics' and materialmen's lien coverage, issued to Lessor by a
title insurance company reasonably satisfactory to Lessor. Such policy shall (i)
insure (A) Lessor's fee title to the Substitute Property, subject to no liens or
encumbrances except those approved or assumed by Lessor, and (B) that any
restrictions affecting the Substitute Property have not been violated and that a
further violation thereof will not result in a forfeiture or reversion of title,
(ii) be in an amount at least equal to the Fair Market Value of the Substitute
Property, and (iii) contain such endorsements as may be reasonably requested by
Lessor;
(e) certificates of insurance with respect to the Substitute Property
fulfilling the requirements of Article XII;
(f) current appraisals or other evidence satisfactory to Lessor, in its
sole discretion, as to the current Fair Market Values of such Substitute
Property;
(g) all available revenue data relating to the Substitute Property for the
period from the date of opening for business of the Facility on such Substitute
Property to the date of Lessee's most recent Fiscal-Year end, or for the most
recent three years, whichever is less; and
(h) such other certificates, documents, opinions of counsel and other
instruments as may be reasonably required by Lessor.
20.3 CONVEYANCE TO LESSEE. on the Substitution Date or the date specified
in the notice given pursuant to Section 20.1 Lessor will convey the Leased
Property to Lessee in accordance with the provisions of Article XVII (except as
to payment of any expenses in connection therewith which shall be governed by
Section 20.4 below) upon either (a) payment in cash therefor or (b) conveyance
to Lessor of the Substitute Property, as appropriate.
20.4 EXPENSES. Lessee shall pay or cause to be paid, on demand, all
reasonable costs and expenses paid or incurred by Lessor in connection with the
substitution and conveyance of the Leased Property and the Substitute Property,
including without limitation (a) fees and expenses of Lessor's counsel, (b) the
amount of any recording taxes and fees, (c) the cost of preparing and recording,
if appropriate, a release of the Leased Property from the lien of any mortgage,
(d) broker's fees and commissions for Lessee, if any, (e) documentary stamp and
transfer taxes, if any, (f) title insurance charges, and (h) escrow fees, if
any.
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ARTICLE XXI
RISK OF LOSS
------------
Except as otherwise provided in this Lease, during the Term of this Lease,
the risk of loss or of decrease in the enjoyment and beneficial use of the
Leased Property in consequence of the damage or destruction thereof by fire, the
elements, casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than by Lessor and those
claiming from, through or under Lessor) is assumed by Lessee, and Lessor shall
in no event be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent except as
specifically provided in this Lease.
ARTICLE XXII
INDEMNIFICATION
---------------
Notwithstanding the existence of any insurance or self insurance provided
for in Article XII, and without regard to the policy limits of any such
insurance or self insurance, Lessee will protect, indemnify, save harmless and
defend Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against Lessor by reason of: (a) any accident, injury to or death of
persons or loss to property occurring on or about the Leased Property, including
any claims of malpractice, (b) any use, misuse, no use, condition, maintenance
or repair by Lessee of the Leased Property, (c) any Impositions (which are the
obligations of Lessee to pay pursuant to the applicable provisions of this
Lease), (d) any failure on the part of Lessee to perform or comply with any of
the terms of this Lease, (e) the non-performance of any of the terms and
provisions of any and all existing and future subleases of the Leased Property
to be performed by Lessee as landlord thereunder and (f) the violation of any
Hazardous Materials Law, in each case of (a) through (f) above occurring while
this Lease is in effect or Lessee is in possession of the Leased Property or any
part thereof Any amounts which become payable by Lessee under this Section
shall be paid within 20 days after liability therefor on the part of Lessor is
finally determined by litigation or otherwise (including the expiration of any
time for appeals) and, if not timely paid, shall bear interest (to the extent
permitted by law) at the overdue Rate from the date of such determination to
the date of payment. Lessee, at its expense, shall contest, resist and defend
any such claim, action or proceeding asserted or instituted against Lessor or
may compromise or otherwise dispose of the same as Lessee sees fit. Lessor shall
cooperate with Lessee in a reasonable manner to permit Lessee to satisfy
Lessee's obligations hereunder, including the execution of any instruments or
documents reasonably requested by Lessee. Nothing herein shall be construed as
indemnifying Lessor or its agents for their own negligent acts or omissions or
willful misconduct. Lessee's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
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ARTICLE XXIII
SUBLETTING AND ASSIGNMENT
-------------------------
23.1 SUBLETTING AND ASSIGNMENT. Without the prior written consent of
Lessor, Lessee may not assign or sublet all or any part of the Leased Property,
except pursuant to (a) Tenant Leases for office space rented to physicians and
other health care professionals having patients at the Leased Property, provided
--------
that the aggregate square footage demised under all such physician leases may
not exceed 6,300 square feet, (b) Permitted Assignments for Security, and (c)
that certain Agreement of Lease dated November 1, 1994 (the "TCV Lease") between
Transitional Care Ventures (Arizona), Inc. and Ramsay Health Care, Inc
("Ramsay") and assigned to Lessee, or any lease of the same or substantially
the same square footage as is demised under the TCV Lease for the same or
substantially the same purposes for which the premises demised under the TCV
Lease is currently used. Any lease executed pursuant to the foregoing exceptions
to the prohibition on assignment shall expressly state that they are
subordinate to this Lease. Any attempted assignment or subletting in violation
of this provision shall be null and void and of no force or effect and shall
constitute a breach of this Lease by Lessee. At the expiration or earlier
termination of this Lease for any reason, Lessee shall assign its rights under
all Tenant Leases then in effect to Lessor, provided that Lessee shall have the
--------
right to terminate any Tenant Lease with a Tenant which is an affiliate of
Lessee.
23.2 NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT. Except for existing
Tenant Leases, Lessee shall insert in each sublease permitted under Section 23.1
provisions to the effect that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) in the event this Lease shall terminate before the expiration of
such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this Lease,
and (c) in the event the sublessee receives a written notice from Lessor or
Lessor's assignees, if any, stating that Lessee is in default under this Lease,
the sublessee shall thereafter be obligated to pay all rentals accruing under
said sublease directly to the party giving such notice, or as such party may
direct. All rentals received from the sublessee by Lessor or Lessor's assignees,
if any, shall be credited against amounts owing by Lessee under this Lease.
Lessor agrees that notwithstanding any default, termination, expiration, sale,
entry or other act or omission of Lessee pursuant to the terms of this Lease, or
at law or in equity, a Tenant's possession shall not be disturbed unless such
possession may otherwise be terminated pursuant to the terms of the applicable
Tenant Lease. Lessor hereby agrees, upon Lessee's request, to execute a
nondisturbance agreement in favor of any Tenant or in favor of any sublessee
under any sublease permitted under Section 23.1 above; provided that the Tenant
--------
or any such sublessee has acknowledged all of the foregoing provisions and
executed all documents required by this Section 23.2.
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ARTICLE XXIV
OFFICERS'S CERTIFICATES AND FINANCIAL STATEMENTS
------------------------------------------------
(a) At any time and from time to time within 14 (fourteen) days following
written request by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease is unmodified and in full force and
effect (or that this Lease is in full force and effect as modified and setting
forth the modifications) and the dates to which the Rent has been paid. Any such
officer's Certificate furnished pursuant to this Article maybe relied upon by
Lessor and any prospective purchaser of the Leased Property.
(b) Lessee will furnish or cause to be furnished the following statements
to Lessor:
(i) within 120 days after the end of each of Lessee's fiscal years
(A) a copy of Lessee's audited Financial Statements for such fiscal year,
(B) an Officer's Certificate stating that no Event of Default, or event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default, has occurred and is continuing and has not
been waived, or, if there shall have occurred and be continuing such an
Event of Default or event, specifying the nature thereof and the steps
being taken to remedy the same, (C) a current rent or lease roll for the
Leased Property setting forth rental information in reasonable detail
regarding all of the Tenants and Tenant Leases, including any space
utilized by Lessee, and (D) a calculation of the Cash Flow Coverage Ratio
and Combined Cash Flow Coverage Ratio for such fiscal year;
(ii) within 120 days after the end of each of Guarantor's fiscal
years (A) a copy of Guarantor's audited Consolidated Financial Statements
for such fiscal year, and (B) an Officer's Certificate stating that no
Event of Default involving Guarantor, or event which, with the giving of
notice or the passage of time, or both, would constitute such an Event of
Default, has occurred and is continuing and has not been waived, or, if
there shall have occurred and be continuing such an Event of Default or
event, specifying the nature thereof and the steps being taken to remedy
the same;
(iii) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year of Lessee, (A) a copy of Lessee's balance
sheet and statement of earnings for such quarter, together with Lessee's
utilization statements produced in the ordinary course of business, which
Lessor will hold in confidence, (B) an Officer's Certificate stating that
no Event of Default or event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default, has
occurred and is continuing and has not been waived, or, if there shall have
occurred and be continuing such an Event of Default or event, specifying
the nature thereof and the steps being taken to remedy the same, and (C) a
calculation of the Cash Flow Coverage Ratio and Combined Cash Flow Coverage
Ratio for such fiscal quarter;
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(iv) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year of Guarantor, (A) a copy of Guarantor's
unaudited Consolidated Financial Statements for such fiscal quarter, and
(B) an Officer's Certificate stating that no Event of Default involving
Guarantor or event which, with the giving of notice or the passage of time,
or both, would constitute an Event of Default involving Guarantor, has
occurred and is continuing and has not been waived, or, if there shall have
occurred and be continuing such an Event of Default or event, specifying
the nature thereof and the steps being taken to remedy the same; and
(v) with reasonable promptness, such other information respecting
the financial condition, affairs and properties of Lessee and Guarantor as
Lessor may reasonably request from time to time.
ARTICLE XXV
INSPECTION
----------
Lessee shall permit Lessor and its authorized representatives to inspect
the Leased Property during usual business hours subject to any security, health,
safety or confidentiality requirements of Lessee or any governmental agency, any
Insurance Requirements relating to the Leased Property, and rights of Tenants.
ARTICLE XXVI
QUIET ENJOYMENT
---------------
So long as Lessee shall pay all Rent as the same becomes due and shall
fully comply with all of the terms of this Lease and fully perform its
obligations hereunder, Lessee shall peaceably; and quietly have, hold and enjoy
the Leased Property for the Term hereof, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor, but subject to all liens
and encumbrances of record as of the date hereof or hereafter consented to by
Lessee. No failure by Lessor to comply with the foregoing covenant shall give
Lessee any right to cancel or terminate this Lease, or to fail to pay any other
sum payable under this Lease, or to fail to perform any other obligation of
Lessee hereunder. Notwithstanding the foregoing, Lessee shall have the right by
separate and independent action to pursue any claim or seek any damages it may
have against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Article.
ARTICLE XXVII
NOTICES
-------
All notices, demands, requests and other communications or documents to be
provided under this Lease shall be in writing and shall be given to the party at
its address or telecopy number set forth below or such other address or telecopy
number as the party may later specify for that purpose by notice to the other
party. Each notice shall, for all purposes shall be deemed given and received:
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(i) If given by telecopy, when the telecopy is transmitted to the
party's telecopy number specified below and confirmation of complete
receipt is received by that transmitting party during normal business hours
on any Business Day, or on the next Business Day if not confirmed during
normal business hours;
(ii) If hand delivered, when delivered;
(iii) If given by nationally recognized and reputable overnight
delivery service, the day on which the notice is actually received by the
party; or
(iv) If given by certified mail, return receipt requested, postage
prepaid, two Business Days after posted with the United States Postal
Service, at the address of the party specified below:
If to Lessor:
CAPSTONE CAPITAL CORPORATION
l000 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
Attention: William C. Harlan, Senior Vice President
Telephone: (205) 967-2092
Telecopy: (205) 967-9066
With a copy to:
Wanda S. McNeil, Esq.
Sirote & Permutt, P.C.
2OO Clinton Avenue, N.W.
Suite 1000
Huntsville, Alabama 35801
Telephone: (205) 536-1711
Telecopy: (205) 518-3681
If intended for Lessee:
MESA PSYCHIATRIC HOSPITAL, INC.
Gregory H. Browne
Chief Executive Officer
Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
Telephone:
38
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Telecopy:
With a copy to:
Mirek Fajt, Esq.
Haythe & Curley
237 Park Avenue
New York, New York l0017-3142
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
ARTICLE XXVIII
APPRAISAL
---------
In the event that it becomes necessary to determine the Fair Market Value,
Fair Market Value Purchase Price, the Fair Market Added Value, the Minimum
Repurchase Price or the Fair Market Rental Value of the Leased Property or a
Substitute Property for any purpose of this Lease, the party required or
permitted to give notice of such required determination shall include in the
notice the name of a person selected to act as an appraiser on its
behalf. Within ten days after receipt of any such notice, Lessor (or
Lessee, as the case may be) shall by notice to Lessee (or Lessor, as the case
may be) appoint a second person as an appraiser on its behalf. The appraisers
thus appointed (each of whom must be a member of the American Institute of Real
Estate Appraisers or any successor organization thereto) shall, within 45 days
after the date of the notice appointing the first appraiser, proceed to appraise
the Leased Property or the Substitute Property, as the case may be, to determine
any of the foregoing values as of the relevant date (giving effect to the
impact, if any, of inflation from the date of their decision to the relevant
date); provided that if only one appraiser shall have been so appointed, or if
--------
two appraisers shall have been so appointed but only one such appraiser shall
have made such determination within 50 days after the making of Lessee's or
Lessor's request, then the determination of such appraiser shall be final and
binding upon the parties. If two appraisers shall have been appointed and shall
have made their determinations within the respective requisite periods set forth
above and if the difference between the amounts so determined shall not exceed
ten percent of the lesser of such amounts, then the Fair Market Value or Fair
Market Added Value or the Fair Market Rental Value shall be an amount equal to
50% of the sum of the amounts so determined. If the difference between the
amounts so determined shall exceed l0% of the lesser of such amounts, then such
two appraisers shall have 20 days to appoint a third appraiser, but if such
appraisers fail to do so, then either party may request the American Arbitration
Association or any successor organization thereto to appoint an appraiser within
20 days of such request, and both parties shall be bound by any appointment so
made within such 20-day period. If no such appraiser shall have been appointed
within such 20 days or within 90 days of the original request for a
determination of Fair Market Value or Fair Market Added Value or the Fair Market
Rental Value, whichever is earlier, either Lessor
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or Lessee may apply to any court having jurisdiction to have appointment made by
such court. Any appraiser appointed, by the American Arbitration Association or
by such court, shall be instructed to determine the Fair Market Value or Fair
Market Added Value or the Fair Market Rental Value within 30 days after
appointment of such appraiser. The determination of the appraiser which differs
most in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and 50% of the sum of the remaining two
determinations shall be final and binding upon Lessor and Lessee as the Fair
Market Value or Fair Market Added Value or the Fair Market Rental Value for such
interest. However, in the event that following the appraisal performed by said
third appraiser, the dollar amount of two of such appraisals are higher and
lower, respectively, than the dollar amount of the remaining appraisal in equal
degrees, the determinations of both the highest and lowest appraisal,
respectively, shall be rejected and the determination of the remaining appraisal
shall be final and binding upon Lessor and Lessee as the Fair Market Value or
Fair Market Added Value or the Fair Market Rental Value for such interest. This
provision for determination by appraisal shall be specifically enforceable to
the extent such remedy is available under applicable law, and any determination
hereunder shall be final and binding upon the parties except as otherwise
provided by applicable law. Lessor and Lessee shall each pay the fees and
expenses of the appraiser appointed by it and each shall pay one-half of the
fees and expenses of the third appraiser and one-half of all other costs and
expenses incurred in connection with each appraisal.
ARTICLE XXIX
PURCHASE RIGHTS
---------------
29.1 FIRST REFUSAL TO PURCHASE. (a) During the initial Term hereof
(provided that Lessee is not in material default at such time), and during any
--------
extended Term (whether or not Lessee is in material default at such time),
Lessee shall have a first refusal option to purchase the Leased Property upon
the same terms and conditions as Lessor, or its successors and assigns, shall
have received an offer from a third party to purchase the Leased Property, which
Lessor intends to accept (or has accepted subject to Lessee's right of first
refusal granted herein). If, during the Term, Lessor receives such an offer or
reaches such agreement with a third party, Lessor shall promptly notify Lessee
of the purchase price and all other material terms and conditions of such
agreement together with a copy of such offer, and Lessee shall have 60 days
after receipt of such notice from Lessor within which time to exercise Lessee's
option to purchase. If Lessee exercises its option, then such purchase shall be
consummated within the time set forth in the third-party offer and in accordance
with the provisions of Article XVII hereof to the extent not inconsistent
herewith.If Lessee does not exercise Lessee's option to purchase within said 60-
day period after receipt of said notice from Lessor, Lessor shall be free for a
period of 180 days after the expiration of said 60-day period to sell the Leased
Property to the third party at the price and terms set forth in such offer.
Whether or not such sale is consummated, Lessee shall be entitled to exercise
its right of first refusal as provided in this section, as to any subsequent
sale of the Leased Property during the Term of this Lease.
40
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(b) During the twelve-month period commencing on the last date of the
initial Term hereof (provided that this Lease has not been terminated prior to
--------
said date), or during the twelve-month period commencing on the date of the
expiration or earlier termination of any Extended Term (upon the occurrence of
an Event of Default or otherwise), Lessee shall have a first refusal option to
purchase the Leased Property upon the same terms and conditions as Lessor, or
its successors and assigns, shall have received an offer from a third party to
purchase the Leased Property, which Lessor intends to accept (or has accepted
subject to Lessee's right of first refusal granted herein). If during such
twelve-month period Lessor receives such an offer or reaches such agreement with
a third party, Lessor shall promptly notify Lessee of the purchase price and all
other material terms and conditions of such agreement together with a copy of
such offer, and lessee shall have 30 days after receipt of such notice from
Lessor within which time to exercise Lessee's option to purchase. If Lessee
exercises its option, then such purchase shall be consummated within the time
set forth in the third-party offer and in accordance with the provisions of
Article XVII hereof to the extent not inconsistent herewith. If Lessee does not
exercise Lessee's option to purchase within said 30-day period after receipt of
said notice from Lessor, Lessor shall be free for the remainder of such twelve-
month period to sell the Leased Property to the third party at the price and
terms set forth in such offer. Whether or not such sale is consummated, Lessee
shall be entitled to exercise its right of first refusal as provided in this
section as to any subsequent sale of the Leased Property during such twelve-
month period.
ARTICLE XXX
DEFAULT BY LESSOR
-----------------
30.l DEFAULT BY LESSOR. Lessor shall be in default of its obligations under
this Lease if Lessor shall fail to observe or perform any term, covenant or
condition of this Lease on its part to be performed and such failure shall
continue for a period of 30 days after written notice thereof is received by
Lessor, unless such failure cannot with due diligence be cured within a period
of 30 days, in which case such failure shall not be deemed to continue if
Lessor, within said 30-day period, proceeds promptly and with due diligence to
cure the failure and diligently completes the curing thereof. The time within
which Lessor shall be obligated to cure any such failure shall also be subject
to extension of time due to the occurrence of any Unavoidable Delay. In the
event Lessor fails to cure any such default, Lessee, without waiving or
releasing any obligations hereunder, and in addition to all other remedies
available to Lessee hereunder or at law or in equity, may purchase the Leased
Property from Lessor for a purchase price equal to the greater of the Fair
Market Value Purchase Price or the Minimum Repurchase Price of the Leased
Property minus an amount equal to any damage suffered by Lessee by reason of
such default. In the event Lessee elects to purchase the Leased Property, it
shall deliver a notice thereof to Lessor specifying a Payment Date occurring no
less than 90 days subsequent to the date of such notice on which it shall
purchase the Leased Property, and the same shall be thereupon conveyed in
accordance with the provisions of Article XVII. Any sums owed Lessee by Lessor
hereunder shall bear interest at the Overdue Rate from the date due and payable
until the date paid.
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30.2 LESSEE'S RIGHT TO CURE. Subject to the provisions of Section 30.l, if
Lessor shall breach any covenant to be performed by it under this Lease, Lessee,
after notice to and demand upon Lessor in accordance with Section 30.1, without
waiving or releasing any obligation of Lessor hereunder, and in addition to all
other remedies available hereunder and at law or in equity to Lessee, may (but
shall be under no obligation at any time thereafter to) make such payment or
perform such act for the account and at the expense of Lessor. All sums so paid
by Lessee and all costs and expenses (including reasonable attorneys' fees) so
incurred, together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by Lessee, shall be paid by
Lessor to Lessee on demand or set off against the Rent. The rights of Lessee
hereunder to cure and to secure payment from Lessor in accordance with this
Section 30.2 shall survive the termination of this Lease.
ARTICLE XXXI
ARBITRATION
-----------
31.1 CONTROVERSIES. Except with respect to the payment of Minimum Rent
hereunder, in case any controversy shall arise between the parties hereto as to
any of the requirements of this Lease or the performance thereof which
controversy the parties shall be unable to settle by agreement or as otherwise
provided herein, such controversy shall be determined by arbitration to be
initiated and conducted as provided in this Article XXXI.
31.2 APPOINTMENT OF ARBITRATORS. The party or parties requesting
arbitration shall serve upon the other a written demand therefor specifying the
matter to be submitted to arbitration, and nominating an arbitrator. Within 20
days after receipt of such written demand and notification, the other party
shall, in writing, nominate a competent disinterested person and the two
arbitrators so designated shall within ten days thereafter, select a third
arbitrator and give immediate written notice of such selection to the parties
and shall fix in said notice a time and place for the first meeting of the
arbitrators, which meeting shall be held as soon as conveniently possible after
the selection of all arbitrators, at which time and place the parties to the
controversy may appear and be heard.
31.3 THIRD ARBITRATOR. In case the notified party or parties shall fail
to make a selection upon notice, as aforesaid, or in case the first two
arbitrators selected shall fail to agree upon a third arbitrator within ten days
after their selection, then such arbitrator or arbitrators may, upon application
made by either of the parties to the controversy, after 20 days' written notice
thereof to the other party or parties, have a third arbitrator appointed by any
judge of any United States court of record having jurisdiction in the state in
which the Leased Property is located or, if such office shall not then exist, by
a judge holding an office most nearly corresponding thereto.
31.4 ARBITRATION PROCEDURE. Said arbitrators shall give each of the
parties not less than ten days' written notice of the time and place of each
meeting at which the parties or any of them may appear and be heard and after
hearing the parties in regard to the matter
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in dispute and taking such other testimony and making such other examinations
and investigations as justice shall require and as the arbitrators may deem
necessary, they shall decide the questions submitted to them. The decision of
said arbitrators in writing signed by a majority of them shall be final and
binding upon the parties to such controversy. In rendering such decisions and
award, the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Lease.
31.5 EXPENSES. The expenses of such arbitration shall be divided between
Lessor and Lessee unless otherwise specified in the decision of the arbitrators.
Each party in interest shall pay the fees and expenses of its own counsel.
ARTICLE XXXII
FINANCING OF THE LEASED PROPERTY
--------------------------------
Lessor agrees that it will not grant or create any mortgage, deed of trust,
lien, encumbrance or other title retention agreement upon the Leased Property to
secure any indebtedness of Lessor (an "Encumbrance"), unless the holder of each
such Encumbrance shall simultaneously with or prior to recording the Encumbrance
agree (a) to give Lessee the same notice, if any, given to Lessor of any default
or acceleration of any obligation underlying any such Encumbrance or any sale in
foreclosure of such Encumbrance, (b) to permit Lessee to appear with its
representatives and to bid at any public foreclosure sale with respect to any
such Encumbrance and (c) to enter into an agreement with Lessee containing the
provisions described in Article XXXII of this Lease. Lessee agrees to execute
and deliver to Lessor or the holder of an Encumbrance any written agreement
required by this Article within ten days of written request thereof by Lessor or
the holder of an Encumbrance.
Lessee hereby consents to the assignment of and grant of a security
interest and lien in this Lease together with the other documents and
instruments delivered to Lessor by Lessee pursuant hereto and in connection
herewith (collectively, the "Assigned Documents"), including all rights of
Lessor in, to and under each Assigned Document, by Lessor to NationsBank of
Georgia, National Association, as Agent (the "Agent") for itself and the other
lenders from time to time parties to that certain Revolving Credit and
Reimbursement Agreement dated as of June 22, 1994, among Lessor, the lenders
party thereto (the "Lenders") and the Agent, as amended by that certain
Amendment Agreement No. 1 to Revolving Credit and Reimbursement Agreement
and Certain Other Loan Documents dated as of October 26, 1994, and by that
certain Amendment Agreement No. 2 to Revolving Credit and Reimbursement
Agreement and Certain Other Loan Documents dated as of March 17, 1995 (as so
amended and as it may be further amended, modified or supplemented from time to
time, the "Credit Agreement"), pursuant to which the Lenders have established a
revolving credit facility and letter of credit facility in favor of Lessor.
Lessee hereby further agrees to execute a Consent to Assignment in substantially
the form attached hereto as Exhibit E. Lessee further agrees that in connection
---------
with the execution
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of any such assignment by Lessor, Lessee will execute and deliver to the Agent a
tenant estoppel certificate in substantially the form attached hereto as Exhibit
-------
F.
- --
ARTICLE XXXIII
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
---------------------------------------------
At the request from time to time by one or more holders of an Encumbrance
that may hereafter be placed upon the Leased Property or any part thereof, and
any and all renewals, replacements, modifications, consolidations, spreaders and
extensions thereof, Lessee will subordinate this Lease and all of Lessee's
rights and estate hereunder to each such Encumbrance and will attorn to and
recognize such holder (or the purchaser at any foreclosure sale or any sale
under a power of sale contained in any such Encumbrance or a holder by a deed in
lieu of foreclosure, as the case may be) as Lessor under this Lease for the
balance of the Term then remaining, subject to all of the terms and provisions
of this Lease, provided that each such holder simultaneously with or prior to
--------
recording any such Encumbrance executes and delivers a written agreement in
recordable form (a) consenting to this Lease and agreeing that, notwithstanding
any such other lease, mortgage, deed of trust, right, title or interest, or any
default, expiration, termination, foreclosure, sale, entry or other act or
omission under, pursuant to or affecting any of the foregoing, Lessee shall not
be disturbed in peaceful enjoyment of the Leased Property nor shall this Lease
be terminated or canceled at any time, except in the event Lessor shall have the
right to terminate this Lease under the terms and provisions expressly set forth
herein; (b) agreeing that it will be bound by all the terms of this Lease
(including all terms with respect to repurchase and substitution of the Leased
Property and extension of the Term) and perform and observe all of Lessor's
obligations set forth herein; and (c) agreeing that all proceeds of the casualty
insurance described in Article XIII of this Lease and all Awards described in
Article XIV will be made available to Lessor for restoration of the Leased
Property as and to the extent required by this Lease, subject only to reasonable
regulation regarding the manner of disbursement and application thereof. Lessee
agrees to execute and deliver to Lessor or the holder of an Encumbrance any
written agreement required by this Article within ten days of written request
thereof by Lessor or the holder of an Encumbrance. Lessee agrees to execute at
the request from time to time of Lessor or an institutional investor a
certificate setting forth any defaults of Lessor hereunder and the dates through
which Rent has been paid and such other matters as may be reasonably requested.
ARTICLE XXXIV
EXTENDED TERMS
--------------
If no Event of Default shall have occurred and be continuing, Lessee is
hereby granted the right to extend the Term of this Lease for three consecutive
five-year periods ("Extended Term") for a maximum possible Term of 30 years, by
giving written notice to Lessor of each such extension at least 180 days, but
not more than 270 days, prior to the expiration of the then-current Term;
subject, however, to the provisions of Section 13.7 hereof. Lessor agrees to use
its best efforts to provide Lessee with prior written notice at
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least 210 days prior to the expiration of the then-current Term. Lessee may not
exercise its option for more than one Extended Term at a time. During each
Extended Term, all of the terms and conditions of this Lease shall continue in
full force and effect, except that the Minimum Rent for and during each of the
Extended Terms shall be the Fair Market Rental Value on the first day of such
Extended Term. In any event, the Minimum Rent shall continue to be adjusted
throughout each of the Extended Terms pursuant to the provisions of Section
2.1(b) hereof
ARTICLE XXXV
MlSCELLANEOUS
-------------
35.1 NO WAIVER. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or any such term. To the extent permitted by law, no waiver of
any breach shall affect or alter this Lease, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
35.2 REMEDIES CUMULATIVE. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
35.3 SURRENDER. No surrender to Lessor of this Lease or of the Leased
Property or any part thereof, or of any interest therein, shall be valid or
effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
35.4 NO MERGER OF TITLE. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or (b) such leasehold estate and the fee estate in the
Leased Property.
35.5 TRANSFERS BY LESSOR. If Lessor or any successor owner of the Leased
Property shall convey the Leased Property in accordance with the terms hereof,
other than solely as security for a debt, the grantee or transferee of the
Leased Property shall expressly assume all obligations of Lessor hereunder
arising or accruing from and after the date of such conveyance or transfer, and
shall be reasonably capable of performing the obligations of
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Lessor hereunder and Lessor or such successor owner, as the case may be, shall
thereupon be released from all future liabilities and obligations of Lessor
under this Lease arising or accruing from and after the date of such conveyance
or other transfer and all such future liabilities and obligations shall
thereupon be binding upon the new owner.
35.6 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee and Lessor
against the other arising out of or relating to this Lease and arising prior to
any date of termination of this Lease shall survive such termination. If any
term or provision of this Lease or any application thereof shall be invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby. If any late charges provided
for in any provision of this Lease are based upon a rate in excess of the
maximum rate permitted by applicable law, the parties agree that such charges
shall be fixed at the maximum permissible rate. Neither this Lease nor any
provision hereof may be changed, waived, discharged or terminated except by an
instrument in writing and in recordable form signed by Lessor and Lessee. All
the terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. The
headings in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof. This Lease shall be governed by and
construed in accordance with the laws of Alabama, but not including its conflict
of laws rules. This Lease may be executed in one or more counterparts, each of
which shall be an original but, when taken together, shall constitute but one
document.
35.7 MEMORANDUM OF LEASE. Lessor and Lessee shall promptly upon the request
of either, enter into a short form memorandum of this Lease in form suitable for
recording under the laws of the state in which the Leased Property is located in
which reference to this Lease, and all options contained herein, shall be made.
35.8 TRANSFER OF LICENSES. Upon the expiration or earlier termination of
the Term, Lessee shall take all action necessary to effect or useful in
effecting the transfer to Lessor or Lessor's nominee of all licenses, operating
permits and other governmental authorizations and all service contracts which
may be necessary or useful in the ownership of the Facility and which relate
exclusively to the Facility which have not previously been transferred or
assigned to Lessor, other than permits or licenses which pertain to the
operation of Lessee's business.
ARTICLE XXXVI
GLOSSARY OF TERMS
-----------------
36.1 For purposes of this Lease, except as otherwise expressly provided or
unless the context otherwise requires, (a) the terms defined in this Article
XXXVI have the meanings assigned to them in this Article XXXVI and include the
plural as well as the singular, (b) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally accepted
accounting principles as at the time
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applicable, (c) all references in this Lease to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Lease, (d) the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Lease as a whole and
not to any particular Article, Section or other subdivision, (e) the word
"including" shall mean "including without limitation", and (f) all consents
required of Lessor hereunder shall be in Lessor's sole and absolute discretion.
For purposes of this Lease, the following terms shall have the meanings
indicated:
"Additional Charges" has the meaning set forth in Section 2.3 hereof.
"Adjustment Date" has the meaning set forth in Section 2.1(b) hereof.
"Affiliate", when used with respect to Lessee, means any person directly or
indirectly controlling, controlled by or under direct or indirect common
control with Lessee. For the purposes of this definition, "control", as used
with respect to any person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, through the ownership of voting securities, partnership interests
or other equity interests.
"Agent" has the meaning set forth in Article XXXII hereof
"Assigned Documents" has the meaning set forth in Article XXXII hereof
"Award" means all compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
"Bountiful" means Bountiful Psychiatric Hospital, Inc., a Utah corporation
and the owner of 100% of the issued and outstanding stock of Lessee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which national banks in the City of Birmingham, Alabama
are closed.
"Capital Additions" means one or more new buildings or one or more
additional structures annexed to any portion of any of the Leased Improvements
constructed on any parcel or portion of the Land during the Term, including the
construction of a new wing or new story, or the rebuilding of the existing
Leased Improvements or any portion thereof not normal, ordinary or recurring to
maintain the Leased Property.
"Capital Addition Cost" means the cost of any Capital Additions proposed to
be made by Lessee whether paid for by Lessee or Lessor. Such cost shall include
and be limited to (a) the cost of construction of the Capital Additions,
including site preparation and improvement, materials, labor, supervision and
certain related design, engineering and architectural services and the cost of
any fixtures, construction financing and miscellaneous items approved in writing
by Lessor, (b) if agreed to by Lessor in writing in advance, the
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cost of any land contiguous to the Leased Property purchased for the purpose of
placing thereon the Capital Additions or any portion thereof or for providing
means of access thereto, or parking facilities therefor, including the cost of
surveying the same, (c) the cost of insurance, real estate taxes, water and
sewage charges and other carrying charges for such Capital Additions during
construction, (d) the cost of title insurance, (e) reasonable fees and expenses
of legal counsel and accountants, (f) filing, registration and recording taxes
and fees, (g) documentary stamp taxes, if any, (h) environmental assessments and
boundary surveys, and (i) all reasonable costs and expenses of Lessor and any
lending institution which has committed to finance the Capital Additions,
including, (A) the reasonable fees and expenses of their respective legal
counsel, (B) all printing expenses, (C) the amount of any filing, registration
and recording taxes and fees, (D) documentary stamp taxes, if any, (E) title
insurance charges, appraisal fees, if any, (F) rating agency fees, if any, and
(G) commitment fees, if any, charged by any Lending Institution advancing or
offering to advance any portion of the financing for such Capital Additions.
"Cash Adjustment" has the meaning set forth in Section 20.1(d).
"Cash Flow Coverage Ratio" means, as of the end of any fiscal quarter, the
ratio of (a) Net Income for the twelve-month period ending at the end of such
quarter to (b) Total Rent payable in respect of such twelve-month period, as
evidenced by Financial Statements covering such period.
"Charge" has the meaning set forth in Article XI hereof
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Cash Flow Coverage Ratio" means, as of the end of any fiscal
quarter, the ratio of (a) Net Income for the twelve-month period ending at the
end of such quarter to (b) Combined Total Rent payable in respect of such
twelve-month period, as evidence by Financial Statements covering such period.
"Combined Total Rent" for any period means the total amount of (a) Minimum
Rent payable by Lessee hereunder and by RHCI under the RHCI Lease, and (b) all
rental expense of Lessee and RHCI as lessee in respect of operating and
capitalized leases (but excluding items that constitute additional Rent or
Additional Charges hereunder and under the RHCI Lease), in each case of (a) and
(b) in respect of such period.
"Commencement Date" has the meaning set forth in Article I.
"Condemnation" means the transfer of all or any part of the Leased Property
as a result of (i) the exercise of any governmental power, whether by legal
proceedings or otherwise, by a Condemnor or (ii) a voluntary sale or transfer by
Lessor to any Condemnor, either under threat of Condemnation or while legal
proceedings for Condemnation are pending.
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"Condemnor" means any public or quasi-public authority or private
corporation or individual having the power of Condemnation.
"Consolidated Financial Statements" means, for any Person and for any
accounting period, statements of earnings and retained earnings and of changes
in cash flows for such Person and its subsidiaries on a consolidated basis for
such period and for the period from the beginning of the respective fiscal year
of such Person to the end of such period and the related balance sheet as at the
end of such period, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year of such Person, containing appropriate notes, and prepared in
accordance with generally accepted accounting principles consistently applied,
subject to normal year-end adjustment. All Consolidated Financial Statements in
respect of any fiscal year shall be audited by an independent accounting firm
acceptable to Lessor.
"Consumer Price Index" or "CPI" means the Consumer Price Index for All
Urban Consumers for the U.S. City Average for all Items (1982-1984=100) as
published by the United States Department of Labor, Bureau of Labor Statistics.
If the manner in which the Consumer Price Index is determined by the Bureau of
Labor Statistics shall be substantially revised (including a change in the base
index year), an adjustment shall be made by Lessor in such revised index which
would produce results equivalent, as nearly as possible, to those which would
have been obtained if the Consumer Price Index had not been so revised. If the
consumer Price Index shall become unavailable to the public because publication
is discontinued or otherwise, or if equivalent data is not readily available to
enable Lessor to make the adjustment referred to in the preceding sentence,
Lessor will substitute therefor a comparable index reasonably acceptable to
Lessee based upon changes in the cost of living or purchasing power of the
consumer dollar published by any other governmental agency or, if no such index
shall be available, then a comparable index published by a major bank or other
financial institution or by a university or a recognized financial publication.
"Credit Agreement" has the meaning set forth in Article XXXII hereof.
"Credit Enhancements" means all cash collateral, security deposits,
security interests, letters of credit, pledges, prepaid rent or other sums,
deposits or interests held by Lessee, if any, to secure obligations with respect
to the Leased Property, Tenant Leases or Tenants.
"Current Yield" means as of any date the annual Minimum Rent, as adjusted
from time-to-time pursuant to the terms of this Lease, divided by the sum of (i)
the purchase price as set forth in the Purchase and Sale Agreement plus (ii) all
Capital Addition Costs paid for or financed by Lessor which have not been repaid
by Lessee.
"Date of Taking" means the date the Condemnor has the right to possession
of the property being condemned.
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"Encumbrance" has the meaning set forth in Article XXXII.
"Event of Default" has the meaning set forth in Section 15.1.
"Extended Term" has the meaning set forth in Article XXXIV.
"Facility" means the five one-story buildings containing approximately
39,786 gross square feet which comprise the psychiatric hospital facility and
related tenant space to be operated on the leased property.
"Facility Mortgage" has the meaning set forth in Section 12.1.
"Facility Mortgagee" has the meaning set forth in Section 12.1.
"Fair Market Added Value" means the Fair Market Value (as hereinafter
defined) of the Leased Property (including all Capital Additions) less the Fair
Market Value of the Leased Property determined as if no Capital Additions paid
for by Lessee without financing by Lessor had been constructed.
"Fair Market Rental Value" means the fair market rental value of the Leased
Property or any Substitute Property, (a) assuming the same is unencumbered by
this Lease, (b) determined in accordance with the appraisal procedures set forth
in Article XXVIII or in such other manner as shall be mutually acceptable to
Lessor and Lessee, and (c) not taking into account any reduction in value
resulting from an indebtedness to which the Leased Property or Substitute
Property may be subject.
"Fair Market Value" means the fair market value of the Leased Property or
any Substitute Property, including all Capital Additions, (a) assuming the same
is unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Article XXVIII or in such other manner as shall be
mutually acceptable to Lessor and Lessee, and (c) not taking into account any
reduction in value resulting from any indebtedness to which the Leased Property
or such Substitute Property is subject or which encumbrance Lessee or Lessor is
otherwise required to remove pursuant to any provision of this Lease or agrees
to remove at or prior to the closing of the transaction as to which such Fair
Market Value determination is being made. The positive or negative effect on the
value of the Leased Property or Substitute Property attributable to the interest
rate, amortization schedule, maturity date, prepayment penalty and other terms
and conditions of any Encumbrance on the Leased Property or any Substitute
Property, as the case may be, which is not so required or agreed to be removed
shall be taken into account in determining such Fair Market Value.
"Fair Market Value Purchase Price" means the Fair Market Value less the
Fair Market Added Value.
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"Financial Statements" means, for any Person and for any accounting
period, statements of earnings and retained earnings and of changes in cash
flows for such Person for such period and for the period from the beginning of
the respective fiscal year of such Person to the end of such period and the
related balance sheet as at the end of such period, all in reasonable detail and
setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year of such Person, containing
appropriate notes and prepared in accordance with generally accepted accounting
principles consistently applied (except to the extent that this Lease shall be
accounted for as an operating Lease by lessee), and subject to normal year-end
adjustment. All Financial Statements in respect of any fiscal year beginning
with the fiscal year ending June 30, 1995 shall be audited by an independent
accounting firm mutually acceptable to Lessor and Lessee.
"Fiscal Year" means the 12-month period from July 1 to the next succeeding
June 30.
"Fixed Term" has the meaning set forth in Article I.
"Fixtures" has the meaning set forth in Article I.
"Full Replacement Cost" has the meaning set forth in Section 12.2.
"Guarantor" means Ramsay.
"Guaranty" means a guaranty of the obligations of Lessee hereunder,
executed by the Guarantor.
"Hazardous Materials" means any substance, including asbestos or any
substance containing asbestos, the group of organic compounds known as
polychlorinated biphenyls, flammable explosives, radioactive materials, medical
waste, chemicals, pollutants, effluents, contaminants, emissions or any other
or related materials and items included in the definition of hazardous or toxic
wastes, materials or substances under any Hazardous Materials Law.
"Hazardous Materials Law" means any law, regulation or ordinance relating
to environmental conditions, medical waste and industrial hygiene, including the
Resource Conservation and Recovery Act of 1976 ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Hazardous Materials Transportation Act, the Federal Water Pollution Control
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Safe Drinking Water Act, and all similar federal, state and local
environmental statutes and ordinances, whether heretofore or hereafter enacted
or effective and all regulations, orders, or decrees heretofore or hereafter
promulgated thereunder.
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"Impositions" means, collectively, all taxes relating to the Leased
Property, including all ad valorem, sales and use, gross receipts, action,
privilege, rent (with respect to the Tenant Leases) or similar taxes,
assessments (including all assessments for public improvements or benefits,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), water, sewer or other rents and charges,
excises, tax levies, fees (including license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or unforeseen, of
every character in respect of the Leased Property and/or the Rent (including all
interest and penalties thereon due to any failure in payment by Lessee), which
at any time prior to, during or in respect of the Term hereof may be assessed
or imposed on or in respect of or be a lien upon (a) Lessor or Lessor's interest
in the Leased Property, (b) the Rent, the Leased Property or any part thereof or
any rent therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, sales from, or activity conducted
on, or in connection with, the Leased Property or the Tenant Leases or use of
the Leased Property or any part thereof; provided that nothing contained in this
--------
Lease shall be construed to require Lessee to pay (1) any tax based on net
income (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor, (2) any transfer or net revenue tax of Lessor, (3) any tax
imposed with respect to the sale, exchange or other disposition by Lessor of any
portion of the Leased Property or the proceeds thereof, or (4) except as
expressly provided elsewhere in this Lease, any principal or interest on any
Encumbrance on the Leased Property, except to the extent that any tax,
assessment, tax levy or charge which Lessee is obligated to pay pursuant to this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1), (2) or (3) is levied, assessed or imposed expressly in lieu thereof
"Indebtedness" with respect to Lessee or Guarantor means: (i) any debt (a)
for borrowed money or (b) evidenced by a bond, note, debenture or similar
instrument (including purchase money obligations and accounts payable and other
obligations created or assumed in the course of business in connection with the
obtaining of materials or services) given in connection with the acquisition of
any business, property or assets, whether by purchase, merger, consolidation or
otherwise, or (c) which is a direct or indirect obligation which arises as a
result of banker's acceptances or bank letters of credit issued to secure
obligations of such person, or to secure the payment of bonds issued for the
benefit of such person, whether contingent or otherwise; (ii) any debt of others
described in the preceding clause (i) which such person has guaranteed or for
which it is otherwise liable; (iii) the obligation of such person as lessee
under any lease of property which is (a) reflected on such person's balance
sheet as a capitalized lease or (b) an operating lease; and (iv) any deferral,
amendment, renewal, extension, supplement or refunding of any liability of the
kind described in any of the preceding clauses (i), (ii) and (iii).
"Insurance Requirements" means all terms of any insurance policy required
by this Lease and all requirements of the issuer of any such policy.
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"Land" has the meaning set forth in Article I.
"Lease" means this Lease.
"Leased Improvements" and "Leased Property" have the meanings set forth in
Article I.
"Legal Requirements" means all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the Leased Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (a) require repairs, modifications or alterations of or to the
Leased Property, or (b) in any way adversely affect the use and enjoyment
thereof, and all permits, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, actions and encumbrances contained in
any instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
"Lenders" has the meaning set forth in Article XXXII hereof.
"Lending Institution" means any insurance company, federally insured
commercial or savings bank, national banking association, savings and loan
association, employees' welfare, pension or retirement fund or system, corporate
profit-sharing or pension plan, college or university, or real estate investment
including any corporation qualified to be treated for federal tax purposes as a
real estate investment trust having a net worth of at least $50,000,000.
"Lessee" means Mesa Psychiatric Hospital, Inc., an Arizona corporation, its
successors and assigns.
"Lessor" means CAPSTONE CAPITAL CORPORATION, a Maryland corporation, and
its successors and assigns.
"RHCI" means RHCI San Antonio, Inc., a Delaware corporation.
"RHCI Lease" means that certain Lease Agreement dated April 12, 1995
between RHCI and Capstone Capital of San Antonio, Ltd., an Alabama limited
partnership.
"Minimum Rent" has the meaning set forth in Section 2.1 hereof.
"Minimum Repurchase Price" means the greater of (i) the Fair Market Value
of the Leased Property at the time of repurchase hereunder by Lessee, or (ii)
the Purchase Price paid to Lessee for the Leased Property pursuant to the
Purchase and Sale Agreement as such amount is increased at the rate of three
percent compounded annually for each year (to be prorated for partial years)
between the Commencement Date and the date of
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repurchase by Lessee, plus the sum of all Capital Addition Costs paid for or
----
financed by Lessor which as of the date of repurchase of the Leased Property
have not been repaid by Lessee, less the net amount (after deduction of all
reasonable legal fees and other costs and expenses, including expert witness
fees, incurred by Lessor in connection with obtaining any such award or
proceeds) of all Awards received by Lessor from Condemnation of the Leased
Property and all insurance proceeds in excess of the costs of any restoration
which are retained by Lessor.
"Net Income" of Lessee means, for any period, net income before Federal and
state taxes and interest expense paid or payable in respect of such period, plus
----
amounts which, in the determination of net income for such period, have been
deducted for amortization of debt discount in respect of Indebtedness of Lessee
for borrowed money, depreciation of tangible assets, amortization of intangible
assets, Total Rent payable in respect of such period, and management fees paid
or payable to Guarantor in respect of such period, all as determined in
accordance with generally accepted accounting principles consistently applied
(except to the extent that this Lease shall be accounted for as an operating
lease by Lessee).
"Officer's Certificate" means a certificate of Lessee signed by the
Chairman of the Board of Directors, the President, any Vice President or another
officer authorized to so sign by the Board of Directors or By-Laws of Lessee, or
any other person whose power and authority to act has been authorized by
delegation in writing by any of the persons holding the foregoing offices.
"Overdue Rate" means as of any date, a rate per annum equal to the Prime
Rate as of such date, plus two percent, but in no event greater than the maximum
rate then permitted under applicable law.
"Payment Date" means any due date for the payment of the installments of
Minimum Rent under this Lease.
"Permitted Assignment for Security" means an assignment of Lessee's
leasehold interest hereunder as collateral security for funded indebtedness of
Lessee or an Affiliate of Lessee, pursuant to documentation which (i) expressly
provides that such assignment and all rights of the assignee thereunder shall be
subject and subordinate in all respects to the terms of this Lease, and to any
Encumbrance upon the Leased Property then existing or thereafter granted or
created by Lessor, provided that the holder of any such Encumbrance complies
with Articles XXXII an XXXIII hereof (including without limitation the
provisions with respect to subordination and non-disturbance contained therein),
(ii) obligates the assignee thereunder to execute and deliver reasonably
appropriate documentation to evidence such subordination to Lessor and to the
holder of any such Encumbrance, provided that such holder complies with the
provisions of said Articles XXXII and XXXIII, and (iii) is otherwise approved by
Lessor, which approval shall not be unreasonably withheld.
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"Person" means a natural person, corporation, partnership, trust,
association, limited liability company or other entity.
"Personal Property" means the personal property listed in Exhibit D hereto.
---------
"Primary Intended Use" has the meaning set forth in Section 6.2(a).
"Prime Rate" means the annual rate announced by the Wall Street Journal or
its successors from time to time as being its prime rate. The prime rate is an
index rate used by the Wall Street Journal to establish lending rates and may
not necessarily be its most favorable lending rate. Any change in the Prime Rate
hereunder shall take effect on the effective date of such change in the prime
rate as established by the Wall Street Journal, without notice to Lessee or any
other action by Lessor. Interest shall be computed on the basis that each year
contains 360 days, by multiplying the principal amount by the per annum rate set
forth above, dividing the product so obtained by 360, and multiplying the
quotient thereof by the actual number of days elapsed.
"Purchase and Sale Agreement" means the agreement dated on or about April
12, 1995, between Lessee as "Seller" and Lessor as "Purchaser" relating to the
acquisition by Lessor of the Leased Property.
"Ramsay" means Ramsay Health Care, Inc., a Delaware corporation and owner
of 100% of the issued and outstanding stock of Bountiful.
"Rent" means, collectively, the Minimum Rent and the Additional Charges.
"Request" has the meaning set forth in Section 9.3(a).
"Substitution Date" has the meaning set forth in Section 20.1.
"Substitute Properties" has the meaning set forth in Section 20.1.
"Taking" means a taking or voluntary conveyance during the Term hereof of
all or part of the Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of any Condemnation
or other eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
"Tenant" means the lessees or tenants under the Tenant Leases, if any.
"Tenant Leases" means all leases, subleases, assignments and other rental
agreements (written or verbal, now or hereafter in effect), if any, that grant a
possessory interest in and to any space in the Improvements, or that otherwise
grant rights with regard to the Leased Property, and all Credit Enhancements, if
any, held in connection therewith.
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"Term" means the Fixed Term and any Extended Term as to which Lessee has
exercised its options to extend contained in Article XXXIV hereof unless earlier
terminated pursuant to the provisions hereof
"Total Rent" for any period means the total amount of (a) Minimum Rent
payable by Lessee hereunder and (b) all rental expense of Lessee as lessee in
respect of operating and capitalized leases (but excluding items that constitute
additional Rent or Additional Charges hereunder), in each case of (a) and (b) in
respect of such period.
"Unavoidable Delays" means delays due to strikes, lockouts, inability to
procure materials after the exercise of due diligence, power failure, acts of
God, governmental restrictions, enemy action, civil commotion, fire, unavoidable
casualty or other causes beyond the control of the party responsible for
performing an obligation hereunder, provided that lack of funds shall not be
--------
deemed a cause beyond the control of either party hereto unless such lack of
funds is caused by the failure of the other party hereto to perform any
obligations of such other party under this Lease.
"Unsuitable for Its Primary Intended Use" as used anywhere in this Lease,
shall mean that, by reason of damage or destruction, or a partial Taking, in the
good faith judgment of Lessee, reasonably exercised, the Facility cannot be
profitably operated for its Primary Intended Use, taking into account all
relevant factors.
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
their respective corporate seals to be hereunto affixed and attested by their
respective officers thereunto duly authorized as of the date first written
above.
LESSOR:
CAPSTONE CAPITAL CORPORATION,
a Maryland corporation
By: /s/ William C. Harlan
--------------------------------------
William C. Harlan
Its: Senior Vice President
Date April 12, 1995
---------------------------------------
Lessor's Tax Identification Number:
63-1129622
LESSEE:
MESA PSYCHIATRIC HOSPITAL, INC.,
an Arizona corporation
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
Its: Vice President
--------------------------------------
Date April 12, 1995
--------------------------------------
Lessee's Tax Identification Number:
93-O92581O
<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
That part of the East half of the Northwest quarter of the Northeast quarter of
Section 16, Township 1 North, Range 5 East of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona, described as follows:
Commencing at the Northeast corner of said Section 16, thence South 88 degrees
40 minutes 15 seconds West, 1253.68 feet to the Northeast corner of said East
half of the Northwest quarter of the Northeast quarter and the point of
beginning;
Thence South 00 degrees 10 minutes 08 seconds East, 698.01 feet along the East
line of said Northwest quarter of the Northeast quarter of the Northwesterly
Right-of-Way line of those certain premises described in instrument recorded in
Docket 9044, Page 917, records of Maricopa County, Arizona;
Thence along said Northwesterly Right-of-Way along a curve to the left having a
radius of 470.74 feet, a delta of 32 degrees 30 minutes 03 seconds, and a chord
bearing and distance of South 35 degrees 19 minutes 23 seconds West, 263.46
feet, to a Point of Spiral Curve;
Thence continuing along said Northwesterly Right-of-Way, along said spiral curve
to the left, having an "A" of 10 and a chord bearing and distance of South 14
degrees 10 minutes 49 seconds West, 115.49 feet, to a Point of Curve;
Thence continuing along said Northwesterly Right-of-Way along a curve to the
left having a radius of 3183.02 feet a delta of 00 degrees 52 minutes 34
seconds and a chord bearing and distance of South 10 degrees 25 minutes 43
seconds West, 48.66 feet;
Thence along a non-tangent line, North 12 degrees 58 minutes O8 seconds West
(North 12 degrees 43 minutes West, Record) 381.00 feet to a point on the South
line of the North 695.00 feet of said Northwest quarter of the Northeast quarter
said point being South 88 degrees 40 minutes 15 seconds West (Record South 88
degrees 47 minutes West), 275.00 feet from the East line of said Northwest
quarter of the Northeast quarter;
Thence South 88 degrees 40 minutes 15 seconds West, 349.01 feet along said South
line of the North 695.0 feet;
Thence North 00 degrees 09 minutes 15 seconds West 695.15 feet, along a line
3.00 feet East of and parallel to the West line of said East half of the
Northwest quarter of the Northeast quarter to a point on the North line of said
Section 16;
<PAGE>
Thence North 88 degrees 40 minutes 15 seconds East, 623.84 feet along the North
line of said Section 16 to the Point of Beginning.
EXCEPT the following described parcel:
Commencing at the Northeast Corner of Section 16, Township 1 North, Range 5
East; Thence South 88 degrees 40 minutes 15 seconds West continuing along the
North line of said Section 16, a distance of 1,253.66 feet to the point of
beginning;
Thence South 88 degrees 40 minutes 15 seconds West continuing along the North
line of said Section 16, a distance of 623.83 feet;
Thence South 00 degrees, l0 minutes three seconds East a distance of 162.62
feet;
Thence North 64 degrees 41 minutes 35 seconds East a distance of 196.89 feet;
Thence North 88 degrees 31 minutes 01 seconds East a distance of 445.59 feet;
Thence North 00 degrees l0 minutes 33 seconds West a distance of 81.40 feet to
the point of beginning.
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. Mineral rights, water rights, reservations and exclusions as contained in the
Patent conveying said land.
2. Taxes for the year 1995, a lien not yet due and payable.
3. Easement for electric lines as set forth in instrument recorded May 9, 1955
in Docket 1619, Page 273.
4. Easement for public utilities as set forth in instrument recorded March 2O,
1986 at Recorders No. 86-133372.
5. Easement for public utilities as reserved by the City of Mesa in Resolution
No. 5660, recorded December 19, 1985 at Recorders No. 85-601514.
6. Encroachment of West end of wall over west property line by 1.31 feet near
Northwest corner of property, as per survey dated April 5, 1995 made by
Collins/Pina Consulting Engineers.
7. The matter described in General Note 5 to survey dated April 5, 1995 made by
Collins/Pina Consulting Engineers.
8. Rights of parties in possession under existing written Tenant Leases.
9. Except the part, if any, lying within the Eureka Canal Right-of-Way or the
Crosscut Canal Right-of-Way.
<PAGE>
EXHIBIT C
[Intentionally Left Blank]
<PAGE>
EXHIBIT D
PERSONAL PROPERTY
None
<PAGE>
LEASE AGREEMENT
CAPSTONE CAPITAL OF SAN ANTONIO, LTD.,
D/B/A CAHABA OF SAN ANTONIO, LTD.,
AN ALABAMA LIMITED PARTNERSHIP
("LESSOR")
AND
RHCI SAN ANTONIO, INC.,
A DELAWARE CORPORATION
("LESSEE")
APRIL 12, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
LEASED PROPERTY; TERM ............................................... 1
---------------------
ARTICLE II
RENT................................................................. 2
----
2.1 MINIMUM RENT AND ADJUSTMENTS TO MINIMUM RENT .............. 2
2.2 CALCULATION OF INCREASES TO MINIMUM RENT................... 2
2.3 ADDITIONAL CHARGES......................................... 3
2.4 NET LEASE ................................................. 3
ARTICLE III
IMPOSITIONS ......................................................... 4
-----------
3.1 PAYMENT OF IMPOSITIONS .................................... 4
3.2 PRORATION OF IMPOSITIONS .................................. 5
3.3 UTILITY CHARGES ........................................... 5
3.4 INSURANCE PREMIUMS ........................................ 5
ARTICLE IV
NO TERMINATION ...................................................... 5
--------------
ARTICLE V
OWNERSHIP OF LEASED PROPERTY ........................................ 6
----------------------------
5.1 OWNERSHIP OF THE PROPERTY ................................. 6
5.2 PERSONAL PROPERTY ......................................... 6
ARTICLE VI
CONDITION AND USE OF LEASED PROPERTY ..................................... 6
- ------------------------------------
6.1 CONDITION OF THE LEASED PROPERTY .......................... 6
6.2 USE OF THE LEASED PROPERTY ................................ 6
6.3 LESSOR TO GRANT EASEMENTS ................................ 7
ARTICLE VII
LEGAL. INSURANCE AND FINANCIAL REQUIREMENTS ......................... 8
-------------------------------------------
7.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS .......... 8
7.2 LEGAL REQUIREMENT COVENANTS ............................... 8
ARTICLE VIII
REPAIRS; RESTRICTIONS AND ANNUAL INSPECTIONS ........................ 8
--------------------------------------------
8.1 MAINTENANCE AND REPAIR; REMODELING ......................... 8
8.2 ENCROACHMENTS; RESTRICTIONS ................................ 9
8.3 ANNUAL INSPECTIONS ......................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
CAPITAL ADDITIONS ............................................................ 10
-----------------
9.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY ........... 10
9.2 CAPITAL ADDITIONS FINANCED BY LESSEE................................ 11
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR................................ 12
9.4 REMODELING AND NON-CAPITAL ADDITIONS................................ 13
9.5 SALVAGE............................................................. 14
ARTICLE X
LIENS ........................................................................ 14
-----
ARTICLE XI
PERMITTED CONTESTS ........................................................... 14
------------------
ARTICLE XII
INSURANCE .................................................................... 15
---------
12.1 GENERAL INSURANCE REQUIREMENTS ..................................... 15
12.2 REPLACEMENT COST ................................................... 17
12.3 ADDITIONAL INSURANCE ............................................... 17
12.4 WAIVER OF SUBROGATION .............................................. 17
12.5 FORM OF INSURANCE .................................................. 18
12.6 CHANGE IN LIMITS ................................................... 18
12.7 BLANKET POLICY ..................................................... 18
12.8 NO SEPARATE INSURANCE .............................................. 18
ARTICLE XIII
FIRE AND CASUALTY ............................................................ 19
-----------------
13.1 INSURANCE PROCEEDS ................................................. 19
13.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED
BY INSURANCE........................................................ 19
13.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT
COVERED BY INSURANCE ............................................... 20
13.4 LESSEE'S PROPERTY .................................................. 21
13.5 RESTORATION OF LESSEE'S PROPERTY ................................... 21
13.6 NO ABATEMENT OF RENT ............................................... 21
13.7 DAMAGE NEAR END OF TERM ............................................ 21
13.8 WAIVER ............................................................. 21
ARTICLE XIV
CONDEMNATION ................................................................. 22
------------
14.1 PARTIES' RIGHTS AND OBLIGATIONS .................................... 22
14.2 TOTAL TAKING ....................................................... 22
14.3 PARTIAL TAKING ..................................................... 22
14.4 RESTORATION ........................................................ 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
14.5 AWARD DISTRIBUTION ........................................ 23
14.6 TEMPORARY TAKING .......................................... 23
ARTICLE XV
DEFAULT ............................................................. 23
-------
15.1 EVENTS OF DEFAULT ......................................... 23
15.2 REMEDIES .................................................. 25
15.3 ADDITIONAL EXPENSES ....................................... 26
15.4 WAIVER .................................................... 27
15.5 APPLICATION OF FUNDS ...................................... 27
15.6 NOTICES BY LESSOR ......................................... 27
ARTICLE XVI
LESSOR'S RIGHT TO CURE .............................................. 27
----------------------
ARTICLE XVII
PURCHASE OF THE LEASED PROPERTY ..................................... 27
-------------------------------
ARTICLE XVIII
HOLDING OVER ........................................................ 29
ARTICLE XIX
ABANDONMENT; OBSOLESCENCE ........................................... 29
-------------------------
19.1 DISCONTINUANCE OF OPERATIONS ON THE LEASED PROPERTY ....... 29
19.2 OBSOLESCENCE OF THE LEASED PROPERTY; PURCHASE ............. 29
19.3 CONVEYANCE OF LEASED PROPERTY ............................. 29
ARTICLE XX
SUBSTITUTION OF PROPERTY ............................................ 30
------------------------
20.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY .......... 30
20.2 CONDITIONS TO SUBSTITUTION ................................ 32
20.3 CONVEYANCE TO LESSEE ...................................... 33
20.4 EXPENSES .................................................. 33
ARTICLE XXI
RISK OF LOSS ........................................................ 34
------------
ARTICLE XXII
INDEMNIFICATION ..................................................... 34
---------------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XXIII
SUBLETTING AND ASSIGNMENT ........................................... 35
-------------------------
23.1 SUBLETTING AND ASSIGNMENT ................................. 35
23.2 NON-DISTURBANCE, SUBORDINATION AND ATTORMENT .............. 35
ARTICLE XXIV
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS ..................... 36
-----------------------------------------------
ARTICLE XXV
INSPECTION .......................................................... 37
----------
ARTICLE XXVI
QUIET ENJOYMENT ..................................................... 37
---------------
ARTICLE XXVII
NOTICES ............................................................. 37
-------
ARTICLE XXVIII
APPRAISAL ........................................................... 39
---------
ARTICLE XXIX
PURCHASE RIGHTS ..................................................... 40
---------------
29.1 FIRST REFUSAL TO PURCHASE.................................. 40
ARTICLE XXX
DEFAULT BY LESSOR ................................................... 41
-----------------
30.1 DEFAULT BY LESSOR ......................................... 41
30.2 LESSEE'S RIGHT TO CURE .................................... 42
ARTICLE XXXI
ARBITRATION ......................................................... 42
-----------
31.1 CONTROVERSIES ............................................. 42
31.2 APPOINTMENT OF ARBITRATORS ................................ 42
31.3 THIRD ARBITRATOR .......................................... 42
31.4 ARBITRATION PROCEDURE ..................................... 42
31.5 EXPENSES .................................................. 43
ARTICLE XXXII
FINANCING OF THE LEASED PROPERTY .................................... 43
--------------------------------
ARTICLE XXXIII
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE ....................... 44
--------------------------------------------
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XXXIV
EXTENDED TERMS ....................................................... 44
--------------
ARTICLE XXXV
MISCELLANEOUS ........................................................ 45
-------------
35.1 NO WAIVER .................................................. 45
35.2 REMEDIES CUMULATIVE ........................................ 45
35.3 SURRENDER .................................................. 45
35.4 NO MERGER OF TITLE ......................................... 45
35.5 TRANSFERS BY LESSOR ........................................ 45
35.6 GENERAL .................................................... 46
35.7 MEMORANDUM OF LEASE ........................................ 46
35.8 TRANSFER OF LICENSES ....................................... 46
ARTICLE XXXVI
GLOSSARY OF TERMS .................................................... 46
-----------------
</TABLE>
v
<PAGE>
LEASE
THIS LEASE ("Lease") dated April 12, 1995 is entered into by and between
-----
CAPSTONE CAPITAL OF SAN ANTONIO, LTD., D/B/A CAHABA OF SAN ANTONIO, LTD., an
Alabama limited partnership, having its principal office at 1000 Urban Center
Drive, Suite 630, Birmingham, Alabama 35242 ("Lessor") and RHCI SAN ANTONIO,
INC., a Delaware corporation, having an office at c/o Ramsay Health Care, Inc.,
One Poydras Avenue, 639 Loyola Avenue, Suite 1700, New Orleans, Louisiana 70113
("Lessee").
ARTICLE I
LEASED PROPERTY: TERM
---------------------
Upon and subject to the terms and conditions hereinafter set forth, Lessor
leases to Lessee and Lessee rents from Lessor all of Lessor's rights and
interest in and to the following real and personal property (collectively, the
"Leased Property"):
---------------
(a) the real property more particularly described on Exhibit A
---------
attached hereto together with all covenants, licenses, privileges and
benefits thereto belonging, and any easements, rights-of-way, rights of
ingress and egress or other interests of Lessor in, on or to any land,
highway, street, road or avenue, open or proposed, in, on, across, in front
of, abutting or adjoining such real property, including all strips and
gores adjacent to or lying between such real property and any adjacent real
property (the "Land");
----
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind (including all alleyways and connecting
tunnels, crosswalks, sidewalks, landscaping, parking lots and structures
and roadways appurtenant to such buildings and structures presently or
hereafter situated upon the Land and Capital Additions financed by Lessor
(but specifically excluding Capital Additions financed by Lessee), drainage
and all above-ground and underground utility structures) (collectively, the
"Leased Improvements");
-------------------
(c) all permanently affixed equipment, machinery, fixtures and other
items of real and/or personal property including all components thereof,
now and hereafter located in or on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements,
including all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air conditioning systems
and apparatus, sprinkler systems and fire and theft protection equipment,
carpet, moveable or immoveable walls or partitions and built-in oxygen and
vacuum systems, all of which are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Personal Property (collectively the
"Fixtures");
--------
(d) the Personal Property;
<PAGE>
(e) to the extent permitted by law, all permits, approvals and other
intangible property or any interest therein now or hereafter owned or held
by Lessor in connection with the Leased Property, including all contract
rights, agreements, water rights and reservations, zoning rights, business
licenses and warranties (including those relating to construction or
fabrication) related to the Leased Property or any part thereof; and
(f) all site plans, surveys, soil and substrata studies,
architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, and other plans and studies that
relate to the Land or the Improvements and are in Lessor's possession or
control;
SUBJECT, HOWEVER, to the matters set forth on Exhibit B attached hereto
---------
(the "Permitted Exceptions"), to have and to hold for a fixed term of 15 years
(the "Fixed Term") commencing on April 12, 199S (the "Commencement Date") and
---------- -----------------
ending at midnight on the last day of the 180th month after the Commencement
Date.
ARTICLE II
RENT
----
2.1 MINIMUM RENT AND ADJUSTMENTS TO MINIMUM RENT. Lessee shall pay to
Lessor, without notice, demand, set off (except as set forth in Section 30.2
hereof) or counterclaim, in advance in lawful money of the United States of
America, at Lessor's address set forth herein or at such other place or to such
other person, firms or corporations as Lessor from time to time may designate in
writing, Minimum Rent, as adjusted annually pursuant to Section 2.1(b) during
the Term, as follows:
(a) Minimum Rent. Lessee will pay to Lessor as rent (as adjusted in
------------
accordance with clause (b) below, the "Minimum Rent") for the Leased Property
------------
the annual sum of $513,600.00, payable in advance in 12 equal, consecutive
monthly installments of $42,800.00, on the first day of each calendar month
during the Term. Minimum Rent shall be prorated as to any partial month, and is
subject to adjustment as provided in Sections 9.3(b)(iv) and 20.1 below. The
prorated Minimum Rent for that portion of April, 1995, during which this Lease
is in effect shall be $27,106.67 and shall be paid upon the execution of this
Lease.
(b) Increases to Minimum Rent. On each anniversary of the Commencement
-------------------------
Date (each such anniversary being hereinafter referred to as an "Adjustment
----------
Date"), commencing with the Adjustment Date occurring on April 1, 1996 and
- ----
continuing throughout the remainder of the Fixed Term and any Extended Terms,
the then-current Minimum Rent shall be increased effective as of such Adjustment
Date (i) in the case of the Adjustment Date occurring on April 1, 1996, by the
increase in the Consumer Price Index from the Commencement Date to the date
immediately preceding said Adjustment Date, and (ii) in the case of each
Adjustment Date thereafter, by the increase in the Consumer Price Index from the
immediately preceding Adjustment Date to the date immediately preceding such
Adjustment Date; provided that in no
--------
2
<PAGE>
event shall any such annual increase exceed three percent of the Minimum Rent in
effect immediately prior to such Adjustment Date.
(c) Payment of Minimum Rent. All payments of Minimum Rent shall be made
-----------------------
in lawful money of the United States by wire transfer of same day funds to
Lessor's account #0000040999 at First Commercial Bank, Birmingham, Alabama, ABA
Routing No. #062003605, Attention: Todd Beard, with advice to William C. Harlan
at (205) 967-2092 (or such other account or location specified by Lessor from
time to time in writing) on or before 2:00 p.m., Birmingham time, on any
Business Day.
2.2 CALCULATION OF INCREASES TO MINIMUM RENT. On each Adjustment Date,
Lessor will calculate the increase in the Minimum Rent for the one-year period
commencing with such Adjustment Date pursuant to the provisions of Section
2.1(b) hereof, and will provide Lessee written notice of same.
2.3 ADDITIONAL CHARGES. Lessee will also pay and discharge as and when
due all other amounts, liabilities, obligations and Impositions which Lessee
assumes or agrees to pay under this Lease and all fines, penalties, interest and
costs which may be added for non-payment or late payment of any such items
(collectively, the "Additional Charges"), and Lessor shall have all legal,
equitable and contractual rights, powers and remedies provided in this Lease, by
statute or otherwise, in the case of non-payment of the Additional Charges, as
well as the Minimum Rent. If any installment of Minimum Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Lessor) shall not be paid within five Business Days after the date when due,
Lessee will pay Lessor on demand, as Additional Charges, (a) with respect to any
overdue installment of Minimum Rent, an amount equal to 10% of such installment,
and (b) with respect to any Additional Charges, interest (to the extent
permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date when due to the date of payment in full thereof.
In the event Lessor provides Lessee with written notice of failure to timely pay
any Additional Charges pursuant to Section 15.1(b) more than one time within any
twelve-month period, Lessee shall pay an administrative fee to Lessor in the
amount of $1,000.00 for each additional written notice Lessor gives pursuant to
Section 15.1(b) during the next twelve months. To the extent that Lessee pays
any Additional Charges to Lessor pursuant to any requirement of this Lease,
Lessee shall be relieved of its obligation to pay such Additional Charges to the
entity to which such Additional Charges would otherwise be due. Additional
Charges shall constitute Rent payable hereunder.
2.4 NET LEASE. The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the installments of Minimum
Rent and the payments of Additional Charges throughout the Term but subject to
any provisions of this Lease which expressly provide for payments by Lessor or
the adjustment of the Rent or other charges.
ARTICLE III
IMPOSITIONS0NS
--------------
3
<PAGE>
3.1 PAYMENT OF IMPOSITIONS. Subject to Article XI relating to permitted
contests, Lessee will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and Lessee will promptly upon
request furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. Lessee's obligation to pay such Impositions and
the amount thereof shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Leased Property or any part thereof. If any
such Imposition may lawfully be paid in installments (whether or not interest
shall accrue on the unpaid balance of such Imposition), Lessee may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such installments
during the Term hereof as the same become due and before any fine, penalty,
premium, further interest or cost may be added thereto. Lessor at its expense
shall, to the extent permitted by applicable law, prepare and file all tax
returns and reports as may be required by governmental authorities in respect of
Lessor's net income, gross receipts, franchise taxes and taxes on its capital
stock. Lessee at its expense shall, to the extent permitted by applicable laws
and regulations, prepare and file all other tax returns and reports in respect
of any Imposition as may be required by governmental authorities. If any refund
shall be due from any taxing authority in respect of any Imposition paid by
Lessee in respect of any period prior or subsequent to the date hereof, the same
shall be paid over to or retained by Lessee if no Event of Default shall have
occurred hereunder and be continuing. Any such funds retained by Lessor due to
an Event of Default shall be applied as provided in Article XV. Lessor and
Lessee shall, upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Leased Property as may
be necessary to prepare any required returns and reports. In the event
governmental authorities classify any property covered by this Lease as personal
property, Lessee shall file all personal property tax returns in such
jurisdictions where filing is required. Lessor and Lessee will provide the other
party, upon request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property. Where Lessor is
legally required to file personal property tax returns, and Lessee is obligated
for the same hereunder, Lessee will be provided with copies of assessment
notices in sufficient time for Lessee to file a protest. Lessee may, upon giving
3O days' prior written notice to Lessor, at Lessee's option and at Lessee's sole
cost and expense, protest, appeal, or institute such other proceedings as Lessee
may deem appropriate to effect a reduction of real estate or personal property
assessments and Lessor, if requested by Lessee and at Lessee's expense as
aforesaid, will cooperate with Lessee in such protest, appeal, or other action.
Billings for reimbursement by Lessee to Lessor of personal property taxes shall
be accompanied by copies of an invoice therefor and payments thereof which
identify the personal property with respect to which such payments are made.
Lessor will cooperate with Lessee in order that Lessee may fulfill its
obligations hereunder, including the execution of any instruments or documents
reasonably requested by Lessee.
3.2 PRORATION OF IMPOSITIONS. Any Imposition imposed in respect of the
tax-fiscal period during which the Term terminates shall be prorated between
Lessor and Lessee, whether or not such Imposition is imposed before or after
such termination, and Lessee's and Lessor's obligation to pay their respective
prorated shares thereof shall survive such termination.
4
<PAGE>
3.3 UTILITY CHARGES. Lessee will, or will cause Tenants to, contract for,
in its own name, and will pay or cause to be paid, all charges for, electricity,
power, gas, oil, water and other utilities used in the Leased Property during
the Term.
3.4 INSURANCE PREMIUMS. Lessee will contract for, in its own name, and
will pay or cause to be paid all premiums for, the insurance coverage required
to be maintained by Lessee pursuant to Article XII.
ARTICLE IV
NO TERMINATION
--------------
Except as provided in this Lease, Lessee shall remain bound by this Lease
in accordance with its terms and shall neither take any action without the
consent of Lessor to modify, surrender or terminate the same, nor seek nor be
entitled to any abatement, deduction, deferment or reduction of Rent, or set-off
against the Rent, nor shall the respective obligations of Lessor, Lessee or any
Guarantor be otherwise affected, by reason of (a) any damage to or destruction
of the Leased Property or any portion thereof from whatever cause, or any Taking
of the Leased Property or any portion thereof, (b) the lawful or unlawful
prohibition of or restriction upon Lessee's use of the Leased Property or any
portion thereof, or the interference with such use by any person, corporation,
partnership or other entity, or by reason of eviction by paramount title, (c)
any claim which Lessee has or might have against Lessor or by reason of any
default or breach of any warranty by Lessor under this Lease or any other
agreement between Lessor and Lessee or to which Lessor and Lessee are parties,
(d) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (e) for any other cause whatsoever,
whether similar or dissimilar to any of the foregoing. Lessee hereby
specifically waives all rights arising from any occurrence whatsoever which may
now or hereafter be conferred upon it by law to (i) modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof, or (ii) entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessor and
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue any
claim or seek any damages it may have against Lessor as a result of a breach by
Lessor of the terms of this Lease.
ARTICLE V
OWNERSHIP OF LEASED PROPERTY
----------------------------
5.1 OWNERSHIP OF THE PROPERTY. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease.
5
<PAGE>
5.2 PERSONAL PROPERTY. Lessee may (and shall as provided hereinbelow), at
its expense, install, affix or assemble or place on any parcels of the Land or
in any of the Improvements any items of the Personal Property, and may remove,
replace or substitute for the same from time to time in the ordinary course of
Lessee's business. Lessee shall provide and maintain during the entire Term all
such Personal Property as shall be necessary in order to operate the Facility in
compliance with all licensure and certification requirements, in compliance with
all applicable Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary Intended Use.
ARTICLE VI
CONDITION AND USE OF LEASED PROPERTY
------------------------------------
6.1 CONDITION OF THE LEASED PROPERTY. Lessee acknowledges receipt and
delivery of possession of the Leased Property and that Lessee has examined and
otherwise acquired knowledge of the condition of the Leased Property prior to
the execution and delivery of this Lease and has found the same to be in good
order and repair and satisfactory for its purpose hereunder. Lessee is leasing
the Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property. Lessor
makes no warranty or representation, express or implied, in respect of the
Leased Property or any part thereof, either as to its fitness for use,
suitability, design or condition for any particular use or purpose or otherwise,
as to quality of the material or workmanship therein, latent or patent, it being
agreed that all such risks are to be borne by Lessee. Lessee acknowledges that
the Leased Property has been inspected by Lessee and is satisfactory to it in
all respects.
6.2 USE OF THE LEASED PROPERTY.
(a) After the Commencement Date and during the entire Term, Lessee shall
use or cause to be used the Leased Property and the improvements thereon as a
licensed comprehensive mental health hospital facility including a licensed
subacute care unit, and for such other uses as may be necessary in connection
with or incidental to such use (the "Primary Intended Use"). Lessee shall not
use the Leased Property or any portion thereof for any other use without the
prior written consent of Lessor.
(b) Lessee covenants and warrants that (i) it has obtained and will
maintain all Federal, state and local approvals, authorizations, consents and
permits necessary for the use and operation of the Leased Property and the
Facility for the Primary Intended Use, (ii) it is and will remain fully
qualified to participate in and receive payment under private insurance programs
having broad application and federal, state and local governmental programs
providing for payment or reimbursement for services rendered, and (iii) it is
and will remain accredited by the Joint Commission on Accreditation on Health
Care Organizations or any successor organization providing like inspection and
accreditation.
6
<PAGE>
(c) Lessee covenants and agrees that during the Term it will continuously
operate the Leased Property in accordance with its Primary Intended Use and
maintain its certifications for reimbursement, licensure and accreditation.
(d) Lessee shall not commit or suffer to be committed any waste on the
Leased Property or in the Facility, or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, including any Capital Addition whether or not financed by
Lessor, to be used in such a manner as (i) might reasonably tend to impair
Lessor's or Lessee's estate therein or in any portion thereof, or (ii) may
reasonably result in a claim or claims of adverse usage or adverse possession by
the public, as such, or of implied dedication of the Leased Property or any
portion thereof.
(f) Lessee will not utilize any Hazardous Materials on the Leased
Property except in accordance with applicable Legal Requirements and will not
permit any contamination which may require remediation under any applicable
Hazardous Materials Law. Lessee agrees not to dispose of any Hazardous Materials
or substances within the sewerage system of the Leased Property, and that it
will handle all "red bag" wastes in accordance with applicable Hazardous
Materials Laws.
6.3 LESSOR TO GRANT EASEMENTS. Lessor will, from time to time, at the
request of Lessee and at Lessee's cost and expense, but subject to the approval
of Lessor (which approval will not be unreasonably withheld), (a) grant
easements and other rights in the nature of easements, (b) release existing
easements or other rights in the nature of easements which are for the benefit
of the Leased Property, (c) dedicate or transfer unimproved portions of the
Leased Property for road, highway or other public purposes, (d) execute
petitions to have the Leased Property annexed to any municipal corporation or
utility district, (e) execute amendments to any covenants and restrictions
affecting the Leased Property, and (f) execute and deliver such instruments as
may be necessary or appropriate to confirm or effect such grants, releases,
dedications and transfers (to the extent of its interest in the Leased
Property), but only upon delivery to Lessor of an Officer's Certificate stating
(and such other information as Lessor may reasonably require confirming) that
such grant, release, dedication, transfer, petition or amendment is required or
beneficial for and not detrimental to the proper conduct of the business of
Lessee on the Leased Property and does not reduce the value thereof.
ARTICLE VII
LEGAL, INSURANCE AND FINANCIAL REQUIREMENTS
-------------------------------------------
7.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS. Subject to Article
XI relating to permitted contests, Lessee, at its expense, will promptly (a)
comply with all material Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair and restoration of the Leased
Property, whether or not compliance therewith shall require structural change in
any of the Leased Improvements or interfere with the use and enjoyment of the
Leased Property, and (b) directly or indirectly with the cooperation of Lessor,
but at
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Lessee's sole cost and expense, procure, maintain and comply with all material
licenses, certificates of need and other authorizations required for (i) any use
of the Leased Property then being made, and for (ii) the proper erection,
installation, operation and maintenance of the Leased Improvements or any part
thereof, including any Capital Additions.
7.2 LEGAL REQUIREMENT COVENANTS. Lessee covenants and agrees that the
Leased Property shall not be used for any unlawful purpose. Lessee shall,
directly or indirectly with the cooperation of Lessor, but at Lessee's sole cost
and expense, acquire and maintain all licenses, certificates, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use and any other use conducted on the
Leased Property as may be permitted from time to time hereunder. Lessee further
covenants and agrees that Lessee's use of the Leased Property and Lessee's
maintenance, alteration, and operation of the same, and all parts thereof, shall
at all times conform to all applicable Legal Requirements.
ARTICLE VIII
REPAIRS: RESTRICTIONS AND ANNUAL INSPECTIONS
--------------------------------------------
8.1 MAINTENANCE AND REPAIR; REMODELING.
(a) Lessee, at its expense, will keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto in reasonably good order and
repair (whether or not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements, the age of the Leased Property or any portion
thereof), and except as otherwise provided in Articles XIII and XIV, with
reasonable promptness will make all necessary and appropriate repairs thereto of
every kind and nature (including remodeling to the extent necessary to maintain
the desirability of the Leased Property), whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to or after the commencement
of the Term of this Lease (concealed or otherwise). All repairs and remodeling
shall, to the extent reasonably achievable, be at least equivalent in quality to
the original work and shall be accomplished by Lessee or a party selected by
Lessee. Lessee will not take or omit to take any action the taking or omission
of which might impair the value or usefulness of the Leased Property or any part
thereof for the Primary Intended Use. If Lessee fails to perform any of its
obligations hereunder, or if Lessor reasonably determines that action is
necessary and is not being taken, Lessor may, on giving thirty days' written
notice to Lessor (other than in a case reasonably deemed by Lessor to be an
emergency, in which no such notice shall be required), without demand on Lessee,
perform any such obligations in such manner and to such extent and take such
other action as Lessor may deem appropriate, and all costs, expenses and charges
of Lessor relating to any such action shall be payable by Lessee to Lessor in
accordance with Section 2.3.
(b) Except for the use of any insurance proceeds (to the extent required
by Sections 13.1 and 13.2 hereof) and any Award (to the extent required by
Section 14.3), Lessor shall not under any circumstances be required to build or
rebuild any improvements on the Leased
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Property, or to make any repairs, replacements, alterations, restorations, or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, structural or nonstructural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto in connection with this
Lease, or to maintain the Leased Property in any way.
(c) Nothing contained in this Lease and no action or inaction by Lessor
shall be construed as (i) constituting the consent or request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any particular labor or services or the
furnishing of any particular materials or other property for the construction,
alteration, addition, repair or demolition of or to the Leased Property or any
part thereof, or (ii) giving Lessee any right, power or permission to contract
for or permit the performance of any labor or services or the finishing of any
materials or other property in such fashion as would permit the making of any
claim against Lessor in respect thereof or to make any agreement that may
create, or in any way be the basis for, any right, title, interest, lien, claim
or other encumbrance upon the estate of Lessor in the Leased Property or any
portion thereof.
(d) Unless Lessor shall convey any of the Leased Property to Lessee
pursuant to the provisions of this Lease, Lessee will, upon the expiration or
prior termination of this Lease, vacate and surrender the Leased Property to
Lessor in the condition in which the Leased Property was originally received
from Lessor and except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease, except for ordinary wear
and tear (subject to the obligation of Lessee to maintain the Property in good
order and repair during the entire Term), damage caused by the gross negligence
or willful acts of Lessor, and damage or destruction described in Article XIII
or resulting from a Taking described in Article XIV which Lessee is not required
by the terms of this Lease to repair or restore.
8.2 ENCROACHMENT; RESTRICTIONS. If any of the Improvements shall at any
time encroach upon any property, street or right-of-way adjacent to the Leased
Property, or shall violate the agreements or conditions contained in any
applicable Legal Requirement, restrictive covenant or other agreement affecting
the Leased Property, or any part thereof, or shall impair the rights of others
under any easement or right-of-way to which the Leased Property is subject, then
promptly upon the request of Lessor, Lessee shall at its expense (a) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lessor or Lessee, or (b) make such changes in the
Improvements, and take such other actions, as Lessor in the good faith exercise
of its judgment deems reasonably practicable, to remove such encroachment or to
end such violation or impairment including, if necessary, the alteration of any
of the Leased Improvements, and in any event take all such actions as may be
necessary in order to continue the operation of the Facility for the Primary
Intended Use in the manner and to the extent the Facility was operated prior to
the assertion of such violation or encroachment. Any such alteration shall be
made in conformity with the applicable requirements of Article IX. Lessee's
obligations under this Section 8.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and Lessee
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shall be entitled to a credit for any sums recovered by Lessor under any such
policy of title or other insurance.
8.3 ANNUAL INSPECTIONS. During each year of the Term after the first
anniversary of the Commencement Date, Lessor and its agents shall have the right
to inspect the Leased Property and all systems contained therein at any
reasonable time to determine Lessee's compliance with its obligations under this
Lease, including those obligations set forth in Article VII and this Article
VIII. Lessee shall be responsible for the costs of such inspections, which costs
shall not exceed on an annual basis the sum of $1,500.00.
ARTICLE IX
CAPITAL ADDITIONS
-----------------
9.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY.
(a) If no Event of Default shall have occurred and be continuing, Lessee
shall have the right, upon and subject to the terms and conditions set forth
below, to construct or install Capital Additions on the Leased Property with the
prior written consent of Lessor, provided. however, that Lessor's consent shall
--------- -------
not be required for any Capital Addition the estimated cost of which, when added
to the estimated cost of all other Capital Additions commenced within the same
calendar year, does not exceed $50,000; and provided, further. that Lessee shall
------------------
not be permitted to create any Encumbrance on the Leased Property in connection
with such Capital Addition without first complying with Section 9.1(b) hereof.
Prior to commencing construction of any Capital Addition, Lessee shall submit to
Lessor in writing a proposal setting forth in reasonable detail any proposed
Capital Addition and shall provide to Lessor such plans and specifications,
permits, licenses, contracts and other information concerning the proposed
Capital Addition as Lessor may reasonably request. Without limiting the
generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such Capital Addition and the use or uses to
which it will be put.
(b) Prior to commencing construction of any Capital Addition (other than
a Capital Addition the Capital Addition Cost of which is reasonably projected by
Lessee not to exceed $100,000 or a Capital Addition financed solely by Lessee or
an Affiliate of Lessee), Lessee shall first request Lessor to provide funds to
pay for such Capital Addition in accordance with the provisions of Section 9.3.
If Lessor declines or is unable to provide such financing on terms acceptable to
Lessee in Lessee's sole discretion, or if Lessee is prohibited under the terms
of any material credit facility (after having made reasonable requests
thereunder) from borrowing from Lessor, then Lessee may arrange or provide other
financing, subject to the provisions of Section 9.2. Additionally, Lessor shall
reasonably cooperate with Lessee regarding the grant of any consents or
easements or the like necessary or appropriate in connection with any Capital
Addition; provided that no Capital Addition shall be made which would tie in or
--------
connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease), including tie-ins of buildings or other structures
or utilities, unless Lessee shall have obtained the prior written
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approval of Lessor. All proposed Capital Additions shall be architecturally
integrated and consistent with the Property.
9.2 CAPITAL ADDITIONS FINANCED BY LESSEE. If Lessee finances or arranges
to finance any Capital Addition with a party other than Lessor or if Lessee pays
cash for any Capital Additions this Lease shall be and hereby is amended to
provide as follows:
(a) There shall be no adjustment in the Minimum Rent by reason of any
such Capital Addition.
(b) Upon the expiration or earlier termination of this Lease, Lessor
shall compensate Lessee for all Capital Additions paid for or financed by Lessee
in any of the following ways:
(i) By purchasing all Capital Additions paid for by Lessee from
Lessee for cash in the amount of the Fair Market Added Value at the time of
purchase by Lessor of all such Capital Additions paid for or financed by
Lessee;
(ii) Such other arrangement regarding such compensation as shall
be mutually acceptable to Lessor and Lessee.
Any amount owed by Lessee to Lessor under this Lease at such termination or
expiration may be deducted from any compensation for Capital Additions payable
by Lessor to Lessee under this Section 9.2.
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
(a) If so required by Section 9.1, Lessee shall request that Lessor
provide or arrange financing for a Capital Addition by providing to Lessor such
information about the Capital Addition as Lessor may reasonably request (a
"Request"), including all information referred to in Section 9.1 above. Lessor
may but shall be under no obligation to provide or obtain funds necessary to
meet the Request. Within 30 days of receipt of a Request, Lessor shall notify
Lessee as to whether it will finance the proposed Capital Addition and, if so,
the terms and conditions upon which it would do so, including the terms of any
amendment to this Lease. In the case of any proposed financing to be provided by
Lessor, in no event (i) shall the portion of the projected Capital Addition Cost
comprised of land (if any), materials, labor charges and fixtures be less than
90% of the total amount of such cost, or (ii) shall Lessee or any of its
Affiliates be entitled to any commission or development fee, directly or
indirectly, as a portion of the Capital Addition Cost. Any Capital Addition not
financed by Lessor must still be approved in writing by Lessor pursuant to the
terms of Section 9.1 hereof. Lessee may
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withdraw its Request by notice to Lessor at any time before or after receipt of
Lessor's terms and conditions.
(b) If Lessor agrees to finance the proposed Capital Addition, Lessor's
obligation to advance any funds shall be subject to receipt of all of the
following, in form and substance reasonably satisfactory to Lessor:
(i) such loan documentation as may be required by Lessor;
(ii) any information, certificates, licenses, permits or documents
requested by Lessor, or by any lender with whom Lessor has agreed or may
agree to provide financing, necessary to confirm that Lessee will be able
to use the Capital Addition upon completion thereof in accordance with the
Primary Intended Use, including all required federal, state or local
government licenses and approvals;
(iii) an Officer's Certificate and, if requested, a certificate
from Lessee's architect, setting forth in detail reasonably satisfactory to
Lessor the projected (or actual, if available) cost of the proposed Capital
Addition;
(iv) an amendment to this Lease, duly executed and acknowledged,
in form and substance satisfactory to Lessor and Lessee (the "Lease
Amendment"), containing such provisions as may be necessary or appropriate
due to the Capital Addition, including any appropriate changes in the legal
description of the Land and the Rent, all such changes to be mutually
agreed upon by Lessor and Lessee;
(v) a deed conveying title to Lessor to any land and improvements
or other rights acquired for the purpose of constructing the Capital
Addition, free and clear of any liens or encumbrances except those approved
in writing by Lessor and, both prior to and following completion of the
Capital Addition, an as-built survey thereof reasonably satisfactory to
Lessor;
(vi) endorsements to any outstanding policy of title insurance
covering the Leased Property or a supplemental policy of title insurance
covering the Leased Property reasonably satisfactory in form and substance
to Lessor (A) updating the same without any additional exceptions, except
as may be permitted by Lessor; and (B) increasing the coverage thereof by
an amount equal to the Fair Market Value of the Capital Addition (except to
the extent covered by the owner's policy of title insurance referred to in
subparagraph (vii) below);
(vii) if required by Lessor, (A) an owner's policy of title
insurance insuring fee simple title to any land conveyed to Lessor pursuant
to subparagraph (v), free and clear of all liens and encumbrances except
those approved by Lessor and (B) a lender's policy of title insurance
satisfactory in form and substance to
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Lessor and the Lending Institution advancing any portion of the Capital
Addition Cost;
(viii) if required by Lessor upon completion of the Capital
Addition, an M.A.I appraisal of the Leased Property; and
(ix) such other certificates (including endorsements increasing
the insurance coverage, if any, at the time required by Section 12.1),
documents, opinions of Lessee's counsel, appraisals, surveys, certified
copies of duly adopted resolutions of the Board of Directors of Lessee
authorizing the execution and delivery of the Lease Amendment and any other
instruments or documents as may be reasonably required by Lessor.
(c) Upon making a Request to finance a Capital Addition, whether or not
such financing is actually consummated, Lessee shall pay the reasonable costs
and expenses of Lessor and any Lending Institution which has committed to
finance such Capital Addition paid or incurred in connection with the financing
of the Capital Addition, including (i) the fees and expenses of their respective
counsel, (ii) the amount of any recording or transfer taxes and fees, (iii)
documentary stamp taxes, if any, (iv) title insurance charges, (v) appraisal
fees, if any, and (vi) commitment fees, if any.
9.4 REMODELING AND NON-CAPITAL ADDITIONS. Lessee shall have the right and
the obligation to make additions, modifications or improvements to the Leased
Property which are not Capital Additions, including tenant improvements made in
connection with the Tenant Leases, from time to time as may reasonably be
necessary for its uses and purposes and to permit the Lessee to comply fully
with its obligations set forth in this Lease; provided that such action will be
--------
undertaken expeditiously, in a workmanlike manner and will not significantly
alter the character or purpose or detract from the value or operating efficiency
of the Leased Property and will not significantly impair the revenue-producing
capability of the Leased Property or adversely affect the ability of the Lessee
to comply with the provisions of this Lease. Title to all non-Capital Additions,
modifications and improvements shall, without payment by Lessor at any time, be
included under the terms of this Lease and, upon expiration or earlier
termination of this Lease, shall pass to and become the property of Lessor.
9.5 SALVAGE. All materials which are scrapped or removed in connection
with the making of Capital Additions permitted by Section 9.1 or repairs
required by Article VIII shall be or become the property of Lessee; provided
--------
that Lessor may require Lessee to dispose of such materials within 15 days.
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ARTICLE X
LIENS
-----
Subject to the provisions of Article XI relating to permitted contests,
Lessee will not directly or indirectly create or suffer to exist and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, set forth in Exhibit B attached hereto, (c)
---------
restrictions, liens and other encumbrances which are consented to in writing by
Lessor, or any easements granted pursuant to the provisions of Section 6.3 of
this Lease, (d) liens for those taxes of Lessor which Lessee is not required to
pay hereunder, (e) subleases permitted by Article XXIII, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested in
accordance with the provisions of Article XI, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed or not yet due,
provided that (1) the payment of such sums shall not be postponed for more than
- --------
60 days after the completion of the action (including any appeal from any
judgment rendered therein) giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor, or (2) any such liens are
in the process of being contested in accordance with the provisions of Article
XI, and (h) any Encumbrance placed on the Leased Property by Lessor.
ARTICLE XI
PERMITTED CONTESTS
------------------
Lessee, after ten days' prior written notice to Lessor, on its own or on
Lessor's behalf (or in Lessor's name), but at Lessee's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any Imposition,
Legal Requirement, Insurance Requirement, lien, attachment, levy, encumbrance,
charge or claim (collectively "Charge") not otherwise permitted by Article X,
which is required to be paid or discharged by Lessee or any Tenant; provided
--------
that (a) in the case of an unpaid Charge, the commencement and continuation of
such proceedings, or the posting of a bond or certificate of deposit as may be
permitted by applicable law, shall suspend the collection thereof from Lessor
and from the Leased Property; (b) neither the Leased Property nor any Rent
therefrom nor any part thereof or interest therein would be in any immediate
danger of being sold, forfeited, attached or lost; (c) Lessor would not be in
any immediate danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings; (d) in the event that any
such contest shall involve a sum of money or potential loss in excess of
$25,000.00, then Lessee shall deliver to Lessor and its counsel an officer's
Certificate as to the matters set forth in clauses (a), (b) and (c) and such
opinions of legal counsel to Lessee as Lessor may request; (e) in the case of an
Insurance Requirement, the coverage required by Article XII shall be maintained;
and (f) if such contest be finally resolved against Lessor or Lessee, Lessee
shall, as Additional Charges due hereunder, promptly pay the amount required to
be paid, together with all interest and penalties accrued thereon, or otherwise
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comply with the applicable Charge; provided further that nothing contained
----------------
herein shall be construed to permit Lessee to contest the payment of Rent, or
any other sums payable by Lessee to Lessor hereunder. Lessor, at Lessee's
expense, shall execute and deliver to Lessee such authorizations and other
documents as may reasonably be required in any such contest and, if reasonably
requested by Lessee or if Lessor so desires and then at its own expense, Lessor
shall join as a party therein. Lessor shall do all things reasonably requested
by Lessee in connection with such action. Lessee shall indemnify and save Lessor
harmless against any liability, cost or expense of any kind that may be imposed
upon Lessor in connection with any such contest and any loss resulting
therefrom.
ARTICLE XII
INSURANCE
---------
12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease,
Lessee shall at all times keep the Leased Property and all property located in
or on the Leased Property insured with the kinds and amounts of insurance
described below and written by companies reasonably acceptable to Lessor
authorized to do insurance business in the state in which the Leased Property is
located. The policies must name Lessor as an additional insured and losses shall
be payable to Lessor and/or Lessee as provided in Article XIII. In addition, the
policies shall name as an additional insured the holder ("Facility Mortgagee")
of any mortgage, deed of trust or other security agreement securing any
Encumbrance placed on the Leased Property or any part thereof in accordance with
the provisions of Article XXXII ("Facility Mortgagee), if any, by way of a
standard form of mortgagee's loss payable endorsement. Any loss adjustment in
excess of $50,000.00 shall require the written consent of Lessor and each
affected Facility Mortgagee. Evidence of insurance shall be deposited with
Lessor and, if requested, with any Facility Mortgagee(s). If any provision of
any Facility Mortgage which constitutes a first lien on the Leased Property
requires deposits of insurance to be made with such Facility Mortgagee, Lessee
shall either pay to Lessor monthly the amounts required and Lessor shall
transfer such amounts to such Facility Mortgagee or, pursuant to written
direction by Lessor, Lessee shall make such deposits directly with such Facility
Mortgagee. The policies on the Leased Property, including the Leased
Improvements, the Fixtures and the Personal Property, shall insure against the
following risks:
(a) Loss or damage by fire, vandalism and malicious mischief,
extended coverage perils commonly known as "All Risk" and all physical loss
perils, including sprinkler leakage and business interruption, in an amount
not less than the then Full Replacement Cost thereof (as defined below in
Section 12.2) after deductible with a replacement cost endorsement
sufficient to prevent Lessee from becoming a co-insurer together with an
agreed value endorsement;
(b) Loss or damage by explosion of steam boilers, pressure vessels or
similar apparatus now or hereafter installed in the Facility, in such
limits with respect to any one accident as may be reasonably requested by
Lessor from time to time;
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(c) Loss of rental under a rental value insurance policy covering
risk of loss during the first 12 months of reconstruction necessitated by
the occurrence of any of the hazards described in Sections 12.1(a) or
12.1(b), in an amount sufficient to prevent Lessee from becoming a co-
insurer; provided that in the event that Lessee shall not be in default
--------
hereunder and Lessor shall receive any proceeds from such rental insurance
which, when added to rental amounts received with respect to the applicable
time period, exceed the amount of rental owed by Lessee hereunder, Lessor
shall immediately pay such excess to Lessee;
(d) Loss or damage by hurricane and earthquake in the amount of the
Full Replacement Cost, after deductible;
(e) Claims for personal injury or property damage under a policy of
comprehensive general public liability insurance including insurance
against assumed or contractual liability including indemnities under this
Lease, with amounts not less than $5,000,000.00 per occurrence in respect
of bodily injury and death and $10,000,000.00 for property damage; provided
--------
that if it becomes customary for tenants occupying similar buildings in the
same City where the Leased Property is located to be required to provide
liability coverage with higher limits than the foregoing, then Lessee shall
provide Lessor with an insurance policy with coverage limits that are not
less than such customary limits;
(f) Claims for personal injury under such policies of hospital
professional liability insurance and physicians malpractice and
professional liability insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
usually carried by providers of similar health care services in the same
general areas in which Lessee operates, provided that the first $500,000 of
--------
such insurance may be pursuant to a plan of self-insurance for which
adequate provision has been made; and
(g) Flood (when the Leased Property is located in whole or in part
within a designated flood plain area) and such other hazards and in such
amounts as may be customary for comparable properties in the area issued by
insurance companies authorized to do business in the state in which the
Leased Property is located.
If Lessee shall engage or cause to be engaged any contractor to perform work on
the Leased Property, Lessee shall require such contractor to carry and maintain
insurance coverage comparable to the foregoing requirements, at no expense to
Lessor; except that in cases where such coverage is excessive in light of the
------
work being done, Lessee may allow any such contractor to carry or maintain
alternative coverage in reasonable amounts upon Lessor's prior written consent,
which shall not be unreasonably withheld.
12.2 REPLACEMENT COST. The term "Full Replacement Cost" as used herein
shall mean the actual replacement cost of the Facility from time to time,
including increased cost of construction endorsement, less exclusions provided
in the normal fire insurance policy. In the
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event Lessor or Lessee believes that the Full Replacement Cost has increased or
decreased at any time during the Term, it shall have the right at its own
expense to have such Full Replacement Cost redetermined by the insurance company
which is then providing the largest amount of casualty insurance carried on the
Leased Property, hereinafter referred to as the "impartial appraiser". The party
desiring to have the Full Replacement Cost so redetermined shall forthwith, on
receipt of such determination by the impartial appraiser, give written notice
thereof to the other party hereto. The determination of such impartial appraiser
shall be final and binding on the parties hereto, and Lessee shall forthwith
increase, or may decrease, the amount of the insurance carried pursuant to this
Article to the amount so determined by the impartial appraiser.
12.3 ADDITIONAL INSURANCE. In addition to the insurance described above,
Lessee shall maintain such additional insurance as may be reasonably required
from time to time by any Facility Mortgagee which is consistent with insurance
coverage for similar buildings in the city where the Leased Property is located
or required pursuant to any applicable Legal Requirement, and shall at all times
maintain adequate worker's compensation insurance coverage for all persons
employed on the Leased Property, in accordance with all applicable Legal
Requirements.
12.4 WAIVER OF SUBROGATION. All insurance policies carried by either party
covering the Leased Property, the Fixtures, the Facility and/or the Personal
Property, including contents, fire and casualty insurance, shall expressly waive
any right of subrogation on the part of the insurer against the other party. The
parties hereto agree that their policies will include such a waiver clause or
endorsement so long as the same is obtainable without extra cost, and in the
event of such an extra charge the other party, at its election, may request and
pay the same, but shall not be obligated to do so.
12.5 FORM OF INSURANCE. All of the policies of insurance referred to in
this Section shall be written in form reasonably satisfactory to Lessor by
insurance companies reasonably satisfactory to Lessor; provided that the
--------
deductibles for insurance required by Sections 12.1(a) and (b) shall be no
greater than $50,000.00 and the deductible for coverage required by Section
12.1(c) shall be no greater than $100,000.00. Lessee shall pay all premiums
therefor, and deliver such policies or certificates thereof to Lessor prior to
their effective date (and, with respect to any renewal policy, at least 30 days
prior to the expiration of the existing policy). In the event of the failure of
Lessee to effect such insurance in the names herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to Lessor
at the times required, Lessor shall be entitled, but shall have no obligation,
to enact such insurance and pay the premiums therefor, which premiums shall be
repayable by Lessee to Lessor upon written demand therefor, and failure to repay
the same shall constitute an Event of Default within the meaning of Section
15.1(c). Each insurer mentioned in this Section shall agree, by endorsement on
the policy or policies issued by it, or by independent instrument furnished to
Lessor, that it will give to Lessor prior written notice before the policy or
policies in question shall be altered, allowed to expire or canceled.
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12.6 CHANGE IN LIMITS. In the event that Lessor shall at any time
reasonably and in good faith believe the limits of the personal injury, property
damage or general public liability insurance then carried to be insufficient,
the parties shall endeavor to agree on the proper and reasonable limits for such
insurance to be carried and such insurance shall thereafter be carried with the
limits thus agreed on until further change pursuant to the provisions of this
Section. If the parties shall be unable to agree thereon, the proper and
reasonable limits for such insurance shall be determined by an impartial third
party selected by the parties, the costs of which shall be divided equally
between the parties. Such redeterminations, whether made by the parties or by
arbitration, shall be made no more frequently than every year. Nothing herein
shall permit the amount of insurance to be reduced below the amount or amounts
reasonably required by any Facility Mortgagee.
12.7 BLANKET POLICY. Notwithstanding anything to the contrary contained in
this Section, Lessee's obligations to carry the insurance provided for herein
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee; provided that the coverage afforded
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Lessor will not be reduced or diminished or otherwise be different from that
which would exist under separate policies meeting all other requirements of this
Lease; and provided further that the requirements of this Article XII are
----------------
otherwise satisfied.
12.8 NO SEPARATE INSURANCE. Without the prior written consent of Lessor,
Lessee shall not, on Lessee's own initiative or pursuant to the request or
requirement of any third party, take out separate insurance concurrent in form
or contributing in the event of loss with that required in this Article XII to
be furnished by, or which may reasonably be required by a Facility Mortgagee to
be furnished by, Lessee, or increase the amounts of any then-existing insurance
required under this Article XII by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor and all Facility Mortgagees, are
included therein as additional insureds and the loss is payable under said
insurance in the same manner as losses are required to be payable under this
Lease. Lessee shall immediately notify Lessor of the taking out of any such
separate insurance or of the increasing of any of the amounts of the then-
existing insurance required under this Article XII by securing an additional
policy or additional policies.
ARTICLE XIII
FIRE AND CASUALTY
-----------------
13.1 INSURANCE PROCEEDS. All proceeds payable by reason of any loss or
damage to the Leased Property or any portion thereof and insured under any
policy of insurance required by Article XII of this Lease shall be paid to
Lessor and held by Lessor in trust (subject to the provisions of Section 13.7)
and shall be made available for reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased Property, or any portion thereof, and
shall be paid out by Lessor from time to time for the reasonable cost of such
reconstruction or repair in accordance with this Article XIII after Lessee has
expended an amount equal to or exceeding the deductible under any applicable
insurance policy. Any excess proceeds of
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insurance remaining after the completion of the restoration or reconstruction of
the Leased Property shall be retained by Lessee free and clear upon completion
of any such repair and restoration except as otherwise specifically provided
below in this Article XIII; provided that in the event neither Lessor nor Lessee
--------
is required or elects to repair or restore the Leased Property, then all such
insurance proceeds shall be retained by Lessor. All salvage resulting from any
risk covered by insurance shall belong to Lessee, including any salvage relating
to Capital Additions paid for by Lessee.
13.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY
INSURANCE.
(a) Except as provided in Section 13.7, if during the Term the Facility
is totally or partially destroyed from a risk covered by the insurance described
in Article XII and the Facility thereby is rendered Unsuitable for its Primary
Intended Use, Lessee shall have the option, by giving notice to Lessor within 60
days following the date of such destruction, to (i) apply all proceeds payable
with respect thereto to restore the Facility to substantially the same condition
as existed immediately before the damage or destruction or such other condition
consistent with the Primary Intended Use as may be approved by Lessor in
writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due, or (ii) offer to substitute a new property
pursuant to and in accordance with the provisions of Article XX. In the event
Lessee does not make an offer or Lessor does not accept Lessee's offer to
substitute for the Leased Property within 30 days after the date of such offer,
Lessee shall either (i) within 30 days after the end of such 30-day period (or,
if no offer is made, within 60 days following the date of such destruction)
proceed to restore the Facility to substantially the same condition as existed
immediately before the damage or destruction or such other condition consistent
with the Primary Intended Use as may be approved by Lessor in writing, which
consent shall not be unreasonably withheld if such other condition would not, in
Lessor's good faith judgment, result in a reduction in the value of the Leased
Property or negatively affect the ability of Lessee to pay Rent hereunder as and
when due, or (ii) within 60 days after the end of such 30-day period (or, if no
offer is made, within 60 days following the date of such destruction), acquire
the Leased Property from Lessor for a purchase price equal to the Minimum
Repurchase Price of the Leased Property immediately prior to such damage or
destruction .
(b) Except as provided in Section 13.7, if during the Term the Facility
is partially destroyed from a risk covered by the insurance described in Article
XII, but the Facility is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Facility to substantially the same
condition as existed immediately before the damage or destruction or such other
condition consistent with the Primary Intended Use as may be approved by Lessor
in writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due. Such damage or destruction shall not
terminate this Lease; provided that if Lessee cannot within a reasonable time
--------
obtain all necessary governmental approvals, including building permits,
licenses,
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conditional use permits and any certificates of need, after diligent efforts to
do so, in order to be able to perform all required repair and restoration work
and to operate the Facility for its Primary Intended Use in substantially the
same manner as immediately prior to such damage or destruction, Lessee may
either (i) offer pursuant to Article XX to substitute a new property,
substantially equivalent to the Leased Property immediately before such damage
or destruction, or (ii) after the fourth anniversary of the Commencement Date,
purchase the Leased Property for a purchase price equal to the Minimum
Repurchase Price of the Leased Property immediately prior to such damage or
destruction.
(c) In the event Lessor accepts Lessee's offer to purchase the Leased
Property or to provide a Substitute Property, this Lease shall terminate upon
payment of the purchase price and execution and delivery of all appropriate
documentation, or execution and delivery of all documents required in connection
with a Substitute Property under Article XX, and Lessor shall remit to Lessee,
or allow Lessee a credit toward the purchase price in an amount equal to, all
insurance proceeds being held in trust by Lessor.
13.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED BY
INSURANCE. Except as provided in Section 13.7 below, if during the Term the
Facility is totally or materially destroyed from a risk which is not covered by
Lessee's insurance described in Article XII (whether or not such damage or
destruction renders the Facility Unsuitable for Its Primary Intended Use),
Lessee at its option shall either (a) restore the Facility to substantially its
condition immediately before such damage or destruction or such other condition
consistent with the Primary Intended Use as may be approved by Lessor in
writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due, and such damage or destruction shall not
terminate this Lease, or (b) acquire the Leased Property from Lessor for a
purchase price equal to the Minimum Repurchase Price immediately prior to such
damage or destruction or (c) if all of the criteria for such substitution are
satisfied, offer to substitute a new property substantially equivalent to the
Leased Property immediately before such damage or destruction pursuant to the
provisions of Article XX; provided. however. that if such damage or destruction
------------------
is not material in the reasonable opinion of Lessor, Lessee shall restore the
Leased Property.
13.4 LESSEE'S PROPERTY. Lessee shall use any insurance proceeds payable by
reason of any loss of or damage to any of the Personal Property to restore such
personal property to the Leased Property with items of substantially equivalent
value to the items being replaced.
13.5 RESTORATION OF LESSEE'S PROPERTY. If Lessee is required or elects to
restore the Facility as provided in Sections 13.2 or 13.3, Lessee shall also
restore the Personal Property as required pursuant to Section 13.4 and all
Capital Additions paid for or financed by Lessor. Insurance proceeds payable by
reason of damage to Capital Additions paid for or financed by Lessor shall be
paid to Lessor and Lessor shall hold such insurance proceeds in trust to pay the
cost of repairing or replacing such Capital Additions in the event Lessee does
not terminate this Lease or purchase or substitute for the Leased Property as
provided in Section 13.2 above.
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13.6 NO ABATEMENT OF RENT. This Lease shall remain in full force and
effect and Lessee's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during any period required
for repair and restoration.
13.7 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of Sections
13.2 or 13.3 to the contrary, if damage to or destruction of the Facility occurs
during the last 12 months of the Term, and if such damage or destruction cannot
be fully repaired and restored within the lesser of (i) six months or (ii) the
period remaining in the Term immediately following the date of loss, either
party shall have the right to terminate this Lease by giving notice to the other
within 3O days after the date of damage or destruction, in which event Lessor
shall be entitled to retain the insurance proceeds and Lessee shall pay to
Lessor on demand the amount of any deductible or uninsured loss arising in
connection therewith; provided that any such notice given by Lessor shall be
--------
void and of no force and effect if Lessee exercises an available option to
extend the Term for one Extended Term, or one additional Extended Term, as the
case may be, within 30 days following receipt of such termination notice.
13.8 Waiver. Lessee hereby waives any statutory or common law rights of
termination which may arise by reason of any damage or destruction of the
Facility.
ARTICLE XIV
CONDEMNATION
------------
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease
by Condemnation, the rights and obligations of the parties shall be determined
by this Article XIV.
14.2 TOTAL TAKING. If there is a Taking of all of the Leased Property by
Condemnation, this Lease shall terminate on the Date of Taking, and the Minimum
Rent and all Additional Charges paid or payable hereunder shall be prorated and
paid to the Date of Taking.
14.3 PARTIAL TAKING. If there is a Taking of a portion of the Leased
Property by Condemnation such that the Facility is not thereby rendered
Unsuitable for Its Primary Intended Use, this Lease shall remain in effect, and
to the extent required by the last sentence of Section 14.5 Lessor shall make
available to Lessee the proceeds of any such Taking for the restoration of the
Leased Property to substantially the same condition as existed immediately
before such Taking or such other condition consistent with the Primary Intended
Use as may be approved by Lessor in writing, which consent shall not be
unreasonably withheld if such other condition would not, in Lessor's good faith
judgment, result in a reduction in the value of the Leased Property or
negatively affect the ability of Lessee to pay Rent hereunder as and when due.
If, however, the Facility is thereby rendered Unsuitable for Its Primary
Intended Use, Lessee shall have the right (a) to take such proceeds of any Award
as shall be necessary and restore the Facility, at its own expense, to the
extent possible, to substantially the same condition as existed immediately
before the partial Taking or such other condition consistent with the Primary
Intended Use as may be approved by Lessor in writing, which consent shall not be
unreasonably
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withheld if such other condition would not, in Lessor's good faith judgment,
result in a reduction in the value of the Leased Property or negatively affect
the ability of Lessee to pay Rent hereunder as and when due, or (b) to offer to
substitute a new property pursuant to and in accordance with the provisions of
Article XX. Lessee shall exercise its option by giving Lessor notice thereof
within 60 days after Lessee receives notice of the Taking. In the event Lessee
does not make an offer or Lessor does not accept Lessee's offer to substitute
for the Leased Property within 30 days after receipt of the notice described in
the preceding sentence, Lessee shall either (a) withdraw its offer to substitute
for the Leased Property and within 30 days after the end of such 30-day period
(or, if no offer is made, within 60 days following the date of such Taking)
proceed to restore the Facility, to the extent possible, to substantially the
same condition as existed immediately before the partial Taking or such other
condition consistent with the Primary Intended Use as may be approved by Lessor
in writing, which consent shall not be unreasonably withheld if such other
condition would not, in Lessor's good faith judgment, result in a reduction in
the value of the Leased Property or negatively affect the ability of Lessee to
pay Rent hereunder as and when due, or (b) within 60 days after the end of such
30-day period (or, if no offer is made, within 60 days following the date of
such Taking), acquire the Leased Property from Lessor for a purchase price equal
to the Minimum Repurchase Price of the Leased Property immediately prior to such
Taking.
14.4 RESTORATION. If there is a partial Taking of the Leased Property and
this Lease remains in full force and effect pursuant to Section 14.3, Lessee
shall accomplish all necessary restoration.
14.5 AWARD DISTRIBUTION. In the event Lessor accepts Lessee's offer to
substitute a new property for the Leased Property or Lessee purchases the Leased
Property pursuant to Section 14.3 above, the entire Award shall belong to Lessee
and Lessor agrees to assign to Lessee all of its rights thereto. Except as
otherwise provided in Section 14.3 above, in any other event, the entire Award
shall belong to and be paid to Lessor, except that, if this Lease is terminated,
and subject to the rights of the Facility Mortgagee, Lessee shall be entitled to
receive from the Award, if and to the extent there is included in such Award any
sum attributable to the Capital Additions for which Lessee would be entitled to
reimbursement at the end of the Term pursuant to the provisions of Section
9.2(b). If Lessee is required or elects to restore the Facility, Lessor agrees
that, subject to the rights of the Facility Mortgagees (as limited by clause (c)
of the second proviso of Article XXXIII), its portion of the Award shall be used
-------
for such restoration and it shall hold such portion of the Award in trust for
application to the cost of the restoration.
14.6 TEMPORARY TAKING. The Taking of the Leased Property, or any part
thereof, by military or other public authority shall constitute a Taking by
Condemnation only when the use and occupancy by the Taking authority has
continued for longer than six months. During any such six-month period all the
provisions of this Lease shall remain in full force and effect and the Rent
shall not be abated or reduced during such period of Taking; provided that
--------
Lessee will receive any compensation from the Taking authority as a result of
such temporary Taking.
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<PAGE>
ARTICLE XV
DEFAULT
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15.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute events of default (individually, an "Event of Default"
and, collectively, "Events of Default") hereunder:
(a) Lessee shall fail to make a payment of the Rent payable by Lessee
under this Lease within five (5) Business Days of the date when due; or
(b) Lessee or Guarantor shall fail to observe or perform any other term,
covenant or condition of this Lease, the Guaranty or any other document executed
in connection therewith, and either (i) such failure shall continue for more
than 30 days after notice thereof is given by Lessor to such party, unless such
failure is not reasonably capable of being cured within such 30-day period (but
is reasonably capable of being cured within 60 days after such notice) and such
party commences action to cure such failure within such 30-day period and
diligently and continuously prosecutes such action to completion and causes such
failure to be cured within 60 days after such notice (or within 90 days after
such notice, in the event that Unavoidable Delays prevent completion within 60
days), or (ii) such failure is not reasonably capable of being cured within 60
days after such notice of such failure is given; or
(c) Lessee or Guarantor shall:
(i) admit in writing its inability to pay its debts generally as
they become due,
(ii) file a petition in bankruptcy or a petition to take advantage
of any insolvency law,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property,
(v) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable law
or statute of the United States of America or any state thereof, or
(vi) be in default with respect to any Indebtedness in the
outstanding amount of (i) in the case of Lessee, at least $50,000, and (ii)
in the case of any Guarantor, at least $1,OOO,OOO, which default shall have
resulted in an acceleration of the maturity of such Indebtedness; or
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(d) An event of default shall occur under any other lease between Lessor
and Lessee or under the Mesa Lease or any other documents executed by Mesa or
any guarantor of the Mesa Lease in connection therewith; or
(e) Lessee shall attempt to make any assignment or sublease in violation
of Section 23.1 hereof; or
(f) As of the end of each fiscal quarter, commencing with the fiscal
quarter ending June 30, 1995, Lessee shall fail to maintain a Cash Flow Coverage
Ratio of at least 1.5 to 1.0 for the twelve-month period then ended; provided,
---------
however, that the failure of Lessee to maintain such Cash Flow Coverage Ratio as
- -------
at the end of any fiscal quarter shall not constitute an Event of Default
hereunder if, but only if, (i) the Cash Flow Coverage Ratio as at the end of
such fiscal quarter for the twelve-month period then ended shall not be less
than 1.0 to 1.0, (ii) the Combined Cash Flow Coverage Ratio under and as defined
in the Mesa Lease shall not be less than 1.15 to 1.0 for said twelve-month
period, and (iii) Lessee shall not have failed to maintain a Cash Flow Coverage
---
Ratio of at least 1.5 to 1.0 for more than any two consecutive fiscal quarters.
15.2 REMEDIES. If an Event of Default shall have occurred, Lessor may, at
its election, then or at any time thereafter, pursue any one or more of the
following remedies, in addition to any remedies which may be permitted by law or
by other provisions of this Lease, without further notice or demand, except as
hereinafter provided:
(a) Without any notice or demand whatsoever, Lessor may take any one or
more actions permissible at law to ensure performance by Lessee of Lessee's
covenants and obligations under this Lease. In this regard, it is agreed that if
Lessee abandons or vacates the Leased Property, Lessor may enter upon and take
possession of such Leased Property in order to protect it from deterioration and
continue to demand from Lessee the monthly rentals and other charges provided in
this Lease. Lessor shall use reasonable efforts to relet but shall have no
absolute obligation to relet. If Lessor does, at its sole discretion, elect to
relet the Leased Property, such action by Lessor shall not be deemed as an
acceptance of Lessee's surrender of the Leased Property unless Lessor expressly
notifies Lessee of such acceptance in writing, Lessee hereby acknowledging that
Lessor shall otherwise be reletting as Lessee's agent. It is further agreed in
this regard that in the event of any Event of Default described in this ARTICLE
XV, Lessor shall have the right to enter upon the Leased Property and do
whatever Lessee is obligated to do under the terms of this Lease; and Lessee
agrees to reimburse Lessor on demand for any reasonable expenses which Lessor
may incur in thus effecting compliance with Lessee's obligations under this
Lease, and further agrees that Lessor shall not be liable for any damages
resulting to Lessee from such action, except as may result from Lessor's gross
negligence or willful misconduct.
(b) Lessor may terminate this Lease by written notice to Lessee, in which
event Lessee shall immediately surrender the Leased Property to Lessor, and if
Lessee fails to do so, Lessor may, without prejudice to any other remedy which
Lessor may have for possession or
24
<PAGE>
arrearage in rent (including any interest which may have accrued pursuant to
Section 2.3 of this Lease or otherwise), enter upon and take possession of the
Leased Property and expel or remove Lessee and any other person who may be
occupying said premises or any part thereof. In addition, Lessee agrees to pay
to Lessor on demand the amount of all loss and damage which Lessor may suffer by
reason of any termination effected pursuant to this subsection (b). When Lessor
desires, Lessor may demand a final settlement not to exceed the Minimum
Repurchase Price at the time of such final settlement. Upon demand for a final
settlement, Lessor shall have a right to, and Lessee hereby agrees to pay, the
difference between (a) the total of all monthly rentals and other charges
provided in this Lease for the remainder of the Term and (b) the reasonable
rental value of the Leased Property for such period (including a reasonable time
to relet the Leased Property), as determined pursuant to the provisions of
Article XXVIII hereof, such difference to be discounted to present value at a
rate equal to the lowest rate of capitalization (highest present worth)
reasonably consistent with industry standards at the time of such determination
and allowed by applicable law.
(c) Lessor may enter upon and take possession of the Leased Property and
expel or remove Lessee and any other person who may be occupying said premises
or any part thereof with or without having terminated this Lease. Although
Lessor shall be under no absolute obligation to attempt and shall be obligated
only to use reasonable efforts to relet the Leased Property, until the Leased
Property is relet Lessee shall pay to Lessor on or before the first day of each
calendar month the monthly rentals and other charges provided in this Lease.
After the Leased Property has been relet by Lessor, Lessee shall pay to Lessor
on the 5th (fifth) day of each calendar month the excess, if any, of the monthly
rentals and other charges provided in this Lease for the preceding calendar
month over the monthly rentals and other charges actually collected by Lessor
for such month. If it is necessary for Lessor to bring suit in order to collect
any deficiency, Lessor shall have a right to allow such deficiencies to
accumulate and to bring an action on several or all of the accrued deficiencies
at one time. Any such suit shall not prejudice in any way the right of Lessor to
bring a similar action for any subsequent deficiency or deficiencies. Any amount
collected by Lessor from subsequent tenants for any calendar month in excess of
the monthly rentals and other charges provided in this Lease shall be credited
to Lessee in reduction of Lessee's liability for any calendar month for which
the amount collected by Lessor will be less than the monthly rentals and other
charges provided in this Lease, but Lessee shall have no right to such excess
other than the above described credit.
The rights and remedies of Lessor hereunder are cumulative, and pursuit of
any of the above remedies shall not preclude pursuit of any other remedies
prescribed in other sections of this Lease and any other remedies provided by
law or equity. Forbearance by Lessor to enforce one or more of the remedies
herein provided upon an Event of Default shall not be deemed or construed to
constitute a waiver of such Event of Default. Exercise by Lessor of any one or
more remedies shall not constitute an acceptance of surrender of the Leased
Property by Lessee, it being understood that such surrender can be effected only
by the written agreement of Lessor and Lessee.
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15.3 ADDITIONAL EXPENSES. In addition to payments required pursuant to
subsections (a) and (b) of Section 15.2 above, Lessee shall compensate Lessor
for all reasonable expenses incurred by Lessor in repossessing the Leased
Property (including any increase in insurance premiums caused by the vacancy of
the Leased Property), all reasonable expenses incurred by Lessor in reletting
(including repairs, remodeling, replacements, advertisements and brokerage
fees), all reasonable concessions granted to a new tenant upon reletting
(including renewal options), all fees and expenses incurred by Lessor as a
direct or indirect result of any appropriate action by a Facility Mortgagee, any
expenses of Lessor incurred for the installation of separate lines or meters for
any public utilities not previously metered separately from adjacent property of
Lessee and a reasonable allowance for Lessor's administrative efforts, salaries
and overhead attributable directly or indirectly to Lessee's default and
Lessor's pursuing the rights and remedies provided herein and under applicable
law.
15.4 WAIVER. If this Lease is terminated pursuant to law or the provisions
of this Article XV, Lessee waives, to the extent permitted by applicable law,
(a) any right of redemption, reentry or repossession and (b) the benefit of any
laws now or hereafter in force exempting property from liability for rent or for
debt.
15.5 APPLICATION OF FUNDS. All payments otherwise payable to Lessee which
are received by Lessor under any of the provisions of this Lease during the
existence or continuance of any Event of Default shall be applied to Lessee's
obligations in the order which Lessor may reasonably determine or as may be
prescribed by the laws of the state in which the Facility is located.
15.6 NOTICES BY LESSOR. The provisions of this Article XV concerning
notices shall be liberally construed insofar as the contents of such notices are
concerned, and any such notice shall be sufficient if it shall generally apprise
Lessee of the nature and approximate extent of any default.
ARTICLE XVI
LESSOR'S RIGHT TO CURE
----------------------
If Lessee, without the prior written consent of Lessor, shall fail to make
any payment, or to perform any act required to be made or performed under this
Lease and to cure the same within the relevant time periods provided in Section
15.1, Lessor, without waiving or releasing any obligation or Event of Default,
may (but shall be under no obligation to) make such payment or perform such act
for the account and at the expense of Lessee, and may, to the extent permitted
by law, enter upon the Leased Property for such purpose and take all such action
thereon as, in Lessor's opinion, may be necessary or appropriate therefor. No
such entry shall be deemed an eviction of Lessee. All sums so paid by Lessor,
together with a late charge thereon (to the extent permitted by law) at the
Overdue Rate from the date on which such sums or expenses are paid or incurred
by Lessor, and all costs and expenses (including reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
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<PAGE>
paid by Lessee to Lessor on demand. The obligations of Lessee and rights of
Lessor contained in this Article shall survive the expiration or earlier
termination of this Lease.
ARTICLE XVII
PURCHASE OF THE LEASED PROPERTY
-------------------------------
In the event Lessee purchases the Leased Property from Lessor pursuant to
any of the terms of this Lease, Lessor shall, upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent due and
payable with respect to any period ending on or before the date of the purchase
and any other amounts owing to Lessor hereunder, deliver to Lessee an
appropriate special warranty deed (in substantially the same form used to convey
the Leased Property to Lessor) and any other documents reasonably requested by
Lessee to convey the interest of Lessor in and to the Leased Property to Lessee,
and such other standard documents usually and customarily prepared in connection
with such transfers, free and clear of all encumbrances other than (a) those
that Lessee has agreed hereunder to pay or discharge, (b) those mortgage liens,
if any, which Lessee has agreed in writing and in its discretion to accept and
to take title subject to, (c) any other Encumbrances permitted to be imposed on
the Leased Property under the provisions of Article XXXII which are assumable at
no cost to Lessee, and (d) any matters affecting the Leased Property on or as of
the Commencement Date. The difference between the applicable purchase price and
the total of the encumbrances assigned or taken subject to shall be paid in cash
to Lessor, or as Lessor may direct, in federal or other immediately available
funds except as otherwise mutually agreed by Lessor and Lessee. The closing of
any such sale shall be contingent upon and subject to Lessee obtaining all
required governmental consents and approvals for such transfer. If such sale
shall fail to be consummated by reason of the inability of Lessee to obtain all
such approvals and consents, any options to extend the Term which otherwise
would have expired during the period from the date when Lessee elected or became
obligated to purchase the Leased Property until Lessee's inability to obtain the
approvals and consents is confirmed shall be deemed to remain in effect for 30
days after the end of such period. The closing with respect to any such sale
shall be appropriately timed to accommodate the determination of the Minimum
Repurchase Price in accordance with Article XXVIII. All expenses of such
conveyance, including the cost of title examination or standard coverage title
insurance, attorneys' fees incurred by Lessor in connection with such
conveyance, and transfer taxes, shall be paid by Lessor. Recording fees and
similar charges shall be paid for by Lessee. Additionally, any sale to Lessee
shall be subject to delivery of an opinion of Lessor's counsel confirming that
(i) the sale will not result in ordinary recapture income to the Lessor pursuant
to Code Section 1245 or 1250 or any other Code provision, (ii) the sale will
result in income, if any, to the Lessor of a type described in Code Section
856(c)(2) or 856(c)(3) and will not result in income of the types described in
Code Section 856(c)(4) or in the tax imposed under Code Section 857(b)(6), and
(iii) the sale, together with all other substitutions and sales made or
requested by Lessee pursuant to any other leases with Lessor of properties
hereto or any other transfers of the Leased Property or the properties leased
under other such operating leases, during the relevant time period, will not
jeopardize the qualification of Lessor as a real estate investment trust under
Code Sections 856-860. In the event that Lessor's counsel cannot deliver such an
opinion, the parties hereto agree to endeavor to enter
27
<PAGE>
into an alternate arrangement such that the economic benefits conferred upon the
parties under this Lease are not impaired (such arrangements to include, by way
of example and not limitation, deferral of the conveyance until such time as
such opinion can be delivered).
ARTICLE XVIII
HOLDING OVER
------------
If Lessee shall for any reason remain in possession of the Leased Property
after the expiration of the Term or any earlier termination of the Term hereof,
such possession shall be as a tenancy at will during which time Lessee shall pay
as rental each month an amount equal to the sum of (a) 150% of the aggregate of
1/12 of the aggregate Minimum Rent payable with respect to the last complete
year prior to the expiration of the Term plus (b) all Additional Charges
----
accruing during such month plus (c) all other sums, if any, payable pursuant to
----
the provisions of this Lease with respect to the Leased Property. During such
period of tenancy, Lessee and Lessor shall be obligated to perform and observe
all of the terms, covenants and conditions of this Lease and to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
ARTICLE XIX
ABANDONMENT: OBSOLESCENCE
-------------------------
19.1 DISCONTINUANCE OF OPERATIONS ON THE LEASED PROPERTY; SUBSTITUTION. If
Lessee has discontinued use of the Leased Property for its Primary Intended Use
for 90 consecutive days without Lessor's prior written consent, for alterations
or remodeling pursuant to Article IX or otherwise, Lessee, if Lessor has not
terminated this Lease as provided in Section 15.1, will offer to substitute a
new property or properties pursuant to and in accordance with the provisions of
Article XX, on the first Payment Date occurring not less than 120 days after the
date of such discontinuance of business operations.
19.2 OBSOLESCENCE OF THE LEASED PROPERTY; PURCHASE. If the Leased Property
becomes Unsuitable for its Primary Intended Use, all as set forth in an
Officer's Certificate delivered to Lessor, and if Lessor has not terminated this
Lease as provided in Section 15.1, Lessee may after the fifteenth anniversary of
the Commencement Date purchase the Leased Property for a purchase price equal to
the Minimum Repurchase Price on the first Payment Date occurring not less than
120 days after the date of such Officer's Certificate.
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19.3 CONVEYANCE OF LEASED PROPERTY. In the event Lessee elects to purchase
the Leased Property pursuant to Section 19.2, then on the first Payment Date
occurring not less than 120 days after the date of the Officer's Certificate
referred to in Section 19.2, Lessor shall, upon receipt from Lessee of the
purchase price provided for above and any Rent or other sums then due and
payable under this Lease (excluding the installment of Minimum Rent due on the
date of conveyance), convey the Leased property to Lessee on such date in
accordance with the provisions of Article XVII and this Lease shall thereupon
terminate as to the Leased Property.
ARTICLE XX
SUBSTITUTION OF PROPERTY
------------------------
20.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY.
(a) In the event a right or requirement of substitution of the Leased
Property arises as a result of (i) damage or destruction of the Leased Property
as set forth in Article XIII hereof, (ii) a Taking of a portion of the Leased
Property as set forth in Section 14.3 hereof, or (iii) the discontinuance of the
use of the Leased Property as set forth in Section 19.1 hereof, and provided
--------
that no Event of Default shall have occurred and be continuing, Lessee shall
have the right (subject to fulfillment of the conditions set forth below in this
Article XX, and upon notice to Lessor) to substitute one or more properties
(collectively referred to as "Substitute Properties" or individually as a
"Substitute Property") on a monthly Payment Date specified in such notice (the
"Substitution Date") occurring not less than 90 days after receipt by Lessor of
such notice. The notice shall be in the form of an Officer's Certificate and
shall specify the reason(s) for the proposed substitution and the proposed
Substitution Date. Notwithstanding anything contained herein to the contrary,
any other substitution for the Leased Property shall require the prior written
consent of Lessor which shall be within the sole discretion of Lessor.
(b) If Lessee gives the notice referred to in Section 20.1(a) above,
Lessee shall present to Lessor one or more properties (or groups of properties)
each of which property (or groups of properties) shall provide Lessor with a
yield (i.e., an annual return on its equity in such property) not less than
---
Lessor's yield from the Leased Property at the time of such proposed
substitution (or in the case of substitution because of damage or destruction,
the yield immediately prior to such damage or destruction) and as reasonably
projected over the remaining Term of this Lease and shall have a Fair Market
Value substantially equivalent to the Fair Market Value of the Leased Property.
Lessor shall have a period of 90 days within which to review such information
and either accept or reject the Substitute Properties so presented unless Lessee
is required by a court order or administrative action to divest or otherwise
dispose of the Leased Property within a shorter time period, in which case the
time period shall be shortened appropriately to meet the reasonable needs of
Lessee, but in no event shall said period be less than 30 Business Days after
Lessor's receipt of said notice (subject to further extension for any period of
time in which Lessor is not timely provided with the information provided for in
Section 20.2 and Section 20.3 below); provided that if Lessor shall contend that
--------
the Substitute
29
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Properties fail to meet all the conditions for substitution set forth in this
Article XX, including the provisions of Sections 20.1(d), (e) and (f) below,
the matter shall be submitted to arbitration in accordance with Article XXXI and
the time periods for Lessor's approval or rejection shall be tolled during the
period of such arbitration.
(c) In the event that on or before the expiration of the applicable time
period for Lessor's review, Lessor has rejected the Substitute Property or
Properties so presented, then Lessee shall, for a period of 60 days after the
expiration of such period, have the right to terminate this Lease as to the
Leased Property upon notice to Lessor accompanied by an offer to purchase the
Leased Property on the first Payment Date occurring at least 90 days after the
date of such notice, as specified in such notice, for a purchase price equal to
the greater of the Fair Market Value Purchase Price or the Minimum Repurchase
Price, and this Lease shall terminate on the purchase date.
(d) Lessee's right to offer substitution as set forth in this Article XX
is subject to the conditions set forth in Section 20.2 below, and to the
delivery of an opinion of counsel for Lessor confirming that (i) the
substitution of the Substitute Property for the Leased Property will qualify as
an exchange solely of property of a like-kind under Section 1031 of the Code, in
which, generally, except for "boot" such as cash needed to equalize exchange
values or discharge indebtedness, no gain or loss is recognized to Lessor, (ii)
the substitution or sale will not result in ordinary recapture income to Lessor
pursuant to Code Section 1245 or 1250 or any other Code provision, (iii) the
substitution or sale will result in income, if any, to Lessor of a type
described in Code Section 856(c)(2) or 856(c)(3) and will not result in income
of the types described in Code Section 856(c)(4) or result in the tax imposed
under Code Section 857(b)(6), and (iv) the substitution or sale, together with
all other substitutions and sales made or requested by Lessee pursuant to any
other leases with Lessor of properties hereto or any other transfers of the
Leased Property or the properties leased under other such operating leases,
during the relevant time period, will not jeopardize the qualification of Lessor
as a real estate investment trust under Code Sections 856-860.
(e) In the event that the equity value of the Substitute Property or
group of Substitute Properties (i.e., the Fair Market Value of the Substitute
Property or group of Substitute Properties minus the encumbrances subject to
which Lessor will take the Substitute Property or group of Substitute
Properties) as of the Substitution Date is greater than the equity value of the
Leased Property (i.e., the Fair Market Value of the Leased Property minus the
encumbrances subject to which Lessee will take the Leased Property) as of the
Substitution Date (or in the case of damage or destruction, the Fair Market
Value immediately prior to such damage or destruction), Lessor shall pay to
Lessee an amount equal to the difference, subject to the limitation set forth
below. In the event that said equity value of the Substitute Property or group
of Substitute Properties is less than said equity value of the Leased Property,
Lessee shall pay to Lessor an amount equal to the difference, subject to the
limitation set forth below. Notwithstanding the foregoing, neither Lessor nor
Lessee shall be obligated to consummate any such substitution if such party
would be required to make a payment to the other in excess of
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<PAGE>
an amount equal to ten percent of the Fair Market Value of the Leased Property
(the amount of cash paid by one party to the other being hereinafter referred to
as the "Cash Adjustment").
(f) The Rent for such Substitute Property in all respects shall provide
Lessor with a yield at the time of such substitution (i.e., annual return on its
investment in such Substitute Property) not less than the Current Yield (and
reasonably expected to be received thereafter throughout the Term of this Lease)
from the Leased Property, taking into account the Cash Adjustment paid or
received by Lessor and any other relevant factors.
(g) The Minimum Repurchase Price of the Substitute Property shall be an
amount equal to the Minimum Repurchase Price of the Leased Property (i)
increased by any Cash Adjustment paid by Lessor pursuant to paragraph (e) above,
or (ii) decreased by any Cash Adjustment paid by Lessee pursuant to paragraph
(e) above.
20.2 CONDITIONS TO SUBSTITUTION. On the Substitution Date, the Substitute
Property will become the Leased Property hereunder upon delivery by Lessee to
Lessor of the following items in form and substance reasonably satisfactory to
Lessor:
(a) an Officer's Certificate certifying that (i) the Substitute Property
has been accepted by Lessee for all purposes of this Lease and there has been no
material damage to the improvements located on the Substitute Property nor is
any condemnation or eminent domain proceeding pending with respect thereto; (ii)
all permits, licenses and certificates (including a permanent, unconditional
certificate of occupancy and, to the extent permitted by law, all certificates
of need and licenses) which are necessary to permit the use of the Substitute
Property in accordance with the provisions of this Lease have been obtained and
are in full force and effect; (iii) under applicable zoning and use laws,
ordinances, rules and regulations the Substitute Property may be used for the
purposes contemplated by Lessee and all necessary subdivision approvals have
been obtained; (iv) there are no mechanic's or materialmen's liens outstanding
or threatened to the knowledge of Lessee against the Substitute Property arising
out of or in connection with the construction of the improvements thereon, other
than those being contested by Lessee pursuant to Article XI; (v) any mechanic's
or materialmen's liens being contested by Lessee will be promptly paid by Lessee
if such contest is resolved in favor of the mechanic or materialman; (vi) to the
best knowledge of Lessee, there exists no Event of Default under this Lease, and
no defense, offset or claim exists with respect to any sums to be paid by Lessee
hereunder; and (vii) any exceptions to Lessor's title to the Substitute Property
do not materially interfere with the intended use of the Substitute Property by
Lessee;
(b) a special warranty deed with warranties against claims arising under
Lessee conveying to Lessor title to the Substitute Property free and clear of
any liens and encumbrances except those approved in writing or assumed by
Lessor;
(c) a lease duly executed, acknowledged and delivered by Lessee
containing the same terms and conditions as are contained herein except that (i)
the legal description of the Land shall refer to the Substitute Property, (ii)
the Minimum Repurchase Price, Rent and any
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<PAGE>
Additional Charges for the Substitute Property shall be consistent with the
requirements of Section 2O.1, and (iii) such other changes therein as may be
necessary or appropriate under the circumstances shall be made;
(d) a standard owner's or lessee's (as applicable) policy of title
insurance covering the Substitute Property (or a valid, binding, unconditional
commitment therefor), dated the Substitution Date, in current form and including
mechanics' and materialmen's lien coverage, issued to Lessor by a title
insurance company reasonably satisfactory to Lessor. Such policy shall (i)
insure (A) Lessor's fee title to the Substitute Property, subject to no liens or
encumbrances except those approved or assumed by Lessor, and (B) that any
restrictions affecting the Substitute Property have not been violated and that a
further violation thereof will not result in a forfeiture or reversion of title,
(ii) be in an amount at least equal to the Fair Market Value of the Substitute
Property, and (iii) contain such endorsements as may be reasonably requested by
Lessor;
(e) certificates of insurance with respect to the Substitute Property
fulfilling the requirements of Article XII;
(f) current appraisals or other evidence satisfactory to Lessor, in its
sole discretion, as to the current Fair Market Values of such Substitute
Property;
(g) all available revenue data relating to the Substitute Property for
the period from the date of opening for business of the Facility on such
Substitute Property to the date of Lessee's most recent Fiscal-Year end, or for
the most recent three years, whichever is less; and
(h) such other certificates, documents, opinions of counsel and other
instruments as may be reasonably required by Lessor.
20.3 CONVEYANCE TO LESSEE. on the Substitution Date or the date specified
in the notice given pursuant to Section 20.1 Lessor will convey the Leased
Property to Lessee in accordance with the provisions of Article XVII (except as
to payment of any expenses in connection therewith which shall be governed by
Section 20.4 below) upon either (a) payment in cash therefor or (b) conveyance
to Lessor of the Substitute Property, as appropriate.
20.4 EXPENSES. Lessee shall pay or cause to be paid, on demand, all
reasonable costs and expenses paid or incurred by Lessor in connection with the
substitution and conveyance of the Leased Property and the Substitute Property,
including without limitation (a) fees and expenses of Lessor's counsel, (b) the
amount of any recording taxes and fees, (c) the cost of preparing and recording,
if appropriate, a release of the Leased Property from the lien of any mortgage,
(d) broker's fees and commissions for Lessee, if any, (e) documentary stamp and
transfer taxes, if any, (f) title insurance charges, and (h) escrow fees, if
any.
32
<PAGE>
ARTICLE XXI
RISK OF LOSS
------------
Except as otherwise provided in this Lease, during the Term of this Lease,
the risk of loss or of decrease in the enjoyment and beneficial use of the
Leased Property in consequence of the damage or destruction thereof by fire, the
elements, casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than by Lessor and those
claiming from, through or under Lessor) is assumed by Lessee, and Lessor shall
in no event be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent except as
specifically provided in this Lease.
ARTICLE XXII
INDEMNIFICATION
---------------
Notwithstanding the existence of any insurance or self insurance provided
for in Article XII, and without regard to the policy limits of any such
insurance or self insurance, Lessee will protect, indemnify, save harmless and
defend Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against Lessor by reason of: (a) any accident, injury to or death of
persons or loss to property occurring on or about the Leased Property, including
any claims of malpractice, (b) any use, misuse, no use, condition, maintenance
or repair by Lessee of the Leased Property, (c) any Impositions (which are the
obligations of Lessee to pay pursuant to the applicable provisions of this
Lease), (d) any failure on the part of Lessee to perform or comply with any of
the terms of this Lease, (e) the non-performance of any of the terms and
provisions of any and all existing and future subleases of the Leased Property
to be performed by Lessee as landlord thereunder and (f) the violation of any
Hazardous Materials Law, in each case of (a) through (f) above occurring while
this Lease is in effect or Lessee is in possession of the Leased Property or any
part thereof. Any amounts which become payable by Lessee under this Section
shall be paid within 20 days after liability therefor on the part of Lessor is
finally determined by litigation or otherwise (including the expiration of any
time for appeals) and, if not timely paid, shall bear interest (to the extent
permitted by law) at the Overdue Rate from the date of such determination to the
date of payment. Lessee, at its expense, shall contest, resist and defend any
such claim, action or proceeding asserted or instituted against Lessor or may
compromise or otherwise dispose of the same as Lessee sees fit. Lessor shall
cooperate with Lessee in a reasonable manner to permit Lessee to satisfy
Lessee's obligations hereunder, including the execution of any instruments or
documents reasonably requested by Lessee. Nothing herein shall be construed as
indemnifying Lessor or its agents for their own negligent acts or omissions or
willful misconduct. Lessee's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
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ARTICLE XXIII
SUBLETTING AND ASSIGNMENT
-------------------------
23.1 SUBLETTING AND ASSIGNMENT. Without the prior written consent of
Lessor, Lessee may not assign or sublet all or any part of the Leased Property,
except pursuant to (a) Permitted Assignments for Security and (b) that certain
Agreement of Lease dated January 19, 1994 (the "TCV Lease") between Transitional
Care Ventures (Texas), Inc. and Ramsay Health Care, Inc. ("Ramsay") and assigned
to Lessee, or any lease of the same or substantially the same square footage as
is demised under the TCV Lease for the same or substantially the same purposes
for which the premises demised under the TCV Lease is currently used. Any lease
executed pursuant to the foregoing exceptions to the prohibition on assignment
shall expressly state that they are subordinate to this Lease. Any attempted
assignment or subletting in violation of this provision shall be null and void
and of no force or effect and shall constitute a breach of this Lease by Lessee.
At the expiration or earlier termination of this Lease for any reason, Lessee
shall assign its rights under all Tenant Leases then in effect to Lessor,
provided that Lessee shall have the right to terminate any Tenant Lease with a
- --------
Tenant which is an affiliate of Lessee.
23.2 NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT. Except for existing
Tenant Leases, Lessee shall insert in each sublease permitted under Section 23.1
provisions to the effect that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) in the event this Lease shall terminate before the expiration of
such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this Lease,
and (c) in the event the sublessee receives a written notice from Lessor or
Lessor's assignees, if any, stating that Lessee is in default under this Lease,
the sublessee shall thereafter be obligated to pay all rentals accruing under
said sublease directly to the party giving such notice, or as such party may
direct. All rentals received from the sublessee by Lessor or Lessor's assignees,
if any, shall be credited against amounts owing by Lessee under this Lease.
Lessor agrees that notwithstanding any default, termination, expiration, sale,
entry or other act or omission of Lessee pursuant to the terms of this Lease, or
at law or in equity, a Tenant's possession shall not be disturbed unless such
possession may otherwise be terminated pursuant to the terms of the applicable
Tenant Lease. Lessor hereby agrees, upon Lessee's request, to execute a
nondisturbance agreement in favor of any Tenant or in favor of any sublessee
under any sublease permitted under Section 23.1 above; provided that the Tenant
--------
or any such sublessee has acknowledged all of the foregoing provisions and
executed all documents required by this Section 23.2.
ARTICLE XXIV
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS
-----------------------------------------------
(a) At any time and from time to time within 14 (fourteen) days following
written request by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease is unmodified and in full force and
effect (or that this Lease is in full force and effect as
34
<PAGE>
modified and setting forth the modifications) and the dates to which the Rent
has been paid. Any such Officer's Certificate furnished pursuant to this Article
maybe relied upon by Lessor and any prospective purchaser of the Leased
Property.
(b) Lessee will furnish or caused to be furnished the following
statements to Lessor :
(i) within 120 days after the end of each of Lessee's fiscal years
(A) a copy of Lessee's audited Financial Statements for such fiscal year,
(B) an Officer's Certificate stating that no Event of Default, or event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default, has occurred and is continuing and has not
been waived, or, if there shall have occurred and be continuing such an
Event of Default or event, specifying the nature thereof and the steps
being taken to remedy the same, (C) a current rent or lease roll for the
Leased Property setting forth rental information in reasonable detail
regarding all of the Tenants and Tenant Leases, including any space
utilized by Lessee, and (D) a calculation of the Cash Flow Coverage Ratio
for such fiscal year;
(ii) within 120 days after the end of each of Guarantor's fiscal
years (A) a copy of Guarantor's audited Consolidated Financial Statements
for such fiscal year, and (B) an Officer's Certificate stating that no
Event of Default involving Guarantor, or event which, with the giving of
notice or the passage of time, or both, would constitute such an Event of
Default, has occurred and is continuing and has not been waived, or, if
there shall have occurred and be continuing such an Event of Default or
event, specifying the nature thereof and the steps being taken to remedy
the same;
(iii) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year of Lessee, (A) a copy of Lessee's balance
sheet and statement of earnings for such quarter, together with Lessee's
utilization statements produced in the ordinary course of business, which
Lessor will hold in confidence, (B) an Officer's Certificate stating that
no Event of Default or event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default, has
occurred and is continuing and has not been waived, or, if there shall have
occurred and be continuing such an Event of Default or event, specifying
the nature thereof and the steps being taken to remedy the same, and (C) a
calculation of the Cash Flow Coverage Ratio for such fiscal quarter;
(iv) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year of Guarantor, (A) a copy of Guarantor's
unaudited Consolidated Financial Statements for such fiscal quarter, and
(B) an Officer's Certificate stating that no Event of Default involving
Guarantor or event which, with the giving of notice or the passage of time,
or both, would constitute an Event of Default involving Guarantor, has
occurred and is continuing and has not been waived, or, if there shall have
occurred and be continuing such an Event of Default or event, specifying
the nature thereof and the steps being taken to remedy the same; and
35
<PAGE>
(v) with reasonable promptness, such other information respecting
the financial condition, affairs and properties of Lessee and Guarantor as
Lessor may reasonably request from time to time.
ARTICLE XXV
INSPECTION
----------
Lessee shall permit Lessor and its authorized representatives to inspect
the Leased Property during usual business hours subject to any security, health,
safety or confidentiality requirements of Lessee or any governmental agency, any
Insurance Requirements relating to the Leased Property, and rights of Tenants.
ARTICLE XXVI
QUIET ENJoYMENT
---------------
So long as Lessee shall pay all Rent as the same becomes due and shall
fully comply with all of the terms of this Lease and fully perform its
obligations hereunder, Lessee shall peaceably and quietly have, hold and enjoy
the Leased property for the Term hereof, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor, but subject to all liens
and encumbrances of record as of the date hereof or hereafter consented to by
Lessee. No failure by Lessor to comply with the foregoing covenant shall give
Lessee any right to cancel or terminate this Lease, or to fail to pay any other
sum payable under this Lease, or to fail to perform any other obligation of
Lessee hereunder. Notwithstanding the foregoing, Lessee shall have the right by
separate and independent action to pursue any claim or seek any damages it may
have against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Article.
ARTICLE XXVII
NOTICES
-------
All notices, demands, requests and other communications or documents to be
provided under this Lease shall be in writing and shall be given to the party at
its address or telecopy number set forth below or such other address or telecopy
number as the party may later specify for that purpose by notice to the other
party. Each notice shall, for all purposes shall be deemed given and received:
(i) If given by telecopy, when the telecopy is transmitted to the
party's telecopy number specified below and confirmation of complete
receipt is received by that transmitting party during normal business hours
on any Business Day, or on the next Business Day if not confirmed during
normal business hours;
(ii) If hand delivered, when delivered;
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(iii) If given by nationally recognized and reputable overnight
delivery service, the day on which the notice is actually received by the
party; or
(iv) If given by certified mail, return receipt requested, postage
prepaid, two Business Days after posted with the United States Postal
Service, at the address of the party specified below:
If to Lessor:
CAPSTONE CAPITAL Of SAN ANTONIO, LTD.
1000 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
Attention: William C. Harlan, Vice President
Telephone: (205) 967-2092
Telecopy: (205) 967-9066
With a copy to:
Wanda S. McNeil, Esq.
Sirote & Permutt, P.C.
200 Clinton Avenue, N.W.
Suite l000
Huntsville, Alabama 35801
Telephone: (205) 536-1711
Telecopy: (205) 518-3681
If intended for Lessee:
RHCI SAN ANTONIO, INC.
Gregory H. Browne
Chief Executive Officer
Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
Telephone:
Telecopy:
With a copy to:
Mirek Fajt, Esq.
Haythe & Curley
237 Park Avenue
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<PAGE>
New York, New York 10017-3142
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
ARTICLE XXVIII
APPRAISAL
---------
In the event that it becomes necessary to determine the Fair Market Value,
Fair Market Value Purchase Price, the Fair Market Added Value, the Minimum
Repurchase Price or the Fair Market Rental Value of the Leased Property or a
Substitute Property for any purpose of this Lease, the party required or
permitted to give notice of such required determination shall include in the
notice the name of a person selected to act as an appraiser on its behalf.
Within ten days after receipt of any such notice, Lessor (or Lessee, as the case
may be) shall by notice to Lessee (or Lessor, as the case may be) appoint a
second person as an appraiser on its behalf. The appraisers thus appointed (each
of whom must be a member of the American Institute of Real Estate Appraisers or
any successor organization thereto) shall, within 45 days after the date of the
notice appointing the first appraiser, proceed to appraise the Leased Property
or the Substitute Property, as the case may be, to determine any of the
foregoing values as of the relevant date (giving effect to the impact, if any,
of inflation from the date of their decision to the relevant date); provided
--------
that if only one appraiser shall have been so appointed, or if two appraisers
shall have been so appointed but only one such appraiser shall have made such
determination within 50 days after the making of Lessee's or Lessor's request,
then the determination of such appraiser shall be final and binding upon the
parties. If two appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten percent of
the lesser of such amounts, then the Fair Market Value or Fair Market Added
Value or the Fair Market Rental Value shall be an amount equal to 50% of the sum
of the amounts so determined. If the difference between the amounts so
determined shall exceed l0% of the lesser of such amounts, then such two
appraisers shall have 20 days to appoint a third appraiser, but if such
appraisers fail to do so, then either party may request the American Arbitration
Association or any successor organization thereto to appoint an appraiser within
20 days of such request, and both parties shall be bound by any appointment so
made within such 20-day period. If no such appraiser shall have been appointed
within such 20 days or within 90 days of the original request for a
determination of Fair Market Value or Fair Market Added Value or the Fair Market
Rental Value, whichever is earlier, either Lessor or Lessee may apply to any
court having jurisdiction to have appointment made by such court. Any appraiser
appointed, by the American Arbitration Association or by such court, shall be
instructed to determine the Fair Market Value or Fair Market Added Value or the
Fair Market Rental Value within 30 days after appointment of such appraiser. The
determination of the appraiser which differs most in terms of dollar amount from
the determinations of the other two appraisers shall be excluded, and 50% of the
sum of the remaining two determinations shall be final and binding upon Lessor
and Lessee as the Fair Market Value or Fair Market Added Value or the Fair
Market Rental Value for such interest. However, in the event that following the
appraisal
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performed by said third appraiser, the dollar amount of two of such appraisals
are higher and lower, respectively, than the dollar amount of the remaining
appraisal in equal degrees, the determinations of both the highest and lowest
appraisal, respectively, shall be rejected and the determination of the
remaining appraisal shall be final and binding upon Lessor and Lessee as the
Fair Market Value or Fair Market Added Value or the Fair Market Rental Value for
such interest. This provision for determination by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. Lessor and Lessee shall each pay
the fees and expenses of the appraiser appointed by it and each shall pay one-
half of the fees and expenses of the third appraiser and one-half of all other
costs and expenses incurred in connection with each appraisal.
ARTICLE XXIX
PURCHASE RIGHTS
---------------
29.1 FIRST REFUSAL TO PURCHASE. (a) During the initial Term hereof
(provided that Lessee is not in material default at such time), and during any
--------
extended Term (whether or not Lessee is in material default at such time),
Lessee shall have a first refusal option to purchase the Leased Property upon
the same terms and conditions as Lessor, or its successors and assigns, shall
have received an offer from a third party to purchase the Leased Property, which
Lessor intends to accept (or has accepted subject to Lessee's right of first
refusal granted herein). If, during the Term, Lessor receives such an offer or
reaches such agreement with a third party, Lessor shall promptly notify Lessee
of the purchase price and all other material terms and conditions of such
agreement together with a copy of such offer, and Lessee shall have 60 days
after receipt of such notice from Lessor within which time to exercise Lessee's
option to purchase. If Lessee exercises its option, then such purchase shall be
consummated within the time set forth in the third-party offer and in accordance
with the provisions of Article XVII hereof to the extent not inconsistent
herewith. If Lessee does not exercise Lessee's option to purchase within said
60-day period after receipt of said notice from Lessor, Lessor shall be free for
a period of 180 days after the expiration of said 60-day period to sell the
Leased Property to the third party at the price and terms set forth in such
offer. Whether or not such sale is consummated, Lessee shall be entitled to
exercise its right of first refusal as provided in this section, as to any
subsequent sale of the Leased Property during the Term of this Lease.
(b) During the twelve-month period commencing on the last date of the
initial Term hereof (provided that this Lease has not been terminated prior to
--------
said date), or during the twelve-month period commencing on the date of the
expiration or earlier termination of any Extended Term (upon the occurrence of
an Event of Default or otherwise), Lessee shall have a first refusal option to
purchase the Leased Property upon the same terms and conditions as Lessor, or
its successors and assigns, shall have received an offer from a third party to
purchase the Leased Property, which Lessor intends to accept (or has accepted
subject to Lessee's right of first refusal granted herein). If during such
twelve-month period Lessor receives such an offer or reaches such agreement with
a third party, Lessor shall promptly notify Lessee of the purchase price and all
other material terms and conditions of such agreement together with a
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copy of such offer, and Lessee shall have 30 days after receipt of such notice
from Lessor within which time to exercise Lessee's option to purchase. If Lessee
exercises its option, then such purchase shall be consummated within the time
set forth in the third-party offer and in accordance with the provisions of
Article XVII hereof to the extent not inconsistent herewith. If Lessee does not
exercise Lessee's option to purchase within said 30-day period after receipt of
said notice from Lessor, Lessor shall be free for the remainder of such twelve-
month period to sell the Leased Property to the third party at the price and
terms set forth in such offer. Whether or not such sale is consummated, Lessee
shall be entitled to exercise its right of first refusal as provided in this
section as to any subsequent sale of the Leased Property during such twelve-
month period.
ARTICLE XXX
DEFAULT BY LESSOR
-----------------
30.l DEFAULT BY LESSOR. Lessor shall be in default of its obligations
under this Lease if Lessor shall fail to observe or perform any term, covenant
or condition of this Lease on its part to be performed and such failure shall
continue for a period of 30 days after written notice thereof is received by
Lessor, unless such failure cannot with due diligence be cured within a period
of 30 days, in which case such failure shall not be deemed to continue if
Lessor, within said 30-day period, proceeds promptly and with due diligence to
cure the failure and diligently completes the curing thereof. The time within
which Lessor shall be obligated to cure any such failure shall also be subject
to extension of time due to the occurrence of any Unavoidable Delay. In the
event Lessor fails to cure any such default, Lessee, without waiving or
releasing any obligations hereunder, and in addition to all other remedies
available to Lessee hereunder or at law or in equity, may purchase the Leased
Property from Lessor for a purchase price equal to the greater of the Fair
Market Value Purchase Price or the Minimum Repurchase price of the Leased
Property minus an amount equal to any damage suffered by Lessee by reason of
such default. In the event Lessee elects to purchase the Leased Property, it
shall deliver a notice thereof to Lessor specifying a Payment Date occurring no
less than 90 days subsequent to the date of such notice on which it shall
purchase the Leased Property, and the same shall be thereupon conveyed in
accordance with the provisions of Article XVII. Any sums owed Lessee by Lessor
hereunder shall bear interest at the Overdue Rate from the date due and payable
until the date paid.
30.2 LESSEE'S RIGHT TO CURE. Subject to the provisions of Section 30.1, if
Lessor shall breach any covenant to be performed by it under this Lease, Lessee,
after notice to and demand upon Lessor in accordance with Section 30.1, without
waiving or releasing any obligation of Lessor hereunder, and in addition to all
other remedies available hereunder and at law or in equity to Lessee, may (but
shall be under no obligation at any time thereafter to) make such payment or
perform such act for the account and at the expense of Lessor. All sums so paid
by Lessee and all costs and expenses (including reasonable attorneys' fees) so
incurred, together with interest thereon at the overdue Rate from the date on
which such sums or expenses are paid or incurred by Lessee, shall be paid by
Lessor to Lessee on demand or set off against the Rent.
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The rights of Lessee hereunder to cure and to secure payment from Lessor in
accordance with this Section 30.2 shall survive the termination of this Lease.
ARTICLE XXXI
ARBITRATION
-----------
31.1 CONTROVERSIES. Except with respect to the payment of Minimum Rent
hereunder, in case any controversy shall arise between the parties hereto as to
any of the requirements of this Lease or the performance thereof which
controversy the parties shall be unable to settle by agreement or as otherwise
provided herein, such controversy shall be determined by arbitration to be
initiated and conducted as provided in this Article XXXI.
31.2 APPOINTMENT OF ARBITRATORS. The party or parties requesting
arbitration shall serve upon the other a written demand therefor specifying the
matter to be submitted to arbitration, and nominating an arbitrator. Within 20
days after receipt of such written demand and notification, the other party
shall, in writing, nominate a competent disinterested person and the two
arbitrators so designated shall, within ten days thereafter, select a third
arbitrator and give immediate written notice of such selection to the parties
and shall fix in said notice a time and place for the first meeting of the
arbitrators, which meeting shall be held as soon as conveniently possible after
the selection of all arbitrators, at which time and place the parties to the
controversy may appear and be heard.
31.3 THIRD ARBITRATOR. In case the notified party or parties shall fail to
make a selection upon notice, as aforesaid, or in case the first two arbitrators
selected shall fail to agree upon a third arbitrator within ten days after their
selection, then such arbitrator or arbitrators may, upon application made by
either of the parties to the controversy, after 20 days' written notice thereof
to the other party or parties, have a third arbitrator appointed by any judge of
any United States court of record having jurisdiction in the state in which the
Leased Property is located or, if such office shall not then exist, by a judge
holding an office most nearly corresponding thereto.
31.4 ARBITRATION PROCEDURE. Said arbitrators shall give each of the
parties not less than ten days' written notice of the time and place of each
meeting at which the parties or any of them may appear and be heard and after
hearing the parties in regard to the matter in dispute and taking such other
testimony and making such other examinations and investigations as justice shall
require and as the arbitrators may deem necessary, they shall decide the
questions submitted to them. The decision of said arbitrators in writing signed
by a majority of them shall be final and binding upon the parties to such
controversy. In rendering such decisions and award, the arbitrators shall not
add to, subtract from or otherwise modify the provisions of this lease.
31.5 EXPENSES. The expenses of such arbitration shall be divided between
Lessor and Lessee unless otherwise specified in the decision of the arbitrators.
Each party in interest shall pay the fees and expenses of its own counsel.
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ARTICLE XXXII
FINANCING OF THE LEASED PROPERTY
--------------------------------
Lessor agrees that it will not grant or create any mortgage, deed of trust,
lien, encumbrance or other title retention agreement upon the Leased Property to
secure any indebtedness of Lessor (an "Encumbrance"), unless the holder of each
such Encumbrance shall simultaneously with or prior to recording the Encumbrance
agree (a) to give Lessee the same notice, if any, given to Lessor of any default
or acceleration of any obligation underlying any such Encumbrance or any sale in
foreclosure of such Encumbrance, (b) to permit Lessee to appear with its
representatives and to bid at any public foreclosure sale with respect to any
such Encumbrance and (c) to enter into an agreement with Lessee containing the
provisions described in Article XXXIII of this Lease. Lessee agrees to execute
and deliver to Lessor or the holder of an Encumbrance any written agreement
required by this Article within ten days of written request thereof by Lessor or
the holder of an Encumbrance.
Lessee hereby consents to the assignment of and grant of a security
interest and lien in this Lease together with the other documents and
instruments delivered to Lessor by Lessee pursuant hereto and in connection
herewith (collectively, the "Assigned Documents"), including all rights of
Lessor in, to and under each Assigned Document, by Lessor to NationsBank of
Georgia, National Association, as Agent (the "Agent") for itself and the other
lenders from time to time parties to that certain Revolving Credit and
Reimbursement Agreement dated as of June 22, 1994, among Lessor, the lenders
party thereto (the "Lenders") and the Agent, as amended by that certain
Amendment Agreement No. 1 to Revolving Credit and Reimbursement Agreement and
Certain Other Loan Documents dated as of October 26, 1994, and by that certain
Amendment Agreement No. 2 to Revolving Credit and Reimbursement Agreement and
Certain Other Loan Documents dated as of March 17, 1995 (as so amended and as it
may be further amended, modified or supplemented from time to time, the "Credit
Agreement"), pursuant to which the Lenders have established a revolving credit
facility and letter of credit facility in favor of Lessor. Lessee hereby further
agrees to execute a Consent to Assignment in substantially the form attached
hereto as Exhibit E. Lessee further agrees that in connection with the execution
---------
of any such assignment by Lessor, Lessee will execute and deliver to the Agent a
tenant estoppel certificate in substantially the form attached hereto as Exhibit
-------
F.
- -
ARTICLE XXXIII
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
---------------------------------------------
At the request from time to time by one or more holders of an Encumbrance
that may hereafter be placed upon the Leased Property or any part thereof, and
any and all renewals, replacements, modifications, consolidations, spreaders and
extensions thereof, Lessee will subordinate this Lease and all of Lessee's
rights and estate hereunder to each such Encumbrance and will attorn to and
recognize such holder (or the purchaser at any foreclosure sale or any sale
under a power of sale contained in any such Encumbrance or a holder by a deed in
lieu of foreclosure, as the case may be) as Lessor under this Lease for the
balance of the Term then remaining, subject to all of the terms and provisions
of this Lease, provided that each such
--------
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holder simultaneously with or prior to recording any such Encumbrance executes
and delivers a written agreement in recordable form (a) consenting to this Lease
and agreeing that, notwithstanding any such other lease, mortgage, deed of
trust, right, title or interest, or any default, expiration, termination,
foreclosure, sale, entry or other act or omission under, pursuant to or
affecting any of the foregoing, Lessee shall not be disturbed in peaceful
enjoyment of the Leased Property nor shall this Lease be terminated or canceled
at any time, except in the event Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein; (b) agreeing
that it will be bound by all the terms of this Lease (including all terms with
respect to repurchase and substitution of the Leased Property and extension of
the Term) and perform and observe all of Lessor's obligations set forth herein;
and (c) agreeing that all proceeds of the casualty insurance described in
Article XIII of this Lease and all Awards described in Article XIV will be made
available to Lessor for restoration of the Leased Property as and to the extent
required by this Lease, subject only to reasonable regulation regarding the
manner of disbursement and application thereof. Lessee agrees to execute and
deliver to Lessor or the holder of an Encumbrance any written agreement required
by this Article within ten days of written request thereof by Lessor or the
holder of an Encumbrance. Lessee agrees to execute at the request from time to
time of Lessor or an institutional investor a certificate setting forth any
defaults of Lessor hereunder and the dates through which Rent has been paid and
such other matters as may be reasonably requested.
ARTICLE XXXIV
EXTENDED TERMS
--------------
If no Event of Default shall have occurred and be continuing, Lessee is
hereby granted the right to extend the Term of this Lease for three consecutive
five-year periods ("Extended Term") for a maximum possible Term of 30 years, by
giving written notice to Lessor of each such extension at least 180 days, but
not more than 270 days, prior to the expiration of the then current Term;
subject, however, to the provisions of Section 13.7 hereof. Lessor agrees to use
its best efforts to provide Lessee with prior written notice at least 210 days
prior to the expiration of the then-current Term. Lessee may not exercise its
option for more than one Extended Term at a time. During each Extended Term, all
of the terms and conditions of this Lease shall continue in full force and
effect, except that the Minimum Rent for and during each of the Extended Terms
shall be the Fair Market Rental Value on the first day of such Extended Term. In
any event, the Minimum Rent shall continue to be adjusted throughout each of the
Extended Terms pursuant to the provisions of Section 2.1(b) hereof.
ARTICLE XXXV
MISCELLANEOUS
-------------
35.1 NO WAIVER. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or any such term. To the extent permitted by law,
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no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
35.2 REMEDIES CUMULATIVE. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
35.3 SURRENDER. No surrender to Lessor of this Lease or of the Leased
Property or any part thereof, or of any interest therein, shall be valid or
effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
35.4 NO MERGER OF TITLE. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or (b) such leasehold estate and the fee estate in the
Leased Property.
35.5 TRANSFERS BY LESSOR. If Lessor or any successor owner of the Leased
Property shall convey the Leased Property in accordance with the terms hereof,
other than solely as security for a debt, the grantee or transferee of the
Leased Property shall expressly assume all obligations of Lessor hereunder
arising or accruing from and after the date of such conveyance or transfer, and
shall be reasonably capable of performing the obligations of Lessor hereunder
and Lessor or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Lessor under this Lease
arising or accruing from and after the date of such conveyance or other transfer
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
35.6 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee and Lessor
against the other arising out of or relating to this Lease and arising prior to
any date of termination of this Lease shall survive such termination. If any
term or provision of this Lease or any application thereof shall be invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby. If any late charges provided
for in any provision of this Lease are based upon a rate in excess of the
maximum rate permitted by applicable law, the parties agree that such charges
shall be fixed at the maximum permissible rate. Neither this Lease nor any
provision hereof may be changed, waived, discharged or terminated except by an
instrument in writing and in recordable form signed by Lessor and Lessee. All
the terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and
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their respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance with
the laws of Alabama, but not including its conflict of laws rules. This Lease
may be executed in one or more counterparts, each of which shall be an original
but, when taken together, shall constitute but one document.
35.7 MEMORANDUM OF LEASE. Lessor and Lessee shall, promptly upon the
request of either, enter into a short form memorandum of this Lease in form
suitable for recording under the laws of the state in which the Leased Property
is located in which reference to this Lease, and all options contained herein,
shall be made.
35.8 TRANSFER OF LICENSES. Upon the expiration or earlier termination of
the Term, Lessee shall take all action necessary to effect or useful in
effecting the transfer to Lessor or Lessor's nominee of all licenses, operating
permits and other governmental authorizations and all service contracts which
may be necessary or useful in the ownership of the Facility and which relate
exclusively to the Facility which have not previously been transferred or
assigned to Lessor, other than permits or licenses which pertain to the
operation of Lessee's business.
ARTICLE XXXVI
GLOSSARY OF TERMS
-----------------
36.1 For purposes of this Lease, except as otherwise expressly provided or
unless the context otherwise requires, (a) the terms defined in this Article
XXXVI have the meanings assigned to them in this Article XXXVI and include the
plural as well as the singular, (b) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally accepted
accounting principles as at the time applicable, (c) all references in this
Lease to designated "Articles", "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of this Lease, (d) the
words "herein", "hereof" and "hereunder" and other words of similar import refer
to this Lease as a whole and not to any particular Article, Section or other
subdivision, (e) the word "including" shall mean "including without limitation",
and (f) all consents required of Lessor hereunder shall be in Lessor's sole and
absolute discretion. For purposes of this Lease, the following terms shall have
the meanings indicated:
"Additional Charges" has the meaning set forth in Section 2.3 hereof.
"Adjustment Date" has the meaning set forth in Section 2.1(b) hereof.
"Affiliate", when used with respect to Lessee, means any person directly or
indirectly controlling, controlled by or under direct or indirect common control
with Lessee. For the purposes of this definition, "control", as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, through the ownership of voting securities, partnership interests or
other equity interests.
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"Agent" has the meaning set forth in Article XXXII hereof.
"Assigned Documents" has the meaning set forth in Article XXXII hereof.
"Award" means all compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which national banks in the City of Birmingham, Alabama
are closed.
"Capital Additions" means one or more new buildings or one or more
additional structures annexed to any portion of any of the Leased Improvements
constructed on any parcel or portion of the Land during the Term, including the
construction of a new wing or new story, or the rebuilding of the existing
Leased Improvements or any portion thereof not normal, ordinary or recurring to
maintain the Leased Property.
"Capital Addition Cost" means the cost of any Capital Additions proposed
to be made by Lessee whether paid for by Lessee or Lessor. Such cost shall
include and be limited to (a) the cost of construction of the Capital Additions,
including site preparation and improvement, materials, labor, supervision and
certain related design, engineering and architectural services and the cost of
any fixtures, construction financing and miscellaneous items approved in writing
by Lessor, (b) if agreed to by Lessor in writing in advance, the cost of any
land contiguous to the Leased Property purchased for the purpose of placing
thereon the Capital Additions or any portion thereof or for providing means of
access thereto, or parking facilities therefor, including the cost of surveying
the same, (c) the cost of insurance, real estate taxes, water and sewage charges
and other carrying charges for such Capital Additions during construction, (d)
the cost of title insurance, (e) reasonable fees and expenses of legal counsel
and accountants, (f) filing, registration and recording taxes and fees, (g)
documentary stamp taxes, if any, (h) environmental assessments and boundary
surveys, and (i) all reasonable costs and expenses of Lessor and any Lending
Institution which has committed to finance the Capital Additions, including, (A)
the reasonable fees and expenses of their respective legal counsel, (B) all
printing expenses, (C) the amount of any filing, registration and recording
taxes and fees, (D) documentary stamp taxes, if any, (E) title insurance
charges, appraisal fees, if any, (F) rating agency fees, if any, and (G)
commitment fees, if any, charged by any Lending Institution advancing or
offering to advance any portion of the financing for such Capital Additions.
"Cash Adjustment" has the meaning set forth in Section 20.l(d).
"Cash Flow Coverage Ratio" means, as of the end of any fiscal quarter, the
ratio of (a) Net Income for the twelve-month period ending at the end of such
quarter to (b) Total Rent payable in respect of such twelve-month period, as
evidenced by Financial Statements covering such period.
"Charge" has the meaning set forth in Article XI hereof.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" has the meaning set forth in Article I.
"Condemnation" means the transfer of all or any part of the Leased
Property as a result of (i) the exercise of any governmental power, whether by
legal proceedings or otherwise, by a Condemnor or (ii) a voluntary sale or
transfer by Lessor to any Condemnor, either under threat of Condemnation or
while legal proceedings for Condemnation are pending.
"Condemnor" means any public or quasi-public authority or private
corporation or individual having the power of Condemnation.
"Consolidated Financial Statements" means, for any Person and for any
accounting period, statements of earnings and retained earnings and of changes
in cash flows for such Person and its subsidiaries on a consolidated basis for
such period and for the period from the beginning of the respective fiscal year
of such Person to the end of such period and the related balance sheet as at the
end of such period, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year of such Person, containing appropriate notes, and prepared in
accordance with generally accepted accounting principles consistently applied,
subject to normal year-end adjustment. All Consolidated Financial Statements in
respect of any fiscal year shall be audited by an independent accounting firm
acceptable to Lessor.
"Consumer Price Index" or "CPI" means the Consumer Price Index for All
Urban Consumers for the U.S. City Average for all Items (1982-1984=l00) as
published by the United States Department of Labor, Bureau of Labor Statistics.
If the manner in which the Consumer Price Index is determined by the Bureau of
Labor Statistics shall be substantially revised (including a change in the base
index year), an adjustment shall be made by Lessor in such revised index which
would produce results equivalent, as nearly as possible, to those which would
have been obtained if the Consumer Price Index had not been so revised. If the
consumer Price Index shall become unavailable to the public because publication
is discontinued or otherwise, or if equivalent data is not readily available to
enable Lessor to make the adjustment referred to in the preceding sentence,
Lessor will substitute therefor a comparable index reasonably acceptable to
Lessee based upon changes in the cost of living or purchasing power of the
consumer dollar published by any other governmental agency or, if no such index
shall be available, then a comparable index published by a major bank or other
financial institution or by a university or a recognized financial publication.
"Credit Agreement" has the meaning set forth in Article XXXII hereof.
"Credit Enhancements" means all cash collateral, security deposits,
security interests, letters of credit, pledges, prepaid rent or other sums,
deposits or interests held by Lessee, if any, to secure obligations with respect
to the Leased Property, Tenant Leases or Tenants.
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"Current Yield" means as of any date the annual Minimum Rent, as adjusted
from time-to-time pursuant to the terms of this Lease, divided by the sum of (i)
the purchase price as set forth in the Purchase and Sale Agreement plus (ii) all
Capital Addition Costs paid for or financed by Lessor which have not been repaid
by Lessee.
"Date of Taking" means the date the Condemnor has the right to possession
of the property being condemned.
"Encumbrance" has the meaning set forth in Article XXXII.
"Event of Default" has the meaning set forth in Section 15.1.
"Extended Term" has the meaning set forth in Article XXXIV.
"Facility" means the five one-story buildings containing approximately
39,786 gross square feet which comprise the psychiatric hospital facility and
related tenant space to be operated on the Leased Property.
"Facility Mortgage" has the meaning set forth in Section 12.1.
"Facility Mortgagee" has the meaning set forth in Section 12.1.
"Fair Market Added Value" means the Fair Market Value (as hereinafter
defined) of the Leased Property (including all Capital Additions) less the Fair
Market Value of the Leased Property determined as if no Capital Additions paid
for by Lessee without financing by Lessor had been constructed.
"Fair Market Rental Value" means the fair market rental value of the Leased
Property or any Substitute Property, (a) assuming the same is unencumbered by
this Lease, (b) determined in accordance with the appraisal procedures set forth
in Article XXVIII or in such other manner as shall be mutually acceptable to
Lessor and Lessee, and (c) not taking into account any reduction in value
resulting from an indebtedness to which the Leased Property or Substitute
Property may be subject.
"Fair Market Value" means the fair market value of the Leased Property or
any Substitute Property, including all Capital Additions, (a) assuming the same
is unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Article XXVIII or in such other manner as shall be
mutually acceptable to Lessor and Lessee, and (c) not taking into account any
reduction in value resulting from any indebtedness to which the Leased Property
or such Substitute Property is subject or which encumbrance Lessee or Lessor is
otherwise required to remove pursuant to any provision of this Lease or agrees
to remove at or prior to the closing of the transaction as to which such Fair
Market Value determination is being made. The positive or negative effect on
the value of the Leased Property or Substitute Property attributable to the
interest rate, amortization schedule, maturity date, prepayment
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penalty and other terms and conditions of any Encumbrance on the Leased Property
or any Substitute Property, as the case may be, which is not so required or
agreed to be removed shall be taken into account in determining such Fair Market
Value.
"Fair Market Value Purchase Price" means the Fair Market Value less the
Fair Market Added Value.
"Financial Statements" means, for any Person and for any accounting period,
statements of earnings and retained earnings and of changes in cash flows for
such Person for such period and for the period from the beginning of the
respective fiscal year of such Person to the end of such period and the related
balance sheet as at the end of such period, all in reasonable detail and setting
forth in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year of such Person, containing appropriate notes and
prepared in accordance with generally accepted accounting principles
consistently applied (except to the extent that this Lease shall be accounted
for as an operating lease by Lessee), subject to normal year-end adjustment. All
Financial Statements in respect of any fiscal year beginning with the fiscal
year ending June 3O, 1996 shall be audited by an independent accounting firm
mutually acceptable to Lessor and Lessee.
"Fiscal Year" means the 12-month period from July 1 to the next succeeding
June 30.
"Fixed Term" has the meaning set forth in Article I.
"Fixtures" has the meaning set forth in Article I.
"Full Replacement Cost" has the meaning set forth in Section 12.2.
"Guarantor" means Ramsay Health Care, Inc., a Delaware corporation and the
owner of 100% of the issued and outstanding stock of Lessee.
"Guaranty" means a guaranty of the obligations of Lessee hereunder,
executed by the Guarantor.
"Hazardous Materials" means any substance, including asbestos or any
substance containing asbestos, the group of organic compounds known as
polychlorinated biphenyls, flammable explosives, radioactive materials, medical
waste, chemicals, pollutants, effluents, contaminants, emissions or any other or
related materials and items included in the definition of hazardous or toxic
wastes, materials or substances under any Hazardous Materials Law.
"Hazardous Materials Law" means any law, regulation or ordinance relating
to environmental conditions, medical waste and industrial hygiene, including the
Resource Conservation and Recovery Act of 1976 ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 198O ("CERCLA"), as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Hazardous Materials
49
<PAGE>
Transportation Act, the Federal Water Pollution Control Act, the Clean Air Act,
the Clean Water Act, the Toxic Substances Control Act, the Safe Drinking Water
Act, and all similar federal, state and local environmental statutes and
ordinances, whether heretofore or hereafter enacted or effective and all
regulations, orders, or decrees heretofore or hereafter promulgated thereunder.
"Impositions" means, collectively, all taxes relating to the Leased
Property, including all ad valorem, sales and use, gross receipts, action,
privilege, rent (with respect to the Tenant Leases) or similar taxes,
assessments (including all assessments for public improvements or benefits,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), water, sewer or other rents and charges,
excises, tax levies, fees (including license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or unforeseen, of
every character in respect of the Leased Property and/or the Rent (including all
interest and penalties thereon due to any failure in payment by Lessee), which
at any time prior to, during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon (a) Lessor or Lessor's interest in
the Leased Property, (b) the Rent, the Leased Property or any part thereof or
any rent therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, sales from, or activity conducted
on, or in connection with, the Leased Property or the Tenant Leases or use of
the Leased Property or any part thereof; provided that nothing contained in this
--------
Lease shall be construed to require Lessee to pay (1) any tax based on net
income (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor, (2) any transfer or net revenue tax of Lessor, (3) any tax
imposed with respect to the sale, exchange or other disposition by Lessor of any
portion of the Leased Property or the proceeds thereof, or (4) except as
expressly provided elsewhere in this Lease, any principal or interest on any
Encumbrance on the Leased Property, except to the extent that any tax,
assessment, tax levy or charge which Lessee is obligated to pay pursuant to this
definition and which is in effect at any time during the Tenn hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1), (2) or (3) is levied, assessed or imposed expressly in lieu thereof.
"Indebtedness" with respect to Lessee or Guarantor means: (i) any debt (a)
for borrowed money or (b) evidenced by a bond, note, debenture or similar
instrument (including purchase money obligations and accounts payable and other
obligations created or assumed in the course of business in connection with the
obtaining of materials or services) given in connection with the acquisition of
any business, property or assets, whether by purchase, merger, consolidation or
otherwise, or (c) which is a direct or indirect obligation which arises as a
result of banker's acceptances or bank letters of credit issued to secure
obligations of such person, or to secure the payment of bonds issued for the
benefit of such person, whether contingent or otherwise; (ii) any debt of others
described in the preceding clause (i) which such person has guaranteed or for
which it is otherwise liable; (iii) the obligation of such person as lessee
under any lease of property which is (a) reflected on such person's balance
sheet as a capitalized lease or (b) an operating lease; and (iv) any deferral,
amendment, renewal, extension, supplement or refunding of any liability of the
kind described in any of the preceding clauses (i), (ii) and (iii).
50
<PAGE>
"Insurance Requirements" means all terms of any insurance policy required
by this Lease and all requirements of the issuer of any such policy.
"Land" has the meaning set forth in Article I.
"Lease" means this Lease.
"Leased Improvements" and "Leased Property" have the meanings set forth in
Article I.
"Legal Requirements" means all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the Leased Property or the construction, use
or alteration thereof, whether now or hereafter enacted and in force, including
any which may (a) require repairs, modifications or alterations of or to the
Leased Property, or (b) in any way adversely affect the use and enjoyment
thereof, and all permits, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, actions and encumbrances contained in
any instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
"Lenders" has the meaning set forth in Article XXXII hereof.
"Lending Institution" means any insurance company, federally insured
commercial or savings bank, national banking association, savings and loan
association, employees' welfare, pension or retirement fund or system, corporate
profit-sharing or pension plan, college or university, or real estate investment
including any corporation qualified to be treated for federal tax purposes as a
real estate investment trust having a net worth of at least $50,000,000.
"Lessee" means RHCI San Antonio, Inc., a Delaware corporation, its
successors and assigns.
"Lessor" means CAPSTONE CAPITAL OF SAN ANTONIO, LTD., d/b/a CAHABA OF SAN
ANTONIO, LTD., an Alabama limited partnership, and its successors and assigns.
"Mesa" means Mesa Psychiatric Hospital, Inc., an Arizona corporation.
"Mesa Lease" means that certain Lease Agreement dated April 12, l995
between Capstone Capital Corporation, a Maryland corporation, and Mesa.
"Minimum Rent" has the meaning set forth in Section 2.1 hereof.
"Minimum Repurchase Price" means the greater of (i) the Fair Market Value
of the Leased Property at the time of repurchase hereunder by Lessee, or (ii)
the Purchase Price paid to Lessee for the Leased Property pursuant to the
Purchase and Sale Agreement as such amount
51
<PAGE>
is increased at the rate of three percent compounded annually for each year (to
be prorated for partial years) between the Commencement Date and the date of
repurchase by Lessee, plus the sum of all Capital Addition Costs paid for or
----
financed by Lessor which as of the date of repurchase of the Leased Property
have not been repaid by Lessee, less the net amount (after deduction of all
reasonable legal fees and other costs and expenses, including expert witness
fees, incurred by Lessor in connection with obtaining any such award or
proceeds) of all Awards received by Lessor from Condemnation of the Leased
Property and all insurance proceeds in excess of the costs of any restoration
which are retained by Lessor.
"Net Income" of Lessee means, for any period, net income before Federal
and state taxes and interest expense paid or payable in respect of such period,
plus amounts which, in the determination of net income for such period, have
- ----
been deducted for amortization of debt discount in respect of Indebtedness of
Lessee for borrowed money, depreciation of tangible assets, amortization of
intangible assets, Total Rent payable in respect of such period, and management
fees paid or payable to Guarantor in respect of such period, all as determined
in accordance with generally accepted accounting principles consistently applied
(except to the extent that this Lease shall be accounted for as an operating
lease by Lessee).
"Officer's Certificate" means a certificate of Lessee signed by the
Chairman of the Board of Directors, the President, any Vice President or another
officer authorized to so sign by the Board of Directors or By-Laws of Lessee, or
any other person whose power and authority to act has been authorized by
delegation in writing by any of the persons holding the foregoing offices.
"Overdue Rate" means as of any date, a rate per annum equal to the Prime
Rate as of such date, plus two percent, but in no event greater than the maximum
rate then permitted under applicable law.
"Payment Date" means any due date for the payment of the installments of
Minimum Rent under this Lease.
"Permitted Assignment for Security" means an assignment of Lessee's
leasehold interest hereunder as collateral security for funded indebtedness of
Lessee or an Affiliate of Lessee, pursuant to documentation which (i) expressly
provides that such assignment and all rights of the assignee thereunder shall be
subject and subordinate in all respects to the terms of this Lease, and to any
Encumbrance upon the Leased Property then existing or thereafter granted or
created by Lessor, provided that the holder of any such Encumbrance complies
with Articles XXXII and XXXIII hereof (including without limitation the
provisions with respect to subordination and non-disturbance contained therein),
(ii) obligates the assignee thereunder to execute and deliver reasonably
appropriate documentation to evidence such subordination to Lessor and to the
holder of any such Encumbrance, provided that such holder complies with the
provisions of said Articles XXXII and XXXIII, and (iii) is otherwise approved by
Lessor, which approval shall not be unreasonably withheld.
52
<PAGE>
"Person" means a natural person, corporation, partnership, trust,
association, limited liability company or other entity.
"Personal Property" means the personal property listed in Exhibit D hereto.
---------
"Primary Intended Use" has the meaning set forth in Section 6.2(a).
"Prime Rate" means the annual rate announced by the Wall Street Journal or
its successors from time to time as being its prime rate. The prime rate is an
index rate used by the Wall Street Journal to establish lending rates and may
not necessarily be its most favorable lending rate. Any change in the Prime Rate
hereunder shall take effect on the effective date of such change in the prime
rate as established by the Wall Street Journal, without notice to Lessee or any
other action by Lessor. Interest shall be computed on the basis that each year
contains 360 days, by multiplying the principal amount by the per annum rate set
forth above, dividing the product so obtained by 360, and multiplying the
quotient thereof by the actual number of days elapsed.
"Purchase and Sale Agreement" means the agreement dated on or about April
12, l995, between Lessee as "Seller" and Lessor as "Purchaser" relating to the
acquisition by Lessor of the Leased Property.
"Rent" means, collectively, the Minimum Rent and the Additional Charges.
"Request" has the meaning set forth in Section 9.3(a).
"Substitution Date" has the meaning set forth in Section 20.1.
"Substitute Properties" has the meaning set forth in Section 20. l .
"Taking" means a taking or voluntary conveyance during the Term hereof of
all or part of the Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of any Condemnation
or other eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
"Tenant" means the lesses or tenants under the Tenant Leases, if any.
"Tenant Leases" means all leases, subleases, assignments and other rental
agreements (written or verbal, now or hereafter in effect), if any, that grant a
possessory interest in and to any space in the Improvements, or that otherwise
grant rights with regard to the Leased Property, and all Credit Enhancements, if
any, held in connection therewith.
"Term" means the Fixed Term and any Extended Term as to which Lessee has
exercised its options to extend contained in Article XXXIV hereof unless earlier
terminated pursuant to the provisions hereof.
53
<PAGE>
"Total Rent" for any period means the total amount of (a) Minimum Rent
payable by Lessee hereunder and (b) all rental expense of Lessee as lessee in
respect of operating and capitalized leases (but excluding items that constitute
additional Rent or Additional Charges hereunder), in each case of (a) and (b) in
respect of such period.
"Unavoidable Delays" means delays due to strikes, lockouts, inability to
procure materials after the exercise of due diligence, power failure, acts of
God, governmental restrictions, enemy action, civil commotion, fire, unavoidable
casualty or other causes beyond the control of the party responsible for
performing an obligation hereunder, provided that lack of funds shall not be
--------
deemed a cause beyond the control of either party hereto unless such lack of
funds is caused by the failure of the other party hereto to perform any
obligations of such other party under this Lease.
"Unsuitable for Its Primary Intended Use" as used anywhere in this Lease,
shall mean that, by reason of damage or destruction, or a partial Taking, in the
good faith judgment of Lessee, reasonably exercised, the Facility cannot be
profitably operated for its Primary Intended Use, taking into account all
relevant factors.
54
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
their respective corporate seals to be hereunto affixed and attested by their
respect officers thereunto duly authorized as of the date first written above.
LESSOR:
CAPSTONE CAPITAL OF SAN ANTONIO, LTD.,
d/b/a CAHABA oF SAN ANTONIO, LTD.
an Alabama limited partnership
By: Capstone Capital of Cape Coral, Inc.
d/b/a Cahaba of Cape Coral, Inc.,
an Alabama corporation
Its General Partner
By: /s/ William C Harlan
-------------------------------
William C Harlan
Its: Vice President
Date April 12, 1995
---------------------------------------
Lessor's Tax Identification Number:
63-1129622
LESSEE:
RHCI SAN ANTONIO, INC.,
a Delaware corporation
By: ____________________________________
Its: ____________________________________
Date______________________________________
Lessee's Tax Identification Number:
___________________________________________
<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
Lot Five (5), N.C.B. 13837, Villa De Tejas Subdivision, an addition to the City
of San Antonio, Bexar County, Texas, as set out on plat of same recorded in
Volume 9504, Page 206, Deed and Plat Records of Bexar County, Texas.
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. Standby fees, taxes and assessments by any taxing authority for the year 1995
and subsequent years.
2. 25' front building setback line along the southeast property line as set out
on plat recorded in Volume 9504, Page 206, Deed and Plat Records of Bexar
County, Texas.
3. 13' rear electrical easement as set out on plat in Volume 9504, Page 206,
Deed and Plat Records of Bexar County, Texas.
4. Electric Line Right of Way easement to San Antonio Public Service Company
recorded in Volume 1749, Page 102, Deed Records of Bexar County, Texas.
5. Fence crossing 13' electrical easement across rear of subject property, as
appearing on survey dated 3-31-95 by Gaylord E. Reaves, R.P.L.S. #3501, Job No.
D17464.
6. Fence inset along the southwest property line, as appearing on survey dated
3-31-95 by Gaylord E. Reaves, R.P.L.S. #3501, Job No. D17464.
7. Rights of tenants in possession.
<PAGE>
EXHIBIT C
[Intentionally Left Blank]
<PAGE>
EXHIBIT D
PERSONAL PROPERTY
NONE
<PAGE>
FACILITY LEASE AGREEMENT
------------------------
THIS FACILITY LEASE AGREEMENT (this "Lease"), made and entered into
this 26th day of June , 1995, by and between CHARTER CANYON BEHAVIORAL
------- --------
HEALTH SYSTEM, INC., a Utah corporation (hereinafter called "Landlord"), and
BOUNTIFUL PSYCHIATRIC HOSPITAL, INC., a Utah corporation (hereinafter called
"Tenant"),
W I T N E S S E T H:
LANDLORD AND TENANT hereby agree as follows:
SECTION 1. DEMISED PREMISES, TERM AND USE.
1.1 Landlord, for and in consideration of the covenants hereinafter
contained and made on the part of the Tenant, does hereby grant, demise and
lease unto the Tenant, and Tenant does hereby accept and lease from Landlord,
all of the followinq (collectively, the "Facility").
1.1.1 That certain tract or parcel of land located at 175 West
7200 South, Midvale, Utah as more particularly described in Exhibit A
---------
attached hereto and incorporated herein by reference in its entirety (the
"Land");
1.1.2 All buildings (which includes the hospital building and
adjacent medical office building), structures and other improvements of
every kind including, but not limited to, alleyways, sidewalks, utility
pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings, structures and improvements
presently situated on the Land (collectively, the "Building");
1.1.3 All easements, rights and appurtenances relating to the
Land and the Building;
1.1.4 All machinery and systems, including all components
thereof, now permanently affixed to or incorporated into the Building; and
1.1.5 The furniture, fixtures and equipment identified on the
Fixed Asset Reserve Report of the Facility (the "Fixed Asset Reserve
Report") as shown on a computer run thereof and initialed for
identification on behalf of Landlord and Tenant and which is incorporated
herein as Exhibit B by this reference (hereinafter referred to as the
---------
"Equipment"). No later than thirty (30) days after the date of this Lease,
Landlord and Tenant shall jointly conduct a physical inventory of the
Equipment, making any corrections to the Fixed Asset Reserve Report as
necessary, and each shall agree in writing upon a final inventory listing
of Equipment. Tenant's signature on the final inventory listing of
Equipment shall serve as its acknowledgement of receipt of the Equipment.
1.1.6 As of the "Rent Commencement Date" (as defined below),
Landlord agrees to transfer and Tenant agrees to accept custody and control
of all patient medical records and all records relating to the medical and
professional staff of the Facility. Tenant agrees to maintain and safeguard
such records in accordance with all provisions of applicable law and to
grant Landlord, and its representatives, free access to such
<PAGE>
2
records upon request from time to time upon reasonable prior notice.
1.2 The term of this Lease (the "Term") shall be for an initial
period of four (4) years commencing on the date hereof (the "Rent Commencement
Date") and ending at midnight on April 24th , 1999, unless sooner terminated or
------------
renewed as provided herein. Tenant shall have the privilege to renew and thereby
extend the Term for an additional period of three (3) years commencing upon the
expiration of the original term of this Lease and expiring at midnight on April
-----
24th , 2002 (the "Renewal Term"), unless sooner terminated as provided herein.
- -----
The aforesaid privilege for Tenant to renew the Term shall be applicable only
if: (i) Tenant provides Landlord written notice of Tenant's exercise of the
Renewal Term at least one hundred eighty (180) days prior to the expiration of
the Term, and (ii) no "Event of Default" (as defined below) exists as of the
date of exercise of the Renewal Term or as of the date of the Renewal Term is to
become effective. Unless the context requires otherwise, any reference herein to
the "Term" shall include any exercised Renewal Term."
1.3 Tenant shall have the right and privilege to use and occupy the
Facility solely for the operation of a licensed acute psychiatric hospital
(including the treatment of mental health and addictive disease), or if the Utah
licensing category changes, the licensing category which most nearly encompasses
the same, which license shall be for a minimum of eighty (80) beds (the
"Permitted Use"), and for no other use without Landlord's prior written consent
(which consent shall not be unreasonably withheld); provided, however, that such
Permitted Use may include the relicensing of no more than eighty (80) beds for
use in connection with a residential treatment program, nursing home program or
other mental health endeavor. Tenant agrees at all times to maintain licensure
by the State of Utah, and accreditation by the Joint Commission on Accreditation
of Healthcare Organizations ("JCAHO"), or if that organization changes or ceases
to exist, its successor. Failure to maintain such licensure and accreditation of
the Facility shall be a material breach of this Lease, giving rise to the remedy
of termination, at Landlord's option, or any other remedy of Landlord pursuant
to Section 16 of this Lease. Tenant shall promptly deliver to Landlord copies of
the Facility's license, when received, and any change thereto during the Term,
copies of all JCAHO and Medicare surveys of the Facility, and any citations
issued with respect to the Facility. There shall be no change in license
category (except due to a change in the law specifying the categories of
licensure or except as otherwise contemplated hereunder) or status without the
prior written consent of Landlord. During the Term, neither Tenant, nor any
affiliate controlling or controlled by Tenant, nor any other entity with
substantially the same ownership as Tenant, shall own, operate or manage, in
whole or in part, any alcohol, chemical dependency or psychiatric hospital,
department, unit, service or rehabilitation center in Utah County. During the
Term, neither Landlord, nor any affiliate controlling or controlled by Landlord,
nor any other entity with substantially the same ownership as Landlord, shall
own, operate or manage, in whole or in part, any alcohol, chemical dependency or
psychiatric hospital, department, unit, service or rehabilitation center in Salt
Lake County.
<PAGE>
3
SECTION 2. RENT COMMENCEMENT DATE; RENTAL PAYMENTS.
2.1 The "Base Rental" (as defined below), "Percentage Rental" (as
defined below) and all additional charges shall begin to accrue on the Rent
Commencement Date.
2.2 Tenant does hereby covenant and agree to pay to Landlord, for the
use and occupancy of the Facility, at the times and in the manner hereinafter
provided, the following base rental (the "Base Rental"), which shall be paid in
U.S. dollars, in advance in equal monthly installments as set forth below,
without offset or deduction and without notice or invoice from Landlord, on the
first day of each and every month during the Term, commencing upon the Rent
Commencement Date and ending upon the termination date of this Lease.
<TABLE>
<CAPTION>
MONTHS MONTHLY RENTAL
------ --------------
<S> <C>
1 to 3 $10,000.00
4 to 48 $38,000.00
49 to 84 (If applicable, to be determined
pursuant to Section 2.3 below.)
</TABLE>
In the event Base Rental shall commence on a day other than the first day of a
month, then the Base Rental for the period from the Rent Commencement Date until
the first day of the month next following shall be prorated accordingly.
2.3 For each 12-month period during the Renewal Term, if any, Base
Rental shall be an amount equal to Base Rental for the previous 12-month period
adjusted to reflect the cost of living increase, if any, as determined by
multiplying the current Base Rental by a fraction, the denominator of which is
the "Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average,
(1982-84 = 100), Unadjusted, All Items Index" as published by the Bureau of
Labor Statistics of the U.S. Department of Labor (the "Index") for the month
immediately prior to the date which is twelve (12) months prior to any such
Renewal Term and the numerator of which is the Index for the month immediately
prior to the commencement date of such Renewal Term. If the publication of the
Index is discontinued, then Landlord and Tenant shall, in good faith, agree on a
suitable substitute. In no event shall the Base Rental for any 12-month period
of the Renewal Term be less than the Base Rental for the immediately prior 12-
month period or exceed the Base Rental for the immediately prior 12-month period
by more than 5%.
2.4 In addition to the Base Rental and all other amounts payable to
Landlord hereunder, Tenant does hereby covenant and agree to pay to Landlord
quarterly, without notice or invoice from Landlord, an amount equal to two
percent (2%) of the "Net Revenue" (as defined below) (the "Percentage Rental").
Each installment of Percentage Rental shall be payable to Landlord within forty-
five (45) days of the end of each calendar quarter during the Term (prorated for
partial quarters) and shall be accompanied by a certified statement of an
executive officer of Tenant detailing the calculation of Percentage Rental
accompanying such statement. For purposes of this Lease, "Net Revenue" shall
mean the gross revenue of Tenant in any way derived from the provision of goods
or services by Tenant at the Facility reduced by contractual allowances and
other discounts and deductions (including, without limitation, administrative
adjustments and charity care) and reserves in respect of doubtful accounts, it
being understood and agreed that "Net Revenue" shall include, in the case of a
sublease
<PAGE>
4
to a subsidiary of Tenant, all "Net Revenue" realized by such sublessee and
shall exclude the rent paid by such sublessee to Tenant, to the extent such rent
is based on "Net Revenue" of such sublessee.
2.5 During the Term, Tenant shall maintain accurate and complete
business records (the "Records"). The Records shall be kept in a reasonable and
customary form. Landlord may cause an audit to be made of the Records in order
to verify the amount of all Percentage Rental installments, and prompt
adjustment shall be made by the proper party to compensate for any errors or
omissions disclosed by such audit. At Landlord's option, any such audit may be
conducted by an employee or other agent of Landlord or a certified public
accountant of Landlord's choice. Any such audit shall be conducted during
regular business hours at Tenant's offices and in such manner as not to
interfere with Tenant's normal business activities. Landlord shall bear the cost
of any such audit. In no event shall audits be made pursuant to this Section
2.5 more frequently than annually. All information transmitted to or audited by
Landlord under Sections 2.4 and 2.5 shall be kept strictly confidential.
2.6 All payments provided for in this Lease (those hereinafter
stipulated as well as Base Rental and Percentage Rental) shall be paid or mailed
to:
Charter Canyon Behavioral Health System, Inc.
c/o Charter Medical Corporation
577 Mulberry Street
Macon, Georgia 31298
Attention: Ms. Vivian Skipper
or to such other payee or address as Landlord may designate in writing to
Tenant. Any Base Rental, Percentage Rental or other amounts payable to Landlord
hereunder, if not paid within ten (10) days after the date the same is due and
payable, shall bear a late charge equal to the greater of (i) one Hundred and
No/100 Dollars ($100.00) or (ii) a daily service charge at the rate of 10% per
annum for each day the same is past due (the "Past Due Interest Rate"); however,
in no event shall Landlord collect any such charges at a rate in excess of the
legal limits for such charges under applicable laws.
2.7 Tenant understands and agrees that the obligation of the Tenant
to pay Base Rental, Percentage Rental and all other amounts payable to Landlord
hereunder is absolute and unconditional without relief from valuation and
appraisement laws and, except as otherwise contemplated hereunder, shall not be
subject to abatement, diminution, postponement or deduction, or to any defense
other than payment or to any right of set-off, counterclaim or recoupment
arising out of any breach under this Lease, or out of any obligation or
liability at any time owing to Tenant by any of the foregoing. It is the
intention of Landlord and Tenant that this Lease be a "triple net lease," with
Tenant paying during the Term all costs and expenses relating to the Facility,
including but not limited to taxes, maintenance, insurance, utilities, and
operational expenses.
SECTION 3. TAXES.
3.1 Tenant shall pay all real estate taxes and assessments imposed
upon the Facility during the Term or imposed upon the rentals payable under this
Lease as and when due and payable to the applicable governing authority.
<PAGE>
5
Tenant shall provide written evidence of the payment of the aforesaid taxes and
assessments at least ten (lO) business days prior to the due date (which shall
be the date upon which payment can be made without penalty, interest or
premium). Landlord shall pay all real estate taxes and assessments (including
back taxes, if any) imposed upon the Facility for any periods prior to and
following the Term. Appropriate adjustments shall be made on the commencement
and termination of this Lease consistent with the foregoing. Tenant shall be
liable for all taxes levied against personal property and trade fixtures placed
or used by Tenant in the Facility including, without limitation, the Equipment.
3.2 Tenant shall not be required to pay and there shall be excluded
from any tax bill received by Tenant all income, excess profits, estate, single
business, inheritance, succession, transfer, franchise, capital or other tax
assessments upon Landlord. Tenant may contest any tax or assessment at its own
expense. Landlord agrees to cooperate with Tenant and will execute any document
which may be reasonably necessary and proper for any such proceedings.
SECTION 4. CONDITION OF PREMISES.
4.1 Subject to the representations and warranties made by Landlord in
this Lease and subject to any defects which Charter Medical Corporation
("Charter Medical") has agreed to cure pursuant to that certain Letter Agreement
dated April 26, 1995 between Charter Medical and Ramsay Health Care, Inc., the
Facility is leased to Tenant from Landlord in an "AS-IS" condition with respect
to compliance with statutes, ordinances, rules, regulations, and zoning
variances applicable to the manner of operation of Tenant's business at the
Facility. Landlord represents and warrants to Tenant, as of the date hereof,
that (i) the Facility meets all physical and safety standards for the operation
of an "acute psychiatric hospital" under the laws of the State of Utah and (ii)
the Facility and all electrical, plumbing, mechanical, utility, roof, foundation
and other systems thereat are in good and proper working order and repair and
all utility systems are in place and available for Tenant's use. Tenant hereby
undertakes, at its sole cost and expense, the responsibility to obtain all
appropriate governmental approvals and licenses in order for Tenant to operate
the Facility for the Permitted Use during the Term. In no event shall Landlord
be liable for any limitation on use of the Facility which may be imposed by
statute, ordinance or regulation.
4.2 If at any time during the Term the manner of operation of
Tenant's business at the Facility does not meet with codes as required by
regulations of governing authorities, then Tenant will bring the Facility up to
the proper standards at Tenant's expense. Tenant shall be responsible for paying
any and all fines or penalties assessed by any governmental authority if the
manner of operation of Tenant's business at the Facility fails to meet codes and
regulations of governmental authorities during the Term.
4.3 Landlord agrees to provide operations and maintenance manuals in
its possession for all improvements and mechanical systems located on the
Facility. Landlord shall deliver the aforesaid operations and maintenance
manuals on the Rent Commencement Date.
<PAGE>
6
SECTION 5. REPAIRS AND MAINTENANCE.
5.1 Tenant acknowledges that, except as provided in Section 4.1 and
Section 6 and Section l0, Landlord has made, makes and shall make no
representations or warranties with respect to the Facility, express or implied.
Without limiting the generality of the foregoing, Tenant acknowledges and agrees
that Landlord has made, makes and shall make (i) no representation or warranty
except as provided in Section 4.1 and Section 6 and Section 10 of tenantability
or habitability with respect to the Facility, (ii) no representation or warranty
of fitness with respect to any Equipment or fixtures contained therein, and
(iii) no representation or warranty, except as provided in Section 4.1 and
Section 6 and Section l0, with respect to the physical condition of the Facility
or the operating order or condition of any Equipment.
5.2 Subject to the representations and warranties made by Landlord in
this Lease, Tenant shall be responsible to keep and maintain, repair and replace
the non-structural and other systems and elements of the Facility, in a state of
good order, condition and repair to the full extent not expressly delineated
below as being Landlord's responsibility. Landlord shall be responsible to keep
and maintain, repair and replace the roof, foundations, floor slabs, structural
walls and other structural elements of the Facility in a state of good order,
condition and repair. Any sums or costs expended or incurred by Tenant for
obligations which are Landlord's responsibility under the immediately preceding
sentence and are not otherwise paid to Tenant may be offset by Tenant against
rentals and other charges otherwise due under this Lease. Tenant will suffer no
active or permissive waste thereof or injury to the Facility and shall assume
financial responsibility for any such waste or injury caused by Tenant.
SECTION 6. ENVIRONMENTAL MATTERS.
6.1 Tenant represents and warrants that no handling, transportation,
storage, treatment or usage of hazardous or toxic substances will occur on or at
the Facility in violation of any "Environmental Laws" (as defined below) as a
result of Tenant's occupancy and use of the Facility. Tenant shall comply with
all Environmental Laws in the use and occupancy of the Facility under this
Lease. Tenant agrees to indemnify, defend and hold Landlord and its officers,
partners, employees and agents harmless from any claims, judgments, damages,
fines, penalties, costs, liabilities (including sums paid in settlement of
claims) or loss, including reasonable attorneys' fees, consultants' fees and
experts' fees, which arise during or after the Term in connection with the
violation by Tenant of any Environmental Laws on or at the Facility.
6.2 Landlord represents and warrants as of the date hereof that no
handling, transportation, storage, treatment or usage of hazardous or toxic
substances has occurred in, on, about or under the Facility and that the
Facility is currently in full compliance with all Environmental Laws. Landlord
agrees to indemnify, defend and hold Tenant and its officers, partners,
employees and agents harmless from and against any and all claims, judgments,
damages, fines, penalties, costs, liabilities (including sums paid in settlement
of claims), loss or expenses, including reasonable attorneys' fees, consultants'
fees and experts' fees, in connection with the presence or alleged presence of
hazardous or toxic substances in, on,
<PAGE>
7
about or under the Facility or any violation of any Environmental Laws for all
periods prior to the date hereof.
6.3 For purposes of this Lease, "Environmental Laws" means all
federal, state, local and foreign laws or regulations, codes, plans, orders,
decrees, judgments, injunctions, notices or demand letters issued, promulgated,
approved or entered thereunder relating to pollution or protection of the
environment, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substance or wastes.
SECTION 7. IMPROVEMENTS. Tenant may make interior non-structural alterations
within the Building provided that all such alterations are performed in a first-
class manner, in a good and workmanlike condition, utilizing first-quality new
materials and complying with all governmental regulations. Tenant shall not,
without Landlord's prior written consent, which consent by Landlord may not be
unreasonably withheld, make any structural alterations, additions or
improvements in, on or about the Facility.
SECTION 8. FIXTURES AND PERSONAL PROPERTY. Any trade fixtures, business
equipment, inventory, trademarked items, signs and other removable personal
property installed in or on the Facility by Tenant, at its expense, shall remain
the property of Tenant. Landlord agrees that Tenant shall have the right, at
any time or from time to time, to remove any and all of such items provided that
Tenant is not in default under the terms of this Lease and provided that the
Facility is promptly restored to a state of good order, condition and repair
upon the removal of such personal property. Tenant shall pay before delinquency
all taxes, assessments, license fees and public charges levied, assessed or
imposed upon its business operations in the Facility as well as upon its trade
fixtures, merchandise and other personal property in or upon the Facility.
SECTION 9. LIENS. Tenant shall not permit to be created nor to remain
undischarged any lien, encumbrance or charge arising out of any work or work
claim of any contractor, mechanic or laborer or arising out of any material
supplied by materialman which might be, or become, a lien or encumbrance or
charge upon the Facility and Tenant shall not suffer any other matter or thing
whereby the estate, right and interest of Landlord in the Facility might be
impaired.
SECTION l0. LAWS AND ORDINANCES.
l0.1 Tenant agrees to comply with all laws, ordinances, orders and
regulations relating to the manner of operation of Tenant's business at the
Facility (including, without limitation, laws, ordinances, orders and
regulations of any authority governing the licensure of the Facility). The
Landlord shall, at the Landlord's sole expense, comply with all requirements of
law and with all ordinances, regulations or orders of any federal, state,
municipal or other public authority affecting the Facility and with all
requirements of any insurance company insuring the Landlord against casualties.
<PAGE>
8
l0.2 Tenant agrees not to (i) permit any illegal practice to be
carried on or committed on or at the Facility, (ii) use the Facility for any
purpose whatsoever which might create a nuisance, or (iii) use the Facility in
any manner which would vitiate the insurance on the Facility.
SECTION 11. SERVICES.
11.1 Tenant shall be solely responsible for and promptly pay all
charges for the use and consumption of water, sewer, gas, phone and electricity
and all other utility services used at the Facility.
11.2 Landlord shall not be liable to Tenant in damages or otherwise
if said utilities or services are interrupted or terminated because of necessary
repairs, installations or improvements, or any cause beyond the Landlord's
control.
SECTION 12. DAMAGE OR CASUALTY.
In the event that fifty percent (5O%) or more of the improvements on
the Facility are destroyed or rendered untenantable by fire or other casualty
during the Term (based upon the cost to replace the improvements damaged or
destroyed as compared with the market value of the improvements immediately
prior to such fire or other casualty as shown by certificate of an independent
architect, engineer or appraiser selected by Tenant and approved by Landlord),
then Tenant shall have the right to terminate this Lease effective as of the
date of the casualty by giving, within thirty (3O) days of such casualty,
written notice of termination to Landlord. If said notice of termination is
given within such thirty (3O) day period, the Lease shall terminate and Base
Rental and all other charges shall abate as aforesaid from the date of such
casualty, and Landlord shall promptly repay to Tenant any rent paid in advance
which has not been earned as of the date of such casualty. If this Lease is not
so terminated, and whether the extent of casualty is more or less than 5O%, the
Landlord shall promptly and completely restore the facility. All rentals and
other charges shall be appropriately abated during the restoration period.
SECTIoN 13. INDEMNITY AND INSURANCE.
13.1 Tenant hereby agrees to indemnify and hold Landlord free and
harmless against and from any and all claims and liability arising from Tenant's
use of the Facility and the conduct of its business thereon, and from any
activity, work or other thing done, permitted or suffered by Tenant on or about
the Facility, and shall further indemnify and hold Landlord harmless against and
from any and all claims arising from any act or negligence of Tenant or any
officer, agent, employee, guest or invitee of Tenant, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or from any such
claim or any action or proceeding brought thereon; and if any case, action or
proceeding be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
selected by Tenant subject to the reasonable approval of Landlord. Landlord
shall indemnify and hold Tenant harmless from and against any and all claims
arising from any wrongful actions or negligence of Landlord or any officer,
agent, employee, guest or invitee of Landlord, or from any misrepresentation
made by Landlord under this Lease or any other breach or violation of this Lease
and from and against
<PAGE>
9
all costs, attorneys' fees, expenses and liabilities incurred in or from any
such claim or any action or proceeding brought thereon; and if any case, action
or proceeding be brought against Tenant by reason of any such claim, Landlord,
upon notice from Tenant, shall defend the same at Landlord's expense by counsel
selected by Landlord subject to the reasonable approval of Tenant.
13.2 During the Term, Landlord, at its sole cost and expense, shall
keep the Facility and all of Tenant's improvements and alterations therein,
insured, for the mutual benefit of Landlord and Tenant, against loss or damage
by earthquake, flood, fire and such other risks as are now or hereafter included
in an extended coverage endorsement in common use for commercial property in the
geographic location of the Facility, including vandalism and malicious mischief,
and such other insurance as may from time to time be reasonably required in an
amount equal to the full replacement value of the Facility. If any dispute
between the parties regarding whether the amount of insurance carried complies
with this Section 13.2 cannot be resolved by agreement, Landlord, not more often
than once every year, may request the carrier of the insurance then in force to
determine the full replacement value of the Facility and the resulting
determination shall be conclusive between the parties for the purpose of this
Section 13.2. Landlord and Tenant agree that Bankers Trust Company, as
mortgagee, shall be named as a loss payee on all insurance required under this
Section 13.2.
13.3 During the Term, Tenant, at its sole cost and expense, shall
keep or cause to be kept in force, for the mutual benefit of Landlord, Bankers
Trust Company, as mortgagee, and Tenant, comprehensive general liability
insurance against claims and liability for personal injury, death, or property
damage arising from the use, occupancy, disuse, or condition of the Facility, or
adjoining areas or walkways, providing protection initially of at least Ten
Million Dollars ($10,OOO,OOO) for personal injury to or death of one or more
persons, or property damage arising out of a single accident or occurrence. The
amount of the required public liability insurance shall be increased to a
reasonable and customary sum under the circumstances as agreed by Landlord and
Tenant upon the request of Landlord, not more than once each year.
13.4 During the Term, Tenant, at its sole cost and expense, shall
maintain in force professional liability insurance, providing protection of at
least Ten Million Dollars $1O,OOO,OOO) per occurrence, insuring against claims
and liabilities arising out of or in connection with services rendered at the
Facility.
13.5 During the Term, Tenant, at its sole cost and expense, shall
keep in force in form and coverage reasonably satisfactory to Landlord:
13.5.1 Workers' compensation insurance in an amount necessary to
meet all legally required limits.
13.5.2 Business interruption insurance insuring that Base
Rental, real estate taxes, [Percentage Rental (based upon an average of the
Percentage Rental paid over the last four (4) calendar quarters) and all
other amounts payable to Landlord hereunder] will be paid to Landlord for
such length of time as would be required with the exercise of due diligence
and dispatch to rebuild, repair or replace the Facility, with any outside
time limit on payment
<PAGE>
10
not to be less than twelve (12) months, if the Facility is destroyed or
rendered inaccessible for the use required herein.
13.5.3 Boiler and machinery insurance if at any time or from
time to time such equipment is located at the Facility.
13.5.4 If Tenant commits, permits, or causes the conduct of any
activity or the bringing or operation of any equipment on or about the
Facility creating unusual hazards, Tenant shall procure and maintain in
force during such activity or operation insurance sufficient to cover the
risks represented thereby. Landlord's demand for usual hazard insurance
hereunder shall not constitute a waiver of Landlord's right to demand the
removal, cessation, or abatement of such activity or operation.
13.5.5 Other insurance, in amounts from time to time reasonably
required by Landlord, against other insurable risks, if at the time they
are commonly insured against for facilities similar to the Facility and
commercially available to Tenant. Tenant may procure and maintain any
insurance not required by this Lease, but all such insurance shall be
subject to all other provisions of this Lease pertaining to insurance and
shall be for the mutual benefit of Landlord and Tenant.
13.6 All insurance required by the provisions of this Lease
shall be carried only with responsible insurance companies, and shall:
13.6.1 Name Landlord as an additional insured or additional loss
payee, as applicable;
13.6.2 Contain a waiver of subrogation by the insurance company
against either Landlord or Tenant. The parties hereby mutually release each
other from all claims for which the claiming party is insured or is under
this Lease required to be insured;
13.6.3 Be primary as to Landlord and noncontributing with any
insurance that may be carried by Landlord;
13.6.4 Not provide for a deductible or more than Twenty-Five
Thousand Dollars ($25,000);
13.6.5 Be provided by insurance companies duly licensed in the
State of Utah and reasonably acceptable to Landlord;
13.6.6 Provide that they cannot be canceled or materially
changed except after thirty (3O) days' written notice by the insurer to
Landlord, Bankers Trust Company, as mortgagee, and Tenant; and
13.6.7 Be on an "occurrence" basis.
To the extent such insurance policies are assignable, at the
expiration of the Term or sooner termination of this Lease, at Landlord's
option, Landlord may reimburse Tenant pro rata for all prepaid premiums on
insurance required to be maintained by Tenant, and Tenant shall thereupon assign
all Tenant's right, title, and interest in that insurance to Landlord. Tenant
may provide any blanket insurance covering the Facility and any other
<PAGE>
11
location or locations any insurance required or permitted under this Lease,
provided such blanket insurance otherwise meets the requirements of this Lease.
13.7 Each party shall deliver, in the manner required for notices
herein, copies of policies and certificates of all insurance policies required
by this Lease, together with evidence satisfactory of payment required for
procurement and maintenance of the policy, within the following time limits:
13.7.1 For insurance required at the commencement of this Lease,
upon the Rent Commencement Date.
13.7.2 For insurance becoming required at a later date, at least
ten (l0) days before the requirement takes effect.
13.7.3 For any renewal or replacement of a policy already in
existence, each party will use its best efforts to provide evidence at
least ten (10) days before expiration or other termination of the existing
policy, but, in any event, no later than the date of expiration or
termination.
If either party fails or refuses to procure or to maintain insurance as
required by this Lease or fails or refuses to furnish required proof that the
insurance has been procured and is in force and paid for, the other party shall
have the right, but not the obligation, at the other party's election, to
procure and maintain such insurance. The premiums paid by Landlord shall be
treated as additional rent due from Tenant with interest at the Past Due
Interest Rate in accordance with Section 2.4, to be paid on the first day of the
month following the date on which the premiums were paid. Landlord shall give
Tenant prompt notice of the payment of such premiums, stating the amounts paid
and the name of the insurer or insurers, and interest shall run from the date of
payment by Landlord. The premiums paid by Tenant shall be treated as credits
against rentals owed.
13.8 All personal property brought into the Facility shall be at the
risk of Tenant only, and Landlord shall not be liable for theft thereof or any
damages thereto occasioned from any act of any other person, other than as
covered by Section 13.1.
SECTION 14. ASSIGNMENT, SUBLETTING AND OWNERSHIP.
14.1 Tenant shall not, without the prior written consent of Landlord,
which consent Landlord may not unreasonably withhold, it being deemed reasonable
for Landlord to withhold consent if such assignee is not financially able to
fulfill Tenant's duties and obligations hereunder, transfer or assign this Lease
or any interest hereunder, or sublet the Facility or any part thereof, or permit
the use of the Facility or any part thereof by any party other than Tenant.
Consent to one assignment or sublease shall not destroy or waive this provision,
and all later assignments and subleases shall likewise by made only upon the
prior written consent of Landlord. Any and all rents payable to Tenant by any
sublessee shall be included in the calculation of Net Revenue. Subtenants or
assignees shall become liable, without the necessity of any further
documentation whatsoever, directly to Landlord for all obligations of Tenant
hereunder. No such sublease or assignment shall relieve Tenant of liability
under this Lease, and after any such sublease or assignment, Tenant and
<PAGE>
12
the sublessee or assignee shall be jointly and severally liable for all of
Tenant's obligations hereunder. If Tenant is a partnership, limited liability
company or corporation, then the transfer of a majority interest in the Tenant
other than as set forth below shall be deemed a transfer for purposes of
assignment or subletting which requires the consent of Landlord hereunder. For
the purposes of this Section 14, any single sale, assignment, transfer, or other
disposition, or any series of sales, assignments, transfers, or other
dispositions, of any of the issued and outstanding capital stock of Tenant which
shall result in changing the "ownership" or "control" of Tenant shall be
construed as a transfer of this Lease. "Control" means possession, direct or
indirect, of the power to elect or designate fifty percent (50%) or more of the
governing board, or to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting securities, by
contract, or otherwise. "Ownership" means the possession, direct or indirect,
of fifty percent (50%) or more of the outstanding securities of an entity.
Notwithstanding anything to the contrary set forth herein, Tenant may assign
this Lease or sublet all or any portion of the Facility without Landlord's
consent, and without paying any Sublease Profits to Landlord, to any person or
entity (i) affiliated with, controlled (directly or indirectly) by or under
common control (directly or indirectly) with Tenant or (ii) into or with which
Tenant is merged or consolidated or (iii) which acquires the stock or assets of
Tenant or any portion thereof.
14.2 Landlord may transfer or assign its interest in the Lease or in
the Facility at any time in its sole discretion, but only if the transferee or
assignee assumes all of Landlord's obligations in writing in favor of Tenant
post assignment, it being understood and agreed that the prior Landlord shall be
liable for obligations arising pre-assignment.
SECTION 15. ACCESS TO PREMISES. Landlord may enter the Facility at any
reasonable time upon reasonable prior notice during the Term for purposes of
inspection of the Facility, to market the Facility or to perform maintenance and
repair obligations imposed upon Landlord by this Lease.
SECTION 16. DEFAULTS BY TENANT.
16.1 The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant (individually, an "Event of
Default" and collectively, "Events of Default):
16.1.1 Failure by Tenant to pay Base Rental, Percentage Rental
or any other amounts payable to Landlord hereunder when due within ten (10)
days after written notice thereof by Landlord to Tenant; or
16.1.2 Failure by Tenant to perform any of its obligations
(other than monetary payments addressed under subsection 16.1.1 above)
under this Lease when due within thirty (30) days after the giving of
written notice thereof by Landlord to Tenant or such longer period of time
as is reasonably needed to perform such obligations under the
circumstances; or
16.1.3 Tenant shall become insolvent, or make a transfer in
fraud of creditors, or make an assignment for the benefit of creditors; or
16.1.4 Tenant shall file a petition under any section or chapter
of Title 11 of the United States Code relating to Bankruptcy, as amended,
or similar bankruptcy laws (the "Bankruptcy Code"), or under any
<PAGE>
13
similar law or statute of the United States or any state thereof; or there
shall be filed against the Tenant or a petition in bankruptcy or insolvency
or a similar proceeding, and any such proceeding filed against Tenant shall
not have been dismissed within sixty (60) days after its commencement; or
Tenant shall be adjudged bankrupt or insolvent in proceedings filed against
or by Tenant; or
16.1.5 A receiver, liquidator or trustee is appointed for
Tenant's property or any part thereof (the term "property" including,
without limitation, Tenant's interest in the Facility) and is not removed
within sixty (60) days after such appointment; or
16.1.6 The Facility or Tenant's effects or interest therein
should be levied upon or attached under process; or
16.1.7 Tenant shall take advantage of any debtors relief
proceedings under any present or future law whereby the Base Rental,
Percentage Rental or other amounts payable to Landlord hereunder or any
part thereof is or is proposed to be reduced or payment hereof deferred.
16.2 Upon the occurrence of an Event of Default, Landlord shall have
the option to do any one or more of the following, in addition to and not in
limitation of any other remedy permitted by law or equity or by this Lease:
16.2.1 Landlord may without notice or demand on Tenant terminate
this Lease in which event Tenant shall immediately surrender the Facility
in accordance with the provisions of this Lease to Landlord and remove all
of Tenant's effects therefrom; or
16.2.2 Without terminating this Lease, Landlord may reenter the
Facility and repossess itself thereof and expel all persons and effects
therefrom using such force as may be necessary and without being guilty of
trespass, forcible entry, or detainer or other tort and without being
liable for prosecution or any claim for damages therefor; or
16.2.3 Landlord may do whatever Tenant is obligated to do under
the terms of this Lease; and Tenant agrees to reimburse Landlord on demand,
as additional rental, for any expenses, including reasonable attorneys'
fees and interest at the Past Due Interest Rate, which Landlord may incur
in thus effecting compliance with Tenant's obligations under this Lease,
and Tenant further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action; or
16.2.4 Landlord may terminate this Lease and recover from Tenant
all damages Landlord may incur by reason of Tenant's default including,
without limitation, all amounts previously due hereunder and a sum which at
the date of such termination represents the present value (discounted at a
rate equal to the then average rate for Moody's "AAA" rated corporate
bonds) of the excess, if any, of (i) the Base Rental, Percentage Rental and
other amounts that would have been payable hereunder by Tenant to Landlord
for the period commencing with the day following the date of such
termination and ending with the date set forth herein for expiration of the
full Term hereunder, over
<PAGE>
14
(ii) the aggregate reasonable rental value of the Facility for the same
period, all of which present value of such excess sum shall be deemed
immediately due and payable; or
16.2.5 Landlord may, without liability to Tenant and without the
same constituting the basis for any claim of constructive eviction and for
so long as such default continues, suspend furnishing or rendering to
Tenant any property, material, labor, utility or any other service Landlord
would or might otherwise be obligated to render or furnish Tenant either
hereunder, under separate agreements between Landlord and Tenant or under
applicable law, ordinance or regulation; or
16.2.6 In any case in which Landlord has recovered possession of
the Facility after an Event of Default, Landlord may allow the Facility to
remain unoccupied and collect Base Rental, Percentage Rental and other
amounts payable to Landlord hereunder as the same become due; or
16.2.7 In any case in which Landlord has recovered possession of
the Facility after an Event of Default, Landlord may occupy the Facility or
cause the Facility to be altered, divided or otherwise changed or prepared
for reletting and may relet the Facility or any part thereof at the best
price obtainable by reasonable effort without advertisement and by private
negotiations, as agent of Tenant or otherwise, for a term or terms to
expire prior to, at the same time as, or subsequent to the original
expiration date of this Lease and receive the rent therefor, applying the
same first to the payment of such expenses as Landlord may have incurred in
connection with the recovery of possession, preparing for reletting and the
reletting, including procurement, brokerage and reasonable attorneys' fees
and then to the payment of damages in amounts equal to the Base Rental,
Percentage Rental and all other amounts payable to Landlord hereunder and
to the cost and expense of performance of the other covenants of Tenant as
herein provided; and Tenant agrees, irrespective of whether Landlord has
relet, to pay to Landlord damages equal to the Base Rental, Percentage
Rental and other amounts payable to Landlord hereunder, less the net
proceeds of the reletting, if any, as ascertained from time to time, and
the same shall be payable by Tenant on the due dates as specified herein.
In reletting the Facility as aforesaid, Landlord may grant rent
concessions, and Tenant shall not be credited therewith. If Landlord
elects, pursuant hereto, actually to occupy and use the Facility or any
part thereof during any part of the balance of the Term, there shall be
allowed against Tenant's obligation for Base Rental, Percentage Rental or
other amounts payable to Landlord hereunder, during the period of
Landlord's occupancy, the reasonable value of such occupancy, not to exceed
in any event the Base Rental, Percentage Rental and other amounts herein
reserved, and such occupancy shall not be construed as a release of
Tenant's liability hereunder. In no event shall the Tenant be entitled to
any excess of the net proceeds of any such reletting over the Base Rental,
Percentage Rentals and other amounts reserved herein, any such excess being
the sole property of Landlord.
16.3 Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any other remedies
provided by law or
<PAGE>
15
equity, nor shall pursuit of any remedy herein provided constitute a forfeiture
or waiver of any Base Rental, Percentage Rental and other amounts payable to
Landlord hereunder or of any damages accruing to Landlord by reason of the
violation of any of the terms, provisions and covenants herein contained. No
action taken by or on behalf of the Landlord shall be construed to be an
acceptance of a surrender of this Lease, or deemed to be evidence thereof.
Forbearance by Landlord to enforce one or more of the remedies herein provided
upon an Event of Default shall not be deemed or construed to constitute a waiver
of such default. Landlord shall, in any event, mitigate damages.
16.4 In no event shall Tenant be entitled to exercise any right,
power or option, otherwise available to or exercisable by Tenant hereunder, at
any time when Tenant is in default in the performance or observance of any of
the covenants, stipulations, agreements, terms, provisions or conditions on its
part to be performed or observed under this Lease beyond the expiration of all
applicable notice and cure periods.
16.5 Notwithstanding anything elsewhere herein to the contrary, in
the event that this Lease is attempted to be assumed under federal or state
bankruptcy law by a trustee in bankruptcy for Tenant or by Tenant as debtor in
possession (hereinafter collectively referred to "Tenant's Trustee") and there
exists an Event of Default or such state of facts which with the giving of
notice and the passage of time would constitute an Event of Default, such
attempted assumption shall not be effective unless Tenant's Trustee:
16.5.1 cures, or provides adequate assurance that it will
promptly cure, all Events of Default;
16.5.2 compensates, or provides adequate assurance that it will
promptly compensate, Landlord for any actual pecuniary loss to
Landlord resulting from all such Events of Default; and
16.5.3 provides "adequate assurance of future performance" (as
such term is herein defined) of Tenant's obligations and covenants
under this Lease.
16.6 For purposes of the foregoing Section 16.5, "adequate assurance
of future performance" shall be deemed to include, without limitation, adequate
assurance of the following:
16.6.1 the source of Base Rental, Percentage Rental and other
amounts payable to Landlord hereunder;
16.6.2 that assumption or assignment of this Lease shall not
breach any provision in any other lease, financing agreement or master
agreement relating to the Facility;
16.6.3 that assumption or assignment of this Lease shall not
violate the provisions of this Lease governing permitted use; and
16.6.4 that assumption or assignment of this Lease shall not
alter or affect materially any other obligation or duty of Tenant, nor be
used to circumvent the remainder of the provisions of this Lease.
16.7 Furthermore, Tenant's Trustee may assign this Lease only if
Tenant's Trustee assumes the Lease in accordance with the above provisions and
the assignee of
<PAGE>
16
Tenant's Trustee provides adequate assurance of future performance of Tenant's
obligations and covenants under this Lease (whether or not an Event of Default
has occurred under the Lease), including, without limitation, the items listed
in Section 16.6 above.
16.8 If Landlord shall not be permitted to terminate this Lease as
provided herein because of the provisions of the Bankruptcy Code, the Tenant as
a debtor in possession or any trustee for Tenant agrees promptly, within no more
than fifteen (15) days upon request by Landlord to the Bankruptcy Court, to
assume or reject this Lease, and Tenant, on behalf of itself and any trustee,
agrees not to seek or request any extension or adjournment of any application to
assume or reject this Lease by Landlord with such Court. In no event after the
assumption of this Lease shall any then existing Event of Default remain uncured
for a period in excess of (i) ten (lO) days and (ii) the time period set forth
herein. In the event of a filing of a petition under the Bankruptcy Code,
Landlord shall have no obligation to provide Tenant with any service or
utilities as herein required unless Tenant shall have paid and is current in all
payments for such services.
16.9 If an Event of Default occurs, then in addition to any remedies
provided Landlord under Section 16.2 or at law or in equity, Landlord may retain
to be applied as partial damages, and not as a penalty any prepaid rents.
Should Landlord violate any of the provisions of this Lease, then
Tenant shall furnish Landlord with a written notice thereof (except in an
emergency). Should Landlord fail to correct said violation within a reasonable
time following delivery of such notice, or in an emergency, then, in any such
case, Tenant may cure such violation on Landlord's behalf, offset the cost
thereof against the rent and other sums due under this Lease and may also seek
and enforce any other lawful remedies to which it may be entitled.
SECTION 17. LANDLORD LIABILITY. The term "Landlord" as used in this Lease
means only the then-current owner of the Facility. Landlord shall be under no
personal liability with respect to any of the provisions of this Lease or with
respect to any claims or causes of action arising out of or related to the
Facility or this Lease, and Tenant shall look solely to the equity of the
Landlord in the Facility for the satisfaction of Landlord's liability under the
terms of this Lease or with respect to any such claims or causes of action.
Notwithstanding the foregoing, the provisions of this Section 17 shall not apply
with respect to Landlord's representations and obligations under Sections 4, 6,
10 and 32 and, in the case of any assignment by Landlord, the prior Landlord
shall have liability for obligations arising prior to such assignment and the
assignee shall have liability for obligations arising after the assignment.
SECTION 18. SURRENDER OF PREMISES. Tenant shall, upon expiration of the Term
granted or any earlier termination of this Lease, surrender to Landlord the
Facility in good condition and order excepting only for normal wear and tear and
excluding all trade fixtures, signs and other personal property which remain the
property of Tenant as provided in Section 8 hereof.
SECTION 19. EMINENT DOMAIN.
19.1 In the event that any portion of the building occupied by Tenant
on the Facility or any material portion of the Facility shall be appropriated or
taken under the power of eminent domain by any public or quasi-public authority,
then at the election of Tenant, this Lease shall
<PAGE>
17
terminate and expire as of the date of such taking, and both Landlord and Tenant
shall thereupon be released from any liability thereafter accruing hereunder.
19.2 In the event that more than thirty percent (30%) of the square
footage of the parking area on the Facility is taken under the power of eminent
domain by any public or quasi-public authority and Landlord does not provide
adequate substitute parking for Tenant, then Tenant shall have the right to
terminate this Lease as of the date of the taking.
19.3 Notice of any termination relating to such eminent domain
proceeding must be given by the Tenant within sixty (60) days after receipt of
written notice of such taking.
19.4 In the event of any termination under this Section 19, both
Landlord and Tenant shall thereupon be released from any liability thereafter
accruing hereunder.
19.5 Landlord shall be entitled to receive the entire award or
proceeds from any such condemnation or purchase in lieu thereof, including any
award made or proceeds paid for the value of Tenant's interest under this Lease,
the Tenant hereby assigning to the Landlord the Tenant's interest in such award
and proceeds, if any; provided, however, nothing herein contained shall be
construed to preclude Tenant from prosecuting any claim directly against the
condemning authority for loss of business, and damage to and the cost of removal
of trade fixtures, furniture and other personal property belonging to Tenant so
long as no such claim diminishes or adversely affects Landlord's award. If this
Lease is terminated as herein above provided, all items of rent, additional rent
and other charges for the last month of Tenant's occupancy shall be prorated and
Landlord agrees to refund to Tenant any rent, additional rent or other charges
paid in advance.
19.6 If this Lease is not so terminated, Tenant shall remain in that
portion of the Facility which shall not have been appropriated or taken as
herein provided and Landlord shall promptly and fully restore the Facility as an
integrated unit, and during such period all rentals and other changes shall be
appropriately abated and/or reduced, and Landlord shall receive all compensation
or damages arising from the appropriation or taking. For the purpose of this
Section 19, a voluntary sale or conveyance in lieu of condemnation, but under
threat of condemnation shall be deemed an appropriation or taking under the
power of eminent domain.
SECTION 20. ATTORNEYS' FEES. In the event that either party shall institute
any action or proceeding against the other party arising out of or relating to
the Facility or the provisions of this Lease, or any default hereunder, then the
non-prevailing party agrees to reimburse the prevailing party for the reasonable
expenses of attorneys' fees and paralegal fees and disbursements incurred
therein by the prevailing party. Such reimbursement shall include all legal
expenses incurred prior to trial, at trial and at all levels of appeal and post
judgment proceedings.
SECTION 21. NOTICES. All notices and other communications hereunder shall be
(i) in writing (except to the extent otherwise expressly provided hereunder,
(ii) delivered by commercial overnight or same-day delivery service with all
delivery costs paid by sender, or by registered or certified mail with postage
prepaid, return receipt requested, (iii) deemed given, on the date and at the
time (if recorded) of delivery by the commercial delivery service, as shown in
the records thereof (if delivered by commercial
<PAGE>
18
overnight or same-day delivery service), or on the date shown on the return
receipt (if delivered by registered or certified mail), and (iv) addressed to
the parties at their addresses specified below (or at such other address for a
party as shall be specified by like notice).
If to Landlord:
--------------
c/o Charter Medical Corporation
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Attention: General Counsel
If to Tenant:
------------
c/o Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue
Suite 1700
New Orleans, Louisiana 70113
Attention: President
SECTION 22. REMEDIES. All rights and remedies of Landlord and Tenant herein
created or otherwise extending at law are cumulative, and the exercise of one or
more rights or remedies may be exercised and enforced concurrently or
consecutively and whenever and as often as deemed desirable.
SECTION 23. SUCCESSORS AND ASSIGNS. All covenants, promises, conditions,
representations and agreements herein contained shall be binding upon, apply and
inure to the parties hereto and their respective heirs, executors,
administrators, successors and assigns; it being understood and agreed, however,
that the provisions of Section 14 are in nowise impaired by this Section 23.
SECTION 24. WAIVER. The failure of either Landlord or Tenant to insist upon
strict performance by the other of any of the covenants, conditions and
agreements of this Lease shall not be deemed a waiver of any subsequent breach
or default in any of the covenants, conditions and agreements of this Lease.
SECTION 25. HOLDING OVER. If Tenant or any party claiming under Tenant remains
in possession of the Facility or any part thereof after any termination or
expiration of this Lease, Landlord, in Landlord's sole discretion, may treat
such holdover as an automatic renewal of this Lease for a month-to-month tenancy
subject to all the terms and conditions of this Lease except that Base Rental
shall double.
SECTION 26. RELATIONSHIP BETWEEN PARTIES.
26.1 The parties hereto agree that it is their intention hereby to
create only the relationship of landlord and tenant, and no provision hereof, or
act of either party hereunder, shall ever be construed as creating the
relationship of principal and agent, or a partnership, or a joint venture or
enterprise between the parties hereto.
26.2 Notwithstanding anything herein to the contrary and
notwithstanding the length of the Term, this contract shall create the
relationship of "landlord" and "tenant" between Landlord and Tenant; no estate
shall pass out of Landlord; Tenant has only a contractual interest not subject
to levy and sale and not assignable or subject to encumbrance by Tenant except
with Landlord's written consent, which consent may be withheld in Landlord's
sole discretion.
<PAGE>
19
SECTION 27. COVENANT OF TITLE AND QUIET ENJOYMENT. Landlord covenants that it
has full right, power and authority to make this Lease and that Tenant or any
permitted assignee or sublessee of Tenant, upon the payment of the rentals and
performance of the covenants hereunder, shall and may peaceably and quietly
have, hold and enjoy the Facility during the Term without interference from any
parties whomsoever.
SECTION 28. RECORDING. Neither this Lease nor any memorandum or "short-form"
of this Lease shall be recorded by either party.
SECTION 29. FORCE MAJEURE. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance required hereunder by
reason of strikes, lockouts, labor troubles, failure of power, riots,
insurrection, war, acts of God or other reason of like nature not the fault of
the party delayed in performing work or doing acts, such party shall be excused
for the period of delay. The period of the performance of any such act shall
then be extended for the period of such delay.
SECTION 30. CONSENT. Wherever in this Lease Landlord or Tenant is required to
give its consent or approval, such consent or approval shall not be unreasonably
withheld or delayed, unless indicated otherwise in the provision creating the
necessity for such consent.
SECTION 31. TENANT'S AUTHORITY. If Tenant is a corporation or partnership, the
officers or partners of Tenant (as the case may be) executing this Lease on
Tenant's behalf make the following warranties and representations upon which
Landlord is relying in agreeing to lease the Facility to Tenant in accordance
with the terms of this Lease:
31.1 that Tenant has been duly organized, is validly existing and is
in good standing in the State of Utah;
31.2 that Tenant has been duly qualified and is, as of the date
hereof, in good standing to transact business in the State of Utah; and
31.3 that the officers or partners executing this Lease on Tenant's
behalf have been duly authorized by all necessary corporate or partnership
action to execute the same, and that upon the execution hereof, this Lease shall
be the valid and binding obligation of Tenant.
SECTION 32. LANDLORD'S AUTHORITY. If Landlord is a corporation or partnership,
the officers or partners of Landlord (as the case may be) executing this Lease
on Landlord's behalf, make the following warranties and representations upon
which Tenant is relying and agreeing to lease the Facility from the Landlord in
accordance with the terms of this Lease:
32.1 that Landlord has been duly organized, is validly existing and
in good standing in the State of Utah;
32.2 that Landlord has been duly qualified and is, as of the date
hereof, in good standing to transact business in the State of Utah;
32.3 that the officers or partners executing this Lease on Landlord's
behalf have been duly authorized by all necessary corporate or partnership
action to execute the same, and that upon the execution hereof, this Lease shall
be the valid and binding obligation of Landlord; and
<PAGE>
20
32.4 that Landlord has obtained all necessary consents, approvals,
authorization, or other action by, or filing with, any federal, state or local
governmental authority necessary in connection with the execution and delivery
by the Landlord of this Lease and the consummation of the transactions
contemplated hereby.
SECTION 33. SEVERABILITY. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provisions shall remain in full force and
effect.
SECTION 34. GOVERNING LAW. This Lease shall be governed by the laws of the
State of Utah.
SECTION 35. MORTGAGEE'S RIGHTS.
35.1 This Lease shall be subject and subordinate to any trust deeds,
deeds to secure debt, security deeds, or mortgages or any liens resulting from
any other method of financing or refinancing (all of which shall hereinafter be
called "Mortgage") now or hereafter encumbering all or any part of the Facility,
and to all advances made or hereafter to be made upon the security thereof, and
renewals and extensions of all or any part thereof but only on condition that
the holder of any such Mortgage recognizes and agrees not to disturb the tenancy
of Tenant under this Lease pursuant to a written agreement in Tenant's favor.
This provision shall be self-operative and no further instrument of
subordination shall be required to establish the priority of any such Mortgage
over this Lease.
35.2 If the holder of any Mortgage (a "Mortgagee") elects to have
this Lease superior to its Mortgage and signifies its election in the instrument
creating its lien or by separate recorded instrument, then this Lease shall be
superior to such Mortgage.
35.3 Within ten (10) days after request therefor by Landlord, the
Tenant agrees to execute and deliver in recordable form an estoppel certificate
to any Mortgagee, proposed mortgagee, purchaser, proposed purchaser, Landlord or
other party designated by any of the foregoing certifying (if such be the case)
that this Lease is unmodified and in full force and effect (and if there has
been modification, that the same is in full force and effect as modified and
stating the modifications); that there are no defenses or offsets against the
enforcement therefor or stating those claimed by the Tenant; and stating the
date to which rentals and other charges have been paid. Such certificate shall
also include such other information as may be reasonably required by Landlord.
In the event Tenant fails to execute and deliver such an estoppel certificate
within ten (10) days after the request therefor, Landlord is hereby expressly
empowered and authorized to execute such a certificate in the name of Tenant,
and as the act of Tenant, as attorney-in-fact for Tenant, the power and
authority herein conveyed being coupled with an interest and irrevocable.
35.4 In the event of any foreclosure, sale under power of sale under
the Mortgage, or sale in lieu of foreclosure or sale under power under any such
Mortgage, this Lease shall, at the election of the purchaser at said sale
continue in full force and effect, and Tenant will, upon request, attorn to and
acknowledge said purchaser or lessor, as the case may be, as Landlord hereunder,
but only if such purchaser recognizes and does not disturb the tenancy of Tenant
under this Lease pursuant to a written agreement in Tenant's favor.
<PAGE>
21
35.5 Notwithstanding anything to the contrary setforth herein,
Landlord agrees to deliver, and no rentals or other charges under this Lease
shall accrue or be due and payable unless and until Landlord shall have
delivered, a non-disturbance agreement from the current mortgagee(s) in form and
substance reasonably acceptable to Tenant.
SECTION 36. BROKERS. Tenant and Landlord represent to each other that neither
has had any dealings with any real estate brokers or agents in connection with
the negotiation of this Lease. Landlord and Tenant shall indemnify and hold
each other harmless from and against any and all liability and cost which the
indemnified party may suffer in connection with real estate brokers claiming by,
through or under the indemnifying party for any commission, fee or payment in
connection with this Lease.
SECTION 37. TIME OF THE ESSENCE. Time shall be of the essence in interpreting
the provisions of this Lease.
SECTION 38. ENTIRE AGREEMENT; CONSTRUCTION OF AGREEMENT. This Lease contains
all of the agreements, representations, warranties and understandings of the
parties hereto with respect to matters covered or mentioned in this Lease and no
prior agreement, letters, representations, warranties, promises or
understandings pertaining to any such matters shall be effective for any such
purpose. This Lease may be amended or added to only by an agreement in writing
signed by the parties hereto or their respective successors in interest. All
parties acknowledge and agree that they have been represented by counsel and
that each of the parties has participated in this drafting of this Lease.
Accordingly, it is the intention and agreement of the parties that the language,
terms and conditions of this Lease are not to be construed in any way against or
in favor of any party hereto by reason of the responsibilities in connection
with the preparation of this Lease.
SECTION 39. EQUIPMENT PROVISIONS.
39.1 THE LANDLORD, BEING NEITHER THE MANUFACTURER OF, NOR A SUPPLIER
OF, NOR A DEALER IN THE EQUIPMENT, MAKES NO WARRANTY,EXPRESS OR IMPLIED, TO
ANYONE, AS TO THE FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, DESIGN,
CONDITION, CAPACITY, PERFORMANCE OR ANY OTHER ASPECT OF THE EQUIPMENT OR ITS
MATERIAL OR WORKMANSHIP. In addition, the Landlord makes no warranty as to the
treatment of this Lease, for tax or accounting purposes. The Landlord further
disclaims any liability for loss, damage or injury to the Tenant or third
parties as a result of any defects, latent or otherwise, in the Equipment
whether arising from the Landlord's negligence or application of the laws of
strict liability. The Tenant agrees to lease and is leasing the Equipment "AS
IS." The Landlord shall have no obligation to maintain, repair, test, adjust or
service the Equipment.
39.2 During the Term, the Landlord hereby assigns to the Tenant,
solely for the purpose of prosecuting a claim relating to the Equipment, all of
the rights, if any, which the Landlord may have pursuant to any warranty to
other representations of any supplier, manufacturer or other vendor with respect
to the Equipment.
39.3 The Tenant, at its own expense, shall (i) maintain and keep the
Equipment in good repair, condition and working order, (ii) use the Equipment
lawfully and (iii) not after the Equipment without the Landlord's prior written
consent, which shall not be unreasonably withheld. If the manufacturer of the
Equipment suggests a standard maintenance schedule, such schedule will
constitute minimum maintenance compliance, and the Tenant, upon request, will
supply the Landlord with evidence of such compliance. In
<PAGE>
22
addition, the Tenant shall cause the Equipment to be operated in accordance with
any applicable supplier's, manufacturer's or other vendor's manual or other
instruction book supplied by Landlord to Tenant by competent and qualified
personnel. The Equipment shall not be removed from the Building without the
Landlord's prior written consent, which consent shall not be unreasonably
withheld. The Landlord shall have the right to inspect the Equipment at any
reasonable time upon reasonable prior notice.
39.4 Upon the expiration or termination of this Lease and upon the
request of the Landlord, the Tenant shall return, at its own expense, the
Equipment to the Landlord in good repair, condition and working order, ordinary
wear and tear excepted.
39.5 The Tenant shall bear all risks of loss of and damage to the
Equipment from any cause from the date hereof, ordinary wear and tear excepted.
The occurrence of any such loss or damage shall not relieve the Tenant of any
obligation hereunder. In the event of loss or damage, the Tenant, at the
Landlord's option, shall (i) place the damaged Equipment in good repair,
condition and working order, (ii) replace lost or damaged Equipment with like
Equipment in good repair, condition and working order with documentation
evidencing clear title thereto in the Landlord or (iii) pay to the Landlord the
value of the Landlord's residual interest in the lost or damaged Equipment.
Upon the Landlord's receipt of the payment described in clause (iii) above, the
Tenant and/or the Tenant's insurer shall be entitled to the Landlord's interest
in the lost or damaged Equipment for salvage purposes, in its then-condition and
location, as is, without warranty, express or implied.
39.6 The Tenant shall pay all sales, use, excise, personal property,
stamp, documentary and ad valorem taxes, license and registration fees,
assessments, fines, penalties and other similar charges imposed on the
ownership, possession or use of the Equipment during the Term and all taxes
(except the Landlord's federal or state income or similar taxes) imposed on the
Landlord or the Tenant with respect to any and all rent and monetary payments
hereunder. The Tenant shall reimburse the Landlord upon demand for all such
taxes paid by or advance by the Landlord. The Tenant shall file all returns
required therefor and furnish copies to the Landlord upon request.
39.7 In the event Tenant determines that any item of Equipment has
become obsolete, worn out or is no longer needed by Tenant in the operation of
the Facility, the obsolete, worn out or surplus item shall, at Landlord's
option, be delivered to Landlord for its own use, sold to a third party and the
net proceeds of sale paid directly to Landlord, or otherwise disposed of
pursuant to Landlord's direction. Tenant shall notify Landlord in writing of
any such obsolete, worn out or surplus Equipment, requesting instructions. If
Landlord does not instruct Tenant as to the disposition of such Equipment within
two (2) weeks after written request by Tenant, Tenant may dispose of the items
of Equipment identified in the request in any manner it sees fit. Upon the
disposition of any item of obsolete or surplus Equipment, this Lease shall
terminate with respect to such item of Equipment, with no adjustment to the rent
payable to Landlord hereunder. All replacement of obsolete or worn out
Equipment, and any additional furniture, fixtures and equipment purchased by
Tenant in connection with the Facility, shall be at Tenant's expense, and shall
be owned by Tenant. Landlord shall have no obligation to replace any Equipment
determined by Tenant to be obsolete, worn out or surplus.
<PAGE>
23
SECTION 40. RECORDING OF MEMORANDUM. The parties shall, simultaneously
herewith, execute and deliver a memorandum of lease (which notes Tenant's
purchase option) in recordable form for recordation in the appropriate land
records.
SECTION 41. TENANT'S OPTION TO PURCHASE. During the period ending six months
after the date hereof, Landlord and Tenant shall negotiate in good faith on the
terms and conditions of an option by Tenant to purchase the Facility at a
designated price, with all bank and other third party approvals of the terms and
conditions of the option having been obtained.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officer or partner, as applicable, to execute this Facility Lease
Agreement on the day and year first mentioned.
LANDLORD:
--------
Signed, sealed and delivered CHARTER CANYON BEHAVIORAL HEALTH
in the presence of: SYSTEM, INC., a Utah corporation
[SIGNATURE IS ILLEGIBLE] By: [SIGNATURE IS ILLEGIBLE]
- ---------------------------- -------------------------------
Executive Assistant Title: Director of Operations
- ---------------------------- ----------------------------
TENANT:
------
Signed, sealed and delivered BOUNTIFUL PSYCHIATRIC HOSPITAL
in the presence of: INC., a Utah corporation
[signature is illegible] By: [SIGNATURE IS ILLEGIBLE]
- ---------------------------- -------------------------------
Title: President
- ---------------------------- ----------------------------
<PAGE>
24
The undersigned, Ramsay Health Care Inc. ("Guarantor"), personally
guarantees to Landlord the full performance and observance of all the
agreements, obligations and liabilities to be performed and observed by Tenant
pursuant to this Lease, without requiring any notice of non-payment or non-
performance, or proof, or notice, or demand to hold Guarantor responsible
hereunder, all of which Guarantor expressly waives, and specifically agrees that
the validity of this guaranty and the obligations of Guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion of
Landlord against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the provisions of this Lease.
Guarantor acknowledges and agrees that its liability hereunder shall be
primary in nature, and that with respect to any right of action that shall
accrue to Landlord under this Lease, Landlord may, at its option, proceed
against Guarantor under this guaranty without commencing any suit or action
against Tenant.
RAMSAY HEALTH CARE, INC.
By: [SIGNATURE IS ILLEGIBLE]
--------------------------
Name:
Title: President / Coo
<PAGE>
RAMSAY HEALTH CARE, INC.
One Poydras Plaza
639 Loyola Avenue
New Orleans, Louisiana 70113
September 15, 1995
Mr. Gregory H. Browne
c/o Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue
New Orleans, Louisiana 70113
Dear Mr. Browne:
This will confirm that you have resigned your employment and all your
positions as an officer of Ramsay Health Care, Inc. (the "Company") and its
subsidiaries, effective September 30, 1995 (the "Effective Date"). The Company
also acknowledges that you have resigned all your positions as an officer of
Ramsay Managed Care, Inc. and its subsidiaries, effective the Effective Date.
The Company undertakes to nominate you for re-election to the Board of Directors
of the Company at its 1995 Annual Meeting of Stockholders. Subsequent to such
Annual Meeting, you agree that you will resign from the Board of Directors if
requested by the Chairman of the Company.
This will further confirm the agreement between you and the Company as
follows:
1. During the period commencing on the Effective Date and ending on
September 30, 1996, the Company will (i) provide you (or your estate or legal
representative in the event of your death) with salary continuation at the
annual rate of $231,250, (ii) provide you with coverage under the medical and
dental plans of the Company on the same terms (including the same Company-paid
portions) that coverage is available to employees of the Company generally and
(iii) provide you with or reimburse you for the cost of term life insurance
coverage equivalent to the life insurance coverage currently provided to you by
the Company. The Company will sell to you as of the Effective Date for book
value plus $1.00 the Company car currently being provided to you. Your rights
and benefits under the other benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs.
<PAGE>
2
2. You agree to make three business trips to Australia for the purpose of
assisting in the management transition following the Effective Date and, in
connection therewith, the Company agrees to pay the cost of three first class
roundtrip airfares to Australia.
3. You hereby surrender to the Company for cancellation the options to
purchase common stock of the Company granted to you on June 8, 1992 originally
covering 100,000 shares of common stock (124,830 shares as adjusted following
the spinoff of Ramsay Managed Care, Inc. by the Company). All other options
granted to you by the Company shall continue in effect in accordance with the
terms of the option plan under which such options are granted and the stock
option certificate evidencing such options.
4. You agree that, in consideration of the payments referred to in Paragraph
1 hereof and for other good and valuable consideration, your receipt of which is
hereby acknowledged, you will not, except as the Company otherwise agrees in
writing, (a) for a period of one year commencing on the Effective Date (i)
solicit or endeavor to solicit patient referrals, either for your own account or
for any person, firm, corporation or other organization, from (X) any person,
including any physician, clinical psychologist, social worker or consultant to
the Company, who, during the period of your employment with the Company, made
patient referrals to the Company, or (Y) any employee of the Company, or (ii)
solicit or entice or endeavor to solicit or entice away from the Company any
person who is a director, officer, employee or consultant of the Company, either
for your own account or for any person, firm, corporation or other organization,
whether or not such person would commit any breach of his contract of employment
by reason of leaving the service of the Company, and you agree not to employ,
directly or indirectly, any person who was a director, officer or employee of
the Company at any time during the twelve (12) month period ending on the
Effective Date or (b) at any time, take any action or make any statement the
effect of which would be, directly or indirectly, to impair the goodwill,
business reputation or good name of the Company or of any of its officers or
directors, or otherwise to be detrimental to the interests of the Company or any
of its officers or directors.
You and the Company agree that if, in any proceeding, the court or other
authority shall refuse to enforce the covenants herein set forth because such
covenants cover too extensive a geographic area or too long a period of time,
any such covenant shall be deemed appropriately amended and modified
<PAGE>
3
in keeping with the intention of the parties to the maximum extent permitted by
law.
5. Your and the Company's respective rights and obligations under Section 7
(Confidential Information), Section 8 (Inventions) and Section 9 (Equitable
Relief) of the Employment Agreement dated January 7, 1992 between you and the
Company, as amended (the "Employment Agreement"), continue in full force and
effect. You agree that the provisions of Section 9 of the Employment Agreement
shall be applicable to your obligations under Paragraph 4 of this Agreement.
6. You and the Company agree that the payments provided for by this
Agreement shall be in full satisfaction of all obligations of the Company and
Ramsay Managed Care, Inc. to you for salary, bonus, vacation, sick and severance
pay, whether arising under the Employment Agreement or otherwise. All payments
to you referred to in this Agreement shall be subject to applicable Federal,
state and local withholding.
7. This Agreement shall be construed in accordance with the laws of the
State of Delaware without regard to its conflict of law provisions.
<PAGE>
4
Please indicate your agreement with the foregoing by signing the enclosed
copy of this letter and returning it to the undersigned, whereupon this shall
constitute a binding agreement between you and the Company.
Very truly yours,
RAMSAY HEALTH CARE, INC.
By (Signature appears here)
----------------------------
Agreed:
(Signature of Gregory
H. Browne appears here)
- --------------------------
Gregory H. Browne
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 7, 1995 by and between Paul
Ramsay Holdings Pty. Limited, an Australian corporation (the "Buyer"), and
Ramsay Health Care, Inc., a Delaware corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, the Buyer desires to purchase 266,667 shares of common stock, $.01
par value ("Common Stock"), of the Seller (the "Shares"), and the Seller desires
to issue and sell to the Buyer, for the consideration hereinafter provided, the
Shares.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby agree as
follows:
SECTION I
PURCHASE AND SALE OF THE SHARES
A. Purchase and Sale of the Shares. Subject to the terms and conditions of
this Agreement and on the basis of the representations, warranties, covenants
and agreements herein contained, the Seller hereby agrees to sell, issue and
convey to the Buyer on the Closing Date (as hereinafter defined), and the Buyer
hereby agrees to purchase, acquire and accept from the Seller on the Closing
Date, the Shares.
B. Purchase Price. The Buyer hereby agrees, subject to an in accordance with
the terms and conditions hereof, to pay to the Seller on the Closing Date, upon
receipt of the certificate referred to in paragraph C of this Section I, the sum
of $1,000,001.25, representing a purchase price of $3.75 per share of Common
Stock (the "Purchase Price"), payable in cash by certified or official bank
check or direct bank wire transfer of immediately available funds to a bank
account or accounts to be designated by the Seller.
C. Delivery of the Shares. Delivery of the Shares shall be made by the
Seller to the Buyer on the Closing Date by delivering a certificate of the
Seller representing 266,667 shares of Common Stock of the Seller registered in
the name of the Buyer, such certificate to be
<PAGE>
2
accompanied by any requisite documentary or stock transfer taxes.
D. The Closing. The closing of the sale of the Shares to the Buyer shall
occur on October 16, 1995 (the "Closing Date"), or on such other date as shall
be mutually agreed to between the Seller and the Buyer.
SECTION II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
The Seller hereby represents and warrants to the Buyer, as of the date
hereof and as of the Closing Date, that:
A. Organization; Good Standing. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to own its properties
and to conduct the businesses in which it is now engaged.
B. Authority. The Seller has full corporate power and authority to execute
and deliver this Agreement and to perform all of its obligations hereunder, and
no consent or approval of any other person or governmental authority is required
therefor. The execution and delivery of this Agreement by the Seller, the
performance by the Seller of its covenants and agreements hereunder and the
consummation by the Seller of the transactions contemplated hereby have been
duly authorized by all necessary corporate action. This Agreement constitutes a
valid and legally binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights or by general
principles of equity.
C. No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the Certificate of Incorporation or By-Laws of the
Seller or any law, statute, ordinance, regulation, order, judgment or decree of
any court or governmental agency, or conflicts with or results in any breach of
any of the terms of or constitutes a default under or results in the termination
of or the creation of any lien
<PAGE>
3
pursuant to the terms of any contract or agreement to which the Seller is a
party or by which the Seller or any of its assets is bound.
D. Authorization of Shares. The Shares being purchased by the Buyer
hereunder have been duly and validly authorized and, upon delivery of the
certificate representing ownership by the Buyer of the Shares as herein
provided, for the consideration herein provided, such Shares will be duly and
validly issued, fully paid and nonassessable.
SECTION III
REPRESENTATIONS AND WARRANTIES
OF THE BUYER
The Buyer hereby represents and warrants to the Seller, as of the date
hereof and as of the Closing Date, that:
A. Authority. The Buyer has full corporate power and authority to execute
and deliver this Agreement and to perform all of its obligations hereunder, and
no consent or approval of any other person or governmental authority is required
therefor. The execution and delivery of this Agreement by the Buyer, the
performance by the Buyer of its covenants and agreements hereunder and the
consummation by the Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement constitutes a valid
and legally binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights or by general principles of
equity.
B. No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any law, statute, ordinance, regulation, order, judgment or decree of
any court or governmental agency, or conflicts with or results in any breach of
any of the terms of or constitutes a default under or results in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which the Buyer is a party or by which the Buyer or any of its
assets is bound.
<PAGE>
C. Investment in the Seller.
(i) The Buyer understands that the Seller proposes to issue and deliver
to the Buyer the Shares pursuant to this Agreement without compliance with the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"); that for such purpose the Seller will rely upon the
representations and warranties of the Buyer contained herein; and that such
non-compliance with registration is not permissible unless such representations
and warranties are correct.
(ii) The Buyer understands that, under existing rules of the Securities
and Exchange Commission (the "SEC"), the Buyer may be unable to sell the Shares
except to the extent that the Shares may be sold (i) pursuant to an effective
registration statement covering such sale pursuant to the Securities Act and
applicable state securities laws or an applicable exemption therefrom or (ii) in
a bona fide private placement to a purchaser who shall be subject to the same
restrictions on any resale or (iii) subject to the restrictions contained in
Rule 144 under the Securities Act ("Rule 144").
(iii) The Buyer is not relying on the Seller respecting the financial,
tax and other economic considerations of an investment in the Common Stock, and
the Buyer has relied on the advice of, or has consulted with, only its own
advisors.
(iv) The Buyer is familiar with the provisions of Rule 144 and the
limitations upon the availability and applicability of such rule.
(v) The Buyer is a sophisticated investor familiar with the type of risks
inherent in the acquisition of restricted securities such as the Shares and its
financial position is such that it can afford to retain the Shares for an
indefinite period of time without realizing any direct or indirect cash return
on its investment.
(vi) The Buyer has such knowledge and experience in financial, tax and
business matters so as to enable the Buyer to utilize the information made
available to the Buyer in connection with the issuance of the Shares to the
Buyer and to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto.
<PAGE>
(vii) The Buyer is purchasing the Shares as an investment for its sole
account, and without any present view towards the resale or other distribution
thereof.
D. Legend. Each certificate representing Shares shall contain upon its face
or upon the reverse side thereof a legend to the following effect:
"These securities have not been registered under the Securities Act of
1933, as amended, or qualified under state securities laws and may not
be sold, pledged, or otherwise transferred unless (a) covered by an
effective registration statement under the Securities Act of 1933, as
amended, and qualified under applicable state securities laws, or (b)
the Corporation has been furnished with an opinion of counsel
acceptable to the Corporation to the effect that no registration or
qualification is legally required for such transfer."
SECTION IV
CONDITIONS TO THE SELLER'S OBLIGATION TO CLOSE
The obligation of the Seller to sell the Shares and otherwise to consummate
the transactions contemplated by this Agreement on the Closing Date is subject
to the following conditions precedent, any or all of which may be waived by the
Seller in the Seller's sole discretion, and each of which the Buyer hereby
agrees to use its reasonable best efforts to satisfy at or prior to the Closing:
A. Representations, Warranties and Covenants. The representations and
warranties of the Buyer contained herein shall be true and correct at and as of
the Closing Date with the same effect as though all such representations and
warranties were made at and as of the Closing Date and the Buyer shall have
complied with all of its covenants and agreements contained herein required to
be complied with on or prior to the Closing Date.
B. No Litigation. No action, suit, proceeding, writ, judgment, injunction,
decree or similar order of any governmental entity, authority or agency or of
any other third party restraining, enjoining or otherwise preventing the
consummation of any of the transactions contemplated by this Agreement, or
seeking to obtain any damages or any other relief as a result of this Agreement
or any of the transactions contemplated hereby, shall be pending or threatened.
<PAGE>
6
C. Approvals. All governmental, corporate and other third party filings,
consents, authorizations and approvals (if any) that are required for the
consummation of the transactions contemplated hereby shall have been duly made
and obtained in form and substance reasonably satisfactory to the Seller.
SECTION V
CONDITIONS TO THE BUYER'S OBLIGATION TO CLOSE
The obligation of the Buyer to purchase the Shares and otherwise to
consummate the transactions contemplated by this Agreement on the Closing Date
is subject to the following conditions precedent, any or all of which may be
waived by the Buyer in its sole discretion, and each of which the Seller hereby
agrees to use its reasonable best efforts to satisfy at or prior to the Closing:
A. Representations, Warranties and Covenants. The representations and
warranties of the Seller contained herein shall be true and correct at and as of
the Closing Date with the same effect as though all such representations and
warranties were made at and as of the Closing Date and the Seller shall have
complied with all of its covenants and agreements contained herein required to
be complied with on or prior to the Closing Date.
B. No Litigation. No action, suit, proceeding, writ, judgment, injunction,
decree or similar order of any governmental entity, authority or agency or of
any other third party restraining, enjoining or otherwise preventing the
consummation of any of the transactions contemplated by this Agreement, or
seeking to obtain any damages or any other relief as a result of this Agreement
or any of the transactions contemplated hereby, shall be pending or threatened.
C. Approvals. All governmental, corporate and other third party filings,
consents, authorizations and approvals (if any) that are required for the
consummation of the transactions contemplated hereby will have been duly made
and obtained in form and substance reasonably satisfactory to the Buyer.
D. No Restrictions on Management Fees. All conditions and other restrictions
on the payment of Ramsay Management Fees (as defined below) by the Seller set
forth in paragraph 2 under the caption "New and Amended Covenants"
<PAGE>
7
in the Extension Request and Amendment - Proposed Terms and Conditions delivered
to the Seller by Societe Generale, New York Branch, under its cover letter of
June 28, 1995, shall have been withdrawn, by means of documentation in form and
substance satisfactory to the Buyer, and no other restriction or condition to
the payment of Ramsay Management Fees (as defined in the Credit Agreement dated
as of May 15, 1993 (the "Credit Agreement"), among the Seller, certain
subsidiaries of the Seller, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia Bank) shall exist, including under
the Credit Agreement (or any amendment, modification or supplement thereof) or
under any other agreement or document to which the Seller is a party, other than
any restrictions in effect on the date hereof and set forth in the Credit
Agreement, the Life Company Indenture (as defined in the Credit Agreement) and
the Ramsay Management Fee Subordination Agreement (as defined in the Credit
Agreement).
SECTION VI
MISCELLANEOUS
A. Notices. All notices, requests or instructions hereunder shall be in
writing and delivered personally, by telecopy or sent by registered or certified
mail, postage prepaid, as follows:
(1) if to the Buyer:
154 Pacific Highway
Greenwich NSW 2065
Australia
Telecopy: (011) 61-2-906-5205
(2) if to the Seller:
One Poydras Plaza
639 Loyola Avenue
Suite 1700
New Orleans, Louisiana 70113
Attention: President
Telecopy No.: (504) 585-0500
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date
<PAGE>
8
of delivery, if hand delivered or delivered by telecopy, and five days after the
date of mailing, if mailed.
B. Survival of Representations. Each representation, warranty, covenant and
agreement of the parties hereto herein contained shall survive the execution of
this Agreement, notwithstanding any investigation at any time made by or on
behalf of any party hereto.
C. Entire Agreement. This Agreement and the documents referred to herein
contain the entire agreement between the parties hereto with respect to the
transactions contemplated hereby, and no modification hereof shall be effective
unless in writing and signed by the party against which it is sought to be
enforced.
D. Assignment. This Agreement shall not be assignable by the Seller or the
Buyer except pursuant to a writing executed by each of the parties hereto;
provided that the Buyer may assign any of its rights hereunder to any affiliate
of the Buyer which agrees to be bound by all of the obligations of the Buyer
hereunder or to any lender in connection with any financing transaction entered
into by the Buyer or any of its affiliates.
E. Invalidity, Etc. If any provision of this Agreement, or the application
of any such provision to any person or circumstance, shall be held invalid by a
court of competent jurisdiction, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than those as to
which it is held invalid, shall not be affected thereby.
F. Expenses. Except as expressly set forth herein, each of the parties
hereto shall bear such party's own expenses in connection with this Agreement
and the transactions contemplated hereby.
G. Headings. The headings of this Agreement are for convenience of reference
only and are not part of the substance of this Agreement.
H. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
I. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable in the case of
agreements made and to be performed entirely within such State.
<PAGE>
9
J. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
K. Third Party Beneficiary. This Agreement shall not create any rights in
favor of any person not a party hereto.
<PAGE>
10
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
PAUL RAMSAY HOLDINGS PTY. LIMITED
By: /s/ [Signature appears here]
-----------------------------------
Name:
Title: Director
RAMSAY HEALTH CARE, INC.
By: /s/ [Signature appears here]
-----------------------------------
Name:
Title: President
<PAGE>
10
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
PAUL RAMSAY HOLDINGS PTY. LIMITED
By:
-----------------------------------
Name:
Title:
RAMSAY HEALTH CARE, INC.
By: /s/ [Signature appears here]
-----------------------------------
Name:
Title: President
<PAGE>
EXHIBIT 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
PRIMARY
Weighted average common shares outstanding.... 7,743,314 7,738,422 7,841,818
Class A convertible preferred stock........... --* 22,910 22,910
Class B convertible preferred stock, Series C. --* 1,424,860 --
Net effect of dilutive stock options and
warrants--based on the treasury stock method
using average market price................... --* 454,911 67,455
------------ ---------- -----------
Total.................................. 7,743,314 9,641,103 7,932,183
============ ========== ===========
Income (loss) before extraordinary items and
cumulative effect.......................... $(17,045,000) $1,477,000 $(2,333,000)
Extraordinary items........................... (257,000) (155,000) (1,580,000)
Cumulative effect............................. -- -- 2,353,000
------------ ---------- -----------
Net income (loss)............................. $(17,302,000) $1,322,000 $(1,560,000)
============ ========== ===========
Per Share amounts:
Income (loss) before extraordinary items and
cumulative effect........................ $ (2.25) $ 0.15 $ (0.29)
Extraordinary items......................... (0.03) (0.01) (0.20)
Cumulative effect........................... -- -- 0.29
------------ ---------- -----------
Net income (loss)........................... $ (2.28) $ 0.14 $ (0.20)
============ ========== ===========
FULLY DILUTED
Weighted average common shares outstanding.... 7,793,542 7,738,422 7,841,818
Class A convertible preferred stock........... --* 22,910 22,910
Class B convertible preferred stock, Series C. --* 1,424,860 --
Net effect of dilutive stock options and
warrants--based on the treasury stock method
using the year-end market price, if higher
than average market price.................... --* 492,793 67,455
------------ ---------- -----------
Total.................................... 7,793,542 9,678,985 7,932,183
============ ========== ===========
Income (loss) before extraordinary items and
cumulative effect.......................... $(17,045,000) $1,477,000 $(2,333,000)
Extraordinary items........................... (257,000) (155,000) (1,580,000)
Cumulative effect............................. -- -- 2,353,000
------------ ---------- -----------
Net income (loss)............................. $(17,302,000) $1,322,000 $(1,560,000)
============ ========== ===========
Per share amounts:
Income (loss) before extraordinary items
and cumulative effect..................... $ (2.24) $ 0.15 $ (0.29)
Extraordinary items......................... (0.03) (0.01) (0.20)
Cumulative effect........................... -- -- 0.29
------------ ---------- -----------
Net income (loss)........................... $ (2.27) $ 0.14 $ (0.20)
============ ========== ===========
</TABLE>
* Common stock equivalents not considered given loss reported for the year.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF RAMSAY HEALTH CARE, INC.
Americare of Galax, Inc.
Atlantic Treatment Center, Inc.
Behavioral Medicine Services of West Virginia, Inc.
Bethany Psychiatric Hospital, Inc.
Bountiful Psychiatric Hospital, Inc.
Carolina Treatment Center, Inc.
Cumberland Mental Health, Inc.
East Carolina Psychiatric Services Corporation
Flagstaff Psychiatric Hospital, Inc.
FPM Behavioral Health, Inc.
FPM/Hawaii, Inc.
Florida Psychiatric Management, Inc.
Florida Psychiatric Associates of South Florida, Inc.
Florida Psychiatric Associates, Inc.
Great Plans Hospital, Inc.
Greenbrier Hospital, Inc.
Gulf Coast Treatment Center, Inc.
Havenwyck Hospital, Inc.
H.C. Corporation
Health Group of Las Cruces, Inc.
<PAGE>
Houma Psychiatric Hospital, Inc.
HSA Hill Crest Corporation
HSA Lynnhaven, Inc.
HSA Medical Offices of Mesa, Inc.
HSA of Oklahoma, Inc.
Integrated Behavioral Services, Inc.
Life Centers of Michigan, Inc.
Mainstream, Inc.
Manhattan Psychiatric Hospital, Inc.
Meadowlake/Western Alliance, LLC
Mesa Psychiatric Hospital, Inc.
Michigan Psychiatric Services, Inc.
Psychiatric Institute of West Virginia, Inc.
PsychOptions, Inc.
Ramsay Arizona Health Management Services, Inc.
Ramsay Chicago, Inc.
Ramsay HDI, Inc.
Ramsay Louisiana, Inc.
Ramsay Management Services of West Virginia, Inc.
Ramsay New Orleans, Inc.
Ramsay Nevada, Inc.
Ramsay Nursing Home Services, Inc.
Ramsay Research & Education Institute, Inc.
<PAGE>
RHCI Concord, Inc.
RHCI San Antonio, Inc.
Rural Health Care Centers of America
The Haven Hospital, Inc.
Transitional Care Ventures, Inc.
Transitional Care Ventures (Arizona), Inc.
Transitional Care Ventures (Florida), Inc.
Transitional Care Ventures (North Texas), Inc.
Transitional Care Ventures (South Carolina), Inc.
Transitional Care Ventures (Texas), Inc.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Forms S-8 No. 33-52991, No. 33-47997, No. 33-44697 and No. 33-39260) of Ramsay
Health Care, Inc. of our report dated September 13, 1995, with respect to the
consolidated financial statements and schedule of Ramsay Health Care, Inc.,
included in this Annual Report (Form 10-K) for the year ended June 30, 1995.
Ernst & Young LLP
New Orleans, Louisiana
September 26, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 9,044,000
<SECURITIES> 0
<RECEIVABLES> 25,450,000
<ALLOWANCES> 3,886,000
<INVENTORY> 0
<CURRENT-ASSETS> 42,983,000
<PP&E> 102,624,000
<DEPRECIATION> 29,156,000
<TOTAL-ASSETS> 139,236,000
<CURRENT-LIABILITIES> 18,885,000
<BONDS> 55,568,000
<COMMON> 83,000
0
233,000
<OTHER-SE> 61,463,000
<TOTAL-LIABILITY-AND-EQUITY> 139,236,000
<SALES> 0
<TOTAL-REVENUES> 136,418,000
<CGS> 0
<TOTAL-COSTS> 116,802,000
<OTHER-EXPENSES> 36,423,000
<LOSS-PROVISION> 5,086,000
<INTEREST-EXPENSE> 8,347,000
<INCOME-PRETAX> (30,240,000)
<INCOME-TAX> (13,195,000)
<INCOME-CONTINUING> (17,045,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (257,000)
<CHANGES> 0
<NET-INCOME> (17,302,000)
<EPS-PRIMARY> (2.28)
<EPS-DILUTED> (2.27)
</TABLE>
