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, 1996
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
Entergy Corporation Building
639 Loyola Avenue, Suite 1700 70113
New Orleans, Louisiana (Zip Code)
(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
October 2, 1996 was 8,307,131. The aggregate market value of Common Stock held
by non-affiliates on such date was $14,952,713.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's definitive Proxy Statement to be filed
for the 1996 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. The Company
offers a continuum of patient care through integrated networks of mental health
delivery systems in 11 states, principally in the southeast and southwest,
organized around 15 inpatient hospitals with 1,369 licensed beds (including 77
medical subacute beds) and outpatient centers. The Company also manages the
mental health programs of certain public and private health care providers under
management contracts.
Overview
The Company currently offers a comprehensive range of
behavioral health services, including acute psychiatric inpatient treatment,
less intensive inpatient treatment (including residential), partial
hospitalization treatment and group and individual outpatient treatment
programs. Each of the Company's integrated delivery systems is centered around a
core hospital facility from which market-responsive mental health services are
arranged with and provided by physicians, psychologists and other mental health
professionals under contract or affiliated with the Company. Certain of these
systems also manage behavioral health services on behalf of other providers and
offer medical subacute services.
Recent Developments
On October 1, 1996, the Company and Ramsay Managed Care, Inc.
("RMCI") entered into an agreement and plan of merger providing for the
acquisition of RMCI by the Company. The merger has been approved by the Board of
Directors of each of the Company and RMCI following the recommendation by a
special committee of the Board of Directors of each company. Upon consummation
of the merger, (i) each share of common stock of RMCI will be converted into
one- third (1/3) of a share of common stock of the Company, and (ii) each share
of Preferred Stock, Series 1996, of RMCI (each of which is convertible into 30
shares of RMCI common stock) will be converted into one share of Class B
Preferred Stock, Series 1996, of the Company (each of which will be convertible
into 10 shares of RHCI common stock). The merger is intended to qualify for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368 (a) of the Internal Revenue Code of 1986, as amended.
The merger is subject to the approval of (i) the holders of a
majority of the shares of RHCI common stock and RHCI Class B Preferred Stock,
Series C (voting on an as converted basis into RHCI common stock and voting
together with the RHCI common stock as a single class) voting at a meeting of
shareholders at which a quorum is present, and (ii) the holders of a majority of
the issued and outstanding shares of RMCI common stock and RMCI Preferred Stock,
Series 1996 (voting on an as converted basis into RMCI common stock and voting
together with the RMCI common stock as a single class). Affiliates of Paul J.
Ramsay, the Chairman of the Board of the Company and RMCI, hold an approximate
35% voting interest in the Company and an approximate 69% voting interest in
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RMCI, and have indicated that they will vote their shares of capital stock of
each company in favor of the merger. The merger is also subject to various other
conditions, including the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, the receipt of necessary
lender and other consents, and the declaration of effectiveness by the
Securities and Exchange Commission of a registration statement to be filed by
the Company. Subject to the satisfaction of these conditions, it is expected
that the merger will be consummated in March, 1997.
Strategy
The Company's strategy is to maintain its reputation as a
high-quality provider of behavioral health services, meeting the needs of its
patients for therapeutic care in the least restrictive setting, its payors for
cost-effective and accountable treatment programs, and its shareholders for
consistent earnings and business growth.
Additional Management Resources Strengthen Organizational Structure
In January 1996, the Company announced the appointment of Luis
Lamela as Vice Chairman of the Board, followed in August 1996 by the
appointments of Bert Cibran as President and Chief Operating Officer and Carol
Lang as Chief Financial Officer. Reynold Jennings became Executive Vice
President of the Company and President of the recently restructured Behavioral
Hospital Division, assuring his continued leadership over the core behavioral
health business. The new management team has over 40 years of healthcare
operations, management and financing experience and a demonstrated history of
success in the industry. With this leadership infrastructure, the Company
believes it has the resources to seek and execute diversification opportunities,
expand the delivery of health care, and establish a capital structure
appropriate for a long-term, high-quality health care company.
Decreasing Dependence on Revenue from Acute Psychiatric Inpatient Care
The behavioral health industry in the United States has
experienced severe cost- containment pressures imposed by managed care
organizations, governmental and other third-party payors. Under increasingly
stringent admissions guidelines, restrictive length of stay criteria, and other
treatment constraints imposed by payors, the Company's acute inpatient care
programs have generated less revenue, even though admissions to these programs
have increased.
To mitigate the revenue declines of acute inpatient treatment,
the Company is expanding its inpatient behavioral care programs which require
longer lengths of stay but less intensive treatment to accomplish effective
outcomes, including residential treatment and youth- oriented correctional
service programs. This will allow the Company to capitalize on its national
recognition as a leading provider of certain youth offender treatment programs.
To this end, the Company is seeking contracts with state agencies and judicial
systems in a number of states to provide these services.
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Reformation and Expansion of Outpatient Programs
The Company's outpatient services consist primarily of partial
hospitalization and group and individual therapy sessions based in or nearby its
inpatient facilities. These services were originally developed as ancillary
sites to deliver patient care, without specific regard to outpatient care
protocols being developed and encouraged by managed care organizations. As the
influence of managed care organizations increased in certain of the Company's
markets, certain of the Company's outpatient programs which did not deliver care
protocols consistent with managed care requirements suffered declines in patient
volumes and, in some cases, were closed due to their unprofitability. In
recognition of the marketplace need to satisfy both patient and payor, the
Company has begun a restructuring of its outpatient product lines in markets,
including markets in which managed care is a dominant payor, to provide
screening, therapeutic protocols, and outcome reviews which are consistent with
managed care requirements. Also, in suitable markets, the Company will look to
open and/or reopen previously closed outpatient care delivery sites. This
restructuring is designed to strengthen existing relationships and foster new
relationships with managed care organizations.
Maintain Dominance in Selected Markets
The Company is the sole or primary provider of behavioral
health services in certain of its markets, particularly those markets with
populations of fewer than 200,000 people. The Company's strategy is to dominate
the provision of behavioral health care in these markets by expanding its
delivery network within a 50-mile geographic area surrounding its inpatient
hospital facility and by aggressively pursuing joint ventures, contract
arrangements and alliances to serve public and private sector behavioral health
care needs. The Company believes that recognition as the dominant provider of
behavioral health care in particular markets enhances the viability of its
facilities and increases the potential for business expansion opportunities in
these markets.
Strengthen Alliances with General Medical/Surgical Hospitals
In certain markets, the Company has initiated discussions with
significant local medical/surgical (acute-care) hospitals to explore possible
"vertical" integration with the Company's inpatient facilities. This integration
strategy is designed to appeal to managed care organizations which seek to
develop relationships with large, acute-care hospitals that provide a full
spectrum of health care services, including behavioral health care. The Company
believes that in certain markets a joint venture, partnership or other form of
alliance with the medical/surgical hospital enhances the long-term viability of
the Company's facility. To date, no such agreements of significance have been
signed.
Asset Utilization
Of the Company's 15 inpatient facilities, four currently
operate medical subacute units. These units were opened in late fiscal
1994/early fiscal 1995 after a determination was made that the demand for
inpatient behavioral health services would not be sufficient to fully utilize
the existing bed capacity of the facility. Also, two of the currently
operational subacute units are being expanded to meet increased market demand
for the subacute service.
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Restructure Lending Relationships
The Company's capital structure currently involves two lending
groups and a real estate investment trust. A bank group consisting of three
banks currently provides letter of credit support for five variable rate demand
revenue bonds which total approximately $19 million and have been outstanding
since 1985. Also, a consortium of three life insurance companies has loans
outstanding to the Company totalling approximately $36 million. The Company has
no short-term access to a working capital facility at the present time. The
Company intends to refinance its debt during the next fiscal year to provide
funds for growth and working capital, as well as to reschedule the current level
of principal repayment required under the life insurance company debt.
In connection with the "safe-harbor" provision of the Private
Securities Litigation Reform Act of 1995, the Company notes that this Annual
Report on Form 10-K contains forward- looking statements about the Company. The
Company is hereby setting forth cautionary statements identifying important
factors that may cause the Company's actual results to differ materially from
any forward-looking statement. Some of the most significant factors include (i)
accelerating changes occurring in the health care industry, including
competition from consolidating and integrated health care provider systems, the
imposition of more stringent admission criteria by payors, increased payor
pressures to limit lengths of stay, limitations on reimbursement rates and
limitations on annual and lifetime patient health benefits, (ii) federal and
state governmental budgetary constraints which could have the effect of limiting
the amount of funds available to support governmental health care programs,
including Medicare and Medicaid, and (iii) statutory, regulatory and
administrative changes or interpretations of existing statutory and regulatory
provisions affecting the conduct of the Company's business and affecting current
and prior reimbursement for the Company's services. While the Company believes
that implementing the above-described strategies will enable the Company to
improve its operations and financial condition, there can be no assurance that
the Company will be successful in doing so.
Facility Operations
The Company's facilities specialize in the treatment of
behavioral 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.
Also, almost all of the Company's facilities conduct outpatient programs within
the facility and/or at clinics located in the surrounding area. In response to
the demands of payors, particularly managed care companies, the Company
anticipates expanding its outpatient network in its continued effort to provide
a less costly, yet effective level of mental health care for patients whose
illness does not require intensive 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 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.
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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.
These disorders are also common in children and adolescents admitted to the
Company's facilities. 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 programs emphasize family involvement in the evaluation and
treatment process.
Residential treatment programs are provided by nine of the
Company's facilities for low-functioning and troubled youths affected by conduct
disorders, psychiatric illness, substance abuse and sexual dysfunction. These
programs provide long-term inpatient care within a safe, therapeutic environment
for youths displaying an inability to function at home, school, with peers or in
the community in general. The highly structured programs assist the youth in
learning how to change ineffective or violent behavior and cope with the
difficulties and stresses of life. The primary objective of the program is
behavioral awareness and self-control, leading the youth to a successful return
to his/her home setting.
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 staff maintain private
practices. 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 15 hospitals, one was
resurveyed in fiscal 1996 and three were resurveyed in fiscal 1995 and, in each
instance, the facilities retained their JCAHO accreditation for an additional
three years.
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The following table summarizes certain operating data related
to (i) the facilities currently operated by the Company and which were also
operated by the Company during each of 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"). The difference between the same
facilities amounts and the all facilities amounts relates to Three Rivers
Hospital, which was closed on June 30, 1995, two facilities which were sold
during fiscal 1994, Benchmark Behavioral Hospital, which commenced operations in
May 1995, and the Company's subacute units, which commenced operations in late
fiscal 1994 and early fiscal 1995.
Same Facilities
Year Ended June 30
1996 1995 1994
Acute psychiatric admissions ......... 12,875 12,221 11,136
Residential treatment admissions ..... 537 551 471
Total inpatient admissions ........... 13,412 12,772 11,607
Acute psychiatric inpatient days ..... 130,522 139,571 153,444
Residential treatment inpatient days . 87,257 63,633 40,973
Total inpatient days ................. 217,779 203,204 194,417
Average bed days available ........... 392,352 369,380 400,770
Overall inpatient occupancy percentage 56% 55% 49%
Partial hospitalization days (1) ..... 54,041 65,280 57,414
Outpatient visits (2) ................ 37,005 44,218 30,984
All Facilities
Acute psychiatric admissions ......... 13,333 12,304 11,545
Residential treatment admissions(3) .. 588 948(3) 883(3)
Subacute admissions .................. 692 323 46
Total admissions ..................... 14,613 13,575 12,474
Acute psychiatric inpatient days ..... 135,037 140,064 159,602
Residential treatment inpatient days (3) 93,038 77,509(3) 64,729(3)
Subacute inpatient days .............. 15,378 6,548 1,061
Total inpatient days ................. 243,453 224,121 225,392
Average bed days available ........... 449,814 422,670 448,585
Overall inpatient occupancy percentage 54% 53% 50%
Partial hospitalization days (1) ..... 54,463 65,280 60,699
Outpatient visits (2) ................ 84,438 82,240 47,725
_______________________
(1) Partial hospitalization days refer to behavioral health patient services
which generally exceed three hours but do not require an overnight stay at
an inpatient facility.
(2) Outpatient visits refer to behavioral health patient services which
generally do not exceed three hours in a given day. Also, the "All
Facilities" amounts include visits related to a facility-based home health
agency.
(3) 1995 and 1994 statistics for the "All Facilities" include significant
residential treatment admissions and inpatient days related to Three Rivers
Hospital, which was closed on June 30, 1995.
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Competition
At June 30, 1996, 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. The number of behavioral health service competitors located
within each of the Company's service areas varies significantly. 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 impact of
competition on the Company's facilities varies depending on the proximity of the
competing facility and its referral sources to the Company's facility.
The Company's outpatient centers are generally located in
areas near 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. 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,
residential treatment, and chemical dependency care in the communities served by
the Company's facilities. 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 services.
Industry Trends
The Company's inpatient facilities have been adversely
affected by factors influencing the entire psychiatric hospital industry.
Factors which have affected the Company's acute psychiatric inpatient business
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 payors that reimburse on a per diem or other discounted basis; (iv) the trend
toward higher deductibles and co-insurance for individual patients; and (v) the
trend by self-insured employers and managed mental health organizations toward
limiting employee health benefits, including annual and lifetime limits on
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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 restructure its outpatient services and
partial hospitalization programs to meet the demands of the marketplace.
Further, the Company's business strategy includes reducing its dependence on
acute psychiatric inpatient services through an expansion of residential
treatment and outpatient services. See also "Strategy" above.
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"), Blue Cross and, for residential treatment
services, various state agencies (including state judicial systems). In
addition, certain payments are received 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 inpatient
days derived from various sources for the periods indicated.
Year Ended June 30
1996 1995 1994
Charge-based programs:
Commercial Insurance .......................... 8% 10% 15%
Blue Cross .................................... 1 1 1
Private Pay ................................... 5 6 5
Sub-total ................................ 14 17 21
Cost-based and per diem-based programs:
Blue Cross .................................... 4 6 6
CHAMPUS ....................................... 3 5 7
Medicare ...................................... 24 22 21
Medicaid ...................................... 30 31 32
State, HMO and PPO ............................ 25 19 13
Sub-total ................................ 86 83 79
Total ............................... 100% 100% 100%
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Most commercial insurance carriers reimburse their
policyholders or reimburse the Company's facilities directly 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 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 federal fiscal year 1992, providers with costs exceeding their
target rates are subject to a payment ceiling of the target amount plus the
lesser of a percentage (currently 10%) of the target amount or a percentage
(currently 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, 1996, all of the Company's facilities were subject to
the TEFRA provisions.
The Health Care Financing Administration ("HCFA") has
implemented changes to Medicare covering inpatient psychiatric services which
are reimbursed under TEFRA. These changes provide for an increase to the TEFRA
payment limitations, subject to annual revision. However, since 14 of the
Company's 15 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
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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 all of the
Company's facilities. During fiscal years 1995 and 1994, the Company received
significant payments from the Louisiana Medicaid program pursuant to enhanced
reimbursement rates under the State's "disproportionate share" program.
Disproportionate share payments from the State of Louisiana were virtually
eliminated effective July 1, 1995. Accordingly, the Company expects that any
future payments made under this program will be minimal. See "Item 3. Legal
Proceedings" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
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 inpatient
psychiatric services to 30 days for adult patients, 45 days for child and
adolescent patients and 150 days for residential treatment services, subject to
waivers which are available under limited circumstances if an extension of the
length of stay can be justified. Although the lengths of stay experienced by the
Company on CHAMPUS adult, child and adolescent beneficiaries have generally been
within these limits, the volume of CHAMPUS patients treated at the Company's
facilities has declined. As set forth in the above table, the amount of the
Company's patient revenues attributable to CHAMPUS have decreased from 7% in
fiscal 1994 to 3% in fiscal 1996.
Blue Cross plans reimburse based on charges or negotiated
rates in all areas in which the Company presently operates facilities, except
Alabama and Michigan. 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.
Marketing
The Company's marketing programs are aimed at 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 support
their needs. These needs may be related to a particular treatment program, the
desires of the patient's family, hospital policies or the timely receipt of
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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.
Regulation
Operations of psychiatric hospitals are subject to extensive
federal, state and local government regulations, including periodic inspection
and licensing requirements. These regulations are 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.
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 generally provide 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
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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 1996 and 1995 were less than
2% of these facilities' gross charges in these years.
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 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 and 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 and 1993 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.
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
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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 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
* Three Rivers Hospital. 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. 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. In May 1996, the Company signed a letter of intent to sell
Three Rivers Hospital to an independent party for approximately $2.2 million
(net of transaction costs). This sale is expected to close during October 1996.
See "Ownership Arrangements and Operating Agreements" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."
* Harbor Oaks Hospital. 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 was extended to October 1996, at which time the Company
anticipates resuming operations at the facility.
* Cumberland Hospital. In August 1993, the Company sold its 175-bed Cumberland
Hospital in Fayetteville, North Carolina for approximately $12 million.
* Ramsay Managed Care, Inc. RHCI, through its former 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 and, in fiscal 1995,
through the award of contracts in Hawaii and West Virginia.
For a variety of reasons deemed by management to be reasonable at the time, 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
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on April 21, 1995 of the Company's common and preferred stock (the "RMCI
Distribution"). Subsequent to this distribution, RMCI became a separate,
publicly traded Company and ceased being a subsidiary of the Company.
On October 1, 1996, the Company and RMCI entered in a merger agreement pursuant
to which RMCI would merge into a wholly-owned subsidiary of the Company. See
"Recent Developments" above.
* Atlantic Shores Hospital. In February 1994, the Company sold its 50-bed
Atlantic Shores Hospital in Daytona Beach, Florida for approximately $4.8
million.
* Sale/Leaseback. 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, currently require aggregate
annual minimum rentals of $1.58 million, payable monthly. Effective April 1 of
each year, the lease payments are subject to any upward adjustment (not to
exceed 3% annually) in the Consumer Price Index over the preceding 12 months.
* Sale of Land. 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.
* Benchmark Behavioral Hospital. 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, payable monthly. In addition, the lease provides for percentage rent
payments to the lessor equal to 2% of the net revenues of the facility, payable
quarterly.
Ownership Arrangements and Operating Agreements
One physician owns a 4% 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
14
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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 through 2004. 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,
effective June 30, 1995, Three Rivers Hospital was closed. The Company has
signed a letter of intent and expects to sell Three Rivers Hospital to an
independent party in October 1996. See "Acquisitions, Sales and Lease
Commitments" above. Further, in July 1996, the Three Rivers Hospital Limited
Partnership was dissolved.
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, 1996, the Company employed approximately 1,625
full-time and 1,540 part-time employees in its facilities and contract services
operations, including approximately 400 full- time equivalent nurses. In
addition, the Company has a corporate headquarters staff of approximately 25,
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
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Executive Officers of the Registrant
Certain information with respect to the executive officers of the Company is set
forth below:
Position With the Company and Principal Occupations
Name of Executive Officer During the Past Five Years
Luis E. Lamela....... 46 Vice Chairman of the Board of the Company since
January 1996; President and CEO of CAC Medical
Centers, a division of United Health Care of
Florida, since May 1994; President and CEO of
Ramsay - HMO, Inc. from prior to 1991 to May
1994.
Bert G. Cibran....... 42 President and Chief Operating Officer of the Company
since August 1996; President, Summa Healthcare
Group, Inc. (a healthcare consulting firm) from
February 1996 through August 1996; President and
Chief Operating Officer for the Florida
operations of Physician Corporation of America
from February 1994 to February 1996; Executive
Vice President of Operations with Ramsay- HMO,
Inc. from 1991 to February 1994.
Reynold J. Jennings.. 50 Executive Vice President of the Company and
President of its Behavioral Hospital Division
since August 1996; President, President/Chief
Operating Officer or President/CEO of the Company
from September 1994 to August 1996; 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 1991 to October 1993.
Carol C. Lang........ 49 Chief Financial Officer of the Company since August
1996; President of HealthLink Enterprises, Inc.
(a healthcare consulting firm) from prior to 1991
to August 1996.
Brent J. Bryson...... 47 Vice President of the Company since October 1994;
(including medical leave from January 1996
through August 1996); 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 1991 to November
1991.
John A. Quinn........ 42 Vice President of the Company since September 1991;
various administrative and management positions
with Community Psychiatric Centers, Inc. from
prior to 1991 to September 1991.
Wallace E. Smith..... 53 Vice President of the Company since prior to 1991.
William N. Nyman..... 43 Vice President of the Company since August 1993.
Regional Controller of the Company from prior to
1991 to July 1993.
Daniel A. Sims....... 36 Corporate Controller of the Company since December
1993; Chief Financial Officer of a 175-bed
medical/surgical hospital from prior to 1991 to
December 1993.
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Item 2. Properties.
The following table provides information concerning the 15
inpatient facilities owned and operated or leased and operated by the Company at
June 30, 1996.
Total
Date Opened Licensed
Hospital (7) or Acquired Beds
Havenwyck Hospital
Auburn Hills, MI ......................... November 1983 166
Brynn Marr Hospital
Jacksonville, NC ......................... December 1983 76
Hill Crest Hospital
Birmingham, AL ........................... January 1984 130
Heartland Hospital
Nevada, MO ............................... April 1984 152
Greenbrier Hospital
Covington, LA ............................ October 1984 67
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 76
Desert Vista Hospital
Mesa, AZ (6) ............................. February 1987 100
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 61
Benchmark Behavioral Hospital
Midvale, UT (4) .......................... June 1995 80
Total (5) ........................... 1,369
(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). See "Item 1. Business-Acquisitions, Sales
and Lease Commitments."
(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, as of June 30, 1996, was 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 --
Acquisitions, Sales and Lease Commitments and Ownership Arrangements and
Operating Agreements."
(6) In April 1995, the Company sold and immediately leased back the land,
buildings and fixed equipment associated with these facilities. The leases
have an initial term of 15 years and three successive renewal options of
five years each. See "Item 1. Business -- Acquisitions, Sales and Lease
Commitments."
(7) The Company believes that its facilities are well maintained and are of
adequate size for present needs.
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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"). As required by
the Statement, the Company periodically reviews 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 is recoverable, based on the future cash flows
expected from the assets. Based on this review, the Company determined that the
carrying value of certain long-lived assets was impaired (within the meaning of
the Statement) at June 30, 1996 and 1995. 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 approximately $4
million and $20 million at June 30, 1996 and 1995, respectively. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations." and "Item 8. Financial Statements and Supplementary Data."
In connection with the Company's decision to relocate its
corporate headquarters from New Orleans, Louisiana to Coral Gables, Florida, the
Company has entered into an office lease in Coral Gables for a term of three
years ending in August 1999. Upon relocation, the Company's lease in New Orleans
will be terminated.
Item 3. Legal Proceedings.
The Company is subject to claims and suits arising in the
ordinary course of business. In addition, during fiscal 1996, the State of
Louisiana requested repayment of disproportionate share payments received by the
Company in fiscal years 1995 and 1994 totalling approximately $5,000,000. On the
basis of discussions to date between the Company and the State, the Company
believes that this matter may be settled for an amount significantly less than
the State's initial request. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Results of Operations."
The Company has established reserves at June 30, 1996 for the
estimated amounts which might be recovered from the Company as a result of all
outstanding legal proceedings. In the opinion of management, the ultimate
resolution of these pending legal proceedings is not expected to have a material
adverse effect on the Company's financial position, results of operations or
liquidity. See "Item 8. Financial Statements and Supplementary Data."
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 27, 1996, there were 660 holders of record of the Company's Common
Stock. No cash 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. Further, in connection with waivers
received from the Company's lenders as of June 30, 1996, the Company agreed not
to pay future cash dividends in respect of its Class B Preferred Stock, Series
C. Prior to this time, the Company's credit facilities permitted the payment of
the full amount of regular fixed dividends on the Class B Preferred Stock,
Series C, provided that such dividends did not exceed $387,200 in each 12-month
period and provided that no event of default existed or occurred as a result of
the payment.
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, 1996 and 1995, as reported on the
NASDAQ National Market System:
High Low
Year ended June 30, 1996
First Quarter ...................... $4 5/8 $3 3/8
Second Quarter ..................... 3 3/4 2 1/2
Third Quarter ...................... 3 15/16 2 7/8
Fourth Quarter ..................... 4 3/8 2 7/8
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
On October 2, 1996, the closing sales price of the Company's
Common Stock was $2 3/8 per share.
* The distribution of Ramsay Managed Care, Inc. occurred
during the fourth quarter of fiscal 1995. See "Item 1. Business--Acquisitions,
Sales and Lease Commitments".
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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.
Year Ended June 30
1996 1995 1994 1993 1992
(in thousands, except per share data)
Statement of Operations
Data:
Net revenues ......... $ 117,423 $136,418 $137,002 $136,354 $136,946
Salaries, wages and
benefits .......... 66,259 72,061 64,805 63,810 60,626
Other operating
expenses .......... 42,387 44,741 42,907 40,454 40,161
Provision for
doubtful accounts . 5,805 5,086 5,846 8,148 8,628
Depreciation and
amortization ...... 5,490 7,290 6,836 6,605 5,439
Interest and other
financing charges . 6,892 8,347 8,906 9,494 10,488
Losses related to
asset sales and
closed businesses . 4,473 6,431 802 7,524 --
Asset impairment
charges ........... 5,485 21,815 -- -- --
Restructuring and
other charges ..... -- -- -- 1,367 2,283
136,791 165,771 130,102 137,402 127,625
Income (loss) before
minority interests,
income taxes,
extraordinary items
and cumulative
effect of accounting
change ............ (19,368) (29,353) 6,900 (1,048) 9,321
Minority interests ... -- 887 4,824 1,126 --
Income (loss) before
income taxes,
extraordinary items
and cumulative effect
of accounting change (19,368) (30,240) 2,076 (2,174) 9,321
Provision (benefit) for
income taxes ...... (2,887) (13,195) 599 159 3,974
Income (loss) before
extraordinary items
and cumulative effect
of accounting change (16,481) (17,045) 1,477 (2,333) 5,347
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
Cumulative effect of change
in accounting for
income taxes ....... -- -- -- 2,353 --
Net income (loss) .... $ (16,481)$(17,302) 1,322 $(1,560) $ 5,934
Primary earnings per share:
Income (loss) per common
and dilutive common
equivalent share before
extraordinary items and
cumulative effect of
accounting change .. $ (2.12) $ (2.25) $ 0.15 $ (0.29) $ 0.68
Net income (loss) ... $ (2.12) $ (2.28) $ 0.14 $ (0.20) $ 0.75
Weighted average shares
outstanding(1) ..... 7,929 7,743 9,641 7,932 7,886
(1) Includes common and dilutive common equivalent shares outstanding.
June 30
1996 1995 1994 1993 1992
(in thousands)
Balance Sheet Data:
Working capital $ 11,715 $ 24,098 $ 21,148 $ 23,811 $ 26,718
Total assets 132,758 139,236 183,168 190,370 194,357
Long-term debt 44,664 55,568 67,707 77,429 84,879
Class B preferred
stock, Series 1987 --- --- --- --- 2,500
Stockholders' equity 46,053 61,779 80,468 79,997 76,068
20
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Patient revenues of the Company's inpatient facilities are
affected by changes in the rates the Company charges, changes in reimbursement
rates by third-party payors, the volume of patients treated and changes in the
mix of payors and patient types. The Company's facilities provide services to
patients requiring intensive inpatient care, less intensive residential
treatment care and outpatient treatment. Also, at four of the Company's
facilities, medical subacute services are provided. The reimbursement rates for
intensive inpatient care are generally greater than the rates paid for
residential treatment care. However, the average length of stay for patients in
residential treatment programs is significantly greater than that for patients
in intensive inpatient programs.
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, and 1994, the Company recorded
contractual adjustment benefits related to intermediary audits of prior year
cost reports of approximately $1,000,000 and $1,400,000, respectively. During
the year ended June 30, 1996, the Company recorded contractual adjustment
expenses related to intermediary audits of prior year cost reports of
approximately $1,900,000. As a result of this negative experience, the Company
recorded reserves totalling $3,500,000 in its June 30, 1996 financial statements
related to possible future adjustments of its cost report estimates by
intermediaries. Management believes that adequate provision has been made for
any adjustments that may result from future intermediary reviews and audits.
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 and 1994, the Company received significant
disproportionate share payments from the Louisiana Medicaid program. Statutory
changes virtually eliminated the disproportionate share funding mechanism in
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Louisiana and, for the year ended June 30 1996, disproportionate share payments
received by the Company's Louisiana facilities were not material.
The impact of Louisiana disproportionate share payments on net
revenues and income from continuing operations in fiscal 1995 was approximately
$5,600,000 and $3,700,000, respectively, and the impact of Louisiana
disproportionate share payments on net revenues and income from continuing
operations in fiscal 1994 was approximately $14,300,000 and $9,300,000,
respectively. The majority of Louisiana disproportionate share payments was
received at the Company's Three Rivers Hospital facility, which treated
primarily Medicaid-eligible adolescents diagnosed with various behavioral
disorders. 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 its operations with
the Company's Greenbrier Hospital facility located less than five miles away.
During fiscal 1996, the State of Louisiana requested repayment
of disproportionate share payments received by two of the Company's Louisiana
facilities in fiscal years 1995 and 1994 totalling approximately $5,000,000. The
repayment requests related to a) alleged overpayments made to Three Rivers
Hospital because the State believed Three Rivers' actual annual inpatient volume
was less than its projection of annual inpatient volume made at the beginning of
its 1994 cost reporting year and b) alleged improper teaching hospital payments
made to Three Rivers Hospital and Bayou Oaks Hospital because the State believed
these facilities were not qualifying teaching hospitals at the time these
payments were made. The Company believes that certain of the calculations which
support the State's calculation of annual inpatient volume in 1994 are in error
and that other relevant factors affecting the State's calculation have not been
considered. Further, the Company believes that, based on its understanding of
the rules and regulations in place at the time the teaching hospital payments
were made, payments received as a result of the teaching classification were
appropriate.
On the basis of discussions to date between the Company and
the State, the Company believes that this matter may be settled for an amount
significantly less than the State's initial requests. Any settlement of this
matter will be contingent upon the execution of settlement documentation, the
terms of which have not been agreed upon. Further, there can be no assurance
that the Company and the State will agree on a settlement amount or the terms
and conditions of settlement documentation. The Company intends to vigorously
contest any position by the State of Louisiana which the Company considers
adverse and believes that adequate provision has been made at June 30, 1996 for
the estimated amount which might be recovered from the Company as a result of
this matter. See "Item 8. Financial Statements and Supplementary Data."
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. For comparison purposes, the prior
year percentages exclude the operations of RMCI which, as discussed elsewhere,
was distributed in the form of a dividend to the Company's stockholders in April
1995, and the amount of Louisiana disproportionate share payments recorded as
net revenues in 1995 and 1994. The discussion following this table quantifies
the significant fluctuations in amounts reported in the Company's consolidated
statements of operations between periods.
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As a Percentage of Net Revenues
Year Ended June 30,
1996 1995 1994
Net revenues ........................................ 100.0% 100.0% 100.0%
Salaries, wages and benefits ......................... 56.4 56.4 54.1
Other operating expenses ............................. 36.1 32.6 33.8
Provision for doubtful accounts ...................... 4.9 4.3 5.0
Depreciation and amortization ........................ 4.7 5.4 5.5
Interest and other financing charges ................. 5.9 6.9 7.5
Losses related to asset sales and closed businesses .. 3.8 5.5 0.7
Asset impairment charges ............................. 4.7 18.5 --
Loss before minority interests,
income taxes and extraordinary item ................(16.5)% (29.6)% (6.6)%
1996 Compared to 1995
The following are the significant changes in the Company's
operations between fiscal 1996 and 1995. These changes affect the comparison of
revenues and expenses of the Company between years as discussed below.
* The RMCI Distribution on April 24, 1995.
* Virtual elimination of Louisiana disproportionate share
payments to the Company, as discussed above.
* The closure of Three Rivers Hospital on June 30, 1995.
* Commencement of operations in April 1995 at an 80-bed leased
facility near Salt Lake City, Utah (Benchmark South).
* The closure of several day treatment centers and
outpatient clinics during fiscal 1996 and 1995 due to
negative operating margins.
* Significant increase in occupancy at the Company's subacute
units, as well as an expansion of the Company's contract
services division.
* Significant asset impairment charges and losses related to
asset sales and closed businesses in fiscal 1996 and 1995.
________________________
Net revenues decreased from $136.4 million in 1995 to $117.4
million in 1996 primarily because $12.9 million of revenues related to RMCI were
included in the prior year total and because same facility net inpatient
revenues decreased $7.3 million between years. During fiscal 1996, the Company
replaced approximately $6.4 million in patient revenues related to Three Rivers
Hospital and $5.5 million in disproportionate share revenues recorded in fiscal
23
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1995 with a $4.7 million increase in revenues from Benchmark South, a $6.6
million increase in subacute revenues and a $1.6 million increase in contract
services revenues. Net outpatient revenues remained stable between 1996 and
1995, increasing $0.3 million, or 2%.
Same facility net inpatient revenues decreased $7.3 million
between periods primarily due to the impact of intermediary audits of prior year
cost reports, which reduced same facility net inpatient revenues by $5.4 million
in 1996 (including the establishment of a $3.5 million reserve for possible
future adjustments) and increased same facility net inpatient revenues in 1995
by $1 million. In addition, the Company's same facility net inpatient revenue
per patient day decreased 8% between years due to the growth in residential
treatment services, which are less intensive and generally reimbursed at rates
which are less than the rates received for acute psychiatric inpatient services.
During fiscal 1996, same facility residential treatment patient days comprised
40% of same facility patient days, compared to 31% in fiscal 1995. Further, in
1996 and 1995, the Company's residential treatment net revenue per patient day
was approximately $200 less than its acute psychiatric net revenue per patient
day (excluding disproportionate share revenues).
Total salaries, wages and benefits in fiscal 1996 were $66.3
million, compared to $72.1 million in fiscal 1995. The material changes in
salaries, wages and benefits included (a) a $1.1 million increase in same
facility salaries, wages and benefits, (b) a $4.8 million decrease related to
the closure of the Three Rivers facility, (c) a $2.6 million increase related to
the opening of Benchmark South, (d) an increase of $1.4 million related to
increased volume in the Company's subacute units and e) salaries, wages and
benefits of $5.5 million in fiscal 1995 related to RMCI.
Other operating expenses in fiscal 1996 were $42.4 million,
compared to $44.7 million in fiscal 1995. The material changes in other
operating expenses between periods included (a) a $3.0 million decrease related
to the closure of the Three Rivers facility, (b) a $2.5 million increase related
to the opening of Benchmark South, (c) an increase of $2.4 million related to
increased volume in the Company's subacute units, and (d) other operating
expenses in fiscal 1995 related to RMCI of $6.2 million. The Company's same
facility other operating expenses remained stable between periods, increasing
$0.3 million, or 1%. And, during 1996, the Company increased its liability for
self-insurance claims and incurred certain other expenses which were not present
in fiscal 1995.
The provision for doubtful accounts increased from $5.1
million in fiscal 1995 to $5.8 million in fiscal 1996. This increase primarily
related to the same facilities, which recorded additional provisions on per-diem
based residential treatment business in 1996. These provisions were necessary as
doubt arose with respect to the ability of certain payors to repay the Company
for services rendered in fiscal 1996.
Depreciation and amortization in fiscal 1996 totalled $5.5
million, compared to $7.3 million in fiscal 1995. Depreciation expense decreased
by $0.4 million on two facilities which were sold and leased back in April 1995.
Also, in June 1995, the book values of four facilities were considered impaired
pursuant to the provisions of FASB Statement Number 121, which reduced
depreciation expense in fiscal 1996 by an additional $0.6 million. Finally,
depreciation and amortization expense in fiscal 1995 related to RMCI totalled
$0.9 million.
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Interest expense decreased from $8.3 million in 1995 to $6.9
million in 1996. This decrease related to debt reductions made in fiscal 1995 on
the Company's senior and subordinated secured notes (including a $7.5 million
prepayment in April 1995), which reduced interest expense in 1996 by $1.2
million. Also, interest expense in fiscal 1995 related to RMCI totalled $0.2
million.
Primarily in the fourth quarter of fiscal 1996, the Company
recorded losses totalling approximately $4.5 million related to additional asset
write-downs, cost report settlements and other adjustments related to businesses
which closed at various times prior to fiscal 1996, a reserve for
disproportionate share payments which the State of Louisiana has contended were
improperly paid to two of the Company's Louisiana facilities in fiscal 1995 and
1994 (see "Results of Operations" above) and lease commitments and other costs
incurred in connection with the Company's decision to relocate its corporate
headquarters. In fiscal 1995, the Company recorded losses totalling
approximately $6.4 million related to a sale/leaseback transaction, the sale of
real estate, the closure of Three Rivers Hospital, the closure of other
outpatient operations and the abandonment of certain development projects. See
"1995 Compared to 1994" below.
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. Pursuant to the principles of measurement contained
in the Statement and the Company's expectations, the Company recorded asset
impairment charges in its 1996 and 1995 statement of operations totalling
approximately $4 million and $20 million, respectively.
In June 1996 and 1995, the Company recorded additional asset
impairment charges related to its investment in other healthcare enterprises of
approximately $1.5 million, based on an assessment of the future cash flows
expected to be realized by the Company from these businesses.
Minority interests in 1995 primarily reflects the limited
partners' share of net income of Three Rivers Hospital prior to its closure on
June 30, 1995.
The Company recorded a $2.9 million benefit for income taxes
in fiscal year 1996 compared to a $13.2 million benefit for income taxes in
fiscal year 1995. The income tax benefit recorded in fiscal year 1996 was
recorded at an effective tax rate significantly less than the statutory tax rate
due to a deferred tax valuation allowance of $4.4 million at June 30, 1996.
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 expenses of the Company between years as discussed below.
25
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* 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.
* Louisiana disproportionate share payments received by
the Company during fiscal 1995 were approximately
$8.7 million less than the amount received in fiscal
1994.
* 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 1995 and 1994
due to negative operating margins. The sale and these
closures are referred to in this section as the
"sold/closed facilities".
* The Company opened four subacute units in late fiscal
1994/early fiscal 1995.
* The Company expanded its contract services division
during fiscal 1995.
* Significant asset impairment charges and losses
related to asset sales and closed businesses in
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, for purposes of comparing 1995 to
1994, is included in the same facility totals).
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 to Three Rivers Hospital and Bayou Oaks
Hospital. 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
26
<PAGE>
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, as
well as an increase in same facility residential treatment days as a percentage
of total same facility patient days. Net revenue per patient day on cost-based
and negotiated per-diem rate payors is generally less than that for charge-based
payors.
Same facility net outpatient revenues totalled $17.0 million
in 1995 compared to $14.1 million in 1994. This increase is primarily due to an
expansion of partial hospitalization day services because of an increased market
focus by facility administrators.
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, (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, (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
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 commercial
insurance per-diem rate payors.
27
<PAGE>
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) a $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 a 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 recorded losses associated with
asset sales and closed businesses of approximately $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 approximately $1.5 million,
payable monthly. Each April 1, 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 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
recorded 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
28
<PAGE>
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 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 subsequent to 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 $1.3 million.
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 1995 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 $0.8 million.
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, which was sold in February 1994. The total net losses related
to these closures and sale in fiscal 1994 was $0.8 million.
In the fourth quarter of fiscal 1995, the Company elected to
adopt FASB Statement Number 121 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 1995 consolidated statement of
operations.
In June 1995, the Company recorded an additional asset
impairment charge related to its investment in a healthcare enterprise in
Germany of approximately $1.5 million, based on a reassessment of the future
expected cash flows to be realized by the Company from this business.
Minority interests primarily reflects the limited partner's
share of net income of Three Rivers Hospital prior to its closure on June 30,
1995.
29
<PAGE>
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
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 due 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, 1996, amounts due from
Medicare, Medicaid and Blue Cross totalled $3.6 million, $2.4 million and $0.5
million, respectively. Also, at June 30, 1996, amounts due to Medicare, Medicaid
and Blue Cross totalled $6.3 million, $1.0 million and $1.1 million,
respectively. See "Results of Operations" above.
At June 30, 1996, net cash advances made by the Company to or
on behalf of RMCI totalled $8.2 million. Of this amount, $6 million primarily
related to the funding of certain RMCI acquisitions and is represented by an
unsecured, interest-bearing (8%), subordinated promissory note due from RMCI and
issued on October 25, 1994. The remaining amount includes $0.36 million of
accrued interest on the promissory note since October 1, 1995 and $1.85 million
of additional amounts paid by RHCI on behalf of RMCI and charges by RHCI to RMCI
for certain administrative services (the "Additional Amount"). Of the $6 million
due on the promissory note, approximately $1.4 million is due on or before June
30, 1997 and the remainder is payable in 13 quarterly installments of
approximately $353,000, beginning September 30, 1997. RHCI has agreed that the
payment of interest on the promissory note for the period October 1, 1995
through June 30, 1996, as well as the Additional Amount will not be required
until after July 1, 1997, all on terms and conditions to be mutually agreed to
by RHCI and RMCI.
In June 1996 and 1995, the Company recorded a write-down of
fixed and intangible assets associated with certain of its inpatient facilities
totalling approximately $4 million and $20 million, respectively. In accordance
with FASB Statement Number 121, the facilities' carrying amount of cost in
excess of net asset value of purchased businesses, if applicable, was eliminated
prior to making a reduction of these facilities' carrying amounts of impaired
property and equipment. The property and equipment impairment, which totalled
approximately $4.0 million and $16.5 million, respectively, 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).
30
<PAGE>
The Company has net deferred tax assets totalling
approximately $11.5 million, which includes a valuation allowance of $4.4
million, at June 30, 1996. Management has considered the effects of implementing
tax planning strategies, consisting of the sales of certain appreciated
property, as the primary basis for recognizing deferred tax assets at June 30,
1996. 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 evaluates the realizability
of its deferred tax assets on a quarterly basis by reviewing its tax planning
strategies and the adequacy of its valuation allowance.
At June 30, 1996, the current portion of long-term debt was
$10.9 million, compared to $3.8 million at June 30, 1995. This increase was due
to (a) the Company's commitment during 1996 to reduce the credit exposure of its
bank group by $3.0 million by December 31, 1996 (see "Liquidity and Capital
Resources" below) and (b) principal payments on the senior secured notes of $6.6
million which came due within one year during fiscal 1996. These increases were
offset by payments during 1996 of $1.5 million on the amount outstanding at June
30, 1995 under the Company's former working capital facility and payments of
$0.9 million on a former capital lease obligation. At June 30, 1995, no amounts
were classified as current on the senior secured notes based on a prepayment of
principal on these notes in April 1995.
Noncurrent other accrued liabilities increased from $1.3
million at June 30, 1995 to $7.2 million at June 30, 1996 due to the
establishment of reserves as discussed in "Results of Operations" above.
During 1996, amounts owed to minority interests decreased by
$0.7 million based on distributions to the minority partners in the Three Rivers
Hospital Limited Partnership. In July 1996, the Three Rivers Limited Partnership
was dissolved.
In October 1995 and August 1996, a corporate affiliate of Paul
J. Ramsay, the Chairman of the Board of the Company, acquired through private
placements 275,863 shares and 275,546 shares, respectively, of Common Stock of
the Company at a price of $3.625 and $2.75 per share, respectively. Of the total
shares acquired in October 1995, 121,363 were issued for cash and 154,500 were
issued for management fees due during the remainder of fiscal 1996 under the
Company's management agreement with another corporate affiliate of Mr. Ramsay.
The shares acquired in August 1996 were issued for management fees due under the
management agreement during fiscal 1997. With the issuance of the additional
shares, the voting the interest in the Company held by Mr. Ramsay increased from
approximately 30.9% to approximately 34.8%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's credit facilities include $34.2 million in
senior secured notes, approximately $20 million in letters of credit and $1.8
million in subordinated secured notes. The senior secured notes bear interest at
11.6% and require a principal payment of approximately $3.1 million on September
30, 1996, semi-annual principal payments of approximately $3.5 million from
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March 31, 1997 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 $1.2 million in years 2001 through 2015. In December 1995, the
Company fully paid down and terminated its working capital facility with its
bank group. In September 1995, and again in August 1996, the Company and banks
supporting the Credit Agreement agreed to terms which extended the expiration
date of the Credit Agreement from May 15, 1996 to February 15, 1997 and from
February 15, 1997 to August 15, 1997, respectively. In connection with the
initial extension, the Company agreed to reduce the banks' exposure by an
additional $3 million on or before July 1, 1996. This requirement was extended
by the bank group to December 31, 1996 as part of the August 1996 extension.
The Company's credit facilities require that the Company meet
certain convenants, including (a) the maintenance of a minimum level of
consolidated tangible net worth, (b) the maintenance of a working capital ratio
and (c) the maintenance of certain fixed charge coverage and debt service
ratios. From time to time, the lenders have agreed to waive or otherwise adjust
certain of these ratios and levels. In connection with these waivers and
adjustments, the Company pays additional fees and expenses. Further, as part of
the waivers and adjustments obtained as of June 30, 1996, the Company agreed to
provide its Hillcrest Hospital facility and related assets as additional
collateral to the lenders and agreed not to pay future cash dividends in respect
of its Class B Preferred Stock, Series C.
In connection with the Company's business strategy, the
Company is currently pursuing a transaction involving one of its facilities
which has been financed, in part, by variable rate revenue bonds, which bonds
are supported by the letter of credit from the Company's bank group. Under the
current structure of the proposed transaction, the Company would contribute the
facility and its operations to a new entity which would be jointly owned by the
Company and a medical/surgical facility in the same market area. The
medical/surgical facility would contribute cash and other consideration to the
new entity. Through economies of scale, infrastructure savings and new business
opportunities of the new entity, the Company believes its income from the new
entity could approximate the income currently realized from this facility. In
connection with this transaction, the revenue bonds outstanding on the facility
would be redeemed or a substitute letter of credit would be issued, thereby
achieving the Company's commitment to reduce the exposure of its bank group by
the required $3.0 million.
In May 1996, the Company signed a letter of intent to sell its
Three Rivers facility to an independent party. The Company expects to receive
approximately $2.2 million from the sale of this facility prior to October 31,
1996.
In response to market demands, the Company is currently
converting an additional 37 beds at its Texas facilities from psychiatric care
to subacute care. Renovation costs associated with this project, which is
expected to be completed by January 1, 1997, will approximate $1.1 million. No
other commitments to make material capital expenditures exists at this time.
The Company's current primary cash requirements relate to its
normal operating expenses, the requirement to reduce its banks' credit exposure
as discussed above, principal payments on its senior secured notes (which resume
on September 30, 1996), routine capital improvements at its facilities and the
above mentioned renovation project. Also, the State of Louisiana has taken the
position that certain disproportionate share payments were improperly paid to
two of the Company's Louisiana facilities. See "Results of Operations" above and
"Item 3. Legal Proceedings."
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On the basis of its historical cash collection experience and
projected cash needs, the Company believes that its existing cash resources,
internally generated funds from operations, proceeds from the sale of Three
Rivers Hospital, debt reductions derived from its business strategy and a
refinancing of the Company's outstanding debt will be sufficient to meet its
current cash requirements and future identifiable needs. At this time, the
Company has not entered into a definitive agreement to sell its Three Rivers
Hospital and does not have any commitment to refinance its outstanding debt.
Further, the Company believes that the resolution of the matter with the State
of Louisiana will not have a material adverse effect on its liquidity.
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.
33
<PAGE>
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 1996 Annual Meeting of Stockholders to be held on November
21, 1996 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, 1996.
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.
34
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as Part of the Report:
1. Financial Statements
Information with respect to this Item is contained on Pages
F-1 to F-26 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
All schedules have been omitted because they are
inapplicable or the information is provided in the consolidated
financial statements, including the notes thereto.
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, 1996. On October 2, 1996, the Company
filed a Current Report on Form 8-K relating to a proposed merger
between the Company and Ramsay Managed Care, Inc.
(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
agreements, management contracts and compensatory plans and
arrangements required to be filed as an Exhibit to this Form 10-K
are listed in Exhibits 4.4, 10.4, 10.58, 10.88, 10.93, 10.94,
10.95, 10.96, 10.97 and 10.98.
35
<PAGE>
POWER OF ATTORNEY
The Registrant, and each person whose signature appears below, hereby
appoints Bert G. Cibran 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.
RAMSAY HEALTH CARE, INC.
Dated: 10/7/96 By /s/ Bert G. Cibran
Bert G. Cibran
President and Principal Executive Officer
Dated: 10/7/96 By /s/ Carol C. Lang
Carol C. Lang
Principal Financial Officer
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: 10/8/96 By /s/ Paul J. Ramsay
Paul J. Ramsay
Chairman of the Board and Director
Dated: 10/7/96 By /s/ Luis E. Lamela
Luis E. Lamela
Executive Vice Chairman of the Board and
Director
36
<PAGE>
Signature/Title
Dated: 10/7/96 By /s/ Aaron Beam, Jr.
Aaron Beam, Jr.
Director
Dated: 10/7/96 By /s/ Peter J. Evans
Peter J. Evans
Director
Dated: __________________ By__________________________________________
Robert E. Galloway
Director
Dated: 10/7/96 By /s/ Thomas M. Haythe
Thomas M. Haythe
Director
Dated: 10/7/96 By /s/ Steven J. Shulman
Steven J. Shulman
Director
Dated: 10/8/96 By /s/ Michael S. Siddle
Michael S. Siddle
Director
37
<PAGE>
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<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):
Page
Number
Report of Independent Auditors........................... F-3
Consolidated Balance Sheets -- June 30, 1996 and 1995.... F-4
Consolidated Statements of Operations-- For the Years
Ended June 30, 1996, 1995 and 1994.................. F-6
Consolidated Statements of Stockholders' Equity -- For
the Years Ended June 30, 1996, 1995 and 1994........ F-7
Consolidated Statements of Cash Flows -- For the Years
Ended June 30, 1996, 1995 and 1994.................. F-8
Notes to Consolidated Financial Statements............... F-9
All schedules have been omitted because they are inapplicable or the
information is provided in the consolidated financial statements, including the
notes thereto.
F1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F2
<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, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, the
Company changed its method of accounting for the impairment of long-lived assets
in 1995.
ERNST & YOUNG LLP
New Orleans, Louisiana
October 8, 1996
F3
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30
1996 1995
ASSETS
Current assets
Cash and cash equivalents ......................... $ 7,605,000 $ 9,044,000
Patient accounts receivable, less allowances for
doubtful accounts of $4,573,000 and $3,886,000
at June 30, 1996 and 1995, respectively ......... 23,410,000 21,564,000
Amounts due from third-party contractual agencies . 6,479,000 5,956,000
Current portion of receivable from affiliated
company ......................................... 1,412,000 325,000
Other receivables ................................. 2,985,000 3,330,000
Deferred income taxes ............................. 1,398,000 --
Other current assets .............................. 2,372,000 2,764,000
Total current assets ............................ 45,661,000 42,983,000
Other assets
Cash held in trust ................................ 745,000 1,778,000
Cost in excess of net asset value of purchased
businesses ...................................... 591,000 663,000
Unamortized preopening and loan costs ............. 1,040,000 2,221,000
Receivable from affiliated company, less current
portion 6,795,000 7,170,000
Deferred income taxes ............................. 10,141,000 8,652,000
Other noncurrent assets ........................... 1,392,000 2,301,000
20,704,000 22,785,000
Property and equipment
Land .............................................. 5,025,000 5,383,000
Buildings and improvements ........................ 69,200,000 77,630,000
Equipment, furniture and fixtures ................. 20,325,000 19,611,000
94,550,000 102,624,000
Less accumulated depreciation ..................... 28,157,000 29,156,000
66,393,000 73,468,000
$ 132,758,000 $139,236,000
See notes to consolidated financial statements.
F4
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable........................ $ 4,990,000 $ 3,868,000
Accrued salaries and wages.............. 5,169,000 4,843,000
Other accrued liabilities............... 4,412,000 1,347,000
Amounts due to third-party
contractual agencies.................. 8,435,000 4,996,000
Current portion of long-term debt....... 10,940,000 3,831,000
Total current liabilities.......... 33,946,000 18,885,000
Noncurrent liabilities
Other accrued liabilities .............. 7,170,000 1,337,000
Long-term debt, less current portion.... 44,664,000 55,568,000
Minority interests...................... 925,000 1,667,000
Total noncurrent liabilities....... 52,759,000 58,572,000
Stockholders' equity
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 8,605,108 shares at
June 30, 1996 and 8,290,795
shares at June 30, 1995............... 86,000 83,000
Additional paid-in capital.............. 99,899,000 99,147,000
Retained earnings (deficit) ............ (50,266,000) (33,785,000)
Treasury stock--581,550 common
shares at June 30, 1996
and June 30, 1995, at cost............ ( 3,899,000) (3,899,000)
Total stockholders' equity......... 46,053,000 61,779,000
$ 132,758,000 $ 139,236,000
See notes to consolidated financial statements.
F5
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30
1996 1995 1994
NET REVENUES ...................... $ 117,423,000 $ 136,418,000 $ 137,002,000
Expenses:
Salaries, wages and benefits ..... 66,259,000 72,061,000 64,805,000
Other operating expenses ......... 42,387,000 44,741,000 42,907,000
Provision for doubtful accounts .. 5,805,000 5,086,000 5,846,000
Depreciation and amortization .... 5,490,000 7,290,000 6,836,000
Interest and other financing
charges ........................ 6,892,000 8,347,000 8,906,000
Losses related to asset sales
and closed businesses ........... 4,473,000 6,431,000 802,000
Asset impairment charges ......... 5,485,000 21,815,000 --
TOTAL EXPENSES .................... 136,791,000 165,771,000 130,102,000
INCOME (LOSS) BEFORE MINORITY
INTERESTS, INCOME TAXES AND
EXTRAORDINARY ITEM ............... (19,368,000) (29,353,000) 6,900,000
Minority interests ................ -- 887,000 4,824,000
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM ..... (19,368,000) (30,240,000) 2,076,000
Provision (benefit) for income
taxes ............................ (2,887,000) (13,195,000) 599,000
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM ............... (16,481,000) (17,045,000) 1,477,000
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)
NET INCOME (LOSS) ................. $ (16,481,000) $ (17,302,000) $ 1,322,000
Income (loss) per common and
dilutive common equivalent
share:
Primary:
Before extraordinary item ........ $ (2.12) $ (2.25) $ 0.15
Extraordinary item:
Loss from early
extinguishment of debt .......... -- (0.03) (0.01)
$ (2.12) $ (2.28) $ 0.14
Fully diluted:
Before extraordinary
item ........................... $ (2.12) $ (2.24) $ 0.15
Extraordinary item:
Loss from early
extinguishment of debt ........ -- (0.03) (0.01)
$ (2.12) $ (2.27) $ 0.14
Weighted average number of
common and dilutive common
equivalent shares
outstanding:
Primary .......................... 7,929,000 7,743,000 9,641,000
Fully diluted .................... 7,929,000 7,794,000 9,679,000
See notes to consolidated financial statements.
F6
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Class B
Class A Convertible
Convertible Preferred Additional Retained
Preferred Stock Common Paid-In Earnings Treasury
Stock Series C Stock Capital (Deficit) Stock
BALANCE AT
JULY 1,
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)
Redemption
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)
Exercise of
stock
options
(3,000
shares) .... -- -- -- 10,000 -- --
Shares issued
in
connection
with
employee
stock
purchase
plan
(21,760
shares) ... -- -- -- 70,000 -- --
Other shares
issued
(289,553
shares) .... -- -- 3,000 1,034,000 -- --
Dividends on
Class B
convertible
preferred
stock,
Series C ... -- -- -- (362,000) -- --
Net loss .... -- -- -- -- (16,481,000) --
BALANCE AT
JUNE 30,
1996 ........ $ -- $233,000 $86,000 $ 99,899,000 $(50,266,000) $(3,899,000)
See notes to consolidated financial statements.
F7
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30
1996 1995 1994
Cash flows from
operating activities
Net income (loss) ............. $(16,481,000) $(17,302,000 $ 1,322,000
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization .............. 6,003,000 8,074,000 7,638,000
Asset impairment
charges ................... 5,485,000 21,815,000 --
Loss on early
extinguishment of
debt ...................... -- 463,000 258,000
Write-off of
development and
other costs ............... 381,000 716,000 --
Loss on disposal
of assets ................. -- 5,096,000 722,000
Deferred income tax
benefit ................... (2,887,000) (13,584,000) (1,188,000)
Provision for
doubtful accounts ......... 5,805,000 5,086,000 5,846,000
Management and
director fees paid
in common stock ........... 600,000 -- --
Minority interests ......... -- 887,000 4,824,000
Cash flows from
(increase) decrease
in operating assets:
Patient accounts
receivable .............. (7,651,000) (4,410,000) (2,169,000)
Other current
assets .................. (1,632,000) (522,000) (2,071,000)
Other noncurrent
assets .................. 225,000 616,000 (554,000)
Cash flows from
increase (decrease)
in operating
liabilities:
Accounts payable ......... 1,105,000 2,466,000 (2,484,000)
Accrued salaries,
wages and other
liabilities ............. 9,202,000 (749,000) 2,072,000
Amounts due to
third-party
contractual
agencies ................ 3,439,000 267,000 (1,385,000)
Total
adjustments ........... 20,075,000 26,221,000 11,509,000
Net cash
provided by
operating
activities ........... 3,594,000 8,919,000 12,831,000
Cash flows from
investing activities
Proceeds from sales
of assets ................... -- 970,000 16,422,000
Acquisitions of
businesses .................. -- -- (6,022,000)
Expenditures for
property and
equipment ................... (1,467,000) (2,726,000) (5,070,000)
Development project
costs ....................... -- (2,124,000) (388,000)
Preopening costs ............. -- (329,000) (2,195,000)
Restricted cash
(reserved) used for
debt payments ............... -- 5,311,000 (5,311,000)
Cash held in trust ........... 1,033,000 (974,000) 806,000
Net cash
provided by
(used in)
investing
activities ........... (434,000) 128,000 (1,758,000)
Cash flows from
financing activities
Loan costs ................... (217,000) (290,000) (222,000)
Proceeds from
sale/leaseback of
facilities and
equipment ................... -- 12,015,000 --
Distributions to
minority interests .......... (742,000) (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) --
Net proceeds from
exercise of options
and stock purchases ......... 517,000 468,000 566,000
Payments on debt ............. (3,795,000) (17,683,000) (11,734,000)
Payment of preferred
stock dividends ............. (362,000) (364,000) (273,000)
Cancellation of
Class A preferred
stock ...................... -- (123,000) --
Purchase of treasury
stock ...................... -- (464,000) (1,144,000)
Net cash used
in financing
activities ........... (4,599,000) (6,210,000) (15,548,000)
Net increase (decrease)
in cash and cash
equivalents .................... (1,439,000) 2,837,000 (4,475,000)
Cash and cash
equivalents at
beginning of year .............. 9,044,000 6,207,000 10,682,000
Cash and cash
equivalents at
end of year .................... $ 7,605,000 $ 9,044,000 $ 6,207,000
See notes to consolidated financial statements.
F8
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 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 1,369 licensed beds (including 77
medical subacute beds), outpatient centers and management contracts. Nine of the
Company's facilities also provide less intensive residential treatment services.
During fiscal years 1995 and 1994, the Company operated a managed mental health
business through a subsidiary, the stock of which was distributed in the form of
a dividend to the Company's stockholders in April 1995. See Note 2.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. See Notes
4, 9 and 11.
Reclassifications
Certain amounts in the fiscal 1995 and 1994 financial statements have been
reclassified to conform with the fiscal 1996 presentation.
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.
Cash Held in Trust
Cash held in trust is revocable by the Company under certain circumstances
and includes cash and short-term investments set aside for the payment of losses
in connection with the Company's self-insurance program for hospital
professional and general liability claims.
F9
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Intangible Assets and Deferred Costs
Cost in excess of net asset value of purchased businesses is amortized on a
straight- line basis over 40 years. 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.
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, 1996 and 1995 was $6,880,000 and $7,544,000, 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.
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
F10
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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 11.
Professional and General Liability Insurance
The Company maintains a self-insurance program for its hospital
professional and general liability insurance. The Company and its facilities are
insured for professional and general liability in the aggregate amount of $25
million with self-insured retentions of $500,000 per claim and $1,500,000
aggregate per year. 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.
Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109. SFAS 109 requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Minority Interests
The equity of minority partners in 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.
Earnings Per Share
Primary earnings per share are calculated by dividing income before
extraordinary items 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
redeemed by the Company 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.
F11
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Stock Options
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
2. Transactions with Affiliated Companies
In October 1993, the Company, through its subsidiary Ramsay Managed Care,
Inc. ("RMCI"), entered the managed mental health business through an acquisition
of Florida Psychiatric Management, Inc. The managed care division expanded in
June 1994 with the acquisition of a Phoenix, Arizona-based managed mental health
business and, in fiscal 1995, through the award of contracts in Hawaii and West
Virginia. 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. Subsequent to this distribution, which was recorded at net book
value, 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
included 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 a 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.
RMCI is governed by a Board of Directors which is substantially the same
as the Company's Board of Directors. At June 30, 1996, 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 $8,207,000. Of this amount, $6,000,000 is represented by an unsecured,
interest-bearing (8%), subordinated promissory note due from RMCI and issued on
October 25, 1994. The remaining amount, which is also unsecured, includes
$360,000 of accrued interest on the promissory note since October 1, 1995 and
$1,847,000 (of which approximately $1,600,000 was outstanding on the
distribution date) of additional amounts paid by RHCI on behalf of RMCI or
charges by RHCI to RMCI for certain administrative services. Of the $6,000,000
due on the promissory note, approximately $1,412,000 is due on or before June
30, 1997 and the remainder is payable in 13 quarterly installments of
approximately $353,000, beginning September 30, 1997. RHCI has agreed that the
payment of interest on the promissory note for the period October 1, 1995
through June 30, 1996, as well as the $1,847,000 of additional amounts owed,
will not be required until after July 1, 1997, all on terms and conditions to be
mutually agreed to by RHCI and RMCI. During fiscal 1996 and 1995, total income
F12
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
recorded on amounts advanced to RMCI were approximately $600,000 and $110,000,
respectively.
On October 1, 1996, the Company and RMCI entered into an agreement and plan
of merger providing for the acquisition of RMCI by the Company. Upon
consummation of the merger, in exchange for all of the outstanding shares of
common and preferred stock of RMCI, the Company will issue approximately
2,130,000 shares of Common Stock and 100,000 shares of Class B Preferred Stock,
Series 1996, which will be convertible into 1,000,000 shares of Common Stock of
the Company. In addition, following the merger, all amounts owed by RMCI to the
Company will become an intercompany payable and receivable between RMCI and
RHCI, respectively. The merger is subject to approval by the shareholders of
each company, the receipt of lender, governmental and other consents and the
declaration of effectiveness by the Securities and Exchange Commission of a
registration statement to be filed by the Company. Subject to the satisfaction
of these conditions, it is expected that the merger will be consummated in
March, 1997.
At June 30, 1996, Ramsay Holdings HSA Limited owns approximately 17.5% of
the outstanding Common Stock of the Company and 50% of the outstanding Class B
Preferred Stock, Series C of the Company. Paul Ramsay Holdings Pty. Limited
("Pty. Limited") owns approximately 3.4% of the outstanding Common Stock of the
Company and the remaining 50% of the outstanding Class B Preferred Stock, Series
C.
In October 1995 and August 1996, Pty. Limited, a corporate affiliate of
Paul J. Ramsay, the Chairman of the Board of the Company, acquired through
private placements 275,863 shares and 275,546 shares, respectively, of Common
Stock of the Company at a price of $3.625 and $2.75 per share, respectively. Of
the total shares acquired in October 1995, 121,363 were issued for cash and
154,500 were issued for management fees due during the remainder of fiscal 1996
under the Company's management agreement with another corporate affiliate (the
"Management Fee Affiliate") of Mr. Ramsay. The shares acquired in August 1996
were issued for management fees due under the management agreement during fiscal
1997. With the issuance of the additional shares, the voting interest in the
Company held by Mr. Ramsay increased to approximately 34.8%.
On September 10, 1996, the Company entered into a letter agreement with
the Management Fee Affiliate and Pty. Limited which terminates the management
agreement effective July 1, 1997. In consideration for this termination, the
Company issued warrants to Pty. Limited to purchase 250,000 shares of Common
Stock at an exercise price of $2.63 per share. These warrants are fully
exercisable as of September 10, 1996 and expire on September 10, 2006.
F13
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
During the years ended June 30, 1996, 1995 and 1994, pursuant to the
management agreement, the Company incurred management fee expenses of $737,000,
$716,000 and $698,000, respectively.
3. Impairment of Assets
In the fourth quarter of fiscal 1995, the Company elected to adopt early
the provisions of FASB Statement Number 121 (the "Statement"). The Statement
requires that a new cost basis be established for impaired assets (within the
meaning of the Statement) 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.
As required by the Statement, the Company periodically reviews 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 is recoverable, based on the
future cash flows expected from the assets. Based on this review, the Company
determined that the carrying value of certain long-lived assets was impaired
(within the meaning of the Statement) at June 30, 1996 and 1995. The amount of
the impairment, calculated as the excess of carrying value of the long-lived
assets over the fair value of the assets (estimated using discounted future cash
flows expected from the assets), totalled approximately $4,000,000 ($3,400,000
after tax) and $20,300,000 ($11,400,000 after tax) at June 30, 1996 and 1995,
respectively. In accordance with the Statement, the facilities' carrying amount
of cost in excess of net asset value of purchased businesses, totalling
$3,800,000 in 1995 (zero in 1996), was written off prior to recording an
impairment to the carrying amount of property and equipment.
In 1996 and in 1995, the Company recorded additional asset impairment
charges totalling approximately $1,500,000 related to its investments in other
healthcare enterprises. The amount of the impairment charges was based on an
assessment of the future expected cash flows to be realized by the Company from
these enterprises.
4. Losses Related to Asset Sales and Closed Businesses
Primarily in the fourth quarter of fiscal 1996, the Company recorded
losses totalling approximately $4,500,000 related to additional asset
write-downs, cost report settlements and other adjustments related to businesses
which closed at various times prior to fiscal 1996, a reserve for
disproportionate share payments which the State of Louisiana has contended were
improperly paid to two of the Company's Louisiana facilities in fiscal 1995 and
1994, and lease commitments and other costs incurred in connection with the
Company's decision to relocate its corporate headquarters.
F14
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
During fiscal 1996, the State of Louisiana requested repayment of
disproportionate share payments received by two of the Company's Louisiana
facilities in fiscal years 1995 and 1994 totalling approximately $5,000,000. The
repayment requests related to a) alleged overpayments made to Three Rivers
Hospital because the State believed Three Rivers' actual annual inpatient volume
was less than its projection of annual inpatient volume made at the beginning of
its 1994 cost reporting year and b) alleged improper teaching hospital payments
made to Three Rivers Hospital and Bayou Oaks Hospital because the State believed
these facilities were not qualifying teaching hospitals at the time these
payments were made. The Company believes that certain of the calculations which
support the State's calculation of annual inpatient volume in 1994 are in error
and that other relevant factors affecting the State's calculation have not been
considered. Further, the Company believes that, based on its understanding of
the rules and regulations in place at the time the teaching hospital payments
were made, payments received as a result of the teaching classification were
appropriate.
On the basis of discussions to date between the Company and the State, the
Company believes that this matter may be settled for an amount significantly
less than the State's initial requests. Any settlement of this matter will be
contingent upon the execution of settlement documentation, the terms of which
have not been agreed upon. Further, there can be no assurance that the Company
and the State will agree on a settlement amount or the terms and conditions of
settlement documentation. The Company intends to vigorously contest any position
by the State of Louisiana which the Company considers adverse and believes that
adequate provision has been made at June 30, 1996 for the estimated amount which
might be recovered from the Company as a result of this matter.
During the third quarter of fiscal 1995, the Company recorded a $3,600,000
loss in connection with the sale and leaseback of two inpatient facilities and a
$400,000 loss in connection with the sale of real estate. 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 Three Rivers Hospital on June 30, 1995. Losses recorded in 1995 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.
F15
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
5. Long-Term Debt
The Company's long-term debt is as follows:
June 30
1996 1995
11.6% senior secured notes
due in semi-annual
installments through
March 31, 2000 ................... $ 34,169,000 $ 34,169,000
Variable rate revenue
bonds through 2015 .............. 19,400,000 20,200,000
15.6% subordinated secured
notes due in semi-annual
installments through
March 31, 2000 .................. 1,846,000 2,308,000
Capital lease obligation .......... -- 919,000
Working capital facility .......... -- 1,500,000
Other ............................. 189,000 303,000
55,604,000 59,399,000
Less amounts due within
one year ......................... 10,940,000 3,831,000
$ 44,664,000 $ 55,568,000
The aggregate scheduled maturities of long-term debt during the five years
subsequent to June 30, 1996 are as follows: 1997 -- $10,940,000; 1998 --
$8,260,000; 1999 -- $10,343,000; 2000 -- $12,462,000; and 2001 -- $800,000.
The Company has pledged substantially all of its real property as
collateral on the Company's long-term debt.
In 1984 and 1985, the Company 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. 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 generally have a term of 30 years, have an outstanding
balance at June 30, 1996 of $19,400,000. The interest rates on the loans are the
same as the applicable revenue bonds and ranged from 3.4% to 6.6% at June 30,
1996. The Company is required to maintain an irrevocable standby letter of
credit for each bond in an amount equal to the total principal payments due
under the bond, plus approximately one quarter's interest. Such letters of
credit are provided in a credit facility with a group of banks finalized in May
1993 (the "1993 Credit Facility").
The 1993 Credit Facility originally included approximately $27,500,000 in
letters of credit and $4,000,000 in a working capital facility. Due to principal
payments and the redemption of the variable rate revenue bonds associated with
the sale of a facility in 1994, the letters of credit outstanding at June 30,
1996 totalled $20,300,000. In addition, the Company fully paid down and
terminated its working capital facility with its bank group in December 1995.
F16
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
In September 1995, and again in August 1996, the Company and banks
supporting the 1993 Credit Facility agreed to terms which extended its
expiration date from May 15, 1996 to February 15, 1997 and from February 15,
1997 to August 15, 1997, respectively. In connection with the initial extension,
the Company agreed to reduce the bank group's exposure under the 1993 Credit
Facility by an additional $3 million on or before July 1, 1996. This requirement
was extended by the bank group to December 31, 1996 as part of the August 1996
extension.
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 $56,500,000 in senior secured notes and $3,000,000 in
subordinated secured notes. The senior secured notes bear interest at 11.6% and
require a principal payment of $3,093,250 on September 30, 1996, semi-annual
principal payments of $3,531,250 from March 31, 1997 through September 30, 1998
and semi-annual principal payments of $5,650,000 from March 31, 1999 through
March 31, 2000. The subordinated secured notes bear interest at 15.6% and are
due in semi-annual installments of $230,769 that began on March 31, 1994 and end
on March 31, 2000. In connection with a $7,500,000 prepayment of principal on
the senior secured notes in May 1995, 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.
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. From time to time, the lenders under the 1993 and 1990 Credit Facilities
have agreed to waive or otherwise adjust certain of these ratios and levels. In
connection with these waivers and adjustments, the Company pays additional fees
and expenses. Further, as part of the waivers and adjustments obtained as of
June 30, 1996, the Company agreed to provide its Hillcrest Hospital facility and
related assets as additional collateral to the lenders and agreed not to pay
future cash dividends in respect of its Class B Preferred Stock, Series C.
6. 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
currently require aggregate annual minimum rentals of $1.58 million, payable
monthly. Effective April 1 of each year, 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, payable monthly, and percentage rental payments equal to
2% of the net revenues of the facility, payable quarterly. The Company leases
office space for various other purposes over terms ranging from one to five
years. Rent expense related to noncancellable operating leases amounted to
F17
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
$3,269,000, $2,718,000 and $2,052,000 for the years ended June 30, 1996, 1995
and 1994, respectively.
Future minimum lease payments required under noncancellable operating
leases as of June 30, 1996 are as follows: 1997--$2,993,000; 1998--$2,699,000;
1999--$2,464,000; 2000-- $1,783,000; 2001--$1,770,000; and
thereafter--$14,520,000.
7. Stockholders' Equity
The Certificate of Incorporation of the Company, as amended, authorizes
the issuance of 20,000,000 shares of Common Stock, $.01 par value, 800,000
shares of Class A Preferred Stock, $1.00 par value, and 1,000,000 shares of
Class B Preferred Stock, $1.00 par value, of which 333,333 shares have been
designated as Class B Preferred Stock, Series 1987, $1.00 par value, and 152,321
shares have been designated as Class B Preferred Stock, Series C, $1.00 par
value ("Series C Preferred Stock").
Outstanding capital stock at June 30, 1996 included 8,605,108 shares of
Common Stock, of which 581,550 shares are held in treasury, and 142,486 shares
of Series C Preferred Stock. The shares of Series C Preferred Stock were issued
in June 1993 in connection with a recapitalization of the interests of Paul J.
Ramsay, the Company's chairman. The shares are entitled to cumulative dividends
at a rate of 5% per annum, payable quarterly in arrears, and 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.
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 Series C Preferred Stock 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 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.
F18
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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. Further, in connection with waivers received
from the Company's lenders under the 1993 and 1990 Credit Facilities as of June
30, 1996, the Company agreed not to pay future cash dividends in respect of its
Series C Preferred Stock. Prior to this time, the Company's credit facilities
permitted the payment of regular fixed dividends on the Series C Preferred
Stock, provided that such dividends did not exceed $387,200 in each 12-month
period and provided that no event of default existed or occurred as a result of
such payment.
8. Options and Warrants
The Company's stock option plans provide for 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 are subject to anti-dilution adjustments and 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. At June 30,
1996, the weighted average remaining life of all outstanding options was seven
years.
During 1996, in connection with a repricing opportunity authorized by the
Company's Board of Directors on November 10, 1995, approximately 1,500,000 of
options were voluntarily repriced by the optionholders. Under the repricing
opportunity, the exercise prices of the holders' outstanding options were
reduced to $2.50 per share, the closing price for the Common Stock on the NASDAQ
National Market System on November 10, 1995. The repriced options are not
exercisable until the closing price for the Common Stock, as quoted on the
NASDAQ National Market System, equals or exceeds $7.00 per share for at least 15
trading days, which need not be consecutive, subsequent to November 10, 1995.
The closing price for the Company's Common Stock has not exceeded $7.00 per
share since November 10, 1995 and, therefore, none of the repriced options were
exercisable at June 30, 1996.
F19
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
At June 30, 1996, there were no shares available for grant under the 1990
Stock Option Plan and 79,057, 64,802 and 178,142 shares available for grant
under the 1991, 1993 and 1995 Stock Option Plans, respectively. The table below
summarizes the activity in the plans in fiscal years 1996, 1995 and 1994.
1990 Plan 1991 Plan
Number Price Range Number Price Range
of Options Per Share of Options Per Share
Outstanding,
July 1, 1993 ......... 332,001 $5.00 1,061,501 $5.00-$6.25
Granted .............. -- -- 173,000 $6.88-$7.88
Canceled ............. -- -- (33,991) $5.00-$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
Granted .............. -- -- -- --
Canceled ............. (52,013) $4.01 (66,885) $4.25-$7.88
Exercised ............ (31,999) $5.00 (42,167) $5.00-$5.31
Effect of
Distribution
of Subsidiary ....... 64,972 266,924
Outstanding,
June 30, 1995 ....... 274,629 $4.01-$5.00 1,283,880 $3.75-$6.31
Granted .............. -- --
Canceled/expired (110,885) $4.01 (39,736) $4.01-$6.31
Exercised ............ -- --
Outstanding,
June 30, 1996 ....... 163,744 $2.50-$4.01 1,244,144 $2.50-$6.31
Exercisable,
June 30, 1996 ....... 63,252 166,961
Exercisable,
June 30, 1995 ....... 274,629 909,390
Exercisable,
June 30, 1994 ....... 293,669 982,669
1993 Plan 1995 Plan
Number Price Range Number Price Range
of Options Per Share of Options Per Share
Outstanding,
July 1, 1993 ........ -- -- -- --
Granted .............. 271,500 $6.88-$7.88 -- --
Canceled ............. (15,505) $7.88 --
Exercised ............ -- -- -- --
Outstanding,
June 30, 1994 ....... 255,995 $6.88-$7.88 -- --
Granted .............. 65,000 $3.75-$6.63 -- --
Canceled ............. (101,037) $5.51-$7.88 -- --
Exercised ............ -- -- -- --
Effect of
Distribution
of Subsidiary ....... 46,930 -- --
Outstanding,
June 30, 1995 ....... 266,888 $3.75-$6.31 -- --
Granted .............. 108,750 $3.38 321,858 $2.50-$4.01
Canceled ............. (49,756) $2.50-$6.31 -- --
Exercised ............ (3,000) $3.38 -- --
Outstanding,
June 30, 1996 ....... 322,882 $2.50-$6.31 321,858 $2.50-$4.01
Exercisable,
June 30, 1996 ....... 67,774 4,161
Exercisable,
June 30, 1995 ....... 210,669 --
Exercisable,
June 30, 1994 ....... 9,999 N/A
F20
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
On September 10, 1996, the Company entered into an Exchange
Agreement with a corporate affiliate of Paul J. Ramsay whereby Mr. Ramsay
exchanged 476,070 options with an exercise price of $2.50 per share (pursuant to
the repricing opportunity discussed above), for warrants to purchase an
aggregate of 500,000 shares for Common Stock at $2.75 per share. The warrants,
which expire in June 2003, are not exercisable until the closing price for the
Common Stock, as quoted on the NASDAQ National Market System, equals or exceeds
$7.00 per share for at least 15 trading days, which need not be consecutive,
subsequent to September 10, 1996. Most of the options exchanged were originally
granted under the 1991 Plan.
As part of the 1990 Credit Facilities, 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 anti-dilution adjustments, at June 30, 1996, the
purchase price is $6.43 per share and a total of 139,597 warrants are
outstanding. These warrants are exercisable on or before March 31, 2000.
9. 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. Significant
components of the Company's deferred tax liabilities and assets are as follows:
June 30
1996 1995
Deferred tax liabilities:
Book basis of fixed assets over tax basis ....... $ 2,710,000 $ 4,023,000
Change in tax accounting methods ................ -- 685,000
Economic performance ............................ 237,000 316,000
Total deferred tax liabilities ............... 2,947,000 5,024,000
Deferred tax assets:
Allowance for doubtful accounts ................. 1,211,000 609,000
General and professional liability insurance .... 899,000 635,000
Accrued employee benefits ....................... 374,000 417,000
Investment in nonconsolidated subsidiaries ...... 1,644,000 1,401,000
Impairment of investment ........................ 677,000 568,000
Other accrued liabilities ....................... 2,280,000 --
Other ........................................... 1,307,000 356,000
Net operating loss carryovers ................... 8,962,000 8,146,000
Alternative minimum tax credit carryovers ....... 1,544,000 1,544,000
Total deferred tax assets .................... 18,898,000 13,676,000
Valuation allowance for deferred tax assets ..... (4,412,000) --
Deferred tax assets, net of valuation allowance 14,486,000 13,676,000
Net deferred tax assets ...................... $11,539,000 $ 8,652,000
F21
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The provision (benefit) for income taxes consists of the following:
Year Ended June 30
1996 1995 1994
Income taxes currently payable:
Federal .......... $ -- $ -- $ 810,000
State ............ -- 183,000 874,000
Deferred income taxes:
Federal .......... (2,577,000) (12,154,000) (1,196,000)
State ............ (310,000) (1,430,000) 8,000
$ (2,887,000) $(13,401,000) $ 496,000
The provision (benefit) for income taxes is reported in the
consolidated statements of operations as follows:
Year Ended June 30
1996 1995 1994
Provision (benefit) for income
taxes...... $ (2,887,000) $(13,195,000) $ 599,000
Income tax benefit from loss
on early extinguishment
of debt................. -- (206,000) (103,000)
$ (2,887,000) $(13,401,000) $ 496,000
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:
Year Ended June 30
1996 1995 1994
Income (loss) before income
taxes,extraordinary items
and cumulative effect of
accounting change............ $(19,368,000) $(30,240,000) $ 2,076,000
Federal statutory income tax
rate......... 34% 34% 34%
(6,585,000) (10,282,000) 706,000
Benefit of net operating loss
recognized --- (2,503,000) (921,000)
Increase in valuation allowance 4,412,000 --- ---
Write-off of cost in excess of
net asset value of purchased
businesses.......... --- 956,000 ---
Income tax benefit from loss
on early extinguishment of
debt ................ --- (206,000) (103,000)
State income taxes............. (310,000) (1,247,000) 882,000
Other.......................... (404,000) (119,000) (68,000)
$ (2,887,000) $(13,401,000) $ 496,000
The Company has net deferred tax assets of $11,539,000 and
$8,652,000 at June 30, 1996 and 1995, respectively. In evaluating the
realizability of its deferred tax assets and the need for a valuation allowance,
management has considered the effects of implementing tax planning strategies,
consisting of the sales of certain appreciated property. The Company's valuation
F22
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
allowance related to deferred tax assets was increased from zero at June 30,
1995 to $4,412,000 at June 30, 1996, based on increases in the Company's
deferred tax assets which are not considered realizable given the estimated
effects of management's tax planning strategies.
At June 30, 1996, net operating loss carryovers of approximately
$23,600,000 (of which $17,600,000 expires from 2000 to 2003, $3,800,000 expires
in 2010 and $2,200,000 expires in 2011) and alternative minimum tax credit
carryovers of approximately $1,500,000 are available to reduce future federal
income taxes, subject to certain annual limitations.
10. Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments:
Cash and cash equivalents and cash held in trust: The carrying amount reported
in the balance sheet for cash and cash equivalents and cash held in trust
approximates its fair value.
Receivable from affiliated company: It was not practicable to estimate the fair
value of the receivable from affiliated company as the borrowing rate of the
affiliate was not determinable. Management believes this receivable is not
impaired at June 30, 1996 and 1995.
Debt: The fair value of the Company's senior secured and subordinated secured
notes is estimated using discounted cash flow analyses, based on the Company's
estimated current incremental borrowing rate for similar types of borrowing
arrangements. The carrying amounts of all other debt instruments approximate
estimated fair value.
The carrying amounts and estimated fair values of the Company's
financial instruments at June 30, 1996 and 1995 are as follows:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash
equivalents ........... $ 7,605,000 $ 7,605,000 $ 9,044,000 $ 9,044,000
Cash held in trust ..... 745,000 745,000 1,778,000 1,778,000
Receivable from
affiliated company .... 8,207,000 (see above) 7,495,000 (see above)
Debt:
Senior and
subordinated
notes .............. 36,015,000 36,904,000 36,477,000 38,226,000
Other ............... 19,589,000 19,589,000 22,922,000 22,922,000
11. 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 these intermediaries. Differences between amounts
recorded as estimated settlements and the audited amounts are reflected as
F23
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
adjustments to net revenues in the period the final determination is made.
During the years ended June 30, 1995 and 1994, the Company recorded contractual
reimbursement benefits of approximately $1,000,000 and $1,400,000, respectively,
related to intermediary audits of prior year cost reports. During the year ended
June 30, 1996 the Company recorded contractual adjustment expenses of
approximately $1,900,000 related to intermediary audits of prior year cost
reports. As a result of this negative experience, the Company recorded reserves
in the fourth quarter of fiscal 1996 totalling $3,500,000 related to possible
future adjustments of its cost report estimates by intermediaries. Management
believes that adequate provision has been made for any adjustments that may
result from future intermediary reviews and audits.
During the fiscal year ended June 30, 1996, the Company derived
approximately 70% of its net revenues from services provided to patients covered
by various federal and state governmental programs. Management believes it is
reasonably possible that the volume of patients or amount of reimbursement
received under these programs could be curtailed, resulting in decreases in the
Company's net revenues.
12. 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 did not contribute to the plan in 1996 and 1995. In 1994, the
Company contributed $160,000 to the plan.
13. 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. See Note 4.
14. Allowance for Doubtful Accounts
Activity in the Company's allowance for doubtful accounts consists of the
following:
Year Ended June 30
1996 1995 1994
Balance at beginning of year....... $ 3,886,000 $ 3,925,000 $ 4,955,000
Provision for doubtful accounts ... 5,805,000 5,086,000 5,846,000
Write-offs of uncollectible
patient accounts receivable...... (5,118,000) (5,125,000) (6,876,000)
Balance at end of year............. $ 4,573,000 $ 3,886,000 $ 3,925,000
F24
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
15. Supplemental Cash Flow Information
The Company's non-cash investing and financing activities and cash
payments for interest and income taxes were as follows:
Year Ended June 30
1996 1995 1994
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
Issuance of stock in lieu of
cash payment for management
and director fees ................. 600,000 -- --
Cash paid during the year for:
Interest (net of amount
capitalized) ...................... $ 5,260,000 $ 6,518,000 $8,064,000
Income taxes ......................... 249,000 1,231,000 398,000
F25
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
16. 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, 1996 and 1995.
Quarter Ended
September 30 December 31 March 31(2) June 30(3)
1996
Net revenues .... $ 29,129,000 $ 31,815,000 $ 31,888,000 $ 24,591,000
Income (loss)
before income
taxes .......... (631,000) 1,336,000 1,040,000 (21,113,000)
Net income
(loss) ......... (391,000) 835,000 638,000 (17,563,000)
Income (loss)
per common
and dilutive
common
equivalent
share(1)
Primary:
Income
(loss) per
common
share ........ $(0.06) $0.09 $0.07 $(2.23)
Fully diluted:
Income (loss)
per common
share ........ $(0.06) $0.09 $0.07 $(2.23)
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)
(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 Note 4, during the third quarter of fiscal 1995,
the Company recorded losses totalling $4.0 million ($2.9 million after
estimated income tax benefit) related to a sale/leaseback transaction and
the sale of real estate.
(3) As further described in Note 3, in the fourth quarter of fiscal 1996 and
1995, the Company recorded asset impairment charges primarily related to
the application of the principles of FASB Statement No. 121 of $5.5 million
($4.7 million after estimated income tax benefit) and $21.8 million ($12.3
million after estimated income tax benefit), respectively. As further
described in Notes 4 and 11, in the fourth quarter of fiscal 1996, the
Company recorded losses related to asset sales and closed businesses of
approximately $4.5 million ($3.8 million after estimated income tax
benefit) and contractual adjustment expenses related to cost report
settlements/reserves of approximately $7 million ($6 million after
estimated income tax benefit). Also, the Company recorded additional asset
write- downs/reserves of approximately $2.9 million ($2.4 million after
estimated income tax benefit) in the fourth quarter of fiscal 1996.
F26
<PAGE>
INDEX OF EXHIBITS
Page
Number
2.1 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) ......................... --
2.2 Agreement of sale and purchase dated April 12, 1995 by
and between Mesa Psychiatric Hospital, Inc. and Capstone
Capital Corporation (incorporated by reference to
Exhibit 2.7 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995). 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 .............................................. --
2.3 Agreement of sale and purchase dated April 12, 1995 by
and between RHCI San Antonio, Inc. and Capstone Capital
Corporation (incorporated by reference to Exhibit 2.8 to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1995). 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 . --
2.4 Agreement and Plan of Merger dated as of October 1, 1996
among Ramsay Managed Care, Inc., the Company and RHCI
Acquisition Corp. (incorporated by reference to Exhibit 2
to the Company's Current Report on Form 8-K dated
October 2, 1996). Pursuant to Reg. S-K, Item 601(b)(2), the
Company agrees to furnish a copy of the Disclosure
Schedules to such Agreement to the Commission upon request --
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) ......................... --
E-1
<PAGE>
Page
Number
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) ......................... --
4.4 Third Supplemental Trust Indenture dated as of April 12,
1995 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 Elizabeth Talley, as Trustee .....
4.5 Fourth Supplemental Trust Indenture dated as of
September 15, 1995 between the Company, Bountiful
Psychiatric Hospital, Inc., Cumberland Mental Health,
Inc., East Carolina Psychiatric Services, Havenwyck
Hospital, Inc., Mesa Psychiatric Hospital, Inc. and
Psychiatric Institute of West Virginia, Inc. and NationsBank
of Georgia, National Association and Elizabeth Talley,
as Trustee (incorporated by reference to Exhibit 10.100 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995) ................................. --
4.6 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) --
4.7 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 4.6) ................. --
4.8 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 4.6) .................. --
4.9 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 4.6) .. --
E-2
<PAGE>
Page
Number
4.10 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 4.6) .................. --
4.11 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 4.6) ................... --
10.1 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 for the year ended June 30, 1990) --
10.2 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 10.1) .......................................... --
10.3 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 10.1) ................................ --
10.4 Pledge and Security Agreement between Bountiful Psychiatric
Hospital, Inc. and The Citizens and Southern National Bank
10.5 Pledge and Security Agreement dated as of March 31, 1990,
between the Company and The Citizens and Southern National
Bank (substantially identical to Exhibit 10.4) ........... --
10.6 Pledge and Security Agreement between Michigan Psychiatric
Services, Inc. and The Citizens and Southern National
Bank (substantially identical to Exhibit 10.4) ............. --
10.7 Pledge and Security Agreement between Americare of Galax,
Inc. and The Citizens and Southern National Bank
(substantially identical to Exhibit 10.4) ............... --
10.8 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 10.10 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1990) --
10.9 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 10.8) ................................ --
10.10 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 10.8) ................................ --
E-3
<PAGE>
Page
Number
10.11 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) .......................... --
10.12 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) ............................. --
10.13 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 10.12) ............................................ --
10.14 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) ............ --
10.15 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) --
10.16 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 10.15 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) --
10.17 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 10.15 above
(substantially identical to Exhibit 10.16) ................ --
10.18 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 10.15 above (substantially
identical to Exhibit 10.16) ............................... --
10.19 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 10.15 above (substantially
identical to Exhibit 10.16) ............................... --
10.20 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 10.15 above
(substantially identical to Exhibit 10.16) ................ --
E-4
<PAGE>
Page
Number
10.21 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 10.15 above
(substantially identical to Exhibit 10.16) ............... --
10.22 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 10.15 above (substantially
identical to Exhibit 10.16) ................................ --
10.23 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 10.15 above
(substantially identical to Exhibit 10.16) ................ --
10.24 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 10.15 above (substantially identical to Exhibit 10.16) --
10.25 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 10.15
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) ............................................ --
10.26 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 10.15 above (substantially identical to
Exhibit 10.25) ............................................ --
10.27 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 10.15 above (substantially identical to
Exhibit 10.25) ............................................ --
10.28 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 10.15 above
(substantially identical to Exhibit 10.25) ................ --
10.29 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 10.15 above (substantially identical
to Exhibit 10.25) ......................................... --
10.30 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 10.15 above (substantially identical to
Exhibit 10.25) ............................................ --
10.31 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 10.15 above (substantially
identical to Exhibit 10.25) ............................... --
E-5
<PAGE>
Page
Number
10.32 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 10.15 above
(substantially identical to Exhibit 10.25) ................ --
10.33 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 10.15 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) --
10.34 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 10.15
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) ............................................ --
10.35 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 10.15 above (substantially identical to
Exhibit 10.34) ............................................ --
10.36 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 10.15 above (substantially identical to
Exhibit 10.34) ............................................ --
10.37 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 10.15
above (substantially identical to Exhibit 10.34) .......... --
10.38 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 10.15 above (substantially identical to
Exhibit 10.34) ............................................ --
10.39 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
10.15 above (substantially identical to Exhibit 10.34) .. --
10.40 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 10.15 above (substantially identical to
Exhibit 10.34) ............................................ --
10.41 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 10.15 above (substantially identical to
Exhibit 10.34) ............................................ --
E-6
<PAGE>
Page
Number
10.42 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 10.15 above (substantially identical
to Exhibit 10.34) ......................................... --
10.43 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 10.15 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) ..... --
10.44 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 10.15 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) ..................................... --
10.45 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 10.15
above, with respect to certain real property located in
Horry County, South Carolina (substantially identical to
Exhibit 10.44) ............................................ --
10.46 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 10.15 above, with respect to
certain real property located in Vernon County, Missouri
(substantially identical to Exhibit 10.44) ................ --
10.47 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 10.15 above, with respect to certain real property
located in St. Tammany Parish, Louisiana (substantially
identical to Exhibit 10.44) ............................... --
10.48 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 10.15 above, with
respect to certain real property located in Okaloosa
County, Florida (substantially identical to Exhibit 10.44) --
10.49 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 10.15 above, with
respect to certain real property located in the City of
Houma, Parish of Terrebonne, Louisiana (substantially
identical to Exhibit 10.44) ............................... --
E-7
<PAGE>
Page
Nimber
10.50 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 10.15
above, with respect to certain real property located in
Garfield County, Oklahoma (substantially identical to
Exhibit 10.44) ............................................ --
--
10.51 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 Generate, individually and as
agent for the lenders which are parties to that certain
Credit Agreement described in Exhibit 10.15 above, with
respect to certain real property located in the City of
DeSoto, Dallas County, Texas (substantially identical to
Exhibit 10.44) ............................................ --
10.52 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) .................................. --
10.53 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) ....................... --
10.54 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) ................................. --
10.55 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) ......................... --
10.56 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) ............................................ --
10.57 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) --
10.58 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) ............................................
10.59 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)
(incorporated by reference to Exhibit 10.60 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995) --
E-8
<PAGE>
Page
Number
10.60 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) ............................................ --
10.61 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) ....... --
10.62 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) ....................... --
10.63 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) ................................. --
10.64 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) ............................................. --
10.65 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) ............... --
10.66 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) --
10.67 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) .......................... --
10.68 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) .......................... --
10.69 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) ........................ --
10.70 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) ................................. --
10.71 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) ...................................... --
10.72 Ramsay Health Care, Inc. 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.83 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1993) .................................. --
E-9
<PAGE>
PagE
Number
10.73 Ramsay Health Care, Inc. 1993 Employee Stock
Purchase Plan (incorporated by reference to Exhibit 10.84
to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993 ........................... --
10.74 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) ............................................ --
10.75 Employment Agreement dated July 19, 1994 between the
Company and Brent J. Bryson (incorporated by reference
to Exhibit 10.85 to the Company's Annual Report on Form
10-K for the year ended June 30, 1995) .................... --
10.76 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) ......................... --
10.77 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) ........................................... --
10.78 Lease Agreement dated April 12, 1995 between Capstone
Capital Corporation and Mesa Psychiatric Hospital, Inc.
(incorporated by reference to Exhibit 10.88 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1995) ............................................ --
10.79 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. (incorporated by reference
to Exhibit 10.89 to the Company's Annual Report on Form
10-K for the year ended June 30, 1995) .................... --
10.80 Facility Lease Agreement dated June 26, 1995 by and between
Charter Canyon Behavioral Health System, Inc. and Bountiful
Psychiatric Hospital, Inc. (incorporated by reference to
Exhibit 10.90 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1995) ......................... --
10.81 Employment termination letter dated September 15, 1995
between the Company and Gregory H. Browne (incorporated by
reference to Exhibit 10.91 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1995) ............ --
10.82 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) --
10.83 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) ........................................... --
E-10
<PAGE>
Page
Number
10.84 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) ........................................ --
10.85 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) ........................................... --
10.86 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) .................... --
10.87 $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) --
10.88 Consent and Amendment dated April 12, 1996 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 ..
10.89 Second Amendment to Credit Agreement dated as of
September 15, 1995 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 10.99 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995) ............ --
10.90 Amended and Restated Stock Purchase Agreement dated
October 12, 1995 by and among Paul Ramsay Holdings Pty.
Limited, Ramsay Health Care, Inc. and, solely for the
purpose of Section I, III and VI of the agreement,
Ramsay Health Care Pty. Limited (incorporated by reference
to Exhibit 10.101 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995) ....... --
10.91 Amendment to Rights Agreement, dated October 3, 1995
between Ramsay Health Care, Inc. and First Union Bank
of North Carolina, as Rights Agent (incorporated by
reference to Exhibit 10.102 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1995) ..................................................... --
10.92 Ramsay Health Care, Inc. 1995 Long Term Incentive Plan
(incorporated by reference to Exhibit 10.103 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995) .................................. --
10.93 Third Amendment to Credit Agreement dated as of August 15,
1996 among the Company and certain 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 .................................................
10.94 Stock Purchase Agreement dated as of August 13, 1996 by and
among Paul Ramsay Holdings Pty. Limited, the Company and,
solely for purposes of Sections I, III and IV thereof,
Ramsay Health Care Pty. Limited ...........................
E-11
<PAGE>
Page
Number
10.95 Amended and Restated Employment Agreement dated as of
August 15, 1996 by and between Reynold Jennings and the
Company ...............................................
10.96 Exchange Agreement dated September 10, 1996, by and among
the Company, Paul Ramsay Hospitals Pty. Limited and
Paul J. Ramsay, including a related Warrant Certificate
dated September 10, 1996 issued to Ramsay Hospital Pty.
Limited ...................................................
10.97 Consulting Agreement dated as of January 1, 1996 between
the Company and Summa Healthcare Group, Inc. ..............
10.98 Letter Agreement dated as of September 10, 1996 by and
among the Company, Ramsay Health Care Pty. Limited and Paul
Ramsay Holdings Pty. Limited, included a related Warrant
Certificate dated September 10, 1996 issued to Paul Ramsay
Holdings Pty. Limited .....................................
11 Computation of Net Income Per Share .......................
21 Subsidiaries of the Company ...............................
23 Consent of Ernst & Young LLP ..............................
27 Financial Data Schedule ...................................
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-12
EXHIBIT 4.4
- --------------------------------------------------------------------------------
THIRD SUPPLEMENTAL TRUST INDENTURE
Dated as of April 12, 1995
Between
RAMSAY HEALTH CARE, INC.,
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
ELIZABETH TALLEY
As Trustees
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
Page
Parties............................................................... 1
Section 1. Definitions............................................... 2
Section 1.1. Definitions Contained in Original
Indenture........................................... 2
Section 1.2. New Definitions................................ 3
Section 2. Sale-Leaseback of Desert Vista Hospital................... 4
Section 2.1. Conditions of the Sale-Leaseback
Transaction......................................... 4
Section 2.2. Disposition of Amounts Deposited with
Trustee............................................. 5
Section 3. Appraisals................................................ 6
Section 4. Miscellaneous............................................. 6
Section 4.1. Applicability of Original Indenture............ 6
Section 4.2. Counterparts................................... 7
Section 4.3. No Legend Required............................. 7
Section 4.4. No Responsibility of Trustees for
Recitals............................................ 7
Section 4.5. Consent of Lenders to Supplement............... 7
Section 4.6. Furnishing of Documents........................ 7
Section 4.7. Payment of Special Counsel Fees................ 7
i
<PAGE>
THIRD SUPPLEMENTAL TRUST INDENTURE
THIRD SUPPLEMENTAL TRUST INDENTURE dated as of
April 12, 1995 (herein called the "Supplement") between
RAMSAY HEALTH CARE, INC., a Delaware corporation (the
"Company"), BOUNTIFUL PSYCHIATRIC HOSPITAL, INC., a Utah
corporation ("Bountiful Psychiatric"), CUMBERLAND MENTAL
HEALTH, INC., a North Carolina corporation ("Cumberland"),
EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION, a North
Carolina corporation ("East Carolina Psychiatric"),
HAVENWYCK HOSPITAL, INC., a Michigan corporation
("Havenwyck"), MESA PSYCHIATRIC HOSPITAL, INC., an Arizona
corporation ("Mesa Psychiatric"), and PSYCHIATRIC INSTITUTE
OF WEST VIRGINIA, INC., a Virginia corporation ("Psychiatric
Institute; together with the Company, Bountiful Psychiatric,
Cumberland, East Carolina Psychiatric, Havenwyck and Mesa
Psychiatric collectively being hereinafter referred to as
the "Obligors"), whose post office addresses are One Poydras
Plaza, 639 Loyola Avenue, Suite 1700, New Orleans, Louisiana
70113, and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
(formerly The Citizens and Southern National Bank), a
national banking association (the "Trustee"), whose post
office address is 600 Peachtree Street, Suite 900, Atlanta
Georgia 30308, Attention: Corporate Trust Department and
ELIZABETH TALLEY (the "Individual Trustee"), whose post
office address is 600 Peachtree Street, Suite 900, Atlanta,
Georgia 30308, as Trustees (the Trustee and the Individual
Trustee hereinafter collectively referred to as the
"Trustees").
WHEREAS, the Obligors on April 30, 1990 issued
their 11.6% Senior Secured Notes due March 31, 2000 in the
aggregate principal amount of $56,500,000 (the "Senior
Notes") and their 15.6% Subordinated Secured Notes due
March 31, 2000 in the aggregate principal amount of
$3,000,000 (the "Subordinated Notes"; and the Senior Notes
and Subordinated Notes collectively, the "Notes") under and
secured by the Trust Indenture dated as of March 31, 1990
from the Obligors to the Trustees (the "Original
Indenture"); and
WHEREAS, the Obligors and the Trustees entered
into a First Supplemental Trust Indenture dated as of
June 15, 1991 (the "First Supplemental Indenture") and
entered into a Second Supplemental Trust Indenture dated as
of May 15, 1993 (the "Second Supplemental Indenture"; and
the Original Indenture as amended by the First Supplemental
Indenture, the Second Supplemental Indenture, as hereby
<PAGE>
2
amended and as the same may be further amended and
supplemented from time to time being referred to as the
"Indenture"); and
WHEREAS, the Trustees are beneficiaries under that
certain Leasehold Deed of Trust, Assignment of Rents and
Security Agreement with Financing Statement (Fixture Filing)
dated as of March 31, 1990 (the "Mesa Psychiatric Mortgage")
delivered by Mesa Psychiatric pursuant to the Indenture; and
WHEREAS, the Obligors have requested the holders
of the Senior Notes and the Subordinated Notes to consent to
certain amendments to the Indenture and the holders of all
of the Notes outstanding have consented in writing to such
changes and all other matters set forth in or effectuated by
this Supplement; and
WHEREAS, all things necessary to make this
Supplement the valid obligation of the Obligors according to
its tenor and effect have been done or authorized;
NOW, THEREFORE, in consideration of the premises
and of the sum of Ten Dollars and of other good and valuable
consideration, receipt whereof upon the delivery of this
Supplement the Obligors hereby acknowledge, and in order to
strengthen the financial and operating condition of each and
every Obligor, directly or indirectly, as a result of the
enhanced ability of the Company to provide financial,
accounting, consulting and administrative assistance and
services to each other Obligor, and in order to secure the
payment, subject to Sec. 10 of the Indenture, of both the
principal of and interest and premium, if any, on the Notes
at any time outstanding thereunder according to their tenor
and the provisions thereof, and, further subject to Sec. 10 of
the Indenture, to secure the faithful performance and
observance of all the covenants and provisions in the Notes,
the Note Agreements, the Pledge Agreements, the Mortgages
and in the Indenture contained, the Obligors hereby covenant
and agree with the Trustees for the equal and pro rata
benefit of all present and future holders of all Notes
issued under the Indenture, subject to Sec. 10 of the
Indenture, without any preference, priority or distinction
as follows:
Section I. Definitions.
Section 1.1. Definitions Contained in Original
Indenture. Except as otherwise provided in Section 1.2 of
this Supplement, words and phrases defined in the Original
Indenture shall have the same meanings ascribed to them
<PAGE>
3
therein when used herein, unless the context or use
indicates a different meaning or intent.
Section 1.2. New Definitions. Unless the context
otherwise requires, the terms hereinafter set forth when
used in the Indenture shall have the following meanings and
the following definitions shall be equally applied to both
the singular and plural forms to any of the terms herein
defined:
"`Additional Sum' shall mean an amount equal
to $234,000."
"`Buyer-Lessor' shall mean Capstone Capital
Corporation, a Maryland corporation, or an
affiliate thereof."
"`Desert Vista Assets' shall mean the Land
Parcels, buildings, improvements, fixtures and all
other real property constituting the Desert Vista
Hospital."
"`Lease' shall mean a lease agreement to be
entered into between Buyer-Lessor and Mesa
Psychiatric of the Desert Vista Assets."
"`Mesa Net Proceeds of Sale' shall mean, with
respect to the purchase price proceeds to be paid
to Mesa Psychiatric for the Desert Vista Assets,
an aggregate amount equal to $7,500,000."
"`Sale-Leaseback Transaction' shall mean the
sale-leaseback transaction between Buyer-Lessor
and Mesa Psychiatric pursuant to which, among
other things, (i) Mesa Psychiatric will sell to
Buyer-Lessor for an aggregate purchase price of
$8,550,000 (subject to adjustment as agreed to
between the Company and Buyer-Lessor) the Desert
Vista Assets and (ii) pursuant to the Lease,
Buyer-Lessor will lease the Desert Vista Assets to
Mesa Psychiatric for an initial term of 15 years
(with three successive renewal options of 5 years
each) for aggregate annual Rentals of $1,026,000
(subject to adjustment as agreed to between the
Company and Buyer-Lessor), payable monthly,
subject to an annual upward adjustment from the
Consumer Price Index with an annual cap of 3%."
<PAGE>
4
Section 2. Sale-Leaseback of Desert Vista Hospital.
Section 2.1. Conditions of the Sale-Leaseback
Transaction. In accordance with the provisions of Sec. 4.2(c)
of the Indenture, and notwithstanding the provisions of
Sec.Sec. 3.21(d) and 3.21(e) of the Indenture, Mesa Psychiatric is
hereby permitted to consummate the Sale-Leaseback
Transaction. The Trustees shall release the Lien of the
Mesa Psychiatric Mortgage and the security interests therein
with respect to the collateral covered thereby upon
compliance by the Obligors with each of the following
conditions:
(a) such sale shall have been the subject of a
binding contract to purchase the Desert Vista Assets
between Mesa Psychiatric and Buyer-Lessor or any
assignee thereof (the "Purchaser") (the "Desert
Hospital Sale Contract");
(b) Mesa Psychiatric shall have determined by
resolution of its Board of Directors that the sale of
the Desert Vista Assets is made at an amount not less
than the fair market value thereof at the time of the
execution of the Desert Vista Hospital Sale Contract
and Mesa Psychiatric shall furnish each Noteholder and
the Trustee on or prior to the date of closing the sale
of the Desert Vista Assets a copy of such resolution
certified by the Secretary or an Assistant Secretary of
Mesa Psychiatric;
(c) on the date of sale of the Desert Vista
Assets and concurrently with the release by the
Trustees of the Lien of the applicable Mortgage, the
Obligors shall pay or cause the Purchaser to pay an
amount equal to the Mesa Net Proceeds of Sale plus the
Additional Sum by wire transfer of immediately
available funds to the account specified by the Trustee
for deposit in trust for the benefit of the
Noteholders, such account to be in the name of Mesa
Psychiatric and held and disbursed in accordance with
Section 2.2 of this Supplement; and
(d) On the date of sale of the Desert Vista
Assets, the Trustees shall have received an opinion of
counsel for Mesa Psychiatric, dated the date of such
sale, to the effect that upon deposit of the Mesa Net
Proceeds of Sale with the Trustees, the Trustees shall
have a perfected security interest in such Mesa Net
Proceeds of Sale entitled to the same priority as the
Mesa Psychiatric Mortgage with respect to the Desert
Vista Assets.
<PAGE>
5
Section 2.2 Disposition of Amounts Deposited with
Trustee.
(a) The Mesa Net Proceeds of Sale and the
Additional Sum shall constitute property of Mesa
Psychiatric subject to the Lien of the Indenture and
shall be held by the Trustee in a separate account
under the Indenture containing only the Mesa Net
Proceeds of Sale and the Additional Sum;
(b) The Mesa Net Proceeds of Sale shall be
applied by the Trustee within three Business Days
following receipt by the Trustee from the Company of a
copy of a written consent by the Lenders under the
Credit Agreement to such application, which consent
shall be reasonably satisfactory to the Company (the
"Written Consent"), to the prepayment of $7,500,000
principal amount of the Senior Secured Notes, as
follows: $7,062,500 to the payment in full of the
principal prepayments of the Senior Secured Notes due
and payable on September 30, 1995 and March 31, 1996,
respectively, and the balance of $437,500 to the
principal prepayment of the Senior Secured Notes due
and payable on September 30, 1996; provided, however,
that if the Company shall not furnish a copy of the
Written Consent to the Trustee, the Trustee shall apply
the Mesa Net Proceeds of Sale to the payment of the
Senior Secured Notes as and when such payments become
due pursuant to Section 5.2(a) of the Indenture until
the Mesa Net Proceeds of Sale are exhausted.
(c) The Additional Sum shall be applied by the
Trustee as follows:
(i) if the Written Consent shall not have
been furnished to the Trustee on or before the
close of business on April 30, 1995, the Trustee
shall on May 1, 1995 pay the Additional Sum to the
Holders of the Senior Secured Notes pro rata; or
(ii) if the Written Consent shall have been
furnished to the Trustee on or before the close of
business on April 30, 1995, the Trustee shall pay
the Additional Sum to the Holders of the Senior
Secured Notes concurrently with the prepayment of
principal of the Senior Secured Notes pursuant to
Section 2.2(b) of this Supplement.
(d) Prior to the exercise of remedies upon an
Event of Default or the application thereof as provided
in this Section, the Mesa Net Proceeds of Sale and the
<PAGE>
6
Additional Sum shall be in the name of Mesa
Psychiatric, as directed by an authorized financial
officer of the Company, in direct obligations of the
United States of America or any agency thereof maturing
on or prior to the respective dates of application of
such moneys to the prepayment of the Senior Secured
Notes. Interest earned on such investments (i) from
the date of consummation of the Sale-Leaseback
Transaction to the date of disbursement of such amounts
in accordance with the provisions of Section 2.2(b)
shall be for the account of the Holders of the Senior
Notes, if the Trustee shall have received a copy of the
Written Consent on or prior to April 30, 1995 and (ii)
from the date of consummation of the Sale-Leaseback
Transaction to the date of disbursement of such amounts
in accordance with the provisions of Section 2.2(c)
shall be for the account of the Obligors, if the
Trustee shall not have received a copy of the Written
Consent on or prior to April 30, 1995; provided that
upon the exercise of remedies upon an Event of Default,
all such investment interest on deposit with the
Trustee or paid to it thereafter shall be applied to
the payment of the principal, premium, if any, and
interest on the Senior Secured Notes.
Section 3. Appraisals.
The Company will furnish to the Noteholders not
more than 90 days following the date of consummation of the
Sale-Leaseback Transaction appraisals of Benchmark Regional
Hospital, Brynn Marr Hospital, Chestnut Ridge Hospital and
Havenwyck Hospital. Each such appraisal shall be (i)
conducted by Valuation Counselors, Inc., Atlanta, Georgia,
or another firm of appraisers selected by the Company with
the consent of the Noteholders and (ii) in a form
substantially similar to the form of appraisals of such
Hospitals furnished to the Noteholders in connection with
their purchase of the Notes pursuant to Section 7(a)(vi) of
the Note Agreements or in such other form as shall be
satisfactory to the Noteholders.
Section 4. Miscellaneous.
Section 4.1. Applicability of Original Indenture.
The provisions of the Original Indenture, as heretofore
supplemented and amended and as supplemented and amended by
this Supplement, are hereby ratified, approved and confirmed
and remain in full force and effect. This Supplement shall
be construed as having been authorized, executed and
delivered under the provisions of Sec. 8.2 of the Indenture.
<PAGE>
7
Section 4.2. Counterparts. This Supplement may
be simultaneously executed in several counterparts, each of
which shall be an original and all of which shall constitute
but one and the same instrument.
Section 4.3. No Legend Required. Any and all
notices, requests, certificates and any other instruments,
including the Notes may refer to the Indenture or the Trust
Indenture dated as of March 31, 1990, without making
specific reference to this Supplement, but nevertheless all
such references shall be deemed to include this Supplement
unless the context shall otherwise require.
Section 4.4. No Responsibility of Trustees for
Recitals. The recitals and statements contained in this
Supplement shall be taken as the recitals and statements of
the Obligors, and the Trustee assume no responsibility for
the correctness of the same.
Section 4.5. Consent of Lenders to Supplement.
The Company represents and covenants that it has obtained
the written consent of the Agent under the Credit Agreement
to its execution of this Supplement.
Section 4.6. Furnishing of Documents. The
Company will within 10 business days after the date of the
closing of the Sale-Leaseback Transaction furnish to each
holder of the Notes, the Trustee and Chapman and Cutler (a)
fully executed counterparts of this Supplement and (b) the
Desert Hospital Sale Contract.
Section 4.7. Payment of Special Counsel Fees.
The Company will pay within 30 days after receipt of a
statement therefor, the reasonable fees and disbursements of
Chapman and Cutler as special counsel to the Noteholders in
connection with the execution and delivery of the waiver and
consent dated April 12, 1995 and this Supplement.
* * *
<PAGE>
IN WITNESS WHEREOF, each Obligor has caused this
Supplement to be executed on its behalf by its President or
Vice President and Vice President or Secretary or Assistant
Secretary; and NationsBank of Georgia, National Association
has caused this Supplement to be executed on its behalf by
one of its Corporate Trust Officers and attested by one of
its Assistant Secretaries and Elizabeth Talley has hereunto
set her hand, all as of the date first above written.
RAMSAY HEALTH CARE, INC.
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
_________________________
Name: Daniel A. Sims
Title: Assistant Secretary
BOUNTIFUL PSYCHIATRIC
HOSPITAL, INC.
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
_________________________
Name: Daniel A. Sims
Title: Assistant Secretary
CUMBERLAND MENTAL HEALTH, INC.
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
_________________________
Name: Daniel A. Sims
Title: Assistant Secretary
<PAGE>
EAST CAROLINA PSYCHIATRIC
SERVICES CORPORATION
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
_________________________
Name: Daniel A. Sims
Title: Assistant Secretary
HAVENWYCK HOSPITAL, INC.
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
_________________________
Name: Daniel A. Sims
Title: Assistant Secretary
MESA PSYCHIATRIC HOSPITAL,INC.
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
_________________________
Name: Daniel A. Sims
Title: Assistant Secretary
PSYCHIATRIC INSTITUTE OF
WEST VIRGINIA, INC.
By____________________________
Name: Reynold J. Jennings
Title: President
ATTEST:
______________________
Name: Daniel A. Sims
Title: Assistant Secretary
<PAGE>
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION,
As Corporate Trustee
(SEAL) By____________________________
Name:
Title: President
ATTEST:
_________________________
Name:
Title:
______________________________
Elizabeth Talley,
As Individual Trustee
EXHIBIT 10.4
PLEDGE AND SECURITY AGREEMENT
Dated March 31, 1990
Between
BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.
(the "Company")
And
THE CITIZENS AND SOUTHERN NATIONAL BANK,
as Trustee
(the "Secured Party")
<PAGE>
TABLE OF CONTENTS
Section Page
Parties.............................................................1
Recitals............................................................1
1. PLEDGE AND DEPOSIT OF COLLATERAL...........................2
2. WARRANTIES.................................................2
3. FURTHER ASSURANCE..........................................3
4. ADMINISTRATION OF PLEDGED SECURITIES.......................3
5. DEFAULT AND REMEDIES.......................................5
6. THE SECURED PARTY..........................................6
7. MISCELLANEOUS.............................................10
Signatures.........................................................11
ATTACHMENTS TO PLEDGE AND SECURITY AGREEMENT:
Schedule 1 - Description of Pledged Capital Stock
-i-
<PAGE>
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT dated March 31,
1990 (this "Security Agreement") is between Bountiful
Psychiatric Hospital, Inc., a Utah corporation (the
"Company") and The Citizens and Southern National Bank, a
national banking association, as trustee (the "Secured
Party").
R E C I T A L S:
A. The Company, Ramsay Health Care, Inc., a
Delaware corporation, Cumberland Mental Health, Inc., a
North Carolina corporation, East Carolina Psychiatric
Services Corporation, a North Carolina corporation,
Havenwyck Hospital, Inc., a Michigan corporation, Mesa
Psychiatric Hospital, Inc., an Arizona corporation, and
Psychiatric Institute Of West Virginia, Inc., a Virginia
corporation (collectively, the "Obligors"), have entered
into the separate Note Purchase Agreements dated as of
March 31, 1990 (the "Note Agreements") with the
institutional investors (the "Note Purchasers") named in the
Note Agreements providing for the commitment of the Note
Purchasers to purchase the 11.6% Senior Secured Notes due
March 31, 2000 in the aggregate principal amount of
$56,500,000 and the 15.6% Subordinated Secured Notes due
March 31, 2000 in the aggregate principal amount of
$3,000,000 constituting the joint and several obligations of
the Obligors (collectively, the "Notes"), which Notes the
Obligors are creating and issuing under and pursuant to that
certain Trust Indenture (the "Indenture") dated as of March
31, 1990 between the Obligors and The Citizens and Southern
National Bank and Susan L. Adams, as Trustees (the
"Trustees").
B. The Company is the owner of 100% of the
outstanding capital stock of Mesa Psychiatric Hospital, Inc.
(another joint and several Obligor on the Notes).
C. The Note Purchasers have required as a
condition of their purchase of the Notes that the Company
execute this Security Agreement as further security for the
Notes, and the Company is willing to execute this Security
Agreement.
D. The Company, on and as of the date of this
Agreement, owns 100% of the shares of outstanding capital
stock of the corporations named in Schedule 1 hereto; said
<PAGE>
2
shares being evidenced by securities more specifically
identified in Schedule 1 hereto.
NOW, THEREFORE, as one of the inducements to and
as part of the consideration for the purchase by the Note
Purchasers of the Notes and in consideration of the premises
and other good and valuable consideration, the receipt
whereof is hereby acknowledged:
SECTION 1. PLEDGE AND DEPOSIT OF COLLATERAL.
1.1 The Company does hereby pledge, assign and
deposit with the Secured Party, and grant the Secured Party
a security interest in, the shares of capital stock of the
corporations named in Schedule 1 hereto evidenced by the
certificates described in Schedule 1 hereto, together with
the proceeds thereof (hereinafter, together with any
additional collateral that may be deposited with the Secured
Party hereunder, called the "Pledged Securities").
This pledge, deposit and grant of a security
interest is made as and shall at all times constitute,
subject to Section 10 of the Indenture, equal and pro rata
security for the payment in full of all principal of,
premium, if any, and interest on the Notes, including any
and all extensions, renewals or refundings thereof in whole
or in part, and the performance and observance by the
Company of all covenants and conditions contained in the
Notes and the Note Agreements; and as security for all
expenses and charges, legal or otherwise, paid or incurred
by the Secured Party in realizing upon or protecting this
Security Agreement or the indebtedness hereby secured.
SECTION 2. WARRANTIES.
The Company hereby represents and warrants to the
Secured Party that:
(a) the pledged shares of capital stock described
in Schedule 1 hereto are all duly authorized, validly
issued, fully paid and nonassessable shares of the issuing
corporation and constitute all of the issued and outstanding
shares of capital stock, of any class, of each of such
issuing corporations;
(b) the Company is the owner of the Pledged
Securities and all rights incident thereto free and clear of
any lien, security interest or other claim thereto other
than the pledge and security interest made hereunder; and
<PAGE>
3
(c) the Pledged Securities have been duly
endorsed in blank or accompanied by an assignment or
assignments sufficient to transfer title thereto.
SECTION 3. FURTHER ASSURANCE.
The Company agrees on request of the Secured Party
to execute and deliver to the Secured Party such other
documents or instruments as shall be deemed necessary or
appropriate by the Secured Party to confirm unto the Secured
Party the pledge hereunder of the Pledged Securities. As and
when any other Pledged Securities shall come into the
possession of the Company or under its control, the Company
shall forthwith deposit and pledge the same with the Secured
Party, together with such proper instruments of assignment
and transfer as the Secured Party may reasonably require,
which shall include express authority to the Secured Party
to vote any shares of stock included therein to the extent
herein provided or permitted and to cause such authority to
be recorded in the entry of transfer of such stock on the
books of the corporation issuing the same.
SECTION 4. ADMINISTRATION OF PLEDGED SECURITIES.
4.1 Unless and until a Default or an Event of
Default, as defined in Section 6.1 of the Indenture, shall
have occurred and be continuing, the Company shall be
entitled:
(a) to vote all or any part of the Pledged
Securities at any and all meetings of shareholders of the
corporations which have issued the Pledged Securities and to
execute consents in respect thereof, and to consent to,
ratify or waive notice of any or all meetings of the
shareholders with the same force and effect as if this
Security Agreement had not been made, and, if necessary and
upon the receipt of the written request from the Company,
the Secured Party shall from time to time execute and
deliver to the Company appropriate powers of attorney or
proxies for that purpose, provided that without the prior,
written consent of the Secured Party, the Company shall not
be entitled to exercise any consensual right or power to
convert or exchange any debt security pledged hereunder for
any other "security" as defined in Section 2(1) of the
Securities Act of 1933, as amended; and
(b) to receive, collect or to have paid over all
dividends or interest declared or paid on the Pledged
Securities, except (i) dividends or distributions
constituting stock dividends, (ii) dividends or
distributions in kind, or (iii) liquidating dividends
<PAGE>
4
(either partial or complete), any and all such excepted
dividends and distributions to constitute and be additional
security for the purposes aforesaid and to be paid over
and/or pledged and deposited with the Secured Party and the
Secured Party shall have in respect thereof all of the
powers and rights as are herein provided in respect of the
initial Pledged Securities.
4.2 The Company shall pay over to the Secured
Party, immediately upon receipt, any money or other
distribution upon or in respect of the Pledged Securities or
any part thereof, other than dividends or interest which the
Company is entitled to receive or retain under Section
4.1(b).
4.3 All payments or other distributions received
by the Company upon or in respect of the Pledged Securities
other than dividends or interest which the Company is
entitled to receive and retain under Section 4.1(b) shall be
held in trust for the Secured Party and forthwith delivered
by the Company in the form received, with the Company's
endorsement in blank for transfer or accompanied by an
assignment or assignments sufficient to transfer title
thereto, and shall constitute part of the Pledged
Securities.
4.4 Except as set forth in clause (i) of this
Section 4.4, the Secured Party may at any time (i) only so
long as a Default or an Event of Default shall have occurred
and be continuing, cause any Pledged Securities to be
registered in its or its nominee's name with or without any
indication of pledge or security interest, (ii) file
financing statements with respect to any Pledged Securities
without the signature of the Company, and (iii) deliver any
of the Pledged Securities to the Company for a period of not
more than 21 days or to the Issuer thereof for the purpose
of making exchanges or registrations or transfers or for
such other purposes in furtherance of the security interest
in the Pledged Securities as the Secured Party may deem
advisable.
4.5 The Company hereby appoints the Secured Party
the attorney-in-fact of the Company for the purpose of
carrying out the provisions of this Security Agreement and
taking any action and executing or completing any
instruments which the Secured Party may deem necessary or
advisable to accomplish the purpose hereof, which
appointment as attorney in-fact is irrevocable and coupled
with an interest; provided, however, that the Secured Party
shall have no duty or obligation to the Company or the
holders of the Notes to collect or enforce payment of any of
<PAGE>
5
the Pledged Securities or any claims for interest thereon
whether by way of presentment, demand, protest, notice of
dishonor or otherwise. Without limiting the generality of
the foregoing, in the event that a Default or an Event of
Default shall have occurred and be continuing the Secured
Party shall have the right and power to receive, endorse and
collect all checks made payable to the order of the Company
representing payments of principal, interest or any other
distribution or payment in respect of the Pledged Securities
or any part thereof and to give full discharge for the same.
SECTION 5. DEFAULT AND REMEDIES.
5.1 The Company acknowledges and agrees that the
term Event of Default wherever used in this Security
Agreement shall mean an Event of Default as defined in
Section 6.1 of the Indenture.
5.2 If an Event of Default shall occur and be
continuing, the Secured Party shall have all the rights,
remedies and options of a secured party under the Illinois
Uniform Commercial Code in respect to the Pledged Securities
and, upon, but only upon, the written direction of the
Required Holders, shall
(a) without demand on the Company or anyone, at
any time or from time to time thereafter, upon ten days
advance notice to the Company setting forth the time and
place of such sale, sell, free from any equity of redemption
in or of the Company (any such right of equity being, to the
extent permitted by applicable law, hereby expressly waived
and released), the Pledged Securities or any part thereof at
any brokers' board or at public or private sale. The Secured
Party is authorized at any sale or other disposition of the
Pledged Securities, if it deems it advisable to do so, to
restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing for
their own account for investment and not with a view to the
distribution or resale of any of the Pledged Securities.
Without limiting any of the other provisions hereof, the
Secured Party at any such sale or sales may sell all the
Pledged Securities as a unit even though the sale price
thereof may be in excess of the amount remaining unpaid on
the indebtedness hereby secured. No notice or advertisement
of any sale or sales (whether or not adjournments of such
sale occur) need be given other than as hereinabove provided
for, and any such sale or sales may be adjourned from time
to time by announcement at the time and place of such sale
or at the time and place appointed for any adjourned sale or
sales. Any sale or sales shall be for cash and may be upon
such other terms and at such price or prices as may be
<PAGE>
6
acceptable to the Secured Party. The Secured Party or the
holder of any Note may purchase the Pledged Securities or
any part thereof at any sale or sales, and for the purpose
of making settlement for or payment of the purchase price,
shall be entitled to turn in and use the Note or Notes and
any claims for interest matured and unpaid thereon, in order
that there may be credited as paid on the purchase price the
sum apportionable and applicable to the Notes so turned in,
including principal and interest thereof, out of the net
proceeds of such sale after allowing for the proportion of
the total purchase price required to be paid in actual cash;
(b) revoke all powers of attorney and proxies
which the Secured Party may have delivered to the Company
pursuant to Section 4.1(a) and shall vote and exercise, or
cause the nominee or nominees of the Secured Party to vote
and exercise, such powers of an owner with respect to any
Pledged Securities as the holders of 51% or more in
aggregate principal amount of the outstanding Notes shall
direct; and
(c) exercise any other rights or remedies now or
hereafter existing at law or in equity or by statute.
5.3 The proceeds of any sale of or other
realization upon all or any part of the Pledged Securities,
and any other cash at the time held by the Secured Party
under this Security Agreement, shall be paid to the Trustees
under the Indenture and such Trustees shall apply such
proceeds in the manner provided in Section 6.10 of the
Indenture.
5.4 The satisfaction or performance of any part
of the indebtedness hereby secured shall not affect the
security hereby afforded or intended to be afforded for any
other indebtedness hereby secured; but the pledge hereby
made shall at all times remain in full force and effect for
the benefit of all indebtedness hereby secured until all
such indebtedness is fully satisfied.
SECTION 6. THE SECURED PARTY.
The Citizens and Southern National Bank accepts
the duties and responsibilities of the Secured Party
hereunder on and subject to the following terms and
conditions:
6.1 Except during the continuance of an Event of
Default known to the Secured Party, the Secured Party
undertakes to perform such duties and only such duties as
are specifically set forth in this Security Agreement, and
<PAGE>
7
no implied covenants or obligations shall be read into this
Security Agreement against the Secured Party.
6.2 In case an Event of Default has occurred and
is continuing to the knowledge of the Secured Party, the
Secured Party shall exercise such of the rights and power
vested in it by this Security Agreement and use the same
degree of care and skill in its exercise as an ordinary
prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
6.3 No provision of this Security Agreement shall
be construed to relieve the Secured Party from liability for
its own negligent action, negligent failure to act, or
wilful misconduct, except that:
(a) this Section shall not be construed to limit
the effect of Section 6.1;
(b) the Secured Party may consult with counsel
selected by the Secured Party and the advice or opinion of
such counsel on legal matters shall be full and complete
authorization and protection in respect of any action taken
or suffered hereunder in good faith and in accordance with
such advice or opinion of counsel;
(c) the Secured Party shall not be liable with
respect to any action taken or omitted to be taken by the
Secured Party in good faith in accordance with any direction
or request of the Required Holders with which the Secured
Party is required by the provisions hereof to comply;
(d) the Secured Party shall not be liable for any
error of judgment made in good faith by any of its officers
unless it shall be proved that the Secured Party was
negligent in ascertaining the pertinent facts;
(e) in the absence of bad faith on its part, the
Secured Party may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any note, notice, resolution, consent,
certificate, affidavit, letter, telegram, teletype message,
statement, order, or other document believed by it to be
genuine and correct and to have been signed or sent by the
proper person or persons; but upon receipt of instruments
furnished to the Secured Party pursuant to the provisions of
this Security Agreement, the Secured Party shall examine the
same to determine whether or not such instruments conform to
the requirements of this Security Agreement.
<PAGE>
8
(f) no provision of this Security Agreement shall
require the Secured Party to expend or risk its own funds or
otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably
assured to it; and
(g) the Secured Party shall not be deemed to have
knowledge of any Event of Default unless and until an
officer of the corporate trust department of the Secured
Party who customarily handles corporate trusts shall have
actual knowledge thereof or the Secured Party shall have
received written notice thereof from a Noteholder.
6.4 The Secured Party shall not be responsible
for the correctness of the recitals and statements herein.
6.5 The Secured Party shall not be responsible
for the validity, genuineness or effectiveness of any
collateral given to or held by it or the effectiveness of
the Pledge Agreements and the security interest purported to
be created thereby.
6.6 The Secured Party and any affiliated
corporation may become the owner of any Note hereby secured
and be interested in any financial transaction with the
Company, and the Secured Party may act as depositary or
otherwise in respect to other securities of the Company, all
with the same rights which it would have if not the Secured
Party.
6.7 The Secured Party may resign and be
discharged of the trusts created by mailing notice
specifying the date when such resignation shall take effect
to the Company and to the holders of the Notes. Such
resignation shall take effect on the day specified in such
notice (being not less than 60 days after the mailing of
such notice) unless previously a successor secured party
shall have been appointed as hereinafter provided, in which
event such resignation shall take effect immediately upon
the appointment of such successor.
The Secured Party may be removed and/or a
successor secured party may be appointed at any time by an
instrument or concurrent instruments in writing signed and
acknowledged by the Required Holders and delivered to the
Secured Party and to the Company and, in the case of
appointment of a successor secured party, to such successor
secured party.
<PAGE>
9
Any successor secured party shall be a state or
national bank or trust company in good standing, organized
under the laws of the United States of America or of any
State thereof, having capital, surplus and undivided profits
aggregating at least $100,000,000, if there be such a bank
or trust company willing and able to accept this trust upon
reasonable and customary terms.
6.8 Every successor secured party appointed
hereunder shall execute, acknowledge and deliver to its
predecessor and also to the Company, an instrument in
writing accepting such appointment hereunder, and thereupon
such successor secured party without any further act, deed
or conveyance, shall become fully vested with all the
estates, properties, rights, powers, trusts, duties and
obligations of its predecessor; but such predecessor shall,
nevertheless, on the written request of the Company, or of
any successor secured party, execute and deliver an
instrument transferring to such successor secured party all
the estates, properties, rights, titles, powers and trusts
of such predecessor hereunder. Should any deed, conveyance
or instrument in writing from the Company be required to
more fully and certainly vest in such successor secured
party the estates, rights, titles, powers and duties hereby
vested, any and all such instruments in writing shall, on
request of the successor secured party, be executed,
acknowledged and delivered by the Company.
6.9 The Secured Party shall be entitled to
reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee
of an express trust) for all services rendered, and to
reimbursement for all reasonable expenses, disbursements and
advances incurred or made by it in and about the admini
stration of the trusts herein provided for and in and about
foreclosure, enforcement or other protection of this
Security Agreement or the security interest hereof
(including reasonable compensation and expenses and
disbursements of its counsel and of all persons not
regularly in its employ). The Company agrees to pay such
compensation for services of the Secured Party and to
reimburse it for such expenses, disbursements and advances
and to indemnify and save harmless the Secured Party from
and against all loss, liability and expense incurred in good
faith and without negligence on its part in the exercise or
performance of any rights, remedies or duties under this
Security Agreement; and the Secured Party agrees to look
solely to the Company for such payments and indemnification.
<PAGE>
10
SECTION 7. MISCELLANEOUS.
7.1 Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the
successors and assigns of such party; and all the covenants,
promises and agreements in this Security Agreement contained
by or on behalf of the Secured Party, shall bind and inure
to the benefit of the respective successors and assigns of
such parties whether so expressed or not.
7.2 The unenforceability or invalidity of any
provision or provisions of this Security Agreement shall not
render any other provision or provisions herein contained
unenforceable or invalid.
7.3 The Secured Party shall release this Security
Agreement and the lien hereof by proper instrument or
instruments upon presentation of satisfactory evidence that
all indebtedness hereby secured has been fully paid or
discharged.
7.4 Any term, covenant, agreement or condition of
this Security Agreement may be amended or compliance
therewith may be waived (either generally or in a particular
instance and either retrospectively or prospectively) by an
instrument in writing executed by the Company and the
Secured Party, if the Company shall have obtained and filed
with the Secured Party the consent in writing of the
Required Holders.
7.5 All notices or other communications required
or contemplated by the provisions hereof shall, unless
otherwise specified, be in writing or by direct telex-to
telex, and shall be deemed to have been given or made on the
fourth Business Day after deposit thereof in the United
States mail, first class postage prepaid, or when received
if sent by facsimile communication or delivered by hand or
by overnight courier, addressed as follows:
If to the Company: One Poydras Plaza
639 Loyola Avenue
Suite 1400
New Orleans, Louisiana 70113
If to the Secured Party: 33 North Avenue, N.E.,
Suite 700
Atlanta, Georgia 30308
Attention: Corporate Trust
Department
Fax No.: (404) 897-3142
<PAGE>
11
If to any holder of Notes: at its address for notices
provided for in the Note
Agreements.
or to any such party at such other address as such party may
designate by notice duly given in accordance with this
Section to other parties.
7.6 This Security Agreement shall be governed by
and construed in accordance with the laws of the State of
Illinois.
7.7 This Security Agreement may be executed,
acknowledged and delivered in any number of counterparts,
each of such counterparts constituting an original but all
together only one Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Security Agreement to be duly executed, all as of the
day and year first above written.
BOUNTIFUL PSYCHIATRIC HOSPITAL,
INC.
By_______________________________
Its President
ATTEST:
____________________________
Assistant Secretary
THE CITIZENS AND SOUTHERN NATIONAL
BANK, Secured Party as aforesaid
By_________________________________
Its Corporate Trust Officer
<PAGE>
DESCRIPTION OF PLEDGED CAPITAL STOCK
Certificate No. of
Issuing Corporation No. Shares Issued in the Name of
Mesa Psychiatric 2 800 Bountiful Psychiatric
Hospital, Inc. Hospital, Inc.
SCHEDULE 1
to
PLEDGE AND SECURITY AGREEMENT
EXHIBIT 10.58
THE CITY OF BETHANY, OKLAHOMA
and
THE BETHANY HOSPITAL TRUST
and
BETHANY GENERAL HOSPITAL through the HOSPITAL
BOARD OF THE CITY OF BETHANY, OKLAHOMA
Lessor
and
BETHANY PSYCHIATRIC HOSPITAL, INC.
Lessee
LEASE
Dated as of December 9, 1985
Property Located at Bethany, Oklahoma
<PAGE>
EXHIBIT 10.58
L E A S E
LEASE, dated as of December 9, 1985, between THE
CITY OF BETHANY, OKLAHOMA, a municipal corporation ("City"),
THE BETHANY HOSPITAL TRUST, a Public Trust created under the
laws of the State of Oklahoma ("Trust"), and BETHANY GENERAL
HOSPITAL through THE HOSPITAL BOARD OF THE CITY OF BETHANY,
OKLAHOMA, a body created by ordinance of the City pursuant
to 11 0.S. Sec.30-102 ("Board"), with City, Trust and Board
being hereinafter collectively called "Lessor" and BETHANY
PSYCHIATRIC HOSPITAL, INC., an Oklahoma corporation
("Lessee").
RECITALS:
WHEREAS, City is the owner of the real property in
Oklahoma County, Oklahoma, described on Exhibit "A" attached
hereto (the "Land"), and
WHEREAS, by Amended Lease Agreement dated
September 16, 1969 (the "City Lease"), City leased the Land
to the Trust, and
WHEREAS, the Trust and the Board entered into a
Contract dated March 23, 1967 (the "Contract") relating to
the management of Bethany General Hospital (the "Hospital")
located on the Land, and
WHEREAS, under date of August 29, 1985, the Trust,
the City and the Board entered into a Management Agreement
with Lessee (the "Management Agreement") pertaining to the
construction of a twenty bed psychiatric pavilion on a part
of the Land, the remodeling of 6,442 square feet of the
Hospital and the operation of the pavilion and the remodeled
portion of the hospital as a forty bed psychiatric unit, and
WHEREAS, pursuant to the terms of and as partial
consideration for the Management Agreement, the City, the
Trust and the Board agree to lease a portion of the Land to
the Lessee.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby
acknowledged, it is agreed as follows:
1. Definitions. Capitalized terms used herein
which are defined in the Management Agreement shall have the
respective meanings set forth in the Management Agreement,
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2
unless otherwise defined herein. Terms defined in the
foregoing recitals shall have the meanings set forth therein
and, in addition, the following terms shall have the follow
ing meanings:
Building Area: The term Building Area shall
mean the tract of land containing 14,578.29 square
feet or .34 acres, more or less, described on
Exhibit "B" attached hereto upon which Lessee is
to construct the psychiatric pavilion as provided
in the Management Agreement.
Parking Area: The term Parking Area shall
mean the tract of land described on Exhibit "C"
attached hereto which is adjacent to the Building
Area and is to be used for parking in connection
with the psychiatric pavilion.
Common Areas: The term Common Areas shall
mean parking areas, roadways, pedestrian
sidewalks, landscape areas, and all other areas or
improvements on the Land which may, from time to
time, be provided by the Lessor for the
convenience and use of patients, visitors and
tenants of the Hospital and their respective
invitees.
Leased Premises: The term Leased Premises
shall mean: (a) the Building Area, (b) the Parking
Area, (c) all the rights, easements and appurte
nances belonging and usually had and enjoyed in
connection with the Building Area and the Parking
Area, and (d) the use, in common with others to
whom Lessor has granted or may hereafter grant
rights to use the same, of the Common Areas.
Depositary: The Depositary shall be a bank
or trust company, appointed by Lessor, having its
principal office in Oklahoma City or Bethany,
Oklahoma, and having a combined capital, surplus
and undistributed profits (according to its most
recent published statement) of at least
$5,000,000.
First Mortgagee: the holder, from time to
time, of the First Mortgage.
Insurance Requirements: all terms of an
insurance policy covering or applicable to the
Leased Premises or any part thereof, all require
ments of the issuer of any such policy and all
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3
orders, rules, regulations and other requirements
of the National Board of Fire Underwriters (or any
other body exercising similar functions)
applicable to or affecting the Leased Premises or
any part thereof or any use or condition of the
Leased Premises or any part thereof.
Lease: this Lease, as at the time amended,
modified or supplemented.
Lease Term: as defined in Section 2.
Legal Requirements: all laws, statutes,
codes, acts, ordinances, orders, judgments, de
crees, injunctions, rules, regulations, permits,
licenses, authorizations, directions and require
ments of all governments, departments,
commissions, boards, courts, authorities,
agencies, officials and officers, foreseen or
unforeseen, ordinary or extraordinary, which now
or at any time hereafter may be applicable to the
Leased Premises or any part thereof.
Lessee's Equipment: all equipment, furniture
and furnishings and any additions or replacement
thereto which are owned by the Lessee, for which
the Lessee has not been repaid under the Terms of
the Management Agreement and are to be located on
the Land.
First Mortgage: a first mortgage of Lessee's
interest under this Lease as provided for in
Section 19.
Taking: a taking during the Lease Term of
all or any part of the Leased Premises or any
leasehold or other interest therein or right
accruing thereto, as the result or in lieu or in
anticipation of the exercise of the right of
condemnation or eminent domain, or a change of
grade affecting the Leased Premises or any part
thereof.
Unavoidable Delays: Delays due to strikes,
acts of God, governmental restrictions, enemy
action, riot, civil commotion, fire, unavoidable
casualty or other causes beyond the control of
Lessee.
Improvements: As defined in Section 4.
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4
Impositions: As defined in Section 8.
2. Property; Lease Term. Upon and subject to
the conditions and limitations set forth below, Lessor
leases to Lessee, and Lessee rents from Lessor, the Leased
Premises.
TO HAVE AND TO HOLD for a term commencing on
December 9, 1985, and expiring at midnight on December 9,
1988, unless the term of this Lease ("Lease Term") shall
sooner terminate as hereinafter provided. Provided, however,
the term of this Lease shall be automatically extended for
five (5) additional three (3) year periods unless Lessee
gives written notice to Board no later than one hundred
twenty (120) days prior to the end of the initial term or
any three (3) year extension that it does not wish there to
be an automatic extension.
3. Rent. The execution and delivery by Lessee
of the Management Agreement and the completion of
construction of the psychiatric pavilion as therein provided
constitutes prepaid rent for the entire term hereof,
including all renewals. PROVIDED, HOWEVER, in the event the
Management Agreement shall terminate prior to the end of the
Lease Term then beginning with the first day of the first
calendar month following termination of the Management
Agreement, the Lessee shall pay as additional rent monthly
in advance on the first day of each calendar month the sum
of Four Thousand One Hundred Sixty-Six and 67/100 Dollars
($4,166.67).
4. Ownership of Improvements. Prior to termina
tion of this Lease the improvements constructed by Lessee on
the Land (the Improvements) shall be and remain the property
of Lessee. On termination of the Lease Term, whether by
expiration of time or otherwise, title to the Improvements
shall be surrendered to and the Improvements shall become
the full and absolute property of the City without further
action by the Lessor or the Lessee. The Lessee's interest in
this Lease and all of the Lessee's right, title and interest
in and to the Improvements shall be non-separable, and any
attempt to transfer, mortgage, assign, convey or otherwise
encumber in whole or in part either of such interests shall
be void and ineffective (whether by act of the Lessee,
judicial decrees, judgment or otherwise) unless there shall
be a complete transfer, mortgage, assignment or encumbrance
to the same party of the Lessee's interest under this Lease
and the Lessee's interest in he Improvements. Any severance
resulting from the Lessee's title to the Improvements shall
not change the character of the Improvements as real
property.
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5
5. Use of Property. Prior to the termination of
the Management Agreement, Lessee shall use the Leased
Premises for the purposes of providing psychiatric and
chemical dependency services and psychiatric and chemical
dependency ancillary therapy and office space, as provided
for in the Management Agreement. After termination of the
Management Agreement, the Leased Premises may be used for
any lawful hospital related purpose.
6. Maintenance and Repairs. Lessor, at its
expense and as a Direct Operating Expense billable to the
Unit in accordance with the Management Agreement, will keep
the Building Area and Improvements in good safe and clean
order and condition and will promptly make all necessary or
appropriate repairs, replacements and renewals thereof,
whether interior or exterior, structural or non-structural,
ordinary or extraordinary, foreseen or unforeseen. In the
event the Management Agreement shall terminate prior to the
end of the Lease Term, such maintenance and repair shall be
the responsibility of Lessee, and the cost thereof shall be
a credit against rent due hereunder. Lessee will give Lessor
ten (10) days prior written notice before incurring an
expense in excess of $5,000.00 which it intends to credit
against rent.
7. Removal or Demolition of Improvements; Alter
ations and Additions. Lessee shall have the right to make
alterations, additions and changes in any of the
Improvements so long as such do not materially or
substantially decrease the value of the same.
8. Impositions. Subject to Section 11 relating
to contests, Lessor and Lessee will pay as a Direct
Operating Expense payable from the revenues of the Unit all
taxes and assessments ("Impositions") against their
respective interests in the Leased Premises during the term
hereof before any interest, penalty, fine or cost may be
added for non-payment, and will furnish to the other party
for inspection within 30 days after written request,
official receipts of the appropriate taxing authority or
other proof satisfactory to such other party evidencing such
payment. In the event the Management Agreement shall
terminate prior to the end of the Lease Term, such taxes and
assessments shall, subject to Section 11, be paid by Lessee.
In the event the Management Agreement is terminated prior to
the end of the Lease Term, if by law any Imposition may be
paid in installments, Lessee shall be obligated to pay only
those installments as they become due from time to time
before any interest, penalty, fine or cost may be added
thereto; and any Imposition relating to the fiscal period of
the taxing authority, part of which is included within the
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6
term of this Lease and a part of which extends beyond such
term shall be apportioned between Lessor and Lessee as of
the expiration of the term of this Lease.
9. Compliance with Requirements, etc. Subject
to Section 11 relating to contests, each of Lessor and
Lessee, at its own expense, will, to the extent applicable
to their respective use of and activities in, and
obligations hereunder with respect to, the Leased Premises,
promptly and diligently (a) comply with all Legal
Requirements and Insurance Requirements, and (b) procure,
maintain and comply with all permits, licenses, franchises
and other authorizations required for any use of the Leased
Premises or any part thereof then being made, and for the
proper erection, installation, operation and maintenance of
the Improvements.
10. Liens, etc. Lessee will not directly or
indirectly create or permit to remain, and will discharge
any mortgage, lien, security interest, encumbrance or charge
on, pledge of or conditional sale or other title retention
agreement with respect to the Leased Premises or any part
thereof, other than (a) this Lease (b) a First Mortgage, and
related security documents in accordance with section 19,
(c) while the Management Agreement is in effect, liens for
any Impositions and thereafter, liens for Impositions not
yet payable, or payable without the addition of any fine,
penalty, interest or cost for non-payment, or being
contested as permitted by Section 11, (d) subject to section
11, liens of mechanics, materialmen, suppliers or vendors,
or rights thereto, incurred in the ordinary course of
business for sums which under the terms of the related
contracts are not at the time due, provided that adequate
provision for the payment thereof shall have been made, and
(e) liens created by Lessor.
11. Permitted Contests. Lessor or Lessee, at its
own expense, may contest by appropriate legal proceedings
conducted in good faith and with due diligence, the amount
or validity or application, in whole or in part, of any
Imposition or any Legal Requirement or Insurance Requirement
provided that (a) such party shall first make all contested
payments, under protest if it desires, unless such proceed
ings shall suspend the collection thereof from Lessor, and
from the Leased Premises, (b) neither the Leased Premises
nor any part thereof or interest therein would be in any
danger of being sold, forfeited, lost or interfered with,
and (c) in the case of any Legal Requirement, Lessor and/or
Lessee would not be in any danger of any additional civil or
any criminal liability for failure to comply therewith and
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7
the Leased Premises would not be subject to the imposition
of any lien as a result of such failure.
12. Utility Services; Lessor Maintenance.
Subject to Section VIC. of the Management Agreement, Lessor
will pay or cause to be paid all charges for all public or
private utility services and protective services at any time
rendered to or in connection with the Leased Premises or any
part thereof, will comply with all contracts relating to any
such services, and will do all other things required for the
maintenance and continuance of all such services. After
termination of the Management Agreement, Lessee will reim
burse Lessor monthly, within ten (10) days after written
request, for Lessor's actual cost of providing such
services. Lessor's request for reimbursement shall contain
supporting calculations and other information reasonably
requested by Lessee, have attached thereto invoices and
other supporting data and be certified as correct by a
Certified Public Accountant acceptable to Lessee. Lessor
will maintain the Common Area and the Parking Area.
13. Quiet Enjoyment. Lessor covenants that
Lessor is the owner of fee simple title to the Leased
Premises free of all liens and encumbrances and that Lessee,
upon performing and complying with all covenants,
agreements, terms and conditions of this Lease on its part
to be performed or complied with, shall not be hindered or
molested in its enjoyment of the Leased Premises.
14. Insurance.
14.1 Risks. The Lessee shall keep all Im
provements insured against loss or damage by fire and other
hazards. Each of Lessor and Lessee shall provide liability
insurance for personal injury and death and property damage
for the benefit of Lessor and Lessee. Lessee shall provide
appropriate workmen's compensation or other insurance
against liability arising from claims of workmen in respect
of and during the period of any work on or about the Leased
Premises. During the term of the Management Agreement, costs
of such insurance shall be Direct Operating Expenses payable
from the revenue of the Unit.
14.2 Coverage. The Lessee shall maintain fire
and extended coverage insurance in an amount of full
replacement cost with "agreed amount" and "inflation guard"
endorsements and with deductible not to exceed $1,000, or in
such greater amount or other terms as First Mortgagee may
require, which policy shall be written by a company or
companies having a Best's rating of A: IX or better. The
cost of such insurance shall be a Direct Operating Expense
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8
payable from the revenue of the Unit. Each of Lessor and
Lessee shall carry liability insurance in the amount
required by the Oklahoma Political Subdivisions Tort Claims
Act.
14.3 Policy Forms. All policies of insurance
to be furnished hereunder shall be in forms, companies and
amounts satisfactory to First Mortgagee, with Standard
Mortgage Clauses attached to all policies in favor of and in
form satisfactory to First Mortgagee, including provisions
requiring that the coverage evidenced thereby shall not be
terminated or materially modified without thirty (30) days'
prior written notice to Lessor, Lessee and First Mortgagee.
14.4 Policy Provisions. All insurance main
tained pursuant to this section shall (a) include an effec
tive waiver by the insurer of all rights of subrogation
against any named insured or such insured's interest in the
Leased Premises or any income derived therefrom; and (b)
provide that any losses shall be payable notwithstanding any
act or failure to act or negligence of Lessor or Lessee or
any other Person.
All policies of insurance provided for shall name
Lessor, Lessee and the First Mortgagee as insurers as their
respective interests may appear.
Lessee, at its sole cost and expense, shall main
tain such other insurance and in such amounts as may from
time to time be reasonably required by First Mortgagee.
A Standard Mortgagee Clause naming each Leasehold
Mortgagee as additional insured (on its own behalf and on
behalf of any Institutional Lenders which it may represent)
and the Leasehold Mortgagee whose Leasehold Mortgage is
prior in lien as sole loss payee shall be added to any and
all insurance policies required to be carried by Lessee
hereunder. At or prior to the commencement of the Lease term
and thereafter not less than fifteen (15) days prior to the
expiration dates of the expiring policies theretofore fur
nished pursuant to this Agreement, originals of the policies
(or, in the case of blanket insurance policies and general
public liability insurance policies, certificates of the
insurers) bearing notations evidencing the payment of premi
ums or accompanied by other evidence of such payment satis
factory to Lessor or Lessee, as the case may be, and First
Mortgagee, shall be delivered to First Mortgagee with copies
thereof certified as true and correct delivered to Lessor or
Lessee, as the case may be.
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9
15. Damage to or Destruction of Property.
15.1 Lessee to Give Notice. In case of any
material damage to or destruction of the Leased Premises or
any part thereof, Lessee will promptly give written notice
thereof to Lessor and First Mortgagee, generally describing
the nature and extent of such damage or destruction.
15.2 Restoration. Except as provided in
Section 15.4 below, in case of any damage to or destruction
of the Improvements or any part thereof, Lessee, at its
expense, shall promptly commence and complete (subject to
Unavoidable Delays) the restoration, replacements or
rebuilding of the Improvements as nearly as possible to its
value, condition and character immediately prior to such
damage or destruction, with such alterations and additions
as may be made at Lessee's election pursuant to and subject
to the terms of section 7 (such restoration, replacement,
rebuilding, alterations and additions, together with any
temporary repairs and property protection pending completion
of the work, being herein called "Restoration").
15.3 Application of Insurance Proceeds.
Insurance proceeds received on account of any damage to or
destruction of the Leased Premises or any part thereof shall
be paid to the First Mortgagee, if any, to be applied in
accordance with the then existing credit agreement between
Lessee, First Mortgagee and other creditors named therein.
If there is no First Mortgage, then said proceeds shall be
held by a Depositary and applied as follows:
(a) If Lessee is obligated to or elects
to rebuild, the proceeds shall be paid to
Lessee or as Lessee may direct, from time to
time as Restoration progresses, to pay (or
reimburse Lessee for) the cost of Restoration
in the manner and under the conditions that
the Lessor may require, including, without
limitation; (i) approval of plans and
specifications of such work before such work
shall be commenced, (ii) suitable completion
or performance bonds and Builder's All Risk
insurance, (iii) The Improvements shall be so
restored or rebuilt as to be of at least
equal value as prior to such damage or
destruction, and (iv) written request of
Lessee accompanied by evidence, satisfactory
to Lessor, that the amount requested has been
paid or is then due and payable and is
properly a part of such cost. Upon receipt by
Lessor of evidence satisfactory to it that
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10
Restoration has been completed and the cost
thereof paid in full, and that there are no
mechanics' or similar liens for labor or
materials supplied in connection therewith,
the balance, if any, of such proceeds shall
be paid to the Lessee or as Lessee may
direct.
(b) If Lessee is not obligated to and
does not elect to rebuild, said insurance
proceeds shall be paid to Lessee, or as
Lessee may direct.
15.4 Limits on Obligation to Restore.
(a) In the event of damage or
destruction of 50% or greater at any time or damage
or destruction of 25% or greater during the
last year of the initial term or any renewal
term, Lessee at its option may terminate this
Lease by written notice to Lessor within
sixty (60) days following such damage or
destruction as of a date specified in such
notice within ninety (90) days of such damage
or destruction. Upon such termination, Lessee
shall have no liability to restore the Leased
Premises.
(b) So long as there is a First
Mortgagee, Lessee's obligation in Section 15.2
shall only apply if and to the extent said
First Mortgagee shall make funds for such
purpose available to Lessee in accordance
with the terms of the then existing credit
agreement between Lessee and such First
Mortgagee, and other creditors named therein.
If Lessee is not obligated to restore the
Leased Premises as a result of the operation
of this paragraph 15.4(b) then (i) this Lease
shall terminate at the option of either party
and upon such termination Lessee shall remove
to the surface elevation of the adjoining
ground all debris and restore the Leased
Premises as nearly as practical to their
condition prior to the erection of the
Improvements. Provided, however, Lessee shall
not be responsible for removal of concrete
slab, paving or underground utility lines.
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11
16. Taking.
16.1 Lessee to Give Notice, etc. In case of
a Taking of all or any part of the Leased Premises or the
commencement of any proceedings or negotiations which might
result in such Taking, Lessee will promptly give written
notice thereof to Lessor and First Mortgagee, generally
describing the nature and extent of such Taking or the
nature of such proceedings and negotiations and the nature
and extent of the Taking which might result therefrom, as
the case may be. Lessor and Lessee may each file and
prosecute their respective claims for an award, but all
awards and other payments on account of a Taking shall be
paid to the Depositary, except as provided in the first
sentence of Section 16.4 below.
16.2 Total Taking. In case of a Taking
(other than for temporary use) of the fee of the entire
Leased Premises, this Lease shall terminate as of the date
of such Taking. In case of a Taking (other than for
temporary use) of, (a) such perpetual easement on the entire
Leased Premises, or (b) such a substantial part of the
Leased Premises, as shall result, in the good faith judgment
of Lessee, in the Leased Premises remaining after such
Taking (even if Restoration were made) being unsuitable for
Lessee's use, or (c) a Taking of 25% or greater during the
last year of the initial term or any renewal term, Lessee
may, at its option, terminate this Lease by written notice
to Lessor given within 60 days after such Taking, as of a
date specified in such notice within 90 days after such
Taking. Any Taking of the character referred to in this
Section 16.2, which results in the termination of this
Lease, is referred to as a "Total Taking". No such
termination shall terminate the right of Lessee or First
Mortgage with respect to awards or other payments on account
of a Taking.
16.3 Partial Taking. In case of a Taking of
the Leased Premises other than a Total Taking, (a) this
Lease shall remain in full force and effect as to the
portion of the Leased Premises remaining immediately after
such Taking, (b) rent shall be reduced pro-rata, based on
the Lessee's reduced interest based on the number of
operational beds, and (c) Lessee, at its expense, will
promptly commence and complete, subject to Unavoidable
Delays, Restoration of the Leased Premises as nearly as
possible to its value, condition and character immediately
prior to such Taking, except for any reduction in area
caused thereby, provided that, in case of a Taking for
temporary use, Lessee shall not be required to effect
Restoration until such Taking is terminated. So long as
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12
there is a First Mortgagee, Lessee's obligation to restore
shall only apply if and to the extent that said First
Mortgagee shall make funds for such purpose available to
Lessee in accordance with the terms of the then existing
credit agreement between Lessee and such First Mortgagee.
16.4 Application of Awards and Other
Payments. Awards and other payments on account of a Taking
shall be paid to the First Mortgagee, if any, to be applied
in accordance with the then existing credit agreement
between Lessee, First Mortgagee and other creditors named
therein. If there is no First Mortgagee, then said awards
and other payments shall be applied as follows:
(a) Net awards and payments received on
account of a Taking other than a Taking for
temporary use or a Total Taking shall be held
and applied to pay the cost of Restoration of
the Property, such application to be made
substantially as provided in paragraph (a) of
section 15.3, with respect to insurance
proceeds. The balance, if any, shall be paid
to Lessee.
(b) Net awards and payments received on
account of a Taking for temporary use shall
be paid to the Lessee, provided that, if any
portion of any such award or payment is made
by reason of any damage to or destruction of
the Leased Premises such portion shall be
held and applied as provided in the first
sentence of paragraph (a) of this Section
16.4.
(c) Net awards and payments received on
account of a Total Taking shall be allocated
as follows:
First: There shall be paid to
Lessor an amount equal to the fair
market value of the improved Building
Area as determined by an appraisal.
Second: Any remaining balance
shall be paid to Lessee.
Not more than thirty (30) days after any Taking
referred to in paragraph (c) of this Section 16.4, Lessor
shall cause a member of The American Institute of Real
Estate Appraisers, or an organization that is a successor
thereto, or in the event no such organization exists, an
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13
organization of appraisers substantially similar thereto,
(hereinafter "MAI Appraiser") to determine the value of the
interest of Lessor as required by the provisions of such
paragraph. Lessor's appraisal shall be the value if Lessee
does not (a) within ten (10) days after receipt of notice of
Lessor's appraisal employ an MAI Appraiser to determine the
value and (b) within thirty (30) days after the effective
date of notice of such objection submit to Lessor Lessee's
appraisal and a written summary of the methods used and data
collected to make the determination. If Lessor's and Les
see's appraisal differ by less than ten percent (10%), they
shall be averaged. If they differ by more than ten percent
(10%), the two appraisers shall jointly appoint a third MAI
Appraiser. The appraisal that among the three is furthest
from the median of the appraisals shall be disregarded and
the mean average of the other two shall be the value and
binding upon Lessor and Lessee. Lessor and Lessee shall each
pay one-half (1/2) of the expense of all appraisals.
16.5 First Mortgagee Participation. The
First Mortgagee, if any, shall have the right to participate
in all proceedings and negotiations described in Section
16.1.
17. Right to Perform Lessee's Covenants. In the
event that Lessee shall fail to perform any act required
hereunder to be performed by Lessee, then Lessor or First
Mortgagee may, but shall be under no obligation to, after
such notice to Lessee, if any, as may be reasonable under
the circumstances, perform such act with the same effect as
if made or performed by Lessee. Entry by Lessor or First
Mortgagee upon the Leased Premises for such purpose shall
not waive or release Lessee from any obligation or default
hereunder (except in the case of any obligation or default
which shall have been fully performed or cured by
Mortgagee). Lessee shall reimburse Lessor and First
Mortgagee for all sums so paid by Lessor or First Mortgagee
and all costs and expenses incurred by Lessor and First
Mortgagee in connection with the performance of any such
act. Any amount not reimbursed to the Lessor within ten (10)
days after demand may be deducted from payments due to the
Lessee under the Management Agreement.
18. Right to Perform Lessor's Covenants. In the
event that Lessor shall fail to pay any sum or perform any
act required hereunder to be paid or performed by Lessor,
then Lessee may, but shall be under no obligation to, after
such notice to Lessor as may be reasonable under the
circumstances, pay such sum or perform such act with the same
effect as if performed by Lessor. Lessor shall reimburse
Lessee for all sums so paid by Lessee and all costs and
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14
expenses incurred by Lessee in the performance of any such
act. Any amount not reimbursed within ten (10) days after
demand may be deducted from rent, or from payments due to
Lessor under the Management Agreement.
19. Leasehold Mortgages.
(a) Leasehold Mortgage Authorized
Without Lessor's prior consent Lessee
may mortgage or otherwise encumber Lessee's
leasehold estate created by this Lease and
including all, Improvements (the "Leasehold
Estate") to or for the benefit of the Lenders, to
secure an amount not to exceed the amount of
$1,700,000.00 plus accrued interest, or to
replace, restructure, refinance, refund or renew
such mortgage (including, without limitation such
replacement, restructure or refinancing involving
a mortgagee as trustee, agent or other
representative capacity to secure notes or bonds
or other obligations issued by Lessee), under a
Leasehold Mortgage and assign this Lease as
security for such Mortgage or Mortgages. Any other
Leasehold Mortgage shall require prior written
consent of the Board.
(b) Notice to Lessor
(i) (1) If Lessee shall on one or more
occasions mortgage or otherwise encumber Lessee's
Leasehold Estate to or for the benefit of one or
more Institutional Lenders, and if the holder of
such Leasehold Mortgage shall provide Lessor with
notice of such Leasehold Mortgage together with a
copy of such Leasehold Mortgage and the name and
address of the Leasehold Mortgagee, Lessor and
Lessee agree that, following receipt of such
notice by Lessor, the provisions of this Section
19 shall apply in respect to each such Leasehold
Mortgage.
(2) In the event of any assignment of a
Leasehold Mortgage or in the event of a change of
address of a Leasehold Mortgagee or of any
Assignee of such Leasehold Mortgage, notice of the
new name and address shall be provided to Lessor.
(ii) Lessor shall promptly upon receipt
of a communication purporting to constitute the
notice provided for by subsection (b)(i) above
<PAGE>
15
acknowledge receipt of such communication as
constituting the notice provided for by subsection
(b)(i) above and agree to be bound by the provi
sions of the Lease for the benefit of the
Leasehold Mortgagee by an instrument in recordable
form or, in the alternative, notify the Lessee and
the Leasehold Mortgagee of the rejection of such
communication as not conforming with the
provisions of subsection (b)(i) and specify the
specific basis of such rejection.
(iii) After Lessor has received the
notice provided for by subsection (b)(i) above,
the Lessee, upon being requested to do so by
Lessor, shall with reasonable promptness provide
Lessor with copies of the note or other obligation
secured by such Leasehold Mortgage and of any
other documents pertinent to the Leasehold
Mortgage as specified by the Lessor. If requested
to do so by Lessor, the Lessee shall thereafter
also provide the Lessor from time to time with a
copy of each amendment or other modification or
supplement to such instruments. All recorded
documents shall be accompanied by the appropriate
certification of the applicable Recording Office
as to their authenticity as true and correct
copies of official records and all nonrecorded
documents shall be accompanied by a certification
by Lessee that such documents are true and correct
copies of the originals. From time to time upon
being requested to do so by Lessor, Lessee shall
also notify Lessor of the date and place of
recording and other pertinent recording data with
respect to such instruments as have been recorded.
Neither Lessee's failure to provide any of the
documents described above certified as so
provided, nor any other act or omission by Lessee
shall affect the validity of a Leasehold Mortgage
or the Leasehold Mortgagee's exercise of its
rights under this Lease or the Leasehold Mortgage.
(c) Definitions
(i) The term "Institutional Lender(s)"
as used in this Section 19 shall refer to a
savings bank, savings and loan association,
commercial bank, trust company, credit union,
insurance company, educational institution, real
estate investment trust or pension fund, in each
case whether acting for itself or as agent or
trustee or other representative capacity for the
<PAGE>
16
holders of notes, bonds or other obligations of
Lessee. The term "Institutional Lender(s)" shall
also include other lenders of substance which
perform functions similar to any of the foregoing,
and which have assets in excess of fifty million
dollars ($50,000,000) at the time the Leasehold
Mortgage loan or obligation is made or incurred.
(ii) The term "Leasehold Mortgage" as
used in this Section 19 shall include a mortgage,
a deed of trust, a deed to secure debt, assignment
of rents and profits or other security instrument
by which Lessee's Leasehold Estate is mortgaged,
conveyed, assigned, or otherwise encumbered, to
secure a debt or other obligation.
(iii) The term "Leasehold Mortgagee" as
used in this Section 19 shall refer to any holder
of a Leasehold Mortgage, whether for itself or in
a representative capacity, in respect to which the
notice provided for by subsection (b) of this
Section 19 has been given and received and as to
which the provisions of this Section 19 are
applicable.
(d) Consent of Leasehold Mortgagee Required
No termination, surrender or modification of this
Lease by Lessor and/or Lessee whether pursuant to Section 2,
15 or 16 or otherwise (other than a termination by Lessor
after an Event of Default made in accordance with the
provisions of this Section 19) shall be effective unless
consented to in writing by all Leasehold Mortgagees.
(e) Default Notice
Lessor, upon providing Lessee any notice of: (i)
default under this Lease, or (ii) a termination of this
Lease, or (iii) a matter on which Lessor may predicate or
claim a default, shall at the same time provide a copy of
such notice to every Leasehold Mortgagee. No such notice by
Lessor to Lessee shall be deemed to have been duly given
unless and until a copy thereof has been so received by
every Leasehold Mortgagee. From and after such notice has
been received by every Leasehold Mortgagee, such Leasehold
Mortgagee shall have the same period, after the giving of
such notice upon it, for remedying any default or acts or
omissions which are the subject matter of such notice or
causing the same to be remedied, as is given Lessee after
the giving of such notice to Lessee, plus in each instance,
the additional period of time specified in subsections (f)
<PAGE>
17
and (g) of this Section 19 to remedy, commence remedying or
cause to be remedied the defaults or acts or omissions which
are the subject matter of such notice specified in any such
notice. Lessor shall accept such performance by or at the
instigation of such Leasehold Mortgagee as if the same had
been done by Lessee. Lessee authorizes each Leasehold
Mortgagee to take any such action at such Leasehold
Mortgagee's option and does hereby authorize entry upon the
Leased Premises by the Leasehold Mortgagee for such purpose.
(f) Notice to Leasehold Mortgagee
(i) Anything contained in this Lease to
the contrary notwithstanding, if any default shall
occur which entitles Lessor to terminate this
Lease, Lessor shall have no right to terminate
this Lease unless, following the expiration of the
period of time given Lessee to cure such default
or the act or omission which gave rise to such
default, Lessor shall notify every Leasehold
Mortgagee of Lessor's intent to so terminate at
least 30 days in advance of the proposed effective
date of such termination if such default is
capable of being cured by the payment of money,
and at least 45 days in advance of the proposed
effective date of such termination if such default
is not capable of being cured by the payment of
money. The provisions of subsection (g) below of
this Section 19 shall apply if, during such 30- or
45-day termination notice period, any Leasehold
Mortgagee shall:
(1) notify Lessor of such Leasehold
Mortgagee's desire to nullify such notice, and
(2) pay or cause to be paid all rent,
additional rent, and other payments then due and
in arrears as specified in the Termination Notice
to such Leasehold Mortgagee and which may become
due during such 30- or 45-day period, and
(3) comply or in good faith, with
reasonable diligence and continuity, commence to
comply with all nonmonetary requirements of this
Lease then in default and reasonably susceptible
of being complied with by such Leasehold
Mortgagee; provided, however, that such Leasehold
Mortgagee shall not be required during such 45-day
period to cure or commence to cure any default
consisting of Lessee's failure to satisfy and
discharge any lien, charge or other encumbrance
<PAGE>
18
against the Lessee's interest in this Lease or the
Leased Premises junior in priority to the lien of
the Leasehold Mortgage held by such Leasehold
Mortgagee.
(ii) Any notice to be given by Lessor to
a Leasehold Mortgagee pursuant to any provision of
this Section 19 shall be deemed properly addressed
if sent to the Leasehold Mortgagee who served the
notice referred to in subsection (b)(i)(l) unless
notice of a change of Leasehold Mortgage ownership
has been given to Lessor pursuant to subsection
(b)(i)(2).
(g) Procedure On Default
(i) If Lessor shall elect to terminate
this Lease by reason of any default of Lessee, and
a Leasehold Mortgagee shall have proceeded in the
manner provided for by subsection (f) of this
Section 19, the specified date for the termination
of this Lease as fixed by Lessor in its
Termination Notice shall be extended for a period
of six months, provided that such Leasehold
Mortgagee shall, during such six-month period:
(1) Pay or cause to be paid the rent,
additional rent and other monetary obligations of
Lessee under this Lease as the same become due,
and continue its good faith efforts to perform all
of Lessee's other obligations under this Lease,
excepting (A) obligations of Lessee to satisfy or
otherwise discharge any lien, charge or other
encumbrance against Lessee's interest in this
Lease or the Leased Premises junior in priority to
the lien of the Leasehold Mortgage held by such
Leasehold Mortgagee and (B) nonmonetary
obligations then in default and not reasonably
susceptible of being cured by such Leasehold
Mortgagee (which shall include Section 20(c) and
20(d), without limitation)
(2) if not enjoined or stayed or
otherwise prohibited by legal process, take steps
to acquire or sell Lessee's interest in this Lease
by foreclosure of the Leasehold Mortgage or other
appropriate means and prosecute the same to
completion with due diligence.
(ii) If at the end of such six (6) month
period such Leasehold Mortgagee is complying with
<PAGE>
19
subsection (g)(i), this Lease shall not then
terminate, and the time for completion by such
Leasehold Mortgagee of its proceedings shall
continue so long as such Leasehold Mortgagee is
enjoined or stayed or otherwise prohibited by
legal process and thereafter for so long as such
Leasehold Mortgagee proceeds to complete steps to
acquire or sell Lessee's interest in this Lease by
foreclosure of the Leasehold Mortgage or by other
appropriate means with reasonable diligence and
continuity. Nothing in this subsection (g) of
this Section 19, however, shall be construed to
extend this Lease beyond the original term thereof
as extended by any options to extend the term of
this Lease properly exercised by Lessee or a
Leasehold Mortgagee in accordance with Section 19,
nor to require a Leasehold Mortgagee to continue
such foreclosure proceedings after the default has
been cured. If the default shall be cured and the
Leasehold Mortgagee shall discontinue such
foreclosure proceedings, this Lease shall continue
in full force and effect as if Lease had not
defaulted under this Lease.
(iii) If a Leasehold Mortgage is
complying with subsection (g)(i) of this Section
19, upon the acquisition of Lessee's Leasehold
Estate herein by such Leasehold Mortgagee or its
designee or any other purchaser at a foreclosure
sale or otherwise, this Lease shall continue in
full force and effect as if Lessee had not
defaulted under this Lease.
(iv) For the purpose of this Section 19,
the making of a Leasehold Mortgage shall not be
deemed to constitute an assignment or transfer of
this Lease or the Leasehold Estate hereby created,
nor shall any Leasehold Mortgagee, as such, be
deemed top be an assignee or transferee of this
Lease or of the Leasehold Estate hereby created so
as to require such Leasehold Mortgagee, as such,
to assume the performance of any of the terms,
covenants or conditions on the part of the Lessee
to be performed hereunder, but the purchaser at
any sale of this Lease and of the Leasehold Estate
hereby created in any proceedings for the
foreclosure of any Leasehold Mortgage, or the
assignee or transferee of this Lease and of the
Leasehold Estate hereby created in any proceedings
for the foreclosure of any Leasehold Mortgage, or
the assignee or transferee of this Lease and of
<PAGE>
20
the Leasehold Estate hereby created under any
instrument of assignment or transfer in lieu of
the foreclosure of any Leasehold Mortgage shall be
deemed to be an assignee or transferee within the
meaning of this Section 19, and shall be deemed to
have agreed to perform all of the terms, covenants
and conditions on the part of the Lessee to be
performed hereunder from and after the date of
such purchase and assignment, but only for so long
as such purchaser or assignee is the owner of the
Leasehold Estate. If the Leasehold Mortgagee
shall become holder of the Leasehold Estate and if
the Improvements shall have been or become
materially damaged on, before or after the date of
such purchase and assignment, the Leasehold
Mortgagee or its designee shall be obligated to
repair, replace or reconstruct the Improvements if
Lessee is obligated to do so under Section 15,
only to the extent of the net insurance proceeds
received by the Leasehold Mortgagee or its
designee by reason of such damage. However, should
such net insurance proceeds be insufficient to
repair, replace or reconstruct the building or
other improvements to the extent required by
Section 15 and should the Leasehold Mortgagee or
its designee choose not to fully reconstruct the
Improvements to the extent required by said
Section 15 such failure shall constitute an event
of default under this Lease.
(v) Any Leasehold Mortgagee or other
acquirer of the Leasehold Estate of Lessee
pursuant to foreclosure, assignment in lieu of
foreclosure or other proceedings may, upon acquir
ing Lessee's Leasehold Estate, without further
consent of Lessor, sell and assign the Leasehold
Estate on such terms and to such persons and
organizations as are acceptable to such Leasehold
Mortgagee or acquirer and thereafter be relieved
of all obligations under this Lease; provided that
such assignee has delivered to Lessor its written
agreement to be bound by all of the provisions of
this Lease.
(vi) Notwithstanding any other
provisions of this Lease, any sale of this Lease
and of the Leasehold Estate hereby created in any
proceedings for the foreclosure of any Leasehold
Mortgage, or the assignment or transfer of this
Lease and of the Leasehold Estate hereby created
in lieu of the foreclosure of any Leasehold
<PAGE>
21
Mortgage shall be deemed to be a permitted sale,
transfer or assignment of this Lease and of the
Leasehold Estate hereby created.
(h) New Lease
In the event of the termination of this Lease for
any reason whatsoever, including, without limitation, due to
a default by Lessee under this Lease or a rejection of this
Lease by Lessee as debtor-in-possession or by Lessee's
trustee in bankruptcy, Lessor shall, in addition to
providing the notices of default and termination as required
by subsections (e) and (f) above of this Section 19, provide
each Leasehold Mortgagee with written notice that the Lease
has been terminated, together with a statement of all sums
which would at that time be due under this Lease but for
such termination, and of all other defaults, if any, then
known to Lessor. Lessor agrees to enter into a new lease
("New Lease") of the Leased Premises with such Leasehold
Mortgagee or its designee for the remainder of the term of
this Lease, effective as of the date of termination, at the
rent and additional rent, and upon the terms, covenants and
conditions (including all options to renew but excluding
requirements which are not applicable or which have already
been fulfilled) of this Lease, provided:
(i) Such Leasehold Mortgagee shall make
written request upon Lessor for such New Lease
within 60 days after the date such Leasehold
Mortgagee receives Landlord's Notice of
Termination of this Lease given pursuant to this
subsection (h).
(ii) Such Leasehold Mortgagee or its
designee shall pay or cause to be paid to Lessor
at the time of the execution and delivery of such
New Lease, any and all sums which would at the
time of execution and delivery thereof be due
pursuant to this Lease but for such termination
and, in addition thereto, all reasonable expenses,
including reasonable attorneys' fees, which Lessor
shall have incurred by reason of such termination
and the execution and delivery of the New Lease
and which have not otherwise been received by
Lessor from Lessee or other party in interest
under Lessee. Upon the execution of such New
Lease, Lessor shall allow to the Lessee named
therein as an offset against the sums otherwise
due under this subsection (h)(ii) or under the New
Lease, an amount equal to the net income derived
by Lessor from the Leased Premises during the
<PAGE>
22
period from the date of termination of this Lease
to the date of the beginning of the Lease term of
such New Lease. In the event of a controversy as
to the amount to be paid to Lessor pursuant to
this subsection (h)(ii), the payment obligation
shall be satisfied if Lessor shall be paid the
amount not in controversy, and the Leasehold
Mortgagee or its designee shall agree to pay any
additional sum ultimately determined to be due
plus interest at the rate of 10% per annum.
(iii) Such Leasehold Mortgagee or its
designee shall agree to remedy any of Lessee's
defaults of which said Leasehold Mortgagee was
notified by Lessor's Notice of Termination and
which are reasonably susceptible of being so cured
by Leasehold Mortgagee or its designee. Provided,
however, that such Leasehold Mortgagee or its
designee shall not be required to cure any default
consisting of Lessee's failure to satisfy and
discharge any lien, charge or other encumbrance
against the Lessee's interest in this Lease or the
Leased Premises junior in priority to the lien of
the Leasehold Mortgage held by the Leasehold
Mortgagee.
(iv) Any New Lease made pursuant to this
subsection (h) and any renewal lease entered into
with a Leasehold Mortgagee shall be prior to any
mortgage or other lien, charge or encumbrance on
the fee of the Leased Premises and the Lessee
under such New Lease shall have the same right,
title and interest in and to the Leased Premises
and the buildings, improvements and fixtures
thereon as Lessee had under this Lease.
(v) The Lessee under any such New Lease
shall be liable to perform the obligations imposed
on the Lessee by such New Lease only during the
period such person has ownership of such Leasehold
Estate.
(i) New Lease Priorities
If more than one Leasehold Mortgagee shall request
a New Lease pursuant to subsection (h)(i) of this Section
19, Lessor shall enter into such New Lease with the
Leasehold Mortgagee whose Leasehold Mortgage is prior in
lien, or with the designee of such Leasehold Mortgagee.
Lessor, without liability to Lessee or any Leasehold
Mortgagee with an adverse claim, may rely upon a mortgagee
<PAGE>
23
title insurance policy issued by a responsible title
insurance company doing business within the state in which
the Leased Premises are located as the basis for determining
the appropriate Leasehold Mortgagee who is entitled to such
New Lease.
(j) Leasehold Mortgagee Need Not Cure
Specified Defaults
Nothing herein contained shall require any
Leasehold Mortgagee or its designee as a condition to its
exercise of right hereunder to cure any default of Lessee
not reasonably susceptible of being cured by such Leasehold
Mortgagee or its designee, or a subsequent owner of the
Leasehold Estate through foreclosure hereof (including,
without limitation, Sections 20(c) and 20(d)), in order to
comply with the provisions of subsection (f) or (g) of this
Section 19, or as a condition of entering into the New Lease
provided for by subsection (h) of this Section 19.
(k) No Merger
So long as any Leasehold Mortgage is in existence,
unless all Leasehold Mortgagees shall otherwise expressly
consent in writing, the fee title to the Leased Premises and
the Leasehold Estate of Lessee therein created by this Lease
shall not merge but shall remain separate and distinct,
notwithstanding the acquisition of said fee title and said
Leasehold Estate by Lessor or by Lessee or by a third party,
by purchase or otherwise.
(l) Future Amendments
In the event Lessee seeks to mortgage its
Leasehold Estate, Lessor agrees to amend this Lease from
time to time to the extent reasonably requested by an
Institutional Lender proposing to make Lessee a loan secured
by a first lien upon Lessee's Leasehold Estate, provided
that such proposed amendments do not materially and
adversely affect the rights of Lessor or its interest in the
Leased Premises. All reasonable expenses incurred by Lessor
in connection with any such amendment shall be paid by
Lessee.
(m) Estoppel Certificate
Lessor shall, without charge, at any time and from
time to time hereafter, but not more frequently than twice
in any one-year period (or more frequently if such request
is made in connection with any sale or mortgaging of
Lessee's Leasehold interest or permitted subletting by
<PAGE>
24
Lessee), within 10 days after written request of Lessee to
do so, certify by written instrument duly executed and
acknowledged to any Leasehold Mortgagee or purchaser, or
proposed Leasehold Mortgagee or proposed purchaser, or any
other person, firm or corporation specified in such request:
(A) as to whether this Lease has been supplemented or amend
ed, and if so, the substance and manner of such supplement
or amendment; (B) as to the validity and force and effect of
this Lease, in accordance with its tenor; (C) as to the
existence of any default hereunder; (D) as to the existence
of any offsets, counterclaims or defenses hereto on the part
of the Lessee; (E) as to the commencement and expiration
dates of the term of this Lease; and (F) as to any other
matters as may be reasonably so requested. Any such
certificate may be relied upon by the Lessee and any other
person, firm or corporation to whom the same may be
exhibited or delivered, and the contents of such certificate
shall be binding on the Lessor.
(n) Notices
Notices from Lessor to the Leasehold Mortgagee
shall be mailed or personally delivered to the address
furnished Lessor pursuant to subsection (b) of this Section
19, and those from the Leasehold Mortgagee to Lessor shall
be mailed or personally delivered to the address designated
pursuant to the provisions of Section 26 hereof. Such
notices, demands and requests shall be given in the manner
described in Section 26 and shall in all respects be
governed by the provisions of that Section.
(o) Erroneous Payments
No payment made to Lessor by a Leasehold Mortgagee
shall constitute agreement that such payment was, in fact,
due under the terms of this Lease; and a Leasehold Mortgagee
having made any payment to Lessor pursuant to Lessor's
wrongful, improper or mistaken notice or demand shall be
entitled to the return of any such payment or portion
thereof provided he shall have made demand therefor not
later than one year after the date of its payment.
(p) Performance of Leasehold Mortgagee
Leasehold Mortgagee shall have the right, but not
the obligation, at any time prior to termination of this
Lease to pay all rents due hereunder, to effect any
insurance, to pay any taxes or assessments, to make any
repair or improvements or otherwise to do any act or thing
required of the Lessee hereunder or necessary or proper to
prevent the termination of this Lease, and Leasehold
<PAGE>
25
Mortgagee is authorized to enter the Leased Premises for any
such purpose. All such acts and things shall be effective to
prevent a termination of this Lease as if done by Lessee
instead of Leasehold Mortgagee.
(q) Survival
The provisions of this section 19 shall survive
any termination of this Lease.
20. Events of Default; Termination. If any one
or more of the following events ("Events of Default") shall
occur:
(a) if Lessee shall fail to pay any rent and
such failure shall continue for more than twenty
(20) days after notice thereof from Lessor; or
(b) if Lessee shall fail to perform or
comply with any term hereof, such failure shall
continue for more than 90 days after notice
thereof from Lessor, and Lessee shall not, subject
to Unavoidable Delays, within such period commence
with due diligence and dispatch the curing of such
default, or, having so commenced, shall thereafter
fail or neglect, for reasons other than
Unavoidable Delays, to prosecute or complete with
due diligence and dispatch the curing of such
default; or
(c) if Lessee shall make a general
assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts as
they become due or shall file a petition in
bankruptcy, or shall be adjudicated a bankrupt or
insolvent, or shall file a petition seeking any
reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or
regulation, or shall file an answer admitting or
shall fail seasonably to contest the material
allegations of a petition filed against it in any
such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee,
receiver or liquidator of Lessee or any material
part of its properties; or
(d) if, within 90 days after the
commencement of any proceeding against Lessee
seeking any reorganization, arrangement,
composition, readjustment, liquidation,
<PAGE>
26
dissolution or similar relief under any present or
future statute, law or regulation, such proceeding
shall not have been dismissed, or if, within 90
days after the appointment without the consent or
acquiescence of Lessee, of any trustee, receiver
or liquidator of Lessee or of any material part of
its properties, such appointment shall not have
been vacated;
then, and in any such event (regardless of the tendency of
any proceeding which has or might have the effect of
preventing Lessee from complying with the terms of this
Lease), Lessor, at any time thereafter may give a written
termination notice to Lessee, and, subject to Section 19, on
the date specified in such notice this Lease shall terminate
and, the Lease Term shall expire and terminate by
limitation, and all rights of Lessee under this Lease shall
cease, unless before such date (i) all arrears of Rent,
(together with interest thereon at the rate of 10% per
annum) and all reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses)
incurred by or on behalf of Lessor hereunder, shall have
been paid by Lessee, and (ii) all other defaults at the time
existing under this Lease shall have been fully remedied to
the reasonable satisfaction of Lessor.
21. No Waiver, etc., by Lessor or Lessee. 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
submission by Lessee or acceptance by Lessor of full or
partial rent during the continuance of any such breach,
shall constitute a waiver of any such breach or of any such
term. No waiver of any breach shall effect or alter this
Lease, which shall continue in full force and effect, or the
respective rights of Lessor or Lessee with respect to any
other then existing or subsequent breach. No foreclosure,
sale or other proceeding under any Mortgage or any other
mortgage with respect to the Leased Premises shall discharge
or otherwise affect the obligations of Lessee hereunder.
22. Acceptance of Surrender. No modification,
termination or surrender of this Lease or surrender of the
Leased Premises or any part thereof whether pursuant to
Sections 15 or 16 or otherwise, or of any interest therein
by Lessee shall be valid or effective unless agreed to and
accepted in writing by Lessor and First Mortgagee, if any,
and no act by any representative or agent of Lessor or First
Mortgagee, other than such a written agreement and
acceptance by Lessor and First Mortgagee, shall constitute
an acceptance thereof.
<PAGE>
27
23. Estoppel Certificate by Lessee. Lessee will
execute, acknowledge and deliver to Lessor, promptly upon
request, a certificate certifying that (a) this Lease is
unmodified and in full force and effect (or, if there have
been modifications, that the Lease is in full force and
effect, as modified, and stating the modifications), (b) the
dates, if any, to which Rent, has been paid, and (c) no
notice has been received by Lessee of any default which has
not been cured, except as to defaults specified in said
certificate. Any such certificate may be relied upon by any
prospective purchaser or mortgagee of the Leased Premises or
any part thereof.
24. End of Lease Term. Upon the expiration or,
other termination of the term of this Lease, Lessee shall
quit and surrender to Lessor the Leased Premises ordinary
wear and tear and damage by fire and other casualty
excepted, and shall remove all Lessee's Equipment therefrom.
25. Provisions Subject to Applicable Law. All
rights, powers and remedies provided herein may be exercised
only to the extent that the exercise thereof does not
violate any applicable law, and are intended to be limited
to the extent necessary so that they will not render this
Lease invalid, unenforceable or not entitled to be recorded
under any applicable law. If any term of this Lease shall be
held to be invalid, illegal or unenforceable, the validity
of the other terms of this Lease shall in no way be affected
thereby.
26. Notices, etc. All notices and other communi
cations hereunder shall be in writing and shall be deemed to
have been given when mailed by first class registered or
certified mail, postage prepaid, or personally delivered
addressed (a) if to Lessee, 2000 Southbridge Parkway, Suite
200, Birmingham, Alabama 35209, with a copy to the Leased
Premises, or at such other address as Lessee shall have
furnished in writing to Lessor, or (b) if the Lessor, at
7600 N.W. 23rd St., Bethany, Oklahoma or at such other
address as Lessor shall have furnished in writing to Lessee.
27. Easements. If requested by Lessee, Lessor
will join in any easements, licenses, plats or restrictions
determined by Lessee to be necessary or desirable for the
operation of the Lease Premises; provided, however, the form
of any such instruments is subject to the approval of Lessor
which will not be unreasonably withheld or delayed.
28. Assignment. The Lessee shall have the right
to assign this Lease, with the consent of the Lessor, which
shall not be unreasonably withheld or delayed, to any
<PAGE>
28
transferee of substantially all of Lessee's assets
(including the Lessee's rights under the Management
Agreement if still in effect) provided such transferree
expressly assumes, by writing delivered to Lessor, all of
the obligations of the transferring party under this Lease.
29. Miscellaneous. This Lease may be changed,
waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought.
This Lease shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns
of the parties hereto. The headings in this Lease are for
purposes of reference only and shall not limit or define the
meaning hereof. This Lease may be executed in any number of
counterparts, each of which is an original, but all of which
shall constitute one instrument. In the event of a conflict
between the terms of this Lease and the terms of the City
Lease or the Contract, the terms of this Lease shall
control. City joins in this Lease as owner of the Leased
Premises to lease the Leased Premises to Lessee and to
evidence its approval of and ratify the terms and provisions
hereof, however, nothing herein contained shall create an
indebtedness of the City.
IN WITNESS WHEREOF, the parties hereto have caused
this Lease to be executed and their respective seals to be
hereunto affixed and attested by their respective officers
thereunto duly authorized.
BETHANY PSYCHIATRIC HOSPITAL,
INC.,
ATTEST: an Oklahoma corporation
By:
Its Assistant Secretary Its President
BETHANY GENERAL HOSPITAL
By: THE HOSPITAL BOARD OF
ATTEST: THE CITY OF BETHANY, OKLAHOMA
By:
Its Secretary Its Chairman
<PAGE>
29
THE CITY OF BETHANY, OKLAHOMA
ATTEST:
By:
Its Clerk Its Mayor
THE BETHANY HOSPITAL TRUST,
ATTEST: a Public Trust
By:
Its Secretary Its Chairman
<PAGE>
1
STATE OF ALABAMA)
)ss.
COUNTY OF JEFFERSON)
The foregoing instrument was acknowledged before
me this ______ day of _________, 1986, by Charles A. Speir,
as President of Bethany Psychiatric Hospital, Inc., an
Oklahoma corporation, on behalf of the corporation.
Notary Public
My Commission Expires:
(SEAL)
STATE OF OKLAHOMA )
) ss.
COUNTY OF OKLAHOMA)
The foregoing instrument was acknowledged before
me this _____ day of ________, 1985, by ______________ as
_______________ of The Hospital Board of the City of
Bethany, Oklahoma, on behalf of Bethany General Hospital.
Notary Public
My Commission Expires:
(SEAL)
<PAGE>
2
STATE OF OKLAHOMA)
) ss.
COUNTY OF OKLAHOMA)
The foregoing instrument was acknowledged before
me this _____ day of _________, 1985, by _________________
as _______________, Chairman of The Bethany Hospital Trust,
a public trust, on behalf of the Trust.
Notary Public
My Commission Expires:
(SEAL)
STATE OF OKLAHOMA)
) ss.
COUNTY OF OKLAHOMA)
The foregoing instrument was acknowledged before
me this _____ day of _______, 1985, by ______________ as
_______________ of The City of Bethany, Oklahoma, on behalf
of The City of Bethany, Oklahoma.
Notary Public
My Commission Expires:
(SEAL)
<PAGE>
1
EXHIBIT "A"
Schedule A
A part of the Northwest Quarter (NW/4) of Section
TWENTY-NINE (29), Township TWELVE (12) North, Range FOUR (4)
West of the Indian Meridian, more particularly described as
follows, to-wit: Beginning at a point in the North line of
said Northwest Quarter (NW/4) 685 feet West of the Northeast
corner of said Northwest Quarter (NW/4) for the point or
place of beginning; thence South and at right angles to the
North line of said Northwest Quarter (NW/4) a distance of 50
feet to the point of a curvature; thence to the left along
the arc of a curve having a radius of 775.06 feet for a
distance of 533.35 feet to the point of a reverse curve;
thence to the right and along an arc of a curve having a
radius of 707.78 feet for a distance of 198.69 feet to the
point of a compound tangency; thence Southwesterly and to
the right along the arc of the curve having a radius of
329.36 feet for a distance of 134.18 feet to the point of a
tangency; thence West and parallel with the North line of
said Northwest Quarter (NW/4) a distance of 735 feet to the
point of a curvature; thence to the right and along the arc
of a curve having a radius of 444.71 feet for a distance of
39.33 feet to the point of a compound tangency; thence
Northeasterly and to the right along the arc of a curve
having a radius of 379.66 feet for a distance of 195.56 feet
to the point of a reverse curve; thence to the left along
the arc of a curve having a radius of 770.95 feet for a
distance of 551.77 feet to the point of a tangency; thence
North and at right angles to the North line of said
Northwest Quarter (NW/4) a distance of 50 feet to a point on
the North line of said Northwest Quarter (NW/4) 1,085 feet
West of the Northeast corner of said Northwest Quarter
(NW/4); thence East along the North line of said Northwest
Quarter (NW/4) a distance of 400 feet to the point or place
of beginning.
(NOTE: Subject to requirement No. 6)
<PAGE>
EXHIBIT "B"
December 20, 1985
LEGAL DESCRIPTION of property from
Bethany General Hospital Tract for use as
Psychiatric Ward Addition
A part of the Northwest Quarter (NW 1/4) of Section
Twenty-nine (29), Township Twelve (12) North, Range Four (4)
West of the Indian Meridian, more particularly described as
follows, to wit:
COMMENCING at a point in the North line of said
Northwest Quarter (NW 1/4) 685.00 feet West of the
Northeast corner of said Northwest Quarter (NW 1/4);
THENCE South and at right angles to the North line of
said Northwest Quarter (NW 1/4) a distance of 50.00 feet
to the point of a curvature; THENCE to the left along
the arc of a curve having a radius of 775.06 feet for a
distance of 533.35 feet to the point of a reverse
curve; THENCE to the right and along an arc of a curve
having a radius of 707.78 feet for a distance of 198.69
feet to the point of a compound tangency; THENCE South
westerly and to the right along the arc of a curve
having a radius of 329.36 feet for a distance of 134.18
feet to the point of a tangency; THENCE West and
parallel with the North line of said Northwest Quarter
(NW 1/4) a distance of 521.84 feet; THENCE North 74.19
feet to the point of BEGINNING; THENCE North 00 degrees 00'00"
East a distance of 168.00 feet; THENCE North 90 degrees 00'00"
West a distance of 6.50 feet; THENCE North 00 degrees 00'00"
East a distance of 26.00 feet to a point on the South
building line of the Bethany General Hospital, THENCE
North 90 degrees 00'00" West along said South building line a
distance of 61.59 feet; THENCE South 00 degrees 00'00" West a
distance of 25.17 feet; THENCE North 90 degrees 00'00" West a
distance of 24.33 feet; THENCE South 00 degrees 00'00" West a
distance of 37.25 feet; THENCE North 90 degrees 00'00" West a
distance of 12.00 feet; THENCE South 00 degrees 00'00" West a
distance of 25.00 feet; THENCE South 90 degrees 00'00" East a
distance of 12.00 feet; THENCE South 00 degrees 00'00" West a
distance of 21.75 feet; THENCE South 90 degrees 00'00" East a
distance of 27.08 feet; THENCE South 00 degrees 00'00" West a
distance of 84.83 feet; THENCE South 90 degrees 00'00" East a
distance of 65.33 feet to the point or place of
BEGINNING containing 15149.92 square feet or .3478
acres more or less.
<PAGE>
1
EXHIBIT "C"
December 20, 1985
LEGAL DESCRIPTION of property from
Bethany General Hospital Tract for use as
Psychiatric Ward Addition
Parking Lot
A part of the Northwest Quarter (NW 1/4) of Section
Twenty-nine (29), Township Twelve (12) North, Range Four (4)
West of the Indian Meridian, more particularly described as
follows, to wit:
COMMENCING at a point in the North line of said
Northwest Quarter (NW 1/4) 685.00 feet West of the
Northeast corner of said Northwest Quarter (NW 1/4);
THENCE South and at right angles to the North line of
said Northwest Quarter (NW 1/4) a distance of 50.00 feet
to the point of a curvature; THENCE to the left along
the end of a curve having a radius of 775.06 feet for a
distance of 533.35 feet to the point of a reverse
curve; THENCE to the right and along an arc of a curve
having a radius of 707.78 feet for a distance of 198.69
feet to the point of a compound tangency; THENCE South
westerly and to the right along the arc of a curve
having a radius of 329.36 feet for a distance of 134.18
feet to the point of a tangency; THENCE West and
parallel with the North line of said Northwest Quarter
(NW 1/4) a distance of 614.26 feet; THENCE North 118.70
feet to the point of BEGINNING; THENCE North 00 degrees 00'00"
East a distance of 62.02 feet; THENCE North 90 degrees 00'00"
West a distance of 12.00 feet; THENCE North 00 degrees 00'00"
East a distance of 25.00 feet; THENCE South 90 degrees 00'00"
East a distance of 12.00 feet; THENCE North 00 degrees 00'00"
East a distance of 36.50 feet; THENCE North 90 degrees 00'00"
West a distance of 40.39 feet to a point on the East
Right-of-way line of Thompkins Avenue; THENCE
Southwesterly along said Right-of-way line on a curve
to the right having a radius of 800.95 feet a distance
of 100.25 feet having a chord length and bearing of
100.18 feet South 37 degrees 25'16" West to a point of a
reverse curve; THENCE on a curve to the left having a
radius of 349.66 feet a distance of 54.75 feet having a
chord length and bearing of 54.70 feet South 36 degrees 31'15"
West; THENCE South 90 degrees 00'00" East a distance of 133.82
feet to the point or place of BEGINNING containing
10440.29 square feet or .2397 acres more or less.
EXHIBIT 10.88
CONSENT AND AMENDMENT
This Consent and Amendment dated as of April __, 1995
(herein called this "Consent") among Ramsay Health Care, Inc., a
Delaware corporation (the "Company"), certain subsidiaries of the
Company (such subsidiaries together with the Company,
collectively being hereinafter referred to as the "Obligors"),
Societe Generale, New York Branch, as agent (the "Agent"), on
behalf of the Lenders (as defined in the Credit Agreement dated
as of May 15, 1993 (the "Credit Agreement"), among the Obligors,
Hibernia National Bank, as a lender, First Union National Bank of
North Carolina, as a lender, and Societe Generale, New York
Branch, as lender, issuing bank and agent), and the Lenders.
WHEREAS, the Obligors have requested the Agent and the
Lenders to consent to certain transactions, and to amend the
terms of the Credit Agreement, all as set forth herein, and the
Agent and the Lenders are willing to give such consent to such
transactions and agree to such amendment, as set forth herein.
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
SECTION 1. DEFINITIONS; REPRESENTATIONS AND WARRANTIES.
Section 1.1. Definitions Contained in Credit
Agreement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
Section 1.2. Representations and Warranties. The
Obligors hereby represent and warrant to the Agent as of the date
hereof, for the benefit of the Lenders, that (i) the
representations and warranties of the Obligors set forth in
Article VI of the Credit Agreement are true and correct on and as
of the date of this Consent, except to the extent that such
representations and warranties expressly relate to an earlier
date; (ii) no Default or Event of Default has occurred and is
continuing as of the date of this Consent; (iii) the consummation
of the Transaction (as defined below) will not result in any
present or projected violation of Section 7.16 or any other
provision of the Credit Agreement (except Sections 7.14, 7.21,
7.22 and 7.25 as to which this Consent is being delivered); (iv)
the information furnished to the Agent by or on behalf of the
Company in connection with this Consent does not contain any
misstatement or understatement of a material fact and does not
omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the
circumstances under which they were made; (v) all obligations of
the Obligors due and payable under the Credit Documents on or as
<PAGE>
2
of the closing date of the Transaction (the "Closing Date") will
be paid in full on the Closing Date, and the reasonable attorneys
fees of the Agent in connection with miscellaneous matters
related to the Credit Agreement prior to the date of this Consent
and in connection with this Consent will be paid within 30 days
after receipt of a statement therefor; (vi) pursuant to Section
2.04(g) of the Credit Agreement, the Company is by separate
notice of even date permanently reducing the Revolving Credit
Maximum Commitment Amount from $4,000,000 to $2,000,000; and
(vii) each of the Leases (as hereinafter defined) will be
absolute net, the Seller-Lessees (as hereinafter defined) will be
responsible, without limitation, for all taxes, repairs,
maintenance, insurance, capital improvements and other expenses
in connection with the operations of the Hospitals (as
hereinafter defined), and the Leases will be accounted for as
operating leases under generally accepted accounting principles.
SECTION 2. CONSENT
Section 2.1 Consent to Sale-Leaseback Transaction.
With respect to the restrictions on sale-leaseback transactions,
guarantees, operating leases, the prepayment of any of the Life
Company Senior Notes and/or the Life Company Subordinated Notes,
and amendments, modifications and supplements of the Life Company
Indenture set forth in Sections 7.14, 7.21, 7.22 and 7.25 of the
Credit Agreement, the Agent, on behalf of the Lenders, hereby
consents to the consummation of a transaction (the various
transactions described in this Section 2.1, hereinafter the
"Transaction"), pursuant to which two wholly-owned subsidiaries
of the Company described below will enter into sale-leaseback
transactions with Capstone Capital Corporation or an affiliate
thereof (collectively, "Buyer-Lessor"). As part of the
Transaction, (i) RHCI San Antonio, Inc., a Delaware corporation
and an indirect wholly-owned subsidiary of the Company ("RHCI
S.A."), will sell to Buyer-Lessor for an aggregate purchase price
of $3,950,000 (subject to adjustment as agreed to between the
Company and Buyer-Lessor) the land, buildings, improvements,
fixtures and all other real property constituting the Mission
Vista hospital facilities owned by RHCI S.A. and located in San
Antonio, Texas (the "Mission Vista Assets"), (ii) Mesa
Psychiatric Hospital, Inc., an Arizona corporation and wholly-
owned subsidiary of the Company ("Mesa"; Mesa and RHCI S.A. are
sometimes hereinafter referred to individually as a "Seller-
Lessee" or collectively as the "Seller-Lessees"), will sell to
Buyer-Lessor for an aggregate purchase price of $8,550,000
(subject to adjustment as agreed to between the Company and
Buyer-Lessor) the land, buildings, improvements, fixtures and all
other real property constituting the Desert Vista hospital
facilities owned by Mesa and located in Mesa, Arizona (the
"Desert Vista Assets" and collectively with the Mission Vista
Assets, the "Hospitals"), (iii) pursuant to leases to be entered
into between Buyer-Lessor and the Seller-Lessees in substantially
<PAGE>
3
the form thereof heretofore delivered to the Agent (the
"Leases"), Buyer-Lessor will lease each of the Hospitals to the
Seller-Lessees for an initial term of 15 years (with three
successive renewal options of five years each) for aggregate
annual lease payments of $1,539,600 (subject to adjustment as
agreed to between the Seller-Lessees and the Buyer-Lessor),
payable monthly, subject to an annual upward adjustment based
upon the CPI (national index) with an annual cap of 3%, (iv) the
Company will guarantee all obligations of the Seller-Lessees
under the Leases and (v) the Third Supplemental Trust Indenture
dated as of April 12, 1995, in the form attached hereto as
Exhibit A, will be executed and delivered by the parties thereto,
pursuant to which, inter alia, $7,500,000 of the proceeds of the
Transaction will be applied to the prepayment not later than
April 30, 1995 of the Life Company Senior Notes with a prepayment
premium not exceeding $234,000.
SECTION 3. AMENDMENT
Section 3.1. Restriction on use of Revolving Credit
Loans. The parties hereto hereby agree that Section 2.04(f) of
the Credit Agreement is amended by adding the following proviso
to the end of such Section:
"; provided that no proceeds of the Revolving
Credit Loans shall be used by the Company to
fund working capital or other capital needs
of Mesa Psychiatric Hospital, Inc."
Section 3.2. Termination of Certain Documents. The
parties hereto hereby agree that the Separate Revolving Credit
Guaranty and the Accounts Receivable Security Agreement executed
and delivered by Mesa Psychiatric Hospital, Inc. ("Mesa") in
favor of the Agent of the benefit of the Lenders are hereby
terminated and of no further force or effect and all of the
obligations of and security interests granted by Mesa thereunder
are hereby released and discharged. The parties agree to execute
and deliver such further documents and instruments as shall be
reasonably necessary and appropriate to effectuate the foregoing,
including UCC termination statements with respect to the security
interests granted pursuant to such Mesa Accounts Receivable
Security Agreement. Mesa shall be a third party beneficiary of
this Section 3.2.
SECTION 4. MISCELLANEOUS
Section 4.1. Applicability of Credit Agreement. The
provisions of the Credit Agreement are hereby ratified, approved
and confirmed and remain in full force and effect.
<PAGE>
4
Section 4.2. Counterparts. This Consent may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
* * *
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have executed
this Consent and Amendment as of the date first written above.
GREENBRIER HOSPITAL, INC. RAMSAY HEALTH CARE, INC.
By__________________________ By____________________________
Name: Reynold J. Jennings Name: Reynold J. Jennings
Title: President Title: President
HOUMA PSYCHIATRIC GULF COAST TREATMENT
HOSPITAL, INC. CENTER, INC.
By__________________________ By____________________________
Name: Reynold J. Jennings Name: Reynold J. Jennings
Title: President Title: President
HSA OF OKLAHOMA, INC. ATLANTIC TREATMENT CENTER, INC.
By__________________________ By____________________________
Name: Reynold J. Jennings Name: Reynold J. Jennings
Title: President Title: President
CAROLINA TREATMENT CENTER, GREAT PLAINS HOSPITAL, INC.
INC.
By__________________________ By____________________________
Name: Reynold J. Jennings Name: Reynold J. Jennings
Title: President Title: President
THE HAVEN HOSPITAL, INC.
By____________________________
Name: Reynold J. Jennings
Title: President
This execution page is part of the Consent and Amendment dated as of
__________, 1995 among Ramsay Health Care, Inc., certain of its subsidiaries,
and Societe Generale, New York Branch, as agent, and the Lenders.
<PAGE>
6
AGENT:
SOCIETE GENERALE, NEW YORK
BRANCH, AS AGENT
By____________________________
Name: Sedare Coradin
Title: Vice President
LENDERS:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:________________________________
Its:_______________________________
HIBERNIA NATIONAL BANK
By:________________________________
Its:_______________________________
SOCIETE GENERALE
By:________________________________
Its:_______________________________
This execution page is part of the Consent and
Amendment dated as of ____________, 1995 among Ramsay Health
Care, Inc., certain of its subsidiaries, and Societe Generale,
New York Branch, as agent, and the Lenders.
<PAGE>
7
EXHIBIT A
Third Supplemental Trust Indenture
EXHIBIT 10.93
THIRD AMENDMENT
TO
CREDIT AGREEMENT
AND
NOTE MODIFICATION AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT AND NOTE MODIFICATION AGREEMENT
dated as of August 15, 1996 (this "Amendment") amending the Credit Agreement
dated as of May 15, 1993, as heretofore amended by the First Amendment and the
Second Amendment described below, the "Credit Agreement") among RAMSAY HEALTH
CARE, INC. (the "Company"), a Delaware corporation, GREENBRIER HOSPITAL, INC.
("Greenbrier"), a Louisiana corporation, HOUMA PSYCHIATRIC HOSPITAL, INC.
("Houma"), a Louisiana corporation, HSA OF OKLAHOMA, INC. ("HSA"), an Oklahoma
corporation, CAROLINA TREATMENT CENTER, INC. ("Carolina"), a South Carolina
corporation, GULF COAST TREATMENT CENTER, INC. ("Gulf Coast"), a Florida
corporation, and ATLANTIC TREATMENT CENTER, INC. ("Atlantic"), a Florida
corporation, as Borrowers (collectively, the Borrowers"), GREAT PLAINS HOSPITAL,
INC., a Missouri corporation, and THE HAVEN HOSPITAL, INC., a Delaware
corporation, as Guarantors (collectively, the "Guarantors"), SOCIETE GENERALE, a
French banking corporation acting by and through its New York Branch, FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association, and
HIBERNIA NATIONAL BANK, a national banking association, as Lenders
(collectively, the "Lenders"), and SOCIETE GENERALE, as the issuer of the
Letters of Credit described in the Credit Agreement (in such capacity, the
"Issuing Bank") and as agent for the Lenders as provided in the Credit Agreement
(in such capacity, the "Agent"), and modifying the Subsidiary Borrower Notes
described in the Credit Agreement,
W I T N E S S E T H:
A. Pursuant to the Credit Agreement, at the request of the Borrowers, the
Issuing Bank issued the Letters of Credit to support certain Bonds theretofore
issued to finance certain hospital assets for the benefit of the Borrowers.
Subsequent to the original issuance of the Letters of Credit, (i) the Letter of
Credit issued for the account of Atlantic was terminated in connection with the
sale of Atlantic's hospital assets and (ii) the other Letters of Credit have
been reduced in connection with the sale of Atlantic's hospital assets and (ii)
the other Letters of Credit have been reduced in connection with mandatory
sinking fund payments of principal of the Bonds supported by such Letters of
Credit. As of the date of this Amendment, the outstanding Letters of Credit and
the respective amounts thereof are as follows:
1
<PAGE>
Letter of Interest
Account Credit Principal Interest Coverage
Party Amount Component Component Calculation
Greenbrier $5,344,375.00 $5,100,000.00 $244,375.00 115 days @ 15%
360-day year
Houma 3,665,410.95 3,500,000.00 165,410.95 115 days @ 15%
365-day year
HSA 3,132,330.00 3,000,000.00 132,330.00 115 days @ 14%
365-day year
Carolina 4,401,250.00 4,200,000.00 201,250.00 115 days @ 15%
360-day year
Gulf Coast 3,765,000.00 3,600,000.00 165,000.00 110 days @ 15%
360-day year
TOTAL $20,308,365.95 $19,400,000.00 $908,365.95
B. The Credit Agreement also provided for Revolving Credit Loans by the
Lenders to the Company up to a maximum aggregate outstanding principal balance
of $4,000,000 to provide working capital for conducting the operations of the
company and certain of its consolidated subsidiaries. Pursuant to Section 2.04
(g) of the Credit Agreement, (i) by letter dated April 12, 1995, the Company
irrevocably elected to permanently reduce the Revolving Credit Maximum
Commitment Amount from $4,000,000 to $2,000,000 and (ii) by letter dated
December 27, 1995, the Company irrevocably elected to reduce the Revolving
Credit Commitment Amount to zero and terminate the Revolving Credit Commitment.
C. As of the date of this Amendment, the maximum credit available to be
outstanding for the benefit of the Borrowers pursuant to the Credit Agreement
(the Maximum Credit Availability as defined herein) is $20,308,365.95 (up to
$20,308,365.95 under the Letters of Credit or, in the event of conversion to one
or more Term Loans, up to $19,400,000 under the Term Loan Commitments).
D. Pursuant to a Consent and Amendment dated as of April 12, 1995 among the
Borrowers, the Guarantors, the Lenders, the Issuing Bank and the Agent (the
"First Amendment"), (i) the Agent, on behalf of the Lenders, consented to the
consummation of certain sale-leaseback transactions between two wholly-owned
subsidiaries of the Company and Capstone Capital Corporation and (ii) Section
2.04 (f) of the Credit Agreement was amended by adding the following provision
to the end of such section:
2
<PAGE>
" ;provided that no proceeds of the Revolving Credit Loans shall be used by
the Company to fund working capital or other capital needs of Mesa Psychiatric
Hospital, Inc."
E. Pursuant to a Second Amendment dated as of September 15, 1995 among the
Borrowers, the Guarantors, the Lenders, the Issuing Bank and the Agent (the
"second Amendment"), the Banks agreed (1) to extend the stated expiration date
of the Letters of Credit to February 15, 1997 and (2) to certain amendments to
the Credit Agreement.
F. The Borrowers have requested the Lenders, the Agent and the Issuing Bank
(collectively in such capacities, the "Banks") (1) to extend the stated
expiration date of the Letters of Credit from February 15, 1997 to August 15,
1997, and (2) to agree to certain amendments to the Credit Agreement. Upon the
terms and conditions set forth in this Amendment, the Banks are willing (i) to
extend the stated expiration date of the Letters of Credit and (ii) to agree to
certain amendments to the Credit Agreement, all as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the understandings
herein set forth and intending to be legally bound, the Borrowers, the
Guarantors, the Lenders, the Issuing Bank and the Agent hereby agree as follows:
1. Definitions. As used in this Amendment and in the Credit Agreement, the
term "Agreement" shall mean the Credit Agreement as amended by the First
Amendment, the Second Amendment and this Amendment. All terms used herein and
not otherwise defined shall have the meanings ascribed to such terms in the
Credit Agreement.
2. Extension of Letters of Credit. The Borrowers hereby request the Banks
to extend the stated expiration date of the Letters of Credit to August 15,
1997. Subject to the payment of the extension fee set forth in section 3 of this
Amendment and to the other conditions precedent hereinafter set forth, the
Issuing Bank will extend the stated expiration date of the Letters of Credit to
August 15, 1997, such extension to be effected through the issuance by the
Issuing Bank to the Greenbrier Trustee, the Houma Trustee, the HSA Trustee, the
Carolina Trustee and the Gulf Coast Trustee, respectively, of an Amendment No. 2
to each of the outstanding Letters of Credit effective as of August 15, 1996.
3. Extension Fee. On the date of execution and delivery of this Amendment,
the Company shall pay to the Agent in immediately available funds a non
refundable extension fee in the amount of $35,000. Such extension fee shall be
shared by the Lenders pro rata on the basis of their respective Percentages.
3
<PAGE>
4. Amendments to Credit Agreement.
4.1. The definitions of the following terms set forth in Section 1.01 of
the Credit Agreement are hereby amended and restated in full as follows:
"Commitment Fee Rate" means, at any time, (i) three percent (3%) per
annum if the Debt Service and Lease Payment Coverage Ratio of the
Consolidated Companies for the most recent 12-month period for which
financial statements of the Consolidated Companies have been provided to
the Agent pursuant to Section 7.12 is greater than 1.25 to 1, (ii) three
and one-half percent (3 1/2%) per annum if such Debt Service and Lease
Payment Coverage Ratio is equal to or less than 1.25 to 1 and equal to or
greater than 1.00 to 1, and (iii) four percent (4%) per annum if such Debt
Service and Lease Payment Coverage Ratio is less than 1.00 to 1; provided
that, if and so long as such Dept Service and Lease Payment Coverage Ratio
of the Consolidated Companies is greater than 1.25 to 1 and no Event of
Default has occurred and is continuing, the Commitment Fee Rate shall be
reduced by one-quarter percent (1/4%) for each permanent reduction from and
after August 15, 1996 of $3,000,000 in the Maximum Credit Availability.
4.2. Section 2.03(f) (1) of the Credit Agreement is hereby amended and
restated in full as follows:
(1) Amortization and Maturity. The principal of each Term Loan shall
be due and payable in full, together with all unpaid accrued interest
thereon, on the 366th day after the date of conversion to such Term Loan.
All payments shall be applied first to the payment of interest due and
payable on the respective Term Loan and then to the reduction of the
outstanding principal balance thereof.
4.3. Section 7.16(a) of the Credit Agreement is hereby amended and restated
in full as follows:
(a) Consolidated Maximum Annual Debt Service and Lease Payment
Coverage Ratio. The Obligors will maintain, and the Company will cause
the other Consolidated Companies to maintain, as to the Consolidated
Companies on a consolidated basis, as of the end of each fiscal
quarter of the Consolidated Companies for the 12-month period then
ended, a Maximum Annual Debt Service and Lease Payment Coverage Ratio
of at least the following amounts from and after the date indicated:
4
<PAGE>
From and Maximum Annual Debt Service
after June 30 and Least Payment Coverage Ratio
1996 1.00 to 1
1997 1.20 to 1
4.4. Section 7.16 (e) of the Credit Agreement is hereby amended and
restated in full as follows:
(e) Consolidated Tangible Net Worth. The Obligors will mainain,
and the company will cause the other Consolidated Companies to
maintain, at all times a Consolidated Tangible Net Worth of at least
the following amounts from and after the date indicated:
From and Consolidated
after June 30 Tangible Net Worth
1996 $48,000,000
1997 $50,000,000
4.5. Section 7.24 of the Credit Agreement is hereby amended and restated in
full as follows:
Section 7.24. Management Agreements. The Obligors will not pay, and
the Company will not permit any of the other Consolidated Companies to pay,
any Ramsay Management Fees, except Ramsay Management Fees payable by the
Company to any Paul Ramsay Affiliate pursuant to the Ramsay Management
Agreement; provided that (i) the Company's obligation to pay Ramsay
Management Fees shall be subordinate to all amounts now or hereafter owing
by the Company to the Agent, the Issuing Bank or the Lenders under the
Credit Documents and (ii) the Company's obligations to pay Ramsay
Management Fees for services rendered during each Fiscal Year shall accrue
and may be paid in common stock of the Company at any time, but shall not
be paid in cash or other property (except such common stock) until after
all of the Letters of Credit have terminated and the Obligors have paid all
of their obligations under the Credit Documents. The Company will cause
Ramsay Health Care Pty. Ltd to execute and deliver to the Agent and the
Lenders on the Closing Date a Ramsay Management Fee Subordination Agreement
(the "Ramsay Management Fee Subordination Agreement") pursuant to which
Ramsay Health Care Pty. Ltd will subordinate all present and future claims
to Ramsay Management Fees owing under the Ramsay Management Agreement (or
any successor management agreement) to all amounts now or hereafter owing
by any Obligor under the Credit Documents. The Company will not (i) amend,
modify or supplement the Ramsay Management Agreement, other than one or
more extensions of the term thereof on
5
<PAGE>
the same terms and conditions as are in effect on the Closing Date and
other than an assignment thereof by a Paul Ramsay Affiliate to another Paul
Ramsay Affiliate (in each case subject to the Ramsay Management Fee
Subordination Agreement), (ii) enter into any other management agreement
with Paul J. Ramsay or any Paul Ramsay Affiliate, or (iii) enter into any
management agreement with any other Person (other than a Consolidated
Company) with respect to the management by such person of material
operations of any Obligor or of the Consolidated Companies taken as a
whole.
4.6. Section 7.34 of the Credit Agreement is hereby amended and restated in
full as follows:
Section 7.34. Reduction of Maximum Credit Availability. The Borrowers
will cause the Maximum Credit Availability to be reduced to not more than
$17,145,835.32 by December 31, 1996, and to not more than $15,000,000 by
July 1, 1997, through permanent reductions in the total of the Letter of
Credit Amounts of the Letters of Credit as a result of mandatory sinking
fund redemptions and/or optional redemptions of Bonds.
5. Modifications to Subsidiary Borrower Notes.
5.1. The definitions of the following terms set forth in each of the
Subsidiary Borrower Notes are hereby modified and amended and restated in full
as follows:
"Base Rate Increment" means one percent (1%) per annum.
"Eurodollar Rate Increment" means two and three-quarters percent (2
3/4%) per annum.
The modifications set forth in this Section 5.1 were made, and are hereby
deemed to have been made, effective as of September 15, 1995.
5.2. Section 6(a) of each of the Subsidiary Borrower Notes is hereby
modified and amended and restated in full as follows:
(a) Amortization and Maturity. The principal of the Term Loan shall be due
and payable in full, together with all unpaid accrued interest thereon, on the
366th day after the date of conversion to the Term Loan. All payments shall be
applied first to the payment of interest due and payable on the Term Loan and
then to the reduction of the outstanding principal balance thereof.
6
<PAGE>
5.3. All references in each of the Subsidiary Borrower Notes to the Credit
Agreement shall be deemed to mean the Credit Agreement, as defined in and
amended by this Amendment and as the same may hereafter be amended.
6. Conditions Precedent. As conditions precedent to the Banks' execution
and delivery of this Amendment, the Agent shall have received the following in
form and substance satisfactory to the Banks:
(a) A certificate of the president, chief executive officer or chief
financial officer of each Obligor as of the date of execution and delivery
by the Obligors of this Amendment stating that (1) the representations and
warranties contained in Section 7 of this Amendment are true and correct,
(2) all obligations, covenants, agreements and conditions contained in the
Agreement to be performed or satisfied by such Obligor on or prior to the
date of execution and delivery by the Obligors of this Amendment have been
performed or satisfied in all respects, (3) since June 30, 1995, there has
been no material adverse change in the properties, business, operations,
assets, condition (financial or otherwise) or prospects of such Obligor
(or, in the case of the certificate of the respective officer of the
Company, the Consolidated Companies taken as a whole) other than as
disclosed in such certificate, and (4) after giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing;
(b) An opinion of Haythe & Curley, New York, New York, counsel to the
Obligors, to the effect that (1) the execution and delivery by the Obligors
of this Amendment has been duly authorized by all requisite corporate
action, (2) this Amendment has been duly executed and delivered by the
Obligors and constitutes the legal, valid and binding obligation of the
Obligors enforceable against the Obligors in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the rights of creditors generally and by the application of
general principles of equity, and (3) the execution and delivery of this
Amendment does not conflict with or constitute a default under the Life
Company Indenture or the Consolidated Companies' Operating Leases with
Capstone Capital Corporation and Charter Canyon Behavioral Health System,
Inc. or the Consolidated Companies have otherwise obtained all requisite
consents of the parties to such agreements in connection with this
Amendment; and
(c) Such other documents, certificates and opinions of counsel as the
Agent may reasonably request.
7. Representations and Warranties. The Obligors hereby represent and
warrant that:
(a) The representations and warranties made by the Obligors in the Credit
Agreement and all documents delivered in connection therewith are true and
correct on and as of the date of execution and delivery by the Obligors of this
Amendment, except to the extent that such
7
<PAGE>
representations and warranties expressly relate to an earlier date. After
giving effect to this Amendment, no Default or Event of Default has occurred and
is continuing on the date of execution and delivery by the Obligors of this
Amendment.
(b) This Amendment has been duly authorized by all requisite action on
behalf of the Obligors and constitutes the legal, valid and binding obligation
of the Obligors, enforceable in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws or equitable principles affecting creditors' rights generally.
(c) The Obligors have obtained all consents and approvals necessary to
their execution and delivery of this Amendment.
8. Costs and Expenses. The Obligors hereby agree to pay on demand all costs
and expenses of the Agent and the Issuing Bank in connection with the
preparation, execution and delivery of this Amendment and the amendments
extending the Letters of Credit being delivered pursuant to section 2 of this
Amendment, including without limitation the reasonable fees and expenses of
counsel for the Agent and the Issuing Bank with respect thereto.
9. Counterparts. This Amendment may be executed in one or more counterparts
each of which shall constitute an original Amendment and all of which together
shall constitute one and the same Amendment.
10. Effect. Upon the execution and delivery of this Amendment, the Credit
Agreement shall be and be deemed to be amended as set forth in this Amendment.
All of the provisions of the Credit Agreement shall remain in full force and
effect as amended by this Amendment.
11. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of law. The foregoing choice of law is made pursuant to Section
5-1401 of the General Obligations Law of the State of New York.
8
<PAGE>
IN WITNESS WHEREOF, the Obligors, the Lenders, the Issuing Bank and the
Agent have caused this Agreement to be duly executed and delivered as of the
date first above written.
(CORPORATE SEAL) RAMSAY HEALTH CARE, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) GREENBRIER HOSPITAL, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) HOUMA PSYCHIATRIC HOSPITAL, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) HSA OF OKLAHOMA, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) CAROLINA TREATMENT CENTER, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
This execution page is part of the Third Amendment to Credit Agreement and Note
Modification Agreement dated as of August 15, 1996 amending the Credit Agreement
dated as of May 15, 1993, as amended, among Ramsay Health Care, Inc., Greenbrier
Hospital, Inc., Houma Psychiatric Hospital, Inc., HSA of Oklahoma, Inc.,
Carolina Treatment Center, Inc., Gulf Coast Treatment Center, Inc. and Atlantic
Treatment Center, Inc., as Borrowers, Great Plains Hospital, Inc. and the Haven
Hospital, Inc., as Guarantors, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as Lenders, Societe
Generale, as Issuing Bank, and Societe Generale, as Agent, and modifying the
Subsidiary Borrower Notes described therein.
9
<PAGE>
(CORPORATE SEAL) GULF COAST TREATMENT, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) ATLANTIC TREATMENT CENTER, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) GREAT PLAINS HOSPITAL, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
(CORPORATE SEAL) THE HAVEN HOSPITAL, INC.
Attest ____________________________ By _________________________________
Assistant Secretary President
This execution page is part of the Third Amendment to Credit Agreement and Note
Modification Agreement dated as of August 15, 1996 amending the Credit Agreement
dated as of May 15, 1993, as amended, among Ramsay Health Care, Inc., Greenbrier
Hospital, Inc., Houma Psychiatric Hospital, Inc., HSA of Oklahoma, Inc.,
Carolina Treatment Center, Inc., Gulf Coast Treatment Center, Inc. and Atlantic
Treatment Center, Inc., as Borrowers, Great Plains Hospital, Inc. and the Haven
Hospital, Inc., as Guarantors, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as Lenders, Societe
Generale, as Issuing Bank, and Societe Generale, as Agent, and modifying the
Subsidiary Borrower Notes described therein.
10
<PAGE>
SOCIETE GENERALE, NEW YORK
BRANCH, as Lender, Issuing
Bank and Agent
By ____________________________
Title _________________________
This execution page is part of the Third Amendment to Credit Agreement and Note
Modification Agreement dated as of August 15, 1996 amending the Credit Agreement
dated as of May 15, 1993, as amended, among Ramsay Health Care, Inc., Greenbrier
Hospital, Inc., Houma Psychiatric Hospital, Inc., HSA of Oklahoma, Inc.,
Carolina Treatment Center, Inc., Gulf Coast Treatment Center, Inc. and Atlantic
Treatment Center, Inc., as Borrowers, Great Plains Hospital, Inc. and the Haven
Hospital, Inc., as Guarantors, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as Lenders, Societe
Generale, as Issuing Bank, and Societe Generale, as Agent, and modifying the
Subsidiary Borrower Notes described therein.
11
<PAGE>
FIRST UNION BANK OF NORTH
CAROLINA, as Lender
By ____________________________
Title ___________________________
This execution page is part of the Third Amendment to Credit Agreement and Note
Modification Agreement dated as of August 15, 1996 amending the Credit Agreement
dated as of May 15, 1993, as amended, among Ramsay Health Care, Inc., Greenbrier
Hospital, Inc., Houma Psychiatric Hospital, Inc., HSA of Oklahoma, Inc.,
Carolina Treatment Center, Inc., Gulf Coast Treatment Center, Inc. and Atlantic
Treatment Center, Inc., as Borrowers, Great Plains Hospital, Inc. and the Haven
Hospital, Inc., as Guarantors, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as Lenders, Societe
Generale, as Issuing Bank, and Societe Generale, as Agent, and modifying the
Subsidiary Borrower Notes described therein.
12
<PAGE>
HIBERNIA NATIONAL BANK, as
Lender
By ____________________________
Title ___________________________
This execution page is part of the Third Amendment to Credit Agreement and Note
Modification Agreement dated as of August 15, 1996 amending the Credit Agreement
dated as of May 15, 1993, as amended, among Ramsay Health Care, Inc., Greenbrier
Hospital, Inc., Houma Psychiatric Hospital, Inc., HSA of Oklahoma, Inc.,
Carolina Treatment Center, Inc., Gulf Coast Treatment Center, Inc. and Atlantic
Treatment Center, Inc., as Borrowers, Great Plains Hospital, Inc. and the Haven
Hospital, Inc., as Guarantors, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as Lenders, Societe
Generale, as Issuing Bank, and Societe Generale, as Agent, and modifying the
Subsidiary Borrower Notes described therein.
13
EXHIBIT 10.94
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of August 13, 1996 by and
among Paul Ramsay Holdings Pty. Limited, an Australian corporation (the
"Acquiror"), Ramsay Health Care, Inc., a Delaware corporation (the "Seller"),
and, solely for the purposes of Sections I, III and IV hereof, Ramsay Health
Care Pty. Limited, an Australian corporation (the "Manager").
W I T N E S S E T H:
WHEREAS, the Manager is an affiliate of the Acquiror and a
party to that certain Amended and Restated Management Agreement dated as of June
25, 1992 with the Seller (the "Management Agreement") pursuant to which the
Seller, among other matters, is obligated to pay certain management fees
("Management Fees") and other amounts to the Manager;
WHEREAS, an agreement of the Seller with certain of its
lenders restricts or may restrict the payment in cash of the amounts now and
hereafter due pursuant to the Management Agreement; and
WHEREAS, the Seller, the Acquiror and the Manager desire to
provide for the issuance of 275,546 shares of common stock, $.01 par value (the
"Common Stock"), of the Seller (the "Shares") for a purchase price of
$757,752.00, payable $2,755.46 in cash and as a prepayment by the Seller of
$754,996.54 in Management Fees;
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 Manager hereby
directs the Seller to, the Seller does hereby, issue and convey to the Acquiror
on the date hereof, and the Acquiror hereby acquires and accepts from the Seller
on the date hereof, the Shares.
B. Consideration for the Shares. The Shares are being issued
for a purchase price of $757,752.00 payable
178961.2
1271-0370
<PAGE>
2
$2,755.46 in cash and as a prepayment by the Seller of $754,996.54 of amounts
now and hereafter due during the Seller's current fiscal year pursuant to the
Management Agreement, representing a purchase price of $2.75 per share of Common
Stock. The Manager hereby accepts the issuance by the Seller to the Acquiror of
the Shares as a prepayment of $754,996.54 of the amounts now or hereafter due
during the Seller's current fiscal year pursuant to the Management Agreement.
The Seller hereby acknowledges receipt of $2,755.46 in cash from the Manager in
payment of the cash portion of the purchase price for the Shares.
C. Delivery of the Shares. The Acquiror hereby acknowledges
receipt of a certificate of the Seller representing the Shares.
SECTION II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
The Seller hereby represents and warrants to the Acquiror and
the Manager, as of the date hereof, 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
178961.2
1271-0370
<PAGE>
3
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 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
Acquiror hereunder have been duly and validly authorized and, upon delivery of
the certificate representing ownership by the Acquiror 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 ACQUIROR AND THE MANAGER
Each of the Acquiror and the Manager, jointly and severally,
hereby represents and warrants to the Seller, as of the date hereof, that:
A. Authority. It 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
it, the performance by it of its covenants and agreements hereunder and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement constitutes a valid
and legally binding obligation of it, enforceable against it 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 it is a party or by
which it or any of its assets is bound.
178961.2
1271-0370
<PAGE>
4
C. Investment in the Seller.
(i) It understands that the Seller proposes to issue
and deliver to the Acquiror 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
its representations and warranties contained herein; and that such
non-compliance with registration is not permissible unless such representations
and warranties are correct.
(ii) It understands that, under existing rules of the
Securities and Exchange Commission (the "SEC"), the Acquiror 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) It is not relying on the Seller respecting the
financial, tax and other economic considerations of an investment in the Common
Stock, and it has relied on the advice of, or has consulted with, only its own
advisors.
(iv) It is familiar with the provisions of Rule 144
and the limitations upon the availability and applicability of such rule.
(v) It 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) It has such knowledge and experience in
financial, tax and business matters so as to enable it to utilize the
information made available to it in connection with the issuance of the Shares
to the Acquiror and to evaluate the merits and risks of an investment in the
Shares and to make an informed investment decision with respect thereto.
(vii) The Acquiror is purchasing the Shares as an
investment for its sole account, and without any present view towards the resale
or other distribution thereof.
178961.2
1271-0370
<PAGE>
5
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
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 Acquiror or the Manager:
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 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
<PAGE>
6
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 amends and restates the Original
Agreement in its entirety. 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 Acquiror except pursuant to a writing executed by each of the
parties hereto; provided that the Acquiror may assign any of its rights
hereunder to any affiliate of the Acquiror which agrees to be bound by all of
the obligations of the Acquiror hereunder or to any lender in connection with
any financing transaction entered into by the Acquiror or any of its affiliates
and that the Manager hereby assigns its rights to acquire the Shares to the
Acquiror.
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.
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.
<PAGE>
7
K. Third Party Beneficiary. This Agreement shall not create
any rights in favor of any person not a party hereto.
* * *
<PAGE>
8
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_________________________________
Name:
Title:
Solely for the purposes of Sections I, III and IV:
RAMSAY HEALTH CARE PTY. LIMITED
By_________________________________
Name:
Title:
EXHIBIT 10.95
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 12th day of August, 1996 by and
between RAMSAY HEALTH CARE, INC., a Delaware corporation (the "Company"), and
REYNOLD JENNINGS (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employee has heretofore been employed by the
Company and the Company wishes to continue to retain the services of the
Employee, and the Employee wishes to continue 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 term set forth in
Section 1.2, in the position and with the responsibilities, duties and authority
set forth in Section 2 and on the other terms and conditions set forth in this
Agreement.
1.2 The term of the Employee's employment under this Agreement
(the "term of this Agreement") shall commence on the date hereof and shall
terminate on December 31, 1999, unless sooner terminated in accordance with this
Agreement.
2. Position; Duties.
2.1 During the term of this Agreement, the Employee shall
serve in the position of Executive Vice President of the Company and President
of the Behavioral Hospital Division of the Company. The Employee shall perform,
faithfully and diligently, such duties, and shall have such responsibilities,
appropriate to such positions, as shall be assigned to him from time to time by
the President and Chief Operating Officer of the Company. The Employee shall
report directly to the President and Chief Operating Officer of the Company. The
Employee shall devote his complete and undivided attention to the performance of
his duties and responsibilities hereunder during the normal working hours of
executive employees of the Company.
<PAGE>
2
2.2 The Employee covenants and agrees that during the term of
this Agreement he will not render professional services of any type for, to or
on behalf of any other individual, firm or corporation (other than an
educational or charitable entity) and will not engage, directly or indirectly,
in any activity competitive with the Company's business, whether alone or as a
partner, officer, director, employee, agent, consultant, shareholder, trustee,
fiduciary or other representative of any other individual, firm or corporation,
without the express prior written consent of the Company.
2.3 The Employee agrees to relocate from New Orleans,
Louisiana to Atlanta, Georgia as soon as possible in connection with the
establishment of a regional operations office for the Behavioral Hospital
Division of the Company in Atlanta.
3. Salary; Bonus; Stock Options.
3.1 (a) 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 $275,000
per annum, payable in accordance with the standard payroll practices of the
Company.
(b) The base salary set forth in Section 3.1(a) above
shall be adjusted annually (but not decreased) on each anniversary date of this
Agreement by multiplying such base salary by a fraction, the numerator of which
shall be the Consumer Price Index for the July preceding the month in which such
adjustment is to be made, and the denominator of which shall be the Consumer
Price Index for the previous July. For purposes hereof, "Consumer Price Index"
shall mean the "Consumer Price Index for all Urban Consumers, Urban Wage Earners
and Clerical Workers-U.S. City Average (1982-84=100)" issued monthly by the
Bureau of Labor Statistics of the United States Department of Labor, or any
successor index thereto appropriately adjusted. The Employee shall be entitled
to such additional increases in base salary as shall be awarded from time to
time by the Board of Directors of the Company in its sole discretion.
3.2 (a) In addition to the base salary provided for in Section
3.1, the Company shall pay to the Employee with respect to each fiscal year of
the Company (or portion thereof in the case of the fiscal years of the Company
in which the Employee's employment with the Company shall begin and shall
terminate) during the term of this Agreement, subject to the provisions of
Section 3.2(c) hereof, a bonus in an amount equal to two percent (2%) of any
<PAGE>
3
increase in "operating income" (as hereinafter defined) for such fiscal year (or
for such portion thereof) over the corresponding operating income for the
preceding fiscal year (or for such corresponding portion thereof).
(b) For purposes of this Section 3.2, "operating income"
shall mean income from operations (calculated in accordance with generally
accepted accounting principles), but excluding (i) income from any operations
over which the Employee has no administrative control; (ii) the amount of the
bonus determined in accordance with this Section 3.2; and (iii) any material
accounting adjustments relating to the period prior to June 30, 1993. The
foregoing shall be calculated on a "same store" basis.
(c) In the event of the termination of the employment of
the Employee pursuant to Section 6.3 (Due Cause) or Section 6.5 (Termination by
Employee) of this Agreement, the Employee shall not be entitled to a bonus for
the fiscal year of the Company in which such termination takes place. The
Employee shall not be entitled to a bonus for any fiscal year of the Company
subsequent to the fiscal year in which the termination of his employment takes
place.
(d) In addition to the bonus provided for in Section
3.2(a), the Company shall each year during the term of this Agreement pay the
Employee an additional bonus in such amount as shall be determined by the Board
of Directors of the Company, which bonus may be based in part on additional
activities of the Employee.
3.3 The Employee, or the Employee's estate, shall have the
right, upon written notice from the Employee, or the Employee's estate,
delivered to the Company at any time on or after the Effective Date (as
hereinafter defined) and until January 15, 2000 to surrender to the Company for
cancellation all or any of the options to purchase 124,830 shares of the common
stock of the Company ("Common Stock"), granted to the Employee on November 9,
1993, and, upon such surrender, the Company shall pay to the Employee in cash an
amount equal to the product of (x) $3.20436 multiplied by (y) the number of
shares of Common Stock underlying the options so surrendered (subject to
applicable Federal, state and local withholding). The reference in this
paragraph to "$3.20436" shall be appropriately adjusted for any stock split,
stock dividend or similar event affecting the Common Stock occurring after the
date hereof and on or prior to the date of surrender. As used herein, the term
"Effective Date" shall mean October 31, 1996.
<PAGE>
4
4. 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, upon the presentation of proper accounts therefor in
accordance with the Company's policies and annual budget parameters.
5. Benefits.
5.1 Benefit Plans. During the term of this Agreement, the
Employee will be eligible to participate in all employee benefit plans and
programs of the Company, including, without limitation, group life insurance,
disability, 401(k), 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.
5.2 Vacation and Sick Days. The Employee shall be entitled to
four weeks' paid vacation and to paid sick days, all in accordance with Company
policies in effect from time to time for its executive employees.
5.3 Relocation Allowance. In connection with the establishment
of a regional operations office for the Behavioral Hospital Division of the
Company in Atlanta, Georgia, the Company shall pay or reimburse the Employee for
reasonable moving expenses, up to $60,000, incurred by the Employee in moving
from New Orleans, Louisiana to Atlanta, Georgia (including costs of temporary
housing, realtor fees and equity shortfalls on the sale of the Employee's
current home and closing costs (exclusive of loan discount points) on the
purchase of the Employee's new home, as approved by the President and Chief
Operating Officer of the Company), subject to the presentation of proper
accounts therefor in accordance with the Company's policies.
5.4 Automobile. During the term of this Agreement, the Company
shall provide the Employee with an automobile and the Company shall pay or
reimburse the Employee for the costs associated with insuring, operating and
maintaining such automobile, consistent with past practice.
5.5 Split Dollar Life Insurance. In addition to any other
insurance which may now or hereafter be provided by the Company on the life of
the Employee under any group contract or otherwise, the Company shall, during
the term of this Agreement and thereafter as herein provided, pay premiums of up
to $50,000 per year (up to $150,000 in the aggregate over the three-year period
beginning with the date of the first premium payment under the Employment
<PAGE>
5
Agreement between the Employee and the Company dated October 2, 1993 the "1993
Employment Agreement") for a split-dollar life insurance policy on the life of
the Employee. Premiums shall be payable by the Company at a rate not greater
than $25,000 semi-annually. Such policy shall be owned by the Employee or by a
trust for the benefit of the Employee or members of the immediate family of the
Employee. The aggregate amount of premiums paid by the Company shall constitute
indebtedness of the Employee to the Company (i) to be forgiven and treated as a
bonus on (x) the fifth anniversary of the date that the Employee began
employment with the Company (the "Commencement Date"), if the Employee is
employed by the Company on such fifth anniversary, or (y) the date of
termination of employment of the Employee pursuant to Section 6.2 (Disability)
prior to the fifth anniversary of the Commencement Date, (ii) to be repaid by
the Employee if the employment of the Employee shall be terminated by the
Company pursuant to Section 6.3 (Due Cause) of this Agreement or by the Employee
other than pursuant to Section 6.2 (Disability) or 6.6 (Change in Control) of
this Agreement, if such termination occurs prior to the fifth anniversary of the
Commencement Date, on the date of termination of his employment with the
Company, and (iii) to be secured by the death benefit or cash value of such
policy as hereinafter set forth. The Employee or the trust, as the case may be,
will execute and deliver to the Company a collateral assignment of the policy on
a form approved by the insurance company issuing such policy. The Company will
be entitled to satisfy the indebtedness owed to it when and to the extent that
the policy is surrendered or the proceeds thereof are paid at death and the
Company shall release the collateral assignment pro tanto upon such
satisfaction.
In the event of termination of employment of the Employee
pursuant to Section 6.4 (Other Termination) or Section 6.6 (Change in Control)
of this Agreement, notwithstanding any provision of Section 6 of this Agreement
to the contrary, the Company shall continue to pay the premiums referred to
above, at the semiannual rate referred to above, until there shall have been
paid an aggregate of $150,000 in premiums subsequent to the Commencement Date.
The Employee agrees that (i) in the event of his death prior
to the fifth anniversary of the Commencement Date, the portion of such death
benefit equal to the aggregate amount of premiums paid by the Company prior to
his death shall be paid to the Company; (ii) neither the Company, the Employee
nor the trust shall terminate or surrender the policy or any part thereof or
withdraw from or be loaned any part of the cash value of such policy prior to
<PAGE>
6
the Company's receipt of payment of the aggregate amount of premiums paid by the
Company for such policy; (iii) neither the Employee nor the trust shall transfer
legal or beneficial ownership of the policy or use the policy as security for
any loan; and (iv) he shall, to the extent possible, take such action as is
necessary to cause: (a) the terms of the policy to satisfy the requirements of
this Section 5.5, (b) the issuer of the policy to pay the amounts in the manner
described above, and (c) the trust to satisfy and be bound by the provisions of
this Section 5.5.
The Company and the Employee shall enter into a Split Dollar
Agreement embodying the foregoing terms and other standard terms and conditions.
6. Termination of Employment.
6.1 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 Section 3
accrued to the date of death and not theretofore paid to the Employee and (b)
any bonus payable pursuant to Section 3.2. Rights and benefits of the estate or
other legal representative of the Employee under the benefit plans and programs
of the Company shall be determined in accordance with the provisions of such
plans and programs. Neither the estate or other legal representative of the
Employee nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 3.3, 5.5 and 6.7.
6.2 Disability. If, during the term of this Agreement, the
Employee shall become incapacitated by reason of sickness, accident or other
physical or mental disability and shall be unable to perform his normal duties
hereunder for a cumulative period of three (3) months in any period of six (6)
consecutive months, the employment of the Employee hereunder may be terminated
by the Company or the Employee. In the event of such termination, the Company
shall (a) pay to the Employee any bonus payable pursuant to Section 3.2 and (b)
continue to pay to the Employee the base salary provided for in Section 3 until
the first to occur of (i) the expiration of a period of six months from the date
of such termination, (ii) the commencement of payment of benefits to 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 benefit
plans and programs of the Company shall be 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 3.3, 5.5, 6.7, 7, 8, 9 and 10.
<PAGE>
7
6.3 Due Cause. The employment of the Employee hereunder may be
terminated by the Company at any time during the term of this Agreement for Due
Cause (as hereinafter defined). In the event of such termination, the Company
shall pay to the Employee (a) the base salary provided for in Section 3 accrued
to the date of such termination and not theretofore paid to the Employee and (b)
any bonus payable pursuant to Section 3.2(d). Rights and benefits of the
Employee under the benefit plans and programs of the Company shall be determined
in accordance with the provisions of such plans and programs. For purposes
hereof, "Due Cause" shall mean (a) the Employee's material breach, by willful
action or inaction, of any of the material provisions of this Agreement, or (b)
the Employee's conviction in a court of law of any felony, or of any crime or
offense concerning money or property of the Company. Neither the Employee nor
the Company shall have any further rights or obligations under this Agreement,
except as provided in Sections 3.3, 5.5, 6.7, 7, 8, 9 and 10.
6.4 Other Termination by the Company. The Company may
terminate the Employee's employment at any time for whatever reason it deems
appropriate or without reason. In the event of such termination, the Company
shall (a) pay to the Employee any bonus payable pursuant to Section 3.2 and (b)
continue to pay the base salary provided for in Section 3 (at the annual rate
then in effect) until December 31, 1999 or the death of the Employee, whichever
first occurs. Rights and benefits of the Employee under the benefit plans and
programs of the Company shall be 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 3.3, 5.5, 6.7, 7, 8, 9 and 10.
6.5 Termination by the Employee. The Employee may terminate
his employment with the Company during the term of this Agreement upon six (6)
months' 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
Section 3 accrued to the date of termination and not theretofore paid to the
Employee and (b) any bonus payable pursuant to Section 3.2(d). Rights and
benefits of the Employee under the benefit plans and programs of the Company
shall be 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 3.3, 5.5, 7, 8,
9 and 10.
<PAGE>
8
6.6 Change in Control. If, within a period of six (6) months
following a change in control of the Company, the employment of the Employee
hereunder is terminated for any reason whatsoever, whether by the Employee or by
the Company, the Company shall pay to the Employee (a) any bonus payable to the
Employee pursuant to Section 3 and any amounts payable pursuant to Section 4 or
5 and (b) severance pay in an amount equal to (x) the greater of twelve (12)
months base salary or the base salary that would have been payable to the
Employee from the date of termination to December 31, 1999, if such termination
is by the Company, or (y) twelve (12) months' base salary if such termination is
by the Employee (in the case of both (x) and (y) at the highest annual rate in
effect during the one-year period ending on the date of termination of
employment). Such severance payment shall be made to the Employee in a cash lump
sum on the date of termination of employment. For purposes of this Agreement, a
change in control of the Company shall be deemed to have occurred if:
(A) a "person" (meaning an individual, a partnership, or other
group or association as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) acquires fifty percent (50%) or more of the combined
voting power of the outstanding securities of the Company having a right to vote
in elections of directors; or
(B) Continuing Directors (as hereinafter defined) shall for
any reason cease to constitute a majority of the Board of Directors of the
Company; or
(C) all or substantially all of the business of the Company is
disposed of by the Company to a party or parties other than a subsidiary or
other affiliate of the Company, in which the Company owns less than a majority
of the equity, pursuant to a partial or complete liquidation of the Company,
sale of assets (including stock of a subsidiary of the Company) or otherwise.
For purposes of this Agreement, the term "Continuing Director"
shall mean a member of the Board of Directors of the Company who either was a
member of the Board of Directors on the date hereof or who subsequently became a
Director and whose election was voted for by Ramsay Holdings HSA Limited
("RHHL") or by a Continuing Director with the acquiescence of RHHL. A Director
shall not be considered a Continuing Director for purposes of this Agreement if
<PAGE>
9
his election was voted for by RHHL, or by a Continuing Director with the
acquiescence of RHHL, (i) pursuant to an agreement with, or at the direction,
request or suggestion of, any individual, firm or corporation in connection with
the purchase or other acquisition or receipt by such individual, firm or
corporation of all or any shares of capital stock of the Company or (ii) in
anticipation of the sale or other disposition by RHHL of all or any of its
shares of capital stock of the Company.
6.7 Stock Options. In the event of termination of the
Employee's employment with the Company: (i) pursuant to Section 6.4 (Other
Termination) or 6.6 (Change in Control) of this Agreement, the Company shall
cause each stock option heretofore granted by the Company to the Employee to
become fully exercisable (and to remain exercisable until December 31, 1999 or
for the maximum period permitted by the plan or agreement pursuant to which such
option was granted) unless such action, in the opinion of counsel to the
Company, would violate, or adversely affect the status of such option or the
plan (if any) pursuant to which such option was granted under, Rule 16b-3 under
Section 16 of the Securities Exchange Act of 1934; and (ii) pursuant to Section
6.1 (Death), 6.2 (Disability), 6.4 (Other Termination) or 6.6 (Change in
Control) of this Agreement, the Company shall cause each stock option heretofore
granted by the Company to the Employee to become exercisable without regard to
the requirement that the closing price for the Common Stock as quoted on the
NASDAQ National Market System shall have equalled or exceeded $7.00 per share on
at least twenty (20) trading days subsequent to November 10, 1995.
7. Confidential Information.
7.1 The Employee shall, during the term of this Agreement and
at all times thereafter, treat as confidential and, except as required in the
performance of his duties and responsibilities under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation any confidential material (as hereinafter
defined). 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, are the exclusive property of the
Company and the Employee agrees to return such material to the Company promptly
upon the termination of the Employee's employment with the Company.
7.2 For the purposes hereof, the term "confidential material"
shall mean all information acquired by the Employee in the course of the
<PAGE>
10
Employee's employment with the Company in any way concerning the products,
projects, activities, business or affairs of the Company or the Company's
customers, including, without limitation, all information concerning trade
secrets and the products or projects of the Company and/or any improvements
therein, all sales and financial information concerning the Company, all
customer and supplier lists, all information concerning projects in research and
development or marketing plans for any such products or projects, and all
information in any way concerning the products, projects, activities, business
or affairs of customers of the Company which is furnished to the Employee by the
Company or any of its agents or customers, as such; provided, however, that the
term "confidential material" shall not include information which (a) becomes
generally available to the public other than as a result of a disclosure by the
Employee, (b) was available to the Employee on a non-confidential basis prior to
his employment with the Company or (c) becomes available to the Employee on a
non-confidential basis from a source other than the Company or any of its agents
or customers provided that such source is not bound by a confidentiality
agreement with the Company or any of such agents or customers.
8. Interference With the Company.
8.1 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 one year 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, 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) at any time, take any action or make any statement the
effect of which would be, directly or indirectly, to impair the good will of the
<PAGE>
11
Company or the 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.
8.2 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.
9. Inventions. Any and all inventions, innovations or
improvements ("inventions") made, developed or created by the Employee (whether
at the request or suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or otherwise)
during the period of his employment with the Company which may be directly or
indirectly useful in, or relate to, the business of the Company, shall be
promptly and fully disclosed by the Employee to the Board of Directors of the
Company and shall be the Company's exclusive property as against the Employee,
and the Employee shall promptly deliver to an appropriate representative of the
Company as designated by the Board of Directors all papers, drawings, models,
data and other material relating to any inventions made, developed or created by
him as aforesaid. The Employee shall, at the request of the Company and without
any payment therefor, execute any documents necessary or advisable in the
opinion of the Company's counsel to direct issuance of patents or copyrights to
the Company with respect to such inventions as are to be the Company's exclusive
property as against the Employee or to vest in the Company title to such
inventions as against the Employee. The expense of securing any such patent or
copyright shall be borne by the Company.
10. Equitable Relief. In the event of a breach or threatened
breach by the Employee of any of the provisions of Sections 7, 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
<PAGE>
12
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 7, 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 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 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.
<PAGE>
13
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, including without limitation the 1993 Employment Agreement, the
amendment to the Employment Agreement dated May 26, 1994 and the letter
agreement between the Employee and the Company dated June 3, 1994.
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 10, 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 may include an award of
attorneys' fees and costs.
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
<PAGE>
14
indicated below or at such other address as such party may subsequently
designate by like notice:
If to the Company:
Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1400
New Orleans, Louisiana 70113
Attention: President
If to the Employee:
Mr. Reynold Jennings
c/o Ramsay Health Care, Inc.
One Poydras Plaza
639 Loyola Avenue, Suite 1400
New Orleans, Louisiana 70113
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.
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.
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.
* * *
<PAGE>
16
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
RAMSAY HEALTH CARE, INC.
By
Reynold Jennings
EXHIBIT 10.96
EXCHANGE AGREEMENT
Exchange Agreement (the "Agreement") dated September 10, 1996,
by and among Ramsay Health Care, Inc., a Delaware corporation ("RHCI"), Paul
Ramsay Hospitals Pty. Limited, an Australian corporation ("Ramsay Hospitals"),
and Paul J. Ramsay ("Ramsay").
R E C I T A L S:
WHEREAS, the Board of Directors of RHCI has authorized the
exchange of outstanding options (the "Options") to purchase an aggregate of
476,070 shares of common stock, $.01 par value (the "Common Stock"), of RHCI
held by Ramsay for warrants (the "Warrants") to purchase an aggregate of 500,000
shares of Common Stock; and
WHEREAS, Ramsay has directed RHCI to issue the Warrants to
Ramsay Hospitals.
NOW, THEREFORE, in consideration of the foregoing, and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION I.
ISSUANCE OF WARRANTS
A. In exchange for the Warrants, Ramsay hereby surrenders and
delivers the Options to RHCI for cancellation and RHCI hereby acknowledges
receipt of option certificates dated November 10, 1995 representing the Options.
Ramsay hereby directs RHCI to issue the Warrants to Ramsay Hospitals. RHCI
hereby issues and delivers to Ramsay Hospitals the Warrants and Ramsay Hospitals
acknowledges receipt of a certificate representing the Warrants in the form of
Exhibit A hereto.
SECTION II
REPRESENTATIONS AND WARRANTIES OF RHCI
RHCI hereby represents and warrants to each of Ramsay
Hospitals and Ramsay, as of the date hereof, that:
182915.2
1271-1370
<PAGE>
2
A. Organization; Good Standing. RHCI 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. RHCI has the corporate power and authority to
issue and deliver the Warrants in accordance with the terms hereof. RHCI has
duly authorized the execution and delivery of this Agreement and this Agreement
constitutes a valid and legally binding obligation of the Company enforceable 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. The shares of Common Stock issuable upon the exercise of the Warrants,
when issued and paid for in accordance with the terms of the warrant certificate
evidencing the Warrants, will be validly issued, fully paid and nonassessable
shares of Common Stock.
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 RHCI 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 pursuant to the terms of any contract or agreement to which
RHCI is a party or by which RHCI or any of its assets is bound.
SECTION III
REPRESENTATIONS AND WARRANTIES OF RAMSAY HOSPITALS
Ramsay Hospitals hereby represents and warrants to each of
RHCI and Ramsay, as of the date hereof, that:
A. Authority. Ramsay Hospitals has the 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 Ramsay Hospitals, the performance by Ramsay Hospitals of its
covenants and agreements hereunder and the consummation by Ramsay
<PAGE>
3
Hospitals of the transactions contemplated hereby have been duly authorized by
all necessary corporate action. This Agreement constitutes a valid and legally
binding obligation of Ramsay Hospitals, enforceable against Ramsay Hospitals 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 Ramsay Hospitals is a party or by which Ramsay Hospitals or
any of its assets is bound.
C. Investment in RHCI.
(i) Ramsay Hospitals understands that RHCI proposes to
issue and deliver to Ramsay Hospitals the Warrants 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 RHCI will rely
upon the representations and warranties of Ramsay Hospitals contained herein;
and that such non-compliance with registration is not permissible unless such
representations and warranties are correct.
(ii) Ramsay Hospitals understands that, under existing
rules of the Securities and Exchange Commission (the "SEC"), Ramsay Hospitals
may be unable to sell the Warrants or the underlying shares of Common Stock with
respect to which the Warrants are exercisable (the "RHCI Shares") except to the
extent that the Warrants or the RHCI Shares may be sold (i) pursuant to an
effective registration statement covering the Warrants or the RHCI Shares
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) Ramsay Hospitals is not relying on RHCI respecting
the financial, tax and other economic
<PAGE>
4
considerations of an investment in the Warrants and the Common Stock; Ramsay
Hospitals has relied on the advice of, or has consulted with, only its own
advisors.
(iv) Ramsay Hospitals is familiar with the provisions of
Rule 144 and the limitations upon the availability and applicability of such
rule.
(v) Ramsay Hospitals is a sophisticated investor familiar
with the type of risks inherent in the acquisition of restricted securities such
as the Warrants and the RHCI Shares and its financial position is such that it
can afford to retain such securities for an indefinite period of time without
realizing any direct or indirect cash return on its investment.
(vi) Ramsay Hospitals has such knowledge and experience in
financial, tax and business matters so as to enable it to utilize the
information made available to it in connection with the issuance of the Warrants
and the RHCI Shares to Ramsay Hospitals and to evaluate the merits and risks of
an investment in the Warrants and the RHCI Shares and to make an informed
investment decision with respect thereto.
(vii) Ramsay Hospitals is acquiring the Warrants and the
RHCI Shares as an investment for its sole account, and without any present view
towards the sale or other distribution thereof.
(viii) Ramsay Hospitals is an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF PAUL J. RAMSAY
Ramsay hereby represents and warrants to each of RHCI and
Ramsay Hospitals, as of the date hereof, that:
A. Ramsay has good and valid title to the Options, free and
clear of all liens, charges, encumbrances, security interests or adverse claims
whatsoever and has the right to transfer the Options to RHCI, and upon the
transfer of the Options to RHCI hereunder, RHCI will acquire good and marketable
title to the Options, free and clear of any lien, encumbrance, charge, security
interest or claim whatsoever.
182915.2
1271-1370
<PAGE>
5
B. Ramsay has duly executed and delivered this Agreement,
and this Agreement constitutes a valid and legal binding obligation of Ramsay,
enforceable against him in accordance with its terms.
SECTION V
MISCELLANEOUS
A. Notices. All notices, requests or instructions
hereunder shall be in writing and delivered personally or sent by registered or
certified mail, postage prepaid, or sent via facsimile transmission as follows:
(1) if to RHCI:
Entergy Corporation Building
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
Attention: President
Telecopier: (504) 585-0505
Telephone: (504) 525-2505
(2) if to Ramsay Hospitals:
c/o Ramsay Health Care Pty. Limited
Suite 103
1st Floor, 156 Pacific Highway
Greenwich NSW 2065
Australia
Attention: Paul J. Ramsay
Telecopier: 011-61-2-906-5205
Telephone: 011-61-2-906-3444
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 of delivery,
if hand delivered, two days after the date of mailing, if mailed or on the day
of transmission, if sent via facsimile provided telephonic confirmation of
receipt is obtained promptly after completion of transmission.
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.
<PAGE>
6
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
RHCI, Ramsay Hospitals or Ramsay except pursuant to a writing executed by each
of the parties hereto; provided, however, that Ramsay Hospitals may assign this
Agreement and the Warrants to any corporation or other entity directly or
indirectly controlled by Ramsay.
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. Each of the parties hereto shall bear such
party's own expenses in connection with this Agreement and the transactions
contemplated hereby.
G. Headings; Gender. The headings of this Agreement are
for convenience of reference only and are not part of the substance of this
Agreement. In this Agreement references to a particular gender shall include the
other genders as the context requires.
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.
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.
* * *
<PAGE>
7
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
RAMSAY HEALTH CARE, INC.
By:________________________________
Name: Remberto Cibran
Title: President
PAUL RAMSAY HOSPITALS PTY. LIMITED
By:________________________________
Name: Peter J. Evans
Title: Director
-----------------------------------
Paul J. Ramsay
<PAGE>
8
EXHIBIT A
THIS WARRANT CERTIFICATE AND THE WARRANTS EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT")
BUT HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL
EITHER (i) THE HOLDER THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY (AS HEREINAFTER DEFINED) THAT
REGISTRATION THEREOF UNDER THE SECURITIES ACT IS NOT REQUIRED OR (ii) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT THERETO SHALL HAVE
BECOME EFFECTIVE.
THIS WARRANT CERTIFICATE IS ISSUED PURSUANT TO AND IS SUBJECT TO THE TERMS AND
CONDITIONS OF AN EXCHANGE AGREEMENT (THE "EXCHANGE AGREEMENT") DATED SEPTEMBER
10, 1996 BY AND AMONG RAMSAY HEALTH CARE, INC., PAUL RAMSAY HOSPITALS, PTY.
LIMITED AND PAUL J. RAMSAY (A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY) AND IS ENTITLED TO THE BENEFITS THEREOF.
500,000 Warrants
WARRANT CERTIFICATE
To Subscribe for and Purchase shares of Common Stock, par
value $.01, of
RAMSAY HEALTH CARE, INC.
THIS CERTIFIES that, for value received, Paul Ramsay
Hospitals, Pty. Limited, an Australian corporation, or its registered successors
and assigns, is the owner of the number of warrants (the "Warrants") set forth
above, each of which entitles the owner thereof to purchase from Ramsay Health
Care, Inc., a Delaware corporation (herein called the "Company"), one share of
Common Stock, par value $.01, of the Company (individually, a "Common Share" and
collectively, the "Common Shares"), at an initial exercise price of $2.75 per
share, subject to adjustment from time to time pursuant to the provisions of
paragraph 2. The Warrants evidenced hereby may be exercised by the registered
holder hereof at any time during the period from December 31, 2002 through 5:00
P.M. New York City Time on June 30, 2003; provided, however, that
notwithstanding the foregoing, such Warrants may be exercised at any time after
the date hereof, if at the time of such exercise, the Market Price (as defined
in Section 2(a)(H) hereof, but calculated without giving effect to the last
<PAGE>
9
clause of the first sentence of such definition) shall have equalled or exceeded
$7.00 (the "Acceleration Price") on at least fifteen (15) trading days, which
need not be consecutive, subsequent to the date hereof. For purposes of this
Warrant Certificate, the term "Common Shares" shall mean the class of capital
stock of the Company designated common stock, par value $.01, as constituted on
the date hereof, and any other class of capital stock of the Company resulting
from successive changes or reclassifications of the Common Shares.
1. Exercise of Warrants. Subject to the foregoing, the
Warrants evidenced hereby may be exercised by the registered holder hereof, in
whole or in part, by the surrender of this Warrant Certificate, duly endorsed
(unless endorsement is waived by the Company), at the principal office of the
Company (or at such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at such holder's last address
appearing on the books of the Company) and upon payment to the Company by
certified or official bank check or checks payable to the order of the Company
of the purchase price of the Common Shares purchased. The Company agrees that
the Common Shares so purchased shall be deemed to be issued to the registered
holder hereof on the date on which this Warrant Certificate shall have been
surrendered and payment made for such Common Shares as aforesaid; provided,
however, that no such surrender and payment on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
entitled to receive such Common Shares as the record holder thereof on such
date, but such surrender and payment shall be effective to constitute the person
entitled to receive such Common Shares as the record holder thereof for all
purposes immediately after the opening of business on the next succeeding day on
which such stock transfer books are open. The certificate(s) for such Common
Shares shall be delivered to the registered holder hereof within a reasonable
time, not exceeding five days, after the Warrants evidenced hereby shall have
been so exercised and a new Warrant Certificate evidencing the number of
Warrants, if any, remaining unexercised shall also be issued to the registered
holder within such time unless such Warrants shall have expired. No fractional
Common Shares of the Company, or scrips for any such fractional shares, shall be
issued upon the exercise of any Warrants.
2. Adjustment in Exercise Price and Number of Shares. The
initial exercise price of $2.75 per share shall be subject to adjustment from
time to time as hereinafter provided (such price, as last adjusted, being
hereinafter called the "Exercise Price"). Upon each adjustment of the Exercise
Price, the holder of this Warrant shall thereafter
<PAGE>
10
be entitled to purchase at the Exercise Price resulting from such adjustment,
the number of shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) Adjustment of Warrant Exercise Price upon Issue of Common
Shares. Except in the case of the issuance from time to time of Excluded Shares
(as defined below), if and whenever after the date hereof the Company shall
issue or sell any Common Shares for a consideration per share less than the
Exercise Price in effect immediately prior to the time of such issue or sale, or
the Company shall issue or sell any Common Shares for a consideration per share
less than the Market Price (as hereinafter defined) of the Common Shares at the
time of such issue or sale, then, forthwith upon such issue or sale, the
Exercise Price shall be reduced (but not increased, except as otherwise
specifically provided in Section 2(a)(C)) to the lower of the prices (calculated
to the nearest cent) determined as follows:
(x) by dividing (i) an amount equal to the sum of (A)
the aggregate number of Common Shares outstanding immediately
prior to such issue or sale multiplied by the then existing
Exercise Price, and (B) the consideration, if any, received by
the Company upon such issue or sale, by (ii) the aggregate
number of Common Shares outstanding immediately after such
issue or sale; and
(y) by multiplying the Exercise Price in effect
immediately prior to the time of such issue or sale by a
fraction, the numerator of which shall be the sum of (i) the
aggregate number of Common Shares outstanding immediately
prior to such issue or sale multiplied by the Market Price of
the Common Shares immediately prior to such issue or sale plus
(ii) the consideration received by the Company upon such issue
or sale, and the denominator of which shall be the product of
(iii) the aggregate number of Common Shares outstanding
immediately after such issue or sale, multiplied by (iv) the
Market Price of the Common Shares immediately prior to such
issue or sale.
No adjustment of the Exercise Price, however, shall be made in an amount less
than $.01 per share, but any such lesser adjustment shall be carried forward and
shall be made upon the earlier of (i) the third anniversary of the issuance or
<PAGE>
11
deemed issuance of the securities requiring such adjustment hereunder, and (ii)
the time of and together with the next subsequent adjustment.
For purposes hereof, the term "Excluded Shares" shall mean
Common Shares issued to employees, officers, directors or affiliates of, or
consultants to, the Company (or any of its subsidiaries, direct or indirect),
pursuant to any agreement, plan (including without limitation stock option plans
and stock purchase plans), arrangement or stock option heretofore or hereafter
approved by the Board of Directors of the Company, including without duplication
pursuant to options or warrants to purchase or rights to subscribe for such
Common Shares, securities which by their terms are convertible into or
exchangeable for such Common Shares, and options and warrants to purchase or
rights to subscribe for such convertible or exchangeable securities.
For purposes of this Section 2(a), the following paragraphs
(A) to (I), inclusive, shall be applicable:
(A) Issuance of Rights or Options. In case at any
time after the date hereof the Company shall in any manner
grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of Common Shares or any stock or
securities convertible into or exchangeable for Common Shares
(such convertible or exchangeable stock or securities being
herein called "Convertible Securities"), whether or not such
rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
price per share for which Common Shares are issuable upon the
exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the granting of such
rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon
the exercise of such rights or options, or plus, in the case
of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of Common Shares
issuable upon the exercise of such rights or options or
<PAGE>
12
upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect
immediately prior to the time of the granting of such rights
or options or less than the Market Price of the Common Shares
determined as of the date of granting such rights or options,
as the case may be, then the total maximum number of Common
Shares issuable upon the exercise of such rights or options or
upon conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options shall be
deemed to be outstanding as of the date of the granting of
such rights or options and to have been issued for such price
per share, with the effect on the Exercise Price specified in
Section 2(a). Except as provided in subparagraph (C), no
further adjustment of the Exercise Price shall be made upon
the actual issue of such Common Shares or of such Convertible
Securities upon exercise of such rights or options or upon the
actual issue of such Common Shares upon conversion or exchange
of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at
any time after the date hereof the Company shall in any manner
issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not
the right to exchange or convert thereunder is immediately
exercisable, and the price per share for which Common Shares
are issuable upon such conversion or exchange (determined by
dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (ii) the total maximum
number of Common Shares issuable upon the conversion or
exchange of all such Convertible Securities) shall be less
than the Exercise Price in effect immediately prior to the
time of such issue or sale, or less than the Market Price of
the Common Shares determined as of the date of such issue or
sale of such Convertible Securities, as the case may be, then
the total maximum number of Common Shares issuable upon
conversion or exchange of all such Convertible Securities
shall be deemed to be outstanding as of the date of the issue
<PAGE>
13
or sale of such Convertible Securities and to have been issued
for such price per share, with the effect on the Exercise
Price specified in Section 2(a); provided, however, that (a)
except as otherwise provided in subparagraph (C), no further
adjustment of the Exercise Price shall be made upon the actual
issue of such Common Shares upon conversion or exchange of
such Convertible Securities, and (b) if any such issue or sale
of such Convertible Securities is made upon exercise of any
rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments
of the Exercise Price have been or are to be made pursuant to
the provisions of subparagraph (A), no further adjustment of
the Exercise Price shall be made by reason of such issue or
sale.
(C) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the
purchase price provided for in any right or option referred to
in subparagraph (A), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in subparagraphs (A) or (B), or the
rate at which any Convertible Securities referred to in
subparagraphs (A) or (B) are convertible into or exchangeable
for Common Shares shall change (other than under or by reason
of provisions designed to protect against dilution), the
Exercise Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the
Exercise Price which would have been in effect at such time
had such rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may
be, at the time initially granted, issued or sold. On the
expiration of any such option or right referred to in
subparagraph (A), or the termination of any such right to
convert or exchange any such Convertible Securities referred
to in subparagraphs (A) or (B), the Exercise Price then in
effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Exercise Price which
would have been in effect at the time of such expiration or
termination had such right, option or Convertible Securities,
to the extent outstanding immediately prior to such expiration
<PAGE>
14
or termination, never been granted, issued or sold, and the
Common Shares issuable thereunder shall no longer be deemed to
be outstanding. If the purchase price provided for in any such
right or option referred to in subparagraph (A) or the rate at
which any Convertible Securities referred to in subparagraphs
(A) or (B) are convertible into or exchangeable for Common
Shares shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect against
dilution, then in case of the delivery of Common Shares upon
the exercise of any such right or option or upon conversion or
exchange of any such Convertible Securities, the Exercise
Price then in effect hereunder shall, if not already adjusted,
forthwith be adjusted to such amount as would have obtained
had such right, option or Convertible Securities never been
issued as to such Common Shares and had adjustments been made
upon the issuance of the Common Shares delivered as aforesaid,
but only if as a result of such adjustment the Exercise Price
then in effect hereunder is thereby reduced.
(D) Stock Dividends. In case at any time the Company
shall declare a dividend or make any other distribution upon
any class or series of stock of the Company payable in Common
Shares or Convertible Securities, any Common Shares or
Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration with the effect
on the Exercise Price specified in Section 2(a).
(E) Consideration for Stock. In case at any time
Common Shares or Convertible Securities or any rights or
options to purchase any such Common Shares or Convertible
Securities shall be issued or sold for cash, the consideration
therefor shall be deemed to be the amount received by the
Company therefor, after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid
or allowed by the Company in connection therewith. In case at
any time any Common Shares, Convertible Securities or any
rights or options to purchase any such Common Shares or
Convertible Securities shall be issued or sold for
consideration other than cash, the amount of the consideration
other than cash received by the Company shall be deemed to be
<PAGE>
15
the fair value of such consideration, as determined reasonably
and in good faith by the Board of Directors of the Company,
after deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case at any time any Common Shares,
Convertible Securities or any rights or options to purchase
any Common Shares or Convertible Securities shall be issued in
connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair
value, as determined reasonably and in good faith by the Board
of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of
Directors may determine to be attributable to such Common
Shares, Convertible Securities, rights or options, as the case
may be. In case at any time any rights or options to purchase
any shares of Common Stock or Convertible Securities shall be
issued in connection with the issue and sale of other
securities of the Company, together comprising one integral
transaction in which no consideration is allocated to such
rights or options by the parties thereto, such rights or
options shall be deemed to have been issued without
consideration. In the event of any consolidation or merger of
the Company in which stock or securities of another
corporation or other entity are issued in exchange for Common
Stock of the Company or in the event of any sale of all or
substantially all of the assets of the Company for stock or
other securities of any corporation or other entity, the
Company shall be deemed to have issued a number of shares of
its Common Stock for stock or securities of the other
corporation or other entity computed on the basis of the
actual exchange ratio on which the transaction was predicated
and for a consideration equal to the fair market value on the
date of such transaction of such stock or securities of the
other corporation or other entity, and if any such calculation
results in the adjustment of the Exercise Price, the
determination of the number of shares of Common Stock
receivable upon exercise of this Warrant Certificate
immediately prior to such merger, consolidation or sale, for
purposes of Section 2(c), shall be made after giving effect to
such adjustment of the Exercise Price.
<PAGE>
16
(F) Record Date. In case the Company shall take a
record of the holders of its Common Shares for the purpose of
entitling them (i) to receive a dividend or other distribution
payable in Common Shares or Convertible Securities, or (ii) to
subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares or Convertible
Securities deemed to have been issued or sold as a result of
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(G) Treasury Shares. The number of Common Shares
outstanding at any given time shall not include shares owned
or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or
sale of Common Shares for the purposes of Section 2(a).
(H) Definition of Market Price. The term "Market
Price" shall mean, for any day, the last sale price for the
Common Shares on the principal securities exchange on which
the Common Shares are listed or admitted to trading, or, if
not so listed or admitted to trading on any securities
exchange, the last sale price for the Common Shares on the
National Association of Securities Dealers National Market
System, or, if the Common Shares shall not be listed on such
system, the NASDAQ Small Cap Market, or, if the Common Shares
shall not be listed on such market, the average of the closing
bid and asked prices in the over-the-counter market, in each
such case, unless otherwise provided herein (including in the
second sentence of this Warrant Certificate), averaged over a
period of 20 consecutive business days prior to the day as of
which the Market Price is being determined. If at any time the
Common Shares are not listed on any such exchange, such system
or such market or quoted in the over-the-counter market, the
Market Price of the Common Shares shall be deemed to be the
higher of (i) the book value thereof, as determined in
accordance with generally accepted accounting principles
consistent with those then being applied by the Company, by
any firm of independent certified public accountants (which
may be the regular auditors of the Company) of recognized
<PAGE>
17
national standing selected by the Board of Directors of the
Company, as of the last day of the month ending within 31 days
preceding the date as of which the determination is to be
made, and (ii) the fair value thereof, as determined in good
faith by an independent brokerage firm, Standard & Poor's
Corporation or Moody's Investors Service, as of a date which
is within 15 days preceding the date as of which the
determination is to be made.
(I) Certain Acquisitions. Anything herein to the
contrary notwithstanding, in case at any time after the date
hereof the Company shall issue any Common Shares or
Convertible Securities, or any rights or options to purchase
any Common Shares or Convertible Securities, in connection
with the acquisition by the Company of the stock or assets of
any other corporation or other entity or the merger of any
other corporation or other entity with and into the Company
under circumstances where on the date of the issuance of such
Common Shares or Convertible Securities, or such rights or
options, the consideration received for such Common Shares or
deemed to have been received for the Common Shares into which
such Convertible Securities are convertible or for which such
rights or options are exercisable is less than the Market
Price of the Common Shares, but on the date the number of
Common Shares or Convertible Securities, or in the case of
Convertible Securities other than stock, the aggregate
principal amount of Convertible Securities, or the number of
such rights or options was determined (as set forth in a
binding agreement between the Company and the other party to
the transaction) the consideration received for such Common
Shares or deemed to have been received for the Common Shares
into which such Convertible Securities are convertible or for
which such rights or options are exercisable would not have
been less than the Market Price of the Common Shares, such
Common Shares shall not be deemed to have been issued for less
than the Market Price of the Common Shares.
(b) Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding Common Shares into a greater number
of shares, each of the Exercise Price and the Acceleration Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
<PAGE>
18
conversely, in case the outstanding Common Shares of the Company shall be
combined into a smaller number of shares, each of the Exercise Price and the
Acceleration Price in effect immediately prior to such combination shall be
proportionately increased.
(c) Reorganization, Reclassification, Consolidation, Merger.
If any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation or
other entity, or sale, transfer or other disposition of all or substantially all
of the Company's properties to another corporation or other entity shall be
effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each holder of Warrants shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions herein specified and in lieu of the Common Shares immediately
theretofore issuable upon exercise of the Warrants, such shares of stock,
securities or properties as may be issuable or payable with respect to or in
exchange for a number of outstanding Common Shares equal to the number of Common
Shares immediately theretofore issuable upon exercise of the Warrants, had such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and in any such case appropriate provision shall be
made with respect to the rights and interests of each holder of Warrants to the
end that the provisions hereof (including, without limitation, provision for
adjustment of the Exercise Price and the Acceleration Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or properties thereafter deliverable upon the exercise
thereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition, unless prior to or simultaneously with the
consummation thereof the successor corporation or other entity, if other than
the Company, resulting from such consolidation or merger, or the corporation or
other entity purchasing or otherwise acquiring such properties shall assume, by
written instrument executed and mailed or delivered to the holders of Warrants
at the last address of such holders appearing on the books of the Company, the
obligation to deliver to such holders such shares of stock, securities or
properties, in accordance with the foregoing provisions, as such holders may be
entitled to acquire. The above provisions of this subparagraph 2(c) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers, or other dispositions.
<PAGE>
19
(d) Liquidating Dividends. In case at any time the Company
shall distribute pro rata to all holders of its Common Shares evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of retained earnings or retained surplus) then, forthwith upon such
distribution, the Exercise Price shall be reduced by the fair market value of
the evidences of indebtedness or assets so distributed applicable to one Common
Share (as conclusively determined by an investment banking firm designated by a
majority in interest of the holders of Warrants; it being understood that the
fees of such investment banking firm shall be borne by the Company).
(e) Notice of Determination. Except as otherwise provided
herein, upon any adjustment of the Exercise Price, then and in each such case
the Company shall promptly obtain the certification of a firm of independent
certified public accountants (which may be the regular auditors of the Company)
of recognized national standing selected by the Company's Board of Directors,
which certification shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of Common Shares
issuable upon exercise of the Warrants held by each holder of Warrants, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company shall promptly mail a copy of such
accountants' certification to each holder of Warrants.
(f) Intent of Provisions. If any event occurs as to which, in
the opinion of the Board of Directors of the Company, the other provisions of
this Section 2 are not strictly applicable or if strictly applicable, would not
fairly protect the rights of the holders of the Warrants in accordance with the
essential intent and principles of such provisions, then such Board of Directors
shall appoint a firm of independent certified public accountants (which may be
the regular auditors of the Company) of recognized national standing, which
shall give their opinion upon the adjustment, if any, on a basis consistent with
such essential intent and principles, necessary to preserve, without dilution,
the rights of the holders of Warrants. Upon receipt of such opinion by the Board
of Directors of the Company, the Company shall forthwith make the adjustments
described therein; provided, however, that no such adjustment pursuant to this
Section 2(f) shall have the effect of increasing the Exercise Price as otherwise
determined pursuant to the other provisions of this Section 2 except in the
event of a combination of shares of the type contemplated in Section 2(b) and
then in no event to an
<PAGE>
20
amount larger than the Exercise Price as adjusted pursuant to Section 2(b).
3. Other Notices. If at any time prior to the expiration of
the Warrants evidenced hereby:
(a) The Company shall declare any dividend on the Common
Shares payable in shares of capital stock of the Company, cash
or other property; or
(b) The Company shall authorize the issue of any options,
warrants or rights pro rata to all holders of Common Shares
entitling them to subscribe for or purchase any shares of
stock of the Company or to receive any other rights; or
(c) The Company shall authorize the distribution pro rata to
all holders of Common Shares of evidences of its indebtedness
or assets (excluding cash dividends or cash distributions paid
out of retained earnings or retained surplus); or
(d) There shall occur any reclassification of the Common
Shares, or any consolidation or merger of the Company with or
into another corporation or other entity (other than a
consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification
of the Common Shares) or a sale or transfer to another
corporation or other entity of all or substantially all of the
properties of the Company; or
(e) There shall occur the voluntary or involun tary
liquidation, dissolution or winding up of the affairs of the
Company;
then, and in each of such cases, the Company shall deliver to the registered
holder hereof at its last address appearing on the books of the Company, as
promptly as practicable but in any event at least 15 days prior to the
applicable record date (or determination date) mentioned below, a notice
stating, to the extent such information is available, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holders of Common
Shares of record to be entitled to such dividend, distribution or rights are to
be determined, or (ii) the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution or winding up is expected to
become effective and the date as of which
<PAGE>
21
it is expected that holders of Common Shares of record shall be entitled to
exchange their Common Shares for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up.
4. Representations and Warranties of the Company. The Company
represents and warrants to and covenants with the registered holder hereof as
follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified and in good standing under the laws of any foreign jurisdiction where
the failure to be so qualified would have a material adverse effect on its
ability to perform its obligations under the Warrants evidenced by this Warrant
Certificate and it has full corporate power and authority to issue the Warrants
and to carry out the provisions of the Warrants evidenced by this Warrant
Certificate.
(b) The issuance, execution and delivery of this Warrant
Certificate has been duly authorized by all necessary corporate action on the
part of the Company and each of the Warrants evidenced by this Warrant
Certificate constitutes the valid and legally binding obligation of the Company,
enforceable against it in accordance with the terms hereof, except as such
enforceability may be limited by bankruptcy, insolvency or other laws affecting
generally the enforceability of creditors' rights, by general principles of
equity and by limitations on the availability of equitable remedies.
(c) Neither the execution and delivery of the Warrants
evidenced by this Warrant Certificate by the Company, nor compliance by the
Company with the provisions hereof, violates any provision of its Certificate of
Incorporation or By-Laws, as amended, or any law, statute, ordinance,
regulation, order, judgment or decree of any court or governmental agency, or
conflicts with or will result in any breach of the terms of or constitute a
default under or result in the termination of or the creation of any lien
pursuant to the terms of any agreement or instrument to which the Company is a
party or by which it or any of its properties is bound.
5. Company to Provide Stock. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable and free from all
<PAGE>
22
taxes, liens and charges with respect to the issue thereof to the registered
holder hereof. The Company further covenants and agrees that during the period
within which the Warrants evidenced hereby may be exercised, the Company will at
all times reserve such number of shares of its capital stock as may be
sufficient to permit the exercise in full of the Warrants evidenced hereby.
6. Registered Holder. The registered holder of this Warrant
Certificate shall be deemed the owner hereof and of the Warrants evidenced
hereby for all purposes. The registered holder of this Warrant Certificate shall
not be entitled by virtue of ownership of this Warrant Certificate to any rights
whatsoever as a shareholder of the Company.
7. Transfer. This Warrant Certificate and the Warrants
evidenced hereby may be sold, transferred, pledged, hypothecated or otherwise
disposed of; provided that this Warrant Certificate and the Warrants evidenced
hereby may not be sold, transferred, pledged, hypothecated or otherwise disposed
of unless, in the opinion of counsel reasonably satisfactory to the Company,
such transfer would not result in a violation of the provisions of the
Securities Act. Any transfer of this Warrant Certificate and the Warrants
evidenced hereby, in whole or in part, shall be effected upon surrender of this
Warrant Certificate, duly endorsed (unless endorsement is waived by the
Company), at the principal office or agency of the Company referred to in
Section 1 hereof. If all of the Warrants evidenced hereby are being sold,
transferred, pledged, hypothecated or otherwise disposed of, the Company shall
issue a new Warrant Certificate registered in the name of the appropriate
transferee(s). If less than all of the Warrants evidenced hereby are being sold,
transferred, pledged, hypothecated or otherwise disposed of, the Company shall
issue new Warrant Certificates, in each case in the appropriate number of
Warrants, registered in the name of the registered holder hereof and the
transferee(s), as applicable. Any Common Shares of the Company issued upon any
exercise hereof may not be sold, transferred, pledged, hypothecated or otherwise
disposed of unless, in the opinion of counsel reasonably satisfactory to the
Company, such transfer would not result in a violation of the Securities Act.
Each taker and holder of this Warrant Certificate, the Warrants evidenced hereby
and any shares of capital stock of the Company issued upon exercise of any such
Warrants, by taking or holding the same, consents to and agrees to be bound by
the provisions of this Section 7.
* * *
<PAGE>
23
IN WITNESS WHEREOF, RAMSAY HEALTH CARE, INC. has caused this
Warrant Certificate to be signed by a duly authorized officer and this Warrant
Certificate to be dated September 10, 1996.
RAMSAY HEALTH CARE, INC.
By
Name: Remberto Cibran
Title: President
<PAGE>
24
FORM OF EXERCISE
(to be executed by the registered holder hereof)
The undersigned hereby exercises ____ Warrants to subscribe
for and purchase shares of common stock, par value $.01 ("Common Shares"), of
RAMSAY HEALTH CARE, INC. evidenced by the within Warrant Certificate and
herewith makes payment of the purchase price in full. Kindly issue certificates
for the Common Shares in accordance with the instructions given below. The
certificate for the unexercised balance of the Warrants evidenced by the within
Warrant Certificate, if any, will be registered in the name of the undersigned.
Dated:
Instructions for registration of shares
Name (please print)
Social Security or Other Identifying
Number:
Address:
_________________________________
Street
_________________________________
City, State and Zip Code
EXHIBIT 10.97
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of January 1, 1996 between
RAMSAY HEALTH CARE, INC., a Delaware corporation (the "Company"), and SUMMA
HEALTHCARE GROUP, INC., a Florida corporation (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Company desires to engage the Consultant to
provide certain advisory and consulting services with respect to the business of
the Company, and the Consultant is willing to provide such services on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto hereby agree as
follows:
1. Agreement. The Company hereby retains the Consultant, and
the Consultant hereby agrees, to render to the Company the consulting services
described in Section 3 on the terms and conditions set forth herein.
2. Term. The term of this Agreement shall commence as of
January 1, 1996 and shall continue in full force and effect until terminated
pursuant to Section 6 of this Agreement.
3. Consulting Services.
3.1 During the term of this Agreement, the Consultant shall
provide the Company with such advisory and consulting services as shall be
requested by the Chairman of the Company in connection with (a) strategic
planning, overall evaluation of the Company's facilities and services,
assistance in developing and targeting managed care agreements, general
evaluation of case management and quality assurance programs, and, with respect
to certain critical relationships of the Company, assisting with physician
interaction and liaising with other providers, and (b) business development and
investor relations.
3.2 The Consultant shall render its services hereunder through
its principal, Luis E. Lamela (the "Principal") and such other individuals as
shall be approved by the Company. The Consultant shall devote such time and
attention as shall be necessary and appropriate to the proper performance of the
Consultant's duties hereunder.
<PAGE>
2
3.3 The Consultant shall report to the Chairman of the
Company.
4. Compensation. In consideration of the services to be
provided by the Consultant hereunder and the other agreements and covenants of
the Consultant set forth herein, the Company shall pay the Consultant a
consulting fee of $10,000 per month with respect to the services described in
Section 3.1(a) and $2,500 per month with respect to the services described in
Section 3.1(b), in each case payable in advance on the first day of each month.
5. Expense Reimbursement. During the term of this Agreement,
the Company shall reimburse the Consultant for reasonable business expenses,
including but not limited to travel, telephone and telecopying expenses,
incurred by the Consultant in the performance of its duties hereunder. Such
reimbursement shall be made monthly, against invoice of the Consultant
accompanied by appropriate documentation of such expenses.
6. Termination.
6.1 The term of this Agreement shall terminate on December 31,
1996, unless extended in accordance with this Section 6.1. As of December 31,
1996, and as of December 31 of each subsequent year (each, an "Automatic Renewal
Date"), unless either party shall have given a notice of non-extension not less
than three (3) months prior to such Automatic Renewal Date, the term of this
Agreement shall be extended automatically for a period of one year to the
anniversary of the expiration date of the then-current term of this Agreement.
6.2 Either the Company or the Consultant may terminate this
Agreement, with or without reason, by written notice to the other, with an
effective date of not less than three (3) months' following the date such notice
is given. The effective date of any termination pursuant to this Section 6.2
shall not be prior to January 1, 1997.
6.3 Upon termination of this Agreement, the Company shall pay
to the Consultant any portion of the Compensation referred to in Section 4 of
this Agreement earned as of the effective date of such termination and not
theretofore paid, and shall reimburse the Consultant for expenses referred to in
Section 5 of this Agreement incurred through the date of such termination, and
the Company and the Consultant shall have no further rights or obligations under
this Agreement except as provided in Sections 7, 8 and 9 of this Agreement.
<PAGE>
3
7. Confidential Information.
7.1 The Consultant and the Principal shall, during the term of
this Agreement and at all times thereafter, treat as confidential and, except as
required in sthe performance of its and his duties under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation (other than an employee or professional advisor
of the Company), any confidential material (as hereinafter defined). The
Consultant and the Principal agree that all confidential material is the
exclusive property of the Company, and the Consultant and the Principal agree to
return such material to the Company promptly upon the termination of the
Consultant's services under this Agreement.
7.2 For purposes hereof, the term "confidential material"
shall mean all information in any way concerning the products, projects,
activities, business or affairs of the Company acquired by the Consultant or the
Principal in the course of providing services to 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 an
unauthorized disclosure by the Consultant or the Principal, (ii) was available
to the Consultant or the Principal on a non-confidential basis prior to its
consultancy with the Company or (iii) becomes available to the Consultant or the
Principal on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company.
8. Equitable Relief. In the event of a breach or threatened
breach by the Consultant or the Principal of any of the provisions of Section 7
of this Agreement, the Consultant hereby consents and agrees that the Company
shall be entitled to pre-judgment injunctive relief or similar equitable relief
restraining the Consultant or the Principal from committing or continuing any
such breach or threatened breach or granting specific performance of any act
required to be performed by the Consultant or the Principal 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.
9. Indemnification. The Company shall defend, indemnify and
save harmless the Consultant and the Principal against and from any and all
<PAGE>
4
loss, liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable attorneys' fees and disbursements, which may be
imposed upon or incurred by or asserted against the Consultant or the Principal
arising out of the performance by the Consultant of its duties hereunder (unless
due to the gross negligence or willful misconduct of the Consultant or the
Principal). In the event that any action or proceeding is commenced against the
Consultant or the Principal with respect to any matter for which the Consultant
or the Principal may be entitled to indemnification pursuant to this Section 10,
the Consultant shall give written notice thereof to the Company and the Company
shall have the right to defend such action or proceeding with counsel selected
by the Company and approved in writing by the Consultant.
10. Notices. All notices, certificates and other
communications hereunder shall be in writing and shall be given by personal
delivery, overnight courier, telex, telefax or other electronic means of
transmission or by certified or registered mail, postage prepaid, return receipt
requested, to the parties at the addresses set forth below, or to such other
address as a party shall designate to the other party in writing:
if to the Company:
Ramsay Health Care, Inc.
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana
Attention: Chairman
Telefax: (504) 585-0505
if to the Consultant:
Summa Healthcare Group, Inc.
75 Valencia Avenue
Suite 102
Coral Gables, Florida 33134
Attention: President
Telefax: (305) 567-1169
Notices, certificates and other communications shall be deemed given, in the
case of personal delivery, overnight courier, telex, telefax or other electronic
means of transmission, on the date of actual receipt by the party entitled
thereto and, in the case of mailing, on the third day following the date of
deposit in the mails.
11. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to
<PAGE>
5
the subject matter hereof and no amendment or modification hereof shall be valid
or binding unless made in writing and signed by the party against whom
enforcement thereof is sought.
12. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors,
heirs, executors, administrators, legal representatives and assigns.
13. Nonwaiver. No course of dealing nor any delay on the part
of the Company or the Consultant in exercising any rights hereunder shall
operate as a waiver of any such rights. No waiver of any default or breach of
this Agreement shall be deemed a continuing waiver or a waiver of any other
breach or default.
14. Independent Contractor. It is the intention of the parties
that the Consultant shall be retained by the Company pursuant to this Agreement,
and shall perform its duties hereunder, as an independent contractor. Nothing
herein shall be deemed to create a partnership, joint venture or employment
relationship between the Consultant and the Company.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
16. Retention of Records. Until the expiration of four (4)
years after the furnishing of services pursuant to this Agreement, the
Consultant shall upon written request make available to the Company, the
Secretary of the Department of Health and Human Services, the Comptroller
General of the United States, or any of their duly authorized representatives,
this Agreement and any books, documents, and records that are necessary to
verify the nature and extent of the costs. In addition, the Consultant agrees to
promptly notify the Company in the event any such request is made by the
Secretary of Health and Human Services or the Comptroller General of the United
States, or any of their duly authorized representatives, and to furnish the
Company with copies of any documents furnished to such persons.
* * *
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
RAMSAY HEALTH CARE, INC.
By
SUMMA HEALTHCARE GROUP, INC.
By
Luis E. Lamela
President
EXHIBIT 10.98
RAMSAY HEALTH CARE, INC.
Entergy Corporation Building
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
As of September 10, 1996
Ramsay Health Care Pty. Limited
Paul Ramsay Holdings Pty. Limited
154 Pacific Highway
Greenwich NSW 2065
Australia
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Management
Agreement (the "Management Agreement") dated as of June 25, 1992 by and among
Ramsay Health Care Pty. Limited ("Ramsay Health Care") and Ramsay Health Care,
Inc. ("RHCI").
The parties hereto hereby agree that the Management Agreement shall be
terminated, effective July 1, 1997 (the "Termination Date"), and in
consideration therefor, RHCI agrees to issue and convey the Warrants (as defined
below) on the date hereof to or at the direction of Ramsay Health Care. Ramsay
Health Care hereby directs RHCI to, RHCI does hereby, issue and convey to Paul
Ramsay Holdings Pty. Limited ("Ramsay Holdings"), and Ramsay Holdings hereby
acquires and accepts from RHCI on the date hereof, warrants (the "Warrants") to
purchase 250,000 shares of the common stock, $.01 par value, of RHCI at an
exercise price of $2.625 per share and otherwise on the terms and conditions set
forth in the warrant certificate attached as Exhibit A hereto.
Notwithstanding the foregoing, the parties hereto acknowledge and
agree that the Management Agreement shall remain in full force and effect from
the date hereof until the Termination Date.
<PAGE>
Ramsay Health Care Pty. Limited
Paul Ramsay Holdings Pty. Limited
As of September 10, 1996
Page 2
This Agreement may be executed in counterparts (including by
facsimile), each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our agreement, please so
indicate by signing in the space below.
RAMSAY HEALTH CARE, INC.
By:________________________________
Remberto Cibran
President
Agreed and Accepted:
RAMSAY HEALTH CARE PTY. LIMITED
By:_____________________________
Peter J. Evans
Director
PAUL RAMSAY HOLDINGS PTY. LIMITED
By:_____________________________
Peter J. Evans
Director
<PAGE>
EXHIBIT A
THIS WARRANT CERTIFICATE AND THE WARRANTS EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") BUT HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNTIL EITHER (i) THE HOLDER THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY (AS HEREINAFTER DEFINED) THAT
REGISTRATION THEREOF UNDER THE SECURITIES ACT IS NOT REQUIRED OR (ii) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT THERETO SHALL HAVE
BECOME EFFECTIVE.
250,000 Warrants
WARRANT CERTIFICATE
To Subscribe for and Purchase shares of Common Stock, par value $.01,
of
RAMSAY HEALTH CARE, INC.
THIS CERTIFIES that, for value received, Paul Ramsay Holdings Pty.
Limited, an Australian corporation, or its registered successors and assigns, is
the owner of the number of warrants (the "Warrants") set forth above, each of
which entitles the owner thereof to purchase from Ramsay Health Care, Inc., a
Delaware corporation (herein called the "Company"), at any time during the
period from the date hereof through 5:00 P.M., New York City Time on September
10, 2006, one share of Common Stock, par value $.01, of the Company
(individually, a "Common Share" and collectively, the "Common Shares"), at an
initial exercise price of $2.625 per share, subject to adjustment from time to
time pursuant to the provisions of paragraph 2. For purposes of this Warrant
Certificate, the term "Common Shares" shall mean the class of capital stock of
the Company designated common stock, par value $.01, as constituted on the date
hereof, and any other class of capital stock of the Company resulting from
successive changes or reclassifications of the Common Shares.
1. Exercise of Warrants. The Warrants evidenced hereby may be
exercised by the registered holder hereof, in whole or in part, by the surrender
of this Warrant Certificate, duly endorsed (unless endorsement is waived by the
Company), at the principal office of the Company (or at such other office or
agency of the Company as it may designate by notice in writing to the registered
holder hereof at such holder's last address appearing on the books of the
<PAGE>
2
Company) and upon payment to the Company by certified or official bank check or
checks payable to the order of the Company of the purchase price of the Common
Shares purchased. The Company agrees that the Common Shares so purchased shall
be deemed to be issued to the registered holder hereof on the date on which this
Warrant Certificate shall have been surrendered and payment made for such Common
Shares as aforesaid; provided, however, that no such surrender and payment on
any date when the stock transfer books of the Company shall be closed shall be
effective to constitute the person entitled to receive such Common Shares as the
record holder thereof on such date, but such surrender and payment shall be
effective to constitute the person entitled to receive such Common Shares as the
record holder thereof for all purposes immediately after the opening of business
on the next succeeding day on which such stock transfer books are open. The
certificate(s) for such Common Shares shall be delivered to the registered
holder hereof within a reasonable time, not exceeding five days, after the
Warrants evidenced hereby shall have been so exercised and a new Warrant
Certificate evidencing the number of Warrants, if any, remaining unexercised
shall also be issued to the registered holder within such time unless such
Warrants shall have expired. No fractional Common Shares of the Company, or
scrips for any such fractional shares, shall be issued upon the exercise of any
Warrants.
2. Adjustment in Exercise Price and Number of Shares. The initial
exercise price of $2.75 per share shall be subject to adjustment from time to
time as hereinafter provided (such price, as last adjusted, being hereinafter
called the "Exercise Price"). Upon each adjustment of the Exercise Price, the
holder of this Warrant shall thereafter be entitled to purchase at the Exercise
Price resulting from such adjustment, the number of shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) Adjustment of Warrant Exercise Price upon Issue of Common Shares.
Except in the case of the issuance from time to time of Excluded Shares (as
defined below), if and whenever after the date hereof the Company shall issue or
sell any Common Shares for a consideration per share less than the Exercise
Price in effect immediately prior to the time of such issue or sale, or the
Company shall issue or sell any Common Shares for a consideration per share less
than the Market Price (as hereinafter defined) of the Common Shares at the time
of such issue or sale, then, forthwith upon such issue or sale, the Exercise
Price shall be reduced (but not increased, except as otherwise specifically
<PAGE>
3
provided in Section 2(a)(C)) to the lower of the prices (calculated to the
nearest cent) determined as follows:
(x) by dividing (i) an amount equal to the sum of (A) the
aggregate number of Common Shares outstanding immediately prior to
such issue or sale multiplied by the then existing Exercise Price, and
(B) the consideration, if any, received by the Company upon such issue
or sale, by (ii) the aggregate number of Common Shares outstanding
immediately after such issue or sale; and
(y) by multiplying the Exercise Price in effect immediately prior
to the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the aggregate number of Common Shares
outstanding immediately prior to such issue or sale multiplied by the
Market Price of the Common Shares immediately prior to such issue or
sale plus (ii) the consideration received by the Company upon such
issue or sale, and the denominator of which shall be the product of
(iii) the aggregate number of Common Shares outstanding immediately
after such issue or sale, multiplied by (iv) the Market Price of the
Common Shares immediately prior to such issue or sale.
No adjustment of the Exercise Price, however, shall be made in an
amount less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made upon the earlier of (i) the third anniversary of the
issuance or deemed issuance of the securities requiring such adjustment
hereunder, and (ii) the time of and together with the next subsequent
adjustment.
For purposes hereof, the term "Excluded Shares" shall mean Common
Shares issued to employees, officers, directors or affiliates of, or consultants
to, the Company (or any of its subsidiaries, direct or indirect), pursuant to
any agreement, plan (including without limitation stock option plans and stock
purchase plans), arrangement or stock option heretofore or hereafter approved by
the Board of Directors of the Company, including without duplication pursuant to
options or warrants to purchase or rights to subscribe for such Common Shares,
securities which by their terms are convertible into or exchangeable for such
Common Shares, and options and warrants to purchase or rights to subscribe for
such convertible or exchangeable securities.
<PAGE>
4
For purposes of this Section 2(a), the following paragraphs (A) to
(I), inclusive, shall be applicable:
(A) Issuance of Rights or Options. In case at any time after
the date hereof the Company shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of
Common Shares or any stock or securities convertible into or
exchangeable for Common Shares (such convertible or exchangeable
stock or securities being herein called "Convertible
Securities"), whether or not such rights or options or the right
to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common
Shares are issuable upon the exercise of such rights or options
or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the granting of
such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
exercise of such rights or options, or plus, in the case of such
rights or options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and
upon the conversion or exchange thereof, by (ii) the total
maximum number of Common Shares issuable upon the exercise of
such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such
rights or options) shall be less than the Exercise Price in
effect immediately prior to the time of the granting of such
rights or options or less than the Market Price of the Common
Shares determined as of the date of granting such rights or
options, as the case may be, then the total maximum number of
Common Shares issuable upon the exercise of such rights or
options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options
shall be deemed to be outstanding as of the date of the granting
of such rights or options and to have been issued for such price
per share, with the effect on the Exercise Price specified in
Section 2(a). Except as provided in subparagraph (C), no further
adjustment of the Exercise Price shall be made upon the actual
issue of such Common Shares or of such Convertible Securities
upon exercise of such
<PAGE>
5
rights or options or upon the actual issue of such Common Shares
upon conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. In case at any time
after the date hereof the Company shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the right to
exchange or convert thereunder is immediately exercisable, and
the price per share for which Common Shares are issuable upon
such conversion or exchange (determined by dividing (i) the total
amount, if any, received or receivable by the Company as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of Common
Shares issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Exercise Price in
effect immediately prior to the time of such issue or sale, or
less than the Market Price of the Common Shares determined as of
the date of such issue or sale of such Convertible Securities, as
the case may be, then the total maximum number of Common Shares
issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to be outstanding as of the date of
the issue or sale of such Convertible Securities and to have been
issued for such price per share, with the effect on the Exercise
Price specified in Section 2(a); provided, however, that (a)
except as otherwise provided in subparagraph (C), no further
adjustment of the Exercise Price shall be made upon the actual
issue of such Common Shares upon conversion or exchange of such
Convertible Securities, and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to
subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Exercise
Price have been or are to be made pursuant to the provisions of
subparagraph (A), no further adjustment of the Exercise Price
shall be made by reason of such issue or sale.
(C) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase
price provided for in any right or option referred to in
subparagraph (A), the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities
<PAGE>
6
referred to in subparagraphs (A) or (B), or the rateat which any
Convertible Securities referred to in subparagraphs (A) or (B)
are convertible into or exchangeable for Common Shares shall
change (other than under or by reason of provisions designed to
protect against dilution), the Exercise Price then in effect
hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Exercise Price which would have been
in effect at such time had such rights, options or Convertible
Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. On the
expiration of any such option or right referred to in
subparagraph (A), or the termination of any such right to convert
or exchange any such Convertible Securities referred to in
subparagraphs (A) or (B), the Exercise Price then in effect
hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Exercise Price which would have been
in effect at the time of such expiration or termination had such
right, option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination,
never been granted, issued or sold, and the Common Shares
issuable thereunder shall no longer be deemed to be outstanding.
If the purchase price provided for in any such right or option
referred to in subparagraph (A) or the rate at which any
Convertible Securities referred to in subparagraphs (A) or (B)
are convertible into or exchangeable for Common Shares shall be
reduced at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then in case of the
delivery of Common Shares upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall, if
not already adjusted, forthwith be adjusted to such amount as
would have obtained had such right, option or Convertible
Securities never been issued as to such Common Shares and had
adjustments been made upon the issuance of the Common Shares
delivered as aforesaid, but only if as a result of such
adjustment the Exercise Price then in effect hereunder is thereby
reduced.
(D) Stock Dividends. In case at any time the Company shall
declare a dividend or make any other distribution upon any class
<PAGE>
7
or series of stock of the Company payable in Common Shares or
Convertible Securities, any Common Shares or Convertible
Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or
sold without consideration with the effect on the Exercise Price
specified in Section 2(a).
(E) Consideration for Stock. In case at any time Common
Shares or Convertible Securities or any rights or options to
purchase any such Common Shares or Convertible Securities shall
be issued or sold for cash, the consideration therefor shall be
deemed to be the amount received by the Company therefor, after
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case at any time any Common Shares,
Convertible Securities or any rights or options to purchase any
such Common Shares or Convertible Securities shall be issued or
sold for consideration other than cash, the amount of the
consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration, as determined
reasonably and in good faith by the Board of Directors of the
Company, after deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case at any time any Common
Shares, Convertible Securities or any rights or options to
purchase any Common Shares or Convertible Securities shall be
issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair
value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of
Directors may determine to be attributable to such Common Shares,
Convertible Securities, rights or options, as the case may be. In
case at any time any rights or options to purchase any shares of
Common Stock or Convertible Securities shall be issued in
connection with the issue and sale of other securities of the
Company, together comprising one integral transaction in which no
consideration is allocated to such rights or options by the
parties thereto, such rights or options shall be deemed to have
been issued without consideration. In the event of any
consolidation or merger of the Company in which stock or
<PAGE>
8
securities of another corporation or other entity are issued in
exchange for Common Stock of the Company or in the event of any
sale of all or substantially all of the assets of the Company for
stock or other securities of any corporation or other entity, the
Company shall be deemed to have issued a number of shares of its
Common Stock for stock or securities of the other corporation or
other entity computed on the basis of the actual exchange ratio
on which the transaction was predicated and for a consideration
equal to the fair market value on the date of such transaction of
such stock or securities of the other corporation or other
entity, and if any such calculation results in the adjustment of
the Exercise Price, the determination of the number of shares of
Common Stock receivable upon exercise of this Warrant Certificate
immediately prior to such merger, consolidation or sale, for
purposes of Section 2(c), shall be made after giving effect to
such adjustment of the Exercise Price.
(F) Record Date. In case the Company shall take a record of
the holders of its Common Shares for the purpose of entitling
them (i) to receive a dividend or other distribution payable in
Common Shares or Convertible Securities, or (ii) to subscribe for
or purchase Common Shares or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale
of the Common Shares or Convertible Securities deemed to have
been issued or sold as a result of the declaration of such
dividend or the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the
case may be.
(G) Treasury Shares. The number of Common Shares outstanding
at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Shares for
the purposes of Section 2(a).
(H) Definition of Market Price. The term "Market Price"
shall mean, for any day, the last sale price for the Common
Shares on the principal securities exchange on which the Common
Shares are listed or admitted to trading, or, if not so listed or
admitted to trading on any securities exchange, the last sale
price for the Common Shares on the National Association of
Securities Dealers National Market System, or, if the Common
Shares shall not be listed on such system, the NASDAQ Small Cap
Market, or, if the Common Shares shall not be listed
<PAGE>
9
on such market, the average of the closing bid and asked prices
in the over-the-counter market, in each such case, unless
otherwise provided herein, averaged over a period of 20
consecutive business days prior to the day as of which the Market
Price is being determined. If at any time the Common Shares are
not listed on any such exchange, such system or such market or
quoted in the over-the-counter market, the Market Price of the
Common Shares shall be deemed to be the higher of (i) the book
value thereof, as determined in accordance with generally
accepted accounting principles consistent with those then being
applied by the Company, by any firm of independent certified
public accountants (which may be the regular auditors of the
Company) of recognized national standing selected by the Board of
Directors of the Company, as of the last day of the month ending
within 31 days preceding the date as of which the determination
is to be made, and (ii) the fair value thereof, as determined in
good faith by an independent brokerage firm, Standard & Poor's
Corporation or Moody's Investors Service, as of a date which is
within 15 days preceding the date as of which the determination
is to be made.
(I) Certain Acquisitions. Anything herein to the contrary
notwithstanding, in case at any time after the date hereof the
Company shall issue any Common Shares or Convertible Securities,
or any rights or options to purchase any Common Shares or
Convertible Securities, in connection with the acquisition by the
Company of the stock or assets of any other corporation or other
entity or the merger of any other corporation or other entity
with and into the Company under circumstances where on the date
of the issuance of such Common Shares or Convertible Securities,
or such rights or options, the consideration received for such
Common Shares or deemed to have been received for the Common
Shares into which such Convertible Securities are convertible or
for which such rights or options are exercisable is less than the
Market Price of the Common Shares, but on the date the number of
Common Shares or Convertible Securities, or in the case of
Convertible Securities other than stock, the aggregate principal
amount of Convertible Securities, or the number of such rights or
options was determined (as set forth in a binding agreement
between the Company and the other party to the transaction) the
consideration received for such Common Shares or deemed to have
been received for the Common Shares into which such Convertible
<PAGE>
10
Securities are convertible or for which such rights or options
are exercisable would not have been less than the Market Price of
the Common Shares, such Common Shares shall not be deemed to have
been issued for less than the Market Price of the Common Shares.
(b) Subdivision or Combination of Stock. In case the Company shall at
any time subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced, and conversely, in case the outstanding Common
Shares of the Company shall be combined into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased.
(c) Reorganization, Reclassification, Consolidation, Merger. If any
capital reorganization, reclassification of the capital stock of the Company,
consolidation or merger of the Company with another corporation or other entity,
or sale, transfer or other disposition of all or substantially all of the
Company's properties to another corporation or other entity shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition, lawful and adequate provision shall
be made whereby each holder of Warrants shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions herein
specified and in lieu of the Common Shares immediately theretofore issuable upon
exercise of the Warrants, such shares of stock, securities or properties as may
be issuable or payable with respect to or in exchange for a number of
outstanding Common Shares equal to the number of Common Shares immediately
theretofore issuable upon exercise of the Warrants, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of each holder of Warrants to the end that
the provisions hereof (including, without limitation, provision for adjustment
of the Exercise Price) shall thereafter be applicable, as nearly equivalent as
may be practicable in relation to any shares of stock, securities or properties
thereafter deliverable upon the exercise thereof. The Company shall not effect
any such consolidation, merger, sale, transfer or other disposition, unless
prior to or simultaneously with the consummation thereof the successor
corporation or other entity, if other than the Company, resulting from such
consolidation or merger, or the corporation or other entity purchasing or
otherwise acquiring such properties shall assume, by written instrument executed
and mailed or delivered to the holders of Warrants at the last address of such
holders appearing on the books of the Company, the obligation to deliver to such
<PAGE>
11
holders such shares of stock, securities or properties, in accordance with the
foregoing provisions, as such holders may be entitled to acquire. The above
provisions of this subparagraph 2(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers,
or other dispositions.
(d) Liquidating Dividends. In case at any time the Company shall
distribute pro rata to all holders of its Common Shares evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of retained earnings or retained surplus) then, forthwith upon such
distribution, the Exercise Price shall be reduced by the fair market value of
the evidences of indebtedness or assets so distributed applicable to one Common
Share (as conclusively determined by an investment banking firm designated by a
majority in interest of the holders of Warrants; it being understood that the
fees of such investment banking firm shall be borne by the Company).
(e) Notice of Determination. Except as otherwise provided herein, upon
any adjustment of the Exercise Price, then and in each such case the Company
shall promptly obtain the certification of a firm of independent certified
public accountants (which may be the regular auditors of the Company) of
recognized national standing selected by the Company's Board of Directors, which
certification shall state the Exercise Price resulting from such adjustment and
the increase or decrease, if any, in the number of Common Shares issuable upon
exercise of the Warrants held by each holder of Warrants, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company shall promptly mail a copy of such
accountants' certification to each holder of Warrants.
(f) Intent of Provisions. If any event occurs as to which, in the
opinion of the Board of Directors of the Company, the other provisions of this
Section 2 are not strictly applicable or if strictly applicable, would not
fairly protect the rights of the holders of the Warrants in accordance with the
essential intent and principles of such provisions, then such Board of Directors
shall appoint a firm of independent certified public accountants (which may be
the regular auditors of the Company) of recognized national standing, which
shall give their opinion upon the adjustment, if any, on a basis consistent with
such essential intent and principles, necessary to preserve, without dilution,
the rights of the holders of Warrants. Upon receipt of such opinion by the Board
of Directors of the Company, the Company shall forthwith make the adjustments
described therein; provided, however, that no such adjustment pursuant to this
<PAGE>
12
Section 2(f) shall have the effect of increasing the Exercise Price as otherwise
determined pursuant to the other provisions of this Section 2 except in the
event of a combination of shares of the type contemplated in Section 2(b) and
then in no event to an amount larger than the Exercise Price as adjusted
pursuant to Section 2(b).
3. Other Notices. If at any time prior to the expiration of the
Warrants evidenced hereby:
(a) The Company shall declare any dividend on the Common Shares
payable in shares of capital stock of the Company, cash or other
property; or
(b) The Company shall authorize the issue of any options,
warrants or rights pro rata to all holders of Common Shares entitling
them to subscribe for or purchase any shares of stock of the Company
or to receive any other rights; or
(c) The Company shall authorize the distribution pro rata to all
holders of Common Shares of evidences of its indebtedness or assets
(excluding cash dividends or cash distributions paid out of retained
earnings or retained surplus); or
(d) There shall occur any reclassification of the Common Shares,
or any consolidation or merger of the Company with or into another
corporation or other entity (other than a consolidation or merger in
which the Company is the continuing corporation and which does not
result in any reclassification of the Common Shares) or a sale or
transfer to another corporation or other entity of all or
substantially all of the properties of the Company; or
(e) There shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company;
then, and in each of such cases, the Company shall deliver to the registered
holder hereof at its last address appearing on the books of the Company, as
promptly as practicable but in any event at least 15 days prior to the
applicable record date (or determination date) mentioned below, a notice
stating, to the extent such information is available, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holders of Common
Shares of record to be entitled to such dividend, distribution or rights are to
be determined, or (ii) the date on which such reclassification, consolidation,
<PAGE>
13
merger, sale, transfer, liquidation, dissolution or winding up is expected to
become effective and the date as of which it is expected that holders of Common
Shares of record shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up.
4. Representations and Warranties of the Company. The Company
represents and warrants to and covenants with the registered holder hereof as
follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, is duly qualified
and in good standing under the laws of any foreign jurisdiction where the
failure to be so qualified would have a material adverse effect on its ability
to perform its obligations under the Warrants evidenced by this Warrant
Certificate and it has full corporate power and authority to issue the Warrants
and to carry out the provisions of the Warrants evidenced by this Warrant
Certificate.
(b) The issuance, execution and delivery of this Warrant
Certificate has been duly authorized by all necessary corporate action on the
part of the Company and each of the Warrants evidenced by this Warrant
Certificate constitutes the valid and legally binding obligation of the Company,
enforceable against it in accordance with the terms hereof, except as such
enforceability may be limited by bankruptcy, insolvency or other laws affecting
generally the enforceability of creditors' rights, by general principles of
equity and by limitations on the availability of equitable remedies.
(c) Neither the execution and delivery of the Warrants evidenced
by this Warrant Certificate by the Company, nor compliance by the Company with
the provisions hereof, violates any provision of its Certificate of
Incorporation or By-Laws, as amended, or any law, statute, ordinance,
regulation, order, judgment or decree of any court or governmental agency, or
conflicts with or will result in any breach of the terms of or constitute a
default under or result in the termination of or the creation of any lien
pursuant to the terms of any agreement or instrument to which the Company is a
party or by which it or any of its properties is bound.
5. Company to Provide Stock. The Company covenants and agrees that all
shares of capital stock of the Company which may be issued upon the exercise of
the Warrants evidenced hereby will be duly authorized, validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with respect
<PAGE>
14
to the issue thereof to the registered holder hereof. The Company further
covenants and agrees that during the period within which the Warrants evidenced
hereby may be exercised, the Company will at all times reserve such number of
shares of its capital stock as may be sufficient to permit the exercise in full
of the Warrants evidenced hereby.
6. Registered Holder. The registered holder of this Warrant
Certificate shall be deemed the owner hereof and of the Warrants evidenced
hereby for all purposes. The registered holder of this Warrant Certificate shall
not be entitled by virtue of ownership of this Warrant Certificate to any rights
whatsoever as a shareholder of the Company.
7. Transfer. This Warrant Certificate and the Warrants evidenced
hereby may be sold, transferred, pledged, hypothecated or otherwise disposed of;
provided that this Warrant Certificate and the Warrants evidenced hereby may not
be sold, transferred, pledged, hypothecated or otherwise disposed of unless, in
the opinion of counsel reasonably satisfactory to the Company, such transfer
would not result in a violation of the provisions of the Securities Act. Any
transfer of this Warrant Certificate and the Warrants evidenced hereby, in whole
or in part, shall be effected upon surrender of this Warrant Certificate, duly
endorsed (unless endorsement is waived by the Company), at the principal office
or agency of the Company referred to in Section 1 hereof. If all of the Warrants
evidenced hereby are being sold, transferred, pledged, hypothecated or otherwise
disposed of, the Company shall issue a new Warrant Certificate registered in the
name of the appropriate transferee(s). If less than all of the Warrants
evidenced hereby are being sold, transferred, pledged, hypothecated or otherwise
disposed of, the Company shall issue new Warrant Certificates, in each case in
the appropriate number of Warrants, registered in the name of the registered
holder hereof and the transferee(s), as applicable. Any Common Shares of the
Company issued upon any exercise hereof may not be sold, transferred, pledged,
hypothecated or otherwise disposed of unless, in the opinion of counsel
reasonably satisfactory to the Company, such transfer would not result in a
violation of the Securities Act. Each taker and holder of this Warrant
Certificate, the Warrants evidenced hereby and any shares of capital stock of
the Company issued upon exercise of any such Warrants, by taking or holding the
same, consents to and agrees to be bound by the provisions of this Section 7. *
* *
<PAGE>
15
IN WITNESS WHEREOF, RAMSAY HEALTH CARE, INC. has caused this Warrant
Certificate to be signed by a duly authorized officer and this Warrant
Certificate to be dated September 10, 1996.
RAMSAY HEALTH CARE, INC.
By
Name: Remberto Cibran
Title: President
<PAGE>
FORM OF EXERCISE
(to be executed by the registered holder hereof)
The undersigned hereby exercises ____ Warrants to subscribe for and
purchase shares of common stock, par value $.01 ("Common Shares"), of RAMSAY
HEALTH CARE, INC. evidenced by the within Warrant Certificate and herewith makes
payment of the purchase price in full. Kindly issue certificates for the Common
Shares in accordance with the instructions given below. The certificate for the
unexercised balance of the Warrants evidenced by the within Warrant Certificate,
if any, will be registered in the name of the undersigned.
Dated:
Instructions for registration of shares
Name (please print)
Social Security or Other Identifying
Number:
Address:
Street
City, State and Zip Code
EXHIBIT 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
Year Ended June 30
1996 1995 1994
Primary
Weighted average common
shares outstanding ......... 7,929,071 7,743,314 7,738,422
Class A convertible
preferred stock ............ ---* ---* 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
Total ................ 7,929,071 7,743,314 9,641,103
Income (loss) before
extraordinary items ........ $(16,481,000) $(17,045,000) $ 1,477,000
Extraordinary items ......... --- (257,000) (155,000)
Net income (loss) ........... $(16,481,000) $(17,302,000) $ 1,322,000
Per share amounts:
Income (loss) before
extraordinary items ...... $(2.12) $(2.25) $0.15
Extraordinary items ....... -- (0.03) (0.01)
Net income (loss) ......... $(2.12) $(2.28) $0.14
Fully diluted
Weighted average common
shares outstanding ......... 7,929,071 7,793,542 7,738,422
Class A convertible
preferred stock ............ ---* ---* 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
Total .................. 7,929,071 7,793,542 9,678,985
Income (loss) before
extraordinary items ........ $(16,481,000) $(17,045,000) $ 1,477,000
Extraordinary items ......... --- (257,000) (155,000)
Net income (loss) ........... $(16,481,000) $(17,302,000) $ 1,322,000
Per share amounts:
Income (loss) before
extraordinary items ...... $(2.12) $(2.24) $0.15
Extraordinary items ....... --- (0.03) (0.01)
Net income (loss) ......... $(2.12) $(2.27) $ 0.14
* Common stock equivalents not considered given loss reported for the year.
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.
Great Plains Hospital, Inc.
Greenbrier Hospital, Inc.
Gulf Coast Treatment Center, Inc.
Havenwyck Hospital, Inc.
H.C. Corporation
Health Group of Las Cruces, Inc.
Houma Psychiatric Hospital, Inc.
HSA Hill Crest Corporation
HSA Lynnhaven, Inc.
HSA Medical Offices of Mesa, Inc.
HSA of Oklahoma, Inc.
<PAGE>
Integrated Behavioral Services, Inc.
Life Centers of Michigan, 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 Chicago, 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.
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.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statements (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 October 8, 1996,
with respect to the consolidated financial statements of Ramsay Health Care,
Inc., included in this Annual Report (Form 10-K) for the year ended June 30,
1996.
ERNST & YOUNG LLP
New Orleans, Louisiana
October 8, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-START> Jul-01-1995
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